Chicopee Bancorp 10-K/A 2006 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

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

For the fiscal year ended December 31, 2006

OR

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

Commission File Number: 000-51996

CHICOPEE BANCORP, INC.

(Exact name of registrant as specified in its charter)

Massachusetts	20-4840562
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
70 Center Street, Chicopee, Massachusetts	01013
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number: (413) 594-6692

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

Title of each class	Name of each exchange on which registered
Common Stock, no par value	Nasdaq Global Market

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

None

Indicate by check mark whether the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  ¨    NO  x

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES  ¨    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    NO  ¨

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.  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act). YES  ¨    NO  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨                Accelerated filer  ¨                Non-accelerated filer  x

Based upon the closing price of the registrant’s common stock as of December 31, 2006, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $116,426,109.

The number of shares of Common Stock outstanding as of March 13, 2007 is 7,439,368.

INDEX

EXPLANATORY NOTE

This Form 10K/A is being filed to revise page F-4 of the Financial Statements and Supplementary Data due to a formula error in the Consolidated Statements of Stockholders’ Equity.

PART II

Item 8.	Financial Statements and Supplementary Data	1
PART IV
Item 15.	Exhibits and Financial Statement Schedules	2
Signatures		3

PART II

Item 8. Financial Statements and Supplementary Data.

Information required by this item included herein beginning on page F-1.

1

PART IV

Item 15. Exhibits and Financial Statements Schedules.

1. Financial Statements

The following consolidated financial statements of the Company and its subsidiaries are filed as part of this document under Item 8:

• Report of Independent Registered Public Accounting Firm

• Consolidated Balance Sheets at December 31, 2006 and 2005

• Consolidated Statements of Income for the Years Ended December 31, 2006, 2005 and 2004

• Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004

• Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004

• Notes to Consolidated Financial Statements

2. Financial Statement Schedules

Financial Statement Schedules have been omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or notes thereto.

3. Exhibits

No.	Description
3.1	Certificate of Incorporation of Chicopee Bancorp, Inc. (1)
3.2	Bylaws of Chicopee Bancorp, Inc. (1)
4.1	Stock Certificate of Chicopee Bancorp, Inc. (1)
10.1  *	Employment Agreement between William J. Wagner and Chicopee Bancorp, Inc. (2)
10.2  *	Employment Agreement between William J. Wagner and Chicopee Savings Bank (2)
10.3  *	Employment Agreement between W. Guy Ormsby and Chicopee Bancorp, Inc. (2)
10.4  *	Employment Agreement between W. Guy Ormsby and Chicopee Savings Bank (2)
10.5  *	Change in Control Agreement between Russell J. Omer and Chicopee Savings Bank (2)
10.6  *	Change in Control Agreement between Alzira C. Costa and Chicopee Savings Bank (2)
10.7  *	Form of Chicopee Savings Bank Employee Stock Ownership Plan (1)
10.8  *	Form of Trust Agreement between Chicopee Savings Bank and the Trustee for Chicopee Savings Bank Employee Stock Ownership Plan Trust (1)
10.9  *	Form of Loan Agreement (1)
10.10*	Form of Chicopee Savings Bank Employee Severance Compensation Plan (1)
10.11*	Form of Chicopee Savings Bank Supplemental Executive Retirement Plan (1)
10.12*	Form of Executive Supplemental Retirement Income Agreement between Chicopee Savings Bank and Alzira C. Costa, Russell J. Omer, W. Guy Ormsby and William J. Wagner (1)
21.0	List of Subsidiaries (3)
23.0	Consent of Berry, Dunn, McNeil & Parker
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.0	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

* Management contract or compensatory plan, contract or arrangement.

(1) Incorporated by reference in this document to the exhibits to the Company’s Registration Statement on Form S-1 (File No. 333-132512) and any amendments thereto, initially filed with the Securities and Exchange Commission on March 17, 2006.

(2) Incorporated by reference in this document to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, filed on November 14, 2006 (File No. 000-51996).

(3) Incorporated by reference in this document to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on March 28, 2006 (File No. 000-51996).

2

Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Chicopee Bancorp, Inc.
Date: April 5, 2007	/s/ William J. Wagner
	William J. Wagner
	Chairman of the Board, President and Chief Executive Officer

3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Chicopee Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of Chicopee Bancorp, Inc. and Subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the years in the three year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

As disclosed in notes 1 and 14 to the financial statements, the Company changed its method of accounting for the defined benefit pension plan during 2006.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Chicopee Bancorp, Inc. and Subsidiaries as of December 31, 2006 and 2005 and the consolidated results of their operations and their consolidated cash flows for each of the years in the three year period ended December 31, 2006 in conformity with U.S. generally accepted accounting principles.

Portland, Maine

March 22, 2007

F-1

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2006			2005
	(In thousands, except share data)
ASSETS
Cash and due from banks	$	8,816		$	10,003
Short-term investments		1,132			4,181
Federal funds sold		1,580			3,402
Cash and cash equivalents		11,528			17,586
Securities available-for-sale, at fair value		7,861			4,934
Securities held-to-maturity, at cost (fair value $37,099 and $29,109 at December 31, 2006 and 2005, respectively)		37,411			29,472
Federal Home Loan Bank stock, at cost		1,574			2,447
Loans receivable, net of allowance for loan losses ($2,908 at December 31, 2006 and $2,605 at December 31, 2005)		368,968			315,649
Cash surrender value of life insurance		11,200			10,801
Premises and equipment, net		7,003			7,079
Accrued interest and dividends receivable		1,901			1,341
Deferred income tax asset		1,538			662
Other assets		1,061			1,378
Total assets	$	450,045		$	391,349
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Noninterest-bearing	$	29,088		$	27,912
Interest-bearing		282,483			267,111
Total deposits		311,571			295,023
Securities sold under agreements to repurchase		12,712			20,163
Advances from Federal Home Loan Bank		15,256			29,417
Mortgagors’ escrow accounts		997			971
Accrued expenses and other liabilities		1,063			2,334
Total liabilities		341,599			347,908
Commitments and contingencies (notes 10, 11, 12 and 13)
Stockholders’ equity:
Common stock (no par value, 20,000,000 shares authorized, 7,439,368 shares issued and outstanding at December 31, 2006 and none issued or outstanding at December 31, 2005)		72,479			—
Additional paid-in capital		144			—
Unearned compensation		(5,654	)		—
Retained earnings		40,817			43,351
Accumulated other comprehensive income		660			90
Total stockholders’ equity		108,446			43,441
Total liabilities and stockholders’ equity	$	450,045		$	391,349

The accompanying notes are an integral part of these consolidated financial statements.

F-2

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2006			2005		2004
	(In thousands)
Interest and dividend income:
Loans	$	20,219		$	17,190	$	15,159
Investment securities		1,805			1,241		1,041
Other interest-earning assets		735			401		308
Total interest and dividend income		22,759			18,832		16,508
Interest expense:
Deposits		7,888			6,013		5,011
Securities sold under agreements to repurchase		280			223		90
Other borrowed funds		1,039			694		426
Total interest expense		9,207			6,930		5,527
Net interest income		13,552			11,902		10,981
Provision for loan losses		440			120		120
Net interest income, after provision for loan losses		13,112			11,782		10,861
Non-interest income:
Service charges, fee and commissions		1,489			1,319		1,503
Loan sales and servicing		117			70		788
Net gain on sales of securities available-for-sale		25			103		68
Total non-interest income		1,631			1,492		2,359
Non-interest expenses:
Salaries and employee benefits		6,792			6,107		5,750
Occupancy expenses		1,065			976		942
Furniture and equipment		946			858		739
Data processing		700			594		608
Stationery, supplies and postage		302			322		295
Charitable foundation contribution		5,511			—		—
Other non-interest expense		2,538			2,230		2,054
Total non-interest expenses		17,854			11,087		10,388
Income (loss) before income taxes		(3,111	)		2,187		2,832
Income tax expense (benefit)		(577	)		771		930
Net income (loss)	$	(2,534	)	$	1,416	$	1,902

The accompanying notes are an integral part of these consolidated financial statements.

F-3

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, 2006, 2005 and 2004

	Common Stock		Additional Paid-in Capital		Unearned Compensation			Retained Earnings			Accumulated Other Comprehensive Income			Total
	(In thousands, except number of shares)
Balance at December 31, 2003	$	—	$	—	$	—		$	40,033		$	98		$	40,131
Comprehensive income:
Net income		—		—		—			1,902			—			1,902
Change in net unrealized gain on securities available-for-sale (net of deferred income taxes of $85)		—		—		—			—			124			124
Total comprehensive income															2,026
Balance at December 31, 2004		—		—		—			41,935			222			42,157
Comprehensive income:
Net income		—		—		—			1,416			—			1,416
Change in net unrealized gain on securities available-for-sale (net of deferred income taxes of $71)		—		—		—			—			(132	)		(132	)
Total comprehensive income															1,284
Balance at December 31, 2005		—		—		—			43,351			90			43,441
Comprehensive loss:
Net loss		—		—		—			(2,534	)		—			(2,534	)
Change in net unrealized gain on securities available-for-sale (net of deferred income taxes of $306)		—		—		—			—			570			570
Total comprehensive loss															(1,964	)
Issuance of common stock for initial public offering, (6,888,304 shares) net of expenses of $1,900		66,968		—		—			—			—			66,968
Issuance of common stock to Chicopee Savings Bank Charitable Foundation (551,064 shares)		5,511		—		—			—			—			5,511
Stock purchase for ESOP						(5,951	)								(5,951	)
Change in unearned compensation		—		144		297			—			—			441
Balance at December 31, 2006	$	72,479	$	144	$	(5,654)		$	40,817		$	660		$	108,446

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2006			2005			2004
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(2,534	)	$	1,416		$	1,902
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		779			712			618
Net (accretion) amortization of investments		9			(30	)		32
Provision for loan losses		440			120			120
Increase in cash surrender value of life insurance		(399	)		(382	)		(438	)
Realized gains on investment securities, net		(25	)		(103	)		(68	)
Other-than-temporary impairment of investment security		—			50			—
Net gains on sales of loans and other real estate owned		(14	)		(12	)		(31	)
Deferred income taxes		(1,182	)		(9	)		317
Decrease (increase) in other assets		317			(374	)		(626	)
Decrease (increase) in accrued interest receivable		(559	)		(254	)		(65	)
Increase (decrease) in other liabilities		(1,272	)		449			41
ESOP expense		441			—			—
Contribution of common stock to Charitable Foundation		5,511			—			—
Net cash provided by operating activities		1,512			1,583			1,802
Cash flows from investing activities:
Additions to premises and equipment		(704	)		(1,346	)		(1,452	)
Loans originations and principal collections, net		(53,744	)		(34,369	)		(24,998	)
Proceeds from sales of securities available-for-sale		4,823			1,624			10,191
Proceeds from sale of other real estate owned		—			—			2
Purchases of securities available-for-sale		(6,849	)		(1,605	)		(2,857	)
Purchases of securities held-to-maturity		(80,263	)		(54,184	)		(15,559	)
Maturities of securities held-to-maturity		72,315			46,845			14,634
Net redemption (purchase) of FHLB stock		873			(854	)		(31	)
Net cash used in investing activities		(63,549	)		(43,889	)		(20,070	)
Cash flows from financing activities:
Net increase (decrease) in deposits		16,548			14,254			(1,833	)
Net increase (decrease) in securities sold under agreements to repurchase		(7,451	)		12,582			4,877
Advances from long-term FHLB advances		—			10,000			11,500
Payments on long-term FHLB advances		(4,161	)		(6,375	)		(8,870	)
Net increase (decrease) in other short-term borrowings		(10,000	)		7,000			3,000
Issuance of common stock for initial public offering net of costs		66,968			—			—
Stock purchased for ESOP		(5,951	)		—			—
Net increase (decrease) in escrow funds held		26			12			35
Net cash provided by financing activities		55,979			37,473			8,709
Net decrease in cash and cash equivalents		(6,058	)		(4,833	)		(9,559	)
Cash and cash equivalents at beginning of year		17,586			22,419			31,978
Cash and cash equivalents at end of year	$	11,528		$	17,586		$	22,419
Supplemental cash flow information:
Interest paid on deposits	$	7,888		$	6,013		$	5,025
Interest paid on borrowings	$	1,305		$	917		$	501
Income taxes paid	$	1,158		$	617		$	454
Noncash transactions
Transfers from loans to other real estate owned	$	—		$	—		$	3

The accompanying notes are an integral part of these consolidated financial statements.

F-5

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2006, 2005 and 2004

(Dollars in Thousands)

Nature of Business

Chicopee Bancorp, Inc. (the “Company”), a Massachusetts corporation, was formed on March 14, 2006 by Chicopee Savings Bank (the “Bank’) to become the holding company for the Bank upon completion of the Bank’s conversion from a mutual savings bank to a stock savings bank. The conversion of the Bank was completed on July 19, 2006. At December 31, 2005, the Company had no assets and conducted no operations, and, therefore, the 2005 and 2004 information presented in this report is for the Bank.

The Company provides a variety of financial services to individuals and businesses through its bank subsidiary Chicopee Savings Bank. The Bank is a Massachusetts state-chartered savings bank operating six branches in Western Massachusetts. The Bank’s primary source of revenue is earned by providing loans to small and middle-market businesses and to residential property homeowners. Its primary deposit products are savings and term certificate accounts.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and consolidation

The consolidated financial statements include the accounts of Chicopee Bancorp, Inc. and its wholly-owned subsidiaries, Chicopee Savings Bank and Chicopee Funding Corporation. The accounts of the Bank include all of its wholly-owned subsidiaries, Cabot Management Corporation, Cabot Realty, LLC, CSB Colts, Inc., and CSB Investment Corporation. At December 31, 2003, the Bank had controlling interest in CSB Real Estate Investment Trust, Inc. (the REIT) and owned all of the common stock. During 2004, the REIT was liquidated.

All significant intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

In preparing consolidated financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-6

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of servicing assets, the valuation of other real estate owned and the deferred tax valuation allowance. In connection with the determination of the allowance for loan losses and the carrying value of other real estate owned, management obtains independent appraisals for significant properties. While management uses available information to recognize losses on loans and other real estate owned, future additions to the allowance for loan losses or future write-downs of other real estate owned may be necessary based upon changes in economic and market conditions.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and the valuation of its other real estate owned. Such agencies may require the Company to recognize additions to the allowance for loan losses or write-down of other real estate owned based upon their judgment about information available to them at the time of their examination.

Significant group concentrations of credit risk

The Company does not have any significant concentrations to any one industry or customer. Although the Company has a diversified loan portfolio and economic conditions are stable, most of the Company’s activities are with customers located in Western Massachusetts. As a result, the Company and its borrowers may be especially vulnerable to the consequences of changes in the local economy.

Cash and cash equivalents

For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash, due from banks, short-term investments with original maturities of ninety days or less and federal funds sold.

The Company’s due from bank accounts, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant risk on cash and cash equivalents.

F-7

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Securities

Debt securities that management has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and recorded at amortized cost. Securities not classified as held-to-maturity, including equity securities with readily determinable fair values, are classified as “available-for-sale” and recorded at fair value, with unrealized gains and temporary unrealized losses excluded from earnings and reported in other comprehensive income (loss). Non-marketable equity securities are carried at cost and evaluated for impairment.

Purchase premiums and discounts are recognized in interest income over the period to call or maturity using a method which yields results that do not differ materially from those which would be recognized by use of the effective-yield method. 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. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Loans held for sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value, as determined by current investor yield requirements, in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income. Loans held for sale are not material at December 31, 2006 and 2005.

Loans

The Company grants mortgage, commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans in Western Massachusetts. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

F-8

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Loans past due 30 days or more are considered delinquent. The accrual of interest on loans is discontinued when, in the judgment of management, the collectibility of the principal or interest becomes doubtful. It is the policy of the Company to discontinue the accrual of interest when principal or interest payments are delinquent ninety days or more.

All interest accrued, but not collected, for loans that are placed on nonaccrual or charged off is reversed against interest income. Interest recognized on these loans is limited to interest payments received until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for loan losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management. Factors considered in evaluating the adequacy of the allowance include previous loss experience, current economic conditions and their effect on borrowers and the performance of individual loans in relation to contract terms. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

F-9

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment evaluation.

Loan servicing

Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rate in increments of 50 basis points and term primarily of 15 and 30 years. Fair value is based upon discounted cash flows using market-based assumptions. Projected prepayments on the portfolio are estimated using the Public Securities Association Standard Prepayment Model. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.

Credit related financial instruments

In the ordinary course of business, the Company has entered into commitments to extend credit, including commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded.

Other real estate owned

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from other real estate owned.

Premises and equipment

Land is carried at cost. Buildings, leasehold improvements and equipment are stated at cost, less accumulated depreciation and amortization, computed on the straight-line method over the shorter of the estimated useful lives of the assets or the lease term.

F-10

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income taxes

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

Employee stock ownership plan (“ESOP”)

Compensation expense is recognized as ESOP shares are committed to be released and is calculated based upon the average market price for the current year. Allocated and committed-to-be-released ESOP shares are considered outstanding for loss per share calculations based on debt service payments. Other ESOP shares are excluded from loss per share calculations. Dividends declared on allocated ESOP shares are charged to retained earnings. Dividends declared on unallocated ESOP shares are used to satisfy debt service. The value of unearned shares to be allocated to ESOP participants for future services not yet performed is reflected as a reduction of stockholders’ equity.

Advertising

Advertising costs are expensed as incurred.

F-11

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Loss per common share

Basic loss per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company relate to outstanding stock options and certain stock awards and are determined using the treasury stock method. No stock options or stock awards were granted or outstanding at or for the year ended December 31, 2006.

Loss per common share are not presented as the Company’s initial public offering was completed on July 19, 2006; therefore, per share results would not be meaningful.

Adjusted weighted average number of common share outstanding (in thousands) at December 31, 2006 is as follows:

Weighted-average number of common shares outstanding	7,439
Less: average number of unallocated ESOP shares	595
Adjusted weighted-average number of common shares outstanding	6,844

Comprehensive income (loss)

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income or loss. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the stockholders’ equity section of the balance sheet, such items, along with net income or loss, are components of comprehensive income or loss.

F-12

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Comprehensive income (loss) (continued)

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

	Years Ended December 31,
	2006			2005			2004
Unrealized holding gains (losses) on available-for-sale securities arising during the year	$	901		$	(100	)	$	277
Reclassification adjustment for gains realized in income		(25	)		(103	)		(68	)
Net unrealized holding gains (losses)		876			(203	)		209
Tax effect		306			(71	)		85
Other comprehensive income (loss)	$	570		$	(132	)	$	124

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

	December 31,
	2006			2005
Net unrealized gain on securities available-for-sale	$	1,014		$	138
Tax effect		(354	)		(48	)
Net-of-tax amount	$	660		$	90

Segment reporting

The Company’s operations are solely in the financial services industry and consist of providing traditional banking services to its customers. Management makes operating decisions and assesses performance based on an ongoing review of the Company’s consolidated financial results. Therefore, the Company has a single operating segment for financial reporting purposes.

F-13

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent accounting pronouncements

In March 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 156,Accounting for Servicing of Financial Assets. This Statement amends SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 requires companies to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract. The Statement requires all separately recognized servicing assets to be initially measured at fair value and it permits an entity to choose either the amortized cost method or fair value measurement method for subsequent measurement for each class of separately recognized servicing assets. This Statement is effective as of the beginning of an entity’s first fiscal year after September 15, 2006 (January 1, 2007 for Chicopee Bancorp, Inc.). The Company does not anticipate that the adoption of SFAS No. 156 will have a material impact on its financial condition or results of operations.

In July 2006, FASB issued Financial Accounting Standards Interpretation No. 48 (“FIN 48”),Accounting for Uncertainty in Income Taxes. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS No. 109,Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attributable for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect FIN 48 to have a material effect on its financial condition and results of operations.

In September, 2006 FASB issued SFAS No. 157,Fair Value Measurements. SFAS No. 157 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007 and early application is encouraged. This Statement does not require any new fair value measurements and the Company does not expect application of this Statement will have a material effect on its financial condition and results of operations.

F-14

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)

Recent accounting pronouncements (continued)

In September 2006, FASB issued SFAS No. 158,Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans– an amendment of FASB Statements No. 87, 88, 106, and 132(R). This Statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through comprehensive income of a business entity. Effective in 2008, the funded status of a plan should be measured as of the date of the Company’s year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide required disclosures as of the end of the fiscal year ending after December 15, 2006. The Company’s plan has used a measurement date of October 31. As of October 31, 2006, the Company had $781 of accrued employee retirement expense which has been committed to the employees and is equal to the plan’s funded status, therefore there was no effect of implementing this Statement.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 requires registrants to evaluate the materiality of unadjusted financial statement misstatements using both the rollover and iron curtain methods. The rollover method quantifies a misstatement based on the amount of the error originating in the current period statement of operations. The iron curtain method quantifies a misstatement based on the effects of correcting the misstatement existing in the balance sheet at the end of the current period, irrespective of the misstatement’s year(s) of origination. SAB No. 108 is effective for years ending after November 15, 2006. The cumulative effect of the initial application on prior years is required to be reported as an adjustment to retained earnings at the beginning of the year of initial application. SAB No. 108 did not have an effect on the Company’s financial statements.

Reclassifications

Certain amounts in the 2004 and 2005 financial statements have been reclassified to conform to the 2006 presentation.

F-15

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

2. RESTRICTIONS ON CASH AND AMOUNTS DUE FROM BANKS

The Company is required to maintain certain reserves of cash on hand or deposits with the Federal Reserve Bank. At December 31, 2006 and 2005, these reserve balances amounted to $1,570 and $914, respectively, and are included in cash and due from banks. At December 31, 2006 the Company did not meet the reserve requirement due to increased transaction accounts. The Company is required to fulfill this requirement over the next six months.

3. SECURITIES

The amortized cost and estimated fair value of securities, with gross unrealized gains and losses, follow:

	December 31, 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale
Marketable equity securities	$	6,847	$	1,116	$	(102	)	$	7,861
Total securities available-for-sale	$	6,847	$	1,116	$	(102	)	$	7,861
Securities held-to-maturity
Debt securities of government sponsored enterprises	$	28,924	$	2	$	(35	)	$	28,891
Corporate and industrial revenue bonds		1,710		—		—			1,710
Collateralized mortgage obligations		6,777		—		(279	)		6,498
Total securities held-to-maturity	$	37,411	$	2	$	(314	)	$	37,099

F-16

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SECURITIES (continued)

	December 31, 2005
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities available-for-sale
Marketable equity securities	$	4,796	$	380	$	(242	)	$	4,934
Total securities available-for-sale	$	4,796	$	380	$	(242	)	$	4,934
Securities held-to-maturity
Debt securities of government sponsored enterprises	$	19,497	$	1	$	(122	)	$	19,376
Corporate and industrial revenue bonds		2,311		—		—			2,311
Collateralized mortgage obligations		7,664		2		(244	)		7,422
Total securities held-to-maturity	$	29,472	$	3	$	(366	)	$	29,109

At December 31, 2006 and 2005, securities with a carrying value of $18.0 million and $18.4 million, respectively, were pledged as collateral to Investors Bank and Trust to support securities sold under agreements to repurchase.

The amortized cost and estimated fair value of debt securities by contractual maturity at December 31, 2006 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.

	Held-to-Maturity
	Amortized Cost		Fair Value
Within 1 year	$	26,924	$	26,906
From 1 to 5 years		2,435		2,420
From 5 to 10 years		1,823		1,809
Over 10 years		6,229		5,964
	$	37,411	$	37,099

F-17

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SECURITIES (continued)

Proceeds from sales of securities available for sale during the years ended December 31, 2006, 2005 and 2004 amounted to $4,823, $1,624, and $10,191 respectively. Gross realized gains of $260, $256, and $348, and gross realized losses of $235, $153, and $280, were realized during the years ended December 31, 2006, 2005 and 2004, respectively. The tax provision applicable to these net realized gains and losses amounted to $9, $36, and $24, respectively.

Information pertaining to securities with gross unrealized losses at December 31, 2006 and 2005, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

	December 31, 2006
	Less Than Twelve Months				Twelve Months and Over				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Marketable equity securities	$	87	$	1,289	$	15	$	183	$	102	$	1,472
Debt securities of government sponsored enterprises		3		6,697		32		7,368		35		14,065
Collateralized mortgage obligations		1		64		278		6,433		279		6,497
Total temporarily impaired securities	$	91	$	8,050	$	325	$	13,984	$	416	$	22,034
	December 31, 2005
	Less Than Twelve Months				Twelve Months and Over				Total
	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
Marketable equity securities	$	42	$	1,038	$	200	$	872	$	242	$	1,910
Debt securities of government sponsored enterprises		50		8,500		72		5,000		122		13,500
Collateralized mortgage obligations		12		833		232		6,583		244		7,416
Total temporarily impaired securities	$	104	$	10,371	$	504	$	12,455	$	608	$	22,826

F-18

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

SECURITIES (concluded)

Unrealized losses within the debt securities of government sponsored enterprises category at December 31, 2006, relate to fourteen debt securities of which nine securities had a continuous loss for more than one year. Unrealized losses within the collateralized mortgage obligations category at December 31, 2006, relate to twenty-five securities of which twenty-four had continuous losses for more than one year. Management reviews these securities on a regular basis for other than temporary impairment and considers if the issuer is the U.S. government or an issuer thereof and whether downgrades by rating agencies have occurred. The primary cause for unrealized losses within the debt securities categories is the impact movements in interest rates have had in comparison with the underlying yields on these securities. Since the unrealized losses are related to the interest rate environment and management has the ability to hold debt securities to maturity, or the foreseeable future, no declines are considered by management to be other than temporary.

Based on periodic analysis of underlying corporations in the marketable equity security portfolio, the Company believes that no equity securities are other-than-temporarily impaired. Unrealized losses within the marketable equity securities category at December 31, 2006 relate to nineteen securities of which one had continuous losses for more than one year. Unrealized loss as a percent of cost was 8%. The equity investments are in highly traded stocks. Management actively monitors the financial condition, core earnings, earnings per share, and trends of investees, reviews industry analysis, and consults with portfolio analysts on an ongoing basis. Management assesses the valuation declines to determine the extent to which such changes are attributable to fundamental factors specific to the issuer, such as financial condition, business prospects, or other factors or if such changes are attributable to market-related factors, such as interest rates or equity market declines. Management determined the Company has the ability to retain the marketable equity securities to permit recovery in light of the fact that they are equity securities with no contractual provisions for return of principal.

In 2005 the bank recorded an other-than-temporarily impaired loss of $50 on one marketable equity security. Based on periodic analysis of underlying corporations and issuers in the investment portfolio, the Company believes that no other securities were other-than-temporarily impaired at December 31, 2005.

F-19

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

4. LOANS

A summary of the balances of loans follows:

	December 31,
	2006			2005
Residential 1-4 family	$	143,964		$	132,824
Residential multifamily		11,447			11,142
Commercial real estate		102,819			93,953
Construction		41,713			22,822
Consumer		24,707			18,106
Commercial		46,348			38,596
Total loans		370,998			317,443
Net deferred loan origination costs		857			811
Undisbursed portion of loans in process		21			—
Allowance for loan losses		(2,908	)		(2,605	)
Loans, net	$	368,968		$	315,649

An analysis of the allowance for loan losses follows:

	Years Ended December 31,
	2006			2005			2004
Balance at beginning of period	$	2,605		$	2,512		$	2,404
Provision for loan losses		440			120			120
Recoveries		2			5			25
Loans charged-off		(139	)		(32	)		(37	)
Balance at end of period	$	2,908		$	2,605		$	2,512

F-20

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

LOANS (concluded)

The following is a summary of information pertaining to impaired loans:

	December 31,
	2006		2005
Impaired loans without a valuation allowance	$	4,611	$	145
Impaired loans with a valuation allowance		115		563
Total impaired loans	$	4,726	$	708
Valuation allowance related to impaired loans	$	55	$	42

	Years Ended December 31,
	2006		2005		2004
Average recorded investment in impaired loans	$	2,640	$	725	$	459

Interest income recognized on impaired loans was $153 for the year ended December 31, 2006 and was insignificant for the years ended December 31, 2005, and 2004. No additional funds are committed to be advanced in connection with impaired loans.

Nonaccrual loans were $1,711 and $736 at December 31, 2006 and 2005, respectively. Interest foregone was $48, $28, and $41 for the years ended December 31, 2006, 2005, and 2004, respectively. There were no loans greater than ninety days past due and still accruing at December 31, 2006 and 2005.

F-21

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

5. LOAN SERVICING

Loans serviced for others are not included in the consolidated balance sheets. The unpaid principal balances of mortgage and other loans serviced for others were $53,564 and $60,779 at December 31, 2006 and 2005, respectively. The Company recorded net gain on sale of loans of $14, $79, and $683 for the years ended December 31, 2006, 2005 and 2004, respectively.

During 2004, the Company implemented SFAS No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. The Statement addresses the recognition and measurement of servicing assets and liabilities, including mortgage servicing rights. The effect of adjusting SFAS No. 140 in prior years was not material.

SFAS No. 140 requires enterprises to measure the impairment of servicing assets based on the difference between the carrying amount of the servicing rights and their current fair value. The balance of capitalized servicing rights included in other assets at December 31, 2006 and 2005 was $370 and $426, respectively. The significant assumptions used by management to estimate the fair value of capitalized servicing rights at December 31, 2006, include weighted average prepayment speed for the portfolio using the Public Securities Association Standard Prepayment Model (203 PSA), weighted average discount rate (9.4%), weighted average servicing fee (25.76 basis points), and net cost to service loans ($46 per loan). The Company estimated the fair value of its servicing rights to be $608 and $640 at December 31, 2006 and 2005, respectively. There was no valuation allowance at December 31, 2006 and 2005. The estimated fair value of capitalized servicing rights may vary significantly in subsequent periods primarily due to changing market interest rates, and their effect on prepayment speeds, and discount rates.

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

	Years Ended December 31,
	2006			2005			2004
Balance at beginning of year	$	426		$	556		$	—
Capitalized mortgage servicing rights		98			68			650
Amortization		(154	)		(198	)		(94	)
Balance at end of year	$	370		$	426		$	556

F-22

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

6. PREMISES AND EQUIPMENT

A summary of the cost and accumulated depreciation and amortization of premises and equipment and their estimated useful lives follows:

	December 31,
	2006			2005
Banking premises:
Land and improvements	$	1,647		$	1,414
Building		5,966			5,948
Furniture and equipment		3,680			3,383
Leasehold improvements		586			586
Computer software and equipment		1,023			877
		12,902			12,208
Less accumulated depreciation and amortization		(5,899	)		(5,129	)
	$	7,003		$	7,079

Depreciation and amortization expense for the years ended December 31, 2006, 2005 and 2004 amounted to $779, $712 and $618, respectively.

7. DEPOSITS

A summary of deposit balances, by type, is as follows:

	December 31,
	2006		2005
Non-interest-bearing demand	$	29,088	$	27,912
NOW		16,350		18,142
Money market		34,083		39,625
Regular savings		40,467		46,418
Total non-certificate accounts		119,988		132,097
Certificate accounts less than $100,000		121,726		111,656
Certificate accounts of $100,000 or more		69,857		51,270
Total certificate accounts		191,583		162,926
	$	311,571	$	295,023

F-23

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

DEPOSITS (concluded)

A summary of certificate accounts, by maturity, is as follows:

	December 31, 2006				December 31, 2005
	Amount		Weighted Average Rate		Amount		Weighted Average Rate
2006	$	—	—		$	97,639	3.06	%
2007		118,072	4.60	%		16,199	3.46	%
2008		15,757	4.08	%		14,395	3.83	%
2009		23,230	4.79	%		15,416	4.32	%
2010		12,708	4.38	%		19,277	4.31	%
2011		21,816	5.30	%		—	—
	$	191,583	4.67	%	$	162,926	3.44	%

8. REPURCHASE AGREEMENTS

Securities sold under agreements to repurchase are summarized as follows:

	Years Ended December 31,
	2006			2005
Balance at year-end	$	12,712		$	20,163
Average amount outstanding during the year		13,690			13,387
Interest expense incurred during the year		280			223
Maximum amount outstanding at any month-end		21,294			23,571
Weighted average interest rate during the year		2.00	%		1.50	%
Weighted average interest rate on year-end balances		2.50	%		1.50	%

Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the fair value of the underlying securities. The carrying value of the securities used as collateral for the repurchase agreements was $18,043 at December 31, 2006.

F-24

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

9. BORROWINGS

Borrowings consist of the following:

	December 31, 2006				December 31, 2005
	Amount		Weighted Average Rate		Amount		Weighted Average Rate
Fixed-rate FHLB advances maturing:
2006 (a)	$	—	—		$	11,037	4.10	%
2007 (a)		57	2.15	%		424	2.15	%
2011 (a)		4,426	2.98	%		5,465	2.98	%
2012 (a)		8,110	4.34	%		9,488	4.34	%
2014 (a)		2,663	3.65	%		3,003	3.65	%
Total FHLB advances	$	15,256	3.82	%	$	29,417	3.90	%

(a) Includes amortizing advances requiring monthly principal and interest payments of $295.

Pursuant to collateral agreements with the FHLB, advances are collateralized by all stock in the FHLB and qualifying first mortgages.

As a member of the FHLB, the Company, through its bank subsidiary, is eligible to borrow amounts up to the level of qualified collateral maintained.

The Company has a $4,865 available line of credit with the FHLB at December 31, 2006, and an unsecured line of credit with Bankers Bank, N.E. that allows the Bank to borrow up to $2,000. There were no borrowings against either line of credit at December 31, 2006.

F-25

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

10. INCOME TAXES

The Company donated common stock in the amount of $5.5 million to the Chicopee Savings Bank Charitable Foundation, which resulted in a tax benefit of $1,900. As of December 31, 2006 a valuation reserve of $800 has been established against deferred tax assets related to the uncertain utilization of the charitable contribution carryforward created primarily by the donation to the Chicopee Savings Bank Charitable Foundation as part of the conversion. The judgments applied by management consider the likelihood that sufficient taxable income will be realized within the carryforward period in light of its tax planning strategies and changes in the market conditions. The charitable contribution carry forward of $5,411 at December 31, 2006 expires in 2011.

Allocation of federal and state income taxes between current and deferred portions, is as follows:

	Years Ended December 31,
	2006			2005			2004
Current tax expense:
Federal	$	420		$	626		$	480
State		185			154			133
		605			780			613
Deferred tax (benefit) expense:
Federal		(1,942	)		(10	)		236
State		(40	)		1			81
		(1,982	)		(9	)		317
Change in valuation reserve		800			—			—
		(1,182	)		(9	)		317
Income tax expense (benefit)	$	(577	)	$	771		$	930

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

	Years Ended December 31,
	2006		2005		2004
Statutory rate	34.0	%	34.0	%	34.0	%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit	(3.1	)	4.7		5.0
Dividends received deduction	0.9		(0.8	)	(0.8	)
Change in valuation allowance	(25.7	)	—		—
Tax-exempt interest	0.8		(1.2	)	(1.0	)
Bank owned life insurance	4.0		(5.4	)	(4.8	)
Other, net	7.6		4.0		0.5
Effective tax rates	18.5	%	35.3	%	32.9	%

F-26

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

INCOME TAXES (continued)

The components of the net deferred tax asset are as follows:

	December 31,
	2006			2005
Deferred tax assets:
Federal	$	2,970		$	1,054
State		390			359
		3,360			1,413
Valuation reserve on asset		(800	)		—
		2,560			1,413
Deferred tax liabilities:
Federal		(838	)		(569	)
State		(184	)		(182	)
		(1,022	)		(751	)
Net deferred tax asset	$	1,538		$	662

The tax effects of each type of income and expense item that gave rise to deferred taxes are as follows:

	December 31,
	2006			2005
Net unrealized gain on securities available for sale	$	(354	)	$	(48	)
Charitable contribution carryforward		1,840			—
Depreciation		(140	)		(207	)
Deferred loan costs		(528	)		(496	)
Allowance for loan losses		1,189			1,065
Employee benefit plans		320			329
Other		11			19
		2,338			662
Valuation reserve		(800	)		—
Net deferred tax asset	$	1,538		$	662

F-27

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

INCOME TAXES (concluded)

A summary of the change in the net deferred tax asset is as follows:

	Years Ended December 31,
	2006			2005		2004
Balance at beginning of year	$	662		$	582	$	814
Deferred tax benefit (provision)		1,182			9		(317	)
Deferred tax effects of net unrealized (gain) loss on securities available for sale		(306	)		71		85
Balance at end of year	$	1,538		$	662	$	582

The federal income tax reserve for loan losses at the Bank’s base year is $3,609,000. If any portion of the 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 fiscal year in which used. As the Bank intends to use the reserve solely to absorb loan losses, a deferred tax liability of approximately $1,480,000 has not been provided.

11. OFF-BALANCE SHEET ACTIVITIES

Credit-related financial instruments

The Company is a party to credit related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and various financial instruments with off-balance-sheet risk. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

F-28

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

OFF-BALANCE SHEET ACTIVITIES (continued)

Credit-related financial instruments (continued)

The following financial instruments were outstanding whose contract amounts represent credit risk:

	December 31,
	2006		2005
Commitments to grant loans	$	12,735	$	6,210
Unfunded commitments for construction loans		17,371		17,101
Unfunded commitments under lines of credit		32,773		30,797
Standby letters of credit		1,778		1,326

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. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer. Collateral held varies but may include cash, securities, accounts receivable, inventory, property, plant and equipment, and real estate.

Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit are uncollateralized, usually do not contain a specified maturity date, and may not be drawn upon to the total extent to which the Company is committed.

F-29

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

OFF-BALANCE SHEET ACTIVITIES (continued)

Credit-related financial instruments (concluded)

FASB Interpretation No. 45 (FIN 45),Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others; an Interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34, requires certain disclosures and liability recognition for the fair value at issuance of guarantees that fall within its scope. Under FIN 45, the Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. The Company has issued conditional commitments in the form of standby letters of credit to guarantee payment on behalf of a customer and guarantee the performance of a customer to a third party. Standby letters of credit generally arise in connection with lending relationships. The credit risk involved in issuing these instruments is essentially the same as that involved in extending loans to customers. Contingent obligations under standby letters of credit totaled $1,778 and $1,326 at December 31, 2006 and 2005, respectively, and represent the maximum potential future payments the Company could be required to make. Typically, these instruments have terms of 12 months or less and expire unused; therefore, the total amounts do not necessarily represent future cash requirements. Each customer is evaluated individually for creditworthiness under the same underwriting standards used for commitments to extend credit and on-balance sheet instruments. The Company’s policies governing loan collateral apply to standby letters of credit at the time of credit extension. Loan-to-value ratios are generally consistent with loan-to-value requirements for other commercial loans secured by similar types of collateral. The fair value of the Company’s standby letters of credit at December 31, 2006 and 2005 was insignificant.

F-30

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

OFF-BALANCE SHEET ACTIVITIES (concluded)

Lease commitments

Pursuant to the terms of non-cancelable lease agreements in effect at December 31, 2006, future minimum operating lease commitments pertaining to banking premises are as follows:

2007	$	206
2008		196
2009		187
2010		187
2011		187
Thereafter		1,332
	$	2,295

The leases contain options to extend for periods from one to five years. Total rent expense for the years ended December 31, 2006, 2005, and 2004 approximated $246, $240, and $235, respectively.

12. OTHER COMMITMENTS AND CONTINGENCIES

Employment and change in control agreements

Chicopee Bancorp, Inc. entered into a three-year employment agreement with its President and Chief Executive Officer and three-year change of control agreements with certain other executives. These agreements generally provide for a base salary and the continuation of certain benefits currently received. The Chicopee Bancorp, Inc. and Bank employment agreements renew on a daily and annual basis, respectively. Under certain specified circumstances, the employment agreements require certain payments to be made for certain reasons other than cause, including a “change in control” as defined in the agreement. However, such employment may be terminated for cause, as defined, without incurring any continuing obligations.

Legal claims

Various legal claims arise from time to time in the ordinary course of business. In the opinion of management, the claims that existed at December 31, 2006 will have no material effect on the Company’s consolidated financial statements.

F-31

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

13. MINIMUM REGULATORY CAPITAL REQUIREMENTS

The Company and its bank subsidiary are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2006 and 2005, that the Company and its bank subsidiary met all capital adequacy requirements to which they are subject.

As of December 31, 2006, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no conditions or events since the notification that management believes have changed the Bank’s category. Prompt corrective action provisions are not applicable to the Company.

F-32

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

MINIMUM REGULATORY CAPITAL REQUIREMENTS (continued)

The Company’s and Bank’s actual capital amounts and ratios as of December 31, 2006 and 2005 are also presented in the table.

	Actual				Minimum for Capital Adequacy Purposes			Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount	Ratio		Amount	Ratio
As of December 31, 2006:
Total Capital to Risk Weighted Assets
Company	$	111,113	28.7	%	$30,975	8.0	%	N/A	N/A
Bank	$	73,164	19.2	%	$30,462	8.0	%	$38,078	10.0	%
Tier 1 Capital to Risk Weighted Assets
Company	$	107,749	27.8	%	$15,487	4.0	%	N/A	N/A
Bank	$	69,800	18.3	%	$15,231	4.0	%	$22,847	6.0	%
Tier 1 Capital to Average Assets
Company	$	107,749	24.3	%	$17,701	4.0	%	N/A	N/A
Bank	$	69,800	16.1	%	$17,385	4.0	%	$21,731	5.0	%
As of December 31, 2005:
Total Capital to Risk Weighted Assets
Bank	$	45,976	13.8	%	$26,599	8.0	%	$33,249	10.0	%
Tier 1 Capital to Risk Weighted Assets
Bank	$	43,309	13.0	%	$13,300	4.0	%	$19,949	6.0	%
Tier 1 Capital to Average Assets
Bank	$	43,309	11.3	%	$15,378	4.0	%	$19,222	5.0	%

F-33

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

MINIMUM REGULATORY CAPITAL REQUIREMENTS (concluded)

The following is a reconciliation of the Company’s equity as disclosed in the balance sheet under U.S. generally accepted accounting principles to regulatory capital as disclosed in the table above.

	December 31,
	2006			2005
Total equity determined under generally accepted accounting principles	$	108,446		$	43,441
Net unrealized gain on securities available-for-sale, net of tax		(660	)		(89	)
Disallowed servicing rights		(37	)		(43	)
Tier 1 Capital		107,749			43,309
Allowable allowance for loan losses		2,908			2,605
Unrealized gain on available-for-sale equity securities, net of tax		456			62
Total regulatory capital	$	111,113		$	45,976

14. EMPLOYEE BENEFIT PLANS

The Company has a 401(k) Plan whereby substantially all employees participate in the Plan. Employees may contribute a portion of their compensation subject to certain limits based on federal tax laws. The Company makes matching contributions equal to 25 percent of the first 6 percent of the participant’s compensation contributed to the Plan. For the years ended December 31, 2006, 2005, and 2004, expenses attributable to the Plan amounted to $66, $53, and $53, respectively.

The Company has a noncontributory defined benefit pension plan (the “Pension Plan”) through its membership in the Savings Bank Employees Retirement Association (“SBERA”). Employees are eligible to join the Pension Plan after attaining age 21 and having been credited with one year of service. Eligible employees become vested in the Pension Plan after three years of service. The Pension Plan provides monthly benefits upon retirement based on compensation during the highest paid consecutive three years of employment. It is the Company’s policy to fund annually an amount equal to pension costs accrued. The Pension Plan assets are maintained in a separate account as part of a single pooled fund made up of all participating SBERA members. This fund is managed by the SBERA Trustees.

F-34

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

EMPLOYEE BENEFIT PLANS (continued)

Pension cost for the Pension Plan is calculated using the projected unit credit method. The measurement date used to determine pension benefits is October 31. The following table sets forth information regarding the Pension Plan.

	Plan Years Ended October 31,
	2006			2005
Change in plan assets:
Fair value of plan assets at beginning of year	$	4,644		$	4,098
Actual return on plan assets		693			372
Contributions		357			253
Benefits paid		(34	)		(79	)
Fair value of plan assets at end of year		5,660			4,644
Change in benefit obligation:
Benefit obligation at beginning of year		6,289			5,164
Service cost		358			294
Interest cost		362			297
Actuarial loss (gain)		(358	)		613
Benefits paid		(34	)		(79	)
Amendment		(176	)		—
Benefit obligation at end of year		6,441			6,289
Funded status		(781	)		(1,645	)
Unrecognized net actuarial loss		—			863
Unrecognized net transition obligation		—			27
Accrued benefit cost recognized in the balance sheet at October 31	$	(781	)	$	(755	)
Accumulated benefit obligation	$	6,441		$	3,287

Components of net periodic benefit cost follow:

	Plan Years Ended October 31,
	2006			2005			2004
Service cost	$	358		$	294		$	293
Interest cost	$	362		$	297		$	301
Expected return on plan assets		(372	)		(328	)		(279	)
Recognized net actuarial loss		33			11			25
Amortization of unrecognized transition obligation		3			3			3
Net periodic benefit cost	$	384		$	277		$	343

F-35

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

EMPLOYEE BENEFIT PLANS (continued)

	2006		2005		2004
Weighted average assumptions used to determine benefit cost were as follows:
Discount rate on benefit obligations	5.75	%	5.75	%	6.25	%
Rate of increase in compensation levels	4.50	%	4.50	%	4.50	%
Expected long-term rate of return on plan assets	8.00	%	8.00	%	8.00	%
Weighted average assumptions used to determine benefit obligation were as follows:
Discount rate on benefit obligations	4.85	%	5.75	%
Rate of increase in compensation levels	N/A		4.50	%

The composition of the Company’s Pension Plan assets at October 31, 2006 and 2005, by asset category, are as follows:

Asset Category	Plan Assets at October 31
	2006		2005
Fixed income	36.5	%	35.1	%
Domestic equity	48.5	%	50.5	%
International equity	15.0	%	14.4	%
	100.0	%	100.0	%

F-36

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

EMPLOYEE BENEFIT PLANS (concluded)

SBERA offers a common and collective trust as the underlying investment structure for pension plans participating in the SBERA. Historically, the target allocation mix for the common and collective trust portfolio calls for an equity-based investment deployment range from 55% to 75% of total portfolio assets. The remainder of the portfolio is allocated to fixed income. Upon the Company’s decision to terminate the Plan, the funds were transferred to fixed income securities. The approximate investment allocation of the portfolio is shown in the table above. The Trustees of SBERA, through its Investment Committee, select investment managers for the common and collective trust portfolio. A professional investment advisory firm is retained by the Investment Committee to provide allocation analysis and performance measurement and to assist with manager searches. The overall investment objective is to diversify equity investments across a spectrum of investment types (e.g., small cap, large cap, international) and styles (e.g., growth, value).

In 2005, the Company’s assumption with respect to long-term rate of return is based on prevailing yields on high quality fixed income investments increased by a premium of 3% to 5% for equity investments. There were no changes to this assumption in 2006.

As of November 14, 2006 the Board of Directors agreed to terminate the Pension Plan effective January 31, 2007. As of December 31, 2006, the Bank had an accrued liability of $781 which will be equitably distributed to all eligible employees who are active when the plan terminates.

There was no effect on the Company’s other comprehensive income as a result of implementing SFAS No. 158 at December 31, 2006 because the funded status of the Company’s postretirement plan was reflected in accrued expenses and other liabilities in the balance sheet prior to implementation and also through December 31, 2006.

The Company provides supplemental life insurance benefits to its key officers. Amounts charged to expense for these benefits were $280, $262 and $242 for the years ended December 31, 2006, 2005 and 2004, respectively.

F-37

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

15. EMPLOYEE STOCK OWNERSHIP PLAN

The Company has established an Employee Stock Ownership Plan (the “ESOP”) for the benefit of each employee that has reached the age of 21 and has completed at least 1,000 hours of service in the previous twelve-month period. As part of the Bank’s conversion from mutual to stock ownership, Chicopee Bancorp, Inc. invested in a subsidiary, Chicopee Funding Corporation. Chicopee Funding Corporation used the proceeds from the investment to fund a loan to the Chicopee Savings Bank Employee Stock Ownership Plan Trust (the “Trust”), which used the proceeds from the loan to purchase 8%, or 595,149 shares, of the Company’s outstanding stock as part of the conversion from mutual to stock. The loan bears interest equal to 8.25% and provides for annual payments of principal and interest. Under the ESOP’s change in control provision, the Trust would be instructed to use proceeds from the sale of stock to pay off the outstanding ESOP loan balance and to distribute the remaining plan assets to current participants.

At December 31, 2006, the remaining principal balance is payable as follows:

Years Ending December 31,
2007	$	131
2008		142
2009		154
2010		166
2011		180
Thereafter		4,809
	$	5,582

The Bank has committed to make contributions to the ESOP sufficient to support the debt service of the loan. The loan is secured by the shares purchased by First Bankers Trust Company (“Trustee”), which are held in a suspense account for allocation among the participants as the loan is paid. Total compensation expense applicable to the ESOP amounted to $441 for the year ended December 31, 2006.

F-38

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

EMPLOYEE STOCK OWNERSHIP PLAN (concluded)

Shares held by the ESOP include the following at December 31, 2006:

Allocated	29,757
Unallocated	565,392
	595,149

The fair value of unallocated shares at December 31, 2006 was $8,848.

16. OTHER NONINTEREST EXPENSE

The components of other noninterest expense which are in excess of 1% of total revenues (total interest and dividend income, and noninterest income) and not shown separately in the consolidated statements of operations are as follows for the years ended December 31:

	2006		2005		2004
Advertising	$	330	$	323	$	314

F-39

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

17. RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company has granted loans to officers, directors and their affiliates amounting to approximately $5,162 and $5,627 at December 31, 2006 and 2005, respectively.

An analysis of the activity of these loans is as follows:

	Years Ended December 31,
	2006			2005
Balance at beginning of year	$	5,627		$	5,655
Additions		536			724
Repayments		(1,055	)		(534	)
Change in related party status		54			(218	)
Balance at end of year	$	5,162		$	5,627

Deposits from related parties held by the Bank at December 31, 2006 and 2005 amounted to $7,571 and $16,771, respectively.

18. RESTRICTIONS ON DIVIDENDS

Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to Chicopee Bancorp, Inc. The total amount of dividends that may be paid at any date is generally limited to the Bank’s retained earnings at December 31, 2006, the Bank’s retained earnings available for the payment of dividends was $44,838. In addition, dividends paid by the Bank to Chicopee Bancorp, Inc. would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.

F-40

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

19. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s 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. SFAS No. 107, Disclosures About Fair Value of Financial Instruments, excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amounts of cash and short-term instruments approximate fair values.

Securities: Fair values for securities, excluding Federal Home Loan Bank stock, are based on quoted market prices. The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of the Federal Home Loan Bank.

Loans receivable: For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Cash surrender value of life insurance: The fair value is based on the actual cash surrender value of life insurance policies.

F-41

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Deposit liabilities and mortgagors’ escrow accounts: 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 interest rates currently being offered on certificates to a schedule of aggregate expected monthly maturities on time deposits.

Securities sold under agreements to repurchase: The carrying amounts of borrowings under repurchase agreements maturing within ninety days approximate their fair values.

Advances from Federal Home Loan Bank: The fair values of these borrowings are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

Accrued interest and dividends: The carrying amounts of accrued interest and dividends approximate fair value.

Off-balance-sheet instruments: The Company’s off-balance-sheet instruments consist of loan commitments. Fair values for loan commitments have not been presented as the future revenue derived from such financial instruments is not significant.

F-42

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

FAIR VALUE OF FINANCIAL INSTRUMENTS (concluded)

The carrying amounts and estimated fair values of the Company’s financial instruments are as follows:

	December 31,
	2006				2005
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	11,528	$	11,528	$	17,586	$	17,586
Securities available-for-sale		7,861		7,861		4,934		4,934
Securities held-to-maturity		37,411		37,099		29,472		29,109
Federal Home Loan Bank stock		1,574		1,574		2,447		2,447
Loans, net		368,968		386,418		315,649		313,440
Accrued interest and dividends receivable		1,901		1,901		1,341		1,341
Cash surrender value of life insurance		11,200		11,200		10,801		10,801
Financial liabilities:
Deposits		311,571		310,515		295,023		295,538
Mortgagors’ escrow accounts		997		997		971		971
Repurchase agreements		12,712		12,712		20,163		20,163
Advances from Federal Home Loan Bank		15,256		14,736		29,417		29,915
Accrued interest payable		53		53		67		67

F-43

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

20. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

Following is the quarterly financial information of the Company for 2006 and 2005:

	2006										2005
	First Quarter		Second Quarter		Third Quarter			Fourth Quarter			First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Interest and dividend income	$	5,148	$	5,416	$	5,962		$	6,233		$	4,375	$	4,569	$	4,821	$	5,066
Interest expense		2,081		2,206		2,284			2,636			1,432		1,654		1,926		1,918
Net interest and dividend income		3,067		3,210		3,678			3,597			2,943		2,915		2,895		3,148
Provision for loan losses		150		110		75			105			30		30		30		30
Net (loss) gain on sales of securities available-for-sale		8		11		13			(7	)		51		39		82		(69	)
Fees and other non-interest income		462		435		367			342			346		339		348		357
Non-interest expenses		2,896		2,989		8,671			3,298			2,732		2,762		2,693		2,900
Income tax provision (benefit)		152		168		(1,057	)		160			184		154		193		240
Net income (loss)	$	339	$	389	$	(3,631	)	$	369		$	394	$	347	$	409	$	266

F-44

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

21. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

Financial information pertaining to Chicopee Bancorp, Inc. is as follows:

	December 31,
	2006		2005
BALANCE SHEETS
Assets
Cash and cash equivalents	$	25,190	$	—
Investment in common stock of Chicopee Savings Bank		70,497		—
Investment in common stock of Chicopee Funding Corporation		6,150		—
Other assets		6,609		—
Total assets	$	108,446	$	—
Liabilities and Stockholders’ Equity
Total liabilities	$	—	$	—
Stockholders’ equity		108,446		—
Total liabilities and stockholders’ equity	$	108,446	$	—

	Years Ended December 31,
	2006			2005		2004
STATEMENTS OF OPERATIONS
Income:
Non-interest income	$	232		$	—	$	—
Operating expenses		5,706			—		—
Loss before income taxes and equity in undistributed net income of subsidiaries		(5,474	)		—		—
Applicable income tax benefit		(1,254	)		—		—
Loss before equity in undistributed net income of subsidiaries		(4,220	)		—		—
Equity in undistributed net income of Chicopee Savings Bank		1,487			—		—
Equity in undistributed net income of Chicopee Funding Corporation		199			—		—
Net loss	$	(2,534	)	$	—	$	—

F-45

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY (concluded)

	Years Ended December 31,
	2006			2005		2004
STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net loss	$	(2,534	)	$	—	$	—
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in undistributed net income of Chicopee Savings Bank		(1,487	)		—		—
Equity in undistributed net income of Chicopee Funding Corporation		(199	)		—		—
Deferred income taxes		(1,014	)		—		—
Increase in accrued interest receivable		(70	)		—		—
Increase in other assets		(506	)		—		—
Contribution of common stock to Charitable Foundation		5,511			—		—
ESOP expense		441			—		—
Net cash provided by operating activities		142			—		—
Cash flows from investing activities:
Initial investment in Chicopee Savings Bank		(24,998	)		—		—
Initial investment in Chicopee Funding Corporation		(5,951	)		—		—
Purchases of securities held-to-maturity		(28,103	)		—		—
Maturities of securities held-to-maturity		23,083			—		—
Net cash used in investing activities		(35,969	)		—		—
Cash flows from financing activities:
Issuance of common stock for initial public offering net of costs		66,968			—		—
Stock purchased for ESOP		(5,951	)		—		—
Net cash provided by financing activities		61,017			—		—
Net increase in cash and cash equivalents		25,190			—		—
Cash and cash equivalents at beginning of year		—			—		—
Cash and cash equivalents at end of year	$	25,190		$	—	$	—

F-46