What changed in this filing

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Item 1A. Risk Factors

2023-03-08 compared with 2022-03-08 · 102 added, 93 removed, 204 unchanged (49% of the section changed)

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As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions.

Our businesses and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from customers in the form of deposits and investing in securities, are sensitive to general business and economic conditions in the United States and to a lesser degree secondary effects of global geopolitical events.

weakens, our growth and profitability from our lending, deposit and investment operations could be constrained.

Our businesses and operations, which primarily consist of lending money to clients in the form of loans, borrowing money from clients in the form of deposits and investing in securities, are sensitive to general business and economic conditions in the United States and to a lesser degree secondary effects of global geopolitical events.

economy weakens, our growth and profitability from our lending, deposit and investment operations could be constrained.

Uncertainty about the federal fiscal policymaking process, the medium-term and long-term fiscal outlook of the federal government, and future tax rates is a concern for businesses, consumers and investors in the United States.

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These risks may be affected by the strength of the borrower’s business sector and local, regional and national market and economic conditions.

Our risk management practices, such as monitoring the concentration of our loans within specific industries and our credit approval practices, may not adequately reduce credit risk, and our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio.

Our risk management practices, such as monitoring the concentration of our loans within specific industries and our credit approval practices, may not adequately reduce credit risk, and our credit administrators, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting clients and the quality of the loan portfolio.

Finally, many of our loans are made to middle-market businesses that may be less able to withstand competitive, economic and financial pressures than larger borrowers.

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The level of our allowance for loan losses reflects management’s continuing evaluation of general economic conditions, diversification and seasoning of the loan portfolio, historic loss experience, identified credit problems, delinquency levels and adequacy of collateral.

The determination of the appropriate level of the allowance for loan losses is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.

The determination of the

appropriate level of the allowance for loan losses is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risks and future trends, all of which may undergo material changes.

Inaccurate management assumptions, continuing deterioration of economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require us to increase our allowance for loan losses.

The COVID-19 pandemic has further impacted the assumptions and methodologies typically used in making allowances for loan losses, and the availability of materials and other market information, including appraisals, have been impacted by the COVID-19 pandemic, making assumptions more subjective.

In addition, our regulators, as an integral part of their examination process, review our loans and the adequacy of our allowance for loan losses and may direct us to make additions to our allowance for loan losses based on their judgments about information available to them at the time of their examination.

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If we are required to materially increase our level of allowance for loan losses for any reason, such increase could have a material adverse effect on our business, financial condition, results of operations and future prospects.

The implementation of Current Expected Credit Loss (“CECL”), which will require us to increase our allowance for loan losses, could have a material adverse effect on our financial condition and results of operation.

The Financial Accounting Standards Board (“FASB”) has adopted a new accounting standard, CECL, effective for the Company as of January 1, 2023.

CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, other financial instruments and other commitments to extend credit and provide for the expected credit losses as allowances for credit losses.

This will change our current method of providing allowance for loan losses that are probable and require us to record an allowance for credit losses as of January 1, 2023 materially in excess of our existing allowance for loan losses.

CECL will also greatly increase the data we will need to collect and review to determine the appropriate level of the allowance for credit losses.

Although we expect the Bank and the Company will continue to meet all applicable capital adequacy requirements following recording of the impact of adoption to shareholders’ equity, future provisioning for expected credit losses under CECL may have a material adverse effect on our financial condition and results of operations.

Our concentration of large loans to certain borrowers may increase our credit risk.

A good number of our loans have been made to a small number of borrowers, resulting in a high concentration of large loans to certain borrowers.

A majority of our loans have been made to a small number of borrowers, resulting in a high concentration of loans to certain borrowers.

As of December 31, 2022, our five largest relationships ranged in exposure from approximately $83.7 million to $127.5 million.

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These loans typically involve repayment dependent upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service.

Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in

real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful leasing of their properties, in addition to the factors affecting residential real estate borrowers.

Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful leasing of their properties, in addition to the factors affecting residential real estate borrowers.

These loans also involve greater risk because they generally are not fully amortizing over the loan period, but have a balloon payment due at maturity.

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During the construction phase, a number of factors can result in delays and cost overruns.

If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan or by sale of collateral.

If estimates of value are inaccurate or if actual

construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan or by sale of collateral.

Our underwriting, review and monitoring cannot eliminate all of the risks related to these loans.

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A prolonged downturn in the real estate market could result in losses and adversely affect our profitability.

As of December 31, 2021, the majority of our loan portfolio was composed of commercial real estate loans.

A high percentage ou r loan portfolio is comprised of commercial real estate loans.

The sale of real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended.

A decline in real estate values could impair the value of our collateral and our ability to sell the collateral upon any foreclosure, which would likely require us to increase our provision for loan losses.

A decline in real estate values c ould impair the value of our collateral and our ability to sell the collateral upon any foreclosure, which would likely require us to increase our provision for loan losses.

In the event of a default with respect to any of these loans, the amounts we receive upon sale of the collateral may be insufficient to recover the outstanding principal and interest on the loan.

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Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the U.S.

Federal Reserve Board.

Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and

the interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration of our assets.

Federal Reserve Board ("FRB").

Throughout 2022, the FRB raised the target range for the federal funds rate on seven separate occasions and citing factors including the hardships caused by the ongoing Russia-Ukraine conflict, continued global supply chain disruptions and imbalances, and increased inflationary pressure.

The FRB has indicated that ongoing increases may be appropriate.

Changes in monetary policy, including changes in interest rates, influences not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration of our assets.

If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore net income, could be adversely affected.

A prolonged period of extremely volatile and unstable market conditions may increase our funding costs and negatively affect market risk mitigation strategies.

Further, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our business, financial condition, results of operations and future prospects.

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These circumstances could not only result in increased loan defaults, foreclosures and charge-offs, but also necessitate further increases to our allowance for loan losses, each of which could have a material adverse effect on our business, results of operations, financial condition and future prospects.

Our business is concentrated in Fairfield and New Haven Counties, Connecticut and the surrounding areas, and we are more sensitive than our more geographically diversified competitors to adverse changes in the local economy.

We conduct a majority of our operations in the New York metropolitan area, including Fairfield and New Haven Counties, Connecticut.

A majority of the real estate loans in our loan portfolio are secured by properties located in the New York metropolitan area, including Fairfield and New Haven Counties.

In addition, as of December 31, 2021, the majority of the loans in our loan portfolio (measured by dollar amount) were made to borrowers who live or conduct business in the New York metropolitan area.

We compete against a number of financial institutions who maintain significant operations located outside of the New York metropolitan area and outside the State of Connecticut.

Accordingly, any regional or local economic downturn, or natural or man-made disaster, that affects Connecticut or the New York metropolitan area or existing or prospective property or borrowers in Connecticut or the New York metropolitan area may affect us and our profitability more significantly and more adversely than our more geographically diversified competitors, which could cause a material adverse effect on our business, financial condition, results of operations and prospects.

Strong competition within our market area could reduce our profits and slow growth.

Competition in the financial services industry in our market and the surrounding area is strong.

Numerous commercial banks, savings banks and savings associations maintain offices or are headquartered in or near our primary market area.

Commercial banks, savings banks, savings associations, money market funds, mortgage brokers, finance companies, credit unions, insurance companies, investment firms and private lenders compete with us for various segments of our business.

These competitors often have far greater resources than we do and are able to conduct more intensive and broader based promotional efforts to reach both commercial and individual customers.

Strong competition could reduce our profits and slow growth.

Competition in the financial services industry is strong.

Numerous commercial banks, savings banks and savings associations maintain offices or are headquartered in or near our market area.

Commercial banks, savings banks, savings associations, money market funds, mortgage brokers, finance companies, credit unions, insurance companies, investment firms

and private lenders compete with us for various segments of our business.

These competitors often have far greater resources than we do and are able to conduct more intensive and broader based promotional efforts to reach both commercial and individual clients.

Our ability to compete successfully will depend on a number of factors, including, among other things:

• Our ability to build and maintain long-term customer relationships while ensuring high ethical standards and safe and sound banking practices;

• Our ability to build and maintain long-term client relationships while ensuring high ethical standards and safe and sound banking practices;

• The scope, relevance, and pricing of products and services that we offer;

• Customer satisfaction with our products and personalized services;

• Client satisfaction with our products and personalized services;

• Industry and general economic trends;

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Increased competition could require us to increase the rates we pay on deposits or lower the rates we offer on loans, which could reduce our profitability.

We derive a majority of our business from our primary market area, the New York metropolitan area, including Fairfield and New Haven Counties, Connecticut.

Our failure to compete effectively in our primary market could cause us to lose market share and could have a material adverse effect on our business, financial condition, results of operations and future prospects.

We are a community bank and our ability to maintain our reputation is critical to the success of our business.

We are a community bank, and our reputation is one of the most valuable components of our business.

Our failure to compete effectively could cause us to lose market share and could have a material adverse effect on our business, financial condition, results of operations and future prospects.

Our ability to maintain our reputation is critical to the success of our business.

Our reputation is one of the most valuable components of our business.

We strive to conduct our business in a manner that enhances our reputation.

This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates.

This is done, in part, by recruiting, hiring and retaining employees who share our core values of delivering superior service to our clients, caring about our clients and associates, and being an integral part of the communities we serve.

If our reputation is negatively affected by the actions of our employees, or otherwise, our business and, therefore, our operating results may be materially adversely affected.

We may not be able to execute our management team’s growth strategy.

As part of our management team’s growth strategy, we pursue a business plan focused on the development and growth of our franchise in our existing market and surrounding areas.

In addition to pursuing organic growth, another element of our management team’s strategy will be to acquire other branches, whole financial institutions or related lines of business.

intend to actively seek potential acquisition opportunities.

There are numerous risks that may make it difficult for us to execute this growth strategy and we cannot assure you that we will be successful in executing any part of our management team’s strategy.

Challenges we will face include obtaining regulatory approvals with respect to acquisitions, assuring that we will not become subject to regulatory actions in the future that could restrict our growth, identifying appropriate targets for acquisitions, negotiating acquisitions on terms that are acceptable to us, and encountering competition for acquisitions from financial institutions and other entities with similar business strategies that have greater financial resources, relevant experience and more personnel than us.

We may not be able to execute our executive management team’s growth strategy.

As part of our executive management team’s growth strategy, we pursue a business plan focused on the development and growth of our franchise.

In addition to pursuing organic growth, another element of our executive management team’s strategy will be to acquire whole financial institutions or related lines of business.

We intend to actively seek potential acquisition opportunities.

There are numerous risks that may make it difficult for us to execute this growth strategy and we cannot assure you that we will be successful in executing any part of our executive management team’s strategy.

Challenges we will face include obtaining regulatory approvals with respect to acquisitions, ensuring that we will not become subject to regulatory actions in the future that could restrict our growth, identifying appropriate targets for acquisitions, negotiating acquisitions on terms that are acceptable to us, and encountering competition for acquisitions from financial institutions and other entities with similar business strategies that have greater financial resources, relevant experience and more employees than us.

Accordingly, there can be no assurance that we will be successful in completing future acquisitions at all or on terms that are acceptable to us.

Our ability to grow will be limited if we are unable to successfully make acquisitions in the future.

Our ability to grow may be limited if we are unable to successfully make acquisitions in the future.

We face various technological risks that could adversely affect our business.

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Potential failures, interruptions or breaches in system security could result in disruptions or failures in our key systems, such as general ledger, deposit or loan systems.

The risk of electronic fraudulent activity within the financial services industry, especially in the commercial banking sector due to cyber criminals targeting bank accounts and other customer information is on the rise.

We have developed policies and procedures aimed at preventing and limiting the effect of failure, interruption or security breaches, including cyber-attacks of information systems;

however, there can be no assurance that these incidences will not occur, or if they do occur, that they will be appropriately addressed.

The occurrence of any failures, interruptions or security breaches, including cyber-attacks of our information systems could damage our reputation, result in the loss of business, subject us to increased regulatory scrutiny or subject us to civil litigation and possible financial liability, any of which could have an adverse effect on our results of operation and financial condition.

The occurrence of any failures, interruptions or security breaches, including cyber-attacks of our information systems could damage our reputation, result in the loss of business, subject us to increased regulatory scrutiny or to civil litigation and possible financial liability, any of which could have an adverse effect on our results of operation and financial condition.

Unauthorized access, cyber-crime and other threats to data security may require significant resources, harm our reputation, and adversely affect our business.

We necessarily collect, use and hold personal and financial information concerning individuals and businesses with which we have a banking relationship.

Threats to data security, including unauthorized access and cyber-attacks, rapidly emerge and change, exposing us to additional costs for protection or remediation and competing time constraints to secure our data in accordance with customer expectations, statutory and regulatory privacy and other requirements.

Threats to data security, including unauthorized access and cyber-attacks, rapidly emerge and change, exposing us to additional costs for protection or remediation and competing time constraints to secure our data in accordance with client expectations, statutory and regulatory privacy and other requirements.

It is difficult or impossible to defend against every risk being posed by changing technologies, as well as criminal intent on committing cyber-crime.

Increasing sophistication of cyber-criminals and terrorists make keeping up with new threats difficult and could result in a breach.

Controls employed by our information technology department and our other employees and vendors could prove inadequate.

Controls employed by our information technology department and our other employees and vendors could prove

We could also experience a breach due to intentional or negligent conduct on the part of employees or other internal sources, software bugs or other technical malfunctions, or other causes.

As a result of any of these threats, our customer accounts may become vulnerable to account takeover schemes or cyber-fraud.

As a result of any of these threats, our client accounts may become vulnerable to account takeover schemes or cyber-fraud.

Our systems and those of our third-party vendors may also become vulnerable to damage or disruption due to circumstances beyond our or their control, such as from catastrophic events, power anomalies or outages, natural disasters, network failures, and viruses and malware.

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• Potential exposure to unknown or contingent liabilities of banks and businesses we acquire;

• The time and expense required to integrate the operations and personnel of the combined businesses;

• The time and expense required to integrate the operations and employees of the combined businesses;

• Experiencing higher operating expenses relative to operating income from the new operations;

• Creating an adverse short-term effect on our results of operations;

• Losing key employees and customers as a result of an acquisition that is poorly received;

• Significant problems relating to the conversion of the financial and customer data of the entity;

• Inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the acquisition;

• Losing key employees and clients as a result of an acquisition that is poorly received;

• Significant problems relating to the conversion of the financial and client data of the entity;

• Inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, depositors and employees or to achieve the anticipated benefits of the acquisition;

• Risks of impairment to goodwill or other than temporary impairment.

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We accommodate larger loans by selling participations in those loans to other financial institutions, but this strategy may not always be available.

If we are unable to compete effectively for loans from our target customers, we may not be able to effectively implement our business strategy, which could have a material adverse effect on our business, financial condition, results of operations and future prospects.

If we are unable to compete effectively for loans from our target clients, we may not be able to effectively implement our business strategy, which could have a material adverse effect on our business, financial condition, results of operations and future prospects.

We are dependent on our executive management team and other key employees and we could be adversely affected by the unexpected loss of their services.

We are led by an experienced core management team with substantial experience in the market that we serve, and our operating strategy focuses on providing products and services through long-term relationship managers.

Accordingly, our success depends in large part on the performance of our key personnel, as well as on our ability to attract, motivate and retain highly qualified senior and middle management.

Competition for employees is intense, and the process of locating key personnel with the combination of skills and attributes required to execute our business plan may be lengthy.

The COVID-19 pandemic, along with general economic conditions, has made it more difficult to retain employees and to attract new employees.

We believe that retaining the services and skills of our management team is important to our success.

unexpected loss of services of any of our key personnel could have an adverse impact on us because of their skills, knowledge of our market, years of industry experience and the difficulty of promptly finding qualified replacement personnel.

If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable to us, which could cause a material adverse effect on our business, financial condition, results of operations and prospects.

We are led by an experienced executive management team and our operating strategy focuses on providing products and services through long-term relationship managers.

Accordingly, our success depends in large part on the performance of our key employees, as well as on our ability to attract, motivate and retain highly qualified senior and middle management.

Competition for employees is intense, and the process of identifying qualified candidates with the combination of skills and attributes required to execute our business plan may be lengthy.

The general economic conditions plus other factors have made it more difficult to retain employees and to attract new employees.

We believe that retaining the services and skills of our executive management team is important to our success.

The unexpected loss of services of any of our key employees could have an adverse impact on us because of their skills, knowledge of our market, years of industry experience and the difficulty of promptly finding qualified replacement employees.

If any of our key employees should become unavailable for any reason, we may be unable to identify and hire qualified candidates on acceptable terms, which could cause a material adverse effect on our business, financial condition, results of operations and future prospects.

The fair value of our investment securities can fluctuate due to factors outside of our control.

Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities.

These factors include, but are not limited to, rating agency actions with respect to individual securities, defaults by the issuer or with respect to the underlying securities, and changes in market interest rates and continued instability in the capital markets.

These factors include, but are not limited to, rating agency actions with respect to individual securities, defaults by the issuer or with respect to the underlying securities, changes in market interest rates, and continued instability in the capital markets.

Any of these factors, among others, could cause other-than-temporary impairments and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could materially and adversely affect our business, results of operations, financial condition and prospects.

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If repurchase and indemnity demands increase and such demands are valid claims and are in excess of our provision for potential losses, our liquidity, results of operations and financial condition may be adversely affected.

We are subject to losses due to fraudulent and negligent acts on the part of loan applicants, our borrowers, other vendors and our employees.

We are subject to losses due to fraudulent and negligent acts on the part of loan applicants, our clients, vendors, bad actors, and/or our employees.

When we originate loans, we rely heavily upon information supplied by third parties, including the information contained in the loan application, property appraisal, title information and employment and income documentation.

If any of this information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected.

Whether a misrepresentation is made by the loan applicant, the borrower, another third party or one of our employees, we generally bear the risk of loss associated with the misrepresentation.

If any of this

information is intentionally or negligently misrepresented and such misrepresentation is not detected prior to loan funding, the value of the loan may be significantly lower than expected.

Whether a misrepresentation is made by the loan applicant, our clients, vendors, bad actors, and/or one of our employees, we generally bear the risk of loss associated with the misrepresentation.

A loan subject to a material misrepresentation is typically unsaleable or subject to repurchase if it is sold prior to detection of the misrepresentation, and the persons and entities involved are often difficult to locate and it is often difficult to collect any monetary losses that we have suffered from them.

We have controls and processes designed to help us identify misrepresented information in our loan origination operations.

We cannot assure you, however, that we have detected or will detect all misrepresented information in our loan originations.

We cannot provide assurance that we have detected or will detect all misrepresented information in our loan originations, however, we have controls and processes designed to help us identify misrepresented information in our loan origination operations.

As a financial institution, we are inherently exposed to risk in the form of theft and other fraudulent activities by clients, vendors, bad actors, and/or employees targeting the Bank or our clients.

Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, and other dishonest acts.

The increasing sophistication of fraudulent activity from possible perpetrators could damage our reputation, result in the loss of business, subject us to increased regulatory scrutiny or to civil litigation and possible financial liability, any of which could have an adverse effect on our results of operation and financial condition.

To mitigate this risk, we maintain effective policies and internal controls along with ongoing employee training to identify and prevent such incidents.

We are subject to environmental liability risk associated with our lending activities.

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The failure to properly transition away from LIBOR may result in increased supervisory scrutiny.

We have not yet determined which alternative rate is most applicable, and there can be no assurances on which benchmark rate(s) may replace LIBOR or how LIBOR will be determined for purposes of financial instruments that are currently referencing LIBOR when it ceases to exist.

We have determined that the CME Term SOFR as the alternative rate to replace LIBOR.

The discontinuance of LIBOR may result in uncertainty or differences in the calculation of the applicable interest rate or payment amount depending on the terms of the governing instruments and may also increase operational and other risks to the Company and the industry.

Other rates or benchmarks may perform differently than LIBOR.

It is also uncertain what will happen with instruments that rely on LIBOR for future interest rate adjustments and which remain outstanding when LIBOR ceases to exist.

The discontinuance of LIBOR may also increase operational and other risks to the Company and the industry.

We have derivative contracts and limited loan exposure tied to LIBOR.

Although we are not yet able to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.

The Coronavirus (COVID-19) pandemic may continue to adversely impact our customers and our business, financial position, results of operations, and prospects.

In March 2020, the World Health Organization declared novel coronavirus disease 2019 ("COVID-19") as a global pandemic.

The COVID-19 pandemic has negatively impacted the global and U.S.

Many businesses in the U.S., including those in the markets we serve, were required to close, causing a significant increase in unemployment and loss of revenue for those businesses.

These developments have impacted the macroeconomic environment, leading to lower interest rates, depressed equity market valuations, heightened financial market volatility, and significant disruption in banking and other financial activities.

government responded to the crisis by enacting a number of policies to provide fiscal stimulus to the economy and relief to those affected by the pandemic.

Throughout March and April of 2020, Congress passed three main relief packages (including the $2.3 trillion CARES Act) and one supplemental package.

A fifth major stimulus package, the $1.9 trillion American Rescue Plan Act (“ARPA”), was signed into law on March 11, 2021.

The stimulus legislation included, among other things, direct payments to individuals and families, loan programs for small businesses, expansion of unemployment benefits and monetary support to state and local governments.

Federal regulatory agencies also took a series of substantial monetary stimulus measures to complement the fiscal stimulus to further add liquidity to the markets.

Most of the relief programs have expired, although state and local governments are still in the process of allocating and deploying ARPA funds.

The COVID-19 pandemic has resulted in, and is likely to continue to result in, significant economic disruption affecting our business and the clients we serve.

However, we are unable to estimate the full impact of COVID-19 on our business and operations at this time, including the ability of our employees and our third-party vendors to work effectively during the course of the pandemic.

If the pandemic continues to spread or otherwise result in a continuation or worsening of the current economic and commercial environments, we could experience an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for credit losses, adverse asset values of the collateral securing loans and an overall material adverse effect on the quality of the loan portfolio of the Company, impairment of our goodwill, reduced demand for our products and services, or other negative impacts on our financial position, results of operations, and prospects.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the ultimate impact of the COVID-19 pandemic on our business.

The extent of such impact will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic, third party providers’ ability to support our operations and what further actions may be taken by governmental authorities and other third parties in response to the pandemic.

The length of the pandemic and the efficacy of the extraordinary measures being put in place to address it are unknown.

To the extent COVID-19 continues to adversely impact the economy, it may also increase the likelihood and/or magnitude of other risk factors described herein.

Disruptions caused by, and unpredictable future developments related to or resulting from, the Coronavirus (COVID-19) pandemic could adversely impact our clients and our business, financial position, results of operations, and future prospects.

The COVID-19 pandemic created extensive disruptions to the global economy, to businesses, and to the lives of individuals throughout the world.

Federal and state governments have taken unprecedented actions to respond to such disruptions, including enacting fiscal stimulus measures and legislation designed to deliver monetary aid and other relief.

The widespread availability of multiple COVID-19 vaccines and boosters has helped to curtail rates of infection in many parts of the United States and, in turn, mitigate many of the adverse social and economic effects of the pandemic.

The future effects of the COVID-19 pandemic on the U.S.

and global economies, labor markets and financial markets are uncertain and cannot be predicted.

Accordingly, the pandemic and related dynamics could materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.

Climate change and related legislative and regulatory initiatives may materially affect the Company’s business and results of operations.

The effects of climate change continue to create an alarming level of concern for the state of the global environment.

As a result, the global business community has increased its political and social awareness surrounding the issue, and the United States has entered into international agreements in an attempt to reduce global temperatures, such as reentering the Paris Agreement.

Further, the U.S.

Congress, state legislatures and federal and state regulatory agencies continue to propose numerous initiatives to supplement the global effort to combat climate change.

Similar and even more expansive initiatives are expected under the current administration, including potentially increasing supervisory expectations with respect to banks’ risk management practices, accounting for the effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio concentrations based on climate-related factors and encouraging investment by banks in climate-related initiatives and lending to communities disproportionately impacted by the effects of climate change.

The lack of empirical data surrounding the credit and other financial risks posed by climate change render it impossible to predict how specifically climate change may impact our financial condition and results of operations;

however, the physical effects of climate change may also directly impact us.

Specifically, unpredictable and more frequent weather disasters may adversely impact the value of real property securing the loans in our portfolios.

Additionally, if insurance obtained by our borrowers is insufficient to cover any losses sustained to the collateral, or if insurance coverage is otherwise unavailable to our borrowers, the collateral securing our loans may be negatively impacted by climate change, which could impact our financial condition and results of operations.

Further, the effects of climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on our clients and impact the communities in which we operate.

Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations.

Risks Applicable to the Regulation of our Industry

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We are subject to extensive regulation and supervision that governs almost all aspects of our operations.

As a registered bank holding company, we are subject to supervision, regulation

and examination by the Federal Reserve.

As a registered bank holding company, we are subject to supervision, regulation and examination by the Federal Reserve.

As a commercial bank chartered under the laws of Connecticut, the Bank is subject to supervision, regulation and examination by the State of Connecticut Department of Banking and the FDIC.

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The Federal Reserve, the FDIC and the Connecticut Department of Banking periodically examine our business, including our compliance with laws and regulations.

If, as a result of an examination, a regulatory agency were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate.

If, as a result of an examination, a regulatory agency were to determine that our

financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate.

These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into receivership or conservatorship.

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Various laws impose nondiscriminatory lending requirements on financial institutions, including the CRA, the Equal Credit Opportunity Act and the Fair Housing Act.

A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money

penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines.

A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines.

Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.

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We anticipate that the process of identifying and investigating institutions for potential acquisitions and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others.

If a decision is made not to complete a specific acquisition transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable.

If a decision is made not to complete a specific

acquisition transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable.

Furthermore, even if an agreement is reached relating to a specific target institution, we may fail to consummate the transaction for any number of reasons, including those beyond our control.

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Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions.

If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of customer business, and subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

If significant, sustained or repeated, a system failure or service denial could compromise our ability to operate effectively, damage our reputation, result in a loss of client business, and subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may incur impairment to goodwill.

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Projections of future operating results and cash flows may vary significantly from actual results.

Additionally, if our analysis results in impairment to our goodwill, we would be required to record a non-

cash charge to earnings in our financial statements during the period in which such impairment is determined to exist.

Additionally, if our analysis results in impairment to our goodwill, we would be required to record a non-cash charge to earnings in our financial statements during the period in which such impairment is determined to exist.

Any such charge could have a material adverse effect on our results of operations.

Increasing scrutiny and evolving expectations from clients, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from clients, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.

Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights.

Increased ESG related compliance costs could result in increases to our overall operational costs.

Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price.

New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

Unresolved Staff Comments

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors