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Item 8. Financial Statements and Supplementary Data

2025-03-07 compared with 2024-03-28 · 642 added, 530 removed, 956 unchanged (55% of the section changed)

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We have audited the accompanying consolidated balance sheets of NB Bancorp, Inc.

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has elected to change its method of accounting for credit losses effective January 1, 2023 due to the adoption of Financial Accounting Standards Board Accounting Standards Codification No.

326, Financial Instruments – Credit Losses (ASC 326).

The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles.

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Consolidated Balance Sheets

December 31, 2023 and 2022

(Dollars in thousands)

5 unchanged sentences

Available-for-sale securities, at fair value

Loans receivable

Loans receivable, net of deferred fees

Allowance for credit losses

1 unchanged sentence

Banking premises and equipment, net

Depositors Insurance Fund stock

Federal Home Loan Bank stock

Federal Reserve Bank stock

Non-public investments

1 unchanged sentence

Prepaid expenses and other assets

Income tax refunds receivable

Deferred income tax asset

Deferred income tax asset, net

Liabilities and shareholders' equity

Core deposits

Brokered deposits

Total deposits

Mortgagors' escrow accounts

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Total liabilities

Commitments and contingencies (Notes 2, 6, 8 & 12)

Shareholders' equity:

Preferred stock, $ 0.01 par value, 5,000,000 shares authorized;

no shares issued and outstanding

Common shares, $ 0.01 par value, 120,000,000 shares authorized;

42,705,729 shares issued and outstanding at December 31, 2023;

no shares issued and outstanding at December 31, 2022

issued and outstanding

Common stock, $ 0.01 par value, 120,000,000 shares authorized;

issued and outstanding at December 31, 2024 and 2023, respectively

Additional paid-in capital

Unallocated common shares held by the Employee Stock Ownership Plan

Unallocated common shares held by the Employee Stock Ownership Plan ("ESOP")

Retained earnings

5 unchanged sentences

Consolidated Statements of Income

For the Years Ended December 31, 2023 and 2022

(Dollars in thousands, except per share amounts)

2 unchanged sentences

Interest and fees on loans

Interest on investments securities

Interest on cash equivalents and other

Interest on investment securities

Interest and dividends on cash equivalents and other

Total interest and dividend income

1 unchanged sentence

Interest on deposits

Interest on FHLB borrowings

Interest on borrowings

Total interest expense

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PROVISION FOR CREDIT LOSSES

Provision for credit losses - allowance for credit losses

Provision for credit losses - allowance for unfunded commitments

Provision for credit losses - loans

(Release of) provision for credit losses - unfunded commitments

Total provision for credit losses

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Swap contract income

Loss on sale of available-for-sale securities, net

Employee retention credit income

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Data processing expenses

Charitable contribution expense

Marketing expense

Marketing and charitable contribution expenses

FDIC and state insurance assessments

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INCOME BEFORE TAXES

Weighted average common shares outstanding

INCOME TAX EXPENSE

Weighted average common shares outstanding, basic

Weighted average common shares outstanding, diluted

Earnings per share, basic

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Consolidated Statement of Comprehensive Income

For the Years Ended December 31, 2023 and 2022

(In thousands)

For the Year Ended

OTHER COMPREHENSIVE INCOME (LOSSES):

Unrealized Holding Gains (Losses) on AFS Securities

Unrecognized Pension Losses on Director Pension Plan

Unrealized Holding (Losses) Gains on Cash Flow Hedge

OTHER COMPREHENSIVE INCOME (LOSS), BEFORE TAX PROVISIONS

INCOME TAX (BENEFIT) PROVISIONS

OTHER COMPREHENSIVE INCOME (LOSS), AFTER TAX PROVISIONS

COMPREHENSIVE INCOME

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Net change in fair value of available-for-sale securities

Net change in other comprehensive income for director pension plan

Net change in fair value of cash flow hedge

TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX:

TOTAL COMPREHENSIVE INCOME, NET OF TAX

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statement of Changes in Shareholders’ Equity

For the Years Ended December 31, 2023 and 2022

(Dollars in thousands)

For the Year Ended

Stock Held by

Comprehensive

Shareholders'

Income (Loss)

Balance at December 31, 2021

Other comprehensive loss, net of tax

Balance at December 31, 2022

Balance, December 31, 2021

Other comprehensive income, net of tax

Balance, December 31, 2022

Adoption of ASU 2016-13

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Purchase of common shares by the ESOP ( 1,000,000 shares)

Balance at December 31, 2023

Balance, December 31, 2023

Adoption of ASU 2023-02

Other comprehensive income, net of tax

Net costs from stock offering and issuance of common shares

Purchase of common shares by the ESOP ( 2,416,458 shares)

ESOP shares committed to be released ( 170,823 shares)

Balance, December 31, 2024

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated Statements of Cash Flows

For the Years Ended December 31, 2023 and 2022

(Dollars in thousands)

Year Ended December 31,

For the Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to reconcile net income to net cash from operating activities:

Net (accretion) amortization of investment securities

Net (accretion) amortization of available-for-sale securities

Gain from bargain purchase and assumption agreement

Amortization of core deposit intangible

Loss on sale of available-for-sale securities, net

Provision for credit losses

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Depreciation and amortization expense

Increase in cash surrender values of bank-owned life insurance

Deferred income taxes (credits)

Increase in cash surrender values of BOLI

Deferred income tax benefit

Changes in operating assets and liabilities:

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Prepaid expenses and other assets

Income tax refunds receivable

Accrued expenses and other liabilities

Accrued retirement liabilities

NET CASH PROVIDED FROM OPERATING ACTIVITIES

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Loan originations and pools purchased, net of repayments

Loan originations and purchases, net of repayments

Purchases of available-for-sale securities

Maturities, calls and principal repayments of available-for-sale securities

Purchases of Federal Home Loan Bank stock, net

Purchases of Federal Reserve Bank stock, net

Proceeds from sales of available-for-sale securities

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

Recoveries of loans previously charged off

Net change in non-public investments

Cash acquired under purchase and assumption agreement

Premiums paid on bank-owned life insurance

Purchases of BOLI policies

Purchases of banking premises and equipment

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Net change in mortgagors' escrow accounts

Net proceeds from stock offering and issuance of common shares

Purchase of common shares by the ESOP

Increase (decrease) in FHLB borrowings, net

NET CASH PROVIDED FROM FINANCING ACTIVITIES

RESULTING IN A NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(Decrease) increase in FHLB borrowings, net

Net (costs) proceeds from stock offering and issuance of common shares

Purchase of common shares held by ESOP

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

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Supplemental disclosure of non-cash transactions:

Cumulative effect adjustment due to adoption of CECL accounting standard under ASC 326, net of income taxes

Cumulative effect adjustment of adoption of ASC 326, net of income taxes

Initial recognition of right of use assets under ASC 842

Initial recognition of operating lease liabilities under ASC 842

Unrealized gains (losses) on securities available for sale

Unrecognized Pension Losses on Director Pension Plan

Unrealized holding (losses) gains on cash flow hedge

Cumulative effect adjustment of adoption of ASU 2023-02, net of income taxes

Unrealized gains on available-for-sale securities

Unrealized holding losses on cash flow hedge

Mortgage loans transferred to loans held for sale

The accompanying notes are an integral part of these consolidated financial statements.

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Corporate Structure and Nature of Operations

NB Bancorp, Inc.

(the “Company”), a Maryland corporation, is a bank holding company.

Through its wholly-owned subsidiary, Needham Bank (the “Bank”), the Company provides a variety of banking services, through its full-service bank branches, located in Massachusetts.

The Bank’s deposits are insured by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (FDIC) up to federal limits.

All deposits above the FDIC insurance amount are insured by the Depositors Insurance Fund (DIF).

The DIF is a private, industry-sponsored insurance fund that insures all deposits above FDIC limits at our member banks.

The Bank provides numerous services to customers, including the maintenance of checking, savings, money market and certificate of deposit accounts, and the granting of several types of residential, construction, commercial, and consumer loans.

The primary market area of the Company is the metro-west area of Boston and surrounding communities, with headquarters in Needham and branch locations in Wellesley, Westwood, Dedham, Medfield, Medford, Dover, Ashland, Millis, Natick and Mission Hill.

The Bank is subject to competition from other financial institutions, including commercial banks, other savings and co-operative banks, credit unions, mortgage banking companies, and other financial service providers.

The primary regulators of the Company are the Massachusetts Commissioner of Banks and the Federal Reserve System (see Note 11, Regulatory Capital Requirements).

As part of the criteria for membership in the Federal Reserve System, the Company is required to maintain stock in the Federal Reserve Bank (see Note 2, Investment Securities).

Conversion and Reorganization

Pursuant to a Plan of Conversion (the “Plan”), NB Financial, MHC (the “MHC”), the Bank’s former mutual holding company parent and the predecessor of the Company, converted from a mutual holding company into a publicly traded stock form of organization on December 27, 2023.

NB Bancorp, Inc., a Maryland corporation (the “Company”), is a bank holding company.

Through its wholly-owned subsidiary, Needham Bank (the “Bank”), the Company provides a variety of banking services, through its full-service bank branches, located primarily in eastern Massachusetts.

The activities of the Company and the Bank are subject to the regulatory supervision of the Board of Governors of the Federal Reserve System.

The activities of the Bank are also subject to the regulatory supervision of the Massachusetts Commissioner of Banks.

The Company and the activities of the Bank and its subsidiaries are also subject to various Massachusetts business and banking regulations.

Pursuant to a Plan of Conversion (the “Plan”), NB Financial, MHC (the “MHC”), the Bank’s former mutual holding company and the predecessor of the Company, converted from a mutual holding company into a publicly traded stock form of organization on December 27, 2023.

In connection with the conversion, the MHC transferred to the Company 100 % of MHC’s common stock, and immediately thereafter merged into the Company.

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The Company completed the offering on December 27, 2023.

Effective as of December 27, 2023, the Company donated $ 2.0 million of cash and 1,708,229 shares of common stock to Needham Bank Charitable Foundation (the “Foundation”).

Effective as of December 27, 2023, the Company donated $ 2.0 million of cash and 1,708,229 shares of common stock to the Needham Bank Charitable Foundation (the “Foundation”).

A total of 42,705,729 shares of common stock of the Company were issued and outstanding immediately after the donation to the Foundation.

After the completion of the conversion, the Bank’s employee stock ownership plan (the “ESOP”) purchased 1,000,000 shares of the Company’s common stock.

After the completion of the conversion, the Bank’s employee stock ownership plan (the “ESOP”) purchased 2,416,458 and 1,000,000 shares of the Company’s common stock during the years ended December 31, 2024 and 2023, respectively.

The cost of conversion and issuing the capital stock was deferred and deducted from the proceeds of the offering.

As of December 31, 2023, the Company incurred approximately $ 9.6 million in conversion costs, which are included in shareholders’ equity on the consolidated balance sheet as of December 31, 2023.

The Company incurred an additional $ 225,000 in conversion costs during the year ended December 31, 2024, which are included in shareholders’ equity on the consolidated balance sheet as of December 31, 2024.

In connection with the conversion, liquidation accounts are established by the Company and the Bank in an aggregate amount equal to (i) the MHC’s ownership interest in the shareholders’ equity of NB Financial, Inc.

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Basis of Presentation

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”) and its Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) as well as the rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) under the authority of federal securities laws.

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S.

GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”) and its Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) as well as the rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) under the authority of federal securities laws.

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and entities in which it holds a controlling financial interest through being the primary beneficiary or through holding a majority of the voting interest.

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Operating Segments

Accounting standards require that information be reported about a company’s operating segments using a “management approach.” Reportable segments are identified in these standards as those revenue producing components for which separate financial information is produced internally and which are subject to evaluation by the chief operating decision maker.

While the chief operating decision maker monitors the revenue streams of the various products and services, operations are managed, and financial performance is evaluated on a Company-wide basis.

Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable segment.

The Company adopted FASB ASU 2023-07 “Segment Reporting (Topic 280) - Improvement to Reportable Segment Disclosures” on January 1, 2024, which requires that information be reported about a company’s operating segments using a “management approach.” Reportable segments are identified in these standards as those revenue producing components for which separate financial information is produced internally and which are subject to evaluation by the chief operating decision maker (“CODM”).

The Company has determined that its CODM is its Chief Executive Officer.

The Company has one reportable segment:

its banking business, which consists of a full range of banking lending, savings, and small business offerings.

The CODM regularly assesses performance of the aggregated single operating and reporting segment and decides how to allocate resources based on net income calculated on the same basis as is net income reported in the Company’s consolidated statements of income and other comprehensive income.

The CODM is also regularly provided with expense information at a level consistent with that disclosed in the Company’s consolidated statements of income and other comprehensive income.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses.

Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, the valuation of deferred tax assets, actuarial estimates related to the Company’s various retirement programs, and the valuation of financial instruments.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, the valuation of deferred tax assets, actuarial estimates related to the Company’s various retirement programs, and the valuation of financial instruments.

In connection with the determination of the allowances for credit losses on loans and foreclosed real estate, management obtains independent appraisals for significant properties.

A majority of the Company's loan portfolio consists of one to four-family residential, commercial real estate, construction and land development loans in the metro-west area of Boston and its surrounding communities.

A majority of the Company's loan portfolio consists of one-to-four-family residential, commercial real estate and construction and land development loans in the metro-west area of Boston and its surrounding communities.

Accordingly, the ultimate collectability of a substantial portion of the Company's loan portfolio and the recovery of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions.

While management uses currently available information to recognize losses on loans and foreclosed real estate, future additions to the allowances for credit losses on loans and foreclosed real estate may be necessary based on changes in local economic conditions.

In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowances for credit losses on loans and foreclosed real estate.

Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examination.

Because of these factors, it is reasonably possible that the allowance for losses on loans and foreclosed real estate may change in the near future.

While management uses currently available information to recognize losses on loans and foreclosed real estate, future additions to the allowances for credit losses on loans and valuation reserves on foreclosed real estate may be necessary based on changes in local economic conditions.

In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowances for credit losses on loans and valuation reserves on foreclosed real estate.

Such agencies may require the Company to recognize additions to the allowances for credit losses on loans and valuation reserves on foreclosed real estate based on their judgments about information available to them at the time of their examination.

Because of these factors, it is reasonably possible that the allowance for credit losses on loans and valuation reserves on foreclosed real estate may change in the near future.

Summary of Significant Accounting Policies

Adoption of New Accounting Standards – On January 1, 2023, the Company adopted FASB ASU No.

Adoption of New Accounting Standards

On January 1, 2023, the Company adopted FASB ASU No.

2016-13 – Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) along with amendments ASU 2019-11 - Codification Improvements to Topic 326, Financial Instruments – Credit Losses , and ASU 2022-02 - Financial Instruments – Credit Losses (Topic 326):

Troubled Debt Restructurings and

Vintage Disclosures (“ASU 2022-02”).

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”).

Together, these ASUs, referred to herein as ASC 326, replace the incurred loss impairment methodology with the current expected credit loss methodology (“CECL”) and require consideration of a broader range of information to determine credit loss estimates at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

ASC 326 applies to financial assets subject to credit losses that are measured at amortized cost and certain off-balance sheet credit exposures, which include, but are not limited to, loans receivable, leases, held-to-maturity (“HTM”) securities, loan commitments, and financial guarantees.

In addition, ASC 326 made changes to the accounting for available for sale (“AFS”) debt securities.

One such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell.

In addition, ASC 326 made changes to the accounting for AFS debt securities.

One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell the available-for-sale debt securities.

The Company adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2023.

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The Company does not have any securities classified as HTM.

Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts are reported in accordance with previously applicable GAAP.

Results for reporting periods beginning after January 1, 2023 are presented under ASC 326.

The following table presents the impact to the consolidated balance sheet as the result of adopting ASC 326 effective January 1, 2023:

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Retained earnings

On January 1, 2023, the Company on a modified retrospective basis early adopted ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323):

Investments in Tax Credit Structures .

On January 1, 2024, the Company adopted ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323):

Investments in Tax Credit Structures on a modified retrospective basis.

This ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method ("PAM"), regardless of the program giving rise to the related income tax credits.

Previously, reporting entities were permitted to apply PAM only to qualifying tax equity investments in low-income housing tax credit structures ("LIHTCs").

The new guidance was effective for public business entities for fiscal years, including interim periods within, beginning after December 15, 2023.

Early adoption is permitted, and the amendments are applied either on a modified retrospective or retrospective basis.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Loans Receivable and Allowance for Credit Losses (“ACL”) – Loans that management has the intent and ability to hold for the foreseeable future or until loan maturity or pay-off are reported held for investment at their outstanding principal balance adjusted for any charge-offs and net of any deferred fees (including purchase accounting adjustments) and origination costs (collectively referred to as “amortized cost”).

Loan origination fees and certain direct origination costs are deferred and amortized as an adjustment of the yield using the payment terms required by the loan contract.

The Company does not apply PAM to LIHTCs.

The following table presents the impact to the consolidated balance sheet as the result of adopting ASU 2023-02 effective January 1, 2024:

January 1, 2024

December 31, 2023

Post-ASU 2023-02

Pre-ASU 2023-02

(in thousands)

Non-public investments

Retained earnings

Loans Receivable and ACL – Loans that management has the intent and ability to hold for the foreseeable future or until loan maturity or pay-off are reported held for investment at their outstanding principal balance adjusted for any charge-offs and net of any deferred fees (including purchase accounting adjustments) and origination costs (collectively referred to as “amortized cost”).

Loan origination fees and certain direct origination costs are deferred and amortized as an adjustment of yield using the payment terms required by the loan contract.

Loans are generally placed into nonaccrual status when they are past due 90 days or more as to either principal or interest or when, in the opinion of management, the collection of principal and/or interest is in doubt.

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Using federal call codes also allows the Company to utilize and assess publicly available external information when developing its estimate of the ACL.

The weighted average remaining maturity (“WARM”) method is the primary credit loss estimation methodology used by the Company and involves estimating future cash flows and expected credit losses for pools of loans using their expected remaining weighted average life.

In applying future economic forecasts, the Company utilizes a forecast period of up to two years.

The Company considers economic forecasts of inflation, Federal Open Market Committee interest rates, national gross domestic product, and unemployment rates sourced from the Federal Reserve System’s “Beige Book,” Wells Fargo’s “U.S.

Economic Outlook,” and the “Economic Forecast” publications from FHN Financial to inform the model for loss estimation.

Historical loss rates used in the quantitative model are primarily derived using both the Bank’s data, supplemented with peer bank data obtained from publicly available sources (i.e., federal call reports).

The Company considers economic forecasts of inflation, national gross domestic product, and unemployment rates sourced from the Federal Open Market Committee’s “Summary of Economic Projections” to inform the model for future loss estimation.

Additionally, interest rate forecasts sourced from CME Group’s “FedWatch”, Wells Fargo’s “U.S.

Economic Outlook,” and FHN Financial’s “Economic Forecast” publications are used for consideration of rate sensitivity in the model’s loan prepayment speed estimation.

Historical loss rates used in the quantitative model are primarily derived using both the Bank’s data and peer bank data obtained from publicly available sources (i.e., federal call reports).

The Bank’s peer group is comprised of financial institutions of relatively similar size and in similar markets (i.e., $ 10 billion or less of total assets and headquartered in Massachusetts).

Management also considers qualitative adjustments when estimating credit losses to take into account the model’s quantitative limitations.

Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of economic conditions, volume and severity of past due loans, value of underlying collateral, experience, depth, and ability of management, and concentrations of credit.

Qualitative adjustments to quantitative loss factors, either negative or positive, may include considerations of economic conditions including economic forecasts as detailed above, volume and severity of past due loans, value of underlying collateral, experience, depth, and ability of management, and concentrations of credit.

For those loans that do not share similar risk characteristics, the Company evaluates the ACL needs on an individual (or loan by loan) basis.

This population of individually evaluated loans (or loan relationships with the same primary source of repayment) is determined on a quarterly basis and is based on whether the risk grade of the loan is substandard or worse and the balance exceeds $ 500,000 , and the loan’s terms differ significantly from other pooled loans.

In accordance with the Company’s policy, non-accrual residential real estate loans that are well secured (LTV < 75 %) are not considered to warrant a downgrade to substandard risk rating and are therefore excluded from individually evaluated loans.

This population of individually evaluated loans (or loan relationships with the same primary source of repayment) is determined on a quarterly basis and consists of:

loans with a risk rating of substandard or worse or loan terms differing significantly from other pooled loans.

In accordance with the Company’s policy, non-accrual residential real estate loans that are below $ 500,000 and well secured (loan-to-value < 60 %) are excluded from individually evaluated loans.

Measurement of credit loss is based on the expected future cash flows of an individually evaluated loan, discounted at the loan’s effective interest rate, or measured on an observable market value, if one exists, or the estimated market value of the collateral underlying the loan, discounted to consider estimated costs to sell the collateral for collateral-dependent loans.

If the net value is less than the loan’s amortized cost, a specific reserve in the ACL is recorded, which is charged-off in the period when management believes the loan balance is no longer collectible.

The Company’s Allowance Committee approves the key methodologies and assumptions, as well as the final ACL on a quarterly basis.

The Company’s Troubled Asset Resolution Committee approves the key methodologies and assumptions, as well as the final ACL on at least a quarterly basis.

While management uses available information at the time of estimation to determine expected credit losses on loans, future changes in the ACL may be necessary based on changes in portfolio composition, portfolio credit quality, and/or economic conditions.

In addition, bank regulatory agencies periodically review its ACL and may require an increase in the provision for credit losses or the recognition of further loan charge-offs, based on judgments different than those of management.

Upon the adoption of ASC 326, the Company recognized an adjustment to retained earnings in the amount of $ 2.1 million, and recorded an adjustment to the allowance for credit losses in loans of approximately of $ 1.2 million and unfunded commitments on loans in the amount of approximately $ 1.8 million, net of deferred taxes of approximately $ 827,000 .

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.

Collateral-dependent Loans – The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty.

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The following provides more detail about the types of collateral that secure collateral-dependent loans:

● Commercial real estate loans may be secured by either owner occupied commercial real estate or non-owner-occupied investment commercial real estate.

● Commercial real estate and multifamily loans may be secured by either owner-occupied commercial real estate or non-owner-occupied investment commercial real estate.

Typically, owner-occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties occupied by operating companies.

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principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or any combination thereof.

Available for Sale Securities – The Company evaluates the fair value and credit quality of its AFS securities portfolio on a quarterly basis.

Available-for-Sale (“AFS”) Securities – The Company evaluates the fair value and credit quality of its AFS securities portfolio on a quarterly basis.

In the event the fair value of a security falls below its amortized cost basis, the security is evaluated to determine whether the decline in value was caused by changes in market interest rates or security credit quality.

The primary indicators of credit quality for the Company’s AFS securities portfolio are security type and credit rating, which

is influenced by a number of security-specific factors that may include obligor cash flow, geography, seniority, and others.

The primary indicators of credit quality for the Company’s AFS securities portfolio are security type and credit rating, which is influenced by a number of security-specific factors that may include obligor cash flow, geography, seniority, and others.

If unrealized losses are related to credit quality, the Company estimates the credit-related loss by evaluating the present value of cash flows expected to be collected from the security with the amortized cost basis of the security.

Subsequent to the adoption of ASC 326, if the present value of cash flows expected to be collected is less than the amortized cost basis of the security and a credit loss exists, then an ACL is recorded for the credit loss, limited by the amount that the fair value is less than amortized cost basis.

As of December 31, 2022, the Company did not have any other-than-temporarily impaired AFS securities.

Upon adoption of ASC 326, the Company determined that an ACL on AFS securities was not warranted.

As of December 31, 2023, there was no allowance for credit losses related to the available for sale portfolio.

For AFS debt securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation.

If the present value of cash flows expected to be collected is less than the amortized cost basis of the security and a credit loss exists, then an ACL is recorded for the credit loss, limited by the amount that the fair value is less than amortized cost basis.

For AFS securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation.

If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings through an allowance for credit loss.

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Losses are charged against the allowance for credit loss when management believes an available for sale security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met.

As of December 31, 2023, there was no allowance for credit loss related to the available- for-sale portfolio.

Accrued interest receivable on available for sale debt securities totaled $ 1.2 million at December 31, 2023 and was excluded from the estimate of credit losses.

As of December 31, 2024, and 2023, there was no allowance for credit losses related to the AFS securities portfolio.

Accrued interest receivable on AFS securities totaled $ 1.6 million and $ 1.2 million at December 31, 2024 and 2023, respectively, and was excluded from the estimate of credit losses.

Purchase premiums and discounts are recognized in interest income, using the interest method, to arrive at periodic interest income at a constant effective yield, thereby reflecting the securities' market yield.

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Reserve for Unfunded Commitments – The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The reserve for unfunded commitments is adjusted as a provision for credit loss expense.

The estimate includes consideration of the likelihood that funding will occur, the existence of any third-party guarantees, and an estimate of credit losses on commitments expected to be funded using the same loss rates of similar financial instruments derived in the estimation of ACL for loans receivable.

Upon the adoption of ASC 326, the Company recorded an increase in its reserve for unfunded commitments of $ 1.8 million (included in accrued expenses and other liabilities), which after related income tax effects, reduced equity by $ 1.3 million.

Comprehensive Income – Under generally accepted accounting principles, "comprehensive income" is defined as the change in equity during a period due to transactions, events and circumstances arising from non-owner sources.

Comprehensive income includes net income under generally accepted accounting principles as well as "other comprehensive income” (“OCI”), which consists of items that are excluded from net income and reported as changes in separate components of equity as required by other accounting standards.

The Company's OCI consists of unrealized gains and losses on investment securities available for sale (see Note 2), unrealized gains and losses on interest rate swap agreements (see Note 14) and unrecognized pension costs (see Note 9).

The reserve for unfunded commitments is adjusted through a provision for credit loss expense and is included in accrued expenses and other liabilities on the consolidated balance sheet.

Comprehensive Income – Under U.S.

GAAP, "comprehensive income" is defined as the change in equity during a period due to transactions, events and circumstances arising from non-owner sources.

Comprehensive income includes net income under U.S.

GAAP as well as "other comprehensive income” (“OCI”), which consists of items that are excluded from net income and reported as changes in separate components of equity as required by other accounting standards.

The Company's OCI consists of unrealized gains and losses on available-for-sale investment securities (see Note 2), unrealized gains and losses on interest rate swap agreements (see Note 13) and unrecognized pension costs (see Note 8).

The Company presents the components of OCI in a separate consolidated statement of comprehensive income (see Note 14).

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This standard applies to certain other existing accounting pronouncements that require or permit fair value measurements (see Note 12).

Cash and Cash Equivalents – For purposes of the consolidated balance sheet and statement of cash flows, cash and cash equivalents include cash and due from banks, short-term investments, and federal funds sold deposited in other financial institutions that mature within ninety days.

Other Investments – Investments in mutually-owned banking organizations (Depositors Insurance Fund, Federal Home Loan Bank and Federal Reserve Bank), cooperative organizations (Connecticut On-Line Computer Center “COCC”), and non-controlling interests in privately-held companies (Jassby, Reinventure Capital, and LearnLaunch Fund), have no quoted market values and are carried at original cost, less any estimated impairment.

Cash and Cash Equivalents – For purposes of the consolidated balance sheet and consolidated statement of cash flows, cash and cash equivalents include cash and due from banks, short-term investments, and federal funds sold deposited in other financial institutions that mature within ninety days.

Non-Public Investments – Investments in mutually-owned banking organizations (Depositors Insurance Fund, Federal Home Loan Bank and Federal Reserve Bank), cooperative organizations (Connecticut On-Line Computer Center “COCC”), and non-controlling interests in privately-held companies (Jassby, Reinventure Capital, Cross Capital and LearnLaunch Fund), have no quoted market values and are carried at original cost, less any estimated impairment.

Interest and dividends on these investments are recognized as earned or when dividends are declared.

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As of December 31, 2024 and 2023, there was no allowance for credit losses related to other investments.

A non-controlling partnership interest in the Massachusetts Housing Equity Fund XXII LLC (a Qualified Affordable Housing Project “QAHP” of the Massachusetts Housing Investment Corporation), is accounted for using the proportional amortization method, whereby the Company amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance as a component of income tax expense.

The Company’s interest in the Massachusetts Housing Equity Fund XXII LLC constitutes a variable interest entity, which is not consolidated into the Company as there is a separate managing member who controls and operates the entity.

Investments in solar energy programs are accounted for under the proportional amortization method of accounting, rather than consolidation, due to the nature of the investee’s business (solar project where control remains with the managing LLC member) and the relative insignificance to the Company’s consolidated financial statements and constitute unconsolidated variable interest entities.

LIHTC partnerships are accounted for using the equity method of accounting, whereby the Company amortizes the investment through recognition of the net investment performance as a component of general and administrative expenses in the consolidated statements of income.

LIHTC partnerships constitute variable interest entities, which are not consolidated into the Company as there are separate managing members who control and operate the entity.

Investments in solar energy programs are accounted for under the proportional amortization method of accounting and constitute variable interest entities, which are not consolidated into the Company as there are separate managing members who control and operate the entity.

Derivative Instruments and Hedging Activities – The Company follows ASC Topic 815, Derivatives and Hedging, with regard to disclosure requirements for derivatives and hedging activities, with the intent to provide users of financial statements with an enhanced understanding of:

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Mortgage servicing rights are included in “prepaid expenses and other assets” on the Company’s consolidated balance sheets.

Loan servicing income received and the related amortization of the mortgage servicing rights are included in “mortgage banking income” in the Company’s consolidated statement of income (see Note 4).

Banking Premises and Equipment – Land is carried at cost.

Other premises and equipment are carried at cost net of accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives of the

assets (see Note 5).

Depreciation is computed using the straight-line method over the estimated useful lives of the assets (see Note 4).

Maintenance and repairs are expensed as incurred while major improvements are capitalized.

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If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Assets to be disposed of are reported at the lower of carrying amount or fair value less estimated costs to sell.

Assets to be disposed of are reported at the lower of the carrying amount or fair value less estimated costs to sell.

Defined Benefit Plans:

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The Company recognizes the over-funded or under-funded status of a defined benefit plan as an asset or liability in its balance sheet and it recognizes changes in the funded status of the plan in the year in which the changes occur.

The funded status of a plan is measured as the difference between the fair value of plan assets and the “projected benefit obligation” (PBO) at the financial statement date.

The unrecognized prior service costs, net actuarial gains and accounting transition obligation are reflected as “accumulated other comprehensive income” (OCI).

The funded status of a plan is measured as the difference between the fair value of plan assets and the “projected benefit obligation” (“PBO”) at the consolidated financial statement date.

The unrecognized prior service costs, net actuarial gains and accounting transition obligation are reflected as OCI.

The changes in the plan’s funded status are recognized as charges or credits to OCI to the extent that they are not required to be recognized as components of “net periodic pension cost” in net income (see Notes 8 and 14).

Employee Pension Plans – The Company provides pension benefits for substantially all employees through membership in the Co-operative Banks Employees Retirement Association (CBERA).

Effective December 31, 2024, the director pension plan was frozen and participants no longer accrue additional retirement benefits.

Employee Pension Plan – The Company provides pension benefits for substantially all employees through membership in the Co-operative Banks Employees Retirement Association (“CBERA”).

The Plan is accounted for as a multi-employer, noncontributory, defined benefit pension plan.

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Effective December 31, 2023, the Plan was frozen and participants no longer accrue additional retirement benefits (see Note 8).

The Plan was terminated and fully liquidated in January 2025.

Employee Stock Ownership Plan ("ESOP") – ESOP shares are shown as a reduction of equity and are presented in the consolidated statements of changes in shareholders’ equity as unallocated common stock held by ESOP.

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The advertising costs of the Company are considered to benefit the period in which they are incurred.

It is the Company’s policy to expense all advertising costs in the period incurred and to include them in the operating expense section of the consolidated income statement under the category marketing and charitable contribution expenses.

The Company’s advertising expenses were approximately $ 2.7 million and $ 2.3 million for the years ended December 31, 2023 and 2022, respectively.

It is the Company’s policy to expense all advertising costs in the period incurred and to include them in the noninterest expense section of the consolidated statements of income under the category marketing and charitable contribution expenses.

The Company’s advertising expenses were $ 3.0 million, $ 2.7 million and $ 2.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Income Taxes – The Company and its subsidiaries file a consolidated federal income tax return.

The Company recognizes certain revenue and expense items in periods which are different for financial accounting purposes than for federal income tax purposes.

Deferred income tax assets and liabilities are computed under the liability method based on differences between the financial statement carrying amounts and the tax bases of assets and liabilities that will result in taxable or

deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

Deferred income tax assets and liabilities are computed under the liability method based on differences between the consolidated financial statement carrying amounts and the tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

In accordance with generally accepted accounting principles, management assesses the likelihood that tax positions taken will be sustained upon examination based on their technical merit, considering the facts, circumstances and information available at the end of each period.

In accordance with U.S.

GAAP, management assesses the likelihood that tax positions taken will be sustained upon examination based on their technical merit, considering the facts, circumstances and information available at the end of each period.

The Company recognizes the effects of significant income tax positions taken on tax returns only if the positions are “more likely than not” to be sustained upon examination by the taxing authorities.

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Interest and penalties, if any, associated with uncertain tax positions, are classified as additional income tax expense in the consolidated statements of income (see Note 9).

Subsequent events – Management has reviewed all events through the date the audited consolidated financial statements were filed with the SEC and concluded that no other events required any adjustment to the balances presented or disclosure.

Reclassifications – Certain prior period balances in the audited consolidated financial statements may have been reclassified to conform to the current year presentation.

Reclassifications – Certain prior period balances in the audited consolidated financial statements have been reclassified to conform to the current year presentation.

These reclassifications had no effect on prior year net income or shareholders’ equity.

Note 2 – Investment Securities

Available for Sale – The amortized cost and estimated fair values of securities classified as available for sale (“AFS”) are as follows:

(In thousands)

Note 2 – Securities

The amortized cost and estimated fair values of securities classified as AFS are as follows:

Allowance for

Credit Losses

December 31, 2024

Debt Securities:

(in thousands)

Available-for-Sale Debt Securities:

Treasury securities

Government agencies

Agency mortgage-backed securities

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Municipal obligations

(In thousands)

SBA securities

Allowance for

Credit Losses

December 31, 2023

Debt Securities:

(in thousands)

Available-for-Sale Debt Securities:

Treasury securities

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Municipal obligations

Investment securities with carrying values of $ 49.6 million as of December 31, 2023 were pledged to secure borrowings with the Federal Reserve Bank (see Note 8).

There were no investment securities pledged to secure borrowings with the Federal Reserve Bank as of December 31, 2022.

The Company did no t sell any AFS securities during the years ended December 31, 2023 and 2022.

The net unrealized gain (loss) on AFS securities is reported, net of deferred income tax effects, as a separate component of the Company’s shareholders’ equity, “Accumulated Other Comprehensive Income (Loss)”, and approximates the following as of the dates stated:

(In thousands)

There were no AFS securities pledged to secure borrowings with the Federal Reserve Bank (“FRB”) as of December 31, 2024.

AFS securities with carrying values of $ 49.6 million as of December 31, 2023 were pledged to secure borrowings with the FRB (see Note 7).

When AFS securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale.

During the year ended December 31, 2024, the Company sold $ 29.3 million of AFS securities and recognized gross realized losses of $ 1.9 million and gross realized gains of $ 30,000 .

There were no sales of AFS securities during the years ended December 31, 2023 and 2022.

The net unrealized loss on AFS securities is reported, net of deferred income tax effects, as a separate component of the Company’s shareholders’ equity, “Accumulated Other Comprehensive Income (Loss)”, and approximates the following as of the dates stated:

December 31, 2024

December 31, 2023

(in thousands)

Unrealized losses, net

Deferred income tax asset

Maturities of Debt Securities – The following is a summary of maturities of securities available for sale as of December 31, 2023.

Maturities of AFS Debt Securities – The following is a summary of maturities of AFS securities as of December 31, 2024.

The amortized cost and fair values are based on the contractual maturity dates.

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Over five years to ten years

Over ten years

Agency mortgage-backed securities

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12 Months or More

(In thousands)

(Dollars in thousands)

December 31, 2024

Number of Securities

Treasury securities

Government Agencies

Taxable municipals

Agency mortgage-backed securities

Agency collateralized mortgage obligations

Corporate bonds

Mortgage backed securities

Municipal obligations

SBA securities

Less than 12 Months

12 Months or More

(In thousands)

(Dollars in thousands)

December 31, 2023

Number of Securities

Treasury securities

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Municipal obligations

Municipal, Agency Debt, and U.S.

Treasury Securities – The contractual cash flows of these securities are direct obligations of municipalities or the U.S.

Treasury, or they consist of agency obligations, mortgage-backed securities or collateralized mortgage obligations which are guaranteed by Fannie Mae, Ginnie Mae, Freddie Mac, the Federal Home Loan Bank or other quasi-government agencies.

Treasury Securities, U.S.

Government Agencies, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations, Municipal Obligations and SBA securities – The contractual cash flows of these securities are direct obligations of municipalities or the U.S.

It is expected that the securities would not be settled at a price less than the amortized cost of the investment.

Corporate Bonds – The Company invests in a substantial amount of corporate bonds and subordinated debentures, which are scheduled to mature between the calendar years 2024 through 2032.

Corporate Bonds – The Company invests in corporate bonds and subordinated debentures, which are scheduled to mature between the calendar years 2025 through 2034.

These corporate bonds vary in commercial industries, including automotive, energy, consumer products, and media companies.

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These ungraded securities were primarily subordinated debt instruments issued by bank holding companies and are classified as corporate bonds in the tables above.

As of December 31, 2023, 14 securities with a market value of $ 37.9 million, respectively, did not have a third-party investment grade available.

As of December 31, 2024 and 2023, 15 and 14 securities with a market value of $ 34.7 million and $ 36.0 million, respectively, did not have a third-party investment grade available.

Investment securities with unrealized losses are generally a result of pricing changes due to changes in the interest rate environment since purchase and not as a result of permanent credit loss.

The Company does not intend to sell, nor does it believe it will be required to sell, any of its securities prior to the recovery of the amortized cost.

Because the declines in fair value are attributable to market changes in interest rates and not due to credit quality, management did not recognize an allowance for credit loss against the Company’s investment portfolio as of December 31, 2023.

Depositors Insurance Fund Stock – The Company holds stock in the Depositors Insurance Fund, as a requirement of membership.

The cost of the shares is $ 139,000 , which represents the Company’s interest in the Depositors Insurance Fund, and is not redeemable.

Federal Home Loan Bank Stock – The Company holds stock in the Federal Home Loan Bank of Boston, a regional member of the Federal Home Loan Bank (“FHLB”), as part of the Company’s membership requirements.

Non-Public Investments – Non-public investments consists of the following:

Depositors Insurance Fund (“DIF”) Stock – The Company holds stock in the DIF, as a requirement of membership.

The cost of the shares is $ 139,000 , which represents the Company’s interest in the DIF, and is not redeemable.

Federal Home Loan Bank (“FHLB”) Stock – The Company holds stock in the FHLB of Boston, a regional member of the FHLB, as part of the Company’s membership requirements.

Based upon the redemption provisions of the FHLB, the stock is restricted, has no quoted market value, and is carried at original cost.

The balance in the investment account as of December 31, 2024 and 2023 was $ 6.7 million and $ 14.6 million, respectively.

The stock serves as additional collateral on FHLB borrowings, which determines the amount of stock the Company is required to hold.

Federal Reserve Bank Stock – The Company is required to maintain shares in the Federal Reserve Bank for 50 % of the total par value in order to meet criteria for membership in the Federal Reserve System.

Federal Reserve Bank (“FRB”) Stock – The Company is required to maintain shares in the FRB for 50 % of the total par value in order to meet criteria for membership in the Federal Reserve System.

Although the full par value of the stock is $ 100 per share, the Company is required to pay only $ 50 per share at the time of purchase with the understanding that the other half of the subscription amount is subject to call at any time.

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As of December 31, 2024, the Company 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 as of December 31, 2023.

Non-Public Investments – Non-public investments consists of the following:

Connecticut On-Line Computer Center, Inc.

(“COCC”) – Common and preferred shares of COCC stock are recorded at cost.

COCC Stock – Common and preferred shares of COCC stock are recorded at cost.

As of December 31, 2024 and 2023, the Company holds 53 shares of common stock in the amount of $ 225,000 and 47 shares of common stock in the amount of $ 195,000 , respectively.

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The carrying value of this preferred stock as of December 31, 2024 and 2023 was $ 1,000,000 .

Reinventure Capital Fund I LP – During 2022, the Company invested $ 2,000,000 as a limited partner in the Reinventure Capital Fund to generate alternative investment earnings.

In July of 2022, there was a capital

distribution of $ 1,000,000 leaving the Company with a remaining investment (carrying value) of $ 1,000,000 as of December 31, 2022.

During 2023, there was an additional capital call of $ 500,000 that increased the Company’s investment (carrying value) to $ 1,500,000 as of December 31, 2023.

Reinventure Capital Fund I LP – During 2022, the Company invested $ 2.0 million as a limited partner in the Reinventure Capital Fund to generate alternative investment earnings.

In July of 2022, there was a capital distribution of $ 1.0 million leaving the Company with a remaining investment carrying value of $ 1.0 million.

During the years ended December 31, 2024 and 2023, there were additional capital calls of $ 318,000 and $ 500,000 , respectively, that increased the Company’s investment carrying value to $ 1.8 million and $ 1.5 million as of December 31, 2024 and 2023, respectively.

LearnLaunch Fund III L.P.

– During 2023, the Company invested $ 455,000 as a limited partner in the LearnLaunch Fund to generate alternative investment earnings.

The total commitment to the fund is $ 650,000 , with $ 455,000 contributed as of December 31, 2023.

– During the year ended December 31, 2023, the Company invested $ 455,000 as a limited partner in the LearnLaunch Fund to generate alternative investment earnings.

The total commitment to the fund is $ 650,000 , with $ 455,000 contributed as of December 31, 2024 and 2023.

Unconsolidated variable interest entities included in non-public investments consist of the following (See Note 20):

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The Company holds a 1.15 % interest in this partnership as of December 31, 2024.

The Company’s accumulated share of losses and tax credits as of December 31, 2023 and 2022 was $ 662,000 .

The Company’s accumulated share of losses and tax credits was $ 663,000 and $ 662,000 as of December 31, 2024 and 2023, respectively.

USA Institutional Tax Credit Fund CXLIV L.P.

("USA ITCF") – The USA ITCF partnership was formed to invest in affordable housing primarily through the acquisition of partnership interest that own leveraged low-income multi-family complexes.

The partnership invests in rural, suburban, and metropolitan areas.

The principal economic benefit from an investment in the Partnership is expected to be derived from the Low-Income Housing Tax Credits.

During 2024, through its subsidiary, 1892 Investments LLC, the Company committed to investing $ 5.0 million in USA ITCF over a thirteen-year period through 2037.

During the year ended December 31, 2024, the Company invested $ 830,000 and the investment has a carrying value of $ 821,000 as of December 31, 2024.

Sunwealth Project Pool 20 LLC (“Sunwealth”) – Sunwealth is a solar energy program formed on April 21, 2021 by the Company as a 99 % non-controlling LLC investor member and Sunwealth Holdco 8 LLC (“Holdco”) as the sole managing LLC member.

Sunwealth is in the business of developing, designing, installing, owning and maintaining solar photovoltaic energy generation facilities on the rooftops or properties of municipal and commercial customers in the United States.

Sunwealth has or intends to purchase solar photovoltaic energy generation facilities from the developers prior to any PV System that is part of any such facilities being placed in service and sell electricity or lease such facilities to off-takers in a manner that will qualify the Company, through its ownership in Sunwealth, to receive income tax credits.

Sunwealth has or intends to purchase solar photovoltaic energy generation facilities from the developers prior to any photovoltaic system that is part of any such facilities being placed in service and sell electricity or lease such facilities to off-takers in a manner that will qualify the Company, through its ownership in Sunwealth, to receive income tax credits.

Energy produced by the facilities will be sold to the applicable off-taker or the facilities will be leased to the applicable off-taker, in each case pursuant to the offtake agreements with the purchaser.

The offtake agreements include leasehold or other rights of access to all areas of the facilities on which the facilities and their parts are located so that agents of the Sunwealth are able to inspect, access, maintain and improve facility equipment and all other rights and assets necessary for the ownership and operation thereof and the sale of power from the facilities.

During 2021, through its subsidiary, 1892 Investments, the Company invested $ 2.5 million in Sunwealth for Project Pool 20.

The carrying value of the investment is approximately $ 1.9 million as of December 31, 2023 compared to $ 2.3 million as of December 31, 2022.

In addition, the Company has made a $ 2.5 million loan to Holdco to fund the project, which is included in the Company’s construction and industrial loan portfolio as of December 31, 2023 and 2022.

Sunwealth Project Pool 26 LLC – Through its subsidiary, 1892 Investments, in 2022 the Company committed $ 5.0 million to Sunwealth for Project Pool 26, of which invested $ 4.2 million (tax basis) was funded towards solar projects during 2022.

The carrying value of the investment is approximately $ 3.4 million as of December 31, 2023 compared to $ 5.0 million as of December 31, 2022, which includes a refundable advance of $ 800,000 .

The offtake agreements include leasehold or other rights of access to all areas of the facilities on which the facilities and their parts are located so that agents of Sunwealth are able to inspect, access, maintain and improve facility equipment and all other rights and assets necessary for the ownership and operation thereof and the sale of power from the facilities.

During 2021, through its subsidiary, 1892 Investments LLC, the Company invested $ 2.5 million in Sunwealth for Project Pool 20.

During the year ended December 31, 2024, the Company adopted the Proportional Amortization Method (“PAM”) under ASU 2023-03.

During the year ended December 31, 2024, the Company did not earn any income tax credits, recognized pass through income tax expense of $ 24,000 included in income tax expense on the consolidated statements of income, earned $ 91,000 in preferred returns included in general and administrative expenses on the consolidated statements of income and recognized $ 1.9 million of amortization expense through retained earnings resulting from the adoption of PAM on this investment.

The Company's accumulated share of losses and tax credits was $583,000 as of December 31, 2023.

In addition, the Company made a loan to Holdco to fund the project, which is included in the Company’s commercial and industrial loan portfolio at an outstanding balance of $ 2.1 million and $ 2.2 million as of December 31, 2024 and 2023, respectively.

Sunwealth Project Pool 26 LLC – During 2022, through its subsidiary, 1892 Investments LLC, the Company committed $ 5.0 million to Sunwealth for Project Pool 26, of which the Company invested $ 4.2 million (tax basis) towards solar projects during 2022.

At December 31, 2024, the Company has no outstanding commitments.

The Company's accumulated share of losses and tax credits was $ 774,000 at December 31, 2023.

During the year ended December 31, 2024, the Company adopted PAM under ASU 2023-03.

During the year ended December 31, 2024, the Company did not earn any income tax credits, recognized pass through income tax expense of $ 64,000 included in income tax expense on the consolidated statements of income, earned $ 162,000 in preferred returns included in general and administrative expenses on the consolidated statements of income and recognized $ 3.4 million of amortization expense through retained earnings resulting from the adoption of PAM on this investment.

In addition, the Company made a loan to Holdco to fund the project, which is included in the Company’s commercial and industrial loan portfolio at an outstanding balance of $ 3.9 million and $ 4.0 million as of December 31, 2024 and 2023, respectively.

Sunwealth Project Pool 48 LLC – During 2024, through its subsidiary, 1892 Investments LLC, the Company invested $ 3.0 million in Sunwealth for Project Pool 48.

At December 31, 2024, the Company has no outstanding commitments.

During the year ended December 31, 2024, the Company adopted PAM under ASU 2023-03.

During the year ended December 31, 2024, the Company earned $ 2.6 million in income tax credits included in income tax expense on the consolidated statements of income, recognized pass through income tax benefits of $ 499,000 included in income tax expense on the consolidated statements of income, earned $ 42,000 in preferred returns included in general and administrative expenses on the consolidated statements of income and recognized $ 3.0 million of amortization expense included in income tax expense on the consolidated statements of income on this investment.

Agilitas – Agilitas Energy, Inc.

is a developer and operator of solar renewable energy power generation and storage facilities in New England.

The Company has invested in the below projects through its subsidiary, 1892 Investments LLC:

Borden Avenue Project – The Company invested $ 7.9 million in the Borden Avenue battery storage project during 2024.

At December 31, 2024, the Company has no outstanding commitments.

During the year ended December 31, 2024, the Company adopted PAM under ASU 2023-03.

During the year ended December 31, 2024, the Company earned $ 7.1 million in income tax credits included in income tax expense on the consolidated statements of income, recognized pass through income tax benefits of $ 2.3 million included in income tax expense on the consolidated statements of income, earned $ 74,000 in preferred returns included in general and administrative expenses on the consolidated statements of income and recognized $ 7.9 million of amortization expense included in income tax expense on the consolidated statements of income on this investment.

Franklin Road Project – The Company committed to investing $ 8.1 million in the Franklin Road energy storage project during 2024.

At December 31, 2024, the Company has an outstanding commitment of $ 5.6 million included in accrued expenses and other liabilities on the consolidated balance sheet.

During the year ended December 31, 2024, the Company adopted PAM under ASU 2023-03.

During the year ended December 31, 2024, the Company earned $ 7.5 million in income tax credits included in income tax expense on the consolidated statements of income, earned $ 39,000 in preferred returns included in general and administrative expenses on the consolidated statements of income and recognized $ 7.6 million of amortization expense included in income tax expense on the consolidated statements of income on this investment.

Patriot Renewable Energy Capital, LLC (“Patriot Renewables”) – Patriot Renewables is a developer, owner, and operator of commercial-scale wind and solar energy projects.

The Company has invested in the below projects through its subsidiary, 1892 Investments.

Bertoline Project – The Company invested $ 623,000 in the Bertoline Project in 2022 with a total commitment of $ 656,000 .

During 2023, the Company invested an additional $ 26,000 .

value of the investment approximates $ 535,000 and $ 623,000 as of December 31, 2023 and 2022, respectively.

Maple Crest Project – During 2023, the Company invested $ 1.0 million towards the Maple Crest Project.

The total commitment to this solar project is $ 5.0 million, with $ 1.0 million contributed as of December 31, 2023.

The Company has invested in the below projects through its subsidiary, 1892 Investments LLC.

Bertoline Project – The Company invested $ 623,000 in the Bertoline Project in 2022 and $ 33,000 in 2023 with a total commitment of $ 656,000 .

At December 31, 2024, the Company has no outstanding commitments.

During the year ended December 31, 2024, the Company adopted PAM under ASU 2023-03.

During the year ended December 31, 2024, the Company recognized $ 494,000 of amortization expense through retained earnings resulting from the adoption of PAM on this investment.

The Company's accumulated share of losses and tax credits was $ 103,000 at December 31, 2023.

Maple Crest Project – During 2024 and 2023, the Company invested $ 247,000 and $ 4.7 million, respectively towards the Maple Crest Project, with a total commitment to this solar project of $ 5.0 million.

During the year ended December 31, 2024, the Company adopted PAM under ASU 2023-03.

At December 31, 2024, the Company has no outstanding commitments.

During the year ended December 31, 2024, the Company did not earn an income tax credits, recognized pass through income tax benefits of $ 280,000 included in income tax expense on the consolidated statements of income, earned $ 74,000 in preferred returns included in general and administrative expenses on the consolidated statements of income and recognized $ 4.3 million of amortization expense through retained earnings resulting from the adoption of PAM on this investment.

The Company's accumulated share of losses and tax credits was $ 647,000 at December 31, 2023.

Note 3 – Loans Receivable and ACL

All loan and ACL information presented as of and for the year ended December 31, 2023 is in accordance with ASC 326.

All loan information presented prior to this period is presented in accordance with previous GAAP.

As a result, the presentation of information pre-ASC 326 and post-ASC 326 adoption will not be comparable for most disclosures.

Loans consist of the following as of the dates stated (in thousands):

Loans consist of the following as of the dates stated:

December 31, 2024

December 31, 2023

(Dollars in thousands)

One-to-four-family residential

Residential real estate

Total residential real estate

Commercial real estate

Multi-family residential

Commercial real estate

Total commercial real estate

Construction and land development

Commercial and industrial

Total commercial

Consumer, net of premium/discount

1 unchanged sentence

Allowance for credit losses

Included in the above as of December 31, 2023 is approximately $ 320.5 million in loans to borrowers in the cannabis industry, of which 80 % is collateralized by real estate compared to $ 58.3 million of cannabis industry loans, of which 91 % is collateralized by real estate at December 31, 2022.

Included in the above are approximately $ 459.6 million and $ 365.9 million in loans to borrowers in the cannabis industry, of which 77 % and 80 % is collateralized by real estate at December 31, 2024 and 2023, respectively.

Of that total, $ 321.9 million and $ 207.7 million were direct loans to cannabis companies and were collateralized by real estate at December 31, 2024 and 2023, respectively.

None of the loans to borrowers in the cannabis industry are collateralized by cannabis.

For the reporting period ended December 31, 2023, the Company disclosed loans to borrowers in the cannabis industry of $ 320.5 million.

Based on revised classifications, the amount of loans to borrowers in the cannabis industry at December 31, 2023 was $ 365.9 million.

The reclassification did not have a significant impact on the calculation of the ACL.

Mortgage loans sold to and serviced for investors are not included in the accompanying consolidated financial statements.

The loans serviced for others were sold without recourse provisions.

The aggregate outstanding unpaid principal balance of such loans approximated $ 221.5 million and $ 215.7 million at December 31, 2024 and 2023, respectively.

Gains on loans sold, including recognition of mortgage servicing rights, for the years ended December 31, 2024, 2023 and 2022 amounted to $ 546,000 , $ 29,000 and $ 60,000 , respectively, and are included in “mortgage banking income” in the noninterest income section in the consolidated statements of income.

During the years ended December 31, 2024 and 2023, the Company purchased approximately $ 46.8 million and $ 34.2 million, respectively, of consumer loan pools.

These purchases included loan pools collateralized by boat and recreational vehicles, automobiles, and solar panels, as well as unsecured home improvement loans.

The outstanding balances of these consumer loan pools, shown net of premium (discount) are as follows as of the dates stated (in thousands):

The outstanding balances of these consumer loan pools, shown net of premium (discount) are as follows as of the dates stated:

December 31, 2024

Premium (Discount)

(in thousands)

Student loans

5 unchanged sentences

Premium (Discount)

(in thousands)

Student loans

3 unchanged sentences

Home improvement loans

For purposes of the schedules included in this note, the Company classifies multi-family residential loans as commercial real estate.

The following table presents the aging of the amortized cost of loans receivable by loan category as of the date stated (in thousands):

More Past Due

December 31, 2024

More Past Due

Still Accruing

(in thousands)

Real estate loans:

1 unchanged sentence

Commercial real estate

Multi-family residential

Construction and land development

1 unchanged sentence

December 31, 2023

More Past Due

Still Accruing

(in thousands)

Real estate loans:

One-to-four-family residential

Construction & land development

Commercial & industrial loans

Consumer loans

Commercial real estate

Multi-family residential

Construction and land development

Commercial and industrial

The following table presents the amortized cost of nonaccrual loans receivable by loan category as of the date stated (in thousands):

1 unchanged sentence

December 31, 2023

(In thousands)

Real estate loans:

3 unchanged sentences

Commercial and industrial

During the year ended December 31, 2023, the Company reversed $ 37 thousand of interest income for loans that were placed on non-accrual.

During the years ended December 31, 2024 and 2023, the Company reversed $ 498,000 and $ 116,000 of interest income, respectively, for loans that were placed on non-accrual.

Credit Quality Information

9 unchanged sentences

There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.

Non-accrual residential real estate loans that are well secured (LTV< 75 %) are not considered to warrant a downgrade to a substandard risk rating.

Loans rated 8:

10 unchanged sentences

Revolving Loans

Residential Real Estate

One-to-Four-Family Residential

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Commercial Real Estate

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Construction and Land Development

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

1 unchanged sentence

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

The following tables present an analysis of the change in the ACL by major loan segment for the period stated (in thousands):

(1) Consumer loans are not formally risk rated and included $ 2.4 million of loans on non-accrual as of December 31, 2024

The following table presents the amortized cost of loans receivable by internal risk grade by year of origination as of December 31, 2023.

Also presented are current period gross charge-offs by loan type and vintage year for the year ended December 31, 2023.

Term Loans Amortized Cost Basis by Origination Year (in thousands)

Revolving Loans

One-to-Four-Family Residential

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Commercial Real Estate

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Construction and Land Development

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Commercial and Industrial

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

Special Mention

Loans not formally risk rated (1)

Current period gross charge-offs

(1) Consumer loans are not formally risk rated and included $ 1.5 million of loans on non-accrual as of December 31, 2023

The following tables present an analysis of the change in the ACL by major loan segment for the period stated:

For the Year Ended December 31, 2024

Commercial and

(in thousands)

Balance at December 31, 2023

Provision for (release of) credit losses

Recoveries of loans previously charged-off

Balance at December 31, 2024

For the Year Ended December 31, 2023

Construction and

Commercial and

Land Development

(in thousands)

Balance at December 31, 2022

Adjustment to allowance for adoption of ASU 2016-13

Provision for credit losses - ACL

Provision for (release of) credit losses

Recoveries of loans previously charged off

Balance at December 31, 2023

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

The impact of these changes resulted in provisions for credit losses of $ 333 thousand.

The following table presents the amortized cost of collateral-dependent loans of December 31, 2023 (in thousands):

The following table presents the amortized cost of collateral-dependent loans as of December 31:

Real estate loans:

(in thousands)

One to four-family residential

Commercial real estate

Construction and land development

1 unchanged sentence

The Company closely monitors the performance of borrowers experiencing financial difficulty to understand the effectiveness of its loan modification efforts.

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

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 no t modify any loans to borrowers experiencing financial difficulty during the year ended December 31, 2023.

Allowance for Credit Losses – Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e., commitment cannot be canceled at any time).

The allowance for off-balance sheet credit exposures is adjusted as a provision for (reversal of) credit loss expense.

The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans.

The allowance for credit losses for unfunded loan commitments of $ 6.0 million as of December 31, 2023 is classified separately on the consolidated balance sheet with accrued expenses and other liabilities.

There no allowance was for credit losses for unfunded commitments as of December 31, 2022.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2023 (in thousands):

The allowance for off-balance sheet credit exposures is adjusted as a provision for (release of) credit loss expense.

The allowance for credit losses for unfunded loan commitments of $ 3.2 million and $ 6.0 million as of December 31, 2024 and 2023, respectively, is classified separately on the consolidated balance sheet within accrued expenses and other liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the periods stated:

December 31, 2024

December 31, 2023

(in thousands)

Beginning balance

Adjustment to allowance for unfunded commitments for adoption of ASC 326

Provision for unfunded commitments

Balance, December 31, 2023

The impact of these changes resulted in provisions for credit losses for unfunded commitments of $ 4.2 million.

(Release of) provision for credit losses

Ending balance

Pre-ASC 326 Adoption Disclosures

Prior to the adoption of ASC 326 on January 1, 2023, the Company calculated the allowance for loan losses under the incurred loss methodology.

The following disclosures are presented under this previously applicable GAAP for the applicable prior periods.

The following disclosures are presented under this previously applicable U.S.

GAAP for the applicable prior periods.

Due to the adoption of CECL under ASC 326, two significant concepts under the incurred loss methodology disclosed below, impaired loans and troubled debt restructurings (“TDRs”) have been eliminated and replaced by collateral-dependent loans and modifications made to borrowers experiencing financial difficulties which were discussed in Note 1 and disclosed previously.

2 unchanged sentences

All TDRs were initially classified by the Company as impaired.

The following table presents a summary of the loan portfolio individually and collectively evaluated for impairment as of the date stated (in thousands):

The following table presents a summary of the loan portfolio individually and collectively evaluated for impairment as of the date stated:

Construction &

Land Development

(in thousands)

December 31, 2022

4 unchanged sentences

Loans collectively evaluated for impairment

The following tables presents a summary of impaired loans as of the date stated (in thousands):

The following tables presents a summary of impaired loans as of the date stated:

Investment in

19 unchanged sentences

Total impaired loans

Additional information about impaired loans is as follows for the period stated (in thousands):

Additional information about impaired loans is as follows for the period stated:

December 31, 2022

(in thousands)

Average recorded investment in impaired loans:

6 unchanged sentences

Amount recognized using a cash-basis method of accounting

The following table summarizes the carrying balance of troubled debt restructurings (“TDRs”) as of December 31, 2022 (in thousands):

The following table summarizes the carrying balance of TDRs as of December 31, 2022:

(in thousands)

Performing TDRs

1 unchanged sentence

There were no loans modified as TDRs and no TDRs that defaulted in the first twelve months after restructuring during the year ended December 31, 2022.

The following tables present an analysis of the change in the allowance for loan losses by loan type for the period stated (in thousands):

The following tables present an analysis of the change in the allowance for loan losses by loan type for the period stated:

For the Year Ended December 31, 2022

2 unchanged sentences

Land Development

(in thousands)

Balance, December 31, 2021

2 unchanged sentences

Balance, December 31, 2022

The following table summarizes the Company’s loans by risk rating category as of the date stated (in thousands):

The following table summarizes the Company’s loans by risk rating category as of the date stated:

Construction &

Land Development

(in thousands)

December 31, 2022

Special Mention

Note 4 – Mortgage Banking – Loan Sales and Servicing

Mortgage loans sold to and serviced for investors are not included in the accompanying financial statements.

The loans serviced for others were sold without recourse provisions.

The aggregate outstanding unpaid principal balance of such loans approximates $ 215.7 million and $ 231.4 million at December 31, 2023 and 2022, respectively.

Gains on loans sold, including recognition of mortgage servicing rights, for the years ended December 31, 2023 and 2022 were approximately $ 29,000 and $ 60,000 , respectively, and are included in "mortgage banking income" in the noninterest income section in the consolidated statements of income.

The fair value of the rights to service mortgage loans sold is estimated by management using independent market information.

This fair value is capitalized and amortized into income in proportion to, and over the period of, estimated net servicing income using the interest amortization method.

The following is a schedule of mortgage servicing assets, including the final carrying value, as of and for the years ended December 31 (in thousands):

Balance at the beginning of the year

Servicing obligations that result from transfers of financial assets

Balance at the end of the year

Management has concluded that the fair value of mortgage servicing rights, which is based on market prices for comparable mortgage servicing contracts, exceeds the carrying value.

Accordingly, there is no adjustment for impairment.

Note 4 – Premises and Equipment

The following table summarizes the Company’s premises and equipment as of December 31:

(Dollars in thousands)

The following table summarizes the Company’s premises and equipment as of the periods stated:

Expected Useful Lives

7 unchanged sentences

Less accumulated depreciation

The Company had depreciation expense for the years ended December 31, 2023 and 2022 in the amount of $ 2.7 million and $ 2.4 million, respectively.

The Company had depreciation expense for the years ended December 31, 2024, 2023 and 2022 in the amount of $ 2.8 million, $ 2.7 million and $ 2.4 million, respectively.

Note 5 – Lease Commitments

The Company is the lessee under seven building and land lease agreements for branch locations in Dedham, Dover, Ashland, Millis, Medford, Natick and Mission Hill.

The Company is the lessee under seven building and land lease agreements for branch locations in Dedham, Dover, Millis, Medford, Natick and Mission Hill and an administrative office in Wellesley.

The Company’s operating leases have remaining lease terms of 10 to 25 years, some of which include options to extend the leases for up to 10 years.

In addition to the rental amounts, the Company is responsible for its share of utilities.

The Company follows ASC 842, “Leases”, whereby all of its existing branch lease agreements have been recognized in the consolidated balance sheet in prepaid expenses and other assets as “right of use assets”, with offsetting “operating lease liabilities” in accrued expenses and other liabilities.

The Company follows ASC 842, “Leases”, whereby all of its existing branch lease agreements have been recognized in the consolidated balance sheets in prepaid expenses and other assets as “right of use assets”, with offsetting “operating lease liabilities” in accrued expenses and other liabilities.

The following is a summary of the recorded lease right-of-use assets for all of the above-mentioned lease agreements as of the dates stated (in thousands):

1 unchanged sentence

December 31, 2023

(in thousands)

Operating lease right-of-use assets

9 unchanged sentences

Recorded present value of lease obligations

The Company has included in its recorded lease obligations and right-of-use assets any of the available lease extension options permitted under the agreements for branch locations as management can be reasonably certain under lease accounting criteria that the options will be exercised.

Required payments for real estate taxes, insurance, utilities and management fees are not included in the recorded lease obligations and assets since they are variable payments that do not

depend on a specified index or rate and they are recorded to expense as they are incurred.

The Company has included in its recorded lease obligations and right-of-use assets any of the available lease extension options permitted under the agreements that management can be reasonably certain under lease accounting criteria that the options will be exercised.

Required payments for real estate taxes, insurance, utilities and management fees are not included in the recorded lease obligations and assets since they are variable payments that do not depend on a specified index or rate and they are recorded to expense as they are incurred.

Any increases in lease payments as a result of changes in the CPI are charged to lease expense.

1 unchanged sentence

The discount rates imputed on the lease obligations range from 3.01 % to 5.29 %, which represented the Company’s incremental borrowing rates for similar length terms as the applicable leases.

Total lease expense for the year ended December 31, 2023 and 2022 approximated $ 938,000 and $ 630,000 , respectively.

Total lease expense for the year ended December 31, 2024, 2023 and 2022 approximated $ 1.2 million, $ 938,000 and $ 630,000 , respectively.

Note 6 – Deposits

13 unchanged sentences

Total deposits

Contractual maturities of time deposits are as follows (in thousands):

December 31, 2023

Contractual maturities of time deposits are as follows:

December 31, 2024

(in thousands)

Within 1 year

5 unchanged sentences

As of December 31, 2024 and 2023, total deposits related to the cannabis industry are $ 395.2 million and $ 317.4 million, or 9.5 % and 9.4 %, of total deposits, respectively.

There are no customers that exceed 5 % of total deposits as of December 31, 2023 and 2022 .

There are no customers whose deposit balances exceed 5 % of total deposits as of December 31, 2024 and 2023 .

Note 7 – Borrowings

8 unchanged sentences

Advances maturing within:

One to two years

Four to five years

Five to ten years

The Company also had a line of credit from the FHLB Ideal Way in the amount of $ 6.1 million at December 31, 2023 and 2022.

The Company has no borrowings outstanding under this line of credit at December 31, 2023 or 2022.

Interest expense on the above FHLB borrowings approximated $ 14.1 million and $ 2.9 million for the years ended December 31, 2023 and 2022, respectively.

The Federal Reserve Bank – The Company has a line of credit agreement with the Federal Reserve Bank of Boston for usage of the discount window.

Within one year

Over 1 year to 2 years

Over 2 years to 3 years

Over 3 years to 4 years

Over 4 years to 5 years

The Company also has a line of credit from the FHLB Ideal Way in the amount of $ 6.1 million at December 31, 2024 and 2023.

The Company had no borrowings outstanding under this line of credit at December 31, 2024 or 2023.

Interest expense on FHLB borrowings approximated $ 4.4 million, $ 14.1 million and $ 2.9 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The Federal Reserve Bank – The Company has 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 (see Note 2).

As of December 31, 2023 and 2022, there were no borrowings outstanding under this agreement.

Interest Rate Swap Contracts – The Company was party to an International Swap and Derivative Association (“ISDA”) interest rate swap contract of $ 50.0 million with a financial institution (“counterparty”) to manage its exposure to interest rate changes previously associated with $ 50.0 million of FHLB borrowings.

The swap was modified during 2021 to manage its exposure to interest rates by replacing the FHLB borrowings with $ 50.0 million of brokered certificates of deposit (representing the notional amount of the swap contract).

The swap contract qualified as a cash flow hedge and, accordingly, the Company recorded the fair value of the contract on its consolidated balance sheet as an asset or liability, with an offset to accumulated other comprehensive income (AOCI), net of income tax impacts, and with changes reflected in other comprehensive income.

The swap contract matured during April of 2023.

The effect of the swap contract was to limit the interest rate exposure on the brokered certificates of deposits to a fixed rate ( 2.53 %) versus the three-month LIBOR.

In accordance with the swap agreement, the interest charge was calculated based upon the LIBOR and the fixed rate.

If interest as calculated was greater based on the LIBOR, the counterparty paid the difference to the Company.

However, if interest as calculated was greater based on the fixed rates, the Company paid the difference to the counterparty.

Depending on the fluctuations in the LIBOR, the Company’s interest rate exposure and its related impact on interest expense and net cash flow could increase or decrease.

The fair value of the interest rate swap agreement was the estimated amount the Company would receive or pay to terminate the agreement at a particular point in time, considering current interest rates and the creditworthiness of the counterparty.

The estimated fair value of the interest rate swap contract was provided by a third-party valuation expert.

As of December 31, 2022, the fair value of the swap contract was estimated to be an asset of approximately $ 321,000 , which was reflected as prepaid expenses and other assets, on the Company’s accompanying consolidated balance sheet.

An unrealized gain on the swap contract of approximately $ 231,000 at December 31, 2022, net of income tax effects, was recorded in AOCI on the consolidated balance sheets at December 31, 2022.

This financial instrument involved counterparty credit exposure.

The counterparty for the interest rate exchange was a major financial institution that met the Company’s criteria for financial stability and creditworthiness.

In order to mitigate counterparty default risk, should there be a significant difference in the market value of the swap components and/or the projected net interest payments, the Company or the counterparty could demand that collateral be pledged to cover the

difference on each swap contract.

The Company was required to maintain $ 500,000 of collateral deposits with the counterparty at December 31, 2022.

The swap agreement resulted in a credit to the Company’s interest expense of approximately $ 321,000 for the year ended December 31, 2023 (this swap contract matured during April 2023) and a charge to the Company’s interest expense of approximately $ 496,000 for the year ended December 31, 2022 (included with interest expense on deposits).

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

During the year ended December 31, 2024, the Company received approval from the FRB under its 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.

Note 8 – Employee Benefits

1 unchanged sentence

All employees who meet specified age and length of service requirements are eligible to participate in the 401(k) plan.

The amount contributed by the Company is included in salaries and employee benefits expense.

The amounts contributed to the 401(k) plan for the years ended December 31, 2023 and 2022 were $ 2.0 million and $ 1.9 million, respectively.

Employee Pension Plan – The Company provides pension benefits through a defined benefit plan maintained with CBERA.

The Company’s Plan assets and liabilities are pooled together with those of other financial institutions;

therefore, the Company is not required to recognize the funded status of the plan on its balance sheet and need only accrue for any quarterly contributions due and payable on demand, or any withdrawal liabilities assessed by CBERA if the Company intended to withdraw from the Plan.

Future benefit under the employee pension plan were frozen as of December 31, 2023 and the Company plans on withdrawing from the defined benefit plan maintained with CBERA.

The Company’s participation in the CBERA Plan C defined benefit plan for year ended December 31 is summarized below:

Pension Protect Act Zone

Bank’s Contributions for

Year Ended December 31,

EIN/Plan Number

The Defined Benefit Plan (Plan C) of the CBERA Retirement Program

The Company’s contributions to the Plan in each of the two periods disclosed above exceeded 5 % of the total plan contributions.

The Plan’s audited financial statements for the year ended December 31, 2022, indicated total net assets available for benefits of $ 403.6 million and total contributions from all participating employers of $ 8.6 million.

Deferred Compensation Plans – During 2014, the Company put into place an unfunded, defined contribution, Non-qualified Deferred Compensation Plan (“Deferred Comp Plan”) for select employees of the Company.

The Deferred Comp Plan was provided to key management of the Company and results in 5 % - 20 % of the employee’s then current base salary being credited to the participant’s account annually, subject to increases based upon increases in annual base compensation and the possibility of additional discretionary contributions.

The amount contributed by the Company is included in salaries and employee benefits expense on the consolidated statements of income.

The amounts contributed by the Company to the 401(k) plan for the years ended December 31, 2024, 2023 and 2022 were $ 2.6 million, $ 2.0 million and $ 1.9 million, respectively.

Employee Pension Plan – The Company provided pension benefits through a defined benefit plan maintained with the Co-operative Banks Employees Retirement Association (“CBERA”) (the “Plan”).

The Plan was a multi-employer plan whereby the contributions by each bank are not restricted to provide benefits to the employees of the contributing bank;

therefore, the Company is not required to recognize the funded status of the plan on its consolidated balance sheet and need only accrue for any quarterly contributions due and payable on demand, or any withdrawal liabilities assessed by CBERA if the Company intended to withdraw from the Plan.

Future benefits under the Plan were frozen as of December 31, 2023 and the Company withdrew from the defined benefit plan maintained with CBERA.

The Plan was terminated during the year ended December 31, 2024 and was fully liquidated in January 2025.

During the year ended December 31, 2024, an expense of $ 390,000 was recorded to reflect an increase in the liability related to the withdrawal from the Plan.

The increase was primarily driven by final computations for estimated payouts to participants.

The Company withdrew from the Plan in the second quarter of 2024.

As part of the final Plan liquidation during the first quarter of 2025, the Company contributed an additional $ 1.1 million to the Plan.

Officers’ Deferred Compensation Plan – During 2014, the Company put into place an unfunded, defined contribution, Non-qualified Deferred Compensation Plan (“Officers’ Deferred Comp Plan”) for select employees of the Company.

The Officers’ Deferred Comp Plan was provided to key management of the Company and results in 5 % - 20 % of the employee’s then current base salary being credited to the participant’s account annually, subject to increases based upon increases in annual base compensation and the possibility of additional discretionary contributions.

The employees vest at varying dates in accordance with each individual’s deferred compensation participation agreement;

however, all key officers will be fully vested upon the attainment of age 65.

The obligations under these plans are included in accrued retirement liabilities in the Company’s consolidated balance sheets and approximated $ 2.4 million and $ 2.1 million as of December 31, 2023 and 2022, respectively.

The expense under these plans (recorded in salaries and employee benefits in the consolidated statements of income) approximated $ 355,000 and $ 336,000 for the years ended December 31, 2023 and 2022, respectively.

Long-Term Incentive Plan – In January 2020, the Company put into place a long-term incentive plan for certain members of its management team where benefits are awarded annually on a discretionary basis and cliff vest after three years .

this plan, individuals are granted “phantom shares” and benefits are accrued based upon the projected growth of the Bank’s capital.

The obligations under these plans are included in accrued retirement liabilities in the Company’s consolidated balance sheets and approximated $ 2.6 million and $ 2.4 million at December 31, 2024 and 2023, respectively.

The expense under the Officers’ Deferred Comp Plan (recorded in salaries and employee benefits in the consolidated statements of income) approximated $ 300,000 , $ 349,000 and $ 335,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

Deferred Compensation Plan – In January 2022, the Company put into place an unfunded Non-qualified Deferred Compensation Plan (“Deferred Comp Plan”) for select employees of the Company.

The Deferred Comp Plan was provided to key management of the Company and allows for the employees to defer amounts from their salary, bonus, or Long-Term Incentive Plan (“LTIP”) into the Deferred Comp Plan to be paid out at a future date.

Amounts deferred under the Deferred Comp Plan increase in value based upon the growth of the Bank’s tangible capital, with the Compensation Committee holding discretionary authority.

The obligations under the Deferred Comp Plan are included in accrued retirement liabilities on the Company’s consolidated balance sheets and approximated $ 878,000 and $ 279,000 at December 31, 2024 and 2023, respectively.

The Company recognized income due to forfeitures under the Deferred Comp Plan (recorded in salaries and employee benefits in the consolidated statements of income) of $ 360,000 during the year ended December 31, 2024.

Expense under the Deferred Comp Plan (recorded in salaries and employee benefits in the consolidated statements of income) was $ 6,000 and $ 1,000 for the years ended December 31, 2023 and 2022, respectively.

LTIP – In January 2020, the Company put into place an LTIP for certain members of its management team where benefits are awarded annually on a discretionary basis and cliff vest after three years .

Under the LTIP, individuals are granted “phantom shares” and benefits are accrued based upon the projected growth of the Bank’s tangible capital.

The obligations under this plan are included in accrued retirement liabilities on the Company’s consolidated balance sheets and approximated $ 14.6 million and $ 11.1 million as of December 31, 2024 and 2023, respectively.

The expense under this plan (recorded in salaries and employee benefits in the consolidated statements of income) approximated $ 7.8 million and $ 3.3 million for the years ended December 31, 2023 and 2022, respectively.

The increase during 2023 was a result of a discretionary increase by the Compensation Committee.

Director Pension Plan – The Company has a director defined benefit pension plan, covering directors who were in service prior to 2023 and have met the plan’s vesting requirements.

The Company’s liabilities for the director pension plan are calculated by an independent actuary who used the “projected unit credit” actuarial method to determine the normal cost and actuarial liability.

A comparison of the actuarial estimates of the benefit obligations to the recorded obligations are as follows as of the measurement date, December 31 (in thousands):

The expense under this plan (recorded in salaries and employee benefits in the consolidated statements of income) approximated $ 6.1 million, $ 7.8 million and $ 3.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Director Pension Plan – The Company maintains a director defined benefit pension plan which covers members of the board of directors who were in service prior to 2023, upon meeting specific qualifications.

Pension expense under this plan is charged to current operations and consists of several components of net periodic pension cost based on various actuarial assumptions regarding future experience under the plans.

The funded status of a plan is measured as the difference between the fair value of plan assets and the “projected benefit obligation” (“PBO”) at the consolidated financial statement date.

The unrecognized prior service costs, net actuarial gains and accounting transition obligation are reflected as OCI.

Effective December 31, 2024, the director pension plan was frozen and participants no longer accrue additional retirement benefits.

A comparison of the actuarial estimates of the benefit obligations to the recorded obligations are as follows as of the measurement date, December 31:

(in thousands)

Projected benefit obligations

1 unchanged sentence

Funded status

Amounts recognized on the consolidated balance sheet as of December 31 are as follows (in thousands):

Amounts recognized on the consolidated balance sheet as of December 31 are as follows:

(in thousands)

Accrued retirement liabilities

1 unchanged sentence

Net amount recognized

Amounts included in “Accumulated Other Comprehensive Income (Loss)” that have not yet been recognized as components of net periodic pension cost as of December 31 are as follows (in thousands):

Unrecognized prior service cost

Unrecognized net loss

Amounts included in AOCI that have not yet been recognized as components of net periodic pension cost as of December 31 are as follows:

(in thousands)

Unrecognized net actuarial losses

Unrecognized prior service costs

Unrecognized losses included in AOCI

The weighted average actuarial assumptions used to determine the director pension plan projected benefit obligations and net periodic pension cost are as follows as of December 31 (in thousands):

The weighted average actuarial assumptions used to determine the director pension plan projected benefit obligations and net periodic pension cost are as follows as of December 31:

Pre-retirement discount rate for net periodic pension cost

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Rate of compensation increase

The components of projected net periodic pension cost for the year ended December 31, 2023 and 2022 are as follows (amortization amounts will be recorded via charges or credits to “other comprehensive income”) (in thousands):

The following schedule reflects the net periodic pension cost, contributions received, and benefits paid for the years ended December 31:

(in thousands)

Benefit obligation at beginning of the year

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Plan amendments

Actuarial loss (gain)

Actuarial (gain) loss

Benefits paid

Benefit obligation at end of the year

The following schedule reflects the net periodic pension cost, contributions received, and benefits paid for the year ended December 31:

The components of projected net periodic pension cost for the years ended December 31 are as follows (amortization amounts will be recorded via charges or credits to OCI):

(in thousands)

December 31, 2023

December 31, 2022

Interest cost

Amortization of net actuarial losses

Amortization of prior service costs

Amortization of net actuarial losses

Net periodic pension cost

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Benefits paid

The Company records an estimate of net periodic pension cost for the director pension plan to accrued retirement liabilities on the consolidated balance sheet on a quarterly basis.

Equity adjustments, to accumulated other comprehensive loss, in conjunction with the pension plan are recorded by the Company annually upon receipt of the independent actuarial report.

The Company records an estimate of net periodic pension cost for the director pension plan to accrued retirement liabilities on the consolidated balance sheet on a monthly basis.

Equity adjustments, to AOCI, in conjunction with the pension plan are recorded by the Company annually upon receipt of the independent actuarial report.

The following estimated pension benefit payments, which reflect expected future service as appropriate, are expected to be paid over the next ten years (in thousands):

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2030 and thereafter

Employee Stock Ownership Plan (“ESOP”) – As part of the Initial Public Offering ("IPO") completed on December 27, 2023, the Bank established a tax-qualified ESOP to provide eligible employees the opportunity to own Company shares.

The ESOP borrowed $ 47.2 million from the Company to purchase 3,416,458 common shares on the open market.

The loan is payable in annual installments over 20 years at an interest rate of 8.50 %.

As the loan is repaid to the Company, shares are released and allocated proportionally to eligible participants on the basis of each participant’s proportional share of compensation relative to the compensation of all participants.

The unallocated ESOP shares are pledged as collateral on the loan.

The Company accounts for its ESOP in accordance with FASB ASC 718-40, Compensation – Stock Compensation .

Under this guidance, unreleased shares are deducted from shareholders’ equity as unearned ESOP shares on the accompanying consolidated balance sheets.

The Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they are committed to be released.

To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, the difference will be credited or debited to shareholders' equity.

As the loan is internally leveraged, the loan receivable from the ESOP to the Company is not reported as an asset nor is the debt of the ESOP shown as a liability on the Company’s consolidated balance sheets.

Total compensation expense recognized in connection with the ESOP was $ 2.8 million for the year ended December 31, 2024.

The Company did not recognize any compensation expense related to the ESOP for the years ended December 31, 2023 and 2022.

The following table presents share information held by the ESOP:

(Dollars in thousands)

Allocated shares

Shares committed to be released

Unallocated shares

Fair value of unallocated shares

Note 9 – Income Taxes

The components of income tax expense for the years ended December 31 are as follows:

(Dollars in thousands)

December 31, 2023

December 31, 2022

(in thousands)

Current tax expense

Deferred tax expense (credits)

Deferred tax credits

Total income tax expense

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Federal solar tax credits

Partnership (income) amortization

Income from bank-owned life insurance

BOLI surrender tax and managed endowment contract penalty

Bargain purchase gain

Effective tax rate

During the year ended December 31, 2023, the Company recognized $ 5.1 million in investment tax credits and $ 1.4 million in proportional amortization expense of its carrying basis in non-public investments, both of which are included in the income tax expense line item in the consolidated statements of income.

During the year ended December 31, 2024, the Company recognized $ 17.3 million in investment tax credits and $ 18.5 million in proportional amortization expense of its carrying basis in non-public investments, both of which are included in income tax expense in the consolidated statements of income.

During the years ended December 31, 2023 and 2022, the Company recognized $ 5.1 million and $ 3.8 million in investment tax credits, respectively and no proportional amortization expense of its carrying basis in non-public investments.

The Company’s deferred income tax assets and liabilities at December 31 consist of the following:

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Deferred income tax assets:

Allowance for credit losses

Allowance for credit loss on loans

Reserve for off balance sheet commitments

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Deferred compensation

Charitable contribution carryforward

Non-accrual interest on loans

Unrealized loss on securities available for sale

Unrecognized pension cost on director pension plan

Unrealized loss on investment securities available for sale

Non-accrual interest on loans

Charitable contributions

Gross deferred income tax assets

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Effective January 1, 2020, the federal banking agencies published a final rule on a Community Bank Leverage Ratio (“CBLR”) Framework that provides a simplified measure of capital adequacy for qualified community banking organizations.

Management has determined that the Company meets the standards to qualify under the CBLR framework and opted into this framework for FDIC call reporting purposes during 2020.

Management had determined that the Company met the standards to qualify under the CBLR framework and opted into this framework for FDIC call reporting purposes during 2020.

Under the CBLR framework, a bank that maintains a CBLR of 9% (defined as Tier 1 capital divided by total average assets) is considered to have satisfied its capital requirements, determined to be well-capitalized, and will no longer be required to calculate risk-based capital ratios.

As of December 31, 2023 the Bank met the minimum requirement with a CBLR of 12.5 %.

As of December 31, 2022, the Company did not meet the requirement for the CBLR framework due to its unfunded loan commitments being over 25.00% of its capital for more than two consecutive quarters.

As of December 31, 2024, the Company no longer meets the requirement for the CBLR framework due to its unfunded loan commitments being over 25.00% 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.

Under this framework, quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of Total Capital, Tier 1 Capital and Common Equity Tier 1 Capital to Risk-Weighted Assets, and Tier 1 Capital to Total Average Assets (as defined in the regulations).

As of December 31, 2022, the Bank was categorized as well capitalized under this regulatory framework for prompt corrective action as presented in the table below (dollars in thousands).

Management believes, as of December 31, 2024, that the Company and the Bank meet all capital adequacy requirements to which each is subject.

As of December 31, 2024, the Company and the Bank were categorized as well capitalized under the regulatory framework for prompt corrective action.

To be categorized as well capitalized, the Company and the Bank must maintain minimum total risk-based, Tier 1 risk-based, Common Equity Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below.

There are no conditions or events that management believes have changed the Company’s or the Bank’s category.

The Bank’s actual capital amounts and ratios are presented in the table as of the date indicated:

To be well capitalized

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December 31, 2024

(Dollars in thousands)

Total Capital

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(to Risk-Weighted Assets)

Common Equity Tier 1 Capital

Common Equity Tier I Capital

(to Risk-Weighted Assets)

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(to Total Average Assets)

The Company’s consolidated capital ratios are consistent with the Bank’s regulatory capital ratios as reported above for December 31, 2023 and 2022.

The Company’s actual consolidated capital amounts and ratios are presented in the table as of the date indicated:

To be well capitalized

For minimum capital

under prompt corrective

adequacy purposes

action provisions

December 31, 2024

(Dollars in thousands)

Total Capital

(to Risk-Weighted Assets)

Tier 1 Capital

(to Risk-Weighted Assets)

Common Equity Tier I Capital

(to Risk-Weighted Assets)

Tier 1 Capital

(to Total Average Assets)

Note 11 – Financial Instruments with Off-Balance Sheet Risk and Concentrations of Credit Risk

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These financial instruments include commitments to originate loans, to disburse funds to borrowers on unused construction and land development loans, and to disburse funds on committed but unused lines of credit.

These financial agreements involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.

These financial agreements involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet.

The contract amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

Commitments to originate loans and disburse additional funds to borrowers on lines of credit are agreements to lend to a customer provided there is no violation of any condition established in the contract.

Commitments generally have fixed

expiration dates or other termination clauses and may require payment of a fee.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

The Company evaluates each customer’s creditworthiness on a case-by-case basis.

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therefore, the total commitment amounts do not necessarily represent future cash requirements.

Financial instruments whose contract amounts represents off-balance sheet credit risk and are not reflected in the Company’s consolidated balance sheets consist of the following at the dates stated:

(In thousands)

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance by a customer to a third party.

The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

As of December 31, 2024 and 2023, the maximum potential amount of the Company’s obligation was $ 6.0 million and $ 7.5 million, respectively, for standby letters of credit.

The Company’s outstanding standby letters of credit generally have a term of less than one year.

If a standby letter of credit is drawn upon, the Company may seek recourse through the customer’s underlying standby line of credit.

If the customer’s standby line of credit is also in default, the Company may take possession of the collateral, if any, securing the standby line of credit.

Financial instruments whose contract amounts represent off-balance sheet credit risk and are not reflected in the Company’s consolidated balance sheets consist of the following at the dates stated:

December 31, 2024

December 31, 2023

Unused commitments to extend credit

(in thousands)

Commitments to originate loans

Unadvanced funds on lines of credit

Unadvanced funds on construction loans

Letters of credit

Concentrations of Credit Risk – The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, investment securities, loans receivable, bank owned life insurance, borrowings, deposits and derivative financial instruments.

Concentrations of Credit Risk – The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, available-for-sale investment securities, loans receivable, BOLI, borrowings, deposits and derivative financial instruments.

Cash and Cash Equivalents – The Company’s cash and due from bank accounts are maintained in high credit quality financial institutions.

At times, such amounts on deposit at any one financial institution may be in excess of the FDIC insurance limits.

As of December 31, 2023, based on bank balances, the Company has no deposits in excess of federal-insured limits.

As of December 31, 2023, the Company has approximately $ 182.1 million of uninsured investments in Federal Funds sold, which are obligations of the Federal Reserve.

Investment Securities Available for Sale – The Company’s investment securities as of December 31, 2023 consist entirely of debt securities, primarily U.S.

Treasury Securities, Corporate Bonds, Municipal Obligations and other Agency Mortgage-Backed Obligations.

A full summary of the Company’s investment securities, of approximately $ 189.5 million as of December 31, 2023 and are classified as available for sale, is presented in Note 2.

As of December 31, 2024 and 2023, based on bank balances, the Company has deposits of $1.2 million and $842,000 in excess of federal-insured limits, respectively.

As of December 31, 2024 and 2023, the Company has approximately $ 152.7 million and $ 182.1 million of uninsured investments in Federal Funds sold, which are obligations of the Federal Reserve, respectively.

AFS Securities – The Company’s AFS securities as of December 31, 2024 consist entirely of debt securities, primarily U.S.

Treasury Securities, Corporate Bonds, Municipal Obligations, Agency Mortgage-Backed Obligations and SBA securities.

A full summary of the Company’s AFS securities, of approximately $ 228.2 million and $ 189.5 million as of December 31, 2024 and 2023, respectively, is presented in Note 2 to these consolidated financial statements.

Loans Receivable – The Company’s most significant group of assets is its loan portfolio of $ 4.29 billion, which represents approximately 83.3 % of total assets.

The majority of the Company’s loans, 64.0 %, are considered commercial loans, with 20 loans comprising 19.2 % of the total loan portfolio, and 30.7 % are considered residential real estate loans granted to customers in the metro-west area of Boston.

The majority of the Company’s loans, 65.4 %, are considered commercial loans, with 24 loans comprising 31.1 % of the total loan portfolio, and 28.9 % are considered residential real estate loans granted to customers, the majority of which are in the metro-west area of Boston.

Most customers are also depositors of the Bank.

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The concentrations of credit by type of loan are set forth in Note 3 to these consolidated financial statements.

Bank Owned Life Insurance – The cash surrender values of bank owned life insurance policies approximate $ 50.5 million as of December 31, 2023, and relates to policies maintained with four reputable and sound life insurance companies.

Deposits – As of December 31, 2023, $ 316.0 million ( 9.33 % of total deposits) of the Company’s deposit obligations are with customers in the cannabis industry.

Borrowings – As of December 31, 2023, all of the Company’s borrowings approximating $ 283.3 million, which is 7.50 % of total liabilities, are with the FHLB.

BOLI – The cash surrender values of BOLI policies approximate $ 102.8 million and $ 50.5 million as of December 31, 2024 and 2023, and relates to policies maintained with four reputable and sound life insurance companies.

Deposits – As of December 31, 2024 and 2023, total deposits related to the cannabis industry are $ 395.2 million and $ 317.4 million, or 9.5 % and 9.4 %, of total deposits, respectively.

Borrowings – As of December 31, 2024 and 2023, all of the Company’s borrowings, approximating $ 120.8 million and $ 283.3 million, which is 2.8 % and 3.2 % of total liabilities, respectively, are from the FHLB.

Derivative Financial Instruments – The Company’s derivative contracts, including collateral deposits, are held with several financial institution counterparties.

2 unchanged sentences

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

The Company records fair value adjustments to certain assets and liabilities and determines fair value disclosures utilizing a definition of fair value of assets and liabilities that states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The Company records fair value adjustments to certain assets and liabilities and determines fair value disclosures utilizing a definition of the fair value of assets and liabilities that states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Fair value is best determined using quoted market prices, however additional considerations are involved to determine the fair value of financial assets in markets that are not active.

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Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available to management.

FASB ASC 820, “Fair Value Measurement and Disclosures Topic,” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

FASB ASC 820, “Fair Value Measurement and Disclosures Topic,” (“ASC 820”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value.

Generally accepted accounting principles establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, and gives the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs.

GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, and gives the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs.

The fair value hierarchy is as follows:

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The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements.

Investment securities – Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.

Level 1 securities would include highly liquid government bonds (such as US Treasuries), mortgage products and exchange traded equities.

AFS securities – Where quoted prices are available in an active market, AFS securities are classified within Level 1 of the valuation hierarchy.

Level 1 AFS securities would include highly-liquid government

bonds (such as US Treasuries), mortgage products and exchange traded equities.

If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.

Level 2 securities would include U.S.

Level 2 AFS securities would include U.S.

agency securities, mortgage-backed agency securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities.

In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

The carrying value of restricted FRB and FHLB stock approximates fair value based upon the redemption provisions of each entity and is therefore excluded from the following table.

In certain cases where there is limited activity or less transparency around inputs to the valuation, AFS securities are classified within Level 3 of the valuation hierarchy.

FHLB and FRB stock – The carrying value of restricted FRB and FHLB stock approximates fair value based upon the redemption provisions of each entity and is therefore excluded from the following table.

Derivative arrangements – The fair values of derivative arrangements are estimated by the Company using a third-party derivative valuation expert who relies on Level 2 inputs, namely interest cash flow models to determine a fair value by calculating a settlement termination value with the counterparty.

Assets measured and reported at estimated fair value on a recurring basis are summarized below (in thousands):

Assets measured and reported at estimated fair value on a recurring basis are summarized below:

December 31, 2024

(in thousands)

Available-for-sale securities:

Treasury securities

Government agencies

Agency mortgage-backed securities

2 unchanged sentences

Municipal obligations

SBA securities

Total available-for-sale securities

Derivative assets

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December 31, 2023

(in thousands)

Available-for-sale securities:

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Municipal obligations

Interest rate swap (cash flow hedge)

Total available-for-sale securities

Derivative assets

Derivative liabilities

The Company purchased $ 3.0 million in level 3 subordinated debentures during the year ended December 31, 2022.

There were no purchases during the year ended December 31, 2023.

There were no sales or transfers of level 3 assets during the year ended December 31, 2023 or 2022.

The changes in level 3 subordinated debentures during the year ended December 31, 2023 are attributable to total net gains (losses) included in other comprehensive income

The Company may also be required from time to time to measure certain other assets on a non-recurring basis in accordance with generally accepted accounting principles.

During the year ended December 31, 2024, the Company purchased one Level 3 bank holding company subordinated debenture for $ 1.0 million.

There were no purchases of Level 3 assets during the year ended December 31, 2023.

During the year ended December 31, 2024, the Company transferred one Level 3 bank holding company subordinated debenture to Level 2 approximating $ 2.0 million as it is valued by quoted prices in markets that are not active.

There were no sales or transfers of Level 3 assets during the year ended December 31, 2023.

Other than the purchase and transfer noted above, the changes in Level 3 subordinated debentures during the years ended December 31, 2024 and 2023 are attributable to total net gains (losses) included in OCI.

The Company may also be required from time to time to measure certain other assets on a non-recurring basis in accordance with U.S.

Any adjustments to fair value usually result in write-downs of individual assets.

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(in thousands)

Impaired Loans - Pre-ASC 326

Collateral-dependent loans

Mortgage servicing rights

For Level 3 assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2024 and 2023, the significant unobservable inputs used in the fair value measurements were as follows:

December 31, 2023

Collateral-dependent loans (previously known as impaired loans)

Appraisal Value/ Comparison Sales

Appraisals and/or sales of comparable properties

Appraisals discounted 5 to 20 % for sales commission and other holding costs

Mortgage servicing rights

Discounted Cash Flows

Comparable sales

Weighted average discount rate - 8 %

Constant prepayment rate – 5 %

December 31, 2022

Impaired Loans

Collateral-dependent (previously known as impaired loans)

Appraisal Value/ Comparison Sales

Appraisals and/or sales of comparable properties

Appraisals discounted 5 to 20 % for sales commission and other holding costs

Appraisals discounted 5 to 20 % for sales commission, market factors and other holding costs

Mortgage servicing rights

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Comparable sales

Constant prepayment rate - 5 %

Weighted average discount rate - 8 %

Fair Value of Financial Instruments – The following table includes the estimated fair value of the Company’s financial assets and financial liabilities.

The methodologies for estimating the fair value of financial assets and financial liabilities measured on a recurring and nonrecurring basis are discussed above.

The methodologies for estimating the fair value for other financial assets and financial liabilities are discussed below.

Weighted average discount rate – 12 % Constant prepayment rate – 7 %

Fair Value of Financial Instruments – The following table includes the estimated fair value of the Company’s financial assets and liabilities.

The methodologies for estimating the fair value of financial assets and liabilities measured on a recurring and nonrecurring basis are discussed above.

The methodologies for estimating the fair value for other financial assets and liabilities are discussed below.

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies.

4 unchanged sentences

December 31, 2024

Fair Value Measurements

(Dollars in thousands)

(In thousands)

Financial Assets:

Cash and cash equivalents

Non-public investments

Loans receivable, net

Accrued interest receivable

Bank owned life insurance ("BOLI")

Other non-public investments

Financial Liabilities:

Noninterest-bearing demand deposits

Savings, NOW and money markets

Deposits, other than time deposits

Time deposits

1 unchanged sentence

December 31, 2023

Fair Value Measurements

(Dollars in thousands)

(In thousands)

Financial Assets:

Cash and cash equivalents

Non-public investments

Loans receivable, net

Accrued interest receivable

Bank owned life insurance ("BOLI")

Other non-public investments

Financial Liabilities:

Noninterest-bearing demand deposits

Savings, NOW and money markets

Deposits, other than time deposits

Time deposits

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Cash and cash equivalents – The carrying amount approximates fair value for these instruments.

Non-public investments – Non-public investments are carried at original cost basis, as cost or accounted for using the equity method.

This approximates fair value as there is no ready market for such investments.

Loans receivable, net – Fair values are estimated for portfolios of loans with similar financial characteristics if collateral dependent.

Loans are segregated by type.

The fair value of performing loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect observable market information incorporating the credit, liquidity, yield and other risks inherent in the loan.

Loans receivable, net – The fair value of performing loans by loan type is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect observable market information incorporating the credit, liquidity, yield and other risks inherent in the loan.

The estimate of maturity is based upon the Company’s historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of the current economic and lending conditions.

Fair value for significant non-performing loans is generally based upon recent external appraisals.

If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows.

Fair value for significant non-performing loans is generally based upon recent external appraisals, if collateral dependent.

If appraisals are not available or the non-performing loan is not collateral dependent, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows.

Assumptions regarding credit risk, cash flows and discounted rates are judgmentally determined using available market information and specific borrower information.

Accrued interest receivable – The carrying amount approximates fair value for these instruments.

Bank – owned life insurance – Bank-owned life insurance is carried at net cash surrender value of the polices which approximates fair value since that is the approximate liquidation value of these assets.

Deposits – The fair value of deposits with no stated maturity date, such as noninterest-bearing demand deposits, savings, NOW and money market accounts, is based on the carrying value.

FHLB and FRB Stock – The carrying amount approximates fair value for these instruments.

Non-public investments – Non-public investments are carried at original cost basis or accounted for using the equity method.

This approximates fair value as there is no ready market for such investments.

BOLI – BOLI is carried at net cash surrender value of the polices which approximates fair value since that is the approximate liquidation value of these assets.

Deposits – The fair value of deposits with no stated maturity date, such as noninterest-bearing demand deposits, savings, NOW and money market accounts, approximates its the carrying value.

The fair value of time deposits is based upon the discounted value of contractual cash flows.

The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities.

Federal Home Loan Bank borrowings – Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms.

FHLB borrowings – Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms.

Note 13 – Derivatives and Hedging Activities

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These fees were capitalized into loans receivable and are being amortized against loan income over the contractual lives of the remaining designated residential loans.

The unamortized amount of this cost basis adjustment is $ 1.0 million and $ 1.2 million at December 31, 2023 and 2022, respectively.

The unamortized amount of this cost basis adjustment is $ 906,000 and $ 1.0 million at December 31, 2024 and 2023, respectively.

Non-designated Hedges – Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements and/or the Company has not elected to apply hedge accounting.

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Those interest rate swap and cap agreements are simultaneously hedged by offsetting interest rate swaps and caps that are executed with a third party, such that the Company minimizes its net risk exposure resulting from such transactions.

As of December 31, 2023, the Company had 52 interest rate swap agreements with an aggregate notional amount of $ 338.58 million related to this program.

As of December 31, 2022, the Company had 36 interest rate swap agreements and one interest rate cap agreement with an aggregate notional amount of $ 263.9 million related to this program.

Risk Participation Agreements – Risk Participation Agreements (“RPAs”) are guarantees issued by the Company to other parties for a fee, whereby the Company agrees to participate in the credit risk of a derivative customer of the other party.

As of December 31, 2024 and 2023, the Company had 67 and 52 interest rate swap agreements with an aggregate notional amount of $ 429.9 million and $ 338.6 million related to this program, respectively.

Risk Participation Agreements (“RPAs”) –RPAs are guarantees issued by the Company to other parties for a fee, whereby the Company agrees to participate in the credit risk of a derivative customer of the other party.

Under the terms of these agreements, the “participating bank” receives a fee from the “lead bank” in exchange for the guarantee of reimbursement if the customer defaults on an interest rate swap.

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These RPAs all represent “participations-in” and generally have terms ranging from five to ten years .

Tabular Disclosure of Fair Values of Derivative Instruments on the Consolidated Balance Sheet – The table below presents the fair value of the Company’s derivative financial instruments not designated as hedging instruments, as well as their classification on the consolidated balance sheets as of the dates stated (in thousands):

December 31, 2023

Derivatives (1)

Derivatives (2)

December 31, 2024

(in thousands)

Derivatives not designated as hedging instruments:

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(2) Recorded in accrued expenses and other liabilities on the consolidated balance sheets

The table below presents the financial impact of the Company’s derivative financial instruments not designated as hedges in the consolidated statements of income, caused by changes in fair value and default termination fees paid on the swap arrangements for the year ended December 31 (in thousands):

Location of Gain or (Loss)

Year ended December 31

in Income on Derivative

Derivatives Not Designated as Hedging Instruments:

RPA credit contracts-fair value adjustments

Other non-interest income

Swap contract fees, net of brokerage costs, recognized in earnings on the above noted interest rate products and RPA contracts approximated $ 2.2 million and $ 1.3 million for the years ended December 31, 2023 and 2022, respectively.

Swap contract fees, net of brokerage costs, recognized in earnings on the above noted interest rate products and RPA contracts approximated $ 1.6 million, $ 2.2 million and $ 1.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults (or is capable of being declared in default) on any of its indebtedness, then the Company could also be declared in default on its derivative obligations, and it could be required to terminate its derivative positions with the counterparty.

The Company also has agreements with certain of its derivative counterparties that contain a provision whereby if the counterparty fails to maintain its status as a well-capitalized institution, then the Company could be required to terminate its derivative positions with the counterparty.

In order to mitigate counterparty default risk in conjunction with these

interest rate products and RPA credit contracts, the Company was required to maintain collateral deposit accounts with the counterparties to these agreements in amounts of $ 9.1 million and $ 8.6 million at December 31, 2023 and 2022.

Note 15 – Other Comprehensive Income

The components of the Company’s “Accumulated Other Comprehensive Income”, along with the changes during the dates stated (net of deferred income tax effects), are as follows (in thousands):

Unrealized Gain

Total Accumulated

(Loss) on AFS

(Loss) on Cash

Other Comprehensive

Income (Loss)

Balances at December 31, 2021

Other comprehensive (losses) income, net of taxes

Balances at December 31, 2022

Other comprehensive income (losses), net of taxes

Balances at December 31, 2023

The following table presents a reconciliation of the changes in the components of “other comprehensive income” and the reclassifications out of “accumulated other comprehensive income” (in thousands):

Year Ended December 31, 2023

Unrealized Gains on AFS Securities:

Unrealized holding gains arising during the year

Unrecognized Pension Losses from Director Pension Plan:

Net actuarial losses arising during the year

New prior service costs related to plan amendments

Reclassification adjustments into net periodic pension cost:

Amortization of prior service costs

Amortization of net actuarial losses

Net change in unrecognized pension cost

Unrealized Losses on Cash Flow Hedge:

Unrealized holding losses arising during the year

Total other comprehensive income

Year Ended December 31, 2022

Unrealized Losses on AFS Securities:

Unrealized holding losses arising during the year

Unrecognized Pension Losses from Director Pension Plan:

Net actuarial gains arising during the year

In order to mitigate counterparty default risk in conjunction with these interest rate products and RPAs, the Company was required to maintain collateral deposit accounts with the counterparties to these agreements in amounts of $ 9.1 million at December 31, 2024 and 2023.

Note 14 – Other Comprehensive Income (Loss)

GAAP generally require that recognized revenue, expenses, gains and losses be included in net income.

Although certain changes in assets and liabilities are reported as a separate component of the shareholders' equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income (loss).

The components of other comprehensive income (loss) and related tax effects are as follows for the periods indicated:

For the Year Ended

December 31, 2024

December 31, 2023

December 31, 2022

(In thousands)

Tax (Expense)

Change in fair value of available-for-sale securities

Reclassification adjustment for realized gains (losses) in net income

Net change in fair value of available-for-sale securities

Change in unrecognized pension losses from director pension plan:

Net actuarial gains (losses) arising during the year

New prior service costs related to plan amendments

2 unchanged sentences

Amortization of net actuarial losses

Net change in unrecognized pension cost

Unrealized Gains on Cash Flow Hedge:

Unrealized holding gains arising during the year

Total other comprehensive loss

Net change in other comprehensive income for director pension plan

Change in fair value of cash flow hedge

Net change in fair value of cash flow hedge, net of tax

Total other comprehensive income (loss)

The following table presents the components of accumulated other comprehensive loss as of the dates stated:

December 31, 2024

December 31, 2023

December 31, 2022

(In thousands)

Net unrealized holding losses on available-for-sale securities, net of tax

Net unrealized losses cash flow hedge, net of tax

Unrecognized director pension plan benefits, net of tax

Total accumulated other comprehensive loss

Note 15 – Transactions with Officers and Directors

The Company has banking transactions with certain of its officers and directors.

These transactions were made in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not deemed related parties to the Company and did not involve more than the normal risk of collectability or present other unfavorable features.

The following table presents loan transactions with such related parties as of December 31 (in thousands):

Balance at beginning of the year

Balance at the end of the year

The Bank held related party deposits of approximately $ 1.6 million and $ 3.0 million as of December 31, 2023 and 2022, respectively.

The Company has, and expects to have in the future, related party transactions in the ordinary course of business.

The transactions include, but are not limited to, lending activities and deposit services with directors and executive officers of the Company and their affiliates.

Based on the Company’s assessment, such transactions are consistent with prudent banking practices and are within applicable banking regulations.

During the years ended December 31, 2024 and 2023, no such transactions involved amounts in excess of 5% of the Company’s total shareholders’ equity.

Note 16 – Earnings Per Share (“EPS”)

Basic EPS represents net income available to common shareholders divided by the weighted-average number of common shares outstanding during the year.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the entity.

Diluted EPS is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the year, plus the effect of potential dilutive common share equivalents computed using the treasury stock method.

There were no securities that had a dilutive effect during the year ended December 31, 2023, and therefore the weighted-average common shares outstanding used to calculate both basic and diluted EPS are the same.

There were no securities that had a dilutive effect during the years ended December 31, 2024, 2023 and 2022, and therefore the weighted-average common shares outstanding used to calculate both basic and diluted EPS are the same.

Unallocated ESOP shares are not deemed outstanding for earnings per share calculations.

Earnings per share data is not applicable for the years ended December 31, 2022 as the Company had no shares outstanding.

(Dollars in thousands, except per share data)

For the years ended December 31, 2024, 2023 and 2022, there were no anti-dilutive shares.

Earnings per share data is not applicable for the year ended December 31, 2022 as the Company had no shares outstanding.

For the Year Ended December 31,

(Dollars in thousands, except per share data)

Net income applicable to common shares

1 unchanged sentence

average unallocated ESOP shares

Average number of common shares outstanding used to calculate basic EPS

Common stock equivalents

Average number of common shares outstanding used to calculate diluted EPS

( 3,315,900 )

Average number of common shares outstanding used to calculate basic and diluted EPS

Earnings per common share:

1 unchanged sentence

Note 17 – Parent Company Only Financial Information

The following information presents the condensed balance sheet of NB Bancorp, Inc.

as of December 31, 2023 (in thousands).

The following information presents the condensed balance sheets of NB Bancorp, Inc.

as of the dates stated:

(in thousands)

Cash and cash equivalents

1 unchanged sentence

Liabilities and Shareholders' Equity

Other liabilities

Total shareholders' equity

Accrued expenses and other liabilities

Shareholders' equity

Total liabilities and shareholders' equity

The following information presents the statement of income and statement of cash flows of NB Bancorp, Inc.

for the year ended December 31, 2023 (in thousands).

The following information presents the statements of income of NB Bancorp, Inc.

for the periods stated:

Interest income

(in thousands)

Interest on ESOP loan

Interest on cash

Total interest income

Charitable contribution expense

Other expenses

Loss before income taxes and equity in undistributed net income of subsidiary

Loss before equity in undistributed net income of subsidiary

General and administrative expense

Income (loss) before income taxes and equity in undistributed net income of subsidiary

Income (loss) before equity in undistributed net income of subsidiary

Equity in undistributed net income of subsidiary

The following information presents the statements of cash flow of NB Bancorp, Inc.

for the periods stated:

Cash flows from operating activities:

(in thousands)

Adjustments to reconcile net income to net cash used in operating activities:

Changes in other liabilities

Changes in other assets

Changes in accrued expense and other liabilities

Equity in undistributed net income of subsidiary

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

ESOP share purchases

Investment in Needham Bank

1 unchanged sentence

Cash flows from financing activities:

Net proceeds from stock offering and issuance of common shares

Purchase of common shares by the ESOP

Net cash provided by financing activities:

Net increase in cash and cash equivalents

Net proceeds (costs) from stock offering and issuance of common shares

Net cash provided by (used in) financing activities:

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the period

2 unchanged sentences

Various legal claims arise from time to time in the normal course of business which, in the opinion of management, at December 31, 2024, will not have a material effect on the Company’s consolidated financial statements.

Note 20 – Purchase and Assumption Agreement

On January 14, 2022, Needham Bank entered into a purchase and assumption agreement with Eastern Bank for the transfer of Eastern Bank’s cannabis and money service banking businesses.

As part of the agreement, customer relationships transitioned to Needham Bank on April 1, 2022.

The Eastern Bank team that served this customer base transitioned to Needham Bank and are now employed at the Company’s new branch location in Medford, therefore the Company treated this as a business combination.

Approximately $ 297.7 million in deposits transitioned from Eastern Bank to Needham Bank.

Also, as a result of this transaction Needham Bank recognized a core deposit intangible of approximately $ 1.5 million as well as a corresponding after-tax bargain purchase gain of approximately $ 1.1 million.

The core deposit intangible is being amortized over a 10 - year period resulting in amortization expense of $ 149,000 and $ 112,000 during the years ended December 31, 2023 and 2022, respectively.

Note 19 – Employee Retention Tax Credit Claims

8 unchanged sentences

Note 20 – Variable Interest Entities (“VIE”)

The Company makes equity investments in various entities that are considered VIEs, as defined by GAAP.

The Company makes equity investments in various entities that are considered VIEs, as defined by U.S.

A VIE typically does not have sufficient equity at risk to finance its activities without additional subordinated financial support from other parties.

5 unchanged sentences

Unconsolidated Variable Interest Entities

Low Income Housing Tax Credit (“LIHTC”) Partnerships

Through designated wholly-owned subsidiaries, Needham Bank makes equity investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the LIHTC.

LIHTC Partnerships

Through designated wholly-owned subsidiaries, the Company makes equity investments as a limited partner in various partnerships that sponsor affordable housing projects utilizing the LIHTC.

The purpose of these investments is to achieve a satisfactory return on capital and to support the Company’s community reinvestment initiatives.

2 unchanged sentences

Accordingly, the Company does not consolidate these VIEs and accounts for these investments in non-public investments on the consolidated balance sheets.

The Company accounts for all qualifying LIHTC investments under the proportional amortization method.

Under this method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance as a component of income tax expense.

Renewable Energy Tax Credit Investments

6 unchanged sentences

Note 21 – Recently Issued Accounting Pronouncements

The following is a summary of recent authoritative announcements:

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”.

ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The ASU is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

Relevant standards that were adopted during the year ended December 31, 2024:

In November 2023, the FASB amended ASU 2023-07, “ Segment Reporting (Topic 280)” to improve disclosures about a public entity's reportable segments and provide more detailed information about a reportable segment's expense.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company does not expect the adoption of ASU 2022-03 to have a material impact on its consolidated financial statements.

The adoption of ASU 2023-07 did not have a material impact on the Company’s consolidated financial statements.

In December 2022, the FASB issued ASU 2022-06, “ Reference Rate Reform (Topic 848):

2 unchanged sentences

The objective of the guidance in Topic 848 is to provide relief during the temporary transition period, so the FASB included a sunset provision within Topic 848 based on expectations of when the London Interbank Offered Rate (“LIBOR”) would cease being published.

In 2021, the UK Financial Conduct Authority (FCA) delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023.

To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, the ASU defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

The ASU is effective for all entities upon issuance.

The Company is assessing ASU 2022-06 and its impact on the Company’s transition away from LIBOR for its loan and other financial instruments that have not already been transitioned to an alternative reference rate.

In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718)”.

This ASU amends the FASB Accounting Standards Codification for SEC paragraphs pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.

ASU 2023-03 is effective upon addition to the FASB Codification.

The Company does not expect the adoption of ASU 2023-03 to have a material impact on its consolidated financial statements.

In November 2023, the FASB amended ASC 2023-07, "Segment Reporting (Topic 280)" to improve disclosures about a public entity's reportable segments and provide more detailed information about a reportable segment's expense.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years

beginning after December 15, 2024.

In 2021, the UK Financial Conduct Authority delayed the intended cessation date of certain tenors of USD LIBOR to June 30, 2023.

To ensure the relief in Topic 848 covers the period of time during which a significant number of modifications may take place, ASU 2022-06 defers the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848.

ASU 2022-06 is effective for all entities upon issuance.

The adoption of ASU 2022-06 did not have a material impact on the Company’s consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, “ Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ”.

ASU 2022-03 is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023.

Early adoption is permitted.

The Company does not expect these amendments to have a material effect on its consolidated financial statements.

The adoption of ASU 2022-03 did not have a material impact on the Company’s consolidated financial statements.

Relevant standards that were recently issued but not yet adopted as of December 31, 2024:

In November 2024, the FASB issued ASU 2024-03, “ Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Sub Topic 220-40):

Disaggregation of Income Statement Expenses ”.

ASU 2024-03 improves disclosures about a public business entity’s expenses and addresses requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development).

ASU 20240-03 is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

Early adoption is permitted.

The adoption of ASU 2024-03 is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740):

2 unchanged sentences

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The Company does not expect these amendments to have a material effect on its consolidated financial statements.

The Company does not expect the adoption of ASU 2023-09 to have a material effect on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

1 unchanged sentence

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 8. Financial Statements and Supplementary Data