What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-10 compared with 2025-03-10 · 745 added, 694 removed, 318 unchanged (82% of the section changed)

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businesses in our primary market area of Hampden County and Hampshire County in western

Massachusetts and Hartford and Tolland Counties in northern Connecticut to increase the

Massachusetts and the Capital Region in Connecticut to increase the

net interest margin and loan income;

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should read the following financial results for the year ended December 31, 2025 in the context of this strategy.

the twelve months ended December 31, 2024, net income was $11.7 million, or $0.56 diluted earnings per share, compared to net

income of $15.1 million, or $0.70 diluted earnings per share, for the twelve months ended December 31, 2023.

The results for the

twelve months ended December 31, 2024 showed decreases in net interest income and the provision for credit losses, as well as

increases in non-interest income and non-interest expense.

the twelve months ended December 31, 2024, net interest income decreased $8.1 million, or 11.9%, to $59.8 million, compared to

the twelve months ended December 31, 2025, the Company reported net income of $15.3 million, or $0.75 per diluted share, compared

to $11.7 million, or $0.56 per diluted share, for the twelve months ended December 31, 2024.

Net interest income increased $10.3

million, or 17.2%, provision for credit losses increased $1.0 million, non-interest income decreased $387,000, or 3.0%, and non-interest

expense increased $4.1 million, or 6.9%, during the same period in 2024.

the twelve months ended December 31, 2025, net interest income increased $10.3 million, or 17.2%, to $70.1 million, compared to

$59.8 million for the twelve months ended December 31, 2024.

The decrease in net interest income was primarily due to an increase

in interest expense of $16.8 million, or 50.6%, partially offset by an increase in interest and dividend income of $8.7 million,

the twelve months 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 twelve months ended December 31, 2023.

The decrease in reserves was primarily due to

changes in the economic environment and related adjustments to the quantitative components of the CECL methodology.

The increase in net interest income was due to an increase in interest

income of $8.8 million, or 8.0%, and a decrease in interest expense of $1.5 million, or 3.0%.

the twelve months ended December 31, 2025, the Company recorded a provision for credit losses of $335,000, compared to a reversal

of credit losses of $665,000 during the twelve months ended December 31, 2024.

The $1.0 million increase in the provision for

credit losses was primarily due to an increase in total loans of $113.2 million, or 5.5%.

consolidated results of operations depend primarily on net interest and dividend income.

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Net interest margin, on a tax-equivalent basis(7)

Ratio of average interest-earning assets to average interest-bearing liabilities

including nonperforming loans, are net of deferred loan origination costs and unadvanced

and securities income are presented on a tax-equivalent basis using a tax rate of 21%

for 2024, 2023 and 2022.

The tax-equivalent adjustment is deducted from tax-equivalent

net interest and dividend income to agree to the amount reported on the consolidated

statements of net income.

Ratio of average interest-earning assets to average

interest-bearing liabilities

(1) Loans, including nonperforming loans, are net of deferred loan origination costs and unadvanced

(2) Loan and securities income are presented on a tax-equivalent basis using a tax rate of 21% for

2025, 2024 and 2023.

The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to

the amount reported on the consolidated statements of net income.

See “Explanation of Use of Non-GAAP Financial Measurements.”

(3) Short-term

investments include federal funds sold.

interest rate spread represents the difference between the weighted average yield on

interest-earning assets and the weighted average cost of interest-bearing liabilities.

interest rate spread, on a tax-equivalent basis, represents the difference between the

tax-equivalent weighted average yield on interest-earning assets and the tax-equivalent

weighted average cost of interest-bearing liabilities.

See “Explanation of Use

of Non-GAAP Financial Measurements.”

interest margin represents net interest and dividend income as a percentage of average

interest-earning assets.

interest margin, on a tax-equivalent basis, represents tax-equivalent net interest and

dividend income as a percentage of average interest-earning assets.

See “Explanation

of Use of Non-GAAP Financial Measurements.”

following table shows how changes in interest rates and changes in the volume of interest-earning assets and interest-bearing

liabilities have affected our interest and dividend income and interest expense during the periods indicated.

Information is provided

in each category with respect to:

(1) interest income changes attributable to changes in volume (changes in volume multiplied

by prior rate);

(2) interest income changes attributable to changes in rate (changes in rate multiplied by prior volume);

(3) the net change.

changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume

and the changes due to rate.

(3) Short-term investments include federal funds sold.

(4) Net interest rate spread represents the difference between the weighted average yield on interest-earning

assets and the weighted average cost of interest-bearing liabilities.

(5) Net interest rate spread, on a tax-equivalent basis, represents the difference between the tax-equivalent

weighted average yield on interest-earning assets and the tax-equivalent weighted average cost of interest-bearing liabilities.

See “Explanation of Use of Non-GAAP Financial Measurements.”

(6) Net interest margin represents net interest and dividend income as a percentage of average interest-earning

(7) Net interest margin, on a tax-equivalent basis, represents tax-equivalent net interest and dividend

income as a percentage of average interest-earning assets.

See “Explanation of Use of Non-GAAP Financial Measurements.”

Rate/Volume Analysis .

The following table shows

how changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected

our interest and dividend income and interest expense during the periods indicated.

Information is provided in each category with

(1) interest income changes attributable to changes in volume (changes in volume multiplied by prior rate);

income changes attributable to changes in rate (changes in rate multiplied by prior volume);

and (3) the net change.

The changes attributable

to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

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Change in net interest and dividend income

Securities and loan income and net interest income are presented on a tax-equivalent basis using a tax rate of 21% for 2024, 2023

The tax-equivalent adjustment is deducted from tax-equivalent net interest income to agree to the amount reported in

the consolidated statements of net income.

See “Explanation of Use of Non-GAAP Financial Measurements.”

(1) Securities and loan income and net interest income are

presented on a tax-equivalent basis using a tax rate of 21% for 2025, 2024 and 2023.

The tax-equivalent adjustment is deducted

from tax-equivalent net interest income to agree to the amount reported in the consolidated statements of net income.

See “Explanation

of Use of Non-GAAP Financial Measurements.”

believe that it is common practice in the banking industry to present interest income and related yield information on tax-exempt

loans and securities on a tax-equivalent basis and that such information is useful to investors because it facilitates comparisons

among financial institutions.

However, the adjustment of interest income and yields on tax-exempt loans and securities to a tax-equivalent

amount is considered a non-GAAP financial measure.

Explanation of Use of Non-GAAP Financial

Measurements.

We believe that it is common practice in

the banking industry to present interest income and related yield information on tax-exempt loans and securities on a tax-equivalent

basis, as well as presenting tangible book value per share and that such information is useful to investors because it facilitates

comparisons among financial institutions.

However, the adjustment of interest income and yields on tax-exempt loans and securities

to a tax-equivalent amount, as well as the presentation of tangible book value per share may be considered to include financial

information that is not in compliance with GAAP.

A reconciliation from GAAP to non-GAAP is provided below.

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Net interest income (no tax adjustment)

Prepayment penalties

Fair value hedge interest income

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Net interest margin, tax-equivalent

Adjusted net interest margin, excluding fair value hedge interest income (non-GAAP)

Adjusted net interest margin, excluding prepayment

penalties and fair value hedge interest income (non-GAAP)

At or for the twelve months ended

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Loss on disposal of premises and equipment

Loss on securities, net

Unrealized (gain) loss on marketable equity securities

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Gain on non-marketable equity investments

Loss (gain) on defined benefit plan termination

Loss on defined benefit plan termination

Non-interest Income for Adjusted Efficiency Ratio (non-GAAP)

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Adjusted Efficiency Ratio (Non-interest Expense (GAAP)/Total Revenue for Adjusted Efficiency Ratio (non-GAAP))

tax equivalent adjustment is based upon a 21% tax rate for 2024, 2023 and 2022.

of Financial Condition at December 31, 2024 and December 31, 2023.

December 31, 2024, total assets were $2.7 billion, an increase of $88.5 million, or 3.5%, from December 31, 2023.

sheet composition and changes since December 31, 2023 are discussed below.

and Cash Equivalents.

and cash equivalents is comprised of cash on hand and amounts due from banks, interest-earning deposits in other financial institutions

and federal funds sold.

Cash and cash equivalents totaled $66.5 million, or 2.5% of total assets, at December 31, 2024 and $28.8

million, or 1.1% of total assets, at December 31, 2023.

Balances in cash and cash equivalents will fluctuate due primarily to

the timing of net deposit flows, borrowing and loan inflows and outflows, investment purchases and maturities, calls and sales

proceeds, and the immediate liquidity needs of the Company.

December 31, 2024, the investment securities portfolio totaled $366.1 million, or 13.8% of total assets, compared to $360.7 million,

or 14.1% of total assets, at December 31, 2023.

At December 31, 2024, the Company’s available-for-sale securities portfolio,

recorded at fair market value, increased $23.6 million, or 17.2%, from $137.1 million at December 31, 2023 to $160.7 million.

The held-to-maturity securities portfolio, recorded at amortized cost, decreased $18.4 million, or 8.2%, from $223.4 million at

December 31, 2023 to $205.0 million at December 31, 2024.

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

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

or 17.5% of the amortized cost basis of the available-for-sale securities at December 31, 2023.

At December 31, 2024, the Company

reported unrealized losses on the held-to-maturity securities portfolio of $39.4 million, or 19.2% of the amortized cost basis

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

securities portfolio at December 31, 2023.

Bank is required to purchase FHLB stock at par value in association with advances from the FHLB.

The stock is classified as a

restricted investment and carried at cost which management believes approximates fair value.

The Company’s investment in

FHLB capital stock amounted to $5.4 million and $3.2 million at December 31, 2024 and December 31, 2023, respectively.

December 31, 2024 and 2023, the Company held $423,000 of Atlantic Community Bankers Bank stock.

The stock is restricted and carried

in other assets at cost.

The stock is evaluated for impairment based on an estimate of the ultimate recovery to the par value.

December 31, 2024, total loans increased by $42.9 million, or 2.1%, from December 31, 2023, to $2.1 billion.

The increase in total

loans was due to an increase in residential real estate loans, including home equity loans, of $53.5 million, or 7.4%, partially

offset by a decrease in commercial real estate loans of $4.0 million, or 0.4%, a decrease in commercial and industrial loans of

$5.7 million, or 2.7% and a decrease in consumer loans of $1.1 million, or 19.8%.

continues to closely monitor the loan portfolio for any signs of deterioration in borrowers’ financial condition and also

in light of speculation that commercial real estate values may deteriorate as the market continues to adjust to higher vacancies

and interest rates.

We continue to proactively take steps to mitigate risk in our loan portfolio.

delinquency was $5.0 million, or 0.24% of total loans, at December 31, 2024, compared to $6.0 million, or 0.30% of total loans

(1) The tax equivalent adjustment is based upon a 21% tax rate for 2025,

2024 and 2023.

Comparison of Financial Condition at

December 31, 2025 and December 31, 2024.

At December 31, 2025, total assets increased

$83.4 million, or 3.1%, from December 31, 2024 to $2.7 billion.

The increase in total assets was primarily due to an increase in

total loans of $113.2 million, or 5.5%, partially offset by a decrease in cash and cash equivalents of $26.1 million, or 39.2%.

The balance sheet composition and changes since December 31, 2024 are discussed below.

Cash and Cash Equivalents.

Cash and cash equivalents is comprised

of cash on hand and amounts due from banks, interest-earning deposits in other financial institutions and federal funds sold.

and cash equivalents totaled $40.4 million, or 1.5% of total assets, at December 31, 2025 and $66.5 million, or 2.5% of total assets,

at December 31, 2024.

At December 31, 2024, nonperforming loans totaled $5.4 million, or 0.26% of total loans, compared to $6.4

million, or 0.32% of total loans, at December 31, 2023.

At December 31, 2024 and December 31, 2023, there were no loans 90 or

more days past due and still accruing interest.

Total nonperforming assets totaled $5.4 million, or 0.20% of total assets, at

December 31, 2024, compared to $6.4 million, or 0.25% of total assets, at December 31, 2023.

At December 31, 2024 and December

31, 2023, the Company did not have any other real estate owned.

At December 31, 2024, the allowance for credit losses was $19.5

million, or 0.94% of total loans and 362.9% of nonperforming loans, compared to $20.3 million, or 1.00% of total loans and 315.6%

of nonperforming loans, at December 31, 2023.

Total criticized loans, defined as special mention and substandard loans, decreased

$1.1 million, or 2.8%, from $39.5 million, or 1.9% of total loans, at December 31, 2023 to $38.4 million, or 1.9% of total loans,

Balances in cash and cash equivalents will fluctuate due primarily to the timing of net deposit flows, borrowing

and loan inflows and outflows, investment purchases and maturities, calls and sales proceeds, and the immediate liquidity needs

of the Company.

At December 31, 2025, the investment securities

portfolio totaled $365.2 million, or 13.3% of total assets, compared to $366.1 million, or 13.8% of total assets, at December 31,

At December 31, 2025, the Company’s available-for-sale securities portfolio, recorded at fair market value, increased

$15.1 million, or 9.4%, from $160.7 million at December 31, 2024 to $175.8 million.

The held-to-maturity securities portfolio,

recorded at amortized cost, decreased $16.2 million, or 7.9%, from $205.0 million at December 31, 2024 to $188.8 million at December

At December 31, 2025, the Company reported

gross unrealized losses on the available-for-sale securities portfolio of $23.4 million, or 11.8% of the amortized cost basis of

the available-for-sale securities portfolio, compared to gross unrealized losses of $31.2 million, or 16.2% of the amortized cost

basis of the available-for-sale securities at December 31, 2024.

At December 31, 2025, the Company reported gross unrealized losses

on the held-to-maturity securities portfolio of $30.5 million, or 16.2% of the amortized cost basis of the held-to-maturity securities

portfolio, compared to $39.4 million, or 19.2% of the amortized cost basis of the held-to-maturity securities portfolio at December

The Bank is required to purchase FHLB stock

at par value in association with advances from the FHLB.

The stock is classified as a restricted investment and carried at cost

which management believes approximates fair value.

The Company’s investment in FHLB capital stock amounted to $4.9 million

and $5.4 million at December 31, 2025 and December 31, 2024, respectively.

At December 31, 2025 and 2024, the Company

held $423,000 of Atlantic Community Bankers Bank stock.

The stock is restricted and carried in other assets at cost.

is evaluated for impairment based on an estimate of the ultimate recovery to the par value.

Total loans increased $113.2 million, or

5.5%, from $2.1 billion, or 77.9% of total assets, at December 31, 2024 to $2.2 billion, or 79.7% of total assets, at December

The increase in total loans was primarily driven by an increase in residential real estate loans, including home equity

loans, of $81.2 million, or 10.5%, an increase in commercial and industrial loans of $10.1 million, or 4.8%, and an increase in

commercial real estate loans of $23.3 million, or 2.2%.

The increase in total loans was partially offset by a decrease in consumer

loans of $1.5 million, or 33.3%.

Management continues to closely monitor

the loan portfolio for any signs of deterioration in borrowers’ financial condition and also in light of speculation that

commercial real estate values may deteriorate as the market continues to adjust to higher vacancies and interest rates.

to proactively take steps to mitigate risk in our loan portfolio.

Total delinquency was $3.1 million, or

0.14% of total loans, at December 31, 2025, compared to $5.0 million, or 0.24% of total loans at December 31, 2024.

31, 2025, nonaccrual loans totaled $5.2 million, or 0.24% of total loans, compared to $5.4 million, or 0.26% of total loans, at

December 31, 2024.

At December 31, 2025 and December 31, 2024, there were no loans 90 or more days past-due and still accruing

Total nonperforming assets, defined as nonaccrual loans and other real estate owned, totaled $5.2 million, or 0.19% of

total assets, at December 31, 2025, compared to $5.4 million, or 0.20% of total assets, at December 31, 2024.

At December 31, 2025

A summary of our past due and nonperforming loans by class is listed in Note 5 of the accompanying unaudited

consolidated financial statements.

commercial real estate portfolio is comprised of diversified property types and primarily within our geographic footprint.

December 31, 2024, the commercial real estate portfolio totaled $1.1 billion, and represented 52.0% of total loans.

billion, $880.8 million, or 81.9%, was categorized as non-owner occupied commercial real estate and represented 325.2% of the

bank’s total risk-based capital.

Company’s commercial real estate loans are considered to be relatively diversified by borrower, industry and concentrated

in the New England geographical area.

A significant portion of the loan portfolio consists of commercial real estate loans, primarily

made in Massachusetts, and to a lesser degree, Connecticut, and secured by real estate or other collateral in the market.

these loans are made to a diversified pool of unrelated borrowers across numerous businesses, adverse developments in the local

real estate market could have an adverse impact on this portfolio of loans and the Company’s income and financial position.

While our basic market area is in Massachusetts, the Company has made loans outside that market area where the applicant is an

existing customer, and the nature and quality of such loans was consistent with the Company’s lending policies.

continuously monitor the asset quality of our loan portfolio.

For the commercial portfolio, we monitor credit quality using a

risk rating scale, which assigns a risk-grade to each borrower based on a number of quantitative and qualitative factors associated

with a commercial loan transaction.

Management utilizes a loan risk rating methodology based on an 8-point scale.

are 0-4 and non-pass categories, which align with regulatory guidelines, include:

special mention (5), substandard (6), doubtful

(7) and loss (8).

Risk rating assignment is determined by analyzing key factors, which may include:

industry and market conditions,

position within the industry, earnings trends, operating cash flow, debt capacity, guarantor strength, management, financial reporting,

collateral and other considerations.

Concentrations .

OCC, the FRB, and the FDIC (“Agencies”) issued

guidance in 2006 which addresses institutions with increased concentrations of commercial real estate (“CRE”) loans.

and December 31, 2024, the Company did not have any other real estate owned.

At December 31, 2025, the allowance for

credit losses was $20.3 million, or 0.93% of total loans and 393.2% of nonaccrual loans, compared to $19.5 million, or 0.94% of

total loans and 362.9% of nonaccrual loans, at December 31, 2024.

Total criticized loans, defined as special mention and substandard

loans, increased $1.3 million, or 3.4%, from $38.4 million, or 1.9% of total loans, at December 31, 2024 to $39.7 million, or 1.8%

of total loans, at December 31, 2025.

A summary of our past due and nonperforming loans by class is listed in Note 3 of the accompanying

unaudited consolidated financial statements.

Our commercial real estate portfolio is

comprised of diversified property types and primarily within our geographic footprint.

At December 31, 2025, the commercial real

estate portfolio totaled $1.1 billion and represented 50.4% of total loans.

Of the $1.1 billion, $900.5 million, or 81.9%, was

categorized as non-owner occupied commercial real estate and represented 325.1% of the Bank’s total risk-based capital.

The Company’s commercial real estate

loans are considered to be relatively diversified by borrower, industry and concentrated in the New England geographical area.

A significant portion of the loan portfolio consists of commercial real estate loans, primarily made in Massachusetts, and to a

lesser degree, Connecticut, and secured by real estate or other collateral in the market.

Although these loans are made to a diversified

pool of unrelated borrowers across numerous businesses, adverse developments in the local real estate market could have an adverse

impact on this portfolio of loans and the Company’s income and financial position.

While our basic market area is in Massachusetts,

the Company has made loans outside that market area where the applicant is an existing customer, and the nature and quality of

such loans was consistent with the Company’s lending policies.

We continuously monitor the asset quality

of our loan portfolio.

For the commercial portfolio, we monitor credit quality using a risk rating scale, which assigns a risk-grade

to each borrower based on a number of quantitative and qualitative factors associated with a commercial loan transaction.

utilizes a loan risk rating methodology based on an 8-point scale.

Pass grades are 0-4 and non-pass categories, which align with

regulatory guidelines, include:

special mention (5), substandard (6), doubtful (7) and loss (8).

Risk rating assignment is determined

by analyzing key factors, which may include:

industry and market conditions, position within the industry, earnings trends, operating

cash flow, debt capacity, guarantor strength, management, financial reporting, collateral and other considerations.

CRE Concentrations .

OCC, the FRB, and the FDIC (“Agencies”) issued guidance in 2006 which addresses institutions with increased

concentrations of commercial real estate (“CRE”) loans.

The guidance does not establish specific CRE lending limits;

rather, it promotes sound risk management practices and appropriate

levels of capital that will enable institutions to continue to pursue CRE lending in a safe and sound manner.

In developing this

guidance, the Agencies recognized that different types of CRE lending present different levels of risk, and that consideration

should be given to the lower risk profiles and historically superior performance of certain types of CRE, such as well-structured

multifamily housing finance, when compared to others, such as speculative office space construction.

are encouraged to segment their CRE portfolios to acknowledge these distinctions for risk management purposes.

The guidance focuses

on those CRE loans for which the cash flow from the real estate is the primary source of repayment rather than loans to a borrower

for which real estate collateral is taken as a secondary source of repayment or through an abundance of caution.

Thus, for the

purposes of the guidance, CRE loans include those loans with risk profiles sensitive to the condition of the general CRE market

(for example, market demand, changes in capitalization rates, vacancy rates, or rents).

CRE loans are land development and construction

loans (including 1- to 4-family residential and commercial construction loans) and other land loans.

CRE loans also include loans

secured by multifamily property, and nonfarm nonresidential property where the primary source of repayment is derived from rental

income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party,

nonaffiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property.

Excluded from

the scope of this Guidance are loans secured by nonfarm nonresidential properties where the primary source of repayment is the

cashflow from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property.

part of their ongoing supervisory monitoring processes, the Agencies use certain criteria to identify institutions that are potentially

exposed to significant CRE concentration risk.

An institution that has experienced rapid growth in CRE lending, has notable exposure

to a specific type of CRE, or is approaching or exceeds the following supervisory criteria may be identified for further supervisory

analysis of the level and nature of its CRE concentration risk:

Total reported loans for construction, land development, and other land represent 100 percent or more of the institution’s

total risk-based capital;

Total commercial real estate loans as defined in this guidance represent 300 percent or more of the institution’s total

risk-based capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased

by 50 percent or more during the prior 36 months.

Agencies use the criteria as a preliminary step to identify institutions that may have CRE concentration risk.

Because regulatory

reports capture a broad range of CRE loans with varying risk characteristics, the supervisory monitoring criteria do not constitute

limits on an institution’s lending activity but rather serve as high-level indicators to identify institutions potentially

exposed to CRE concentration risk.

Company holds a concentration in commercial real estate loans.

As of December 31, 2024, construction, land development and other

land loans represented 37.9% of consolidated bank risk-based capital.

During the prior 36 months, the Company has experienced

an increase in its commercial real estate portfolio of 16.1%.

management team has extensive experience in underwriting commercial real estate loans and has implemented and continues to maintain

heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio.

Board has established internal maximum limits on CRE as an asset class overall as well as sub limits within CRE by property class,

to better manage and control the exposure to property classes during periods of changing economic conditions.

The Board also has

minimum targets for regulatory capital ratios that are in excess of well capitalized ratios.

risk management process begins with a robust underwriting program.

The underwriting and risk rating of all loans is completed

by the Company’s Credit Department that is independent of the originating lender(s).

December 31, 2024 and December 31, 2023, non-owner and owner occupied commercial real estate loans, totaled $1.1 billion, or 52.0%,

of total gross loans, and $1.1 billion, or 53.3%, of total gross loans, respectively.

table below breaks down the commercial real estate portfolio outstanding balance by non-owner and owner occupied and by concentration

rather, it promotes sound risk management practices and appropriate levels of capital that will enable institutions to continue

to pursue CRE lending in a safe and sound manner.

In developing this guidance, the Agencies recognized that different types of

CRE lending present different levels of risk, and that consideration should be given to the lower risk profiles and historically

superior performance of certain types of CRE, such as well-structured multifamily housing finance, when compared to others, such

as speculative office space construction.

Institutions are encouraged to segment

their CRE portfolios to acknowledge these distinctions for risk management purposes.

The guidance focuses on those CRE loans for

which the cash flow from the real estate is the primary source of repayment rather than loans to a borrower for which real estate

collateral is taken as a secondary source of repayment or through an abundance of caution.

Thus, for the purposes of the guidance,

CRE loans include those loans with risk profiles sensitive to the condition of the general CRE market (for example, market demand,

changes in capitalization rates, vacancy rates, or rents).

CRE loans are land development and construction loans (including 1-

to 4-family residential and commercial construction loans) and other land loans.

CRE loans also include loans secured by multifamily

property, and nonfarm nonresidential property where the primary source of repayment is derived from rental income associated with

the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, nonaffiliated, rental

income) or the proceeds of the sale, refinancing, or permanent financing of the property.

Excluded from the scope of this guidance

are loans secured by nonfarm nonresidential properties where the primary source of repayment is the cashflow from the ongoing operations

and activities conducted by the party, or affiliate of the party, who owns the property.

As part of their ongoing supervisory monitoring

processes, the Agencies use certain criteria to identify institutions that are potentially exposed to significant CRE concentration

An institution that has experienced rapid growth in CRE lending, has notable exposure to a specific type of CRE, or is approaching

or exceeds the following supervisory criteria may be identified for further supervisory analysis of the level and nature of its

CRE concentration risk:

Total reported loans for construction,

land development, and other land represent 100 percent or more of the institution’s total risk-based capital;

Total commercial real estate

loans, as defined in this guidance, represent 300 percent or more of the institution’s total risk-based capital, and the

outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50 percent or more during

the prior 36 months.

The Agencies use the criteria as a preliminary

step to identify institutions that may have CRE concentration risk.

Because regulatory reports capture a broad range of CRE loans

with varying risk characteristics, the supervisory monitoring criteria do not constitute limits on an institution’s lending

activity but rather serve as high-level indicators to identify institutions potentially exposed to CRE concentration risk.

The Company holds a concentration in commercial

real estate loans.

As of December 31, 2025, commercial real estate loans represented 396.8% of consolidated bank risk-based capital.

Non-owner occupied commercial real estate loans totaled $900.5 million, or 325.1% of consolidated bank risk-based capital, and

owner-occupied commercial real estate loans totaled $198.6 million, or 71.7% of consolidated bank risk-based capital.

As of December

31, 2025, construction, land development and other land loans represented 39.0% of consolidated bank risk-based capital.

the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio of 9.0%.

The management team has extensive experience

in underwriting commercial real estate loans and has implemented and continues to maintain heightened risk management procedures

and strong underwriting criteria with respect to its commercial real estate portfolio.

The Company’s Board of Directors (the

“Board”) has established internal maximum limits on CRE as an asset class overall as well as sub limits within CRE

by property class, to better manage and control the exposure to property classes during periods of changing economic conditions.

The Board also has minimum targets for regulatory capital ratios that are in excess of well capitalized ratios.

Our risk management process begins with

a robust underwriting program.

The underwriting and risk rating of all loans is completed by the Company’s Credit Department

that is independent of the originating lender(s).

At December 31, 2025 and December 31, 2024,

non-owner and owner occupied commercial real estate loans, totaled $1.1 billion, or 50.4%, of total gross loans, and $1.1 billion,

or 52.0%, of total gross loans, respectively.

The table below breaks down the commercial

real estate portfolio outstanding balance by non-owner and owner occupied and by concentration as of December 31, 2025:

Property Type

7 unchanged sentences

Hotel/Hospitality

Shopping Center

Automotive Sales

Auto Service and Repair

Adult Care/Assisted Living

Student Housing

Shopping Center

School/Higher Education

Student Housing

Total commercial real estate

1 unchanged sentence

% of Total CRE loans

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

table below breaks down the commercial real estate portfolio outstanding balance by non-owner and owner occupied and by

concentration as of December 31, 2023:

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

The table below breaks down the commercial

real estate portfolio outstanding balance by non-owner and owner occupied and by concentration as of December 31, 2024:

Property Type

5 unchanged sentences

(Dollars in thousands)

Office Portfolio

Hotel/Hospitality

Automotive Sales

Adult Care/Assisted Living

2 unchanged sentences

School/Higher Education

Automotive Sales

Total commercial real estate

1 unchanged sentence

% of Total CRE loans

31, 2023 property types have been reclassified for consistency with December 31, 2024

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

December 31, 2024, of the $1.1 billion in commercial real estate loans, $880.8 million, or 42.6% of total loans, were categorized

as non-owner occupied and represented 325.2% of total bank risk-based capital.

following table further breaks down the non-owner occupied commercial real estate portfolio balances by concentration, collateral

location and weighted average loan-to-value (“LTV”) as of December 31, 2024:

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

At December 31, 2025, of the $1.1 billion

in commercial real estate loans, $900.5 million, or 41.3% of total loans, were categorized as non-owner occupied and represented

325.1% of total bank risk-based capital.

The following table further breaks down

the non-owner occupied commercial real estate portfolio balances by concentration, collateral location and weighted average loan-to-value

(“LTV”) as of December 31, 2025:

Property Type

of Total Bank Risk-Based Capital (1)

Weighted Average LTV (2)

(Dollars in thousands)

Hotel/Hospitality

Adult Care/Assisted Living

Student Housing

Shopping Center

Student Housing

Adult Care/Assisted Living

School/Higher Education

Automotive Service and Repair

Automotive Sales

Total Non-Owner CRE

___________________

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

average LTV is based on the original appraisal and the current loan exposure.

December 31, 2023, of the $1.1 billion in commercial real estate loans, $881.7 million, or 43.5% of total loans, was categorized

as non-owner occupied and represented 324.8% of total risk-based capital.

following table further breaks down the non-owner occupied commercial real estate portfolio balances by concentration, collateral

location and weighted average LTV as of December 31, 2023.

Property Type (1)

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

(2) Weighted average LTV is based on the original appraisal and the current loan exposure.

At December 31, 2024, of the $1.1 billion

in commercial real estate loans, $880.8 million, or 42.6% of total loans, was categorized as non-owner occupied and represented

325.2% of total risk-based capital.

Weighted Average LTV (3)

The following table further breaks down

the non-owner occupied commercial real estate portfolio balances by concentration, collateral location and weighted average LTV

as of December 31, 2024.

Property Type

% of Total Bank Risk-Based Capital (1)

Weighted Average

(Dollars in thousands)

Adult Care/Assisted Living

Automotive Sales

School/Higher Education

Hotel/Hospitality

Adult Care/Assisted Living

Student Housing

Shopping Center

School/Higher Education

Automotive Sales

Total Non-Owner CRE

31, 2023 property types have been reclassified for consistency with December 31, 2024

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

average LTV is based on the original appraisal and the current loan exposure.

Company also underwrites and originates owner occupied commercial real estate loans.

These loans are typically term loans made

to support properties that rely upon the operations of the business occupying the property for repayment.

The Agencies specifically

excluded owner occupied commercial real estate from their concentration guidance, as the primary source of repayment is the cash

flow from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property.

table below depicts a well-diversified portfolio of owner occupied commercial real estate portfolio as of December 31,

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

(2) Weighted average LTV is based on the original appraisal and the current loan exposure.

The Company also underwrites and originates

owner occupied commercial real estate loans.

These loans are typically term loans made to support properties that rely upon the

operations of the business occupying the property for repayment.

The Agencies specifically excluded owner occupied commercial real

estate from their concentration guidance, as the primary source of repayment is the cash flow from the ongoing operations and activities

conducted by the party, or affiliate of the party, who owns the property.

The table below depicts a well-diversified

portfolio of owner occupied commercial real estate portfolio as of December 31, 2025:

Property Type

2 unchanged sentences

(Dollars in thousands)

Owner Occupied CRE

Adult Care/Assisted Living

Automotive Sales

Automotive Service and Repair

School/Higher Education

1 unchanged sentence

Total Owner Occupied CRE

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

average LTV is based on the original appraisal and the current loan exposure.

table below depicts a well-diversified portfolio of owner occupied commercial real estate as of December 31, 2023:

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

(2) Weighted average LTV is based on the original appraisal and the current

loan exposure.

The table below depicts a well-diversified

portfolio of owner occupied commercial real estate as of December 31, 2024:

Property Type

% of Total Risk-based Capital (2)

% of Total Bank Risk-Based Capital (1)

Weighted Average LTV (2)

(Dollars in thousands)

Owner Occupied CRE

Adult Care/Assisted Living

Automotive Sales

2 unchanged sentences

Total Owner Occupied CRE

31, 2023 property types have been reclassified for consistency with December 31, 2024

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

average LTV is based on the original appraisal and the current loan exposure.

Real Estate Office Exposure.

total office-related commercial real estate loans (which is comprised of loans within our commercial real estate portfolio that

are secured by office space, medical office space, and mixed-use where rental income is primarily from office space) totaled $200.1

million, or 73.9% of total bank risk-based capital and $216.2 million, or 79.6% of total bank risk-based capital, as of December

31, 2024 and December 31, 2023, respectively.

table below breaks the office-related commercial real estate loans by collateral type for the periods noted:

____________________

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

(2) Weighted average LTV is based on the original appraisal and the current loan exposure.

Commercial Real Estate Office Exposure.

Our total office related commercial real

estate loans (which is comprised of loans within our commercial real estate portfolio that are secured by office space, medical

office space, and mixed-use where rental income is primarily from office space) totaled $195.2 million, or 70.5% of total bank

risk-based capital and $200.1 million, or 73.9% of total bank risk-based capital, as of December 31, 2025 and December 31, 2024,

respectively.

The table below breaks the commercial real

estate office loans by collateral type for the periods noted:

December 31, 2025

Non-Owner Occupied

Owner Occupied

% of Office Portfolio

% of Total Bank Risk-Based

% of Total Bank Risk-Based Capital (1)

(Dollars in thousands)

7 unchanged sentences

Non-Owner Occupied

Owner Occupied

% of Office Portfolio

% of Total Bank Risk-Based

% of Total Bank Risk-Based Capital (1)

(Dollars in thousands)

5 unchanged sentences

Total Office Portfolio

31, 2023 property types have been reclassified for consistency with December 31, 2024

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

Office-related

CRE loans are primarily concentrated in Massachusetts, where approximately 41.5% at December 31, 2024 and 43.9%, at December 31,

2023, of the total balance of office-related CRE loans are located.

The Company does not have office CRE loans secured by real

estate in greater Boston or New York.

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

CRE office loans are primarily concentrated

in Massachusetts, where approximately 42.3% at December 31, 2025 and 41.5%, at December 31, 2024, of the total balance of CRE office

loans are located.

The Company does not have CRE loans secured by office real estate in greater Boston or New York.

December 31, 2025

Non-Owner Occupied

Owner Occupied

% of Office Portfolio

% of Total Bank Risk-Based

% of Total Bank Risk-Based Capital (1)

(Dollars in thousands)

4 unchanged sentences

Non-Owner Occupied

Owner Occupied

% of Office Portfolio

% of Total Bank Risk-Based

% of Total Bank Risk-Based Capital (1)

(Dollars in thousands)

2 unchanged sentences

Total Office Portfolio

31, 2023 property types have been reclassified for consistency with December 31, 2024

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

following table sets forth the office-related CRE loans for non-owner occupied and owner occupied CRE and their credit quality

indicators as of the dates indicated:

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

The following table sets forth the CRE

office loans for non-owner occupied and owner occupied CRE and their credit quality indicators as of the dates indicated:

December 31, 2025

Non-Owner Occupied

Owner Occupied

% of Office Portfolio

% of Total Bank Risk-Based

% of Total Bank Risk-Based Capital (1)

(Dollars in thousands)

4 unchanged sentences

Non-Owner Occupied

Owner Occupied

% of Office Portfolio

% of Total Bank Risk-Based

% of Total Bank Risk-Based Capital (1)

(Dollars in thousands)

2 unchanged sentences

Total Office Portfolio

31, 2023 property types have been reclassified for consistency with December 31, 2024

to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from

the call report.

prevailing market conditions such as recent sustained increases in interest rates, reduced occupancy as a result of the increase

in hybrid work arrangements post-COVID, and lower commercial real estate valuations, we carefully monitor these loans for signs

of deterioration in credit quality and other risks.

Such heightened monitoring includes incremental risk management strategies

undertaken by management, including more frequent portfolio reviews, ongoing monitoring of market conditions, and additional portfolio

analysis, which may include monitoring concentration limitations, including concentrations by loan type, property type, geographic

area and with participants, where applicable, and risk diversification, tracking aggregated policy and underwriting exceptions

and stress testing the loan portfolios.

Company indirectly utilizes the earnings on BOLI to offset the cost of the Company’s benefit plans.

The cash surrender value

of BOLI was $77.1 million and $75.1 million at December 31, 2024 and 2023, respectively, and was issued by eleven insurance companies

rated investment grade or better.

December 31, 2024, total deposits increased $118.9 million, or 5.6%, from $2.1 billion at December 31, 2023 to $2.3 billion.

deposits, which the Company defines as all deposits except time deposits, increased $26.7 million, or 1.7%, from $1.5 billion,

or 71.5% of total deposits, at December 31, 2023, to $1.6 billion, or 68.9% of total deposits, at December 31, 2024.

Non-interest-bearing

deposits decreased $14.0 million, or 2.4%, to $565.6 million, and represent 25.0% of total deposits, money market accounts increased

$27.1 million, or 4.3%, to $661.5 million, savings accounts decreased $5.8 million, or 3.1%, to $181.6 million and interest-bearing

checking accounts increased $19.3 million, or 14.7%, to $150.3 million.

deposits increased $92.2 million, or 15.1%, from $611.4 million at December 31, 2023 to $703.6 million at December 31, 2024.

time deposits, which are included in time deposits, totaled $1.7 million at December 31, 2024 and at December 31, 2023.

has experienced growth and movement in both money market accounts and time deposits as a result of relationship pricing, the current

interest rate environment, and customer behaviors, as opposed to time deposit specials or interest rate adjustments.

our disciplined and focused approach to core relationship management and customer outreach to meet funding requirements and liquidity

needs, with an emphasis on retaining a long-term customer relationship base by competing for and retaining deposits in our local

At December 31, 2024, the Bank’s uninsured deposits represented 28.4% of total deposits, compared to 26.8% at December

December 31, 2024, total borrowings decreased $33.4 million, or 21.3%, from $156.5 million at December 31, 2023 to $123.1 million.

At December 31, 2024, short-term borrowings decreased $10.7 million, or 66.5%, to $5.4 million, compared to $16.1 million at December

Long-term borrowings decreased $22.6 million, or 18.8%, from $120.6 million at December 31, 2023 to $98.0 million at

(1) Due to loan classifications, the percentage of Total Bank Risk-Based Capital may differ from the

Given prevailing market conditions such

as recent sustained increases in interest rates, reduced occupancy as a result of the increase in hybrid work arrangements post-COVID,

and lower commercial real estate valuations, we carefully monitor these loans for signs of deterioration in credit quality and

Such heightened monitoring includes incremental risk management strategies undertaken by management, including more

frequent portfolio reviews, ongoing monitoring of market conditions, and additional portfolio analysis, which may include monitoring

concentration limitations, including concentrations by loan type, property type, geographic area and with participants, where applicable,

and risk diversification, tracking aggregated policy and underwriting exceptions and stress testing the loan portfolios.

Bank-Owned Life Insurance.

The Company owns bank-owned life insurance

(“BOLI”) to help offset the cost of employee benefit plans.

BOLI is recorded at its cash surrender value.

BOLI policies

insure the lives of officers and certain employees and names the Bank as beneficiary.

The change in the cash surrender value is

included as a component of non-interest income and is exempt from federal and state income taxes as long as the policies are held

until the death of the insured individuals.

The cash surrender value of BOLI was $79.0 million and $77.1 million at December 31,

2025 and December 31, 2024, respectively, and was issued by eleven insurance companies rated investment grade or better.

At December 31, 2025, total deposits were

$2.4 billion and increased $98.3 million, or 4.3%, from December 31, 2024.

Core deposits, which the Company defines as all deposits

except time deposits, increased $111.9 million, or 7.2%, from $1.6 billion, or 68.9% of total deposits, at December 31, 2024, to

$1.7 billion, or 70.8% of total deposits, at December 31, 2025.

Non-interest-bearing deposits increased $28.9 million, or 5.1%,

to $594.5 million, and represent 25.2% of total deposits, money market accounts increased $54.1 million, or 8.2%, to $715.6 million,

interest-bearing checking accounts increased $23.9 million, or 15.9%, to $174.2 million, and savings accounts increased $5.0 million,

or 2.7%, to $186.6 million.

Time deposits decreased $13.7 million,

or 1.9%, from $703.6 million at December 31, 2024 to $689.9 million at December 31, 2025.

Brokered time deposits, which are included

in time deposits, totaled $1.7 million at December 31, 2024.

The Company did not have any brokered time deposits at December 31,

We continue our disciplined and focused approach to core relationship management and customer outreach to meet funding requirements

and liquidity needs, with an emphasis on retaining a long-term core customer relationship base by competing for and retaining deposits

in our local market.

At December 31, 2025, the Bank’s uninsured deposits totaled $697.6 million, or 29.5% of total deposits,

compared to $643.6 million, or 28.4% of total deposits, at December 31, 2024.

Borrowed Funds.

At December 31, 2025, total borrowings

decreased $17.1 million, or 13.9%, from $123.1 million at December 31, 2024 to $106.1 million.

At December 31, 2025, short-term

borrowings increased $7.9 million, or 146.2%, to $13.3 million, compared to $5.4 million at December 31, 2024.

Long-term borrowings

decreased $25.0 million, or 25.5%, from $98.0 million at December 31, 2024 to $73.0 million at December 31, 2025.

At December 31,

2025 and December 31, 2024, borrowings also consisted of $19.8 million in fixed-to-floating rate subordinated notes.

As of December 31, 2025, the Company had

$538.6 million of additional borrowing capacity at the FHLB, $349.0 million of additional borrowing capacity under the FRB Discount

Window and $25.0 million of other unsecured lines of credit with correspondent banks.

Shareholders’ Equity.

At December 31, 2025, shareholders’

equity was $247.6 million, or 9.1% of total assets, compared to $235.9 million, or 8.9% of total assets, at December 31, 2024.

The change was primarily attributable to net income of $15.3 million and a decrease in accumulated other comprehensive loss of

$6.6 million, partially offset by cash dividends paid of $5.7 million and the repurchase of shares at a cost of $6.2 million.

December 31, 2025, total shares outstanding were 20,372,786.

The Company’s regulatory capital ratios continue to be strong

and in excess of regulatory minimum requirements to be considered well-capitalized as defined by regulators and internal Company

The Company’s book value per share

was $12.16 at December 31, 2025, compared to $11.30 at December 31, 2024, while tangible book value per share, a non-GAAP financial

measure, increased $0.86, or 8.1%, from $10.63 at December 31, 2024 to $11.49 at December 31, 2025.

For more information regarding

the Company’s use of Non-GAAP financial measures see “Explanation of Use of Non-GAAP Financial Measurements.”

Assets under Management.

Total assets under management include loans

serviced for others and investment assets under management.

Loans serviced for others and investment assets under management are

not carried as assets on the Company’s consolidated balance sheet, and as such, total assets under management is not a financial

measurement recognized under GAAP, however, management believes its disclosure provides information useful in understanding the

trends in total assets under management.

The Company provides a wide range of investment

advisory and wealth management services through Westfield Investment Services through LPL Financial, a third-party broker-dealer.

Investment assets under management increased $34.7 million, or 17.4%, to $234.0 million as of December 31, 2025, from $199.3 million

as of December 31, 2024.

Comparison of Operating Results for

Years Ended December 31, 2025 and 2024.

For the twelve months ended December 31,

2025, the Company reported net income of $15.3 million, or $0.75 per diluted share, compared to $11.7 million, or $0.56 per diluted

share, for the twelve months ended December 31, 2024.

Net interest income increased $10.3 million, or 17.2%, provision for credit

losses increased $1.0 million, non-interest income decreased $387,000, or 3.0%, and non-interest expense increased $4.1 million,

or 6.9%, compared to 2024.

Return on average assets and return on average equity were 0.56% and 6.35% for the twelve months ended

December 31, 2025, respectively, compared to 0.45% and 4.93% for the twelve months ended December 31, 2024, respectively.

Income and Net Interest Margin.

During the twelve months ended December

31, 2025, net interest income increased $10.3 million, or 17.2%, to $70.1 million, compared to $59.8 million for the twelve months

ended December 31, 2024.

The increase in net interest income was due to an increase in interest income of $8.8 million, or 8.0%,

and a decrease in interest expense of $1.5 million, or 3.0%.

The net interest margin for the twelve

months ended December 31, 2025 was 2.75%, compared to 2.45% for the twelve months ended December 31, 2024.

The net interest margin,

on a tax-equivalent basis, was 2.77% for the twelve months ended December 31, 2025, compared to 2.47% for the twelve months ended

December 31, 2024.

At December 31, 2024 and December 31, 2023, borrowings also consisted of $19.8 million and $19.7 million, respectively,

in fixed-to-floating rate subordinated notes.

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.

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 Company’s outstanding

balance under the BTFP was $90.0 million.

There was no outstanding balance under the BTFP at December 31, 2024.

of December 31, 2024, the Company had $464.1 million of additional borrowing capacity at the Federal Home Loan Bank, $382.9 million

of additional borrowing capacity under the Federal Reserve Bank Discount Window and $25.0 million of other unsecured lines of

credit with correspondent banks.

Shareholders’

December 31, 2024, shareholders’ equity was $235.9 million, or 8.9% of total assets, compared to $237.4 million, or 9.3%

of total assets, at December 31, 2023.

The change was primarily attributable to an increase in accumulated other comprehensive

loss of $1.5 million, cash dividends paid of $5.9 million, repurchase of shares at a cost of $7.8 million, partially offset by

net income of $11.7 million.

At December 31, 2024, total shares outstanding were 20,875,713.

Company’s book value per share was $11.30 at December 31, 2024, compared to $10.96 at December 31, 2023, while tangible

book value per share, a non-GAAP financial measure, increased $0.33, or 3.2%, from $10.30 at December 31, 2023 to $10.63 at December

Tangible book value is a Non-GAAP measure.

For more information regarding the Company’s use of Non-GAAP financial

measures see “Explanation of Use of Non-GAAP Financial Measurements.” As of December 31, 2024, the Company’s

and the Bank’s regulatory capital ratios continued to exceed the levels required to be considered “well-capitalized”

under federal banking regulations.

under Management.

assets under management include loans serviced for others and investment assets under management.

Loans serviced for others and

investment assets under management are not carried as assets on the Company’s consolidated balance sheet, and as such, total

assets under management is not a financial measurement recognized under GAAP, however, management believes its disclosure provides

information useful in understanding the trends in total assets under management.

Company provides a wide range of investment advisory and wealth management services through Westfield Investment Services through

LPL Financial, a third-party broker-dealer.

Investment assets under management increased $27.2 million, or 15.8%, to $199.3 million

as of December 31, 2024, from $172.1 million as of December 31, 2023.

of Operating Results for Years Ended December 31, 2024 and 2023.

the twelve months ended December 31, 2024, the Company reported net income of $11.7 million, or $0.56 per diluted share, compared

to $15.1 million, or $0.70 per diluted share, for the twelve months ended December 31, 2023.

Net interest income decreased $8.1

million, or 11.9%, provision for credit losses decreased $1.5 million, non-interest income increased $2.0 million, or 18.4%, and

non-interest expense increased $78,000, or 0.1%, during the same period in 2023.

Return on average assets and return on average

equity were 0.45% and 4.93% for the twelve months ended December 31, 2024, respectively, compared to 0.59% and 6.47% for the twelve

months ended December 31, 2023, respectively.

Interest Income and Net Interest Margin.

the twelve months ended December 31, 2024, net interest income decreased $8.1 million, or 11.9%, to $59.8 million, compared to

$67.9 million for the twelve months ended December 31, 2023.

The decrease in net interest income was primarily due to an increase

in interest expense of $16.8 million, or 50.6%, partially offset by an increase in interest and dividend income of $8.7 million,

net interest margin for the twelve months ended December 31, 2024 was 2.45%, compared to 2.82% for the twelve months ended December

The net interest margin, on a tax-equivalent basis, was 2.47% for the twelve months ended December 31, 2024, compared

to 2.84% for the twelve months ended December 31, 2023.

average yield on interest-earning assets, without the impact of tax-equivalent adjustments, increased 30 basis points from 4.20%

for the twelve months ended December 31, 2023 to 4.50% for the twelve months ended December 31, 2024.

The average yield on loans,

During the twelve months ended December 31, 2024, the Company had fair value hedge income of $1.4 million, which

contributed six basis points to the net interest margin.

The adjusted net interest margin, excluding income from the fair value

hedge, a non-GAAP financial measure, increased 36 basis points from 2.39% for the twelve months ended December 31, 2024 to 2.75%

for the twelve months ended December 31, 2025.

The fair value hedge matured in October of 2024.

For more information regarding

the Company’s use of Non-GAAP financial measures see “Explanation of Use of Non-GAAP Financial Measurements.”

The average yield on interest-earning assets,

without the impact of tax-equivalent adjustments, increased 15 basis points from 4.50% for the twelve months ended December 31,

2024 to 4.65% for the twelve months ended December 31, 2025.

During the twelve months ended December 31, 2024, average interest-earning

assets increased $33.5 million, or 1.4%, to $2.4 billion, compared to the twelve months ended December 31, 2023, primarily due

to an increase in average loans of $29.0 million, or 1.4%, an increase in average short-term investments, consisting of cash and

cash equivalents, of $12.8 million, or 62.5%, and an increase in average other investments of $2.2 million, or 18.1%, partially

offset by a decrease in average securities of $10.6 million, or 2.9%.

the twelve months ended December 31, 2024, the average cost of funds, including non-interest-bearing demand accounts and borrowings,

increased 70 basis points from 1.44% for the twelve months ended December 31, 2023 to 2.14%.

For the twelve months ended December

31, 2024, the average cost of core deposits, including non-interest-bearing demand deposits, increased 24 basis points from 0.65%

The average yield on loans, without the impact of tax-equivalent adjustments,

increased 14 basis points from 4.86% for the twelve months ended December 31, 2024 to 5.00% for the twelve months ended December

During the twelve months ended December 31, 2025, average interest-earning assets increased $108.9 million, or 4.5%,

to $2.5 billion, compared to the twelve months ended December 31, 2024, primarily due to an increase in average loans of $73.6

million, or 3.6%, an increase in average short-term investments, consisting of cash and cash equivalents, of $21.5 million, or

64.7%, and an increase in average securities of $13.6 million, or 3.8%.

During the twelve months ended December

31, 2025, the average cost of funds, including non-interest-bearing demand accounts and borrowings, decreased 15 basis points from

2.14% for the twelve months ended December 31, 2024 to 1.99%.

The average cost of time deposits increased 129 basis points from 3.03%

for the twelve months ended December 31, 2023 to 4.32% for the twelve months ended December 31, 2024.

The average cost of borrowings,

which include borrowings and subordinated debt, increased 16 basis points from 4.84% for the twelve months ended December 31,

2023 to 5.00% for the twelve months ended December 31, 2024.

the twelve months ended December 31, 2024, average demand deposits, an interest-free source of funds, decreased $41.4 million,

or 6.9%, from $602.7 million, or 27.8% of total average deposits, for the twelve months ended December 31, 2023, to $561.3 million,

or 25.8% of total average deposits.

for Credit Losses.

credit 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.

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 twelve months 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 twelve months ended December 31, 2023.

The decrease in reserves was primarily due to

changes in the economic environment and related adjustments to the quantitative components of the CECL methodology.

twelve months ended December 31, 2024, the Company recorded net recoveries of $87,000, compared to net charge-offs of $2.0 million

For the twelve months ended December 31, 2025, the average cost of

core deposits, including non-interest-bearing demand deposits, increased 15 basis points from 0.89% for the twelve months ended

December 31, 2024, to 1.04%.

The average cost of time deposits decreased 63 basis points from 4.32% for the twelve months ended

December 31, 2024 to 3.69% for the twelve months ended December 31, 2025.

The average cost of borrowings, which include borrowings

and subordinated debt, increased 2 basis points from 5.00% for the twelve months ended December 31, 2024 to 5.02% for the twelve

months ended December 31, 2025.

For the twelve months ended December 31,

The charge-offs during the twelve months ended December 31, 2023 were related to

one commercial relationship acquired in October 2016 from Chicopee Bancorp, Inc.

Specifically, the Company recorded a $1.9 million

charge-off on the acquired commercial relationship, which represented the non-accretable credit mark that was required to be grossed-up

to the loan’s amortized cost basis with a corresponding increase to the allowance for credit losses under the CECL implementation.

decrease in the provision for credit losses was primarily due to changes in the loan mix as well as economic environment and related

adjustments to the quantitative components of the CECL methodology.

The provision for credit losses was determined by a number

the continued strong 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.

management believes it has established and maintained the allowance for credit losses at appropriate levels for the current economic

environment and supportable forecast period, future adjustments may be necessary if economic, real estate and other conditions

differ substantially from the current operating environment.

the twelve months ended December 31, 2024, non-interest income increased $2.0 million, or 18.4%, from $10.9 million for the twelve

months ended December 31, 2023 to $12.9 million.

During the twelve months ended December 31, 2023, the Company recorded a non-recurring

final termination expense of $1.1 million related to the defined benefit pension plan termination.

During the twelve months ended,

December 31, 2023, the Company also recorded a non-taxable gain of $778,000 on BOLI death benefits and did not have a comparable

gain during the twelve months ended December 31, 2024.

Excluding the defined benefit pension plan termination expense and the

BOLI death benefit, non-interest income increased $1.6 million, or 14.6%.

the twelve months ended December 31, 2024, service charges and fees increased $346,000, or 3.9%, and income from BOLI increased

$91,000, or 5.0%, from $1.8 million for the twelve months ended December 31, 2023 to $1.9 million.

During the twelve months ended

December 31, 2024, the Company recorded other income from loan-level swap fees on commercial loans of $261,000 and did not have

comparable income during the twelve months ended December 31, 2023.

During the twelve months ended December 31, 2024, the Company

reported a gain of $1.3 million on non-marketable equity investments, compared to a gain of $590,000 during the twelve months

ended December 31, 2023.

During the twelve months ended December 31, 2024, the Company reported a loss on the disposal of premises

and equipment of $6,000, compared to a loss of $3,000 during the twelve months ended December 31, 2023.

During the twelve months

ended December 31, 2023, the Company also reported unrealized losses on marketable equity securities of $1,000, compared to unrealized

gains on marketable equity securities of $13,000 during the twelve months ended December 31, 2024.

the twelve months ended December 31, 2024, non-interest expense increased $78,000, or 0.1%, to $58.4 million from the twelve months

ended December 31, 2023.

During the twelve months ended December 31, 2023, the Company reached an agreement-in-principle to settle

purported class action lawsuits concerning the Company’s deposit products and related disclosures, specifically involving

overdraft fees and insufficient funds fees.

This agreement-in-principle reflects our business decision to avoid the costs, uncertainties

and distractions of further litigation.

Excluding the legal settlement accrual of $510,000, non-interest expense increased $588,000,

or 1.0%, from $57.8 million for the twelve months ended December 31, 2023 to $58.4 million for the twelve months ended December

the same period, salaries and related benefits increased $472,000, or 1.5%, software expenses increased $208,000, or 9.0%, data

processing expense increased $320,000, or 10.1%, debit card processing and ATM network costs increased $298,000, or 13.9%, occupancy

expense increased $146,000, or 3.0%, due to higher repair and maintenance costs, real estate taxes, and depreciation expense.

FDIC insurance expense increased $139,000, or 10.5%.

These increases were partially offset by a decrease in professional fees

of $571,000, or 20.9%, which is comprised of legal fees, audit and other professional fees.

During the three months ended December

31, 2023, professional fees included legal fees related to the settlement of the purported class action lawsuits.

expense decreased $226,000, or 15.1%, and other non-interest expense, excluding the $510,000 legal settlement accrual, decreased

2025, average demand deposits, an interest-free source of funds, increased $20.9 million, or 3.7%, from $561.3 million, or 25.8%

of total average deposits, for the twelve months ended December 31, 2024, to $582.2 million, or 25.1% of total average deposits.

Provision for Credit Losses.

The credit 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.

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 WARM method.

During the twelve months ended December

31, 2025, the Company recorded a provision for credit losses of $335,000, compared to a reversal of credit losses of $665,000 during

the twelve months ended December 31, 2024.

The $1.0 million increase in the provision for credit losses was primarily due to an

increase in total loans of $113.2 million, or 5.5%.

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

continued strong 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 Bank’s actions to control

Management continues to monitor macroeconomic variables related to increasing interest rates, tariffs, inflation and

concerns of an economic downturn, and believes it is appropriately reserved for the current economic environment.

The Company recorded net recoveries of

$472,000 for the twelve months ended December 31, 2025, as compared to net recoveries of $87,000 for the twelve months ended December

During the twelve months ended December 31, 2025, the Company recorded a recovery of $624,000 on a previously charged-off

commercial relationship acquired on October 21, 2016 from Chicopee Bancorp, Inc.

As of June 30, 2025, the relationship paid in

Although management believes it has established

and maintained the allowance for credit losses at appropriate levels for the current economic environment and supportable forecast

period, future adjustments may be necessary if economic, real estate and other conditions differ substantially from the current

operating environment.

For the twelve months ended December 31,

2025, non-interest income decreased $387,000, or 3.0%, from $12.9 million during the twelve months ended December 31, 2024 to $12.5

During the same period, service charges and fees on deposits increased $715,000, or 7.8%, and income from BOLI increased

$52,000, or 2.7%.

the twelve months ended December 31, 2024, the efficiency ratio was 80.4%, compared to 74.0% for the twelve months ended December

For the twelve months ended December 31, 2024, the adjusted efficiency ratio, a non-GAAP financial measure, was 81.8%,

compared to 74.3% for the twelve months ended December 31, 2023.

For more information regarding the Company’s use of Non-GAAP

financial measures see “Explanation of Use of Non-GAAP Financial Measurements.”

the twelve months ended December 31, 2024, income tax expense was $3.3 million, with an effective tax rate of 22.0%, compared

to $4.5 million, with an effective tax rate of 23.1%, for twelve months ended December 31, 2023.

The decrease in income tax expense

for the twelve months ended December 31, 2024 compared to the twelve months December 31, 2023 was due to lower income before taxes

and Capital Resources.

term “liquidity” refers to our ability to generate adequate amounts of cash to fund loan originations, loan purchases,

deposit withdrawals and operating expenses.

Our primary sources of liquidity are deposits, scheduled amortization and prepayments

of loan principal and mortgage-backed securities, maturities and calls of investment securities and funds provided by our operations.

We also can borrow funds from the FHLB based on eligible collateral of loans and securities.

Our material cash commitments include

funding loan originations, fulfilling contractual obligations with third-party service providers, maintaining operating leases

for certain of our Bank properties and satisfying repayment of our long-term debt obligations.

Sources of Liquidity

Company, on an ongoing basis, closely monitors the Company’s liquidity position for compliance with internal policies, and

believes that available sources of liquidity are adequate to meet funding needs in the normal course of business.

As part of that

monitoring process, the Company stresses the potential liabilities calculation to ensure a strong liquidity position.

in the calculation are assumptions of some significant deposit run-off as well as funds needed for loan closing and investment

The Company does not anticipate engaging in any activities, either currently or over the long-term, for which adequate

funding would not be available and which would therefore result in significant pressure on liquidity.

However, an economic recession

could negatively impact the Company’s liquidity.

The Bank relies heavily on FHLB as a source of funds, particularly with

its overnight line of credit.

In past economic recessions, some FHLB branches have suspended dividends, cut dividend payments,

and not bought back excess FHLB stock that members hold in an effort to conserve capital.

FHLB has stated that it expects to be

able to continue to pay dividends, redeem excess capital stock, and provide competitively priced advances in the future.

December 31, 2024 and December 31, 2023, outstanding borrowings from the FHLB were $98.0 million and $40.6 million, respectively.

At December 31, 2024, we had $464.1 million in available borrowing capacity with the FHLB.

We have the ability to increase our

borrowing capacity with the FHLB by pledging investment securities or additional loans.

Company has an available line of credit of $382.9 million with the FRB Discount Window at an interest rate determined and reset

on a daily basis.

Borrowings from the FRB Discount Window are secured by certain eligible loan collateral and securities from

the Company’s investment portfolio not otherwise pledged.

As of December 31, 2024 and December 31, 2023, there were no advances

outstanding under either of these lines.

March 12, 2023, the FRB made available the BTFP, which enhanced the ability of banks to borrow greater amounts against certain

high-quality, unencumbered investments at par value.

During the year ended December 31, 2023, the Company participated in the

BTFP, which enabled the Company to pay off higher rate FHLB advances.

At December 31, 2023, long-term debt included $90.0 million

in outstanding advances under the BTFP with a weighted average fixed rate of 4.71%.

There were no advances outstanding with the

FRB under the BTFP at December 31, 2024.

addition, we have available lines of credit of $15.0 million and $10.0 million with other correspondent banks.

Interest rates

on these lines are determined and reset on a daily basis by each respective bank.

At December 31, 2024 and 2023, we did not have

an outstanding balance under either of these lines of credit.

In addition, we may enter into reverse repurchase agreements with

approved broker-dealers.

Reverse repurchase agreements are agreements that allow us to borrow money using our securities as collateral.

also have outstanding at any time, a significant number of commitments to extend credit and provide financial guarantees to third

These arrangements are subject to strict credit control assessments.

During the twelve months ended December 31, 2025, the Company reported $347,000 in other income from loan-level

swap fees on commercial loans, compared to $261,000 during the same period in 2024.

During the twelve months ended December 31,

2025, the Company reported a gain of $243,000 on non-marketable equity investments, compared to a gain of $1.3 million during the

twelve months ended December 31, 2024.

During the twelve months ended December 31, 2025, the Company reported unrealized gains

on marketable equity securities of $35,000, compared to unrealized gains on marketable equity securities of $13,000 during the

twelve months ended December 31, 2024.

Gains and losses from the investment portfolio vary from quarter to quarter based on market

conditions, as well as the related yield curve and valuation changes.

During the twelve months ended December 31, 2025, the Company

reported $11,000 in gains from mortgage banking activities, compared to $235,000 during the twelve months ended December 31, 2024

due to the sale of fixed rate residential real estate loans.

In addition, during the twelve months ended December 31, 2024, the

Company reported a loss on the disposal of premises and equipment of $6,000 and did not have a comparable gain or loss during the

twelve months ended December 31, 2025.

For the twelve months ended December 31,

2025, non-interest expense increased $4.1 million, or 6.9%, to $62.5 million, compared to $58.4 million for the twelve months ended

December 31, 2024.

The increase in non-interest expense was primarily due to an increase in salaries and employee benefits of $3.0

million, or 9.3%, due to an increase in deferred compensation expense to reflect updated year-end performance award estimates as

well as annual merit increases.

Advertising expense increased $385,000, or 30.3%, data processing expense increased $153,000, or

4.4%, FDIC insurance expense increased $144,000, or 9.9%, software related expenses increased $124,000, or 4.9%, debit card and

ATM processing fees increased $46,000, or 1.9%, and other non-interest expense increased $410,000, or 8.0%.

These increases were

partially offset by a decrease in occupancy expense of $11,000 or 0.2%, a decrease in furniture and equipment expense of $87,000,

or 4.5%, and a decrease in professional fees of $144,000, or 6.7%.

For the twelve months ended December 31,

2025, the efficiency ratio was 75.6%, compared to 80.4% for the twelve months ended December 31, 2024.

The decrease in the efficiency

ratio was driven by higher net interest income during the twelve months ended December 31, 2025 compared to the twelve months ended

December 31, 2024.

Income Taxes.

Income tax expense for the twelve months

ended December 31, 2025 was $4.5 million, representing an effective tax rate of 22.8%, compared to $3.3 million, representing an

effective tax rate of 22.0%, for the twelve months ended December 31, 2024.

The increase in income tax expense was due to higher

pre-tax income for the twelve months ended December 31, 2025.

Liquidity and Capital

The term “liquidity”

refers to our ability to generate adequate amounts of cash to fund loan originations, loan purchases, deposit withdrawals and operating

Our primary sources of liquidity are deposits, scheduled amortization and prepayments of loan principal and mortgage-backed

securities, maturities and calls of investment securities and funds provided by our operations.

We also can borrow funds from the

FHLB based on eligible collateral of loans and securities.

Our material cash commitments include funding loan originations, fulfilling

contractual obligations with third-party service providers, maintaining operating leases for certain of our Bank properties and

satisfying repayment of our long-term debt obligations.

Primary Sources

The Company, on an ongoing

basis, closely monitors the Company’s liquidity position for compliance with internal policies, and believes that available

sources of liquidity are adequate to meet funding needs in the normal course of business.

As part of that monitoring process, the

Company stresses the potential liabilities calculation to ensure a strong liquidity position.

Included in the calculation are assumptions

of some significant deposit run-off as well as funds needed for loan closing and investment purchases.

The Company does not anticipate

engaging in any activities, either currently or over the long-term, for which adequate funding would not be available and which

would therefore result in significant pressure on liquidity.

However, an economic recession could negatively impact the Company’s

The Bank relies heavily on FHLB as a source of funds, particularly with its overnight line of credit.

In past economic

recessions, some FHLB branches have suspended dividends, cut dividend payments, and not bought back excess FHLB stock that members

hold in an effort to conserve capital.

FHLB has stated that it expects to be able to continue to pay dividends, redeem excess capital

stock, and provide competitively priced advances in the future.

At December 31, 2025

and December 31, 2024, outstanding borrowings from the FHLB were $83.0 million and $98.0 million, respectively.

At December 31,

2025, we had $538.6 million in available borrowing capacity with the FHLB, including our $9.5 million overnight Ideal Way Line

We have the ability to increase our borrowing capacity with the FHLB by pledging investment securities or additional

The Company has an available line of credit

of $349.0 million with the FRB Discount Window at an interest rate determined and reset on a daily basis.

Borrowings from the FRB

Discount Window are secured by certain eligible loan collateral and securities from the Company’s investment portfolio not

otherwise pledged.

As of December 31, 2025 and December 31, 2024, there were no advances outstanding under either of these lines.

In addition, we have available lines of

credit of $15.0 million and $10.0 million with other correspondent banks.

Interest rates on these lines are determined and reset

on a daily basis by each respective bank.

At December 31, 2025 and 2024, we did not have an outstanding balance under either of

these lines of credit.

In addition, we may enter into reverse repurchase agreements with approved broker-dealers.

Reverse repurchase

agreements are agreements that allow us to borrow money using our securities as collateral.

We also have outstanding at any time, a

significant number of commitments to extend credit and provide financial guarantees to third parties.

These arrangements are subject

to strict credit control assessments.

Guarantees specify limits to our obligations.

many commitments and almost all guarantees expire without being funded in whole or in part, the contract amounts are not estimates

of future cash flows.

We are also obligated under agreements with the FHLB to repay borrowed funds and are obligated under leases

for certain of our branches and equipment.

investment securities are a relatively predictable source of funds.

However, deposit flows, calls of securities and prepayments

of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition

in the marketplace.

Because many commitments and almost all guarantees

expire without being funded in whole or in part, the contract amounts are not estimates of future cash flows.

We are also obligated

under agreements with the FHLB to repay borrowed funds and are obligated under leases for certain of our branches and equipment.

Maturing investment securities

are a relatively predictable source of funds.

However, deposit flows, calls of securities and prepayments of loans and mortgage-backed

securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace.

These factors reduce the predictability of the timing of these sources of funds.

Company’s primary activities are the origination of commercial real estate loans, commercial and industrial loans and residential

real estate loans, as well as and the purchase of mortgage-backed and other investment securities.

During the year ended December

31, 2023, we originated $336.4 million in loans, compared to $225.6 million in 2023.

During the year ended December 31, 2024,

total loans increased $42.9 million, or 2.1%, compared to an increase of $35.9 million, or 1.8%, for the year ended December 31,

At December 31, 2024, the Company had approximately $122.4 million in loan commitments and letters of credit to borrowers

and approximately $343.1 million in available home equity and other unadvanced lines of credit.

inflows and outflows are affected by the level of interest rates, the products and interest rates offered by competitors and by

other factors.

At December 31, 2024, time deposit accounts scheduled to mature within one year totaled $694.9 million.

the Company’s deposit retention experience and current pricing strategy, we anticipate that a significant portion of these

The Company’s primary activities

are the origination of commercial real estate loans, commercial and industrial loans and residential real estate loans, as well

as and the purchase of mortgage-backed and other investment securities.

During the year ended December 31, 2025, we originated

$380.2 million in loans, compared to $336.4 million in 2024.

Total loans increased $113.2 million, or 5.5%, from $2.1 billion,

or 77.9% of total assets, at December 31, 2024 to $2.2 billion, or 79.7% of total assets, at December 31, 2025.

At December 31,

2025, the Company had approximately $144.0 million in loan commitments and letters of credit to borrowers and approximately $357.3

million in available home equity and other unadvanced lines of credit.

Deposit inflows and outflows

are affected by the level of interest rates, the products and interest rates offered by competitors and by other factors.

31, 2025, time deposit accounts scheduled to mature within one year totaled $678.1 million, or 98.3% of total time deposits.

on the Company’s deposit retention experience and current pricing strategy, we anticipate that a significant portion of these

time deposits will remain on deposit.

1 unchanged sentence

funds to meet our current funding commitments for the next 12 months and beyond.

December 31, 2024, the Company and the Bank exceeded each of the applicable regulatory capital requirements (See Note 13, Regulatory

Capital , to our consolidated financial statements for further information on our regulatory requirements).

Cash Commitments

Company entered into a long-term contractual obligation with a vendor for use of its core provider and ancillary services beginning

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

At December 31, 2025,

the Company and the Bank exceeded each of the applicable regulatory capital requirements (See Note 13, Regulatory Capital ,

to our consolidated financial statements for further information on our regulatory requirements).

Material Cash Commitments

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, 2025 were estimated to be $3.6 million, which is expected

to be paid within one year.

Further, the Company has operating leases for certain of its 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.

Our leases have

remaining lease terms of less than one year to thirteen years, some of which include options to extend the leases for additional

five-year terms up to ten years.

Undiscounted lease liabilities totaled $7.7 million as of December 31, 2025.

Principal payments expected to be

made on our lease liabilities during the twelve months ended December 31, 2025 were $1.5 million.

The remaining lease liability

payments totaled $7.4 million and are expected to be made after December 31, 2025 (See Note 12, Leases , to our consolidated

financial statements for further information on our lease obligations).

addition, the Company completed an offering of $20 million in aggregate principal amount of its 4.875% Notes to certain qualified

institutional buyers in a private placement transaction on April 20, 2021.

Unless earlier redeemed, the Notes mature on May 1,

At December 31, 2024, $19.8 million aggregate principle amount of the Notes was outstanding.

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 (See Note 8, Long-Term Debt , to our consolidated financial

statements for further information on our long-term debt).

do not anticipate any material capital expenditures during the calendar year 2025, except in pursuance of the Company’s

strategic initiatives.

The Company does not have any balloon or other payments due on any long-term obligations or any off-balance

sheet items other than the commitments and unused lines of credit noted above.

Sheet Arrangements.

Company does not have any off-balance sheet arrangements, other than noted above and in Note 16, Commitments and Contingencies,

to our consolidated financial statements, that have or are reasonably likely to have a current or future effect on our financial

condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital

resources that is material to investors.

of Market Risk.

a financial institution, our primary market risk is interest rate risk since substantially all transactions are denominated in

Principal payments

expected to be made on our lease liabilities during the twelve months ended December 31, 2025 were $1.4 million.

The remaining

lease liability payments totaled $6.3 million and are expected to be made after December 31, 2026 (See Note 12, Leases ,

to our consolidated financial statements for further information on our lease obligations).

On April 20, 2021, the

Company completed an offering of its private placement of $20.0 million aggregate principal amount of 4.875% fixed-to-floating

rate subordinated notes due on May 1, 2031, unless earlier redeemed, to certain qualified institutional buyers (the “Notes”).

The Notes 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 (“SOFR”), 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 (See Note 8, Long-Term

Debt , to our consolidated financial statements for further information on our long-term debt).

At December 31, 2025 and December

31, 2024, $19.8 million in aggregate principal amount of the Notes was outstanding.

We do not anticipate

any material capital expenditures during the calendar year 2025, except in pursuance of the Company’s strategic initiatives.

The Company does not have any balloon or other payments due on any long-term obligations or any off-balance sheet items other than

the commitments and unused lines of credit noted above.

Off-Balance Sheet

Arrangements.

The Company does not

have any off-balance sheet arrangements, other than noted above and in Note 16, Commitments and Contingencies, to our consolidated

financial statements, that have or are reasonably likely to have a current or future effect on our financial condition, changes

in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that

is material to investors.

Management of Market Risk.

financial institution, our primary market risk is interest rate risk since substantially all transactions are denominated in U.S.

dollars with no direct foreign exchange or changes in commodity price exposure.

Fluctuations in interest rates will affect

both our level of income and expense on a large portion of our assets and liabilities.

Fluctuations in interest rates will also

affect the market value of all interest-earning assets and interest-bearing liabilities.

Company’s interest rate management strategy is to limit fluctuations in net interest income as interest rates vary up or

down and control variations in the market value of assets, liabilities and net worth as interest rates vary.

We seek to coordinate

asset and liability decisions so that, under changing interest rate scenarios, net interest income will remain within an acceptable

order to achieve the Company’s objectives of managing interest rate risk, the Asset and Liability Management Committee (“ALCO”)

meets periodically to discuss and monitor the market interest rate environment relative to interest rates that are offered on

our products.

ALCO presents quarterly reports to the Board which includes the Company’s interest rate risk position and

liquidity position.

Company’s primary source of funds are deposits, consisting primarily of time deposits, money market accounts, savings accounts,

demand accounts and interest-bearing checking accounts, which have shorter terms to maturity than the loan portfolio.

strategies have been employed to manage the interest rate risk inherent in the asset/liability mix, including but not limited

● maintaining

the diversity of our existing loan portfolio through residential real estate loans, commercial

and industrial loans and commercial real estate loans;

● emphasizing

investments with an expected average duration of five years or less;

appropriate, using interest rate swaps to manage the interest rate position of the balance

2024, cash flows from deposit inflows were used to first to fund loan growth, and then to purchase securities, primarily AFS securities.

While net loan growth during 2024 was centered in residential real estate loans, the Company’s long-term focus continues

to be on growing commercial loans that present the appropriate levels of risk and return.

Commercial loans typically have variable

interest rates and shorter maturities than residential loans.

actual amount of time before loans are repaid can be significantly affected by changes in market interest rates.

Prepayment rates

will also vary due to a number of other factors, including the regional economy in the area where the loans were originated, seasonal

factors, demographic variables and the assumability of the loans.

However, the major factors affecting prepayment rates are prevailing

interest rates, related financing opportunities and competition.

We monitor interest rate sensitivity so that we can adjust our

asset and liability mix in a timely manner and minimize the negative effects of changing rates.

Company’s liquidity sources are vulnerable to various uncertainties beyond our control.

Loan amortization and investment

cash flows are a relatively stable source of funds, while loan and investment prepayments and calls, as well as deposit flows

vary widely in reaction to market conditions, primarily prevailing interest rates.

Asset sales are influenced by pledging activities,

general market interest rates and unforeseen market conditions.

Our financial condition is affected by our ability to borrow at

attractive rates, retain deposits at market rates and other market conditions.

We consider our sources of liquidity to be adequate

to meet expected funding needs and also to be responsive to changing interest rate markets.

rate risk represents the sensitivity of earnings to changes in market interest rates.

As interest rates change, the interest income

and expense streams associated with our financial instruments also change, thereby impacting net interest income, the primary

component of our earnings.

ALCO utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure

of net interest income to sustained interest rate changes.

While ALCO routinely monitors simulated net interest income sensitivity

over a rolling two-year horizon, they also utilize additional tools to monitor potential longer-term interest rate risk.

simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all

interest-earning assets and interest-bearing liabilities reflected on our consolidated balance sheet, as well as for derivative

financial instruments.

This sensitivity analysis is compared to ALCO policy limits, which specify a maximum tolerance level for

net interest income exposure over a one and two-year horizon, assuming no balance sheet growth.

repricing and/or new rates of assets and liabilities moved in tandem with market rates.

However, in certain deposit products,

the use of data from a historical analysis indicated that the rates on these products would move only a fraction of the rate change

Pertinent data from each loan account, deposit account and investment security was used to calculate future cash flows.

The data included such items as maturity date, payment amount, next repricing date, repricing frequency, repricing index, repricing

spread, caps and floors.

Prepayment speed assumptions were based upon the difference between the account rate and the current

We also evaluate changes in interest rate sensitivity under various scenarios including but not limited to nonparallel

shifts in the yield curve, variances in prepayment speeds and variances to correlations of instrument rates to market indexes.

table below shows our net interest income sensitivity analysis reflecting the following changes to net interest income for the

first and second years of the simulation model.

The analysis assumes no balance sheet growth, a parallel shift in interest rates,

and all rate changes were “ramped” over the first 12-month period and then maintained at those levels over the remainder

of the simulation horizon.

Changes in Net Interest Income

in Interest Rates

Fluctuations in interest rates will affect both

our level of income and expense on a large portion of our assets and liabilities.

Fluctuations in interest rates will also affect

the market value of all interest-earning assets and interest-bearing liabilities.

The Company’s interest rate management

strategy is to limit fluctuations in net interest income as interest rates vary up or down and control variations in the market

value of assets, liabilities and net worth as interest rates vary.

We seek to coordinate asset and liability decisions so that,

under changing interest rate scenarios, net interest income will remain within an acceptable range.

In order to achieve the Company’s

objectives of managing interest rate risk, the Asset and Liability Management Committee (“ALCO”) meets periodically

to discuss and monitor the market interest rate environment relative to interest rates that are offered on our products.

ALCO presents

quarterly reports to the Board which includes the Company’s interest rate risk position and liquidity position.

The Company’s primary

source of funds are deposits, consisting primarily of time deposits, money market accounts, savings accounts, demand accounts and

interest-bearing checking accounts, which have shorter terms to maturity than the loan portfolio.

Several strategies have been

employed to manage the interest rate risk inherent in the asset/liability mix, including but not limited to:

● maintaining the diversity of our existing loan portfolio through residential real estate loans,

commercial and industrial loans and commercial real estate loans;

● emphasizing investments with an expected average duration of five years or less;

● when appropriate, using interest rate swaps to manage the interest rate position of the balance

In 2025, cash flows from

deposit inflows were used to fund loan growth.

During 2025, the Company experienced net loan growth in residential real estate

loans, commercial real estate loans and commercial and industrial loans.

The Company’s long-term focus continues to be on

growing commercial loans that present the appropriate levels of risk and return.

Commercial loans typically have variable interest

rates and shorter maturities than residential loans.

The actual amount of

time before loans are repaid can be significantly affected by changes in market interest rates.

Prepayment rates will also vary

due to a number of other factors, including the regional economy in the area where the loans were originated, seasonal factors,

demographic variables and the assumability of the loans.

However, the major factors affecting prepayment rates are prevailing interest

rates, related financing opportunities and competition.

We monitor interest rate sensitivity so that we can adjust our asset and

liability mix in a timely manner and minimize the negative effects of changing rates.

The Company’s liquidity

sources are vulnerable to various uncertainties beyond our control.

Loan amortization and investment cash flows are a relatively

stable source of funds, while loan and investment prepayments and calls, as well as deposit flows vary widely in reaction to market

conditions, primarily prevailing interest rates.

Asset sales are influenced by pledging activities, general market interest rates

and unforeseen market conditions.

Our financial condition is affected by our ability to borrow at attractive rates, retain deposits

at market rates and other market conditions.

We consider our sources of liquidity to be adequate to meet expected funding needs

and also to be responsive to changing interest rate markets.

Interest Rate Risk.

Interest rate risk represents

the sensitivity of earnings to changes in market interest rates.

As interest rates change, the interest income and expense streams

associated with our financial instruments also change, thereby impacting net interest income, the primary component of our earnings.

ALCO utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure of net interest income

to sustained interest rate changes.

While ALCO routinely monitors simulated net interest income sensitivity over a rolling two-year

horizon, they also utilize additional tools to monitor potential longer-term interest rate risk.

The simulation model

captures the impact of changing interest rates on the interest income received and interest expense paid on all interest-earning

assets and interest-bearing liabilities reflected on our consolidated balance sheet, as well as for derivative financial instruments.

This sensitivity analysis is compared to ALCO policy limits, which specify a maximum tolerance level for net interest income exposure

over a one and two-year horizon, assuming no balance sheet growth.

The repricing and/or new rates of assets

and liabilities moved in tandem with market rates.

However, in certain deposit products, the use of data from a historical analysis

indicated that the rates on these products would move only a fraction of the rate change amount.

Pertinent data from each loan

account, deposit account and investment security was used to calculate future cash flows.

The data included such items as maturity

date, payment amount, next repricing date, repricing frequency, repricing index, repricing spread, caps and floors.

speed assumptions were based upon the difference between the account rate and the current market rate.

We also evaluate changes

in interest rate sensitivity under various scenarios including but not limited to nonparallel shifts in the yield curve, variances

in prepayment speeds and variances to correlations of instrument rates to market indexes.

The table below shows

our net interest income sensitivity analysis reflecting the following changes to net interest income for the first and second years

of the simulation model.

The analysis assumes no balance sheet growth, a parallel shift in interest rates, and all rate changes

were “ramped” over the first 12-month period and then maintained at those levels over the remainder of the simulation

Estimated Changes in

Net Interest Income

Changes in Interest Rates

December 31, 2025

December 31, 2024

1 – 12 Months

UP 200 basis points

DOWN 200 basis points

13 – 24 Months

UP 200 basis points

DOWN 200 basis points

________________________

preceding sensitivity analysis does not represent a forecast of net interest income, nor do the calculations represent any actions

that management may undertake in response to changes in interest rates.

They should not be relied upon as being indicative of

expected operating results.

These hypothetical estimates are based upon numerous assumptions including, among others, the nature

and timing of interest rate levels, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions

on loans and deposits and reinvestment/replacement of asset and liability cash flows.

While assumptions are developed based upon

current economic and local market conditions, we cannot make any assurances as to the predictive nature of these assumptions,

including how customer preferences or competitor influences might change.

Periodically,

if deemed appropriate, we may use interest rate swaps, floors and caps, which are common derivative financial instruments, to

hedge our interest rate exposure to interest rate movements.

The Board has approved hedging policy statements governing the use

of these instruments.

These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts

from a counterparty in exchange for our making fixed payments.

Accounting Pronouncements.

to Note 1 to our consolidated financial statements for a summary of the recent accounting pronouncements.

of Inflation and Changing Prices.

Company’s consolidated financial statements and accompanying notes have been prepared in accordance with GAAP.

GAAP generally

requires the measurement of financial position and operating results in terms of historical dollars without consideration for

changes in the relative purchasing power of money over time due to inflation.

The impact of inflation is reflected in the increased

cost of our operations.

Unlike industrial companies, our assets and liabilities are primarily monetary in nature.

changes in market interest rates have a greater impact on performance than do the effects of inflation.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Management of Market

Risk,” for a discussion of quantitative and qualitative disclosures about market risk.

STATEMENTS AND SUPPLEMENTARY DATA.

consolidated financial statements and the accompanying notes may be found on pages F-1 through F-59 of this report.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

The preceding sensitivity analysis does

not represent a forecast of net interest income, nor do the calculations represent any actions that management may undertake in

response to changes in interest rates.

They should not be relied upon as being indicative of expected operating results.

hypothetical estimates are based upon numerous assumptions including, among others, the nature and timing of interest rate levels,

yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits and reinvestment/replacement

of asset and liability cash flows.

While assumptions are developed based upon current economic and local market conditions, we

cannot make any assurances as to the predictive nature of these assumptions, including how customer preferences or competitor influences

might change.

Periodically, if deemed appropriate, we

may use interest rate swaps, floors and caps, which are common derivative financial instruments, to hedge our interest rate exposure

to interest rate movements.

The Board has approved hedging policy statements governing the use of these instruments.

These interest

rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange

for our making fixed payments.

Recent Accounting Pronouncements.

Refer to Note 1 to our consolidated financial

statements for a summary of the recent accounting pronouncements.

Impact of Inflation

and Changing Prices.

The Company’s consolidated

financial statements and accompanying notes have been prepared in accordance with GAAP.

GAAP generally requires the measurement

of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing

power of money over time due to inflation.

The impact of inflation is reflected in the increased cost of our operations.

industrial companies, our assets and liabilities are primarily monetary in nature.

As a result, changes in market interest rates

have a greater impact on performance than do the effects of inflation.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

See Item 7, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations-Management of Market Risk,” for a discussion

of quantitative and qualitative disclosures about market risk.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our consolidated financial statements and

the accompanying notes may be found on pages F-1 through F-57 of this report.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis