2014

Needham Bank represents the evolution

of community banking,™ bringing the latest fi nancial products and technologies to our

customers, while maintaining an unwavering commitment to the communities served.

< Fuller Brook Park, Wellesley

Dear Valued Customers and Friends,

Thanks to the patronage of our customers, your bank has performed exceptionally well over the past year. Needham Bank not only achieved record growth in new checking account openings and commercial loan volumes, but did so while maintaining traditional high capital ratios and our commitment to personalized customer service.

We are ever mindful that our customers have choices when it comes to banking. And that our customers’ needs must be at the very center of everything we do. As a bank that is proudly and fi rmly grounded in the communities we serve, we know that our success is directly tied to exceeding our customers’ expectations with each and every encounter. While some banks resort to

gimmicky advertising (with a lot of fi ne print), we prefer to put forward simple, straight-forward banking solutions written in plain English – solutions that avoid fees and build trust.

You, our customers, tell us you like this approach – and you take it a step further by telling your friends, neighbors and family members to consider Needham Bank for their banking needs. We thank you for this, knowing that a personal recommendation is the most powerful customer acquisition tool.

This past year was notable in several other respects. In April we completed a 7,500 sq. ft. Loan Center addition to our Main Offi ce. This beautiful yet functional new structure, which houses newly-hired and our existing highly experienced lending offi cers, will enable us to better serve this growing area of our business. Our success as a residential and commercial lender has been well-documented and we continue to expand our activities in these important areas.

Also, we recently announced that pending regulatory approval we will be opening a new branch in Dover, taking over a site abruptly abandoned by Bank of America. Needham Bank has a long-standing relationship with many Dover residents and their families and we welcome this opportunity to not only better serve their needs, but those of the entire community.

Serving communities is the essence of what we do at Needham Bank. It is a commitment we take very seriously, not only 9 to 5, but also on evenings, weekends – whenever local charities, organizations, schools and volunteers seek our support and sponsorship. I am proud to say that we provide support in many ways, including attending and participating

in numerous fairs, philanthropic events, youth sports tournaments and the like. Most of our employees typically not only provide legendary customer service, but also contribute time and talent to our communities. This makes them very special – and our greatest asset.

Finally, this coming year will be my last as Chief Executive Offi cer. I shall continue as Board Chair, but in May, 2015 I will hand the CEO position off to our current President and Chief Operating Offi cer, Mark Whalen. In turn, Mark will be transferring his responsibilities as President to Paul Totino who currently serves as an Executive Vice President. An orderly and well-planned succession is the hallmark of any great company and represents best-practice from a governance perspective. Mark, who has been with the bank since 2007 – and was CEO of Dedham Co-operative Bank prior to the merger of our two institutions – has a proven record of achievement. Having worked closely with Mark over the past eight years (and having known him even longer), I am secure in the knowledge that the Board has placed the future of the bank in good hands – and that the bank’s future is very bright.

Most appreciatively,

Jack McGeorge, Chief Executive Offi cer& Chairman of the Board

Serving communities is the essence of what we do at Needham Bank.

Jack McGeorge, Chief Executive Offi cer& Chairman of the Board

Dear Friends,

What do we mean when we talk about Needham Bank representing the evolution of community banking™? What underpins this somewhat intriguing phrase?

It is our way of expressing a commitment to retain community bank values, including legendary personalized service, responsive management, and community involvement, while at the same time offering banking products and services that rival those of any of our larger publicly-traded competitors – without all of the annoying fees or red tape.

How can we do this?

First, we are a mutual bank. We are not beholden to distant shareholders looking to extract profi t on a quarterly basis. Our owners are our customers and our commitment is to long-term sustainability – both for the bank and for the communities we serve.

Second, we benefi t from advances in technology, which levels the playing fi eld. A few short years ago the cost of technological banking solutions placed them out of the reach of many community banks. Today, we offer services like free check deposit via your smartphone; free person-to-person payments enabling customers to send money to anyone at any U.S. bank; and our checking account ATM policy which reimburses ATM fees customers may incur while using other bank ATMs anywhere in the world.

Looking ahead, Needham Bank will continue along this path. We will add technology where it provides direct benefi t to our customers (as opposed to simply cutting costs or increasing profi t margins). We will add branches where residents deserve local banking services – not being abandoned by larger national or international banks.

We will continue to provide training and opportunities to our employees, knowing that friendly, courteous and knowledgeable staff is the bedrock upon which our legendary customer service is built.

These are exciting times at Needham Bank. It has been said that growth brings change and change brings growth. When

managed prudently, change and growth bring opportunity, both for our employees in terms of enhanced career paths and for the communities we serve in terms of economic prosperity. In this sense, our promise to promote and foster the evolution of community banking™ heralds the most exciting period in Needham Bank’s 123-year history.

More detail on our three core businesses – personal, residential and commercial banking – can be found in the pages that follow, along with additional fi nancial information.

But before you get to that, I want to take this opportunity to thank all of our employees for making our success possible. I also want to thank our customers for providing us with the opportunity to serve them – it is a privilege we will never take for granted.

And to our non-customers I can only say “what are you waiting for?” Come experience the best of all worlds; big bank-like products built upon the foundation of community bank values and service.

Most appreciatively,

Mark WhalenPresident &Chief Operating Offi cer

Our owners are our customers and our commitment to them is long-term.

Experience our legendary customer service fi rst-hand.

Nowhere has the evolution of community banking™ been more evident than in Needham Bank’s consumer banking activities. Our investments in customer-friendly technologies and in additional training and education provided customers with greater convenience and an enhanced experience.

Banking at Needham Bank has always been about friendly, personalized service and a deep connection with the communities we serve. Building on that heritage, we focused even greater attention on our customers in Fiscal Year 2014 by asking them to expand their relationship with us by consolidating their banking with us. We also asked customers to recommend the Bank to family, friends and neighbors.

The results of this approach have been nothing less than spectacular. For the second year in a row we opened a record number of new checking accounts, an important benchmark in terms of measuring the vitality and success of any retail banking operation. We also saw a very healthy CD renewal rate during the year. As a result of these and other factors, Needham Bank’s assets during the year grew to $1.4 billion – a remarkable one-year increase.

What has accounted for this success? There is no question that customers new and old have responded positively to a number of initiatives designed to make banking a more pleasant experience. For example, we have eliminated most of the fees and charges that they often encounter elsewhere. We also abhor fi ne print, the so-called “mice-type” that many banks and car dealerships use to qualify offers or terms – and then bury at the bottom of a document. Our approach is to use plain English in a type-size that can actually be read.

There is of course our checking account ATM policy, which is among the fi nest offerings of its type in the industry. Put simply, Needham Bank reimburses customers for any fees they may incur while using an ATM anywhere in the world. You can be in Boston, Boise or Bhutan (which recently got its fi rst ATM) and can rest assured that you will not be needlessly dinged for gaining access to your own money. We also

introduced a free person-to-person payments service so that customers can send money to anyone, at any U.S. bank, without incurring a fee.

Looking to the future, we plan to increasingly reach out to our Millennials, those people in our communities born from the early 1980s to the mid-1990s. This population, while hard hit by the economic down-turn has, according to researchers, demonstrated a high degree of social and civil involvement, including volunteerism. We will look for ways to engage this demographic, who we believe might well be positively inclined to support community banking, much as they support other “buy local” efforts. Reaching across generations in this way will help ensure that our communities remain vibrant and provide a bright future for our children and grandchildren.

We also plan to expand our presence in several adjoining communities, pending regulatory approval, including Dover, Ashland, Millis, and Natick where we already have a loyal customer base. We believe that by establishing a physical presence in these towns we not only demonstrate our commitment to community-building, but also enable them to experience our legendary customer service fi rst-hand. Because at the end of the day, it is our employees, through their knowledge, experience and willingness to go the extra mile on behalf of customers, that make Needham Bank a very special place.

PersonalBanking

Banking here is all about friendly, personalized service.

< Marjorie Cappucci, Medfi eld Branch Manager

ResidentialLending

Our strategy of reaching out to area realtors, CPAs, attorneys and other key infl uencers in the residential market paid signifi cant dividends for Needham Bank’s residential lending business in FY 2014.

Our seasoned team of loan offi cers took advantage of an improving housing market in the communities we serve, writing a total of 449 new residential loans, a 108% increase over FY 2013.

Needham Bank has long been a proud leader in fi nancing construction loans for area builders – and we are committed to continue as the premier fi nancial institution serving that important market.

But we knew we could do more if we grew our team and if we proactively asked for people to consider Needham Bank for their residential needs.

We took the elements that led to our sustained success in the construction loan business – superb accessibility, responsiveness and service – and applied them to the residential market. Moving more aggressively into consumer residential lending with an enhanced variety of lending products was a natural evolution for a community bank so closely associated with residential construction.

We streamlined the mortgage lending process to allow customers to receive a timely answer regarding their loan requests – often a critical factor in this segment. We now offer First-Time Homebuyer Mortgages to help younger customers and others to experience the pride of home ownership. We also opened our beautiful new Loan Center at our Main Offi ce to better serve our growing customer roster.

Needham Bank, as a community-based institution, believes in serving the needs and fostering the

aspirations of the residents of the communities we serve. Residential lending, by that measure, is and should continue to be a core business activity for the bank. We want people to know that we not only offer very competitive mortgage rates, both fi xed and adjustable, but also home equity loans and home equity lines of credit.

In summary, Needham Bank’s residential lending business has moved front and center, providing our customers with a highly competitive offering that will allow them to achieve their home-owning dreams.

That’s good news for Needham Bank – and good news for the communities we serve. It is just one more example of how Needham Bank represents the evolution of community banking.™

Our swift decision-making provides a critical advantage.

Helping our customers experience the pride of home ownership.

31 Maple Avenue, Cambridge | Project fi nanced by Needham Bank<

Needham Bank’s Commercial Lending Group possesses a deep understanding of the needs of small and medium-sized businesses. We appreciate the time-to-market pressures on local builders and developers. And we are acutely aware of the particular requirements of family businesses, so important to the communities we serve.Honoring a tradition of many years, Needham Bank promises its commercial customers exceptionally timely service, including twice-weekly credit committee meetings to speed up decision-making and a 7:00 AM opening time at our Main Offi ce to allow business owners to conduct their banking affairs without interfering with their own business hours or operations.

We also offer customers easy and direct access to all levels of the management team, from individual lenders right up to the Chairman and the President.

Construction loans to builders and developers in Eastern Massachusetts did exceptionally well during the year. The overall market in the region continued to improve, with several of our builders reporting signifi cant increases in single-family and small multi-unit sales. In addition, resurgence in the market for construction of rental properties was evident for the second year running, especially in and around Boston.

Also during the year our strategy of assembling a group of highly professional lenders with broad experience and expertise enabled the Bank to increase its activity in areas like providing lines of credit for working capital purposes; term loans to fi nance equipment purchases; and fi nancing for investment properties, including offi ce buildings, industrial parks, retail space, apartment buildings and mixed use properties. Each of these areas experienced signifi cant growth. This expansion and development of our commercial lending capability could only have been possible thanks to our skilled, vibrant commercial lending team, whose leaders each have more than 20 years lending

experience. With our in-house expertise, Needham Bank is now better positioned to offer a full range of products and services to virtually any area business. In addition more and more of our commercial customers are turning to Needham Bank for their broader banking needs, including business deposits. They appreciate a Business Checking Account that features no minimum balance; no monthly service charge; free unlimited transaction items; free unlimited coin and currency deposits; and the added convenience of Remote Deposit Capture that allows electronic deposit from their offi ce.

In the area of commercial lending, Needham Bank is thus making good on its commitment to broaden its offerings and provide customers enhanced expertise and the fi nancial tools to grow their business or fi rm. These actions will not only provide Needham Bank with a broader and more diverse deposit and lending portfolio, but has the very real potential to fuel growth, jobs and greater prosperity in the community. It is the evolution of community banking™ at its best.

Access to quick decisions and enhanced expertise – our promise to you.

CommercialLending

Commercial lending that understands the meaning of community.

< (clockwise from upper left, all fi nanced by Needham Bank) Charles River Village (subdivision), Medway | 395 - 397A West Broadway (apartment and retail building), South Boston | 68 Wachusett Road, Needham | Tower Flagg Road (subdivision), Rhode Island

From the very moment of its founding in 1892, Needham Bank has been deeply committed to community involvement. It is quite literally in our DNA as expressed in our charter. It remains to this day a core element of our mission as a fi nancial institution. While other banks may primarily cater to the needs of stock exchanges and shareholders, often located in distant cities or countries, we have a laser-like focus on the economic and civic well-being of the people living right here in the communities we so proudly serve.

This support takes many forms, large and small. In 2013, for example, we donated to more than 255 local organizations. But our involvement typically goes beyond simply writing a check. In many instances, be it at a local soccer tournament, a farmer’s market, historical society program, or a charity event or fundraiser, you’ll fi nd Needham Bank employees in attendance and often lending a hand. This is simply what we do.

Some of the organizations we support, like Beth Israel-Deaconess Hospital in Needham, are highly visible and well-known.

But most are less visible – but no less worthy. In any given year we will sponsor and participate in events as diverse as the Birthday Wishes “Cakewalk” in Newton; to a Marathon Day BBQ in Wellesley on behalf of the Hale Reservation’s Summer Day Camp, located in Westwood; to Zullo Gallery’s “Party Under the Big Tent” held in support of Arts in Medfi eld.

The list is a long one – far too long to be enumerated here.

We are also vocal supporters of the “Buy Local” movement, including the increasingly popular farmer’s markets taking place in our communities during the summer and early autumn months. In that

regard, with the expansion and refurbishment of our Main Offi ce in Needham, we are delighted to be able to help provide the Needham Farmer’s Market with a new, convenient home adjacent to our building.

From our perspective, the Buy Local movement perfectly expresses our own belief that residents who truly care about the future of the community they live in should seriously consider banking locally. Banking with us creates a virtuous circle, with the dollars deposited at Needham Bank used to fi nance local building, home-buying, small businesses, retirement savings and all manner of other activities. In turn, the bank donates both money and volunteer time – again in the local community. Taken together, these activities can do much to maintain our communities as places that are not only prosperous and economically viable, but also culturally alive and caring. In other words, communities in the full sense of the word.

‘Buy Local’ is a credo we live by every day.CommunityInvolvement

Community involvement is in our DNA.

< 41st Annual Flag Day Parade, Dedham

Financial Statement

Statement of Conditi on

AssetsCash and due from banksShort-term investmentsCash and cash equivalents

Securiti es available for sale, at fair valueFederal Home Loan Bank Stock, at costCo-operati ve Central Bank Stock, at costLoans, net of allowance for loan lossPremises and equipmentAccrued interest receivableDeferred income tax assetOther assetsTotal assets

Liabiliti es and SurplusDepositsFederal Home Loan Bank advancesMortgagors’ escrow accountsAccrued expensesOther liabiliti esNet worthTotal liabiliti es and surplus

March 31, 2014

$ 11,034,066

4,988,73416,022,800

178,930,00210,982,500

3,014,3851,147,209,359

19,235,5534,114,0279,084,5428,890,124

$ 1,397,483,292

$ 967,129,541193,761,405

2,753,9978,836,4093,252,540

221,749,400$ 1,397,483,292

March 31, 2013

$ 10,183,2732,852,080

13,035,353

180,318,8829,846,8003,014,385

886,637,62514,280,785

3,768,5388,843,4838,431,637

$ 1,128,177,488

$ 864,792,61936,428,612

2,482,7537,958,4412,399,542

214,115,521$ 1,128,177,488

Based on Audited Consolidated Financial Statements.Audited-Published in accordance with Provisions of Massachusett s General Laws, Chapter 170, Secti on18.

Financial Statement

Statement of Operati on

Interest and Dividend IncomeInterest and fees on loansInterest and dividends on investments

Interest ExpenseInterest on depositsInterest on borrowed funds

Net Interest Income

Provision for Loan LossNet Interest Income aft er Loan Loss

Other Income

Operati ng ExpensesSalaries and employee benefi tsProfessional service feesOccupancy and equipment expensesData processing expensesCharitable contributi onsFDIC insurance assessmentsOREO and foreclosure expenses and losses, netGeneral and administrati ve expenses

Income Before Taxes

Income taxesNet income

March 31, 2014

$ 47,816,465

3,724,83051,541,295

6,397,822869,255

7,267,077

44,274,218

-44,274,218

1,387,258

19,936,1503,023,4651,666,2691,568,111

492,437724,719150,266

1,904,91829,466,335

16,195,141

$ 6,393,2539,801,888

March 31, 2013

$ 46,523,4944,054,222

50,577,716

7,729,4831,683,3359,412,818

41,164,898

(700,000)41,864,898

1,463,180

16,888,0072,589,3161,500,5981,450,461

370,764708,096255,191

1,391,89025,154,323

18,173,755

$ 7,093,72311,080,032

Based on Audited Consolidated Financial Statements.Audited-Published in accordance with Provisions of Massachusett s General Laws, Chapter 170, Secti on18.

Board of Directors

JACK McGEORGEChief Executive Offi cer& Chairman of the BoardNeedham Bank

MARK WHALENPresident& Chief Operating Offi cerNeedham Bank

JOHN BUCKLEYVice President of SalesJames F. Gilmore Realty

LENNOX CHASEFounder and OwnerChase Legal Services

ROBERT CICERONEAssociate ProfessorDepartment of Geological Sciences Bridgewater State University

JOHN DAYRetired Contractor

WILLIAM DAYRetired Executive Vice PresidentNeedham Bank

ARTHUR HOWEPresidentHowe Associates/Marketing Design

THOMAS McINERNEYOwnerRelaxin Custom Embroidery

PAULA McLAUGHLINDirector of Developmentand Public RelationsHale Reservation

FRANCIS ORFANELLOChief Financial Offi cerMMB

RICHARD QUINCYPresidentQuincy & Co.

AL WISIALKOCPAWisialko & Company

Advisory Council

SCOTT BOCKPresident, CEORiverside Community Care

WILLIAM DARCEYPresident, CEOProvider Insurance Group

JAMES HEALYAssociate Vice ChancellorUMASS Medical School

CHRISTOPHER LYNCHNortheast US RepresentativeMarshall Industries

ERIC MORSESenior Vice PresidentNeedham Bank

TIM NUGENTOwnerThe Incentive Group

KEN SOMMERPartnerB2BCFO

NEEDHAM1063 Great Plain Avenue

Needham, MA 02492Tel: 781-444-2100

MEDFIELD520 Main Street

Medfi eld, MA 02052Tel: 508-359-4442

WESTWOOD341 Washington StreetWestwood, MA 02090

Tel: 781-329-0216

DOVER60 Centre Street

Dover, MA 02030

ASHLAND41 Front Street

Ashland, MA 01721Pending regulatory approval

DEDHAM402 Washington StreetDedham, MA 02026Tel: 781-326-0700

WELLESLEY458 Washington StreetWellesley, MA 02482Tel: 781-237-0210

BI DEACONESS NEEDHAM HOSPITAL (ATM only)148 Chestnut StreetNeedham, MA 02492Tel: 781-444-2100

MILLIS857 Main StreetMillis, MA 02054Pending regulatory approval

NATICK17 West Central StreetNatick, MA 01760Pending regulatory approval

Private bank-like service without the requirements of a private bank.

< Main Offi ce 2014 expansion, back entrance, Needham