Form DEF 14A Western New England Banc For: May 11

March 30, 2021 8:01 AM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

(RULE 14a-101)

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to §240.14a-12

 

WESTERN NEW ENGLAND BANCORP, INC.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
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Fee paid previously with preliminary materials.

 

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March 30, 2021

Dear Fellow Shareholder:

You are cordially invited to attend the 2021 Annual Meeting of Shareholders of Western New England Bancorp, Inc., (the “Company” or “WNEB”), the holding company for Westfield Bank (the “Bank”), which will be held on May 11, 2021, at 10:00 a.m., Eastern Daylight Time, at the Sheraton Springfield Monarch Place Hotel, One Monarch Place, Springfield, Massachusetts, 01144. However, while we intend to hold the Annual Meeting of Shareholders (the “Annual Meeting”) in person, we are actively monitoring the COVID-19 global pandemic situation.  We are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state and local governments may impose.  In the event we determine, in our sole discretion, that it is not possible to hold the Annual Meeting in person, we will announce alternative meeting arrangements, which may include changing the location of the meeting or holding the meeting by means of remote communication (i.e., virtual meeting), as promptly as practicable.  You are encouraged to monitor our investor relations website at www.westfieldbank.com for updated information about the Annual Meeting.

The enclosed Notice of Annual Meeting of Shareholders and Proxy Statement describe the formal business that we will transact at the Annual Meeting, which includes:

The election of four (4) Directors;

An advisory, non-binding vote on our 2020 executive compensation;

Ratification of the appointment of Wolf and Company, P.C. (“Wolf & Company”) as our independent registered public accounting firm for the fiscal year-ending December 31, 2021;

Approval of the 2021 Omnibus Incentive Plan;

A report on the operations of the Company; and

Act upon such other business as may properly come before the meeting.

The Board of Directors of the Company (the “Board”) has fixed the close of business on March 15, 2021, as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting. Directors and officers of the Company will be present to answer any questions that you and other shareholders may have. Also enclosed for your review is our Annual Report on Form 10-K, which contains detailed information concerning the activities and operating performance of the Company.

It is important that your shares be represented at the Annual Meeting and voted in accordance with your wishes. Whether or not you plan to attend the Annual Meeting, please promptly submit your proxy by telephone, internet or mail. Your vote is important regardless of the number of shares you own. Voting by proxy will not prevent you from voting in person at the Annual Meeting but will assure that your vote is counted if you cannot attend.

The Board has determined that an affirmative vote on the matters to be considered at the Annual Meeting is in the best interests of Western New England Bancorp, Inc., and its shareholders, and the Board unanimously recommends a vote “FOR” these matters. We appreciate your participation and interest in Western New England Bancorp, Inc.

Sincerely yours,

James C. Hagan

Chief Executive Officer

Lisa G. McMahon

Chairperson

IF YOU HAVE ANY QUESTIONS, PLEASE CALL US AT (413) 568-1911.

WESTERN NEW ENGLAND BANCORP, INC.

141 Elm Street
Westfield, Massachusetts 01085
(413) 568-1911

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

DATE

Tuesday, May 11, 2021

TIME

10:00 A.M. Eastern time

PLACE

Sheraton Springfield Monarch Place Hotel
One Monarch Place
Springfield,
Massachusetts 01114

ITEMS OF BUSINESS

(1)

Election of the nominees named in the attached Proxy Statement as directors to serve on the Board for a term of office stated.

 

(2)

Consideration and approval of a non-binding advisory resolution on the compensation of our Named Executive Officers.

 

(3)

Ratification of the appointment of Wolf & Company as our independent registered public accounting firm for the fiscal year ending December 31, 2021.

 

(4)

Approval of the 2021 Omnibus Incentive Plan.

 

(5)

Consideration of any other business properly brought before the Annual Meeting and any adjournment or postponement thereof.

RECORD DATE

The record date for the Annual Meeting is March 15, 2021. Only shareholders of record as of the close of business on that date may vote at the Annual Meeting or any adjournment thereof.

PROXY VOTING

You are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, please promptly submit your proxy by telephone, internet or by signing and returning the Proxy Card by mail. Submitting a proxy will not prevent you from attending the Annual Meeting and voting in person. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain a proxy issued in your name from that record holder.

By Order of the Board of Directors,

Western New England Bancorp, Inc.

James C. Hagan

Chief Executive Officer

Westfield, Massachusetts

March 30, 2021

It is important that your shares be represented and voted at the Annual Meeting. Shareholders whose shares are held in registered form have a choice of voting by Proxy Card, telephone or the Internet, as described on your Proxy Card. Shareholders whose shares are held in the name of a broker, bank or other holder of record must vote in the manner directed by such holder. Check your Proxy Card or the information forwarded by your broker, bank or other holder of record to see which options are available to you.

Important Notice Regarding the Availability of Proxy Materials for the 2021 Annual Meeting of Shareholders: This Proxy Statement for the 2021 Annual Meeting of Shareholders, the 2020 Annual Report to Shareholders, the Proxy Card and voting instructions are available free of charge on our website at wneb.q4ir.com/proxy and www.viewproxy.com/WNEB/2021.

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TABLE OF CONTENTS

 

Page

 

INFORMATION ABOUT THE ANNUAL MEETING

1

General

1

Notice Regarding the Availability of Proxy Materials

1

Obtaining a Copy of the Proxy Statement and Annual Report on Form 10-K

1

Who Can Vote at the Annual Meeting?

1

Voting Procedures

2

Quorum Requirement

3

Proposals and Vote Requirements

3

Effect of Broker Non-Votes

4

Confidential Voting Policy

4

Revoking Your Proxy

4

Solicitation of Proxies

4

Submission of Shareholder Proposals and Nominations for the 2022 Annual Meeting

4

PROPOSAL 1 – ELECTION OF DIRECTORS

5

Vote Required

5

Our Recommendation

5

INFORMATION ABOUT OUR BOARD OF DIRECTORS

6

General

6

Board Diversity

6

Board Refreshment

6

Nominees

7

Continuing Directors

7

INFORMATION ABOUT OUR EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

9

Retired Executive Officers

10

CORPORATE GOVERNANCE

11

Board of Directors

11

Board of Directors Independence

11

Code of Ethics and Corporate Governance Guidelines

12

Hedging and Pledging of Company Securities

12

Committees of the Board of Directors

12

Communicating with the Board of Directors

16

Board Leadership Structure and Role in Risk Oversight

16

Environmental, Social and Governance Highlights

17

COMPENSATION DISCUSSION AND ANALYSIS

20

Executive Summary

20

Company Performance

20

Advisory Vote On NEO Compensation

21

Best Practices in Executive Compensation

21

Our Decision Making Process

21

Compensation Philosophy

22

Compensation Components

23

Clawback Policy

29

Stock Ownership Guidelines

29

Other Benefits

29

Benchmarking Data and Use of Compensation Consultants

30

ii

EXECUTIVE COMPENSATION

31

Summary Compensation Table

31

CEO Pay Ratio Disclosure

32

Outstanding Equity Awards at Fiscal Year-End

32

Option Exercises and Stock Vesting

33

Pension Benefits

33

Non-Qualified Deferred Compensation

34

DIRECTOR COMPENSATION

35

Meeting and Chairperson Fees

35

Stock Awards

35

Deferred Compensation Plan

35

Stock Ownership Guidelines

36

Non-Employee Director Stock Election Program

36

TRANSACTIONS WITH RELATED PERSONS

37

Related-Person Transactions Policy and Procedures

37

Transactions with Certain Related Persons

37

DELINQUENT SECTION 16(A) REPORTS

38

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

39

Principal Shareholders

39

Security Ownership of Management

40

PROPOSAL 2 – NON-BINDING ADVISORY RESOLUTION ON THE COMPENSATION OF THE
NAMED EXECUTIVE OFFICERS

42

Vote Required

42

Our Recommendation

42

General

42

PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

43

Vote Required

43

Our Recommendation

43

Independent Registered Public Accounting Firm Fees and Services

43

PROPOSAL 4 – APPROVAL OF THE COMPANY’S 2021 OMNIBUS INCENTIVE PLAN

44

Vote Required

44

Our Recommendation

44

Securities Authorized for Issuance under Equity Compensation Plans

44

Notable Features of the 2021 Plan

44

Purpose of the 2021 Plan

45

Description of the 2021 Plan

45

Registration with the SEC

50

HOUSEHOLDING OF PROXY MATERIALS

51

OTHER MATTERS

51

APPENDIX A – 2021 OMNIBUS INCENTIVE PLAN

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WESTERN NEW ENGLAND BANCORP, INC.

141 Elm Street
Westfield, Massachusetts 01085
(413) 568-1911

PROXY STATEMENT
FOR THE 2021 ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 11, 2021

INFORMATION ABOUT THE ANNUAL MEETING

General

Western New England Bancorp, Inc., a Massachusetts-chartered stock holding company, is registered as a savings and loan holding company with the Federal Reserve Board and owns all of the capital stock of Westfield Bank. As used in this Proxy Statement, “we,” “us,” “our” and “Company” refer to Western New England Bancorp, Inc., and/or its subsidiaries, depending on the context. Our common stock is listed on The NASDAQ Global Select Market (“NASDAQ”) under the symbol “WNEB.” The term “Annual Meeting,” as used in this Proxy Statement, means the 2021 Annual Meeting of shareholders and includes any adjournment or postponement of such meeting.

We have sent you this Proxy Statement and the Proxy Card because our Board is soliciting your proxy to vote at the Annual Meeting. This Proxy Statement summarizes the information you will need to know to cast an informed vote at the Annual Meeting. You do not need to attend the Annual Meeting to vote your shares. You may vote by proxy over the telephone, internet or by mail, and your votes will be cast for you at the Annual Meeting. This process is described below in the section entitled “Voting Procedures.”

We made available this Proxy Statement, the Notice of Annual Meeting of Shareholders and the Proxy Card on or about March 30, 2021, to all shareholders of record entitled to vote. If you owned our common stock as of the close of business on March 15, 2021, the record date, you are entitled to vote at the Annual Meeting.

Notice Regarding the Availability of Proxy Materials

Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the internet. Accordingly, we are sending an Important Notice Regarding the Availability of Proxy Materials (the “Notice”) to our shareholders of record. All shareholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice.

Obtaining a Copy of the Proxy Statement and Annual Report on Form 10-K

A copy of the Proxy Statement and our Annual Report on Form 10-K for the year ended December 31, 2020, (without exhibits) will be provided free of charge, upon request, to any registered or beneficial owner of common stock entitled to vote at the Annual Meeting. If you want to receive a paper or e-mail copy of the Proxy Statement or Annual Report, please follow the instructions provided with your proxy materials and on your Proxy Card or voter instruction form.

If requesting materials by e-mail, please send a blank e-mail with the Control Number that is printed on the Notice in the subject line. Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before May 2, 2021, to facilitate timely delivery.

The SEC also maintains a website at www.sec.gov that contains reports, Proxy Statements and other information regarding registrants, including the Company.

Who Can Vote at the Annual Meeting?

Only shareholders of record as of the close of business on March 15, 2021, will be entitled to vote at the Annual Meeting. On this record date, there were 25,103,656 shares of common stock outstanding and entitled to vote.

If on March 15, 2021, your shares were registered directly in your name with our transfer agent, Computershare, then you are a shareholder of record. As a shareholder of record, you may vote in person at the Annual Meeting or vote by proxy.

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Voting Procedures

Your vote is important and you are encouraged to vote your shares promptly. Each proxy submitted will be voted as directed. For all matters to be voted on, you may vote “FOR” or “AGAINST” or abstain from voting. However, if a proxy solicited by the Board does not specify how it is to be voted, it will be voted as the Board recommends—that is:

Proposal 1 –

“FOR” the election of each of the four (4) nominees for director named in this Proxy Statement;

Proposal 2 –

“FOR” the approval, on an advisory basis, of the compensation of our Named Executive Officers;

Proposal 3 –

“FOR” the ratification of the appointment of Wolf and Company;

Proposal 4 –

“FOR” the approval of the 2021 Omnibus Incentive Plan.

The procedures for voting are as follows:

Shareholder of Record: Shares Registered in Your Name

If you are a shareholder of record, you may (a) vote in person at the Annual Meeting or (b) vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy over the telephone, internet or by mail as instructed below to ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you have already voted by proxy.

To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.

To vote over the telephone, dial toll-free 1-866-804-9616 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the Control Number from your Notice. Your vote must be received by 11:59 P.M., Eastern Daylight Time on May 10, 2021, to be counted.

To vote on the internet, go to www.AALvote.com/WNEB to complete an electronic Proxy Card. You will be asked to provide the Control Number from your Notice. Your vote must be received by 11:59 P.M., Eastern Daylight Time on May 10, 2021, to be counted.

To vote by mail, simply request a copy of the Proxy Statement as indicated above, which will include a Proxy Card and then complete, sign and date the Proxy Card and return it promptly in the envelope provided. If you return your signed Proxy Card to us before the Annual Meeting, the designated proxy holders will vote your shares as you direct.

If you sign the Proxy Card but do not make specific choices, your proxy will vote your shares “FOR” Proposals 1, 2, 3 and 4 as set forth in the Notice of Annual Meeting of Shareholders.

If any other matter is presented at the Annual Meeting, your proxy will vote the shares represented by all properly executed proxies on such matters as a majority of the Board determines. As of the date of this Proxy Statement, we know of no other matters that may be presented at the Annual Meeting, other than those listed in the Notice of Annual Meeting of Shareholders.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If on March 15, 2021, your shares were held not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the shareholder of record for purposes of voting at the Annual Meeting.

As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You should have received a Proxy Card and voting instructions with these proxy materials from that organization rather than from us. Simply complete and mail the Proxy Card and voting instructions to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by your broker or bank, if applicable. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

Employee Stock Ownership Plan

Each participant in our Employee Stock Ownership Plan Trust (the “ESOP”) has the right to direct True Integrity Fiduciary Services, as trustee of the ESOP (“TI-Trust”), as to how to vote his or her proportionate interests in all allocated shares of common stock held in the ESOP. TI-Trust will vote any unallocated shares, as well as any allocated shares as to which no voting instructions are received, in the same proportion as the shares for which voting instructions have been received. TI-Trust’s duties with respect to voting the common stock in the ESOP is governed by the fiduciary provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The fiduciary provisions of ERISA may require, in certain limited circumstances that TI-Trust override the votes

3

of participants with respect to the common stock held by TI-Trust and to determine, in TI-Trust’s best judgment, how to vote the shares. Your voting instructions must be received by 11:59 P.M., Eastern Daylight Time on May 4, 2021, to be counted.

401(k) Plan Shares

Each participant in our 401(k) Plan has the right to direct Delaware Charter & Trust Company, a Delaware Corporation conducting business under the trade name of The Principal Trust Company, as trustee of the 401(k) Plan (“Principal Trust”), as to how to vote his or her proportionate interests in all allocated shares of common stock held in the 401(k) Plan. Principal Trust will vote any unallocated shares, as well as any allocated shares as to which no voting instructions are received, in the same proportion as the shares for which voting instructions have been received. Principal Trust’s duties with respect to voting the common stock in the 401(k) Plan are governed by the fiduciary provisions of ERISA. The fiduciary provisions of ERISA may require, in certain limited circumstances, that Principal Trust override the votes of participants with respect to the common stock held by Principal Trust and to determine, in Principal Trust’s best judgment, how to vote the shares. Your voting instruction must be received by 11:59 P.M., Eastern Daylight Time on May 4, 2021, to be counted.

Quorum Requirement

A quorum is necessary to hold a valid Annual Meeting. A quorum will be present if shareholders holding at least a majority of our outstanding shares of common stock entitled to vote at the Annual Meeting are present at the Annual Meeting in person or are represented by proxy. On the record date, there were 25,103,656 shares of common stock outstanding and entitled to vote. Thus, the holders of 12,551,829 shares of common stock must be present in person or represented by proxy at the Annual Meeting to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the Annual Meeting or vote by proxy over the telephone or the internet as instructed above. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the Annual Meeting in person or represented by proxy may adjourn the Annual Meeting to another date.

Proposals and Vote Requirements

Proposal 1: Election of Directors

Directors will be elected by a plurality of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. Plurality means that the individuals who receive the largest number of “FOR” votes cast are elected as directors up to the maximum number of directors to be chosen at the Annual Meeting. Abstentions and broker non-votes will not affect the outcome of the election of directors. You may not vote your shares cumulatively for the election of directors.

Proposal 2: Consideration and Approval of a Non-Binding Advisory Resolution on the Compensation of Our Named
Executive Officers

The approval of the non-binding advisory resolution on the compensation of our Named Executive Officers will require “FOR” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions are not counted as votes cast and they will have no effect on the vote. Brokers do not have discretionary authority to vote shares on this proposal without direction from the beneficial owner. Therefore, broker non-votes will have no effect on the vote.

Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm

The ratification of Wolf & Company, as our independent registered public accounting firm for the fiscal year ending December 31, 2021, will require “FOR” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions and broker non-votes are not counted as votes cast and they will have no effect on the vote.

Proposal 4: Consideration and Approval of the Company’s 2021 Omnibus Incentive Plan

The approval of the 2021 Omnibus Incentive Plan will require “FOR” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions and broker non-votes are not counted as votes cast and they will have no effect on the vote.

4

Effect of Broker Non-Votes

Broker non-votes are proxies received from brokers or other nominees holding shares on behalf of their clients who have not been given specific voting instructions from their clients with respect to non-routine matters. Brokers who hold their customers’ shares in “street name” may, under the applicable rules of the exchange and other self-regulatory organizations of which the brokers are members, sign and submit proxies for such shares and may vote such shares on routine matters, which typically include the ratification of the appointment of our independent registered public accounting firm. Proposals 1, 2 and 4 are considered “non-routine” under New York Stock Exchange Rules (“NYSE”), which govern NYSE brokerage members.

If your broker returns a proxy but does not vote on a proposal, this will constitute a broker non-vote. A broker non-vote will have no effect on the outcome of any proposal.

Confidential Voting Policy

The Company maintains a policy of keeping shareholder votes confidential. Only the Inspector of Election and certain employees of our independent tabulating agent examine the voting materials. We will not disclose your vote to management unless it is necessary to meet legal requirements.

Revoking Your Proxy

You may revoke your grant of proxy at any time before the final vote at the Annual Meeting. If you are the shareholder of record, you may revoke your proxy in any one of the following four ways:

filing a written revocation of the proxy with our Secretary;

entering a new vote over the internet or by telephone;

attending and voting in person at the Annual Meeting; or

submitting another signed Proxy Card bearing a later date.

If your shares are held by your broker, bank or another party as a nominee or agent, you should follow the instructions provided by such party in order to revoke your proxy.

Your personal attendance at the Annual Meeting does not revoke your proxy. Your last vote, prior to or at the Annual Meeting, is the vote that will be counted.

Solicitation of Proxies

We will bear the cost of solicitation of proxies, including preparation, assembly, printing and mailing of the Notice of Annual Meeting of Shareholders, the Proxy Card and any additional information furnished to shareholders. We have engaged Alliance Advisors as our proxy solicitor to help us solicit proxies for a fee of $15,000, plus reasonable out-of-pocket expense. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of our common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of our common stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by our directors, officers or other regular employees or by a firm engaged to do the same by such individuals. No additional compensation will be paid to directors, officers or other regular employees for such services.

Submission of Shareholder Proposals and Nominations for the 2022 Annual Meeting

If you wish to submit proposals to be included in our Proxy Statement for the 2022 Annual Meeting of shareholders (the “2022 Annual Meeting”) pursuant to Rule 14a-8 (as defined below), we must receive them on or before December 1, 2021. Nothing in this paragraph shall be deemed to require us to include in our Proxy Statement and Proxy Card for the 2022 Annual Meeting any shareholder proposal which does not meet the requirements of the SEC in effect at the time. Any such proposal will be subject to 17 C.F.R. §240.14a-8 of the Rules and Regulations promulgated by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In addition, under our Amended and Restated Bylaws (“Bylaws”), if you wish to nominate a director or bring other business before the 2022 Annual Meeting, which is not included in the Proxy Statement for the 2022 Annual Meeting, the following criteria must be met: (i) you must be a shareholder of record; (ii) you must have given timely notice in writing to our Secretary; and (iii) your notice must contain specific information required in Article I, Section 6 of our Bylaws, which are on file with the SEC. These notice provisions require that nominations of persons for election to the Board and the proposal of business to be considered by the shareholders for the 2022 Annual Meeting must be received no earlier than November 1, 2021, and no later than December 1, 2021.

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PROPOSAL 1

ELECTION OF DIRECTORS

The Board, upon recommendation of its Nominating and Corporate Governance Committee, has nominated the following four (4) individuals named in the table below for election as directors. All nominees have consented to being named in this Proxy Statement and to serve if elected. If you elect all the nominees listed below, they will hold office until the Annual Meeting of shareholders noted within the table below or until their successors have been elected and qualified.

If any nominee is unable or does not qualify to serve, you or your proxy may vote for another nominee proposed by the Board. If for any reason these nominees prove unable or unwilling to stand for election or cease to qualify to serve as directors, the Board will nominate alternates or reduce the size of the Board to eliminate the vacancies. The Board has no reason to believe that any of the nominees would prove unable to serve if elected. There are no arrangements or understandings between us and any director, or nominee for directorship, pursuant to which such person was selected as a director or nominee.

Name of Nominee

Age(1)

Term to
Expire

Position Held

Director
Since
(2)

James C. Hagan

60

2024

President, Chief Executive Officer, Director

2009

William D. Masse

65

2024

Director

2016

Gregg F. Orlen

71

2024

Director

2016

Philip R. Smith

64

2024

Director

2009

  

(1)Age at May 11, 2021

(2)Includes terms served on the Board of Westfield Bank, as applicable.

Vote Required

Directors are elected by a plurality of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. The nominees for director who receive the most votes will be elected. You may not vote your shares cumulatively for the election of directors. For purposes of the election of directors, shares for which voting authority is withheld and broker non-votes will have no effect on the result of the vote.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR ALL”
THE NOMINEES FOR ELECTION AS DIRECTORS SET FORTH ABOVE.

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INFORMATION ABOUT OUR BOARD OF DIRECTORS

General

Our Board currently consists of ten (10) members, each who have the highest ethical character and personal and professional reputations consistent with the Company’s image and reputation, and also who demonstrate integrity and a willingness to appropriately challenge management. The name, age and length of service of each of our nominees and the continuing members of our Board are set forth below:

Gender

70% Men

30% Women

3

Women
Directors

Age

2 in 50s

7 in 60s

1 in 70s

62

Avg. Age of
Directors

Tenure

6 < ten years

4 > ten years

7.8

Avg. Tenure of
Directors

Independence

90% Independent

10% Non-
Independent

9

Independent
Directors

Name of Nominee

Age(1)

Term to
Expire

Position Held

Director
Since
(2)

James C. Hagan

60

2021

President, Chief Executive Officer, Director

2009

William D. Masse

65

2021

Director

2016

Gregg F. Orlen

71

2021

Director

2016

Philip R. Smith

64

2021

Director

2009

Gary G. Fitzgerald

54

2022

Director

2016

Paul C. Picknelly

60

2022

Director

2016

Laura Benoit

54

2023

Director

2014

Donna J. Damon

62

2023

Director

2011

Lisa G. McMahon

62

2023

Director, Chairperson of the Board

2014

Steven G. Richter

65

2023

Director

2011

  

(1)At May 11, 2021

(2)Includes terms served on the Board of Westfield Bank, as applicable.

In accordance with the Company’s By-laws, no person shall be eligible for election, reelection, appointment or reappointment to the Board if such person reached seventy-two (72) years of age or older on appointment or reappointment to the Board.

Board Diversity

The Company and the Board strongly believe diversity is critical to the Company’s success and creating long-term value for our shareholders. The Board and Executive Management have adopted diversity and inclusion as a key focus of the Company’s overall strategic plan. In 2020, the Company proudly announced its first female Chairperson in its 168-year history. With respect to the Board, it is acknowledged that a Board consisting of individuals with diverse backgrounds ensures broader representation and inspires deeper commitment to management, employees, and the community we serve. While not specific to a particular policy, the Board prioritizes diversity in gender, ethnic background, and professional experience when considering candidates for director as part of its commitment to diversity. At present, 30% of the Company’s Board is diverse from a gender, race or ethnic perspective.

Board Refreshment

Our Board believes that a fully engaged Board is a strategic asset of the Company and that knowledgeable and fresh viewpoints and perspectives are important for informed decision-making. The Board also believes that appropriate tenure can facilitate members developing greater institutional knowledge and deeper insight into the Company’s operations across a variety of economic and competitive environments.

Even before vacancies arise, the Board periodically evaluates whether it collectively has the right mix of skills, experience, attributes and diverse viewpoints necessary for it to drive shareholder value. The results of this evaluation are used to help inform the desirable skills set for potential Board nominees and to screen director candidates.

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At the same time, as part of planning for Board refreshment and director succession, the Nominating and Corporate Governance Committee’s practice has been to periodically consider potential director candidates. As a result of this ongoing review, in the last ten years, the Board has nominated eight new directors, and in the last six years, the Board has nominated four new directors. The average tenure for the Board is 7.8 years.

With the Board’s recommended slate of four nominees, the Board believes that it has an appropriately balanced Board and will continue to consider opportunities to strengthen the Board’s composition over time. As a group, the average tenure of the four nominees for election to the Board is approximately 8.5 years.

The biographies of the nominees below contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experience, qualifications, attributes or skills that caused the Nominating and Governance Committee and the Board to determine that the person should serve as a director.

Nominees

James C. Hagan has been a director of our Board since 2009, our Chief Executive Officer since December 31, 2008, and our President since June 2005. Mr. Hagan served as Chief Operating Officer of the Company and Westfield Bank from June 2005 until December 2008. Prior to that, he served as Senior Vice President and Commercial Loan Department Manager of Westfield Bank from 1998. From 1994 through 1998, Mr. Hagan was a Vice President at Westfield Bank. Prior to 1994, Mr. Hagan worked as a commercial lender and manager at other New England based banking institutions. He received a Bachelor of Science from Westfield State College and received a Master of Business Administration from American International College. Mr. Hagan’s expertise in credit administration, commercial lending and management through his various roles within the Company and within other New England based banking institutions provides him with the qualifications and skills to serve as a director.

William D. Masse has been a director of our Board since October 2016. Previously, Mr. Masse served on the boards of Chicopee Savings Bank and Chicopee Bancorp, Inc., since 1998 and 2006, respectively. Mr. Masse retired on January 1, 2021, as the President of Granfield, Bugbee & Masse Insurance Agency in Chicopee, Massachusetts. He had been in the insurance industry for 40 years. Mr. Masse holds a Bachelor of the Arts degree from Williams College where he majored in economics. Mr. Masse has, in the past, served as Chairman and/or President of the board of directors of area non-profit organizations. His experience, as well as business and community contacts, provide him with the qualifications and skills to serve as a director.

Gregg F. Orlen has been a director of our Board since October 2016. Previously, Mr. Orlen served on the boards of Chicopee Savings Bank and Chicopee Bancorp, Inc., since 1999 and 2006, respectively. Mr. Orlen is the owner of Gregg Orlen Custom Homebuilders and works as an excavating contractor. Mr. Orlen served on the development committee for South Hadley’s municipal golf course, The Ledges, and was responsible for the oversight of its construction phase. Mr. Orlen remained on the golf course commission, while a resident of South Hadley. Mr. Orlen holds a Bachelor of Science in Business Management. Mr. Orlen is a well-established premier builder of residential homes within our market and brings to the Board his extensive knowledge of the local housing market.

Philip R. Smith has been a director of our Board since 2009. Prior to Mr. Smith’s directorship, he served as Secretary to the Company. Mr. Smith has been a partner at Bacon & Wilson, P.C., one of the largest regional law firms in western Massachusetts specializing in Real Estate, Business Law and Estate Planning, since 2001.  Mr. Smith has served as a past board member of the Westfield Chamber of Commerce in Westfield, Massachusetts, and of the Westfield State College Foundation. Mr. Smith is a past member of the Westfield Community Development Corporation board of directors. He is a graduate of the University of New Hampshire and received a Juris Doctor from New England School of Law and an LL.M. in taxation from Boston University. Mr. Smith’s experience in commercial and residential lending and business law through his many years of legal practice provides him with the qualifications and skills to serve as a director.

Continuing Directors

Lisa G. McMahon has been a director of our Board since 2014 and was named Chairperson on March 24, 2020, making her the first female Board Chairperson in the Company’s 168-year history. Ms. McMahon is the Director of Institutional Advancement and Stewardship with Westfield State University. Ms. McMahon began at Westfield State University in 2013 after leaving Merrill Lynch where she obtained her general securities license and license to become a registered investment advisor representative. Ms. McMahon currently serves as President of the Westfield Academy Foundation as well as the President of the executive board of the Genesis Center – a division of the Sisters of Providence Health Systems. From 2007 to 2012, Ms. McMahon was the executive director of the Westfield Business Improvement District, Inc.

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Ms. McMahon received a Bachelor of Science degree from Our Lady of the Elms College. Ms. McMahon’s business experience and extensive work with micro businesses, nonprofits, and community relations provides her with the qualifications and skills to serve as a director.

Laura Benoit has been a director of our Board since 2014. Ms. Benoit has been the Treasurer and Co-Owner of Baystate Fuel Oil, Inc., a fuel distribution company located in Agawam, Massachusetts, since 1985. Ms. Benoit also serves as President of Buddy Realty, LLC. Ms. Benoit is a former member of the board of directors of the Western Mass Fuel Dealers Association where she served as Treasurer and then President for a period of ten years. Ms. Benoit received an Associate’s degree in Business Administration from Holyoke Community College. Ms. Benoit’s finance, accounting and small business management experience provides her with the qualifications and skills to serve as a director.

Donna J. Damon has been a director of our Board since 2011. Ms. Damon is the President and owner of New England Concrete Cutting, Inc., a construction company specializing in concrete cutting and drilling located in Agawam, Massachusetts. She also serves as an executive officer and the office manager for two separate companies, Witch Equipment of New England, Inc., and Witch Enterprises, Inc. Ms. Damon also serves on various community boards. Ms. Damon’s experience in human resources, office management and business administration, including financial management and employee benefit administration, provides her with the qualifications and skills to serve as a director.

Steven G. Richter has been a director of our Board since 2011. Dr. Richter is the founder, former owner, operator and President of Micro Test Laboratories, Inc., a contract testing and manufacturing support operation for the pharmaceutical and biotechnology industries. Dr. Richter is the manager of Richco Laboratories LLC, which is a life science consulting and testing operation. Dr. Richter is a registered microbiologist with both the American Society of Clinical Pathology and the American Society for Microbiology. Dr. Richter serves on the boards of the Holyoke Community College Biotech Advisory Board and the Westfield State University Life Science Advisory Board. Dr. Richter is also actively involved in research and development with the University of Massachusetts and is an IALS Institute advisory board member. Dr. Richter previously served in a biotechnological advisory capacity for small business with Governor Romney and is a past FDA microbiologist and accredited regulatory affairs professional. Dr. Richter is a graduate of the University of Massachusetts with a Bachelor’s of Science in Microbiology and went on to receive his Master of Sciences degree in Biological Sciences from the University of Massachusetts-Lowell and his Ph.D. in Sterilization Sciences from Columbia Pacific University. Dr. Richter’s experience in small business administration and management, including financial and business operations matters, provides him with the qualifications and skills to serve as a director.

Gary G. Fitzgerald has been a director of our Board since October 2016. Previously, Mr. Fitzgerald served on the boards of Chicopee Savings Bank and Chicopee Bancorp, Inc., since 2009. Mr. Fitzgerald is a Certified Public Accountant and is a Managing Principal of Downey, Pieciak, Fitzgerald & Co., P.C., a CPA firm located in Springfield, Massachusetts. Mr. Fitzgerald received a Bachelor of Science degree from Western New England University, a Master of Science in Taxation degree from Bentley University, and has been licensed as a Certified Public Accountant since 1996. His extensive background in accounting and taxation provides him with the qualifications and skills to serve as a director and as the Company’s financial expert.

Paul C. Picknelly has been a director of our Board since October 2016. Previously, Mr. Picknelly served on the boards of Chicopee Savings Bank and Chicopee Bancorp, Inc., since 2000 and 2006, respectively. Mr. Picknelly is a premium hotel owner and operator, as well as a commercial real estate developer. Mr. Picknelly currently serves as President of Monarch Enterprises, LLC (Monarch Place Office Tower, Sheraton Springfield, and the Hilton Garden Inn Hotels in Springfield and Worcester, Massachusetts) and further manages various commercial real estate properties in the local area. Mr. Picknelly brings to the Board his unique and extensive knowledge of the customers, communities and political climate within our marketplace from a premier hotel management and real estate developer perspective.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

The executive officers of the Company, as of March 30, 2021, are as follows: Ages reflected are as of the Annual Meeting date of May 11, 2021.

Allen J. Miles, III, age 58, was appointed to Executive Vice President in December 2008 and serves as Westfield Bank’s Senior Lender. Prior to that, Mr. Miles served as Senior Vice President and Senior Lender of the Company and Westfield Bank since August 2005. From 1998 to 2005, Mr. Miles served as Vice President and Commercial Loan Officer.

Kevin C. O’Connor, age 61, was appointed to Executive Vice President and Chief Banking Officer in February 2017. Previously, Mr. O’Connor held the position of Senior Vice President of Retail Banking since February 2015 and served as Vice President since 2010. Mr. O’Connor has over twenty-five years’ experience in retail and branch banking and had previously worked at both national and regional banking institutions as a Vice President and regional manager of retail banking and sales, including small business sales.

Guida R. Sajdak, age 48, was appointed to serve as Chief Financial Officer and Treasurer of the Company and Westfield Bank in April 2017. Mrs. Sajdak had served as the Executive Vice President and Chief Risk Officer of the Company and Westfield Bank since October 2016. Previously, Mrs. Sajdak served as the Senior Vice President and Chief Financial Officer and Treasurer of Legacy Chicopee Bancorp, Inc., and Legacy Chicopee Savings Bank where she held the position since 2010. Mrs. Sajdak served Chicopee Savings Bank in various capacities since 1989 including that of Internal Auditor and Commercial Lender. Mrs. Sajdak also serves on the board of the Chicopee Savings Bank Charitable Foundation as its Treasurer.

John E. Bonini, age 53, joined the Company on August 31, 2020, as a Senior Vice President and Associate General Counsel.  Mr. Bonini assumed the position of General Counsel on January 1, 2021, upon the retirement of Mr. Ciejka, who previously held that position.  Prior to joining the Company, Mr. Bonini was employed at Barings LLC, an international investment management firm owned by MassMutual, where he was a Managing Director and Senior Counsel for Barings Real Estate.  Mr. Bonini has extensive experience in real estate transactions, corporate and investment law matters and corporate governance related issues.  He is a graduate of Wesleyan University and received his Juris Doctor from Suffolk University Law School. 

Louis O. Gorman, age 61, serves as Senior Vice President of Credit Administration and Chief Credit Officer. Mr. Gorman has served as Chief Credit Officer since 2010 and as Vice President of Credit Administration since 2009. Prior to 2009, Mr. Gorman was a commercial loan officer for the Company and Westfield Bank since 2000 and also performed the same function at other New England based banking institutions.

Cidalia Inacio, age 65, serves as the Senior Vice President of Retail Banking and also supervises Westfield Bank’s investment services division – Westfield Investment Services. Ms. Inacio has been serving in her current position since October 2016. Previously, Ms. Inacio served as the Senior Vice President of Retail Banking for Legacy Chicopee Savings Bank where she held the position since March 2010.

Darlene Libiszewski, age 55, serves as Senior Vice President and Chief Information Officer. Ms. Libiszewski has been serving in her current position since October 2016. Previously, Ms. Libiszewski served as the Senior Vice President of Information Technology for Legacy Chicopee Savings Bank where she held the position since December 2007.

Deborah J. McCarthy, age 61, serves as Senior Vice President of the Company and Westfield Bank since 2016. Since 2001, she has been the Manager of the Deposit Operations Department and Electronic Banking Department. Ms. McCarthy has worked for Westfield Bank in numerous capacities since 1979.

Christine Phillips, age 48, joined the Company on November 30, 2020, as a Senior Vice President and Human Resources Director.  Prior to joining the Company, Ms. Phillips served as the First Vice President of Human Resources for PeoplesBank, headquartered in Massachusetts. Ms. Phillips brings with her extensive leadership and human resources management including compensation, benefits, talent management and employee training programs.  Ms. Phillips is a graduate of the University of Massachusetts and is currently pursuing a Master’s Degree in Business Administration at the Isenberg School of Management at the University of Massachusetts.

Leo R. Sagan, Jr., age 58, serves as Chief Risk Officer and Senior Vice President of the Company and the Bank since 2017. Previously, Mr. Sagan served as the Chief Financial Officer of the Company and Westfield Bank since December 2008, as Vice President and Controller of the Company and Westfield Bank since 2003, as Controller of the Company and Westfield Bank from 2002 to 2003 and as Assistant Treasurer of the Company and Westfield Bank from 1999 to 2002.

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William J. Wagner, age 74, has been serving as the Company’s Employee Advisor to the Executive Committee since October 2019. Prior to this position, Mr. Wagner held the position of Senior Vice President and Chief Business Development Officer since October 21, 2016. Mr. Wagner retired from the Company’s Board on May 12, 2020, and had served as the Board Vice Chairman since October 2016, following the Company’s merger with Legacy Chicopee Bancorp, Inc. Prior to the merger, Mr. Wagner served as the President and Chief Executive Officer of Legacy Chicopee Savings Bank since 1984 and the President and the Chairman of the Board of Legacy Chicopee Bancorp, Inc., since its formation in 2006.  Mr. Wagner currently serves as the President of the Chicopee Savings Bank Charitable Foundation, an affiliate with Westfield Bank, established in 2006. Mr. Wagner is well known and respected in the Massachusetts and Connecticut banking industry through his leadership roles and participation on the boards of many banking, civic and philanthropic organizations. Mr. Wagner is the recipient of numerous achievement and philanthropic awards for his active leadership and is a recipient of an Honorary Doctorate of Law Degree from the Elms College. Mr. Wagner is a graduate of Western New England University with a Bachelor of Business Administration degree in Accounting, cum laude.

Retired Executive Officers

Gerald P. Ciejka retired from the Company on December 31, 2020, and served as a Senior Vice President, General Counsel and Director of Human Resources of the Company and Westfield Bank.

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CORPORATE GOVERNANCE

The Company is dedicated to being a financial industry leader in corporate governance and business ethics. Our Board is composed of directors with diverse professional and business experience. All of our directors, other than Mr. Hagan are independent. They all share a commitment to fostering an effective risk environment coupled with a strong internal audit structure. Their unwavering commitment protects our clients, shareholders and reputation. Our Code of Ethics for our Senior Financial Officers and our Code of Conduct reflect the Company’s expectation for the conduct of our directors, officers and employees. Through recurring training and disclosures, as well as periodic communication related to specific topics, the Company maintains the highest level of ethical conduct. The Nominating and Corporate Governance Committee receives annual education related to corporate social responsibility as well as to trends and best practices for directors.

Board of Directors

The Board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the Board does not involve itself in our day-to-day operations. Our executive officers and management oversee our day-to-day operations. Our directors fulfill their duties and responsibilities by attending regular meetings of the Board, which are held on a monthly basis. Our directors also discuss business and other matters with the Chairperson and the President, other key executives, and our principal external advisers (legal counsel, auditors, financial advisors and other consultants).

The Company’s Board held eight regular meetings during the fiscal year ended December 31, 2020, and the Westfield Bank Board held 12 regular meetings. Each incumbent director attended at least 75% of the total of (i) the meetings of the Board held during the period for which he or she has been a director, and (ii) the meetings of the committee(s) on which that particular director served during such period.

It is our policy that all directors and nominees attend the Annual Meeting. Due to the COVID-19 global pandemic and the gathering and building capacity restrictions then in effect by the Commonwealth of Massachusetts, the Company held the Annual Meeting in 2020 virtually. All members of the Board were in attendance via Zoom. In addition to the Company’s regularly scheduled Board of Director meetings, all members of the Board annually participate in an all-day Strategic Planning Session, which was also held virtually last year.

Board of Directors Independence

Rule 5605 of the NASDAQ Marketplace Rules (the “NASDAQ Listing Rules”) requires that independent directors compose a majority of a listed company’s board of directors. In addition, the NASDAQ Listing Rules require that, subject to specified exceptions, each member of a listed company’s Audit, Compensation, and Nominating and Corporate Governance Committees be independent and that Audit Committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. Under Rule 5605(a)(2) of the NASDAQ Listing Rules, a director will only qualify as an “independent director” if, in the opinion of our Board, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an Audit Committee of a listed company may not, other than in his or her capacity as a member of the Audit Committee, the board of directors or any other board committee: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries. In addition to satisfying general independence requirements under the NASDAQ Listing Rules, members of a Compensation Committee must also satisfy independence requirements set forth in Rule 10C-1 under the Exchange Act and NASDAQ Listing Rule 5605(d)(2). Pursuant to Rule 10C-1 under the Exchange Act and NASDAQ Listing Rule 5605(d)(2), in affirmatively determining the independence of a member of a Compensation Committee of a listed company, the board of directors must consider all factors specifically relevant to determining whether that member has a relationship with the company which is material to that member’s ability to be independent from management in connection with the duties of a Compensation Committee member, including: (a) the source of compensation of such member, including any consulting, advisory or other compensatory fee paid by the company to such member; and (b) whether such member is affiliated with the company, a subsidiary of the company or an affiliate of a subsidiary of the company.

The Board consults with our legal counsel to ensure that their determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent NASDAQ Listing Rules, as in effect from time to time.

Consistent with these considerations, the Board has affirmatively determined that all of its directors, including the director nominees, satisfy general independence requirements under the NASDAQ Listing Rules, other than Mr. Hagan. In making this determination, the Board found that none of the directors, other than Mr. Hagan, had a material or other disqualifying relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that each director, other than Mr. Hagan, is “independent” as that term is defined under Rule 5605(a)(2) of the NASDAQ Listing Rules. The Board determined that Mr. Hagan, President and Chief Executive Officer, is not an independent director by virtue of his current employment with the Company. The Board also determined that each member of the Audit, Nominating and Corporate Governance and Compensation Committees satisfies the independence standards for such committees established by the SEC and the NASDAQ Listing Rules, as applicable.

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Code of Ethics and Corporate Governance Guidelines

We have adopted a Conflict of Interest Policy and Code of Conduct, which applies to all of our employees and officers. We have also adopted a Code of Ethics for Senior Financial Officers, which applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions for us, and which requires compliance with the Conflict of Interest Policy and Code of Conduct. The Code of Ethics for Senior Financial Officers meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K.

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, by posting such information on our website at the internet address set forth below. We have not amended or granted any waivers of a provision of our Code of Ethics during 2020.

The Board adopted Corporate Governance Guidelines to assure that it will have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The Corporate Governance Guidelines are also intended to align the interests of directors and management with those of our shareholders. The Corporate Governance Guidelines set forth the practices the Board intends to follow with respect to Board independence, composition and selection, Board meetings and involvement of senior executives, senior executive performance evaluation and succession planning, and Board committees and compensation.

The Code of Ethics for Senior Financial Officers and our Corporate Governance Guidelines are available to shareholders on our website at www.westfieldbank.com. The inclusion of our website address here and elsewhere in this Proxy Statement does not include or incorporate by reference the information on our website into this Proxy Statement.

Hedging and Pledging of Company Securities

On an annual basis, all directors and senior financial officers, as defined therein, are required to review the Company’s Insider Trading Policy and are provided with the Company’s scheduled blackout periods. The policy details trading guidelines and prohibitions for those directors and officers, subject to Section 16 of the SEC, and serves to educate such directors and senior financial officers as to their individual and corporate responsibilities as insider shareholders. A signed Certification of Acknowledgment from all directors and senior financial officers is collected and retained by the Corporate Secretary.

Committees of the Board of Directors

The following table provides the Board’s committee membership as of the date of this Proxy Statement, and meeting information for the year ended December 31, 2020, for the following committees:

Name

Executive

Audit

Nominating
and Corporate
Governance

Compensation

Finance & Risk
Management

Laura Benoit

Donna J. Damon

Gary G. Fitzgerald(1)

Chair

James C. Hagan

William D. Masse

Chair

Lisa G. McMahon

Chair

Chair

Gregg F. Orlen

Chair

Paul C. Picknelly

Steven G. Richter

Philip R. Smith

Total Meetings in 2020:

13(2)

5

3

5

3

  

(1)Financial Expert

(2)See Executive Committee below.

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Executive Committee

The Executive Committee exercises the powers of the Board between Board meetings and is responsible for reviewing and approving all Westfield Bank extensions of credit above and beyond management’s authority. The Executive Committee takes action to review and approve extensions of credit either through meetings, as noted above, or virtually through the Company’s online board portal. In addition to meeting thirteen times during 2020, the Executive Committee also took action reviewing and approving extensions of credit twenty-five times using its online board portal. During 2020, the Executive Committee was chaired by Mr. Tapases until his passing on March 6, 2020. On March 24, 2020, Mr. Richter and Ms. McMahon joined the Executive Committee and Ms. McMahon was appointed as its chair serving along with Messrs. Hagan, Smith and Wagner. On May 12, 2020, Mr. Wagner retired from the Board and was appointed as the Employee Advisor of the Executive Committee.

Audit Committee

The Audit Committee is chaired by Mr. Fitzgerald with Ms. Benoit and Messrs. Masse and Picknelly serving as members. The Audit Committee assists the Board by overseeing the audit coverage and monitoring the accounting, financial reporting, data processing, regulatory and internal control environments. The primary duties and responsibilities of the Audit Committee are to:

oversee and monitor the financial reporting process and internal controls system;

review and evaluate the audit performed by outside auditors and report any substantive issues found during the audit to the Board;

appoint, compensate and oversee the work of the independent auditors;

review and approve all transactions with affiliated parties; and

provide an open avenue of communication among the independent auditors, financial and senior management, the internal audit department and the Board.

The Board reviews the NASDAQ Listing Rules’ definition of independence for Audit Committee members on an annual basis and has determined that all members of our Audit Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Exchange Act). The Board has also determined that Mr. Fitzgerald qualifies as an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K. The Board has adopted a written charter for the Audit Committee that is available to shareholders on our website at www.westfieldbank.com.

Pre-approval of Services

The Audit Committee shall pre-approve all auditing services and permitted non-audit services (including the fees and terms) to be performed for us by our independent registered public accounting firm, subject to the de minimis exception for non-audit services described below, which are approved by the Audit Committee prior to completion of the audit. The pre-approval requirement set forth above shall not be applicable with respect to non-audit services if:

the aggregate amount of all such services provided constitutes no more than 5% of the total amount of revenues paid by us to our auditor during the fiscal year in which the services are provided;

such services were not recognized by us at the time of the engagement to be non-audit services; and

such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the Board to whom authority to grant such approvals has been delegated by the Audit Committee.

Delegation

The Audit Committee may delegate to one or more designated members of the Audit Committee the authority to grant required pre-approvals. The decisions of any member to whom authority is delegated under this paragraph to pre-approve activities under this subsection shall be presented to the full Audit Committee at its next scheduled meeting.

The Audit Committee pre-approved 100% of the services performed by the independent registered public accounting firm for the fiscal year ending December 31, 2020, pursuant to the policies outlined above.

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Audit Committee Report(1)

The Audit Committee has reviewed and discussed our audited financial statements for the fiscal year ended December 31, 2020, with management and our independent registered public accounting firm, Wolf & Company. The Audit Committee has discussed with Wolf & Company the matters required to be discussed by Public Company Accounting Oversight Board, or PCAOB, Auditing Standard No. 1301, Communications with Audit Committees. The Audit Committee has also received the written disclosures and the letter from Wolf & Company required by applicable requirements of the PCAOB regarding Wolf & Company’s communications with the Audit Committee concerning independence, and has discussed with Wolf & Company the firm’s independence. Based on the foregoing, the Audit Committee recommended to the Board that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, for filing with the SEC.

Western New England Bancorp, Inc.

Audit Committee

Gary G. Fitzgerald, Chair

Laura Benoit

William D. Masse

Paul C. Picknelly

  

(1)The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing we make under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee is chaired by Ms. McMahon with Ms. Damon and Messrs. Orlen, Picknelly and Richter serving as members. Each member of the Nominating and Corporate Governance Committee is a non-employee director within the meaning of Rule 16b-3 under the Exchange Act, and each is an independent director under the corporate governance standards of the NASDAQ Listing Rules. The Board has adopted a written charter for the Nominating and Corporate Governance Committee that is available to shareholders on our website at www.westfieldbank.com. Pursuant to its charter, the Nominating and Corporate Governance Committee is responsible for:

identifying, reviewing and evaluating candidates to serve as directors (consistent with criteria approved by the Board);

reviewing director nominations by shareholders;

reviewing and evaluating incumbent directors;

recommending to the Board for selection candidates for election to the Board;

making recommendations to the Board regarding the membership of the committees of the Board; and

reviewing the Nominating and Corporate Governance Committee Charter and developing and implementing corporate governance guidelines.

It is the policy of the Nominating and Corporate Governance Committee to select individuals as director nominees who shall have the highest personal and professional integrity, who shall have demonstrated exceptional ability and judgment and who shall be most effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of the shareholders. When considering candidates for the Board, the Nominating and Corporate Governance Committee takes into account the candidate’s qualifications, experience and independence from management. Shareholder nominees, if any, would be analyzed by the Nominating and Corporate Governance Committee in the same manner as nominees that are identified by the Nominating and Corporate Governance Committee. If the Nominating and Corporate Governance Committee believes a candidate would be a valuable addition to the Board, it will recommend to the full Board that candidate’s election. The Nominating and Corporate Governance Committee also has the authority to retain any search firm to assist in the identification of director candidates. However, the Nominating and Corporate Governance Committee has not retained any such search firm, and we do not pay a fee to any third party to identify or evaluate director candidates or nominees.

In accordance with our Bylaws, nominations of individuals for election to the Board at an Annual Meeting of shareholders may be made by any shareholder of record entitled to vote for the election of directors at such meeting who provides timely notice in writing to our Secretary at our principal executive office. To be timely, a shareholder’s notice must be delivered to or received by our Secretary not less than 120 calendar days in advance of the anniversary date of our Proxy Statement released to shareholders in connection with the previous year’s Annual Meeting of shareholders. Submissions must include the full name of the proposed nominee and include a detailed background of the suggested candidate, and a representation that the nominating shareholder is a beneficial or record holder of our common stock. If a nomination is not properly brought before the Annual Meeting in accordance with our Bylaws, the Chairperson of the Annual Meeting may determine that the nomination was not properly brought before the Annual Meeting and shall not be considered. For additional information about our director nomination requirements, please see our Bylaws.

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All nominees were nominated by the Nominating and Corporate Governance Committee. As of the date of this Proxy Statement, the Nominating and Corporate Governance Committee had not received any shareholder recommendations for nominees in accordance with our Bylaws in connection with the Annual Meeting.

Compensation Committee

The Compensation Committee is chaired by Mr. Orlen with Mses. Damon, Benoit and McMahon and Messrs. Fitzgerald and Richter serving as members. Each member of the Compensation Committee is a non-employee director within the meaning of Rule 16b-3 under the Exchange Act, each is an outside director as defined by Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and each is an independent director under the corporate governance standards of the NASDAQ Listing Rules and the independence requirements of Rule 10C-1 under the Exchange Act. As required by its charter, the Compensation Committee meets at least three times annually and with greater frequency, if necessary. The Board has adopted a written charter for the Compensation Committee that is available to shareholders on our website at www.westfieldbank.com. Pursuant to its charter, the Compensation Committee’s responsibilities include:

evaluating the performance of the Chief Executive Officer and other elected officers in light of approved performance and objectives;

making recommendations to the Board for, and setting the compensation of the Chief Executive Officer and other elected officers, based upon the evaluation of the performance of the Chief Executive Officer and the other elected officers, respectively; and

making recommendations to the Board with respect to profit sharing and equity-based compensation plans.

The Compensation Committee also reviews and discusses with management the “Compensation Discussion and Analysis” section of our Proxy Statements and considers whether to recommend to the full Board that it be included in our Proxy Statements and other filings.

Compensation Decision-Making and Policy-Making

Our Bylaws require that our business and affairs be under the direction of the Board, which includes executive officer compensation. Executive compensation is set by the Board after recommendation of the Compensation Committee. As a company listed on NASDAQ, we must observe governance standards and listing requirements that require executive officer compensation decisions to be made by a majority of independent directors of our Board, by a committee of independent directors or in exceptional and limited circumstances, a compensation committee comprised of at least three members where only one member is not independent.

The Compensation Committee has been delegated authority from our Board to oversee executive compensation by approving salary increases for Senior Vice Presidents and above by reviewing general personnel matters, such as staff performance evaluations, for such Senior Vice Presidents and above. The Compensation Committee has established a compensation program and has a formal charter, which was adopted in December of 2006 and amended in 2007, 2013 and 2017, and advises senior management on the average salary increases for all employees under the compensation program. The compensation program consists of three components: (1) base salary; (2) annual bonuses (short-term incentives); and (3) long-term incentives (e.g., omnibus equity grants, employment and change-in-control agreements, deferred compensation, retirement and fringe benefits).

The Compensation Committee considers the expectations of the Chief Executive Officer with respect to his own compensation and his recommendations with respect to the compensation of more junior executive officers, as well as empirical data and the recommendations of advisors both internal and external. Compensation decisions made by the Compensation Committee are reported by the Compensation Committee’s Chairperson to the Board, which approves, disapproves or amends the Compensation Committee’s action. The Compensation Committee does not delegate its duties to others. The Compensation Committee also confirms and approves the Summary Compensation Tables included in this Proxy Statement in accordance with the rules and regulations of the SEC.

In addition, pursuant to its charter, the Compensation Committee has the sole authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee has ever been an officer or employee of ours. None of our executive officers served as a member of another entity’s board of directors or as a member of another entity’s compensation committee (or other board committee performing equivalent functions) during 2020, which entity had an executive officer serving on our Board or as a member of our Compensation Committee. There are no interlocking relationships between us and other entities that might affect the determination of the compensation of our executive officers.

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Compensation Committee Report

The Compensation Committee has reviewed and discussed the following “Compensation Discussion and Analysis” with management. Based upon such review, the related discussions and such other matters deemed relevant and appropriate by the Compensation Committee, the Compensation Committee has recommended to the Board that the “Compensation Discussion and Analysis” be included in our Annual Report on Form 10-K for the year-ended December 31, 2020, and this Proxy Statement.

Western New England Bancorp, Inc.

Compensation Committee

Gregg F. Orlen, Chair

Donna J. Damon

Laura Benoit

Gary G. Fitzgerald

Lisa G. McMahon

Steven G. Richter

Finance and Risk Management Committee

The Finance and Risk Management Committee is a standing committee of the Board formed in January 2014. During 2020, Mr. Wagner served as its chair with Messrs. Hagan, Smith and Tapases serving as its members. Mr. Tapases passed away on March 6, 2020. Mr. Wagner retired from the Board on May 12, 2020, at which time Mr. Masse was appointed to serve as its chair. The Finance and Risk Management Committee meets as often as necessary, but at least three times annually.

The Board has adopted a written charter for the Finance and Risk Management Committee that is available to shareholders on our website at www.westfieldbank.com. Pursuant to its charter, the purpose of the Finance and Risk Management Committee is to assist the Board and the Executive Committee of the Board in fulfilling their responsibility with respect to the oversight of the Company’s (1) enterprise risk management and financial framework, including all risks associated therewith, and (2) policies and practices relating to financial matters, including but not limited to, capital, liquidity and financing, as well as to merger, acquisition and divestiture activity. The Finance and Risk Management Committee reports to the Board regarding the Company’s risk profile, as well as its enterprise risk management framework, including the significant policies and practices employed to manage such risks, as well as the overall adequacy of the enterprise risk management function. The Finance and Risk Management Committee also will, as directed by the Executive Committee or the Board, review financial strategic planning, corporate financial statements, projects or initiatives.

Communicating with the Board of Directors

Shareholders may contact the Company’s Board of Directors by writing to:

Theresa C. Szlosek, Corporate Secretary

Western New England Bancorp, Inc.

141 Elm Street

Westfield, Massachusetts, 01085

All communications addressed to this address will be forwarded directly to the Chairperson of the Board of Directors. Any letter addressed to an individual director will be forwarded to that director.

Board Leadership Structure and Role in Risk Oversight

Board Leadership Structure

The Board does not have a formal policy on separating the roles of Chairperson of the Board and Chief Executive Officer and, if separate, whether the Chairperson of the Board should be a non-employee director or an employee. The Board believes that no single, one-size fits all, board leadership model is universally or permanently appropriate. The Board prefers to retain the flexibility to structure its leadership from time to time in any manner that is in the best interests of the Company and its shareholders.

The positions of our Chairperson of the Board and Chief Executive Officer are currently separated. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairperson of the Board to lead our Board in its fundamental role of providing advice to, and independent oversight of, management. The Board recognizes the time, effort and energy that our Chief Executive Officer must devote to his position in the current business environment, as well as the commitment required to serve as our Chairperson, particularly as the Board’s oversight responsibilities continue to grow. The Board also believes that this structure ensures a greater role for the independent directors in the oversight of the Company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work of our Board. The Board recognizes that depending

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on the circumstances, other leadership models, such as combining the role of Chairperson of the Board with the role of Chief Executive Officer, might be appropriate. Accordingly, the Board may periodically review its leadership structure.

Board’s Role in Risk Oversight

The Board is responsible for consideration and oversight of risk management and is responsible for ensuring that material risks are identified and managed appropriately. The Board believes an effective risk management system will (1) timely identify the material risks that the Company faces; (2) communicate necessary information on material risks to senior management and, as appropriate, to the Board or relevant Board Committee; (3) implement responsive risk management strategies appropriate to the Company’s risk profile; and (4) integrate risk management into the Company’s decision making. 

The Board’s role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal, regulatory, strategic and reputational risks. The Board receives these reports to enable it to understand the Company’s risk identification, risk management and risk mitigation strategies. While the Board has the ultimate oversight responsibility for the risk management process, various committees of both management and the Board also have responsibility for risk management. The Board has established a Finance and Risk Management Committee of the Board to assist in fulfilling this responsibility. The Board and the Finance and Risk Management Committee approve the Bank’s business strategies and, in so doing, ultimately approve the level of risks the Bank takes. Senior management is responsible for implementing the Board’s strategies in such a way as to limit the associated risks the Bank takes and for ensuring that the staff complies with applicable laws and regulations.

To further assist the Board and the Finance and Risk Management Committee in carrying out its responsibility, the Chief Risk Officer serves as the primary risk management officer for establishing policy and designing and implementing the overall Enterprise Risk Management framework. While business unit managers are primarily responsible for managing risk inherent in their areas of responsibility, the objective of the Chief Risk Officer is to promote risk management practices throughout the organization that are well defined, repeatable, and allow a comprehensive understanding of the Company’s risk profile.

Our Chief Risk Officer provides reports and updates to the Finance and Risk Management Committee on risk management initiatives. The chair of the Finance and Risk Management Committee reports to the full Board with respect to any notable risk management issues and coordinates with other Board and management level committees as necessary. The Board also meets regularly in executive session without management to discuss a variety of topics, including risk. In these ways, the full Board is able to monitor our risk profile and risk management activities on an on-going basis.

The Audit Committee provides quarterly updates to the Board relating to our internal and external audit functions. The Board reviews all reports of examination by regulatory agencies, including the Bank’s primary regulator, the Office of the Comptroller of the Currency. All policies and procedures affecting the risk factors listed above are reviewed and approved by the Board on a monthly, quarterly and annual basis, as the case may be.

We believe that through our current reporting structure, the Board maintains strong and effective oversight of all risk factors affecting us. This oversight is maintained through active involvement by all members of the Board on various committees, with elected chairpersons for each such committee, which ensures that diverse leadership exists throughout the Board and prevents centralization of control within one, or a group of individuals. Oversight is also maintained through the Executive Committee, which, pursuant to our Bylaws, has the ability to exercise the powers of the Board between Board meetings, and through the Board’s monthly meetings. Recommendations of the Board at these meetings are then implemented by senior management and the results are subsequently reported to the Board.

Environmental, Social and Governance Highlights

The Company is committed to strengthening the communities we serve through volunteerism and corporate philanthropy, as well as environmental responsibility, serving as a cornerstone of the local community, and maintaining transparency and diversity in governance. We strive to have positive impacts on the communities in which we live and work by focusing on certain core initiatives including, financial empowerment and education; diversity, equity and inclusion in governance; volunteerism; and environmental sustainability. Below are some of our significant initiatives and events of 2020:

We promote economic development and education through investment in community-strengthening initiatives like small business and affordable housing lending programs, as well as no-cost, first-time homebuyer educational seminars open to the public. The following are a few examples:

First Time Home-Buyer Program: This program provides home loans with special incentives, such as low down payments and closing cost credits, to individuals purchasing a primary residence for the first time. In 2020, the Bank lent over $39 million under this program;

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Basic Banking for Massachusetts Program: This program is coordinated by the Massachusetts Community & Banking Council and recognizes Massachusetts banks that expand access to low-cost bank products and services. In 2020, the Company was recognized in both the checking and savings categories;

Second Chance Checking Program: Through this program, we work with individuals to help rehabilitate their past bank deposit account charge-off record, which provides them with the opportunity to access mainstream financial services. After twelve (12) months of satisfactory performance, accounts are automatically converted to standard products;

Ready, Set, Grow Program: This proprietary program encourages youth savings and is available through participating schools and all branch locations; and

Financial Literacy: We promote financial literacy through a number of educational programs, including:

oOur first time homebuyer seminars, which help promote the joy and responsibility of homeownership;

oOur educational partnerships with community centers and local schools with Bank personnel providing instruction about personal finance and banking.

The Company has received an “Outstanding” rating in each of its last three Community Reinvestment Act examinations performed by the Office of the Comptroller of Currency. These examinations assess our responsiveness to the financial needs of the communities we serve, with a special emphasis on meeting the needs of low-to-moderate income consumers and small businesses. Throughout our footprint, we have facilitated more than 35 community development loans totaling in excess of $82 million and have partnered with numerous local and state-based small business development agencies to foster successful business relationships.

We support environmental awareness and sustainability by encouraging and empowering recycling, responsible waste management practices and energy conservation throughout the organization. The following are a few examples:

We continue to utilize recycled paper, stationery products and janitorial supplies, and partner with a local information destruction vendor for bulk shredding services that ensures all paper waste is recycled back into the marketplace;

We have further reduced the amount of paper and other waste we create by expanding electronic storage of documents, eliminating envelopes at most ATM locations, replacing customer mailings with statement messages and email options, allowing electronic delivery and signing of documents by customers, emphasizing client use of monthly electronic statements and by making our Board and Board committee meetings paperless;

We typically host several community shredding events throughout the year at branch locations. During 2020, as a result of the COVID-19 global pandemic, we were forced to limit the number of community shred events to just one held in September 2020;

We have continued our initiative to reduce consumption of electricity through the installation and use of motion-activated lighting in our offices and the replacing of interior and exterior lighting to LED sourced bulbs throughout our organization;

We continue to make environmentally conscious renovations in our buildings and installed energy efficient HVAC equipment and air purifiers in multiple locations throughout 2020. In addition, all new buildings are designed and built to be energy efficient;

We collaborate with a local electronic recycling company and recycled more than 3,700 pounds of computer and mixed electronic equipment in 2020; and

We indirectly reduced automobile emissions impacting our environment by utilizing remote work options and virtual meetings and trainings for numerous departments throughout the organization.

The Company continually evaluates opportunities to reduce energy dependence in areas such as facilities, equipment, operations, shipping and business travel, and remains cognizant of our impact on the environment.

Philanthropy

Philanthropy has always been one of our Company’s core values as we continually focus on strengthening the communities we serve through our support of economic development and charitable organizations. We accomplish this through a culture of employee volunteerism, corporate sponsorships and grants, non-profit board service by employees, and organized employee fundraising donations for non-profit groups and associations in our communities. The following are some examples of these philanthropic activities:

In 2020, the Company and its affiliate, the Chicopee Savings Bank Charitable Foundation (the “Foundation”), donated in excess of $785,000 in grants and sponsorships to hundreds of non-profit organizations as well as to economic development groups located within our footprint;

Through the Foundation, each year we provide $33,000 in annual scholarships to local students;

As of December 31, 2020, the Company and the Foundation have an additional approximately $895,000 outstanding in multi-year pledged commitments; and

We promote volunteerism in our communities by providing paid-time-off to our employees for performing volunteer work and we formally partner with, and source volunteers for, numerous community groups and non-profits. Due to the state and federal distancing mandates resulting from the COVID-19 global pandemic, the Company was not able to volunteer at the same level as in past years. In 2019, the Company provided in excess of 8,000 volunteer hours to hundreds of organizations through its active board leadership and committee roles, as well as through organized event volunteer efforts, which is indicative of typical volunteer hours in past years.

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Diversity, Equity and Inclusion

The Company and the Board strongly believe diversity is critical to the Company’s success and creating long-term value for our shareholders. The Board and Executive Management have adopted diversity, equity and inclusion as a key focus of the Company’s overall strategic plan.

During 2020, we were proud to announce the first female Chairperson in the Company’s 168-year history. With respect to the Board, it is acknowledged that a Board consisting of individuals with diverse backgrounds ensures broader representation and inspires deeper commitment to management, employees, and the communities we serve. While not specific to a particular policy, the Board prioritizes diversity in gender, ethnic background, and professional experience when considering candidates for director as part of its commitment to diversity. At present, 30% of our Board is diverse from a gender, race or ethnic perspective. For additional information regarding the composition of our current Board, including diversity, see “INFORMATION ABOUT OUR BOARD OF DIRECTORS” at page 6.

In addition, the Company is committed to a culture of inclusiveness, equality and diversity at all levels of the organization’s workforce. The Company aims to maintain a workplace that presents a respectful, productive environment for everyone and enables individuals to achieve their full potential. Engaging a diverse workforce is sought by creating a culture of inclusion where similarities, differences, complexities and constructive dialogue are valued. As of December 31, 2020, more than 40% of our senior management team were diverse from a gender, race or ethnic perspective. Our workforce is also representative of our commitment to recruit, develop, and retain diverse individuals wherein 20% of our employees are either ethnic minorities, veterans, or persons with disabilities. We remain focused on bolstering our workforce through inclusive hiring and retention practices, which we feel reflects and better serves our communities. The Company respects, values and invites diversity in our Board, workforce, customers, suppliers, marketplace and community. Our Board is considerably diversified by ISS gender diversity standards, and we actively seek to recruit diversified candidates throughout our communities.

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COMPENSATION DISCUSSION AND ANALYSIS

In this section, the term “Committee” refers to the Compensation Committee. This Compensation Discussion and Analysis describes and explains the material elements of the 2020 compensation for our Chief Executive Officer, our Chief Finance Officer and our Chief Lending Officer. The detailed information regarding the compensation of these executive officers, also called “Named Executive Officers” or “NEOs”, is set forth in the tables following this Compensation Discussion and Analysis. We also provide an overview of our executive compensation philosophy and our executive compensation program.

The following individuals are our NEOs for 2020:

James C. Hagan, President and Chief Executive Officer;

Allen J. Miles, III, Executive Vice President and Chief Lending Officer; and

Guida R. Sajdak, Executive Vice President, Chief Financial Officer and Treasurer.

Executive Summary

In 2020, the Company used its strategic plan to expand the Company’s footprint with the addition of three new branches while continuing to transition to be more efficient and to be a diversified community bank. We opened new branches in Huntington, Massachusetts, and in West Hartford and Bloomfield, Connecticut, and we are very pleased with their progress.  In 2020, we also restructured the balance sheet in order to benefit from the low interest rate environment and to position the Company for future growth by paying down highcost wholesale funding with excess cash. We believe the market expansion, coupled with our restructuring of the balance sheet, will lead to improved profitability.

The volatile environment created by the COVID-19 global pandemic impacted the Company’s business operations in 2020. After experiencing disruption and uncertainty in the first half of 2020 related to the ongoing pandemic, we were encouraged to see the beginning of stabilization in the second half of the year, as businesses adapted to the environment and government stimulus measures provided support. We supported our borrowers and community by participating in the SBA Paycheck Protection Program (“PPP”) and offered loan deferrals under the CARES Act to borrowers in need.

We saw significant core deposit growth and positive deposit cost trends throughout the year. We were able to expand our core net interest margin, notwithstanding a 150 basis point rate cut by the Federal Reserve Bank in March 2020. With robust capital and liquidity positions and strong asset quality, as well as the successes achieved to date with our deposit initiatives, we have great confidence in our ability to deliver enhanced value to our shareholders.

Company Performance

For the fiscal year ended December 31, 2020:

The Company reported net income of $11.2 million, or $0.45 per diluted share, for the fiscal year ended December 31, 2020, compared to $13.3 million or $0.51 per diluted share for the fiscal year ended December 31, 2019. The decrease in net income was primarily due to an increase in the provision for loan losses of $5.1 million, or 190.7%, from $2.7 million for the twelve months ended December 31, 2019, to $7.8 million for the twelve months ended December 31, 2020. The increase was reflective of the impact of the COVID19 global pandemic on the Company’s allowance for loan losses.

Total assets were $2.4 billion at December 31, 2020, compared to $2.2 billion at December 31, 2019, with the increase in total assets primarily driven by an increase in total loans of $151.3 million, or 8.5%, from $1.8 billion at December 31, 2019, to $1.9 billion at December 31, 2020, due to the addition of $167.3 million in PPP loans.

The Company maintained its focus on credit quality and increased its loan loss provision, based on economic conditions. Non-performing assets to total assets were 0.33% at December 31, 2020, compared to 0.45% of total assets at December 31, 2019. The allowance for loan losses, excluding PPP loans, was 1.20% of loans at December 31, 2020, compared with 0.79% at December 31, 2019.

Total deposits increased $360.3 million, or 21.5%, from $1.7 billion at December 31, 2019, to $2.0 billion at December 31, 2020.

Tangible book value per share at December 31, 2020, increased $0.22, or 2.7%, to $8.36, compared to $8.14 at December 31, 2019.

Also, during fiscal year 2020:

As a response to the COVID-19 global pandemic, we implemented a successful remote work model for 75% of our non-branch employee base driven by a desire to protect customers and employees.

Reduced or waived late charges and provided loan payment relief, for a limited time, for businesses and individuals negatively impacted by the coronavirus pandemic.

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Provided loan modifications under the CARES Act to over 500 borrowers in 2020.

Assisted small businesses by granting 1,386 loans under PPP totaling $223.1 million.

In 2019 and 2020, the Company repurchased approximately 1.9 million and 1.4 million shares, respectively.

Authorized a 5% share buyback program for the purchase of up to 1.3 million shares.

Advisory Vote on NEO Compensation

At our Annual Meeting of shareholders held on May 12, 2020, we held an advisory vote on executive compensation. Although the vote was non-binding, the Committee has considered and will continue to consider the outcome of the vote when determining compensation policies and setting NEO compensation. Approximately 75% of the shares of our common stock that were voted on the proposal were voted for the approval of the compensation of the NEOs, as disclosed in our 2020 Proxy Statement.

The Committee will continue to consider the outcome of our say-on-pay proposal, regulatory changes and emerging best practices when making future recommendations regarding compensation for our executives.

Best Practices in Executive Compensation

The Company employs a number of practices that reflect our commitment to good compensation governance practices.

WHAT WE DO

WHAT WE DON’T DO

Use an independent compensation consultant to advise on executive compensation matters

Do not have compensation programs that encourage unnecessary and excessive risk taking

Design compensation programs to drive long-term performance

No income tax or excise tax gross-ups in our Change-in-Control programs    

Incorporate an overriding performance condition in our performance metrics    

No repricing stock options without shareholder approval and no backdating stock options

Consider peer group data when making executive compensation decisions    

Do not permit hedging, pledging or short-selling of the Company's stock by executive officers

Set multi-year vesting periods for equity awards.  

No reload or “evergreen” share replenishment features

Stock ownership guidelines

Do not provide guaranteed bonuses to our named executive officers

Have a recoupment policy

Do not provide excessive severance arrangements

Maintain an independent Compensation Committee

Provide the NEO’s compensation opportunity in the form of incentive awards, aligning compensation with the Company’s performance

Conduct an annual Say-on-Pay advisory vote and evaluate voting results

Our Decision Making Process

Role of the Committee

The Committee of the Board is responsible for discharging the Board’s duties in executive compensation matters and for administering the Company’s incentive and equity-based plans. The Committee oversees the development and implementation of the total compensation program for our NEOs.

The Committee has the responsibility for establishing, implementing and continually monitoring adherence with our executive compensation philosophy.  The Committee ensures that the total compensation paid to executives is fair, reasonable, and performance-based while aligning with shareholder interests.

Details on the Committee’s functions are more fully described in its charter, which has been approved by the Board and is available on our website.  To fulfill its charter and responsibilities, the Committee met throughout the year, meeting five times in 2020, and also may take action by written consent. The Chair of the Committee regularly reports on Committee actions at meetings of the Company’s Board, which actions are reviewed and approved by the Board.

The Committee reviews all compensation components for the Company’s Chief Executive Officer and other executive officers, including base salary, annual incentive, long-term incentives/equity, benefits and other perquisites. In addition to reviewing competitive market values, the Committee examines the total compensation mix, pay-for-performance relationship, and how all elements, in aggregate, comprise the executive’s total compensation package. The Committee also reviews the employment contracts entered into with the Chief Executive Officer, the Chief Financial Officer and the Chief Lending Officer, as well as the Change in Control Agreements or any severance or employment agreements with other senior officers. The Committee and management closely review any accounting and tax (individual and corporate) consequences of the compensation plans prior to making changes to the plans.

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The Committee reviews the Chief Executive Officer’s performance annually and makes decisions regarding the Chief Executive Officer’s compensation, including base salary, incentives and equity grants based on this review. Input and data from management and outside consultants and advisors are provided as a matter of practice and as requested by the Committee to provide external reference and perspective. While the Chief Executive Officer makes recommendations on other NEOs, the Committee is ultimately responsible for approving compensation for all NEOs. The Committee reviews its decisions with the full Board and obtains its approval on all actions.

The Committee has the sole authority and resources to obtain advice and assistance from internal or external legal, human resource, accounting or other advisors or consultants as it deems desirable or appropriate. The Committee has direct access to outside advisors and consultants throughout the year as they relate to executive compensation.  The Committee has direct access to, and meets periodically with, the compensation consultant independently of management, and ultimately the Board is responsible for all compensation decisions, upon the recommendation of the Compensation Committee.

Role of the Compensation Consultant

In 2020, the Compensation Committee engaged the consulting services of Pearl Meyer & Partners, LLC (“Pearl Meyer”) to provide independent advice and counsel related to executive and Board compensation. The Compensation Committee has also used the services of several law firms to ensure compensation plans and programs are properly administered, documented, and meet legal and regulatory requirements.

The Compensation Committee considered the independence of Pearl Meyer and its outside legal advisors in light of SEC and NASDAQ rules for compensation committees and compensation consultants, legal counsel and other advisers.

Role of Management

The Company’s management provides information and input as requested by the Compensation Committee to facilitate decisions related to executive compensation. Members of management may be asked to provide input relating to potential changes in compensation programs for review by the Compensation Committee. The Compensation Committee occasionally requests members of management to be present at meetings where executive compensation and Company or individual performances are discussed and evaluated. Executives are free to provide insight, suggestions or recommendations regarding executive compensation. However, only Compensation Committee members are allowed to vote on decisions regarding executive compensation.

In 2020, Gerald Ciejka, the Company’s Senior Vice President, General Counsel and Director of Human Resources, served as management’s liaison to the Compensation Committee. Mr. Ciejka assisted in the administration of executive compensation programs, prepared Compensation Committee and Board meeting materials, worked with consultants and legal counsel engaged by the Compensation Committee, and performed work as requested, including the preparation of peer analyses, based on a peer group selected by the Compensation Committee. Upon Mr. Ciejka’s retirement on December 31, 2020, Ms. Phillips, the Company’s Senior Vice President and HR Director will serve as management’s liaison to the Compensation Committee. Guida R. Sajdak, the Company’s Chief Financial Officer, provided the Compensation Committee with periodic updates of the Company’s financial performance measures under the short- and long-term incentive programs. James C. Hagan, the Company’s Chief Executive Officer and President, made recommendations with respect to base salary, annual incentives, and equity compensation for executive officers who report to him. Mr. Hagan was not present at any Compensation Committee meetings in which his own compensation was discussed or voted upon.

Although executives may provide insight, suggestions or recommendations regarding executive compensation, they are not present during the Compensation Committee’s deliberations or vote. Only Compensation Committee members vote on decisions regarding executive compensation. The Compensation Committee periodically meets in executive session without management present.

Compensation Philosophy

Our compensation philosophy is to provide competitive compensation that rewards executives for performance and management of risk. The Company’s executive compensation program is reviewed on an annual basis to ensure the program remains in alignment with the Company’s compensation philosophy and business objectives. The Compensation Committee continues to subscribe to the philosophy that the most effective compensation program is one that is designed to attract and retain qualified and experienced officers and at the same time, is reasonable, competitive, and aligned with the Company’s pay for performance philosophy.

The Compensation Committee believes that an effective program is one component of the overall management of the Company and that it helps to support and promote a culture that recognizes and rewards the individuals, behaviors, and results that the Company and shareholders value. The Company’s compensation philosophy is one that recognizes the importance of individual achievements and strives to reward these behaviors while also emphasizing overall corporate achievement while being fair and competitive.

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Compensation Components

In support of our executive compensation philosophy and objectives, our executive compensation program consists of the following three key components:

Base salaries;

Short-term annual incentive awards; and

Long-term equity incentive compensation.

We also provide modest levels of perquisites, described later, to our Named Executive Officers and participation in other benefit programs that are generally available to the Company’s broader workforce (e.g., health care, disability, life insurance, and a defined contribution plan). The Summary Compensation Table on page 31 provides additional information on these perquisites and benefits.

The Committee maintains a flexible policy for the allocation of compensation components. Allocations of compensation among the various components are intended to align compensation with achievement of short- and long-term performance goals and appropriate risk management while remaining competitive in comparison to the Company’s peer group.

Base Salaries

Base salaries recognize and compensate for competencies, experience, and knowledge that we believe our Named Executive Officers must possess. The Committee also considers external market data to assess the competitiveness of our base salary levels.

In early 2020, performance evaluations of the executive officers were completed with respect to their 2019 performance. The Committee approved base salary increases for all executive officers, which were derived from the evaluation of their individual performance.

In 2020, the Committee approved increases in base salaries for the Company’s Named Executive Officers as follows:

Name

Title

2019 Base Salary
($)

2020 Base Salary
($)

Increase
(%)

James C. Hagan

President and Chief Executive Officer

504,708

545,084

8.00

Allen J. Miles, III

Executive Vice President and
Chief Lending Officer

286,449

300,771

5.00

Guida R. Sajdak

Executive Vice President and
Chief Financial Officer

252,400

266,161

5.45

2020 Short-Term Incentive Plan (STI)

The Company’s short-term incentive compensation program (the “STI Plan”) is designed to align executives’ interests with the Company’s strategic plan and critical annual performance goals by providing meaningful “pay-at-risk” that is earned each year based on performance results. It also seeks to motivate and reward achievement of specific Company and individual performance goals with competitive compensation when performance goals are achieved and above or below median pay when performance results are above or below goals.

The Compensation Committee sets and approves award targets as a percentage of base salary. The incentive pool funding ranges from 0% - 150% of target based on actual performance. The maximum award for any participant, in consideration of corporate and individual performance, is capped at 150% of target.

Each year, in the first quarter, the Compensation Committee sets specific incentive metrics and goals that align with the Company’s strategic plan. In 2020, the incentive metrics were approved by the Compensation Committee on February 18, 2020. The Compensation Committee sets threshold and stretch goals for each incentive metric. Target goals (in other words, the Company’s budget) are expected to have some stretch and not be “guaranteed.” Threshold performance goals and awards are intended to reward solid performance but at reduced payout levels. Stretch performances are expected to represent strong performance that is unlikely, but possible, if the Company exceeds its goals.

The Compensation Committee approves the scorecard as well as the NEO goals. The Compensation Committee can modify the goals at its discretion and approves the final goals at the beginning of each year. Once the scorecard results and pool funding are known, individual performance is assessed to determine and allocate the actual awards from the amount that has been funded to the pool. The Compensation Committee determines awards in consideration of individual performance, but with the discretion to consider other factors such as (i) Company performance shortfalls, (ii) regulatory and safety and soundness concerns, and/or (iii) risk management considerations.

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For 2020, the individual targets were defined as a percent of salary: the NEO target was 100% and was unchanged from the prior year. Similarly, all NEOs had the same four Company performance goals and weightings. The Committee, working with management and Pearl Meyer, established and approved the Company’s 2020 performance metrics within the STI Plan.

Company Performance Component (75% of annual incentive award)

On February 18, 2020, the Compensation Committee established performance goals for the corporate scorecard that determine the pool available for payout of incentive compensation. The Compensation Committee also established a minimum trigger or gate level of performance, which is defined as (i) 70% of budgeted net income; and (ii) Westfield Bank receiving satisfactory regulatory ratings from its regulatory examiner.

Once the minimum trigger is achieved, the incentive pool funding is determined based on Company performance compared against four performance goals. In 2020, the Compensation Committee replaced the 2019 performance metrics to better align with shareholder interests and factor in the 2020 strategic initiatives to open three branches and expand the Company’s footprint further into the Connecticut marketplace.

2020 Scorecard Performance Metrics

2019 Scorecard Performance Metrics

Net Interest Margin, on a Tax-Equivalent Basis

20%

Earnings Per Share

40%

Expense Ratio

20%

Efficiency Ratio

35%

Pre-Tax, Pre-Provision Income

20%

Individual Goals

25%

Non-performing Loans to Total Loans

15%

Individual Goals

25%

The considerations in setting the 2020 corporate targets and evaluating performance are shown below. It should be noted that the performance metrics for 2020 were set and approved on February 18, 2020, before the COVID-19 global pandemic was declared in the United States.

Net Interest Margin (NIM), on a Tax-Equivalent Basis

NIM, on a tax-equivalent basis, represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. The target NIM, on a tax-equivalent basis, for 2020 was established at 3.05%, which was an increase of 4.1% from the 2019 actual results of 2.93%. Due to the decrease in interest rates at the end of 2019, management developed strategies to manage the balance sheet to offset the impact of the changing interest rate environment and improve the net interest margin towards the peer group metrics. The NIM, on a tax-equivalent basis, did not meet the target of 3.05%, but exceeded the threshold of 2.75%. Using interpolation, a payout factor of 84% was established for this metric.

Expense Ratio

The expense ratio is defined as expenses over average assets. Due to the branch strategy to add three new branches in 2020, management was projecting an increase in occupancy expenses as well as salaries and benefits related to additional staff. Management was tasked by the Board to manage expenses during this period of branch expansion. In order to focus on the expense portion of the efficiency ratio, and remove the impact of net interest income and non-interest income, the Compensation Committee removed the previously used efficiency ratio and replaced it with the expense ratio. The expense ratio target was established at 2.41%, compared to actual results from 2019 of 2.24%. This target goal required expense management initiatives to control expenses during a period of branch expansion. The actual performance of 2.21% exceeded the stretch target, primarily due to the growth in average assets related to management’s effort in the PPP program, which increased average loans by $200.7 million, or 11.7%. Excluding the one-time, non-recurring loss on debt extinguishment, the expense ratio was 2.17%. Excluding the one-time, non-recurring loss on debt extinguishment, expenses increased $3.0 million, or 6.2%, from 2019 to 2020. Management earned 150% of the targeted payout for this measure.

Pre-Tax, Pre-Provision Income (PTPPI)

The Company defined pre-tax, pre-provision income as income before income tax provision (benefit) and before provision for loan losses. In order to focus on the earnings of the Company and to remove the uncertainty of the provision for loan losses and income tax provision (benefit), the PTPPI income metric replaced the previously used earnings per share metric. The earnings per share metric was changed on February 18, 2020, before the COVID-19 global pandemic was declared. Due to the level of historical Company stock buybacks, and the impact such buybacks have on the earnings per share metric, the Compensation Committee changed the metric from earnings per share to PTPPI in order to measure operating income. The target for this metric was set at $19.2 million, compared to $19.9 million in 2019. We were projecting an increase in expenses related to branch expansion as part of the Company’s strategic plan for 2020. Although at the time, the COVID-19 global pandemic was not factored into the design of the STI plan, management was preparing for a possible recession and was incentivized to manage earnings during a period of expense growth. The actual result for 2020 was $21.9 million. Using interpolation, a payout factor of 135% was established for this metric.

25

Non-performing Loans to Total Loans (NPL)

The NPL goal measures the level of non-performing loans to total loans. The target for this metric was set at 1.25%. Although at the time, the COVID-19 global pandemic was not factored into the design of the STI plan, management was preparing for a possible recession and was incentivized to manage and maintain problem loans in 2020 to acceptable levels. The Compensation Committee reviewed the Company’s NPL ratio for the last six years and, projecting a possible recession in 2020 and 2021, set the acceptable level of NPL at 1.25%. In addition, the metric was used to mitigate any unintended results of utilizing the pre-tax, pre-provision income metric. If the provision which was excluded from the PTPPI metric, was elevated due to loan growth, this NPL metric would remain at acceptable levels. If the provision was elevated due to asset quality issues in the portfolio, the NPL would negatively exceed the target and reduce the overall payout. The actual result for 2020 was 0.41%, or 0.45% excluding PPP loans, compared to 0.56% in 2019, which represented ongoing strong asset management. Management earned 150% of the targeted payout for this measure.

Individual Performance Component (25% of annual incentive awards)

In addition to the corporate performance component, each 2020 STI Award was determined based on individual performance. The individual component for each NEO, with the exception of Mr. Hagan, was assessed by Mr. Hagan based on each NEO’s annual performance evaluation and was reviewed and approved by the Compensation Committee. The review of Mr. Hagan’s individual component was based on the Compensation Committee and the full Board’s performance evaluation of Mr. Hagan.

Multiple factors were considered in this assessment, including but not limited to:

Overall corporate performance;

Progress on key strategic initiatives;

Regulatory relationships and evaluations;

The performance of each individual’s business line or department; and

Extraordinary unplanned accomplishments outside of the planned annual goals but which significantly contributed to organizational success and increased shareholder value.

In 2020, the Committee worked with Pearl Meyer to design the 2020 STI Plan framework. The performance goals listed below were approved by the Compensation Committee on February 18, 2020. The Compensation Committee determined that these four corporate performance goals reflect a broad measurement of corporate performance in 2020, including bottom-line profitability; top line revenue objectives; and safety and soundness. The assessment of corporate goals was based on the reported financial results of the Company. Financial results are subject to adjustment at the discretion of the Compensation Committee to exclude the impact of one-time extraordinary gains or losses, which may have the effect of either increasing or decreasing calculated payouts under the STI Plan.

The table below outlines the 2020 performance objectives and corporate performance results under the STI Plan:

Goals and Weighting

Performance Goals

Actual

Company Goals (75%)

Goal
Weight

Threshold

Target

Stretch

Actual
Performance

% of
Target

Net Interest Margin, on a Tax-Equivalent Basis

20%

2.75%

3.05%

3.66%

2.95%

84%

Expense Ratio

20%

2.00%

2.41%

2.29%

2.21%

150%

Pre-Tax, Pre-Provision Income

20%

$17,300

$19,200

$23,100

$21,900

135%

Non-performing Loans to Total Loans

15%

2.00%

1.25%

0.50%

0.45%

150%

The table below details the STI Plan opportunities and awards earned and paid for each NEO for 2020:

Annual Incentive Award Opportunity
(Percent of Salary)

Annual Incentive Award
Opportunity
(Dollar Value)

2020 Payment

Earned

Actual
Payment

NEO

Threshold

Target

Stretch

Threshold

Target

Stretch

($)

% of Target

($)

James C. Hagan

15%

30%

45%

$82,200

$164,500

$246,700

$191,700

116.6%

$131,600

Allen J. Miles, III

10%

20%

30%

$30,200

$60,400

$90,600

$70,400

116.6%

$51,300

Guida R. Sajdak

10%

20%

30%

$26,700

$53,400

$80,100

$62,300

116.6%

$45,400

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In 2020, the Company, and the industry as a whole, was challenged by the impact of the COVID-19 global pandemic as well as the substantial reduction in interest rates and the ongoing provisioning for COVID-19 global pandemic related conditions. Despite the challenges, the Company was able to support the needs of our borrowers and community by:

Participating in the PPP loan program to support local businesses and granted 1,386 PPP loans totaling $223.1 million;

Granting deferred loan payments under the CARES Act, for impacted commercial, residential and consumer customers who experienced financial hardship due to COVID-19 global pandemic. As of June 30, 2020, the deferred loan payment modifications totaled $261.0 million (525 loans), for which principal and interest payments were deferred, and represented 15% of the total loan portfolio, excluding PPP loans. As of December 31, 2020, deferred loan payment modifications declined to $76.9 million (47 loans), or 4.4% of total loans, excluding PPP loans;

Despite the ongoing challenges, at December 31, 2020, the Company’s asset quality remained strong, with non-performing loans of $7.8 million, or 0.45% of total loans excluding PPP loans. Total delinquency as a percentage of total loans, excluding PPP loans, was 0.77%, during the same period.

The allowance for loan losses as a percentage of total loans, excluding PPP loans, was 1.20%, compared to 0.79% at December 31, 2019.

Total core deposits increased $422.6 million, or 41.2%, and represented 61.1% of total deposits. The loan-to-deposit ratio improved from 105.9% at December 31, 2019, to 94.6% at December 31, 2020. The excess cash from deposits enable us to restructure the balance sheet and protect the net interest margin from the reduction in interest rates. The net interest margin was 2.93% in 2020, compared to 2.90% in 2019. The net interest margin, on a tax-equivalent basis, was 2.95% in 2020, compared to 2.93% in 2019.

In 2020, we also opened three new branches in Huntington, Massachusetts, in West Hartford and Bloomfield, Connecticut.

The Compensation Committee has the discretion to adjust any payouts to reflect the business environment and market conditions. After reviewing the Company’s performance, combined with its evaluation of the individual achievement of the Named Executive Officers, the Compensation Committee authorized individual incentive payments for 2020 at 116.6% of target on January 21, 2021. In 2020, based upon the successful opening of three new branch locations pursuant to the Company’s strategic initiatives, as well as the strong leadership and decision-making provided throughout the COVID-19 global pandemic, the Compensation Committee did not make any changes to the calculated payout to the NEOs. However, due to the COVID-19 global pandemic and the impact it had on our community, borrowers and employees, the three NEOs unilaterally reduced their approved cash payouts under the STI Plan. Mr. Hagan reduced his payout by 31%, and Mrs. Sajdak and Mr. Miles decreased their payouts by 27% each.

Long-Term Incentive Plan (LTI)

The Company’s long-term incentive compensation program (the “LTI Plan”) is designed to align senior executives with the long-term interests of the Company and shareholders through stock-based compensation. The LTI Plan also seeks to provide reward for superior multi-year performance, encourage stock ownership, and enhance the Company’s ability to retain its top performers.

The Compensation Committee sets and approves award targets as a percentage of base salary. The incentive pool funding ranges from 0% - 150% of target based on actual performance. The maximum award for any participant, in consideration of corporate and individual performance, is capped at 150% of target.

The Company’s LTI Plan is the third component of each executive officer’s total compensation and consists of time-based and performance-based awards and serves to link the net worth of executive officers to the performance of the Company. The LTI Plan provides an incentive to accomplish the strategic, long-term objectives established by the Company to maximize long-term shareholder value and also is designed to be a retention tool for the participants.

Each year, in the first quarter, the Compensation Committee determines, at its discretion, the terms of the LTI Plan, the timing of the awards, the recipients who may be granted awards and the form and the amount of awards. In 2020, the Compensation Committee worked with its compensation consultant, Pearl Meyer, to continue to improve upon the LTI Plan framework with the following objectives:

Align executives with our shareholders by matching incentives with increases in shareholder value;

Attract and retain talented executives to drive the Company’s success;

Ensure sound risk management by providing a balanced view of performance and aligning rewards with the time horizon of risk;

Position the Company’s total compensation to be competitive with the market for meeting performance goals; and

Motivate and reward long-term sustained performance and avoid excessive risk taking.

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The performance shares are tied to performance goals for a three-year performance period. The Company believes that the measure of return on equity (“ROE”) is one of the most significant financial measures utilized by shareholders in valuing the Company. In 2019, the Compensation Committee used ROE as the sole measure used for the performance component of the award. In 2020, the Compensation Committee added one additional metric; 3-Year Cumulative Diluted Earnings per Share (“EPS”). The award will be based on the EPS at the end of the three-year performance period. The Compensation Committee believes that these measures are appropriate to evaluate performance over a three-year period. Each of these two measures is independently assigned a 50% weight for determining future performance against goals. The actual number of performance shares that vest will be determined at the end of the three-year period, depending upon Company performance against the three-year goals and aligning to shareholder value.

Long-Term Incentive Plan Awards for 2017-2019 Performance Period

Grants were made in January 2017 and awarded as 50% performance shares and 50% time-based restricted stock. The overall long-term incentive compensation for all NEOs remained unchanged from prior years. Mr. Hagan’s target was 30% of his base salary and Mr. Miles and Mrs. Sajdak’s target remained at 20% of his/her respective base salary. Grants for the performance period provided for the possibility of awards at a threshold, target and exceptional level based on the Company’s performance against one financial goal: Return on Equity with 100% weight.

The framework for establishing specific goals for the 2017 long-term incentive grant was similar to previous years. The goals were based on the Company’s business strategic plan at the end of 2016. The goals motivated improved performance to align results to shareholders’ expectations.

The performance goals and actual outcomes for the period are set forth below:

Performance Goal

Performance Period

Threshold

Target

Stretch

Actual

2017

6.00%

6.60%

7.30%

6.55%(1)

2018

6.87%

7.63%

8.28%

6.82%

2019

7.09%

7.85%

8.61%

5.79%

  

(1)Return on equity for the 2017 period excludes a one-time deferred tax adjustment of $4.0 million resulting from the corporate tax rate change.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) was enacted which reduced the corporate federal tax rate to 21%. As a result of the tax law change, the Company reported a one-time non-cash deferred tax asset write-down of $4.0 million, or earnings per share of $0.13, during the fourth quarter of 2017.

In order to avoid driving higher payouts due to the tax savings as a result of the Tax Act, the Compensation Committee adjusted the 2018 and 2019 performance period under the 2017 LTI Plan. The 2017 measure was not impacted by the Tax Act and the performance goal was not changed.

As of December 31, 2019, the three-year performance period for the 2017 grants ended. Performance-based shares were earned based on the Company achieving the annual 2017 performance metrics adjusted threshold, target or maximum metrics at the end of each year of the three-year performance period. Of the original 33,883 performance-based shares granted in 2017, 15,898 performance-based shares vested and were issued to eligible recipients, while 17,985 shares were forfeited in February of 2020. Of the total 15,898 performance-based shares that vested, Mr. Hagan earned 3,119 shares; Mr. Miles earned 1,249 shares and Mrs. Sajdak earned 1,041 shares. Shares forfeited became available for reissuance under future grants under the Company’s 2014 Omnibus Incentive Plan.

2017 Performance Measure. The 2017 Measure was not impacted by the Tax Act and the performance goal was not changed. The year-end results for 2017 were adjusted to reflect the one-time, non-cash write-down of $4.0 million as a result of the 2017 Tax Act. The actual ROE results for 2017 were 4.94% and the core, excluding the Tax Act impact, was 6.55%. Management obtained 96% of target.

2018 Performance Measure. The 2018 target goal was adjusted due to the Tax Act from 7.00% to 7.63% and the threshold was adjusted from 6.30% to 6.87%. Management missed the threshold metric by 0.05%, or 0.73%. Due to the adjustment in the ratios due to the Tax Act, the Compensation Committee made the decision in its sole discretion to payout under the 2018 Performance at threshold.

2019 Performance Measure. The 2019 target performance goal was adjusted due to the Tax Act from 7.20% to 7.85%, while the threshold performance goal was adjusted from 6.50% to 7.09%. The Company missed the threshold of 7.09%. The 2019 shares in the 2017 LTI Plan were not awarded. Overall, the incentive operated as designed by paying less when performance targets are not achieved.

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Long-Term Incentive Plan Awards for 2018-2020 Performance Period

Grants were made in January 2018 and awarded as 50% performance shares and 50% time-based restricted stock. The overall long-term incentive compensation for all NEOs remained unchanged from prior years. Mr. Hagan’s target was 30% of his base salary and Mr. Miles and Mrs. Sajdak’s target remained at 20% of his/her respective base salary. Grants for the performance period provided for the possibility of awards at a threshold, target and exceptional level based on the Company’s performance against one financial goal: Return on Equity with 100% weight.

The framework for establishing specific goals for the 2018 long-term incentive grant was similar to previous years. The goals were based on the Company’s business strategic plan at the end of 2017. The goals motivated improved performance to align results to shareholders’ expectations.

The performance goals and actual outcomes for the period are set forth below:

Performance Period

Threshold

Target

Stretch

Actual

2018

6.30%

6.80%

7.20%

6.82%

2019

6.85%

7.35%

7.75%

5.79%

2020

7.40%

7.90%

8.30%

4.86%

As of December 31, 2020, the three-year performance period for the 2018 grants ended. Of the original 31,841 performance-based shares granted in 2018, 9,943 performance-based shares vested and were issued to eligible recipients, while 21,898 shares were forfeited in February of 2021. Of the total 9,943 performance-based shares that vested, Mr. Hagan earned 2,180 shares; Mr. Miles earned 847 shares and Mrs. Sajdak earned 706 shares. Shares forfeited became available for reissuance under future grants under the Company’s 2014 Omnibus Incentive Plan.

Long-Term Incentive Plan Awards for 2019-2021 Performance Period

Grants were made in January 2019 and awarded as 50% performance shares and 50% time-based restricted stock. The overall long-term incentive compensation for all NEOs remained unchanged from prior years. Mr. Hagan’s target was 30% of his base salary and Mr. Miles and Mrs. Sajdak’s target remained at 20% of his/her respective base salary. Grants for the performance period provided for the possibility of awards at a threshold, target and exceptional level based on the Company’s performance against one financial goal: Return on Equity with 100% weight.

LTI Plan grants with respect to the 2019-2021 performance periods have not yet been earned. For each performance-based goal, achieving threshold performance pays at 50% of target value and achieving stretch performance pays at 150% of target value. To the extent earned at the end of the performance period, performance shares will be paid in the form of immediately vested shares of common stock at the end of the performance period. The framework for establishing specific goals for the 2019 long-term incentive grant was similar to previous years. The goals were based on the Company’s business strategic plan at the end of 2018. The goals motivated improved performance to align results to shareholders’ expectations.

The performance goals and weighting for the period are set forth below:

Goal

Weight

Threshold

Target

Stretch

Return on Equity

100%

2019

5.75%

6.13%

7.00%

2020

6.00%

6.75%

7.75%

2021

6.25%

7.00%

8.00%

Long-Term Incentive Plan Awards for 2020-2022 Performance Period

Grants were made in January 2020 and awarded as 50% performance shares and 50% time-based restricted stock. The overall long-term incentive compensation for all NEOs remained unchanged from prior years. Mr. Hagan’s target was 30% of his base salary, and Mr. Miles and Mrs. Sajdak’s target remained at 20% of his/her respective base salary. Grants for the performance period provided for the possibility of awards at a threshold, target and exceptional level, based on the Company’s performance against two financial goals: ROE, with 50% weight, and three-year cumulative EPS goals, with 50% weight.

LTI Plan grants with respect to the 2020-2022 performance period have not yet been earned. For each performance-based goal, achieving threshold performance pays at 50% of target value, and achieving stretch performance pays at 150% of target value. To the extent earned at the end of the performance period, performance shares will be paid in the form of immediately vested shares of common stock at the end of the performance period.

29

The framework for establishing specific goals for the 2020 long-term incentive grant was similar to previous years. The goals were based on the Company’s business strategic plan at the end of 2019. The goals motivated improved performance to align results to shareholders’ expectations.

The performance goals and weighting for the period are set forth below:

Goal

Weight

Threshold

Target

Stretch

Return on Equity

50%

2020

  5.00%

  5.48%

  6.00%

2021

  5.62%

  6.24%

  6.86%

2022

  6.29%

  6.99%

  7.69%

Three year cumulative EPS

50%

$1.50

$1.65

$1.80

The table below outlines the awards value and the number of shares granted to each Named Executive Officer in 2020:

2020 Equity Award
(# of Performance-Based
Shares)

2020 Equity Award
(# of Time-Based Shares)

2020 Grant Date Fair Value

James C. Hagan

9,027

9,026

$164,463

Allen J. Miles III

3,314

3,313

$ 60,372

Guida R. Sajdak

2,933

2,932

$ 53,430

Clawback Policy

Under the LTI and STI Plans, if the Board or an appropriate Board committee has determined that any fraud or intentional misconduct by one or more executive officers caused, directly or indirectly, the Company to restate its financial statements, the Board or committee may require reimbursement of any bonus or incentive compensation awarded to such officers and/or effect the cancellation of awards. This policy operates in addition to any (a) recoupment provisions contained in the terms of other compensation awards or programs, and (b) recoupment requirements imposed under applicable laws.

Stock Ownership Guidelines

We maintain stock ownership guidelines for our NEOs. These guidelines were established to promote a long-term perspective in managing the Company and to align the interests of our shareholders and NEOs. The stock ownership goal for each of these individuals is a multiple of 1x salary. The guidelines provide the NEOs five years to comply. As of December 31, 2020, all NEOs were in compliance with the stock ownership guidelines. Information about ownership guidelines for our non-employee directors can be found in “Director Compensation” of this Proxy Statement.

Other Benefits

Qualified Retirement Plans

The Company sponsors a tax-qualified non-contributory defined benefit pension plan (the “DB Plan”) covering substantially all employees hired before September 30, 2016, including Mr. Hagan and Mr. Miles. The plan was frozen to new employees hired after that date.

The Company also maintains a tax-qualified defined contribution plan (the “Profit Sharing Plan” or “401(k) Plan”) that provides for deferral of federal and state income taxes on employee contributions allowed under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The Company matches employee contributions up to 50% of the first 6% of eligible compensation contributed by the employee.

In addition to the DB Plan and the 401(k) Plan, the Company maintains an employee stock ownership plan (“ESOP”). The ESOP is a tax-qualified defined contribution plan in which our employees, including our Named Executive Officers, are eligible to participate when they reach the age of 21 and have completed 1,000 hours of service in the previous 12-month period. In general, pursuant to the terms of the ESOP, the Company contributes funds to the ESOP trust fund, and the contributed funds are allocated among all the participants’ accounts according to their relative levels of compensation (subject to IRS limits).

30

Perquisites

The Committee supports providing benefits and perquisites to the NEOs that are substantially the same as those offered to officers of comparative financial institutions, which we believe are reasonable, competitive and consistent with our overall compensation program. In addition, we may also make available to certain NEOs the use of a Company automobile, as was the case in 2020 for the NEOs.

Employment Agreements and Change of Control Agreements

The Committee believes that our continued success depends, to a significant degree, on the skills and competence of certain senior officers. The employment agreements are intended to ensure that we continue to maintain and retain experienced senior management. We currently have employment agreements with our President and Chief Executive Officer, Mr. Hagan; our Executive Vice President and Chief Lending Officer, Mr. Miles and our Executive Vice President and Chief Financial Officer, Mrs. Sajdak, in order to retain such executives. The employment agreements of Messrs. Hagan and Miles and Mrs. Sajdak provide for an initial three-year term subject to separate one-year extensions as approved by the Board at the end of each applicable fiscal year with minimum annual salaries, discretionary cash bonuses and other fringe benefits.

The employment agreements also provide uninsured death and disability benefits, as well as protection for the executives in the event the Company experiences a change in ownership or control. If the Company experiences a change in ownership, a change in effective ownership or control, or a change in the ownership of a substantial portion of the Company’s assets, as contemplated by Section 280G of the Code, a portion of any severance payments under the employment agreements might constitute an “excess parachute payment” under current federal tax laws. Any excess parachute payment would be subject to a federal excise tax payable by the executive and would be non-deductible by the Company for federal income tax purposes. The employment agreements do not provide a tax indemnity.

Benchmarking Data and Use of Compensation Consultants

The Compensation Committee believes that utilization of appropriate benchmarks for compensation analyses is an effective method for evaluating executive and director compensation. Accordingly, approximately every three years, the Compensation Committee engages the compensation consultant to conduct market competitive reviews, which, generally, include an assessment of compensation compared to market (e.g., industry-specific surveys and proxy peer group, where applicable), recommendations for total compensation opportunity guidelines (e.g., base salary, annual and long-term incentive targets), and a high-level assessment of performance relative to peers. The Compensation Committee uses this information to determine appropriate salary and incentive levels for executive officers and directors.

The competitive review was conducted in 2018 for reference with 2019 to 2021 pay decisions. This peer group was selected in October 2018 and included financial institutions of generally similar asset size and regional location. At that time, the Company was positioned approximately at the median of the peer group in terms of total assets, with asset size ranging from $1.6 billion to $4.2 billion. All banks were publicly-traded financial institutions located within the Northeast. The peer group used in the report presented for consideration of 2020 compensation decisions consisted of the following institutions:

Compensation Peer Group

ACNB Corporation

Camden National Corporation

Financial Institutions, Inc.

Arrow Financial Corporation

Chemung Financial Corporation

First Bancorp, Inc.

Bankwell Financial Group, Inc.

CNB Financial Corporation

Hingham Institution for Savings

Bar Harbor Bankshares

Codorus Valley Bancorp, Inc.

Orrstown Financial Services, Inc.

BSB Bancorp, Inc.

Enterprise Bancorp, Inc.

Peoples Financial Services Corp

Cambridge Bancorp

ESSA Bancorp, Inc.

SI Financial Group, Inc.(1)

  

(1)In 2019, Berkshire Hills Bancorp, Inc., acquired SI Financial Group, Inc.

It is expected that Pearl Meyer will continue to support the Compensation Committee in its 2021 executive compensation actions.

31

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information regarding compensation awarded to or earned by our NEOs for service during each of the last two completed fiscal years, as applicable:

Year

Salary(1)
($)

Non-Equity Incentive Plan Compensation(2)
($)

Stock
Awards
(3)
($)

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
(4)
($)

All Other Compensation(5)
($)

Total
($)

James C. Hagan

President and Chief Executive Officer

2020

545,084

191,700

268,215

239,345

42,712

1,287,056

2019

504,708

140,056

152,275

279,829

49,134

1,126,002

Allen J. Miles, III

EVP and Chief Lending Officer

2020

300,771

 70,400

 60,372

267,863

16,101

  715,507

2019

286,449

 50,272

 57,496

281,421

27,751

  703,389

Guida R. Sajdak

EVP Chief Financial Officer
and Treasurer

2020

266,161

 62,300

 97,904

18,421

  444,786

2019

252,399

 47,577

 50,882

19,738

  370,596

  

(1)The figures shown for salary represent amounts earned for the fiscal year, whether or not actually paid during such year.

(2)Amounts shown in this column reflect cash awards earned under the STI Plan, whether or not paid. For the 2020 year, however, due to the COVID-19 global pandemic and the impact it had on our community, borrowers and employees, each of the NEOs unilaterally reduced their approved cash payouts under the STI Plan. Mr. Hagan reduced his payout by 31% to $131,570, and Mrs. Sajdak and Mr. Miles decreased their payouts by 27% each to $45,412 and $51,312, respectively. Amounts payable under the STI Plan were paid in February of the following calendar year.

(3)Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 with respect to restricted stock awards granted to our NEOs. For more information concerning the assumptions used for these calculations, please refer to the notes to the financial statements contained in the 2020 Annual Report on Form 10-K. The stock award column does not include the value of dividends paid on unvested restricted stock, which are included in the Summary Compensation Table under the caption “All Other Compensation.”

(4)Amounts in this column represent the increase (if any) for each respective year in the present value of the individual’s accrued benefit (whether or not vested) under each tax-qualified and non-qualified actuarial or defined benefit plan calculated by comparing the present value of each individual’s accrued benefit under each such plan in accordance with FASB ASC Topic 715, Retirement Benefits, as of the plan’s measurement date in such year to the present value of the individual’s accrued benefit as of the plan’s measurement date in the prior fiscal year.

(5)Amounts in this column are set forth in the table below and include life insurance premiums, 401(k) Plan matching contributions, ESOP contributions, dividends on unvested restricted stock and contributions under the Benefit Restoration Plan. The NEOs participate in certain group life, health, disability insurance and medical reimbursement plans, not disclosed in the Summary Compensation Table, that are generally available to salaried employees and do not discriminate in scope, terms and operation. In addition, we provide certain non-cash perquisites and personal benefits to each NEO that do not exceed $10,000 in the aggregate for any individual, and are not included in the reported figures.

Life
Insurance
Premiums
($)

401(k)
Matching Contributions
($)

ESOP
Contributions
($)

Dividends
on Unvested
Restricted
Stock
($)

Contributions
under the
Benefit
Restoration
Plan
($)

Total
($)

James C. Hagan

5,079

8,002

9,011

4,284

16,336

42,712

Allen J. Miles, III

1,360

4,089

9,011

1,641

16,101

Guida R. Sajdak

7,985

9,022

1,414

18,421

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CEO Pay Ratio Disclosure

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing this disclosure regarding the relationship of the annual total compensation of the individual identified as the median paid employee of our Company and the annual total compensation of James C. Hagan, our President and Chief Executive Officer.

The individual identified as the median compensated employee was determined using a census of all full-time and part-time employees as of December 31, 2020, which totaled 357 employees, excluding the CEO. In order to identify the median compensated employee, we included compensation reported in Box 5 of Form W-2 for the full year of 2020. Base salary was annualized for employees who were hired during 2020. The annual total compensation for the median employee was calculated using the same methodology shown for the CEO in the “Summary Compensation Table – 2020” on page 31.

Based on this methodology, the annual total compensation of the CEO for 2020 was $1,226,926 and the annual total compensation of the median employee for 2020 was $45,932. The ratio of these amounts was 26.7 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

Outstanding Equity Awards at Fiscal Year-End

The following table provides information about outstanding equity awards under the Company’s equity compensation plans at December 31, 2020, whether granted in 2020 or earlier.

Option Awards

Restricted Stock Awards

Name

Grant
Date

Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)

Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)

Option
Exercise
Price
($)

Option
Expiration
Date

Grant
Date

Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
(2)

Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($)
(1)

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested
(#)
(3)

Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)
(1)

James C. Hagan 

01/30/2018

6,380

43,958

 

02/26/2019

2,597

17,893

7,793

53,694

 

02/25/2020

6,017

41,457

9,027

62,196

Allen J. Miles, III

01/30/2018

2,478

17,073

 

02/26/2019

981

6,759

2,942

20,270

 

02/25/2020

2,208

15,213

3,314

22,833

Guida R. Sajdak

1/25/2012

14,550

5.86

1/25/2022

01/30/2018

2,065

14,228

 

1/22/2013

22,965

6.82

1/22/2023

02/26/2019

868

5,981

2,604

17,942

 

1/22/2013

13,410

6.82

1/22/2023

02/25/2020

1,954

13,463

2,933

20,208

   

(1)The market values of these shares are based on the closing market price of the Company’s common stock on the NASDAQ Stock Market of $6.89 on Decemb