What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-10 compared with 2024-03-08 · 1543 added, 1660 removed, 1139 unchanged (74% of the section changed)

CONTROLS AND PROCEDURES.

Evaluation of Disclosure

Controls and Procedures

Management, including

our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer has evaluated the effectiveness

of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period

covered by this report.

Based upon that evaluation, our Chief Executive Officer and Executive Vice President and Chief Financial

Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed

in the reports we file and submit under the Exchange Act (i) is recorded, processed, summarized and reported as and when required

and (ii) accumulated and communicated to our management including the Chief Executive Officer and Executive Vice President and

Chief Financial Officer, as appropriate to allow timely discussion regarding required disclosure.

Management’s Annual Report on Internal

Control over Financial Reporting

The management of Western New England Bancorp,

and subsidiaries (collectively, the “Company”), including our President and Chief Executive Officer and Executive

Vice President and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial

reporting, as defined in Rule 13a-15(f) of the Exchange Act.

Our management assessed the effectiveness of our internal control

over financial reporting as of December 31, 2023 based on the criteria set forth by the Committee of Sponsoring Organizations of

the Treadway Commission in Internal Control-Integrated Framework (2013).

Based on this assessment, management concluded

that our internal control over financial reporting was effective as of December 31, 2023.

There have been no changes in our internal

control over financial reporting identified in connection with the evaluation that occurred during our last fiscal quarter that

has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

Report of Independent Registered Public Accounting

To the Shareholders and Board of Directors of Western

New England Bancorp, Inc.

Opinion on Internal Control over Financial

We have audited Western New England Bancorp, Inc.

and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2023, based on criteria

established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of

the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control

over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013)

issued by the COSO.

We have also audited, in accordance with the standards

of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company

and our report dated March 8, 2024 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for

maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial

reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

Our responsibility

is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting

firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal

control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control

over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness

of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in

the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control

AND PROCEDURES.

of Disclosure Controls and Procedures

including our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer has evaluated the

effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end

of the period covered by this report.

Based upon that evaluation, our Chief Executive Officer and Executive Vice President and

Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required

to be disclosed in the reports we file and submit under the Exchange Act (i) is recorded, processed, summarized and reported as

and when required and (ii) accumulated and communicated to our management including the Chief Executive Officer and Executive

Vice President and Chief Financial Officer, as appropriate to allow timely discussion regarding required disclosure.

Annual Report on Internal Control over Financial Reporting

management of Western New England Bancorp, Inc.

and subsidiaries (collectively, the “Company”), including our President

and Chief Executive Officer and Executive Vice President and Chief Financial Officer, is responsible for establishing and maintaining

adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act.

Our management assessed

the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the criteria set forth by

the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).

on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2024.

have been no changes in our internal control over financial reporting identified in connection with the evaluation that occurred

during our last fiscal quarter that has materially affected, or that is reasonably likely to materially affect, our internal control

over financial reporting.

A company's internal control over financial reporting

is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial

statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial

reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately

and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions

are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and

that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition

of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods

are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the

policies or procedures may deteriorate.

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 8, 2024

OTHER INFORMATION.

During the quarter

ended December 31, 2023, no director or officer of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule

10b5-1 trading arrangements.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following information

included in the Proxy Statement is incorporated herein by reference:

“Information About Our Board of Directors,” “Information

About Our Executive Officers Who Are Not Directors,” and “Corporate Governance.”

EXECUTIVE COMPENSATION.

The following information

included in the Proxy Statement is incorporated herein by reference:

“Compensation Committee Interlocks and Insider Participation,”

“Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation”

and “Director Compensation.”

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.

The following information

included in the Proxy Statement is incorporated herein by reference:

“Security Ownership of Certain Beneficial Owners and

Management” and “Securities Authorized For Issuance Under Equity Compensation Plans.”

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The following information

included in the Proxy Statement is incorporated herein by reference:

“Transactions with Related Persons” and “Board

of Directors Independence.”

PRINCIPAL ACCOUNTING FEES AND SERVICES.

The following information

included in the Proxy Statement is incorporated herein by reference:

“Independent Registered Public Accounting Firm Fees

and Services.” Our independent registered public accounting firm is Wolf & Company, P.C.

, Boston, Massachusetts , Auditor

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) Financial Statements

Reference is made to

our consolidated financial statements and accompanying notes included in Item 8 of Part II hereof.

(a)(2) Financial Statement Schedules

Consolidated financial

statement schedules have been omitted because the required information is not present, or not present in amounts sufficient to

require submission of the schedules, or because the required information is provided in the consolidated financial statements or

notes thereto.

of Independent Registered Public Accounting Firm

the Shareholders and Board of Directors of Western New England Bancorp, Inc.

on Internal Control over Financial Reporting

have audited Western New England Bancorp, Inc.

and subsidiaries’ (the “Company”) internal control over financial

reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued

by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained,

in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established

in Internal Control — Integrated Framework (2013) issued by the COSO.

have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the consolidated financial statements of the Company and our report dated March 10, 2025 expressed an unqualified opinion.

Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment

of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report

on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control

over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be

independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that

a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the

assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

that our audit provides a reasonable basis for our opinion.

and Limitations of Internal Control over Financial Reporting

company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures

that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures

of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s

assets that could have a material effect on the financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections

of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes

in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Wolf & Company, P.C.

Massachusetts

the quarter ended December 31, 2024, no director or officer of the Company adopted or terminated any Rule 10b5-1 trading arrangements

or non-Rule 10b5-1 trading arrangements.

REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Company has an insider trading policy and procedures governing the purchase, sale and/or other dispositions of the Company’s

securities that applies to all directors, officers, employees and certain other persons.

It is also the Company’s policy

to take appropriate steps to comply with applicable federal and state securities laws and regulations, as well as applicable stock

exchange listing standards, when the Company engages in transactions in the Company’s securities.

The Company believes that

its insider trading policy and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations,

and listing standards applicable to the Company.

A copy of the Company’s insider trading policy is filed as Exhibit 19.1

to this Report.

The remaining information required by this item will be included in the Proxy Statement under “Corporate

Governance” and is incorporated herein by reference.

following information included in the Proxy Statement is incorporated herein by reference:

“Information About Our Board

of Directors,” “Information About Our Executive Officers Who Are Not Directors,” and “Corporate Governance.”

COMPENSATION.

following information included in the Proxy Statement is incorporated herein by reference:

“Compensation Committee Interlocks

and Insider Participation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,”

“Executive Compensation” and “Director Compensation.”

OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.

following information included in the Proxy Statement is incorporated herein by reference:

“Security Ownership of Certain

Beneficial Owners and Management” and “Securities Authorized For Issuance Under Equity Compensation Plans.”

RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

following information included in the Proxy Statement is incorporated herein by reference:

“Transactions with Related Persons”

and “Board of Directors Independence.”

ACCOUNTING FEES AND SERVICES.

following information included in the Proxy Statement is incorporated herein by reference:

“Independent Registered Public

Accounting Firm Fees and Services.” Our independent registered public accounting firm is Wolf & Company, P.C.

Massachusetts , Auditor ID:

AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) Financial

is made to our consolidated financial statements and accompanying notes included in Item 8 of Part II hereof.

(a)(2) Financial

Statement Schedules

financial statement schedules have been omitted because the required information is not present, or not present in amounts sufficient

to require submission of the schedules, or because the required information is provided in the consolidated financial statements

or notes thereto.

(a)(3) Exhibits

EXHIBIT INDEX

Restated Articles of Organization of Western New England Bancorp, Inc.

5 unchanged sentences

333-137024) filed with the SEC on August 31, 2006).

Description of Securities Registered Under Section 12 of the

Securities Exchange Act of 1934.

Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934.

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

32 unchanged sentences

dated February 17, 2017 (incorporated by reference to Exhibit 10.21 of the Form 10-K filed with the SEC on March 11, 2021).

Change of Control Agreement between John Bonini and Western New England Bancorp, Inc.

dated as of January 1, 2021 (incorporated by reference to Exhibit 10.22 of the Form 10-K filed with the SEC on March 11, 2021).

Employment Agreement between John Bonini and Western New England Bancorp dated as of February 22, 2024.

Employment Agreement between John Bonini and Westfield Bank dated as of February 22, 2024.

Change of Control Agreement between Christine Phillips and Western New England Bancorp, Inc.

dated as of January 1, 2021(incorporated by reference to Exhibit 10.23 of the Form 10-K filed with the SEC on March 11, 2021).

Employment Agreement between Christine Phillips and Western New England Bancorp dated as of February 22, 2024.

Employment Agreement between Christine Phillips and Westfield Bank dated as of February 22, 2024.

Employment Agreement between John Bonini and Western New England Bancorp dated February 22, 2024 (incorporated by reference to Exhibit 10.16 of the Form 10-K filed with the SEC on March 8, 2024).

Employment Agreement between John Bonini and Westfield Bank dated February 22, 2024 (incorporated by reference to Exhibit 10.17 of the Form 10-K filed with the SEC on March 8, 2024).

Employment Agreement between Christine Phillips and Western New England Bancorp dated as of February 22, 2024(incorporated by reference to Exhibit 10.19 of the Form 10-K filed with the SEC on March 8, 2024).

Employment Agreement between Christine Phillips and Westfield Bank dated as of February 22, 2024(incorporated by reference to Exhibit 10.20 of the Form 10-K filed with the SEC on March 8, 2024).

Employment Agreement between Filipe B.

5 unchanged sentences

dated as of January 1, 2022 (incorporated by reference to Exhibit 10.21 of the Form 10-K filed with the SEC on March 10, 2023).

2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on May 19, 2014).

Chicopee Bancorp, Inc.

2007 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-8 (No.

333-214261) filed with the SEC on October 26, 2016).

Western New England Bancorp, Inc.

9 unchanged sentences

Form of Long-Term Incentive and Retention Equity Award Agreement under the Western New England Bancorp, Inc.

2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.6 of the Form S-8 with the SEC on May 19, 2021).

2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.6 of the Form S-8 filed with the SEC on May 19, 2021).

Western New England Bancorp, Inc.

Insider Trading Policy as Adopted by the Board of Directors on February 25, 2025.

Subsidiaries of Western New England Bancorp, Inc.

5 unchanged sentences

Western New England Bancorp, Inc.

Incentive Compensation Recovery Policy as Adopted by the Board of Directors on November 20, 2023.

Financial statements from the annual report on Form 10-K of Western New England Bancorp, Inc.

for the year ended December 31, 2023, formatted in XBRL (eXtensible Business Reporting Language):

(i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Net Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

† Filed herewith.

* Management contract or compensatory plan or arrangement.

** Pursuant to Rule 406T of Regulation S-T, the Interactive

Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections

11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange

Act of 1934, as amended, and otherwise are not subject to liability under those sections.

FORM 10-K SUMMARY.

Pursuant to the requirements of Section

13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its

behalf by the undersigned, thereunto duly authorized, on March 8, 2024.

WESTERN NEW ENGLAND BANCORP, INC.

Incentive Compensation Recovery Policy as Adopted by the Board of Directors on November 20, 2023 (incorporated by reference to Exhibit 97 of the Form 10-K filed with the SEC on March 8, 2024).

Financial statements

from the annual report on Form 10-K of Western

New England Bancorp, Inc.

for the year ended December 31, 2024, formatted in XBRL (eXtensible

Business Reporting Language):

(i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Net Income, (iii) the

Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity,

(v) the Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.

Cover Page Interactive

Data File (formatted as Inline XBRL and contained in Exhibit 101)

contract or compensatory plan or arrangement.

to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration

statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for

purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those

10-K SUMMARY.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused

this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 10, 2025.

NEW ENGLAND BANCORP, INC.

Chief Executive Officer and President

(Principal Executive Officer)

Chief Financial Officer and Executive Vice President (Principal Financial Officer and Principal Accounting Officer)

POWER OF ATTORNEY

Each person whose individual

signature appears below hereby authorizes and appoints James C.

Chief Financial Officer and Executive Vice President

(Principal Financial Officer and Principal Accounting Officer)

person whose individual signature appears below hereby authorizes and appoints James C.

Hagan and Guida R.

Sajdak, and each of them, with full power of

substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent

to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity

stated below, and to file any and all amendments to this report on Form 10-K, and to file the same, with all exhibits thereto,

and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact

and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming

all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to

be done by virtue thereof.

Pursuant to the requirements

of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed by the following persons on

behalf of the registrant and in the capacities indicated on March 8, 2024.

Chief Executive Officer, President and Director

Sajdak, and each of

them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful

attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person,

individually and in each capacity stated below, and to file any and all amendments to this report on Form 10-K, and to file the

same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting

unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing,

ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may

lawfully do or cause to be done by virtue thereof.

to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed by the

following persons on behalf of the registrant and in the capacities indicated on March 10, 2025.

Executive Officer, President and Director

(Principal Executive Officer)

Chief Financial Officer and Executive

Vice President

(Principal Financial Officer and

Principal Accounting Officer)

Chairperson of the Board

/s/ Laura Benoit

/s/ William D.

/s/ Steven G.

/s/ Philip R.

of Independent Registered Public Accounting Firm

Financial Officer and Executive Vice President

(Principal Financial Officer and Principal Accounting Officer)

Chairperson of the

Report of Independent Registered Public Accounting

To the Shareholders and Board of Directors of

Western New England Bancorp, Inc.

Opinion on the Consolidated Financial Statements

Opinion on the Consolidated Financial

We have audited the accompanying consolidated

7 unchanged sentences

December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the

standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial

reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the

Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 8, 2024 expressed an unqualified opinion

on the effectiveness of the Company’s internal controls over financial reporting.

We also have audited, in accordance with the standards

of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting

as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee

of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 10, 2025 expressed an unqualified opinion on

the effectiveness of the Company’s internal controls over financial reporting.

Change in Accounting Principle

As discussed in the financial statements, the

Company changed its method of accounting for measurement and recognition of credit losses as of January 1, 2023 upon the adoption of Accounting

As discussed in the financial statements, the Company

changed its method of accounting for measurement and recognition of credit losses as of January 1, 2023 upon the adoption of Accounting

Standards Codification Topic 326, Financial Instruments - Credit Losses (“ASC 326”).

5 unchanged sentences

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks

of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below

are matters arising from the current period audit of the financial statements that was communicated or required to be communicated to

the Company’s Audit Committee and that:

The critical audit matters communicated below are

matters arising from the current period audit of the financial statements that was communicated or required to be communicated to the

Company’s Audit Committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2)

involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,

providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Credit Losses – Loans

Evaluated on a Pooled Basis

Critical Audit Matter Description

As described in Notes 1 and 3 to the financial

statements, the Company has recorded an allowance for credit losses (ACL) for its loan portfolio in the amount of $20.3 million as of

December 31, 2023, representing management’s estimate of credit losses over the remaining expected life of the Company’s loan

portfolio as of that date.

Upon adoption of ASC 326 on January 1, 2023, the Company recorded a cumulative effect adjustment to opening

retained earnings which increased the ACL and established a reserve for off-balance sheet credit exposures recorded in other liabilities.

Management determined the amounts, and corresponding provision for credit loss expense for the year, pursuant to the application of Accounting

Standards Codification Topic 326, Financial Instruments – Credit Losses .

The Company’s methodology to determine

its allowance for credit losses incorporates quantitative and qualitative assessments of its historical losses, current loan portfolio

and economic conditions, the application of forecasted economic conditions, and related modeling.

The communication of critical audit matters does not alter in any

way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing

separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for

Credit Losses – Loans Evaluated on a Pooled Basis

Critical Audit

Matter Description

As described in Notes 1 and 3 to the financial statements,

the Company has recorded an allowance for credit losses (ACL) for its loan portfolio in the amount of $19.5 million as of December 31,

2024, representing management’s estimate of credit losses over the remaining expected life of the Company’s loan portfolio

as of that date.

Management determined the amounts, and corresponding reversal for credit loss expense for the year, pursuant to the application

of Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses .

The Company’s methodology to determine its

allowance for credit losses incorporates quantitative and qualitative assessments of its historical losses, current loan portfolio and

economic conditions, the application of forecasted economic conditions, and related modeling.

Management incorporates the use of third-party

software to arrive at an expected life-of-loan loss amount based on discounted cash flow estimate at the loan level.

The amount and timing

of cash flows is determined using assumptions for probability of default and loss given default (PD/LGD);

software to arrive at an expected life-of-loan loss amount based on discounted cash flow estimates at the loan level for material loan

The amount and timing of cash flows is determined using assumptions for probability of default and loss given default (PD/LGD);

expected term;

and forecasted

economic factors.

The results of these calculations are then qualitatively adjusted by management based on pool-specific attributes.

determined that performing procedures relating to these components of the Company’s methodology is a critical audit matter.

and forecasted economic factors.

The results of these calculations are then qualitatively adjusted by management based

on pool-specific attributes.

We determined that performing procedures relating to these components of the Company’s methodology

is a critical audit matter.

The principal considerations for our determination

2 unchanged sentences

in evaluating management’s methodology, significant assumptions and calculations.

How the Critical Audit Matter was addressed

Following are some of the primary procedures

we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal

controls related to the Company’s measurement of the collectively evaluated ACL, including controls over the:

Segmentation of loans into pools with similar risk

characteristics

Validation of the third-party model and recalculation

of model results

How the Critical Audit Matter was addressed in

Following are some of the primary procedures we

performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls

related to the Company’s measurement of the collectively evaluated ACL, including controls over the:

· Segmentation of loans into pools with similar risk characteristics

· Validation of the third-party model and recalculation of model results

· Role of peer loss data and the appropriate peer group

· Completeness and accuracy of loan data

Evaluation of modeling assumptions including the

economic factors indicative of expected losses, length of the forecast period, and expected term of loans

· Evaluation of modeling assumptions including the economic factors indicative

of expected losses, length of the forecast period, and expected term of loans

· Development of qualitative adjustments to model results

4 unchanged sentences

the completeness and accuracy of data used in the model.

Goodwill Impairment Analysis

Critical Audit Matter Description

As discussed in Note 5 to the consolidated financial

statements, goodwill is tested for impairment at least annually, or more frequently as events or circumstances change.

The evaluation

is performed on the basis that the consolidated company is the reporting unit.

The carrying value of the Company’s equity exceeded

its market capitalization for a period in 2023 due to recent events affecting the banking industry and declines in bank stock prices.

Management used relevant valuation multiples from recent comparable whole bank merger and acquisition transactions to determine the estimated

fair value of the Company.

Based on the results of this analysis management determined that the fair value of the Company exceeded the

carrying value of the reporting unit and as a result goodwill was not impaired.

We determined that performing procedures relating

to the Company’s impairment analysis of goodwill in 2023 is a critical audit matter.

The principal considerations for our determination

are (i) the application of significant judgment and estimation on the part of management, which in turn led to a high degree of auditor

judgment and subjectivity in performing procedures and evaluating audit evidence obtained, and (ii) significant audit effort was necessary

in evaluating management’s methodology and significant assumptions.

How the Critical Audit Matter was addressed

We obtained an understanding, evaluated the

design and tested the operating effectiveness of the controls over the Company's goodwill impairment process, including controls over

management's review of the significant assumptions.

To test management’s estimate of the fair

value of the Company's reporting unit we performed audit procedures that included, among others, assessing the reasonableness of the methodology

and testing the significant assumptions and the underlying data used by the Company in its analysis.

We compared the significant assumptions

used by management to current industry and economic trends.

In addition, we tested management's reconciliation of the fair value of the

reporting unit to the market capitalization of the Company.

We have served as the Company's auditor since

/s/ Wolf & Company, P.C.

Boston, Massachusetts

March 10, 2025

WESTERN NEW ENGLAND BANCORP, INC., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

NEW ENGLAND BANCORP, INC., AND SUBSIDIARIES

BALANCE SHEETS

in thousands, except share data)

Cash and due from banks

1 unchanged sentence

Interest-bearing deposits and other short-term investments

Cash and cash equivalents

Available-for-sale securities, at fair value

Held-to-maturity securities, at amortized cost (Fair value of $ 187,692 at December 31, 2023 and $ 190,950 at December 31, 2022)

Total cash and cash equivalents

Securities available-for-sale, at fair value

Securities held-to-maturity, at amortized cost (Fair value of $ 165,606 at December 31, 2024 and $ 187,692 at December 31, 2023)

Marketable equity securities, at fair value

Federal Home Loan Bank stock and other restricted stock, at cost

Loans, net of allowance for credit losses of $ 20,267 and $ 19,931 at December 31, 2023 and 2022, respectively

Total investment securities

Federal Home Loan Bank stock and other restricted stock, at amortized cost

Allowance for credit losses

Premises and equipment, net

4 unchanged sentences

LIABILITIES AND SHAREHOLDERS’ EQUITY

Non-interest-bearing

Interest-bearing

Non-interest-bearing deposits

Interest-bearing deposits

Total deposits

2 unchanged sentences

Subordinated debt

Total borrowings

Securities pending settlement

Other liabilities

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES (see Note 16)

SHAREHOLDERS’ EQUITY:

3 unchanged sentences

Additional paid-in capital

Unearned compensation - ESOP

Unearned compensation – Employee Stock Ownership Plan (“ESOP”)

Unearned compensation - Equity Incentive Plan

3 unchanged sentences

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

See accompanying notes to consolidated financial statements.

WESTERN NEW ENGLAND BANCORP, INC.

See accompanying notes

to consolidated financial statements.

NEW ENGLAND BANCORP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME

(Dollars in thousands, except per share data)

STATEMENTS OF NET INCOME

in thousands, except per share data)

Years Ended December 31,

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Consumer loans

Debt securities, taxable

Debt securities, tax-exempt

Total interest income from loans

Investment securities, taxable

Investment securities, tax-exempt

Marketable equity securities

Total interest and dividend income from investment securities

Other investments

Short-term investments

Total interest income from cash and cash equivalents

Total interest and dividend income

5 unchanged sentences

Net interest and dividend income

Provision for (reversal of) credit losses

Net interest and dividend income after provision for (reversal of) credit losses

(Reversal of) provision for credit losses

Net interest and dividend income after (reversal of) provision for credit losses

Non-interest income:

5 unchanged sentences

Gain on sale of mortgages

Net loss on marketable equity securities

Net unrealized gain (loss) on marketable equity securities

Gain on non-marketable equity investments

(Loss) gain on defined benefit plan curtailment

Loss on interest rate swap termination

(Loss) gain on defined benefit plan termination

Total non-interest income

3 unchanged sentences

Data processing

Debit card and ATM processing expense

Professional fees

FDIC insurance assessment

Loss on prepayment of borrowings

Other expenses

8 unchanged sentences

Dividends per share

See accompanying notes to consolidated financial statements.

WESTERN NEW ENGLAND BANCORP, INC.

accompanying notes to consolidated financial statements.

NEW ENGLAND BANCORP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

STATEMENTS OF COMPREHENSIVE INCOME

in thousands)

Years Ended December 31,

Other comprehensive income (loss):

Unrealized losses on available-for-sale securities:

Unrealized holding gain (losses)

Securities available-for-sale:

Unrealized gain (loss)

Reclassification adjustment for amounts realized in income (1)

Net-of-tax amount

Cash flow hedges:

Reclassification

adjustment for amounts realized in income for interest rate swap termination (2)

Reclassification

adjustment for amounts realized in interest expense (3)

Net-of-tax amount

Defined benefit pension plan:

1 unchanged sentence

Reclassification

adjustment for amounts realized in income for defined benefit plan termination (4)

adjustment for amounts realized in income (2)

Amortization of defined benefit plan actuarial loss (3)

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Comprehensive income

(1) Realized gains and losses on available-for-sale securities are recognized as

a component of non-interest income in the consolidated statements of net income.

The tax effects applicable to net realized gains

and $ 15,000 for the years ended December 31, 2022 and 2021.

There were no tax effects applicable to net realized gains for the year ended

December 31, 2023.

(2) Loss realized in income on interest rate swap termination

is recognized as a component of non-interest income.

Income tax effects associated with the reclassification adjustments

were $ 113,000 for the year ended December 31, 2021.

(3) Termination fee realized in interest expense on derivative

instruments is recognized as a component of interest expense on long-term debt in the consolidated statements of net income.

tax effects associated with the reclassification adjustments were $ 79,000 for the year ended December 31, 2021.

(1) Realized gains and losses on available-for-sale securities

are recognized as a component of non-interest income in the consolidated statements of net income.

The tax effects applicable

to net realized gains were $ 1,000 for the year ended December 31, 2022.

There were no tax effects applicable to net realized gains

or losses for the years ended December 31, 2024 and 2023.

(2) Amounts represent the reclassification of defined benefit

plan termination realized in income and have been recognized as a component of non-interest income.

Income tax effects

associated with the reclassification adjustments were $ 321,000 and $ 789,000 for the years ended December 31, 2023 and December

Income tax effects associated

with the reclassification adjustments were $ 321,000 and $ 789,000 for the years ended December 31, 2023 and December 31, 2022,

respectively.

(5) Amounts represent the

reclassification of defined benefit plan amortization and have been recognized as a component of non-interest

Income tax effects associated with the reclassification adjustments were $ 149,000

and $ 256,000 for the years ended December 31, 2022 and 2021.

There were no tax effects applicable to reclassification adjustments for the year ended 2024.

(3) Amount represents the reclassification of defined benefit

plan amortization and has been recognized as a component of non-interest expense.

Income tax effects associated with the reclassification

adjustment were $ 149,000 for the year ended December 31, 2022.

There were no tax effects applicable to reclassification adjustments

for the year ended 2023.

See accompanying notes to consolidated financial statements.

WESTERN NEW ENGLAND BANCORP, INC.

for the years ended 2024 and 2023.

See accompanying

notes to consolidated financial statements.

NEW ENGLAND BANCORP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(Dollars in thousands, except share data)

Compensation- ESOP

Compensation-

Equity Incentive Plan

Comprehensive

AT DECEMBER 31, 2020

Comprehensive

income (loss)

stock held by ESOP committed to be released ( 81,893 shares)

equity incentive plan shares ( 24,506 shares)

stock repurchased

( 2,775,134 )

compensation - equity incentive plan

of common stock in connection with stock option exercises

of common stock in connection with equity incentive plan

equity incentive plan shares reissued ( 32,544 shares)

dividends declared and paid on common stock ($ 0.20 per share)

AT DECEMBER 31, 2021

Comprehensive

income (loss)

stock held by ESOP committed to be released ( 78,526 shares)

equity incentive plan shares ( 24,440 shares)

stock repurchased

compensation - equity incentive plan

of common stock in connection with stock option exercises

of common stock in connection with equity incentive plan

equity incentive plan shares reissued ( 7,289 shares)

dividends declared and paid on common stock ($ 0.24 per share)

AT DECEMBER 31, 2022

effect accounting adjustment (1)

Comprehensive

stock held by ESOP committed to be released ( 74,993 shares)

equity incentive plan shares ( 4,219 shares)

equity incentive plan shares reissued ( 22,503 shares)

stock repurchased

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

ENDED DECEMBER 31, 2024, 2023 AND 2022

in thousands, except share data)

Additional Paid-in Capital

Unearned Compensation- ESOP

Compensation- Equity Incentive Plan

of common stock in connection with equity incentive plan

dividends declared and paid on common stock ($ 0.28 per share)

AT DECEMBER 31, 2023

Retained Earnings

Other Comprehensive Loss

BALANCE AT DECEMBER 31, 2021

Comprehensive loss

Common stock held by ESOP committed to be released ( 78,526 shares)

Forfeited equity incentive plan shares ( 24,440 shares)

Common stock repurchased

Share-based compensation – equity incentive plan

Issuance of common stock in connection with stock option exercises

Issuance of common stock in connection with equity incentive plan

Forfeited equity incentive plan shares reissued ( 7,289 shares)

Cash dividends declared and paid on common stock ($ 0.24 per share)

BALANCE AT DECEMBER 31, 2022

Cumulative effect accounting adjustment (1)

Comprehensive income

Common stock held by ESOP committed to be released ( 74,993 shares)

Forfeited equity incentive plan shares ( 4,219 shares)

Forfeited equity incentive plan shares reissued ( 22,503 shares)

Common stock repurchased

Share-based compensation - equity incentive plan

Issuance of common stock in connection with equity incentive plan

Cash dividends declared and paid on common stock ($ 0.28 per share)

BALANCE AT DECEMBER 31, 2023

Comprehensive loss

Common stock held by ESOP committed to be released ( 71,240 shares)

Forfeited equity incentive plan shares ( 2,384 shares)

Forfeited equity incentive plan shares reissued ( 4,219 shares)

Common stock repurchased

Share-based compensation - equity incentive plan

Issuance of common stock in connection with equity incentive plan

Cash dividends declared and paid on common stock ($ 0.28 per share)

BALANCE AT DECEMBER 31, 2024

See accompanying notes to consolidated financial statements.

(1) Represents

gross transition adjustment amount of $ 13,000 , net of taxes of $ 4,000 , to reflect the

cumulative impact on retained earnings pursuant to the Company’s adoption of Accounting

Standards Update (“ASU”) 2016-13 Financial Instruments-Credit Losses on

Financial Instruments and relevant amendments.

Refer to Note 3, “ Loans ”

within the accompanying notes to the consolidated financial statements.

WESTERN NEW ENGLAND BANCORP, INC.

gross transition adjustment amount of $ 13,000 , net of taxes of $ 4,000 , to reflect the cumulative impact on retained earnings pursuant

to the Company’s adoption of Accounting Standards Update (“ASU”) 2016-13 Financial Instruments-Credit Losses

on Financial Instruments and relevant amendments.

NEW ENGLAND BANCORP, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

STATEMENTS OF CASH FLOWS

in thousands)

Years Ended December 31,

OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for (reversal of) credit losses

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

(Reversal of) provision for credit losses

Depreciation and amortization of premises and equipment

Net amortization (accretion) of purchase accounting adjustments

Net (accretion) amortization of purchase accounting adjustments

Amortization of core deposit intangible

Net amortization of premiums and discounts on securities and mortgage loans

Net amortization of deferred costs on loans

Net amortization of deferred costs on mortgage loans

Net amortization of premiums on subordinated debt

3 unchanged sentences

Principal balance of loans sold

Net loss on marketable equity securities

Net change in unrealized (gain) loss on marketable equity securities

Net loss on sales of available-for-sale securities

Loss on disposal of premises and equipment

Loss on prepayment of borrowings

Gain on bank-owned life insurance death benefit

5 unchanged sentences

Net cash provided by operating activities

INVESTING ACTIVITIES:

Purchases of held-to-maturity securities

Proceeds from calls, maturities, and principal collections of held-to-maturity securities

Purchases of available-for-sale securities

Proceeds from redemption and sales of available-for-sale securities

Proceeds from calls, maturities, and principal collections of available-for-sale securities

Proceeds from redemption of marketable equity securities

Loan originations and principal payments, net

(Purchase) redemption of Federal Home Loan Bank of Boston stock, net

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of securities held-to-maturity

Proceeds from calls, maturities, and principal collections of securities held-to-maturity

Purchases of securities available-for-sale

Proceeds from calls, maturities, and principal collections of securities available-for-sale

Proceeds from redemption and sales of marketable equity securities

Net loan originations and principal payments

Purchase of Federal Home Loan Bank of Boston stock

Proceeds from sale of portfolio mortgages

3 unchanged sentences

Net cash used in investing activities

FINANCING ACTIVITIES:

Net (decrease) increase in deposits

Net (decrease) increase in short-term borrowings

CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in deposits

Decrease in short-term borrowings

Repayment of long-term debt

Proceeds from subordinated debt issuance

Payment of subordinated debt issuance costs

Proceeds from long-term debt

Cash dividends paid

Common stock repurchased

Repurchase of common stock

Issuance of common stock in connection with stock option exercises

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

NET CHANGE IN CASH AND CASH EQUIVALENTS:

1 unchanged sentence

Supplemental cash flow information:

Available-for-sale securities purchases pending settlement

Net change in due to broker for common stock repurchased

29 unchanged sentences

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United

States of America (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the reported amounts

States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts

of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements

1 unchanged sentence

Actual results could differ from those estimates.

Estimates that are

particularly susceptible to significant change in the near-term relate to the determination of the allowance for credit losses

and goodwill impairment.

An estimate that is

particularly susceptible to significant change in the near-term relates to the determination of the allowance for credit losses.

Reclassifications .

8 unchanged sentences

and Mortgage-Backed Securities .

Debt securities, including mortgage-backed securities, which management has the positive intent

and ability to hold until maturity are classified as held to maturity and are carried at amortized cost.

Debt securities, including

mortgage-backed securities, which have been identified as assets for which there is not a positive intent to hold to maturity

are classified as available-for-sale and are carried at fair value with unrealized gains and losses, net of income taxes, reported

as a separate component of comprehensive income (loss).

Marketable equity securities are measured at fair value with changes in

fair value reported on the Company’s consolidated statements of net income as a component of non-interest income, regardless

of whether such gains and losses are realized.

We do not acquire securities and mortgage-backed securities for purposes of engaging

in trading activities.

gains and losses on sales of securities and mortgage-backed securities are computed using the specific identification method and

are included in non-interest income on the trade date.

The amortization of premiums and accretion of discounts are determined

by using the level yield method to the maturity date, except that premiums are amortized to the earliest call date or maturity.

January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit

Losses on Financial Instruments , as amended, which replaces the incurred loss methodology with an expected loss methodology

that is referred to as CECL methodology.

The measurement of expected credit losses under the CECL methodology is applicable to

financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.

In addition, ASC

326 made changes to the accounting for available-for-sale debt securities.

for Credit Losses – Available-for-Sale Securities

Company measures expected credit losses on available-for-sale debt securities based upon the gain or loss position of the security.

For available-for-sale debt securities in an unrealized loss position which the Company does not intend to sell, and it is not

Investment debt securities, including mortgage-backed securities, which management has the

positive intent and ability to hold until maturity are classified as held to maturity and are carried at amortized cost.

debt securities, including mortgage-backed securities, which have been identified as assets for which there is not a positive

intent to hold to maturity are classified as available-for-sale and are carried at fair value with unrealized gains and losses,

net of income taxes, reported as a separate component of comprehensive income (loss).

Marketable equity securities are measured

at fair value with changes in fair value reported on the Company’s consolidated statements of net income as a component

of non-interest income, regardless of whether such gains and losses are realized.

We do not acquire investment securities and

mortgage-backed securities for purposes of engaging in trading activities.

gains and losses on sales of investment securities and mortgage-backed securities are computed using the specific identification

method and are included in non-interest income on the trade date.

The amortization of premiums and accretion of discounts are

determined by using the level yield method to the maturity date, except that premiums are amortized to the earliest call date

for Credit Losses – Securities Available-for-Sale

Company measures expected credit losses on debt securities available-for-sale based upon the gain or loss position of the security.

For debt securities available-for-sale in an unrealized loss position which the Company does not intend to sell, and it is not

more likely than not that the Company will be required to sell the security before recovery of the Company’s amortized cost,

4 unchanged sentences

cash flows of the security.

Available-for-sale securities which are guaranteed by government agencies do not currently have an

Securities available-for-sale which are guaranteed by government agencies do not currently have an

allowance for credit loss as the Company determined these securities are either backed by the full faith and credit of the U.S.

2 unchanged sentences

In assessing the Company’s investments in government-sponsored and U.S.

guaranteed mortgage-backed securities and government-sponsored enterprise obligations, the contractual cash flows of these investments

are guaranteed by the respective government-sponsored enterprise;

government guaranteed mortgage-backed securities and government-sponsored enterprise obligations, the contractual cash flows of

these investments are guaranteed by the respective government-sponsored enterprise;

Federal Home Loan Mortgage Corporation (“FHLMC”),

3 unchanged sentences

of the Company’s investments.

The Company will evaluate this position no less than annually, however, certain items which may

cause the Company to change this methodology include legislative changes that remove a government-sponsored enterprise’s

The Company will evaluate this position no less than annually, however, certain items which

may cause the Company to change this methodology include legislative changes that remove a government-sponsored enterprise’s

ability to draw funds from the U.S.

1 unchanged sentence

implicit guarantee on such securities.

Accrued interest receivable on available-for-sale securities guaranteed by government agencies

totaled $ 333,000 at December 31, 2023 and is excluded from the estimate of credit losses.

If the Company does not expect to recover

the entire amortized cost basis of the security, an allowance for credit losses would be recorded, with a related charge to earnings,

limited by the amount of the fair value of the security less its amortized cost.

If the Company intends to sell the security or

it is more likely than not that the Company will be required to sell the debt security before recovery of its amortized cost basis,

the Company recognizes the entire difference between the amortized cost basis of the security and its fair value in earnings.

If the Company does not expect to recover the entire amortized cost basis of the security,

an allowance for credit losses would be recorded, with a related charge to earnings.

If the Company intends to sell the security

or it is more likely than not that the Company will be required to sell the debt security before recovery of its amortized cost

basis, the Company recognizes the entire difference between the amortized cost basis of the security and its fair value in earnings.

Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

for Credit Losses – Held-to-Maturity Securities

Company measures expected credit losses on held-to-maturity debt securities on a collective basis by security type and risk rating

for Credit Losses – Securities Held-to-Maturity

Company measures expected credit losses on debt securities held-to-maturity on a collective basis by security type and risk rating

where available.

13 unchanged sentences

value of the Company’s investments.

The Company will evaluate this position no less than annually, however, certain items which

may cause the Company to change this methodology include legislative changes that remove a government-sponsored enterprise’s

The Company will evaluate this position no less than annually, however, certain items

which may cause the Company to change this methodology include legislative changes that remove a government-sponsored enterprise’s

ability to draw funds from the U.S.

1 unchanged sentence

implicit guarantee on such securities.

Any expected credit losses on held-to-maturity securities would be presented as an allowance

Any expected credit losses on securities held-to-maturity would be presented as an allowance

for credit loss.

15 unchanged sentences

and subsequently reclassified into earnings when the forecasted transaction affects earnings.

Company’s interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty

in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying

notional amount.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well

as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.

Value Hierarchy .

16 unchanged sentences

Home Loan Bank of Boston Stock .

The Bank, as a member of the Federal Home Loan Bank (“FHLB”) system, is required

to maintain an investment in capital stock of the FHLB of Boston.

Based on the redemption provisions of the FHLB, the stock has

no quoted market value and is carried at cost.

The Bank, as a member of the FHLB system, is required to maintain an investment in capital

stock of the FHLB of Boston.

Based on the redemption provisions of the FHLB, the stock has no quoted market value and is carried

At its discretion, the FHLB may declare dividends on the stock.

Management reviews

for impairment based on the ultimate recoverability of the cost basis in the FHLB stock.

As of December 31, 2023, no impairment

has been recognized.

Management reviews for impairment based on the ultimate

recoverability of the cost basis in the FHLB stock.

As of December 31, 2024, no impairment has been recognized.

Held for Sale .

22 unchanged sentences

for Credit Losses .

The allowance for credit losses (“ACL”) is an estimate of expected losses inherent within the

Company’s existing loans held for investment portfolio.

The ACL for loans held for investment, as reported in our consolidated

The allowance for credit losses is an estimate of expected losses inherent within the Company’s existing

loans held for investment portfolio.

The allowance for credit losses for loans held for investment, as reported in our consolidated

balance sheet, is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts,

net of recoveries.

Accrued interest receivable on loans held for investment was $ 7.5 million at December 31, 2023 and is excluded

from the estimate of credit losses.

credit loss estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments,

loan loss estimation process involves procedures to appropriately consider the unique characteristics of loan portfolio segments,

which consist of commercial real estate loans, residential real estate loans, commercial and industrial loans, and consumer loans.

7 unchanged sentences

is model-based and utilizes a forward-looking macroeconomic forecast.

The Company uses a discounted cash flow method, incorporating

probability of default and loss given default forecasted based on statistically derived economic variable loss drivers, to estimate

expected credit losses.

This process includes estimates which involve modeling loss projections attributable to existing loan

balances, and considering historical experience, current conditions, and future expectations for pools of loans over a reasonable

and supportable forecast period.

The historical information either experienced by the Company or by a selection of peer banks,

when appropriate, is derived from a combination of recessionary and non-recessionary performance periods for which data is available.

For commercial real estate loans, residential real estate

loans, and commercial and industrial loans, the Company uses a discounted cash flow method, incorporating probability of default

and loss given default forecasted based on statistically derived economic variable loss drivers, to estimate expected credit losses.

This process includes estimates which involve modeling loss projections attributable to existing loan balances, and considering

historical experience, current conditions, and future expectations for pools of loans over a reasonable and supportable forecast

The historical information either experienced by the Company or by a selection of peer banks, when appropriate, is derived

from a combination of recessionary and non-recessionary performance periods for which data is available.

The expected loss estimates

for the consumer loan segment are based on historical loss rates using the weighted average remaining maturity (“WARM”)

real estate loans .

Loans in this segment include commercial real estate, multi-family dwellings, owner-occupied commercial

real estate and income producing investment properties, as well as commercial construction loans for commercial development projects

Loans in this segment include owner occupied and non-owner occupied commercial real estate, multi-family

dwellings, and income producing investment properties, as well as commercial construction loans for commercial development projects

throughout New England.

The underlying cash flows generated by the properties or operations can be adversely impacted by a downturn

in the economy due to increased vacancy rates or diminished cash flows, which in turn, would have an effect on the credit quality

in this segment.

Management obtains financial information annually and continually monitors the cash flows of these loans.

Typically, commercial real estate loans are secured by office buildings, apartment buildings, industrial

properties, warehouses, retail facilities, hotels, assisted living facilities, and educational facilities.

Collateral values are

established by independent third-party appraisals and evaluations.

Primary repayment sources for commercial real estate loans

include operating income and cash flow generated by the real estate, sale of the real estate and, funds from any liquidation of

the collateral.

Under its lending guidelines, the Company generally requires a corporate or personal guarantee from individuals

that hold material ownership in the borrowing entity.

The underlying cash flows generated by the properties or operations can

be adversely impacted by a downturn in the economy due to increased vacancy rates or diminished cash flows, which in turn, would

have an effect on the credit quality in this segment.

Management obtains financial information annually and continually monitors

the cash flows of these loans.

real estate loans .

This portfolio segment consists of first mortgages, home equity loans, and home equity lines secured by

one-to-four family residential properties.

First mortgages may be underwritten to a maximum loan-to-value of 97 % for owner-occupied

homes, 90 % for second homes and 85 % for investment properties.

Mortgages with loan-to-values greater than 80 % require private

mortgage insurance.

We do not grant subprime loans.

Home equity loans and lines are secured by first or second mortgages on one-to-four

family owner-occupied properties.

Equity loans and lines are underwritten to a maximum combined loan-to-value of 85 % of the appraised

value of the property.

Underwriting approval is dependent on review of the borrower’s ability to repay and credit history

in accordance with Westfield Bank’s policy.

The overall health of the economy, including unemployment rates and housing

pricing, will have an effect on the credit quality in this segment.

This portfolio segment consists of first mortgages secured by one-to-four family residential properties

and home equity loans and home equity lines secured by first or second mortgage on one-to-four family owner occupied properties.

First mortgages may be underwritten to a maximum loan-to-value of 97 % for owner occupied homes, 90 % for second homes and 85 % for

investment properties.

Mortgages with loan-to-values greater than 80 % require private mortgage insurance.

We do not grant subprime

Home equity loans and lines are underwritten to a maximum combined loan-to-value of 85 % of the appraised value of the property.

Underwriting approval is dependent on review of the borrower’s ability to repay principal and interest on a monthly basis,

credit history, financial resources and the value of the collateral.

Residential real estate loans are originated either for sale

to investors or retained in the Company’s loan portfolio.

Decisions about whether to sell or retain residential real estate

loans are made based on the interest rate, pricing for loans in the secondary market, and the Company’s liquidity and capital

The overall health of the economy, including unemployment rates and housing pricing, will have an effect on the credit

quality in this segment.

and industrial loans .

Loans in this segment include commercial business loans and are generally secured by assignments of

corporate assets and personal guarantees of the business owners.

Repayment is expected from the cash flows of the business.

weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve

business results and cash flows consistent with those projected at loan origination.

Collateral frequently consists of a first

lien position on business assets including, but not limited to, accounts receivable, inventory, and equipment.

The primary repayment

source is operating cash flow, followed by liquidation of assets.

Under its lending guidelines, the Company generally requires

a corporate or personal guarantee from individuals that hold material ownership in the borrowing entity.

A weakened economy and

resultant decreased consumer spending will have an effect on the credit quality in this segment.

Loans in this segment are both secured and unsecured and repayment is dependent on the credit quality of the individual

cash flow method (“DCF”)

for Credit Losses Methodology

estimating the component of the allowance for credit losses for loans that share similar risk characteristics with other loans,

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credit loss assumption from a model that categorizes loan pools based on loan type and purpose.

This model calculates an expected

loss percentage for each loan class by considering the probability of default, using life-of-loan analysis periods for all loan

segments, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class.

and severity factors used to calculate the allowance for credit losses for loans that share similar risk characteristics with

other loans are adjusted for differences between the historical period used to calculate historical default and loss severity

rates and expected conditions over the remaining lives of the loans in the portfolio related to:

discounted cash flow (“DCF”) model calculates an expected loss percentage for each loan class by considering the probability

of default, using life-of-loan analysis periods for the commercial and industrial, commercial real estate, residential real estate

loan segments, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class.

loss estimates for the consumer loan segment are based on historical loss rates using the remaining life method.

The default and

severity factors used to calculate the allowance for credit losses for loans that share similar risk characteristics with other

loans are adjusted for differences between the historical period used to calculate historical default and loss severity rates

and expected conditions over the remaining lives of the loans in the portfolio related to:

(1) lending policies and procedures;

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(5) the volume and severity of past due and adversely classified

loans and the volume of nonaccrual loans;

loans and the volume of nonperforming loans;

(6) the quality of our loan review system and (7) the value of underlying collateral

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forecasts are also considered by management when developing the forecast metrics.

company uses a WARM method to estimate the ACL for the consumer loan segment.

Under this method, the historical average annual

charge-off rate is applied to the weighted average remaining maturity of the loan portfolio, currently calculated at 2.5 years.

This calculation is adjusted based on additional factors that include (1) lending policies and procedures;

(2) international,

national, regional and local economic business conditions and developments that affect the collectability of the portfolio;

the nature and volume of the loan portfolio including the terms of the loans;

(4) the experience, ability, and depth of the lending

management and other relevant staff;

(5) the volume and severity of past due and adversely classified loans and the volume of

nonperforming loans;

(6) the quality of our loan review system and (7) the value of underlying collateral for collateralized loans.

evaluated financial assets

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on the sale (rather than only on the operation) of the collateral.

Credit Deteriorated Loans

Company has loans acquired with evidence of credit deterioration from Chicopee Bancorp, Inc.

Prior to the adoption of the Current

Expected Credit Losses (“CECL”) methodology, these loans were accounted for under accounting guidance for purchased

credit-impaired (“PCI”) loans.

The Company did not elect the practical expedient to maintain pool accounting for these

loans and will measure credit loss at the loan level.

adoption of ASC 326, PCI loans are accounted for as purchase credit deteriorated (“PCD loans”).

PCD loans are recorded

at the amount paid.

An allowance for credit losses is determined using the same methodology as other loans held for investment.

The initial allowance for credit losses determined on a collective basis is allocated to individual loans.

The sum of the loan’s

purchase price and allowance for credit losses becomes its initial amortized cost basis.

The difference between the initial amortized

cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the

life of the loan.

Subsequent changes to the allowance for credit losses are recorded through credit loss expense.

for credit losses on off-balance sheet credit exposures, including unfunded loan commitments

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losses related to unfunded commitments for each loan type.

No credit loss estimate is reported for off-balance-sheet credit exposures

that are unconditionally cancellable by the Company, such as undrawn amounts under such arrangements that may be drawn prior to

the cancellation of the arrangement.

The allowance for credit losses on off-balance sheet credit exposures is adjusted as credit

loss expense.

Categories of off-balance sheet credit exposures correspond to the loan portfolio segments described above.

evaluates the need for a reserve on unfunded loan commitments in a manner consistent with loans held for investment.

No credit loss estimate is reported for outstanding off-balance-sheet

credit exposures that are unconditionally cancellable by the Company.

The allowance for credit losses on off-balance sheet credit

exposures is adjusted as credit loss expense.

Categories of off-balance sheet credit exposures correspond to the loan portfolio

segments described above.

Management evaluates the need for a reserve on unfunded loan commitments in a manner consistent with

loans held for investment.

Life Insurance .

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Plans and Employee Benefits .

The Board of Directors previously announced the termination of the Westfield Bank Defined Benefit

Pension Plan (the “DB Plan”) on October 31, 2022.

Information pertaining to the DB Plan and its termination can be

found in Note 10, Retirement Plans and Employee Benefits , within the accompanying notes to the financial statements.

Company also maintains a tax-qualified defined contribution plan through a third party provider (the “401(k) Plan”)

that provides for deferral of federal and state income taxes on employee contributions allowed under Section 401(k) of the Internal

Revenue Code of 1986, as amended (the “Internal Revenue Code”).

Participants may make pre-tax salary deferrals to

the plan not to exceed the annual IRS limits.

Effective January 1, 2023, the Company converted to a Safe Harbor 401(k) Plan.

addition to salary deferrals, in 2023, the Company will match up to 100 % of the first 4 % of the participant’s eligible compensation

(for a total maximum employer matching contribution of 4 % of a participant’s eligible compensation).

In addition, on an

annual basis, the Company may make a discretionary profit share contribution to each participant.

The Company maintains a tax-qualified defined contribution plan through a third party provider

(the “401(k) Plan”) that provides for deferral of federal and state income taxes on employee contributions allowed

under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

may make pre-tax salary deferrals to the plan not to exceed the annual IRS limits.

Effective January 1, 2023, the Company converted

to a Safe Harbor 401(k) Plan.

In addition to salary deferrals, the Company will match up to 100 % of the first 4 % of the participant’s

eligible compensation (for a total maximum employer matching contribution of 4 % of a participant’s eligible compensation).

In addition, on an annual basis, the Company may make a discretionary profit share contribution to each participant.

Compensation Plans .

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ended December 31, 2024, 2023 and 2022.

per common share have been computed based on the following:

per common share for the years ended December 31, 2024, 2023 and 2022 have been computed based on the following:

Years Ended December 31,

(In thousands, except per share data)

(Dollars and shares in thousands)

Net income applicable to common stock

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Average unallocated ESOP Shares

Average unvested equity incentive plan shares

Average unvested performance-based equity incentive plan shares

Average number of common shares outstanding used to calculate basic earnings per common

Effect of dilutive equity incentive plan

Effect of dilutive performance-based equity incentive plan shares

Effect of dilutive stock options

Average number of common shares outstanding used to calculate diluted

earnings per common share

Average number of common shares

outstanding used to calculate diluted earnings per common share

Net income per common share:

Basic earnings per share

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December 31, 2023

(In thousands)

Net unrealized losses on available-for-sale securities

Net-of-tax amount

Unrecognized actuarial loss on the defined benefit plan

(Dollars in thousands)

Net unrealized losses on securities available-for-sale

Net-of-tax amount

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Accounting Pronouncements .

December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2023-09, Income Taxes—Improvements to Income Tax Disclosures (Topic 740), which requires entities to disclose specific

categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures (Topic 280), which expands segment disclosure

requirements for public entities to require disclosure of significant segment expenses and other segment items on an annual and

interim basis.

It also requires companies to provide in interim periods all disclosures about a reportable segment’s profit

or loss and assets that are currently required annually.

This ASU, as amended, became effective for the Company in the consolidated

financial statements for the year ended December 31, 2024 (see Note 18 – Segment) and did not have a material impact on

the Company’s consolidated financial statements.

In addition, this ASU, as amended, will be effective for interim periods

beginning in 2025 and is not expected to have a material impact on the Company’s consolidated financial statements.

December 2023, the FASB issued ASU 2023-09, Income Taxes—Improvements to Income Tax Disclosures (Topic 740), which

requires entities to disclose specific categories in the rate reconciliation and provide additional information for reconciling

items that meet a quantitative threshold.

On an annual basis, entities must disclose:

(1) the amount of income taxes paid, net of refunds, disaggregated by federal, state,

and (2) the amount of income taxes paid, net of refunds, disaggregated by individual jurisdictions in which income

taxes paid, net of refunds received, for amounts equal to or greater than 5% of total income taxes paid.

Further, the amendments

also require entities to disclose:

(1) income or loss from continued operations before income tax expense (or benefit) disaggregated

between domestic and foreign sources;

and (2) income or loss from continued operations disaggregated by federal, state, and foreign

This ASU, as amended, is effective for the Company in fiscal years beginning after December 15, 2024 and is not expected

(1) the amount of income taxes paid, net

of refunds, disaggregated by federal, state, and foreign;

and (2) the amount of income taxes paid, net of refunds, disaggregated

by individual jurisdictions in which income taxes paid, net of refunds received, for amounts equal to or greater than 5% of total

income taxes paid.

Further, the amendments also require entities to disclose:

(1) income or loss from continued operations before

income tax expense (or benefit) disaggregated between domestic and foreign sources;

and (2) income or loss from continued operations

disaggregated by federal, state, and foreign sources.

This ASU, as amended, is effective for the Company in fiscal years beginning

after December 15, 2024 and is not expected to have a material impact on the Company’s consolidated financial statements.

November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation

Disclosures – Disaggregation of Income Statement Expenses (Subtopic 220-40).

ASU 2024-03 requires disaggregated disclosure

of income statement expenses for public business entities.

ASU 2024-03 requires new financial statement disclosures in tabular

form, disaggregating information about prescribed categories underlying any relevant income statement expense caption.

The prescribed

categories include, among other things, employee compensation, depreciation, and intangible asset amortization.

Additionally,

entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of

selling expenses.

This ASU is effective for the Company, on a prospective basis, for annual reporting periods beginning after

December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027 and is not expected

to have a material impact on the Company’s consolidated financial statements.

Available-for-sale

and held-to-maturity investment securities at December 31, 2023 and 2022 are summarized as follows:

following tables summarize the amortized cost and fair value of securities available-for-sale and held-to-maturity at December

31, 2024 and December 31, 2023 , and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other

comprehensive loss on securities available-for-sale.

The Company did not record an allowance for credit losses on its securities

held-to-maturity portfolio as of December 31, 2024 and December 31, 2023.

December 31, 2024

(In thousands)

Available-for-sale securities:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

(Dollars in thousands)

Securities available-for-sale:

Debt securities:

Government-sponsored enterprise obligations

State and municipal bonds

Corporate bonds

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Total mortgage-backed securities

Total available-for-sale

Held-to-maturity securities:

Total securities available-for-sale

Securities held-to-maturity:

Debt securities:

Treasury securities

government guaranteed obligations

Total debt securities

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Total mortgage-backed securities

Total held-to-maturity

Total securities held-to-maturity

December 31, 2023

(In thousands)

Available-for-sale securities:

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

(Dollars in thousands)

Securities available-for-sale:

Debt securities:

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Total mortgage-backed securities

Total available-for-sale

Held-to-maturity securities:

Total securities available-for-sale

Securities held-to-maturity:

Debt securities:

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Total mortgage-backed securities

Total held-to-maturity

following table presents the unrealized gains (losses) recognized on marketable equity securities for the periods indicated:

Total securities held-to-maturity

following table presents the unrealized gains (losses) recognized on marketable equity securities for the years indicated:

Years Ended December 31,

(In thousands)

Net losses recognized during the year on marketable equity securities

(Dollars in thousands)

Net gains (losses) recognized during the year on marketable equity securities

Net losses recognized during the year on equity securities sold during the year

Unrealized (loss) gain recognized during the year on marketable equity securities still held at year end

Unrealized gain (loss) recognized during the year on marketable equity securities still held at year end

the second quarter of 2023, $ 6.3 million in marketable equity securities was redeemed.

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was marked to market through income monthly, the fund liquidation resulted in no gain or loss to the income statement.

31, 2023, the balance of marketable equity securities was $ 196,000 .

31, 2024 and 2023, the balance of marketable equity securities was $ 397,000 and $ 196,000 .

December 31, 2024, U.S.

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a fair value of $ 7.9 million and mortgage-backed securities with a fair value of $ 157.4 million were pledged to secure public

deposits, the Bank Term Funding Program (“BTFP”) and for other purposes as required or permitted by law.

The securities

collateralizing public deposits are subject to fluctuations in fair value.

We monitor the fair value of the collateral on a periodic

basis, and pledge additional collateral if necessary based on changes in fair value of collateral or the balances of such deposits.

amortized cost and fair value of available-for-sale and held-to-maturity investment securities at December 31, 2023, by final

maturity, are shown below.

Actual maturities may differ from contractual maturities because certain issuers have the right to

call or prepay obligations.

deposits and for other purposes as required or permitted by law.

The securities collateralizing public deposits are subject to

fluctuations in fair value.

We monitor the fair value of the collateral on a periodic basis, and pledge additional collateral

if necessary based on changes in fair value of collateral or the balances of such deposits.

amortized cost and fair value of securities available-for-sale and held-to-maturity at December 31, 2024, by final maturity, are

Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay

Available-for-Sale

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Amortized Cost

(In thousands)

(Dollars in thousands)

Debt securities:

Due in one year or less

Due after one year through five years

Due after five years through ten years

Due after ten years

Total debt securities

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Amortized Cost

(In thousands)

(Dollars in thousands)

Mortgage-backed securities:

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Total securities

realized gains and losses on sales of available-for-sale securities for the years ended December 31, 2023, 2022 and 2021 are as

Years Ended December 31,

(In thousands)

Gross gains realized

Gross losses realized

Net (loss) gain realized

from the redemption and sales of available-for-sale securities totaled $ 20,000 and $9.6 million for the years ended December 31,

2022 and 2021, respectively.

There were no sales of securities for the year ended December 31, 2023.

interest receivable on available-for-sale debt securities not guaranteed by government agencies totaled $ 178,000 at December 31,

realized losses on sales of securities available-for-sale for the year ended December 31, 2022 were $ 4,000 .

There were no gross

realized gains or losses on sales of securities available-for-sale for the years ended December 31, 2024 and 2023.

from the sales of securities available-for-sale totaled $ 20,000 for the year ended December 31, 2022.

There were no sales of securities

for the years ended December 31, 2024 and 2023.

interest receivable on securities available-for-sale guaranteed by government agencies totaled $ 472,000 at December 31, 2024 and

$ 333,000 at December 31, 2023, and is excluded from the estimate of credit losses.

Accrued interest receivable on debt securities

available-for-sale not guaranteed by government agencies totaled $ 123,000 at December 31, 2024 and $ 178,000 at December 31, 2023,

and is excluded from the estimate of credit losses.

There were no allowance for credit losses established on available-for-sale

debt securities during the years ended December 31, 2023 and 2022.

At December 31, 2023 and December 31, 2022, there were two

available-for-sale corporate bonds that were rated below investment grade by one or more ratings agencies.

The Company reviewed

the financial strength of these bonds and has concluded that the amortized cost remains supported by the expected future cash

flows of the securities.

interest receivable on held-to-maturity securities totaled $ 454,000 at December 31, 2023 and is excluded from the estimate of

credit losses.

There were no allowance for credit losses established on held-to-maturity securities during the years ended December

31, 2023 and 2022.

pertaining to investment securities with gross unrealized losses as of December 31, 2023 for which the Company did not recognize

a provision for credit losses under CECL, and as of December 31, 2022, for which the Company did not deem to be impaired under

its prior methodology, aggregated by investment category and length of time that individual securities have been in a continuous

loss position, follows:

There were no allowances for credit losses established on debt securities

available-for-sale during the years ended December 31, 2024 and 2023.

December 31, 2024 there was one available-for-sale corporate bond that was rated below investment grade by one or more ratings

agencies, while at December 31, 2023, there were two available-for-sale corporate bonds that were rated below investment grade

by one or more ratings agencies.

The Company reviewed the financial strength of the corporate bond rated below investment grade

at December 31, 2024 and has concluded that the amortized cost remains supported by the expected future cash flows of the securities.

interest receivable on securities held-to-maturity totaled $ 430,000 at December 31, 2024 and $ 454,000 at December 31, 2023, and

is excluded from the estimate of credit losses.

There were no allowances for credit losses established on securities held-to-maturity

securities during the years ended December 31, 2024 and 2023.

following tables summarize the gross unrealized losses and fair value of the Company’s securities available-for-sale and

held-to-maturity, segregated by the duration of their continuous unrealized loss positions at December 31, 2024 and 2023:

December 31, 2024

8 unchanged sentences

(Dollars in thousands)

Available-for-sale:

Securities available-for-sale:

Government-sponsored mortgage-backed securities

2 unchanged sentences

Corporate bonds

Total available-for-sale

Held-to-maturity:

Total securities available-for-sale

Securities held-to-maturity:

Treasury securities

government guaranteed obligations

Government-sponsored mortgage-backed securities

Total held-to-maturity

Total securities held-to-maturity

Total securities

December 31, 2023

8 unchanged sentences

(Dollars in thousands)

Available-for-sale:

Securities available-for-sale:

Government-sponsored mortgage-backed securities

2 unchanged sentences

Corporate bonds

Total available-for-sale

Held-to-maturity:

Total securities available-for-sale

Securities held-to-maturity:

Treasury securities

Government-sponsored mortgage-backed securities

Total held-to-maturity

December 31, 2023 and December 31, 2022, management attributed the unrealized losses to increases in current market yields compared

to the yields at the time the investments were purchased by the Company and not due to credit quality.

There was no credit loss

during years ended December 31, 2023 or 2022.

classifications of loans as of the dates indicated were as follows:

(In thousands)

Total securities held-to-maturity

Total securities

Company expects to recover its amortized cost basis on all securities in its available-for-sale and held-to-maturity portfolios.

Furthermore, the Company does not intend to sell, nor does it anticipate that it will be required to sell any of its securities

in an unrealized loss position as of December 31, 2024, prior to this anticipated recovery.

The decline in fair value on its available-for-sale

and held-to-maturity portfolios is largely due to changes in interest rates and other market conditions and not due to credit

quality issues.

The issuers continue to make timely principal and interest payments on the securities and the fair value is expected

to recover as the securities approach maturity.

The Company’s ability and intent to hold these securities until recovery

is supported by the Company’s stable capital and liquidity positions as well as its historically low portfolio turnover.

The following description provides the number of investment positions in an unrealized loss position:

December 31, 2024, the Company reported unrealized losses on the securities available-for-sale portfolio of $ 31.2 million, or

16.2 % of the amortized cost basis of the securities available-for-sale, compared to unrealized losses of $ 29.2 million, or 17.5 %

of the amortized cost basis of the securities available-for-sale at December 31, 2023.

At December 31, 2024, there were 96 securities

available-for-sale in which the fair value was less than the amortized cost, compared to 85 securities available-for-sale at December

December 31, 2024, the Company reported unrealized losses on the securities held-to-maturity portfolio of $ 39.4 million, or 19.2 %,

of the amortized cost basis of the securities held-to-maturity portfolio, compared to $ 35.7 million, or 16.0 % of the amortized

cost basis of the securities held-to-maturity at December 31, 2023.

At December 31, 2024, there 43 securities held-to-maturity

in which the fair value was less than the amortized cost, compared to 42 securities held-to-maturity at December 31, 2023.

AND ALLOWANCE FOR CREDIT LOSSES

following table presents the summary of the loan portfolio by the major classification of the loan at the periods indicated:

(Dollars in thousands)

Commercial real estate:

Non-owner occupied

Owner occupied

Total commercial real estate

Residential real estate:

Residential one-to-four family

1 unchanged sentence

Commercial and industrial

Paycheck Protection Program (“PPP”) loans

Commercial and industrial

Total commercial and industrial

Total gross loans

Unamortized PPP loan fees

Unearned premiums and deferred loan fees and costs, net

Total loans, net

Allowance for credit losses

________________________________

Company adopted ASU 2016-13 on January 1, 2023 with a modified retrospective approach.

Accordingly, beginning at January 1, 2023, the allowance for credit losses was determined

in accordance with ASC 326, “ Financial Instruments-Credit Losses .”

activities primarily consist of commercial real estate loans, commercial and industrial loans, residential real estate loans,

and to a lesser degree, consumer loans.

Pledged as Collateral.

December 31, 2024 and December 31, 2023, the carrying value of eligible loans pledged as collateral to support borrowing capacity

at the FHLB were $ 906 .0 million and $ 941.2 million, respectively.

The outstanding balance of FHLB advances was $ 98 .0 million and

$ 40.6 million at December 31, 2024 and December 31, 2023, respectively.

December 31, 2024, the carrying value of eligible loans pledged as collateral to support borrowing capacity at the Federal Reserve

Bank (“FRB”) was $ 377 .0 million.

There were no loans pledged to secure borrowing capacity at the FRB at December 31,

There were no funds borrowed from the FRB backed by loans outstanding or securities pledged at December 31, 2024 or December

Serviced for Others.

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31, 2024, include weighted average prepayment speed for the portfolio using the Public Securities Association Standard Prepayment

Model ( 101 PSA), weighted average internal rate of return ( 10.01 %), weighted average servicing fee ( 0.25 %), and average cost to

service loans ($ 83.57 per loan).

The estimated fair value of capitalized servicing rights may vary significantly in subsequent

periods primarily due to changing market interest rates, and their effect on prepayment speeds and discount rates.

ended December 31, 2022, the Company sold $ 277,000 in residential real estate mortgages with servicing retained and recorded gains

Model ( 141 PSA), average internal rate of return ( 10.01 %), weighted average servicing fee ( 0.25 %), and average cost to service

loans ($ 83.31 per loan).

The estimated fair value of capitalized servicing rights may vary significantly in subsequent periods

primarily due to changing market interest rates, and their effect on prepayment speeds and discount rates.

For the year ended

December 31, 2024, the Company sold $ 20.1 million in residential real estate mortgages with servicing retained and recorded gains

on the sale of mortgages of $ 235,000 within non-interest income.

1 unchanged sentence

secondary market during the year ended December 31, 2023.

December 31, 2023 and 2022, the Company was servicing residential mortgage loans owned by investors totaling $ 72.3 million and

$ 79.3 million, respectively.

December 31, 2024 and December 31, 2023, the Company was servicing residential mortgage loans owned by investors totaling $ 84.8

million and $ 72.7 million, respectively.

Servicing fee income of $ 189,000 and $ 191,000 was recorded for the years ended December

2 unchanged sentences

Years Ended December 31,

(In thousands)

(Dollars in thousands)

Balance at the beginning of year:

Capitalized mortgage servicing rights

Write-down of mortgage servicing asset to fair value

Balance at the end of year

16 unchanged sentences

of the related loans.

of New Financial Accounting Standards.

January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses ( Topic326 ):

of Credit Losses on Financial Instruments , which requires the recognition of the allowance for credit losses be estimated

using the CECL methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets

measured at amortized cost, including loan receivables and held-to-maturity debt securities.

It also applies to off-balance sheet

credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other

similar instruments) and net investments in leases recognized by a lessor in accordance with Topic 842 on leases.

ASC 326 made changes to the accounting for available-for-sale debt securities.

One such change is to require credit losses to

be presented as an allowance rather than as a write-down on available-for-sale debt securities that are determined to have impairment

related to credit losses.

Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance

sheet credit exposures.

Results for reporting periods beginning January 1, 2023 are presented under ASC 326 while prior period

amounts continue to be reported in accordance with previously applicable GAAP.

The Company recorded a net increase to retained

earnings of $ 9,000 as of January 1, 2023 for the cumulative effect of adopting ASC 326, which includes a net deferred tax liability

The transition adjustment includes a $ 1.2 million increase to the allowance for credit losses and the recording of

a $ 918,000 allowance for credit losses on off-balance sheet credit exposures.

following table illustrates the impact of ASC 326:

Reported Under ASC 326

of ASC 326 Adoption

for credit losses on loans (2)

Allowance for credit

losses on off-balance sheet exposures

Shareholders’

Retained earnings,

$ ( 127,982 )

$ ( 127,991 )

_____________________________

credit deteriorated (“PCD loans”) gross up of cost basis of loans totaled

$ 422,000 for commercial real estate loans and $ 1,691,000 for commercial and industrial

to allowance for credit losses on loans of $ 2,113,000 for PCD loans gross up and a decrease

of $931,000 for pooled loans through retained earnings.

for Credit Losses.

2 unchanged sentences

by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.

interest receivable on loans held for investment was $ 7.5 million at December 31, 2023 and is excluded from the estimate of credit

analysis of changes in the allowance for credit losses by segment for the year ended December 31, 2023 and the allowance for credit

losses for the years ended December 31, 2022 and 2021 is as follows:

interest receivable on loans held for investment was $ 7.4 million at December 31, 2024 and $ 7.5 million at December 31, 2023 and

is excluded from the estimate of credit losses.

analysis of changes in the allowance for credit losses for loans and off-balance sheet commitments by segment for the years ended

December 31, 2024 and 2023 is as follows:

Commercial Real Estate

1 unchanged sentence

Commercial and Industrial

(In thousands)

(Dollars in thousands)

Allowance for credit losses for loans

Balance at December 31, 2023

Cumulative effect of change in accounting principle

Provision for (reversal of) for credit losses

Balance at December 31, 2024

Balance at December 31, 2022

Cumulative effect change in accounting principle

Adjusted beginning balance

1 unchanged sentence

Balance at December 31, 2023

following table presents information pertaining to the allowance for credit losses by segment Pre-ASC 326 CECL adoption for the

year ended December 31, 2022:

Commercial Real Estate

1 unchanged sentence

Commercial and Industrial

(In thousands)

Allowance for credit losses for off-balance sheet exposures

(Dollars in thousands)

Balance at December 31, 2021

Cumulative effect of change in accounting principle

Reversal of credit losses

Provision for (reversal of) for credit losses

Balance at December 31, 2022

____________________________________

balance of $ 7.5 million in accrued interest receivable is excluded from amortized cost and the calculation of the allowance for

credit losses at December 31, 2023.

$ 872,000 provision for credit losses during the year ended December 31, 2023 was comprised of a $ 1.2 million provision for loan

losses, which was partially offset by a $ 321,000 reversal of credit losses for unfunded commitments.

The provision expense during

the year ended December 31, 2023 was primarily due to changes in the economic environment and related adjustments to the quantitative

components of the CECL methodology.

The $ 321,000 reversal of credit losses for unfunded commitments for the year ended December

31, 2023 was primarily related to the impact of lower unfunded loan commitments, with off-balance sheet unfunded commitment exposures

decreasing $ 46.8 million for the year ended December 31, 2023.

following table presents information pertaining to the allowance for credit losses by segment Pre-ASC 326 CECL adoption for the

dates indicated:

Commercial Real Estate

1 unchanged sentence

Commercial and Industrial

(In thousands)

(Dollars in thousands)

Allowance for credit losses for off-balance sheet exposures

Balance at December 31, 2023

Provision (credit)

Provision (reversal) for credit losses

Balance at December 31, 2024

Provision (credit)

Balance at December 31, 2022

Commercial Real Estate

Residential Real Estate

Commercial and Industrial

(In thousands)

December 31, 2022

Amount of allowance for impaired loans

Amount of allowance for non-impaired loans

Total allowance for credit losses

Impaired loans

Non-impaired loans

Impaired loans acquired with deteriorated credit quality

Due and Nonaccrual Loans.

Cumulative effect of change in accounting principle

Reversal of credit losses

Balance at December 31, 2023

was no allowance for credit losses for off-balance sheet exposures for the year ended December 31, 2022.

the year ended December 31, 2024, the Company recorded a reversal of credit losses of $665,000 , compared to a provision for credit

losses of $ 872,000 during the year ended December 31, 2023.

The $665,000 reversal of credit losses during the year ended December

31, 2024 was comprised of an $825,000 reversal of credit losses on loans, which was offset by a $ 160,000 reserve on unfunded loan

commitments related to the impact of higher unfunded loan commitments for the period.

the year ended December 31, 2023, the Company recorded a provision for credit losses of $ 872,000 , comprised of a $1.2 million

provision for loan losses, partially offset by a $321,000 reversal of reserves on unfunded loan commitments primarily related

to the impact of lower unfunded loan commitments.

provision for or reversal of credit losses was determined by a number of factors:

the continued stable credit performance of the

Company’s loan portfolio, changes in the loan portfolio mix and management’s consideration of existing economic conditions

and the economic outlook from the Federal Reserve’s actions to control inflation.

Management continues to monitor macroeconomic

variables related to increasing interest rates, inflation and the concerns of an economic downturn, and believes it is appropriately

reserved for the current economic environment and supportable forecast period.

Due and Nonperforming Loans.

following tables present an age analysis of past due loans as of the dates indicated:

2 unchanged sentences

90 Days or More Past Due

Nonaccrual Loans

(In thousands)

Nonperforming

(Dollars in thousands)

December 31, 2024

Commercial real estate:

Non-owner occupied

Owner occupied

Residential real estate:

1 unchanged sentence

Commercial and industrial

30 – 59 Days Past Due

60 – 89 Days Past Due

90 Days or More Past Due

Nonperforming

(Dollars in thousands)

December 31, 2023

Commercial real estate:

Non-owner occupied

Owner occupied

Residential real estate:

1 unchanged sentence

Commercial and industrial

December 31, 2023 and 2022, total past due loans totaled $ 6.0 million, or 0.30 % of total loans, and $ 4.5 million, or 0.22 % of

total loans, respectively.

December 31, 2024 and December 31, 2023, total past due loans totaled $ 5.0 million, or 0.24 % of total loans, and $ 6.0 million,

or 0.30 % of total loans, respectively.

Nonperforming

of interest on loans is generally discontinued when contractual payment of principal or interest becomes past due 90 days or,

3 unchanged sentences

When a loan is placed

on nonaccrual status, interest accruals cease and uncollected accrued interest is reversed and charged against current interest

Interest payments on nonaccrual loans are generally applied to principal.

on nonperforming status, interest accruals cease and uncollected accrued interest is reversed and charged against current interest

Interest payments on nonperforming loans are generally applied to principal.

If collection of the principal is reasonably

3 unchanged sentences

of at least six consecutive months of performance has been achieved.

following table presents information regarding nonaccrual loans as of the date indicated:

following table is a summary of the Company’s nonperforming loans by major categories at December 31, 2024 and December

As of December 31, 2024

For the Year Ended December 31, 2024

Nonaccrual Loans with Allowance for Credit Loss

Nonaccrual Loans Without Allowance for Credit Loss

Amortized Cost of Loans Greater than 90 Days Past Due and Still Accruing

Nonperforming Loans with Allowance for Credit Loss

Nonperforming Loans Without Allowance for Credit Loss

Nonperforming

Accrued Interest Receivable Reversed from Income

(In thousands)

(Dollars in thousands)

Commercial real estate:

Non-owner occupied

Owner occupied

Residential real estate:

Residential (1)

Home equity (1)

Residential one-to-four family

Commercial and industrial

Total loans (1)

__________________________________

Company adopted ASU 2016-13 as of January 1, 2023.

December 31, 2023 and December 31, 2022, nonaccrual loans totaled $ 6.4 million, or 0.32 % of total loans, and $ 5.7 million, or

As of December 31, 2023

For the Year Ended December 31, 2023

Nonperforming Loans with Allowance for Credit Loss

Nonperforming Loans Without Allowance for Credit Loss

Nonperforming

Accrued Interest Receivable Reversed from Income

(Dollars in thousands)

Commercial real estate:

Non-owner occupied

Owner occupied

Residential real estate:

Residential one-to-four family

Commercial and industrial

December 31, 2024 and December 31, 2023, nonperforming loans totaled $ 5.4 million, or 0.26 % of total loans and $ 6.4 million, or

0.32 % of total loans, respectively.

The Company did not recognize any interest income on nonaccrual loans for the years ended

The Company did not recognize any interest income on nonperforming loans for the years ended

December 31, 2024 and 2023.

At December 31, 2023 and 2022, there were no commitments to lend additional funds to any borrower

on nonaccrual status.

Evaluated Loans.

connection with the adoption of ASU-2016-13, the Company no longer provides information on impaired loans.

Loans that do not share

similar risk characteristics with loans that are pooled into portfolio segments are individually evaluated.

A loan is considered

individually evaluated when, based on current information and events, the borrower is experiencing financial difficulty and repayment,

both principal and interest, is expected to be provided substantially through the operation or sale of the collateral.

are rated substandard, have an LTV above 85% or have demonstrated a specific weakness (i.e.

slow payment history, industry weakness,

or other clear credit deterioration) may be considered for individual evaluation if they are determined not to share similar risk

characteristics within the segment.

Individually evaluated assets will be measured primarily using the collateral dependent financial

asset practical expedient, although the discounted cash flow method may be used when management deems it more appropriate or collateral

values cannot be supported.

For individually evaluated assets, an ACL is determined separately for each financial asset.

must measure the expected credit losses based on an appropriate method per ASC Subtopic 326-20, similar to collectively evaluated

financial assets.

At December 31, 2023, the Company had $ 13.8 million in individually evaluated commercial loans, collateralized

by business assets, $ 15.9 million in individually evaluated real estate loans, collateralized by real estate property and $ 8,000

in individually evaluated consumer loans.

following table summarizes the Company’s individually evaluated loans by class as of December 31, 2023:

At December 31, 2024 and December 31, 2023, there were no commitments to lend additional funds to

any borrower on nonperforming status.

At December 31, 2024 and December 31, 2023, there were no loans 90 or more days past due

and still accruing interest.

There was no other real estate owned at December 31, 2024 or December 31, 2023.

Evaluated Collateral Dependent Loans.

that do not share similar risk characteristics with loans that are pooled into portfolio segments are individually evaluated.

A loan is considered collateral dependent when, based on current information and events, the borrower is experiencing financial

difficulty and repayment, both principal and interest, is expected to be provided substantially through the operation or sale

of the collateral.

Loans that are rated Substandard, have a loan-to-value above 85% or have demonstrated a specific weakness (e.g.,

slow payment history, industry weakness, or other clear credit deterioration) may be considered for individual evaluation if they

are determined not to share similar risk characteristics within the segment.

Individually evaluated assets will be measured primarily

using the collateral dependent financial asset practical expedient, although the discounted cash flow method may be used when

management deems it more appropriate or collateral values cannot be supported.

For individually evaluated assets, an ACL is determined

separately for each financial asset.

At December 31, 2024, the Company had $ 1.3 million in individually evaluated commercial loans,

collateralized by business assets, and $ 13.0 million in individually evaluated real estate loans, collateralized by real estate

following table summarizes the Company’s individually evaluated collateral dependent loans by class as of the dates indicated:

As of December 31, 2024

Recorded Investment

Related Allowance

(In thousands)

(Dollars in thousands)

With no related allowance recorded:

Commercial real estate:

Non-owner occupied

Owner occupied

Residential real estate:

4 unchanged sentences

Commercial real estate:

Non-owner occupied

Owner occupied

Residential real estate:

3 unchanged sentences

Total individually evaluated loans

326 CECL adoption impaired loan information as of December 31, 2022 is as follows:

At December 31, 2022

December 31, 2022

As of December 31, 2023

Recorded Investment

Unpaid Principal Balance

Related Allowance

Average Recorded Investment

Interest Income Recognized

Impaired Loans (1)

(In thousands)

(Dollars in thousands)

With no related allowance recorded:

Commercial real estate:

Non-owner occupied

Owner occupied

Residential real estate:

1 unchanged sentence

Commercial and industrial

Total impaired loans

(1) Includes loans

acquired with deteriorated credit quality and performing troubled debt restructurings.

are designated as modified when, as part of an agreement to modify the original contractual terms of the loan as a result of financial

difficulties of the borrower, the Company grants the borrower a concession on the terms that would not otherwise be considered.

Typically, such concessions may consist of a reduction in interest rate to a below market rate, taking into account the credit

quality of the note, extension of additional credit based on receipt of adequate collateral, or a deferment or reduction of payments

(principal or interest) which materially alters the Company’s position or significantly extends the note’s maturity

date, such that the present value of cash flows to be received is materially less than those contractually established at the

loan’s origination.

were no loan modifications for the years ended December 31, 2023 and 2022.

During the years ended December 31, 2023 and 2022,

no modified loans defaulted (defined as 30 days or more past due) within 12 months of restructuring.

There were no charge-offs

on modified loans during the years ended December 31, 2023 or 2022.

Loans with no related allowance recorded

With an allowance recorded:

Commercial real estate:

Non-owner occupied

Owner occupied

Residential real estate:

Residential one-to-four family

Commercial and industrial

Loans with an allowance recorded

Total individually evaluated loans

Loans to Borrowers Experiencing Financial Difficulty.

Company will modify the contractual terms of loans to a borrower experiencing financial difficulties as a way to mitigate loss

and comply with regulations regarding bankruptcy and discharge situations.

Loans are designated as modified when, as part of an

agreement to modify the original contractual terms of the loan as a result of financial difficulties of the borrower, the Company

grants the borrower a concession on the terms that would not otherwise be considered.

Typically, such concessions may consist

of a reduction in interest rate to a below market rate, taking into account the credit quality of the note, extension of additional

credit based on receipt of adequate collateral, or a deferment or reduction of payments (principal or interest) which materially

alters the Company’s position or significantly extends the note’s maturity date, such that the present value of cash

flows to be received is materially less than those contractually established at the loan’s origination.

were no loan modifications granted based on borrower financial difficulty during the years ended December 31, 2024 and 2023.

the years ended December 31, 2024 and 2023, no modified loans defaulted (defined as 30 days or more past due) within 12 months

of restructuring.

There were no charge-offs on modified loans during the years ended December 31, 2024 or 2023.

Quality Information.

Company utilizes an eight-grade internal loan rating system for commercial real estate and commercial and industrial loans.

Company’s internal credit risk grades are based on the definitions currently utilized by the banking regulatory agencies.

The grades assigned and definitions are as follows, and loans graded excellent, above average, good (risk ratings 1-4) are treated

as “pass” for grading purposes.

Company monitors the credit quality of its loan portfolio by using internal risk ratings that are based on regulatory guidance.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their

debt such as:

current financial information, historical payment experience, credit documentation, public information, and current

economic trends, among other factors.

The Company utilizes an eight-grade internal loan rating system for commercial real estate

and commercial and industrial loans.

grades assigned and definitions are as follows:

loans graded excellent, above average, good are classified as “Pass”

for grading purposes (risk ratings 1-4).

All loans risk rated Special Mention (5), Substandard (6), Doubtful (7) and Loss (8)

2 unchanged sentences

In addition, the Company closely

monitors classified loans, defined as substandard, doubtful, and loss for signs of deterioration to mitigate the growth in nonaccrual

monitors classified loans, defined as Substandard, Doubtful, and Loss for signs of deterioration to mitigate the growth in nonperforming

loans, including performing additional due diligence, updating valuations and requiring additional financial reporting from the

5 unchanged sentences

rated 1 – 4 :

Loans rated 1-4 represent groups of loans that are not subject to adverse criticism as defined in regulatory

Loans in these groups exhibit characteristics that represent acceptable risk.

Loans rated 5 are considered “ Special Mention ” and may exhibit potential credit weaknesses or

downward trends and are being monitored by management.

Loans in this category are currently protected based on collateral and

repayment capacity and do not constitute undesirable credit risk, but have potential weakness that may result in deterioration

of the repayment process at some future date.

This classification is used if a negative trend is evident in the obligor’s

financial situation.

Special mention loans do not sufficiently expose the Company to warrant adverse classification.

Loans rated 6 are considered “ Substandard .” A loan is classified as substandard if the borrower

exhibits a well-defined weakness and may be inadequately protected by the current net worth and cash flow capacity to pay the

current debt.

Loans rated 7 are considered “ Doubtful .” Loans classified as doubtful have all the weaknesses

inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation of the

loan highly questionable and improbable.

The possibility of some loss is extremely high, but because of specific pending factors

that may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more

exact status may be determined.

Loans rated 8 are considered uncollectible.

The loss classification does not mean that the asset has absolutely no

recovery or salvage value, but rather that it is not practical or desirable to defer writing off the asset because recovery and

collection time may be affected in the future.

an annual basis, or more often if needed, we formally review the ratings on all commercial real estate and commercial and industrial

In addition, management utilizes delinquency reports, the criticized loan report and other loan reports to monitor credit

In addition, at least on an annual basis, the Company contracts with an external loan review company to review the internal

credit ratings assigned to loans in the commercial loan portfolio on a pre-determined schedule, based on the type, size, rating,

and overall risk of the loan.

During the course of its review, the third party examines a sample of loans, including new loans,

existing relationships over certain dollar amounts and classified assets.

following table details the amortized cost balances of the Company’s loan portfolio presented by risk rating and origination

year as of the periods presented.

In addition, payment activity has been included as an additional credit quality indicator:

Loans rated 1-4 are classified as “Pass” and have quality metrics to support that the loan

will be repaid according to the terms established and are not subject to adverse criticism as defined in regulatory guidance.

Pass loans exhibit characteristics that represent acceptable risk and are not considered problem loans.

Loans rated 5 are classified as “Special Mention” and have potential weaknesses that deserve management’s

close attention.

Special mention loans are currently performing but with potential weaknesses including adverse trends in borrower’s

operations, credit quality, financial strength, or possible collateral deficiency.

Loans in this category are currently protected

based on collateral and repayment capacity and do not constitute undesirable credit risk, but have potential weakness that may

result in deterioration of the repayment process at some future date.

Special Mention loans do not sufficiently expose the Company

to warrant adverse classification.

Loans rated 6 are classified as “Substandard” and have an identified definitive weakness which may make

full collection of contractual cash flows questionable and/or jeopardize the liquidation of the debt.

Loans rated 7 are classified as “Doubtful” and have all the weaknesses inherent in those classified Substandard

with the added characteristic that the weaknesses make collection or liquidation of the loan highly questionable and improbable.

The possibility of some loss is extremely high, but because of specific pending factors that may work to the advantage and strengthening

of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.

Loans rated 8 are classified a “Loss” and are considered uncollectible and are charged to the allowance

for credit losses.

The loss classification does not mean that the asset has absolutely no recovery or salvage value, but rather

that it is not practical or desirable to defer writing off the asset because recovery and collection time may be affected in the

an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate loans over $2

million and commercial and industrial loans over $1 million.

On an ongoing basis, Management utilizes delinquency reports, interim

customer financials, the criticized loan report and other loan reports to monitor credit quality and adjust risk ratings accordingly.

In addition, at least on an annual basis, the Company contracts with an independent third-party to review the internal credit

ratings assigned to loans in the commercial loan portfolio on a pre-determined schedule, based on the type, size, rating, and

overall risk of the loan.

During the course of its review, the third party examines a sample of loans, including new loans, existing

relationships over certain dollar amounts and classified assets.

following tables summarize the amortized cost basis by aggregate Pass and criticized categories of Special Mention and Substandard

within the Company’s internal risk rating system by year of origination as of December 31, 2024 and 2023.

The tables also

summarize gross charge-offs by year of origination for the years ended December 31, 2024 and 2023.

As of and Year Ended December 31, 2024

Term Loan Origination by Year

20 unchanged sentences

Nonperforming

As of and Year Ended December 31, 2024

Term Loans Originated by Year

15 unchanged sentences

Nonperforming

The following table presents our loans

by risk rating as of December 31, 2022 Pre-ASC 326 CECL adoption:

As of and Year Ended December 31, 2023

Term Loan Origination by Year

Revolving Loans

Revolving Loans Converted to Term Loans

(Dollars in thousands)

Commercial Real Estate:

Residential 1-4 Family

Pass (Rated 1- 4)

Special Mention (Rated 5)

Substandard (Rated 6)

Total commercial real estate loans

Current period gross charge-offs

Payment Performance:

Nonperforming

Residential One-to-Four Family:

Total residential one-to-four family

Current period gross charge-offs

Payment Performance:

Nonperforming

Total home equity loans

Current period gross charge-offs

Payment Performance:

Nonperforming

As of and Year Ended December 31, 2023

Term Loans Originated by Year

Revolving Loans

Revolving Loans Converted to Term Loans

(Dollars in thousands)

Commercial and Industrial:

(In thousands)

December 31, 2022

Pass (Rated 1- 4)

1 unchanged sentence

Substandard (Rated 6)

PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows:

(In thousands)

Total commercial and industrial loans

Current period gross charge-offs

Payment Performance:

Nonperforming

Total consumer loans

Current period gross charge-offs

Payment Performance:

Nonperforming

following table summarizes information about total loans rated Special Mention, Substandard, Doubtful or Loss for the periods

December 31, 2024

December 31, 2023

(Dollar in thousands)

Criticized loans:

Special Mention

Total criticized loans

Total criticized loans as a percentage of total loans

AND EQUIPMENT

and equipment are summarized as follows:

(Dollars in thousands)

Leasehold improvements

2 unchanged sentences

Premises and equipment, net

Depreciation and amortization expense for the years ended December

31, 2023, 2022 and 2021 amounted to $ 2.2 million, $ 2.3 million and $ 2.3 million, respectively.

GOODWILL AND OTHER INTANGIBLES

Goodwill is measured as the excess of the

cost of a business combination over the sum of the amounts assigned to identifiable intangible assets acquired less liabilities

Goodwill is not amortized but rather assessed for impairment annually or more frequently if circumstances warrant.

has the option of first assessing qualitative factors, such as events and circumstances, to determine whether it is more likely

than not, meaning a likelihood of more than 50%, the value of a reporting unit is less than its carrying amount.

If, after considering

all relevant events and circumstances, management determines it is not more likely than not the fair value of a reporting unit

is less than its carrying amount, then performing an impairment test is unnecessary.

At December 31, 2023 and December 31, 2022,

the Company’s goodwill was related to the acquisition of Chicopee Savings Bank in October 2016.

For the year ended December

31, 2023, the carrying value of the Company’s equity exceeded its market capitalization for a period in 2023 due to recent

events affecting the banking industry and declines in bank stock prices, and therefore, the Company completed a fair value analysis

to assess potential impairment and any necessary write-down of the carrying value of goodwill.

Management used valuation multiples

from recent comparable whole bank merger and acquisition transactions to determine the estimated fair value of the Company.

on the results of this analysis, management determined that the fair value of the Company exceeded the carrying value of the reporting

unit, and as a result, goodwill was not impaired at December 31, 2023.

For the year ended December 31, 2022, management determined

that it was not more likely than not the fair value of the reporting unit was less than its carrying amount.

If management had

determined otherwise, a fair value analysis would have been completed to determine the impairment and necessary write-down of goodwill.

Core Deposit Intangibles

In connection with the acquisition of Chicopee,

the Bank recorded a core deposit intangible of $ 4.5 million, which is amortized over twelve years using the straight-line method.

Amortization expense was $ 375,000 , $ 375,000 and $ 374,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

December 31, 2023, future amortization of the core deposit intangible totaled $ 375,000 for each of the next four years and $ 313,000

Deposit accounts, by type, are summarized as follows for the

periods indicated :

and amortization expense for the years ended December 31, 2024, 2023 and 2022 amounted to $ 2.2 million, $ 2.2 million and $ 2.3

million, respectively.

AND OTHER INTANGIBLES

December 31, 2024 and December 31, 2023, the carrying value of the Company’s goodwill was $12.5 million.

Goodwill is measured

as the excess of the cost of a business combination over the sum of the amounts assigned to identifiable intangible assets acquired

less liabilities assumed.

Goodwill is not amortized but rather assessed for impairment annually or more frequently if circumstances

Management has the option of first assessing qualitative factors, such as events and circumstances, to determine whether

it is more likely than not, meaning a likelihood of more than 50%, the value of a reporting unit is less than its carrying amount.

If, after considering all relevant events and circumstances, management determines it is not more likely than not the fair value

of a reporting unit is less than its carrying amount, then performing an impairment test is unnecessary.

At December 31, 2024

(In thousands)

and December 31, 2023, the Company’s goodwill was related to the acquisition of Chicopee Bancorp, Inc.

in October 2016.

For the year ended December 31, 2024, management determined that it was not more likely than not the fair value of the reporting

unit was less than its carrying amount.

If management had determined otherwise, a fair value analysis would have been completed

to determine the impairment and necessary write-down of goodwill.

Deposit Intangibles

connection with the acquisition of Chicopee Bancorp, Inc., the Company recorded a core deposit intangible of $ 4.5 million, which

is being amortized over twelve years using the straight-line method.

Amortization expense was $ 375,000 for each of the years ended

December 31, 2024, 2023 and 2022, respectively.

At December 31, 2024, future amortization of the core deposit intangible totaled

$ 375,000 for each of the next three years and $ 313,000 thereafter.

accounts, by type, are summarized as follows for the periods indicated:

At December 31,

(Dollars in thousands)

Demand and interest-bearing checking:

Interest-bearing checking accounts

Demand deposits

Demand deposit accounts

Regular savings accounts

Money market accounts

Total core deposits

Time deposits

Total deposits

There were $ 1.7 million in brokered deposits

reported within time deposits at December 31, 2023.

There were no brokered deposits at December 31, 2022.

Time deposits of $250,000 or more totaled

$ 198.6 million at December 31, 2023.

Interest expense on time deposits of $250,000 or more totaled $ 5.6 million and $ 358,000 for

the years ended December 31, 2023 and 2022, respectively.

The scheduled maturities of time deposits

for the periods indicated are as follows:

were $ 1.7 million in brokered deposits reported within time deposits at December 31, 2024 and 2023.

deposits of $250,000 or more, which represent those exceeding the fully-insured FDIC limitation, totaled $ 234.4 million at December

Interest expense on time deposits of $250,000 or more totaled $ 9.1 million and $ 5.6 million for the years ended December

31, 2024 and 2023, respectively.

scheduled maturities of time deposits for the periods indicated are as follows:

At December 31,

(In thousands)

(Dollars in thousands)

Total time deposits

Interest expense on deposits for the years ended December 31,

2023, 2022 and 2021 is summarized as follows:

expense on deposits for the years ended December 31, 2024, 2023 and 2022 is summarized as follows:

Years Ended December 31,

(In thousands)

Regular savings

(Dollars in thousands)

Savings accounts

Money market accounts

Time deposits

Interest-bearing checking

Cash paid for interest on deposits totaled

$ 26.4 million, $ 5.3 million and $ 5.5 million for years ended December 31, 2023, 2022 and 2021, respectively.

SHORT-TERM BORROWINGS

We utilize short-term borrowings and long-term

debt as additional sources of funds to finance our lending and investing activities and to provide liquidity for daily operations.

Total borrowing capacity includes borrowing arrangements at the FHLB, the Federal Reserve Bank (“FRB”), and borrowing

arrangements with correspondent banks.

Short-term borrowings can consist of FHLB

advances with an original maturity of less than one year, overnight Ideal Way line of credit advances and other borrowings held

as collateral for customer swap arrangements.

Other borrowings totaled $ 6.1 million with a weighted average rate of 5.33 % at December

31, 2023, compared to $ 6.4 million with a weighted average rate of 4.33 % at December 31, 2022.

Short-term borrowings issued by

the FHLB were $ 10 .0 million with a weighted average rate of 5.56 % at December 31, 2023, compared to $ 35 .0 million with a weighted

average rate of 4.38 % at December 31, 2022.

FHLB advances provide more pricing and

option alternatives for particular asset/liability needs.

The FHLB provides a central credit facility primarily for member institutions.

As an FHLB member, the Company is required to own capital stock of the FHLB, calculated periodically based primarily on its level

of borrowings from the FHLB.

FHLB borrowings are secured by certain securities from the Company’s investment portfolio not

otherwise pledged as well as certain residential real estate and commercial real estate loans.

Advances are made under several

different credit programs with different lending standards, interest rates and range of maturities.

This relationship is an integral

component of the Company’s asset-liability management program.

The Company also has an available overnight Ideal Way line

of credit with the FHLB of $ 9.5 million.

Interest on this line of credit is payable at a rate determined and reset by the FHLB

on a daily basis.

Interest-bearing accounts

paid for interest on deposits totaled $ 42.2 million, $ 26.4 million and $ 5.3 million for years ended December 31, 2024, 2023 and

2022, respectively.

a long-term basis, the Company intends to continue to increase its core deposits to fund loan growth.

The Company also uses FHLB

borrowings as part of the Company’s overall strategy to manage interest rate risk and liquidity risk.

FHLB advances are

secured by a blanket security agreement which requires the Company to maintain certain qualifying assets as collateral, principally

certain residential real estate loans and commercial real estate loans and securities, not otherwise pledged.

The maximum amount

that the FHLB will advance to member institutions, including the Company, fluctuates from time to time in accordance with the

policies of the FHLB.

As an FHLB member, the Company is required to own capital stock of the FHLB, calculated periodically based

primarily on its level of borrowings from the FHLB.

Advances are made under several different credit programs with different lending

standards, interest rates and range of maturities.

The Company’s relationship with the FHLB is an integral component of

the Company’s asset-liability management program.

At December 31, 2024, the Company pledged $ 906 .0 million of eligible collateral

to support its borrowing capacity at the FHLB.

FHLB advances totaled $ 10 .0 million with a weighted average rate of 5.56 % at December 31, 2023.

There were no short-term FHLB

advances outstanding at December 31, 2024.

The Company also has a standing available overnight Ideal Way line of credit with the

FHLB of $ 9.5 million.

Interest on this line of credit is payable at a rate determined and reset by the FHLB on a daily basis.

The outstanding principal is due daily but the portion not repaid will be automatically renewed.

31, 2023, the Bank had $ 535.6 million in additional borrowing capacity from the FHLB.

The Company also has an available line

of credit of $ 48.6 million with the FRB Discount Window at an interest rate determined and reset on a daily basis.

Borrowings from

the FRB Discount Window are secured by certain securities from the Company’s investment portfolio not otherwise pledged.

As of December 31, 2023 and December 31, 2022, there were no advances outstanding under either of these lines.

The Company also has pre-established, non-collateralized

overnight borrowing arrangements with large national and regional correspondent banks to provide additional overnight and short-term

borrowing capacity for the Company.

The Company has a $ 15 .0 million line of credit with a correspondent bank and a $ 10 .0 million

line of credit with another correspondent bank, both at an interest rate determined and reset on a daily basis.

As of December

31, 2023 and December 31, 2022, there were no advances outstanding under these lines.

Cash paid for interest on short-term borrowings

totaled $ 1.6 million for the year ended December 31, 2023 and $ 327,000 for the year ended December 31, 2022.

LONG-TERM DEBT

FHLB Advances.

The following advances

are collateralized by a blanket lien on our residential real estate loans and certain eligible commercial real estate loans.

At December 31, 2024 and 2023,

the Company did not have an outstanding balance under the Ideal Way line of credit.

At December 31, 2024, the Company had an immediate

availability to borrow an additional $ 464.1 million from the FHLB, including the Ideal Way line of credit, based on qualified

collateral pledged.

borrowings, held as collateral for customer swap arrangements, totaled $ 5.4 million with a weighted average rate of 4.33 % at December

31, 2024 and $ 6.1 million with a weighted average rate of 5.33 % at December 31, 2023, respectively.

a member of the FRB, the Company may also borrow from the Federal Reserve Bank Discount Window (the “Discount Window”).

At December 31, 2024 and 2023, the Company had an available line of credit of $ 382.9 million and $ 48.6 million, respectively,

with the FRB Discount Window at an interest rate determined and reset on a daily basis.

Borrowings from the FRB Discount Window

are secured by eligible loan collateral and certain securities from the Company’s investment portfolio not otherwise pledged.

At December 31, 2024 and 2023, the Company did not have an outstanding balance under the Discount Window.

Company also has pre-established, non-collateralized overnight borrowing arrangements with large national and regional correspondent

banks to provide additional overnight and short-term borrowing capacity for the Company.

The Company has a $ 15.0 million line

of credit with a correspondent bank and a $ 10.0 million line of credit with another correspondent bank, both at an interest rate

determined and reset on a daily basis.

As of December 31, 2024 and December 31, 2023, there were no advances outstanding under

paid for interest on short-term borrowings totaled $ 600,000 for the year ended December 31, 2024 and $ 1.6 million for the year

ended December 31, 2023.

paid for interest on long-term debt totaled $ 9.6 million and $ 2.1 million for the years ended December 31, 2024 and 2023, respectively.

During the year ended December 31, 2024, interest previously accrued on Bank Term Funding Program (“BTFP”) advances

was payable upon final maturity of the advances in May of 2024 and totaled $ 4.3 million.

The following advances are collateralized by a blanket lien on our residential real estate loans and certain eligible

commercial real estate loans.

Weighted Average Rate

(In thousands)

(Dollars in thousands)

Fixed-rate advances maturing:

Total long-term advances

Cash paid for interest on long-term FHLB

advances totaled $ 1.1 million for the year ended December 31, 2023.

There was no cash paid for interest on long-term FHLB advances

for the year ended December 31, 2022.

BTFP Advances.

On March 12, 2023,

the FRB made available the BTFP, which enhances the ability of banks to borrow greater amounts against certain high-quality, unencumbered

investments at par value.

During the year ended December 31, 2023, the Company participated in the BTFP, which enabled the Company

to pay off higher rate FHLB advances.

With the BTFP, the Company has the ability to pay off the BTFP advance prior to maturity

without incurring a penalty or termination fee.

Interest expense on BTFP advances is payable at maturity.

At December 31, 2023, long-term debt included

$ 90 .0 million in outstanding advances under the BTFP with a weighted average fixed rate of 4.71 %.

The $ 90 .0 million in BTFP advances

outstanding mature in May of 2024.

There were no advances outstanding with the FRB under the BTFP at December 31, 2022.

31, 2023, the Company had $ 23.6 million in available borrowing capacity under the BTFP.

Interest expense accrued on BTFP advances

was $ 2.8 million as of December 31, 2023.

Subordinated Debt.

2021, the Company completed an offering of $ 20 .0 million in aggregate principal amount of its 4.875 % fixed-to-floating rate subordinated

notes (the “Notes”) to certain qualified institutional buyers in a private placement transaction.

At December 31, 2023,

$ 19.7 million aggregate principle amount of the Notes was outstanding.

Unless earlier redeemed, the Notes mature

on May 1, 2031 .

The Notes will bear interest from the initial issue date to, but excluding, May 1, 2026, or the earlier redemption

date, at a fixed rate of 4.875 % per annum, payable quarterly in arrears on May 1, August 1, November 1 and February 1 of each year,

beginning August 1, 2021, and from and including May 1, 2026, but excluding the maturity date or earlier redemption date, equal

to the benchmark rate, which is the 90-day average secured overnight financing rate , plus 412 basis points, determined on the determination

date of the applicable interest period, payable quarterly in arrears on May 1, August 1, November 1 and February 1 of each year.

The Company may also redeem the Notes, in whole or in part, on or after May 1, 2026 , and at any time upon the occurrence of certain

events, subject in each case to the approval of the Board of Governors of the Federal Reserve System (the “Federal Reserve”).

The Notes were designed to qualify as Tier 2 capital under the Federal Reserve’s capital adequacy regulations.

The Notes are presented net of issuance

costs of $ 288,000 as of December 31, 2023, which are being amortized into interest expense over the life of the Notes.

of issuance costs into interest expense was $ 39,000 and $ 40,000 for the years ended December 31, 2023 and 2022, respectively.

paid for interest on the Notes totaled $ 1 .0 million for the years ended December 31, 2023 and 2022, respectively.

STOCK PLANS AND EMPLOYEE STOCK OWNERSHIP PLAN

Restricted Stock Awards.

In May 2014, the Company’s shareholders

approved the 2014 Omnibus Incentive Plan, a stock-based compensation plan (the “2014 Incentive Plan”).

Under the 2014

Incentive Plan, up to 516,000 shares of the Company’s common stock were reserved for grants of stock awards, including stock

options and restricted stock, which may be granted to any officer, key employee or non-employee director of WNEB.

Any shares that

were not issued because vesting requirements were not met were available for future issuance under the 2014 Incentive Plan.

On an annual basis, the Compensation Committee

(the “Committee”) approves long-term incentive awards out of the 2014 Incentive Plan, whereby shares will be granted

to eligible participants of the Company that are nominated by the Chief Executive Officer and approved by the Committee, with vesting

over a three-year term for employees and a one-year term for directors.

Annual employee grants provide for a periodic award that

is both performance and time-based and is designed to recognize the executive’s responsibilities, reward performance and

leadership and as a retention tool.

The objective of the award is to align compensation for the named executive officers and directors

over a multi-year period directly with the interests of our shareholders by motivating and rewarding creation and preservation

of long-term financial strength, shareholder value and relative shareholder return.

In February 2020, 120,053 shares were granted

under the 2020 Long-Term Incentive Plan (the “2020 Incentive Plan”).

Of the 120,053 shares, 69,898 shares were time-based,

with 19,760 vesting in one year and 50,138 vesting ratably over a three-year period.

The remaining 50,155 shares granted are performance-based

and are subject to the achievement of the 2020 Incentive Plan performance metrics, with 50 % of the performance-based shares vesting

for each performance metric.

The primary performance metrics for the 2020 Incentive Plan grants are return on equity and earnings

Performance shares will be earned based upon how the Company performs relative to threshold, target and stretch absolute

Company-specific, not relative to a peer index) on an annual performance period for return on equity metrics and for

a three-year cumulative performance period for earnings per share, but will be distributed at the end of the three-year period

The threshold, target and stretch metrics

under the 2020 Incentive Plan are as follows:

Return on Equity Metrics

Performance Period Ending

December 31, 2020

December 31, 2021

December 31, 2022

Earnings Per Share Metrics

Performance Period Ending

Three-year Cumulative Diluted Earnings Per Share

Eligible participants will be able to earn

between 50 % (“threshold” performance), 100 % (“target” performance) and 150 % (“stretch” performance).

As of December 31, 2022, the three-year performance period for the 2020 Incentive Plan grants ended.

The 2020 Incentive Plan included

a “catch-up” provision allowing for any unearned performance-based shares from the 2020 and 2021 performance periods

to be earned at the end of the three-year period based on the final year performance.

Of the original 50,155 performance-based

shares granted in 2020 based on achieving target, 59,268 performance-based shares were eligible for vesting during the first quarter

of 2023 based on achieving stretch.

The fair market value of shares awarded

is based on the market price at the grant date, recorded as unearned compensation and amortized over the applicable vesting period.

Performance-based metrics are monitored on a quarterly basis in order to compare actual results to the performance metric, with

any necessary adjustments being recognized through share-based compensation expense and unearned compensation.

In May 2021, the Company’s shareholders

approved the 2021 Omnibus Incentive Plan, a stock-based compensation plan (the “2021 Incentive Plan”).

Under the 2021

Incentive Plan, up to 700,000 shares of the Company’s common stock were reserved for grants of stock awards, including stock

options and restricted stock, which may be granted to any officer, key employee or non-employee director of the Company.

that are not issued because vesting requirements are not met will be available for future issuance under the 2021 Incentive Plan.

In May 2021, 122,362 shares were granted

under the 2021 Long-Term Incentive Plan (the “2021 Incentive Plan”).

Of the 122,362 shares, 61,181 shares were time-based,

vesting ratably over a three-year period.

The remaining 61,181 shares granted are performance-based and are subject to the achievement

of the 2021 Incentive Plan performance metrics, with 50 % of the performance-based shares vesting for each performance metric.

primary performance metrics for the 2021 Incentive Plan grants are return on equity and earnings per share.

Performance-based shares

will be earned based upon how the Company performs relative to threshold, target and stretch absolute goals (i.e.

Company-specific,

not relative to a peer index) on an annual performance period for return on equity metrics and for a three-year cumulative performance

period for earnings per share, but will be distributed at the end of the three-year period as earned.

The threshold, target and stretch metrics

under the 2021 Incentive Plan are as follows:

Return on Equity Metrics

Performance Period Ending

December 31, 2021

December 31, 2022

December 31, 2023

Earnings Per Share Metrics

Performance Period Ending

Three-year Cumulative Diluted Earnings Per Share

As of December 31, 2023, the three-year

performance period for the 2021 LTI Plan ended.

The 2021 LTI Plan included a “catch-up” provision allowing unearned

performance-based shares from the 2021 and 2022 performance periods to be earned at the end of the three-year period based on the

final year performance.

Of the 50,205 performance-based shares granted in 2021 based on achieving target, 69,376 performance-based

shares were eligible for vesting during the first quarter of 2024 based on achieving stretch.

In March 2022, 137,151 shares were granted

under the 2022 Long-Term Incentive Plan (the “2022 Incentive Plan”).

Of the 137,151 shares, 77,463 shares were time-based,

with 17,775 vesting in one year and 59,688 vesting ratably over a three-year period.

The remaining 59,688 shares granted are performance-based

and are subject to the achievement of the 2022 Incentive Plan performance metrics, with 50 % of the performance-based shares vesting

for each performance metric.

The primary performance metrics for the 2022 Incentive Plan grants are return on equity and earnings

Performance-based shares will be earned based upon how the Company performs relative to threshold, target and stretch

absolute goals (i.e.

Company-specific, not relative to a peer index) on an annual performance period for return on equity metrics

and for a three-year cumulative performance period for earnings per share, but will be distributed at the end of the three-year

period as earned.

The threshold, target and stretch metrics

under the 2022 Incentive Plan are as follows:

Return on Equity Metrics

Performance Period Ending

December 31, 2022

December 31, 2023

December 31, 2024

Earnings Per Share Metrics

Performance Period Ending

Three-year Cumulative Diluted Earnings Per Share

In March 2023, 139,196 shares were granted

under the 2023 Long-Term Incentive Plan (the “2023 Incentive Plan”).

Of the 139,196 shares, 78,697 shares were time-based,

with 18,198 vesting in one year and 60,499 vesting ratably over a three-year period.

The remaining 60,499 shares granted are performance-based

and are subject to the achievement of the 2023 Incentive Plan performance metrics, with 50 % of the performance-based shares vesting

for each performance metric.

The primary performance metrics for the 2023 Incentive Plan grants are return on equity and earnings

Performance shares will be earned based upon how the Company performs relative to threshold, target and stretch absolute

Company-specific, not relative to a peer index) on an annual performance period for return on equity metrics and for

a three-year cumulative performance period for earnings per share, but will be distributed at the end of the three-year period

The threshold, target and stretch metrics

under the 2023 Incentive Plan are as follows:

Return on Equity Metrics

Performance Period Ending

December 31, 2023

December 31, 2024

December 31, 2025

Earnings Per Share Metrics

Performance Period Ending

Three-year Cumulative Diluted Earnings Per Share

At December 31, 2023, there were 308,252 remaining shares available

to grant under the 2021 Incentive Plan.

A summary of the status of restricted stock awards at December

31, 2023 and 2022 is presented below:

Weighted Average Grant Date Fair Value

Balance at December 31, 2022

Shares granted

Balance at December 31, 2023

Weighted Average Grant Date Fair Value

The Company utilized the BTFP, which was created in March 2023 to enhance banking system liquidity by allowing institutions

to pledge certain securities at par value and borrow at a rate of ten basis points over the one-year overnight index swap rate.

The BTFP was available to federally insured depository institutions in the U.S., with advances having a term of up to one year

with no prepayment penalties.

The BTFP ceased extending new advances in March 2024.

At December 31, 2023, the outstanding balance

under the BTFP was $ 90.0 million.

There was no outstanding balance at December 31, 2024.

On April 20, 2021, the Company completed an offering of $ 20.0 million in aggregate principal amount of its 4.875 % fixed-to-floating

rate subordinated notes (the “Notes”) to certain qualified institutional buyers in a private placement transaction.

At December 31, 2024, $ 19.8 million aggregate principle amount of the Notes was outstanding.

earlier redeemed, the Notes mature on May 1, 2031 .

The Notes will bear interest from the initial issue date to, but excluding,

May 1, 2026, or the earlier redemption date, at a fixed rate of 4.875 % per annum, payable quarterly in arrears on May 1, August

1, November 1 and February 1 of each year, beginning August 1, 2021, and from and including May 1, 2026, but excluding the maturity

date or earlier redemption date, equal to the benchmark rate, which is the 90-day average secured overnight financing rate , plus

412 basis points, determined on the determination date of the applicable interest period, payable quarterly in arrears on May

1, August 1, November 1 and February 1 of each year.

The Company may also redeem the Notes, in whole or in part, on or after May

1, 2026 , and at any time upon the occurrence of certain events, subject in each case to the approval of the Board of Governors

of the Federal Reserve System (the “Federal Reserve”).

The Notes were designed to qualify as Tier 2 capital under

the Federal Reserve’s capital adequacy regulations.

Notes are presented net of issuance costs of $ 249,000 as of December 31, 2024, which are being amortized into interest expense

over the life of the Notes.

Amortization of issuance costs into interest expense was $ 39,000 for each of the years ended December

31, 2024 and 2023.

PLANS AND EMPLOYEE STOCK OWNERSHIP PLAN

Stock Awards.

May 2021, the Company’s shareholders approved the 2021 Omnibus Incentive Plan, a share-based compensation plan (the “2021

Omnibus Plan”).

Under the 2021 Omnibus Plan, up to 700,000 shares of the Company’s common stock were reserved for

grants of stock awards, including stock options and restricted stock, which may be granted to any officer, key employee or non-employee

director of the Company.

Any shares that are not issued because vesting requirements are not met will be available for future

issuance under the 2021 Omnibus Plan.

an annual basis, the Compensation Committee (the “Committee”) approves long-term incentive awards out of the 2021

Omnibus Plan, whereby shares will be granted to eligible participants of the Company that are nominated by the Chief Executive

Officer and approved by the Committee, with vesting over a three-year term for employees and a one-year term for directors.

employee grants provide for a periodic award that is both performance and time-based and is designed to recognize the executive’s

responsibilities, reward performance and leadership and as a retention tool.

The objective of the award is to align compensation

for the named executive officers and directors over a multi-year period directly with the interests of our shareholders by motivating

and rewarding creation and preservation of long-term financial strength, shareholder value and relative shareholder return.

Long-Term Incentive Plan.

May 2021, the Committee granted 122,362 shares under the 2021 Long-Term LTI Plan (the “2021 LTI Plan”).

Of the 122,362

shares granted, 61,181 shares, or 50 % of the shares granted, were time-based restricted shares that were scheduled to vest ratably

over a three-year period.

The remaining 61,181 shares, or 50 % of the shares granted, were performance-based restricted shares

which were subject to the achievement of the 2021 LTI Plan performance metrics.

Committee selected Return on Average Equity (“ROE”) and Three-Year Cumulative Diluted Earnings per Share (“EPS”)

as the primary performance metrics for the 2021 LTI Plan.

Each of these two measures were independently assigned a 50% weight

for determining future performance against goals.

Performance-based restricted shares will be earned based upon the Company’s

performance relative to Threshold, Target and Stretch absolute goals on an annual performance period for ROE metrics and for a

three-year cumulative performance period for EPS.

For each performance-based goal, achieving Threshold performance pays at 50 %

of Target value, while achieving Stretch performance pays at 150 % of Target value.

The performance-based shares will be certified

by the Committee and distributed at the end of the three-year period as earned.

Threshold, Target and Stretch metrics under the 2021 LTI Plan are as follows:

Period Ending

Cumulative Diluted EPS

December 31, 2023, the three-year performance period for the 2021 LTI Plan ended.

The 2021 LTI Plan included a “catch-up”

provision allowing unearned performance-based restricted shares from the 2021 and 2022 performance periods to be earned at the

end of the three-year period based on the ROE and EPS for the final year.

At December 31, 2023, the Company achieved Stretch,

and granted 69,376 performance-based restricted shares to eligible participants in the first quarter of 2024.

Long-Term Incentive Plan.

March 2022, the Committee granted 119,376 shares under the 2022 Long-Term LTI Plan (the “2022 LTI Plan”).

Of the 119,376

shares granted, 59,688 shares, or 50 % of the shares granted, were time-based restricted shares that are scheduled to vest ratably

over a three-year period.

The remaining 59,688 shares, or 50 % of the shares granted, were performance-based restricted shares

that are subject to the achievement of the 2022 LTI Plan performance metrics.

Committee selected ROE and EPS as the primary performance metrics for the 2022 LTI Plan.

Each of these two measures were independently

assigned a 50% weight for determining future performance against goals.

Performance-based restricted shares will be earned based

upon the Company’s performance relative to Threshold, Target and Stretch absolute goals on an annual performance period

for ROE metrics and for a three-year cumulative performance period for EPS.

For each performance-based goal, achieving Threshold

performance pays at 50 % of Target value, while achieving Stretch performance pays at 150 % of Target value.

The performance-based

restricted shares will be certified by the Committee and distributed at the end of the three-year period as earned.

Threshold, Target and Stretch metrics under the 2022 LTI Plan are as follows:

Period Ending

Cumulative Diluted EPS

December 31, 2024, the three-year performance period for the 2022 LTI Plan ended.

The Compensation Committee will certify the

results of the 2022 LTI Plan on or about, but no later than March 15, 2025.

Annual Equity Retainer.

March 2022, under the Company’s 2021 Omnibus Plan, each non-employee director received an annual equity retainer of 1,975

time-based restricted shares of WNEB common stock.

In total, 17,775 shares were granted and fully vested on December 31, 2022.

Long-Term Incentive Plan.

March 2023, the Committee granted 120,998 shares under the 2023 Long-Term LTI Plan (the “2023 LTI Plan”).

Of the 120,998

shares granted, 60,499 shares, or 50 % of the shares granted, were time-based restricted shares and vest ratably over a three-year

The remaining 60,499 shares, or 50 % of the shares granted, were performance-based restricted shares that are subject to

the achievement of the 2023 LTI Plan performance metrics.

Committee selected ROE and EPS as the primary performance metrics for the 2023 LTI Plan.

Each of these two measures were independently

assigned a 50% weight for determining future performance against goals.

Performance-based restricted shares will be earned based

upon the Company’s performance relative to Threshold, Target and Stretch absolute goals on an annual performance period

for ROE metrics and for a three-year cumulative performance period for EPS.

For each performance-based goal, achieving Threshold

performance pays at 50 % of Target value, while achieving Stretch performance pays at 150 % of Target value.

The performance-based

restricted shares will be certified by the Committee and distributed at the end of the three-year period as earned.

Threshold, Target and Stretch metrics under the 2023 LTI Plan are as follows:

Period Ending

Cumulative Diluted EPS

Annual Equity Retainer.

March 2023, under the Company’s 2021 Omnibus Plan, each non-employee director received an annual equity retainer of 2,022

time-based restricted shares of WNEB common stock.

In total, 18,198 shares were granted and fully vested on December 31, 2023.

Long-Term Incentive Plan.

March 2024, the Committee granted 146,422 shares under the 2024 Long-Term LTI Plan (the “2024 LTI Plan”).

Of the 146,422

shares granted, 73,211 shares, or 50 % of the shares granted, were time-based restricted shares that are scheduled to vest ratably

over a three-year period.

The remaining 73,211 shares, or 50 % of the share granted, were performance-based restricted shares that

are subject to the achievement of the 2024 LTI Plan performance metrics.

Committee selected ROE and EPS as the primary performance metrics for the 2024 LTI Plan.

Each of these two measures were independently

assigned a 50% weight for determining future performance against goals.

Performance-based restricted shares will be earned based

upon the Company’s performance relative to Threshold, Target and Stretch absolute goals on an annual performance period

for ROE metrics and for a three-year cumulative performance period for EPS.

For each performance-based goal, achieving Threshold

performance pays at 50 % of Target value, while achieving Stretch performance pays at 150 % of Target value.

The performance-based

restricted shares will be certified by the Committee and distributed at the end of the three-year period as earned.

Threshold, Target and Stretch metrics under the 2024 LTI Plan are as follows:

Period Ending

Cumulative Diluted EPS

Annual Equity Retainer.

March 2024, under the Company’s 2021 Omnibus Plan, each non-employee director received an annual equity retainer of 2,384

time-based restricted shares of WNEB common stock.

In total, 21,456 shares were granted and there were 19,072 shares that fully

vested on December 31, 2024.

December 31, 2024, there were 123,587 remaining shares available to grant under the 2021 Omnibus Plan.

summary of the status of unvested restricted stock awards at December 31, 2024 and 2023 is presented below:

Weighted Average Grant

Date Fair Value

Balance at December 31, 2023

3 unchanged sentences

Balance at December 31, 2024

Weighted Average Grant Date Fair Value

Weighted Average Grant

Date Fair Value

Balance at December 31, 2022

3 unchanged sentences

Balance at December 31, 2023

We recorded total

expense for restricted stock awards of $ 1.4 million, $ 1.1 million and $ 1.3 million for the years ended December 31, 2023, 2022

recorded total expense for restricted stock awards of $ 1.5 million, $ 1.4 million and $ 1.1 million for the years ended December

31, 2024, 2023 and 2022, respectively.

The aggregate fair value of restricted stock vested during 2024 was $ 1.3 million.

Tax benefits (shortfall)

related to equity incentive plan expense were $ 29,000 , $ 29,000 and $ 16,000 for the years ended December 31, 2024, 2023 and 2022,

respectively.

Unrecognized compensation cost for stock awards was $ 573,000 at December 31, 2023 with a remaining term of 1.7 years.

Employee Stock

Ownership Plan (“ESOP”).

We established an ESOP for the benefit of each employee that has reached the age of 21

and has completed at least 1,000 hours of service in the previous 12-month period.

In January 2002, as part of the initial stock

conversion, we provided a loan to the ESOP Trust which was used to purchase 8 %, or 1,305,359 shares, of the common stock sold in

the initial public offering.

In January 2007, as

part of the second-step stock conversion, we provided an additional loan to the ESOP Trust which was used to purchase 4.0 %, or

736,000 shares, of the 18,400,000 shares of common stock sold in the offering.

The 2002 and 2007 loans bear an interest rate of

8.0 % and provide for annual payments of interest and principal.

At December 31, 2023,

the remaining principal balances are payable as follows:

(In thousands)

We have committed to make contributions

to the ESOP sufficient to support the debt service of the loans.

The loans are secured by the shares purchased, which are held

in a suspense account for allocation among the participants as the loans are paid.

Total compensation expense applicable to the

ESOP amounted to $ 562,000 , $ 683,000 and $ 682,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Shares held by the ESOP include the following

at December 31, 2023 and 2022:

Unrecognized compensation cost for stock awards was $ 1.0 million at December 31, 2024 with a remaining term of 1.8

Stock Ownership Plan (“ESOP”).

We established an ESOP for the benefit of each employee that has reached the age

of 21 and has completed at least 1,000 hours of service in the previous 12-month period.

In January 2002, as part of the initial

stock conversion, we provided a loan to the ESOP Trust which was used to purchase 8 %, or 1,305,359 shares, of the common stock

sold in the initial public offering.

January 2007, as part of the second-step stock conversion, we provided an additional loan to the ESOP Trust which was used to

purchase 4.0 %, or 736,000 shares, of the 18,400,000 shares of common stock sold in the offering.

The 2002 and 2007 loans bear

an interest rate of 8.0 % and provide for annual payments of interest and principal.

December 31, 2024, the remaining principal balances are payable as follows:

(Dollars in thousands)

have committed to make contributions to the ESOP sufficient to support the debt service of the loans.

The loans are secured by

the shares purchased, which are held in a suspense account for allocation among the participants as the loans are paid.

compensation expense applicable to the ESOP amounted to $ 572,000 , $ 562,000 and $ 683,000 for the years ended December 31, 2024,

2023 and 2022, respectively.

held by the ESOP include the following at December 31, 2024 and 2023:

Committed to be allocated

Cash dividends declared

and received on allocated shares are allocated to participants and charged to retained earnings.

Cash dividends declared and received

on unallocated shares are held in suspense and are applied to repay the outstanding debt of the ESOP.

The fair value of unallocated

shares was $ 2.6 million and $ 3.5 million at December 31, 2023 and 2022, respectively.

ESOP shares are considered outstanding for

earnings per share calculations when they are committed to be allocated.

Unallocated ESOP shares are excluded from earnings per

share calculations.

The cost of unearned shares to be allocated to ESOP participants for future services not yet performed is reflected

as a reduction of shareholders’ equity.

RETIREMENT PLANS AND EMPLOYEE BENEFITS

Pension Plan .

The Board of Directors

previously announced the termination of the Westfield Bank Defined Benefit Plan (the “DB Plan”) on October 31, 2022.

At December 31, 2022, the Company reversed $ 7.3 million in net unrealized losses recorded in accumulated other comprehensive income

attributed to both the DB Plan curtailment resulting from the termination of the DB Plan as well as changes in discount rates.

In addition, during the three months ended December 31, 2022, the Company recorded a gain on curtailment of $ 2.8 million through

non-interest income.

During the twelve months ended December 31, 2023, the Company made an additional cash contribution of $ 1.3

million in order to fully fund the DB Plan on a plan termination basis.

In addition, for those participants who did not opt for

a one-time lump sum payment, the Company funded $ 6.3 million to purchase a group annuity contract to transfer its remaining liabilities

under the DB Plan.

During the twelve months ended December 31, 2023, the Company recognized the final termination expense of $ 1.1

million related to the DB Plan termination, which was recorded through non-interest income.

The following table provides information

related to the DB Plan for the years ended December 31, 2023 and 2022:

For the Year Ended December 31,

(In thousands)

dividends declared and received on allocated shares are allocated to participants and charged to retained earnings.

Cash dividends

declared and received on unallocated shares are held in suspense and are applied to repay the outstanding debt of the ESOP.

fair value of unallocated shares was $ 2.0 million and $ 2.6 million at December 31, 2024 and 2023, respectively.

ESOP shares are

considered outstanding for earnings per share calculations when they are committed to be allocated.

Unallocated ESOP shares are

excluded from earnings per share calculations.

The cost of unearned shares to be allocated to ESOP participants for future services

not yet performed is reflected as a reduction of shareholders’ equity.

PLANS AND EMPLOYEE BENEFITS

The Westfield Bank Defined Benefit Plan (the “DB Plan”) was terminated effective October 31, 2022.

the twelve months ended December 31, 2023, the Company recognized the final termination expense of $ 1.1 million related to the

DB Plan termination, which was recorded through non-interest income.

The assets of the DB Plan were liquidated as of June 2, 2023.

following table provides information related to the DB Plan for the year ended December 31, 2023:

For the year ended

(Dollars in thousands)

Change in benefit obligation:

13 unchanged sentences

Accumulated benefit obligation at end of year

For the year ended December 31, 2023,

the discount rate assumptions reflected the IRS 417 Segment Rates ( 4.48 % / 5.26 % / 5.07 % ) for lump sums and for annuities in the Insurance

Company annuity contract.

For the year ended December, 31, 2022, the following actuarial assumptions were used in determining

the pension benefit obligation:

Discount rate

Rate of compensation increase

The DB Plan was terminated effective October

The DB Plan termination resulted in a $ 5.1 million curtailment of future salary recognition, which also decreased the

DB Plan’s pension benefit obligation for the year ended December 31, 2022.

The assets of the DB Plan were liquidated as of

June 2, 2023.

Net pension cost includes the following

components for the years ended December 31, 2023 and 2022:

For the Years Ended December 31,

(In thousands)

the year ended December 31, 2023, the discount rate assumptions reflected the IRS 417 Segment Rates ( 4.48 % / 5.26 % / 5.07 % ) for lump

sums and for annuities in the Insurance Company annuity contract.

pension cost includes the following components for the year ended December 31, 2023:

For the year ended

(Dollars in thousands)

Interest cost

2 unchanged sentences

Net periodic pension cost

The following actuarial assumptions were

used in determining the net periodic pension cost for the years ended December 31, 2023 and 2022:

Year Ended December 31,

following actuarial assumptions were used in determining the net periodic pension cost for the year ended December 31, 2023:

Discount rate

1 unchanged sentence

Rate of compensation increase

The following is a summary of the DB Plan’s investments

as of December 31, 2022:

December 31, 2022

(In thousands)

Pooled separate investment accounts:

Pooled separate accounts are valued at

the Net Asset Value (“NAV”) of units held by the DB Plan at year end.

The NAV is used as a practical expedient to estimate

This practical expedient would not be used if it was determined to be probable that the funds will sell the underlying

investments for an amount different from the reported NAV.

Participant transactions (purchases and sales) may occur daily.

preceding method described may produce a fair value calculation that may not be indicative of net realizable value or reflective

of future fair values.

Furthermore, although the DB Plan administrators believes the valuation methods are appropriate and consistent

with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial

instruments could result in a different fair value measurement at the reporting date.

Due to the DB Plan termination and settlement

on June 2, 2023, there were no assets remaining in the DB Plan for the year ended December 31, 2023.

The following table summarizes

the investments for which fair value is measured using NAV per share as a practical expedient for the year ended December 31, 2022.

There are no pertinent redemption restrictions for these investments;

the redemption notice period is applicable only to the DB

Frequency (if

Currently Eligible)

Redemption Notice

(In thousands)

December 31, 2022

Prior to its termination, the DB Plan offered

a mixture of fixed income, equity and real assets as the underlying investment structure for its retirement structure for the pension

In August 2022, the DB Plan’s assets were reallocated into short-and-long duration fixed income pooled separate investment

accounts offered by the Custodian.

In anticipation of DB Plan settlement during the second quarter of 2023, the overall investment

objective was to preserve principal and protect DB Plan assets from market volatility.

401(k) Defined Contribution Plan.

The Company also maintains a tax-qualified

defined contribution plan through a third party provider (the “401(k) Plan”) that provides for deferral of federal

and state income taxes on employee contributions allowed under Section 401(k) of the Internal Revenue Code of 1986, as amended

(the “Internal Revenue Code”).

Participants may make pre-tax salary deferrals to the plan not to exceed the annual

Effective January 1, 2023, the Company converted to a Safe Harbor 401(k) Plan.

In addition to salary deferrals, in

2023, the Company will match up to 100 % of the first 4 % of the participant’s eligible compensation (for a total maximum employer

matching contribution of 4 % of a participant’s eligible compensation).

In addition, on an annual basis, the Company may make

a discretionary profit share contribution to each participant.

The Company’s expense for the 401(k)

plan match was $ 736,000 , $ 470,000 and $ 476,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company’s

expense for the 401(k) discretionary profit share contribution was $ 675,000 for the year ended December 31, 2023.

The discretionary

profit share contribution is expected to be made during the first quarter of 2024.

DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives.

The Company is exposed to certain risks

arising from both our business operations and economic conditions.

We principally manage our exposures to a wide variety of business

and operational risks through management of our core business activities.

We manage economic risks, including interest rate, liquidity,

and credit risk, primarily by managing the amount, sources, and duration of our assets and liabilities and the use of derivative

financial instruments.

Specifically, we entered into derivative financial instruments to manage exposures that arise from business

activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined

by interest rates.

Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our

known or expected cash receipts and our known or expected cash payments principally related to certain variable rate loan assets

and variable rate borrowings.

Fair Value Hedges of Interest Rate Risk.

The Company is exposed to changes in the

fair value of certain pools of fixed-rate assets due to changes in benchmark interest rates.

The Company uses interest rate swaps

to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest

The Company's interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty

in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying

notional amount.

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as

the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income .

As of December 31, 2023, the following

amounts were recorded on the balance sheet related to cumulative basis adjustment of fair value hedges:

Item in the Balance Sheet in which

the Hedged Item is Included

Defined Contribution Plan.

Company also maintains a tax-qualified defined contribution plan through a third party provider (the “401(k) Plan”)

that provides for deferral of federal and state income taxes on employee contributions allowed under Section 401(k) of the Internal

Revenue Code.

Participants may make pre-tax salary deferrals to the plan not to exceed the annual IRS limits.

Effective January

1, 2023, the Company converted to a Safe Harbor 401(k) Plan.

In addition to salary deferrals, the Company will match up to 100 %

of the first 4 % of the participant’s eligible compensation (for a total maximum employer matching contribution of 4 % of

a participant’s eligible compensation).

In addition, on an annual basis, the Company may make a discretionary profit share

contribution to each participant.

Company’s expense for the 401(k) plan match was $ 773,000 , $ 736,000 and $ 470,000 for the years ended December 31, 2024, 2023

and 2022, respectively.

The Company’s expense for the 401(k) discretionary profit share contribution was $ 598,000 and $ 675,000

for the years ended December 31, 2024 and 2023, respectively.

The discretionary profit share contribution expensed during the

year ended December 31, 2024 is expected to be made during the first quarter of 2025.

AND HEDGING ACTIVITIES

Management Objective of Using Derivatives.

Company is exposed to certain risks arising from both our business operations and economic conditions.

We principally manage our

exposures to a wide variety of business and operational risks through management of our core business activities.

We manage economic

risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our assets

and liabilities and the use of derivative financial instruments.

Specifically, we entered into derivative financial instruments

to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash

amounts, the value of which are determined by interest rates.

Our derivative financial instruments are used to manage differences

in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally

related to certain variable rate loan assets and variable rate borrowings.

Value Hedges of Interest Rate Risk.

Company is exposed to changes in the fair value of certain pools of fixed-rate assets due to changes in benchmark interest rates.

The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes

in the designated benchmark interest rate.

The Company’s interest rate swaps designated as fair value hedges involve the

payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of

the agreements without the exchange of the underlying notional amount.

For derivatives designated and that qualify as fair value

hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged

risk are recognized in interest income .

October of 2024, $200 million in notional amount of designated fair value hedges matured.

As of December 31, 2024, the Company

did not have any outstanding fair value hedges on the balance sheet.

As of December 31, 2023, the following amounts were recorded

on the balance sheet related to cumulative basis adjustment of fair value hedges:

Item in the Balance Sheet in which the

Hedged Item is Included

Carrying Amount of Hedged

Assets/(Liabilities)

Cumulative Amount of Fair Value

Hedging Adjustments Included in the

Carrying Amount of Hedged

Cumulative Amount of Fair

Value Hedging Adjustments

Included in the Carrying

Amount of Hedged

Assets/(Liabilities)

(In thousands)

These amounts include the amortized cost

basis of closed portfolios of fixed rate residential loans used to designate hedging relationships in which the hedged item is

the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated hedged period.

31, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was $ 461.2 million;

the cumulative

basis adjustments associated with these hedging relationships was approximately $ 607,000 ;

and the notional amount of the designated

hedged items were $ 200 million.

The Company had no fair value hedges at December 31, 2022.

The notional amounts of these agreements

do not represent amounts exchanged by the parties and, thus, are not a measure of the potential loss exposure.

At December 31, 2023

2023, the Company’s fair value hedges had a remaining maturity of 0.8 years, and an average fixed rate of 4.43 % .

Non-hedging Derivatives.

Derivatives not designated as hedges are

not speculative, but rather result from a service the Company provides to certain customers.

The Company executes loan-level derivative

products such as interest-rate swap agreements with commercial banking customers to aid them in managing their interest-rate risk

by converting floating-rate loan payments to fixed-rate loan payments.

The Company concurrently enters into offsetting swaps with

a third-party financial institution, effectively minimizing the Company’s net risk exposure resulting from such transactions.

The third-party financial institution exchanges the customer's fixed-rate loan payments for floating-rate loan payments.

interest-rate swap agreements associated with this program do not meet hedge accounting requirements, changes in the fair value

are recognized directly in earnings.

Fair Values of Derivative Instruments

on the Balance Sheet.

The table below presents the fair value

of our derivative financial instruments designated as hedging and non-hedging instruments as well as our classification on the

balance sheet as of December 31, 2023 and December 31, 2022.

At December 31, 2023

(Dollars in thousands)

amounts include the amortized cost basis of closed portfolios of fixed rate residential loans used to designate hedging relationships

in which the hedged item is the stated amount of assets in the closed portfolio anticipated to be outstanding for the designated

hedged period.

At December 31, 2023, the amortized cost basis of the closed portfolios used in these hedging relationships was

$ 461.2 million;

the cumulative basis adjustments associated with these hedging relationships was approximately $ 607,000 ;

notional amount of the designated hedged items were $ 200 million.

The notional amounts of these agreements do not represent amounts

exchanged by the parties and, thus, are not a measure of the potential loss exposure.

not designated as hedges are not speculative, but rather result from a service the Company provides to certain customers.

Company executes loan-level derivative products such as interest-rate swap agreements with commercial banking customers to aid

them in managing their interest-rate risk by converting floating-rate loan payments to fixed-rate loan payments.

The Company concurrently

enters into offsetting swaps with a third-party financial institution, effectively minimizing the Company’s net risk exposure

resulting from such transactions.

The third-party financial institution exchanges the customer’s fixed-rate loan payments

for floating-rate loan payments.

As the interest-rate swap agreements associated with this program do not meet hedge accounting

requirements, changes in the fair value are recognized directly in earnings.

Values of Derivative Instruments on the Balance Sheet.

tables below present the fair value of our derivative financial instruments designated as hedging and non-hedging instruments

as well as our classification on the balance sheet as of December 31, 2024 and December 31, 2023.

December 31, 2024

3 unchanged sentences

Balance Sheet

(In thousands)

Hedging Derivatives

Interest rate swaps - fair value hedges

(Dollars in thousands)

Derivatives not designated as hedging instruments:

8 unchanged sentences

Balance Sheet

(In thousands)

(Dollars in thousands)

Hedging Derivatives

Interest rate swaps - fair value hedges

Derivatives not designated as hedging instruments:

1 unchanged sentence

Interest rate swap – with dealer counterparties

Total derivatives not designated as hedging instruments

Total derivatives

Other Liabilities

Effect of Derivative Instruments in

the Consolidated Statements of Net Income.

The table below presents the effect of

the Company’s fair value hedge derivative on the statements of net income as of December 31, 2023, December 31, 2022 and

December 31, 2021.

of Derivative Instruments in the Consolidated Statements of Net Income.

table below presents the effect of the Company’s derivative financial instruments on the statements of net income as of

December 31, 2024, 2023 and 2022.

Location and Amount of Gain (Loss) Recognized in Income

on Fair Value Hedging Relationships

Twelve Months Ended

Year Ended December 31,

(Dollars in thousands)

Balance sheet location

Interest Income

1 unchanged sentence

Interest Income

(In thousands)

Total amounts of income line items presented in the statements of net income in which the effects of fair value hedges are recorded

2 unchanged sentences

Derivatives designated as hedging instruments

There were no gains or losses recognized

in accumulated other comprehensive income during the years ended December 31, 2023 or 2022.

Credit-risk-related Contingent Features

By using derivative financial instruments,

we expose ourselves to credit risk.

Credit risk is the risk of failure by the counterparty to perform under the terms of the derivative

When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us.

When the fair value of a derivative is negative, we owe the counterparty and, therefore, it does not possess credit risk.

risk in derivative instruments is mitigated by entering into transactions with highly-rated counterparties that we believe to be

creditworthy and by limiting the amount of exposure to each counterparty.

We have agreements with our derivative

counterparties that contain a provision where if we default on any of our indebtedness, including default where repayment of

the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations.

We also have agreements with certain of our derivative counterparties that contain a provision where if we fail to maintain our

status as well capitalized, then the counterparty could terminate the derivative positions and we would be required to settle our

obligations under the agreements.

Certain of our agreements with our derivative counterparties contain provisions where if a formal

administrative action by a federal or state regulatory agency occurs that materially changes our creditworthiness in an adverse

manner, we may be required to fully collateralize our obligations under the derivative instrument.

At December 31, 2023, we had minimum collateral posting thresholds

with certain of our derivative counterparties.

As of December 31, 2023, we were not required to post collateral under these agreements

because we did not have any derivatives in a liability position with those counterparties.

The Company has lease agreements with lease

and non-lease components, which are generally accounted for separately.

We have not elected the practical expedient to account

for lease and non-lease components as one lease component.

The Company has operating leases for certain of our banking offices

Our leases have remaining lease terms of less than one year to fifteen years , some of which include options to extend

the leases for additional five-year terms up to ten years .

Operating lease costs were $ 1.6 million, $ 1.5 million, and $ 1.6 million

for the years ended December 31, 2023, 2022 and 2021.

Supplemental cash flow information related to leases was as

were no gains or losses recognized in accumulated other comprehensive income during the years ended December 31, 2024 and 2023,

respectively.

Credit-risk-related

Contingent Features

using derivative financial instruments, we expose ourselves to credit risk.

Credit risk is the risk of failure by the counterparty

to perform under the terms of the derivative contract.

When the fair value of a derivative contract is positive, the counterparty

owes us, which creates credit risk for us.

When the fair value of a derivative is negative, we owe the counterparty and, therefore,

it does not possess credit risk.

The credit risk in derivative instruments is mitigated by entering into transactions with highly-rated

counterparties that we believe to be creditworthy and by limiting the amount of exposure to each counterparty.

have agreements with our derivative counterparties that contain a provision where if we default on any of our indebtedness, including

default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default

on our derivative obligations.

We also have agreements with certain of our derivative counterparties that contain a provision

where if we fail to maintain our status as well capitalized, then the counterparty could terminate the derivative positions and

we would be required to settle our obligations under the agreements.

Certain of our agreements with our derivative counterparties

contain provisions where if a formal administrative action by a federal or state regulatory agency occurs that materially changes

our creditworthiness in an adverse manner, we may be required to fully collateralize our obligations under the derivative instrument.

December 31, 2024, we had minimum collateral posting thresholds with certain of our derivative counterparties.

As of December

31, 2024, we were not required to post collateral under these agreements because we did not have any derivatives in a liability

position with those counterparties.

Company has lease agreements with lease and non-lease components, which are generally accounted for separately.

We have not elected

the practical expedient to account for lease and non-lease components as one lease component.

The Company has operating leases

for certain of our banking offices and ATMs.

Our leases have remaining lease terms of less than one year to fourteen years , some

of which include options to extend the leases for additional five-year terms up to ten years .

Operating lease costs were $ 1.6

million, $ 1.6 million, and $ 1.5 million for the years ended December 31, 2024, 2023 and 2022, respectively.

cash flow information related to leases was as follows:

Year Ended December 31,

(In thousands)

(Dollars in thousands)

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Operating leases

Supplemental balance sheet information related to leases was

balance sheet information related to leases was as follows:

December 31, 2024

December 31, 2023

(In thousands)

(Dollars in thousands)

Operating lease ROU assets

Operating lease liabilities

The weighted average remaining lease term for our operating

leases was 9.1 years with a weighted average discount rate of 3.26 % at December 31, 2023.

Future undiscounted lease payments for

the Company’s operating lease liabilities were as follows (in thousands):

weighted average remaining lease term for our operating leases was 8.4 years with a weighted average discount rate of 3.33 % at

December 31, 2024.

Future undiscounted

lease payments for the Company’s operating lease liabilities were as follows (in thousands):

Years Ending December 31,

1 unchanged sentence

Less imputed interest

REGULATORY CAPITAL

The Company and the Bank are subject to

various regulatory capital requirements administered by the federal banking agencies.

Failure to meet minimum capital requirements

can initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct

material effect on our consolidated financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt

corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and

certain off-balance sheet items as calculated under regulatory accounting practices.

The capital amounts and classification are

also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Prompt corrective

action provisions are not applicable to savings and loan holding companies.

Federal banking regulations require the

Company and the Bank to maintain minimum amounts and ratios of total, common equity Tier 1, Tier 1 and total capital to risk-weighted

assets and Tier 1 capital to average assets, as set forth in the table below.

Additionally, community banking institutions must

maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5 % of total risk-weighted assets

to avoid being subject to limitations on capital distributions and discretionary bonuses.

At December 31, 2023, we exceeded each

of the applicable regulatory capital requirements including the capital conservation buffer.

As of December 31, 2023, the most

recent notification from the Office of Comptroller of the Currency categorized the Bank as “well-capitalized” under

the regulatory framework for prompt corrective action.

To be categorized as “well-capitalized,” the Bank must maintain

minimum total risk-based, Tier 1 risk-based, Common Equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following

Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies.

to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators

that, if undertaken, could have a direct material effect on our consolidated financial statements.

Under capital adequacy guidelines

and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative

measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings,

and other factors.

Prompt corrective action provisions are not applicable to savings and loan holding companies.

banking regulations require the Company and the Bank to maintain minimum amounts and ratios of total, common equity Tier 1, Tier

1 and total capital to risk-weighted assets and Tier 1 capital to average assets, as set forth in the table below.

Additionally,

community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater

than 2.5 % of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonuses.

December 31, 2024, we exceeded each of the applicable regulatory capital requirements including the capital conservation buffer.

As of December 31, 2024, the most recent notification from the Office of Comptroller of the Currency categorized the Bank as “well-capitalized”

under the regulatory framework for prompt corrective action.

To be categorized as “well-capitalized,” the Bank must

maintain minimum total risk-based, Tier 1 risk-based, Common Equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth

in the following table.

There are no conditions or events since that notification that management believes would change our category.

Our actual capital ratios of December 31,

2023 and December 31, 2022 are also presented in the following table.

actual capital ratios of December 31, 2024 and December 31, 2023 are also presented in the following table.

Minimum For Capital

20 unchanged sentences

Tier 1 Leverage Ratio (to Adjusted Average Assets):

The following is a reconciliation of our GAAP capital to regulatory

Tier 1, Common Equity Tier 1 and total capital:

(In thousands)

following is a reconciliation of our GAAP capital to regulatory Tier 1, Common Equity Tier 1 and total capital:

(Dollars in thousands)

Consolidated GAAP capital

1 unchanged sentence

Intangible assets, net of associated deferred tax liabilities

Unrealized loss on defined benefit pension plan, net of tax

Tier 1 and Common Equity Tier 1 capital

2 unchanged sentences

Total regulatory capital

On July 26, 2022, the Board of Directors

authorized a stock repurchase plan (the “2022 Plan”), pursuant to which the Company is authorized to repurchase up

to 1.1 million shares, which is approximately 5 .0% of the Company’s outstanding common stock as of the date the 2022 Plan

During the three months ended December 31, 2023, the Company repurchased 244,839 shares of common stock under the

2022 Plan and during the twelve months ended December 31, 2023, the Company repurchased 649,744 shares of common stock under the

May 22, 2024, the Board of Directors authorized a new stock repurchase plan (the “2024 Plan”) under which the Company

may repurchase up to 1.0 million shares, or approximately 4.6 %, of the Company’s then-outstanding shares of common stock.

the three months ended December 31, 2024, the Company repurchased 220,000 shares of common stock under the 2024 Plan, with an

average price per share of $ 9.00 .

During the twelve months ended December 31, 2024, the Company repurchased 934,282 shares of

common stock under the 2024 Plan and the previously existing share repurchase plan, as applicable, with an average price per share

As of December 31, 2024, there were 472,318 shares of common stock available for repurchase under the 2024 Plan.

We are subject to dividend restrictions

imposed by various regulators, including a limitation on the total of all dividends that the Bank may pay to the Company in any

calendar year, to an amount that shall not exceed the Bank’s net income for the current year, plus its net income retained

for the two previous years, without regulatory approval.

At December 31, 2023, the Bank had $ 26.2 million in retained earnings

available for payment of dividends without prior regulatory approval.

In addition, the Bank may not declare or pay dividends on,

and we may not repurchase, any of our shares of common stock if the effect thereof would cause shareholders’ equity to be

reduced below applicable regulatory capital maintenance requirements or if such declaration, payment or repurchase would otherwise

violate regulatory requirements.

The Bank will be prohibited from paying cash dividends to the Company to the extent that any such

payment would reduce the Bank’s capital below required capital levels.

Accordingly, $ 157 .0 million and $ 156.9 million of

our equity in the net assets of the Bank was restricted at December 31, 2023 and 2022, respectively.

Income taxes consist of the following:

are subject to dividend restrictions imposed by various regulators, including a limitation on the total of all dividends that

the Bank may pay to the Company in any calendar year, to an amount that shall not exceed the Bank’s net income for the current

year, plus its net income retained for the two previous years, without regulatory approval.

At December 31, 2024, the Bank had

$ 5.3 million in retained earnings available for payment of dividends without prior regulatory approval.

In addition, the Bank

may not declare or pay dividends on, and we may not repurchase, any of our shares of common stock if the effect thereof would

cause shareholders’ equity to be reduced below applicable regulatory capital maintenance requirements or if such declaration,

payment or repurchase would otherwise violate regulatory requirements.

The Bank will be prohibited from paying cash dividends

to the Company to the extent that any such payment would reduce the Bank’s capital below required capital levels.

$ 159.0 million and $ 156.0 million of our equity in the net assets of the Bank was restricted at December 31, 2024 and 2023, respectively.

taxes consist of the following:

Years Ended December 31,

(In thousands)

(Dollars in thousands)

Current tax provision:

1 unchanged sentence

Total tax provision

The differences between the statutory federal income tax at

a rate of 21% and the effective tax are summarized below:

differences between the statutory federal income tax at a rate of 21% and the effective tax are summarized below:

Years Ended December 31,

(In thousands)

(Dollars in thousands)

Statutory federal income tax

6 unchanged sentences

Effective tax

Cash paid for income taxes for the years ended December 31,

2023, 2022 and 2021 was $ 4.6 million, $ 7.4 million and $ 6.9 million, respectively.

The tax effects of each item that gives rise to deferred taxes

are as follows:

(In thousands)

paid for income taxes for the years ended December 31, 2024, 2023 and 2022 was $ 2.9 million, $ 4.6 million and $ 7.4 million, respectively.

tax effects of each item that gives rise to deferred taxes are as follows:

(Dollars in thousands)

Deferred tax assets:

Net unrealized loss on available-for-sale securities

Allowance for loan losses

Allowance for credit losses

Lease liability

1 unchanged sentence

Accrued expenses

Nonaccrual interest

Nonperforming interest

FDIC assessment

1 unchanged sentence

Purchased mortgage servicing rights

Defined benefit plan

Net unrealized loss on marketable equity securities

Gross deferred tax assets

6 unchanged sentences

Net deferred tax asset

The federal income tax reserve for loan

losses at the Bank’s base year is $ 9.4 million.

If any portion of the reserve is used for purposes other than to absorb loan

losses, approximately 150 % of the amount actually used, limited to the amount of the reserve, would be subject to taxation in the

fiscal year in which used.

As the Bank intends to use the reserve solely to absorb loan losses, a deferred tax liability of $ 2.6

million has not been provided.

We do not have any uncertain tax positions

at December 31, 2023 or 2022 which require accrual or disclosure.

We record interest and penalties as part of income tax expense.

We recorded $ 6,400 in interest and penalties for the year ended December 31, 2023.

There were no interest or penalties were recorded

for the years ended December 31, 2022 and 2021.

Our income tax returns

are subject to review and examination by federal and state tax authorities.

We are currently open to audit under the applicable

statutes of limitations by the Internal Revenue Service for the years ended December 31, 2020 through 2023.

The years open to examination

by state taxing authorities vary by jurisdiction;

federal income tax reserve for loan losses at the Bank’s base year is $ 9.4 million.

If any portion of the reserve is used

for purposes other than to absorb loan losses, approximately 150 % of the amount actually used, limited to the amount of the reserve,

would be subject to taxation in the fiscal year in which used.

As the Bank intends to use the reserve solely to absorb loan losses,

a deferred tax liability of $ 2.6 million has not been provided.

did not have any uncertain tax positions at December 31, 2024 or 2023 which required accrual or disclosure.

We record interest

and penalties as part of income tax expense.

There were no interest or penalties recorded for the years ended December 31, 2024,

2023 and 2022.

income tax returns are subject to review and examination by federal and state tax authorities.

We are currently open to audit

under the applicable statutes of limitations by the Internal Revenue Service for the years ended December 31, 2021 through 2024.

The years open to examination by state taxing authorities vary by jurisdiction;

however, no years prior to 2021 are open.

TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS

We have had, and expect

to have in the future, loans with our directors and executive officers including their affiliates.

Such loans, in our opinion,

do not include more than the normal risk of collectability or other unfavorable features.

Following is a summary of activity for

WITH DIRECTORS AND EXECUTIVE OFFICERS

have had, and expect to have in the future, loans with our directors and executive officers including their affiliates.

in our opinion, do not include more than the normal risk of collectability or other unfavorable features.

Following is a summary

of activity for such loans:

Years Ended December 31,

(In thousands)

(Dollars in thousands)

Balance at beginning of year

2 unchanged sentences

Change in related party status

Balance at end of year

COMMITMENTS AND CONTINGENCIES

Loan Commitments.

In the normal course of business, various

commitments and contingent liabilities are outstanding, such as standby letters of credit and commitments to extend credit with

off-balance-sheet risk that are not reflected in the consolidated financial statements.

Financial instruments with off-balance-sheet

risk involve elements of credit, interest rate, liquidity and market risk.

We do not anticipate any significant losses

as a result of these transactions.

The following summarizes these financial instruments and other commitments and contingent liabilities

at their contract amounts:

(In thousands)

at end of year

AND CONTINGENCIES

the normal course of business, various commitments and contingent liabilities are outstanding, such as standby letters of credit

and commitments to extend credit with off-balance-sheet risk that are not reflected in the consolidated financial statements.

Financial instruments with off-balance-sheet risk involve elements of credit, interest rate, liquidity and market risk.

do not anticipate any significant losses as a result of these transactions.

The following summarizes these financial instruments

and other commitments and contingent liabilities at their contract amounts:

(Dollars in thousands)

Commitments to extend credit:

3 unchanged sentences

Standby letters of credit

We use the same credit policies in making

commitments and conditional obligations as for on balance sheet instruments.

Commitments to extend credit are agreements

to lend to a customer as long as there is no violation of any condition established in the contract.

Commitments generally have

fixed expiration dates or other termination clauses and may require payment of a fee.

Since some commitments expire without being

drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

We evaluate each customer’s

creditworthiness on a case-by-case basis.

The amount of collateral obtained, if deemed necessary by us upon extension of credit,

is based on management’s credit evaluation of the counterparty.

Collateral held varies but may include accounts receivable,

inventory, property, plant and equipment, and income-producing commercial properties.

Standby letters of credit are written conditional

commitments that guarantee the performance of a customer to a third party.

Those guarantees are primarily issued to support public

and private borrowing arrangements.

The credit risk involved in issuing letters of credit is essentially the same as that involved

in extending loan facilities to customers.

At December 31, 2023 and 2022, outstanding standby letter of credit commitments totaled

$22.4 million and $ 22 .0 million, respectively, with standby letters of credit issued by the FHLB on our behalf totaling $ 15.3 million

and $ 16.4 million, respectively.

At December 31, 2023, outstanding commitments

to extend credit totaled $ 444.5 million, with $ 52.8 million in fixed rate commitments with interest rates ranging from 1.99 % to

18.00 % and $ 391.7 million in variable rate commitments.

At December 31, 2022, outstanding commitments to extend credit totaled

$ 505.5 million, with $ 107.1 million in fixed rate commitments with interest rates ranging from 1.99 % to 18.00 % and $ 398.4 million

in variable rate commitments.

We also have risk participation agreements

(“RPAs”) with another financial institution.

The RPAs are a guarantee to share credit risk associated with an interest

rate swap on participation loans in the event of counterparty default.

As such, we accept a portion of the credit risk in order

to participate in the loans and we receive a one-time fee.

The interest rate swap is collateralized (generally by real estate or

business assets) by us and the third party, which limits the credit risk associated with the RPAs.

Per the terms of the RPAs, we

must pledge collateral equal to our exposure for the interest rate swap.

We monitor overall collateral as part of our off-balance

sheet liability analysis, and at December 31, 2023, believe sufficient collateral is available to cover potential swap losses.

In the ordinary course of business, we

are party to various legal proceedings, none of which, in our opinion, will have a material effect on our consolidated financial

position or results of operations.

Vendor Contract.

The Company entered into a long-term contractual

obligation with a vendor for use of its core provider and ancillary services beginning in 2016.

Total remaining contractual obligations

outstanding with this vendor as of December 31, 2023 were estimated to be $ 11.6 million, with $ 5.4 million expected to be paid

within one year and the remaining $ 6.2 million to be paid within the next three years.

Investment Commitments.

The Bank is a limited partner in a Small

Business Investment Company (“SBIC”) and committed to contribute capital of $ 7.5 million to the partnership.

31, 2023, the SBIC currently has a book value of $ 3.7 million and is included in other assets.

The unfunded commitment to the partnership

was $ 3.8 million at December 31, 2023.

Employment and change of control agreements.

We have entered into employment and change

of control agreements with certain senior officers.

The initial term of the employment agreements is for three years subject to

separate one-year extensions as approved by the Board of Directors at the end of each applicable fiscal year.

Each employment agreement

provides for minimum annual salaries, discretionary cash bonuses and other fringe benefits as well as severance benefits upon certain

terminations of employment that are not for cause.

The change of control agreements expire one year following a notice of non-extension

and only provide for severance benefits upon certain terminations of employment that are not for cause and that are related to

a change of control of the Company or the Bank.

FAIR VALUE OF ASSETS AND LIABLITIES

Determination of Fair Value.

We use fair value measurements to record

fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

The fair value of a financial

instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date.

Fair value is best determined based upon quoted market prices.

However, in many instances,

there are no quoted market prices for our various financial instruments.

In cases where quoted market prices are not available,

fair values are based on estimates using present value or other valuation techniques.

Those techniques are significantly affected

by the assumptions used, including the discount rate and estimates of future cash flows.

Accordingly, the fair value estimates

may not be realized in an immediate settlement of the instrument.

Methods and assumptions

for valuing our financial instruments are set forth below.

Estimated fair values are calculated based on the value without regard

to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications

or estimated transaction cost.

The securities measured

at fair value in Level 1 are based on quoted market prices in an active exchange market.

All other securities are measured at fair

value in Level 2 and are based on pricing models that consider standard input factors such as observable market data, benchmark

yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

These securities include government-sponsored

enterprise obligations, state and municipal obligations, corporate bonds, residential mortgage-backed securities guaranteed and

What changed 10-K

Item 9A. Controls and Procedures