Western New England Bancorp, Inc. 10-K

ITEM 9A. 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, 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). Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2024. 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. 80 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Western New England Bancorp, Inc. Opinion on Internal Control over Financial Reporting We 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. 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 10, 2025 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. 81 Definition and Limitations of 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 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. 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 10, 2025 82 ITEM 9B. OTHER INFORMATION. During 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. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. The 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. 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.” ITEM 11. 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.” ITEM 12. 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.” ITEM 13. 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.” ITEM 14. 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 ID: 392 . 83 PART IV ITEM 15. 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. 84 (a)(3) Exhibits EXHIBIT INDEX 3.1 Restated Articles of Organization of Western New England Bancorp, Inc. (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the SEC on October 26, 2016). 3.2 Amended and Restated Bylaws of Western New England Bancorp, Inc. (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the SEC on February 2, 2017). 4.1 Form of Stock Certificate of Western New England Bancorp, Inc. (f/k/a Westfield Financial, Inc.) (incorporated by reference to Exhibit 4.1 of the Registration Statement on Form S-1 (No. 333-137024) filed with the SEC on August 31, 2006). 4.2† Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934. 10.1* 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). 10.2* Amended and Restated Benefit Restoration Plan of Western New England Bancorp, Inc. (f/k/a Westfield Financial, Inc.) (incorporated by reference to Exhibit 10.5 of the Form 8-K filed with the SEC on October 29, 2007). 10.3* Amended and Restated Employment Agreement between James C. Hagan and Westfield Bank (incorporated by reference to Exhibit 10.9 of the Form 8-K filed with the SEC on January 5, 2009). 10.4* Amended and Restated Employment Agreement between James C. Hagan and Western New England Bancorp, Inc. (f/k/a Westfield Financial, Inc.) (incorporated by reference to Exhibit 10.12 of the Form 8-K filed with the SEC on January 5, 2009). 10.5* Employment Agreement between Leo R. Sagan, Jr. and Westfield Bank (incorporated by reference to Exhibit 10.15 of the Form 8-K filed with the SEC on January 5, 2009). 10.6* Employment Agreement between Leo R. Sagan, Jr. and Western New England Bancorp, Inc. (f/k/a Westfield Financial, Inc.) (incorporated by reference to Exhibit 10.16 of the Form 8-K filed with the SEC on January 5, 2009). 10.7* Employment Agreement between Allen J. Miles, III and Westfield Bank (incorporated by reference to Exhibit 10.19 of the Form 8-K filed with the SEC on January 5, 2009). 10.8* Employment Agreement between Allen J. Miles, III and Western New England Bancorp, Inc. (f/k/a Westfield Financial, Inc.) (incorporated by reference to Exhibit 10.20 of the Form 8-K filed with the SEC on January 5, 2009). 10.9* Employment Agreement between Darlene M. Libiszewski and Western New England Bancorp, Inc. (f/k/a Westfield Financial, Inc.) (incorporated by reference to Exhibit 10.4 of the Registration Statement on Form S-4 (No. 333-212221) filed with the SEC on June 24, 2016). 10.10* Employment Agreement between Darlene M. Libiszewski and Westfield Bank (incorporated by reference to Exhibit 10.5 of the Registration Statement on Form S-4 (No. 333-212221) filed with the SEC on June 24, 2016). 10.11* Employment Agreement between Guida R. Sajdak and Western New England Bancorp (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the SEC on February 8, 2018). 10.12* Employment Agreement between Guida R. Sajdak and Westfield Bank (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the SEC on February 8, 2018). 10.13* Employment Agreement between Kevin C. O’Connor and Westfield Bank dated February 17, 2017 (incorporated by reference to Exhibit 10.20 of the Form 10-K filed with the SEC on March 11, 2021). 10.14* Employment Agreement between Kevin C. O’Connor and Western New England Bancorp, Inc. dated February 17, 2017 (incorporated by reference to Exhibit 10.21 of the Form 10-K filed with the SEC on March 11, 2021). 10.15* 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). 10.16* 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). 85 10.17* 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). 10.18* 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). 10.19* Employment Agreement between Filipe B. Goncalves and Western New England Bancorp dated as of January 1, 2021 (incorporated by reference to Exhibit 10.19 of the Form 10-K filed with the SEC on March 10, 2023). 10.20* Employment Agreement between Filipe B. Goncalves and Westfield Bank dated as of January 1, 2021 (incorporated by reference to Exhibit 10.20 of the Form 10-K filed with the SEC on March 10, 2023). 10.21* Change of Control Agreement between Daniel A. Marini, Westfield Bank and Western New England Bancorp, Inc. 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). 10.22* Western New England Bancorp, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 of the Form S-8 filed with the SEC on May 19, 2021). 10.23* Form of Incentive Stock Option Agreement under the Western New England Bancorp, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 of the Form S-8 filed with the SEC on May 19, 2021). 10.24* Form of Non-Qualified Stock Option Agreement under the Western New England Bancorp, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.3 of the Form S-8 filed with the SEC on May 19, 2021). 10.25* Form of Director Incentive Award Agreement under the Western New England Bancorp, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.4 of the Form S-8 filed with the SEC on May 19, 2021). 10.26* Form of Restricted Stock Award Agreement under the Western New England Bancorp, Inc. 2021 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 of the Form S-8 filed with the SEC on May 19, 2021). 10.27* 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 filed with the SEC on May 19, 2021). 19.1† Western New England Bancorp, Inc. Insider Trading Policy as Adopted by the Board of Directors on February 25, 2025. 21.1† Subsidiaries of Western New England Bancorp, Inc. 23.1† Consent of Wolf & Company, P.C. 31.1† Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2† Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1† Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2† Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97* 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). 101** 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. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) † Filed herewith. * Management contract or compensatory plan or arrangement. 86 ** 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. ITEM 16. FORM 10-K SUMMARY. None. 87 SIGNATURES 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 10, 2025. WESTERN NEW ENGLAND BANCORP, INC. By: /s/ James C. Hagan James C. Hagan Chief Executive Officer and President (Principal Executive Officer) By: /s/ Guida R. Sajdak Guida R. Sajdak 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. 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 10, 2025. Name Title /s/ James C. Hagan Chief Executive Officer, President and Director (Principal Executive Officer) James C. Hagan /s/ Guida R. Sajdak Chief Financial Officer and Executive Vice President (Principal Financial Officer and Principal Accounting Officer) Guida R. Sajdak /s/ Lisa G. McMahon Chairperson of the Board Lisa G. McMahon /s/ Laura Benoit Director Laura Benoit /s/ Donna J. Damon Director Donna J. Damon /s/ Gary G. Fitzgerald Director Gary G. Fitzgerald /s/ William D. Masse Director William D. Masse /s/ Gregg F. Orlen Director Gregg F. Orlen /s/ Paul C. Picknelly Director Paul C. Picknelly Name Title /s/ Steven G. Richter Director Steven G. Richter /s/ Philip R. Smith Director Philip R. Smith Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Western New England Bancorp, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Western New England Bancorp, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of net income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended 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, 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 Standards Codification Topic 326, Financial Instruments - Credit Losses (“ASC 326”). Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. 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. 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. F- 1 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: (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 $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 estimates at the loan level for material loan segments. 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. 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 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, significant assumptions and calculations. F- 2 How the Critical Audit Matter was addressed in the Audit 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 · Development of qualitative adjustments to model results Addressing the above matters involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, reviewing the Company’s procedures to validate the model, testing assumptions used in the calculation of discounted cash flows, testing management’s process for determining the qualitative reserve component, and testing the completeness and accuracy of data used in the model. We have served as the Company's auditor since 2004. Boston, Massachusetts March 10, 2025 F- 3 WESTERN NEW ENGLAND BANCORP, INC., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) December 31, December 31, 2024 2023 ASSETS Cash and due from banks $ 18,824 $ 20,784 Federal funds sold 9,264 2,991 Interest-bearing deposits and other short-term investments 38,362 5,065 Total cash and cash equivalents 66,450 28,840 Securities available-for-sale, at fair value 160,704 137,115 Securities held-to-maturity, at amortized cost (Fair value of $ 165,606 at December 31, 2024 and $ 187,692 at December 31, 2023) 205,036 223,370 Marketable equity securities, at fair value 397 196 Total investment securities 366,137 360,681 Federal Home Loan Bank stock and other restricted stock, at amortized cost 5,818 3,707 Total Loans 2,070,189 2,027,317 Less: Allowance for credit losses ( 19,529 ) ( 20,267 ) Net loans 2,050,660 2,007,050 Premises and equipment, net 24,421 25,575 Accrued interest receivable 8,468 8,528 Bank-owned life insurance 77,056 75,145 Deferred tax asset, net 13,997 13,636 Goodwill 12,487 12,487 Core deposit intangible 1,438 1,813 Other assets 26,158 27,109 TOTAL ASSETS $ 2,653,090 $ 2,564,571 LIABILITIES AND SHAREHOLDERS’ EQUITY Deposits: Non-interest-bearing deposits $ 565,620 $ 579,594 Interest-bearing deposits 1,697,027 1,564,150 Total deposits 2,262,647 2,143,744 Borrowings: Short-term borrowings 5,390 16,100 Long-term debt 98,000 120,646 Subordinated debt 19,751 19,712 Total borrowings 123,141 156,458 Securities pending settlement 8,622 — Other liabilities 22,770 26,960 TOTAL LIABILITIES 2,417,180 2,327,162 SHAREHOLDERS’ EQUITY: Preferred stock - $ 0.01 par value, 5,000,000 shares authorized, none outstanding at December 31, 2024 and December 31, 2023 — — Common stock - $ 0.01 par value, 75,000,000 shares authorized, 20,875,713 shares issued and outstanding at December 31, 2024; 21,666,807 shares issued and outstanding at December 31, 2023 209 217 Additional paid-in capital 119,326 125,448 Unearned compensation – Employee Stock Ownership Plan (“ESOP”) ( 1,906 ) ( 2,394 ) Unearned compensation - Equity Incentive Plan ( 1,190 ) ( 1,111 ) Retained earnings 142,745 136,993 Accumulated other comprehensive loss ( 23,274 ) ( 21,744 ) TOTAL SHAREHOLDERS’ EQUITY 235,910 237,409 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 2,653,090 $ 2,564,571 See accompanying notes to consolidated financial statements. F- 4 WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF NET INCOME (Dollars in thousands, except per share data) Years Ended December 31, 2024 2023 2022 Interest and dividend income: Residential and commercial real estate loans $ 85,426 $ 77,964 $ 66,609 Commercial and industrial loans 13,147 12,865 10,397 Consumer loans 325 340 258 Total interest income from loans 98,898 91,169 77,264 Investment securities, taxable 8,633 8,241 8,095 Investment securities, tax-exempt 3 7 11 Marketable equity securities 13 122 190 Total interest and dividend income from investment securities 8,649 8,370 8,296 Other investments 687 558 177 Short-term investments 1,598 1,021 191 Total interest income from cash and cash equivalents 2,285 1,579 368 Total interest and dividend income 109,832 101,118 85,928 Interest expense: Deposits 42,236 26,649 5,352 Short-term borrowings 600 1,589 330 Long-term debt 6,164 3,957 — Subordinated debt 1,015 1,014 1,014 Total interest expense 50,015 33,209 6,696 Net interest and dividend income 59,817 67,909 79,232 (Reversal of) provision for credit losses ( 665 ) 872 700 Net interest and dividend income after (reversal of) provision for credit losses 60,482 67,037 78,532 Non-interest income: Service charges and fees 9,202 8,856 9,072 Income from bank-owned life insurance 1,911 1,820 1,725 Bank-owned life insurance death benefit — 778 — Loss on disposal of premises and equipment ( 6 ) ( 3 ) — Loss on available-for-sale securities, net — — ( 4 ) Gain on sale of mortgages 235 — 2 Net unrealized gain (loss) on marketable equity securities 13 ( 1 ) ( 717 ) Gain on non-marketable equity investments 1,287 590 422 (Loss) gain on defined benefit plan termination — ( 1,143 ) 2,807 Other income 261 — 25 Total non-interest income 12,903 10,897 13,332 Non-interest expense: Salaries and employee benefits 32,686 32,214 32,697 Occupancy 5,054 4,908 4,984 Furniture and equipment 1,955 1,954 2,026 Data processing 3,477 3,157 2,885 Software 2,519 2,311 2,074 Debit card and ATM processing expense 2,437 2,139 1,948 Professional fees 2,161 2,732 2,601 FDIC insurance assessment 1,460 1,321 1,048 Advertising 1,269 1,495 1,408 Other expenses 5,410 6,119 5,564 Total non-interest expense 58,428 58,350 57,235 Income before income taxes 14,957 19,584 34,629 Income tax provision 3,291 4,516 8,742 Net income $ 11,666 $ 15,068 $ 25,887 Earnings per common share: Basic earnings per share $ 0.56 $ 0.70 $ 1.18 Weighted average basic shares outstanding 20,899,573 21,535,888 21,879,657 Diluted earnings per share $ 0.56 $ 0.70 $ 1.18 Weighted average diluted shares outstanding 21,016,358 21,610,329 21,938,323 Dividends per share $ 0.28 $ 0.28 $ 0.24 See accompanying notes to consolidated financial statements. F- 5 WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) Years Ended December 31, 2024 2023 2022 Net income $ 11,666 $ 15,068 $ 25,887 Other comprehensive income (loss): Securities available-for-sale: Unrealized gain (loss) ( 2,070 ) 2,993 ( 27,478 ) Reclassification adjustment for amounts realized in income (1) — — 4 Net amount ( 2,070 ) 2,993 ( 27,474 ) Tax effect 540 ( 775 ) 7,037 Net-of-tax amount ( 1,530 ) 2,218 ( 20,437 ) Defined benefit pension plan: Gains arising during the period — 358 13,000 Reclassification adjustment for amounts realized in income (2) — 1,143 ( 2,807 ) Amortization of defined benefit plan actuarial loss (3) — — 531 Net amount — 1,501 10,724 Tax effect — ( 421 ) ( 3,015 ) Net-of-tax amount — 1,080 7,709 Other comprehensive income (loss) ( 1,530 ) 3,298 ( 12,728 ) Comprehensive income $ 10,136 $ 18,366 $ 13,159 (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 31, 2022, respectively. 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 years ended 2024 and 2023. See accompanying notes to consolidated financial statements. F- 6 WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022 (Dollars in thousands, except share data) Common Stock Unearned Accumulated Shares Par Value Additional Paid-in Capital Unearned Compensation- ESOP Compensation- Equity Incentive Plan Retained Earnings Other Comprehensive Loss Total BALANCE AT DECEMBER 31, 2021 22,656,515 $ 227 $ 132,821 $ ( 3,441 ) $ ( 981 ) $ 107,376 $ ( 12,314 ) $ 223,688 Net income — — — — — 25,887 — 25,887 Comprehensive loss — — — — — — ( 12,728 ) ( 12,728 ) Common stock held by ESOP committed to be released ( 78,526 shares) — — 148 535 — — — 683 Forfeited equity incentive plan shares ( 24,440 shares) — — ( 213 ) — 213 — — — Common stock repurchased ( 754,758 ) ( 8 ) ( 6,343 ) — — — — ( 6,351 ) Share-based compensation – equity incentive plan — — ( 2 ) — 1,076 — — 1,074 Issuance of common stock in connection with stock option exercises 177,881 2 1,169 — — — — 1,171 Issuance of common stock in connection with equity incentive plan 137,151 1 1,248 — ( 1,249 ) — — — Forfeited equity incentive plan shares reissued ( 7,289 shares) — — 71 — ( 71 ) — — — Cash dividends declared and paid on common stock ($ 0.24 per share) — — — — — ( 5,281 ) — ( 5,281 ) BALANCE AT DECEMBER 31, 2022 22,216,789 $ 222 $ 128,899 $ ( 2,906 ) $ ( 1,012 ) $ 127,982 $ ( 25,042 ) $ 228,143 Cumulative effect accounting adjustment (1) — — — — — 9 — 9 Net income — — — — — 15,068 — 15,068 Comprehensive income — — — — — — 3,298 3,298 Common stock held by ESOP committed to be released ( 74,993 shares) — — 50 512 — — — 562 Forfeited equity incentive plan shares ( 4,219 shares) — — ( 40 ) — 40 — — — Forfeited equity incentive plan shares reissued ( 22,503 shares) — — 207 — ( 207 ) — — — Common stock repurchased ( 686,436 ) ( 6 ) ( 5,016 ) — — — — ( 5,022 ) Share-based compensation - equity incentive plan — — — — 1,417 — — 1,417 Issuance of common stock in connection with equity incentive plan 136,454 1 1,348 — ( 1,349 ) — — — Cash dividends declared and paid on common stock ($ 0.28 per share) — — — — — ( 6,066 ) — ( 6,066 ) BALANCE AT DECEMBER 31, 2023 21,666,807 $ 217 $ 125,448 $ ( 2,394 ) $ ( 1,111 ) $ 136,993 $ ( 21,744 ) $ 237,409 Net income — — — — — 11,666 — 11,666 Comprehensive loss — — — — — — ( 1,530 ) ( 1,530 ) Common stock held by ESOP committed to be released ( 71,240 shares) — — 84 488 — — — 572 Forfeited equity incentive plan shares ( 2,384 shares) — — ( 20 ) — 20 — — — Forfeited equity incentive plan shares reissued ( 4,219 shares) — — 35 — ( 35 ) — — — Common stock repurchased ( 973,924 ) ( 10 ) ( 7,752 ) — — — — ( 7,762 ) Share-based compensation - equity incentive plan — — — — 1,469 — — 1,469 Issuance of common stock in connection with equity incentive plan 182,830 2 1,531 — ( 1,533 ) — — — Cash dividends declared and paid on common stock ($ 0.28 per share) — — — — — ( 5,914 ) — ( 5,914 ) BALANCE AT DECEMBER 31, 2024 20,875,713 $ 209 $ 119,326 $ ( 1,906 ) $ ( 1,190 ) $ 142,745 $ ( 23,274 ) $ 235,910 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. F- 7 WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Years Ended December 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 11,666 $ 15,068 $ 25,887 Adjustments to reconcile net income to net cash provided by (used in) operating activities: (Reversal of) provision for credit losses ( 665 ) 872 700 Depreciation and amortization of premises and equipment 2,230 2,219 2,312 Net (accretion) amortization of purchase accounting adjustments ( 39 ) 95 ( 135 ) Amortization of core deposit intangible 375 375 375 Net amortization of premiums and discounts on securities and mortgage loans 1,187 1,267 1,553 Net amortization of deferred costs on mortgage loans 490 497 681 Net amortization of premiums on subordinated debt 39 39 40 Share-based compensation expense 1,469 1,417 1,074 ESOP expense 572 562 683 Gain on sale of portfolio mortgages ( 235 ) — — Principal balance of loans originated for sale — — ( 277 ) Principal balance of loans sold — — 277 Net change in unrealized (gain) loss on marketable equity securities ( 13 ) 1 717 Net loss on sales of available-for-sale securities — — 4 Loss on disposal of premises and equipment 6 3 — Gain on bank-owned life insurance death benefit — ( 778 ) — Deferred income tax provision 178 191 1,088 Income from bank-owned life insurance ( 1,911 ) ( 1,820 ) ( 1,725 ) Net change in: Accrued interest receivable 60 ( 388 ) ( 365 ) Other assets 133 ( 968 ) ( 4,218 ) Other liabilities ( 3,372 ) ( 3,879 ) 8,099 Net cash provided by operating activities 12,170 14,773 36,770 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of securities held-to-maturity ( 1,100 ) ( 7,701 ) ( 28,030 ) Proceeds from calls, maturities, and principal collections of securities held-to-maturity 19,022 14,090 19,650 Purchases of securities available-for-sale ( 32,945 ) ( 196 ) ( 5,000 ) Proceeds from calls, maturities, and principal collections of securities available-for-sale 14,804 12,047 23,664 Proceeds from redemption and sales of marketable equity securities — 6,237 5,131 Net loan originations and principal payments ( 63,475 ) ( 37,023 ) ( 127,823 ) Purchase of Federal Home Loan Bank of Boston stock ( 2,111 ) ( 355 ) ( 758 ) Proceeds from sale of portfolio mortgages 20,333 — — Purchases of premises and equipment ( 1,196 ) ( 2,902 ) ( 1,143 ) Proceeds from sale of premises and equipment 74 18 — Proceeds from payout on bank-owned life insurance — 2,079 2,435 Net cash used in investing activities ( 46,594 ) ( 13,706 ) ( 111,874 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits 118,903 ( 85,699 ) ( 27,427 ) Decrease in short-term borrowings ( 10,710 ) ( 25,250 ) 41,350 Repayment of long-term debt ( 120,646 ) ( 532 ) ( 1,472 ) Proceeds from long-term debt 98,000 120,000 — Cash dividends paid ( 5,914 ) ( 6,066 ) ( 5,281 ) Repurchase of common stock ( 7,599 ) ( 5,022 ) ( 6,351 ) Issuance of common stock in connection with stock option exercises — — 1,171 Net cash provided by (used in) financing activities 72,034 ( 2,569 ) 1,990 NET CHANGE IN CASH AND CASH EQUIVALENTS: 37,610 ( 1,502 ) ( 73,114 ) Beginning of year 28,840 30,342 103,456 End of year $ 66,450 $ 28,840 $ 30,342 Supplemental cash flow information: Available-for-sale securities purchases pending settlement $ 8,459 $ — $ — Net change in due to broker for common stock repurchased 163 — — See the accompanying notes to consolidated financial statements. F- 8 WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2024, 2023 AND 2022 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations and Basis of Presentation . Western New England Bancorp, Inc. (“Western New England Bancorp,” “WNEB,” “Company,” “we,” or “us”) is a Massachusetts-chartered stock holding company for Westfield Bank, a federally-chartered savings bank (“Bank”). The Bank operates 25 banking offices in Hampden County and Hampshire County in western Massachusetts and Hartford County and Tolland County in northern Connecticut, and its primary sources of revenue are interest income from loans as well as interest income from investment securities. The West Hartford Financial Services Center serves as the Company’s Connecticut hub, housing Commercial Lending, Cash Management and a Mortgage Loan Officer. The Bank’s deposits are insured up to the maximum Federal Deposit Insurance Corporation (“FDIC”) coverage limits. Wholly-owned Subsidiaries . Elm Street Securities Corporation, WFD Securities, Inc. and CSB Colts, Inc., are Massachusetts chartered securities corporations, formed for the primary purpose of holding qualified securities. WB Real Estate Holdings, LLC, is a Massachusetts-chartered limited liability company that holds real property acquired as security for debts previously contracted by the Bank. Principles of Consolidation . The consolidated financial statements include the accounts of Western New England Bancorp, the Bank, CSB Colts, Inc., Elm Street Securities Corporation, WB Real Estate Holdings, LLC and WFD Securities, Inc. All material intercompany balances and transactions have been eliminated in consolidation. Estimates . The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United 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 and the reported amounts of income and expenses for each. Actual results could differ from those estimates. An estimate that is particularly susceptible to significant change in the near-term relates to the determination of the allowance for credit losses. Reclassifications . Amounts in the prior year financial statements are reclassified when necessary to conform to the current year presentation. Significant Group Concentrations of Credit Risk . Most of the Company’s lending activities are with customers located within the New England region of the country. The Company does not have any significant concentrations to any one industry or customer. Cash and Cash Equivalents . We define cash on hand, cash due from banks, federal funds sold and interest-bearing deposits having an original maturity of 90 days or less as cash and cash equivalents. Securities and Mortgage-Backed Securities . 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. Investment 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. Realized 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 or maturity. F- 9 Allowance for Credit Losses – Securities Available-for-Sale The 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, the Company evaluates qualitative criteria to determine any expected loss. This includes among other items the financial health of, and specific prospects for the issuer, including whether the issuer is in compliance with the terms and covenants of the security. The Company also evaluates quantitative criteria including determining whether there has been an adverse change in expected future cash flows of the security. 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. government and/or there is an unconditional commitment to make interest payments and to return the principal investment in full to investors when a debt security reaches maturity. In assessing the Company’s investments in government-sponsored and U.S. 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”), Federal National Mortgage Association (“FNMA”), Federal Farm Credit Bank (“FFCB”), or Federal Home Loan Bank (“FHLB”). Accordingly, it is expected that the securities would not be settled at a price less than the par 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 ability to draw funds from the U.S. government, or legislative changes to housing policy that reduce or eliminate the U.S. government’s implicit guarantee on such securities. 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. Allowance for Credit Losses – Securities Held-to-Maturity The Company measures expected credit losses on debt securities held-to-maturity on a collective basis by security type and risk rating where available. The reserve for each pool is calculated based on a Probability of Default/Loss Given Default basis taking into consideration the expected life of each security. Held-to-maturity securities which are issued by the United States Treasury or 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. government and/or there is an unconditional commitment to make interest payments and to return the principal investment in full to investors when a debt security reaches maturity. In assessing the Company’s investments in government-sponsored and U.S. 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; FHLMC, FNMA, FFCB, or FHLB. Accordingly, it is expected that the securities would not be settled at a price less than the par 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 ability to draw funds from the U.S. government, or legislative changes to housing policy that reduce or eliminate the U.S. government’s implicit guarantee on such securities. Any expected credit losses on securities held-to-maturity would be presented as an allowance for credit loss. Non-marketable Equity Securities . Investments in equity securities without readily determinable fair values are measured at cost, less any impairment, with re-measurement to fair value when there are observable price changes. Impairment is evaluated on such securities based on a qualitative assessment that considers various potential impairment indicators. Upon determining that an impairment exists, a loss is recognized for the amount by which the carrying value exceeds the fair value of the investment. F- 10 Derivatives . We enter into interest rate swap agreements as part of our interest-rate risk management strategy for certain assets and liabilities and not for speculative purposes. Based on our intended use for interest rate swaps, these are hedging instruments subject to hedge accounting provisions. Cash flow hedges are recorded at fair value in other assets or other liabilities within our balance sheets. Changes in the fair value of these cash flow hedges are initially recorded in accumulated other comprehensive income (loss) and subsequently reclassified into earnings when the forecasted transaction affects earnings. 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. Fair Value Hierarchy . We group our assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets. Level 1 assets generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Federal Home Loan Bank of Boston Stock . 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 cost. 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, 2024, no impairment has been recognized. Loans Held for Sale . Loans originated and intended for sale in the secondary market are carried at the lower of amortized cost or fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. Net unrealized losses, if any, are recognized through a valuation allowance by charges to non-interest income. Gains or losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold on the trade date and reported within non-interest income on the accompanying consolidated statements of net income. Loans Receivable . Loans are recorded at the principal amount outstanding, adjusted for charge-offs, the allowance for credit losses, unearned premiums, discounts and deferred loan fees and costs. Interest on loans is calculated using the effective yield method on daily balances of the principal amount outstanding and is credited to income on the accrual basis to the extent it is deemed collectible. Our general policy is to discontinue the accrual of interest when principal or interest payments are delinquent 90 days or more based on the contractual terms of the loan, or earlier if the loan is considered impaired. Any unpaid amounts previously accrued on these loans are reversed from current period interest income. Subsequent cash receipts are applied to the outstanding principal balance or to interest income if, in the judgment of management, collection of the principal balance is not in question. Loans are returned to accrual status when they become current as to both principal and interest and when subsequent performance reduces the concern as to the collectability of principal and interest. Loan fees, discounts and premiums on purchased loans, and certain direct loan origination costs are deferred and the net fee or cost is recognized as an adjustment to interest income over the estimated average lives of the related loans. F- 11 Allowance for Credit Losses . 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. The 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. These segments are further disaggregated into loan classes, the level at which credit risk is monitored. For each of these pools, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical internal data. The quantitative component of the ACL on loans is model-based and utilizes a forward-looking macroeconomic forecast. 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 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. The expected loss estimates for the consumer loan segment are based on historical loss rates using the weighted average remaining maturity (“WARM”) method. Commercial real estate loans . 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. 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. Residential real estate loans . 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 loans. 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 needs. The overall health of the economy, including unemployment rates and housing pricing, will have an effect on the credit quality in this segment. Commercial and industrial loans . 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. F- 12 Consumer loans . Loans in this segment are both secured and unsecured and repayment is dependent on the credit quality of the individual borrower. Allowance for Credit Losses Methodology In estimating the component of the allowance for credit losses for loans that share similar risk characteristics with other loans, such loans are segregated into loan classes. Loans are designated into loan classes based on loans pooled by product types and similar risk characteristics or areas of risk concentration. In determining the allowance for credit losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and purpose. The 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. The expected 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; (2) international, national, regional and local economic business conditions and developments that affect the collectability of the portfolio; (3) 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. Additional factors include the existence and effect of any concentrations of credit, and changes in the level of such concentrations and the effect of external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. Such factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management expectation of future conditions based on a reasonable and supportable forecast. The Company uses regression analysis of historical internal and peer data to determine which variables are best suited to be economic variables utilized when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the economic variables. For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Other internal and external indicators of economic forecasts are also considered by management when developing the forecast metrics. The 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; (3) 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. Individually evaluated financial assets For a loan that does not share risk characteristics with other loans, expected credit loss is measured based on net realizable value, that is, the difference between the discounted value of the expected future cash flows, based on the original effective interest rate, and the amortized cost basis of the loan. For these loans, we recognize expected credit loss equal to the amount by which the net realizable value of the loan is less than the amortized cost basis of the loan (which is net of previous charge-offs and deferred loan fees and costs), except when the loan is collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In these cases, expected credit loss is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. F- 13 Allowance for credit losses on off-balance sheet credit exposures, including unfunded loan commitments The Company maintains a separate allowance for credit losses from off-balance-sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the balance sheet. Management estimates the amount of expected losses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Company and applying the loss factors used in the ACL methodology to the results of the usage calculation to estimate the liability for credit losses related to unfunded commitments for each loan type. 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. Bank-owned Life Insurance . Bank-owned life insurance policies are reflected on the consolidated balance sheets at cash surrender value. Changes in the net cash surrender value of the policies, as well as insurance proceeds received in excess of carrying value, are reflected in non-interest income on the consolidated statements of net income and are not subject to income taxes. Transfers and Servicing of Financial Assets . Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from us, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) we do not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Premises and Equipment . Land is carried at cost. Buildings, furniture and equipment are stated at cost, less accumulated depreciation and amortization, computed on the straight-line method over the estimated useful lives of the assets, or the expected lease term, if shorter. Expected terms include lease option periods to the extent that the exercise of such options is reasonably assured. The estimated useful lives of the assets are as follows: The estimated useful lives of the assets are as follows: Years Buildings 39 Leasehold Improvements 5 - 20 Furniture and Equipment 3 - 7 The cost of maintenance and repairs is charged to expense when incurred. Major expenditures for betterments are capitalized and depreciated. Other Real Estate Owned . Other real estate owned (“OREO”) represents property acquired through foreclosure or deeded to us in lieu of foreclosure. OREO is initially recorded at the estimated fair value of the real estate acquired, net of estimated selling costs, establishing a new cost basis. Initial write-downs are charged to the allowance for credit losses at the time the loan is transferred to OREO. Subsequent valuations are periodically performed by management and the carrying value is adjusted by a charge to expense to reflect any subsequent declines in the estimated fair value. Operating costs associated with OREO are expensed as incurred. Servicing . The Company services mortgage loans for others. Mortgage servicing assets are recognized as separate assets at fair value when rights are acquired through purchase or retained through the sale of financial assets. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Capitalized servicing rights are reported in other assets and are amortized into service charges and fee income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to the amortized cost. Impairment is determined by stratifying rights by predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that the fair value is less than the capitalized amount for the stratum. Changes in the valuation allowance are reported in service charges and fee income. F- 14 Servicing fee income is recorded for fees earned for servicing loans, which is included in service charges and fee income. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. Impairment of Long-lived Assets . Long-lived assets, including premises and equipment and certain identifiable intangible assets that are held and used by the Company, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the asset is determined to be impaired, it is written down to its estimated fair value through a charge to earnings. 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 warrant. 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. Retirement Plans and Employee Benefits . 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”). 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. Share-based Compensation Plans . We measure and recognize compensation cost relating to share-based payment transactions based on the grant-date fair value of the equity instruments issued. Share-based compensation is recognized over the period the employee is required to provide services for the award. Reductions in compensation expense associated with forfeited options are estimated at the date of grant, and this estimated forfeiture rate is adjusted based on actual forfeiture experience. We use a binomial option-pricing model to determine the fair value of the stock options granted. Employee Stock Ownership Plan . Compensation expense for the Employee Stock Ownership Plan (“ESOP”) is recorded at an amount equal to the shares allocated by the ESOP multiplied by the average fair market value of the shares during the period. We recognize compensation expense ratably over the year based upon our estimate of the number of shares expected to be allocated by the ESOP. Unearned compensation applicable to the ESOP is reflected as a reduction of shareholders’ equity in the consolidated balance sheets. The difference between the average fair market value and the cost of the shares allocated by the ESOP is recorded as an adjustment to additional paid-in capital. Leases . The Company determines if an arrangement is a lease at inception. Operating leases are included within other assets and other liabilities in our consolidated balance sheets. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Advertising Costs . Advertising costs are accounted for using the accrual basis of accounting. F- 15 Income Taxes . We use the asset and liability method for income tax accounting, whereby, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance related to deferred tax assets is established when, in the judgment of management, it is more likely than not that all or a portion of such deferred tax assets will not be realized based on the available evidence including historical and projected taxable income. We do not have any uncertain tax positions at December 31, 2024 that require accrual or disclosure. We record interest and penalties as part of income tax expense. Earnings per Share . Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. If rights to dividends on unvested awards are non-forfeitable, these unvested awards are considered outstanding in the computation of basic earnings per share. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by us relate to stock options and certain performance-based restricted stock awards and are determined using the treasury stock method. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. There were no anti-dilutive shares outstanding during the years ended December 31, 2024, 2023 and 2022. Earnings per common share for the years ended December 31, 2024, 2023 and 2022 have been computed based on the following: Years Ended December 31, 2024 2023 2022 (Dollars and shares in thousands) Net income applicable to common stock $ 11,666 $ 15,068 $ 25,887 Average number of common shares issued 21,345 22,037 22,451 Less: Average unallocated ESOP Shares ( 264 ) ( 338 ) ( 415 ) Less: Average unvested performance-based equity incentive plan shares ( 181 ) ( 163 ) ( 156 ) Average number of common shares outstanding used to calculate basic earnings per common share 20,900 21,536 21,880 Effect of dilutive performance-based equity incentive plan shares 116 74 41 Effect of dilutive stock options — — 17 Average number of common shares outstanding used to calculate diluted earnings per common share 21,016 21,610 21,938 Net income per common share: Basic earnings per share $ 0.56 $ 0.70 $ 1.18 Diluted earnings per share $ 0.56 $ 0.70 $ 1.18 Comprehensive Income (Loss) . Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income (loss). F- 16 The components of accumulated other comprehensive loss, included in shareholders’ equity, are as follows: December 31, 2024 December 31, 2023 (Dollars in thousands) Net unrealized losses on securities available-for-sale $ ( 31,236 ) $ ( 29,166 ) Tax effect 7,962 7,422 Net-of-tax amount ( 23,274 ) ( 21,744 ) Accumulated other comprehensive loss $ ( 23,274 ) $ ( 21,744 ) Recent Accounting Pronouncements . In 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. In 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 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. In 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. F- 17 2. INVESTMENT SECURITIES The 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 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Dollars in thousands) Securities available-for-sale: Debt securities: Government-sponsored enterprise obligations $ 19,424 $ — $ ( 2,966 ) $ 16,458 Corporate bonds 5,000 — ( 390 ) 4,610 Total debt securities 24,424 — ( 3,356 ) 21,068 Mortgage-backed securities: Government-sponsored mortgage-backed securities 161,313 — ( 26,535 ) 134,778 U.S. government guaranteed mortgage-backed securities 6,203 — ( 1,345 ) 4,858 Total mortgage-backed securities 167,516 — ( 27,880 ) 139,636 Total securities available-for-sale 191,940 — ( 31,236 ) 160,704 Securities held-to-maturity: Debt securities: U.S. Treasury securities 5,002 — ( 275 ) 4,727 U.S. government guaranteed obligations 1,064 — ( 3 ) 1,061 Total debt securities 6,066 — ( 278 ) 5,788 Mortgage-backed securities: Government-sponsored mortgage-backed securities 198,970 13 ( 39,165 ) 159,818 Total mortgage-backed securities 198,970 13 ( 39,165 ) 159,818 Total securities held-to-maturity 205,036 13 ( 39,443 ) 165,606 Total $ 396,976 $ 13 $ ( 70,679 ) $ 326,310 December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value (Dollars in thousands) Securities available-for-sale: Debt securities: Government-sponsored enterprise obligations $ 14,924 $ — $ ( 2,898 ) $ 12,026 State and municipal bonds 135 — — 135 Corporate bonds 8,000 — ( 1,038 ) 6,962 Total debt securities 23,059 — ( 3,936 ) 19,123 Mortgage-backed securities: Government-sponsored mortgage-backed securities 136,533 — ( 23,976 ) 112,557 U.S. government guaranteed mortgage-backed securities 6,689 — ( 1,254 ) 5,435 Total mortgage-backed securities 143,222 — ( 25,230 ) 117,992 Total securities available-for-sale 166,281 — ( 29,166 ) 137,115 Securities held-to-maturity: Debt securities: U.S. Treasury securities 9,995 — ( 545 ) 9,450 Total debt securities 9,995 — ( 545 ) 9,450 Mortgage-backed securities: Government-sponsored mortgage-backed securities 213,375 107 ( 35,240 ) 178,242 Total mortgage-backed securities 213,375 107 ( 35,240 ) 178,242 Total securities held-to-maturity 223,370 107 ( 35,785 ) 187,692 Total $ 389,651 $ 107 $ ( 64,951 ) $ 324,807 F- 18 The following table presents the unrealized gains (losses) recognized on marketable equity securities for the years indicated: Years Ended December 31, 2024 2023 2022 (Dollars in thousands) Net gains (losses) recognized during the year on marketable equity securities $ 13 $ ( 1 ) $ ( 717 ) Net losses recognized during the year on equity securities sold during the year — — 1,021 Unrealized gain (loss) recognized during the year on marketable equity securities still held at year end $ 13 $ ( 1 ) $ 304 During the second quarter of 2023, $ 6.3 million in marketable equity securities was redeemed. As the marketable equity securities portfolio was marked to market through income monthly, the fund liquidation resulted in no gain or loss to the income statement. At December 31, 2024 and 2023, the balance of marketable equity securities was $ 397,000 and $ 196,000 . At December 31, 2024, U.S. Treasury securities with a fair value of $ 4.7 million, government-sponsored enterprise obligations with 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 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. The amortized cost and fair value of securities available-for-sale and held-to-maturity at December 31, 2024, by final maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations. Available-for-Sale Held-to-Maturity Amortized Cost Fair Value Amortized Cost Fair Value (Dollars in thousands) Debt securities: Due after one year through five years $ — $ — $ 5,002 $ 4,727 Due after five years through ten years 22,427 19,076 — — Due after ten years 1,997 1,992 1,064 1,061 Total debt securities $ 24,424 $ 21,068 $ 6,066 $ 5,788 F- 19 Available-for-Sale Held-to-Maturity Amortized Cost Fair Value Amortized Cost Fair Value (Dollars in thousands) Mortgage-backed securities: Due after one year through five years $ 843 $ 820 $ — $ — Due after five years through ten years 2,807 2,749 2,524 2,397 Due after ten years 163,866 136,067 196,446 157,421 Total mortgage-backed securities 167,516 139,636 198,970 159,818 Total securities $ 191,940 $ 160,704 $ 205,036 $ 165,606 Gross 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. Proceeds 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. Accrued 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 allowances for credit losses established on debt securities available-for-sale during the years ended December 31, 2024 and 2023. At 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. Accrued 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. The 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 Less Than Twelve Months Over Twelve Months Number of Securities Fair Value Gross Unrealized Loss Depreciation from Amortized Cost Basis (%) Number of Securities Fair Value Gross Unrealized Loss Depreciation from Amortized Cost Basis (%) (Dollars in thousands) Securities available-for-sale: Government-sponsored mortgage-backed securities 9 $ 33,145 $ 584 1.7 % 70 $ 99,529 $ 25,951 20.7 % U.S. government guaranteed mortgage-backed securities — — — — 9 4,858 1,345 21.7 Government-sponsored enterprise obligations 3 4,452 19 0.4 3 11,988 2,947 19.7 Corporate bonds — — — — 2 4,610 390 7.8 Total securities available-for-sale 12 37,597 603 84 120,985 30,633 Securities held-to-maturity: U.S. Treasury securities — — — — % 1 4,727 275 5.5 % U.S. government guaranteed obligations 1 1,061 3 0.3 — — — — Government-sponsored mortgage-backed securities 4 9,187 127 1.4 37 148,992 39,038 20.8 Total securities held-to-maturity 5 10,248 130 38 153,719 39,313 Total securities 17 $ 47,845 $ 733 122 $ 274,704 $ 69,946 F- 20 December 31, 2023 Less Than Twelve Months Over Twelve Months Number of Securities Fair Value Gross Unrealized Loss Depreciation from Amortized Cost Basis (%) Number of Securities Fair Value Gross Unrealized Loss Depreciation from Amortized Cost Basis (%) (Dollars in thousands) Securities available-for-sale: Government-sponsored mortgage-backed securities — $ — $ — — % 70 $ 112,557 $ 23,976 17.6 % U.S. government guaranteed mortgage-backed securities — — — — 9 5,435 1,254 18.7 Government-sponsored enterprise obligations — — — — 3 12,026 2,898 19.4 Corporate bonds — — — — 3 6,962 1,038 13.0 Total securities available-for-sale — — — 85 136,980 29,166 Securities held-to-maturity: U.S. Treasury securities — — — — % 2 9,450 545 5.5 % Government-sponsored mortgage-backed securities 4 7,097 56 0.8 36 164,395 35,184 17.6 Total securities held-to-maturity 4 7,097 56 38 173,845 35,729 Total securities 4 $ 7,097 $ 56 123 $ 310,825 $ 64,895 The 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: At 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 31, 2023. At 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. F- 21 3. LOANS AND ALLOWANCE FOR CREDIT LOSSES The following table presents the summary of the loan portfolio by the major classification of the loan at the periods indicated: December 31, December 31, 2024 2023 (Dollars in thousands) Commercial real estate: Non-owner occupied $ 880,828 $ 881,643 Owner occupied 194,904 198,108 Total commercial real estate 1,075,732 1,079,751 Residential real estate: Residential one-to-four family 653,802 612,315 Home equity 121,857 109,839 Total residential real estate 775,659 722,154 Commercial and industrial 211,656 217,447 Consumer 4,391 5,472 Total gross loans 2,067,438 2,024,824 Plus: Unearned premiums and deferred loan fees and costs, net 2,751 2,493 Less: Allowance for credit losses ( 19,529 ) ( 20,267 ) Net loans $ 2,050,660 $ 2,007,050 Lending activities primarily consist of commercial real estate loans, commercial and industrial loans, residential real estate loans, and to a lesser degree, consumer loans. Loans Pledged as Collateral. At 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. At 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, 2023. There were no funds borrowed from the FRB backed by loans outstanding or securities pledged at December 31, 2024 or December 31, 2023. Loans Serviced for Others. The Company has transferred a portion of its originated commercial loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in our accompanying consolidated balance sheets. We continue to service the loans on behalf of the participating lenders. We share with participating lenders, on a pro-rata basis, any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. At December 31, 2024 and December 31, 2023, the Company was servicing commercial loans participated out to various other institutions totaling $ 65.3 million and $ 65 .0 million, respectively. Residential real estate mortgages are originated by the Company both for its portfolio and for sale into the secondary market. The Company may sell its loans to institutional investors such as the FHLMC. Under loan sale and servicing agreements with the investor, the Company generally continues to service the residential real estate mortgages. The Company pays the investor an agreed upon rate on the loan, which is less than the interest rate received from the borrower. The Company retains the difference as a fee for servicing the residential real estate mortgages. The Company capitalizes mortgage servicing rights at their fair value upon sale of the related loans, amortizes the asset over the estimated life of the serviced loan, and periodically assesses the asset for impairment. The significant assumptions used by a third party to estimate the fair value of capitalized servicing rights at December 31, 2024, include weighted average prepayment speed for the portfolio using the Public Securities Association Standard Prepayment 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. There were no sales of residential real estate mortgages to the secondary market during the year ended December 31, 2023. F- 22 At 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 31, 2024 and 2023, respectively, and is included in service charges and fees on the consolidated statements of net income. A summary of the activity in the balances of mortgage servicing rights follows: Years Ended December 31, 2024 2023 (Dollars in thousands) Balance at the beginning of year: $ 422 $ 550 Capitalized mortgage servicing rights 114 — Amortization ( 100 ) ( 128 ) Balance at the end of year $ 436 $ 422 Fair value at the end of year $ 826 $ 724 Loans are recorded at the principal amount outstanding, adjusted for charge-offs, unearned premiums and deferred loan fees and costs. Interest on loans is calculated using the effective yield method on daily balances of the principal amount outstanding and is credited to income on the accrual basis to the extent it is deemed collectable. Our general policy is to discontinue the accrual of interest when principal or interest payments are delinquent 90 days or more based on the contractual terms of the loan, or earlier if there are concerns regarding the collectability of the loan. Any unpaid amounts previously accrued on these loans are reversed from income. Subsequent cash receipts are applied to the outstanding principal balance or to interest income if, in the judgment of management, collection of the principal balance is not in question. Loans are returned to accrual status when they become current as to both principal and interest and perform in accordance with contractual terms for a period of at least six months, reducing the concern as to the collectability of principal and interest. Loan fees and certain direct loan origination costs are deferred, and the net fee or cost is recognized as an adjustment to interest income over the estimated average lives of the related loans. Allowance for Credit Losses. 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 $ 7.4 million at December 31, 2024 and $ 7.5 million at December 31, 2023 and is excluded from the estimate of credit losses. F- 23 An 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 Residential Real Estate Commercial and Industrial Consumer Unallocated Total (Dollars in thousands) Allowance for credit losses for loans Balance at December 31, 2023 $ 15,141 $ 2,548 $ 2,537 $ 41 $ — $ 20,267 Provision for (reversal of) for credit losses ( 1,670 ) 761 ( 212 ) 296 — ( 825 ) Charge-offs ( 46 ) ( 185 ) ( 65 ) ( 228 ) — ( 524 ) Recoveries 252 32 217 110 — 611 Balance at December 31, 2024 $ 13,677 $ 3,156 $ 2,477 $ 219 $ — $ 19,529 Balance at December 31, 2022 $ 12,199 $ 4,312 $ 3,160 $ 245 $ 15 $ 19,931 Cumulative effect change in accounting principle 3,989 ( 2,518 ) ( 75 ) ( 199 ) ( 15 ) 1,182 Adjusted beginning balance 16,188 1,794 3,085 46 — 21,113 Provision (reversal) for credit losses ( 292 ) 728 665 92 — 1,193 Charge-offs ( 764 ) — ( 1,561 ) ( 185 ) — ( 2,510 ) Recoveries 9 26 348 88 471 Balance at December 31, 2023 $ 15,141 $ 2,548 $ 2,537 $ 41 $ — $ 20,267 The 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 Residential Real Estate Commercial and Industrial Consumer Unallocated Total (Dollars in thousands) Balance at December 31, 2021 $ 12,970 $ 3,964 $ 2,643 $ 197 $ 13 $ 19,787 Provision for (reversal of) for credit losses ( 434 ) 344 586 202 2 700 Charge-offs ( 337 ) ( 28 ) ( 92 ) ( 216 ) — ( 673 ) Recoveries — 32 23 62 — 117 Balance at December 31, 2022 $ 12,199 $ 4,312 $ 3,160 $ 245 $ 15 $ 19,931 Commercial Real Estate Residential Real Estate Commercial and Industrial Consumer Unallocated Total (Dollars in thousands) Allowance for credit losses for off-balance sheet exposures Balance at December 31, 2023 $ 375 $ 163 $ 59 $ — $ — $ 597 Provision (reversal) for credit losses 81 93 ( 14 ) — — 160 Balance at December 31, 2024 $ 456 $ 256 $ 45 $ — $ — $ 757 Balance at December 31, 2022 $ — $ — $ — $ — $ — $ — Cumulative effect of change in accounting principle 611 267 40 — — 918 Reversal of credit losses ( 236 ) ( 104 ) 19 — — ( 321 ) Balance at December 31, 2023 $ 375 $ 163 $ 59 $ — $ — $ 597 There was no allowance for credit losses for off-balance sheet exposures for the year ended December 31, 2022. F- 24 During 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. During 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. The 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. Past Due and Nonperforming Loans. The following tables present an age analysis of past due loans as of the dates indicated: 30 – 59 Days Past Due 60 – 89 Days Past Due 90 Days or More Past Due Total Past Due Loans Total Current Loans Total Loans Nonperforming Loans (Dollars in thousands) December 31, 2024 Commercial real estate: Non-owner occupied $ 285 $ — $ — $ 285 $ 880,543 $ 880,828 $ — Owner occupied — — — — 194,904 194,904 330 Total 285 — — 285 1,075,447 1,075,732 330 Residential real estate: Residential one-to-four family 1,747 569 983 3,299 650,503 653,802 3,965 Home equity 810 213 317 1,340 120,517 121,857 408 Total 2,557 782 1,300 4,639 771,020 775,659 4,373 Commercial and industrial 60 — 1 61 211,595 211,656 673 Consumer 10 — — 10 4,381 4,391 5 Total loans $ 2,912 $ 782 $ 1,301 $ 4,995 $ 2,062,443 $ 2,067,438 $ 5,381 30 – 59 Days Past Due 60 – 89 Days Past Due 90 Days or More Past Due Total Past Due Loans Total Current Loans Total Loans Nonperforming Loans (Dollars in thousands) December 31, 2023 Commercial real estate: Non-owner occupied $ — $ 647 $ 236 $ 883 $ 880,760 $ 881,643 $ 1,107 Owner occupied 272 — 167 439 197,669 198,108 240 Total 272 647 403 1,322 1,078,429 1,079,751 1,347 Residential real estate: Residential one-to-four family 2,354 934 881 4,169 608,146 612,315 4,739 Home equity 263 112 102 477 109,362 109,839 109 Total 2,617 1,046 983 4,646 717,508 722,154 4,848 Commercial and industrial 20 — 8 28 217,419 217,447 218 Consumer 3 — — 3 5,469 5,472 8 Total loans $ 2,912 $ 1,693 $ 1,394 $ 5,999 $ 2,018,825 $ 2,024,824 $ 6,421 F- 25 At 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 Loans. Accrual of interest on loans is generally discontinued when contractual payment of principal or interest becomes past due 90 days or, if in management’s judgment, reasonable doubt exists as to the full timely collection of interest. Exceptions may be made if the loan has matured and is in the process of renewal or is well-secured and in the process of collection. When a loan is placed on nonperforming status, interest accruals cease and uncollected accrued interest is reversed and charged against current interest income. Interest payments on nonperforming loans are generally applied to principal. If collection of the principal is reasonably assured, interest payments are recognized as income on the cash basis. Loans are generally returned to accrual status when principal and interest payments are current, full collectability of principal and interest is reasonably assured and a consistent record of at least six consecutive months of performance has been achieved. The following table is a summary of the Company’s nonperforming loans by major categories at December 31, 2024 and December 31, 2023: As of December 31, 2024 For the Year Ended December 31, 2024 Nonperforming Loans with Allowance for Credit Loss Nonperforming Loans Without Allowance for Credit Loss Total Nonperforming Loans Accrued Interest Receivable Reversed from Income (Dollars in thousands) Commercial real estate: Non-owner occupied $ — $ — $ — $ — Owner occupied — 330 330 — Total — 330 330 — Residential real estate: Residential one-to-four family — 3,965 3,965 192 Home equity — 408 408 30 Total 4,373 4,373 222 Commercial and industrial — 673 673 151 Consumer — 5 5 — Total loans $ — $ 5,381 $ 5,381 $ 373 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 Total Nonperforming Loans Accrued Interest Receivable Reversed from Income (Dollars in thousands) Commercial real estate: Non-owner occupied $ — $ 1,107 $ 1,107 $ 44 Owner occupied — 240 240 23 Total — 1,347 1,347 67 Residential real estate: Residential one-to-four family — 4,739 4,739 182 Home equity — 109 109 10 Total 4,848 4,848 192 Commercial and industrial — 218 218 159 Consumer — 8 8 — Total loans $ — $ 6,421 $ 6,421 $ 418 F- 26 At 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 nonperforming loans for the years ended December 31, 2024 and 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. Individually Evaluated Collateral Dependent Loans. 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 property. The 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 (Dollars in thousands) With no related allowance recorded: Commercial real estate: Non-owner occupied $ 6,956 $ — Owner occupied 1,285 — Total 8,241 — Residential real estate: Residential one-to-four family 4,333 — Home equity 408 — Total 4,741 Commercial and industrial 776 — Consumer — — Loans with no related allowance recorded $ 13,758 $ — With an allowance recorded: Commercial real estate: Non-owner occupied $ — $ — Owner occupied — — Total — — Residential real estate: Residential one-to-four family — — Home equity — — Total — — Commercial and industrial 494 156 Consumer — — Loans with an allowance recorded $ 494 $ 156 Total individually evaluated loans $ 14,252 $ 156 F- 27 As of December 31, 2023 Recorded Investment Related Allowance (Dollars in thousands) With no related allowance recorded: Commercial real estate: Non-owner occupied $ 8,879 $ — Owner occupied 1,769 — Total 10,648 — Residential real estate: Residential one-to-four family 5,163 — Home equity 109 — Total 5,272 — Commercial and industrial 13,273 — Consumer 8 — Loans with no related allowance recorded $ 29,201 $ — With an allowance recorded: Commercial real estate: $ — $ — Non-owner occupied — — Owner occupied — — Total — — Residential real estate: Residential one-to-four family — — Home equity — — Total Commercial and industrial 517 179 Consumer — — Loans with an allowance recorded $ 517 $ 179 Total individually evaluated loans $ 29,718 $ 179 Modified Loans to Borrowers Experiencing Financial Difficulty. The 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. There were no loan modifications granted based on borrower financial difficulty during the years ended December 31, 2024 and 2023. During 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. F- 28 Credit Quality Information. The 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. The 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) are listed on the Company’s criticized report and are reviewed not less than on a quarterly basis to assess the level of risk and to ensure that appropriate actions are being taken to minimize potential loss exposure. In addition, the Company closely 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 borrower. Loans identified as containing a loss are partially charged-off or fully charged-off. Performing residential real estate, home equity and consumer loans are grouped with “Pass” rated loans. Nonperforming residential real estate, home equity and consumer loans are risk rated as “Substandard” and individually evaluated. Loans rated 1 – 4 : 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 : 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 : 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 : 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 : 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 future. On 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. The 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. F- 29 As of and Year Ended December 31, 2024 Term Loan Origination by Year Revolving Loans 2024 2023 2022 2021 2020 Prior Revolving Loans Revolving Loans Converted to Term Loans Total (Dollars in thousands) Commercial Real Estate: Pass (Rated 1- 4) $ 51,726 $ 46,105 $ 175,159 $ 237,531 $ 108,165 $ 348,564 $ 84,083 $ 3,391 $ 1,054,724 Special Mention (Rated 5) — — — — — 10,104 134 — 10,238 Substandard (Rated 6) — — — — 8,166 2,604 — — 10,770 Total commercial real estate loans $ 51,726 $ 46,105 $ 175,159 $ 237,531 $ 116,331 $ 361,272 $ 84,217 $ 3,391 $ 1,075,732 Current period gross charge-offs $ — $ — $ — $ — $ — $ 46 $ — $ — $ 46 Payment Performance: Performing $ 51,726 $ 46,105 $ 175,159 $ 237,531 $ 116,331 $ 360,942 $ 84,217 $ 3,391 $ 1,075,402 Nonperforming — — — — — 330 — — 330 Residential One-to-Four Family: Pass $ 79,180 $ 60,825 $ 87,635 $ 88,761 $ 119,302 $ 205,620 $ 7,821 $ — $ 649,144 Substandard — — 425 355 380 3,498 — — 4,658 Total residential one-to-four family $ 79,180 $ 60,825 $ 88,060 $ 89,116 $ 119,682 $ 209,118 $ 7,821 $ — $ 653,802 Current period gross charge-offs $ — $ — $ — $ — $ — $ 59 $ — $ — $ 59 Payment Performance: Performing $ 79,180 $ 60,825 $ 87,635 $ 88,761 $ 119,302 $ 206,313 $ 7,821 $ — $ 649,837 Nonperforming — — 425 355 380 2,805 — — 3,965 Home Equity: Pass $ 9,509 $ 8,699 $ 9,196 $ 5,801 $ 6,264 $ 9,998 $ 68,920 $ 3,062 $ 121,449 Substandard 13 — 70 — — — 317 8 408 Total home equity loans $ 9,522 $ 8,699 $ 9,266 $ 5,801 $ 6,264 $ 9,998 $ 69,237 $ 3,070 $ 121,857 Current period gross charge-offs $ — $ — $ 20 $ — $ — $ 7 $ — $ 99 $ 126 Payment Performance: Performing $ 9,509 $ 8,699 $ 9,196 $ 5,801 $ 6,264 $ 9,998 $ 68,920 $ 3,062 $ 121,449 Nonperforming 13 — 70 — — — 317 8 408 F- 30 As of and Year Ended December 31, 2024 Term Loans Originated by Year Revolving Loans 2024 2023 2022 2021 2020 Prior Revolving Loans Revolving Loans Converted to Term Loans Total (Dollars in thousands) Commercial and Industrial: Pass (Rated 1- 4) $ 29,346 $ 19,096 $ 27,609 $ 27,371 $ 14,859 $ 22,117 $ 58,852 $ 64 $ 199,314 Special Mention (Rated 5) — 25 590 125 — 328 99 — 1,167 Substandard (Rated 6) — 5,872 — — 376 1,547 3,380 — 11,175 Total commercial and industrial loans $ 29,346 $ 24,993 $ 28,199 $ 27,496 $ 15,235 $ 23,992 $ 62,331 $ 64 $ 211,656 Current period gross charge-offs $ — $ — $ — $ — $ — $ 56 $ — $ 9 $ 65 Payment Performance: Performing $ 29,346 $ 24,993 $ 28,199 $ 27,496 $ 15,235 $ 23,468 $ 62,182 $ 64 $ 210,983 Nonperforming — — — — — 524 149 — 673 Consumer: Pass $ 839 $ 1,421 $ 842 $ 271 $ 45 $ 145 $ 823 $ — $ 4,386 Substandard — — — — — 5 — — 5 Total consumer loans $ 839 $ 1,421 $ 842 $ 271 $ 45 $ 150 $ 823 $ — $ 4,391 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ 228 $ 228 Payment Performance: Performing $ 839 $ 1,421 $ 842 $ 271 $ 45 $ 145 $ 823 $ — $ 4,386 Nonperforming — — — — — 5 — — 5 F- 31 As of and Year Ended December 31, 2023 Term Loan Origination by Year Revolving Loans 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Loans Total (Dollars in thousands) Commercial Real Estate: Pass (Rated 1- 4) $ 42,764 $ 175,829 $ 228,739 $ 113,631 $ 91,353 $ 320,806 $ 81,483 $ 9,289 $ 1,063,894 Special Mention (Rated 5) — — — 180 915 3,237 164 — 4,496 Substandard (Rated 6) — — — 8,013 — 3,348 — — 11,361 Total commercial real estate loans $ 42,764 $ 175,829 $ 228,739 $ 121,824 $ 92,268 $ 327,391 $ 81,647 $ 9,289 $ 1,079,751 Current period gross charge-offs $ — $ — $ — $ — $ — $ 764 $ — $ — $ 764 Payment Performance: Performing $ 42,764 $ 175,829 $ 228,739 $ 121,824 $ 92,268 $ 326,044 $ 81,647 $ 9,289 $ 1,078,404 Nonperforming — — — — — 1,347 — — 1,347 Residential One-to-Four Family: Pass $ 59,257 $ 88,213 $ 94,290 $ 125,917 $ 54,263 $ 174,688 $ 10,401 $ — $ 607,029 Substandard — 447 495 445 — 3,899 — — 5,286 Total residential one-to-four family $ 59,257 $ 88,660 $ 94,785 $ 126,362 $ 54,263 $ 178,587 $ 10,401 $ — $ 612,315 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Payment Performance: Performing $ 59,257 $ 88,213 $ 94,290 $ 125,540 $ 54,263 $ 175,612 $ 10,401 $ — $ 607,576 Nonperforming — 447 495 822 — 2,975 — — 4,739 Home Equity: Pass $ 9,937 $ 10,885 $ 6,861 $ 7,108 $ 5,234 $ 7,261 $ 60,115 $ 2,329 $ 109,730 Substandard — — — — — 7 90 12 109 Total home equity loans $ 9,937 $ 10,885 $ 6,861 $ 7,108 $ 5,234 $ 7,268 $ 60,205 $ 2,341 $ 109,839 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Payment Performance: Performing $ 9,937 $ 10,885 $ 6,861 $ 7,108 $ 5,234 $ 7,261 $ 60,115 $ 2,329 $ 109,730 Nonperforming — — — — — 7 90 12 109 F- 32 As of and Year Ended December 31, 2023 Term Loans Originated by Year Revolving Loans 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Loans Total (Dollars in thousands) Commercial and Industrial: Pass (Rated 1- 4) $ 31,108 $ 35,705 $ 26,553 $ 19,780 $ 19,765 $ 8,825 $ 57,393 $ 69 $ 199,198 Special Mention (Rated 5) — 101 — — 8 498 707 — 1,314 Substandard (Rated 6) — — 1,408 8,156 — 85 7,286 — 16,935 Total commercial and industrial loans $ 31,108 $ 35,806 $ 27,961 $ 27,936 $ 19,773 $ 9,408 $ 65,386 $ 69 $ 217,447 Current period gross charge-offs $ — $ 147 $ — $ — $ — $ 221 $ — $ 1,193 $ 1,561 Payment Performance: Performing $ 31,108 $ 35,806 $ 27,961 $ 27,936 $ 19,773 $ 9,401 $ 65,175 $ 69 $ 217,229 Nonperforming — — — — — 7 211 — 218 Consumer: Pass $ 2,168 $ 1,381 $ 524 $ 241 $ 68 $ 270 $ 812 $ — $ 5,464 Substandard — — — — — 8 — — 8 Total consumer loans $ 2,168 $ 1,381 $ 524 $ 241 $ 68 $ 278 $ 812 $ — $ 5,472 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ 3 $ 182 $ 185 Payment Performance: Performing $ 2,168 $ 1,381 $ 524 $ 241 $ 68 $ 271 $ 811 $ — $ 5,464 Nonperforming — — — — — 7 1 — 8 F- 33 The following table summarizes information about total loans rated Special Mention, Substandard, Doubtful or Loss for the periods noted. December 31, 2024 December 31, 2023 (Dollar in thousands) Criticized loans: Special Mention $ 11,405 $ 5,810 Substandard 27,016 33,699 Total criticized loans $ 38,421 $ 39,509 Total criticized loans as a percentage of total loans 1.9 % 1.9 % 4. PREMISES AND EQUIPMENT Premises and equipment are summarized as follows: December 31, 2024 2023 (Dollars in thousands) Land $ 6,239 $ 6,239 Buildings 28,451 28,231 Leasehold improvements 3,472 3,472 Furniture and equipment 24,164 23,268 Total 62,326 61,210 Less: accumulated depreciation and amortization ( 37,905 ) ( 35,635 ) Premises and equipment, net $ 24,421 $ 25,575 Depreciation 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. 5. GOODWILL AND OTHER INTANGIBLES Goodwill At 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 warrant. 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 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. Core Deposit Intangibles In 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. F- 34 6. DEPOSITS Deposit accounts, by type, are summarized as follows for the periods indicated: At December 31, 2024 % of Total Deposits 2023 % of Total Deposits (Dollars in thousands) Demand and interest-bearing checking: Interest-bearing checking accounts $ 150,348 6.7 % $ 131,031 6.1 % Demand deposit accounts 565,620 25.0 % 579,595 27.0 % Savings: Regular savings accounts 181,618 8.0 % 187,405 8.8 % Money market accounts 661,478 29.2 % 634,361 29.6 % Total core deposits 1,559,064 68.9 % 1,532,392 71.5 % Time deposits 703,583 31.1 % 611,352 28.5 % Total deposits $ 2,262,647 100.0 % $ 2,143,744 100.0 % There were $ 1.7 million in brokered deposits reported within time deposits at December 31, 2024 and 2023. Time deposits of $250,000 or more, which represent those exceeding the fully-insured FDIC limitation, totaled $ 234.4 million at December 31, 2024. 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. The scheduled maturities of time deposits for the periods indicated are as follows: At December 31, 2024 2023 (Dollars in thousands) 2024 $ — $ 596,292 2025 694,916 9,302 2026 5,186 3,170 2027 1,217 798 2028 2,129 1,790 2029 135 — Total time deposits $ 703,583 $ 611,352 F- 35 Interest expense on deposits for the years ended December 31, 2024, 2023 and 2022 is summarized as follows: Years Ended December 31, 2024 2023 2022 (Dollars in thousands) Savings accounts $ 166 $ 181 $ 161 Money market accounts 12,242 9,529 3,187 Time deposits 28,806 15,898 1,474 Interest-bearing accounts 1,022 1,041 530 Total $ 42,236 $ 26,649 $ 5,352 Cash 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. 7. SHORT-TERM BORROWINGS On 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. Short-term 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. 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. Other 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. As 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. 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, 2024 and December 31, 2023, there were no advances outstanding under these lines. F- 36 Cash 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. 8. LONG-TERM DEBT Cash 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. FHLB Advances. The following advances are collateralized by a blanket lien on our residential real estate loans and certain eligible commercial real estate loans. Amount Weighted Average Rate 2024 2023 2024 2023 (Dollars in thousands) Fixed-rate advances maturing: 2024 $ — $ 30,646 — % 4.81 % 2025 25,000 — 5.07 — 2026 48,000 — 5.00 — 2027 25,000 — 4.83 — Total long-term advances $ 98,000 $ 30,646 4.97 % 4.81 % BTFP Advances. 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. Subordinated Debt. 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. 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 $ 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. F- 37 9. STOCK PLANS AND EMPLOYEE STOCK OWNERSHIP PLAN Restricted Stock Awards. In 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. On 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. 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. 2021 Long-Term Incentive Plan. In 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. The 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. The Threshold, Target and Stretch metrics under the 2021 LTI Plan are as follows: ROE Metrics Performance Period Ending Threshold Target Stretch Actual December 31, 2021 5.63 % 6.25 % 7.50 % 10.64 % December 31, 2022 5.85 % 6.50 % 7.80 % 11.85 % December 31, 2023 6.08 % 6.75 % 8.10 % 6.47 % EPS Metrics Performance Period Ending Threshold Target Stretch Actual Three-Year Cumulative Diluted EPS $ 1.58 $ 1.97 $ 2.36 $ 2.90 At 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. F- 38 2022 Long-Term Incentive Plan. In 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. The 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. The Threshold, Target and Stretch metrics under the 2022 LTI Plan are as follows: ROE Metrics Performance Period Ending Threshold Target Stretch December 31, 2022 7.79 % 8.20 % 8.61 % December 31, 2023 7.93 % 8.35 % 8.77 % December 31, 2024 8.03 % 8.45 % 8.87 % EPS Metrics Performance Period Ending Threshold Target Stretch Three-Year Cumulative Diluted EPS $ 2.35 $ 2.61 $ 2.85 At 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. 2022 Annual Equity Retainer. In 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. 2023 Long-Term Incentive Plan. In 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 period. 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. The 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. F- 39 The Threshold, Target and Stretch metrics under the 2023 LTI Plan are as follows: ROE Metrics Performance Period Ending Threshold Target Stretch December 31, 2023 8.00 % 8.45 % 8.85 % December 31, 2024 8.75 % 9.25 % 9.75 % December 31, 2025 9.00 % 9.50 % 10.00 % EPS Metrics Performance Period Ending Threshold Target Stretch Three-Year Cumulative Diluted EPS $ 2.39 $ 2.65 $ 2.89 2023 Annual Equity Retainer. In 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. 2024 Long-Term Incentive Plan. In 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. The 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. The Threshold, Target and Stretch metrics under the 2024 LTI Plan are as follows: ROE Metrics Performance Period Ending Threshold Target Stretch December 31, 2024 5.05 % 5.61 % 6.17 % December 31, 2025 6.18 % 6.86 % 7.55 % December 31, 2026 7.30 % 8.11 % 8.92 % EPS Metrics Performance Period Ending Threshold Target Stretch Three-Year Cumulative Diluted EPS $ 2.25 $ 2.50 $ 2.75 F- 40 2024 Annual Equity Retainer. In 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. At December 31, 2024, there were 123,587 remaining shares available to grant under the 2021 Omnibus Plan. A summary of the status of unvested restricted stock awards at December 31, 2024 and 2023 is presented below: Shares Weighted Average Grant Date Fair Value ($) Balance at December 31, 2023 220,635 9.29 Shares granted 187,049 8.38 Shares forfeited ( 2,384 ) 8.39 Shares vested ( 150,568 ) 8.65 Balance at December 31, 2024 254,732 9.01 Shares Weighted Average Grant Date Fair Value ($) Balance at December 31, 2022 206,092 8.85 Shares granted 158,957 9.79 Shares forfeited ( 4,219 ) 9.57 Shares vested ( 140,195 ) 9.21 Balance at December 31, 2023 220,635 9.29 We 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 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 $ 1.0 million at December 31, 2024 with a remaining term of 1.8 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, 2024, the remaining principal balances are payable as follows: Years Ending December 31, Amount (Dollars in thousands) 2025 $ 447 2026 447 2027 447 2028 447 2029 447 Thereafter 182 Total $ 2,417 F- 41 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 $ 572,000 , $ 562,000 and $ 683,000 for the years ended December 31, 2024, 2023 and 2022, respectively. Shares held by the ESOP include the following at December 31, 2024 and 2023: 2024 2023 Allocated 1,182,583 1,176,311 Committed to be allocated 71,240 74,993 Unallocated 220,254 291,494 Total 1,474,077 1,542,798 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 $ 2.0 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. 10. RETIREMENT PLANS AND EMPLOYEE BENEFITS Pension Plan . The Westfield Bank Defined Benefit Plan (the “DB Plan”) was terminated effective October 31, 2022. 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 assets of the DB Plan were liquidated as of June 2, 2023. The following table provides information related to the DB Plan for the year ended December 31, 2023: For the year ended December 31, 2023 (Dollars in thousands) Change in benefit obligation: Benefit obligation at beginning of year $ 24,612 Service cost — Interest 487 Actuarial gain ( 33 ) Effect of settlement/curtailment ( 24,886 ) Benefits paid ( 180 ) Benefit obligation at end of year — Change in plan assets: Fair value of plan assets at beginning of year 23,134 Actual return on plan assets 671 Employer contribution 1,261 Benefits paid ( 180 ) Effect of settlement ( 24,886 ) Fair value of plan assets at end of year — Funded status and accrued benefit at end of year $ — Accumulated benefit obligation at end of year $ — F- 42 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. Net pension cost includes the following components for the year ended December 31, 2023: For the year ended December 31, 2023 (Dollars in thousands) Service cost $ — Interest cost 487 Expected return on assets ( 333 ) Amortization of actuarial loss — Net periodic pension cost $ 154 The following actuarial assumptions were used in determining the net periodic pension cost for the year ended December 31, 2023: Year Ended December 31, 2023 Discount rate 5.05 % Expected return on plan assets 3.70 Rate of compensation increase N/A 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. 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. The 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. 11. 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. F- 43 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 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 . In 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 Assets/(Liabilities) At December 31, 2023 At December 31, 2023 (Dollars in thousands) Loans $ 199,393 $ ( 607 ) Total $ 199,393 $ ( 607 ) 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. 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 ; and the 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. 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. 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. Fair Values of Derivative Instruments on the Balance Sheet. The 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. F- 44 December 31, 2024 Asset Derivatives Liability Derivatives Balance Sheet Location Fair Value Balance Sheet Location Fair Value (Dollars in thousands) Derivatives not designated as hedging instruments: Interest rate swap – with customer counterparties $ — 5,883 Interest rate swap – with dealer counterparties 5,883 — Total derivatives Other Assets $ 5,883 Other Liabilities $ 5,883 December 31, 2023 Asset Derivatives Liability Derivatives Balance Sheet Location Fair Value Balance Sheet Location Fair Value (Dollars in thousands) Hedging Derivatives Interest rate swaps - fair value hedges $ 651 $ — Derivatives not designated as hedging instruments: Interest rate swap – with customer counterparties — 5,239 Interest rate swap – with dealer counterparties 5,239 — Total derivatives Other Assets $ 5,890 Other Liabilities $ 5,239 Effect of Derivative Instruments in the Consolidated Statements of Net Income. The 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 Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Balance sheet location Interest Income Interest Income Interest Income Total amounts of income line items presented in the statements of net income in which the effects of fair value hedges are recorded $ 1,398 $ 1,085 $ — Gain (loss) on fair value hedging relationships Interest rate contracts: Hedged items $ 607 $ ( 607 ) — Derivatives designated as hedging instruments 791 1,692 — There 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 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 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. F- 45 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, 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. 12. LEASES 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 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. Supplemental cash flow information related to leases was as follows: Year Ended December 31, 2024 2023 (Dollars in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,524 $ 1,488 ROU assets obtained in exchange for lease obligations: Operating leases 451 412 Supplemental balance sheet information related to leases was as follows: December 31, 2024 December 31, 2023 (Dollars in thousands) Operating lease ROU assets $ 7,383 $ 8,201 Operating lease liabilities $ 7,673 $ 8,471 The 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. F- 46 Future undiscounted lease payments for the Company’s operating lease liabilities were as follows (in thousands): Years Ending December 31, 2025 $ 1,474 2026 1,358 2027 1,099 2028 861 2029 821 Thereafter 3,262 Total lease payments 8,875 Less imputed interest ( 1,202 ) Total $ 7,673 13. 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, 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, 2024 and December 31, 2023 are also presented in the following table. F- 47 Actual Minimum For Capital Adequacy Purpose Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2024 Total Capital (to Risk Weighted Assets): Consolidated $ 285,545 14.38 % $ 158,884 8.00 % N/A N/A Bank 270,879 13.65 158,744 8.00 $ 198,430 10.00 % Tier 1 Capital (to Risk Weighted Assets): Consolidated 245,663 12.37 119,163 6.00 N/A N/A Bank 250,748 12.64 119,058 6.00 158,744 8.00 Common Equity Tier 1 Capital (to Risk Weighted Assets): Consolidated 245,663 12.37 89,372 4.50 N/A N/A Bank 250,748 12.64 89,293 4.50 128,979 6.50 Tier 1 Leverage Ratio (to Adjusted Average Assets): Consolidated 245,663 9.14 107,461 4.00 N/A N/A Bank 250,748 9.34 107,390 4.00 134,237 5.00 Actual Minimum For Capital Adequacy Purpose Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2023 Total Capital (to Risk Weighted Assets): Consolidated $ 285,760 14.67 % $ 155,873 8.00 % N/A N/A Bank 271,420 13.94 155,711 8.00 $ 194,639 10.00 % Tier 1 Capital (to Risk Weighted Assets): Consolidated 245,363 12.59 116,905 6.00 N/A N/A Bank 250,734 12.88 116,783 6.00 155,711 8.00 Common Equity Tier 1 Capital (to Risk Weighted Assets): Consolidated 245,363 12.59 87,679 4.50 N/A N/A Bank 250,734 12.88 87,587 4.50 126,515 6.50 Tier 1 Leverage Ratio (to Adjusted Average Assets): Consolidated 245,363 9.40 104,400 4.00 N/A N/A Bank 250,734 9.62 104,290 4.00 130,363 5.00 The following is a reconciliation of our GAAP capital to regulatory Tier 1, Common Equity Tier 1 and total capital: December 31, 2024 2023 (Dollars in thousands) Consolidated GAAP capital $ 235,910 $ 237,409 Net unrealized losses on available-for-sale securities, net of tax 23,274 21,744 Goodwill ( 12,487 ) ( 12,487 ) Intangible assets, net of associated deferred tax liabilities ( 1,034 ) ( 1,303 ) Tier 1 and Common Equity Tier 1 capital 245,663 245,363 Allowance for credit losses for regulatory capital 20,131 20,685 Subordinated debt 19,751 19,712 Total regulatory capital $ 285,545 $ 285,760 F- 48 On 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. During 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 of $ 7.94 . 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, 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. Accordingly, $ 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. 14. INCOME TAXES Income taxes consist of the following: Years Ended December 31, 2024 2023 2022 (Dollars in thousands) Current tax provision: Federal $ 2,089 $ 2,990 $ 5,251 State 1,024 1,335 2,403 Total 3,113 4,325 7,654 Deferred tax provision: Federal 123 94 712 State 55 97 376 Total 178 191 1,088 Total tax provision $ 3,291 $ 4,516 $ 8,742 The differences between the statutory federal income tax at a rate of 21% and the effective tax are summarized below: Years Ended December 31, 2024 2023 2022 (Dollars in thousands) Statutory federal income tax $ 3,141 $ 4,113 $ 7,272 Increase (decrease) resulting from: State taxes, net of federal tax benefit 853 1,244 2,195 Tax-exempt income ( 340 ) ( 340 ) ( 360 ) Bank-owned life insurance (BOLI) ( 401 ) ( 382 ) ( 362 ) BOLI death benefit — ( 163 ) — Option exercise tax (benefit) shortfall — — ( 28 ) Other, net 38 44 25 Effective tax $ 3,291 $ 4,516 $ 8,742 F- 49 Cash 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. The tax effects of each item that gives rise to deferred taxes are as follows: December 31, 2024 2023 (Dollars in thousands) Deferred tax assets: Net unrealized loss on available-for-sale securities $ 7,962 $ 7,422 Allowance for credit losses 5,702 5,865 Lease liability 2,157 2,381 Employee benefit and share-based compensation plans 1,154 1,272 Accrued expenses 599 450 Nonperforming interest 292 264 FDIC assessment 103 95 Interest payable 90 73 Purchased mortgage servicing rights 66 38 Other 203 277 Gross deferred tax assets 18,328 18,137 Deferred tax liabilities: Lease right-of-use asset ( 2,075 ) ( 2,305 ) Purchase accounting adjustments, net ( 774 ) ( 867 ) Deferred loan fees ( 914 ) ( 804 ) Fixed asset depreciation ( 533 ) ( 494 ) Other ( 35 ) ( 31 ) Gross deferred tax liabilities ( 4,331 ) ( 4,501 ) Net deferred tax asset $ 13,997 $ 13,636 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 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. 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, 2021 through 2024. The years open to examination by state taxing authorities vary by jurisdiction; however, no years prior to 2021 are open. F- 50 15. 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 such loans: Years Ended December 31, 2024 2023 (Dollars in thousands) Balance at beginning of year $ 561 $ 545 Principal distributions 50 1 Repayments of principal ( 246 ) ( 42 ) Change in related party status — 57 Balance at end of year $ 365 $ 561 16. 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: December 31, 2024 2023 (Dollars in thousands) Commitments to extend credit: Unused lines of credit $ 343,078 $ 352,462 Loan commitments 56,183 37,814 Existing construction loan agreements 47,398 31,829 Standby letters of credit 18,773 22,393 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, 2024 and 2023, outstanding standby letter of credit commitments totaled $ 18.8 million and $ 22.4 million, respectively, with standby letters of credit issued by the FHLB on our behalf totaling $ 11.8 million and $ 15.3 million, respectively. At December 31, 2024, outstanding commitments to extend credit totaled $ 465.4 million, with $ 33.9 million in fixed rate commitments with interest rates ranging from 3.25 % to 18.00 % and $ 431.5 million in variable rate commitments. 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. F- 51 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, 2024, 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, 2024 were estimated to be $ 7.1 million, with $ 6.1 million expected to be paid within one year and the remaining $ 1 .0 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. At December 31, 2024, 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, 2024. 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. 17. 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. F- 52 Securities. 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 sponsored by the U.S. government or an agency thereof. Fair value measurements are obtained from a third-party pricing service and are not adjusted by management. Interest rate swaps. The valuation of our interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. We have determined that the majority of the inputs used to value our interest rate derivatives fall within Level 2 of the fair value hierarchy. Assets and Liabilities Measured at Fair Value on a Recurring Basis. Assets and liabilities measured at fair value on a recurring basis are summarized below: December 31, 2024 Level 1 Level 2 Level 3 Total (Dollars in thousands) Assets: Securities available-for-sale $ — $ 160,704 $ — $ 160,704 Marketable equity securities 397 — — 397 Interest rate swaps — 5,883 — 5,883 Total assets $ 397 $ 166,587 $ — $ 166,984 Liabilities: Interest rate swaps $ — $ 5,883 $ — $ 5,883 December 31, 2023 Level 1 Level 2 Level 3 Total (Dollars in thousands) Assets: Securities available-for-sale $ — $ 137,115 $ — $ 137,115 Marketable equity securities 196 — — 196 Interest rate swaps — 5,890 — 5,890 Total assets $ 196 $ 143,005 $ — $ 143,201 Liabilities: Interest rate swaps $ — $ 5,239 $ — $ 5,239 There were no transfers to or from Level 1 and 2 for assets measured at fair value on a recurring basis during the years ended December 31, 2024 and 2023. Assets Measured at Fair Value on a Non-recurring Basis. We may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. The following table summarizes the fair value hierarchy used to determine the carrying values of the related assets as of December 31, 2024 and 2023. F- 53 Year Ended At December 31, 2024 December 31, 2024 Total Level 1 Level 2 Level 3 Losses (Dollars in thousands) (Dollars in thousands) Collateral dependent loans $ — $ — $ 325 $ 182 Year Ended At December 31, 2023 December 31, 2023 Total Level 1 Level 2 Level 3 Losses (Dollars in thousands) (Dollars in thousands) Collateral dependent loans $ — $ — $ 1,100 $ 2,178 The amount of impaired loans represents the carrying value, net of the related write-down or valuation allowance of collateral dependent loans for which adjustments are based on the estimated fair value of the underlying collateral. The fair value of collateral dependent loans with specific allocations of the allowance for loan losses is generally based on real estate appraisals performed by independent licensed or certified appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Management will discount appraisals as deemed necessary based on the date of the appraisal and new information deemed relevant to the valuation. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Summary of Fair Values of Financial Instruments. The estimated fair values of our financial instruments are as follows: December 31, 2024 Carrying Value Fair Value Level 1 Level 2 Level 3 Total (Dollars in thousands) Assets: Cash and cash equivalents $ 66,450 $ 66,450 $ — $ — $ 66,450 Securities held-to-maturity 205,036 4,727 160,879 — 165,606 Securities available-for-sale 160,704 — 160,704 — 160,704 Marketable equity securities 397 397 — — 397 FHLB and other restricted stock 5,818 — — 5,818 5,818 Loans - net 2,050,660 — — 1,894,621 1,894,621 Accrued interest receivable 8,468 — — 8,468 8,468 Mortgage servicing rights 436 — 826 — 826 Derivative asset 5,883 — 5,883 — 5,883 Liabilities: Deposits 2,262,647 — — 2,261,666 2,261,666 Short-term borrowings 5,390 — 5,390 — 5,390 Long-term debt 98,000 — 98,835 — 98,835 Subordinated debt 19,751 — 15,876 — 15,876 Accrued interest payable 903 — — 903 903 Derivative liabilities 5,883 — 5,883 — 5,883 F- 54 December 31, 2023 Carrying Value Fair Value Level 1 Level 2 Level 3 Total (Dollars in thousands) Assets: Cash and cash equivalents $ 28,840 $ 28,840 $ — $ — $ 28,840 Securities held-to-maturity 223,370 9,450 178,242 — 187,692 Securities available-for-sale 137,115 — 137,115 — 137,115 Marketable equity securities 196 196 — — 196 FHLB and other restricted stock 3,707 — — 3,707 3,707 Loans - net 2,007,050 — — 1,841,913 1,841,913 Accrued interest receivable 8,528 — — 8,528 8,528 Mortgage servicing rights 422 — 724 — 724 Derivative asset 5,890 — 5,890 — 5,890 Liabilities: Deposits 2,143,744 — — 2,140,930 2,140,930 Short-term borrowings 16,100 — 16,100 — 16,100 Long-term debt 120,646 — 120,460 — 120,460 Subordinated debt 19,712 — 17,938 — 17,938 Accrued interest payable 3,310 — — 3,310 3,310 Derivative liabilities 5,239 — 5,239 — 5,239 Limitations . Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument. Where quoted market prices are not available, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment. Changes in assumptions could significantly affect the estimates. 18. SEGMENT The Company operates as a single reportable segment under ASC 280, as the Chief Operating Decision Maker (“CODM”) reviews financial performance and allocates resources based on the consolidated results of the Company as a whole. The Company, through its bank subsidiary, provides banking services to individuals and companies primarily in Hampden County and Hampshire County in western Massachusetts and Hartford County and Tolland County in northern Connecticut. These services include commercial lending, residential lending and consumer lending, checking, savings, time deposits, cash management, and wealth management. The CODM primarily evaluates performance using net interest income and net income as reported in the consolidated statement of income. The Company’s primary measure of profitability is net interest and dividend income. Net interest and dividend income is the difference between the interest income earned on interest-earning assets and the interest paid on interest-bearing liabilities. Interest-earning assets consist primarily of commercial real estate loans, commercial and industrial loans, residential real estate loans and securities. Interest-bearing liabilities consist primarily of time deposits and money market accounts, demand deposits, savings accounts and borrowings from the FHLB. The consolidated results of operations also depend on the provision for credit losses, non-interest income, and non-interest expense. In addition, the CODM considers net income as a key measure of overall financial performance. The Company’s CODM consists of members of the Senior Management team, including the Chief Executive Officer, the Chief Financial Officer, the Chief Banking Officer and the Chief Lending Officer. F- 55 19. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS The condensed balance sheets of the parent company are as follows: December 31, 2024 2023 (Dollars in thousands) ASSETS: Cash equivalents $ 422 $ 940 Investment in subsidiaries 240,994 242,780 ESOP loan receivable 2,417 3,050 Other assets 14,575 13,780 TOTAL ASSETS $ 258,408 $ 260,550 LIABILITIES: ESOP loan payable $ 2,417 $ 3,050 Other liabilities 20,081 20,091 EQUITY 235,910 237,409 TOTAL LIABILITIES AND EQUITY $ 258,408 $ 260,550 The condensed statements of net income for the parent company are as follows: Years Ended December 31, 2024 2023 2022 (Dollars in thousands) INCOME: Dividends from subsidiaries $ 14,209 $ 12,119 $ 8,152 ESOP loan interest income 244 296 349 Other income 11 36 2 Total income 14,464 12,451 8,503 OPERATING EXPENSE: Salaries and employee benefits 1,408 1,761 2,011 ESOP loan interest expense 244 296 349 Other expenses 1,285 1,310 1,283 Total operating expense 2,937 3,367 3,643 Income before equity in undistributed income of subsidiaries and income taxes 11,527 9,084 4,860 Equity in undistributed income of subsidiaries ( 255 ) 5,591 20,595 Net income before taxes 11,272 14,675 25,455 Income tax benefit ( 394 ) ( 393 ) ( 432 ) Net income $ 11,666 $ 15,068 $ 25,887 F- 56 The condensed statements of cash flows of the parent company are as follows: Years Ended December 31, 2024 2023 2022 (Dollars in thousands) OPERATING ACTIVITIES: Net income $ 11,666 $ 15,068 $ 25,887 Equity in undistributed income of subsidiaries 255 ( 5,591 ) ( 20,595 ) Net amortization of premiums on subordinated debt 39 39 40 Change in other liabilities ( 844 ) ( 881 ) ( 642 ) Change in other assets ( 162 ) 651 694 Other, net 2,041 1,979 1,757 Net cash provided by operating activities 12,995 11,265 7,141 INVESTING ACTIVITIES: Purchase of securities ( 82 ) ( 103 ) ( 107 ) Sales of securities 82 103 107 Net cash provided by investing activities — — — FINANCING ACTIVITIES: Cash dividends paid ( 5,914 ) ( 6,066 ) ( 5,281 ) Common stock repurchased ( 7,599 ) ( 5,022 ) ( 6,351 ) Issuance of common stock in connection with stock option exercises — — 1,171 Net cash used in financing activities ( 13,513 ) ( 11,088 ) ( 10,461 ) NET CHANGE IN CASH AND CASH EQUIVALENTS ( 518 ) 177 ( 3,320 ) CASH AND CASH EQUIVALENTS Beginning of year 940 763 4,083 End of year $ 422 $ 940 $ 763 Supplemental cash flow information: Net change in due to broker for common stock repurchased $ 163 $ — $ — 20. SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following tables present a summary of our quarterly financial information for the periods indicated. The year-to-date totals may differ slightly due to rounding. All unaudited interim financial statements furnished shall reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for interim periods presented and are of a normal and recurring nature, unless otherwise noted . F- 57 2024 First Quarter Second Quarter Third Quarter Fourth Quarter (Dollars in thousands, except per share amounts) Interest and dividend income $ 26,604 $ 26,802 $ 27,840 $ 28,586 Interest expense 11,258 12,332 13,112 13,313 Net interest and dividend income 15,346 14,470 14,728 15,273 (Reversal of) provision for credit losses ( 550 ) ( 294 ) 941 ( 762 ) Loss on disposal of premises and equipment ( 6 ) — — — Unrealized gain (loss) on marketable equity securities, net 8 4 10 ( 9 ) Gain on non-marketable equity investments — 987 — 300 Gain (loss) on sale of mortgages — — 246 ( 11 ) Other non-interest income 2,672 2,843 2,885 2,974 Non-interest income 2,674 3,834 3,141 3,254 Non-interest expense 14,782 14,314 14,406 14,926 Income before income taxes 3,788 4,284 2,522 4,363 Income tax provision 827 771 618 1,075 Net income $ 2,961 $ 3,513 $ 1,904 $ 3,288 Basic earnings per share $ 0.14 $ 0.17 $ 0.09 $ 0.16 Diluted earnings per share $ 0.14 $ 0.17 $ 0.09 $ 0.16 F- 58 2023 First Quarter Second Quarter Third Quarter Fourth Quarter (Dollars in thousands, except per share amounts) Interest and dividend income $ 23,638 $ 24,809 $ 25,901 $ 26,770 Interest expense 5,134 7,963 9,518 10,594 Net interest and dividend income 18,504 16,846 16,383 16,176 (Reversal of) provision for credit losses ( 388 ) 420 354 486 Loss on disposal of premises and equipment — — ( 3 ) — Unrealized loss on marketable equity securities, net — — — ( 1 ) Gain on non-marketable equity investments 352 — 238 — Loss on defined benefit plan termination (1) — ( 1,143 ) — — Gain on bank-owned life insurance death benefit (2) — — 778 — Other non-interest income 2,627 2,735 2,599 2,715 Non-interest income 2,979 1,592 3,612 2,714 Non-interest expense 14,896 14,551 14,118 14,785 Income before income taxes 6,975 3,467 5,523 3,619 Income tax provision 1,671 704 1,033 1,108 Net income $ 5,304 $ 2,763 $ 4,490 $ 2,511 Basic earnings per share $ 0.24 $ 0.13 $ 0.21 $ 0.12 Diluted earnings per share $ 0.24 $ 0.13 $ 0.21 $ 0.12 (1) The decrease in non-interest income for the three months ended June 30, 2023 was due to a one-time, non-recurring final termination expense of $1.1 million resulting from the termination of the Company’s defined benefit pension plan. (2) The increase in non-interest income for the three months ended September 30, 2023 was due to a non-taxable gain on bank-owned life insurance. F- 59