Western New England Bancorp, Inc. (WNEB) Risk Factors

ITEM 1A. RISK FACTORS.

An
investment in the Company’s common stock is subject to a variety of risks and uncertainties including, without limitation,
those set forth below, any of which could cause the Company’s actual results to vary materially from recent results, or
from the other forward looking statements that the Company may make from time to time in news releases, annual reports and other
written or oral communications. The material risks and uncertainties that management believes may affect the Company are described
below. These risks and uncertainties are not listed in any particular order of priority and are not necessarily the only ones
facing the Company. Additional risks and uncertainties that management is not aware of or focused on or that management currently
deems immaterial may also impair the Company’s business, financial condition and results of operations.

This
annual report on Form 10-K is qualified in its entirety by these risk factors. If any of the following risks actually occur, the
Company’s business, financial condition and results of operations could be materially and adversely affected. If this were
to happen, the value of the Company’s common stock could decline significantly, and stockholders could lose some or all
of their investment.

Risks
Related to our Business and Industry

Our
Business and Results of Operations May be Adversely Affected by the Financial Markets, Fiscal, Monetary, and Regulatory Policies
and Economic Conditions. These Factors Could Have a Material Adverse Effect on Our Earnings, Net Interest Margin, Rate of Growth,
Financial Condition and Stock Price. The economy in the United States and globally has experienced volatility in recent
years and may continue to do so for the foreseeable future, particularly as a result of regulatory changes from the new administration.
There can be no assurance that economic conditions will not worsen. Our business has been and may in the future continue to be
affected by unfavorable or uncertain economic conditions such as the level and volatility of interest rates, availability and
market conditions of financing, business activity or investor or business confidence, unexpected changes in gross domestic product,
economic growth or its sustainability, inflation, supply chain disruptions, consumer spending, employment levels, labor shortages,
wage inflation, federal government shutdowns, developments related to the U.S. federal debt ceiling, energy prices, home prices,
commercial property values, bankruptcies, fluctuations or other significant changes in both debt and equity capital markets and
currencies, liquidity of financial markets and the availability and cost of capital and credit, natural disasters, epidemics and
pandemics (including COVID-19), terrorist attacks, acts of war or a combination of these or other factors.

Market
fluctuations may impact our margin requirements and affect our business liquidity. Also, any sudden or prolonged market downturn,
as a result of the above factors or otherwise, could result in a decline in net interest income and noninterest income and adversely
affect our results of operations and financial condition, including asset quality, capital and liquidity levels.

In
particular, the Company may face the following risks in connection with the economic or market environment:

37

In
addition, there are continuing concerns related to, among other things, the level of U.S. government debt and fiscal actions that
may be taken to address that debt, economic and political instability and uncertainty, wars and military conflict, such as in
Ukraine, the Middle East and Venezuela, all of which may have a destabilizing effect on financial markets and economic activity.
Economic pressure on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing
and saving habits. These economic conditions and/or other negative developments in the domestic or international credit markets
or economies may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing
operations, costs and profitability. Declines in real estate values and sales volumes and high unemployment or underemployment
may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and
a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect
our capital, liquidity and financial condition.

Interest
Rate Volatility Could Adversely Affect Our Results of Operations and Financial Condition. We cannot predict or control
changes in interest rates. Interest rates are highly sensitive to many factors that are beyond the Company’s control, including
monetary policy of the federal government, inflation and deflation, volatility of domestic and global financial markets, volatility
of credit markets, and competition. During 2025, the Federal Reserve Board continued reducing the federal funds rate, which had
been raised significantly during 2022 and 2023 to combat rising inflation in the U.S. Notwithstanding these reductions, there
can be no assurances that the Federal Reserve Board will continue to cut the target federal funds rate in 2026 and it may remain
open to increasing rates further should inflation dynamics remain unfavorable. Changes in monetary policy, including changes in
interest rates, influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings,
but such changes could affect our ability to originate loans and obtain deposits, the fair value of financial assets and liabilities,
and the average duration of our assets.

The
Company’s earnings and cash flows are largely dependent upon its net interest income, meaning the difference between interest
income earned on interest-earning assets and interest expense paid on interest-bearing liabilities. Net interest income is the
most significant component of our net income, accounting for approximately 84.8% of total revenues in 2025. Changes in market
interest rates, in the shape of the yield curve or in spreads between different market interest rates can have a material effect
on our net interest margin. The rates on some interest-earning assets, such as loans and investments, and interest-bearing liabilities,
such as deposits and borrowings, adjust concurrently with, or within a brief period after, changes in market interest rates, while
others adjust only periodically or not at all during their terms. Thus, changes in market interest rates might, for example, result
in an increase in the interest paid on interest-bearing liabilities that is not accompanied by a corresponding increase in the
interest earned on interest-earning assets, or the increase in interest earned might be at a slower pace, or in a smaller amount,
than the increase in interest paid, reducing our net interest income and/or net interest margin. In addition, we rely on lower-cost,
core deposits as our primary source of funding and changes in interest rates could increase our cost of funding, reduce our net
interest margin and/or create liquidity challenges We have policies and procedures designed to manage the risks associated with
changes in interest rates and actively manage these risks through hedging and other risk mitigation strategies. However, if our
assumptions are wrong or overall economic conditions are significantly different than anticipated, our hedging and other risk
mitigation strategies may be ineffective and may adversely impact our financial condition and results of operations.

38

Our
Loan Portfolio Includes Loans with a Higher Risk of Loss. The Company originates commercial and industrial loans, commercial
real estate loans, consumer loans, and residential mortgage loans primarily within its market area. The lending strategy focuses
on residential real estate lending as well as servicing commercial customers, including increased emphasis on commercial and industrial
lending and commercial deposit relationships. Commercial and industrial loans, commercial real estate loans, and consumer loans
may expose a lender to greater credit risk than loans secured by residential real estate because the collateral securing these
loans may not be sold as easily as residential real estate. In addition, commercial real estate and commercial and industrial
loans may also involve relatively large loan balances to individual borrowers or groups of borrowers.

These
loans also have greater credit risk than residential real estate for the following reasons:

Any
downturn in the real estate market or local economy could adversely affect the value of the properties securing the loans or revenues
from the borrowers’ businesses thereby increasing the risk of nonperforming loans.

Inflation
Can Have an Adverse Impact on the Company’s Business and its Customers. Inflation risk is the risk that the value
of assets or income from investments will be worth less in the future as inflation decreases the value of money. While the Federal
Reserve reduced the federal funds rate in 2025, there can be no assurances that the Federal Reserve will continue to cut target
funds rates in 2026 and it may remain open to increasing rates further should inflation dynamics remain unfavorable in 2026. Additionally,
the Federal Reserve has raised certain benchmark interest rates in response to this elevated inflation. As discussed above, changes
in interest rates could hurt our profits, as inflation increases and market interest rates rise, the value of the Company’s
investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced
for floating rate instruments. In addition, inflation generally increases the cost of goods and services the Company uses in its
business operations, such as electricity and other utilities, and also generally increases employee wages, any of which can increase
the Company’s non-interest expenses. Furthermore, the Company’s customers are also affected by inflation and the rising
costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay
their loans with the Company. Sustained higher interest rates by the Federal Reserve Board to tame persistent inflationary price
pressures could also push down asset prices and weaken economic activity. A deterioration in economic conditions in the United
States and the Company’s markets could result in an increase in loan delinquencies and non-performing assets, decreases
in loan collateral values and a decrease in demand for the Company’s products and services, all of which, in turn, would
adversely affect the Company’s business, financial condition and results of operations.

The
Company’s Allowance for Credit Losses May Not be Adequate to Cover Loan Losses, Which Could Have a Material Adverse Effect
on the Company’s Business, Financial Condition and Results of Operations. A significant source of risk for the Company
arises from the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform
in accordance with the terms of their loan agreements. Most loans originated by the Bank are secured, but some loans are unsecured
based upon management’s evaluation of the creditworthiness of the borrowers. With respect to secured loans, the collateral
securing the repayment of these loans principally includes a wide variety of real estate, and to a lesser extent personal property,
either of which may be insufficient to cover the obligations owed under such loans.

Collateral
values and the financial performance of borrowers may be adversely affected by changes in prevailing economic, environmental and
other conditions, including declines in the value of real estate, changes in interest rates and debt service levels, changes in
oil and gas prices, changes in monetary and fiscal policies of the federal government, widespread disease, terrorist activity,
environmental contamination and other external events, which are beyond the control of the Company. In addition, collateral appraisals
that are out of date or that do not meet industry recognized standards might create the impression that a loan is adequately collateralized
when in fact it is not. Although the Company may acquire any real estate or other assets that secure defaulted loans through foreclosures
or other similar remedies, the amounts owed under the defaulted loans may exceed the value of the assets acquired.

39

The
Company maintains an allowance for credit losses, which is established through a provision for credit losses charged to earnings
that represents management’s estimate of expected losses inherent within the Company’s existing loans held for investment
portfolio. The allowance for credit losses for loans held for investment, as reported in our consolidated balance sheet, is adjusted
by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.

The
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.

The
allowance for credit losses inherently involves a high degree of subjectivity and requires the Company to make significant estimates
of current credit risks and trends, all of which may undergo material changes. In addition, bank regulatory agencies periodically
review the Company’s allowance for credit losses and may require an increase in the provision for credit losses or the recognition
of further loan charge-offs, based on judgments that differ from those of the Company’s management. While the Company strives
to carefully monitor credit quality and to identify loans that may become nonperforming, it may not be able to identify deteriorating
loans before they become nonperforming assets, or be able to limit losses on those loans that have been identified to be nonperforming.

Increases
in the Company’s Nonperforming Assets Could Adversely Affect the Company’s Results of Operations and Financial Condition
in the Future. Nonperforming assets adversely affect net income in various ways. While the Company pays interest expense
to fund nonperforming assets, no interest income is recorded on nonperforming loans or other real estate owned, thereby adversely
affecting income and returns on assets and equity. In addition, loan administration and workout costs increase, resulting in additional
reductions of earnings. When taking collateral in foreclosures and similar proceedings, the Company is required to carry the property
or loan at its then-estimated fair market value less estimated cost to sell, which, when compared to the carrying value of the
loan, may result in a loss. These nonperforming loans and other real estate owned also increase the Company’s risk profile
and the capital that regulators believe is appropriate in light of such risks and have an impact on the Company’s FDIC risk-based
deposit insurance premium rate. The resolution of nonperforming assets requires significant time commitments from management and
staff. The Company may experience further increases in nonperforming loans in the future, and nonperforming assets may result
in further costs and losses in the future, either of which could have a material adverse effect on the Company’s financial
condition and results of operations.

The
Company’s Use of Appraisals in Deciding Whether to Make a Loan Does Not Ensure the Value of the Collateral. In considering
whether to make a loan secured by real property or other business assets, the Company generally requires an internal evaluation
or independent appraisal of the asset. However, these assessment methods are only an estimate of the value of the collateral at
the time the assessment is made, and involve a large degree of estimates and assumptions and an error in fact or judgment could
adversely affect the reliability of the valuation. Changes in those estimates resulting from continuing change in the economic
environment and events occurring after the initial assessment may cause the value of the assets to decrease in future periods.
As future events and their effects cannot be determined with precision, actual values could differ significantly from these estimates.
As a result of any of these factors, the value of collateral backing a loan may be less than estimated at the time of assessment,
and if a default occurs the Company may not recover the outstanding balance of the loan.

40

The
Company’s Investments are Subject to Interest Rate Risks, Credit Risk and Liquidity Risk and Declines in Value in its Investments
May Require the Company to Record Impairment Charges That Could Have a Material Adverse Effect on the Company’s Results
of Operations and Financial Condition. There are inherent risks associated with the Company’s investment activities,
many of which are beyond the Company’s control. These risks include the impact from changes in interest rates, weakness
in real estate, municipalities, government-sponsored enterprises, or other industries, the impact of changes in income tax rates
on the value of tax-exempt securities, adverse changes in regional or national economic conditions, and general turbulence in
domestic and foreign financial markets, among other things. These conditions could adversely impact the fair market value and/or
the ultimate collectability of the Company’s investments. In addition to fair market value impairment, carrying values may
be adversely impacted due to a fundamental deterioration of the individual municipality, government agency, or corporation whose
debt obligations the Company owns or of the individual company or fund in which the Company has invested.

If
the Company does not expect to recover the entire amortized cost basis of the security, an allowance for credit losses would be
recorded, with a related charge to earnings, limited by the amount of the fair value of the security less its amortized cost.
If the Company intends to sell the security or it is more likely than not that the Company will be required to sell the debt security
before recovery of its amortized cost basis, the Company recognizes the entire difference between the amortized cost basis of
the security and its fair value in earnings. Any impairment that has not been recorded through an allowance for credit loss is
recognized in other comprehensive income. Any impairment charges, depending upon the magnitude of the charges, could have a material
adverse effect on the Company’s financial condition and results of operations.

We
Depend Primarily on Net Interest Income for our Earnings Rather Than Fee Income. Net interest income is the most significant
component of our operating income. We have less reliance on traditional sources of fee income utilized by some community banks,
such as fees from sales of insurance, securities, or investment advisory products or services. For the years ended December 31,
2025, 2024 and 2023, our net interest income was $70.1 million, $59.8 million, and $67.9 million, respectively. The amount of
our net interest income is influenced by the overall interest rate environment, competition, and the amount of our interest-earning
assets relative to the amount of our interest-bearing liabilities. In the event that one or more of these factors were to result
in a decrease in our net interest income, we do not have significant sources of fee income to make up for decreases in net interest
income.

Events
Impacting Global, National and Regional Economies Could Adversely Affect our Business Activities, Financial Condition, and Results
of Operations. The occurrence of events which adversely affect the global, national
and regional economies may have a negative impact on our business. Like other financial institutions, our business relies upon
the ability and willingness of our customers to transact business with us, including banking, borrowing and other financial transactions.
A strong and stable economy at each of the local, federal and global levels is often a critical component of consumer confidence
and typically correlates positively with our customers’ ability and willingness to transact certain types of business with
us. Local and global events outside of our control may therefore negatively impact our business and financial condition.

The
Company is Subject to Environmental Risks Associated with Real Estate Held as Collateral or Occupied. When a borrower
defaults on a loan secured by real property, the Company may purchase the property in foreclosure or accept a deed to the property
surrendered by the borrower. The Company may also take over the management of commercial properties whose owners have defaulted
on loans. The Company also occupies owned and leased premises where branches and other bank facilities are located. While the
Company’s lending, foreclosure and facilities policies and guidelines are intended to exclude properties with an unreasonable
risk of contamination, hazardous substances could exist on some of the properties that the Company may own, acquire, manage or
occupy. Environmental laws could force the Company to clean up the properties at the Company’s expense. The Company may
also be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up
costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up
hazardous or toxic substances, or chemical releases at a property. The cost associated with investigation or remediation activities
could be substantial and could increase the Company’s operating expenses. It may cost much more to clean a property than
the property is worth and it may be difficult or impossible to sell contaminated properties. The Company could also be liable
for pollution generated by a borrower’s operations if the Company takes a role in managing those operations after a default.
In addition, as the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based
on damages and costs resulting from environmental contamination emanating from the property.

41

Climate
Change or Government Action and Societal Responses to Climate Change Could Adversely Affect Our Results of Operations. Climate
change can increase the likelihood of the occurrence and severity of natural disasters and can also result in longer-term shifts
in climate patterns such as extreme heat, sea level rise and more frequent and prolonged drought. Such significant climate change
effects may negatively impact the Company’s geographic markets, disrupting the operations of the Company, our customers
or third parties on which we rely. Damages to real estate underlying mortgage loans or real estate collateral and declines in
economic conditions in geographic markets in which the Company’s customers operate may impact our customers’ ability
to repay loans or maintain deposits due to climate change effects, which could increase our delinquency rates and average credit
loss.

Competition
in Our Primary Market Area May Reduce Our Ability to Attract and Retain Deposits and Originate Loans. We operate in a
competitive market for both attracting deposits, which is our primary source of funds, and originating loans. Historically, our
most direct competition for deposits has come from savings and commercial banks. Our competition for loans comes principally from
commercial banks, savings institutions, mortgage banking firms, credit unions, finance companies, mutual funds, insurance companies
and brokerage and investment banking firms. We also face additional competition from internet-based institutions, brokerage firms
and insurance companies. Competition for loan originations and deposits may limit our future growth and earnings prospects.

Deposit
Outflows May Increase Reliance on Borrowings and Brokered Deposits as Sources of Funds. The Company has traditionally
funded asset growth principally through deposits and borrowings. As a general matter, deposits are typically a lower cost source
of funds than external wholesale funding (brokered deposits and borrowed funds), because interest rates paid for deposits are
typically less than interest rates charged for wholesale funding. If, as a result of competitive pressures, market interest rates,
alternative investment opportunities that present more attractive returns to customers, general economic conditions or other events,
the balance of the Company’s deposits decreases relative to the Company’s overall banking operations, the Company
may have to rely more heavily on wholesale or other sources of external funding, or may have to increase deposit rates to maintain
deposit levels in the future. Any such increased reliance on wholesale funding, or increases in funding rates in general could
have a negative impact on the Company’s net interest income and, consequently, on its results of operations and financial
condition.

The
Bank’s Reliance on Brokered and Reciprocal Deposits Could Adversely Affect its Liquidity and Operating Results. Among
other sources of funds, the Company, from time to time, relies on brokered deposits to provide funds with which to make loans
and provide for other liquidity needs. There were no brokered time deposits at December 31, 2025. One of the Bank’s sources
for deposits is CDARS. At December 31, 2025, the Bank has $45.4 million in CDARS reciprocal deposits and $89.7 million in ICS
network deposits. These amounts, are reciprocal and are not considered brokered deposits under recent regulatory reform.

The
Company, as Part of its Strategic Plans, Periodically Considers Potential Acquisitions. The Risks Presented by Acquisitions Could
Adversely Affect Our Financial Condition and Results of Operations. Any acquisitions will be accompanied by the risks
commonly encountered in acquisitions including, among other things: our ability to realize anticipated cost savings and avoid
unanticipated costs relating to the merger, the difficulty of integrating operations and personnel, the potential disruption of
our or the acquired company’s ongoing business, the inability of our management to maximize our financial and strategic
position, the inability to maintain uniform standards, controls, procedures and policies, and the impairment of relationships
with the acquired company’s employees and customers as a result of changes in ownership and management. These risks may
prevent us from fully realizing the anticipated benefits of an acquisition or cause the realization of such benefits to take longer
than expected.

The
Company Relies on Third-Party Service Providers. The Company relies on independent firms to provide critical services
necessary to conducting its business. These services include, but are not limited to: electronic funds delivery networks; check
clearing houses; electronic banking services; investment advisory, management and custodial services; correspondent banking services;
information security assessments and technology support services; and loan underwriting and review services. The occurrence of
any failures or interruptions of the independent firms’ systems or in their delivery of services, or failure to perform
in accordance with contracted service level agreements, for any number of reasons could also impact the Company’s ability
to conduct business and process transactions and result in loss of customer business and damage to the Company’s reputation,
any of which may have a material adverse effect on the Company’s business, financial condition and results of operation.

42

The
Company Relies on Dividends from the Bank for Substantially All of its Revenue. The Company is a separate and distinct
legal entity from the Bank. It receives substantially all of its revenue from dividends paid by the Bank. These dividends are
the principal source of funds used to pay dividends on the Company’s common stock and interest and principal on the Company’s
subordinated debt. Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Company.
If the Bank, due to its capital position, inadequate net income levels, or otherwise, is unable to pay dividends to the Company,
then the Company will be unable to service debt, pay obligations or pay dividends on the Company’s common stock. The OCC
also has the authority to use its enforcement powers to prohibit the Bank from paying dividends if, in its opinion, the payment
of dividends would constitute an unsafe or unsound practice. The Bank’s inability to pay dividends could have a material
adverse effect on the Company’s business, financial condition, results of operations and the market price of the Company’s
common stock.

The
Carrying Value of the Company’s Goodwill Could Become Impaired. In accordance with GAAP, the Company does not amortize
goodwill and instead, at least annually, evaluates whether the carrying value of goodwill has become impaired. Impairment of goodwill
may occur when the estimated fair value of the Company is less than its recorded book value (i.e., the net book value of its recorded
assets and liabilities). This may occur, for example, when the estimated fair value of the Company declines due to changes in
the assumptions and inputs used in management’s estimate of fair value. A determination that goodwill has become impaired
results in an immediate write-down of goodwill to its determined value with a resulting charge to operations. Any write down of
goodwill will result in a decrease in net income and, depending upon the magnitude of the charge, could have a material adverse
effect on the Company’s financial condition and results of operations.

Risks
Related to Legal, Governmental and Regulatory Changes

If
Dividends Are Not Paid on Our Investment in the FHLB, or if Our Investment is Classified as Other-Than-Temporarily Impaired, Our
Earnings and/or Shareholders’ Equity Could Decrease. As a member of the FHLB, the Company is required to own a minimum
required amount of FHLB capital stock, calculated periodically based primarily on its level of borrowings from the FHLB. This
stock is classified as a restricted investment and carried at cost, which management believes approximates fair value of the FHLB
stock. If negative events or deterioration in the FHLB financial condition or capital levels occurs, the Company’s investment
in FHLB capital stock may become other-than-temporarily impaired to some degree. There can be no assurance that FHLB stock dividends
will be declared in the future. If either of these were to occur, the Company’s results of operations and financial condition
may be adversely affected.

Concentration
in Commercial Real Estate Lending is Subject to Heightened Risk Management and Regulatory Review. If a concentration in
commercial real estate lending is present, as measured under government banking regulations, management must employ heightened
risk management practices that address the following key elements: board and management oversight and strategic planning, portfolio
management, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing,
and maintenance of increased capital levels as needed to support the level of commercial real estate lending. If a concentration
is determined to exist, the Company may incur additional operating expenses in order to comply with additional risk management
practices and increased capital requirements which could have a material adverse effect on the Company’s financial condition
and results of operations.

Sources
of External Funding Could Become Restricted and Impact the Company’s Liquidity. The Company’s external wholesale
funding sources include borrowing capacity at the FHLB, capacity in the brokered deposit markets, other borrowing arrangements
with correspondent banks, as well as accessing the public markets through offerings of the Company’s stock or issuance of
debt. If, as a result of general economic conditions or other events, these sources of external funding become restricted or are
eliminated, the Company may not be able to raise adequate funds or may incur substantially higher funding costs or operating restrictions
in order to raise the necessary funds to support the Company’s operations and growth. The 2023 collapse and subsequent regulatory
takeover of certain U.S. regional banks may result in modifications or additional laws which we could be subject to, including
potentially increasing capital requirements, modifying regulations related to liquidity risk management, deposit concentrations,
capital adequacy and other oversight requirements. Any such increase in funding costs or restrictions could have a negative impact
on the Company’s net interest income and, consequently, on its results of operations and financial condition.

43

We
Operate In a Highly-Regulated Environment That is Subject to Extensive Government Supervision and Regulation, Which May Interfere
With Our Ability to Conduct Business and May Adversely Impact the Results of our Operations. Banking regulations are primarily
intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not the interests
of stockholders. These regulations affect the Company’s lending practices, capital structure, investment practices, dividend
policy and growth, among other things. In particular, regulators are increasingly focused on liquidity risk after the bank failures
of 2023. The Company is subject to extensive federal and state supervision and regulation that govern nearly all aspects of our
operations and can have a material impact on our business. Federal banking agencies have significant discretion regarding the
supervision, regulation and enforcement of banking laws and regulations.

Financial
laws, regulations and policies are subject to amendment by Congress, state legislatures and federal and state regulatory agencies.
Changes to statutes, regulations or policies, including changes in the interpretation of regulations or policies and changes in
enforcement and regulatory priorities, could materially impact our business. These changes could also impose additional costs
on us and limit the types of products and services that we may offer our customers. Compliance with laws and regulations can be
difficult and costly, and the failure to comply with any law, regulation or policy could result in sanctions by financial regulatory
agencies, including civil monetary penalties, private lawsuits, or reputational damage, any of which could adversely affect our
business, financial condition, or results of operations. While we have policies and procedures designed to prevent such violations,
there can be no assurance that violations will not occur. We cannot provide assurance that future changes in laws, regulations
and policies will not adversely affect our business. See the section titled, “Supervision and Regulation” in ITEM
1. Business.

State
and Federal Regulatory Agencies Periodically Conduct Examinations of Our Business, Including for Compliance With Laws and Regulations,
and Our Failure to Comply With Any Supervisory Actions to Which We Are or Become Subject as a Result of Such Examinations May
Adversely Affect Our Business. Federal and state regulatory agencies periodically conduct examinations of our business,
including our compliance with applicable laws and regulations. If, as a result of an examination, an agency were to determine
that the financial, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of any of our
operations had become unsatisfactory, or violates any law or regulation, such agency may take certain remedial or enforcement
actions it deems appropriate to correct any deficiency. Remedial or enforcement actions include the power to enjoin “unsafe
or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice,
to issue an administrative order that can be judicially enforced against a bank, to direct an increase in the bank’s capital,
to restrict the bank’s growth, to assess civil monetary penalties against a bank’s officers or directors, and to remove
officers and directors. In the event that the FDIC concludes that, among other things, our financial conditions cannot be corrected
or that there is an imminent risk of loss to our depositors, it may terminate our deposit insurance. The OCC, as the supervisory
and regulatory authority for federal savings associations, has similar enforcement powers with respect to our business. The CFPB
also has authority to take enforcement actions, including cease-and-desist orders or civil monetary penalties, if it finds that
we offer consumer financial products and services in violation of federal consumer financial protection laws.

If
we were unable to comply with future regulatory directives, or if we were unable to comply with the terms of any future supervisory
requirements to which we may become subject, then we could become subject to a variety of supervisory actions and orders, including
cease and desist orders, prompt corrective actions, memoranda of understanding, and other regulatory enforcement actions. Such
supervisory actions could, among other things, impose greater restrictions on our business, as well as our ability to develop
any new business. We could also be required to raise additional capital, or dispose of certain assets and liabilities within a
prescribed time period, or both. Failure to implement remedial measures as required by financial regulatory agencies could result
in additional orders or penalties from federal and state regulators, which could trigger one or more of the remedial actions described
above. The terms of any supervisory action and associated consequences with any failure to comply with any supervisory action
could have a material negative effect on our business, operating flexibility and overall financial condition.

The
Company’s Capital Levels Could Fall Below Regulatory Minimums. The Company and the Bank are subject to the capital
adequacy guidelines of the FRB and the OCC, respectively. Failure to meet applicable minimum capital ratio requirements (including
the capital conservation “buffer” imposed by Basel III) may subject the Company and/or the Bank to various enforcement
actions and restrictions. If the Company’s capital levels decline, or if regulatory requirements increase, and the Company
is unable to raise additional capital to offset that decline or meet the increased requirements, then its capital ratios may fall
below regulatory capital adequacy levels. The Company’s capital ratios could decline due to it experiencing rapid asset
growth, or due to other factors, such as, by way of example only, possible future net operating losses, impairment charges against
tangible or intangible assets, or adjustments to retained earnings due to changes in accounting rules.

44

The
Company’s failure to remain “adequately-capitalized” for bank regulatory purposes could affect customer confidence,
restrict the Company’s ability to grow (both assets and branching activity), increase the Company’s costs of funds
and FDIC insurance costs, prohibit the Company’s ability to pay dividends on common shares, and its ability to make acquisitions,
and have a negative impact on the Company’s business, results of operation and financial conditions, generally. If the Bank
ceases to be a “well-capitalized” institution for bank regulatory purposes, its ability to accept brokered deposits
and the interest rates that it pays may be restricted.

Changes
in Tax Policies at Both the Federal and State Levels Could Impact the Company’s Financial Condition and Results of Operations.
The Company’s financial performance is impacted by federal and state tax laws. Enactment of new legislation, or
changes in the interpretation of existing law, may have a material effect on the Company’s financial condition and results
of operations. A deferred tax asset is created by the tax effect of the differences between an asset’s book value and its
tax basis. The deferred tax asset is measured using enacted tax rates expected to apply to taxable income in the years in which
the temporary differences are expected to be recovered or settled. Accordingly, a reduction in enacted tax rates may result in
a decrease in current tax expense and a decrease to the Company’s deferred tax asset, with an offsetting charge to current
tax expense. The alternative would occur with an increase to enacted tax rates. In addition, certain tax strategies taken in the
past derive their tax benefit from the current enacted tax rates. Accordingly, a change in enacted tax rates may result in a decrease/increase
to anticipated benefit of the Company’s previous transactions which in turn, could have a material effect on the Company’s
financial condition and results of operations.

Risks
Related to Cybersecurity and Data Privacy

We
Face Cybersecurity Risks and Risks Associated with Security Breaches Which Have the Potential to Disrupt Our Operations, Cause
Material Harm to Our Financial Condition, Result in Misappropriation of Assets, Compromise Confidential Information and/or Damage
Our Business Relationships and Can Provide No Assurance That the Steps We and Our Service Providers Take in Response to These
Risks Will Be Effective. We depend upon data processing, communication and information exchange on a variety of computing
platforms and networks and over the internet. In addition, we rely on the services of a variety of vendors to meet our data processing
and communication needs. We face cybersecurity risks and risks associated with security breaches or disruptions such as those
through cyber-attacks or cyber intrusions over the internet, malware, computer viruses, attachments and links in emails, social
engineering and phishing schemes or persons inside our organization. The risk of a security breach or disruption, particularly
through cyber-attacks or cyber intrusions, including by computer hackers, nation-state affiliated actors, and cyber terrorists,
has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world
have increased. These incidents may result in disruption of our operations, material harm to our financial condition, cash flows
and the market price of our common stock, misappropriation of assets, compromise or corruption of confidential information collected
in the course of conducting our business, liability for stolen information or assets, increased cybersecurity protection and insurance
costs, regulatory enforcement, litigation and damage to our stakeholder relationships. These risks require continuous and likely
increasing attention and other resources from us to, among other actions, identify and quantify these risks, upgrade and expand
our technologies, systems and processes to adequately address them and provide periodic training for our employees to assist them
in detecting phishing, malware and other schemes. Such attention diverts time and other resources from other activities and there
is no assurance that our efforts will be effective.

In
the normal course of business, we collect and retain certain personal information provided by our customers, employees and vendors.
We also rely extensively on computer systems to process transactions and manage our business. We can provide no assurance that
the data security measures designed to protect confidential information on our systems established by us will be able to prevent
unauthorized access to this personal information. There can be no assurance that our efforts to maintain the security and integrity
of the information we and our service providers collect and our and their computer systems will be effective or that attempted
security breaches or disruptions would not be successful or damaging. Even the most well-protected information, networks, systems
and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally
are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be
detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative
measures, and thus it is impossible for us to entirely mitigate this risk.

45

We
Continually Encounter Technological Change and The Failure to Understand and Adapt to These Changes Could Hurt Our Business. The
financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products
and services, and technological advances are likely to intensify competition. The effective use of technology, including emerging
technologies, increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future
success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services
that will satisfy customer demands, as well as create additional efficiencies in our operations. Many of our competitors have
substantially greater resources to invest in technological improvements, including the use of artificial intelligence. We may
not be able to keep pace with technological change or effectively implement new technology-driven products and services or be
successful in marketing these products and services to customers. Failure to successfully keep pace with technological changes
affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition
and results of operations.

The
Development and Use of Artificial Intelligence Exposes Us to Risks That May Adversely Impact our Business. We or our third-party
providers may develop or incorporate artificial intelligence (“AI”) technology in certain business processes, services,
or products. The development and use of AI poses a number of risks and challenges to our business. The legal and regulatory environment
relating to AI is uncertain and rapidly evolving, and we may be subject to increasing regulations related to our use of these
technologies, including regulations related to privacy, data security, and intellectual property rights, which could expose us
to legal risks. AI models, particularly generative AI models, may produce incorrect, biased, or misleading results, expose confidential
information, or infringe on intellectual property rights. Further, we may rely on AI models developed by third parties, and, to
that extent, would be subject to additional risks, including limited oversight of how these models are developed and trained and
potential exposure to unauthorized data usage. If our AI models, or those developed by third parties, produce inaccurate or controversial
results, we could face legal liability, regulatory scrutiny, reputational harm, or operational inefficiencies. These risks could
negatively impact our business, financial results, and the perception of our security measures.

General
Risk Factors

Changes
in the Local Economy May Affect our Future Growth Possibilities. The Company’s success depends principally on the
general economic conditions of the primary market areas in which the Company operates. The local economic conditions in these
regions have a significant impact on the demand for the Company’s products and services, as well as the ability of the Company’s
customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding
sources. The Company’s market area is principally located in Hampden and Hampshire Counties, Massachusetts and Hartford
and Tolland Counties in Connecticut. The local economy may affect future growth possibilities. The Company’s future
growth opportunities depend on the growth and stability of our regional economy and the ability to expand in our market area.

Natural
Disasters, Acts of Terrorism, Public Health Issues and Other External Events Could Harm Our Business. Natural disasters
can disrupt our operations, result in damage to our properties, reduce or destroy the value of the collateral for our loans and
negatively affect the economies in which we operate, which could have a material adverse effect on our results of operations and
financial condition. The emergence of widespread health emergencies or pandemics, such as the spread of COVID-19, has and may
again lead to regional quarantines, business shutdowns, labor shortages, disruptions to supply chains, and overall economic instability.
Events such as these may become more common in the future and could cause significant damage such as disruptions to power and
communication services, impacting the stability of our facilities and result in additional expenses, impairing the ability of
our borrowers to repay outstanding loans or reducing the value of collateral securing the repayment of our loans, which could
result in the loss of revenue and/or cause us to incur additional expenses. A significant natural disaster, such as a tornado,
hurricane, earthquake, fire or flood, could have a material adverse impact on our ability to conduct business, and our insurance
coverage may be insufficient to compensate for losses that may occur. Acts of terrorism, war, civil unrest, violence or human
error could cause disruptions to our business or the economy as a whole. While we have established and regularly test disaster
recovery procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial
condition.

46

The
Company May Not be Able to Attract, Retain or Develop Key Personnel. The Company’s success depends, in large part,
on its ability to attract, retain and develop key personnel. Competition for the best people in most activities engaged in by
the Company can be intense, and the Company may not be able to hire or retain the key personnel that it depends upon for success.
The unexpected loss of key personnel or the inability to identify and develop individuals for planned succession to key senior
positions within management, or on the Board, could have a material adverse impact on the Company’s business because of
the loss of their skills, knowledge of the Company’s market, years of industry or business experience and the difficulty
of promptly finding qualified replacements.

Controls
and Procedures Could Fail, or Be Circumvented by Theft, Fraud or Robbery. Management regularly reviews and updates the
Company’s internal controls over financial reporting, corporate governance policies, compensation policies, Code of Business
Conduct and Ethics and security controls to prevent and detect theft, fraud or robbery from both internal and external sources.
Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable,
not absolute, assurances that the objectives of the system are met. Any failure or circumvention of the Company’s internal
controls and procedures, or failure to comply with regulations related to controls and procedures, or a physical theft or robbery,
whether by employees, management, directors, or external elements, or any illegal activity conducted by a Bank customer, could
result in loss of assets, regulatory actions against the Company, financial loss, damage the Company’s reputation, cause
a loss of customer business, and expose the Company to civil litigation and possible financial liability, any of which could have
a material adverse effect on the Company’s business, results of operations and financial condition.

Damage
to the Company’s Reputation Could Affect the Company’s Profitability and Shareholders’ Value. The Company
is dependent on its reputation within its market area, as a trusted and responsible financial company, for all aspects of its
business with customers, employees, vendors, third-party service providers, and others, with whom the Company conducts business
or potential future business. Any negative publicity or public complaints, whether real or perceived, disseminated by word of
mouth, by the general media, by electronic or social networking means, or by other methods, regarding, among other things, the
Company’s current or potential business practices or activities, cyber-security issues, regulatory compliance, an inability
to meet obligations, employees, management or directors’ ethical standards or actions, or about the banking industry in
general, could harm the Company’s reputation. Any damage to the Company’s reputation could affect its ability to retain
and develop the business relationships necessary to conduct business which in turn could negatively impact the Company’s
profitability and shareholders’ value.

There
has been a marked increase in the use of social media platforms, including weblogs (blogs), social media websites, and other forms
of Internet-based communications which allow individuals’ access to a broad audience of consumers and other interested persons.
Many social media platforms immediately publish the content their subscribers and participants’ post, often without filters
or checks on accuracy of the content posted. Information posted on such platforms at any time may be adverse to the Bank’s
interests and/or may be inaccurate. The dissemination of information online could harm the Bank’s business, prospects, financial
condition, and results of operations, regardless of the information’s accuracy. The harm may be immediate without affording
the Bank an opportunity for redress or correction.

Other
risks associated with the use of social media include improper disclosure of proprietary information, negative comments about
the Bank’s business, exposure of personally identifiable information, fraud, out-of-date information, and improper use by
employees, directors and customers. The inappropriate use of social media by the Bank’s customers, directors or employees
could result in negative consequences such as remediation costs including training for employees, additional regulatory scrutiny
and possible regulatory penalties, litigation, or negative publicity that could damage the Bank’s reputation adversely affecting
customer or investor confidence.

The
Company is Exposed to Legal Claims and Litigation. The Company is subject to legal challenges under a variety of circumstances
in the course of its normal business practices in regards to laws and regulations, duties, customer expectations of service levels,
in addition to potentially illegal activity (at a federal or state level) conducted by any of our customers, use of technology
and patents, operational practices and those of contracted third-party service providers and vendors, and stockholder matters,
among others. Regardless of the scope or the merits of any claims by potential or actual litigants, the Company may have to engage
in litigation that could be expensive, time-consuming, disruptive to the Company’s operations, and distracting to management.
Whether claims or legal action are founded or unfounded, if such claims and legal actions are not resolved in a manner favorable
to the Company, they may result in significant financial liability, damage the Company’s reputation, subject the Company
to additional regulatory scrutiny and restrictions, and/or adversely affect the market perception of our products and services,
as well as impact customer demand for those products and services. Any financial liability or reputation damage could have a material
adverse effect on the Company’s business, which in turn, could have a material adverse effect on the Company’s financial
condition and results of operations.

47

The
Company’s Insurance Coverage May Not be Adequate to Prevent Additional Liabilities or Expenses. The Company maintains
insurance policies that provide coverage for various risks at levels the Company deems adequate to provide reasonable coverage
for losses. The coverage applies to incidents and events which may impact such areas as: loss of bank facilities; accidental injury
or death of employees; injuries sustained on bank premises; cyber and technology attacks or breaches; loss of customer nonpublic
personal information; processing of fraudulent transactions; robberies, embezzlement and theft; improper processing of negotiable
items or electronic transactions; improper loan underwriting and perfection of collateral, among others. These policies will provide
varying degrees of coverage for losses under specific circumstances, and in most cases after related deductible amounts are paid
by the Company. However, there is no guarantee that the circumstance of an incident will meet the criteria for insurance coverage
under a specific policy, and despite the insurance policies in place the Company may experience a loss incident or event which
could have a material adverse effect on the Company’s business, reputation, financial condition and results of operations.

The
Trading Volume in the Company’s Common Stock is Less Than That of Larger Companies. Although the Company’s
common stock is listed for trading on the NASDAQ, the trading volume in the Company’s common stock is substantially less
than that of larger companies. Given the lower trading volume of the Company’s common stock, significant purchases or sales
of the Company’s common stock, or the expectation of such purchases or sales, could cause significant volatility in the
price for the Company’s common stock.

The
Market Price of the Company’s Common Stock May Fluctuate Significantly, and This May Make it Difficult for You to Resell
Shares of Common Stock Owned by You at Times or at Prices You Find Attractive. The price of the Company’s common
stock on the NASDAQ constantly changes. The Company expects that the market price of its
common stock will continue to fluctuate, and the Company cannot give you any assurances regarding any trends in the market prices
for its common stock.

The
Company’s stock price may fluctuate significantly as a result of a variety of factors, many of which are beyond its control.
These factors include, but are not limited to, the Company’s:

48

In
addition, the banking industry may be more affected than other industries by certain economic, credit, regulatory or information
security issues. Although the Company itself may or may not be directly impacted by such issues, the Company’s stock price
may vary due to the influence, both real and perceived, of these issues, among others, on the banking industry in general. Investment
in the Company’s stock is not insured against loss by the FDIC, or any other public or private entity. As a result, and
for the other reasons described in this “Risk Factors” section and elsewhere in this report, if you acquire our common
stock, you may lose some or all of your investment.

Shareholder
Dilution Could Occur if Additional Stock is Issued in the Future. If the Board should determine in the future that there
is a need to obtain additional capital through the issuance of additional shares of the Company’s common stock or securities
convertible into shares of common stock, such issuances could result in dilution to existing stockholders’ ownership interest.
Similarly, if the Board decides to grant additional stock awards or options for the purchase of shares of common stock, the issuance
of such additional stock awards and/or the issuance of additional shares upon the exercise of such options would expose stockholders
to dilution.

The
Company’s Financial Condition and Results of Operation Rely in Part on Management Estimates and Assumptions. In
preparing the financial statements in conformity with GAAP, management is required to exercise judgment in determining many of
the methodologies, estimates and assumptions to be utilized. These estimates and assumptions affect the reported values of assets
and liabilities at the balance sheet date and income and expenses for the years then ended. Changes in those estimates resulting
from continuing change in the economic environment and other factors will be reflected in the financial statements and results
of operations in future periods. As future events and their effects cannot be determined with precision, actual results could
differ significantly from these estimates and be adversely affected should the assumptions and estimates used be incorrect, or
change over time due to changes in circumstances.

49

business,
financial condition, results of operations and the market price of the Company’s common stock.

None.

Risk
Management & Strategy.

The
Company uses an enterprise risk management and financial framework to oversee its risks, including risks from cybersecurity incidents,
as further described below. The Company’s information technology & cybersecurity risk management is a continuous process
that includes identification, assessment, classification, and management of threats that could adversely impact our ability to
maintain the integrity of Bank data and systems, prevent unauthorized access to confidential data and Bank systems, and achieve
the Company’s operational, financial, legal and regulatory compliance requirements or objectives. Please see Item 1A. Risk
Factors – Risks Related to Cybersecurity and Data Privacy – “We Face Cybersecurity Risks and Risks Associated
With Security Breaches Which Have the Potential to Disrupt Our Operations, Cause Material Harm to Our Financial Condition, Result
in Misappropriation of Assets, Compromise Confidential Information and/or Damage Our Business Relationships and Can Provide No
Assurance That the Steps We and Our Service Providers Take in Response to These Risks Will Be Effective” for our disclosures
regarding the most pertinent risks we may experience from cybersecurity threats.

The
Bank has a management-level Strategic Technology Oversight Committee (the “TOC”). Members of the TOC include the Bank’s
Chief Operating Officer, Chief Risk Officer, Chief Information Officer, and the Information Security Officer (the “ISO”),
as well as representatives of each department, including Senior Officers and/or their designees. The TOC reviews the status of
various tactical and strategic projects; emerging technologies; cybersecurity, availability and performance metrics; audit results;
IT and Business Continuity policies; Business Continuity test results and IT & Cybersecurity Risk Assessment results to monitor
the extent of risk, evaluate the effectiveness of mitigating controls in place and ensure the level of risk remains within tolerance
through acceptance, or further mitigation, transfer or elimination of the risk.

Additionally,
the Bank has an Information Security Oversight and Metrics Committee (the “ISO Metrics Committee”) which meets on
a monthly basis with a focus on cybersecurity. Members of the ISO Metrics Committee include the ISO, the Chief Information Officer,
the Chief Risk Officer, as well as members of the information technology team involved with cybersecurity and infrastructure.
The function of the ISO Metrics Committee is to review monthly cybersecurity metrics to support discussion of cyber threats, cyber
risk trends, and risk mitigation as well as to participate in an annual tabletop business disruption exercise to assess the Bank’s
resilience and readiness should such an event occur.

All
employees participate in cybersecurity and social engineering training. The Board also receives formal training annually. The
Bank conducts social engineering tests for employees, including Senior Management, on relevant topics, such as phishing, smishing
and deepfakes, throughout the year. We consider employee awareness and training to be a critical component of the Bank’s
cybersecurity program and celebrate employees who exemplify strong situational awareness and defense against cyber threats.

Third-party
relationships, including vendor relationships, can offer the Bank a variety of opportunities to enhance its product and servicing
offerings along with facilitating operational functions or business activities. Outsourcing processes or functions does not diminish
the Bank’s responsibility to ensure that the third-party activity is conducted in a safe and sound manner and in compliance
with applicable laws, regulations, and internal policies. Oversight for the potential risks of third-party relationships lies
with the Bank’s management and the Board.

The
Bank maintains a third-party risk management oversight program to effectively assess, measure, monitor and manage the risks associated
with vendor relationships. The Bank manages its third-party relationships through the use of informed risk assessments, due-diligence
reviews, and ongoing oversight and monitoring. Information security and cybersecurity risks are included as elements in the third-party
risk management process and are assessed for vendor relationships with access to confidential Bank or customer data.

50

The
Bank uses industry standard assessment frameworks as part of its overall cybersecurity risk assessment. Industry standard assessment
frameworks are used to evaluate the effectiveness of the Bank’s mitigating controls and support initiatives to achieve continuous
improvements in the efficacy of the control environment. The Bank’s TOC and Enterprise Risk Management framework provide
ongoing oversight and governance of technology and cybersecurity risk management activities to ensure alignment with the Bank’s
risk appetite. Independent audits are performed periodically to review the Bank’s mitigating controls as well as to conduct
penetration testing of the Bank’s internal and external systems to help assess the effectiveness of the Bank’s security
controls. Additionally, on an annual basis, an independent auditor tests our employees’ awareness of and resilience to various
social engineering tactics to provide independent verification and to augment the Bank’s internal testing. Results of the
audits are reported through the Bank’s Audit Committee, and ultimately to the Bank’s Board.

The
Bank also has a relationship with a third-party Security Operations Center that provides continuous monitoring of all traffic
in our environment for anomalies as well as services, as needed, to assist in conducting forensic analysis, correlation and remediation
activities for any potential indications of compromise.

Governance.

The
Finance and Risk Management Committee is a standing committee of the Board formed in January 2014 to assist the Board and the
Executive Committee of the Board in fulfilling their responsibility with respect to the oversight of the Company’s (1) enterprise
risk management and financial framework, including all risks associated therewith, including risks related to cyber incidents
and (2) policies and practices relating to financial matters, including but not limited to, capital, liquidity and financing,
as well as to merger, acquisition and divestiture activity. The Finance and Risk Management Committee reports to the Board regarding
the Company’s risk profile, as well as its enterprise risk management framework, including the significant policies and
practices employed to manage such risks, as well as the overall adequacy of the enterprise risk management function.

Material
risks and results from any industry standard risk assessments parties, including any recommendations to further mitigate, transfer
or eliminate risks, if applicable, are reported annually to the TOC, as well as to the Board’s Finance and Risk Management
Committee, who then reports the results to the Bank’s Board. Further, these results are included in the Board’s annual
Information Security Program Report.

Technology
and cybersecurity risk metrics are two of the Bank’s primary categorical risks defined in the Bank’s enterprise risk
management framework. The Enterprise Risk Management Dashboard, which includes ongoing monitoring of current and emerging technology
and cybersecurity risks, is presented to the Finance and Risk Management Committee and to the Bank’s Board on a tri-annual
basis. In addition, reports on the monitoring of third-party relationships, particularly critical relationships, are presented
to the Finance and Risk Management Committee.

The
Bank’s Board, through the Finance and Risk Management Committee, has oversight of cybersecurity incident disclosures, if
applicable. The Finance and Risk Management Committee shall annually review with Management the Company’s Business Continuity
Plan (the “BCP”), the BCP Policy, BCP testing results and the Company’s Pandemic Plan and Cyber Incident Response
Plan and programs, including materiality determination criteria and escalation protocols with respect to the prompt reporting
of material cyber incidents to the Finance and Risk Management Committee and the Bank’s Board. The Finance and Risk Management
Committee shall further review with Management and report to the Bank’s Board any cyber incident disclosure reports to or
from regulators with respect thereto, and the root cause and remediation and enhancement efforts with respect thereto.

The
Bank’s Information Technology team (the “IT Team”) is comprised of professionals with technology certifications,
or Associate, Bachelor’s or Master’s degrees across business, technology and cybersecurity disciplines. The IT Team
maintains and enhances its technical expertise through ongoing participation in business, technology, and cybersecurity training
programs, including certifications focused on emerging technologies and evolving cyber-risk practices.

The
IT leadership team, consisting of Assistant Vice Presidents and above, bring extensive technical experience primarily aligned
with the financial services industry. The Bank’s ISO holds the Certified Cyber Crimes Investigator designation from the
International Association of Financial Crimes Investigators and completes ongoing cybersecurity-related continuing education to
support improving the Bank’s information security posture.

51