Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2008~~

2010

Commission File No.: 001-16767

Westfield Financial, Inc.

(Exact name of registrant as specified in its charter)

~~Massachusetts~~

~~73-1627673~~

~~(State or other jurisdiction~~

~~(I.R.S. Employer Identification No.)~~

~~of incorporation or organization)~~

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

141 Elm Street, Westfield, Massachusetts 01085

(Address of principal executive offices, including zip code)

(413) 568-1911

(Registrant’s telephone number, including area code)

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

~~Common Stock, $.01 par value per share~~

~~The NASDAQ Stock Market, LLC~~

~~(Title of each class)~~

~~(Name of each exchange on which registered)~~

Common Stock, $0.01 par value per share	The NASDAQ Global Select Market
(Title of each class)	(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ~~[ ]~~o No ~~[X]~~

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ~~[ ]~~o No ~~[X]~~

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such filed). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ~~[ ]~~

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 ~~[ ]~~o Accelerated filer ~~[X]~~x Non-accelerated filer ~~[ ]~~o Smaller reporting company ~~[ ]~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ~~[ ]~~o No ~~[X].~~

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, ~~2008,~~2010, was ~~$284,017,851.~~$243,599,838. This ~~figure~~amount was based on the closing price as of June 30, ~~2008~~2010 on The NASDAQ ~~Stock~~Global Select Market for a share of the registrant’s common stock, which was ~~$9.05~~$8.33 on June 30, ~~2008.~~

2010.

As of March ~~6, 2009,~~4, 2011, the registrant had ~~31,218,960~~28,164,901 shares of common stock, $0.01 per value, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the ~~2009~~2010 Annual Meeting of ~~Stockholders~~Shareholders are incorporated by reference into Part ~~II and Part~~ III of this report.

WESTFIELD FINANCIAL, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED

DECEMBER 31, ~~2008~~

2010

TABLE OF CONTENTS

ITEM
PART I
PAGE

1
BUSINESS
2
1A
RISK FACTORS
41
1B
UNRESOLVED STAFF COMMENTS
45
2
PROPERTIES
46
3
LEGAL PROCEEDINGS
47
4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
47

PART II

5
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
48
6
SELECTED FINANCIAL DATA
51
7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
53
7A
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
78
8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
78
9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
78
9A
CONTROLS AND PROCEDURES
78
9B
OTHER INFORMATION
79

PART III

10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
80
11
EXECUTIVE COMPENSATION
80
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
80
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
80
14
PRINCIPAL ACCOUNTING FEES AND SERVICES
80

PART IV

15
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
81

SIGNATURES

ITEM	PART I	PAGE

1	BUSINESS	2
1A	RISK FACTORS	25
1B	UNRESOLVED STAFF COMMENTS	28
2	PROPERTIES	29
3	LEGAL PROCEEDINGS	30
4	[REMOVED AND RESERVED]	30

	PART II

5	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	31
6	SELECTED FINANCIAL DATA	34
7	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	51
8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	51
9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	51
9A	CONTROLS AND PROCEDURES	51
9B	OTHER INFORMATION	52
	PART III

10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	53
11	EXECUTIVE COMPENSATION	53
12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	53
13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	53
14	PRINCIPAL ACCOUNTING FEES AND SERVICES	53

	PART IV

15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	54

FORWARD - LOOKING STATEMENTS

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

•

~~changes in the 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.~~

●	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.

Any or all of our forward-looking statements in this Annual Report on Form 10-K, and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Consequently, no forward-looking statements can be guaranteed. We disclaim any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events.

Unless the context indicates otherwise, all references in this prospectus to “Westfield Financial,” “we,” “us,” “our company,” “corporation” and “our” refer to Westfield Financial, Inc. and its subsidiaries (including the Bank, Elm Street Securities Corporation, WFD Securities, Inc. and WB Real Estate Holdings, LLC). References to the “Bank” are to Westfield Bank, our wholly owned bank subsidiary.

PART I

~~ITEM 1.~~

~~BUSINESS~~

ITEM 1.

BUSINESS

General. Westfield Financial is a Massachusetts-chartered stock holding company and the parent company of Westfield Bank (the “Bank”). Westfield Financial was formed in 2001 in connection with its reorganization from a federally-chartered mutual holding company to a Massachusetts-chartered stock holding company with the second step conversion being completed in 2007. The Bank was formed in 1853 and ~~reorganized into a mutual holding company structure without a stock offering in 1995. In July 2004, Westfield Bank converted from a Massachusetts-chartered savings bank to~~is a federally-chartered savings bank regulated by the Office of Thrift Supervision. ~~Westfield Financial, Inc. (“Westfield Financial”) was organized as~~As a Massachusetts-chartered stock holding company in November 2001 in connection with the reorganization of Westfield Mutual Holding Company, a federally-chartered mutual holding company. As part of the reorganization, Westfield Financial offered for sale 47% of its common stock. The remaining 53% of Westfield Financial’s shares were issued to Westfield Mutual Holding Company. The reorganization and related stock offering were completed on December 27, 2001.

On January 3, 2007, Westfield Financial completed its stock offering in connection with the second step conversion of Westfield Mutual Holding Company. As part of the conversion, New Westfield Financial, Inc. succeeded Westfield Financial as the stock holding company of Westfield Bank, and Westfield Mutual Holding Company was dissolved. In the stock offering, a total of 18,400,000 shares representing Westfield Mutual Holding Company’s ownership interest in Westfield Financial were sold by New Westfield Financial in a subscription offering, community offering and syndicated offering. In addition, each outstanding share of Westfield Financial as of January 3, 2007 was exchanged for 3.28138 new shares of New Westfield Financial common stock. New Westfield Financial, Inc. changed its name to Westfield Financial, Inc. effective January 3, 2007.

Historically, Westfield Bank has been a community-oriented provider of banking products and services to businesses and individuals, including traditional products such as residential and commercial real estate loans, consumer loans and a variety of deposit products. In recent years, however, Westfield Bank has developed and implemented a lending strategy that focuses less on residential real estate lending and morebank, we focus on servicing commercial customers, including ~~increased emphasis on~~ commercial and industrial lending and commercial deposit ~~relationships, extending its branch network and broadening its product lines and services. Westfield Bank believes~~relationships. We believe that this business ~~strategy~~focus is best for ~~its~~our long term success and viability, and complements ~~its~~our existing commitment to high quality customer service.

Westfield Bank refers substantially all of the originations of its residential real estate loans to a third party mortgage company. Residential real estate borrowers submit applications to Westfield Bank, but the loan is approved by and closed on the books of the mortgage company. The third party mortgage company owns the servicing rights and services the loans. Westfield Bank retains no residual ownership interest in these loans. Westfield Bank receives a fee for each of the loans originated by the third party mortgage company. Westfield Bank may purchase residential real estate loans from the third party mortgage company depending on market conditions. To date, Westfield Bank has not purchased a significant amount of loans from the third party mortgage company.

Westfield Bank’s revenues are derived principally from interest on its loans and interest and dividends on its investment securities. Its primary sources of funds are deposits, short-term borrowings, long-term debt, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of investment securities, and funds provided by operations.

Elm Street Securities Corporation, a Massachusetts-chartered corporation, was formed by ~~Westfield Financial~~us for the primary purpose of holding qualified investment securities. In February 2007, ~~Westfield Financial also~~we formed WFD Securities, Inc., a Massachusetts-chartered corporation, for the primary purpose of holding qualified investment securities.

~~Unless~~ In October 2009, we formed WB Real Estate Holdings, LLC, a Massachusetts-chartered limited liability company, for the context otherwise requires, all references in this document to Westfield Financial or Westfield Bank include Westfield Financial, Westfield Bank, Elm Street Securities Corporation and WFD Securities, Inc. on a consolidated basis.

primary purpose of holding real property acquired as security for debts previously contracted by the Bank.

Market Area. ~~Westfield Bank operates through~~ We operate 11 banking offices in Agawam, East Longmeadow, Holyoke, Southwick, Springfield, West Springfield and Westfield, Massachusetts. ItWe also ~~has six~~have twelve free-standing ATM locations in ~~Agawam,~~ Feeding Hills, Holyoke, Springfield, West Springfield and Westfield, Massachusetts. ~~Westfield Bank’s~~Our primary deposit gathering area is concentrated in the communities surrounding these locations and ~~its~~our primary lending area includes all of Hampden County in western Massachusetts. In addition, ~~Westfield Bank provides~~we provide online banking services through ~~its~~our website located atwww.westfieldbank.com.

The markets served by ~~Westfield Bank’s~~our branches are primarily suburban in character, as ~~Westfield Bank operates~~we operate only ~~two offices~~one office in Springfield, the Pioneer Valley’s primary urban market. Westfield, Massachusetts, is located in the Pioneer Valley near the intersection of U.S. Interstates 90 (the Massachusetts Turnpike) and 91. ~~Interstate 90 is the major east-west highway that crosses Massachusetts. Interstate 91 is the major north-south highway that runs directly through the heart of New England.~~ The Pioneer Valley of western Massachusetts encompasses the fourth largest metropolitan area in New England. The Springfield Metropolitan area covers a relatively diverse area ranging from densely populated urban areas, such as Springfield, to outlying rural areas. Westfield is located approximately 90 miles west of Boston, Massachusetts, 70 miles southeast of Albany, New York and 30 miles north of Hartford, Connecticut. The populati on estimates for Westfield, Springfield and Hampden County were 40,160, 149,938 and 457,908, respectively, in 2007.

The economy of Westfield Bank’s market area historically has been supported by a variety of industries. Its primary market area has benefited from the presence of large employers centered in insurance, health care, warehousing, manufacturing and education. Among the largest employers currently in its market area are Bay State Health Systems, Big Y Foods, Friendly Ice Cream Corporation, Mass Mutual Life Insurance Company, Mestek, Noble Hospital, the University of Massachusetts, Westfield State College, American International College, and the Sullivan Paper Company. In addition, other employment and economic activity is provided by a substantial number of small and medium size businesses in the area.

Westfield Bank’s future growth opportunities will be influenced by the growth and stability of the statewide and regional economies, other demographic population trends and the competitive environment. Westfield Bank believes that it has developed lending products and marketing strategies to address the diverse credit-related needs of the residents in its market area.

Median household and per capita income levels in Hampden County are below the state average, which is dominated by relatively high income levels prevailing in the populous Boston metropolitan area. Similarly, the median household and per capita income levels in Westfield Bank’s markets more closely approximate but also fall below the national averages.

~~As of December 2008, the unemployment rate of Hampden County and Massachusetts was 7.2% and 6.9%, respectively, compared to 4.6% and 4.5%, respectively, in December 2007.~~

Competition.~~Westfield Bank faces~~ We face intense competition both in making loans and attracting deposits. ~~Its~~Our primary market area is highly competitive and ~~it faces~~we face direct competition from approximately 1921 financial institutions, many with a local, state-wide or regional presence and, in some cases, a national presence. Many of these financial institutions are significantly larger than us and have greater financial ~~resources than Westfield Bank. Westfield Bank’s~~resources. Our competition for loans comes principally from commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, mutual funds, insurance companies and brokerage and investment banking firms. Historically, ~~Westfield Bank’s~~our most direct competition for deposits has come from savings and commercial banks. ~~Westfield Bank faces~~We face additional competition for deposits from internet-based institutions, credit unions, brokerage firms and insurance companies.

Lending Activities

Loan Portfolio Composition.~~Westfield Bank’s~~ Our loan portfolio primarily consists of commercial ~~and industrial~~real estate loans, commercial ~~real estate~~and industrial loans, residential real estate loans, home equity loans, and consumer loans.

At December 31, ~~2008, Westfield Bank~~2010, we had total loans of ~~$480.3~~$508.6 million, of which ~~65.4%~~71.8% were adjustable rate loans and ~~34.6 %~~28.2% were fixed rate loans. Commercial real estate loans and commercial and industrial loans totaled ~~$223.9~~$221.6 million and ~~$153.9,~~$135.3 million, respectively. The remainder of ~~its~~our loans at December 31, ~~2008~~2010 consisted of residential real estate loans, home equity loans and consumer loans. Residential real estate and home equity loans outstanding at December 31, ~~2008~~2010 totaled ~~$98.4~~$148.8 million. Consumer loans outstanding at December 31, ~~2008~~2010 were ~~$4.2~~$2.9 million.

The interest rates ~~Westfield Bank charges~~we charge on loans are affected principally by the demand for loans, the supply of money available for lending purposes and the interest rates offered by ~~its~~our competitors. These factors are, in turn, affected by general and local economic conditions, monetary policies of the federal government, including the Federal Reserve Board, legislative tax policies and governmental budgetary matters. The following table presents the composition of ~~Westfield Bank’s~~our loan portfolio in dollar amounts and in percentages of the total portfolio at the dates indicated.

At December 31,

2008

2007

2006

2005

2004

Amount

Percent of
Total

Amount

Percent of
Total

Amount

Percent of
Total

Amount

Percent of
Total

Amount

Percent of
Total

(Dollars in thousands)
Real estate loans:

    Commercial
$223,857

46.61
%

$189,964

45.22
%

$174,556

44.74
%

$169,564

44.17
%

$144,336

38.65
%
    Residential
62,810

13.08

72,170

17.18

79,308

20.33

82,279

21.43

101,098

27.07

    Home equity
35,562

7.40

35,940

8.56

30,232

7.75

24,639

6.42

21,724

5.82

        Total real estate loans
322,229

67.09

298,074

70.96

284,096

72.82

276,482

72.02

267,158

71.54

Other loans:

    Commercial and industrial
153,861

32.03

116,514

27.74

100,237

25.69

100,019

26.06

94,726

25.36

    Consumer, other
4,248

0.88

5,479

1.30

5,841

1.49

7,372

1.92

11,565

3.10

        Total other loans
158,109

32.91

121,993

29.04

106,078

27.18

107,391

27.98

106,291

28.46

        Total loans
480,338

100.00
%

420,067

100.00
%

390,174

100.00
%

383,873

100.00
%

373,449

100.00
%

Unearned premiums and net deferred
  loan fees and costs, net
593

561

447

386

429

Allowance for loan losses
(8,796)

(5,726)

(5,437)

(5,422)

(5,277)

        Total loans, net
$472,135

$414,902

$385,184

$378,837

$368,601

At December 31,
2010 2009 2008 2007 2006
Percent of Percent of Percent of Percent of Percent of
Amount Total Amount Total Amount Total Amount Total Amount Total
(Dollars in thousands)
Real estate loans:
Commercial $ 221,578 43.57 % $ 229,061 48.08 % $ 223,857 46.61 % $ 189,964 45.22 % $ 174,556 44.74 %
Residential 112,680 22.17 64,299 13.50 62,810 13.08 72,170 17.18 79,308 20.33
Home equity 36,116 7.09 34,755 7.29 35,562 7.40 35,940 8.56 30,232 7.75
Total real estate loans 370,374 72.83 328,115 68.87 322,229 67.09 298,074 70.96 284,096 72.82

Other loans
Commercial and industrial 135,250 26.59 145,012 30.44 153,861 32.03 116,514 27.74 100,237 25.69
Consumer, other 2,960 0.58 3,307 0.69 4,248 0.88 5,479 1.30 5,841 1.49
Total other loans 138,210 27.17 148,319 31.13 158,109 32.91 121,993 29.04 106,078 27.18

Total loans 508,584 100.00 % 476,434 100.00 % 480,338 100.00 % 420,067 100.00 % 390,174 100.00 %

Unearned premiums and net deferred
loan fees and costs, net 742 360 593 561 447
Allowance for loan losses (6,934 ) (7,645 ) (8,796 ) (5,726 ) (5,437 )
Total loans, net $ 502,392 $ 469,149 $ 472,135 $ 414,902 $ 385,184

Loan Maturity and Repricing. The following table shows the repricing dates or contractual maturity dates as of December 31, ~~2008.~~2010. The table does not reflect prepayments or scheduled principal amortization. Demand loans, loans having no stated maturity, and overdrafts are shown as due in within one year.

At December 31, 2008

Residential
Real Estate
Loans

Home Equity
Loans

Commercial
Real Estate
Loans

Commercial
and Industrial
Loans

Consumer
Loans

Totals

(In thousands)
Amount due:

Within one year
$       21,902

$       11,517

$       37,529

$       81,324

$        839

$153,111

After one year:

        One to three years
8,942

825

56,151

12,790

1,565

80,273
        Three to five years
2,223

1,694

83,112

50,175

1,588

138,792
        Five to ten years
5,449

8,700

42,063

9,572

14

65,798
        Ten to twenty years
6,748

12,826

4,277

-

-

23,851
        Over twenty years
17,546

-

725

-

242

18,513
Total due after one year
40,908

24,045

186,328

72,537

3,409

327,227

Total amount due:
62,810

35,562

223,857

153,861

4,248

480,338

Unearned premiums and
    deferred loan fees and
    costs, net
84

294

1

206

8

593
Allowance for loan losses
(295)

(167)

(2,216)

(6,062)

(56)

(8,796)

Loans, net
$       62,599

$       35,689

$     221,642

$     148,005

$      4,200

$472,135

	At December 31, 2010
	Residential						Commercial			Commercial
	Real Estate			Home Equity			Real Estate			and Industrial			Consumer
	Loans			Loans			Loans			Loans			Loans			Totals
	(In thousands)
Amount due:
Within one year	$	14,806		$	18,050		$	21,929		$	76,355		$	639		$	131,779

After one year:

One to three years		3,062			437			51,961			30,025			916			86,401
Three to five years		722			1,604			114,873			19,872			980			138,051
Five to ten years		5,812			7,605			13,617			4,429			-			31,463
Ten to twenty years		33,752			8,420			15,354			-			-			57,526
Over twenty years		54,526			-			3,844			4,569			425			63,364
Total due after one year		97,874			18,066			199,649			58,895			2,321			376,805

Total amount due:		112,680			36,116			221,578			135,250			2,960			508,584


Net deferred loan origination costs		314			297			(150	)		275			6			742
Allowance for loan losses		(664	)		(213	)		(3,182	)		(2,849	)		(26	)		(6,934	)

Loans, net	$	112,330		$	36,200		$	218,246		$	132,676		$	2,940		$	502,392

The following table presents, as of December 31, ~~2008,~~2010, the dollar amount of all loans contractually due or scheduled to reprice after December 31, ~~2009~~2011, and whether such loans have fixed interest rates or adjustable interest rates.

	Due After December 31, 2011
	Fixed		Adjustable		Total
	(In thousands)
Real estate loans:
Residential	$	94,470	$	3,404	$	97,874
Home equity		18,066		-		18,066
Commercial real estate		48,500		151,149		199,649
Total real estate loans		161,036		154,553		315,589

Other loans:
Commercial and industrial		46,892		12,003		58,895
Consumer		2,321		-		2,321
Total other loans		49,213		12,003		61,216

Total loans	$	210,249	$	166,556	$	376,805

Due After December 31, 2009

Fixed

Adjustable

Total

(In thousands)

Real estate loans:

    Residential
$     32,846

$        8,062

$      40,908
    Home Equity
24,045

-

24,045
    Commercial real estate
33,523

152,805

186,328
    Totat real estate loans
90,414

160,867

251,281

Other loans:

    Commercial and Industrial
58,260

14,277

72,537
    Consumer
3,409

-

3,409
    Total other loans
61,669

14,277

75,946

Total loans
$    152,083

$    175,144

$    327,227

The following table presents our loan originations, purchases ~~sales~~ and principal payments for the years indicated:

	For the Years Ended December 31,
	2010		2009		2008
	(In thousands)
Loans:
Balance outstanding at beginning of year	$	476,434	$	480,338	$	420,067

Originations:
Real estate loans:
Residential		1,830		1,378		2,807
Home equity		13,167		16,601		12,120
Commercial		19,174		39,805		40,367
Total mortgage originations		34,171		57,784		55,294

Commercial and industrial loans		41,029		47,492		84,300
Consumer loans		1,550		1,299		1,624
Total originations		76,750		106,575		141,218
Purchase of one-to-four family mortgage loans		61,880		16,381		1,648
		138,630		122,956		142,866

Less:
Principal repayments, unadvanced funds and other, net		96,846		121,809		82,212
Loan charge-offs, net		9,634		5,051		383
Total deductions		106,480		126,860		82,595
Ending balance	$	508,584	$	476,434	$	480,338

For the Year Ended December 31,

2008

2007

2006

(In thousands)
Loans:

    Balance outstanding at beginning of year
$    420,067

$    390,174

$    383,873

Originations:

    Real estate loans:

        Residential
2,807

3,692

4,337
        Home Equity
12,120

17,158

15,336
        Commericial
40,367

44,811

52,807
            Total mortgage originations
55,294

65,661

72,480

        Commercial and industrial loans
84,300

59,812

34,864
        Consumer loans
1,624

3,161

3,657
            Total originations
141,218

128,634

111,001
        Purchase of one-to-four family mortgage loans
1,648

1,759

11,845

142,866

130,393

122,846

Less:

    Principal repayments, unadvanced funds and
      other, net

82,212

100,389

116,170
    Loan charge-offs, net
383

111

375
        Total deductions
82,595

100,500

116,545
    Ending balance
$    480,338

$    420,067

$    390,174

Commercial and Industrial Loans. ~~Westfield Bank offers~~ We offer commercial and industrial loan products and services which are designed to give business owners borrowing opportunities for modernization, inventory, equipment, construction, consolidation, real estate, working capital, vehicle purchases and the financing of existing corporate debt. ~~Westfield Bank offers~~We offer business installment loans, vehicle and equipment financing, lines of credit, ~~equipment leasing~~ and other commercial loans. At December 31, ~~2008, Westfield Bank’s~~2010, our commercial and industrial loan portfolio consisted of ~~877~~986 loans, totaling ~~$153.9~~$135.3 million or ~~32.0%~~26.6 % of ~~its~~our total loans. Since ~~2004,~~2006, commercial and industrial loans have grown ~~$59.2~~$35.1 million, or ~~62.5 %,~~35.0%, from ~~$94.7~~$100.2 million at December 31, ~~2004~~2006 to ~~$153.9~~$135.3 million at December 31, ~~2008. Westfield Bank’s~~2010. Our commercial loan team includes ~~seven~~nine commercial loan officers, one business development manager, ~~four cred it~~five credit analysts and ~~two~~one portfolio ~~managers. Westfield Bank~~manager. We may hire additional commercial loan officers on an as needed basis.

As part of ~~Westfield Bank’s~~our strategy of increasing ~~its~~our emphasis on commercial lending, ~~Westfield Bank seeks~~we seek to attract ~~its~~our business customers’ entire banking relationship. Most commercial borrowers also maintain commercial ~~deposits at Westfield Bank. Westfield Bank provides~~deposits. We provide complementary commercial products and services, a variety of commercial deposit accounts, cash management services, internet banking, sweep accounts, a broad ATM network and night deposit services. ~~Westfield Bank offers~~We offer a remote deposit capture product whereby commercial customers can receive credit for check deposits by electronically transmitting check images from their own locations. Commercial loan officers are based in ~~its~~our main and branch offices, and ~~Westfield Bank views its~~we view our potential branch expansion as a means of facilitating these commercial relationships. ~~Westfield Bank intends~~We intend to continue to expand the volume of ~~its com mercial~~our commercial business products and services within ~~its~~our current underwriting standards.

~~Westfield Bank’s~~

Our commercial and industrial loan portfolio does not have any significant loan concentration by type of property or borrower. The largest concentration of loans was for manufacturing, which ~~comprise~~comprises approximately ~~5.84%~~5.32% of the total loan portfolio as of December 31, ~~2008.~~2010. At December 31, ~~2008, Westfield Bank’s~~2010, our largest commercial and industrial loan relationship was ~~$19.8~~$24.8 million to a private New England college. The loan relationship is secured by business assets and financial instruments. The loans ofto this borrower have performed to contractual terms.

Commercial and industrial loans generally have terms of seven years or less, however, on an occasional basis, may have terms of up to ten years. Among the ~~$153.9~~$135.3 million ~~Westfield Bank has~~we have in ~~its~~our commercial and industrial loan portfolio as of December 31, ~~2008, $84.3~~2010, $81.7 million have adjustable interest rates and ~~$69.6~~$53.6 million have fixed interest rates. Whenever possible, ~~Westfield Bank seeks~~we seek to originate adjustable rate commercial and industrial loans. Borrower activity and market conditions, however, may influence whether ~~Westfield Bank is~~we are able to originate adjustable rate loans rather than fixed rate loans. ~~Westfield Bank~~We generally ~~requires~~require the personal guarantee of the business owner. Interest rates on commercial and industrial loans generally have higher yields than residential or commercial real estate loans.

Commercial and industrial loans are generally considered to involve a higher degree of risk than residential or commercial real estate loans because the collateral may be in the form of intangible assets and/or inventory subject to market obsolescence. Please see “Risk Factors –Our loan portfolio includes loans with a higher risk of loss.” Commercial and industrial loans may also involve relatively large loan balances to single borrowers or groups of related borrowers, with the repayment of such loans typically dependent on the successful operation and income stream of the borrower. These risks can be significantly affected by economic conditions. In addition, business lending generally requires substantially greater oversight efforts by ~~Westfield Bank’s~~our staff compared to residential or commercial real estate lending. In order to mitigate this risk, ~~Westfield Bank monitors its~~we monitor our loan concentration and ~~i ts~~our loan policies generally to limit the amount of loans to a single borrower or group of borrowers. ~~Westfield Bank~~We also ~~utilizes~~utilize the services of an outside consultant to conduct credit quality reviews of the commercial and industrial loan portfolio.

Commercial Real Estate Loans. ~~Westfield Bank originates~~ We originate commercial real estate loans to finance the purchase of real property, which generally consists of apartment buildings, business properties, multi-family investment properties and construction loans to developers of commercial and residential properties. In underwriting commercial real estate loans, consideration is given to the property’s historic cash flow, current and projected occupancy, location and physical condition. At December 31, ~~2008, Westfield Bank’s~~2010, our commercial real estate loan portfolio consisted of ~~408~~393 loans, totaling ~~$223.9~~$221.6 million, or ~~46.6%~~43.6 %, of total loans. Since ~~2004,~~2006, commercial real estate loans have grown by ~~$79.6~~$47.0 million, or ~~55.2%,~~26.9 %, from ~~$144.3~~$174.6 million at December 31, ~~2004~~2006 to ~~$223.9~~$221.6 million at December 31, ~~2008.~~

2010.

The majority of the commercial real estate portfolio consists of loans which are collateralized by properties in the Pioneer Valley of Massachusetts and northern Connecticut. ~~Westfield Bank’s~~Our commercial real estate loan portfolio is diverse, and does not have any significant loan concentration by type of property or borrower. ~~Westfield Bank~~We generally ~~lends~~lend up to a loan-to-value ratio of ~~80%~~75% on commercial ~~properties, Westfield Bank,~~properties. We, however, will lend up to a maximum of 85% loan-to-value ratio but will generally ~~requires~~require a minimum debt coverage ratio of ~~1.15 times. Its~~1.15. Our largest non-owner occupied commercial real estate loan relationship had an outstanding balance of ~~$20.1~~$11.7 million at December 31, ~~2008~~2010, which ~~was~~is secured by ~~one commercial investment property located in Massachusetts, and~~ one commercial investment property located in Rhode Island. The loans of this borrower have performed to contractual terms.

~~Westfield Bank~~

We also ~~offers~~offer construction loans to finance the construction of commercial properties located in ~~its~~our primary market area. At December 31, ~~2008, Westfield Bank~~2010, we had ~~$14.9 million~~$309,000 in commercial construction loans and commitments that are committed to refinance into permanent mortgages at the end of the construction ~~period. Westfield Bank had $13.9~~period and $4.0 million in commercial construction loans and commitments ~~at December 31, 2008~~ that are not committed to permanent financing at the end of the construction period.

Commercial real estate lending involves additional risks compared with one-to-four family residential lending. Payments on loans secured by commercial real estate properties often depend on the successful management of the properties, on the amount of rent from the properties, or on the level of expenses needed to maintain the properties. Repayment of such loans may therefore be adversely affected by conditions in the real estate market or the general economy. Also, commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers. In order to mitigate this risk, ~~Westfield Bank monitors its~~we monitor our loan concentration risk on a quarterly basis and ~~its~~our loan policies generally limit the amount of loans to a single borrower or group of borrowers.

Because of increased risks associated with commercial real estate loans, ~~Westfield Bank’s~~our commercial real estate loans generally have higher rates than residential real estate loans. Please see“RiskFactors – Our loan portfolio includes loans with a higher risk of loss.” Commercial real estate loans generally have adjustable rates with repricing dates of five years or less; however, occasionally repricing dates may be as long as ten years. Whenever possible, ~~Westfield Bank seeks~~we seek to originate adjustable rate commercial real estate loans. Borrower activity and market conditions, however, may influence whether ~~Westfield Bank is~~we are able to originate adjustable rate loans rather than fixed rate loans.

Residential Real Estate Loans and Originations. ~~Westfield Bank refers~~ We process substantially all of ~~the~~our originations of ~~its~~ residential real estate loans tothrough a ~~third party~~third-party mortgage company. Residential real estate borrowers submit applications to ~~Westfield Bank,~~us, but the loan is approved by and closed on the books of the mortgage company. The ~~third party~~third-party mortgage company owns the servicing rights and services the loans. ~~Westfield Bank retains~~We retain no residual ownership interest in these loans. ~~Westfield Bank receives~~We receive a fee for each of these loans originated by the ~~third party~~third-party mortgage company.

Even though substantially all residential real estate loan originations are referred to a ~~third party~~third-party mortgage company, ~~Westfield Bank~~we still ~~holds~~hold residential real estate loans in ~~its~~our loan portfolio. The loans consist primarily of loans originated by ~~Westfield Bank,~~us prior to the commencement of the ~~third party~~third-party residential mortgage referral program in September 2001, or are loans ~~purchased by Westfield Bank. Westfield Bank~~we purchased. We occasionally ~~purchases~~purchase adjustable rate mortgages, which are serviced by the originating institutions, from other banks located in Massachusetts. At December 31, ~~2008,~~2010, loans on one-to-four family residential properties, including home equity lines, accounted for ~~$98.4~~$148.8 million, or ~~20.5%~~29.3%, of ~~Westfield Bank’s~~our total loan portfolio.

~~Westfield Bank’s~~

Our residential adjustable rate mortgage loans generally are fully amortizing loans with contractual maturities of up to 30 years, payments due monthly. ~~Its~~Our adjustable rate mortgage loans generally provide for specified minimum and maximum interest rates, with a lifetime cap and floor, and a periodic adjustment on the interest rate over the rate in effect on the date of origination. As a consequence of using caps, the interest rates on these loans are not generally as rate sensitive as ~~its~~our cost of funds. The adjustable rate mortgage loans that ~~Westfield Bank originates~~we originate generally are not convertible into fixed rate loans.

Adjustable rate mortgage loans generally pose different credit risks than fixed rate loans, primarily because as interest rates rise, the borrower’s payments rise, increasing the potential for default. To date, ~~Westfield Bank has~~we have not experienced difficulty with payments for these loans. At December 31, ~~2008, its~~2010, our residential real estate and home equity loan portfolio included ~~$41.4~~$35.9 million in adjustable rate loans, or ~~8.6%~~7.1%, of ~~its~~our total loan portfolio, and ~~$57.0~~$112.9 million in fixed rate loans, or ~~11.9%~~22.2%, of ~~its~~our total loan portfolio.

~~Westfield Bank’s~~

Our home equity loans totaled ~~$35.6~~$36.1 million, or ~~7.4%~~7.1%, of total loans at December 31, ~~2008.~~2010. Home equity loans include ~~$24.1~~$18.1 million in fixed rate loans, or ~~5.0%~~3.6%, of total loans, and ~~$11.5~~$18.0 million in adjustable rate loans, or ~~2.4%~~3.5%, of total loans. These loans may be originated in amounts of the existing first mortgage, or up to 80% of the value of the property securing the loan. The term to maturity on ~~Westfield Bank’s~~our home equity and home improvement loans may be up to 15 years.

Consumer Loans. Consumer loans are generally originated at higher interest rates than residential and commercial real estate loans, but they also generally tend to have a higher credit risk than residential real estate loans because they are usually unsecured or secured by rapidly depreciable assets. Management, however, believes that offering consumer loan products helps to expand and create stronger ties to ~~Westfield Bank’s~~our existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.

~~Westfield Bank offers~~

We offer a variety of consumer loans to retail customers in the communities ~~it serves.~~we serve. Examples of ~~its~~our consumer loans include automobile loans, secured passbook loans, credit lines tied to deposit accounts to provide overdraft protection, and unsecured personal loans. At December 31, ~~2008,~~2010, the consumer loan portfolio totaled ~~$4.2~~$2.9 million, or ~~0.9%~~0.6%, of total loans. ~~Westfield Bank’s~~Our consumer lending will allow itus to diversify ~~its~~our loan portfolio while continuing to meet the needs of the individuals and businesses that ~~it serves.~~

we serve.

Loans collateralized by rapidly depreciable assets such as automobiles or that are unsecured entail greater risks than residential real estate loans. In such cases, repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance, since there is a greater likelihood of damage, loss or depreciation of the underlying collateral. The remaining deficiency often does not warrant further substantial collection efforts against the borrower beyond obtaining a deficiency judgment. Further, collections on these loans

are dependent on the borrower’s continuing financial stability and, therefore, are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. There was no repossessed collateral relating to consumer loans at December 31, ~~2008.~~2010. Finally, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans if a borrower defaults.

Loan Approval Procedures and Authority.Individuals authorized to make loans on our behalf ~~of Westfield Bank~~ are designated by ~~Westfield Bank’s~~our Senior Lending Officer and approved by the Board of Directors. Each loan officer has loan approval authority up to prescribed limits that depend upon the officer’s level of experience.

Upon receipt of a completed loan application from a prospective borrower, ~~Westfield Bank orders~~we order a credit report and ~~verifies~~verify other information. If necessary, ~~Westfield Bank obtains~~we obtain additional financial or credit related information. ~~Westfield Bank~~We also ~~requires~~require an appraisal for all commercial real estate loans greater than $250,000, which is performed by licensed or certified ~~third party~~third-party appraisal firms and reviewed by ~~Westfield Bank’s~~our lending department.

Appraisals for home equity loans are required for loans in excess of ~~$250,000;~~$100,000; otherwise, a designated employee ~~of Westfield Bank~~ conducts an inspection of the property. ~~Westfield Bank requires~~We require title insurance on most commercial real estate loans. ~~Westfield Bank~~We also ~~requires~~require borrowers to obtain flood insurance, if applicable, prior to closing, for all loans secured by real estate within a designated flood zone.

Commercial and Industrial Loans and Commercial Real Estate Loans. ~~Westfield Bank lends~~ We lend up to a maximum loan-to-value ratio of 85% on commercial properties and the majority of these loans require a minimum debt coverage ratio of 1.15. Commercial real estate lending involves additional risks compared with ~~one- to four-family~~one-to-four-family residential lending. Because payments on loans secured by commercial real estate properties are often dependent on the successful operation or management of the properties, and/or the collateral value of the commercial real estate securing the loan, repayment of such loans may be subject, to a greater extent, to adverse conditions in the real estate market or the economy. Also, commercial real estate loans typically involve large loan balances to single borrowers or groups orof related borrowers. ~~Westfield Bank’s~~Our loan policies limit the amounts of loans to a single borrower or group of borrowers to ~~r educe~~reduce this risk.

~~Westfield Bank’s~~

Our lending policies permit ~~its~~our underwriting department to review and approve commercial and industrial loans and commercial real estate loans up to $1$1.0 million. Any commercial and industrial or commercial real estate loan application that exceeds $1$1.0 million or that would result in the borrower’s total credit exposure with ~~Westfield Bank~~us to exceed $1$1.0 million, or whose approval requires an exception to ~~Westfield Bank’s~~our standard loan approval procedures, requires approval of the Executive Committee of the Board of Directors. An example of an exception to ~~Westfield Bank’s~~our standard loan approval procedures would be if a borrower was located outside ~~Westfield Bank’s~~our primary lending area. For loans requiring Board approval, management is responsible for presenting to the Board information about the creditworthiness of a borrower and the estimated value of the subject equipment or property. Generally, these determinations are based on financial statements, corporate and personal tax returns, as well as any other necessary information, including real estate and or equipment appraisals.

Home Equity Loans. ~~Home~~ We originate and fund our home equity ~~loans are originated and funded by Westfield Bank.~~loans. These loans may be originated in amounts of the existing first mortgage, or up to 80% of the value of the property securing the loan. ~~Westfield Bank’s~~Our underwriting department may approve home equity loans up to $200,000. Home equity loans in amounts greater than $200,000 and up to $350,000 may be approved by certain officers ~~of Westfield Bank~~ who have been approved by the Board of Directors. Home equity loans over $350,000, or whose approval requires an exception to ~~Westfield Bank’s~~our standard loan approval procedures, are reviewed and approved by the Executive Committee of the Board of Directors.

Asset Quality

One of ~~Westfield Bank’s~~our key operating objectives has been and continues to be the achievement of a high level of asset quality. ~~Westfield Bank maintains~~We maintain a large proportion of loans secured by residential and commercial properties, ~~sets~~set sound credit standards for new loan originations and ~~follows~~follow careful loan administration procedures. ~~Westfield Bank~~We also ~~utilizes~~utilize the services of an outside consultant to conduct credit quality reviews of ~~Westfield Bank’s~~our commercial and industrial and commercial real estate loan portfolio on ~~a semi-annual~~at least an annual basis.

Nonaccrual Loans and Foreclosed Assets. ~~Westfield Bank’s~~ Our policies require that management continuously monitor the status of the loan portfolio and report to the Board of Directors on a monthly basis. These reports include information on nonaccrual loans and foreclosed real estate, as well as ~~Westfield Bank’s~~our actions and plans to cure the nonaccrual status of the loans and to dispose of the foreclosed property.

The following table presents information regarding nonperforming mortgage, consumer and other loans, and foreclosed real estate as of the dates indicated. All loans where the interest payment is 90 days or more in arrears as of the closing date of each month are placed on non-accrual status. At December 31, 2010, 2009 and 2008, ~~2007, and 2006, Westfield Bank~~we had ~~$8.8~~$3.2 million, ~~$1.2~~$5.5 million, and ~~$1.0~~$8.8 million, respectively, of nonaccrual loans. If all nonaccrual loans had been performing in accordance with their terms, ~~Westfield Bank~~we would have earned additional interest income of ~~$200,000, $65,000,~~$159,000 $94,000, and ~~$67,000~~$200,000 for the years ended December 31, 2010, 2009 and 2008, ~~2007, and 2006,~~ respectively.

Included in nonperforming loans at December 31, 2010 is one loan in the amount of $125,000 which was modified in a troubled debt restructuring (“TDR”). We had no TDR’s at December 31, 2009 or 2008.

At December 31,

2008

2007

2006

2005

2004

(Dollars in thousands)
Nonaccrual real estate loans:

    Residential
$       905

$       820

$       803

$       321

$       492

    Home equity
239

175

103

108

139

    Commercial real estate
1,460

177

69

1,285

1,341

Total nonaccrual real estate loans
2,604

1,172

975

1,714

1,972

Other loans:

    Commercial and industrial
6,195

19

44

173

170

    Consumer
6

11

9

32

29

Total nonaccrual consumer and other loans
6,201

30

53

205

199

Total nonperforming loans
8,805

1,202

1,028

1,919

2,171

Foreclosed real estate, net
-

-

-

-

-

Total nonperforming assets
$    8,805

$    1,202

$    1,028

$    1,919

$    2,171

Nonperforming loans to total loans
1.83
%

0.29
%

0.26
%

0.50
%

0.58
%
Nonperforming assets to total assets
0.79

0.12

0.10

0.24

0.27

	At December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)
Nonaccrual real estate loans:
Residential	$	629		$	784		$	905		$	820		$	803
Home equity		144			225			239			175			103
Commercial real estate		1,892			782			1,460			177			69
Total nonaccrual real estate loans		2,665			1,791			2,604			1,172			975
Other loans:
Commercial and industrial		539			3,675			6,195			19			44
Consumer		-			4			6			11			9
Total nonaccrual other loans		539			3,679			6,201			30			53
Total nonperforming loans		3,204			5,470			8,805			1,202			1,028
Foreclosed real estate, net		223			1,662			-			-			-
Total nonperforming assets	$	3,427		$	7,132		$	8,805		$	1,202		$	1,028
Nonperforming loans to total loans		0.63	%		1.15	%		1.83	%		0.29	%		0.26	%
Nonperforming assets to total assets		0.28			0.60			0.79			0.12			0.10

Allowance for Loan Losses. The following table presents the activity in ~~Westfield Bank’s~~our allowance for loan losses and other ratios ~~(annualized as applicable)~~ at or for the dates indicated.

At or for Years Ended December 31,

2008

2007

2006

2005

2004

(Dollars in thousands)

Balance at beginning of year
$        5,726

$        5,437

$        5,422

$        5,277

$        4,642

Charge-offs:

    Residential
(131)

-

-

-

-

    Commercial real estate
-

-

-

-

-

    Home equity loans
-

-

-

-

-

    Commercial and industrial
(284)

(255)

(505)

(431)

(14)

    Consumer
(34)

(62)

(79)

(181)

(390)

        Total charge-offs
(449)

(317)

(584)

(612)

(404)

Recoveries:

    Residential
-

-

4

-

-

    Commercial real estate
-

-

-

1

-

    Home equity loans
4

3

3

3

4

    Commercial and industrial
4

54

7

9

65

    Consumer
58

149

195

279

220

        Total recoveries
66

206

209

292

289

Net charge-offs
(383)

(111)

(375)

(320)

(115)

Provision for loan losses
3,453

400

390

465

750

Balance at end of year
$        8,796

$        5,726

$        5,437

$        5,422

$        5,277

Total loans receivable (1)
$    480,338

$    420,067

$    390,174

$    383,873

$    373,449

Average loans outstanding
$    444,492

$    398,281

$    386,039

$    383,436

$    366,677

Allowance for loan losses as a
  percent of total loans
  receivable
1.83
%

1.36
%

1.39
%

1.41
%

1.41
%

Net loans charged-off as a
  percent of average loans
  outstanding
0.09

0.03

0.10

0.08

0.03

~~(1) Does not include unearned premiums, deferred costs and fees, or allowance for loan losses.~~

~~Westfield Bank maintains~~

	At or for Years Ended December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)

Balance at beginning of year	$	7,645		$	8,796		$	5,726		$	5,437		$	5,422

Charge-offs:
Residential		(36	)		-			(131	)		-			-
Commercial real estate		(7,536	)		(50	)		-			-			-
Home equity loans		-			(117	)		-			-			-
Commercial and industrial		(2,129	)		(4,910	)		(284	)		(255	)		(505	)
Consumer		(16	)		(22	)		(34	)		(62	)		(79	)
Total charge-offs		(9,717	)		(5,099	)		(449	)		(317	)		(584	)

Recoveries:
Residential		7			-			-			-			4
Commercial real estate		8			-			-			-			-
Home equity loans		4			6			4			3			3
Commercial and industrial		21			2			4			54			7
Consumer		43			40			58			149			195
Total recoveries		83			48			66			206			209

Net charge-offs		(9,634	)		(5,051	)		(383	)		(111	)		(375	)

Provision for loan losses		8,923			3,900			3,453			400			390

Balance at end of year	$	6,934		$	7,645		$	8,796		$	5,726		$	5,437

Total loans receivable (1)	$	508,584		$	476,434		$	480,338		$	420,067		$	390,174

Average loans outstanding	$	482,215		$	476,214		$	444,492		$	398,281		$	386,039

Allowance for loan losses as a
percent of total loans receivable		1.36	%		1.60	%		1.83	%		1.36	%		1.39	%

Net loans charged-off as a percent
of average loans outstanding		2.00			1.06			0.09			0.03			0.10
_________________________
(1) Does not include unearned premiums, deferred costs and fees, or allowance for loan losses.

We maintain an allowance for loan losses to absorb losses inherent in the loan portfolio based on ongoing quarterly assessments of the estimated losses. ~~Westfield Bank’s~~Our methodology for assessing the appropriateness of the allowance consists of a review of the components, which include a specific valuation allowance for impaired loans and a general allowance for non-impaired loans. Fluctuations in the balances of impaired loans affect the specific valuation allowance while fluctuations in volume and concentrations of loans affects the general reserve and the allocation of the allowance of the loan losses among loan types. Other factors considered in the allowance calculation include general economic or industry conditions that might impact the loan portfolio along with trends in the quality of the portfolio as measured by delinquency, non-performing and charge-offs.

The specific valuation allowance incorporates the results of measuring impairment for specifically identified non-homogenous problem loans in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 114, “Accounting By Creditors for Impairment of a Loan,” and SFAS No. 118, “Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures.” In accordance with SFAS No. 114 and No. 118, theloans. The specific allowance reduces the carrying amount of the impaired loans to their estimated fair ~~value.~~value if collateral dependent. A loan is recognized as impaired when it is probable that principal and/or interest are not collectible in accordance with the loan’s contractual terms. A loan is not deemed to be impaired if there is a short delay in receipt of payment or if, during a longer period of delay, Westfield Bank expects to collect all amounts due including interest accrued at the contractual rate during the period of delay. Measurement of impairment can be based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, if the loan is collateral dependent. Measurement of impairment does not apply to large groups of smaller balance homogenous loans that are collectively evaluated for impairment such as Westfield Bank’s portfolios of consumer and residential real estate loans.

The general allowance is calculated by applying loss factors to outstanding loans by type, excluding loans for which a specific allowance has been determined. As part of this analysis, each quarter ~~Westfield Bank prepares~~we prepare an allowance for loan losses worksheet which categorizes the loan portfolio by risk characteristics such as loan type and loan grade. The general allowance is inherently subjective as it requires material estimates that may be susceptible to significant

change. There are a number of factors that are considered when evaluating the appropriate level of the allowance. These factors include current economic and business conditions that affect our key lending areas, ~~of the company,~~ new loan products, collateral values, loan volumes and concentrations, credit quality trends such as nonperforming loans, delinquency and loan losses, and specific industry concentrations within the portfolio segments that may impact the ~~collectabili ty~~collectability of the loan portfolio.

For information on our methodology for assessing the appropriateness of the allowance for loan losses please see Footnote 1 – “Summary of Significant Accounting Policies” of our notes to consolidated financial statements.

In addition, management employs an independent ~~third party~~third-party to perform ~~a semi-annual~~an annual review of all of ~~Westfield Bank’s~~our commercial and industrial loans and owner occupied commercial real estate loans with balances or commitments equal to or greater than $750,000. The ~~third party~~third-party also reviews all commercial investment real estate loans in excess of $750,000, as well as all adversely rated loans.

~~Westfield Bank’s~~

Our methodologies include several factors that are intended to reduce the difference between estimated and actual ~~losses.~~losses; however, because these are management’s best estimates based on information known at the time, estimates may differ from actual losses incurred. The loss factors that are used to establish the allowance for pass graded loans are designated to be self-correcting by taking into account changes in loan classification, loan concentrations and loan volumes and by permitting adjustments based on management’s judgments of qualitative factors as of the evaluation date. Similarly, by basing the pass graded loan loss factors on loss experience over the prior ~~three~~six years, the methodology is designed to take ~~Westfield Bank’s recent~~ loss experience into account.

~~Westfield Bank’s~~

Our allowance methodology has been applied on a consistent basis. Based on this methodology, ~~Westfield Bank believes~~we believe that ~~it has~~we have established and maintained the allowance for loan losses at ~~adequate~~appropriate levels. Future adjustments to the allowance for loan losses, however, may be necessary if economic, real estate and other conditions differ substantially from the current operating environment resulting in estimated and actual losses differing substantially. Adjustments to the allowance for loan losses are charged to income through the provision for loan losses.

A summary of the components of the allowance for loan losses is as follows:

	December 31, 2010						December 31, 2009						December 31, 2008
	Specific		General		Total		Specific		General		Total		Specific		General		Total
	(In thousands)
Real estate mortgage:
Residential and home equity	$	-	$	877	$	877	$	-	$	487	$	487	$	-	$	462	$	462
Commercial		-		3,182		3,182		-		2,371		2,371		-		2,216		2,216

Commercial and industrial		19		2,830		2,849		875		3,873		4,748		2,286		3,776		6,062

Consumer		-		26		26		-		39		39		-		56		56
Total	$	19	$	6,915	$	6,934	$	875	$	6,770	$	7,645	$	2,286	$	6,510	$	8,796


	December 31, 2007						December 31, 2006
	Specific		General		Total		Specific		General		Total
	(In thousands)
Real estate mortgage:
Residential and home equity	$	-	$	456	$	456	$	-	$	422	$	422
Commercial		-		1,756		1,756		13		2,004		2,017

Commercial and industrial		-		3,436		3,436		7		2,912		2,919

Consumer		-		78		78		-		79		79
Total	$	-	$	5,726	$	5,726	$	20	$	5,417	$	5,437

December 31, 2008

December 31, 2007

December 31, 2006

Specific

General

Total

Specific

General

Total

Specific

General

Total

(In thousands)
Real Estate Mortgage:

    Residential and
      home equity
$          -

$     462

$     462

$       -

$     456

$     456

$       -

$     422

$    422
    Commercial
-

2,216

2,216

-

1,756

1,756

13

2,004

2,017

Commercial and
  Industrial
2,286

3,776

6,062

-

3,436

3,436

7

2,912

2,919

Consumer
-

56

56

-

78

78

-

79

79
Total
$  2,286

$  6,510

$  8,796

$       -

$  5,726

$  5,726

$    20

$  5,417

$  5,437

December 31, 2005

December 31, 2004

Specific

General

Total

Specific

General

Total

(In thousands)

Real Estate Mortgage:

    Residential and
      home equity
$          -

$     355

$     355

$       -

$     421

$     421

    Commercial
218

2,400

2,618

264

2,097

2,361

Commercial and
  Industrial

32

2,334

2,366

236

2,078

2,314

Consumer
-

83

83

-

181

181

Total
$     250

$  5,172

$  5,422

$  500

$  4,777

$  5,277

In addition, the Office of Thrift Supervision (“OTS”), as an integral part of its examination process, periodically reviews ~~Westfield Bank’s~~our loan and foreclosed real estate portfolios and the related allowance for loan losses and valuation allowance for foreclosed real estate. The ~~Office of Thrift Supervision~~OTS may require ~~Westfield Bank~~us to adjust the allowance for loan losses or the valuation allowance for foreclosed real estate based on their ~~judgments~~judgment of information available to them at the time of their examination, thereby adversely affecting ~~Westfield Bank’s~~our results of operations.

For the year ended December 31, ~~2008, Westfield Bank~~2010, we provided ~~$3.5~~$8.9 million to the allowance for loan losses based on ~~its~~our evaluation of the items discussed above. ~~Westfield Bank believes~~We believe that the allowance for loan losses accurately reflects the level of ~~risk~~incurred losses in the current loan portfolio as of December 31, ~~2008.~~

2010.

Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan category, the total loan balances by category, and the percent of loans in each category to total ~~loans indicated.~~

loans.

At December 31,

2008

2007

2006
Loan Category
Amount of
Loan Loss

Loan
Balances by
Category

Percent of
Loans in Each
Category to
Total Loans

Amount of
Loan Loss

Loan
Balances by
Category

Percent of
Loans in Each
Category to
Total Loans

Amount of
Loan Loss

Loan
Balances by
Category

Percent of
Loans in Each
Category to
Total Loans

(Dollars in thousands)
Real estate mortgages:

    Commercial
$    2,216

$    223,857

46.61
%

$    1,756

$    189,964

45.22
%

$    2,017

$    174,556

44.74
%
    Residential and home equity
462

98,372

20.48

456

108,110

25.74

422

109,540

28.08

Commercial loans
6,062

153,861

32.03

3,436

116,514

27.74

2,919

100,237

25.69

Consumer loans
56

4,248

0.88

78

5,479

1.30

79

5,841

1.49

Total allowance for loan losses
$    8,796

$    480,338

100.00
%

$    5,726

$    420,067

100.00
%

$    5,437

$    390,174

100.00
%

At December 31,

2005

2004

Amount of
Loan Loss

Loan
Balances by
Category

Percent of
Loans in Each
Category to
Total Loans

Amount of
Loan Loss

Loan
Balances by
Category

Percent of
Loans in Each
Category to
Total Loans

(Dollars in thousands)

Real estate mortgages:

    Commercial
$    2,618

$    169,564

44.17
%

$    2,361

$    144,336

38.65
%

    Residential and home equity
355

106,918

27.85

421

122,822

32.89

Commercial loans
2,366

100,019

26.06

2,314

94,726

25.36

Consumer loans
83

7,372

1.92

181

11,565

3.10

Total allowance for loan losses
$    5,422

$    383,873

100.00
%

$    5,277

$    373,449

100.00
%

December 31, 2010 December 31, 2009 December 31, 2008
Loan Category
Amount of
Loan Loss

Loan
Balances by
Category

Percent of
Loans in
Each
Category
to Total
Loans

Amount of
Loan Loss

Loan
Balances by
Category

Percent of
Loans in
Each
Category
to Total
Loans

Amount of
Loan Loss

Loan
Balances by
Category

Percent of
Loans in
Each
Category
to Total
Loans

(In thousands)
Real estate mortgage:
Commercial $ 3,182 $ 221,578 43.57 % $ 2,371 $ 229,061 48.08 % $ 2,216 $ 223,857 46.61 %
Residential and home equity 877 148,796 29.26 487 99,054 20.79 462 98,372 20.48
Commercial loans 2,849 135,250 26.59 4,748 145,012 30.44 6,062 153,861 32.03
Consumer loans 26 2,960 0.58 39 3,307 0.69 56 4,248 0.88
Total allowances for loan losses $ 6,934 $ 508,584 100.00 % $ 7,645 $ 476,434 100.00 % $ 8,796 $ 480,338 100.00 %

December 31, 2007 December 31, 2006
Amount of
Loan Loss Loan
Balances by
Category Percent of
Loans in
Each
Category
to Total
Loans Amount of
Loan Loss Loan
Balances by
Category Percent of
Loans in
Each
Category
to Total
Loans
(In thousands)
Real estate mortgage:
Commercial $ 1,756 $ 189,964 45.22 % $ 2,017 $ 174,556 44.74 %
Residential and home equity 456 108,110 25.74 422 109,540 28.08
Commercial loans 3,436 116,514 27.74 2,919 100,237 25.69
Consumer loans 78 5,479 1.30 79 5,841 1.49
Total allowances for loan losses $ 5,726 $ 420,067 100.00 % $ 5,437 $ 390,174 100.00 %

Potential Problem Loans. ~~Westfield Bank has~~We have a commercial ~~line~~and industrial term loan of ~~credit of $1.1~~$1.2 million with a borrower primarily engaged in the production and distribution of ~~automotive parts and accessories.~~machine parts. This potential problem loan was not delinquent as of December 31, ~~2008 or as~~2010. In February of ~~March 9, 2009. During 2008,~~2011, however, the ~~borrower experienced~~Bank was notified that a ~~decrease~~major contract to produce machined parts was in ~~revenue. Westfield Bank intends~~jeopardy and is not expected to ~~restructure $470,892 of~~be obtained by our customer. We intend to modify the ~~debt to a real estate holding company~~term loan and ~~an operating company affiliated~~work with the borrower ~~which~~to sell equipment and pay off the term loan. A collateral analysis has been performed and no impairment is evident at this time. The loan has been classified as a TDR for the ~~ability to service the debt. After the restructure, the remaining balance on the line~~first quarter of ~~credit is estimated to be $666,766 and is collateralized by inventory and accounts receivable.~~

2011.

Investment Activities.The Board of Directors ~~reviews~~review and ~~approves Westfield Bank’s~~approve our investment policy on an annual basis. The Chief Executive Officer and Chief Financial Officer, as authorized by the Board of Directors, implement this policy based on the established guidelines within the written policy.

~~Westfield Bank’s~~

Our investment policy is designed primarily to manage the interest rate sensitivity of ~~its~~our assets and liabilities, to generate a favorable return without incurring undue interest rate and credit risk, to complement ~~its~~our lending activities and to provide and maintain liquidity within the range established by policy. In determining ~~Westfield Bank’s~~our investment strategies, ~~it considers its~~we consider our interest rate sensitivity, yield, credit risk factors, maturity and amortization schedules, and other characteristics of the securities to be held.

Federally-chartered savings banks have authority to invest in various types of assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises, mortgage-backed securities, certain certificates of deposit of insured financial institutions, repurchase agreements, overnight and ~~short term~~short-term loans to other banks and corporate debt instruments.

Securities Portfolio.~~Westfield Financial classifies~~ In August 2010, we transferred all of our held-to-maturity securities ~~as held~~ to ~~maturity or available for sale at~~ the ~~date of purchase. Westfield Financial does not have any~~available-for-sale category. We determined that we no longer had the positive intent to hold our securities classified as ~~trading. Held~~held-to-maturity for an indefinite period of time because of our desire to ~~maturity~~have more flexibility in managing the investment portfolio. The securities ~~are reported~~transferred had a total amortized cost of $287.1 million and a fair value of $299.7 million, and the net unrealized gain of $12.6 million was recorded as other comprehensive income at ~~cost, adjusted for amortization~~the time of ~~premium and accretion of discount.~~transfer. Available for sale securities are reported at fair value. At December 31, ~~2008, held to maturity securities totaled $247.6 million, or 49.0% of~~2010, the ~~total~~entire securities portfolio was classified as available-for-sale and ~~available for sale investments~~ totaled ~~$258.2 million, or 51.0% of Westfield Financial’s total securities portfolio.~~

$644.1 million.

~~Westfield Financial invests~~

We invest in ~~Government-sponsored~~government-sponsored enterprise debt securities, the majority of which have average lives of less than five years. ~~Westfield Financial~~We also ~~invests~~invest in municipal bonds issued by cities and towns in Massachusetts ~~and~~that are rated as investment grade by Moody’s, Standard and Poor’s, or Fitch, ~~and~~ the majority of which are also independently insured. These securities generally have maturities between seven and 20 years; however, many have earlier call dates. In addition, ~~Westfield Financial has~~we have investments in Federal Home Loan Bank stock and mutual funds that invest only in securities allowed by the ~~Office of Thrift Supervision.~~

OTS.

~~Westfield Financial’s~~

Our mortgage-backed securities, the majority of which are directly or indirectly insured or guaranteed by Freddie Mac, Ginnie Mae or Fannie Mae, consist of both fixed rate and adjustable rate securities primarily with average lives of less than five years. At December 31, ~~2008, Westfield Financial~~2010, we owned ~~$37.5~~$7.6 million in Collateralized Mortgage Obligations which were rated AAA by Standard and Poors, the majority of which are privately issued. The securities have gross unrealized losses of $11.4 million at December 31, 2008. Management has determined that an orderly and active market for these securities did not exist based upon a reduction in trading volume and widening spreads during the third quarter of 2008. Based upon detailed analysis, management believes it is probable that all principal and interest will be collected according to the contractual terms of the securities and no d eclines are other than temporary at December 31, 2008. Management will continually monitor these securities for deterioration in delinquency, loss rates and real estate values as this may increase the probability that a loss will be incurred.

private-label residential mortgage-backed securities.

The following table sets forth the composition of ~~Westfield Bank’s~~our securities portfolio at the dates indicated.

At December 31,

2008

2007

2006

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

Amortized
Cost

Fair
Value

(In thousands)
Debt Securities:

Government-sponsored enterprises
$    60,924

$    64,105

$  101,906

$  103,638

$    81,916

$    81,242
Municipal bonds
36,354

36,655

32,993

33,402

30,204

30,387
Total securities
97,278

100,760

134,899

137,040

112,120

111,629

Mortgage-backed securities:

Fannie Mae
195,307

196,080

176,416

176,928

150,547

148,310
Freddie Mac
120,596

122,078

141,662

142,535

90,972

90,477
Ginnie Mae
48,293

47,977

15,882

15,883

22,060

21,695
Collateralized mortgage obligations
48,916

36,328

45,844

45,382

27,336

27,169

Total mortgage-backed securities
413,112

402,463

379,804

380,728

290,915

287,651

Marketable equity securities
6,301

6,127

7,364

6,840

7,260

6,996

Total securities
$  516,691

$  509,350

$  522,067

$  524,608

$  410,295

$  406,276

At December 31,
2010 2009 2008
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
(In thousands)
Debt securities:
Government-sponsored enterprises $ 18,447 $ 17,864 $ 45,884 $ 47,358 $ 60,924 $ 64,105
Municipal bonds 42,119 43,077 36,316 37,774 36,354 36,655
Total debt securities 60,566 60,941 82,200 85,132 97,278 100,760

Mortgage-backed securities:
Government sponsored residential mortgage-backed 381,436 380,984 494,324 500,659 315,903 318,158
U.S. government guaranteed residential mortgage-backed 192,609 187,676 17,364 17,333 48,293 47,977
Private label residential mortgage-backed 8,251 7,578 15,317 13,068 48,916 36,328
Total mortgage-backed securities 582,296 576,238 527,005 531,060 413,112 402,463

Marketable equity securities
Mutual funds 6,949 6,913 6,561 6,489 6,231 6,088
Common and preferred stock 70 47 70 59 70 39
Total marketable equity securities 7,019 6,960 6,631 6,548 6,301 6,127

Total securities $ 649,881 $ 644,139 $ 615,836 $ 622,740 $ 516,691 $ 509,350

Mortgage-Backed Securities. The following table sets forth the amortized cost and fair value of ~~Westfield Bank’s~~our mortgage-backed securities, which are classified as available for sale or held to maturity at the dates ~~indicated.~~

At December 31,

2008

2007

2006

Amortized
Cost

Percent of
Total

Fair
Value

Amortized
Cost

Percent of
Total

Fair
Value

Amortized
Cost

Percent of
Total

Fair
Value

(Dollars in thousands)
Mortgage-backed securities available
    for sale:

Fannie Mae
$  105,397

25.51
%

$  105,304

$    74,062

19.50
%

$    74,658

$    47,203

16.23
%

$    46,730
Freddie Mac
56,529

13.68

56,972

86,411

22.75

87,202

49,554

17.03

49,378
Ginnie Mae
40,401

9.78

40,424

5,674

1.49

5,687

8,635

2.97

8,543
Collateralized mortgage obligations
42,453

10.28

31,047

39,063

10.28

38,631

22,430

7.71

22,291
Total mortgage-backed securities
    available for sale
244,780

59.25

233,747

205,210

54.02

206,178

127,822

43.94

126,942

Mortgage-backed securities held to
    maturity:

Fannie Mae
89,910

21.77

90,776

102,354

26.95

102,270

103,344

35.52

101,580
Freddie Mac
64,067

15.51

65,106

55,251

14.55

55,333

41,418

14.24

41,099
Ginnie Mae
7,892

1.91

7,553

10,208

2.69

10,196

13,425

4.61

13,152
Collateralized mortgage obligations
6,463

1.56

5,281

6,781

1.79

6,751

4,906

1.69

4,878
Total mortgage-backed securities
    held to maturity
168,332

40.75

168,716

174,594

45.98

174,550

163,093

56.06

160,709

Total mortgage-backed securities
$  413,112

100.00
%

$  402,463

$  379,804

100.00
%

$  380,728

$  290,915

100.00
%

$  287,651

indicated.

At December 31,
2010 2009 2008
Amortized
Cost Percent of
Total Fair
Value Amortized
Cost Percent of
Total Fair
Value Amortized
Cost Percent of
Total Fair
Value
(Dollars in thousands)
Available for sale:
Government sponsored residential $ 381,436 65.50 % $ 380,984 $ 289,840 55.00 % $ 290,248 $ 161,926 39.20 % $ 162,276
U.S. government guaranteed residential 192,609 33.08 187,676 1,030 0.19 1,047 40,401 9.78 40,424
Private label residential 8,251 1.42 7,578 10,368 1.97 8,510 42,453 10.28 31,047
Total available for sale 582,296 100.00 576,238 301,238 57.16 299,805 244,780 59.26 233,747

Held to maturity:
Government sponsored residential - - - 204,484 38.80 210,411 153,977 37.27 155,882
U.S. government guaranteed residential - - - 16,334 3.10 16,286 7,892 1.91 7,553
Private label residential - - - 4,949 0.94 4,558 6,463 1.56 5,281
Total held to maturity - - - 225,767 42.84 231,255 168,332 40.74 168,716

Total mortgage-backed securities $ 582,296 100.00 % $ 576,238 $ 527,005 100.00 % $ 531,060 $ 413,112 100.00 % $ 402,463

Securities Portfolio Maturities. The composition and maturities of the debt securities portfolio ~~(debt securities)~~ and the mortgage-backed securities portfolio at December 31, ~~2008~~2010 are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or redemptions that may occur.

One Year or Less

More than One Year
through Five Years

More than Five Years
through Ten Years

More than Ten Years

Total Securities

Amortized
Cost

Weighted
Average
Yield

Amortized
Cost

Weighted
Average
Yield

Amortized
Cost

Weighted
Average
Yield

Amortized
Cost

Weighted
Average
Yield

Amortized
Cost

Fair
Value

Weighted
Average
Yield

(Dollars in thousands)
Securities available for sale:

Government-sponsored enterprises
$           -

-
%

$      5,018

5.41
%

$              -

-
%

$    11,000

5.00
%

$    16,018

$    16,299

4.52
%
Municipal bonds
-

-

-

-

850

4.04

1,107

4.04

1,957

1,970

3.89

Total securities
-

-

5,018

5.41

850

4.04

12,107

4.91

17,975

18,269

4.45

Mortgage-backed securities
  available for sale:

Ginnie Mae
-

-

-

-

-

-

40,401

5.46

40,401

40,424

5.46

Fannie Mae
-

-

-

-

3,411

4.65

101,986

5.31

105,397

105,304

5.28

Freddie Mac
-

-

-

-

-

-

56,529

5.28

56,529

56,972

5.21

Collateralized mortgage obligations
-

-

-

-

2,091

5.39

40,362

5.18

42,453

31,047

9.56

Total mortgage-backed securities
-

-

-

-

5,502

4.93

239,278

5.31

244,780

233,747

5.86

Total
$           -

-
%

$      5,018

5.41
%

$      6,352

4.81
%

$  251,385

5.29
%

$  262,755

$  252,016

5.76
%

Securities held to maturity:

Government-sponsored enterprises
$           -

-
%

$    15,092

5.56
%

$    29,814

5.08
%

$              -

-
%

$    44,906

$    47,806

3.95

Municipal bonds
-

-

5,838

3.61

14,300

4.07

14,259

4.33

34,397

34,685

3.87

Total investment securities
-

-

20,930

5.02

44,114

4.75

14,259

4.33

79,303

82,491

3.92
%

Mortgage-backed securities
  held to maturity:

Ginnie Mae
1

(1.42)

203

4.17

-

-

7,688

4.02

7,892

7,553

4.44

Fannie Mae
825

(2.60)

5,550

3.02

5,185

4.44

78,350

5.08

89,910

90,776

4.82

Freddie Mac
138

(41.98)

2,270

1.26

-

-

61,659

5.33

64,067

65,106

4.79

Collateralized mortgage obligations
-

-

-

-

-

-

6,463

5.45

6,463

5,281

7.70

Total mortgage-backed securities
964

(8.24)

8,023

2.55

5,185

4.44

154,160

5.14

168,332

168,716

4.88

Total
$      964

(8.24)
%

$    28,953

4.33
%

$    49,299

4.72
%

$  168,419

5.07
%

$  247,635

$  251,207

4.56
%

	One Year or Less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total Securities
	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Debt securities:
Government-sponsored enterprises	$	-	-	%	$	8,497	2.02	%	$	-	-	%	$	9,950	3.24	%	$	18,447	$	17,864	2.68	%
Municipal bonds		896	3.43			9,814	3.69			21,361	3.94			10,048	4.39			42,119		43,077	3.98
Total debt securities		896	3.43			18,311	2.92			21,361	3.94			19,998	3.82			60,566		60,941	3.59

Mortgage-backed securities:
Government sponsored residential mortgage- backed		3	5.00			981	4.11			17,476	3.28			362,976	3.10			381,436		380,984	3.11
U.S. government guaranteed residential mortgage-backed		-	-			74	1.95			-	-			192,535	2.92			192,609		187,676	2.92
Private label residential mortgage-backed		-	-			-	-			-	-			8,251	5.73			8,251		7,578	5.73
Total mortgage- backed securities		3	5.00			1,055	3.96			17,476	3.28			563,762	3.07			582,296		576,238	3.08

Total	$	899	3.44	%	$	19,366	2.97	%	$	38,837	3.64	%	$	583,760	3.10	%	$	642,862	$	637,179	3.13	%

Sources of Funds

General. Deposits, short-term borrowings, long-term debt, scheduled amortization and prepayments of loan principal, maturities and calls of ~~investments~~ securities and funds provided by operations are ~~Westfield Bank’s~~our primary sources of funds for use in lending, investing and for other general purposes. See“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Deposits. ~~Westfield Bank offers~~ We offer a variety of deposit accounts having a range of interest rates and terms. ~~Westfield Bank~~We currently ~~offers~~offer regular savings deposits (consisting of passbook and statement savings accounts), NOW accounts, noninterest-bearing demand accounts, money market accounts and time deposits. ~~Westfield Bank has~~We have expanded the types of deposit products that ~~it offers~~we offer to include jumbo certificates of deposit, tiered money market accounts and customer repurchase agreements to ~~compliment its~~complement our increased emphasis on attracting commercial banking relationships.

Deposit flows are influenced significantly by general and local economic conditions, changes in prevailing interest rates, pricing of deposits and competition. ~~Westfield Bank’s~~Our deposits are primarily obtained from areas surrounding ~~its~~our offices. ~~Westfield Bank relies~~We rely primarily on paying competitive rates, service and long-standing relationships with customers to attract and retain these deposits. ~~Westfield Bank does not use brokers to obtain deposits.~~

When ~~Westfield Bank determines its~~we determine our deposit rates, ~~it considers~~we consider local competition, U.S. Treasury securities offerings and the rates charged on other sources of funds. Core deposits (defined as regular accounts, money market accounts, NOW accounts and demand accounts) represented ~~44.3%~~49.5% of total deposits on December 31, ~~2008~~2010 and ~~41.4%~~47.1% on December 31, ~~2007.~~2009. At December 31, ~~2008~~2010 and December 31, ~~2007,~~2009, time deposits with remaining terms to maturity of less than one year amounted to ~~$245.9~~$236.9 million and ~~$266.2~~$242.3 million, respectively. See“Management’s Discussion and Analysis of Financial Condition and Results of Operations — Net Interest and Dividend Income” for information relating to the average balances and costs of ~~Westfield Bank’s~~our deposit accounts for the years ended December 31, ~~2008, 2007~~2010, 2009 and ~~2006.~~

2008.

Deposit Distribution and Weighted ~~Average.~~Average Rates. The following table sets forth the distribution of ~~Westfield Bank’s~~our deposit accounts, by account type, at the dates ~~indicated.~~

indicated.

At December 31,

2008

2007

2006

Amount

Percent

Weighted
Average
Rates

Amount

Percent

Weighted
Average
Rates

Amount

Percent

Weighted
Average
Rates

(Dollars in thousands)
Demand deposits
$    50,860

8.65
%

-
%

$    42,408

7.04
%

-
%

$    42,383

6.75
%

-
%
NOW accounts
83,788

14.25

1.17

85,316

14.15

1.62

80,527

12.83

1.40

Regular Accounts
68,085

11.58

1.05

47,072

7.81

1.24

36,110

5.76

0.50

Money Market Accounts
57,655

9.80

0.94

74,601

12.38

1.24

94,441

15.05

1.51

Total non-certificated accounts
260,388

44.28

0.86

249,397

41.38

1.16

253,461

40.39

1.08

Time certificates of deposit

Due within 1 year
245,939

41.83

3.30

266,234

44.18

4.49

270,026

43.04

4.40

Over 1 year through 3 years
78,627

13.37

3.82

79,806

13.24

4.26

91,201

14.53

4.33

Over 3 years
3,075

0.52

3.43

7,239

1.20

4.50

12,778

2.04

4.56

Total certificated accounts
327,641

55.72

3.43

353,279

58.62

4.44

374,005

59.61

4.39

Total
$  588,029

100.00
%

2.29
%

$  602,676

100.00
%

3.08
%

$  627,466

100.00
%

3.05
%

At December, 31
2010 2009 2008
Amount Percent Weighted
Average
Rates Amount Percent Weighted
Average
Rates Amount Percent Weighted
Average
Rates
(Dollars in thousands)

Demand deposits $ 85,217 12.17 % - % $ 80,110 12.36 % - % $ 50,860 8.65 % - %
Now accounts 83,621 11.94 1.08 70,462 10.87 1.42 83,788 14.25 1.17
Regular accounts 101,333 14.47 0.62 104,650 16.15 0.88 68,085 11.58 1.05
Money market accounts 76,184 10.88 0.57 50,120 7.74 0.74 57,655 9.80 0.94
Total non-certificate accounts 346,355 49.46 0.57 305,342 47.12 0.75 260,388 44.28 0.86

Time certificates of deposit:
Due within the year 236,926 33.83 1.79 242,318 37.40 2.41 245,939 41.83 3.30
Over 1 year through 3 years 72,582 10.36 2.22 85,867 13.25 2.65 78,627 13.37 3.82
Over 3 years 44,472 6.35 2.62 14,448 2.23 2.02 3,075 0.52 3.43
Total certificate accounts 353,980 50.54 1.98 342,633 52.88 2.45 327,641 55.72 3.43

Total $ 700,335 100.00 % 1.28 % $ 647,975 100.00 % 1.65 % $ 588,029 100.00 % 2.29 %

Certificate of Deposit Maturities.At December 31, ~~2008, Westfield Bank~~2010, we had ~~$ 86.7~~$115.5 million in time certificates of deposit with balances of $100,000 and over maturing as follows:

Maturity Period	Amount		Weighted Average Rate
	(In thousands)

3 months or less	$	24,971		2.21	%
Over 3 months through 6 months		18,187		1.80
Over 6 months through 12 months		31,929		1.55
Over 12 months		40,458		2.40
Total	$	115,545		2.03	%

Maturity Period

Amount

Weighted
Average
Rate

(Dollars in Thousands)

Three months or less

$ 11,134

3.36
%
Over three months through six months

24,274

3.22

Over six months through 12 months

30,388

3.50

Over 12 months

20,904

3.91

Total

$ 86,700

3.50
%

Certificate of Deposit Balances by Rates. The following table sets forth, by interest rate ranges, information concerning ~~Westfield Bank’s~~our time certificates of deposit at the dates indicated.

At December 31, 2008

Period to Maturity

Less than
One Year

One to Two
Years

Two to
Three Years

More than
Three Years

Total

Percent
of Total

(Dollars in thousands)

2.00% and under
$      11,805

$             6

$           10

$           4

$      11,825

3.61
%
2.01% to 3.00%
55,063

4,484

3,769

189

63,505

19.38

3.01% to 4.00%
134,020

27,022

16,344

2,207

179,593

54.82

4.01% to 5.00%
38,269

17,042

7,260

675

63,246

19.30

5.01% and over
6,782

2,690

-

-

9,472

2.89

Total
$    245,939

$    51,244

$    27,383

$    3,075

$    327,641

100.00
%

	At December 31, 2010
	Period to Maturity
	Less than One Year		One to Two Years		Two to Three Years		More than Three Years		Total		Percent of Total
	(Dollars in thousands)

2.00% and under	$	187,799	$	16,659	$	16,011	$	8,853	$	229,322		64.78	%
2.01% to 3.00%		23,161		12,373		24,771		35,481		95,786		27.06
3.01% to 4.00%		18,895		2,001		45		138		21,079		5.96
4.01% to 5.00%		7,071		323		399		-		7,793		2.20
Total	$	236,926	$	31,356	$	41,226	$	44,472	$	353,980		100.00	%

Short-term borrowings and long-term debt. ~~Westfield Bank~~ We also ~~utilizes~~utilize short-term borrowings and long-term debt as an additional source of funds to finance ~~Westfield Bank’s~~our lending and investing activities and to provide liquidity for daily operations. Short-term borrowings are made up of ~~Federal Home Loan Bank~~FHLBB 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 ~~Federal Home Loan Bank~~FHLBB were ~~$28.5~~$50.6 million at December 31, ~~2008~~2010 and ~~$18.4~~$58.0 million at December 31, ~~2007. Westfield Bank’s~~2009. Our repurchase agreements are with commercial customers. These agreements are linked to customers’ checking accounts. Excess funds are swept out of certain commercial checking accounts and into repurchase agreements where the customers can earn interest on their funds. By law, a bank cannot pay interest on commercial checking accounts; however, interest can be paid on non-deposit products such as repurchase agreements. At December 31, ~~2008~~2010 and ~~2007,~~2009, such repurchase ~~agreements~~agreement borrowings totaled ~~$21.3~~$12.3 million and ~~$16.8~~$16.5 million, respectively.

Long-term debt consists of ~~FHLB~~FHLBB advances, ~~and~~ securities sold under repurchase agreements and customer repurchase agreements with an original maturity of one year or more. At December 31, ~~2008, Westfield Bank~~2010, we had ~~$115.0~~$151.6 million in long-term debt with the ~~FHLB and $58.3~~FHLBB, $81.3 million in securities sold under repurchase agreements with an approved ~~broker-dealer.~~broker-dealer and $5.2 million in long-term customer repurchase agreements. This compares to ~~$105.0~~$127.5 million in ~~FHLB~~FHLBB advances and no$81.3 million in securities sold under repurchase agreements with an approved broker-dealer and $5.0 million in long-term customer repurchase agreements at December 31, ~~2007.~~2009. At December 31, ~~2008,~~2010, securities sold under repurchase agreements of ~~$58.3~~$81.3 million were executed with a weighted average interest rate of ~~2.62%~~2.8% and final maturities of ~~$9.8~~$14.8 million in the year 2013, $28.0 million in the year 2014, and ~~$48.5~~$38.5 million in the year 2018. The securities sold under agreements to repurchase are callable at the issuer’s option beginning in the years ~~2009~~2011 to 2012.

Personnel

As of December 31, ~~2008, Westfield Bank~~2010, we had ~~140~~153 full-time employees and 4739 part-time employees. The employees are not represented by a collective bargaining unit, and ~~Westfield Bank considers its~~we consider our relationship with ~~its~~our employees to be excellent.

REGULATION

~~TAXATION~~

~~Federal~~

General. The following discussion is intended as only a summary and does not purport to be a comprehensive description of the tax rules applicable to Westfield Bank or Westfield Financial. For federal income tax purposes, Westfield Bank reports its income on the basis of a taxable year ending December 31, using the accrual method of accounting, and Westfield Financial is generally subject to federal income taxation in the same manner as other corporations. Since December 27, 2001, Westfield Bank and Westfield Financial have constituted an affiliated group of corporations and, therefore, have reported their income on a consolidated basis. The tax years up to and including the year ended December 31, 2004 are closed.

~~Distributions~~. To the extent that Westfield Bank makes “non-dividend distributions” to stockholders, such distributions will be considered to result in distributions from Westfield Bank’s unrecaptured tax bad debt reserve “base year reserve” (i.e. its reserve as of December 31, 1987), to the extent thereof and then from its supplemental reserve for losses on loans, and an amount based on the amount distributed, but no more than the amount of these reserves, will be included in Westfield Bank’s taxable income. Non-dividend distributions include distributions in excess of Westfield Bank’s current and accumulated earnings and profits, distributions in redemption of stock and distributions in partial or complete liquidation. However, dividends paid out of Westfield Bank’s current or accumulated earnings and profits, as calculated for federal income tax purposes, will not constitute non- dividend distributions and, therefore, will not be included in Westfield Bank’s income.

The amount of additional income created from a non-dividend distribution is equal to the lesser of Westfield Bank’s base year reserve and supplemental reserve for losses on loans or an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, in some situations, approximately one and one-half times the non-dividend distribution would be includible in gross income for federal income tax purposes, assuming a 34% federal corporate income tax rate. Westfield Bank does not intend to pay dividends that would result in the recapture of any portion of the bad debt reserves.

~~Corporate Alternative Minimum Tax~~. The alternative minimum tax rules have been devised to ensure that at least a minimum amount of income tax is paid by high-income corporate taxpayers who take advantage of substantial tax savings due to the use of certain tax deductions and exemptions. In essence, the alternative minimum tax functions as a recapture mechanism, reclaiming some of the tax deductions and credits utilized by these taxpayers when calculating their regular federal income tax liability. In general, a corporation’s alternative minimum taxable income is equal to its regular taxable income, increased by its preference items for the year and adjusted by computing certain items under special rules that negate the acceleration of certain tax benefits which are available under the regular tax rules. The alternative minimum tax rate is 20%. Such preference items include adjustments for tax exempt interest, inside build-up of life insurance policies and accelerated depreciation deductions. During the past five years, we have not been subject to alternative minimum tax and therefore have no alternative minimum tax net operating losses or credit to utilize.

~~Elimination of Dividends; Dividends Received Deduction~~~~. Westfield Financial may exclude from its income 100% of dividends received from Westfield Bank as a member of the same affiliated group of corporations.~~

~~Net Operating Losses~~. A financial institution may carry back net operating losses to the preceding two taxable years and forward to the succeeding twenty taxable years. At December 31, 2008, Westfield Financial had no net operating loss carry forwards for federal income tax purposes.

~~State~~

Until 2009, financial institutions in Massachusetts were not allowed to file consolidated income tax returns. Instead, each entity in the consolidated group files a separate annual income tax return. Beginning in 2009, Westfield Financial and Westfield Bank will be required to file a combined return pursuant to a Massachusetts law change enacted in July 2008. The security corporation subsidiaries will continue to file separately. The Massachusetts excise tax rate for savings banks is currently 10.5% of federal taxable income, adjusted for certain items. Taxable income includes gross income as defined under the Internal Revenue Code, plus interest from bonds, notes and evidences of indebtedness of any state, including Massachusetts, less deductions, but not the credits, allowable under the provisions of the Internal Revenue Code, except for those deductions relating to dividends received and income or franchise taxes imposed by a state or political subdivision. Carryforwards and carrybacks of net operating losses and capital losses are not allowed.

Due to the legislative change referred to above, beginning in 2010 the Massachusetts financial institution tax rate will decrease by 0.5% each year for three years until 2012, when it will become 9% and will remain at that rate. Westfield Financial’s subsidiaries, Elm Street Securities Corporation and WFD Securities Corporation are taxed as Massachusetts security corporations, and are subject to a state tax rate of 1.32% of gross income.

~~Westfield Financial’s state tax returns, as well as those of its subsidiaries, are not currently under audit.~~

~~REGULATION~~

~~General~~. As a federally-chartered savings bank, ~~Westfield~~the Bank is currently subject to regulation, examination, and supervision by the ~~Office of Thrift Supervision~~OTS as its chartering authority, and the Federal Deposit Insurance Corporation (“FDIC”) as its deposit insurer. ~~Westfield~~The Bank must file reports with the ~~Office of Thrift Supervision~~OTS and the FDIC describing ~~its~~our activities and financial condition. ~~Westfield~~The Bank is also subject to certain reserve and other requirements promulgated by the Federal Reserve Board. This supervision and regulation is intended primarily for the protection of depositors’ funds, federal deposit insurance funds and the banking system as a whole, not shareholders.

As the holding company of a savings bank, Westfield Financial is ~~a savings and loan holding company~~also regulated by the ~~Office of Thrift Supervision.~~OTS. As such, Westfield Financial is registered with and subject to ~~Office of Thrift Supervision~~OTS examination and supervision, as well as certain ~~Office of Thrift Supervision~~OTS reporting requirements. In addition, the ~~Office of Thrift Supervision~~OTS has enforcement authority over Westfield Financial and Westfield Financial’s ~~non-savings association~~non-savings-association subsidiaries. Among other things, this authority permits the ~~Office of Thrift Supervision~~OTS to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of a subsidiary savings association. Unlike bank holding companies, federal savings and loan holding companies are currently not subject to any regulatory capital requirements or to supervision by the Federal Reserve Board. Westfield Financial also is required to file reports with the ~~Office of Thrift Supervision~~OTS and the ~~Securities and Exchange Commission,~~SEC, and otherwise comply with the rules and regulations of the ~~Office of Thrift Supervision~~OTS and the ~~Securities and Exchange Commission~~SEC under federal securities laws.

~~The Office~~

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or “Dodd-Frank”), enacted on July 21, 2010, the OTS will be abolished as of ~~Thrift Supervision~~July 21, 2011 (the “Transfer Date”) and ~~the FDIC have significant discretion in connection with their supervisory~~its powers and ~~enforcement activities and examination policies. Any change in such policies, whether by~~duties transferred to the Office of ~~Thrift Supervision,~~ the ~~FDIC,~~Comptroller of the ~~Securities~~Currency (“OCC”) as to savings banks and ~~Exchange Commission or~~other thrifts, and to the ~~United States Congress, could have a material adverse impact~~Federal Reserve Board as to the holding companies of thrifts. Therefore, Westfield Financial will be regulated by the Federal Reserve Board, and the Bank will be regulated by the OCC. We cannot predict, at this point, what effect on ~~Westfield Bank and Westfield Financial’s~~our operations ~~and stockholders.~~

will result from this change in supervision.

The following discussion is intended to be a summary of ~~the~~selected material statutes and regulations currently applicable to federal savings banks and their holding companies, and it does not purport to be a comprehensive description of all such statutes and regulations.

Federal and state regulators also have significant discretion in connection with their supervisory and enforcement activities and examination policies. Any change in such policy, whether by the OTS, the FDIC, the Federal Reserve Board, the OCC, the SEC, the United States Congress, or any other governmental or regulatory authority, could have a material adverse impact on the Bank and Westfield Financial’s operations and shareholders. We also cannot predict what if any changes to our obligations under these statutes and regulations may be made by our new regulators.

Regulation of Federal Savings Banks

OCC Regulation. As of July 21, 2011, the Bank will be regulated by the OCC rather than the OTS, as the OTS will be abolished as of that date pursuant to the Dodd-Frank Act. On that date, the powers of the OTS as to thrift holding companies will be transferred to the Federal Reserve Board, and to the OCC as to thrifts. Until July 21, 2011, the Bank will continue to be regulated by the OTS.

Business Activities. ~~Westfield~~ The Bank derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and ~~Office~~the regulations of ~~Thrift Supervision regulations. The Home Owners’ Loan Act~~the OTS thereunder. Those laws and ~~the Office of Thrift Supervision~~ regulations ~~also~~ limit ~~Westfield~~the Bank’s authority to invest in certain types of ~~loans or other investments.~~assets and to make certain types of loans. Permissible investments include, but are not limited to, mortgage loans secured by residential and commercial real estate, commercial and consumer loans, certain types of debt securities, and certain other assets. ~~Westfield~~The Bank may also establish service corporations that may engage in activities not otherwise permissible for ~~Westfield~~the Bank, including certain real estate equity investments and securities and insurance brokerage.

Loans to One Borrower. ~~Westfield Bank is generally subject to the same limits on loans to one borrower as is~~Generally, a ~~national bank. With specified exceptions, Westfield Bank’s total loans~~federal savings bank may not make a loan or ~~extensions of~~extend credit to a single borrower ~~cannot exceed~~or related group of borrowers in excess of 15% of ~~Westfield Bank’s~~unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include ~~accumulated other comprehensive income. Westfield Bank may lend additional amounts up~~real estate. As of December 31, 2010, we were in compliance with these limitations on loans to 10% of its unimpaired capital and surplus which does not include accumulated other comprehensive income, if the loans or extensions of credit are fully-secured by readily-marketable collateral. Westfield Bank currently complies with applicable loans-to-one borrower limitations.

one borrower.

Qualified Thrift Lender Test. The ~~Home Owners’ Loan Act requires that Westfield~~ Bank as a savings association, comply with the qualified thrift lender test. Under the qualified thrift lender test, Westfield Bank is required to maintain at least 65% of its portfolio assets in certain “qualified thrift investments” in at least nine months of the most recent twelve-month period. “Portfolio assets” means, in general, Westfield Bank’s total assets less the sum of:

•

~~specified liquid assets up to 20% of total assets;~~

•

~~goodwill and other intangible assets; and~~

•

~~the value of property used to conduct Westfield Bank’s business.~~

~~Westfield Bank also may satisfy the qualified thrift lender test by qualifying~~must either qualify as a domestic building and loan association ~~as defined in~~under the Internal Revenue Code, or maintain an appropriate level of ~~1986. If Westfield~~certain investments, called “Qualified Thrift Investments” (“QTIs”), to remain a “Qualified Thrift Lender” (“QTL”). QTIs must represent 65% or more of portfolio assets on a monthly average basis during 9 out of every 12 months on a continuous basis. Failure by the Bank to maintain its status as a QTL would result in the following restrictions on operations: (i) we would not be able to engage in any new activity or make any new investment, directly or indirectly, unless such activity or investment was permissible for both national banks and thrift institutions; (ii) the branching powers of the Bank would be restricted to those of a national bank; and (iii) payment of dividends would be subject to the rules regarding payment of dividends by a national bank. Additional restrictions would apply three years after we ceased to be a QTL, including requirements to dispose of certain assets not permissible for national banks and to cease engaging in activities not permissible for national banks. A thrift institution that fails to maintain its QTL status will be permitted to requalify once, and if it fails the ~~qualified thrift lender~~QTL test ~~and is unable to correct that failure for~~ a ~~period of~~second time, it ~~must either operate under certain~~will become immediately subject to all restrictions ~~on its activities or convert~~described above as if all time periods prior to ~~a bank charter.~~

~~Westfield Bank met the qualified thrift lender test at~~such restrictions becoming effective had expired. At December 31, ~~2008 and in each of~~2010, our QTL ratio was 80.0%, which exceeded the ~~prior 12 months, and, therefore, is a “qualified thrift lender.”~~

requirement.

Capital Requirements. ~~Office of Thrift Supervision~~ The OTS regulations require ~~Westfield~~the Bank to meet ~~three~~the following minimum capital standards:

~~(1)~~

~~a tangible capital ratio requirement of 1.5% of total assets as adjusted under Office of Thrift Supervision regulations;~~

(1)

a tangible capital ratio requirement of 2.0% of total assets as adjusted under OTS regulations;

(2)

a leverage ratio of 3% of core capital to such adjusted total assets, if a savings association has been assigned the highest composite rating of 1 under the Uniform Financial Institutions Rating System; otherwise, the minimum leverage capital ratio for any other depository institution that does not have a composite rating of 1 will be 4%, unless a higher leverage capital ratio is warranted by the particular circumstances or risk profile of the depository institution;

(3)

a Tier 1 risk-based capital ratio of 4.0%; and

(4)

a risk-based capital ratio requirement of 8% of core and supplementary capital to total risk-based assets, provided that the amount of supplementary capital used to satisfy this requirement may not exceed the amount of core capital.

~~(2)~~

a leverage ratio requirement of 3% of core capital to such adjusted total assets, if a savings association has been assigned the highest composite rating of 1 under the Uniform Financial Institutions Rating System; and

~~(3)~~

The minimum leverage capital ratio for any other depository institution that does not have a composite rating of 1 will be 4%, unless a higher leverage capital ratio is warranted by the particular circumstances or risk profile of the depository institution.

In determining the amount of risk-weighted assets for purposes of the risk-based capital requirement, a savings association must compute its risk-based assets by multiplying its assets and certain off-balance sheet items by ~~risk-weights,~~risk weights, which range from 0% for cash and obligations issued by the United States Government or its agencies to 100% for consumer and commercial loans, as assigned by the ~~Office of Thrift Supervision~~OTS capital regulation based on the risks found by the ~~Office of Thrift Supervision~~OTS to be inherent in the type of asset.

Tangible capital is defined, generally, as common stockholders’ equity (including retained earnings)~~, certain~~; non-cumulative perpetual preferred stock and related ~~earnings,~~earnings; nonwithdrawable accounts and pledged deposits that would qualify as core capital; and minority interests in equity accounts of fully consolidated subsidiaries, less ~~intangibles (other than~~deductions such as certain ~~mortgage servicing rights), and investments in and loans to subsidiaries engaged in activities not permissible for a national bank.~~intangible assets. Core capital (or Tier 1 capital) is defined similarly to tangible capital, but core capital also includes other elements such as certain qualifying supervisory ~~goodwill and certain purchased credit card relationships.~~goodwill. Supplementary capital (or Tier 2 capital) ~~currently~~ includes elements such as cumulative and other preferred ~~stock,~~stock; mandatory convertible debt ~~securities,~~securities; subordinated ~~debt and intermediate preferred stock~~debt; and the allowance for loan and lease ~~losses.~~losses (“ALLL”). In addition, up to 45% of unrealized gains on available-for-sale equity securities with a ~~readi ly~~readily determinable fair value may be included in Tier 2 capital. The ~~allowance for loan and lease losses~~ALLL includable in Tier 2 capital is limited to a maximum of 1.25% of risk-weighted assets.

At December 31, ~~2008, Westfield Bank met~~2010, we exceeded each of ~~its capital requirements, in each case on a fully phased-in basis. The table below presents Westfield Bank’s~~the applicable regulatory capital ~~as compared to the OTS regulatory capital requirements at December 31, 2008:~~

requirements.

Bank
Capital
Requirements
Excess
Capital

(In thousands)

Tangible capital
20.51%
16,070
203,674
Core capital
20.51%
42,854
176,890
Risk-based capital
35.55%
50,930
175,387

Community Reinvestment. Under the Community Reinvestment Act (“CRA”), as implemented by ~~Office of Thrift Supervision~~the OTS regulations, ~~Westfield~~the Bank has a continuing and affirmative obligation, consistent with safe and sound banking practices, to help meet the credit needs of its entire community, including ~~low and moderate income neighborhoods.~~low-and moderate-income neighborhoods (“LMI”). The ~~Community Reinvestment Act~~CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its

particular community, so long as such practices are consistent with the ~~Community Reinvestment Act.~~CRA. The ~~Community Reinvestment Act~~CRA requires the ~~Office of Thrift Supervision,~~OTS, in connection with its examination of a savings association, to assess ~~Westfield~~the Bank’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by ~~Westfield~~the Bank.

The ~~Community Reinvestment Act~~CRA regulations establish an assessment system that bases an association’s rating on its actual performance in meeting community needs. In particular, the assessment system focuses on three tests:

•

~~a lending test, to evaluate the institution’s record of making loans in its assessment areas;~~

●

a lending test, to evaluate the institution’s record of making loans in its assessment areas;

•

an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses in its assessment area or a broader area that includes its assessment area; and

●

•

~~a service test, to evaluate the institution’s delivery of services through its retail banking channels and the extent and innovativeness of its community development services.~~

●

a service test, to evaluate the institution’s delivery of services through its retail banking channels and the extent and innovativeness of its community development services.

~~Westfield~~

The Bank received a “Satisfactory” Community Reinvestment Act rating in its most recent examination.

Transactions with Affiliates. ~~Westfield~~ The Bank’s authority to engage in transactions with its ~~“affiliates”~~affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve Board’s Regulation W, as made applicable to federal savings associations by the Home Owners’ Loan Act and the ~~Office of Thrift Supervision regulations.~~OTS regulations, which impose certain additional restrictions on affiliate transactions. In general, these transactions must be on terms that are at least as favorable to Westfield Bank as comparable transactions with non-affiliates. In addition, certain types of these transactions are restricted to an aggregate percentage of ~~Westfield~~the Bank’s capital. Collateral in specified amounts must usually be provided by affiliates in order to receive loans from ~~Westfield~~the Bank. In addition, ~~Office of Thrift Supervision~~the OTS regulations prohibit a savings association from lending to any of its affiliates that engage in activities not permissible for bank ~~holdi ng~~holding companies and from purchasing the securities of any affiliate, other than a subsidiary.

Loans to Insiders. ~~Westfield~~ The Bank’s authority to extend credit to its directors, executive officers and principal ~~stockholders,~~shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board, as made applicable to federal savings associations by the Home Owners’ Loan Act and the ~~Office of Thrift Supervision~~OTS regulations. Among other things, these provisions require that extensions of credit to insiders: (i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and (ii) not exceed certain limitations on the amount of ~~c redit~~credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of ~~Westfield~~the Bank’s capital. In addition, extensions for credit in excess of certain limits must be approved by ~~Westfield~~the Bank’s Board of Directors.

Enforcement. The ~~Office of Thrift Supervision~~OTS has primary enforcement responsibility over savings associations, including ~~Westfield~~the Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist orders and to remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations as well as in response to unsafe or unsound practices.

Standards for Safety and Soundness. ~~Pursuant~~ The Bank is subject to certain standards designed to maintain the ~~Federal Deposit Insurance Act, the Office of Thrift Supervision has adopted a set of guidelines prescribing~~ safety and soundness ~~standards. These guidelines establish general standards relating to internal controls~~of individual banks and information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings standards, compensation, fees and benefits. In general, the ~~guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines.~~

~~In addition, the Office of Thrift Supervision adopted regulations that authorize, but do not require, the Office of Thrift Supervision to order a savings association that~~banking system. The OTS has ~~been given notice that it is not satisfying these~~prescribed safety and soundness guidelines relating to (i) internal controls, information systems and internal audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate exposure; (v) asset growth, concentration, and quality; (vi) earnings; and (vii) compensation and benefit standards for officers, directors, employees and principal stockholders. A savings institution not meeting one or more of the safety and soundness guidelines may be required to ~~submit~~file a compliance ~~plan. If, after being notified, a savings association fails to submit an acceptable~~ plan ~~of compliance or fails in any material respect to implement an accepted plan,~~with the ~~Office of Thrift Supervision must issue an order directing action to correct~~OTS.

Prompt Corrective Action. The federal banking agencies have established by regulation, for each capital measure, the ~~deficiency, may issue an order directing other actions of the types to~~levels at which an ~~undercapitalized association~~insured institution is ~~subject under the “prompt corrective action” provisions of the Federal Deposit Insurance Act. If a savings association fails~~“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” The federal banking agencies are required to ~~comply with such an order, the Office of Thrift Supervision may seek to enforce such order in judicial proceedings and to impose civil money pen alties.~~

~~Prompt Corrective Regulatory Action~~. ~~Pursuant to the Federal Deposit Insurance Act and the Office of Thrift Supervision~~take prompt corrective action ~~regulations,~~with respect to insured institutions that fall below the ~~Office~~“adequately capitalized” level. Any insured depository institution that falls below the “adequately capitalized” level must submit a capital restoration plan, and, if its capital levels further decline or do not increase, will face increased scrutiny and more stringent supervisory action. As of Thrift Supervision is required to take certain, and is authorized to take other, supervisory actions against undercapitalized savings associations. For this purpose, a savings association would be placed in one ofDecember 31, 2010, the ~~following four categories based on~~most recent notification from the ~~association’s capital:~~

•

~~well-capitalized;~~

•

~~adequately capitalized;~~

•

~~undercapitalized; or~~

•

~~critically undercapitalized.~~

~~When appropriate,~~OTS categorized us as “well capitalized” under the ~~Office of Thrift Supervision can require~~prompt corrective action ~~by a savings and loan holding company under the “prompt corrective action” provisions of the Federal Deposit Insurance Act.~~

framework.

~~At December 31, 2008, Westfield Bank met the criteria for being considered “well-capitalized.”~~

Capital Distributions. ~~The Office of~~ Thrift ~~Supervision imposes various restrictions or requirements~~institutions are subject to limitations on ~~Westfield Bank’s~~their ability to make capital distributions ~~including~~such as dividends, stock redemptions or repurchases, cash-out mergers, and other transactions charged to the ~~payment of cash dividends. A savings association that is the subsidiary~~capital account of a ~~savings and loan holding company must file a notice with~~thrift institution. In general, an application to the ~~Office of Thrift Supervision at least 30 days before making a capital distribution. Westfield Bank must file an application~~OTS for prior approval ifto pay a dividend is required when that dividend, combined with all distributions made during the ~~total amount of its capital distributions for the applicable~~ calendar year, would exceed ~~an amount equal to Westfield Bank’s~~a thrift institution’s net income ~~for that year~~year-to-date plus ~~Westfield Bank’s~~ retained net income for the ~~previous~~proceeding two ~~years.~~

~~The Office of Thrift Supervision may disapprove of a notice of application if:~~

•

~~Westfield Bank~~years, or that would cause the thrift institution to be ~~undercapitalized following the distribution;~~

•

~~the proposed capital distribution raises safety and soundness concerns; or~~

•

~~the capital distribution would violate a prohibition contained~~less than adequately capitalized. We are currently in ~~any statute, regulation, or agreement.~~

compliance with this requirement.

Liquidity. ~~Westfield~~ The Bank is required to maintain a sufficient amount of liquid assets to ensure its safe and sound operation.

Insurance of Deposit Accounts. The deposits of the Bank are insured by the FDIC ~~is an independent federal agency that insures deposits,~~ up to ~~prescribed statutory~~the applicable limits ~~of federally insured banks~~established by law and ~~savings institutions and safeguards~~are subject to the ~~safety and soundness~~deposit insurance premium assessments of the banking and savings industries. Previously, the FDIC administered two separate insurance funds, the Bank Insurance Fund (“BIF”), which generally insured commercial bank and state savings bank deposits, and the Savings Association Insurance Fund (“SAIF”), which generally insured savings association deposits.

Under the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”), which was signed into law on February 15, 2006, the Bank Insurance Fund and the Savings Association Insurance Fund were merged into a new combined fund, called the Deposit Insurance Fund ~~(the “DIF”~~(“DIF”). The FDIC ~~was also given greater latitude in setting the~~currently maintains a risk-based assessment system under which assessment rates ~~for insured depository institutions which could be used to impose minimum assessments.~~

Pursuant to the Emergency Economic Stabilization Act of 2008, the maximum deposit insurance amount has been increased from $100,000 to $250,000 until December 31, 2009. On October 13, 2008, the FDIC established a Temporary Liquidity Guarantee Program under which the FDIC will fully guarantee all non-interest-bearing transaction accounts and all senior unsecured debt of any insured depository institutions or their qualified holding companies that did not opt out of the program issued between October 14, 2008 and June 30, 2009. Senior unsecured debt includes federal funds purchased and certificates of deposit outstanding to the credit of the bank with a maturity of 30 days or greater.

The FDIC is authorized to set the reserve ratio for the Deposit Insurance Fund annually at between 1.15% and 1.50% of estimated insured deposits. If the Deposit Insurance Fund’s reserves exceed the designated reserve ratio, the FDIC is required to pay out all or, if the reserve ratio is less than 1.50%, a portion of the excess as a dividend to insured depository institutionsvary based on the ~~percentage~~level of insured deposits held on December 31, 1996 adjusted for subsequently paid premiums. Insured depository institutions that were in existence on December 31, 1996 and paid assessments prior to that date (or their successors) are entitled to a one-time credit against future assessments based on their past contributions to the BIF or SAIF. At December 31, 2008, Westfield Bank’s credit was substantially utilized to offset its 2008 deposit insurance assessment.

Pursuant to the Reform Act, the FDIC has determined to maintain the designated reserve ratio at its current 1.25%. The FDIC has also adopted a new risk-based premium system that provides for quarterly assessments based on an insured institution’s ranking in one of four risk categories based on their examination ratings and capital ratios. Under these regulations, all insured depository institutions are placed into one of four risk categories. Westfield Bank is in Risk Category I, the most favorable category. As of January 1, 2009, all insured institutions will pay a base rate assessment of 12 to 50 basis points for the first quarter of 2009 of assessable deposits based on the risk of loss to the DIF posed by the ~~particular institution.~~

Institutions, such as Westfield Bank, in Risk Category I will be assessed within a range of 12 to 14 basis points for the first quarter of 2009. This is a substantial increase from the base rate assessment of 2 to 4 basis points that was in effect during 2008. The increase in the base rate assessment from 2008 to 2009 is dueinstitution to the ~~financial crises affecting~~DIF. The assessment rate may, therefore, change when that level of risk changes.

In February 2011, the ~~banking~~FDIC adopted a final rule making certain changes to the deposit insurance assessment system, many of which were made as a result of provisions of the Dodd-Frank Act. The final rule also revises the assessment rate schedule effective April 1, 2011, and ~~financial markets. For institutions such as Westfield Bank, which do not have a long-term public debt rating,~~adopts additional rate schedules that will go into effect when the ~~individual risk~~DIF reserve ratio reaches various milestones. The final rule changes the deposit insurance assessment system from one that is based on ~~its supervisory ratings and certain financial ratios and other measurements of its financial condition. For institutions~~domestic deposits to one that ~~have a long-term public debt rating, the individual risk assessment~~ is based on ~~its supervisory ratings and its debt rating.~~

On February 27, 2009, the FDIC issued new rules to take effect April 1, 2009 that will change the way the FDIC differentiates risk and appropriate assessment rates. Base assessment rates set to take effect on April 1, 2009 will range from 12 to 45 basis points, but giving effect to certain risk adjustments in the rule issued by the FDIC on February 27, 2009, assessments may range from 7 to 77.5 basis points.average consolidated total assets minus average tangible equity. In addition, the rule suspends FDIC ~~also issued an interim~~dividend payments if the DIF reserve ratio exceeds 1.5 percent but provides for decreasing assessment rates when the DIF reserve ratio reaches certain thresholds.

The rule ~~on February 27, 2009 that~~ will ~~impose an emergency special assessment of 20 basis points in addition to its risk-based assessment. This assessment~~take effect for the quarter beginning April 1, 2011, and will be ~~imposed on June 30, 2009 and collected on~~reflected in the invoices for assessments due September 30, ~~2009.~~

2011.

~~Due to the full utilization of the Bank’s credit and the systemic increase in deposit insurance assessments, Westfield Bank will be subject to increased deposit premium expenses in future periods.~~

In addition, all institutions with deposits insured by the FDIC are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation (“FICO”), an agency of the Federal government established to recapitalize the predecessor to the Savings Association Insurance Fund. ~~The FICO assessment rate for 2008 is approximately .0110% of insured deposits.~~ These assessments will continue until the ~~Financing Corporation~~FICO bonds mature in 2017.

The FDIC’s FICO assessment authority is separate from its authority to assess risk-based premiums for deposit insurance. The FICO assessment rate is adjusted quarterly to reflect changes in the assessment bases of the fund and is not risk-based by institution. The FICO assessment rate for the first quarter of 2011, due December 30, 2010, was 0.0102% of insured deposits.

Federal Home Loan Bank System. ~~Westfield~~The Bank is a member of the Federal Home Loan Bank of Boston ~~(the “FHLBB”~~(“FHLBB”), which is one of the regional Federal Home Loan Banks ~~composing~~comprising the Federal Home Loan Bank System. Each Federal Home Loan Bank serves as a central credit facility primarily for its member institutions. ~~Westfield~~The Bank, as a member of the FHLBB, is required to acquire and hold shares of capital stock in the FHLBB. While the required percentages of stock ownership are subject to change by the FHLBB, ~~Westfield~~the Bank was in compliance with this requirement with an investment in FHLBB stock at December 31, ~~2008~~2010 of ~~$8.2million.~~$12.0 million. Any advances from a Federal Home Loan Bank must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for residential housing finance. InIf there are any developments that cause the ~~past, Westfield Bank has received dividends on its Federal Home Loan Bank stock. The average dividend yield for fiscal 2008~~value of our stock investment in the FHLBB to become impaired, we would be required to write down the value of our investment, which in turn could affect our net income and ~~2007 was 3.4% and 5.8%, respectively.~~shareholders’ equity. On ~~January 28, 2009,~~February 22, 2011, the FHLBB notified its members that it would be paying a fourth quarter dividend and that it anticipates paying modest cash dividends through 2011. FHLBB had previously suspended payment of ~~its focus~~dividends on preserving capital in response to the ongoing market volatility. That letter outlined that actions taken by the FHLBB included an excess stock repurchase moratorium, an increased retained earnings target, and suspension of its quarterly dividend payment. ThereJanuary 28, 2009. However, there can be no guarantee of future dividends.

Federal Reserve System. ~~Westfield~~ The Bank is subject to certain provisions of the Federal Reserve Act and the Federal Reserve Board’s regulations, such as those under which depository institutions may be required to maintain non-interest-earning reserves against their deposit accounts and certain other liabilities. Currently, reserves must be maintained against transaction accounts (primarily NOW and regular checking accounts). The Federal Reserve

Board’s regulations currently require reserves equal to 3% on transaction account balances over $10.3 million and up to $44.4 million, plus 10% on the excess over $44.4 million. These requirements are subject to adjustment annually by the Federal Reserve Board. Because required reserves must be maintained in the form of vault cash or in a noninterest bearing account at a Federal Reserve Bank, the effect of the reserve requirement is to reduce the amount of the institution’s ~~interest-earnin g~~interest-earning assets. ~~Westfield~~The Bank is in compliance with the foregoing reserve requirements. On October 9, 2008, the Federal Reserve Banks began paying interest on reserve balances. The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements imposed by the Office of Thrift Supervision. Federal Home Loan Bank System members are also authorized to borrow from the Federal Reserve Board discount window, but Federal Reserve Board regulations require such institutions to exhaust all Federal Home Loan Bank sources before borrowing from the Federal Reserve Board.

Prohibitions Against Tying Arrangements. Federal savings associations are subject to prohibitions on certain tying arrangements. A savings association is prohibited, subject to some exceptions, from extending credit or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain credit or services from a competitor of the institution.

The Bank Secrecy Act. ~~Westfield Bank and Westfield Financial~~ We are subject to the Bank Secrecy Act, as amended by the USA PATRIOT Act, which gives the federal government powers to address money laundering and terrorist threats through enhanced domestic security measures, expanded surveillance powers, and mandatory transaction reporting obligations. ~~By way of~~For example, the Bank Secrecy Act imposes an affirmative obligation on ~~Westfield~~the Bank to report currency transactions that exceed certain thresholds and to report other transactions determined to be suspicious.

Title III of the USA PATRIOT Act takes measures intended to encourage information sharing among financial institutions, bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act. Among other ~~requirements,~~provisions, the USA PATRIOT Act ~~imposes~~and the ~~following obligations on financial institutions:~~

•

~~financial institutions must establish anti-money laundering programs that include, at minimum: (i) internal policies, procedures,~~related regulations of the OTS and ~~controls, (ii) specific designation~~the United States Department of ~~an anti-money laundering compliance officer, (iii) ongoing employee training programs, and (iv) an independent audit function to test the anti-money laundering program;~~

•

~~financial institutions must establish and meet minimum standards for customer due diligence, identification and verification;~~

•

~~financial institutions that establish, maintain, administer, or manage private banking accounts or correspondent accounts~~Treasury require savings banks operating in the United States ~~for non-United States persons or their representatives (including foreign individuals visiting~~to supplement and enhance the ~~United States) must establish appropriate, specific, and, where necessary, enhanced~~anti-money laundering compliance programs, due diligence policies ~~procedures,~~ and controls ~~designed to detect and report money laundering through those accounts;~~

•

financial institutions are prohibited from establishing, maintaining, administering or managing correspondent accounts for foreign shell banks (foreign banks that do not have a physical presence in any country), and are subject to certain recordkeeping obligations with respect to correspondent accounts of foreign banks; and

•

~~bank regulators are directed to consider a depository institution’s or holding company’s effectiveness in combating money laundering when ruling on Federal Reserve~~required by the Bank Secrecy Act and ~~Bank Merger Act applications.~~

Office of Foreign ~~Asset~~Assets Control. ~~Westfield Bank~~ regulations to ensure the detection and reporting of money laundering.

Holding Company Regulation

Federal Reserve Board Regulation. As of July 21, 2011, Westfield Financial ~~are, like all United States~~will be regulated by the Federal Reserve Board rather than the OTS, as the OTS will be abolished on that date pursuant to the Dodd-Frank Act. On that date, the powers of the OTS as to thrift holding companies will be transferred to the Federal Reserve Board, and ~~individuals, prohibited from transacting business with certain individuals and entities named on~~to the ~~Office of Foreign Asset Control’s list of Specially Designated Nationals and Blocked Persons. Failure~~OCC as to comply may result in fines and other penalties. The Office of Foreign Asset Control has issued guidance directed at financial institutions in which it asserts that it may, in its discretion, examine institutions determinedthrifts. Until July 21, 2011, Westfield Financial will continue to be ~~high-risk or to be lacking in their efforts to comply with these prohibitions.~~

regulated by the OTS.

~~Holding Company Regulation~~

Activities Restrictions Applicable to Westfield Financial. Under the Gramm-Leach-Bliley Act, Westfield Financial is prohibited from engaging in or acquiring an entity engaged in non-financial activities. ~~As a result, Westfield Financial’s activities are restricted to:~~

•

~~furnishing or performing management services for a savings institution subsidiary of such holding company;~~

•

~~conducting an insurance agency or escrow business;~~

•

~~holding, managing, or liquidating assets owned or acquired from a savings association subsidiary of such company;~~

•

~~holding or managing properties used or occupied by a savings association subsidiary of such company;~~

•

~~acting as trustee under a deed of trust;~~

•

any other activity (i) that the Federal Reserve Board, by regulation, has determined to be permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act of 1956, unless the Director of the Office of Thrift Supervision, by regulation, prohibits or limits any such activity for savings and loan holding companies, or (ii) in which multiple savings and loan holding companies were authorized by regulation to directly engage in on March 5, 1987;

•

purchasing, holding, or disposing of stock acquired in connection with a qualified stock issuance if the purchase of such stock by such holding company is approved by the Director of the Office of Thrift Supervision; and

•

~~any activity permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act.~~

~~Permissible activities which are deemed to be financial in nature or incidental thereto under Section 4(k) of the Bank Holding Company Act include:~~

•

~~lending, exchanging, transferring, investing for others, or safeguarding money or securities;~~

•

~~insurance activities or providing and issuing annuities, and acting as principal, agent, or broker;~~

•

~~financial, investment, or economic advisory services;~~

•

~~issuing or selling instruments representing interests in pools of assets that a bank is permitted to hold directly;~~

•

~~underwriting, dealing in, or making a market in securities;~~

•

~~activities previously determined by the Federal Reserve Board to be closely related to banking;~~

•

~~activities that bank holding companies are permitted to engage in outside of the U.S.; and~~

•

~~portfolio investments made by an insurance company.~~

In addition, we cannot be acquired unless the acquirer is generally engaged solely in financial activities.

Restrictions on Acquisition of Control Applicable to Westfield Financial. ~~The Home Owners’ Loan~~ Under the federal Change in Bank Control Act, ~~prohibits all savings~~a notice must be submitted to the OTS if any person, or persons acting in concert, seeks to acquire control of WSB, as “control” is defined in the OTS’s regulations. In reviewing a notice, the OTS is required to take into consideration certain statutory factors, including the financial and ~~loan holding companies, including Westfield Financial, from acquiring, directly or indirectly:~~

•

~~control (as defined under the Home Owners’ Loan Act) of another savings association (or a holding company parent) without prior Office of Thrift Supervision approval;~~

•

~~through merger, consolidation, or purchase of assets, another savings association or a holding company thereof, or acquiring all or substantially all~~managerial resources of the ~~assets~~acquirer, the competitive effects of ~~such savings association (or~~the proposed acquisition and any adverse effect on the DIF. If a ~~holding company) without prior Office~~company, an individual who owns or controls more than 25% of ~~Thrift Supervision approval; or~~

•

~~control~~the voting shares of ~~any depository institution not insured by the FDIC (except through~~ a ~~merger with and into the holding company’s savings association subsidiary that is approved by the Office of Thrift Supervision).~~

A savings and loan holding company ~~may not acquire as~~or a ~~separate subsidiary~~director or officer of a ~~savings association that has a principal office outside of the state where the principal office of its subsidiary savings association is located, except:~~

•

~~in the case of certain emergency acquisitions approved by the FDIC;~~

•

~~if such holding company controls a savings association subsidiary that operated a home or branch office in such additional state as of March 5, 1987; or~~

•

if the laws of the state in which the savings association to be acquired is located specifically authorize a savings association chartered by that state to be acquired by a savings association chartered by the state where the acquiring savings association or savings and loan holding company ~~is located or by a holding company that controls such a state-chartered association.~~

~~Federal Securities Laws.~~ ~~Westfield Financial’s common stock is registered with~~seeks to acquire control of us, an application for approval must be submitted to the ~~Securities and Exchange Commission under Section 12(b)~~OTS instead of the ~~Securities Exchange Act of 1934, as amended, and Westfield Financial is subject to information, proxy solicitation, insider trading restrictions, and other requirements under~~notice described above. In reviewing an application, the ~~Securities Exchange Act of 1934, as amended.~~

~~The Sarbanes-Oxley Act.~~ As a public company, Westfield Financial is subject to the Sarbanes-Oxley Act of 2002 (the “Act”), which implements a broad range of corporate governance and accounting measures for public companies designed to promote honesty and transparency in corporate America and better protect investors from corporate wrongdoing. In general, the Sarbanes-Oxley Act mandated important new corporate governance and financial reporting requirements intended to enhance the accuracy and transparency of public companies’ reported financial results. It established new responsibilities for corporate chief executive officers, chief financial officers and audit committees in the financial reporting process, and it created a new regulatory body to oversee auditors of public companies. It backed these requirements with new SEC enforcement tools, increased criminal penalties for federal mail, wire and securit ies fraud, and created new criminal penalties for document and record destruction in connection with federal investigations. It also increased the opportunity for more private litigation by lengthening the statute of limitations for securities fraud claims and providing new federal corporate whistleblower protection.

Section 402 of the Act prohibits the extension of personal loans to directors and executive officers of issuers (as defined in the Sarbanes-Oxley Act). The prohibition, however, does not apply to mortgages advanced by an insured depository institution, such as Westfield Bank, that are subject to the insider lending restrictions of Section 22(h) of the Federal Reserve Act.

The Act also required that the various securities exchanges, including The Nasdaq Stock Market, prohibit the listing of the stock of an issuer unless that issuer complies with various requirements relating to their committees and the independence of their directors that serve on those committees.

~~Quotation on Nasdaq~~. Westfield Financial’s common stock is quoted on The Nasdaq Stock Market. In order to maintain such quotation, Westfield Financial is subject to certain corporate governance requirements, including:

•

~~a majority of its board must be composed of independent directors;~~

•

itOTS is required to ~~have an audit committee composed~~take into consideration certain statutory factors in addition to those considered under the Change in Bank Control Act, including the convenience and needs of ~~at least three directors, each of whom is an independent director, as such term is defined by~~ the ~~Nasdaq Marketplace Rules and by the Exchange Act regulations;~~

•

~~its nominating committee and compensation committee must also~~community to be ~~composed entirely of independent directors; and~~

served.

•

~~each of its audit committee and nominating committee must have a publicly available written charter.~~

AVAILABLE INFORMATION

We maintain an Internet website atwww.westfieldbank.com. The website contains information about us and our operations. Through a link to the Investor Relations section of our website, copies of each of our filings with the SEC, on Form 10-K, Form 10-Q and Form 8-K and all amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or

furnished to the SEC.

In addition, copies of any document we file with or furnish to the SEC may be obtained from the SEC at its public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the SEC's public reference room by calling the SEC at 1-800-SEC-0330. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at its principal office at 100 F Street, N.E., Washington, D.C. 20549. The SEC maintains an Internet website atwww.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file or furnish such information electronically with the SEC. Our SEC filings are accessible through the Internet at that website.

ITEM 1A.

RISK FACTORS

~~ITEM 1A.~~

~~RISK FACTORS~~

Our loan portfolio includes loans with a higher risk of loss.~~Westfield Bank originates~~We originate commercial and industrial loans, commercial real estate loans, consumer loans, and residential mortgage loans primarily within our market area. In recent years, ~~Westfield Bank has~~we have developed and implemented a lending strategy that focuses ~~less~~ on residential real estate lending ~~and more on~~as well as servicing commercial customers, including increased emphasis on commercial and industrial lending and commercial deposit relationships. Commercial and industrial loans, commercial real estate loans, and consumer loans may expose a lender to greater credit risk than loans secured by residential real estate because the collateral securing these loans may not be sold as easily as residential real estate. In addition, commercial real estate and commercial and industrial loans may also involve relatively large loan balances to individual borrowers or ~~group s~~groups of borrowers. These loans also have greater credit risk than residential real estate for the following reasons:

•

~~Commercial and Industrial Loans.~~~~Repayment is generally dependent upon the successful operation of the borrower's business.~~

●

Commercial and Industrial Loans. Repayment is generally dependent upon the successful operation of the borrower's business.

•

~~Commercial Real Estate Loans.~~~~Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.~~

●

Commercial Real Estate Loans. Repayment is dependent on income being generated in amounts sufficient to cover operating expenses and debt service.

•

~~Consumer Loans.~~~~Consumer loans are collateralized, if at all, with assets that may not provide an adequate source of payment of the loan due to depreciation, damage or loss.~~

●

Consumer Loans. Consumer loans are collateralized, if at all, with assets that may not provide an adequate source of payment of the loan due to depreciation, damage or loss.

Due to the ongoing economic recession, the real estate market and local economy are continuing to deteriorate which has adversely affected the value of the properties securing the loans or revenues from the borrower’s business, thereby increasing the risk of non-performing loans. The decreases in real estate values have adversely affected the value of property used as collateral for our commercial real estate loans. The continued deterioration in the economy may also have a negative effect on the ability of our commercial borrowers to make timely repayments of their loans, which could have an adverse impact on our earnings. In addition, if poor economic conditions continue to result in decreased demand for loans, our profits may decrease because our alternative investments may earn less income for us than loans.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease. Our loan customers may not repay their loans according to their terms and the collateral securing the payment of these loans may be insufficient to pay any remaining loan balance. We therefore may experience significant loan losses, which could have a material adverse effect on our operating results.

Material additions to our allowance for loan losses also would materially decrease our net income, and the charge-off of loans may cause us to increase the allowance. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. We rely on our loan quality reviews, our experience and our evaluation of economic conditions, among other factors, in determining the amount of the allowance for loan losses. If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance.

If dividends are not paid on our investment in the FHLBB , or if our investment is classified as other-than-temporarily impaired, our earnings and/or shareholders’ equity could decrease. We own common stock of the FHLBB to qualify for membership in the Federal Home Loan Bank System and to be eligible to borrow funds under the FHLBB’s advance program. There is no market for our FHLBB common stock. After suspending all dividend payment in 2009, on February 22, 2011, the FHLBB reinstated the payment of dividends on its common stock. There can be no assurance that such dividends will be declared in the future. Further, there can be no assurance that the impact of recent or future legislation on the Federal Home Loan Banks also will not cause a decrease in the value of the FHLBB stock held by us.

It is possible that the capitalization of a Federal Home Loan Bank, including the FHLBB, could be substantially diminished or reduced to zero. Consequently, we believe that there is a risk that our investment in FHLBB common stock could be deemed other-than-temporarily impaired at some time in the future, and if this occurs, it would cause our earnings and shareholders’ equity to decrease by the after-tax amount of the impairment charge.

Changes in interest rates could adversely affect our results of operations and financial condition. Our profitability, like that of most financial institutions, depends substantially on our net interest income, which is the difference between the interest income earned on our interest-earning assets and the interest expense paid on our interest-bearing liabilities. Increases in interest rates may decrease loan demand and make it more difficult for borrowers to repay adjustable rate loans. In addition, as market interest rates rise, we will have competitive pressures to increase the rates we pay on deposits, which will result in a decrease of our net interest income.

We also are subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and mortgage-related securities. Decreases in interest rates can result in increased prepayments of loans and mortgage-related securities as borrowers refinance to reduce borrowing costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments at rates that are comparable to the rates on existing loans and securities.

Changes in the national and local economy may affect our future growth possibilities.Our current market area is principally located in Hampden County, Massachusetts. Our future growth opportunities depend on the growth and stability of our regional economy and our ability to expand our market area. The continued downturn in our local economy may limit funds available for deposit and may negatively affect our borrowers’ ability to repay their loans on a timely basis, both of which could have an impact on our profitability.

Dramatic declines in the housing market, with decreasing home prices and increasing delinquencies and foreclosures, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of assets by many financial institutions. In addition, the values of real estate collateral supporting many loans have declined and may continue to decline. The ongoing economic recession, reduced availability of commercial credit and increasing unemployment have negatively impacted the credit performance of commercial and consumer credit, resulting in additional write-downs. Concerns over the stability of the financial markets and the economy have resulted in decreased lending by financial institutions to their customers and to each other. This market turmoil and tightening of credit has led to increased commercial and consumer delinquencies, lack of customer confidence, increased market volatility and widespread ~~red uction~~reduction in general business activity. We do not believe these difficult conditions are likely to improve in the near future. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market and economic conditions on us, our customers and the other financial institutions in our market. As a result, we may experience increases in foreclosures, delinquencies and customer bankruptcies, as well as more restricted access to funds and decrease in our stock price.

We depend on our executive officers and key personnel to continue the implementation of our long-term business strategy and could be harmed by the loss of their services. We believe that our continued growth and future success will depend in large part upon the skills of our management team. The competition for qualified personnel in the financial services industry is intense, and the loss of our key personnel or an inability to continue to attract, retain and motivate key personnel could adversely affect our business. We cannot assure you that we will be able to retain our existing key personnel or attract additional qualified personnel. We have employment agreements with our Chief Executive Officer, ~~and~~ Chief Financial Officer, and Executive Vice President and General Counsel and change of control agreements with several other senior executive officers, and the loss of the services of one or more of our executive officers and key personnel could impair our ability to ~~c ontinue~~continue to develop our business strategy.

We operate in a highly regulated environment, and changes in laws and regulations to which we are subject may adversely affect our results of operations. ~~Westfield~~ The Bank is subject to extensive regulation, supervision and examination by the ~~Office of Thrift Supervision,~~OTS, as its chartering authority, and by the FDIC as the insurer of its deposits up to certain limits. In addition, the ~~Office of Thrift Supervision~~OTS regulates and oversees Westfield Financial. We also belong to the Federal Home Loan Bank System and, as a member of such system, we are subject to certain limited regulations promulgated by the Federal Home Loan Bank of Boston. This regulation and supervision limits the activities in which we may engage. The purpose of regulation and supervision is primarily to protect our depositors and borrowers and, in the case of FDIC regulation, the FDIC’s insurance fund. Regulatory authorities have extensive discretion in the exercise of their supervisory and enforcement powers. They may, among other things, impose restrictions on the operation of a banking institution, the classification of assets by such institution and such institution’s allowance for loan losses. Regulatory and law enforcement authorities also have wide discretion and extensive enforcement powers under various consumer protection and civil rights laws, including the Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Housing Act, and the Real Estate Settlement Procedures Act.

As discussed above under the caption “Regulation,” pursuant to the Dodd-Frank Act, the OTS will be abolished as of July 21, 2011 and its powers and duties will be transferred to the OCC as to the Bank and to the Federal Reserve Board as to Westfield Financial. Therefore, Westfield Financial and the Bank will no longer be regulated by the OTS, but by the Federal Reserve Board and the OCC, respectively. We cannot predict, at this time, what effect on our operations will results from this change in supervision. We will have to devote increased resources to ensuring compliance with this new supervisory regime, including compliance with any new requirements the Federal Reserve Board and the OCC may impose. The Dodd-Frank Act also creates a new Consumer Financial Protection Bureau (“CFPB”) as an independent bureau of the Federal Reserve Board, which will begin operations on July 21, 2011. The CFPB will have broad authority to write regulations regarding consumer financial products and services, and certain examination and enforcement powers.

We will have to devote resources to evaluating any regulations proposed by the CFPB and to complying with any such regulations after they are finalized.

In addition, financial institutions ~~have been the subject of significant legislative and regulatory changes and will~~could continue to be the subject of further significant legislation or regulation in the future, none of which is within our control. These changes as well as any future change in the laws or regulations applicable to us, or in banking regulators’ supervisory policies or examination procedures, whether by the ~~Office of Thrift Supervision,~~OTS, the FDIC, other state or federal regulators, or the United States Congress could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, the cost and burden of compliance, over time, could significantly increase and adversely affect our ability to operate profitably.

Competition in our primary market area may reduce our ability to attract and retain deposits and originate loans.We operate in a competitive market for both attracting deposits, which is our primary source of funds, and originating loans. Historically, our most direct competition for deposits has come from savings and commercial banks. Our competition for loans comes principally from commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, mutual funds, insurance companies and brokerage and investment banking firms. We also face additional competition from internet-based institutions, brokerage firms and insurance companies. Competition for loan originations and deposits may limit our future growth and earnings prospects.

~~Recent legislative~~

Compliance with the recently enacted Dodd-Frank Act will alter the regulatory regime to which we are subject, and ~~regulatory initiatives~~may increase our costs of operations and adversely impact our business. On July 21, 2010, President Obama signed the Dodd-Frank Act into law. The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation of the financial-services industry. Among other things, the Dodd-Frank Act creates a new Consumer Financial Protection Bureau as an independent bureau of the Federal Reserve, tightens capital standards, imposes clearing and margining requirements on many derivatives activities, and generally increases oversight and regulation of financial institutions and financial activities. It requires depository institution holding companies with assets greater than $500 million to ~~address these difficult market and economic conditions may not stabilize the U.S. banking system.The U.S. Congress enacted the Emergency Economic Stabilization Act of 2008 (the “EESA”) in response~~be subject to the ~~impact~~same capital requirements as insured depository institutions, meaning, for instance, that such holding companies will no longer be able to count trust preferred securities issued on or after May 19, 2010 as Tier 1 capital.

As discussed above, the Dodd-Frank Act abolishes the OTS as of July 21, 2011, and transfers its powers and duties to the OCC and Federal Reserve Board. As of that date, the CFPB will also come into existence. We will have to apply resources to prepare for our new supervisory regime under these regulators. We cannot predict what new requirements these regulators may impose that will affect us.

In addition to the self-implementing provisions of the ~~volatility~~statute, the Dodd-Frank Act calls for over 200 administrative rulemakings by various federal agencies to implement various parts of the legislation. While some rules have been finalized and/or issued in proposed form, many have yet to be proposed. It is impossible to predict when all such additional rules will be issued or finalized, and ~~disruption~~what the content of such rules will be. We will have to apply resources to ensure that we are in compliance with all applicable provisions of the ~~capital~~Dodd-Frank Act and ~~credit markets~~any implementing rules, which may increase our costs of operations and adversely impact our earnings.

The Dodd-Frank Act and any implementing rules that are ultimately issued could have adverse implications on the financial ~~sector. The U.S. Department of~~industry, the ~~Treasury (the “Treasury”)~~competitive environment, and ~~the federal banking regulators are implementing a number of programs under this legislation that are intended~~our ability to ~~address these conditions~~conduct business.

Increases in FDIC deposit insurance premiums and the asset quality, capital and liquidity issues they have caused for certain financial institutions and to improve the general availability of credit for consumers and businesses. In addition, the U.S. Congress recently enacted the American Recovery and Reinvestment Act (“ARRA”) in an effort to save and create jobs, stimulate t he U.S. economy and promote long-term growth and stability. There can be no assurance that EESA, ARRA or the programs that are implemented under them will achieve their intended purposes. The failure of EESA, ARRA or the programs that are implemented under them to achieve their intended purposes could result in a continuation or worsening of current economic and market conditions, and thisassessments could adversely affect our financial ~~condition, results~~condition. FDIC insurance premiums increased substantially in 2009 and we expect to continue to pay high FDIC premiums in the future. FDIC insured bank failures have significantly depleted the insurance fund of ~~operations, and/or~~ the ~~trading price~~FDIC and reduced the ratio of ~~our common stock.~~

reserves to insured deposits. The FDIC adopted a revised risk-based deposit insurance ~~premiums have increased and~~assessment schedule on February 27, 2009, which raised deposit insurance premiums. On May 22, 2009, the FDIC also implemented a five basis point special assessment of each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009, but no more than 10 basis points times the institution’s assessment base for the second quarter of 2009, which was collected on September 30, 2009. Additional special assessments may ~~increase further~~be imposed by the FDIC for future periods.

In December 2009, the FDIC enacted a proposal that required most FDIC-insured banks to prepay their projected insurance assessments for the years 2010 through 2012. In December 2009, we advanced approximately $2.5 million of such prepaid assessments. The actual FDIC insurance expense could be higher if the balance in the ~~future.Under~~deposit insurance fund reaches levels that cause the FDIC to implement additional special assessments or take other actions that result in an increase to the amounts paid by banks under the FDIC insurance program.

The Dodd-Frank Act also broadens the base for Federal Deposit Insurance ~~Act,~~Corporation insurance assessments. Assessments will now be based on the ~~FDIC, absent extraordinary circumstances, must establish and implement~~average consolidated total assets less tangible equity capital of a plan to restore the deposit insurance reserve ratio to 1.15% of insured deposits, over a five-year period, at any time that the reserve ratio falls below 1.15%. The FDIC’s reserve ratio has continued to decline due to costs associated with bank failures and FDIC-assisted transactions, and the reserve ratio is expected to continue to decline due to future bank failures and FDIC-assisted transactions.

Pursuant to the EESA, the maximum deposit insurance amount has been increased from $100,000 to $250,000 until December 31, 2009, and certain types of deposit accounts will have unlimited deposit insurance coverage through that date. On October 13, 2008, the FDIC established a Temporary Liquidity Guarantee Program under which the FDIC will fully guarantee all non-interest-bearing transaction accounts and all senior unsecured debt of any insured depository institutions or their qualified holding companies that did not opt out of the program issued between October 14, 2008 and June 30, 2009. Senior unsecured debt includes federal funds purchased and certificates of deposit outstanding to the credit of the bank with a maturity of 30 days or greater. These increases have increased the aggregate amount of deposits that the FDIC insures and thus have exposed the FDIC’s deposit insurance fund to potentially gre ater losses. Westfield Bank will be subject to increased deposit premium expenses in 2009 and futures years which may have an adverse impact on our results of operations.

financial institution.

~~ITEM 1B.~~

~~UNRESOLVED STAFF COMMENTS~~

~~None.~~

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

~~Westfield Bank~~

We currently ~~conducts its~~conduct our business through ~~its~~our eleven banking offices and ~~six~~twelve off-site ATMs. As of December 31, ~~2008,~~2010, the properties and leasehold improvements owned by us had an aggregate net book value of ~~$12.1~~$11.6 million.

Location
Ownership
Year
Opened
Year of Lease or
License
Expiration

Main Office:

141 Elm St.
Westfield, MA
Owned
1964
N/A

Branch Offices:

206 Park St.
West Springfield, MA
Owned
1957
N/A

655 Main St.
Agawam, MA
Owned
1968
N/A

26 Arnold St.
Westfield, MA
Owned
1976
N/A

300 Southampton Rd.
Westfield, MA
Owned
1987
N/A

462 College Highway
Southwick, MA
Owned
1990
N/A

382 North Main St.
E. Longmeadow, MA
Leased
1997
2012

1500 Main St.
Springfield, MA
Leased
2006
2016

1642 Northampton St.
Holyoke, MA
Owned
2001
N/A

1342 Liberty St.
Springfield, MA
Owned
2001
N/A

560 East Main St.
Westfield, MA
Leased
2007
2046

ATMs:

337 N. Westfield St.
Feeding Hills, MA
Leased
1988
2013

516 Carew St.
Springfield, MA
Tenant at will
2002
N/A

1000 State St.
Springfield, MA
Tenant at will
2003
N/A

788 Memorial Ave.
West Springfield, MA
Leased
2006
2016

2620 Westfield St.
West Springfield, MA
Leased
2006
2020

98 Southwick Rd.
Westfield, MA
Leased
2006
2021

Location	Ownership	Year Opened	Year of Lease or License Expiration

Main Office:
141 Elm St.	Owned	1964	N/A
Westfield, MA

Branch Offices:
206 Park St.	Owned	1957	N/A
West Springfield, MA

655 Main St.	Owned	1968	N/A
Agawam, MA

26 Arnold St.	Owned	1976	N/A
Westfield, MA

300 Southampton Rd.	Owned	1987	N/A
Westfield, MA

462 College Highway	Owned	1990	N/A
Southwick, MA

382 North Main St.	Leased	1997	2012
E. Longmeadow, MA

1500 Main St.	Leased	2006	2016
Springfield, MA

1642 Northampton St.	Owned	2001	N/A
Holyoke, MA

560 East Main St.	Leased	2007	2046
Westfield, MA

241 South Westfield St.	Leased	2009	2038
Feeding Hill, MA

ATMs:
337 N. Westfield St.	Leased	1988	2013
Feeding Hills, MA

516 Carew St.	Tenant at will	2002	N/A
Springfield, MA

1000 State St.	Tenant at will	2003	N/A
Springfield, MA

788 Memorial Ave.	Leased	2006	2016
West Springfield, MA

2620 Westfield St.	Leased	2006	2020
West Springfield, MA

98 Southwick Rd.	Leased	2006	2021
Westfield, MA

115 West Silver St.	Tenant at will	2005	N/A
Westfield, MA

1342 Liberty St.	Owned	2001	N/A
Springfield, MA

98 Lower Westfield Rd.	Leased	2010	2020
Holyoke, MA

Westfield State University
577 Western Ave.
Westfield, MA
Woodward Center	Leased	2010	2015
Wilson Hall	Leased	2010	2015
Ely Hall	Leased	2010	2015

~~ITEM 3.~~

~~LEGAL PROCEEDINGS~~

~~Westfield Financial is~~

ITEM 3.

LEGAL PROCEEDINGS

We are not involved in any pending legal proceeding other than routine legal proceedings occurring in the ordinary course of business. In the opinion of management, no legal proceedings will have a material effect on ~~Westfield Financial’s~~our consolidated financial position or results of operations.

ITEM 4.

[REMOVED AND RESERVED]

~~ITEM 4.~~

~~SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS~~

~~None.~~

PART II

~~ITEM 5.~~

~~MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~

~~Effective on August 21, 2007, Westfield Financial switched the listing of its~~

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock ~~from the American Stock Exchange to~~is currently listed on the NASDAQ Stock Market ~~and retained~~under the symbol ~~“WFD”.~~“WFD.” Prior to August 21, 2007, we were listed on the American Stock Exchange. At December 31, ~~2008,~~2010, there were ~~31,307,881~~28,166,419 shares of common stock issued and outstanding, and there were approximately ~~5,197~~4,785 shareholders of record.

The table below shows the high and low sales price during the periods indicated as well as dividends declared per share. ~~The information set forth in the table below was provided by the American Stock Exchange and NASDAQ.~~

Price Per Share

Cash
Dividends
Declared
For the Year Ended December 31, 2008

High

Low

Fourth Quarter ended December 31, 2008

$        10.36

$        8.89

$        0.30
Third Quarter ended September 30, 2008

11.30

8.76

0.05
Second Quarter ended June 30, 2008

9.86

9.05

0.20
First Quarter ended March 31, 2008

10.53

8.95

0.05

Price Per Share

Cash
Dividends
Declared
For the Year Ended December 31, 2007

High

Low

Fourth Quarter ended December 31, 2007

$        10.18

$        9.49

$        0.25
Third Quarter ended September 30, 2007

10.25

8.73

0.05
Second Quarter ended June 30, 2007

10.83

9.97

0.05
First Quarter ended March 31, 2007

11.02

10.16

0.05

~~A quarterly~~

	Price Per Share				Cash Dividends Declared
2010	High ($)		Low ($)		($)
Fourth Quarter ended December 31, 2010		9.37		7.70		0.21	*
Third Quarter ended September 30, 2010		8.84		7.33		0.06
Second Quarter ended June 30, 2010		10.12		7.95		0.20	*
First Quarter ended March 31, 2010		9.25		7.98		0.05

	Price Per Share				Cash Dividends Declared
2009	High ($)		Low ($)		($)
Fourth Quarter ended December 31, 2009		8.50		7.85		0.20	*
Third Quarter ended September 30, 2009		9.82		8.43		0.05
Second Quarter ended June 30, 2009		9.86		8.62		0.20	*
First Quarter ended March 31, 2009		10.34		8.27		0.05

*Includes a special cash dividend of ~~$0.05 per share was declared on January 22, April 22, July 22, and October 28, 2008 by~~$0.15 in addition to the ~~Board of Directors. In addition, the Board of Directors declared special~~regular quarterly cash ~~dividends of $0.15 per share and $0.25 per share on April 22, 2008 and October 28, 2008, respectively.~~ dividend.

The continued payment of dividends depends upon our debt and equity structure, earnings, financial condition, need for capital in connection with possible future acquisitions and other factors, including economic conditions, regulatory restrictions and tax considerations. ~~Westfield Financial~~We cannot guarantee the payment of dividends or that, if paid, that dividends will not be reduced or eliminated in the future.

The only funds available for the payment of dividends on ~~the~~our capital stock ~~of Westfield Financial~~ will be cash and cash equivalents held by ~~Westfield Financial,~~us, dividends paid by ~~Westfield~~to us by the Bank, ~~to Westfield Financial,~~ and borrowings. ~~Westfield~~The Bank will be prohibited from paying cash dividends to ~~Westfield Financial~~us to the extent that any such payment would reduce ~~Westfield~~the Bank’s capital below required capital levels or would impair the liquidation account to be established for the benefit of ~~Westfield~~the Bank’s eligible account holders and supplemental eligible account holders at the time of the reorganization and stock offering.

There were no sales by ~~Westfield Financial~~us of unregistered securities during the year ended December 31, ~~2008.~~

2010.

The following table sets forth information with respect to purchases made by us of our common stock during the three months ended December 31, 2010.

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)

October 1 - 31, 2010		61,882	(2)		7.94		33,947		1,666,031

November 1 - 30, 2010		111,844			8.01		111,844		1,554,187

December 1 - 31, 2010		1,671			8.25		1,671		1,552,516

Total		175,397			7.99		147,462		1,552,516

(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.

(2)

In October 2010, we repurchased 27,935 shares from certain executives as repayment of their tax obligations for shares of restricted stock that vested on October 20, 2010 under our 2002 and 2007 Recognition and Retention Plans. These repurchases were reported by each reporting person on October 20, 2010.

Performance Graph

The following graph compares ~~Westfield Financial, Inc.’s~~our total cumulative shareholder return by an investor who invested $100.00 on December 31, ~~2003~~2005 to December 31, ~~2008,~~2010, to the total return by an investor who invested $100.00 in each of the Russell 2000 Index and the Nasdaq Bank Index for the same period.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

Among Westfield Financial, Inc., The Russell 2000 Index and the

NASDAQ Bank Index

Period Ending
Index
12/31/03
12/31/04
12/31/05
12/31/06
12/31/07
12/31/08
Westfield Financial, Inc.
100.00
110.16
106.29
158.82
152.10
171.81
Russell 2000
100.00
118.33
123.72
146.44
144.15
95.44
NASDAQ Bank
100.00
110.99
106.18
117.87
91.85
69.88

			Period Ending
Index	12/31/05		12/31/06		12/31/07		12/31/08		12/31/09		12/31/10
Westfield Financial, Inc.		100.00		149.42		143.10		161.64		136.74		163.05
Russell 2000		100.00		118.37		116.51		77.15		98.11		124.46
NASDAQ Bank		100.00		113.82		91.16		71.52		59.87		68.34

ITEM 6.

SELECTED FINANCIAL DATA

The summary information presented below at or for each of the years presented is derived in part from ~~the~~our consolidated financial ~~statements of Westfield Financial.~~statements. The following information is only a summary, and you should read it in conjunction with our consolidated financial statements and notes beginning on page F-1.

At December 31,

2008

2007

2006

2005

2004

(In thousands)
Selected Financial Condition Data:

Total assets
$1,109,056

$1,039,784

$   996,829

$   805,095

$   796,903
Loans, net(1)
472,135

414,902

385,184

378,837

368,601
Securities available for sale
24,396

38,051

41,687

28,321

14,968
Securities held to maturity
79,303

104,025

77,299

73,323

71,298
Mortgage-backed securities available for sale
233,747

206,178

126,942

101,138

73,316
Mortgage-backed securities held to maturity
168,332

174,594

163,093

152,127

175,302
Deposits
588,029

602,676

627,466

623,045

612,621
Short-term borrowings
49,824

32,268

17,919

14,441

14,615
Long-term debt
173,300

105,000

55,000

45,000

45,000
Total stockholders’ equity (2)
259,919

286,532

289,408

115,842

118,051
Allowance for loan losses
8,796

5,726

5,437

5,422

5,277
Nonperforming loans
8,805

1,202

1,028

1,919

2,171

For the Years Ended

December 31,

2008

2007

2006

2005

2004

(In thousands, except per share data)
Selected Operating Data:

Interest and dividend income
$     54,056

$     53,584

$     42,435

$     37,306

$     34,428
Interest expense
22,304

23,408

19,551

13,597

10,913
Net interest and dividend income
31,752

30,176

22,884

23,709

23,515
Provision for loan losses
3,453

400

390

465

750
Net interest and dividend income after

  provision for loan losses
28,299

29,776

22,494

23,244

22,765
Total noninterest income
3,520

4,561

3,073

3,372

3,896
Total noninterest expense
23,333

21,825

19,390

18,464

17,776
Income before income taxes
8,486

12,512

6,177

8,152

8,885
Income taxes
1,795

3,812

1,523

1,933

2,562
Net income
$       6,691

$       8,700

$       4,654

$       6,219

$       6,323

Basic earnings per share
$         0.23

$         0.29

$         0.15

$         0.20

$         0.20
Diluted earnings per share
$         0.23

$         0.29

$         0.15

$         0.20

$         0.20

Dividends per share paid (3)
$         0.60

$         0.40

$         0.32

$         0.27

$         0.10

~~(1)~~

~~Loans are shown net of deferred loan costs, allowance for loan losses and unadvanced loan funds.~~

~~(2)~~

Stockholders’ equity includes $171.7 million in capital from the net proceeds raised in the stock offering. Westfield Financial completed its second step stock offering on January 3, 2007. Consequently, the proceeds were recognized by Westfield Financial and reported in its balance sheet as of December 31, 2006. Proceeds, net of stock issuance costs, received directly by Westfield Financial or held by the underwriter for the convenience of Westfield Financial were recorded by increasing cash, the capital stock, and the paid-in capital accounts.

~~(3)~~

Per share amounts related to periods prior to the date of completion of the conversion (January 3, 2007) have been restated to give retroactive recognition to the exchange ratio applied in the conversion.

	At December 31,
	2010		2009		2008		2007		2006
	(In thousands)
Selected Financial Condition Data:
Total assets	$	1,239,489	$	1,191,410	$	1,109,056	$	1,039,784	$	996,829
Loans, net (1)		502,392		469,149		472,135		414,902		385,184
Securities available for sale		644,139		319,121		258,143		244,229		168,629
Securities held to maturity (2)		-		295,011		247,635		278,619		240,392
Deposits		700,335		647,975		588,029		602,676		627,466
Short-term borrowings		62,937		74,499		49,824		32,268		17,919
Long-term debt		238,151		213,845		173,300		105,000		55,000
Total stockholders’ equity		221,245		247,299		259,919		286,532		289,408
Allowance for loan losses		6,934		7,645		8,796		5,726		5,437
Nonperforming loans		3,204		5,470		8,805		1,202		1,028

	For the Years Ended December 31,
	2010		2009		2008		2007		2006
	(In thousands, except per share data)
Selected Operating Data:
Interest and dividend income	$	46,147	$	52,530	$	54,056	$	53,584	$	42,435
Interest expense		16,765		20,022		22,304		23,408		19,551
Net interest and dividend income		29,382		32,508		31,752		30,176		22,884
Provision for loan losses		8,923		3,900		3,453		400		390
Net interest and dividend income after provision for loan losses		20,459		28,608		28,299		29,776		22,494
Total noninterest income		7,390		3,218		3,579		4,609		3,123
Total noninterest expense		24,809		25,100		23,392		21,873		19,440
Income before income taxes		3,040		6,726		8,486		12,512		6,177
Income taxes		34		1,267		1,795		3,812		1,523
Net income	$	3,006	$	5,459	$	6,691	$	8,700	$	4,654

Basic earnings per share (3)	$	0.11	$	0.19	$	0.22	$	0.29	$	0.15
Diluted earnings per share (3)	$	0.11	$	0.18	$	0.22	$	0.28	$	0.15

Dividends per share paid (3)	$	0.52	$	0.50	$	0.60	$	0.40	$	0.32

_________________________________
(1) Loans are shown net of deferred loan costs, allowance for loan losses and unadvanced loan funds.
(2) In August 2010, we transferred all of our held-to-maturity securities to the available-for-sale category. We determined that we no longer had the positive intent to hold our securities classified as held-to-maturity for an indefinite period of time because of our desire to have more flexibility in managing the investment portfolio. The securities transferred had a total amortized cost of $287.1 million, fair value of $299.7 million and a net unrealized gain of $12.6 million, which was recorded as other comprehensive income at the time of transfer.
(3) Per share amounts related to periods prior to the date of completion of the conversion (January 3, 2007) have been restated to give retroactive recognition to the exchange ratio applied in the conversion.

	At or for the Years Ended December 31,
	2010			2009			2008			2007			2006

Selected Financial Ratios and
Other Data(1)
Performance Ratios:
Return on average assets		0.25	%		0.47	%		0.63	%		0.86	%		0.56	%
Return on average equity		1.25			2.12			2.43			3.00			3.99
Average equity to average assets		19.63			22.16			25.75			28.74			14.08
Equity to total assets at end of year		17.85			20.76			23.44			27.56			29.03
Average interest rate spread		2.22			2.41			2.44			2.23			2.61
Net interest margin (2)		2.64			3.04			3.23			3.25			3.05
Average interest-earning assets to average interest-earning liabilities		128.51			134.62			135.36			141.05			117.37
Total noninterest expense to average assets		2.03			2.16			2.18			2.16			2.34
Efficiency ratio (3)		75.53			68.49			65.83			64.55			73.68
Dividend payout ratio		4.73			2.63			2.73			1.38			2.13
Regulatory Capital Ratios:
Total risk-based capital		34.05			38.07			42.56			50.29			29.07
Tier 1 risk-based capital		33.03			36.94			41.31			49.30			54.38
Tier 1 leverage capital		18.07			20.92			23.97			27.48			55.39
Asset Quality Ratios:
Nonperforming loans to total loans		0.63			1.15			1.83			0.29			0.26
Nonperforming assets to total assets		0.28			0.60			0.79			0.12			0.10
Allowance for loan losses to total loans		1.36			1.60			1.83			1.36			1.39
Allowance for loan losses to nonperforming assets		202			107			100			476			529
Number of:
Banking offices		11			11			11			11			10
Full-time equivalent employees		180			168			180			177			155

_________________________________
(1) Asset quality ratios and regulatory capital ratios are end of period ratios.
(2) Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest earning assets.
(3) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and noninterest income less gain on sale and losses on other than temporary impairment of securities and sale of premises and equipment.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At or for the Years Ended December 31,

2008

2007

2006

2005

2004

Selected Financial Ratios and
  Other Data(1)

Performance Ratios:

Return on average assets
0.63
%

0.86
%

0.56
%

0.77
%

0.79
%
Return on average equity (2)
2.43

3.00

3.99

5.27

5.24

Average equity to average assets (2)
25.75

28.74

14.08

14.66

15.14

Equity to total assets at end of year (3)
23.44

27.56

29.03

14.39

14.83

Average interest rate spread
2.44

2.23

2.61

2.89

2.94

Net interest margin (4)
3.23

3.25

3.05

3.24

3.25

Average interest-earning assets to average
    interest-earning liabilities
135.36

141.05

117.37

119.22

121.47

Total noninterest expense to
    average assets
2.18

2.16

2.34

2.29

2.24

Efficiency ratio (5)
65.77

63.91

73.63

68.23

66.99

Dividend payout ratio
2.61

1.38

2.13

1.35

0.50

Regulatory Capital Ratios:

Total risk-based capital
42.56

50.29

29.07

14.48

14.69

Tier 1 risk-based capital
41.31

49.30

54.38

24.54

25.75

Tier 1 leverage capital
23.97

27.48

55.39

25.68

26.90

Asset Quality Ratios:

Nonperforming loans as a percent of
  total loans
1.83

0.29

0.26

0.50

0.58

Nonperforming assets as a percent of
  total assets
0.79

0.12

0.10

0.24

0.27

Allowance for loan losses as a percent of
  total loans
1.83

1.36

1.39

1.41

1.41

Allowance for loan losses as a percent of
  nonperforming assets
100

476

529

283

243

Number of:

Banking offices
11

11

10

10

10

Full-time equivalent employees
180

177

155

142

144

~~____________________________~~

~~(1)~~

~~Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios.~~

~~(2)~~

Average equity includes $171.7 million in capital from the net proceeds raised in the stock offering. Westfield Financial completed its second step stock offering on January 3, 2007. Consequently, the proceeds were recognized by Westfield Financial and reported in its balance sheet as of December 31, 2006 and therefore affected the balance of stockholders’ equity for one calendar day. Proceeds, net of stock issuance costs, received directly by Westfield Financial or held by the underwriter for the convenience of Westfield Financial were recorded by increasing cash, the capital stock, and the paid-in capital accounts.

~~(3)~~

~~(4)~~

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

(5) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and noninterest income less gain on sale and losses on other than temporary impairment of securities and sale of premises and equipment.

~~ITEM 7.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

Overview.~~Westfield Financial strives~~ 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 ~~it has~~we have served since 1853. Historically, ~~Westfield Bank has~~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. ~~Westfield Bank meets~~We meet the needs of ~~its~~our local community through a community-based and service-oriented approach to banking.

~~Westfield Financial has~~

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

●

grow our commercial and industrial and commercial real estate loan portfolio 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

•

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

●

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.

•

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

•

depending on market conditions, refer substantially all of the fixed-rate residential real estate loans to a third party mortgage company which underwrites, originates and services these loans in order to diversify its loan portfolio, increase fee income and reduce interest rate risk.

You should read ~~our~~the following financial results for the year ended December 31, ~~2008~~2010 in the context of this strategy.

•

Net income was $6.7 million, or $0.23 per diluted share, for the year ended December 31, 2008 compared to $8.7 million, or $0.29 per diluted share for the same period in 2007. The results for the year ended December 31, 2008 showed increases in net interest income and a lower provision for income taxes; however this was offset by an increase in the provision for loan losses and noninterest expenses and a decrease in noninterest income.

•

Westfield Bank provided $3.5 million for loan losses for the year ended December 31, 2008, compared to $400,000 for the same period in 2007. This was the result of an increase in nonperforming loans, an increase in commercial and industrial loans and commercial real estate loans, and an increase in charged-off loans. The allowance was $8.8 million, or 1.83% of total loans, at December 31, 2008 and $5.7 million, or 1.36% of total loans, at December 31, 2007.

•

Net interest income increased $1.6 million to $31.8 million for the year ended December 31, 2008, compared to $30.2 million for the same period in 2007. The net interest margin, on a tax equivalent basis, was 3.23% for the year ended December 31, 2008, compared to 3.25% for the same period in 2007. The increase in net interest income was primarily due to increases in average earning assets of $56.1 million for the year ended December 31, 2008. Also contributing to the increase in net interest income was a decrease in the cost of interest-bearing liabilities. The cost of interest-bearing liabilities decreased 48 basis points to 3.02% for the year ended December 31, 2008 compared to the same period in 2007.

•

The year ended December 31, 2008 also includes a net loss of $205,000 on the sale and write-down of securities. Westfield Financial recorded write-downs of $1.3 million on securities deemed to be other than temporary impaired. This was primarily due to write-downs of $961,000 on preferred stock issued by Freddie Mac. Freddie Mac was placed into conservatorship by the United States Treasury in September 2008. Westfield Financial’s book value remaining on preferred stock issued by Freddie Mac was $39,000 at December 31, 2008. The write-downs were partially offset by net gains of $1.1 million for the year ended December 31, 2008 on the sale of other investment securities.

•

Net loans increased by $57.2 million, to $472.1 million at December 31, 2008 from $414.9 million at December 31, 2007. The increase in net loans was primarily the result of an increase in commercial and industrial loans and commercial real estate loans. Commercial and industrial loans increased $37.3 million to $153.9 million at December 31, 2008 from $116.5 million at December 31, 2007. Commercial real estate loans increased $33.9 million to $223.9 million at December 31, 2008 from $190.0 million at December 31, 2007.

•

Nonperforming loans increased $7.6 million to $8.8 million at December 31, 2008 compared to $1.2 million at December 31, 2007. This represented 1.83% of total loans at December 31, 2008 and 0.29% of total loans at December 31, 2007. The increase was primarily the result of a manufacturing commercial loan relationship of $5.5 million and an agricultural commercial loan relationship of $1.7 million.

●

Net income was $3.0 million, or $0.11 per diluted share, for the year ended December 31, 2010, compared to $5.5 million, or $0.18 per diluted share for the same period in 2009. The results for the year ended December 31, 2010 showed an increase in the provision for loan losses and a decrease in net interest income; however, this was offset by an increase in noninterest income and a decrease in noninterest expense and the provision for income taxes.

●

We provided $8.9 million for loan losses for the year ended December 31, 2010, compared to $3.9 million for the same period in 2009. This was the result of an increase in net loan charge-offs due to a $7.2 million charge-off on a single commercial real estate loan relationship. The allowance was $6.9 million, or 1.36% of total loans at December 31, 2010 and $7.6 million, or 1.60% of total loans at December 31, 2009. In 2010, total loans increased $32.5 million, with the increase primarily in residential real estate loans which contain less credit risk and market risk than both commercial real estate and commercial and industrial loans.

●

Net interest and dividend income decreased $3.1 million to $29.4 million for the year ended December 31, 2010, compared to $32.5 million for the same period in 2009. The net interest margin, on a tax-equivalent basis, was 2.64% for the year ended December 31, 2010, compared to 3.04% for the same period in 2009. The margin decreased because the yield on interest-earning assets decreased more than the cost of interest-bearing liabilities. The decrease in interest rates during 2010 caused an increase in prepayments on loans and investments and the funds were reinvested in a lower rate environment, thus reducing yields.

●

Noninterest income increased $4.2 million to $7.4 million for the year ended December 31, 2010, compared to $3.2 million for the same period in 2009. The increase was primarily the result of an increase in net gains on the sale of securities of $4.5 million for the year ended December 31, 2010.

●

Nonperforming loans decreased $2.3 million to $3.2 million at December 31, 2010, compared to $5.5 million at December 31, 2009. This represented 0.63% of total loans at December 31, 2010 and 1.15% of total loans at December 31, 2009. At December 31, 2010, nonperforming loans were primarily made up of three commercial relationships totaling $2.4 million.

General. ~~Westfield Financial’s~~ Our consolidated results of operations are comprised of earnings on investments and loans and the net income recorded by ~~its principal operating subsidiary, Westfield~~the Bank. ~~Westfield Bank’s~~Our consolidated results of operations depend primarily on net interest and dividend income. Net interest and dividend income is the difference between the interest income earned on interest-earning assets and the interest paid on interest-bearing liabilities. Interest-earning assets consist primarily of securities, commercial real estate loans, commercial and industrial loans and residential real estate ~~loans, consumer loans, mortgage-backed securities and investment securities.~~loans. Interest-bearing liabilities consist primarily of certificates of deposit and money market account, NOW account and savings account deposits, ~~and~~ borrowings from the Federal Home Loan Bank of ~~Boston.~~Boston and securities sold under repurchase agreements. The consolidated results of operations ~~als o~~also depend on the provision for loan losses, noninterest income, and noninterest expense. Noninterest expense includes salaries and employee benefits, occupancy expenses and other general and administrative expenses. Noninterest income includes service fees and charges, income on bank-owned life insurance, and gains (losses) on securities.

Critical Accounting Policies.~~Westfield Financial’s~~ Our accounting policies are disclosed in Note 1 to the Consolidated Financial Statements. Given ~~Westfield Financial’s~~our current business strategy and asset/liability structure, the more critical policies are accounting for nonperforming loans, the allowance for loan losses and provision for loan losses, ~~the classification of securities as either held to maturity or available for sale,~~ other than temporary impairment of securities, and the valuation of deferred taxes. In addition to the informational disclosure in the Notes to the Consolidated Financial Statements, ~~Westfield Financial’s~~our policy on each of these accounting policies is described in detail in the applicable sections of“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Senior management has discussed the development and selection of these ~~ac counting estimates~~accounting policies and the related disclosures with the Audit Committee of ~~Westfield Financial’s~~our Board of Directors.

~~On a quarterly basis, Westfield Financial reviews investment securities with unrealized depreciation~~

Our general policy regarding recognition of interest on a judgmental basis to assess whether the decline in fair value is temporary or other than temporary. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of Westfield Financial to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Securities, including mortgage-backed securities, which management has the positive intent and ability to hold until maturity are classified as held to maturity and are carried at amortized cost. Securities, including mortgage-backed securities, that have been identified as assets for which there is not a positive intent to hold to maturity are classified as available for sale and are carried at fair value with unrealized gains and losses, net of income taxes, reported as a separate component of equity. Accordingly, a misclassification would have a direct effect on stockholders’ equity. Sales or reclassification as available for sale (except for certain permitted reasons) of held to maturity securities may result in the reclassification of all such securities to available for sale. Westfield Financial has never sold held to maturity securities or reclassified such securities to available for sale other than in specifically permitt ed circumstances. Westfield Financial does not acquire securities or mortgage-backed securities for purposes of engaging in trading activities.

~~Westfield Financial’s general policy~~loans is to discontinue the accrual of interest when principal or interest payments are delinquent 90 days or more, 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 principal balance is not in question. Loans are returned to accrual status when they become current as to both principal and interest and when subsequent performance reduces 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 process of evaluating the loan portfolio, classifying loans and determining the allowance and provision is described in detail in Part I under “Business ~~of Westfield Financial and Westfield~~~~Bank~~ – Lending Activities - Allowance for Loan Losses.” ~~Westfield Financial’s~~ Our methodology for assessing the allocation of the allowance consists of two key components, which are a specific allowance for ~~identified problems or~~ impaired loans and a formula allowance for the remainder of the portfolio. Measurement of impairment can be based on present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral, if the loan is collateral dependent. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change. The allocation of the allowance is also reviewed by ~~mana gement~~management based upon ~~its~~our evaluation of then-existing economic and business conditions affecting ~~Westfield Financial’s~~our key lending areas and other conditions, such as new loan products, credit quality trends (including trends in nonperforming loans expected to result from existing conditions), collateral values, loan volumes and concentrations, specific industry conditions within portfolio segments that existed as of the balance sheet date and the impact that such conditions were believed ~~tohave~~to have had on the collectability of the loan portfolio. Although management believes it has established and maintained the allowance for loan losses at adequate levels, if management’s assumptions and judgments prove to be incorrect due to continued deterioration in economic, real estate and other conditions, and the allowance for loan losses is not adequate to absorb inherent losses, ~~the Company’s~~our earnings and capital could be significantly and adversely affected.

On a quarterly basis, we review securities with a decline in fair value below the amortized cost of the investment to determine whether the decline in fair value is temporary or other than temporary. Declines in the fair value of marketable equity securities below their cost that are deemed to be other than temporary based on the severity and duration of the impairment are reflected in earnings as realized losses. In estimating other than temporary impairment losses for securities, impairment is required to be recognized if (1) we intend to sell the security; (2) it is “more likely than not” that we will be required to sell the security before recovery of its amortized cost basis; or (3) for debt securities, the present value of expected cash flows is not sufficient to recover the entire amortized cost basis. For all impaired available for sale securities that we intend to sell, or more likely than not will be required to sell, the full amount of the other than temporary impairment is recognized through earnings. For other impaired debt securities, credit-related other than temporary impairment is recognized through earnings, while non-credit related other than temporary impairment is recognized in other comprehensive income, net of applicable taxes.

~~Westfield Financial~~We must make certain estimates in determining income tax expense for financial statement purposes. These estimates occur in the calculation of the deferred tax assets and liabilities, which arise from the temporary differences between the tax basis and financial statement basis of ~~the Company’s~~our assets and liabilities. The carrying value of our net deferred tax asset is based on ~~the Company’s~~our historic taxable income for the two prior years as well as our belief that it is more likely than not that ~~the Company~~we will generate sufficient future taxable income to realize these deferred tax assets. Judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws or other factors which could result in a change in the assessment of the realization of the net deferred tax asset.

Average Balance Sheet and Analysis of Net Interest and Dividend Income

The following table sets forth information relating to ~~Westfield Financial’s~~our condition and net interest and dividend income for the years ended December 31, ~~2008, 2007~~2010, 2009 and ~~2006~~2008 and reflect the average yield on assets and average cost of liabilities for the years indicated. The yields and costs were derived by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the years shown. Average balances were derived from actual daily balances over the years indicated. Interest income includes fees earned from making changes in loan rates or terms, and fees earned when commercial real estate loans were prepaid or refinanced.

The interest earned on ~~tax exempt~~tax-exempt assets is adjusted to a ~~tax equivalent~~tax-equivalent basis to recognize the income tax savings which facilitates comparison between taxable and ~~tax exempt~~tax-exempt assets.

For the Years Ended December 31,

2008

2007

2006

Average
Balance

Interest

Average
Yield/Cost

Average
Balance

Interest

Average
Yield/Cost

Average
Balance

Interest

Average
Yield/Cost

(Dollars in thousands)
ASSETS:

Interest-earning assets:

Short-term investments(1)
$       33,674

$       594

1.76
%

$       53,624

$    2,800

5.22
%

$    18,658

$       872

4.67
%
Securities(5)
521,767

26,752

5.13

491,968

24,332

4.95

372,519

16,764

4.50

Loans(2)(5)
444,492

27,280

6.14

398,281

26,993

6.78

386,039

25,586

6.63

        Total interest-earning assets
999,933

54,626

5.46

943,873

54,125

5.73

777,216

43,222

5.56

        Total noninterest-earning assets
68,831

65,194

50,535

        Total assets
$  1,068,764

$  1,009,067

$  827,751

LIABILITIES AND EQUITY:

Interest-bearing liabilities:

NOW accounts
$       85,558

1,205

1.41

$       80,613

1,340

1.66

$ 73,256

908

1.24

Savings accounts
60,515

748

1.24

41,266

329

0.08

45,241

226

0.50

Money market deposit accounts
67,017

763

1.14

85,045

1,301

1.53

109,710

1,684

1.53

Time certificates of deposit
330,892

12,417

3.75

369,516

16,574

4.49

368,901

14,450

3.92

        Total interest-bearing deposits
543,982

15,133

576,440

19,544

597,108

17,268

Short-term borrowings and long-tern debt
194,750

7,171

3.68

92,750

3,864

4.17

65,062

2,283

3.51

Interest-bearing liabilities
738,732

22,304

3.02

669,190

23,408

3.50

662,170

19,551

2.95

Non-interest-bearing deposits
45,009

39,387

41,134

Other noninterest-bearing liabilities
9,828

10,495

7,927

        Total noninterest-bearing liabilities
54,837

49,882

49,061

        Total liabilities
793,569

719,072

711,231

        Total equity
275,195

289,995

116,520

        Total liabilities and equity
$  1,068,764

$  1,009,067

$  827,751

Less: Tax-equivalent adjustment(5)

(570)

(541)

(787)

Net interest and dividend income

$  31,752

$  30,176

$  22,884

Net interest rate spread(3)

2.44

2.23

2.61

Net interest margin(4)

3.23
%

3.25
%

3.05
%
Ratio of average interest-earning
  assets to average interest-bearing liabilities

135.4
x

141.0
x

117.4
x

~~(1) Short-term investments include federal funds sold.~~

~~(2) Loans, including non-accrual loans, are net of deferred loan origination costs, and unadvanced funds.~~

~~(3) 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.~~

~~(4) Net interest margin represents tax equivalent net interest and dividend income as a percentage of average interest earning assets.~~

~~(5) Investment securities, loan income and net interest 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.~~

For the Years Ended December 31,
2010 2009 2008

Average
Balance
Interest
Avg Yield/
Cost
Average
Balance Interest
Avg Yield/
Cost

Average
Balance
Interest
Avg Yield/
Cost

ASSETS:
Interest-earning assets
Loans(1)(2)
$ 482,215 $ 24,887 5.16 % $ 476,214 $ 25,834 5.42 % $ 444,492 $ 27,280 6.14 %
Securities(2)
647,462 22,079 3.41 597,811 27,286 4.56 521,767 26,752 5.13
Short-term investments(3)
13,948 8 0.06 15,051 11 0.07 33,674 594 1.76
Total interest-earning assets 1,143,625 46,974 4.11 1,089,076 53,131 4.88 999,933 54,626 5.46
Total noninterest-earning assets 78,811 72,267 68,831

Total assets $ 1,222,436 $ 1,161,343 $ 1,068,764

LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 76,954 933 1.21 $ 68,967 1,238 1.80 $ 85,558 1,205 1.41
Savings accounts 112,546 824 0.73 89,185 955 1.07 60,515 748 1.24
Money market accounts 56,082 358 0.64 53,100 467 0.88 67,017 763 1.14
Time certificates of deposit 347,590 7,735 2.23 337,692 10,034 2.97 330,892 12,417 3.75
Total interest-bearing deposits 593,172 9,850 548,944 12,694 543,982 15,133
Short-term borrowings and long-term debt 296,752 6,915 2.33 260,083 7,328 2.82 194,750 7,171 3.68
Interest-bearing liabilities 889,924 16,765 1.88 809,027 20,022 2.47 738,732 22,304 3.02
Noninterest-bearing deposits 83,077 80,186 45,009
Other noninterest-bearing liabilities 9,513 14,789 9,828
Total noninterest-bearing liabilities 92,590 94,975 54,837

Total liabilities 982,514 904,002 793,569
Total equity 239,922 257,341 275,195
Total liabilities and equity $ 1,222,436 $ 1,161,343 $ $ 1,068,764
Less: Tax-equivalent adjustment(2)
(827 ) (601 ) (570 )
Net interest and dividend income $ 29,382 $ 32,508 $ 31,752
Net interest rate spread(4)
2.22 % 2.41 % 2.44 %
Net interest margin(5)
2.64 % 3.04 % 3.23 %
Ratio of average interest-earning
assets to average interest-bearing liabilities
128.5 134.6 135.4

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

Rate/Volume Analysis. The following table shows how changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected ~~Westfield Financial’s~~our interest and dividend income and interest expense during the periods indicated. Information is provided in each category with respect to: (1) interest income changes attributable to changes in volume (changes in volume multiplied by prior rate); (2) interest income changes attributable to changes in rate (changes in rate multiplied by prior volume); and (3) the net change.

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

Year Ended December 31, 2008
Compared to Year Ended December 31,
2007

Year Ended December 31, 2007
Compared to Year Ended December 31,
2006

Increase/(Decrease) Due to

Increase/(Decrease) Due to

Volume

Rate

Net

Volume

Rate

Net

(In thousands)
Interest-Earning Assets

Short-term investments
$  (1,042)

$  (1,164)

$  (2,206)

$  1,634

$     294

$  1,928
Investment securities(1)
1,474

946

2,420

5,375

2,193

7,568
Loans(1)
3,132

(2,845)

287

811

596

1,407
Total interest-earning assets
3,564

(3,063)

501

7,820

3,083

10,903

Interest-bearing liabilities:

NOW accounts
82

(217)

(135)

91

341

432
Savings accounts
153

266

419

(20)

123

103
Money market deposit accounts
(276)

(262)

(538)

(379)

(4)

(383)
Time certificates of deposit
(1,732)

(2,425)

(4,157)

24

2,100

2,124
Short-term borrowings and long-
    term debt
4,249

(942)

3,307

972

609

1,581
Total interest-bearing
    liabilities
2,476

(3,580)

(1,104)

688

3,169

3,857

Change in net interest and
    dividend income
$   1,088

$      517

$   1,605

$  7,132

$      (86)

$  7,046

~~_________________~~

(1) Securities and loan income and net interest 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 to agree to the amount reported in the statements of income.

	Year Ended December 31, 2010 Compared to Year Ended December 31, 2009									Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

	Increase (Decrease) Due to									Increase (Decrease) Due to
	Volume			Rate			Net			Volume			Rate			Net
Interest-earning assets	(In thousands)
Loans (1)	$	326		$	(1,273	)	$	(947	)	$	1,947		$	(3,393	)	$	(1,446	)
Securities (1)		2,266			(7,473	)		(5,207	)		3,899			(3,365	)		534
Short-term investments		(1	)		(2	)		(3	)		(329	)		(254	)		(583	)
Total interest-earning assets		2,591			(8,748	)		(6,157	)		5,517			(7,012	)		(1,495	)

Interest-bearing liabilities
NOW accounts		143			(448	)		(305	)		(234	)		267			33
Savings accounts		250			(381	)		(131	)		354			(147	)		207
Money market accounts		26			(135	)		(109	)		(158	)		(138	)		(296	)
Time deposits		294			(2,593	)		(2,299	)		255			(2,638	)		(2,383	)
Short-term borrowing and long-time debt		1,033			(1,446	)		(413	)		2,406			(2,249	)		157
Total interest-bearing liabilities		1,746			(5,003	)		(3,257	)		2,623			(4,905	)		(2,282	)
Change in net interest and dividend income	$	845		$	(3,745	)	$	(2,900	)	$	2,894		$	(2,107	)	$	787

(1)	Securities and loan income and net interest 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 to agree to the amount reported in the statements of income.

Comparison of Financial Condition at December 31, ~~2008~~2010 and December 31, ~~2007~~

2009

Total assets increased ~~$69.3~~$48.1 million to ~~$1.1~~$1.2 billion at December 31, ~~2008 from $1.0 billion at December 31, 2007. Securities and mortgage-backed securities decreased $17.0~~2010. Net loans increased by $33.2 million to ~~$505.8~~$502.3 million at December 31, ~~2008~~2010 from ~~$522.8~~$469.1 million at December 31, ~~2007. Investment securities~~2009. Securities increased $31.9 million to $656.4 million at December 31, 2010 from $624.5 million at December 31, 2009. Cash and cash equivalents decreased $17.1 million to $11.6 million at December 31, 2010 from $28.7 million at December 31, 2009, as funds ~~received~~were reinvested into securities and loans.

Securities increased $31.9 million to $656.4 million at December 31, 2010 from ~~securities that matured, sold, or paid down~~$624.5 million at December 31, 2009. Securities increased as funds from deposits and long-term debt were ~~used to originate loans.~~reinvested in securities. The securities portfolio is primarily comprised of mortgage-backed securities, which totaled ~~$402.1~~$576.2 million at December 31, ~~2008,~~2010, the majority of which were issued by government-sponsored enterprises such as ~~Fannie Mae.~~the Federal National Mortgage Association. Privately issued mortgage-backed securities comprised ~~9.3%~~$7.6 million, or 1.32%, of the mortgage-backed securities portfolio at December 31, ~~2008 and are rated investment grade by Standard & Poors.~~

2010.

Debt securities issued by government-sponsored enterprises decreased ~~$41.0~~$27.7 million to ~~$61.2~~$17.9 million at December 31, ~~2008~~2010 from ~~$102.2~~$45.6 million at December 31, ~~2007.~~2009. Securities issued by government-sponsored enterprises consist entirely of bonds issued by the Federal National Mortgage Association and the Federal Home Loan Mortgage ~~Corporation and the Federal Home Loan Bank. Westfield Financial~~Corporation. We also ~~invests~~invest in municipal bonds issued by cities and towns in Massachusetts ~~and~~that are rated as investment grade by Moody’s, Standard & Poor’s or Fitch, and the majority of which are also independently insured. Municipal bonds were ~~$36.4~~$43.1 million at December 31, ~~2008~~2010 and ~~$33.0~~$36.4 million at ~~December 31, 2007.~~2009. In addition, ~~Westfield Financial has~~we have investments in ~~Federal Home Loan Bank~~FHLB stock and mutual funds that invest only in securities allowed by the ~~Office~~OTS.

In August 2010, we transferred all of ~~Thrift Supervision.~~

our held-to-maturity securities to the available-for-sale category. We determined that we no longer had the positive intent to hold our securities classified as held-to-maturity for an indefinite period of time because of our desire to have more flexibility in managing the investment portfolio. The securities transferred had a total amortized cost of $287.1 million, fair value of $299.7 million and a net unrealized gain of $12.6 million which was recorded as other comprehensive income at the time of transfer.

Net loans increased by ~~$57.2~~$33.2 million to ~~$472.1~~$502.3 million at December 31, ~~2008~~2010 from ~~$414.9~~$469.1 million at December 31, ~~2007. This~~2009. The increase in net loans was primarily the result of an increase in residential real estate loans, partially offset by decreases in commercial real estate loans and commercial and industrial ~~loans and commercial~~loans. Residential real estate ~~loans. Commercial and industrial~~ loans increased ~~$37.4~~$49.7 million to ~~$153.9~~$148.8 million at December 31, ~~2008~~2010 from ~~$116.5~~$99.1 million at December 31, ~~2007. Commercial real estate~~2009. We have begun to purchase more residential loans ~~increased $33.9 million to $223.9 million at December 31, 2008 from $190.0 million at December 31, 2007. The increases in commercial~~as a means of diversifying our loan portfolio.

Commercial and industrial ~~and commercial real estate loans were due to increased loan originations in the Bank’s market area.~~

~~Residential real estate~~ loans decreased $9.7 million to ~~$98.4~~$135.3 million at December 31, ~~2008~~2010 from ~~$108.1~~$145.0 million at December 31, ~~2007. Since September 2001, Westfield Bank has referred substantially all~~2009. While we continue to originate commercial and industrial loans, new originations were offset by customers decreasing their balances on lines of ~~the originations of its residential~~credit and normal loan payments and payoffs.

Commercial real estate loans decreased $7.5 million to $221.6 million at December 31, 2010 from $229.1 million at December 31, 2009. In addition to normal loan payments and payoffs, the decrease in commercial real estate loans from December 31, 2009 included the full charge-off of $7.2 million related to one commercial real estate loan. During the second quarter of 2010, the initial $3.6 million of the loan was charged-off and the final $3.6 million was charged-off in the third quarter of 2010. The loan, a leasehold mortgage, was related to a ~~third party mortgage company. Residential~~retail building which lost its tenant, a national chain store, due to bankruptcy. We have minimal exposure to commercial real estate ~~borrowers submit applications to Westfield Bank, but the loan is approved by~~loans which involve similar leasehold mortgages. Owner occupied commercial real estate loans totaled $107.0 million at December 31, 2010 and ~~closed on the books of the mortgage company. The third party mortgage company owns the servicing rights~~$99.3 million at December 31, 2009, while non-owner occupied commercial real estate loans totaled $114.6 million at December 31, 2010 and ~~services the loans. Westfield Bank retains no residual ownership interest in these loans.~~

$129.7 million at December 31, 2009.

Asset growth was funded primarily through a ~~$68.3~~$52.3 million increase in ~~long-term debt,~~deposits, which totaled ~~$173.3~~$700.3 million at December 31, ~~2008.~~2010, compared to $648.0 million at December 31, 2009. Regular savings accounts and money market accounts increased $22.7 million to $177.5 million at December 31, 2010. NOW and checking accounts increased $18.3 million to $168.8 million at December 31, 2010. In addition, time deposits increased $11.3 million to $354.0 million. Sales emphasis was placed on relationship-based products, which resulted in increases in all deposit product categories.

Long-term debt consists of FHLB advances, ~~and~~ securities sold under repurchase agreements and customer repurchase agreements with an original maturity of one year or more. At December 31, ~~2008, Westfield Bank~~2010, we had ~~$115.0~~$151.6 million in long-term debt with the FHLB, ~~and $58.3~~$81.3 million in securities sold under repurchase agreements ~~with a broker-dealer approved by the Company’s management~~ and ~~Board of Directors.~~$5.2 million in customer repurchase agreements. This compares to ~~$105.0~~$127.5 million in FHLB advances, ~~and no~~$81.3 million in securities sold under repurchase agreements at December 31, ~~2007. Securities sold under repurchase agreements were executed with a weighted average interest rate of 2.62%~~2009 and ~~final maturities of $9.8~~$5.0 million in ~~the year 2013 and $48.5 million in the year 2018. The securities sold under~~customer repurchase ~~agreements are callable at the issuer’s option beginning in the years 2009 to 2012.~~agreements. Current interest rates permit ~~Westfield Bank~~us to earn a more advantageous spread by borrowing funds and reinvesting in loans and securities.

Short-term borrowings ~~increased $14.6~~decreased $11.6 million to ~~$49.8~~$62.9 million at December 31, ~~2008~~2010 from ~~$35.2~~$74.5 million at December 31, ~~2007.~~2009. Short-term borrowings are made up of 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 ~~$28.5~~$50.6 million and ~~$18.4~~$58.0 million at December 31, ~~2008~~2010 and ~~2007,~~2009, respectively. Customer repurchase agreements ~~increased $4.5~~decreased $4.2 million to ~~$21.3~~$12.3 million at December 31, ~~2008~~2010 from ~~$16.8~~$16.5 million at December 31, ~~2007.~~2009. A customer repurchase agreement is an agreement by ~~Westfield Bank~~us to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the United States ~~government.~~government or government-sponsored enterprises. 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. At ~~Dec ember~~December 31, ~~2008,~~2010, all of ~~Westfield Bank’s~~our customer repurchase agreements were held by commercial customers.

~~Total deposits~~

Shareholders’ equity decreased ~~$14.7~~$26.1 million to ~~$588.0~~$221.2 million at December 31, ~~2008~~2010 from ~~$602.7~~$247.3 million at December 31, 2007. The decrease in deposits was due to a decrease in time deposit and money market accounts, partially offset by an increase in regular savings and checking accounts. Time deposits decreased $25.6 million to $327.6 million at December 31, 2008. Management placed less emphasis on gathering time deposits in favor of using other types of funding, such as securities sold under repurchase agreements. Management believes that doing so helped control funding costs.

Money market accounts decreased $16.9 million to $57.7 million at December 31, 2008. These decreases were partially offset by increases of $21.0 million in regular savings and $6.9 million in checking accounts. The increases in both regular savings and checking accounts were fueled by new products with higher interest rates than the Bank’s other comparable products.

~~Stockholders’ equity decreased $26.6 million to $259.9 million at December 31, 2008 from $286.5 million at December 31, 2007.~~2009. This represented ~~23.4%~~17.8% of total assets as of December 31, ~~2008~~2010 and ~~27.6%~~20.8% of total assets as of December 31, ~~2007.~~2009. The decrease in ~~stockholders’~~shareholders’ equity ~~is the result of~~reflects the repurchase of ~~1,058,778~~1,988,634 shares of our common stock at a cost of ~~$10.5~~$16.1 million, pursuant to ~~Westfield Financial’s~~our current stock ~~repurchase~~repurchases plan, ~~paying out~~the payment of regular and special dividends amounting to ~~$17.9~~$14.3 million, or ~~$0.60~~$0.52 per share, and a decrease in ~~accumulated~~ other comprehensive income of ~~$10.0~~$3.2 million. This was partially offset by an increase of $4.6 million related to the recognition of share-based compensation and the exercise of stock options and net income of ~~$6.7~~$3.0 million for the year ended December 31, 2008 and the issuance of 433,110 shares of common stock amounting to $1.9 million in connection with stock option exercises. All of the stock options exercised during the year ended December 31, 2008 were granted in 2002.

2010.

Comparison of Operating Results for Years Ended December 31, ~~2008~~2010 and ~~2007~~

2009

General.Net income for the year ended December 31, ~~2008~~2010 was ~~$6.7~~$3.0 million, or ~~$0.23~~$0.11 per diluted share, compared to ~~$8.7~~$5.5 million, or ~~$0.29~~$0.18 per diluted share for the same period in ~~2007.~~

2009.

Interest and Dividend Income.Total interest and dividend income ~~increased $473,000~~decreased $6.4 million to ~~$54.1~~$46.1 million for the year ended December 31, ~~2008,~~2010, compared to ~~$53.6~~$52.5 million for the same period in ~~2007.~~

2009.

The ~~increase~~decrease in interest income was primarily the result of a ~~$56.1 million increase~~decrease in the average ~~interest-earnings~~yield on interest-earning assets for the ~~twelve months~~year ended December 31, ~~2008. Average~~2010, which was partially offset by an increase in the average balance of interest-earning assets ~~were $1.0 billion for the twelve months ended December 31, 2008 compared to $943.9 million~~ for the same ~~period in 2007.~~period. The average yield on interest-earning assets, on a tax-equivalent basis, decreased 2777 basis points to ~~5.46%~~4.11% for the ~~twelve months~~year ended December 31, ~~2008~~2010 from ~~5.73%~~4.88% for the same period in ~~2007.~~

2009. The cost of interest-bearing liabilities decreased 59 basis points to 1.88% for the year ended December 31, 2010 from 2.47% for the same period in 2009.

Interest ~~and dividends~~income on securities ~~increased $2.4~~decreased $5.4 million to ~~$26.3~~$21.4 million for the year ended December 31, ~~2008 compared to $23.9 million for the same period in 2007. The average balance on securities increased $29.8 million to $521.8 million at December 31, 2008~~2010 from $492.0 million at December 31, 2007. In addition, the tax-equivalent yield on securities increased from 4.95% for the year 2007 to 5.13% for the same period in 2008. The increase in interest and dividend income on securities was partially offset by a decrease in the tax-equivalent yield on and average balance of short-term investments. The tax-equivalent yield on short-term investments decreased 346 basis points to 1.76% for the year ended December 31, 2008 from 5.22% for the same period in 2007 due to the falling interest rate environment. In addition, the average balance of short-term investments decreased $20.0 million from $53.6 million for the year ended December 3 1, 2007 to $33.6$26.8 million for the year ended December 31, ~~2008.~~

~~Interest income~~2009. The tax-equivalent yield on securities decreased 115 basis points from ~~loans increased $287,000~~4.56% for the year 2009 to ~~$27.3~~3.41% for the same period in 2010 due to the enduring low interest rate environment. The decrease in interest rates during 2010 caused an increase in prepayments on investments and the funds were reinvested in a lower rate environment, thus reducing yields. This was partially offset by a $49.7 million increase in the average balance of securities from $597.8 million for the year ended December 31, ~~2008 from $27.0~~2009 to $647.5 million for the year ended December 31, ~~2007. The average balance of~~2010.

Interest income on loans ~~increased $46.2 million~~decreased $993,000 to ~~$444.5~~$24.7 million for the year ended December 31, ~~2008~~2010 from ~~$398.3~~$25.7 million for the year ended December 31, ~~2007~~

2009. The tax-equivalent yield on loans decreased 26 basis points from 5.42% for the year 2009 to 5.16% for the same period in 2010 due to the enduring low interest rate environment. The decrease in interest rates during 2010 caused an increase in ~~interest income resulting from~~prepayments on loans and the ~~volume of average loan balances of $3.1 million~~funds were reinvested in a lower rate environment, thus reducing yields. This was partially offset by a ~~decrease~~$6.0 million increase in the ~~yield on~~average balance of loans ~~of $2.8~~from $476.2 million for the year ended December 31, ~~2008. The falling interest rate environment in 2008 caused a decrease in the average yield on loans of 64 basis points~~2009 to ~~6.14%~~$482.2 million for the year ended December 31, ~~2008 from 6.78% for the comparable 2007 period.~~

2010.

Interest Expense.Interest expense for the year ended December 31, ~~2008~~2010 decreased ~~$1.1~~$3.3 million to ~~$22.3~~$16.7 million from the comparable ~~2007~~2009 period. This was attributable to a decrease in the average cost of interest-bearing liabilities of 4859 basis points to ~~3.02%~~1.88% for the year ended December 31, ~~2008~~2010 from ~~3.50%~~2.47% for the same period in 2007. In addition, the average balance of total interest-bearing liabilities increased $69.5 million to $738.7 million for the year ended December 31, 2008 from $669.2 million for the same period in 2007.2009. The decrease in the ~~average~~ cost of interest-bearing liabilities was primarily due to ~~the falling interest rate environment. Additionally, management placed less emphasis~~a decrease in rates on ~~gathering~~ time deposits, ~~in order to take advantage of other sources of lower-cost funding, such as long-term debt~~repurchase agreements and ~~short-term borrowings, to control funding costs.~~

borrowings.

Net Interest and Dividend Income.Net interest and dividend income ~~increased $1.6~~decreased $3.1 million to ~~$31.8~~$29.4 million for the year ended December 31, ~~2008~~2010 as compared to ~~$30.2~~$32.5 million for same period in ~~2007.~~2009. The net interest margin, on a tax-equivalent basis, was ~~3.23%~~2.64% and ~~3.25%~~3.04% for the years ended December 31, ~~2008~~2010 and ~~2007,~~2009, respectively. The change in net interest and dividend income for the year ended December 31, ~~2008~~2010 was primarily the result of ~~a decrease in interest expense of $1.1 million from~~ the ~~comparable 2007 period resulting from a decrease in~~yield on interest-earning assets decreasing more than the ~~average~~ cost of interest-bearing liabilities, partially offset by an increase in interest and dividend income of $473,000 resulting from an increase in the average balance of interest-earning assets of $56.1 million for the year ending December 31, 2008.

liabilities.

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

The amount that ~~Westfield Bank~~we provided for the provision for loan losses during the year ended December 31, ~~2008~~2010 was based upon the changes that occurred in the loan portfolio during that same period as well as the continued weakening of the local and national economy. The changes in the loan portfolio, described in detail below, include an increase in net loan charge-offs, partially offset by decreases in commercial and industrial loans and commercial real estate loans ~~an increase in impaired loans and nonperforming loans,~~ and an increase in ~~net charged-off~~residential real estate loans. After evaluating these factors, ~~Westfield Bank~~we provided ~~$3.5~~$8.9 million for loan losses for the year ended December 31, ~~2008,~~2010, compared to ~~$400,000~~$3.9 million for the same period in ~~2007.~~2009. The allowance was ~~$8.8~~$6.9 million at December 31, ~~2008~~2010 and ~~$5.7~~$7.6 million at December 31, ~~2007.~~2009. The allowance for loan losses was ~~1.83%~~1.36% of total loans at December 31, ~~2008~~2010 and ~~1.36%~~1.60% at December 31, ~~2007.~~

2009.

For the year ended December 31, 2010, we recorded net charge-offs of $9.6 million compared to net charge-offs of $5.1 million for the year ended December 31, 2009. The 2010 period was comprised of charge-offs of $9.7 million partially offset by recoveries of $83,000. For the year ended December 31, 2010, charge-offs were primarily made up of a $7.2 million charge-off on a single commercial real estate loan relationship. The loan, a leasehold mortgage, was related to a retail building which lost its tenant, a national chain store, due to bankruptcy. We have minimal exposure to commercial real estate loans which involve similar leasehold mortgages. We are currently in the process of initiating a recovery action against the borrower.

The 2009 period was comprised of charge-offs of $5.1 million partially offset by recoveries of $48,000. Charge-offs for the 2009 period were primarily due to three unrelated commercial loan relationships which resulted in charge offs totaling $4.7 million.

Nonperforming loans decreased $2.3 million to $3.2 million at December 31, 2010 from $5.5 million at December 31, 2009. This represented 0.63% of total loans at December 31, 2010 and 1.15% of total loans at December 31, 2009. At December 31, ~~2008,~~2010, nonperforming loans were primarily made up of three commercial ~~and industrial~~relationships totaling $2.4 million.

At December 31, 2010, residential real estate loans increased ~~$37.4~~$49.7 million to ~~$153.9~~$148.8 million ~~compared to~~at December 31, ~~2007. Westfield Bank considers~~2010. We consider these types of loans to contain ~~more~~less credit risk and market risk than both commercial real estate loans and ~~conventional residential real estate mortgages.~~commercial and industrial loans. Commercial real estate loans ~~increased by $33.9~~decreased $7.5 million to ~~$223.9~~$221.6 million at December 31, ~~2008.~~

~~For the year ended~~2010. Commercial and industrial loans decreased $9.7 million to $135.3 million compared to December 31, 2008, Westfield Bank recorded net charge-offs of $383,000 compared to net charge-offs of $111,000 for the year ended December 31, 2007. The 2008 period was comprised of charge-offs of $449,000 for the year ended December 31, 2008, partially offset by recoveries of $66,000 for the same period. The 2007 period was comprised of charge-offs of $317,000 for the year ended December 31, 2007, partially offset by recoveries of $206,000 for the same period.

Nonperforming loans increased $7.6 million to $8.8 million at December 31, 2008 from $1.2 million at December 31, 2007. This represented 1.83% of total loans at December 31, 2008 and 0.29% of total loans at December 31, 2007. The increase was primarily the result of a manufacturing commercial loan relationship of $5.5 million and an agricultural commercial loan relationship of $1.7 million.

The manufacturing commercial loan relationship is secured by real estate and other business assets. Additionally, all debt is cross-collateralized, defaulted, and guaranteed with the exception of the SBA guaranteed notes. During the twelve months ended December 31, 2008, a valuation allowance of $2.1 million was allocated on the relationship of $5.5 million based on the estimated fair value of the underlying collateral.

The agricultural commercial loan relationship is primarily secured by real estate. Management does not anticipate incurring significant losses on this relationship. During the twelve months ended December 31, 2008, a valuation allowance of $138,000 was allocated on the loan relationship of $1.7 million based on the estimated fair value of the underlying collateral.

Nonperforming residential real estate loans increased $149,000 to $1.1 million at December 31, 2008 from $995,000 at December 31, 2007. The majority of nonperforming residential real estate loans are collateralized by first liens.

Impaired loans increased $5.4 million to $5.6 million at December 31, 2008 primarily as a result of the two commercial loan relationships consisting of an agricultural commercial loan relationship of $1.7 million and a manufacturing commercial loan relationship of $5.5 million, as discussed above. The manufacturing commercial loan relationship is secured by real estate and other business assets. Additionally, all debt is cross-collateralized, defaulted, and guaranteed with the exception of the SBA guaranteed notes. Management estimates a $1.9 million loss on this relationship. During the twelve months ended December 31, 2008, a valuation allowance of $138,000 was allocated on the loan relationship of $1.7 million and a valuation allowance of $1.9 million was allocated on the loan relationship of $5.5 million based on the estimated fair value of the underlying collateral.

2009.

Although management believes it has established and maintained the allowance for loan losses at ~~adequate~~appropriate 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 $1.1~~increased $4.2 million to ~~$3.5~~$7.4 million for the year ended December 31, ~~2008~~2010 compared to ~~$4.6~~$3.2 million for the same period in ~~2007. The 2007 results include a pre-tax gain of $546,000~~2009.

Net gains on the ~~sale~~sales of a piece of vacant land in Feeding Hills, Massachusetts. The results for the 2007 year also include a pre-tax gain of $315,000 resulting from the curtailment of a defined benefit plan, specifically pertaining to providing a life insurance benefit to employees who retire from Westfield Bank.

~~The year ended December 31, 2008 included a net loss of $205,000 on the sale and write-down of securities. Westfield Financial recorded write-downs of $1.3 million on~~ securities deemed to be other than temporarily impaired. This was primarily due to write-downs on preferred stock issued by Freddie Mac of $961,000. Freddie Mac was placed into conservatorship by the United States Treasury in September 2008. Westfield Financial’s book value remaining on preferred stock issued by Freddie Mac was $39,000 at December 31, 2008. The write-downs were ~~partially offset by net gains of $1.1~~$4.1 million for the year ended December 31, ~~2008~~2010, compared to a net loss of $383,000 for the same period in 2009. The increase in net gains on the ~~sale~~sales of ~~other investment securities.~~ securities for the year ended 2010 is primarily the result of management wanting to take advantage of unrealized gains within the portfolio as well as wanting to restructure the securities portfolio.

For the year ended December 31, ~~2007, Westfield Financial reported net gains~~2010, income from service charges and fees decreased $676,000 to $1.9 million, compared to $2.6 million for the comparable 2009 period. This decrease was the result of ~~$41,000~~decreases in income from the third-party mortgage program and fees collected on ~~sales of securities.~~

overdraft or insufficient customer accounts. Income from ~~bank-owned life insurance increased $98,000~~the third-party mortgage program decreased $485,000 to ~~$1.4 million~~$87,000 for the year ended December 31, ~~2008~~2010, compared to ~~the same period in 2007. This was primarily the result of a $2.8 million increase~~$572,000 in the ~~average balance~~comparable 2009 period. We have begun to buy back more residential loans from a third-party mortgage company as a means of ~~bank-owned~~diversifying our loan portfolio. As a result, we forgo receiving referral fee income on these loans but instead earn interest income for the life ~~insurance~~of the loans. In addition, net checking account processing fee income decreased $198,000 to $961,000 for the year ended December 31, 2010, primarily due to a decrease in ~~2008 compared to 2007.~~

overdraft fee income.

Noninterest Expense.Noninterest expense for the ~~twelve months~~year ended December 31, ~~2008~~2010 was ~~$23.3~~$24.8 million compared to ~~$21.8~~$25.0 million for the same period in ~~2007.~~2009. This ~~increase~~decrease was primarily due to ~~an increase~~a decrease of ~~$921,000~~$383,000 in ~~salaries~~FDIC insurance expense to $751,000 for the year ended December 31, 2010, compared to $1.1 million during the same period in 2009. The decrease was due to a special assessment of $453,000 for the 2009 period. Salaries and benefits decreased $306,000 to $14.7 million for the year ended December 31, ~~2008. Expenses~~2010, primarily the result of a $317,000 decrease in costs related to ~~share-based compensation increased $702,000~~stock-based compensation. This was partially offset by a $327,000 increase in expenses associated with other real estate owned (“OREO”). OREO expenses were related to write-downs and maintenance of foreclosed properties.

Income Taxes. The provision for income taxes decreased $1.2 million to $34,000 for the year ended December 31, ~~2008 as a result of new grants of restricted stock~~2010, compared to $1.3 million for the comparable 2009 period. The effective tax rate was 1.1% for the year ended December 31, 2010 and ~~stock options awarded~~18.8% for the same period in 2009. The decrease in the ~~third quarter~~tax provision and effective tax rate in the 2010 period is due primarily to lower pre-tax income while maintaining the same level of ~~2007. In addition, expenses related~~tax-advantaged income such as BOLI and tax-exempt municipal obligations.

Comparison of Operating Results for Years Ended December 31, 2009 and 2008

General. Net income for the year ended December 31, 2009 was $5.5 million, or $0.18 per diluted share, compared to ~~employee health insurance increased $150,000 due~~$6.7 million, or $0.22 per diluted share for the same period in 2008.

Interest and Dividend Income. Total interest and dividend income decreased $1.6 million to ~~normal increases in this area.~~

~~Data processing expense increased $270,000 to $1.7~~$52.5 million for the year ended December 31, ~~2008~~2009, compared to ~~$1.4~~$54.1 million for the same period in ~~2007. This~~2008.

The decrease in interest income was primarily the result of ~~new software licensing agreements and new technology related~~a decrease in the average yield on interest-earning assets for the year ended December 31, 2009, which was partially offset by an increase in the average balance of interest-earning assets for the same period. The average yield on interest-earning assets, on a tax-equivalent basis, decreased 58 basis points to ~~branch deposit imaging.~~

~~Professional services expense~~4.88% for the twelve months ended December 31, 2009 from 5.46% for the same period in 2008. While the decrease in the average yield on the balance of interest-earning assets, on a tax-equivalent basis, decreased interest income by $7.0 million, the average balance of interest-earning assets increased ~~$225,000~~$89.1 million, resulting in a partial offset of $5.5 million to ~~$1.6~~the decrease in interest income for the year ended December 31, 2009.

Interest income on loans decreased $1.4 million to $25.7 million for the year ended December 31, 2008 compared to $1.4 million for the same period in 2007. This was primarily the result of expenses related to fees paid to consultants for work performed reviewing internal Bank procedures in order to improve efficiencies.

~~Income Taxes.~~~~The provision for income taxes decreased $2.0 million to $1.8~~2009 from $27.1 million for the year ended December 31, 2008. The tax-equivalent yield on loans decreased 72 basis points from 6.14% for the year 2008 to 5.42% for the same period in 2009 due to the falling interest rate environment. The decrease in interest income resulting from the decrease in the ~~provision for income tax~~average yield on loans was ~~primarily due to lower income before taxes. The effective tax rate was 21.2%~~partially offset by a $31.7 million increase in the average balance of loans from $444.5 million for the year ended December 31, 2008 ~~and 30.5% for the same period in 2007.~~

~~Comparison of Financial Condition at December 31, 2007 and December 31, 2006~~

~~Total assets increased $43.0 million~~ to $1.0 billion at December 31, 2007 from $996.8 million at December 31, 2006. Cash and cash equivalents decreased $116.9 million, to $37.6 million at December 31, 2007 from $154.5 million at December 31, 2006. The decrease in cash and cash equivalents was the result of management investing the proceeds of Westfield Financial’s second step stock offering, which was completed on January 3, 2007, in investment securities and loans.

Securities and mortgage-backed securities increased $113.8 million to $522.8 million at December 31, 2007 from $409.0 million at December 31, 2006. Investment securities increased as management invested the proceeds of Westfield Financial’s second step stock offering, which was completed on January 3, 2007. The securities portfolio is primarily comprised of mortgage-backed securities, which totaled $380.8 million at December 31, 2007, the majority of which were issued by government-sponsored enterprises such as Fannie Mae. Privately issued mortgage-backed securities comprised 11.9% of the mortgage-backed securities portfolio at December 31, 2007, are rated AAA by Standard & Poors, and contain no sub-prime collateral.

Debt securities issued by government-sponsored enterprises increased by $20.4 million to $102.2 million at December 31, 2007 from $81.8 million at December 31, 2006. Securities issued by government-sponsored enterprises consist entirely of bonds issued by the Fannie Mae, Freddie Mac and the Federal Home Loan Bank of Boston. Westfield Financial also invests in municipal bonds issued by cities and towns in Massachusetts and are AAA rated by Moody’s, Standard & Poor’s, or Fitch, and the majority of which are also independently insured. Municipal bonds were $33.0 million at December 31, 2007 and $30.2 million at December 31, 2006. In addition, Westfield Financial has investments in Federal Home Loan Bank stock and mutual funds that invest only in securities allowed by the Office of Thrift Supervision.

Net loans increased by $29.7 million to $414.9 million at December 31, 2007 from $385.2 million at December 31, 2006. This was primarily the result of an increase in commercial and industrial loans and commercial real estate loans. Commercial and industrial loans increased $16.3 million to $116.5 million at December 31, 2007 from $100.2 million at December 31, 2006. Commercial real estate loans increased $15.4 million to $189.9 million at December 31, 2007 from $174.5 million at December 31, 2006. The increase in commercial and industrial loans and commercial real estate loans were due to increased loan originations.

Residential real estate loans decreased $1.4 million to $108.1 million at December 31, 2007 from $109.5 million at December 31, 2006. Since September 2001, Westfield Bank has referred substantially all of the originations of its residential real estate loans to a third party mortgage company. Residential real estate borrowers submit applications to Westfield Bank, but the loan is approved by and closed on the books of the mortgage company. The third party mortgage company owns the servicing rights and services the loans. Westfield Bank retains no residual ownership interest in these loans.

Asset growth was funded primarily through a $68.4 million increase in Federal Home Loan Bank borrowings and debt, which totaled $123.4 million at December 31, 2007. Customer repurchase agreements decreased $1.1 million to $16.8 million at December 31, 2007 from $17.9 million at December 31, 2006. A customer repurchase agreement is an agreement by Westfield Bank to sell to and repurchase from the customer an interest in specific securities issued by or guaranteed by the United States 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. At December 31, 2007, all of Westfield Bank’s customer repurchase agreements were held by commercial customers.

Total deposits decreased $24.8 million to $602.7 million at December 31, 2007 from $627.5 million at December 31, 2006. The decrease in deposits was due to a decrease in time deposit and money market accounts, partially offset by an increase in regular savings and checking accounts. Time deposits decreased $20.7 million to $353.3 million at December 31, 2007. Management placed less emphasis on gathering time deposits in favor of using other types of funding, such as borrowings and debt.

Money market accounts decreased $19.8 million to $74.6 million at December 31, 2007. These decreases were partially offset by increases of $11.0 million in regular savings and $4.9 million in checking accounts. The increases in both regular savings and checking accounts were fueled by new products with higher interest rates than Westfield Bank’s other comparable products.

Stockholders’ equity decreased $2.9 million to $286.5 million at December 31, 2007 from $289.4 million at December 31, 2006. This represented 27.6% of total assets as of December 31, 2007 and 29.0% of total assets as of December 31, 2006. The change is primarily comprised of paying out regular and special dividends amounting to $0.40 per share in 2007 for a total of $12.1 million, partially offset by net income of $8.7$476.2 million for the year ended December 31, ~~2007.~~

~~Comparison~~2009.

The tax-equivalent yield on and average balance of ~~Operating Results for Years Ended December 31, 2007 and 2006~~

~~General~~.~~Net income~~short-term investments decreased for the year ended December 31, ~~2007 was $8.7 million, or $0.29 per diluted share, compared~~2009. The tax-equivalent yield on short-term investments decreased 169 basis points to ~~$4.7 million, or $0.15 per diluted share~~0.07% for the year ended December 31, 2009 from 1.76% for the same period in ~~2006. The increase in earnings was primarily~~2008 due to the ~~result~~enduring low interest rate environment. In addition, the average balance of ~~increase in net interest income, partially offset by increased noninterest expenses.~~

~~Interest and Dividend Income~~.~~Total interest and dividend income increased $11.2~~short-term investments decreased $18.6 million ~~or 26.3%, to $53.6~~from $33.7 million for the year ended December 31, ~~2007, compared~~2008 to ~~$42.4 million for the same period in 2006.~~

The increase in interest income was primarily the result of a $166.7 million increase in average earnings assets as a result of funds raised in Westfield Financial’s second step stock offering, which was completed on January 3, 2007. Average earning assets were $943.9$15.1 million for the year ended December 31, ~~2007 compared~~2009. Management actively reinvested available funds during the year into securities and loans in order to ~~$777.2 million for the same period in 2006. The average~~earn a more favorable yield on ~~earning assets, on a tax equivalent basis, increased 17 basis points to 5.73% for the twelve months ended December 31, 2007 from 5.56% for the same period~~our interest-earning assets.

These decreases were partially offset by an increase in ~~2006.~~

~~Interest~~interest and dividends on securities ~~was $23.9~~of $500,000 to $26.8 million for the year ended December 31, ~~2007 and $16.1~~2009 compared to $26.3 million for the same period in 2006. The average balance on securities increased $119.5 million to $492.0 million at December 31, 2007 from $372.5 million at December 31, 2006. In addition, the tax equivalent yield on securities increased to 4.95% for the year 2007 from 4.50% for the year 2006.2008. The increase in interest and dividend income on securities was ~~primarily~~due to an increase in the ~~result of~~average balance on securities, which increased $76.0 million to $597.8 million at December 31, 2009 from $521.8 million at December 31, 2008. The increase was partially offset by a decrease in the ~~reinvestment of the proceeds of Westfield Financial’s second step stock offering,~~tax-equivalent yield on securities, which was completed on January 3, 2007. In addition, as lower yielding investments purchased in a higher rate environment matured, were called or paid down in 2007, the funds were reinvested at higher rates.

~~Interest income from commercial and industrial loans and commercial real estate loans increased $1.2 million~~decreased 57 basis points to 4.56% for the year ended December 31, ~~2007~~2009 from the year ended December 31, 2006. In accordance with Westfield Bank’s strategic plan, the average balance of commercial and industrial loans and commercial real estate loans increased $13.7 million to $282.9 million for the year ended December 31, 2007, compared to $269.2 million5.13% for the same period in ~~2006.~~

~~Interest income from residential real estate loans increased $250,000~~2008 due to ~~$6.6 million for~~ the year ended December 31, 2007 compared to $6.4 million for the same period in 2006. The average balance of residential real estate loans decreased $664,000 to $109.9 million for the year ended December 31, 2007 from $110.6 million for the year ended December 31, 2006. The average balance of home equity loans increased $6.4 million to $33.4 million but was offset by payments and payoffs in other areas.

enduring low interest rate environment.

Interest Expense.Interest expense for the year ended December 31, ~~2007 increased $3.8~~2009 decreased $2.3 million to ~~$23.4~~$20.0 million from the comparable ~~2006~~2008 period. This was attributable to a decrease in the average cost of interest-bearing liabilities ~~increasing~~of 55 basis points to ~~3.50%~~2.47% for the year ended December 31, ~~2007~~2009 from ~~2.95%~~3.02% for the same period in 2006. In addition, the average balance of total interest-bearing liabilities increased $7.0 million to $669.2 million for the year ended December 31, 2007 from $662.2 million for the same period in 2006.2008. The ~~increase~~decrease in the average cost of interest-bearing liabilities was primarily due to ~~an increase in~~ the ~~cost of time deposits resulting from the rising~~enduring low interest rate environment. ~~Interest expense on~~Additionally, management utilized sources of lower-cost funding, such as long-term debt and short-term borrowings, to control overall funding costs.

Net Interest and ~~long-term debt~~Dividend Income. Net interest and dividend income increased ~~$1.6~~$756,000 to $32.5 million for the year ended December 31, ~~2007.~~2009 as compared to $31.8 million for same period in 2008. The ~~average balance of short-term borrowings~~net interest margin, on a tax-equivalent basis, was 3.04% and ~~long-term debt increased $27.7 million to $92.8 millio n at~~3.23% for the years ended December 31, ~~2007. In addition, the average cost of short-term borrowings~~2009 and ~~long-term debt increased 66 basis points to 4.17%~~2008, respectively. The change in net interest and dividend income for the year ended December 31, ~~2007 from 3.51% for the same period in 2006.~~

~~Net Interest and Dividend Income.~~Net interest and dividend income increased $7.3 million to $30.2 million for the year ended December 31, 2007 as compared to $22.9 million for same period in 2006. The net interest margin, on a tax equivalent basis, was 3.25% and 3.05% for the years ended December 31, 2007 and 2006, respectively. The increase in net interest margin2009 was primarily the result of a decrease in interest expense of $2.3 million from the ~~reinvestment~~comparable 2008 period resulting from a 55 basis point decrease in the average cost of interest-bearing liabilities, partially offset by an decrease in interest and dividend income of $1.6 million resulting from a 58 basis point decrease in the ~~proceeds~~average yield of ~~Westfield Financial’s second step stock offering, which~~interest-earning assets. The enduring low rate environment was ~~completed~~the cause for the basis point decrease in both the average cost of interest-bearing liabilities and the average yield on ~~January 3, 2007.~~

interest-earning assets.

The amount that ~~Westfield Bank~~we provided for the provision for loan losses during the year ended December 31, ~~2007~~2009 was based upon the changes that occurred in the loan portfolio during that same ~~period.~~period as well as the continued weakening of the local and national economy. The changes in the loan portfolio, described in detail below, include ~~a decrease~~an increase in net loan charge-offs, ~~tempered~~partially offset by ~~an increase~~a decrease in commercial and industrial loans and ~~commercial real estate loans and~~ an increase in ~~nonperforming~~commercial real estate loans. After evaluating these factors, ~~Westfield Bank~~we provided ~~$400,000~~$3.9 million for loan losses for the year ended December 31, ~~2007,~~2009, compared to ~~$390,000~~$3.5 million for the same period in ~~2006.~~2008. The allowance was ~~$5.7~~$7.6 million at December 31, ~~2007~~2009 and ~~$5.4~~$8.8 million at December 31, ~~2006.~~

2008. The allowance for loan losses was 1.60% of total loans at December 31, 2009 and 1.83% at December 31, 2008. At December 31, 2008, the allowance for loan losses included a specific valuation allowance of $2.1 million related to a manufacturing commercial loan relationship. This amount was charged off in the first quarter of 2009 and contributed to the decrease in the allowance for loan losses and the allowance for loan losses as a percent of total loans.

For the year ended December 31, ~~2007, Westfield Bank~~2009, we recorded net charge-offs of ~~$111,000~~$5.1 million compared to net charge-offs of ~~$375,000~~$383,000 for the year ended December 31, ~~2006.~~2008. The ~~2007~~2009 period was comprised of charge-offs of ~~$317,000~~$5.1 million for the year ended December 31, ~~2007,~~2009, partially offset by recoveries of ~~$206,000~~$48,000 for the same period. The ~~2006~~increase in charge offs for the year 2009 was primarily due to three unrelated commercial loan relationships which resulted in charge offs totaling $4.7 million, the majority of which occurred in the first half of 2009. The 2008 period was comprised of charge-offs of ~~$584,000~~$449,000 for the year ended December 31, ~~2006,~~2008, partially offset by recoveries of ~~$209,000~~$66,000 for the same period.

~~Nonperforming loans increased $174,000 to $1.2 million at~~

At December 31, 2007 from $1.0 million at December 31, 2006. Nonperforming residential real estate loans increased $89,000 to $995,000 at December 31, 2007 from $906,000 at December 31, 2006. The majority of nonperforming residential real estate loans have balances under $80,000, are collateralized by first liens and are seasoned, i.e. originated more than five years ago. Nonperforming2009, commercial and industrial loans decreased $25,000 to $19,000 at December 31, 2007 from $44,000 at December 31, 2006. The balance of nonperforming commercial and industrial loans as of December 31, 2007 was comprised of a single loan relationship.

~~At December 31, 2007, commercial and industrial loans increased $16.3~~$8.8 million to ~~$116.5~~$145.0 million compared to December 31, ~~2006. Westfield Bank considers~~2008. We consider these types of loans to contain more credit risk and market risk than both commercial real estate loans and conventional residential real estate mortgages. Commercial real estate loans increased by ~~$15.4~~$5.2 million to ~~$189.9~~$229.1 million at December 31, ~~2007.~~

2008.

Nonperforming loans decreased $3.3 million to $5.5 million at December 31, 2009 from $8.8 million at December 31, 2008. This represented 1.15 % of total loans at December 31, 2009 and 1.83% of total loans at December 31, 2008. The decrease in nonperforming loans was related to the previously mentioned single commercial manufacturing relationship of $5.5 million. The underlying business was sold in 2009 and resulted in a charge-off of $3.1 million.

Although management believes it has 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 ~~increased $1.5 million~~decreased $365,000 to ~~$4.6~~$3.2 million for the year ended December 31, ~~2007~~2009 compared to ~~$3.1~~$3.5 million for the same period in ~~2006.~~ 2008.

The ~~2007 results include a pre-tax gain~~years ended December 31, 2009 and 2008 included net impairment losses of ~~$546,000~~$278,000 and $1.3 million, respectively, on securities that were determined to be other-than-temporarily impaired. The 2009 impairment losses were on two private-label residential mortgage-backed securities. The fair value of these securities was $4.5 million at December 31, 2009. The 2008 impairment loss was primarily due to write-downs of $961,000 on preferred stock issued by Freddie Mac, which was placed into conservatorship by the U. S. Treasury in September 2008. Our book value remaining on preferred stock issued by Freddie Mac was $39,000 at December 31, 2009. In addition, we recorded net losses on the ~~sale~~sales of ~~a piece~~securities of vacant land in Feeding Hills, Massachusetts. The results for the 2007 year also include a pre-tax gain of $315,000 resulting from the curtailment of a defined benefit plan, specifically pertaining to providing a life insurance benefit to employees who retire from Westfield Bank. The results$383,000 for the year ended December 31, ~~2006 included~~2009. For the year ended December 31, 2008, net gains on sales of securities were $1.1 million.

For the year ended December 31, 2009, income from service charges and fees increased $248,000 to $2.6 million, compared to $2.4 million for the comparable 2008 period. This increase was due to income from the third-party mortgage program and bank-owned life insurance. Income from the third-party mortgage program increased $473,000 to $572,000 for the year ended December 31, 2009, compared to $99,000 in the comparable 2008 period. During the year, we experienced an increase in mortgage referrals due to a ~~pre-tax loss of $378,000 on the sale of premises, which was the result of the sale of a building that previously housed Westfield Bank’s branch~~decrease in ~~downtown Springfield, Massachusetts.~~

~~Income~~interest rates. In addition, income from bank-owned life insurance increased ~~$459,000~~$103,000 to ~~$1.3~~$1.5 million for the year ended December 31, ~~2007~~2009 compared to the same period in ~~2006.~~2008. This was primarily the result of a ~~$11.2~~$2.6 million increase in the average balance of bank-owned life insurance in ~~2007~~2009 compared to ~~2006.~~

2008.

~~Net checking account processing fee income decreased $301,000~~

Noninterest Expense. Noninterest expense for the year ended December 31, 2009 was $25.0 million compared to $23.3 million for the same period in 2008. This increase was primarily due to an increase of $1.0 million in FDIC insurance expense to $1.1 million for the year ended December 31, ~~2007~~2009, compared to ~~$1.4 million for~~$89,000 during the same period in ~~2006. This was primarily the result of a decrease in fees collected from customers who overdraw their checking accounts.~~

~~Noninterest Expense.~~~~Noninterest expense for the year ended December 31, 2007 was $21.8 million compared to $19.4 million for the same period in 2006. This~~2008. The increase was ~~primarily~~ due to ~~an increase~~higher FDIC insurance assessments nationwide and a special assessment of ~~$1.8 million in salaries~~$453,000 at June 30, 2009. Salaries and benefits increased $295,000 to ~~$13.7~~$15.0 million for the year ended December 31, ~~2007. Salaries expense increased $1.2 million as a~~2009, primarily the result of ~~hiring new employees and normal increases~~a $526,000 increase in costs related to the ~~employee salaries. A portion of the new hiring~~defined benefit pension plan. This was partially offset by a $207,000 decrease in salary expenses associated with ~~a new Westfield Bank branch which opened~~employee bonuses.

Income Taxes. The provision for ~~business during the second quarter of 2007. Expenses related~~income taxes decreased $500,000 to share-based compensation increased $848,000 for the year ended December 31, 2007 as a result of new grants of restricted stock and stock options in the third quarter of 2007, along with expenses related to Westfield Financial’s tax-qualified employee stock ownership plan.

~~Professional services expense increased $319,000 to $1.4~~$1.3 million for the year ended December 31, ~~2007~~2009, compared to ~~$1.1~~$1.8 million for the ~~same period in 2006. This was primarily the result of expenses related to corporate legal matters and fees paid to an industry consultant.~~

~~Income Taxes.~~~~Income taxes increased $2.3 million to $3.8 million primarily as a result of an increase in income before income taxes.~~comparable 2008 period. The effective tax rate was ~~30.5%~~18.8% for the year ended December 31, ~~2007~~2009 and ~~24.7%~~21.2% for the same period in ~~2006.~~2008. The ~~increase~~decrease in the tax provision and effective tax rate in the 2009 period is due primarily to ~~a reduction in tax advantaged~~lower pre-tax income while maintaining the same level of tax-advantaged income such as ~~a percentage~~BOLI and tax-exempt municipal obligations. The 2008 period also includes the utilization of ~~income before income taxes.~~

prior years’ loss carry forwards against gains on the sales of securities.

Liquidity and Capital Resources

The term “liquidity” refers to ~~Westfield Financial’s~~our ability to generate adequate amounts of cash to fund loan originations, loan purchases, deposit withdrawals and operating expenses. ~~Westfield Financial’s~~Our primary sources of liquidity are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed securities, maturities and calls of investment securities and funds provided by our operations. ~~Westfield Bank~~We also can borrow funds from the ~~Federal Home Loan Bank~~FHLB based on eligible collateral of loans and securities. Outstanding borrowings from the ~~Federal Home Loan Bank~~FHLB were ~~$143.5~~$202.2 million at December 31, ~~2008~~2010 and ~~$123.4~~$185.5 million at December 31, ~~2007.~~2009. At December 31, ~~2008, Westfield Bank~~2010, we had ~~$188.7~~$57.0 million in available borrowing capacity with the ~~Federal Home Loan Bank. Westfield Bank has~~FHLB. We have the ability to increase ~~its~~our borrowing capacity with the ~~Federal Home Loan Bank~~FHLB by pledging investment ~~secu rities~~securities or loans. In addition, ~~Westfield Bank~~we may enter into reverse repurchase agreements with approved broker-dealers. Reverse repurchase agreements are agreements that allow ~~Westfield Bank~~us to borrow money using ~~its~~our securities as collateral.

~~Westfield Bank~~

We also ~~has~~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 ~~Westfield Bank’s~~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. ~~Westfield Bank is~~We are also obligated under agreements with the ~~Federal Home Loan Bank~~FHLB to repay borrowed funds and isare obligated under leases for certain of ~~its~~our branches and equipment. A summary of lease obligations, borrowings, and credit commitments at December 31, ~~2008~~2010 follows:

Within
1 Year

After 1 Year
but Within
3 Years

After 3 Years
but Within
5 Years

After
5 Years

Total

(In thousands)
Lease Obligations

    Operating lease obligations
$         524

$    1,014

$       809

$  10,667

$    13,014

Borrowings and Debt

    Federal Home Loan Bank
73,550

45,000

20,000

5,000

143,550
    Securities sold under agreements
      to repurchase
-

-

-

58,300

58,300
        Total borrowings and debt
73,550

45,000

20,000

63,300

201,850

Credit Commitments

    Available lines of credit
54,319

-

-

14,903

69,222
    Other loan commitments
17,905

-

-

-

17,905
    Letters of credit
5,703

-

-

243

5,946
        Total credit commitments
77,927

-

-

15,146

93,073

Total
$  152,001

$  46,014

$  20,809

$  89,113

$  307,937

	Within 1 Year		After 1 Year But Within 3 Years		After 3 Year But Within 5 Years		After 5 Years		Total
Lease Obligations
Operating lease obligations	$	565	$	939	$	898	$	10,137	$	12,539

Borrowings and Debt
Federal Home Loan Bank		55,751		66,254		66,224		14,000		202,229
Securities sold under agreements to repurchase		17,559		14,800		28,000		38,500		98,859
Total borrowings and debt		73,310		81,054		94,224		52,500		301,088

Credit Commitments
Available lines of credit		60,305		-		-		20,073		80,378
Other loan commitments		6,804		-		50		-		6,854
Letters of credit		2,527		-		-		505		3,032
Total credit commitments		69,636		-		50		20,578		90,264

Total	$	143,511	$	81,993	$	95,172	$	83,215	$	403,891

Maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of securities and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds.

~~Westfield Financial’s~~

Our primary investing activities are the origination of commercial real estate, commercial and industrial and consumer loans, and the purchase of mortgage-backed and other investment securities. During the year ended December 31, ~~2008, Westfield Bank~~2010, we originated loans of ~~approximately $141.2~~$76.8 million, and during the comparable period of ~~2007, Westfield Bank~~2009, we originated loans of ~~approximately $128.6~~$106.6 million. Under ~~Westfield Bank’s~~our residential real estate loan program, ~~Westfield Bank refers its~~we refer our residential real estate borrowers to a ~~third party~~third-party mortgage company and substantially all of ~~Westfield Bank’s~~our residential real estate loans are underwritten, originated and serviced by a ~~third party~~third-party mortgage company. Purchases of securities totaled ~~$223.0~~$717.0 million for the year ended December 31, ~~2008~~2010 and ~~$230.7~~$426.2 million for the year ended December 31, ~~2007.~~2009. At December 31, ~~2008, Westfield Bank~~2010, we had loan commitments to ~~bo rrowers~~borrowers of approximately ~~$ 12.6~~$9.9 million, and available home equity and unadvanced lines of credit of approximately ~~$80.5~~$80.4 million.

Deposit flows are affected by the level of interest rates, by the interest rates and products offered by competitors and by other factors. Total deposits ~~decreased $14.7~~increased $52.3 million and ~~$24.8~~60.0 million during the years ended December 31, ~~2008~~2010 and ~~2007,~~2009, respectively. Time deposit accounts scheduled to mature within one year were ~~$245.9~~$236.9 million at December 31, ~~2008.~~2010. Based on ~~Westfield Bank’s~~our deposit retention experience and current pricing strategy, ~~it anticipates~~we anticipate that a significant portion of these certificates of deposit will remain on deposit. ~~Westfield Bank monitors its~~We monitor our liquidity position frequently and ~~anticipates~~anticipate that it will have sufficient funds to meet ~~its~~our current funding commitments.

At December 31, ~~2008,~~2010, Westfield Financial and the Bank exceeded each of the applicable regulatory capital requirements. Westfield ~~Bank’s~~Financial had tier 1 leverage capital ~~was $219.7~~of $224.3 million, or ~~20.51%~~18.1% to adjusted total ~~assets. Westfield Bank’s~~assets, tier 1 capital to risk weighted assets ~~was $219.7~~of $224.3 million, or ~~34.52%. Westfield Bank had~~33.0%, and total capital to risk weighted assets of ~~$226.3~~$231.3 million or ~~35.55%~~34.1%.

~~Westfield Financial does~~ The Bank had tier 1 leverage capital of $214.7 million, or 17.4% to adjusted total assets, tier 1 capital to risk weighted assets of $214.7 million or 31.7%, and total capital to risk weighted assets of $221.6 million or 32.7%. See Footnote 10, Regulatory Capital, of our notes to consolidated financial statements for further information on our regulatory requirements.

We do not anticipate any material capital expenditures during calendar year ~~2009,~~2010, nor do we have any balloon or other payments due on any long-term obligations or any off-balance sheet items other than the commitments and unused lines of credit noted above.

Off-Balance Sheet Arrangements

~~Westfield Financial does~~

We do not have any off-balance sheet arrangements, other than noted above, 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.

Management of Market Risk

As a financial institution, ~~Westfield Financial’s~~our primary market risk is interest rate risk since substantially all transactions are denominated in U.S. dollars with no direct foreign exchange or changes in commodity price exposure. Fluctuations in interest rates will affect both our level of income and expense on a large portion of our assets and liabilities. Fluctuations in interest rates will also affect the market value of all interest-earning assets.

The primary goal of ~~Westfield Financial’s~~our interest rate management strategy is to limit fluctuations in net interest income as interest rates vary up or down and control variations in the market value of assets, liabilities and net worth as interest rates vary. ~~Westfield Financial seeks~~We seek to coordinate asset and liability decisions so that, under changing interest rate scenarios, net interest income will remain within an acceptable range.

To achieve the objectives of managing interest rate risk, ~~Westfield Bank’s~~the Asset and Liability Management Committee meets monthly to discuss and monitor the market interest rate environment relative to interest rates that are offered on ~~its~~our products. The Asset and Liability Management Committee presents periodic reports to ~~the~~our Board of Directors ~~of Westfield Bank and Westfield Financial, Inc.~~ at their regular meetings.

In recent years, Westfield Bank’s lending activities have emphasized commercial real estate and commercial and industrial loans.Commercial real estate loans have grown $33.9 million or 17.8% since December 31, 2007. Commercial and industrial loans have grown $37.3 million or 32.1% since December 31, 2007. Management believes that Westfield Bank’s increased emphasis on commercial lending has allowed it to diversify its loan portfolio while continuing to meet the needs of the businesses and individuals that it serves.

~~Westfield Bank’s~~

Our primary source of funds has been deposits, consisting primarily of time deposits, money market accounts, savings accounts, demand accounts and ~~NOW~~interest bearing checking accounts, which have shorter terms to maturity than the loan portfolio. Several strategies have been employed to manage the interest rate risk inherent in the asset/liability mix, including but not limited to:

•

maintaining the diversity of Westfield Bank’s existing loan portfolio through the origination of commercial loans and commercial real estate loans which typically have variable rates and shorter terms than residential mortgages; and

•

~~emphasizing investments with an expected average duration of five years or less.~~

●

maintaining the diversity of our existing loan portfolio through the origination of commercial loans and commercial real estate loans which typically have variable rates and shorter terms than residential mortgages; and

●

emphasizing investments with an expected average duration of five years or less.

In addition, emphasis on commercial loans has reduced the average maturity of ~~Westfield Bank’s~~our loan portfolio. Moreover, the actual amount of time before loans are repaid can be significantly affected by changes in market interest rates. Prepayment rates will also vary due to a number of other factors, including the regional economy in the area where the loans were originated, seasonal factors, demographic variables and the assumability of the loans. However, the major factors affecting prepayment rates are prevailing interest rates, related financing opportunities and competition. ~~Westfield Financial monitors~~We monitor interest rate sensitivity so that itwe can adjust ~~its~~our asset and liability mix in a timely manner and minimize the negative effects of changing rates.

Each of ~~Westfield Bank’s~~our sources of liquidity is vulnerable to various uncertainties beyond ~~the control of Westfield Bank.~~our control. Scheduled loan and security payments are a relatively stable source of funds, while loan and security prepayments and calls, and deposit flows vary widely in reaction to market conditions, primarily prevailing interest rates. Asset sales are influenced by pledging activities, general market interest rates and unforeseen market conditions. ~~Westfield Bank’s~~Our financial condition is affected by ~~its~~our ability to borrow at attractive rates, retain deposits at market rates and other market conditions. ~~Management considers Westfield Bank’s~~We consider our sources of liquidity to be adequate to meet expected funding needs and also to be responsive to changing interest rate markets.

Net Interest and Dividend Income Simulation. We use a simulation model to monitor interest rate risk. This model reports the net interest income at risk primarily under seven different interest rate environments. Specifically, net interest income is measured in one scenario that assumes no change in interest rates, and six scenarios where interest rates increase 100, 200, 300 and ~~300~~400 and decrease 100 ~~200~~ and ~~300~~200 basis points, respectively, from current rates over the one year time period following the current consolidated financial statements.

The changes in interest income and interest expense due to changes in interest rates reflect the rate sensitivity of our interest earning assets and interest bearing liabilities. For example, in a rising interest rate environment, the interest income from an adjustable rate loan is likely to increase depending on its repricing characteristics while the interest income from a fixed rate loan would not increase until the funds were repaid and loaned out at a higher interest rate.

The tables below set forth as of December 31, ~~2008~~2010 the estimated changes in net interest and dividend income that would result from incremental changes in interest rates over the applicable twelve-month period.

For the Year Ending December 31, 2009
(Dollars in thousands)
Changes in
Interest Rates
(Basis Points)

Net Interest and
Dividend
Income

% Change
300

35,127

3.5%
200

34,613

2.0%
100

34,058

0.4%
0

33,925

0.0%
-100

33,669

-0.8%
-200

33,217

-2.1%
-300

32,868

-3.1%

For the Year Ending December 31, 2011
Changes in Interest Rates (Basis Points)	Net Interest and Dividend Income	% Change
(Dollars in thousands)

400	33,600	4.5	%
300	33,369	3.8	%
200	33,087	2.9	%
100	32,896	2.3	%
0	32,143	0.0	%
-100	31,838	-0.9	%
-200	29,567	-8.0	%

Market rates were assumed to increase 100, 200, 300 and ~~300~~400 basis points and decrease 100 ~~200~~ and ~~300~~200 basis points, in even increments over the twelve month period. The repricing and/or new rates of assets and liabilities moved in tandem with market rates. However, in certain deposit products, the use of data from a historical analysis indicated that the rates on these products would move only a fraction of the rate change amount.

We have developed consolidated balance sheet growth projections for the twelve month period. The same product mix and growth strategy was used for all rate change simulations, except for the shift into term deposits in certain scenarios as described in the previous paragraph. ~~Income from tax-exempt assets is calculated on a fully taxable equivalent basis.~~

Pertinent data from each loan account, deposit account and investment security was used to calculate future cash flows. The data included such items as maturity date, payment amount, next repricing date, repricing frequency, repricing index and spread. Prepayment speed assumptions were based upon the difference between the account rate and the current market rate.

The income simulation analysis was based upon a variety of assumptions. These assumptions include but are not limited to ~~balance sheet growth,~~ asset mix, prepayment speeds, the timing and level of interest rates, and the shape of the yield curve. As market conditions vary from the assumptions in the income simulation analysis, actual results will differ. As a result, the income simulation analysis does not serve as a forecast of net interest income, nor do the calculations represent any actions that management may undertake in response to changes in interest rates.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, “Fair Value Measurements.” This Statement defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The definition of fair value retains the exchange price notion in earlier definitions of fair value. This Statement clarifies that the exchange price is the price in an orderly transaction between market participants

Refer to sell the asset or transfer the liability in the market in which the reporting entity would transact for the asset or liability, that is, the principal or most advantageous market for the asset or liability. Emphasis is placed on fair value being a market-based measurement, not an entity-specific measurement, and therefore a fair value measurement should be determined based on the assu mptions that market participants would use in pricing the asset or liability. As a basis for considering these market participant assumptions, a fair value hierarchy has been established to distinguish between (1) market participant assumptions developed based on market data obtained from sources independentNote 1 of the reporting entity (observable inputs) and (2) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). In February 2008, the FASB issued a Staff Position which delays the effective date of Statement No. 157 for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis,Notes to fiscal years beginning after November 15, 2008. Westfield Financial adopted this statement, except for items covered by the Staff Position, as of January 1, 2008 and the adoption did not have a material impact on the consolidated financial statements.

In October 2008, the FASB issued FASB Staff Position No. 157-3, Determining the Fair Value of a Financial Asset When The Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 was effective immediately upon issuance, and includes prior periods for which financial statements have not been issued. This Statement did not have a material impact on the consolidated financial statements at December 31, 2008.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115.” This Statement permits entities to choose to measure many financial instruments and certain other items at fair value, which the objective of improving financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions, and is expected to expand the use of fair value measurement. An entity will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option may generally be applied instrument by instrument and is irrevocable. This Statement was adopted by Westfield Financial on January 1, 200 8 and did not have a material impact on the consolidated financial statements.

In June 2007, the FASB ratified EITF Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards,” which requires an entity to recognize, as an increase to additional paid-in capital, the income taxes benefits related to dividends that are charged to retained earnings for unvested equity shares or options. This EITF was adopted on January 1, 2008 and did not have a material impact on the consolidated financial statements of Westfield Financial.

In December 2007, the FASB issued Statement No. 141 (revised 2007), “Business Combinations” (“Statement No. 141(R)”). Statement No. 141(R) establishes principles and requirements for how the acquirer in a business combination recognizes and measures identifiable assets acquired, liabilities assumed, and noncontrolling interests in the acquiree. Statement No. 141(R) further addresses how goodwill acquired or a gain from a bargain purchase is to be recognized and measured and determines what disclosures are needed to enable users of the financial statements to evaluate the effects of the business combination. Statement No. 141(R) is effective prospectively for business combinations for which the acquisition date is on or after December 15, 2008. Earlier application is not permitted.

~~In December 2007, the FASB issued Statement No. 160, “Noncontrolling Interests in~~ Consolidated Financial Statements ~~an amendment~~for a summary of ~~ARB No. 51.” This Statement establishes~~the recent accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is on January 1, 2009 and did not have a material impact on the consolidated financial statements of Westfield Financial.

pronouncements.

~~In March of 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133~~.~~” This Statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses~~

derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This Statement is effective for on January 1, 2009 and did not have a material impact on the consolidated financial statements of Westfield Financial.

In December 2008, the FASB issued FASB Staff Position No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP 132(R)-1”). FSP 132(R)-1 amends FASB Statement No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This staff position requires disclosure of information about how investment allocation decisions are made, the fair value of each major category of plan assets and the inputs and valuation techniques used to develop fair value measurements. Also, an employer shall provide users of financial statements with an understanding of significant concentrations of risk in plan assets. In addition, it requires a nonpublic entity that sponsors one or more defined benefit pension or postretireme nt plans to disclose the net periodic benefit cost recognized for each annual period for which an annual statement of income is presented. The disclosures about plan assets are required for fiscal years ending after December 15, 2009 and are not expected to have a material impact on the consolidated financial statements of Westfield Financial. The requirement to disclose the net periodic benefit cost is effective as of December 31, 2008. This disclosure has been provided in these consolidated financial statements and did not have a material impact on the consolidated financial statements as of December 31, 2008. Upon initial adoption of FSP 132(R)-1, disclosures are not required for earlier periods that are presented for comparative purposes.

In January 2009, the FASB issued FASB Staff Position No. EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (“FSP 99-20-1”). FSP 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other-than-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and other related guidance. FSP 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008. This Statement did not have a material impact o n the consolidated financial statements of Westfield Financial at December 31, 2008.

Impact of Inflation and Changing Prices

~~The~~

Our Consolidated Financial Statements and accompanying Notes ~~of Westfield Financial~~ have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of ~~Westfield Financial’s~~our operations. Unlike industrial companies, ~~Westfield Financial’s~~our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than do the effects of inflation.

~~ITEM 7A.~~

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 7,“Management’s Discussion and Analysis of Financial Condition and Results of Operations-Management of Market Risk,” for a discussion of quantitative and qualitative disclosures about market risk.

~~ITEM 8.~~

~~FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA~~

~~The~~

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements ~~of Westfield Financial~~ may be found on pages F-1 through F-44 of this report.

~~ITEM 9.~~

~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON~~~~ACCOUNTING AND FINANCIAL DISCLOSURE~~

~~None.~~

~~ITEM 9A.~~

~~CONTROLS AND PROCEDURES~~

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, including ~~Westfield Financial’s~~our President and Chief Executive Officer and Chief Financial Officer and Treasurer, has evaluated the effectiveness of ~~Westfield Financial’s~~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 that evaluation, ~~Westfield Financial’s~~our Chief Executive Officer and Chief Financial Officer and Treasurer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports ~~Westfield Financial files~~we file and ~~submits~~submit under the Exchange Act (i) is recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to ~~Westfield Financial’s~~our management including the Chief Executive Officer and Chief Financial Officer and Treasurer, as appropriate to allow timely discussion regarding required disclosure.

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

Management Report on Internal Control Over Financial Reporting

•

The management of Westfield Financial is responsible for establishing and maintaining adequate internal control over financial reporting. Westfield Financial’s internal control system is a process designed to provide reasonable assurance to Westfield Financial’s management and board of directors regarding the preparation and fair presentation of published financial statements.

●

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is a process designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.

•

●

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

●

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

●

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment we believe that, as of December 31, 2010, our internal control over financial reporting is effective based on those criteria.

Attestation Report of the Registered Public Accounting Firm

Our Independent Registered Public Accounting Firm has issued an audit report on our internal control over financial reporting as of December 31, 2010, which appears on page F-1.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following information included in the Proxy Statement is incorporated herein by reference: “Information About Our Board of Directors,” “Information About Our Executive Officers,” “Corporate Governance,” and “Section 16(a) Beneficial Ownership Reporting Compliance.”

ITEM 11.

EXECUTIVE COMPENSATION

The following information included in the Proxy Statement is incorporated herein by reference: “Corporate Governance – Compensation Committee Interlocks,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” and “Compensation of Directors and Executive Officers.”

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following information included in the Proxy Statement is incorporated herein by reference: “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized For Issuance Under Equity Compensation Plans.”

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The following information included in the Proxy Statement is incorporated herein by reference: “Transactions with Certain Related Persons” and “Board of Directors Independence.”

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The following information included in the Proxy Statement is incorporated herein by reference: “Principal Accounting Fees and Services.”

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)

Financial Statements

Reference is made to the Consolidated Financial Statements included in Item 8 of Part II hereof.

(a)(2)

Financial Statement Schedules

Consolidated financial statement schedules have been omitted because the required information is not present, or not present in amounts sufficient to require submission of the schedules, or because the required information is provided in the consolidated financial statements or notes thereto.

(a)(3)

Exhibits

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

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 March 11, 2011.

	Westfield Financial, Inc.


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

	By:	/s/ Leo R. Sagan, Jr.
		Leo R. Sagan, Jr.
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)

Pursuant to the requirements of the Securities Act of 1933, as amended, and any rules and regulations promulgated thereunder, this Annual Report on Form 10-K, has been signed by the following persons in the capacities and on the dates indicated.

Name	Title	Date


/s/ James C. Hagan	Chief Executive Officer, President and Director	March 11, 2011
James C. Hagan	(Principal Executive Officer)

/s/ Donald A. Williams	Chairman of the Board	March 11, 2011
Donald A. Williams

/s/ Victor J. Carra	Director	March 11, 2011
Victor J. Carra

/s/ David C. Colton, Jr.	Director	March 11, 2011
David C. Colton, Jr.

/s/ Robert T. Crowley, Jr.	Director	March 11, 2011
Robert T. Crowley, Jr.

/s/ Harry C. Lane	Director	March 11, 2011
Harry C. Lane

/s/ Richard C. Placek	Director	March 11, 2011
Richard C. Placek

/s/ Paul R. Pohl	Director	March 11, 2011
Paul R. Pohl

/s/ Philip R. Smith	Director	March 11, 2011
Philip R. Smith

/s/ Charles E. Sullivan	Director	March 11, 2011
Charles E. Sullivan

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 Form 8-K filed with the Securities and Exchange Commission on January 5, 2007).

3.2†		Amended and Restated Bylaws of Westfield Financial, Inc.

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*		Form of Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.1 of the Registration Statement No. 333-68550 on Form S-1 filed with the Securities and Exchange Commission on August 28, 2001).

10.2*		Amendment to the Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.9 of the Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission on March 31, 2003).

10.3*		Amendment No. 1 to the Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.9 of the Annual Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission on March 15, 2004).

10.4*		Amendment No. 3 (incorporating Amendment Nos. 1 and 2) to the Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.10 of the Form 8-K filed with the Securities and Exchange Commission on August 25, 2005).

10.5*		Amendment No. 4 to the Employee Stock Ownership Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.3 of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2010).

10.6†		Amendment No. 5 to the Employee Stock Ownership Plan of Westfield Financial, Inc.

10.7*		Form of Director’s Deferred Compensation Plan (incorporated by reference to Exhibit 10.7 of the Form 8-K filed with the Securities and Exchange Commission on December 22, 2005).

10.8*		The 401(k) Plan adopted by Westfield Bank (incorporated herein by reference to Exhibit 4.1 of the Post-Effective Amendment No. 1 to the Registration Statement No. 333-73132 on Form S-8 filed with the Securities and Exchange Commission on April 28, 2006).

10.9*		Amendment to the 401(k) Plan adopted by Westfield Bank (incorporated by reference to Exhibit 10.11 of the Form 8-K filed with the Securities and Exchange Commission on July 13, 2006).

10.10	*	Amended and Restated Benefit Restoration Plan of Westfield Financial, Inc. (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission on October 25, 2007).

10.11	*	Form of Amended and Restated Deferred Compensation Agreement with Donald A. Williams (incorporated by reference to Exhibit 10.10 of the Form 8-K filed with the Securities and Exchange Commission on December 22, 2005).

10.12	*	Amended and Restated Employment Agreement between James C. Hagan and Westfield Bank (incorporated by reference to Exhibit 10.9 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009).

10.13	*	Amended and Restated Employment Agreement between James C. Hagan and Westfield Financial, Inc. (incorporated by reference to Exhibit 10.12 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009).

10.14	*	Agreement between Westfield Bank and Village Mortgage Company (incorporated by reference to Exhibit 10.17 of Amendment No. 1 of the Registration Statement No. 333-137024 on Form S-1 filed with the Securities and Exchange Commission on August 31, 2006).

10.15	*	Employment Agreement between Leo R. Sagan, Jr. and Westfield Bank (incorporated by reference to Exhibit 10.15 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009).

10.16	*	Employment Agreement between Leo R. Sagan, Jr. and Westfield Financial, Inc (incorporated by reference to Exhibit 10.16 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009).

10.17	*	Employment Agreement between Gerald P. Ciejka and Westfield Bank (incorporated by reference to Exhibit 10.17 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009).

10.18	*	Employment Agreement between Gerald P. Ciejka and Westfield Financial, Inc. (incorporated by reference to Exhibit 10.18 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009).

10.19	*	Employment Agreement between Allen J. Miles, III and Westfield Bank (incorporated by reference to Exhibit 10.19 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009).

10.20	*	Employment Agreement between Allen J. Miles, III and Westfield Financial, Inc. (incorporated by reference to Exhibit 10.20 of the Form 8-K filed with the Securities and Exchange Commission on January 5, 2009).

10.21	*	2002 Stock Option Plan (incorporated by reference to Appendix B of the Schedule 14A filed with the Securities and Exchange Commission on May 24, 2002).

10.22	*	Amendment to the 2002 Stock Option Plan (incorporated by reference to Appendix A of the Schedule 14A filed with the Securities and Exchange Commission on April 25, 2003).

10.23	*	2002 Recognition and Retention Plan (incorporated by reference to Appendix C of the Schedule 14A filed with the Securities and Exchange Commission on May 24, 2002).

10.24	*	Amendment to the 2002 Recognition and Retention Plan (incorporated by reference to Appendix B of the Schedule 14A filed with the Securities and Exchange Commission on April 25, 2003).

10.25	*	2007 Stock Option Plan (incorporated by reference to Appendix A of the Schedule 14A filed with the Securities and Exchange Commission on June 18, 2007).

10.26	*	Amendment to the 2007 Stock Option Plan (incorporated by reference to Appendix B of the Schedule 14A filed with the Securities and Exchange Commission on April 14, 2008).

10.27	*	2007 Recognition and Retention Plan (incorporated by reference to Appendix B of the Schedule 14A filed with the Securities and Exchange Commission on June 18, 2007).

10.28	*	Amendment to the 2007 Recognition and Retention Plan (incorporated by reference to Appendix C of the Schedule 14A filed with the Securities and Exchange Commission on April 14, 2008).

21.1†		Subsidiaries of Westfield Financial

23.1†		Consent of Wolf & Company, P.C.

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

† Filed herewith.

* Management contract or compensatory plan or arrangement.

	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)
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		-

December 31, 2009

Total Capital (to Risk Weighted Assets):
Consolidated	$	257,209		38.07	%	$	54,052		8.00	%		N/A
Bank		236,940		35.29			53,706		8.00		$	67,132		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Consolidated		249,564		36.94			27,026		4.00			N/A		-
Bank		230,109		34.28			26,853		4.00			40,279		6.00
Tier 1 Capital (to Adjusted Total Assets):
Consolidated		249,564		20.92			47,713		4.00			N/A		-
Bank		230,109		19.56			47,059		4.00			58,824		5.00
Tangible Equity (to Tangible Assets):
Consolidated		N/A		-			N/A		-			N/A		-
Bank		230,109		19.56			23,530		2.00			N/A		-

The following is a reconciliation of our GAAP capital to regulatory Tier 1 and total capital:

	December 31,
	2010			2009
	(In thousands)
Consolidated GAAP capital	$	221,245		$	247,299
Unrealized losses on certain available for sale
securities, net of tax		3,774			913
Unrealized losses on defined benefit pension plan		1,742			1,352
Disallowed deferred tax asset		(2,423	)		-
Tier 1 capital		224,338			249,564

Plus: allowance for loan losses		6,934			7,645

Total regulatory capital	$	231,272		$	257,209

F-33

In January 2008, ~~Westfield Financial~~we announced that the Board of Directors had approved a share repurchase program (the “Repurchase Program”) which authorized the repurchase of up to 3,194,000 shares or ten percent of ~~its~~our outstanding shares of common ~~stock, continuing until its completion.~~stock. This program was completed during the second quarter of 2010. On May 25, 2010 the Board of Directors voted to authorize the commencement of a second repurchase program, authorizing the repurchase of an additional 2,924,367 shares, or ten percent of our outstanding shares of common stock. At December 31, ~~2008, Westfield Financial~~2010, we had ~~2,154,979~~1,552,516 shares remaining to be purchased under this program.

~~F-33~~

~~Westfield Financial and Westfield Bank~~

We are subject to dividend restrictions imposed by various regulators, including a limitation on the total of all dividends that ~~Westfield~~the Bank may pay to ~~Westfield Financial~~us in any calendar year, to an amount that shall not exceed ~~Westfield~~the Bank’s net income for the current year, plus ~~Westfield Bank’s~~its net income retained for the two previous years, without regulatory approval. In addition, ~~Westfield~~the Bank may not declare or pay dividends on, and ~~Westfield Financial~~we may not repurchase, any of ~~its~~our shares of common stock if the effect thereof would cause ~~stockholders’~~shareholders’ equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration, payment or repurchase would otherwise violate regulatory requirements. At December 31, ~~2008~~2010 and ~~2007, Westfield~~2009, the Bank’s retained earnings available for payment of dividends was ~~$20.4~~$1.9 million and ~~$1 9.2~~$12.3 million, respectively. Accordingly, ~~$52.0~~$54.3 million and ~~$46.3~~$54.1 million of ~~Westfield Financial’s~~our equity in the net assets of ~~Westfield~~the Bank ~~were~~was restricted at December 31, ~~2008~~2010 and ~~2007,~~2009, respectively.

~~The following is a reconciliation of Westfield Financial’s GAAP capital to regulatory Tier 1 and total capital:~~

December 31,

2008

2007

(In thousands)

Consolidated GAAP capital
$    259,919

$    286,532
Unrealized losses (gains) on certain available-for-sale
  securities, net of tax
6,779

(804)
Unrealized losses (gains) on defined benefit pension plan
2,027

(554)
Tier 1 Capital
268,725

285,174

Plus: Allowance for loan losses
8,132

5,726

Total Regulatory Capital
$    276,857

$    290,900

~~12.~~

11. INCOME TAXES

Income taxes consist of the following:

Years Ended December 31,

2008

2007

2006

(In thousands)

Current tax provision:

Federal
$    2,774

$    3,612

$    1,631
State
119

384

148
Total
2,893

3,996

1,779

Deferred tax (benefit) provision:

Federal
(1,153)

(136)

(257)
State
55

(48)

1
Total
(1,098)

(184)

(256)

Total
$    1,795

$    3,812

$    1,523

~~F-34~~

	Years Ended December 31,
	2010			2009			2008
				(In thousands)

Current tax provision:
Federal	$	302		$	1,213		$	2,774
State		121			166			119
Total		423			1,379			2,893

Deferred tax (benefit) provision:
Federal		(387	)		(108	)		(1,153	)
State		(2	)		(4	)		55
Total		(389	)		(112	)		(1,098	)

Total	$	34		$	1,267		$	1,795

The reasons for the differences between the statutory federal income tax rate and the effective rates are summarized below:

Years Ended December 31,

2008

2007

2006

Statutory federal income tax rate
34.0
%

34.0
%

34.0
%
Increase (decrease) resulting from:

State taxes, net of federal tax benefit
1.3

1.8

1.6

Tax exempt income
(5.8)

(4.0)

(8.0)

Bank-owned life insurance
(5.7)

(3.6)

(4.7)

Dividends received deduction
(0.1)

(0.1)

(0.2)

Other, net
(2.5)

2.4

2.0

Effective tax rate
21.2
%

30.5
%

24.7
%

	Years Ended December 31,
	2010			2009			2008

Statutory federal income tax rate		34.0	%		34.0	%		34.0	%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit		2.6			1.6			1.3
Tax exempt income		(17.0	)		(7.1	)		(5.8	)
Bank-owned life insurance		(17.0	)		(7.7	)		(5.7	)
Dividends received deduction		-			-			(0.1	)
Other, net		(1.5	)		(2.0	)		(2.5	)

Effective tax rate		1.1	%		18.8	%		21.2	%

F-34

Cash paid for income taxes for the years ended December 31, 2010, 2009, and 2008 ~~2007,~~was $177,000, $1.8 million, and ~~2006 was~~ $3.4 million, ~~$3.8 million, and $1.8 million,~~ respectively.

The tax effects of each item that gives rise to deferred taxes ~~included in other assets,~~ are as follows:

December 31,

2008

2007

(In thousands)

Net unrealized loss (gain) on securities available for sale
$      4,032

$      (286)
Defined benefit plan
1,043

(286)
Allowance for loan losses
2,991

1,947
Employee benefit and stock-based compensation plans
2,060

2,007
Other
395

394

Net deferred tax asset
$    10,521

$    3,776

~~A summary~~

	December 31,
	2010		2009
	(In thousands)

Net unrealized loss on securities available for sale	$	1,968	$	742
Defined benefit plan		896		695
Allowance for loan losses		2,357		2,599
Employee benefit and share-based compensation plans		2,327		2,094
Other-than-temporary impairment write-down		581		531
Other		682		334

Net deferred tax asset	$	8,811	$	6,995

The federal income tax reserve for loan losses at the Bank’s base year is $5.8 million. If any portion of the ~~change~~reserve is used for purposes other than to absorb loan losses, approximately 150% of the amount actually used, limited to the amount of the reserve, would be subject to taxation in the ~~net~~fiscal year in which used. As the Bank intends to use the reserve solely to absorb loan losses, a deferred tax ~~asset is as follows:~~

liability of $2.4 million has not been provided.

Our income tax returns are subject to review and examination by federal and state tax authorities. We are currently open to audit under the applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2007 through 2009. The years open to examination by state taxing authorities vary by jurisdiction; however, no years prior to 2007 are open.

Years Ended December 31,

2008

2007

2006

(In thousands)

Balance at beginning of year
$    3,776

$    4,595

$    4,583
Deferred tax benefit
1,098

184

256
Net unrealized loss (gain) on securities
  available for sale
4,318

(757)

(204)
Defined benefit plan
1,329

(246)

(40)

Balance at end of year
$    10,521

$    3,776

$    4,595

~~F-35~~

~~13.~~

12. TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

~~Westfield Financial has~~

We have had, and ~~expects~~expect to have in the future, loans with ~~its~~our directors and executive officers. Such loans, in ~~the~~our opinion ~~of management~~ do not include more than the normal risk of collectability or other unfavorable features. Following is a summary of activity for such loans:

Years Ended December 31,

2008

2007

(In thousands)

Balance, beginning of year
$  12,893

$  13,415
Principal distributions
7,457

3,913
Repayments of principal
(4,811)

(4,435)

Balance, end of year
$  15,539

$  12,893

~~14.~~

	Years Ended December 31,
	2010			2009
	(In thousands)

Balance, beginning of year	$	17,626		$	15,539
Principal distributions		187			4,061
Repayments of principal		(2,503	)		(1,974	)
Balance, end of year	$	15,310		$	17,626

F-35

13. COMMITMENTS AND CONTINGENCIES

In the normal course of business, various commitments and contingent liabilities are outstanding, such as standby letters of credit and commitments to extend credit with off-balance-sheet risk that are not reflected in the consolidated financial statements. Financial instruments with off-balance-sheet risk involve elements of credit, interest rate, liquidity and market risk.

~~Management does~~

We do not anticipate any significant losses as a result of these transactions. The following summarizes these financial instruments and other commitments and contingent liabilities at their contract amounts:

December 31,

2008

2007

(In thousands)
Commitments to extend credit:

Unused lines of credit
$ 69,222

$ 61,975
Loan commitments
16,826

19,163
Existing construction loan agreements
1,079

8,419
Standby letters of credit
5,946

7,364

~~Westfield Financial uses~~

	December 31,
	2010		2009
	(In thousands)
Commitments to extend credit:
Unused lines of credit	$	80,378	$	78,173
Loan commitments		6,637		13,482
Existing construction loan agreements		217		882
Standby letters of credit		3,032		3,745

We use the same credit policies in making commitments and conditional obligations as ~~it does~~ for on balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. ~~Westfield Financial evaluates~~We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by ~~Westfield Financial~~us upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

~~F-36~~

Standby letters of credit are written conditional commitments issued by ~~Westfield Financial~~us that ~~guarantees~~guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

At December 31, ~~2008~~2010, outstanding commitments to extend credit totaled ~~$93.1~~$90.3 million, with ~~$9.2~~$5.6 million in fixed rate commitments with interest rates ranging from ~~6.00%~~4.25% to 12.00% and ~~$83.9~~$84.7 million in variable rate commitments. At December 31, ~~2007,~~2009, outstanding commitments to extend credit totaled ~~$96.9~~$96.3 million, with ~~$13.3~~$9.6 million in fixed rate commitments with interest rates ranging from ~~5.25%~~4.25% to 12.00% and ~~$83.6~~$86.7 million in variable rate commitments.

In the ordinary course of business, ~~Westfield Financial is~~we are party to various legal proceedings, none of which, in ~~the~~our opinion, ~~of management,~~ will have a material effect on ~~Westfield Financial’s~~our consolidated financial position or results of operations.

~~Westfield Financial leases~~

We lease facilities and certain equipment under cancelable and noncancelable leases expiring in various years through the year 2046. Certain of the leases provide for renewal periods for up to forty years at ~~the discretion of Westfield Financial.~~our discretion. Rent expense under operating leases was ~~$401,000, $363,000,~~$523,000, $481,000, and ~~$246,000~~$401,000 for the years ended December 31, 2010, 2009, and 2008, ~~2007, and 2006,~~ respectively.

F-36

Aggregate future minimum rental payments under the terms of ~~the~~non-cancelable operating leases at December 31, ~~2007,~~2010, are as follows:

Years Ending
(In thousands)

2009
$ 524
2010
509
2011
505
2012
409
2013
400
Thereafter
10,667

$ 13,014

Year Ending December 31,	Amount
	(In thousands)

2011	$	565
2012		473
2013		466
2014		463
2015		435
Thereafter		10,137
	$	12,539

~~15.~~

Employment and change of control agreements

We have entered into employment and change of control agreements with certain senior officers. The initial term of the employment agreements is for three years subject to separate one-year extensions as approved by the Board of Directors at the end of each applicable fiscal year. Each employment agreement provides for minimum annual salaries, discretionary cash bonuses and other fringe benefits as well as severance benefits upon certain terminations of employment that are not for cause. The change of control agreements expire one year following a notice of non-extension and only provide for severance benefits upon certain terminations of employment that are not for cause and that are related to a change of control of the Company or the Bank.

14. CONCENTRATIONS OF CREDIT RISK

Most of ~~Westfield Financial’s~~our loans consist of residential and commercial real estate loans located in Western Massachusetts. As of December 31, ~~2007~~2010 and ~~2006, Westfield Financial’s~~2009, our residential and commercial related real estate loans represented ~~60%~~72.8% and 68.9% of total ~~loans. Westfield Financial’s~~loans, respectively. Our policy for collateral requires that the amount of the loan may not exceed 100% and 85% of the appraised value of the property for residential and commercial real estate, respectively, at the date the loan is granted. For residential loans, in cases where the loan exceeds 80%, private mortgage insurance is typically obtained for that portion of the loan in excess of 80% of the appraised value of the property.

~~F-37~~

~~16.~~

15. FAIR VALUE OF ~~FINANCIAL INSTRUMENTS~~

ASSETS AND LIABLITIES

Determination of Fair Value

~~Westfield Financial uses~~

We use fair value measurements to record fair value adjustments to certain assets and ~~liabilities and~~ to determine fair value disclosures. ~~In accordance with SFAS No. 157, the~~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 ~~Westfield Financial’s~~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~~

In accordance with SFAS No. 157, Westfield Financial groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities 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. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments or mortgage loans held for sale, for which the fair value is based on what the securitization market is currently offering for mortgage loans with similar characteristics.

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. This category generally includes certain asset-backed securities, certain private equity investments, residential mortgage servicing rights, and long-term derivative contracts.

Methods and assumptions for valuing ~~Westfield Financial’s~~our financial instruments are set forth ~~below for financial instruments that have fair values different than their carrying values.~~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.

~~F-38~~

Cash and cash equivalents - ~~The~~ 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.

F-37

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

These securities include government sponsored enterprise obligations, state and municipal obligations, residential mortgage-backed securities guaranteed and sponsored by the U.S. government or an agency thereof, and private label residential mortgage-backed securities. At December 31, 2010, all fair value measurements are obtained from a third-party pricing service and are not adjusted by management.

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

Loans receivable - For ~~variable-rate~~adjustable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for certain mortgage loans (e.g., one-to-four family residential), credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. 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~~

Long-term debt - The fair values of ~~other short-term borrowings are~~our long-term debt is 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 Westfield Financial’s 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 - The stated value of commitments to extend credit approximates fair value as the current interest rates for similar commitments do not differ significantly. 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.

~~F-39~~

Assets Measured at Fair Value on a Recurring Basis

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

December 31, 2008

Level 1

Level 2

Level 3

Total

(In thousands)

Securities available for sale
$  6,127

$    18,269

$      -

$    24,396
Mortgage-backed securities available

for sale
-

233,747

-

233,747
Total assets

$  6,127

$  252,016

$      -

$  258,143

	December 31, 2010
	Level 1			Level 2		Level 3		Total
Securities available for sale:	(In thousands)
Mutual funds	$	5,272		$	1,641	$	-	$	6,913
Common and preferred stock		47			-		-		47
Government-sponsored enterprise obligations		-	��		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	$	5,319		$	638,820	$	-	$	644,139

F-38

	December 31, 2009
	Level 1		Level 2		Level 3		Total
	(In thousands)
Securities available for sale:
Mutual funds	$	5,037	$	1,452	$	-	$	6,489
Common and preferred stock		59		-		-		59
Government-sponsored enterprise obligations		-		10,698		-		10,698
State and municipal		-		2,070		-		2,070
Government-sponsored residential mortgage-backed securities		-		290,248		-		290,248
U.S. government guaranteed residential mortgage-backed securities		-		1,047		-		1,047
Private-label residential mortgage-backed		-		8,510		-		8,510
Total assets	$	5,096	$	314,025	$	-	$	319,121

There were no transfers to or from Level 1 and 2 for assets measured at fair value on a recurring basis during the year ended December 31, 2010.

Assets Measured at Fair Value on a Non-recurring Basis

~~Westfield Financial~~

We may also be required, from time to time, to measure certain other financial assets on a nonrecurring basis in accordance with generally accepted accounting principles. 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 individual assets as of December 31, ~~2008.~~

2010 and 2009.

At December 31, 2008

Year Ended
December 31,
2008

(In thousands)

Total

Level 1

Level 2

Level 3

Gains (Losses)

Impaired loans
$            -

$            -

$     4,809

$           (2,286)
Total assets
$            -

$            -

$     4,809

$           (2,286)

	At						Year Ended
	December 31, 2010						December 31, 2010
							Total
	Level 1		Level 2		Level 3		Gains (Losses)
	(In thousands)
Impaired loans	$	-	$	-	$	1,661	$	(714	)
Other real estate owned		-		-		223		(157	)
Total assets	$	-	$	-	$	1,884	$	(871	)


	At						Year Ended
	December 31, 2009						December 31, 2009
							Total
	Level 1		Level 2		Level 3		Gains (Losses)
	(In thousands)
Impaired loans	$	-	$	-	$	3,575	$	(875	)
Total assets	$	-	$	-	$	3,575	$	(875	)

F-39

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.

~~Westfield Financial does~~

The amount of other real estate owned represents the carrying value of the collateral based on the appraised value of the underlying collateral using the market approach less selling costs.

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

Summary of Fair Values of Financial Instruments

~~F-40~~

The estimated fair values of ~~the Westfield Financial’s~~our financial instruments at December 31 are as follows:

2008

2007

Carrying

Estimated

Carrying

Estimated

Value

Fair Value

Value

Fair Value

(In thousands)
Assets:

Cash and cash equivalents
$    56,533

$    56,533

$    37,623

$    37,623
Securities:

Available for sale
24,396

24,396

38,051

38,051
Held to maturity
79,303

82,491

104,025

105,829

Mortgage backed securities:

Available for sale
233,747

233,747

206,178

206,178
Held to maturity
168,332

168,716

174,594

174,550
Federal Home Loan Bank of Boston

and other stock
8,456

8,456

7,510

7,510

Loans - net
472,135

492,121

414,902

432,901

Accrued interest receivable
5,261

5,261

5,761

5,761

Liabilities:

Deposits
588,029

591,244

602,676

603,780

Short-term borrowings
49,824

49,824

35,268

35,268

Long-term debt
173,300

177,567

105,000

106,063

Accrued interest payable
762

762

602

602

2010 2009
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
(In thousands)
Assets:
Cash and cash equivalents $ 11,611 $ 11,611 $ 28,719 $ 28,719
Securities:
Available for sale 644,139 644,139 319,121 319,121
Held to maturity - - 295,011 303,619
Federal Home Loan Bank of Boston
and other restricted stock 12,251 12,251 10,339 10,339
Loans - net 502,392 505,791 469,149 474,554
Accrued interest receivable 4,279 4,279 5,198 5,198

Liabilities:
Deposits 700,335 697,815 647,975 649,473
Short-term borrowings 62,937 62,936 74,499 74,499
Long-term debt 238,151 243,800 213,845 214,669
Accrued interest payable 720 720 730 730

Limitations - 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 ~~Westfield Financial’s~~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.

~~17.~~

F-40

16. SEGMENT INFORMATION

~~Westfield Financial has~~

We have one reportable segment, “Community Banking.” All of ~~Westfield Financial’s~~our activities are interrelated, and each activity is dependent and assessed based on how each of the activities ~~of Westfield Financial~~ supports the others. For example, commercial lending is dependent upon the ability of ~~Westfield~~the Bank to fund itself with retail deposits and other borrowings and to manage interest rate and credit risk. This situation is also similar for consumer and residential mortgage lending. Accordingly, all significant operating decisions are based upon our analysis ~~of Westfield Financial~~ as one operating segment or unit.

~~Westfield Financial operates~~

We operate only in the U.S. domestic market, primarily in Western Massachusetts. For the years ended December 31, ~~2008, 2007~~2010, 2009 and ~~2006~~2008, there is no customer that accounted for more than 10% of ~~Westfield Financial’s~~our revenue.

~~F-41~~

~~18.~~

17. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS

The condensed balance sheets of the ~~Westfield Financial~~ parent company are as follows:

December 31,

2008

2007

(In thousands)
ASSETS:

Due from banks
$         2,700

$         2,691
Federal funds sold
10,518

10,979
Securities held to maturity
6,885

6,885
Securities available for sale
-

10,163
Mortgage-backed securities held to maturity
9,937

11,964
Mortgage-backed securities available for sale
13,503

27,331
Investment in subsidiaries
212,277

213,574
Other assets
4,227

3,072
TOTAL ASSETS
260,047

286,659

LIABILITIES AND EQUITY:

Liabilities
128

127
Equity
259,919

286,532
TOTAL LIABILITIES AND EQUITY
$     260,047

$     286,659

	December 31,
	2010		2009
	(In thousands)
ASSETS:
Due from banks	$	1,236	$	5,237
Federal funds sold		3		-
Securities held to maturity		-		1,917
Securities available for sale		4,544		8,130
Investment in subsidiaries		210,886		227,680
Other assets		4,633		4,371
TOTAL ASSETS		221,302		247,335

LIABILITIES AND EQUITY:
Liabilities		57		36
Equity		221,245		247,299
TOTAL LIABILITIES AND EQUITY	$	221,302	$	247,335

F-41

The condensed statements of income for the ~~Westfield Financial~~ parent company are as follows:

Years Ended December 31,

2008

2007

2006

(In thousands)

INTEREST AND DIVIDEND INCOME:

Securities
$     2,231

$     2,605

$        248
Federal funds sold
           290

        1,559

             40
Gain on sale of securities, net
           303

               -

               -
Other income
              9

              9

              6
Total interest income
        2,833

        4,173

           294

NONINTEREST EXPENSE:

Salaries and employee benefits
        2,857

        2,200

        1,331
Other
           491

           493

           160
Total noninterest expense
        3,348

        2,693

        1,491

INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED

INCOME OF SUBSIDIARIES AND INCOME TAXES
          (515)

        1,480

       (1,197)

EQUITY IN UNDISTRIBUTED INCOME OF

SUBSIDIARIES
        7,144

        7,882

        5,434

INCOME TAX PROVISION (BENEFIT)
            (62)

           662

          (417)

NET INCOME
$     6,691

$     8,700

$     4,654

	Years Ended December 31,
	2010			2009			2008
	(In thousands)
INCOME (LOSS):
Dividends from subsidiaries	$	19,500		$	9,078		$	-
Interest income from securities		247			1,499			2,231
Interest income from federal funds sold		-			4			290
(Loss) gain on sale of securities, net		(22	)		(2,079	)		303
Other income		2			6			9
Total income		19,727			8,508			2,833

OPERATING EXPENSE:
Salaries and employee benefits		2,710			3,100			2,857
Other		426			470			491
Total operating expense		3,136			3,570			3,348

INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES AND INCOME TAXES		16,591			4,938			(515	)

EQUITY IN UNDISTRIBUTED (LOSS) INCOME OF
SUBSIDIARIES		(13,600	)		(767	)		7,144

NET INCOME BEFORE TAXES		2,991			4,171			6,629

INCOME TAX BENEFIT		(15	)		(1,288	)		(62	)

NET INCOME	$	3,006		$	5,459		$	6,691

F-42

The condensed statements of cash flows of the ~~Westfield Financial~~ parent company are as follows:

Years Ended December 31,

2008

2007

2006

(In thousands)
OPERATING ACTIVITIES:

Net Income
$    6,691

$    8,700

$    4,654
Equity in undistributed earnings of subsidiaries
     (7,144)

     (7,882)

     (5,434)
Net amortization of premiums and discounts on securities
           10

           21

           12
Net realized securities gains
        (303)

             -

             -
Change in other liabilities
             1

           55

          (42)
Change in other assets
         414

     (1,565)

        (535)
Net transfers from subsidiaries
             -

             -

         236
Other, net
      2,327

      2,780

      2,074

        Net cash provided by operating activities
      1,996

      2,109

         965

INVESTING ACTIVITIES:

Purchase of securities
             -

    (58,179)

             -
Proceeds from principal collections
      5,331

      4,395

         530
Transfer of stock offering proceeds to subsidiaries
             -

    (90,797)

             -
Sale of securities
     18,414

             -

             -

        Net cash provided (used) by investing activities
     23,745

  (144,581)

         530

FINANCING ACTIVITIES:

Cash dividends paid
    (17,945)

    (12,075)

     (3,785)
Purchase of common stock for equity incentive plan
             -

     (6,075)

             -
Capital contribution pursuant to dissolution of MHC
             -

      2,713

             -
Common stock repurchased
    (10,483)

             -

     (1,583)
Net proceeds from sale of common stock
             -

             -

   171,712
Exchange of common stock pursuant to reorganization
             -

        (320)

             -
Excess tax benefit from share-based compensation
         334

         222

         260
Issuance of common stock in connection with stock

option exercises
      1,901

           42

         563
Other, net
             -

        (738)

         783

        Net cash (used) provided by financing activities
    (26,193)

    (16,231)

   167,950

NET (DECREASE) INCREASE IN CASH AND

    CASH EQUIVALENTS
        (452)

  (158,703)

   169,445

CASH AND CASH EQUIVALENTS:

        Beginning of year
     13,670

   172,373

      2,928

        End of year
$ 13,218

$ 13,670

$172,373

Transfer of securities to Westfield Bank
$            -

$            -

$ (10,153)

~~F-43~~

~~19.~~

	Years Ended December 31,
	2010			2009			2008
	(In thousands)
OPERATING ACTIVITIES:
Net Income	$	3,006		$	5,459			$	6,691
Undistributed equity in subsidiaries		13,600			767				(7,144	)
Net amortization of premiums and discounts on securities		14			39				10
Net realized securities losses (gains)		22			2,079				(303	)
Change in other liabilities		21			(92	)			1
Change in other assets		367			(789	)			414
Other, net		2,110			2,610				2,327

Net cash provided by operating activities		19,140			10,073				1,996

INVESTING ACTIVITIES:
Purchase of securities		-			(5,276	)			-
Proceeds from principal collections		1,160			10,509				5,331
Sale of securities		4,264			4,394				18,414

Net cash provided by investing activities		5,424			9,627				23,745

FINANCING ACTIVITIES:
Cash dividends paid		(14,295	)		(14,595	)			(17,945	)
Common stock repurchased		(16,127	)		(13,690	)			(10,483	)
Excess tax benefit from share-based compensation		383			155				334
Issuance of common stock in connection with stock
option exercises		1,477			449				1,901

Net cash used in financing activities		(28,562	)		(27,681	)			(26,193	)

DECREASE IN CASH AND CASH EQUIVALENTS		(3,998	)		(7,981	)			(452	)

CASH AND CASH EQUIVALENTS:
Beginning of year		5,237			13,218				13,670

End of year	$	1,239		$	5,237			$	13,218

18. OTHER NONINTEREST EXPENSE

There is no item that as a component of other noninterest expense exceeded 1% of the aggregate of total interest income and noninterest income for the years ended December 31, 2010, 2009 and 2008, ~~2007 and 2006~~ respectively.

~~20.~~

F-43

19. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

2008

First Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

(Dollars in thousands, except per share amounts)

Interest and dividend income
$      13,769

$      13,547

$      13,504

$      13,236
Interest expense
6,061

5,594

            5,405

            5,244

Net interest and dividend income
7,708

7,953

            8,099

            7,992

Provision for loan losses (1)
175

240

               275

            2,763
Noninterest income
875

932

               964

               954
Gain on sales of securities, net
300

19

486

273
Other than temporary impairment of securities
(310)

-

(651)

(322)
Noninterest expense
5,784

5,733

            5,783

            6,033

Income before income taxes
2,614

2,931

            2,840

               101

Income taxes
753

811

               793

             (562)

Net income
$        1,861

$        2,120

$        2,047

$           663

Basic earnings per share
$          0.06

$          0.07

$          0.07

$          0.03

Diluted earnings per share
$          0.06

$          0.07

$          0.07

$          0.03

2007

First Quarter

Second
Quarter

Third Quarter

Fourth
Quarter

(Dollars in thousands, except per share amounts)

Interest and dividend income
$      12,844

$      13,059

$      13,752

$      13,929
Interest expense
5,323

5,646

            6,173

            6,266

Net interest and dividend income
7,521

7,413

            7,579

            7,663

Provision for loan losses
100

75

                 50

               175
Noninterest income
819

974

               964

               943
Loss on sales of premises and

    equipment, net
-

-

                     -

               546
Curtailment of defined benefit life insurance plan
-

-

                     -

               315
Noninterest expense
5,306

5,581

            5,351

            5,587

Income before income taxes
2,934

2,731

            3,142

            3,705

Income taxes
913

826

               970

            1,103

Net income
$        2,021

$        1,905

$        2,172

$        2,602

Basic earnings per share
$          0.07

$          0.06

$          0.07

$          0.09

Diluted earnings per share
$          0.07

$          0.06

$          0.07

$          0.09

~~(1) The fourth quarter provision for loan losses includes a specific valuation allowance of $1.9 million relating to a single commercial loan relationship deemed to be impaired.~~

	2010
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(Dollars in thousands, except per share amounts)
Interest and dividend income	$	11,955		$	11,595		$	11,550		$	11,047
Interest expense		4,264			4,171			4,201			4,129

Net interest and dividend income		7,691			7,424			7,349			6,918

Provision for loan losses		500			4,120			3,928			375
Noninterest income		867			878			836			883

Total other-than-temporary impairment losses in securities		(1,071	)		-			-			(490	)
Portion of impairment losses recognized in accumulated other comprehensive loss		971			-			-			443
Net impairment losses recognized in income		(100	)		-			-			(47	)

Loss on sales of premises and equipment, net		-			-			-			-
Loss on prepayment of borrowings		-			-			-			-
Loss on disposal of OREO		7			(6	)		-			-
Gain (loss) on sales of securities, net		186			1,132			2,609			145
Noninterest expense		6,395			5,941			6,184			6,289

Income before income taxes		1,756			(633	)		682			1,235
Income taxes		402			(247	)		(17	)		(104	)
Net income	$	1,354		$	(386	)	$	699		$	1,339

Basic earnings per share	$	0.05		$	(0.01	)	$	0.03		$	0.04
Diluted earnings per share	$	0.05		$	(0.01	)	$	0.03		$	0.04


		2009
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	(Dollars in thousands, except per share amounts)
Interest and dividend income	$	13,102		$	12,975		$	13,298		$	13,155
Interest expense		5,084			5,169			5,056			4,713

Net interest and dividend income		8,018			7,806			8,242			8,442

Provision for loan losses		1,150			590			620			1,540
Noninterest income		1,060			1,098			951			967

Total other-than-temporary impairment losses in securities		-			-			(1,343	)		(411	)
Portion of impairment losses recognized in accumulated other comprehensive loss		-			-			1,157			319
Net impairment losses recognized in income		-			-			(186	)		(92	)

Loss on sales of premises and equipment, net		(8	)		-			-			-
Loss on prepayment of borrowings		-			(142	)		-			-
Loss on disposal of OREO		-			-			(110	)		-
Gain (loss) on sales of securities, net		87			122			(774	)		182
Noninterest expense		6,408			7,007			6,064			5,558

Income before income taxes		1,599			1,287			1,439			2,401
Income taxes		394			214			197			462
Net income	$	1,205		$	1,073		$	1,242		$	1,939

Basic earnings per share	$	0.04		$	0.04		$	0.04		$	0.07
Diluted earnings per share	$	0.04		$	0.04		$	0.04		$	0.06


	At December 31, 2008
	Residential Real Estate Loans	Home Equity Loans	Commercial Real Estate Loans	Commercial and Industrial Loans	Consumer Loans	Totals
	(In thousands)
Amount due:
Within one year	$ 21,902	$ 11,517	$ 37,529	$ 81,324	$ 839	$153,111

After one year:

One to three years	8,942	825	56,151	12,790	1,565	80,273
Three to five years	2,223	1,694	83,112	50,175	1,588	138,792
Five to ten years	5,449	8,700	42,063	9,572	14	65,798
Ten to twenty years	6,748	12,826	4,277	-	-	23,851
Over twenty years	17,546	-	725	-	242	18,513
Total due after one year	40,908	24,045	186,328	72,537	3,409	327,227

Total amount due:	62,810	35,562	223,857	153,861	4,248	480,338

Unearned premiums and deferred loan fees and costs, net	84	294	1	206	8	593
Allowance for loan losses	(295)	(167)	(2,216)	(6,062)	(56)	(8,796)

Loans, net	$ 62,599	$ 35,689	$ 221,642	$ 148,005	$ 4,200	$472,135


	Due After December 31, 2009
	Fixed	Adjustable	Total
	(In thousands)

Real estate loans:
Residential	$ 32,846	$ 8,062	$ 40,908
Home Equity	24,045	-	24,045
Commercial real estate	33,523	152,805	186,328
Totat real estate loans	90,414	160,867	251,281

Other loans:
Commercial and Industrial	58,260	14,277	72,537
Consumer	3,409	-	3,409
Total other loans	61,669	14,277	75,946

Total loans	$ 152,083	$ 175,144	$ 327,227


	For the Year Ended December 31,
	2008	2007	2006
	(In thousands)
Loans:
Balance outstanding at beginning of year	$ 420,067	$ 390,174	$ 383,873

Originations:
Real estate loans:
Residential	2,807	3,692	4,337
Home Equity	12,120	17,158	15,336
Commericial	40,367	44,811	52,807
Total mortgage originations	55,294	65,661	72,480

Commercial and industrial loans	84,300	59,812	34,864
Consumer loans	1,624	3,161	3,657
Total originations	141,218	128,634	111,001
Purchase of one-to-four family mortgage loans	1,648	1,759	11,845
	142,866	130,393	122,846

Less:
Principal repayments, unadvanced funds and other, net
Principal repayments, unadvanced funds and other, net	82,212	100,389	116,170
Loan charge-offs, net	383	111	375
Total deductions	82,595	100,500	116,545
Ending balance	$ 480,338	$ 420,067	$ 390,174

	At December, 31
	2010								2009								2008
	Amount		Percent			Weighted Average Rates			Amount		Percent			Weighted Average Rates			Amount		Percent			Weighted Average Rates
	(Dollars in thousands)

Demand deposits	$	85,217		12.17	%		-	%	$	80,110		12.36	%		-	%	$	50,860		8.65	%		-	%
Now accounts		83,621		11.94			1.08			70,462		10.87			1.42			83,788		14.25			1.17
Regular accounts		101,333		14.47			0.62			104,650		16.15			0.88			68,085		11.58			1.05
Money market accounts		76,184		10.88			0.57			50,120		7.74			0.74			57,655		9.80			0.94
Total non-certificate accounts		346,355		49.46			0.57			305,342		47.12			0.75			260,388		44.28			0.86

Time certificates of deposit:
Due within the year		236,926		33.83			1.79			242,318		37.40			2.41			245,939		41.83			3.30
Over 1 year through 3 years		72,582		10.36			2.22			85,867		13.25			2.65			78,627		13.37			3.82
Over 3 years		44,472		6.35			2.62			14,448		2.23			2.02			3,075		0.52			3.43
Total certificate accounts		353,980		50.54			1.98			342,633		52.88			2.45			327,641		55.72			3.43

Total	$	700,335		100.00	%		1.28	%	$	647,975		100.00	%		1.65	%	$	588,029		100.00	%		2.29	%


	Bank	Capital Requirements	Excess Capital
		(In thousands)

Tangible capital	20.51%	16,070	203,674
Core capital	20.51%	42,854	176,890
Risk-based capital	35.55%	50,930	175,387


Location	Ownership	Year Opened	Year of Lease or License Expiration

Main Office:

141 Elm St. Westfield, MA	Owned	1964	N/A

Branch Offices:

206 Park St. West Springfield, MA	Owned	1957	N/A

655 Main St. Agawam, MA	Owned	1968	N/A

26 Arnold St. Westfield, MA	Owned	1976	N/A

300 Southampton Rd. Westfield, MA	Owned	1987	N/A

462 College Highway Southwick, MA	Owned	1990	N/A

382 North Main St. E. Longmeadow, MA	Leased	1997	2012

1500 Main St. Springfield, MA	Leased	2006	2016

1642 Northampton St. Holyoke, MA	Owned	2001	N/A

1342 Liberty St. Springfield, MA	Owned	2001	N/A

560 East Main St. Westfield, MA	Leased	2007	2046

ATMs:

337 N. Westfield St. Feeding Hills, MA	Leased	1988	2013

516 Carew St. Springfield, MA	Tenant at will	2002	N/A

1000 State St. Springfield, MA	Tenant at will	2003	N/A

788 Memorial Ave. West Springfield, MA	Leased	2006	2016

2620 Westfield St. West Springfield, MA	Leased	2006	2020

98 Southwick Rd. Westfield, MA	Leased	2006	2021


	Price Per Share		Cash Dividends Declared
For the Year Ended December 31, 2008	High	Low

Fourth Quarter ended December 31, 2008	$ 10.36	$ 8.89	$ 0.30
Third Quarter ended September 30, 2008	11.30	8.76	0.05
Second Quarter ended June 30, 2008	9.86	9.05	0.20
First Quarter ended March 31, 2008	10.53	8.95	0.05

	Price Per Share		Cash Dividends Declared
For the Year Ended December 31, 2007	High	Low

Fourth Quarter ended December 31, 2007	$ 10.18	$ 9.49	$ 0.25
Third Quarter ended September 30, 2007	10.25	8.73	0.05
Second Quarter ended June 30, 2007	10.83	9.97	0.05
First Quarter ended March 31, 2007	11.02	10.16	0.05


	*Period Ending*
*Index*	12/31/03	12/31/04	12/31/05	12/31/06	12/31/07	12/31/08
Westfield Financial, Inc.	100.00	110.16	106.29	158.82	152.10	171.81
Russell 2000	100.00	118.33	123.72	146.44	144.15	95.44
NASDAQ Bank	100.00	110.99	106.18	117.87	91.85	69.88


	Year Ended December 31, 2008 Compared to Year Ended December 31, 2007			Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
	Increase/(Decrease) Due to			Increase/(Decrease) Due to
	Volume	Rate	Net	Volume	Rate	Net
	(In thousands)
Interest-Earning Assets
Short-term investments	$ (1,042)	$ (1,164)	$ (2,206)	$ 1,634	$ 294	$ 1,928
Investment securities(1)	1,474	946	2,420	5,375	2,193	7,568
Loans(1)	3,132	(2,845)	287	811	596	1,407
Total interest-earning assets	3,564	(3,063)	501	7,820	3,083	10,903

Interest-bearing liabilities:
NOW accounts	82	(217)	(135)	91	341	432
Savings accounts	153	266	419	(20)	123	103
Money market deposit accounts	(276)	(262)	(538)	(379)	(4)	(383)
Time certificates of deposit	(1,732)	(2,425)	(4,157)	24	2,100	2,124
Short-term borrowings and long- term debt	4,249	(942)	3,307	972	609	1,581
Total interest-bearing liabilities	2,476	(3,580)	(1,104)	688	3,169	3,857

Change in net interest and dividend income	$ 1,088	$ 517	$ 1,605	$ 7,132	$ (86)	$ 7,046


	Within 1 Year	After 1 Year but Within 3 Years	After 3 Years but Within 5 Years	After 5 Years	Total
	(In thousands)
Lease Obligations
Operating lease obligations	$ 524	$ 1,014	$ 809	$ 10,667	$ 13,014

Borrowings and Debt
Federal Home Loan Bank	73,550	45,000	20,000	5,000	143,550
Securities sold under agreements to repurchase	-	-	-	58,300	58,300
Total borrowings and debt	73,550	45,000	20,000	63,300	201,850

Credit Commitments
Available lines of credit	54,319	-	-	14,903	69,222
Other loan commitments	17,905	-	-	-	17,905
Letters of credit	5,703	-	-	243	5,946
Total credit commitments	77,927	-	-	15,146	93,073

Total	$ 152,001	$ 46,014	$ 20,809	$ 89,113	$ 307,937


For the Year Ending December 31, 2009
For the Year Ending December 31, 2009
(Dollars in thousands)
Changes in Interest Rates (Basis Points)	Net Interest and Dividend Income	% Change
300	35,127	3.5%
200	34,613	2.0%
100	34,058	0.4%
0	33,925	0.0%
-100	33,669	-0.8%
-200	33,217	-2.1%
-300	32,868	-3.1%


~~2.1~~	~~Amended and Restated Plan of Conversion and Stock Issuance of Westfield Mutual Holding Company, Westfield Financial, Inc. and Westfield Bank. (1)~~
~~3.1~~	~~Articles of Organization of Westfield Financial, Inc. (2)~~
~~3.2~~	~~Bylaws of Westfield Financial, Inc. (2)~~
~~4.1~~	~~Form of Stock Certificate of Westfield Financial, Inc. (1)~~
~~10.1~~	~~Form of Employee Stock Ownership Plan of Westfield Financial, Inc. (3)~~
~~10.2~~	~~Amendments to the Employee Stock Ownership Plan of Westfield Financial, Inc. (4)~~
~~10.3~~	~~Form of Director’s Deferred Compensation Plan. (5)~~
~~10.4~~	~~The 401(k) Plan adopted by Westfield Bank. (6)~~
~~10.5~~	~~Amended and Restated Benefit Restoration Plan of Westfield Financial, Inc. (7)~~
~~10.6~~	~~Form of Amended and Restated Deferred Compensation Agreement with Donald A. Williams. (5)~~
~~10.7~~	~~Amended and Restated Employment Agreement between Donald A. Williams and Westfield Bank. (7)~~
~~10.8~~	~~Amended and Restated Employment Agreement between Michael J. Janosco, Jr. and Westfield Bank. (7)~~
~~10.9~~	~~Amended and Restated Employment Agreement between James C. Hagan and Westfield Bank. (8)~~
~~10.10~~	~~Amended and Restated Employment Agreement between Donald A. Williams and Westfield Financial, Inc. (7)~~
~~10.11~~	~~Amended and Restated Employment Agreement between Michael J. Janosco, Jr. and Westfield Financial, Inc. (7)~~


~~10.12~~	~~Amended and Restated Employment Agreement between James C. Hagan and Westfield Financial, Inc. (8)~~
~~10.13~~	~~Form of Amended and Restated Change in Control Agreement by and among certain officers, Westfield Financial, Inc. and Westfield Bank. (7)~~
~~10.14~~	~~Agreement between Westfield Bank and Village Mortgage Company. (1)~~
~~10.15~~	~~Employment Agreement between Leo R. Sagan, Jr. and Westfield Bank (8)~~
~~10.16~~	~~Employment Agreement between Leo R. Sagan, Jr. and Westfield Financial, Inc. (8)~~
~~10.17~~	~~Employment Agreement between Gerald P. Ciejka and Westfield Bank (8)~~
~~10.18~~	~~Employment Agreement between Gerald P. Ciejka and Westfield Financial, Inc. (8)~~
~~10.19~~	~~Employment Agreement between Allen J. Miles, III and Westfield Bank (8)~~
~~10.20~~	~~Employment Agreement between Allen J. Miles, III and Westfield Financial, Inc. (8)~~
~~23.1~~	~~Consent of Wolf & Company, P.C.~~
~~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 and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*


	~~WESTFIELD FINANCIAL, INC.~~

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


~~Name~~	~~Title~~	~~Date~~

~~/s/ James C. Hagan~~	~~Chief Executive Officer and President~~	~~March 13, 2009~~
~~James C. Hagan~~	~~(Principal Executive Officer)~~

~~/s/ Leo R. Sagan, Jr.~~	~~Chief Financial Officer and Treasurer~~	~~March 13, 2009~~
~~Leo R. Sagan, Jr.~~	~~(Principal Accounting Officer)~~

~~/s/ Donald A. Williams~~	~~Chairman of the Board~~	~~March 13, 2009~~
~~Donald A. Williams~~

~~/s/ Victor J. Carra~~	~~Director~~	~~March 13, 2009~~
~~Victor J. Carra~~

~~/s/ David C. Colton, Jr.~~	~~Director~~	~~March 13, 2009~~
~~David C. Colton, Jr.~~

~~/s/ Robert T. Crowley, Jr.~~	~~Director~~	~~March 13, 2009~~
~~Robert T. Crowley, Jr.~~

~~/s/ Harry C. Lane~~	~~Director~~	~~March 13, 2009~~
~~Harry C. Lane~~

~~/s/ Mary C. O’Neil~~	~~Director~~	~~March 13, 2009~~
~~Mary C. O’Neil~~

~~/s/ Richard C. Placek~~	~~Director~~	~~March 13, 2009~~
~~Richard C. Placek~~

~~/s/ Paul R. Pohl~~	~~Director~~	~~March 13, 2009~~
~~Paul R. Pohl~~

~~/s/ Charles E. Sullivan~~	~~Director~~	~~March 13, 2009~~
~~Charles E. Sullivan~~

WESTFIELD FINANCIAL, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
	December 31,
	2010			2009
ASSETS
Cash and due from banks	$	9,247		$	12,204
Federal funds sold		13			2
Interest-bearing deposits and other short-term investments		2,351			16,513
Cash and cash equivalents		11,611			28,719

SECURITIES :
Available for sale - at fair value		644,139			319,121

Held to maturity - at amortized cost (fair value of $303,619)		-			295,011

FEDERAL HOME LOAN BANK OF BOSTON AND OTHER RESTRICTED STOCK - AT COST		12,251			10,339

LOANS - Net of allowance for loan losses of $6,934 at December 31, 2010 and $7,645 at December 31, 2009		502,392			469,149

PREMISES AND EQUIPMENT, Net		11,603			12,202

ACCRUED INTEREST RECEIVABLE		4,279			5,198

BANK-OWNED LIFE INSURANCE		40,494			38,970

DEFERRED TAX ASSET, Net		8,811			6,995

OTHER REAL ESTATE OWNED		223			1,662

OTHER ASSETS		3,686			4,044
TOTAL ASSETS	$	1,239,489		$	1,191,410

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
DEPOSITS :
Noninterest-bearing	$	85,217		$	80,110
Interest-bearing		615,118			567,865
Total deposits		700,335			647,975

SHORT-TERM BORROWINGS		62,937			74,499

LONG-TERM DEBT		238,151			213,845
SECURITIES PENDING SETTLEMENT		7,791			-
OTHER LIABILITIES		9,030			7,792
TOTAL LIABILITIES		1,018,244			944,111

COMMITMENTS AND CONTINGENCIES (Note 13)

SHAREHOLDERS' EQUITY:
Preferred stock - $.01 par value, 5,000,000 shares authorized, none outstanding at December 31, 2010 and December 31, 2009		-			-
Common stock - $.01 par value, 75,000,000 shares authorized, 28,166,419 shares issued and outstanding at December 31, 2010; 29,818,526 shares issued and outstanding at December 31, 2009		282			298
Additional paid-in capital		181,842			193,609
Unearned compensation - ESOP		(9,701	)		(10,299	)
Unearned compensation - Equity Incentive Plan		(2,158	)		(3,248	)
Retained earnings		56,496			69,253
Accumulated other comprehensive loss		(5,516	)		(2,314	)
Total shareholders' equity		221,245			247,299
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,239,489		$	1,191,410
See accompanying notes to consolidated financial statements.

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
	Years Ended December 31,
	2010			2009			2008
INTEREST AND DIVIDEND INCOME:
Debt securities, taxable	$	19,648		$	25,090		$	24,362
Residential and commercial real estate loans		18,023			18,312			18,783
Commercial and industrial loans		6,496			7,150			8,032
Debt securities, tax-exempt		1,533			1,470			1,389
Consumer loans		213			263			322
Equity securities		226			234			574
Federal funds sold, interest-bearing deposits and other short-term investments		8			11			594
Total interest and dividend income		46,147			52,530			54,056
INTEREST EXPENSE:
Deposits		9,850			12,694			15,133
Long-term debt		6,538			6,984			6,291
Short-term borrowings		377			344			880
Total interest expense		16,765			20,022			22,304
Net interest and dividend income		29,382			32,508			31,752
PROVISION FOR LOAN LOSSES		8,923			3,900			3,453
Net interest and dividend income after provision for loan losses		20,459			28,608			28,299

NONINTEREST INCOME (LOSS):
Total other-than-temporary impairment losses on equity securities		-			-			(1,283	)
Total other-than-temporary impairment losses on debt securities		(590	)		(1,754	)		-
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss on debt securities		443			1,476			-
Net other-than-temporary impairment losses recognized in income		(147	)		(278	)		(1,283	)
Service charges and fees		1,940			2,616			2,368
Income from bank-owned life insurance		1,524			1,523			1,416
Loss on sales of premises and equipment, net		-			(8	)		-
Loss on prepayment of borrowings		-			(142	)		-
Gain (loss) on sales of securities, net		4,072			(383	)		1,078
Gain (loss) on disposal of OREO		1			(110	)		-
Total noninterest income		7,390			3,218			3,579
NONINTEREST EXPENSE:
Salaries and employees benefits		14,712			15,018			14,719
Occupancy		2,620			2,583			2,448
Computer operations		1,940			1,760			1,717
Professional fees		1,671			1,705			1,625
OREO expense		374			47			-
FDIC insurance assessment		751			1,134			89
Other		2,741			2,853			2,794
Total noninterest expense		24,809			25,100			23,392
INCOME BEFORE INCOME TAXES		3,040			6,726			8,486
INCOME TAX PROVISION		34			1,267			1,795
NET INCOME	$	3,006		$	5,459		$	6,691

EARNINGS PER COMMON SHARE:
Basic earnings per share	$	0.11		$	0.19		$	0.22
Weighted average shares outstanding		27,595,014			29,308,996			29,838,347
Diluted earnings per share	$	0.11		$	0.18		$	0.22
Weighted average diluted shares outstanding		27,793,409			29,577,622			30,190,532
See accompanying notes to consolidated financial statements.

	Common Stock												Unearned						Accumulated
	Shares			Par Value			Additional Paid-in Capital			Unearned Compensation- ESOP			Compensation- Equity Incentive Plan			Retained Earnings			Other Comprehensive Loss			Total
BALANCE AT DECEMBER 31, 2007		31,933,549		$	319		$	209,497		$	(11,542	)	$	(5,493	)	$	92,702		$	1,049		$	286,532
Comprehensive loss:
Net income		-			-			-			-			-			6,691			-			6.691
Net unrealized losses on securities available for sale arising during the period net of reclassification adjustment and tax effects		-			-			-			-			-			-			(7,376	)		(7,376	)
Change in pension gains or losses and transition assets, net of tax		-			-			-			-			-			-			(2,581	)		(2,581	)
Total comprehensive loss																	-			-			(3,266	)
Common stock held by ESOP committed to be released (93,947 shares)		-			-			291			629			-			-			-			920
Share-based compensation – stock options		-			-			770			-			-			-			-			770
Share-based compensation – equity incentive plan		-			-			-			-			1,156			-			-			1,156
Excess tax shortfalls from equity incentive plan		-			-			(11	)		-			-			-			-			(11	)
Common stock repurchased		(1,058,778	)		(10	)		(10,473	)		-			-			-			-			(10,483	)
Issuance of common stock in connection with stock option exercises		433,110			4			4,447			-			-			(2,550	)		-			1,901
Excess tax benefits in connection with stock option exercises		-			-			345			-			-			-			-			345
Cash dividends declared (0.$60 per share)		-			-			-			-			-			(17,945	)		-			(17,945	)
BALANCE AT DECEMBER 31, 2008		31,307,881			313			204,866			(10,913	)		(4,337	)		78,898			(8 ,908	)		259,919
Comprehensive income:
Net income		-			-			-			-			-			5,459			-			5,459
Noncredit portion of other-than-temporary impairment losses on
available for sale securities net of reclassification and tax effects		-			-			-			-			-			-			(872	)		(872	)
Net unrealized gains on securities available for sale arising during the period, net of reclassification adjustment and tax effects																				6,791			6,791
Change in pension gains or losses and transition assets, net of tax		-			-			-			-			-						675			675
Total comprehensive income																							12,053
Common stock held by ESOP committed to be released (91,493 shares)		-			-			210			614			-			-			-			824
Share-based compensation - stock options		-			-			899			-			-			-			-			899
Share-based compensation - equity incentive plan		-			-			-			-			1,285			-			-			1,285
Excess tax benefit from equity incentive plan		-			-			5			-			-			-			-			5
Common stock repurchased		(1,591,733	)		(16	)		(13,674	)		-			-			-			-			(13,690	)
Issuance of common stock in connection with stock option exercises		102,378			1			957			-			-			(509	)		-			449
Issuance of common stock in connection with equity incentive plan		-			-			205			-			(205	)		-			-			-
Forfeiture of common stock in connection with equity incentive plan		-			-			(9	)		-			9			-			-			-
Excess tax benefits in connection with stock option exercises		-			-			150			-			-			-			-			150
Cash dividends declared ($0.50 per share)		-			-			-			-			-			(14,595	)		-			(14,595	)
BALANCE AT DECEMBER 31, 2009		29,818,526			298			193,609			(10,299	)		(3,248	)		69,253			(2,314	)		247,299
Comprehensive loss:
Net income		-			-			-			-			-			3,006			-			3,006
Net unrealized losses on securities available for sale arising
during the period, net of reclassification adjustment and tax effects		-			-			-			-			-			-			(11,163	)		(11,163	)
Net unrealized gains on securities resulting from transfer from
held-maturity to available-for-sale, net tax effects		-			-			-			-			-			-			8,351			8,351
Change in pension gains or losses and transition assets, net of tax		-			-			-			-			-			-			(390	)		(390	)
Total comprehensive loss:																							(196	)
Common stock held by ESOP committed to be released (89,039 shares)		-			-			149			598			-			-			-			747
Share-based compensation - stock options		-			-			798			-			-			-			-			798
Share-based compensation - equity incentive plan		-			-			-			-			1,159			-			-			1,159
Excess tax shortfalls from equity incentive plan		-			-			(18	)		-			-			-			-			(18	)
Common stock repurchased		(1,988,634	)		(19	)		(16,108	)		-			-			-			-			(16,127	)
Issuance of common stock in connection with stock option exercises		336,527			3			2,942			-			-			(1,468	)		-			1,477
Issuance of common stock in connection with equity incentive plan		-			-			69			-			(69	)		-			-			-
Excess tax benefits in connection with stock option exercises		-			-			401			-			-			-			-			401
Cash dividends declared ($0.52 per share)		-			-			-			-			-			(14,295	)		-			(14,295	)
BALANCE AT DECEMBER 31, 2010		28,166,419		$	282		$	181,842		$	(9,701	)	$	(2,158	)	$	56,496		$	(5,516	)	$	221,245

See the accompanying notes to consolidated financial statements.

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASHFLOWS
(Dollars in thousands)
	Years Ended December 31,
	2010			2009			2008
OPERATING ACTIVITIES:
Net income	$	3,006		$	5,459		$	6,691
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		8,923			3,900			3,453
Depreciation and amortization of premises and equipment		1,261			1,252			1,182
Net amortization of premiums and discounts on securities and mortgage loans		6,053			1,909			178
Share-based compensation expense		1,957			2,184			1,926
Amortization of ESOP expense		747			824			920
Excess tax shortfalls (benefits) from equity incentive plan		18			(5	)		11
Excess tax benefits in connection with stock option exercises		(401	)		(150	)		(345	)
Net (gains) losses on sales of securities		(4,072	)		383			(1,078	)
Other-than-temporary impairment losses on securities		147			278			1,283
Write-downs of other real estate owned		285			17			-
(Gain) loss on sale of other real estate owned, net		(1	)		110			-
Loss on disposition of premises and equipment, net		-			8			-
Loss on prepayment of borrowings		-			142			-
Deferred income tax benefit		(389	)		(112	)		(1,098	)
Income from bank-owned life insurance		(1,524	)		(1,523	)		(1,416	)
Changes in assets and liabilities:
Accrued interest receivable		928			37			526
Other assets		358			(2,863	)		107
Other liabilities		1,059			(1,411	)		(1,245	)
Net cash provided by operating activities		18,355			10,439			11,095
INVESTING ACTIVITIES:
Securities held to maturity:
Purchases		(62,111	)		(128,489	)		(33,379	)
Proceeds from calls, maturities, and principal collections		69,075			80,215			61,927
Securities available for sale:
Purchases		(654,889	)		(297,683	)		(164,275	)
Proceeds from sales		496,990			149,809			109,195
Proceeds from calls, maturities, and principal collections		122,598			66,911			56,880
Purchase of residential mortgages		(61,880	)		(16,381	)		(1,648	)
Loan originations and principal payments, net		19,122			13,473			(59,074	)
Purchase of Federal Home Loan Bank of Boston stock		(1,912	)		(1,883	)		(946	)
Proceeds from sale of other real estate owned		1,693			148			-
Purchases of premises and equipment		(662	)		(1,396	)		(536	)
Purchase of bank-owned life insurance		-			(320	)		(2,345	)
Net cash used in investing activities		(71,976	)		(135,596	)		(34,201	)
FINANCING ACTIVITIES:
Net increase (decrease) in deposits		52,360			59,946			(14,647	)
Net change in short-term borrowings		(11,562	)		24,675			14,556
Repayment of long-term debt		(20,852	)		(80,142	)		(20,000	)
Proceeds from long-term debt		45,129			120,545			88,300
Cash dividends paid		(14,295	)		(14,595	)		(17,945	)
Common stock repurchased		(16,127	)		(13,690	)		(10,483	)
Issuance of common stock in connection with stock option exercises		1,477			449			1,901
Excess tax (shortfalls) benefits in connection with equity incentive plan		(18	)		5			(11	)
Excess tax benefits in connection with stock option exercises		401			150			345
Net cash provided by financing activities		36,513			97,343			42,016
NET CHANGE IN CASH AND CASH EQUIVALENTS:		(17,108	)		(27,814	)		18,910
Beginning of year		28,719			56,533			37,623
End of year	$	11,611		$	28,719		$	56,533
Supplemental cash flow information:
Transfer of loans to other real estate owned	$	538		$	1,937		$	-
Increase (decrease) due from broker		7,791			(27,603	)		27,603
Securities reclassified from held-to-maturity to available-for-sale		287,074			-			-
See the accompanying notes to consolidated financial statements


					Unearned Compensation - Equity Incentive Plan	Retained Earnings	Accumulated Other Comprehensive (Loss) Income	Total
	Common Stock		Additional Paid-in Capital	Unearned Compensation - ESOP
	Shares	Par Value
	Shares	Par Value
BALANCE, DECEMBER 31, 2005	9,754,757	$ 98	$ 30,120	$ (5,127)	$ (861)	$ 92,789	$ (1,177)	$ 115,842
Comprehensive income:
Net income	-	-	-	-	-	4,654	-	4,654
Net unrealized gains on securities available for sale arising during the year, net of tax effects	-	-	-	-	-	-	374	374
Comprehensive income								5,028
Net proceeds from sale of common stock		177	171,535	-	-	-	-	171,712
Common stock held by ESOP committed to be released (60,729 shares)	-	-	229	292	-	-	-	521
Adjustment to initially apply FASB Statement No. 158, net of tax	-	-	-	-	-	-	77	77
Share-based compensation - stock options	-	-	317	-	-	-	-	317
Share-based compensation - equity incentive plan	-	-	-	-	456	-	-	456
Excess tax benefits from equity incentive plan	-	-	260	-	-	-	-	260
Common stock repurchased	(65,000)	(1)	(1,582)	-	-	-	-	(1,583)
Issuance of common stock in connection with stock option exercises	39,155	-	857	-	-	(294)	-	563
Cash dividends declared ($0.32 per share)	-	-	-	-	-	(3,785)	-	(3,785)
BALANCE, DECEMBER 31, 2006	9,728,912	274	201,736	(4,835)	(405)	93,364	(726)	289,408
Comprehensive income:
Net income	-	-	-	-	-	8,700	-	8,700
Net unrealized gains on securities available for sale arising during the period, net reclassification adjustment and tax effects	-	-	-	-	-	-	1,298	1,298
Change in pension gains or losses and transition assets, net of tax	-	-	-	-	-	-	477	477
Comprehensive income								10,475
Exchange of common stock pursuant to reorganization (9,728,912 shares exchanged at a 3.28138 ratio for 31,923,903 shares)	21,458,993	38	(358)	-	-	-	-	(320)
Capital contribution pursuant to dissolution of Mutual Holding Company	-	-	-	-	-	2,713	-	2,713
Common stock held by ESOP committed to be released (96,182 shares)	-	-	320	653	-	-	-	973
Share-based compensation - stock options	-	-	418	-	-	-	-	418
Share-based compensation - equity incentive plan	-	-	-	-	751	-	-	751
Establishment of equity incentive plan - restricted stock	-	-	5,839	-	(5,839)	-	-	-
Excess tax benefits from equity incentive plan	-	-	222	-	-	-	-	222
Purchase of ESOP Shares	736,000	7	7,353	(7,360)	-	-	-	-
Purchase of common stock in connection equity incentive plan	-	-	(6,075)	-	-	-	-	(6,075)
Issuance of common stock in connection with stock option exercises	9,644	-	42	-	-	-	-	42
Cash dividends declared ($0.40 per share)	-	-	-	-	-	(12,075)	-	(12,075)
BALANCE, DECEMBER 31, 2007	31,933,549	319	209,497	(11,542)	(5,493)	92,702	1,049	286,532
Comprehensive loss:
Net income	-	-	-	-	-	6,691	-	6,691
Net unrealized gains on securities available for sale arising during the period, net reclassification adjustment and tax effects	-	-	-	-	-	-	(7,376)	(7,376)
Change in pension gains or losses and transition assets, net of tax	-	-	-	-	-	-	(2,581)	(2,581)
Comprehensive loss								(3,266)
Common stock held by ESOP committed to be released (93,947 shares)	-	-	291	629	-	-	-	920
Share-based compensation - stock options	-	-	770	-	-	-	-	770
Share-based compensation - equity incentive plan	-	-	-	-	1,156	-	-	1,156
Excess tax shortfalls from equity incentive plan	-	-	(11)	-	-	-	-	(11)
Common stock repurchased	(1,058,778)	(10)	(10,473)	-	-	-	-	(10,483)
Issuance of common stock in connection with stock option exercises	433,110	4	4,447	-	-	(2,550)	-	1,901
Excess tax benefits in connection with stock option exercises	-	-	345	-	-	-	-	345
Cash dividends declared ($0.60 per share)	-	-	-	-	-	(17,945)	-	(17,945)
BALANCE, DECEMBER 31, 2008	31,307,881	$ 313	$ 204,866	$ (10,913)	$ (4,337)	$ 78,898	$ (8,908)	$ 259,919

See the accompanying notes to consolidated financial statements.


	Years Ended December 31,
	2008	2007		2006
OPERATING ACTIVITIES:
Net Income	$ 6,691	$ 8,700		$ 4,654
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses	3,453	400		390
Depreciation and amortization of premises and equipment	1,182	1,096		1,030
Net amortization of premiums and discounts on securities, mortgage-
backed securities and mortgage loans	178	321		657
Share-based compensation expense	1,926	1,169		773
Amortization of ESOP expense	920	973		521
Excess tax shortfalls (benefits) from equity incentive plan	11	(222)		(260)
Excess tax benefits in connection with stock option exercises	(345)	-		-
Net gains on sales of securities	(1,078)	(41)		-
Other than temporary impairment of securities	1,283	-		-
(Gain) loss on sale of premises and equipment, net	-	(546)		378
Deferred income tax benefit	(1,098)	(184)		(256)
Income from bank-owned life insurance	(1,357)	(1,259)		(800)
Changes in assets and liabilities:
Accrued interest receivable	526	(1,259)		(649)
Other assets	48	376		(436)
Other liabilities	(1,245)	1,236		530
Net cash provided by operating activities	11,095	10,760		6,532
INVESTING ACTIVITIES:
Securities, held to maturity:
Purchases	(2,290)	(41,738)		(17,097)
Proceeds from calls, maturities, and principal collections	27,010	15,000		13,000
Securities, available for sale:
Purchases	(22,346)	(26,281)	��	(21,295)
Proceeds from sales	20,304	15,147		5,000
Proceeds from calls, maturities, and principal collections	14,992	15,023		3,000
Mortgage-backed securities, held to maturity:
Purchases	(31,089)	(49,078)		(48,727)
Principal collections	34,917	39,560		37,368
Mortgage-backed securities, available for sale:
Purchases	(141,929)	(111,304)		(51,720)
Proceeds from sales	88,891	272		-
Principal collections	41,888	33,634		26,307
Purchase of residential mortgages	(1,648)	(1,759)		(11,845)
Net other (increase) decrease in loans	(59,074)	(28,388)		5,080
Purchase of Federal Home Loan Bank of Boston stock	(946)	(3,481)		(9)
Proceeds from redemption of Federal Home Loan Bank of Boston stock	-	217		-
Purchases of premises and equipment	(536)	(1,935)		(2,618)
Proceeds from sale of premises and equipment	-	920		10
Purchase of bank-owned life insurance	(2,345)	(10,520)		-
Net cash used in investing activities	(34,201)	(154,711)		(63,546)
FINANCING ACTIVITIES:
Net (decrease) increase in deposits	(14,647)	(24,790)		4,421
Net change in short-term borrowings	14,556	7,349		13,478
Repayment of long-term debt	(20,000)	(20,000)		(10,000)
Proceeds from long-term debt	88,300	80,000		10,000
Cash dividends paid	(17,945)	(12,075)		(3,785)
Net proceeds from sale of common stock	-	-		171,712
Exchange of common stock pursuant to reorganization	-	(320)		-
Capital contribution pursuant to dissolution of MHC	-	2,713		-
Common stock repurchased	(10,483)	-		(1,583)
Issuance of common stock in connection with stock option exercises	1,901	42		563
Excess tax (shortfalls) benefits in connection with equity incentive plan	(11)	222		260
Excess tax benefits in connection with stock option exercises	345	-		-
Purchase of common stock in connection with equity incentive plan	-	(6,075)		-
Net cash provided by financing activities	42,016	27,066		185,066
NET CHANGE IN CASH AND CASH EQUIVALENTS:	18,910	(116,885)		128,052
Beginning of period	37,623	154,508		26,456
End of period	$ 56,533	$ 37,623		$ 154,508
Supplemental cash flow information:
Net cash due to broker for purchase of mortgage-backed securities,
available for sale	$ (27,603)	$ -		$ -

See the accompanying notes to consolidated financial statements

	Years
	~~Years~~
Buildings	39
~~Buildings~~ Leasehold Improvements	39 5-20
~~Leasehold Improvements~~	~~5-20~~
Furniture and Equipment	3-7

	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
Government-sponsored enterprise obligations		18,447		193		(776	)		17,864
Municipal bonds		42,119		1,298		(340	)		43,077
Mutual funds		6,949		25		(61	)		6,913
Common and preferred stock		70		-		(23	)		47

Total	$	649,881	$	6,879	$	(12,621	)	$	644,139

	Years Ended Decmeber 31,
	2010			2009			2008
	(In thousands)
Gross gains realized	$	6,346		$	2,033		$	1,246
Gross losses realized		(2,274	)		(2,416	)		(168	)
Net gain (loss) realized	$	4,072		$	(383	)	$	1,078


	December 31, 2008
	Less Than Twelve Months		Over Twelve Months
	Gross Unrealized Losses	Fair Value	Gross Unrealized Losses	Fair Value
	(In thousands)
Held to maturity:
Municipal bonds	$ 155	$ 6,677	$ 24	$ 1,585

Total held to maturity	155	6,677	24	1,585

Available for sale:
Municipal bonds	14	1,093	-	-
Equity securities	-	-	174	3,842

Total available for sale	14	1,093	174	3,842

Total	$ 169	$ 7,770	$ 198	$ 5,427


		December 31, 2008
		Amortized	Estimated
		Cost	Fair Value
		(In thousands)
Held to maturity:
	Due in one year or less	$ -	$ -
	Due after one year through five years	20,930	21,332
	Due after five years through ten years	44,114	46,983
	Due after ten years	14,259	14,176

Total held to maturity		$ 79,303	$ 82,491

Available for sale:
	Due in one year or less	$ -	$ -
	Due after one year through five years	5,018	5,161
	Due after five years through ten years	850	877
	Due after ten years	12,107	12,231

Total available for sale		$ 17,975	$ 18,269

Loans consisted of the following amounts:	December 31,
	2010			2009
	(In thousands)

Commercial real estate	$	221,578		$	229,061
Residential real estate		112,680			64,299
Home equity		36,116			34,755
Commercial and industrial		135,250			145,012
Consumer		2,960			3,307
Total Loans		508,584			476,434
Unearned premiums and deferred loan fees and costs, net		742			360
Allowance for loan losses		(6,934	)		(7,645	)
	$	502,392		$	469,149

An analysis of changes in the allowance for loan losses is as follows:
	Years Ended December 31,
	2010			2009			2008
	(In thousands)

Balance, beginning of year	$	7,645		$	8,796		$	5,726
Provision		8,923			3,900			3,453
Charge-offs		(9,717	)		(5,099	)		(449	)
Recoveries		83			48			66

Balance, end of year	$	6,934		$	7,645		$	8,796

	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
	(In thousands)
Amount of allowance for loan losses for loans deemed to be impaired	$	-	$	-	$	19	$	-	$	19
Amount of allowance for loan losses not deemed to be impaired		877		3,182		2,830		26		6,915
Loans deemed to be impaired		125		1,891		539		-		2,555
Loans not deemed to be impaired		148,671		219,687		134,711		2,960		506,029


	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)
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