# NB Bancorp, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [NB Bancorp, Inc.](/companies/nbbk.md) (CIK 1979330)
- Form: 10-Q
- Filed: 2023-11-22
- Accepted by EDGAR: Nov 22, 2023, 12:28 ET
- Period: 2023-09-30
- Accession: 0001558370-23-019309
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1979330/000155837023019309/nbbk-20230930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1979330/000155837023019309/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $26.1m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $61.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $3.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $8.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $8.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $23.4m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $39.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $2.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Total assets | at 2023-09-30 | $4.23bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $3.87bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $365.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 49,507 characters.

### General

Management’s discussion and analysis of the financial condition and results of operations at and for the three and nine months ended September 30, 2023 is intended to assist in understanding the financial condition and results of operations of the MHC. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “intend,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

- statements of our goals, intentions and expectations;
- statements regarding our business plans, prospects, growth and operating strategies;
- statements regarding the quality of our loan portfolio; and
- estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

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

- general economic conditions, either nationally or in our market areas, that are worse than expected including as a result of employment levels and labor shortages, and the effects of inflation, a potential recession or slowed economic growth caused by supply chain disruptions or otherwise;
- inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments, including our mortgage servicing rights asset, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
- changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan and lease losses;
- the effect of any change in federal government enforcement of federal laws affecting the cannabis industry;
- changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;
- our ability to access cost-effective funding;
- fluctuations in real estate values and both residential and commercial real estate market conditions;
- demand for loans and deposits in our market area;
- our ability to implement and change our business strategies;
- competition among depository and other financial institutions;
- adverse changes in the securities or secondary mortgage markets;
- changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;
- changes in the quality or composition of our loan or investment portfolios;
- technological changes that may be more difficult or expensive than expected;
- the inability of third-party providers to perform as expected;
- a failure or breach of our operational or security systems or infrastructure, including cyberattacks;
- our ability to manage market risk, credit risk and operational risk;
- our ability to enter new markets successfully and capitalize on growth opportunities;
- changes in consumer spending, borrowing and savings habits;
- changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC or the Public Company Accounting Oversight Board;
- our ability to attract and retain key employees; and
- changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

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

### Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in NB Bancorp, Inc.’s Prospectus dated October 12, 2023, as filed with the Securities and Exchange Commission pursuant to Securities Act Rule 424(b)(3) on October 20, 2023.

### Comparison of Financial Condition as of September 30, 2023 and December 31, 2022

***Total Assets.*** Total assets increased $639.5 million, or 17.80%, to $4.23 billion as of September 30, 2023 from $3.59 billion as of December 31, 2022. The increase was primarily the result of increases in net loans, offset, in part, by decreases in cash and cash equivalents and investment securities.

***Cash and Cash Equivalents.*** Cash and cash equivalents decreased $22.7 million, or 14.51%, to $133.8 million as of September 30, 2023 from $156.5 million as of December 31, 2022. The decrease in cash and cash equivalents was due to the deployment of cash primarily into loans.

***Securities Available-for-Sale.*** Securities available-for-sale decreased $48.5 million, or 19.77%, to $196.9 million as of September 30, 2023 from $245.5 million as of December 31, 2022 due to maturities. No securities were sold during the nine months ended September 30, 2023.

***Loans, net.*** Loans, net increased $692.8 million, or 23.17%, to $3.68 billion as of September 30, 2023 from $2.99 billion as of December 31, 2022. During the period, we experienced increases in each of our loan portfolios. One- to four-family residential real estate loans increased $110.0 million, or 11.79%, from December 31, 2022 to September 30, 2023; our commercial real estate portfolio, including multi-family real estate loans, increased $273.4 million, or 27.02%, from December 31, 2022 to September 30, 2023; and commercial and industrial loans increased $224.3 million, or 90.67%, from December 31, 2022 to September 30, 2023. The increase in our loan portfolios reflects our strategy to grow the balance sheet by continuing to diversify into these higher-yielding loans to improve net margins and manage interest rate risk.

***Federal Home Loan Bank Stock.*** We held an investment in FHLB stock of $17.6 million and $13.2 million as of September 30, 2023 and December 31, 2022, respectively. The amount of stock we are required to purchase is in proportion to our FHLB borrowings and level of total assets. Accordingly, the increase in the FHLB stock during the nine months ended September 30, 2023 is due to increased borrowings.

***Prepaid Expenses and Other Assets.*** Prepaid expenses and other assets consist primarily of right of use assets related to our long-term leases and derivatives with a positive fair value and other investments. These assets increased $8.3 million, or 14.55%, to $65.5 million as of September 30, 2023 from $57.2 million as of December 31, 2022. The increase resulted primarily from the one-time recognition of $3.5 million in eligible employee retention credits, which are refundable tax credits against certain employment taxes under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and booked as a receivable in March 2023.Additionally, the MHC had incurred approximately $1.8 million as of September 30, 2023 in conversion costs, which are included in prepaid expenses and other assets on the respective consolidated balance sheets. There were no expenses incurred as of December 31, 2022

***Deposits.*** Deposits increased $549.9 million, or 19.02%, to $3.44 billion as of September 30, 2023 from $2.89 billion as of December 31, 2022.

Core deposits (which we define as all deposits including certificates of deposit, other than brokered deposits) increased $476.3 million, or 18.06%, to $3.11 billion as of September 30, 2023 from $2.64 billion as of December 31, 2022. The increase was primarily a result of a $169.4 million, or 25.69%, increase in money market accounts to $828.9 million as of September 30, 2023 from $659.5 million as of December 31, 2022 and a $123.3 million, or 27.68%, increase in noninterest-bearing checking accounts during the period, offset, in part, by a decrease of $31.0 million, or 18.99%, in savings accounts and a decrease of $63.3 million or 15.48% in NOW accounts. Certificates of deposit, including brokered deposits, increased $351.5 million, or 29.06%, to $1.56 billion as of September 30, 2023 from $1.21 billion as of December 31, 2022. As of September 30, 2023 and December 31, 2022, we had approximately $323.6 million of $250.0 million of brokered deposits, respectively.

A significant amount of our deposit growth during the nine months ended September 30, 2023 occurred in March 2023. We believe much of this growth resulted, in part, from the turmoil and liquidity uncertainty created in the banking industry by the high-profile failures of certain financial institutions around the country in March 2023. Additionally, in December 2022, we opened a new branch office in Medford, Massachusetts, and as of September 30, 2023, this branch office accounted for approximately $90.3 million of new deposits.

***Borrowings.*** Borrowings increased $52.6 million, or 17.93%, to $345.6 million as of September 30, 2023 from $293.1 million as of December 31, 2022. The increase is related to the execution of short-term borrowings to support loan growth. As of September 30, 2023, our borrowings consisted solely of FHLB advances.

***Accrued expenses and other liabilities.*** Accrued expenses and other liabilities increased $13.0 million, or 24.75%, to $65.4 million as of September 30, 2023 from $52.4 million as of December 31, 2022. The increase resulted from increases in interest accrued on brokered deposits and borrowings and the increase in allowance for credit losses reserve on unfunded commitments.

***Equity.*** Total equity increased $21.6 million, or 6.29%, to $365.7 million as of September 30, 2023 from $344.1 million at December 31, 2022, due to net income of $23.4 million for the nine months ended September 30, 2023 offset, in part, by the implementation of the CECL credit loss standard which resulted in a $2.1 million decrease to equity.

### Comparison of Operating Results for the Three Months Ended September 30, 2023 and September 30, 2022

***Net Income.*** Net income was $8.5 million for the quarter ended September 30, 2023, compared to net income of $7.1 million for the quarter ended September 30, 2022, an increase of approximately $1.4 million, or 19.35%. The increase was primarily due to a $5.7 million increase in net interest income after credit loss provision, offset in part by an increase of $4.8 million, or 26.53%, in noninterest and operating expense.

***Interest and Dividend Income.*** Interest and dividend income increased $27.8 million, or 88.37%, to $59.3 million for the quarter ended September 30, 2023 from $31.5 million for the quarter ended September 30, 2022, primarily due to a $27.1 million increase in interest and fees on loans. The increase in interest and fees on loans was primarily due to an increase of $1.08 billion in the average balance of the loan portfolio to $3.62 billion for the quarter ended September 30, 2023 from $2.54 billion for the quarter ended September 30, 2022 and an increase of 158 basis points in the weighted average yield for the loan portfolio to 6.21% for 2023 from 4.63% for 2022, reflecting the increasing rate environment year to year as well as the growth of our consumer and commercial portfolios.

Average interest-earning assets increased $991.4 million, to $3.97 billion for the quarter ended September 30, 2023 from $2.98 billion for the quarter ended September 30, 2022. The yield on interest-earning assets increased 174 basis points to 5.92% for the quarter ended September 30, 2023 from 4.18% for the quarter ended September 30, 2022.

***Interest Expense.*** Total interest expense increased $23.0 million, or 735.65%, to $26.1 million for the quarter ended September 30, 2023 from $3.1 million for the quarter ended September 30, 2022. Interest expense on deposit accounts increased $18.4 million, or 760.12%, to $20.8 million for the quarter ended September 30, 2023 from $2.4 million for the quarter ended September 30, 2022, due to an increase in the average balance of interest-bearing deposits of $632.1 million to $2.73 billion for the quarter ended September 30, 2023 from $2.10 billion for the quarter ended September 30, 2022 and an increase in the weighted average rate on interest-bearing deposits to 3.02% for the quarter ended September 30, 2023 from 0.46% for the quarter ended September 30, 2022.

Interest expense on FHLB advances increased $4.6 million, or 652.12%, to $5.3 million for the quarter ended September 30, 2023 from $708,000 for the quarter ended September 30, 2022. The average balance of FHLB advances increased $274.7 million to $383.5 million for the quarter ended September 30, 2023 from $108.8 million for the quarter ended September 30, 2022. The increase in the average balance was due to our strategy to utilize additional borrowings to support loan growth and for liquidity management.

***Net Interest Income.*** Net interest income increased $4.8 million, or 16.97%, to $33.1 million for the quarter ended September 30, 2023 from $28.3 million for the quarter ended September 30, 2022, primarily due to a $991.4 million increase in the average balance of interest-earning assets during the quarter ended September 30, 2023 and increase in average yield on interest-earning assets to 5.92% from 4.18% for the third quarter of 2022.

***Provision for Credit Losses.*** Based on management’s analysis of the adequacy of allowance for credit losses, a provision of $2.0 million was recorded for the quarter ended September 30, 2023, compared to a provision of $2.9 million for the quarter ended September 30, 2022. The decrease of $885,000, or 31.05%, in the provision was primarily due to the implementation of the CECL methodology and our analysis of the loan portfolio.

***Noninterest Income.*** Noninterest income increased $907,000, or 40.56%, to $3.1 million for the quarter ended September 30, 2023 from $2.2 million for the quarter ended September 30, 2022. The increase resulted primarily from increases in customer service fees, including cash management and money service fees related primarily to our cannabis business, and increase in the swap contract income, offset, in part, by decreases in cash surrender value of BOLI and mortgage banking income. The table below sets forth our noninterest income for the quarters ended September 30, 2023 and 2022:

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Quarter Ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Change Amount ​ ​ | ​ ​ ​ ​ ​ ​ Percent ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Customer service fees | ​ | $1,694 | ​ | $1,460 | ​ | $234 | $16.03% |
| Increase in cash surrender value of BOLI | ​ | 374 | ​ | 410 | ​ | (36) | (8.78)% |
| Mortgage banking income | ​ | 101 | ​ | 143 | ​ | (42) | (29.37)% |
| Swap contract income | ​ | 950 | ​ | 188 | ​ | 762 | 405.32% |
| Other income | ​ | 24 | ​ | 35 | ​ | (11) | (31.43)% |
| Total noninterest income | ​ | $3,143 | ​ | $2,236 | ​ | $907 | $40.56% |

***Noninterest Expense.*** Noninterest expense increased $4.7 million, or 26.00%, to $22.7 million for the quarter ended September 30, 2023 from $18.0 million for the quarter ended September 30, 2022. Salary and employee benefit expenses increased $2.6 million, or 21.91%. The increase in salary and employee benefits resulted primarily from the hiring of additional employees consistent with our business strategy to grow the Bank, including the addition of 23 employees who became employed at Needham Bank in connection with our cannabis and money service business acquisition, as well normal salary increases. Additionally, director and professional fees increased $623,000, or 63.18%, resulting primarily from increased professional services in connection with our loan operations. The table below sets forth our noninterest expense for the quarters ended September 30, 2023 and 2022:

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Quarter Ended September 30, 2023 ​ ​ | ​ ​ | ​ ​ 2022 ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Change Amount ​ ​ | ​ ​ ​ ​ ​ ​ Percent ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Salaries and employee benefits | ​ | $14,658 | ​ | $12,024 | ​ | $2,634 | 21.91% |
| Director and professional service fees | ​ | 1,609 | ​ | 986 | ​ | 623 | 63.18% |
| Occupancy and equipment expenses | ​ | 1,279 | ​ | 1,095 | ​ | 184 | 16.80% |
| Data processing expenses | ​ | 2,017 | ​ | 1,469 | ​ | 548 | 37.30% |
| Marketing and charitable contribution expenses | ​ | 918 | ​ | 822 | ​ | 96 | 11.68% |
| FDIC and state insurance assessments | ​ | 1,215 | ​ | 434 | ​ | 781 | 179.95% |
| General and administrative expenses | ​ | 1,053 | ​ | 1,149 | ​ | (96) | (8.36)% |
| Total noninterest expense | ​ | $22,749 | ​ | $17,979 | ​ | $4,770 | 26.53% |

***Income Tax Expense.*** Income tax expense increased $457,000, or 17.28%, to $3.1 million for the quarter ended September 30, 2023 from $2.6 million for the quarter ended September 30, 2022. The effective tax rate was 26.81% and 27.16% for the quarter ended September 30, 2023 and 2022, respectively.

***Average Balances and Yields.*** The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. Non-accrual loans were included in the computation of average balances. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense; such fees, discounts and premiums were not material for the periods presented.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: | ​ ​ ​ ​ ​ | ​ ​ ​ For the Quarters Ended September 30, 2023 Average Outstanding ​ Balance ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ | ​ ​ ​ | ​ ​ ​ ​ Average ​ Yield/Rate(1) ​ | ​ ​ ​ 2022 Average Outstanding ​ Balance ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ | ​ ​ ​ | ​ ​ ​ Average Yield/Rate(1) ​ |
| --- | --- | ---: | ---: | --- | ---: | ---: | ---: | --- | ---: |
| Loans | ​ | $3,623,804 ​ | $56,698 |  | 6.21% | $2,540,921 ​ | $29,628 |  | 4.63% |
| Securities | ​ | 221,689 ​ | 1,105 |  | 1.98% | 370,558 ​ | 1,461 |  | 1.57% |
| Other investments | ​ | 47,195 ​ | 440 |  | 3.69% | 28,212 ​ | 166 |  | 2.33% |
| Short-term investments | ​ | 81,422 ​ | 1,011 |  | 4.93% | 43,032 ​ | 202 |  | 1.86% |
| Total interest-earning assets | ​ | 3,974,110 ​ | 59,254 |  | 5.92% | 2,982,723 ​ | 31,457 |  | 4.18% |
| Non-interest-earning assets | ​ | 190,986 ​ | ​ ​ |  | ​ | 156,093 ​ |  |  | ​ |
| Allowance for loan losses | ​ | (32,062) ​ | ​ ​ |  | ​ | (20,545) ​ |  |  | ​ |
| Total assets | ​ | $4,133,034 ​ | ​ ​ |  | ​ | $3,118,271 ​ |  |  | ​ |
| **​** | ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ |
| **Interest-bearing liabilities:** | ​ | ​ |  |  | ​ | ​ |  |  | ​ |
| Savings accounts | ​ | $136,241 ​ | 18 |  | 0.05% | $171,806 ​ | 21 |  | 0.05% |
| NOW accounts | ​ | 344,578 ​ | 245 |  | 0.28% | 405,413 ​ | 86 |  | 0.08% |
| Money market accounts | ​ | 806,815 ​ | 5,535 |  | 2.72% | 801,772 ​ | 563 |  | 0.28% |
| Certificates of deposit and individual retirement accounts | ​ | 1,445,893 ​ | 14,991 |  | 4.11% | 722,401 ​ | 1,747 |  | 0.96% |
| Total interest-bearing deposits | ​ | 2,733,527 ​ | 20,789 |  | 3.02% | 2,101,392 ​ | 2,417 |  | 0.46% |
| FHLB advances | ​ | 383,549 ​ | 5,325 |  | 5.51% | 108,807 ​ | 708 |  | 2.58% |
| Total interest-bearing liabilities | ​ | 3,117,076 ​ | 26,114 |  | 3.32% | 2,210,199 ​ | 3,125 |  | 0.56% |
| Non-interest-bearing deposits | ​ | 575,728 ​ | ​ |  | ​ | 529,832 ​ |  |  | ​ |
| Other non-interest-bearing liabilities | ​ | 76,761 ​ | ​ ​ |  | ​ | 44,183 ​ |  |  | ​ |
| Total liabilities | ​ | 3,769,565 ​ | ​ ​ |  | ​ | 2,784,214 ​ |  |  | ​ |
| Equity | ​ | 363,469 ​ | ​ ​ |  | ​ | 334,057 ​ |  |  | ​ |
| Total liabilities and equity | ​ | $4,133,034 ​ | ​ ​ |  | ​ | $3,118,271 ​ |  |  | ​ |
| Net interest income | ​ | ​ ​ ​ | $33,140 |  | ​ | ​ | $28,332 |  | ​ |
| Net interest rate spread (2) | ​ | ​ ​ ​ | ​ ​ |  | 2.60% | ​ |  |  | 3.62% |
| Net interest-earning assets (3) | ​ | $731,114 ​ | ​ ​ |  | ​ | $581,229 ​ |  | ​ | ​ ​ |
| Net interest margin (4) | ​ | ​ ​ ​ | ​ ​ |  | 3.31% | ​ |  |  | 3.77% |
| Average interest-earning assets to interest-bearing liabilities | ​ | 132.15% | ​ ​ |  | ​ | 126.48% |  |  | ​ |

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: | ​ ​ ​ ​ ​ | ​ ​ ​ For the Nine months Ended September 30, 2023 Average Outstanding ​ Balance ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ | ​ ​ ​ | ​ ​ ​ ​ Average ​ Yield/Rate (1) ​ | ​ ​ ​ 2022 Average Outstanding ​ Balance ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ | ​ ​ ​ | ​ ​ ​ Average Yield/Rate (1) ​ |
| --- | --- | ---: | --- | --- | ---: | ---: | ---: | --- | ---: |
| Loans | ​ | $3,356,963 ​ | $150,281 |  | 5.99% | $2,350,997 ​ | $75,925 |  | 4.32% |
| Securities | ​ | 242,581 ​ | 3,612 |  | 1.99% | 336,799 ​ | 3,808 |  | 1.51% |
| Other investments | ​ | 41,766 ​ | 682 |  | 2.18% | 24,734 ​ | 347 |  | 1.88% |
| Short-term investments | ​ | 58,080 ​ | 2,045 |  | 4.71% | 209,004 ​ | 751 |  | 0.48% |
| Total interest-earning assets | ​ | 3,699,390 ​ | 156,620 |  | 5.66% | 2,921,534 ​ | 80,831 |  | 3.70% |
| Non-interest-earning assets | ​ | 186,347 ​ | ​ ​ |  | ​ | 127,031 ​ |  |  | ​ |
| Allowance for credit losses | ​ | (29,166) ​ | ​ ​ |  | ​ | (19,391) ​ |  |  | ​ |
| Total assets | ​ | $3,856,571 ​ | ​ ​ |  | ​ | $3,029,174 ​ |  |  | ​ |
| **​** | ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ |
| **Interest-bearing liabilities:** | ​ | ​ |  |  | ​ | ​ |  |  | ​ |
| Savings accounts | ​ | $145,464 ​ | 55 |  | 0.05% | $168,251 ​ | 62 |  | 0.05% |
| NOW accounts | ​ | 360,664 ​ | 493 |  | 0.18% | 407,942 ​ | 262 |  | 0.09% |
| Money market accounts | ​ | 759,991 ​ | 13,397 |  | 2.36% | 791,455 ​ | 1,374 |  | 0.23% |
| Certificates of deposit and individual retirement accounts | ​ | 1,363,959 ​ | 36,604 |  | 3.59% | 789,857 ​ | 4,533 |  | 0.77% |
| Total interest-bearing deposits | ​ | 2,630,078 ​ | 50,549 |  | 2.57% | 2,157,505 ​ | 6,231 |  | 0.39% |
| FHLB advances | ​ | 272,622 ​ | 10,871 |  | 5.33% | 36,907 ​ | 712 |  | 2.58% |
| Total interest-bearing liabilities | ​ | 2,902,700 ​ | 61,420 |  | 2.83% | 2,194,412 ​ | 6,943 |  | 0.42% |
| Non-interest-bearing deposits | ​ | 528,550 ​ | ​ |  | ​ | 471,759 ​ |  |  | ​ |
| Other non-interest-bearing liabilities | ​ | 69,570 ​ | ​ ​ |  | ​ | 33,098 ​ |  |  | ​ |
| Total liabilities | ​ | 3,500,820 ​ | ​ ​ |  | ​ | 2,699,269 ​ |  |  | ​ |
| Equity | ​ | 355,751 ​ | ​ ​ |  | ​ | 329,905 ​ |  |  | ​ |
| Total liabilities and equity | ​ | $3,856,571 ​ | ​ ​ |  | ​ | $3,029,174 ​ |  |  | ​ |
| Net interest income | ​ | ​ ​ ​ | $95,200 |  | ​ | ​ | $73,888 |  | ​ |
| Net interest rate spread (2) | ​ | ​ ​ ​ | ​ ​ |  | 2.83% | ​ |  |  | 3.28% |
| Net interest-earning assets (3) | ​ | $767,670 ​ | ​ ​ |  | ​ | $703,053 ​ | ​ ​ |  | ​ |
| Net interest margin (4) | ​ | ​ ​ ​ | ​ ​ |  | 3.44% | ​ |  |  | 3.38% |
| ​ | ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ | ​ ​ ​ | ​ ​ | ​ | ​ ​ |
| Average interest-earning assets to interest-bearing liabilities | ​ | 127.45% | ​ ​ |  | ​ | 133.14% |  |  | ​ |

(1) Annualized.

(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

***Rate/Volume Analysis.*** The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.

*(In thousands)*

| ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: | ​ ​ ​ ​ ​ | ​ ​ Nine months ended September 30, 2023 vs. 2022 Increase (Decrease) Due to ​ ​ Volume ​ | ​ ​ | ​ ​ ​ ​ Rate ​ | ​ ​ ​ | ​ ​ Total Increase (Decrease) ​ | ​ ​ ​ ​ ​ | ​ ​ Three months ended September 30, 2023 vs. 2022 Increase (Decrease) Due to ​ ​ Volume ​ | ​ ​ | ​ ​ ​ ​ Rate ​ | ​ ​ ​ | ​ ​ Total Increase (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Loans | ​ | $39,082 | ​ | $35,274 | ​ | $74,356 | ​ | $15,022 | ​ | $12,048 | ​ | $27,070 |
| Securities | ​ | 1,476 | ​ | (1,672) | ​ | (196) | ​ | (1,041) | ​ | 685 | ​ | (356) |
| Other | ​ | 271 | ​ | 65 | ​ | 336 | ​ | 147 | ​ | 127 | ​ | 274 |
| Short-term investments | ​ | (116) | ​ | 1,409 | ​ | 1,293 | ​ | 284 | ​ | 525 | ​ | 809 |
| Total interest-earning assets | ​ | 40,713 | ​ | 35,076 | ​ | 75,789 | ​ | 14,412 | ​ | 13,385 | ​ | 27,797 |
| **​** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Interest-bearing liabilities:** | ​ |  | ​ |  | ​ | ​ | ​ |  | ​ |  | ​ | ​ |
| Savings accounts | ​ | (10) | ​ | — | ​ | (10) | ​ | (4) | ​ | — | ​ | (4) |
| NOW accounts | ​ | (26) | ​ | 258 | ​ | 232 | ​ | (11) | ​ | 171 | ​ | 160 |
| Money market accounts | ​ | (52) | ​ | 12,076 | ​ | 12,024 | ​ | 4 | ​ | 4,968 | ​ | 4,972 |
| Certificates of deposit and individual retirement accounts | ​ | 5,294 | ​ | 26,778 | ​ | 32,072 | ​ | 3,092 | ​ | 10,153 | ​ | 13,245 |
| Total interest-bearing deposits | ​ | 5,206 | ​ | 39,112 | ​ | 44,318 | ​ | 3,081 | ​ | 15,292 | ​ | 18,373 |
| Federal Home Loan Bank advances | ​ | 8,705 | ​ | 1,454 | ​ | 10,159 | ​ | 3,187 | ​ | 1,429 | ​ | 4,616 |
| Total interest-bearing liabilities | ​ | 13,911 | ​ | 40,566 | ​ | 54,477 | ​ | 6,268 | ​ | 16,721 | ​ | 22,989 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Change in net interest income | ​ | $26,802 | ​ | $(5,490) | ​ | $21,312 | ​ | $8,144 | ​ | $(3,336) | ​ | $4,808 |

### Comparison of Operating Results for the nine months Ended September 30, 2023 and September 30, 2022

***Net Income.*** Net income was $23.4 million for the nine months ended September 30, 2023, compared to net income of $18.0 million for the nine months ended September 30, 2022, an increase of $5.4 million, or 29.98%. The increase was primarily due to a $17.4 million increase in net interest income after provision for credit losses and an increase of $5.4 million in noninterest income, offset in part by a $15.2 million increase in noninterest expense and a $2.3 million increase in income tax expense for the nine months ended September 30, 2023 compared to the same period in 2022.

***Interest and Dividend Income.*** Interest and dividend income increased $75.8 million, or 93.76%, to $156.6 million for the nine months ended September 30, 2023 from $80.8 million for the nine months ended September 30, 2022, primarily due to a $74.4 million increase in interest and fees on loans. The increase in interest and fees on loans was primarily due to an increase of $1.01 billion in the average balance of the loan portfolio to $3.36 billion for the nine months ended September 30, 2023 from $2.35 billion for nine months ended September 30, 2022 and an increase of 167 basis points in the weighted average yield for the loan portfolio to 5.99% for the 2023 period from 4.32% for the 2022 period, reflecting the increasing rate environment period to period as well as the growth of our consumer and commercial portfolios.

Average interest-earning assets increased $777.9 million, to $3.70 billion for the nine months ended September 30, 2023 from $2.92 billion for the nine months ended September 30, 2022. The yield on interest-earning assets increased 196 basis points to 5.66% for the period ended September 30, 2023 from 3.70% for the period ended September 30, 2022.

***Interest Expense.*** Total interest expense increased $54.5 million, or 784.63%, to $61.4 million for the nine months ended September 30, 2023 from $6.9 million for the nine months ended September 30, 2022. Interest expense on deposit accounts increased $44.3 million, or 711.25%, to $50.5 million for the nine months ended September 30, 2023 from $6.2 million for the nine months ended September 30, 2022, due to an increase in the average balance of interest-bearing deposits of $472.6 million to $2.63 billion for the period ended September 30, 2023 from $2.16 billion for the period ended September 30, 2022 and an increase in the weighted average rate on interest-bearing deposits to 2.57% for the period ended September 30, 2023 from 0.39% for the period ended September 30, 2022.

Interest expense on FHLB advances increased $10.2 million to $10.9 million for the period ended September 30, 2023 from $6.2 million for the period ended September 30, 2022. The average balance of FHLB advances increased $235.7 million to $272.6 million for the nine months ended September 30, 2023 from $36.9 million for the nine months ended September 30, 2022. The increase in the average balance was due to our strategy to utilize additional borrowings to support loan growth and liquidity.

***Net Interest Income.*** Net interest income increased $21.3 million, or 28.84%, to $95.2 million for the nine months ended September 30, 2023 from $73.9 million for the nine months ended September 30, 2022, primarily due to a $777.9 million increase in the average balance of interest-earning assets during the period ended September 30, 2023 and an increase in the net interest margin to 3.44% for the period ended September 30, 2023 from 3.38% for the period ended September 30, 2022, offset in part, by a decrease in the interest rate spread to 2.83% for the period ended September 30, 2023 from 3.28% for the period ended September 30, 2022. The increase in the net interest margin was primarily due to the increase in the average balance of interest-earning assets and a 196 basis point increase in the average yield on interest-earning assets when comparing the 2023 period to the 2022 period, offset, in part, by an increase of $472.6 million in the average balances on interest-bearing liabilities and an increase of 218 basis points in the weighted average rate paid on interest-bearing liabilities to 2.57% for the period ended September 30, 2023 from 0.39% for the period ended September 30, 2022.

***Provision for Credit Losses.*** Based on management’s analysis of the adequacy of allowance for credit losses, a provision of $8.0 million was recorded for the period ended September 30, 2023 in accordance with the CECL standard, compared to a provision of $4.1 million for the period ended September 30, 2022 in accordance with the incurred loss methodology standard. The $3.9 million, or 94.73%, increase in the provision was primarily due to the portfolio loan growth.

***Noninterest Income.*** Noninterest income increased $5.4 million, or 78.50%, to $12.3 million for the period ended September 30, 2023 from $6.9 million for the period ended September 30, 2022. The increase resulted primarily from a one-time gain of $3.5 million in employee retention credit, a refundable tax credit against certain employment taxes under the CARES Act and a $1.9 million increase in customer service fees, resulting largely from cash management services fees during 2023 from our cannabis business which we acquired effective April 1, 2022, as well as an increase in income from bank-owned life insurance offset, in part by a decrease in the gain from bargain purchase of $1.1 million that was realized in April 2022 from our cannabis and money service business acquisition.

The table below sets forth our noninterest income for the nine months ended September 30, 2023 and 2022, respectively:

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Nine months ended September 30, 2023 | ​ ​ | ​ ​ 2022 | ​ ​ ​ ​ | ​ ​ ​ ​ Change Amount | ​ ​ ​ | ​ ​ Percent |
| --- | --- | --- | --- | --- | --- | --- | --- | ---: |
| Gain from bargain purchase and assumption agreement | ​ | $- | ​ | $1,070 | ​ | $(1,070) | ​ | (100.00)% |
| Customer service fees | ​ | ​ 5,180 | ​ | ​ 3,286 | ​ | ​ ​ | ​ | ​ |
| Increase in cash surrender value of BOLI | ​ | ​ 1,117 | ​ | ​ 786 | ​ | ​ 331 | ​ | 42.11% |
| Mortgage banking income | ​ | ​ 469 | ​ | ​ 480 | ​ | ​ (11) | ​ | (2.29)% |
| Swap contract income | ​ | ​ 2,058 | ​ | ​ 1,260 | ​ | ​ 798 | ​ | 63.33% |
| Employee retention credit income | ​ | ​ 3,452 | ​ | ​ — | ​ | ​ 3,452 | ​ | 100.00% |
| Other income | ​ | ​ 46 | ​ | ​ 21 | ​ | ​ 25 | ​ | 119.05% |
| Total noninterest income | ​ | $12,322 | ​ | $6,903 | ​ | $3,525 | ​ | 51.06% |

***Noninterest Expense.*** Noninterest expense increased $15.2 million, or 28.98%, to $67.5 million for the nine months ended September 30, 2023 from $52.4 million for the nine months ended September 30, 2022. Salary and employee benefit expenses increased $8.8 million, or 24.84%. The increase in salary and employee benefits resulted primarily from the hiring of additional employees consistent with our business strategy to grow the Bank, including the addition of 23 employees who became employed at Needham Bank in connection with our cannabis and money service business acquisition, as well normal salary increases. Additionally, director and professional fees increased $1.4 million, or 38.32%. This increase was mainly the result of increased professional services in connection with our loan operations. Data processing expense increased $1.3 million or 31.00%, resulting from our strategy to upgrade and implement information technology systems, including cybersecurity and fraud prevention and detection platforms, as well as data expense related to increased deposit activity. General and administrative expense increased $727,000, or 28.07%, primarily resulting from a general increase in the customer base as well as increases resulting from the addition of the Medford branch and the servicing of our cannabis business primarily from this branch location.

The table below sets forth our noninterest expense for the nine months ended September 30, 2023 and 2022:

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Nine months ended September 30, 2023 | ​ ​ | ​ ​ 2022 | ​ ​ ​ ​ | ​ ​ ​ ​ Change Amount | ​ ​ ​ | ​ ​ Percent |
| --- | --- | --- | --- | --- | --- | --- | --- | ---: |
| Salaries and employee benefits | ​ | $44,033 | ​ | $35,271 | ​ | $8,762 | ​ | 24.84% |
| Director and professional service fees | ​ | ​ 4,985 | ​ | ​ 3,604 | ​ | ​ 1,381 | ​ | 38.32% |
| Occupancy and equipment expenses | ​ | ​ 3,926 | ​ | ​ 3,240 | ​ | ​ 686 | ​ | 21.17% |
| Data processing expenses | ​ | ​ 5,456 | ​ | ​ 4,165 | ​ | ​ 1,291 | ​ | 31.00% |
| Marketing and charitable contribution expenses | ​ | ​ 2,972 | ​ | ​ 2,216 | ​ | ​ 756 | ​ | 34.12% |
| FDIC and state insurance assessments | ​ | ​ 2,844 | ​ | ​ 1,274 | ​ | ​ 1,570 | ​ | 123.23% |
| General and administrative expenses | ​ | ​ 3,317 | ​ | ​ 2,590 | ​ | ​ 727 | ​ | 28.07% |
| Total noninterest expense | ​ | $67,533 | ​ | $52,360 | ​ | $15,173 | ​ | 28.98% |

***Income Tax Expense.*** Income tax expense increased $2.3 million, or 36.02%, to $8.6 million for the nine months ended September 30, 2023 from $6.3 million for the nine months ended September 30, 2022. The effective tax rate was 26.75% and 25.87% for the periods ended September 30, 2023 and 2022, respectively.

### Management of Market Risk

***General.*** Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset Liability Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors. The Asset Liability Committee meets at least quarterly, is comprised of directors, executive officers and certain senior management, and reports to the full board of directors on at least a quarterly basis. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:

- maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations;
- maintaining a prudent level of liquidity;
- growing our volume of core deposit accounts;
- utilizing our investment securities portfolio and interest rate swaps as part of our balance sheet asset and liability and interest rate risk management strategy to reduce the impact of movements in interest rates on net interest income and economic value of equity;
- managing our utilization of wholesale funding with borrowings from the FHLB and brokered deposits in a prudent manner;
- continuing to diversify our loan portfolio by adding more commercial-related loans and consumer loans, which typically have shorter maturities and/or balloon payments; and
- continuing to price our one-to-four family residential real estate loan products in a way that encourages borrowers to select our adjustable-rate loans as opposed to longer-term, fixed-rate loans.

Shortening the average term of our interest-earning assets by increasing our investments in shorter-term assets, as well as originating loans with variable interest rates, helps to match the maturities and interest rates of our assets and liabilities better, thereby reducing the exposure of our net interest income to changes in market interest rates.

On occasion we have employed various financial risk methodologies that limit, or “hedge,” the adverse effects of rising or decreasing interest rates on our loan portfolios and short-term liabilities. We also engage in hedging strategies with respect to arrangements where our customers swap floating interest rate obligations for fixed interest rate obligations, or vice versa. Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions.

***Net Interest Income.*** We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by various basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100-basis point increase in the “Change in Interest Rates” column below.

The following table sets forth, as of September 30, 2023, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve.

*At September 30, 2023*

*(Dollars in thousands)*

| ​ Change in Interest Rates (basis points) (1) ​ | ​ ​ ​ | ​ ​ Net Interest Income Year 1 Forecast ​ ​ | ​ ​ ​ Year 1 Change from ​ Level ​ ​ ​ ​ |
| ---: | --- | ---: | ---: |
| 300 | ​ | $124,958 | (3.5)% |
| 200 | ​ | 126,409 | (2.4)% |
| 100 | ​ | 128,289 | (0.9)% |
| Level | ​ | 129,472 | —% |
| (100) | ​ | 129,418 | —% |
| (200) | ​ | 128,515 | (0.7)% |
| (300) | ​ | 127,910 | (1.2)% |

(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at September 30, 2023, we would have experienced a 2.4% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 0.7% decrease in net interest income in the event of an instantaneous 200 basis point decrease in market interest rates.

***Economic Value of Equity.*** We also compute amounts by which the net present value of our assets and liabilities (economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases instantaneously by 100, 200, 300 and 400 basis point increments or decreases instantaneously by 100 or 200 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The following table sets forth, as of September 30, 2023, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.

*(Dollars in thousands)*

| ​ ​ At September 30, 2023 Change in Interest Rates (basis points) (1) ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Estimated EVE (2) ​ ​ | ​ ​ ​ ​ | ​ ​ Estimated Increase (Decrease) in EVE Amount ​ ​ | ​ ​ ​ Percent ​ ​ ​ |
| ---: | --- | ---: | --- | ---: | ---: |
| 300 | ​ | $450,470 | ​ | $(12,830) | (2.8)% |
| 200 | ​ | 457,090 | ​ | (6,210) | (1.3)% |
| 100 | ​ | 462,543 | ​ | (757) | (0.2)% |
| Level | ​ | 463,300 | ​ | n/a | —% |
| (100) | ​ | 456,477 | ​ | (6,823) | (1.5)% |
| (200) | ​ | 440,163 | ​ | (23,137) | (5.0)% |
| (300) | ​ | 417,643 | ​ | (45,657) | (9.9)% |

(1) Assumes an immediate uniform change in interest rates at all maturities.

(2) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

The table above indicates that at September 30, 2023, we would have experienced a 1.3% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 5.0% decrease in EVE in the event of an instantaneous 200 basis point decrease in market interest rates.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ.

Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, mortgage servicing rights, deposits and borrowings.

### Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We are also able to borrow from the FHLB. As of September 30, 2023, we had outstanding advances of $345.6 million from the FHLB. As of September 30, 2023, we had unused borrowing capacity of $465.8 million with the FHLB. As of September 30, 2023 we also had a $45.3 million available line of credit with the Discount Window at the Federal Reserve Bank of Boston. Additionally, as of September 30, 2023, we had $323.6 million of brokered deposits and pursuant to our internal liquidity policy, which allows us to utilize brokered deposits up to 10.0% of our total assets, we had an additional capacity of up to approximately $99.6 million of brokered deposits.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. For additional information, see the consolidated statements of cash flows for the nine months ended September 30, 2023 and 2022.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

As of September 30, 2023, Needham Bank exceeded all of its regulatory capital requirements, and was categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category. See Note 11 of the notes to consolidated financial statements.

### Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

***Commitments.*** As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. As of September 30, 2023, the unfunded portion of construction loans, home equity lines of credit, commercial lines of credit and other lines of credit, along with letters of credit, totaled $1.03 billion. Our allowance for credit losses on these unfunded commitments amounted to $1.8 million. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in less than one year from September 30, 2023 totaled $1.54 billion. Management expects that a substantial portion of these time deposits will be retained. However, if a substantial portion of these time deposits is not retained, we may utilize advances from the FHLB, brokered deposits or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

***Contractual Obligations.*** In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

## Controls and procedures

As filed, 878 characters.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2023. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

During the quarter ended September 30, 2023, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Filed Nov 22, 2023.
Source: SEC EDGAR, the filing index for accession 0001558370-23-019309. Last ingested by Listed: Nov 4, 2026, 16:11 ET. No prices; not investment advice.