Edgar Filing: CHICOPEE BANCORP, INC.

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Form 10-Q for the quarterly period ended March 31, 2009

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2009

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

For the transition period from to

Commission File Number: 000-51996

CHICOPEE BANCORP, INC.

(Exact name of registrant as specified in its charter)


Massachusetts		20-4840562
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

70 Center Street, Chicopee, Massachusetts		01013
(Address of principal executive offices)		(Zip Code)

(413) 594-6692

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

As of May 7, 2009, there were 6,458,853 shares of the Registrant’s Common Stock outstanding.

CHICOPEE BANCORP, INC.

FORM 10-Q

INDEX


			Page
PART I.		FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Consolidated Statements of Financial Condition at March 31, 2009 and December 31, 2008		2

	Consolidated Statements of Income for the Three Months Ended March 31, 2009 and 2008		3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2009 and 2008		4

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008		5

	Notes to Unaudited Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		25

Item 4.	Controls and Procedures		26

PART II:		OTHER INFORMATION

Item 1.	Legal Proceedings		27
Item 1A.	Risk Factors		27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 3.	Defaults Upon Senior Securities		28
Item 4.	Submission of Matters to a Vote of Security Holders		28
Item 5.	Other Information		28
Item 6.	Exhibits		28

SIGNATURES			29

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollars In Thousands)


	March 31, 2009			December 31, 2008
	March 31, 2009			December 31, 2008
	(Unaudited)
Assets

Cash and due from banks	$	8,179		$	21,070
Short-term investments		1,288			1,003
Federal funds sold		16,737			1,000

Total cash and cash equivalents		26,204			23,073

Securities available-for-sale, at fair value		4,427			5,451
Securities held-to-maturity, at cost (fair value $45,877 and $49,673 at March 31, 2009 and December 31, 2008, respectively)		45,676			49,662
Federal Home Loan Bank stock, at cost		4,306			4,306
Loans, net of allowance for loan losses ($3,416 at March 31, 2009 and $3,333 at December 31, 2008)		415,187			416,261
Cash surrender value of life insurance		12,260			12,144
Premises and equipment, net		10,892			10,677
Accrued interest and dividends receivable		1,588			1,577
Deferred income tax asset		2,711			2,434
Other assets		2,158			2,058

Total assets	$	525,409		$	527,643


Liabilities and Stockholders’ Equity

Deposits
Non-interest-bearing	$	31,433		$	30,921
Interest-bearing		314,756			302,527

Total deposits		346,189			333,448

Securities sold under agreements to repurchase		23,119			21,956
Advances from Federal Home Loan Bank		60,630			76,567
Mortgagors’ escrow accounts		1,478			1,112
Accrued expenses and other liabilities		366			543

Total liabilities		431,782			433,626


Stockholders’ equity
Common stock (no par value, 20,000,000 shares authorized, 7,439,368 shares issued at March 31, 2009 and December 31, 2008)		72,479			72,479
Treasury stock, at cost (979,515 shares at March 31, 2009 and 942,615 shares at December 31, 2008)		(12,889	)		(12,483	)
Additional paid-in-capital		1,305			1,168
Unearned compensation (restricted stock awards)		(2,900	)		(3,107	)
Unearned compensation (Employee Stock Ownership Plan)		(4,984	)		(5,059	)
Retained earnings		42,553			42,439
Accumulated other comprehensive loss		(1,937	)		(1,420	)

Total stockholders’ equity		93,627			94,017

Total liabilities and stockholders’ equity	$	525,409		$	527,643

See accompanying notes to unaudited consolidated financial statements.

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except for Number of Shares and Per Share Amounts)

(Unaudited)


	Three Months Ended March 31,
	2009		2008
Interest and dividend income:
Loans, including fees	$	5,898	$	5,935
Interest and dividends on securities		177		316
Other interest-earning assets		3		138

Total interest and dividend income		6,078		6,389


Interest expense:
Deposits		1,880		2,647
Securities sold under agreements to repurchase		59		90
Other borrowed funds		405		159

Total interest expense		2,344		2,896


Net interest income		3,734		3,493
Provision for loan losses		94		10


Net interest income, after provision for loan losses		3,640		3,483


Non-interest income:
Service charges, fees and commissions		452		477
Loan sales and servicing, net of amortization		199		(6	)
Net gain on sales of securities available-for-sale		36		15

Total non-interest income		687		486


Non-interest expenses:
Salaries and employee benefits		2,352		2,221
Occupancy expenses		468		289
Furniture and equipment		278		233
Data processing		279		205
Stationery, supplies and postage		106		85
Other non-interest expense		729		664

Total non-interest expenses		4,212		3,697


Income before income taxes		115		272
Income tax expense		1		84

Net income	$	114	$	188


Earnings per share:
Basic	$	0.02	$	0.03
Diluted	$	0.02	$	0.03

Adjusted weighted average shares outstanding:
Basic		5,741,744		6,317,296
Diluted		5,741,744		6,330,306

See accompanying notes to unaudited consolidated financial statements.

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2009 and 2008

(Dollars In Thousands)

(Unaudited)


	Common Stock		Treasury Stock			Additional Paid-in Capital		Unearned Compensation (restricted stock awards)			Unearned Compensation (ESOP)			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total



Balance at December 31, 2008	$	72,479	$	(12,483	)	$	1,168	$	(3,107	)	$	(5,059	)	$	42,439	$	(1,420	)	$	94,017


Comprehensive loss:
Net income		—		—			—		—			—			114		—			114
Change in net unrealized gain on securities available-for-sale (net of deferred income taxes of $277)		—		—			—		—			—			—		(517	)		(517	)

Total comprehensive loss																				(403	)


Treasury stock purchased (36,900 shares)		—		(406	)		—		—			—			—		—			(406	)
Change in unearned compensation:
Stock option expense		—		—			129		—			—			—		—			129
Restricted stock award expense		—		—			—		207			—			—		—			207
Common stock held by ESOP committed to be released		—		—			8		—			75			—		—			83

Balance at March 31, 2009	$	72,479	$	(12,889	)	$	1,305	$	(2,900	)	$	(4,984	)	$	42,553	$	(1,937	)	$	93,627


Balance at December 31, 2007	$	72,479	$	(2,108	)	$	573	$	(3,940	)	$	(5,356	)	$	42,417	$	234		$	104,299


Comprehensive loss:
Net income		—		—			—		—			—			188		—			188
Change in net unrealized gain on securities available-for-sale (net of deferred income taxes of $143)		—		—			—		—			—			—		(267	)		(267	)

Total comprehensive loss																				(79	)


Treasury stock purchased (316,968 shares)		—		(4,118	)		—		—			—			—		—			(4,118	)
Change in unearned compensation:
Stock option expense		—		—			100		—			—			—		—			100
Restricted stock award expense		—		—			—		204			—			—		—			204
Common stock held by ESOP committed to be released		—		—			19		—			74			—		—			93

Balance at March 31, 2008	$	72,479	$	(6,226	)	$	692	$	(3,736	)	$	(5,282	)	$	42,605	$	(33	)	$	100,499

See accompanying notes to unaudited consolidated financial statements.

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2009			2008
	(In thousands)
Cash flows from operating activities:
Net income	$	114		$	188
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		256			168
Provision for loan losses		94			10
Increase in cash surrender value of life insurance		(116	)		(117	)
Realized gains on investment securities, net		(36	)		(15	)
Realized gains on sales of mortgages		112			3
(Increase) decrease in other assets		(100	)		109
(Increase) decrease in accrued interest receivable		(11	)		181
Decrease in other liabilities		(178	)		(334	)
Change in unearned compensation		419			397

Net cash provided by operating activities		554			590


Cash flows from investing activities:
Additions to premises and equipment		(484	)		(327	)
Loan originations and principal collections, net		868			(5,544	)
Proceeds from sales of securities available-for-sale		339			1,230
Purchases of securities available-for-sale		(73	)		(1,451	)
Purchases of securities held-to-maturity		(28,100	)		(48,540	)
Maturities of securities held-to-maturity		32,100			46,365

Net cash provided (used) by investing activities		4,650			(8,267	)


Cash flows from financing activities:
Net increase in deposits		12,741			7,143
Net increase in securities sold under agreements to repurchase		1,163			5,172
Proceeds from long-term FHLB advances		—			15,000
Payments on long-term FHLB advances		(937	)		(677	)
Net decrease in other short-term borrowings		(15,000	)		(5,000	)
Stock purchased for treasury		(406	)		(4,118	)
Net increase in escrow funds held		366			332

Net cash (used) provided by financing activities		(2,073	)		17,852


Net increase in cash and cash equivalents		3,131			10,175

Cash and cash equivalents at beginning of year		23,073			23,521

Cash and cash equivalents at end of period	$	26,204		$	33,696


Supplemental cash flow information:
Interest paid on deposits	$	1,880		$	2,647
Interest paid on borrowings		464			249
Income taxes paid		20			175

See accompanying notes to unaudited consolidated financial statements.

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

At and for the Three Months Ended March 31, 2009 and 2008

1.	Basis of Presentation

Chicopee Bancorp, Inc. (the “Corporation”) has no significant assets other than all of the outstanding shares of its wholly-owned subsidiaries, Chicopee Savings Bank (the “Bank”) and Chicopee Funding Corporation (collectively, the “Company”). The Corporation was formed on March 14, 2006 by the Bank to become the holding company for the Bank upon completion of the Bank’s conversion from a mutual savings bank to a stock savings bank. The conversion of the Bank was completed on July 19, 2006. The accounts of the Bank include both of its wholly-owned subsidiaries. The Consolidated Financial Statements of the Company as of March 31, 2009 and for the three-month periods ended March 31, 2009 and 2008 included herein are unaudited. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial condition, results of operations, changes in stockholders’ equity and cash flows, as of and for the periods covered herein, have been made. These financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended December 31, 2008 included in the Company’s Annual Report on Form 10-K.

The results for the three-month interim periods covered hereby are not necessarily indicative of the operating results for a full year.

2.	Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the adjusted weighted-average number of common shares outstanding during the period. The adjusted outstanding common shares equals the gross number of common shares issued less treasury shares, unallocated shares of the Chicopee Savings Bank Employee Stock Ownership Plan (“ESOP”) and nonvested restricted stock awards under the 2007 Equity Incentive Plan. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company relate to outstanding stock options and certain stock awards and are determined using the treasury stock method.

Earnings per share is computed as follows:


	Three Months Ended March 31,
	2009			2008
Net income (in thousands)	$	114		$	188


Weighted average number of common shares issued		7,439,368			7,439,368
Less: average number of treasury shares		(956,991	)		(288,863	)
Less: average number of unallocated ESOP shares		(505,878	)		(535,635	)
Less: average number of nonvested restricted stock awards		(234,755	)		(297,574	)


Adjusted weighted average number of common shares outstanding		5,741,744			6,317,296
Plus: dilutive nonvested restricted stock awards		—			13,010

Weighted average number of diluted shares outstanding		5,741,744			6,330,306


Net income per share:
Basic	$	0.02		$	0.03
Diluted	$	0.02		$	0.03

There were 671,667 and 666,667 stock options that were not included in the diluted earnings per share for the three months ended March 31, 2009 and 2008, respectively because their effect is anti-dilutive. In addition, there were 234,755 and 293,438 stock awards that were not included in the diluted earnings per share for the three months ended March 31, 2009 and 2008, respectively because their effect is anti-dilutive.

3.	Equity Incentive Plan

Stock Options

Under the Company’s 2007 Equity Incentive Plan, the Company may grant options to directors, officers and employees for up to 743,936 shares of common stock. Both incentive stock options and non-qualified stock options may be granted under the Plan. The exercise price for each option is equal to the market price of the Company’s stock on the date of grant and the maximum term of each option is ten years. The stock options vest over five years in five equal installments on each anniversary of the date of grant.

The Company recognizes compensation expense over the vesting period, based on the grant-date fair value of the options granted. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for options granted during the three months ended March 31, 2009 and 2008:


	Three Months Ended March 31,
	2009	2008
Expected dividend yield	2.00%	2.00%
Expected term	6.5 years	6.5 years
Expected volatility	24.52%	23.00%
Risk-free interest rate	1.99%	5.08%

Expected volatility is based on the historical volatility of the Company’s stock and other factors. The risk-free ratio for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company uses historical data, such as option exercise and employee termination rates, to calculate the expected option life.

A summary of options under the Plan as of March 31, 2009, and changes during the three months then ended, is as follows:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value



Outstanding at December 31, 2008	671,667	$	14.27	8.43
Granted	—		—	—
Exercised	—		—	—
Forfeited or expired	—		—	—

Outstanding at March 31, 2009	671,667	$	14.27	8.19	$	9,582

Exercisable at March 31, 2009	133,331	$	14.29	8.18	$	1,905

The weighted-average grant-date fair value of options granted during 2008 and 2007 was $3.91 and $3.92, respectively. For the three months ended March 31, 2009, share based compensation expense applicable to the plan was $129 and the related tax benefit was $26. No options have vested as of March 31, 2009 and no options were granted prior to July 1, 2007. As of March 31, 2009, unrecognized stock-based compensation expense related to nonvested options amounted to $1.7 million. This amount is expected to be recognized over a period of 3.33 years.

Stock Awards

Under the Company’s 2007 Equity Incentive Plan, the Company may grant stock awards to its directors, officers and employees for up to 297,574 shares of common stock. The stock awards vest 20% per year beginning on the first anniversary of the date of grant. The fair market value of the stock awards, based on the market price at the date of grant, is recorded as unearned compensation. Unearned compensation is amortized over the applicable vesting period. The weighted-average grant-date fair value of stock awards as of March 31, 2009 is $14.29. The Company recorded compensation cost related to stock awards of approximately $207 and $70 of related tax benefit in the three months ended March 31, 2009. Stock awards with a fair value of $765 vested during 2008. No stock awards have vested during 2009 and no stock awards were granted prior to July 1, 2007. As of March 31, 2009, unrecognized stock-based compensation expense related to nonvested restricted stock awards amount to $2.8 million. This amount is expected to be recognized over a period of 3.32 years.

A summary of the status of the Company’s stock awards as of March 31, 2009, and changes during the three months ended March 31, 2009, is as follows:


Nonvested Shares	Number of Shares	Weighted Average Grant-Date Fair Value



Balance at December 31, 2008	234,755	$	14.29
Granted	—		—
Vested	—		—
Forfeited	—		—

Balance at March 31, 2009	234,755	$	14.29

4.	Recent Accounting Pronouncements

In January 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) EITF No. 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20”. FSP EITF 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interest that Continue to be held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other-than-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and other related guidance. This Statement will be effective for interim and annual reporting periods ending after December 15, 2008. Management has implemented this guidance and is currently reviewing the Company’s securities portfolio in accordance with this FSP.

In April 2009, FASB issued FSP No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. FSP FAS 157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. This Statement will be effective for interim and annual reporting periods ending after June 15, 2009. This Statement does not require any new fair value measurements. Management does not expect the application of this Statement will have a material effect on the financial statements of the Company.

In April 2009, FASB issued FSP No. 115-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. FSP FAS 115-2 is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about credit and noncredit components of impaired debt securities that are not expected to be sold. This Statement will be effective for interim and annual reporting periods ending after June 15, 2009. Currently, the bank does not hold any other-than-temporary impaired securities. Management does not expect the application of this Statement will have a material effect on the financial statements of the Company.

In April 2009, FASB issued FSP No. 107-1, “Interim Disclosures about Fair Value of Financial Instruments”. FSP FAS 107-1 relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. Prior to issuing this FSP, fair values for these assets and liabilities were only disclosed once a year. This FSP now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. This Statement will be effective for interim and annual reporting periods ending after June 15, 2009. Management will be adding this disclosure to the Company’s quarterly reports beginning with the quarter ending June 30, 2009.

5.	Comprehensive Income or Loss

Accounting principles generally require recognized revenue, expenses, gains, and losses to be included in net income or loss. Certain changes in assets and liabilities, such as the after-tax effect of unrealized gains and losses on securities available-for-sale, are not reflected in the statement of income, but the cumulative effect of such items from period-to-period is reflected as a separate component of the equity section of the statement of financial condition (accumulated other comprehensive income or loss). Other comprehensive income or loss, along with net income or loss, comprises the Company’s total comprehensive loss.

Comprehensive loss is comprised of the following:


	Three Months Ended March 31,
	2009			2008
	(Dollars In Thousands)
Net income	$	114		$	188
Other comprehensive loss, net of tax:
Unrealized holding losses on available-for-sale securities arising during the period		(758	)		(395	)
Reclassification adjustment for gain on sale of available-for-sale securities included in net income		(36	)		(15	)
Tax effect		277			143

Other comprehensive loss, net of tax		(517	)		(267	)

Total comprehensive loss	$	(403	)	$	(79	)

6.	Defined Benefit Pension Plan

Prior to January 31, 2007, the Company sponsored a noncontributory defined benefit plan through its membership in the Savings Bank Employees Retirement Association (“SBERA”).

As of January 31, 2007, the Company terminated the Pension Plan. As of March 31, 2009, the Bank had no accrued liability. All funds from the Plan were distributed on July 16, 2008 to all eligible employees who were active when the plan terminated.

For the three months ended March 31, 2008 the components of the net periodic benefit cost are:


	Three Months Ended March 31, 2008
	Three Months Ended March 31, 2008
Service cost	$	—
Interest cost		51
Amortization of transition obligation		—
Expected return on assets		(51	)
Recognized net actuarial loss		—

Net periodic benefit cost	$	—


Weighted-average discount rate assumption used to determine benefit obligation		4.79	%
Weighted-average discount rate assumption used to determine net benefit cost		4.79	%

7.	Fair Values of Assets and Liabilities

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements”, which provides a framework for measuring fair value under U.S. generally accepted accounting principles.

The Company did not adopt SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115.”

In accordance with SFAS No. 157, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the assumptions used to determine fair value.

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury, other U.S. government and agency mortgage-backed securities that are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 – Valuations for assets and liabilities with inputs that are observable either directly or indirectly for substantially the full term. Level 2 also includes assets and liabilities traded in inactive markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities or from models arising from observable inputs.

Level 3 – Valuations for assets and liabilities with inputs that are unobservable, which are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.

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


	Fair Value Measurements Using
	March 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	March 31, 2009				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars In Thousands)
Assets
Securities available-for-sale	$	4,427	$	4,427	$	—	$	—


	Fair Value Measurements Using
	December 31, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2008				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars In Thousands)
Assets
Securities available-for-sale	$	5,451	$	5,451	$	—	$	—

The valuation approach used to value the securities available-for-sale was the market approach.

Also, the Company may be required, from time to time, to measure certain other financial assets on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets as of March 31, 2009.


	Fair Value Measurements Using
	March 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars In Thousands)
Assets
Impaired loans	$	386	$	—	$	386	$	—


	Fair Value Measurements Using
	December 31, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars In Thousands)
Assets
Impaired loans	$	106	$	—	$	106	$	—

In accordance with the provisions of SFAS No. 114, a valuation reserve of $153,000 as of March 31, 2009 and $110,000 as of December 31, 2008 was included in the allowance for loan losses, for the above impaired loans. The amount of impaired loans represents the carrying value, net of the related allowance for loan losses on impaired loans for which adjustments are based on the appraised value of the collateral which is based on the market approach of valuation.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following analysis discusses changes in the financial condition and results of operations of the Company at and for the three months ended March 31, 2009 and 2008, and should be read in conjunction with the Company’s Unaudited Consolidated Financial Statements and the notes thereto, appearing in Part I, Item 1 of this document.

Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company include, but are not limited to: changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company’s market area and accounting principles and guidelines. Additional factors are discussed in the Company’s 2008 Annual Report on Form 10-K under “Item 1A-Risk Factors.” These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

The Company does not undertake – and specifically disclaims any obligation – to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

General

Chicopee Savings Bank is a community-oriented financial institution dedicated to serving the financial services needs of consumers and businesses within its market area. We attract deposits from the general public and use such funds to originate primarily one- to four-family residential real estate loans, commercial real estate loans and commercial loans. To a lesser extent, we originate multi-family loans, construction loans and consumer loans. At March 31, 2009, we operated out of our main office, lending and operations center, and seven branch offices located in Chicopee, Ludlow, South Hadley, Ware, and West Springfield; all in Western Massachusetts.

Comparison of Financial Condition at March 31, 2009 and December 31, 2008

The Company’s assets decreased $2.2 million, or 0.4%, to $525.4 million at March 31, 2009 as compared to $527.6 million at December 31, 2008, primarily as a result of a decrease in held-to-maturity securities of $4.0 million, a decrease in net loans of $1.1 million, and an increase in cash and cash equivalents of $3.1 million. The decrease in held-to-maturity securities is primarily due maturities of U.S. Treasury securities. Total net loans decreased to $415.2 million from $416.3 million as of December 31, 2008, with one-to-four family loans decreasing $3.0 million, or 1.8%, and construction loans increasing $1.7 million, or 4.2%.

The balance sheet compression was also a result of paying down $15.9 million in Federal Home Loan Bank advances. Deposits increased $12.7 million to $346.2 million, compared to $333.4 million as of December 31, 2008. Core deposits, which exclude certificates of deposit, increased $13.5 million, or 10.2%, to $146.1 million at March 31, 2009 from $132.6 million at December 31, 2008 as a result of successful business development efforts. Certificates of deposit balances decreased $767,000, or 0.4%, to $200.1 million at March 31, 2009 due to the decreasing rate environment.

Total stockholders’ equity decreased $390,000, or 0.4%, to $93.6 million at March 31, 2009 from December 31, 2008, resulting mainly from the purchase of 36,900 shares of the Company’s common stock through the Company’s stock repurchase program, at a cost of $406,000. Partially offsetting the decrease was net income of $114,000 during the period.

Lending Activities

At March 31, 2009, the Company’s net loan portfolio was $415.2 million, or 79.0% of total assets. The following table sets forth the composition of the Company’s loan portfolio in dollar amounts and as a percentage of the respective portfolio at the dates indicated.


	March 31, 2009					December 31, 2008
	Amount			Percent of Total		Amount			Percent of Total
	(Dollars In Thousands)
Real estate loans:
One- to four-family	$	162,050		38.9	%	$	165,072		39.4	%
Multi-family		11,310		2.7	%		11,459		2.7	%
Commercial		113,988		27.4	%		114,875		27.4	%
Construction		43,371		10.4	%		41,629		10.0	%

Total real estate loans		330,719		79.4	%		333,035		79.5	%


Consumer loans:
Home equity		10,250		2.5	%		9,463		2.3	%
Second mortgages		17,032		4.0	%		17,840		4.2	%
Other		3,964		1.0	%		3,926		1.0	%

Total consumer loans		31,246		7.5	%		31,229		7.5	%


Commercial loans		54,728		13.1	%		54,255		13.0	%


Total loans		416,693		100.0	%		418,519		100.0	%


Undisbursed portion of loans in process		915					72
Net deferred loan origination costs		995					1,003
Allowance for loan losses		(3,416	)				(3,333	)


Loans, net	$	415,187				$	416,261

The Company’s net loan portfolio decreased $1.1 million, or 0.3%, during the first three months of 2009 primarily due to pay downs in residential real estate lending.

Non-performing Assets

The following table sets forth information regarding nonaccrual loans, real estate owned, and restructured loans at the dates indicated.


	March 31, 2009			December 31, 2008
	March 31, 2009			December 31, 2008
	(Dollars In Thousands)
Nonaccrual loans:
Real estate mortgage	$	2,418		$	2,595
Construction		—			97
Commercial		249			139
Consumer		200			85

Total		2,867			2,916
Real estate owned, net		269			269

Total nonperforming assets	$	3,136		$	3,185

Total nonperforming loans as a percentage of total loans (1) (2)		0.68	%		0.69	%
Total nonperforming assets as a percentage of total assets (2)		0.60	%		0.60	%

(1)	Total loans includes loans, plus unadvanced loan funds in process, plus net deferred loan costs.

(2)	Nonperforming assets consist of nonperforming loans and REO. Nonperforming loans consist of all loans 90 days or more past due.

Nonaccrual loans remained consistent at $2.9 million for the periods of March 31, 2009 and December 31, 2008.

Allowance for Loan Losses

Management prepares a loan loss analysis on a quarterly basis. The allowance for loan losses is maintained through the provision for loan losses, which is charged to operations. The allowance for loan losses is maintained at an amount that management considers appropriate to cover estimated losses in the loan portfolio based on management’s on-going evaluation of the risks inherent in the loan portfolio, consideration of local and regional trends in delinquency and impaired loans, the amount of charge-offs and recoveries, the volume of loans, changes in risk selection, credit concentrations, existing loan-to-value ratios, national and regional economies and the real estate market in the Company’s primary lending area. Management believes that the current allowance for loan losses is appropriate to cover probable losses inherent in the current loan portfolio. The Company’s loan loss allowance determinations also incorporate factors and analyses which consider the principal loss associated with the loan. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance for loan losses is based on management’s estimate of the amount required to reflect the potential inherent losses in the loan portfolio, based on circumstances and conditions known or anticipated at each reporting date. There are inherent uncertainties with respect to the collectibility of the Bank’s loans and it is reasonably possible that actual loss experience in the near term may differ from the amounts reflected in this report.

The allowance for loan losses is determined using a consistent, systematic methodology which analyzes the size and risk of the loan portfolio. In addition to evaluating the collectibility of specific loans when determining the allowance for loan losses, management also takes into consideration other factors such as

changes in the mix and the volume of the loan portfolio, historic loss experience, amount of the delinquencies and loans adversely classified, and economic trends. The adequacy of the allowance for loan losses is assessed by the allocation process whereby specific loss allocations are made against certain adversely classified loans, and general loss allocations are made against segments of the loan portfolio which have similar attributes. The Bank’s historical loss experience, industry trends, and the impact of the local and regional economy on the Bank’s borrowers, were considered by management in determining the allowance for loan losses.

The following table sets forth activity in the Company’s allowance for loan losses for the periods set forth.


	At or for the Three Months Ended March 31,
	2009			2008
	(Dollars In Thousands)
Allowance for loan losses, beginning of period	$	3,333		$	3,076

Charged-off loans:
Real estate		—			—
Commercial		—			—
Consumer		16			15

Total charged-off loans		16			15


Recoveries on loans previously charged-off:
Real estate		—			—
Commercial		—			—
Consumer		5			2

Total recoveries		5			2


Net loan charge-offs		11			13
Provision for loan losses		94			10

Allowance for loan losses, end of period	$	3,416		$	3,073


Net loan charge-offs to average loans, net		0.01	%		0.01	%
Allowance for loan losses to total loans (1)		0.82	%		0.79	%
Allowance for loan losses to nonperforming loans (2)		119.15	%		225.96	%
Recoveries to charge-offs		31.25	%		13.33	%

(1)	Total loans includes loans, plus unadvanced loan funds in process, plus net deferred loan costs.

(2)	Nonperforming loans consist of all loans 90 days or more past due and other loans which have been identified by the Company as presenting uncertainty with respect to the collectibility of interest or principal.

Investment Activities

At March 31, 2009, the Company’s investment securities portfolio amounted to $50.1 million, or 9.5% of assets. The following table sets forth at the dates indicated information regarding the amortized cost and market values of the Company’s investment securities.


	March 31, 2009				December 31, 2008
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars In Thousands)
Securities available-for-sale:
Marketable equity securities	$	7,401	$	4,427	$	7,632	$	5,451

Total equity securities		7,401		4,427		7,632		5,451

Securities held-to-maturity:
Debt securities of U.S. government sponsored enterprises		28,878		28,898		27,164		27,189
U.S. Treasury securities		6,298		6,298		11,997		12,000
Corporate and industrial revenue bonds		4,061		4,061		4,060		4,060
Collateralized mortgage obligations		6,439		6,620		6,441		6,424

Total securities held-to-maturity		45,676		45,877		49,662		49,673

Total	$	53,077	$	50,304	$	57,294	$	55,124

(1)	Does not include investments in FHLB-Boston stock totaling $4.3 million at March 31, 2009 and December 31, 2008.

Fair market value of securities available-for-sale decreased $1.0 million, or 18.79%, to $4.4 million at March 31, 2009 primarily due to market conditions and $340,000 of securities sold. Held-to-maturity securities decreased $4.0 million or 8.0% to $45.7 million due to maturities of U.S. Treasury securities.

Deposits

The following table sets forth the Company’s deposit accounts at the dates indicated.


	March 31, 2009				December 31, 2008
	Balance		Percent of Total Deposits		Balance		Percent of Total Deposits


	(Dollars In Thousands)
Demand deposits	$	31,433	9.08	%	$	30,921	9.27	%
NOW accounts		15,529	4.49	%		14,692	4.41	%
Passbook accounts		41,644	12.03	%		39,668	11.90	%
Money market deposit accounts		57,484	16.60	%		47,301	14.19	%
Certificates of deposit		200,099	57.80	%		200,866	60.24	%

Total deposits	$	346,189	100.00	%	$	333,448	100.00	%

Deposits grew $12.7 million, or 3.8%, to $346.2 million at March 31, 2009 from $333.4 million at December 31, 2008. The growth in demand deposit, passbook, and money market deposit accounts reflects the success of sales and marketing efforts. Certificates of deposit balances decreased $767,000, or 0.4%, to $200.1 million at March 31, 2009 largely due to the decreasing rate environment.

Borrowings

The following sets forth information concerning our borrowings for the periods indicated.


	March 31, 2009		December 31, 2008
	March 31, 2009		December 31, 2008
	(Dollars In Thousands)
Maximum amount of advances outstanding at any month-end during the period:
FHLB Advances	71,258		76,567
Securities sold under agreements to repurchase	27,334		38,557
Other borrowings	—		50
Average advances outstanding during the period:
FHLB Advances	67,178		45,872
Securities sold under agreements to repurchase	23,313		23,191
Other borrowings	—		25
Weighted average interest rate during the period:
FHLB Advances	2.45	%	3.16	%
Securities sold under agreements to repurchase	1.03	%	1.50	%
Other borrowings	0.00	%	7.00	%
Balance outstanding at end of period:
FHLB Advances*	60,630		76,567
Securities sold under agreements to repurchase	23,119		21,956
Other borrowings	—		—
Weighted average interest rate at end of period:
FHLB Advances	2.59	%	2.24	%
Securities sold under agreements to repurchase	1.00	%	1.25	%
Other borrowings	0.00	%	0.00	%

*	Balance includes a one time put option of $5.0 million, the FHLB may call this advance on June 30, 2011.

We utilize borrowings from a variety of sources to supplement our supply of funds for loans and investments.

Comparison of Operating Results for the Three Months Ended March 31, 2009 and 2008

General

Net income decreased $74,000, to $114,000 for the quarter ended March 31, 2009 compared to $188,000 for the same quarter last year. The decrease in net income for the first quarter of 2009 was primarily as a result of the narrowing of the net interest margin and an increase in salaries and employee benefits expense and occupancy expenses relating to the Bank’s expansion that included two additional branch locations.

Analysis of Net Interest Income

Net interest income represents the difference between income on interest-earning assets and expense on interest-bearing liabilities. Net interest income depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rate earned or paid on them.

The following table sets forth average balances, interest income and expense and yields earned or rates paid on the major categories of assets and liabilities for the periods indicated. The average yields and costs are derived by dividing interest income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively. The yields and costs are annualized. Average balances are derived from average daily balances. The yields and costs include fees which are considered adjustments to yields. Loan interest and yield data does not include any accrued interest from nonaccruing loans.


	For the Three Months Ended March 31,
	2009							2008
	Average Balance		Interest			Average Yield/ Rate		Average Balance		Interest			Average Yield/ Rate
	(Dollars In Thousands)
Interest-earning assets:
Investment securities (1)	$	53,804	$	214		1.61	%	$	37,721	$	355		3.79	%
Loans:
Residential real estate loans		176,300		2,480		5.70	%		168,837		2,469		5.88	%
Commercial real estate loans		157,447		2,386		6.15	%		141,042		2,310		6.59	%
Consumer loans		31,294		404		5.24	%		26,976		426		6.35	%
Commercial loans		55,490		628		4.59	%		45,859		730		6.40	%

Loans, net		420,531		5,898		5.69	%		382,714		5,935		6.24	%
Other		12,310		3		0.10	%		14,498		138		3.83	%

Total interest-earning assets		486,645		6,115		5.10	%		434,933		6,428		5.94	%

Noninterest-earning assets		38,913							26,488

Total assets	$	525,558						$	461,421


Interest-bearing liabilities:
Deposits:
Money market accounts	$	49,312	$	109		0.90	%	$	36,864	$	243		2.65	%
Savings accounts (2)		41,179		42		0.41	%		40,480		76		0.76	%
NOW accounts		15,267		18		0.48	%		14,224		15		0.42	%
Certificates of deposit		202,580		1,711		3.43	%		204,353		2,313		4.55	%

Total interest-bearing deposits		308,338		1,880		2.47	%		295,921		2,647		3.60	%
FHLB advances		67,178		405		2.44	%		17,751		158		3.58	%
Securities sold under agreement to repurchase		23,313		59		1.03	%		17,055		90		2.12	%
Other borrowings		—		—		0.00	%		45		1		7.68	%

Total interest-bearing borrowings		90,491		464		2.08	%		34,851		249		2.87	%

Total interest-bearing liabilities		398,829		2,344		2.37	%		330,772		2,896		3.52	%

Demand deposits		32,030							26,686
Other noninterest-bearing liabilities		324							704

Total liabilities		431,183							358,162
Total stockholders’ equity		94,375							103,259

Total liabilities and stockholders’ equity	$	525,558						$	461,421

Net interest-earning assets	$	87,816						$	104,161


Tax equivalent net interest income/interest rate spread (3)				3,771		2.73	%				3,532		2.42	%

Tax equivalent net interest income as a percentage of interest-earning assets						3.14	%						3.27	%

Ratio of interest-earning assets to interest-bearing liabilities						122.02	%						131.49	%

Less: tax equivalent adjustment (1)				(37	)						(39	)

Net interest income as reported on statement of operations			$	3,734						$	3,493

(1)	Municipal securities income and net interest income are presented on a tax equivalent basis using a tax rate of 41%. The tax equivalent adjustment is deducted from the tax equivalent net interest income to agree to the amount reported on the statement of income.

(2)	Savings accounts include mortgagors’ escrow deposits.

(3)	Tax equivalent net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

The following table presents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s tax equivalent interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (changes in volume multiplied by prior rate); (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.


	Three Months Ended March 31, 2009 compared to 2008
	Increase (Decrease) Due to
	Volume			Rate			Net
	(Dollars In Thousands)
Interest-earning assets:
Investment securities (1)	$	108		$	(249	)	$	(141	)
Loans:
Residential real estate loans		96			(85	)		11
Commercial real estate loans		246			(170	)		76
Consumer loans		60			(82	)		(22	)
Commercial loans		134			(236	)		(102	)

Total loans		536			(573	)		(37	)
Other		(18	)		(117	)		(135	)

Total interest-earning assets	$	626		$	(939	)	$	(313	)


Interest-bearing liabilities:
Deposits:
Money market accounts	$	63		$	(197	)	$	(134	)
Savings accounts (2)		1			(35	)		(34	)
NOW accounts		1			2			3
Certificates of deposit		(20	)		(582	)		(602	)

Total deposits		45			(812	)		(767	)
FHLB advances		311			(64	)		247
Securities sold under agreement to repurchase		25			(56	)		(31	)
Other borrowings		0			(1	)		(1	)

Total interest-bearing borrowings		336			(121	)		215

Total interest-bearing liabilities		381			(933	)		(552	)


Increase (decrease) in net interest income (3)	$	245		$	(6	)	$	239

(1)	The changes in state and municipal income are reflected on a tax equivalent basis using a tax rate of 41%.

(2)	Includes interest on mortgagors’ escrow deposits.

(3)	The changes in net interest income are reflected on a tax equivalent basis and thus do not correspond to the statement of operations.

Net interest income increased $241,000, or 6.9%, to $3.7 million for the three months ended March 31, 2009 compared to $3.5 million for the same period in 2008, mainly driven by the decreased interest rate paid on interest-bearing liabilities. Net interest margin decreased 13 basis points to 3.14% for the three months ended March 31, 2009 from the comparable period in 2008 primarily resulting from the decreasing rate environment.

Interest and dividend income, on a tax equivalent basis, declined $313,000, or 4.9%, to $6.1 million for the three months ended March 31, 2009 compared to $6.4 million for the same period last year, largely reflecting growth in average interest-earning assets. Average interest-earning assets totaled $486.6 million for the three months ended March 31, 2009 compared to $434.9 million for the same period last year, an increase of $51.7 million, or 11.9%. Average loans increased $37.8 million, or 9.9%, primarily due to strong originations. Average investment securities increased $16.1 million, or 42.6%, principally reflecting purchases of agencies and U.S. treasury securities. The yield on average interest-earning assets decreased 84 basis points to 5.10% for the three months ended March 31, 2009, principally as a result of lower market rates of interest on investment securities and fed funds. The lower interest rate environment led to an increase in the levels of loan prepayment and refinancing volume.

Total interest expense decreased $552,000, or 19.1%, to $2.3 million for the three months ended March 31, 2009 from $2.9 million for the same period in 2008, resulting primarily from decreased cost of liabilities. Average interest-bearing liabilities increased $68.1 million, or 20.6%, to $398.8 million for the three months ended March 31, 2009 from $330.8 million for the comparable period in 2008 reflecting an increase in interest-bearing borrowings and deposits. Rates paid on average interest-bearing liabilities declined 115 basis points to 2.37% for the first quarter of 2009, largely reflecting the lower market interest rates. The lower interest rate environment led to a decrease in rates paid for certificates of deposit as well as the repricing of a portion of the Company’s outstanding certificates of deposit.

Provision for Loan Losses

The provision for loan losses for the first quarter of 2009 was $94,000 compared to $10,000 for the same period in 2008. The increase in provision for loan losses was due to the increase in general reserve requirement allocation percentages and a slight increase to specific reserve allocations. The allowance for loan losses is maintained through provisions for loan losses.

Non-interest Income

Total non-interest income increased $201,000, or 41.4%, to $687,000 for the first quarter of 2009 compared to $486,000 for the same period in 2008. The increase is primarily due to the increase in loan sales and servicing.

Non-interest Expenses

Non-interest expenses increased $530,000, or 14.4%, to $4.2 million for the three months ended March 31, 2009 compared to $3.7 million in the first quarter of 2008. The increase is primarily attributable to occupancy expenses that increased $179,000, or 61.9%, to $468,000 and salaries and employee benefits expense that increased $131,000, or 5.9%, to $2.4 million and for the first quarter of 2009 reflecting the bank’s expansion that included two additional branch locations.

Income Taxes

The Company’s income tax expense decreased $83,000, or 98.8%, to $1,000 for the first quarter of 2009 compared to $84,000 in the first quarter of 2008. The Company’s combined federal and state effective tax rate was 0.9%, down from 30.9% for the same period in 2008. This decrease resulted from the combination of a decrease in taxable income and the impact of tax exempt income.

Explanation of Use of Non-GAAP Financial Measurements

We believe that it is common practice in the banking industry to present interest income and related yield information on tax exempt securities on a tax-equivalent basis and that such information is useful to investors because it facilitates comparisons among financial institutions. However, the adjustment of interest income and yields on tax exempt securities to a tax equivalent amount may be considered to include financial information that is not in compliance with U.S. generally accepted accounting principles (GAAP). A reconciliation from GAAP to non-GAAP is provided below.


	Three Months Ended March 31,
	2009				2008
	(Dollars in Thousands)
	Interest		Average Yield		Interest		Average Yield
	Interest		Average Yield		Interest		Average Yield
Investment securities (non-tax adjustment)	$	177	1.33	%	$	316	3.37	%
Tax equivalent adjustment (1)		37				39

Investment securities (tax equivalent basis)	$	214	1.61	%	$	355	3.79	%


Net interest income (non-tax adjustment)	$	3,734			$	3,478
Tax equivalent adjustment (1)		37				39

Net interest income (tax equivalent basis)	$	3,771			$	3,517


Interest rate spread (no tax adjustment)			2.70	%			2.37	%
Net interest margin (no tax adjustment)			3.11	%			3.22	%

(1)	The tax equivalent adjustment is based on a combine federal and state tax rate of 41% for all periods presented

Liquidity Management

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of securities, borrowings from the Federal Home Loan Bank of Boston and securities sold under agreements to repurchase. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. Prepayment rates can have a significant impact on interest income. Because of the large percentage of loans we hold, rising or falling interest rates have a significant impact on the prepayment speeds of our earning assets that in turn affect the rate sensitivity position. When interest rates rise, prepayments tend to slow. When interest rates fall, prepayments tend to rise. Our asset sensitivity would be reduced if prepayments slow and vice versa. While we believe these assumptions to be reasonable, there can be no assurance that assumed prepayment rates will approximate actual loan repayment activity. Our short-term investments are primarily comprised of U.S. Treasury and government agencies, which we use primarily for the collateral purposes for sweep accounts maintained by commercial customers. The balance of these investments fluctuates as the aggregate balance of our sweep accounts fluctuates.

We regularly adjust our investments in liquid assets based upon our assessment of: (1) expected loan demands; (2) expected deposit flows; (3) yields available on interest-earning deposits and securities; and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At March 31, 2009, cash and cash equivalents net of reserve requirements totaled $26.2 million. Agencies and U.S. Treasury securities net of pledged securities totaled $7.6 million. Collateralized mortgage obligations totaled $6.4 million. Securities

classified as available-for-sale totaled $4.4 million at March 31, 2009. At March 31, 2009, we had the ability to borrow a total of approximately $111.1 million from the Federal Home Loan Bank of Boston. On March 31, 2009, we had $60.6 million of borrowings outstanding. In addition, we had the following available lines of credit: a $4.9 million credit line with the FHLB, a $2.0 million borrowing line of with the Depositors Insurance Fund, and a $3.0 million unsecured line of credit of with Bankers Bank, N.E.

At March 31, 2009, we had $77.9 million in loan commitments outstanding, which consisted of $4.9 million of commitments to grant commercial loans, $13.6 million of commitments to grant mortgage loans, $10.3 million in unadvanced construction loan commitments, $46.5 million in unfunded commitments under lines of credit and $2.6 million in commercial standby letters of credit. Certificates of deposit due within one year of March 31, 2009 totaled $122.9 million, or 61.4%, of our certificates of deposit. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before March 31, 2010. We believe, however, based on past experience that a significant portion of our certificates of deposit will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Capital Management

We are subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2009, the Bank exceeded all of its regulatory capital requirements. The Bank is considered “well capitalized” under regulatory guidelines. The Company is subject to the Federal Reserve Board’s capital adequacy guidelines for bank holding companies (on a consolidated basis) substantially similar to those of the Federal Deposit Insurance Corporation. The Company exceeded these requirements at March 31, 2009.

The Company’s and Bank’s actual capital amounts and ratios as of March 31, 2009 and December 31, 2008 are presented in the table.


	Actual				Minimum for Capital Adequacy Purposes				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars In Thousands)
As of March 31, 2009

Total Capital to Risk Weighted Assets
Company	$	98,967	24.0	%	$	42,010	8.0	%		N/A	N/A
Bank	$	82,382	20.1	%	$	32,802	8.0	%	$	41,003	10.0	%

Tier 1 Capital to Risk Weighted Assets
Company	$	95,550	23.2	%	$	16,462	4.0	%		N/A	N/A
Bank	$	78,965	19.3	%	$	16,401	4.0	%	$	24,602	6.0	%

Tier 1 Capital to Average Assets
Company	$	95,550	18.2	%	$	21,005	4.0	%		N/A	N/A
Bank	$	78,965	15.1	%	$	20,945	4.0	%	$	26,182	5.0	%


As of December 31, 2008:

Total Capital to Risk Weighted Assets
Company	$	98,762	23.6	%	$	33,492	8.0	%		N/A	N/A
Bank	$	82,546	19.8	%	$	33,340	8.0	%	$	41,675	10.0	%

Tier 1 Capital to Risk Weighted Assets
Company	$	95,429	22.8	%	$	16,746	4.0	%		N/A	N/A
Bank	$	79,213	19.0	%	$	16,670	4.0	%	$	25,005	6.0	%

Tier 1 Capital to Average Assets
Company	$	95,429	18.3	%	$	20,808	4.0	%		N/A	N/A
Bank	$	79,213	15.3	%	$	20,733	4.0	%	$	25,916	5.0	%

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with U.S. generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments, letters of credit and lines of credit. We currently have no plans to engage in hedging activities in the future.

For the three month periods ended March 31, 2009 and March 31, 2008, we engaged in no off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Qualitative Aspects of Market Risk

We manage the interest rate sensitivity of our interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changes in the interest rate environment. Deposit accounts typically react more quickly to changes in market interest rates than mortgage loans because of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect our earnings while decreases in interest rates may beneficially affect our earnings. To reduce the potential volatility of our earnings, we have sought to improve the match between asset and liability maturities and rates, while maintaining an acceptable interest rate spread. Our strategy for managing interest rate risk emphasizes: adjusting the maturities of borrowings; adjusting the investment portfolio mix and duration; increasing our focus on shorter-term, adjustable-rate commercial and multi-family lending; selling fixed-rate mortgage loans; and periodically selling available-for-sale securities. We currently do not participate in hedging programs, interest rate swaps or other activities involving the use of derivative financial instruments.

We have an Asset/Liability Committee, which includes members of management, to communicate, coordinate and control all aspects involving asset/liability management. The committee reports to the Board of Directors of the Bank quarterly and establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

Quantitative Aspects of Market Risk

We analyze our interest rate sensitivity to manage the risk associated with interest rate movements through the use of interest income simulation. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest sensitive.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period.

Our goal is to manage asset and liability positions to moderate the effects of interest rate fluctuations on net interest income. Interest income simulations are completed monthly and presented to the Asset/Liability Committee and Board of Directors of the Bank. The simulations provide an estimate of the impact of changes in interest rates on net interest income under a range of assumptions. The numerous assumptions used in the simulation process are reviewed by the Asset/Liability Committee and the Board of Directors of the Bank on a quarterly basis. Changes to these assumptions can significantly affect the results of the simulation. The simulation incorporates assumptions regarding the potential timing in the repricing of certain assets and liabilities when market rates change and the changes in spreads between different market rates. The simulation analysis incorporates management’s current assessment of the risk that pricing margins will change adversely over time due to competition or other factors.

Simulation analysis is only an estimate of our interest rate risk exposure at a particular point in time. We continually review the potential effect changes in interest rates could have on the repayment of rate sensitive assets and funding requirements of rate sensitive liabilities.

The table below sets forth an approximation of our exposure as a percentage of estimated net interest income for the next 12 month period using interest income simulation. The simulation uses projected repricing of assets and liabilities at March 31, 2009 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Prepayment rates can have a significant impact on interest income simulation. Because of the large percentage of loans we hold, rising or falling interest rates have a significant impact on the prepayment speeds of our earning assets that in turn affect the rate sensitivity position. When interest rates rise, prepayments tend to slow. When interest rates fall, prepayments tend to rise. Our asset sensitivity would be reduced if prepayments slow and vice versa. While we believe such assumptions to be reasonable, there can be no assurance that assumed prepayment rates will approximate future mortgage-backed security and loan repayment activity.

The following table reflects changes in estimated net interest income for the Bank at March 31, 2008 through March 31, 2009.


Increase (Decrease) in Market Interest Rates (Rate Shock)	Net Interest Income
	$ Amount		$ Change			% Change
(Dollars In Thousands)
300 bp	$	15,495	$	1,091		7.6	%
200	$	15,251	$	847		5.9	%
100	$	14,793	$	389		2.7	%
—	$	14,404		—		—
(100)	$	13,997	$	(407	)	-2.8	%
(200)	$	13,645	$	(759	)	-5.3	%

The basis point changes in rates in the above table are assumed to occur evenly over the following 12 months.

Item 4.

Controls and Procedures

The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s

management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Such routine legal proceedings, in the aggregate, are believed by management to be immaterial to the financial condition and results of operations of the Company.

Item 1A.

Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008, which could materially affect our business, financial condition or future results. At March 31, 2009, the risk factors for the Company have not changed materially from those reported in our Annual Report on Form 10-K. However, the risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

(a)

Unregistered Sales of Equity Securities – Not applicable

(b)

Use of Proceeds – Not applicable

(c)

Repurchase of Our Equity Securities –

On August 8, 2008, the Company announced that its Board of Directors authorized a third stock repurchase program (the “Third Stock Repurchase Program”) for the purchase of up to 335,000 shares of the Company’s common stock, or approximately 5% of its outstanding common stock. The repurchase of up to 200,000 shares under the Third Stock Repurchase Program will be conducted solely through a Rule 10b5-1 repurchase plan with Sterne, Agee & Leach, Inc. Repurchased shares will be held in treasury. This plan will continue until it is completed or terminated by the Board of Directors. Repurchases made in the first quarter of 2009 were as follows:


Period	(a) Total Number of Shares (or Units) Purchased	(b) Average Price Paid Per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs







January 1 - 31, 2009	—	$	—	217,277	117,723

February 1 - 28, 2009	35,000		10.99	252,277	82,723

March 1 - 31, 2009	1,900		11.26	254,177	80,823


Total	36,900	$	11.01	254,177

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Submission of Matters to a Vote of Security Holders.

None.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

3.1	Articles of Incorporation of Chicopee Bancorp, Inc. (1)

3.2	Bylaws of Chicopee Bancorp, Inc. (2)

4.0	Stock Certificate of Chicopee Bancorp, Inc. (1)

31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32.0	Section 1350 Certification

(1)	Incorporated herein by reference to the Exhibits to the Company’s Registration Statement on Form S-1 (File No. 333-132512), as amended, initially filed with the Securities and Exchange Commission on March 17, 2006.

(2)	Incorporated herein by reference to Exhibit 3.2 to the Company’s 8-K (File No. 000-51996) filed with the Securities and Exchange Commission on August 1, 2007.

SIGNATURES

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


	CHICOPEE BANCORP, INC.

Dated: May 7, 2009	By:	/s/ William J. Wagner
		William J. Wagner
		Chairman of the Board, President and
		Chief Executive Officer
		(principal executive officer)

Dated: May 7, 2009	By:	/s/ W. Guy Ormsby
		W. Guy Ormsby
		Executive Vice President,
		Chief Financial Officer and Treasurer
		(principal financial and chief accounting officer)

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