What changed in this filing

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Item 1. Business

2025-03-07 compared with 2024-03-28 · 363 added, 319 removed, 648 unchanged (51% of the section changed)

FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning.

This Annual Report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “could,” “potential,” “target” and words of similar meaning.

These forward-looking statements include, but are not limited to:

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The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

● general economic conditions, either nationally or in our market areas, that are worse than expected including as a result of employment levels and labor shortages, and the effects of inflation, a potential recession or slowed economic growth caused by supply chain disruptions or otherwise;

● inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments, including our mortgage servicing rights asset, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

● changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

● general economic conditions, either nationally or in our market areas, including as a result of employment levels and labor shortages, and the effects of inflation, a potential recession or slowed economic growth caused by supply chain disruptions or otherwise;

● inflation and changes in the interest rate environment that reduce margins and yields, our mortgage banking revenues, the fair value of financial instruments, including our mortgage servicing rights asset, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

● the possibility that future credit losses, loan defaults and charge-off rates are higher than expected due to changes in economic conditions or adverse economic developments;

● changes in the level and direction of loan delinquencies and changes in assumptions and estimates of the adequacy of the allowance for credit losses;

● the effect of any change in federal government enforcement of federal laws affecting the cannabis industry;

● changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;

● our ability to access cost-effective funding;

● our ability to access cost-effective funding timely;

● fluctuations in real estate values and both residential and commercial real estate market conditions;

● demand for loans and deposits in our market area;

● demand for loans and deposits in our market areas;

● our ability to implement and change our business strategies;

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● changes in the financial condition, results of operations or future prospects of issuers of securities that we own;

● turbulence in the capital and debt markets and within the banking industry;

● changes in assumptions used in making such forward-looking statements;

● other risks and uncertainties detailed in Part I, Item 1A “Risk Factors” of this Annual Report on Form 10-K.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Please see “Risk Factors” beginning on page 36.

In this Annual Report the terms “we,” “our,” and “us” refer to NB Bancorp, Inc.

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The shares of the Company’s common stock sold in the offering began trading on The Nasdaq Capital Market on December 28, 2023 under the symbol “NBBK.”

Since being incorporated, other than holding the common stock of Needham Bank, retaining approximately 50% of the net cash proceeds of the stock conversion offering and making a loan to the Bank’s employee stock ownership plan, we have not engaged in any material business activities to date.

Our cash flow depends on earnings from the investment of the net proceeds we retained from our initial public stock offering that was consummated on December 27, 2023, and any dividends we receive from Needham Bank.

We neither own nor lease any property, but pay a fee to Needham Bank for the use of its premises, equipment and furniture.

At the present time, we employ only persons who are officers of Needham Bank who also serve as officers of NB Bancorp.

We use the support staff of Needham Bank from time to time and pay a fee to Needham Bank for the time devoted to NB Bancorp by employees of Needham Bank.

However, these persons are not separately compensated by NB Bancorp.

NB Bancorp may hire additional employees, as appropriate, to the extent it expands its business in the future.

Since being incorporated, other than holding the common stock of the Bank, the Company has not engaged in any material business activities to date.

We neither own nor lease any property.

At the present time, we employ only persons who are officers of the Bank who also serve as officers of the Company.

We use the support staff of the Bank from time to time and pay a fee to the Bank for the time devoted to the Company by employees of the Bank.

However, these persons are not separately compensated by the Company.

The Company may hire additional employees, as appropriate, to the extent it expands its business in the future.

Our executive offices are located at 1063 Great Plain Avenue, Needham, Massachusetts 02492.

Our telephone number at this address is (781) 444-2100.

Our website address is www.needhambank.com .

Information on our website is not incorporated into this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.

BUSINESS OF NEEDHAM BANK

Needham Bank is a Massachusetts-chartered cooperative bank headquartered in Needham, Massachusetts.

Needham Bank was organized in 1892 and has operated continuously in Needham, Massachusetts, which is approximately 17 miles southwest of Boston’s financial district, since this time.

The Bank is a Massachusetts-chartered cooperative bank headquartered in Needham, Massachusetts.

The Bank was organized in 1892 and has operated continuously in Needham, Massachusetts, which is approximately 17 miles southwest of Boston’s financial district, since this time.

Our headquarters are still located in Needham, and we have branch locations in Wellesley, Westwood, Dedham, Medfield, Medford, Dover, Ashland, Millis, Natick and Boston (Mission Hill).

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To a lesser extent, we originate home equity loans and lines of credit.

At December 31, 2023, our total loan portfolio was comprised of $1.38 billion, or 35.5%, of commercial real estate and multifamily loans, $1.10 billion, or 28.2%, of one- to four-family residential real estate loans, $622.7 million, or 16.0%, of construction and land development loans, and $487.9 million, or 12.5%, of commercial and industrial loans.

At December 31, 2024, our total loan portfolio was comprised of $1.70 billion, or 39.1%, of commercial real estate and multifamily loans, $1.25 billion, or 28.9%, of one-to-four-family residential real estate loans and home equity loans, $583.8 million, or 13.5%, of construction and land development loans, and $559.8 million, or 12.9%, of commercial and industrial loans.

We also invest in securities, consisting primarily of U.S.

Treasury and federal agency securities, municipal bonds and corporate bonds.

Treasury and federal agency securities, mortgage-backed securities and corporate bonds.

We offer a variety of deposit accounts, including certificate of deposit accounts, IRAs, money market accounts, savings accounts, demand deposit accounts and interest-bearing and noninterest-bearing checking accounts.

We historically have utilized advances from the Federal Home Loan Bank of Boston (“FHLB”) to fund our operations and we had $283.3 million of FHLB advances at

December 31, 2023.

Historically, we have utilized advances from the Federal Home Loan Bank of Boston (“FHLB”) to fund our operations and we had $120.8 million of FHLB advances at December 31, 2024.

Additionally, in recent years, we have also utilized brokered deposits as a non-retail funding source to fund our operations and at December 31, 2024, we had $309.8 million of brokered deposits.

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It is also regulated by Federal Deposit Insurance Corporation (the “FDIC”) as its primary insurer of its deposits.

Our executive offices are located at 1063 Great Plain Avenue, Needham, Massachusetts 02492.

Our telephone number at this address is (781) 444-2100.

Our website address is www.needhambank.com .

Information on our website is not incorporated into this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.

Business Strategy

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Additional investments have been made to continually strengthen cybersecurity controls, such as with expanded vulnerability detection and patch management protocols.

The acquisition of our cannabis-related and money service banking businesses resulted in the addition of $297.7 million of core deposits in April 2022 and we believe our significant investment in these cash management products has allowed us to capture and service the full banking relationships for these and our other Structured Finance customer relationships.

We have invested in systems to automate compliance with cannabis-related regulatory requirements and guidance.

Investments in tools have been completed to further automate compliance with state-specific and federal regulatory requirements for cannabis banking and consumer lending activities.

We are also implementing a Marketing Customer Information File and Customer Relationship Management system to improve communication, collaboration and the customer experience.

We also implemented a Marketing Customer Information File and Customer Relationship Management system to improve communication, collaboration and the customer experience.

In recent years, we have focused on building an experienced management team and diversifying and enhancing our operating and business strategy.

In January 2017, we hired Joseph Campanelli as our Chief Executive Officer, and in April 2017, we hired Salvatore Rinaldi, our Chief Operating Officer.

Campanelli and Rinaldi each have more than 40 years of banking experience at larger, more complex financial institutions.

They have worked together for over 40 years at other financial institutions prior to joining Needham Bank successfully executing similar strategies.

In January 2017, we hired Joseph Campanelli as our Chief Executive Officer.

Campanelli has more than 40 years of banking experience at larger, more complex financial institutions and has executed similar strategies.

In February 2024, we hired JP Lapointe, our Chief Financial Officer.

Lapointe has more than 20 years of combined banking and bank audit experience.

Under their leadership, the Bank has implemented an intentional and structured growth plan to enable the Bank to grow its balance sheet and diversify its operations and offer a personalized banking experience to individuals and businesses while seeking to address the risks inherent with such growth.

Since 2020, the Bank added approximately 102 full time employees, including approximately 23 employees in connection with the April 2022 acquisition of a cannabis banking business from another financial institution.

During the year ended December 31, 2024, the Bank added approximately 34 additional full-time employees.

Consistent with our strategy to continue to service individuals and small businesses in our market area, while also competing for larger business customers, the Bank has made significant investments in infrastructure, upgraded technology solutions and offerings, and compliance and risk management.

Following a comprehensive strategic review of the Company’s governance structure, in May 2023, we added four new board members, and in July 2023 added a fifth new director, each of whom individually, and together as a group, we believe bring a level of business acumen and sophistication that matches our growth strategy.

The proceeds from our initial stock offering which we consummated in December 2023 will enable us to continue to implement our prudent and disciplined growth strategy.

We plan to employ the following strategies to maximize sustainable profitability:

Following a comprehensive strategic review of the Company’s governance structure, during the year ended December 31, 2023, we added five new board members, and during the year ended December 31, 2024 we added a sixth new director, each of whom individually, and together as a group, we believe bring a level of business acumen and sophistication that matches our growth strategy.

The proceeds from our initial stock offering which we consummated in December 2023 have and will enable us to continue to implement our prudent and disciplined growth strategy.

We have employed the following strategies to maximize sustainable profitability:

● Continue to moderately grow our commercial real estate and multifamily loan portfolio.

In recent years, we have increased our commercial real estate and multifamily loan portfolio consistent with safe and sound underwriting practices.

This has had the benefit of increasing the yield on our loan portfolio

while reducing the average term to repricing of our loans.

At December 31, 2023, our commercial real estate and multifamily loan portfolio totaled $1.38 billion, or 35.5% of our total loan portfolio, compared with $1.01 billion, or 33.6% of total loans, at December 31, 2022.

We intend to continue to compete for more relationships, primarily to experienced seasoned builders, developers and investors in our market area.

This has the benefit of increasing the yield on our loan portfolio while reducing the average term to repricing of our loans.

At December 31, 2024, our commercial real estate and multifamily loan portfolio totaled $1.70 billion, or 39.1% of our total loan portfolio, compared with $1.38 billion, or 35.4% of our total loan portfolio, at December 31, 2023.

We intend to continue to compete for more of these types of relationships, primarily to experienced seasoned builders, developers and investors in our market area.

● Continue to diversify our commercial and industrial loan portfolio.

We have diversified our commercial and industrial loan portfolio into three divisions, which we refer to as Small Business, Middle Market and Structured Finance.

The Small Business Lending division generally focuses on loans under the Small Business Administration (the “SBA”) programs of up to $5 million and traditional non-small SBA commercial business relationships with businesses who generate up to $10 million in revenue, and our Middle Market division generally focuses on relationships with businesses who have annual revenues from $10 million to $50 million, nearly all of which are to borrowers in our primary market area.

Our Middle Market division generally focuses on relationships with businesses that have annual revenues from $10 million to $50 million, nearly all of which are to borrowers in our primary market area.

Our Structured Finance division seeks to service the banking needs of larger business customers, typically with greater than $50 million in annual revenues, throughout a variety of industries, including manufacturers, service companies, renewable energy providers, commercial finance companies, and cannabis-related entities.

We believe that our industry-specific knowledge about the banking needs of these industries gives us a competitive advantage to service these customers.

We intend to continue to emphasize growth in each of these divisions of our commercial and industrial lending.

We intend to continue to emphasize growth in each of these divisions of our commercial and industrial lending, with a measured approach to cannabis-related entities.

● Continue our historical emphasis on residential mortgage lending, including construction of single-family homes.

Historically, we have emphasized residential mortgage lending, including for the construction of single-family homes, and at December 31, 2023, one- to four-family residential real estate loans totaled $1.10 billion, or 28.2% of our total loan portfolio.

Historically, we have emphasized residential mortgage lending, including for the construction of single-family homes, and at December 31, 2024, one-to-four-family residential real estate loans totaled $1.13 billion, or 26.1% of our total loan portfolio, compared with $1.10 billion, or 28.2% of our total loan portfolio, at December 31, 2023.

We intend to continue measured, efficient growth of these types of residential lending.

● Grow our consumer loan operations.

We seek to continue our growth in consumer loan operations, and in 2022, we purchased a variety of consumer loans from a third-party originator.

● Modestly grow our consumer loan portfolio.

In 2022, 2023 and 2024, we purchased a variety of consumer loans from several third-party originators.

Largely as a result of these purchases, at December 31, 2024, consumer loans totaled $244.6 million, or 5.6% of our total loan portfolio, compared to $204.9 million, or 5.3% of our total loan portfolio, at December 31, 2023.

Going forward, we intend to continue to emphasize the modest growth in our consumer loan portfolio through ongoing originations and purchases from two limited-flow arrangements.

Going forward, we intend to continue to emphasize the modest growth in our consumer loan portfolio through selective ongoing originations and purchases.

We believe that this loan diversification will allow us to continue to execute our business strategy of growing the Bank while addressing the inherent risks of community banking, including the risk of geographic concentrations in our loan portfolios.

The diversification of our loan products allows us to address risk across a wider variety of borrowers and industries as well as the ongoing management of these portfolios to minimize our exposure to interest rate risk.

● Diversify our deposit gathering.

● Diversify and focus on deposit gathering.

Consistent with our strategy to grow core deposits, which we consider to be all deposits including certificates of deposits, other than brokered deposits, we have invested in a cash management suite of products and enhanced our online and mobile banking offerings, as well as fraud prevention and detection systems.

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We view the growth of commercial and industrial lending, in each of our market segments, as an opportunity to increase our core deposits through our effort to capture the full banking relationship of these commercial customers.

Reflecting our focus on our community, in connection with our mutual to stock conversion and initial public offering which closed in December 2023, we established a charitable foundation called Needham Bank Charitable Foundation and funded it with $2.0 million in cash and 1,708,229 shares of our common stock, for a total contribution of $19.1 million based on the $10.00 per share offering price.

Reflecting our focus on our community, in connection with our mutual to stock conversion and initial public offering which closed in December 2023, we established a charitable foundation called Needham Bank Charitable Foundation (the “Foundation”) and funded it with $2.0 million in cash and 1,708,229 shares of our common stock, for a total contribution of $19.1 million based on the $10.00 per share offering price.

The purpose of this foundation is to make contributions to support various charitable organizations operating in our community now and in the future.

During the year ended December 31, 2024, the Foundation made $1.3 million in contributions to local non-profit charities and organizations.

We consider our primary market area to be any counties, towns or municipalities within a 100-mile radius of Needham, which generally covers the Greater Boston metropolitan area as well as surrounding communities in Massachusetts, eastern Connecticut, southern New Hampshire and Rhode Island.

We will consider commercial and residential real estate opportunities outside of this market area, but these are generally to customers with whom we have an existing relationship and who have a presence within our primary market area.

We also have industry-specific and structured commercial and industrial relationships to cannabis, wind and solar companies based on our underlying diligence and understanding of the specific operations outside of our primary market area.

We also have industry-specific and structured commercial and industrial relationships to cannabis and solar companies and bridge financing based on our underlying diligence and understanding of the specific operations outside of our primary market area.

The Greater Boston metropolitan area benefits from the presence of numerous institutions of higher learning, medical care and research centers and the corporate headquarters of several significant multinational corporations.

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Located adjacent to major transportation corridors, the Greater Boston metropolitan area provides a highly diversified economic base, with major employment sectors ranging from services, manufacturing and wholesale/retail trade, to finance, technology and medical care.

According to the United States Department of Labor, in March 2023, the Boston-Cambridge-Newton, Massachusetts area had an estimated unemployment rate of 3.2%, compared to a Massachusetts state unemployment rate of 3.5% and the national unemployment rate of 3.5%.

According to the United States Department of Labor, in December 2024, the Boston-Cambridge-Newton, Massachusetts area had an estimated unemployment rate of 3.7%, compared to a Massachusetts state unemployment rate of 4.1% and the national unemployment rate of 4.1%.

Based on the Census’ estimates, from 2020 to 2023, the populations of Boston–Cambridge–Newton, MA–NH Metropolitan Statistical Area (“MSA”) decreased 0.51%, compared to a 0.05% increase for the Commonwealth of Massachusetts.

At July 2023, the Census estimates that the Boston–Cambridge–Newton, MA–NH MSA’s median household incomes was $110,697, compared to median household income of $94,755 for the city of Boston, $99,858 for the Commonwealth of Massachusetts, and $77,719 for the United States.

We face significant competition within our market both in making loans and attracting deposits.

We face significant competition within our market both in originating loans and attracting deposits.

Our market area has a high concentration of financial institutions, including large money center and regional banks, community banks, credit unions and other non-bank financial service providers.

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We expect to continue to emphasize originations of larger structured finance credit facilities.

In recent years, most of our larger, structured commercial and industrial loans have been to customers in the cannabis, wind or solar industries.

In recent years, most of our larger, structured commercial and industrial loans have been to customers in the cannabis or solar industries and bridge financing.

Our competition in this business sector is broad-based and not dominated by any specific larger or more well-established competitors.

Changing legislation and government policy with respect to these industries could increase competition even further on a jurisdictional or industry-specific basis.

We do not believe that our ability to compete is dependent on our existing relationships in these areas but we believe our experience could provide a competitive

advantage versus lenders who enter these business lines in the future.

We do not believe that our ability to compete is dependent on our existing relationships in these areas but we believe our experience could provide a competitive advantage versus lenders who enter these business lines in the future.

We intend to continue to compete effectively in these areas by utilizing our knowledge of the operating and cash flow structures of these industries, as well as the applicable regulatory considerations.

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To a lesser extent, we also originate home equity loans and lines of credit.

Subject to market conditions and our asset-liability analysis, we expect to continue to grow each of our loan portfolios with the most significant emphasis of growth in commercial real estate and multifamily loans, commercial and industrial loans and consumer loans.

From time to time and subject to market conditions, we have also originated for sale and sold a portion of our long-term, fixed-rate one- to four-family residential real estate loans, on a servicing-retained, limited or no recourse basis, while retaining shorter-term fixed-rate and adjustable-rate one- to four-family residential real estate loans in order to manage the duration and time to repricing of our loan portfolio.

Historically, we have also engaged in loan participation sales, with Needham Bank as the lead, for certain larger commercial real estate and commercial and industrial loans and have limited purchased participations from well-established financial institutions in our market area.

Subject to market conditions and our asset-liability management, we expect to continue to grow each of our loan portfolios with the most significant emphasis on growth in commercial real estate and multifamily loans and commercial and industrial loans.

From time to time and subject to market conditions, we have also originated for sale and sold a portion of our long-term, fixed-rate, one-to-four-family residential real estate loans, on a servicing-retained, limited or no recourse basis, while retaining shorter-term fixed-rate and adjustable-rate one-to four family residential real estate loans in order to manage the interest rate risk and duration of our loan portfolio.

Historically, we have also engaged in loan participation sales, with Needham Bank as the lead, for certain larger commercial real estate and commercial and industrial loans and have purchased participations from well-established financial institutions in our market area.

Participations and counterparty exposure is periodically reported to the board of directors.

At December 31, 2023, our highest combined participations sold with one bank was approximately 9.3% of our total capital and was comprised of three commercial real estate loans.

At December 31, 2024, our highest combined participations sold with one bank was approximately 14.2% of our total capital and was comprised of four commercial real estate loans, three construction and land development loans and one commercial and industrial loan.

At December 31, 2024, our highest combined participations purchased with one bank was approximately 7.8% of our total capital and was comprised of one commercial real estate loan and one multi-family residential loan.

Loan Portfolio Composition.

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Contractual Maturities.

The following tables set forth the contractual maturities of our total loan portfolio at December 31, 2023.

The following tables set forth the contractual maturities of our loan portfolio at December 31, 2024.

Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less.

Residential real estate includes one-to four-family residential and home equity loans and commercial real estate includes commercial real estate and multi-family residential loans in the table below.

The tables present contractual maturities and do not reflect repricing or the effect of prepayments.

Actual maturities may differ.

One-to-Four-Family

Construction and

Commercial and

(Dollars in thousands)

Land Development

Amounts due in:

(in thousands)

One year or less

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The following table sets forth our fixed- and adjustable-rate loans at December 31, 2024 that are contractually due after December 31, 2025:

(Dollars in thousands)

As of December 31, 2024

(in thousands)

One-to-four-family residential

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See “Originations, Sales and Purchases of Loans.”

Our one- to four-family residential real estate loans are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed- and adjustable-rate one- to four-family residential real estate loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency (“FHFA”).

Our one-to-four-family residential real estate loans are generally underwritten according to Fannie Mae guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed- and adjustable-rate one-to-four-family residential real estate loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency (“FHFA”), which was $766,550 as of December 31, 2024.

We also originate loans above the FHFA limit, which are referred to as “jumbo loans.” We generally underwrite jumbo loans in a manner similar to conforming loans and at December 31, 2024, approximately $583.8 million, or 51.6%, of our one-to-four-family residential real estate loans were jumbo loans with an average balance of $1.4 million.

Our fixed-rate one- to four-family residential real estate loans are originated with terms of up to 30 years and our and adjustable-rate one- to four-family residential real estate loans are originated with terms of up to 40 years.

Our fixed-rate one-to-four-family residential real estate loans are originated with terms of up to 30 years and our adjustable-rate one-to-four-family residential real estate loans are originated with terms of up to 40 years.

At December 31, 2024, $549.6 million, or 48.6%, of our one-to-four-family residential real estate loans were fixed-rate loans.

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We determine whether a borrower qualifies for an adjustable-rate mortgage loan based on our lending policy.

We originate conventional one- to four-family residential mortgage loans with loan-to-value ratios of up to 95% without private mortgage insurance.

We also originate loans with loan-to-value ratios of up to 97% for loans that are sold and serviced by MassHousing, an independent, quasi-public Massachusetts agency charged with providing financing for affordable housing in Massachusetts or under our First-Time Homebuyer Program.

We originate conventional one-to-four-family residential real estate loans with loan-to-value ratios of up to 95% without private mortgage insurance.

We also originate one-to-four-family residential real estate loans with loan-to-value ratios of up to 97% for loans that are sold and serviced by MassHousing, an independent, quasi-public Massachusetts agency charged with providing financing for affordable housing in Massachusetts or under our First-Time Homebuyer Program.

From time to time and subject to market conditions, we sell a portion of the fixed-rate one-to-four-family residential real estate loans that we originate with terms of greater than 20 years.

We base the amount of fixed-rate loans that we sell on our liquidity needs, asset/liability mix, loan volume, portfolio size and other factors.

In recent years, most of the loans that we originated and sold to the secondary market were sold with servicing retained.

We generally do not offer “interest-only” mortgage loans on one- to four-family residential real estate loans nor do we offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan.

We base the amount of fixed-rate one-to-four-family residential real estate loans that we sell on our liquidity needs, asset/liability mix, loan volume, portfolio size and other factors.

In recent years, most of the one-to-four-family residential real estate loans that we originated and sold to the secondary market were sold with servicing retained.

We generally do not offer “interest-only” loans on one-to-four-family residential real estate loans nor do we offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan.

Additionally, we do not offer “subprime loans” (loans that are made with low down-payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios).

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Our one-to-four-family residential real estate loans do not currently include prepayment penalties, are non-assumable and do not produce negative amortization.

Our one- to four-family residential mortgage loans customarily include “due-on-sale” clauses giving us the right to declare the loan immediately due and payable in the event that, among other things, the borrower sells the property subject to the mortgage.

Our one-to-four-family residential real estate loans customarily include “due-on-sale” clauses giving us the right to declare the loan immediately due and payable in the event that, among other things, the borrower sells the property subject to the mortgage.

All borrowers are required to obtain title insurance.

We also require homeowner’s insurance and fire and casualty insurance and, where circumstances warrant, flood insurance on properties securing real estate loans.

We also require homeowner’s insurance and fire and casualty insurance and, where circumstances warrant, flood insurance on properties securing one-to-four-family residential real estate loans.

We offer one-to-four-family residential real estate loans secured by non-owner-occupied properties.

Generally, we will not make loans in excess of 80.0% loan to value on non-owner-occupied one- to four-family residential real estate properties or in excess of 80.0% on single family non-owner occupied residential real estate properties.

Generally, we will not make loans in excess of 80.0% loan-to-value on non-owner-occupied one-to-four-family residential real estate properties or in excess of 80.0% on single family non-owner occupied one-to-four-family residential real estate properties.

Home Equity Loans and Lines of Credit .

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When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs.

However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid loan and we may be unsuccessful in recovering the remaining balance from those customers.

However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid loan and we may be unsuccessful in recovering the remaining balance from those borrowers.

Particularly with respect to our home equity loans and lines of credit, decreases in real estate values could adversely affect our ability to fully recover the loan balance in the event of a default.

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All of our commercial real estate and multifamily real estate loans are subject to our underwriting procedures and guidelines.

Although our commercial real estate and multifamily loans are made to a diversified pool of unrelated borrowers across numerous businesses, adverse developments in our market area could have an adverse impact on this portfolio of loans and the Company’s income and financial position.

The federal banking agencies (the “Agencies”) issued guidance in 2006 (the “Guidance”) which addresses institutions with increased concentrations of commercial real estate (“CRE”) loans.

The Guidance does not establish specific CRE lending limits;

but 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 the 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.

As discussed under “CRE Concentration Assessments,” 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 one-to-four-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 the Guidance are loans secured by nonfarm nonresidential properties where 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.

As 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 supervisory criteria may be identified for further supervisory analysis of the level and nature of its CRE concentration risk.

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, 2024, construction, land development and other land loans, as defined by the Guidance, represented 71.5% of consolidated risk-based capital.

Total commercial real estate loans, as defined by the Agency Guidance, represented 201.3% of consolidated risk-based capital.

During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio as defined by the Agency Guidance, by 71.0%.

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 Board of Directors has established internal maximum limits on CRE to better manage and control the exposure to property classes during periods of changing economic conditions.

The Board of Directors 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 an underwriting team that is independent of the originating lender(s).

The underwriting analysis of commercial real estate loans includes pre-origination sensitivity analysis utilizing portfolio stress testing methods to fully understand the potential exposure before we originate the credit.

Once originated, each loan receives ongoing quarterly stress tests to evaluate the risk profile over the life of the credit.

At December 31, 2024, our 25 largest commercial real estate lending relationships had an average balance of approximately $35.3 million, or approximately $883.3 million in the aggregate, representing 52.1% of our total commercial real estate loans at such date.

Consistent with our internal policies, any borrowing relationship with aggregate exposure of greater than $55.0 million requires approval by the board of directors and at such date we had nine such relationships in excess of $55.0 million, which were comprised of commercial real estate and multifamily, and construction and land development loans.

At December 31, 2023, each of the commercial real estate loans underlying our 25 largest commercial real estate relationships was performing in accordance with its repayment terms.

Consistent with our internal policies, any borrowing relationship with aggregate exposure of greater than $55.0 million requires approval by the board of directors and at such date we had eleven such relationships in excess of $55.0 million, which were comprised of commercial real estate and multifamily, construction and land development and commercial and industrial loans.

At December 31, 2024, each of the commercial real estate loans underlying our 25 largest commercial real estate relationships was performing in accordance with its repayment terms excluding one commercial real estate participation loan that experienced a $4.0 million charge-off during the year ended December 31, 2024 and has a remaining outstanding loan balance of $2.2 million as of December 31, 2024.

The total relationship balance was $24.0 million, or 1.4%, of total commercial real estate loans as of December 31, 2024.

We consider a number of factors in originating commercial real estate and multifamily loans.

We evaluate the qualifications and financial condition of the borrower (including credit history), profitability and expertise, as well as the value and condition of the mortgaged property securing the loan.

When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and

the borrower’s payment history with us and other financial institutions.

When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions.

In evaluating the property securing the loan, among other factors, we consider the net operating income of the mortgaged property before debt service and depreciation, the debt service coverage ratio (the ratio of net operating income to debt service) to ensure that, subject to certain exceptions, it is at least 1.20x for multifamily loans and 1.25x for commercial real estate loans, and the ratio of the loan amount to the appraised value of the mortgaged property.

Our commercial real estate and multifamily loans are appraised by outside independent and qualified appraisers that are duly approved in accordance with Needham Bank policy.

Our commercial real estate and multifamily loans are appraised by outside independent and qualified appraisers that are duly approved in accordance with Bank policy.

Personal guarantees are often obtained from commercial real estate borrowers.

Each borrower’s financial information on such loans is monitored on an ongoing basis by requiring periodic financial statement updates.

Our loans-to-one borrower limit is 20% of our capital, which limit was $125.8 million at December 31, 2023.

We believe that our commercial real estate loan portfolio composition is relatively diversified in terms of industry sectors, property types and various lending specialties.

We believe that our commercial real estate and multifamily loan portfolio composition is relatively diversified in terms of industry sectors, property types and various lending specialties.

As of December 31, 2024, the amortized cost balances of concentrations in our commercial real estate loan portfolio, including multi-family loans, were as follows:

Commercial Real Estate

As of December 31, 2024

Owner-Occupied

Non-Owner-Occupied

(Dollars in thousands)

Cannabis Facility

Special Purpose

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Construction loans are generally limited to 80% (75% for investment properties) loan-to-completed-appraised-value ratio upon completion of the project.

Land development loans which are approved for development are limited to 75%, and not yet approved for development land loans, are limited to 65% loan to completed appraised value.

Land development loans which are approved for development are limited to 75%, and not yet approved for development land loans, are limited to 65% as-is appraised value.

Before making a commitment to fund a construction loan, we require an appraisal of the property by an independent licensed appraiser.

We also generally require inspections of the property before disbursements of funds during the term of the construction loan.

At December 31, 2023, our 25 largest construction and land development loan relationships had an average balance of approximately $17.0 million, or approximately $425.8 million in the aggregate, representing 68.4% of our total construction and land development loans at such date.

At December 31, 2024, our 25 largest construction and land development loan relationships had an average balance of approximately $17.4 million, or approximately $435.9 million in the aggregate, representing 74.7% of our total construction and land development loans.

Consistent with our internal policies, any borrowing relationship with aggregate exposure of greater than $55.0 million requires approval by the board of directors and at such date we had eleven such relationships in excess of $55.0 million, which were comprised of commercial real estate and multifamily, construction and land development and commercial and industrial loans.

At December 31, 2024, each of the construction and land development loans underlying our 25 largest construction and land development loan relationships was performing in accordance with its repayment terms.

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Small Business, Middle Market and Structured Finance.

The Small Business division generally focuses on loans under SBA programs of up to $5 million and non-SBA commercial business relationships with businesses who have annual revenues up to $10 million.

The Small Business division generally focuses on loans under Small Business Administration (“SBA”) programs of up to $5 million and non-SBA commercial business relationships with businesses who have annual revenues up to $10 million.

SBA product offerings include SBA 7(a) Loans, SBA Express Lines of Credit, 504 Loans, and Massachusetts Capital Access Program.

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Our Structured Finance division generally focuses on relationships with businesses with greater than $50 million in annual revenues and which may contain unique attributes to certain industries.

In recent years, most of these larger, structured commercial and industrial loans have been to customers in the cannabis, wind or solar industries.

In recent years, most of these larger, structured commercial and industrial loans have been to customers in the cannabis or solar industries and bridge financing.

These industries may be subject to heightened regulatory or business risks, and we believe our knowledge of the operating and cash flow structures of these industries, as well as the applicable regulatory considerations, enable us to offer competitive credit facility solutions to these customers while maintaining our prudent underwriting standards consistent with our Small Business and Middle Market lending divisions.

Generally, our Structured Finance loans are collateralized by the borrower’s real estate and not by operating equipment which is harder to value due to these industries’ unique operations.

Generally, our Structured Finance loans are collateralized by the borrower’s real estate or business assets.

We seek to partner with company owners, management teams, and private equity sponsors to provide customized debt facility and cash management solutions for business owners.

The Structured Finance division’s practices include sponsored and direct-to-company transactions, family-owned and privately held businesses, and, to a limited extent, publicly traded companies.

We believe our Structured Finance division’s portfolio is well diversified with over 50 commercial relationships at December 31, 2023.

We believe our Structured Finance division’s portfolio is well diversified with 49 commercial relationships at December 31, 2024.

Our Small Business and Middle Market commercial and industrial loans are generally secured by all business assets of the borrower, including but not limited to equipment, accounts receivable, inventory, specific project assets and contracts, and real estate.

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Terms generally range from three to 10 years.

The average tenor of our commercial and industrial portfolio varies and at December 31, 2023 was less than 7 years for Structured Finance loans.

At December 31, 2023, the average loan to value of the Structured Finance loan portfolio was less than 75%.

We also offer lines of credit in amounts of up to 80% of the value of the eligible collateral securing the loan.

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The vast majority of the loans are extended on a secured basis, with a limited number of unsecured lines of credit with additional covenants.

At December 31, 2023, we had commitments to fund $22.0 million of unsecured lines of credit with no balances outstanding at this date.

At December 31, 2024, we had commitments to fund $24.3 million of unsecured lines of credit with $124,000 outstanding.

The security of any underlying loan is determined according to the credit profile of the customer on a case-by-case basis.

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On occasion, we will make these types of loans outside of the primary market but generally only to customers with whom we have a pre-existing relationship.

Because of the unique business characteristics of the cannabis, wind and solar industries, which comprise most of our Structured Finance loans, many of these loans are to customers which have operations both within and outside of our primary market area.

Because of the unique business characteristics of the cannabis and solar industries and bridge financing, which comprise most of our Structured Finance loans, many of these loans are to customers which have operations both within and outside of our primary market area.

The vast majority of the relationships in the commercial and industrial segment also have cash management and treasury service product offerings tied to the relationships.

These products include specific online banking tools, ACH products, wire capabilities, fraud prevention tools and other customized set-up that help the underlying business securely manage the business’ cash.

Generally, these products provide for additional fee income, along with enhanced risk management, to the Bank and are managed within the commercial and industrial business unit of the Bank.

Generally, these products provide for additional fee income, along with enhanced risk management, to the Company and are managed within the commercial and industrial business unit of the Bank.

Consumer Lending.

We offer a variety of consumer loans to individuals who reside or work in our primary lending area, including loans that are secured by mobile homes, new and used automobiles, new and used boats and recreational vehicles, solar panels, deposit accounts, as well as a limited number of unsecured loans, including student loans, home improvement loans and credit cards loans.

In recent years we have purchased a variety of consumer loan portfolios from a third-party originator subject to our underwriting procedures.

Largely as a result of these purchases, higher yielding consumer loans increased $8.3 million, or 4.2% to $204.9 million at December 31, 2023 from $196.5 million at December 31, 2022 and from $39.4 million at December 31, 2021.

Subject to market conditions, we intend to continue to modestly grow our consumer loan portfolio and we would expect this growth to come through partnerships with established third-party originators.

In recent years we have purchased a variety of consumer loan portfolios from third-party originators subject to our underwriting procedures.

Largely as a result of these purchases, higher-yielding consumer loans increased $39.7 million, or 19.4% to $244.6 million, or 5.6%, of totals loans at December 31, 2024 from $204.9 million, or 5.3%, of total loans at December 31, 2023.

Subject to market conditions, we intend to continue to prudently grow our consumer loan portfolio.

The growth in this portfolio has come largely through partnerships with established third-party originators.

Consumer loans generally have shorter terms to maturity, which reduces our exposure to changes in interest rates.

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We also obtain referrals from existing and former customers and from accountants, real estate brokers, builders and attorneys.

All loans we originate

are underwritten pursuant to our policies and procedures which incorporate Fannie Mae underwriting guidelines to the extent applicable for residential loans.

All loans we originate are underwritten pursuant to our policies and procedures which incorporate Fannie Mae underwriting guidelines to the extent applicable for residential loans.

While we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon relative borrower demand and the pricing levels as set in the local marketplace by competing banks, thrifts, credit unions, and mortgage banking companies.

Our volume of real estate loan originations is influenced significantly by market interest rates, and, accordingly, the volume of our real estate loan originations can vary from period to period.

Consistent with our interest rate risk strategy, we originate for sale and sell a portion of the long-term, fixed-rate, one- to four-family residential real estate loans that we originate on a servicing-retained, limited or no recourse basis, while generally retaining shorter-term fixed-rate and all adjustable-rate one- to four-family residential real estate loans in order to manage the duration and time to repricing of our loan portfolio.

Consistent with our interest rate risk strategy, we originate and sell a portion of the long-term, fixed-rate, one- to-four-family residential real estate loans on a servicing-retained, limited or no recourse basis, while generally retaining shorter-term fixed-rate and all adjustable-rate one-to-four-family residential real estate loans in order to manage the duration and repricing of our loan portfolio.

We consider our balance sheet as well as market conditions on an ongoing basis in making decisions as to whether to hold loans we originate for investment or to sell such loans to investors, choosing the strategy that is most advantageous to us from a profitability and risk management standpoint.

Historically, we have also engaged in loan participations sales, with Needham Bank as the lead, for certain larger commercial real estate and commercial and industrial loans and have, on a limited basis, purchased participations from well-established financial institutions in our market area.

Historically, we have also engaged in loan participations sales, with the Bank as the lead, for certain larger commercial real estate and commercial and industrial loans and have, on a limited basis, purchased participations from well-established financial institutions in our market area.

Participations are periodically reported to the Board of Directors.

In recent years we have also purchased a variety of consumer loan portfolios and would expect to continue to purchase consumer loans from several established third-party originators.

At December 31, 2023, our highest combined participations with one bank was approximately 9.3% of total capital and was comprised of commercial real estate and multifamily, commercial and industrial, and construction and land development loans.

In recent years we have also purchased a variety of consumer loan portfolios and expect to continue to purchase consumer loans from several established third-party originators.

At December 31, 2024, our highest combined participations with one bank was approximately 14.2% of total capital and was comprised of four commercial real estate loans, three construction and land development loans and one commercial and industrial loan.

Loan Approval Procedures, Loans to One Borrower Limit and Lending Authority

The maximum amount that we may lend to one borrower and the borrower’s related entities is generally limited, by statute, to 20% of our capital, which is defined under Massachusetts law as the sum of our surplus account, undivided profits and, after the completion of the conversion, capital stock.

The maximum amount that we may lend to one borrower and the borrower’s related entities is generally limited, by statute, to 20% of the Bank’s capital, which is defined under Massachusetts law as the sum of our surplus account, undivided profits and capital stock.

Loans secured by a first mortgage on residential property occupied by the borrower are excluded from this limit.

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At December 31, 2024, our general internal limit on an aggregate loan relationship-to-one borrower (and related entities) was $55.0 million.

Most of our largest loan relationships are to borrowers which have multiple loans with Needham Bank and are collateralized by commercial real estate, commercial and industrial and construction and land development loans.

Aggregate exposure limits can be increased above our internal limit up to the legal lending limit on an exception basis with the approval of the Credit Committee and the board of directors, and at December 31, 2023, we had nine relationships in excess of $55.0 million which were secured by commercial and industrial and commercial real estate loans, including construction and land development loans.

Most of our largest loan relationships are to borrowers who have multiple loans with the Bank and are collateralized by commercial real estate, commercial and industrial and construction and land development loans.

Aggregate exposure limits can be increased above our internal limit up to the legal lending limit on an exception basis with the approval of the Credit Committee and the Board of Directors, and at December 31, 2024, we had eleven relationships in excess of $55.0 million which were secured by commercial and industrial and commercial real estate loans, including multifamily and construction and land development loans.

Each of these relationships was approved by the Board of Directors and at December 31, 2024 each of the loans underlying these relationships was performing in accordance with their prepayment terms.

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Decisions on loans are made consistent with our loan policies and procedures, and the underwriting and review of a loan decision is designed primarily to determine the borrower’s ability to repay the requested loan.

The board of directors has overall responsibility for our lending policy, and the board reviews this policy at least annually.

The Board of Directors has overall responsibility for our lending policy, and reviews this policy at least annually.

The Board of Directors has delegated loan approval authority to certain officers up to prescribed limits, depending on the officer’s experience, the type of loan and whether the loan is secured or unsecured.

Loans for residential real estate of greater than $2.5 million require approval by management’s Credit Committee, which consists of the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”), Chief Credit Officer (“CCO”), SVP – Managed Assets Group Leader and managers of the Bank’s lending departments.

Commercial loan relationships with

total loan exposure of greater than $3.0 million up to our internal loans-to-one relationship limitation require approval by the Credit Committee.

Loans for residential real estate of greater than $2.5 million require approval by the Credit Committee, which consists of the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”), Chief Credit Officer (“CCO”), SVP – Managed Assets Group Leader and managers of the Bank’s lending departments.

Commercial loan relationships with total loan exposure of greater than $3.0 million up to our internal loans-to-one relationship limitation require approval by the Credit Committee.

All commercial and industrial loans under $3.0 million are approved by the CCO (or designated signer), and all commercial loan relationships with total loan exposure of greater than $3.0 million are approved by the Credit Committee.

Loan policy exceptions are fully disclosed to the approving authority, either an individual officer or the appropriate management or Credit Committee prior to approval.

Reporting on Policy exceptions are included within the Board package.

Reporting on Policy exceptions are included within the Board of Directors reporting package.

Generally, we require title insurance on our mortgage loans as well as fire and extended coverage casualty insurance in amounts at least equal to the principal amount of the loan or the value of improvements on the property, depending on the type of loan.

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Management submits a delinquent loan report detailing loans 30 days or more past due to the Board of Directors on a monthly basis.

When we acquire real estate as a result of foreclosure or by deed in lieu of foreclosure, the real estate is classified as foreclosed real estate until it is sold.

The real estate is recorded at estimated fair value at the date of acquisition less estimated costs to sell, and any write-down resulting from the acquisition is charged to the allowance for credit losses.

When we acquire real estate as a result of foreclosure or by deed in lieu of foreclosure, the real estate is classified as other real estate owned (“OREO”) until it is sold.

The OREO is recorded at estimated fair value at the date of acquisition less estimated costs to sell, and any write-down resulting from the acquisition is charged to the allowance for credit losses on loans.

Estimated fair value is based on an appraisal typically obtained before the foreclosure process is completed.

Subsequent decreases in the value of the property are charged to operations.

After acquisition, all costs incurred in maintaining the property are expensed.

Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

Subsequent decreases in the value of the OREO property are charged to operations.

After acquisition, all costs incurred in maintaining the OREO property are expensed.

Costs relating to the development and improvement of the OREO property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

In the course of resolving delinquent loans, we may choose to restructure the contractual terms of certain loans.

We attempt to work-out alternative payment schedules with the borrowers in order to avoid foreclosure actions.

As noted in Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K, we adopted ASU 2022-02 on January 1, 2023, which eliminated troubled-debt restructuring (“TDR”) accounting.

Prior to the adoption of this standard, we reviewed each loan that was modified to identify whether a TDR had occurred.

TDRs involved situations in which, for economic or legal reasons related to the borrower’s financial difficulties, we granted a concession to the borrower that we would not otherwise have considered.

Subsequent to our adoption of this standard, we apply the loan refinancing and restructuring guidance codified in paragraphs 310-20-35-9 through 35-11 of the Accounting Standards Codification to determine whether a modification results in a new loan or a continuation of an existing loan.

As noted in Note 1, “Organization, Activities and Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023, which eliminated troubled-debt restructuring accounting.

Subsequent to our adoption of ASU 2022-02, we apply the loan refinancing and restructuring guidance codified in paragraphs 310-20-35-9 through 35-11 of the Accounting Standards Codification to determine whether a modification results in a new loan or a continuation of an existing loan.

ASU 2022-02 requires disclosure of loan modifications to borrowers experiencing financial difficulty.

During the year ended December 31, 2024, the Company modified one participation commercial real estate loan with an amortized cost basis of $6.2 million, or 0.01% of total commercial real estate loans, through an interest rate reduction and maturity extension.

The modified loan experienced a $4.0 million charge-off during the year ended December 31, 2024 resulting from a shortfall in the projected sale price of the underlying real estate collateral.

The Company did not modify any loans to borrowers experiencing financial difficulty during the year ended December 31, 2023.

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December 31, 2023

More and Still

(Dollars in thousands)

More Past Due

Still Accruing

(in thousands)

Real estate loans:

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Commercial real estate

Multi-family residential

Construction and land development

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The following table sets forth information regarding our non-performing assets as of December 31, 2024 and 2023.

As a result of the adoption of CECL beginning January 1, 2023, troubled debt restructuring recognition and measurement has been eliminated.

We had no loans 90 days or more delinquent and still accruing interest as of the dates presented.

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Total non-performing assets to total assets

(1) Includes both non-accrual loans and non-accruing troubled debt restructured loans for 2022.

Classified Assets .

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Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” by our management.

When an insured depository institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses.

General allowances represent loss allowances which have been established to cover probable accrued losses associated with

lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets.

When an insured depository institution classifies problem assets as either substandard or doubtful, it may establish specific or general allowances in an amount deemed prudent by management to cover probable accrued losses.

General allowances represent loss allowances which have been established to cover probable accrued losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets.

When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount.

An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory agencies, which may require the establishment of additional general or specific loss allowances.

In connection with the filing of our quarterly reports with the Federal Reserve Board and in accordance with our classification of assets policy, we regularly review the problem loans in our portfolio to determine whether any loans require classification in accordance with applicable regulations.

On the basis of this review of our assets, our classified and special mention assets at December 31 were as follows:

(Dollars in thousands)

(in thousands)

Substandard loans

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On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology.

Under this new current expected loss model, provisions for credit losses are charged to operations to establish an allowance for credit losses at a level to cover expected losses over the expected life of a loan or securities portfolio.

Measurement of Credit Losses on Financial Instruments , which replaces the incurred loss methodology with an expected loss methodology that is referred to as CECL methodology.

Under this new CECL model, provisions for credit losses are charged to operations to establish an allowance for credit losses at a level to cover expected losses over the expected life of a loan or securities portfolio.

Under the previous incurred loss model, provisions for loan losses were charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements.

In evaluating the level of the allowance for credit losses, management analyzes reasonable and supportable forecasts and several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses.

As part of the initial adoption of the CECL standard on January 1, 2023, we recorded $1.1 million to the allowance for credit losses and $1.8 million for off-balance sheet commitments.

As part of the initial adoption of the CECL standard on January 1, 2023, we recorded $1.1 million to the allowance for credit losses on loans and $1.8 million for the allowance for credit losses on off-balance sheet commitments.

The total of $2.9 million was tax effected and resulted in a decrease of $2.1 million to retained earnings.

Additionally, as part of the adoption of the CECL standard, for the year ended December 31, 2023, we recorded a provision for credit losses of $9.7 million and a provision of $4.2 million as a reserve for off-balance sheet commitments, both of which are included in the provision for credit losses in the consolidated statements of income.

Subsequent to the CECL adoption, management refined the modeling assuming and enhanced the CECL calculation, including the reserve for unfunded commitments, specifically regarding the probability of funding assumptions related to unfunded commitments and enhanced the qualitative analysis used in the determination of expected credit losses.

The impact of these changes, in addition to growth in the unfunded commitment balances resulted in provisions for credit losses of $4.2 million.

Our allowance for credit losses was $32.2 million as of December 31, 2023 compared to $25.0 million at December 31, 2022.

The ratio of our allowance for credit losses to total loans was 0.83% at both December 31, 2023 and 2022, while the allowance for credit losses to non-performing loans was 298% at December 31, 2023 compared to 192% at December 31, 2022.

We had net charge offs of $3.6 million and $87,000 during the years ended December 31, 2023 and 2022, respectively.

The increase in net charge-offs was caused by charge-offs in the higher yielding purchased consumer loan portfolio.

Additions to the allowance for credit losses are provided by charges against income based on various factors, which, in our judgment, deserve current recognition in estimating probable losses.

Additionally, for the years ended December 31, 2024 and 2023, we recorded a provision for credit losses of $14.9 million and $9.7 million and a reserve reduction of $2.8 million and a provision of $4.2 million for off-balance sheet commitments, respectively, both of which are included in the provision for credit losses in the consolidated statements of income.

For the year ended December 31, 2022, p rior to the adoption of ASC 326 on January 1, 2023, the Company calculated the allowance for loan losses under the incurred loss methodology and recorded a provision for the allowance for loan losses of $6.7 million.

During 2024, enhancements were made to certain estimates used in the Company’s CECL model, including the qualitative factor framework and prepayment speed forecasts.

In order to reduce the subjectivity of the qualitative factor framework, the Company developed a data-driven qualitative risk grade matrix, utilizing a correlation of qualitative factors to historical losses to determine more objective risk grade selections used in the qualitative factor framework.

The prepayment speed forecast model was enhanced to shorten the historical prepay speed lookback period from ten years to a period equal to the prior quarter’s aggregate portfolio weighted-average remaining maturity term.

This lookback period provides historical prepayment speeds realized over the most recently completed life cycle of the portfolio.

Prepayment speed forecasts are more reactive to the current state of the portfolio than the prior ten-year lookback, while avoiding volatility experienced with a shorter lookback period.

Our allowance for credit losses on loans was $38.7 million as of December 31, 2024 compared to $32.2 million at December 31, 2023.

The ratio of our allowance for credit losses on loans to total loans was 0.89% at December 31, 2024 and 0.83% at December 31, 2023, while the allowance for credit losses on loans to non-performing loans was 280% at December 31, 2024 compared to 298% at December 31, 2023.

The Company had net charge-offs of $8.4 million, $3.6 million and $87,000 during the years ended December 31, 2024, 2023 and 2022, respectively.

The increase in net charge-offs was primarily caused by one $4.0 million participation CRE charge-off during the year ended December 31, 2024 resulting from a shortfall in the projected sale price of the underlying real estate collateral.

Additions to the allowance for credit losses on loans are provided by charges against income based on various factors, which, in our judgment, deserve current recognition in estimating probable losses.

Credit losses are charged-off in the period the loans, or portion thereof, are deemed uncollectible.

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We regularly review the loan portfolio in order to maintain the allowance for credit losses in accordance with U.S.

As an integral part of their examination process, the Commissioner and the Federal Reserve Board will periodically review our allowance for credit losses, and as a result of such reviews, we may determine to adjust our allowance for credit losses.

However, regulatory agencies are not directly involved in the process for establishing the allowance for credit losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

The Audit Committee reviews and approves the CECL calculation quarterly, including management’s support for qualitative factors used in developing its allowance for credit losses.

The following table sets forth activity in our allowance for credit losses for the periods indicated.

For the years ended December 31,

As an integral part of their examination process, the Commissioner and the Federal Reserve Board will periodically review our allowance for credit losses on loans, and as a result of such reviews, we may determine to adjust our allowance for credit losses on loans.

However, regulatory agencies are not directly involved in the process for establishing the allowance for credit losses on loans as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management.

The Troubled Asset Resolution Committee reviews and approves the CECL calculation quarterly, including management’s support for qualitative factors used in developing the Company’s allowance for credit losses on loans.

The following table sets forth activity in our allowance for credit losses on loans for the periods indicated.

Activity for the years ended December 31, 2024 and 2023 is in accordance with the CECL standard, while activity for the year ended December 31, 2022 is in accordance with the incurred loss methodology standard:

For the year ended December 31,

(Dollars in thousands)

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One-to-Four-Family Residential

Commercial real estate

Commercial and Industrial

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Commercial real estate

Commercial and Industrial

Total recoveries

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One-to Four-Family Residential

Commercial Real Estate

Commercial and Industrial

Allocation of Allowance for Credit Losses.

The following table sets forth the allowance for credit losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.

The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

Allocation of Allowance for Credit Losses (“ACL”) on Loans.

The following table sets forth the allowance for credit losses on loans allocated by loan category and the percent of the allowance for credit losses on loans in each category to the total allocated allowance for credit losses on loans at the dates indicated.

The allowance for credit losses on loans allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance for credit losses on loans to absorb losses in other categories.

At December 31,

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Each Category

(Dollars in thousands)

Credit Losses

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to Total Loans

(Dollars in thousands)

One-to Four-Family Residential

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Our investment policy is established by the Board of Directors.

The objectives of the policy are to:

The objectives of the investment policy are to:

(i) provide and maintain liquidity within the guidelines of the Massachusetts banking laws and regulations for loan demand and deposit fluctuations, and to allow us to alter our liquidity position to meet both day-to-day and long-term changes in assets and liabilities;

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and (v) maintain a balance of high-quality, diversified investments to minimize risk.

All purchase and sale transactions are reviewed by the Audit Committee, which consists of the CEO, COO, Chief Financial Officer and certain board members, at least quarterly.

Our investment policy is reviewed annually by our board of directors and all policy changes recommended by management must be approved by the board.

Our investment policy is reviewed annually by the Board of Directors and all policy changes recommended by management must be approved by the Board of Directors.

Authority to make investments under the approved guidelines are delegated to appropriate officers.

The execution of specific actions with respect to securities held by Needham Bank rests with the Audit Committee within the scope of the established investment policy.

The execution of specific actions with respect to securities held by the Company rests with management within the scope of the established investment policy.

We have legal authority to invest in various types of liquid assets, including U.S.

Treasury obligations, securities of various government-sponsored enterprises and municipal governments, deposits at the FHLB, certificates of deposit of federally insured institutions, investment grade corporate bonds and investment grade marketable equity securities.

We also are required to maintain an investment in FHLB stock.

We also are required to maintain an investment in FHLB and FRB stock.

While we have the authority under applicable law to invest in derivative securities, we have not purchased derivative securities as an investment strategy.

At December 31, 2023 we had $189.5 million of investment securities, representing 4.2% of our total assets, and our investment portfolio consisted primarily of U.S.

Treasury and federal agency securities, government-sponsored residential mortgage-backed securities (which includes collateralized mortgage obligations), municipal bonds and corporate bonds.

At the time of purchase, we designate a security as held-to-maturity, available-for-sale, or trading, depending on our ability and intent.

At December 31, 2024 we had $228.2 million of investment securities, representing 4.4% of our total assets, compared to $189.5 million and 4.2% of our total assets, at December 31, 2023.

Our investment portfolio consisted primarily of U.S.

Treasury and federal agency securities, government-sponsored residential mortgage-backed securities (which includes collateralized mortgage obligations), SBA securities, municipal bonds and corporate bonds.

At the time of purchase, we designate a security as held-to-maturity, available-for-sale (“AFS”), or trading, depending on our intent.

Securities available-for-sale or trading are reported at fair value, while securities held-to-maturity are reported at amortized cost.

Consistent with our overall business and asset/liability management plan, which focuses on sustaining adequate levels of core earnings, the base premise of our investment portfolio is that all securities purchased will be suitable to be held-to-maturity.

However, at December 31, 2023, we had no securities which we designated held to maturity.

However, at December 31, 2024 and 2023, we had no securities which we designated held-to-maturity.

Some of our securities are callable by the issuer.

Although these securities may have a yield somewhat higher than the yield of similar securities without such features, these securities are subject to the risk that they may be redeemed by the issuer prior to maturing in the event general interest rates decline.

At December 31, 2023, we had $66.5 million of securities which were subject to redemption by the issuer prior to their stated maturity, including four subordinated note agreements totaling $37.5 million issued by community bank mutual holding companies.

At December 31, 2024, we had $42.5 million of securities which were subject to redemption by the issuer prior to their stated maturity, including eleven subordinated note agreements totaling $25.6 million issued by community bank mutual holding companies.

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

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Due after ten years

(In thousands)

Average Yield

December 31, 2024

Debt Securities:

(Dollars in thousands)

AFS Debt Securities:

Treasury securities

Government agencies

Agency mortgage-backed securities

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Municipal obligations

For additional information regarding our investment securities portfolio, see Note 2 to the notes to our consolidated financial statements.

Bank-Owned Life Insurance.

We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations.

Bank-owned life insurance also generally provides us noninterest income that is non-

Applicable regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses.

At December 31, 2023, we had $50.5 million in bank-owned life insurance, representing 8.1% of Tier 1 capital.

SBA securities

For additional information regarding our AFS securities portfolio, see Note 2 of the notes to the consolidated financial statements.

Bank-Owned Life Insurance (“BOLI”).

We invest in BOLI to provide us with a funding source for our benefit plan obligations.

BOLI also generally provides us noninterest income that is non-taxable.

Applicable regulations generally limit our investment in BOLI to 25% of the Bank’s Tier 1 capital plus our allowance for credit losses, which in the aggregate was $163.2 million as of December 31, 2024.

During the year ended December 31, 2024, the Bank surrendered $46.7 million of existing BOLI policies that were earning an annualized yield of 3.08%.

Prior to the surrender of the policies, the Bank purchased an additional $50.0 million of BOLI policies, which are currently yielding 4.80%.

As a result of the surrender of the BOLI policies, the Bank incurred $1.7 million of income tax and penalty, which the Bank expects to earn back in less than two years.

The insurance carriers have six months to pay out the proceeds from the surrendered policies, and as a result, the Bank expects BOLI to be at higher balances and to continue earning income related to the increase in cash surrender value until the proceeds are received.

At December 31, 2024, we had $102.8 million in BOLI, representing 16.7% of the Bank’s Tier 1 capital.

Other Securities .

We hold common stock of the FHLB in connection with our borrowing activities.

The FHLB common stock is carried at cost and classified as restricted equity securities.

It is not practicable to determine the fair value of FHLB common stock due to restrictions placed on its transferability.

Under current FHLB rules, we will be required to purchase additional FHLB common stock if we increase borrowings in the future.

We maintain shares in the Federal Reserve Bank of Boston in order to meet criteria for membership in the Federal Reserve System.

The FHLB is a cooperative bank that provides services to its member financial institutions.

The primary reason for our membership in the FHLB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk.

We held an investment in FHLB stock of $6.7 million and $14.6 million as of December 31, 2024 and 2023, respectively.

The amount of stock we are required to purchase is in proportion to our FHLB borrowings and level of total assets.

Accordingly, the decrease in the FHLB stock from December 31, 2023 to December 31, 2024 is due to the decrease in FHLB borrowings.

The FHLB may declare dividends from time to time.

We maintain shares in the FRB of Boston in order to meet criteria for membership in the Federal Reserve System.

Dividends are paid semi-annually at the statutory rate of 6.0%.

At December 31, 2023, we held 206,450 shares of stock in the approximate amount of $10.3 million.

We also invest in certain equity securities which offer favorable tax treatment.

See Note 2 to the notes to our consolidated financial statements.

At December 31, 2024, we held 242,844 shares of stock in the approximate amount of $12.1 million, compared to 206,450 shares of stock in the approximate amount of $10.3 million at December 31, 2023.

We also invest in certain equity method investments which offer favorable tax treatment.

See Note 2 to the notes to the consolidated financial statements.

Sources of Funds

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We also use borrowings and brokered deposits to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds.

In addition, we receive funds from scheduled loan payments, investment maturities, loan prepayments, loan sales, retained earnings and income on earning assets.

In addition, we receive funds from scheduled loan payments, investment payments/maturities, loan prepayments, loan sales, retained earnings and income on earning assets.

While scheduled loan payments and income on interest-earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

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Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate.

In recent years, we have also utilized brokered deposits as non-retail funding source to fund our operations.

These non-core funding sources are not relationship-based accounts and are generally more price-sensitive than our core deposits.

Therefore, these deposits carry a greater risk of non-renewal than our core deposits.

As of December 31, 2023, our core deposits, which are deposits other than brokered deposits, were $3.2 billion, representing 94.6% of total deposits.

At December 31, 2023, we had $183.6 million of brokered deposits and we had 26 municipal deposit relationships in the aggregate amount of $83.2 million.

Additionally, At December 31, 2023, we believe that our highest concentration of industry-specific deposits was from cannabis-related relationships.

At December 31, 2023, we had 817 cannabis-related deposit relationships totaling $277.2 million, or 8.2% of total deposits, of which $144.0 million were directly related to the cannabis industry (e.g., growing, transporting, packaging, distributing, or selling cannabis) and $133.2 million were indirectly related to the cannabis industry.

At December 31, 2023, we do not believe that we have significant concentrations among our larger deposit accounts from venture capital funds, or their portfolio companies, or from out-of-market businesses.

In recent years, we have also utilized brokered deposits as a non-retail funding source to fund our operations.

These non-core funding sources are not relationship-based accounts and are generally more price-sensitive than our core deposits, which we consider all deposits other than brokered deposits.

Therefore, these brokered deposits carry a greater risk of non-renewal than our core deposits.

At December 31, 2024, our core deposits were $3.87 billion, representing 92.6% of total deposits, compared to $3.20 billion, and 94.6%, of total deposits at December 31, 2023.

At December 31, 2024 and 2023, we had $309.8 million and $183.6 million of brokered deposits, respectively.

At December 31, 2024 and 2023, we believe that our highest concentration of industry-specific deposits was from cannabis-related relationships.

At December 31, 2024, we had 568 cannabis-related deposit relationships totaling $395.2 million, or 9.5% of total deposits, of which $331.6 million were directly related to the cannabis industry (e.g., growing, transporting, packaging, distributing, or selling cannabis), $63.6 million were indirectly related to the cannabis industry, compared to December 31, 2023, where we had 617 cannabis-related deposit relationships totaling $317.4 million, or 9.4% of total deposits, of which $262.6 million were directly related to the cannabis industry (e.g., growing, transporting, packaging, distributing, or selling cannabis) and $54.8 million were indirectly related to the cannabis industry.

At December 31, 2024 and 2023, we do not believe that we have significant concentrations among our larger deposit accounts from venture capital funds, or their portfolio companies, or from out-of-market businesses.

Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis.

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Money market accounts

Certificates of deposit and individual retirement accounts

As of December 31, 2023 and 2022, the aggregate amount of time deposits we had in amounts greater than $250,000, which is the maximum amount for federal deposit insurance, was $544.2 million and $915.0 million, respectively.

Time deposits

Total deposits

As of December 31, 2024 and 2023, the aggregate amount of time deposits we had in amounts greater than $250,000, which is the maximum amount for Federal Deposit Insurance Corporation (“FDIC”) insurance, was $694.1 million and $544.2 million, respectively.

The following table sets forth, by time remaining until maturity, the portion of our time deposits that are in excess of the FDIC insurance limit at December 31, 2024:

December 31, 2024

(Dollars in thousands)

(in thousands)

Maturity period:

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Over 12 months

All of our deposits are fully insured due to the additional insurance provided to a Massachusetts cooperative bank, such as Needham Bank, under the DIF, a private industry-sponsored insurance fund in Massachusetts that insures all deposits at Needham Bank above FDIC limits.

All of our deposits are fully insured due to the additional insurance provided to the Bank, under the Deposit Insurance Fund (“DIF”), a private industry-sponsored insurance fund in Massachusetts that insures all deposits at the Bank above FDIC limits.

Borrowing Capacity .

As a member of the FHLB, Needham Bank is eligible to obtain advances upon the security of the FHLB common stock owned and certain residential mortgage loans, provided certain standards related to credit-worthiness have been met.

As a member of the FHLB, the Bank is eligible to obtain advances upon the security of the FHLB common stock owned and certain pledged residential mortgage, commercial real estate and multifamily loans, provided certain standards related to credit-worthiness have been met.

FHLB advances are available pursuant to several credit programs, each of which has its own interest rate and range of maturities.

At December 31, 2023, we had the ability to borrow an additional $508.0 million from the FHLB, subject to certain collateral requirements and had advances of $283.3 million at such date.

At December 31, 2023 we also had an additional line of credit from the FHLB in the amount of $6.1 million.

We had no borrowings outstanding under this line of credit at December 31, 2023.

Additionally, at December 31, 2023 we had secured Federal Reserve Bank Discount Window borrowing capacity of $49.6 million, and at December 31, 2023, we had no such borrowings.

Under the Bank’s Liquidity Policy, we test access to all off-balance sheet liquidity sources periodically, but no less than annually.

At December 31, 2024 and 2023, we had the ability to borrow an additional $754.1 million and $508.0 million from the FHLB, respectively, subject to certain collateral requirements and had outstanding advances of $120.8 million and $283.3 million at December 31, 2024 and 2023, respectively.

At December 31, 2024 and 2023 we also had an additional line of credit from the FHLB in the amount of $6.1 million.

We had no borrowings outstanding under this line of credit at December 31, 2024 and 2023.

Additionally, we have a line of credit agreement with the FRB of Boston for usage of the discount window.

The terms of the agreement call for the pledging of certain assets for any and all obligations of the Company under the agreement.

At December 31, 2024 and 2023, there were no borrowings outstanding under this agreement.

At December 31, 2023 we had secured Federal Reserve Bank Discount Window borrowing capacity of $49.6 million.

During the year ended December 31, 2024, the Company received approval from the FRB under its Borrower in Custody (“BIC”) program, which allowed the Company to pledge $849.5 million commercial real estate and multi-family loans to the FRB, which provides the Company with additional borrowing capacity of $451.0 million.

Under the Company’s Liquidity Policy, we test access to all off-balance sheet liquidity sources periodically, but no less than annually.

Subsidiary and Other Activities

Needham Bank is the wholly owned subsidiary of NB Bancorp.

Needham Bank is the wholly owned subsidiary of NB Bancorp, Inc.

Needham Bank has three subsidiaries:

Needco-op Investment Corporation, Inc.

(“Needco”), a Massachusetts corporation, which is engaged in the buying, selling and holding of investment securities.

The income earned on Needco’s securities is subject to a significantly lower rate of state tax than that assessed on income earned on securities maintained at Needham Bank.

At December 31, 2023, Needco had total assets of $93.0 million, substantially all of which were in securities, federal funds, and cash to be invested.

The Bank’s other subsidiaries are Eaton Square Realty LLC and 1892 Investments LLC, both of which hold certain real estate investments for Needham Bank, including investor tax credit investments.

(“Needco”), a Massachusetts corporation, which is engaged in the buying, selling and holding of securities.

The income earned on Needco’s securities is subject to a significantly lower rate of state tax than that assessed on income earned on securities maintained at the Bank.

At December 31, 2024 and 2023, Needco had total assets of $96.3 million and $93.0 million, respectively, substantially all of which were in securities, federal funds, and cash to be invested.

The Bank’s other subsidiaries are Eaton Square Realty LLC, which hold certain real estate investments for the Bank, and 1892 Investments LLC, which hold certain investor tax credit investments.

These entities enable us to segregate certain assets for management purposes, and/or borrow against assets or stock of these entities for liquidity purposes.

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Needham Bank has entered into an agreement with NB Bancorp to provide it with certain administrative support services for compensation not less than the fair market value of the services provided.

In addition, Needham Bank and NB Bancorp will enter into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability.

As of December 31, 2023, we had 342 full-time equivalent employees.

In addition, Needham Bank and NB Bancorp have entered into an agreement to establish a method for allocating and for reimbursing the payment of their consolidated tax liability.

At December 31, 2024 and 2023, we had 376 and 342 full-time equivalent employees, respectively.

Our employees are not represented by any collective bargaining group.

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SUPERVISION AND REGULATION

Needham Bank is a Massachusetts-chartered cooperative bank and is the wholly owned subsidiary of NB Bancorp, Inc., which is a Maryland corporation, and a registered bank holding company.

Needham Bank’s deposits are insured up to applicable limits by the FDIC and by the Massachusetts Depositors Insurance Fund (“DIF”), a private industry-sponsored insurance fund, for amounts in excess of the FDIC insurance limits.

Needham Bank is subject to extensive regulation by the Massachusetts Division of Banks, as its chartering agency, and by the Federal Reserve Board, its primary federal regulator.

The Bank is a Massachusetts-chartered cooperative bank and is the wholly owned subsidiary of the Company, which is a Maryland corporation, and a registered bank holding company.

The Bank’s deposits are insured up to applicable limits by the FDIC and by the Massachusetts DIF, a private industry-sponsored insurance fund, for amounts in excess of the FDIC insurance limits.

The Bank is subject to extensive regulation by the Massachusetts Division of Banks, as its chartering agency, and by the Federal Reserve Board, its primary federal regulator.

It is also regulated by the FDIC as the insurer of its deposit accounts.

Needham Bank must also comply with consumer protection regulations issued by the Consumer Financial Protection Bureau, as enforced by the Federal Reserve Board.

Needham Bank is required to file reports with, and is periodically examined by the Federal Reserve Board and the Commissioner concerning its activities and financial condition and must obtain regulatory approvals prior to entering into certain transactions, including, but not limited to, mergers with or acquisitions of other financial institutions.

As a registered bank holding company, NB Bancorp is regulated by the Federal Reserve Board.

Needham Bank also is a member of and owns stock in the FHLB, which is one of the 11 regional banks in the Federal Home Loan Bank System.

The Bank must also comply with consumer protection regulations issued by the Consumer Financial Protection Bureau, as enforced by the Federal Reserve Board.

The Bank is required to file reports with, and is periodically examined by the Federal Reserve Board and the Commissioner of the Massachusetts Division of Banks (the “Commissioner”) concerning its activities and financial condition and must obtain regulatory approvals prior to entering into certain transactions, including, but not limited to, mergers with or acquisitions of other financial institutions.

As a registered bank holding company, the Company is regulated by the Federal Reserve Board.

The Bank also is a member of and owns stock in the FHLB, which is one of the eleven regional banks in the FHLB System.

Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that:

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These ratings rely on the supervisor’s judgment and the receipt of a less than satisfactory rating in one or more categories may result in enforcement action by the banking regulators against a financial institution.

A less than satisfactory rating may also prevent a financial institution, such as Needham Bank or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.

In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations.

A less than satisfactory rating may also prevent a financial institution, such as the Bank or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.

In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act (“CRA”) laws and regulations, and fair lending laws and regulations.

Government agencies have the authority to impose monetary penalties and other sanctions on institutions that fail to comply with these laws and regulations, which could significantly affect our business activities, including our ability to acquire other financial institutions or expand our branch network.

NB Bancorp is a bank holding company and is required to comply with the Bank Holding Company Act of 1956, as amended (“BHCA”), and the rules and regulations of the Federal Reserve Board.

As a bank holding company, the Company is required to comply with the Bank Holding Company Act of 1956, as amended (“BHCA”), and the rules and regulations of the Federal Reserve Board.

It is required to file certain reports with the Federal Reserve Board and is subject to examination by and the enforcement authority of the Federal Reserve Board.

Additionally, the Federal Reserve Board may directly examine the subsidiaries of a bank holding company, including Needham Bank.

NB Bancorp will also be subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Any change in applicable laws or regulations, whether by the Massachusetts legislature, the Commissioner, the Consumer Financial Protection Bureau, the FDIC, the Federal Reserve Board, the Securities and Exchange Commission or Congress, could have a material adverse impact on the operations and financial performance of NB Bancorp and Needham Bank.

Set forth below is a brief description of material regulatory requirements that are applicable to Needham Bank and NB Bancorp.

The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Needham Bank and NB Bancorp.

Additionally, the Federal Reserve Board may directly examine the subsidiaries of a bank holding company, including the Bank.

The Company will also be subject to the rules and regulations of the Securities and Exchange Commission (“SEC”) under the federal securities laws.

Any change in applicable laws or regulations, whether by the Massachusetts legislature, the Commissioner, the Consumer Financial Protection Bureau, the FDIC, the Federal Reserve Board, the SEC or Congress, could have a material adverse impact on the operations and financial performance of the Company and the Bank.

Set forth below is a brief description of material regulatory requirements that are applicable to the Bank and the Company.

Massachusetts Banking Laws and Supervision Applicable to the Bank

As a Massachusetts-chartered cooperative bank, Needham Bank is subject to supervision, regulation and examination by the Commissioner and to various Massachusetts statutes and regulations which govern, among other things, investment powers, lending and deposit-taking activities, borrowings, maintenance of surplus and reserve accounts, distribution of earnings and payment of dividends.

In addition, Needham Bank is subject to Massachusetts consumer protection, Community Reinvestment Act, civil rights laws and regulations.

As a Massachusetts-chartered cooperative bank, the Bank is subject to supervision, regulation and examination by the Commissioner and to various Massachusetts statutes and regulations which govern, among other things, investment powers, lending and deposit-taking activities, borrowings, maintenance of surplus and reserve accounts, distribution of earnings and payment of dividends.

In addition, the Bank is subject to Massachusetts consumer protection, CRA, civil rights laws and regulations.

The approval of the Commissioner is required for a Massachusetts-chartered bank to establish or close branches, merge with other financial institutions, issue stock and undertake certain other activities.

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The approval of the Commissioner is required if the total of all dividends declared in any calendar year exceeds the total of its net profits for that year combined with its retained net profits of the preceding two years.

Dividends from NB Bancorp may depend, in part, upon receipt of dividends from Needham Bank.

The payment of dividends from Needham Bank would be restricted by federal law if the payment of such dividends resulted in Needham Bank failing to meet regulatory capital requirements.

Dividends from the Company may depend, in part, upon receipt of dividends from the Bank.

The payment of dividends from the Bank would be restricted by federal law if the payment of such dividends resulted in the Bank failing to meet regulatory capital requirements.

Loans-to-One Borrower Limitations.

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The Commissioner applies the Office of the Comptroller of the Currency’s attribution rules to a borrower’s related interests.

At December 31, 2023, Needham Bank was in compliance with the loans-to-one borrower limitations.

At December 31, 2024, the Bank was in compliance with the loans-to-one borrower limitations.

Loans to a Bank’s Insiders.

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In general, Massachusetts-chartered banks may invest in preferred and common stock of any corporation organized under the laws of the United States or any state provided such investments do not involve control of any corporation and do not, in the aggregate, exceed 4% of a bank’s deposits.

Federal law imposes additional restrictions on Needham Bank’s investment activities.

Federal law imposes additional restrictions on the Bank’s investment activities.

Regulatory Enforcement Authority.

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The Commissioner also has authority to take possession of a bank and appoint the FDIC as receiver under certain conditions such as an unsafe and unsound condition to transact business, the conduct of business in an unsafe or unauthorized manner or impaired capital.

In addition, Massachusetts consumer protection and civil rights statutes applicable to Needham Bank permit private individual and class action law suits and provide for the rescission of consumer transactions, including loans, and the recovery of statutory and punitive damages and attorneys’ fees in the case of certain violations of those statutes.

In addition, Massachusetts consumer protection and civil rights statutes applicable to the Bank permit private individual and class action law-suits and provide for the rescission of consumer transactions, including loans, and the recovery of statutory and punitive damages and attorneys’ fees in the case of certain violations of those statutes.

Excess Deposit Insurance Fund.

Massachusetts-chartered cooperative banks are members of the DIF, a private industry-sponsored insurance fund in Massachusetts that insures all deposits at Needham Bank above FDIC limits.

In the future, if the aggregate amount of our deposits in excess of the federal deposit insurance limit (which is $250,000 per depositor) exceed the threshold as established by the DIF, which at December 31, 2023 was $1.10 billion, then we may be required to exit from the DIF resulting in these excess deposits no longer being insured above FDIC-limits, beginning one year after such exit.

Massachusetts-chartered cooperative banks are members of the DIF, a private industry-sponsored insurance fund in Massachusetts that insures all deposits at the Bank above FDIC limits.

In the future, if the aggregate amount of our deposits in excess of the federal deposit insurance limit (which is $250,000 per depositor) exceed the threshold as established by the DIF, then we may be required to exit from the DIF resulting in these excess deposits no longer being insured above FDIC-limits, beginning one year after such exit or until the next maturity date.

Protection of Personal Information.

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A bank may be licensed directly or indirectly through an affiliate or a subsidiary corporation established for this purpose.

Needham Bank does not currently sell insurance products, and has not sought approval for direct insurance sales activities.

Needham Bank is licensed to solicit and refer potential insurance customers to an unaffiliated, third-party licensed insurance producer.

The Bank does not currently sell insurance products, and has not sought approval for direct insurance sales activities.

The Bank is licensed to solicit and refer potential insurance customers to an unaffiliated, third-party licensed insurance producer.

Parity Regulation.

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Higher levels of capital are required for asset categories believed to present greater risk.

Common equity Tier 1 capital is generally

defined as common stockholders’ equity and related surplus and retained earnings.

Common equity Tier 1 capital is generally defined as common stockholders’ equity and related surplus and retained earnings.

Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital.

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Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable regulatory capital requirements.

At December 31, 2023, Needham Bank had opted into the community bank leverage ratio framework and its leverage capital ratio exceeded the applicable requirement.

At December 31, 2024, the Company no longer meets the requirement for the community bank leverage ratio framework due to its unfunded loan commitments being over 25% of its capital for more than two consecutive quarters.

As a result, the Company operated under the risk-based framework for the year ended December 31, 2024.

At December 31, 2023, the Bank had opted into the community bank leverage ratio framework and its leverage capital ratio exceeded the applicable requirement.

Capital Distributions.

The Federal Deposit Insurance Act (“FDIA”) generally provides that an insured depository institution may not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement.

Unless the approval of the Federal Reserve Board is obtained, Needham Bank may not declare or pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of its net income during the current calendar year and the retained net income of the prior two calendar years.

Payments of dividends by Needham Bank are also subject to other banking law restrictions, such as the Federal Reserve Board’s authority to prevent a bank from paying dividends if such payment would constitute an unsafe or unsound banking practice or reduce a bank’s capital below safe and sound levels and Massachusetts banking law restrictions which require dividends to be paid from net profits for the current and two previous years, and which preclude a Massachusetts bank from paying dividends if its capital is, or would become, impaired.

Community Reinvestment Act and Fair Lending Laws.

All insured depository institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers, consistent with its safe and sound banking operations.

The Federal Reserve Board’s Community Reinvestment Act regulations are generally based upon objective criteria of the performance of institutions under three key assessment tests:

The Federal Deposit Insurance Act (“FDIA”) generally provides that an insured depository institution may not make any capital distributions if, after making such distributions, the institution would fail to meet any applicable regulatory capital requirement.

Unless the approval of the Federal Reserve Board is obtained, the Bank may not declare or pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of its net income during the current calendar year and the retained net income of the prior two calendar years.

Payments of dividends by the Bank are also subject to other banking law restrictions, such as the Federal Reserve Board’s authority to prevent a bank from paying dividends if such payment would constitute an unsafe or unsound banking practice or reduce a bank’s capital below safe and sound levels and Massachusetts banking law restrictions which require dividends to be paid from net profits for the current and two previous years, and which preclude a Massachusetts bank from paying dividends if its capital is, or would become, impaired.

CRA and Fair Lending Laws.

All insured depository institutions have a responsibility under the CRA and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers, consistent with its safe and sound banking operations.

The Federal Reserve Board’s CRA regulations are generally based upon objective criteria of the performance of institutions under three key assessment tests:

(i) a lending test, to evaluate the institution’s record of making loans in its service areas;

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and (iii) a service test, to evaluate the institution’s delivery of services through its branches, ATMs and other offices.

The Federal Reserve Board is required to assess Needham Bank’s record of compliance with the Community Reinvestment Act.

An institution’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its

The Federal Reserve Board is required to assess the Bank’s record of compliance with the CRA.

An institution’s failure to comply with the provisions of the CRA could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities.

In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices.

The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the Federal Reserve Board, as well as other federal regulatory agencies and the Department of Justice.

The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating.

Needham Bank received a “Satisfactory” Community Reinvestment Act rating in its most recent federal examination.

Massachusetts has its own statutory counterpart to the CRA which is also applicable to Needham Bank.

The CRA requires all institutions insured by the FDIC to publicly disclose their rating.

The Bank received a “Satisfactory” CRA rating in its most recent federal examination.

Massachusetts has its own statutory counterpart to the CRA which is also applicable to the Bank.

The Massachusetts version is generally similar to the CRA but utilizes a five-tiered descriptive rating system.

Massachusetts law requires the Commissioner to consider, but not be limited to, a bank’s record of performance under Massachusetts law in considering any application by the bank to establish a branch or other deposit-taking facility, to relocate an office or to merge or consolidate with or acquire the assets and assume the liabilities of any other banking institution.

Needham Bank’s most recent November 2022 CRA performance rating under Massachusetts law was “High Satisfactory.”

The Bank’s most recent November 2023 CRA performance rating under Massachusetts law was “High Satisfactory.”

Transactions with Related Parties.

An insured depository institution’s authority to engage in transactions with its affiliates is generally limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation.

An affiliate is generally a company that controls, or is under common control with, an insured depository institution such as Needham Bank.

NB Bancorp is an affiliate of Needham Bank because of its control of Needham Bank.

An affiliate is generally a company that controls, or is under common control with, an insured depository institution such as the Bank.

NB Bancorp, Inc.

is an affiliate of the Bank because of its control of the Bank.

In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements.

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Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

Needham Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.

The Bank’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board.

Among other things, these provisions generally require that extensions of credit to insiders:

● be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features;

● not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Needham Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved by Needham Bank’s board of directors.

● not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved by the Bank’s Board of Directors.

Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

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Federal law permits insured state banks to engage in interstate branching if the laws of the state where the new banking office is to be established would permit the establishment of the banking office if it were chartered by a bank in such state.

Under current Massachusetts law, Needham Bank can establish a branch in Massachusetts or in any other state.

Under current Massachusetts law, the Bank can establish a branch in Massachusetts or in any other state.

All branch applications require prior approval of the Commissioner and the FDIC.

Finally, Needham Bank may also establish banking offices in other states by merging with banks or by purchasing banking offices of other banks in other states, subject to certain restrictions.

Finally, the Bank may also establish banking offices in other states by merging with banks or by purchasing banking offices of other banks in other states, subject to certain restrictions.

Acquisitions.

Prior approval from the Commissioner and Federal Reserve Board is required in order for Needham Bank to acquire another bank.

Prior approval from the Commissioner and Federal Reserve Board is required in order for the Bank to acquire another bank.

Well capitalized and well managed banks may acquire other banks in any state, subject to certain deposit concentration limits and other conditions, pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as amended by the Dodd-Frank Act.

Activities and Investments of Insured State-Chartered Member Banks.

The Federal Reserve Act generally limits the types of equity investments a Federal Reserve member bank, such as Needham Bank, may make, and the Federal Deposit Insurance Act generally limits the kinds of activities in which such an FDIC-insured state-chartered bank may engage, as a principal, to those that are permissible for national banks.

Further, the Gramm-Leach-Bliley Act (“GLBA”) permits national banks and state banks, to the extent permitted under state law, to engage via financial subsidiaries in certain activities that are permissible for subsidiaries of a financial holding company.

The Federal Reserve Act generally limits the types of equity investments a Federal Reserve member bank, such as the Bank, may make, and the Federal Deposit Insurance Act generally limits the kinds of activities in which such an FDIC-insured state-chartered bank may engage, as a principal, to those that are permissible for national banks.

Further, the Gramm-Leach-Bliley Act permits national banks and state banks, to the extent permitted under state law, to engage via financial subsidiaries in certain activities that are permissible for subsidiaries of a financial holding company.

In order to form a financial subsidiary, a state-chartered bank must be “well capitalized,” and such banks must comply with certain capital deduction, risk management and affiliate transaction rules, among other requirements.

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An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%%.

An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of

less than 3.0%.

An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

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The previously referenced final rule establishing an elective community bank leverage ratio regulatory capital framework provides that a qualifying institution whose capital exceeds the community bank leverage ratio and opts to use that framework will be considered “well-capitalized” for purposes of prompt corrective action.

At December 31, 2023, Needham Bank met the criteria for being considered “well capitalized.”

At December 31, 2024, the Bank no longer meets the requirement for the community bank leverage ratio framework due to its unfunded loan commitments being over 25% of its capital for more than two consecutive quarters.

As a result, the Bank operated under the risk-based framework for the year ended December 31, 2024.

At December 31, 2023, the Bank had opted into the community bank leverage ratio framework and its leverage capital ratio exceeded the applicable requirement.

At December 31, 2024 and 2023, the Bank met the criteria for being considered “well capitalized.”

Insurance of Deposit Accounts.

The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as Needham Bank, generally up to a maximum of $250,000 per separately insured depositor.

The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as the Bank, generally up to a maximum of $250,000 per separately insured depositor.

The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund.

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The FDIC has authority to increase insurance assessments.

Any significant increases would have an adverse effect on the operating expenses and results of operations of Needham Bank.

For 2023, the FDIC insurance expense for Needham Bank was $4.1 million.

Any significant increases would have an adverse effect on the operating expenses and results of operations of the Bank.

During the years ended December 31, 2024 and 2023, the FDIC insurance expense for the Bank was $2.2 million and $4.1 million, respectively.

We cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the Federal Reserve Board.

Needham Bank does not know of any practice, condition or violation that may lead to termination of its deposit insurance.

The Bank does not know of any practice, condition or violation that may lead to termination of its deposit insurance.

Privacy Regulations.

Federal regulations generally require that Needham Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship.

Needham Bank currently has a privacy protection policy in place, provides each new customer with this policy at the time of an initial account opening, and believes that such policy is in compliance with the regulations.

Most states, including Massachusetts, have enacted legislation concerning breaches of data security and the duties of Needham Bank in response to a data breach.

Federal regulations generally require that the Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship.

The Bank currently has a privacy protection policy in place, provides each new customer with this policy at the time of an initial account opening, and believes that such policy is in compliance with applicable regulations.

Most states, including Massachusetts, have enacted legislation concerning breaches of data security and the duties of the Bank in response to a data breach.

Congress continues to consider federal legislation that would require consumer notice of data security breaches.

In addition, Massachusetts has promulgated data security regulations with respect to personal information of their residents.

Pursuant to the Fair and Accurate Credit Transactions

Act (the “FACT Act”), Needham Bank had to develop and implement a written identity theft prevention program to detect, prevent, and mitigate identity theft in connection with the opening of certain accounts or certain existing accounts.

Pursuant to the Fair and Accurate Credit Transactions Act (the “FACT Act”), the Bank had to develop and implement a written identity theft prevention program to detect, prevent, and mitigate identity theft in connection with the opening of certain accounts or certain existing accounts.

Additionally, the FACT Act amended the Fair Credit Reporting Act to generally prohibit a person from using information received from an affiliate to make a solicitation for marketing purposes to a consumer, unless the consumer is given notice and a reasonable opportunity and method to opt out of the making of such solicitations.

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In addition, financial institutions are required to file suspicious activity reports for any transaction or series of transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect involves illegal funds, is designed to evade the requirements of the BSA or has no lawful purpose.

The USA PATRIOT Act, which amended the BSA, together with the implementing regulations of various federal regulatory agencies, has caused financial institutions, such as the Bank, to adopt and implement additional policies or amend existing policies and procedures with respect to, among other things, anti-money laundering compliance, suspicious activity, currency transaction reporting, customer identity verification and customer risk analysis.

The USA PATRIOT Act, which amended the BSA, together with the implementing regulations of various federal regulatory agencies, has caused financial institutions, such as the Bank, to adopt and implement additional policies or amend existing policies and procedures with respect to, among other things, anti-money laundering compliance, suspicious activity reporting, currency transaction reporting, customer identity verification and customer risk analysis.

In evaluating an application to acquire a bank or to merge banks or effect a purchase of assets and assumption of deposits and other liabilities, the applicable federal banking regulator must consider the anti-money laundering compliance record of both the applicant and the target.

In addition, under the USA PATRIOT Act financial institutions are required to take steps to monitor their correspondent banking and private banking relationships as well as, if applicable, their relationships with “shell banks.”

Office of Foreign Assets Control.

Office of Foreign Assets Control (“OFAC”).

has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others.

These sanctions, which are administered by the Office of Foreign Assets Control (“OFAC”), take many different forms.

These sanctions, which are administered by OFAC, take many different forms.

Generally, however, they contain one or more of the following elements:

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jurisdiction (including property in the possession or control of U.S.

and (iii) restrictions on transactions with or involving certain persons or entities.

(iii) restrictions on transactions with or involving certain persons or entities.

Blocked assets (for example, property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.

Failure to comply with these sanctions could have serious legal and reputational consequences for Needham Bank.

Failure to comply with these sanctions could have serious legal and reputational consequences for the Bank.

Prohibitions Against Tying Arrangements .

Needham Bank is prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

The Bank is prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Consumer Protection and Fair Lending Regulations.

Needham Bank is subject to a variety of federal and Massachusetts statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit.

The Bank is subject to a variety of federal and Massachusetts statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit.

These statutes and regulations provide for a range of sanctions for non-compliance with their terms, including imposition of administrative fines and remedial orders, and referral to the Attorney General for prosecution of a civil action for actual and punitive damages and injunctive relief.

Certain of these statutes, including Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts and practices against consumers, authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of violations.

Federal laws also prohibit unfair, deceptive or abusive acts or practices against consumers, which can be enforced by the Consumer Financial Protection Bureau, the Federal Reserve Board, the FDIC and state attorneys general.

Other Regulations

Interest and other charges collected or contracted for by Needham Bank are subject to state usury laws and federal laws concerning interest rates.

Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates.

Loan operations are also subject to state and federal laws applicable to credit transactions, such as the:

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● Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The deposit operations of Needham Bank also are subject to, among others, the:

The deposit operations of the Bank also are subject to, among others, the:

● Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

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● Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Federal Home Loan Bank System

Needham Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks.

The Federal Home Loan Banks provide central credit facilities primarily for member institutions.

Members of a Federal Home Loan Bank are required to acquire and hold shares of capital stock in their Federal Home Loan Bank.

Needham Bank complied with this requirement at December 31, 2023.

Based on redemption provisions of the Federal Home Loan Bank of Boston, the stock has no quoted market value and is carried at cost.

Needham Bank reviews for impairment, based on the ultimate recoverability, the cost basis of the Federal Home Loan Bank of Boston stock.

At December 31, 2023, no impairment had been recognized.

The Bank is a member of the FHLB System, which consists of eleven regional FHLBs.

The FHLBs provide central credit facilities primarily for member institutions.

Members of an FHLB are required to acquire and hold shares of capital stock in their FHLB.

The Bank complied with this requirement at December 31, 2024 and 2023.

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

The Bank reviews for impairment, based on the ultimate recoverability, the cost basis of the FHLB of Boston stock.

At December 31, 2024 and 2023, no impairment had been recognized.

Bank Holding Company Regulation

NB Bancorp is a bank holding company within the meaning of the BHCA.

As such, NB Bancorp is registered with the Federal Reserve Board and is subject to regulations, examinations, supervision and reporting requirements applicable to bank holding companies.

In addition, the Federal Reserve Board has enforcement authority over NB Bancorp and its non-bank subsidiaries.

Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to Needham Bank.

The Company is a bank holding company within the meaning of the BHCA.

As such, the Company is registered with the Federal Reserve Board and is subject to regulations, examinations, supervision and reporting requirements applicable to bank holding companies.

In addition, the Federal Reserve Board has enforcement authority over the Company.

and its non-bank subsidiaries.

Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the Bank.

A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities.

One of the principal exceptions to this prohibition is for activities found by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto.

Some of the principal activities that the

Federal Reserve Board has determined by regulation to be so closely related to banking are:

Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are:

(i) making or servicing loans;

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and (vii) acquiring a savings association whose direct and indirect activities are limited to those permitted for bank holding companies.

NB Bancorp is subject to the Federal Reserve Board’s capital adequacy guidelines for bank holding companies (on a consolidated basis).

The Company is subject to the Federal Reserve Board’s capital adequacy guidelines for bank holding companies (on a consolidated basis).

The Dodd-Frank Act required the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to the depository institutions themselves.

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By law, bank holding companies must act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

This support may be required at times when NB Bancorp may not have the resources to provide support to Needham Bank.

This support may be required at times when the Company may not have the resources to provide support to the Bank.

In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment.

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The policy statement also states that a holding company should inform the Federal Reserve Board supervisory staff before redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.

These regulatory policies may affect the ability of NB Bancorp to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

NB Bancorp is a legal entity separate and distinct from Needham Bank and any of its other subsidiaries.

Revenues of NB Bancorp are derived primarily from dividends paid to it by Needham Bank and NB Bancorp’s other subsidiaries.

The right of NB Bancorp, and consequently the right of shareholders of NB Bancorp, to participate in any distribution of the assets or earnings of its subsidiaries, through the payment of such dividends or otherwise, is subject to the prior claims of creditors of the subsidiaries, including, with respect to the Bank, depositors of the Bank, except to the extent that certain claims of NB Bancorp in a creditor capacity may be recognized.

These regulatory policies may affect the ability of the Company to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

The Company is a legal entity separate and distinct from the Bank and any of its other subsidiaries.

Revenues of the Company are derived primarily from dividends paid to it by the Bank and the Company’s other subsidiaries.

The right of the Company, and consequently the right of shareholders of the Company, to participate in any distribution of the assets or earnings of its subsidiaries, through the payment of such dividends or otherwise, is subject to the prior claims of creditors of the subsidiaries, including, with respect to the Bank, depositors of the Bank, except to the extent that certain claims of the Company in a creditor capacity may be recognized.

Massachusetts Holding Company Regulation.

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and (iii) is subject to examination by the Commissioner.

NB Bancorp would become a bank holding company regulated by the Commissioner if it acquires a second banking institution and holds and operates it separately from Needham Bank.

The Company would become a bank holding company regulated by the Commissioner if it acquires a second banking institution and holds and operates it separately from the Bank.

Change in Control Regulations

Under the Change in Bank Control Act, no person or group of persons may acquire “control” of a bank holding company, such as NB Bancorp, unless the Federal Reserve Board has been given 60 days prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.

Control, as defined

under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquirer has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution.

Under the Change in Bank Control Act, no person or group of persons may acquire “control” of a bank holding company, such as the Company, unless the Federal Reserve Board has been given 60 days prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.

Control, as defined under federal law, means ownership, control of or holding irrevocable proxies representing more than 25% of any class of voting stock, control in any manner of the election of a majority of the institution’s directors, or a determination by the regulator that the acquirer has the power, directly or indirectly, to exercise a controlling influence over the management or policies of the institution.

There is a presumption of control upon the acquisition of 10% or more of a class of voting stock if the holding company involved has its shares registered under the Exchange Act, or, if the holding company involved does now have its shares registered under the Exchange Act, if no other persons will own, control or hold the power to vote a greater percentage of that class of voting security after the acquisition.

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Federal Securities Laws

The common stock of NB Bancorp is registered with the SEC.

NB Bancorp is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

The common stock of the Company is registered with the SEC.

The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.

Sarbanes-Oxley Act of 2002

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Emerging Growth Company Status

NB Bancorp is an emerging growth company.

The Company is an emerging growth company.

For as long as it continues to be an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to public companies.

These exemptions include, but are not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

As an emerging growth company, NB Bancorp is also not subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require that our independent auditors audit our internal control over financial reporting.

As an emerging growth company, the Company is also not subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require that our independent auditors audit our internal control over financial reporting.

We have also elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

Such an election is irrevocable during the period a company is an emerging growth company.

NB Bancorp will cease to be an emerging growth company upon the earliest of:

The Company will cease to be an emerging growth company upon the earliest of:

(i) the end of the fiscal year following the fifth anniversary of the completion of the conversion and offering;

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or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year.

We expect to lose our status as an emerging growth company effective December 31, 2028, which is the end of the fifth year after the completion date of the conversion and offering.

Federal Taxation

NB Bancorp and Needham Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below.

The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to NB Bancorp and Needham Bank.

The Company and the Bank are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below.

Method of Accounting.

For federal income tax purposes, NB Bancorp currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax returns.

For federal income tax purposes, the Company currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax returns.

Alternative Minimum Tax.

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The Tax Cuts and Jobs Act repealed the alternative minimum tax for income generated after January 1, 2018.

At December 31, 2023, NB Bancorp had no minimum tax credit carryovers.

At December 31, 2024, the Company had no minimum tax credit carryovers.

Net Operating Loss Carryovers.

As a result of the Tax Cuts and Jobs Act generally, a financial institution may carry net operating losses forward indefinitely.

At December 31, 2023, NB Bancorp had no federal net operating loss carryforwards.

At December 31, 2024, the Company had no federal net operating loss carryforwards.

Capital Loss Carryovers.

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Any undeducted loss remaining after the five-year carryover period is not deductible.

At December 31, 2023, NB Bancorp had no capital loss carryovers.

At December 31, 2024, the Company had no capital loss carryovers.

Corporate Dividends.

NB Bancorp may generally exclude from its income 100% of dividends received from Needham Bank as a member of the same affiliated group of corporations.

The Company may generally exclude from its income 100% of dividends received from Needham Bank as a member of the same affiliated group of corporations.

Audit of Tax Returns.

Needham Bank’s federal income tax returns, nor the consolidated returns of NB Bancorp or NB Financial, MHC’s and NB Financial, Inc.’s, Needham Bank’s former holding companies have not been audited in the most recent five-year period.

The Bank’s federal income tax returns, nor the consolidated returns of the Company or NB Financial, MHC’s and NB Financial, Inc.’s, the Bank’s former holding companies have not been audited in the most recent five-year period.

State Taxation

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Carryforwards and carrybacks of net operating losses and capital losses are not allowed.

Neither NB Bancorp’s nor Needham Bank’s state tax returns, as well as those of its subsidiaries have not been audited in the most recent five-year period.

Neither the Company’s nor the Bank’s state tax returns, as well as those of its subsidiaries have not been audited in the most recent five-year period.

A financial institution or business corporation is generally entitled to special tax treatment as a “security corporation” under Massachusetts law provided that:

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and (b) it has applied for, and received, classification as a “security corporation” by the Commissioner of the Massachusetts Department of Revenue.

A security corporation that is also a

bank holding company under the Internal Revenue Code must pay a tax equal to 0.33% of its gross income.

A security corporation that is also a bank holding company under the Internal Revenue Code must pay a tax equal to 0.33% of its gross income.

A security corporation that is not a bank holding company under the Internal Revenue Code must pay a tax equal to 1.32% of its gross income.

Needham Bank’s wholly owned subsidiary, Needco-op Investment Corporation, which engages in securities transactions on its own behalf, is qualified as a security corporation.

The Bank’s wholly owned subsidiary, Needco-op Investment Corporation, which engages in securities transactions on its own behalf, is qualified as a security corporation.

As such, it has received security corporation classification by the Massachusetts Department of Revenue and does not conduct any activities deemed impermissible under the governing statutes and the various regulations, directives, letter rulings and administrative pronouncements issued by the Massachusetts Department of Revenue.

As a Maryland business corporation, NB Bancorp is required to file an annual report with and pay franchise taxes to the state of Maryland.

As a Maryland business corporation, the Company is required to file an annual report with and pay franchise taxes to the state of Maryland.

Availability of Annual Report on Form 10-K

This Annual Report on Form 10-K is available on our website at www.needhambank.com.

This Annual Report on Form 10-K is available on our website at www.nbbancorp.com.

Information on the website is not incorporated into, and is not otherwise considered a part of, this Annual Report on Form 10-K.

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 1. Business