NB Bancorp(NBBK) - 2024 Q2 - Quarterly Results

Financial Performance Overview Second Quarter 2024 Highlights NB Bancorp reported strong Q2 2024 results, with net income increasing to $9.5 million and robust loan and deposit growth Q2 2024 Key Financial Metrics | Metric | Q2 2024 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $9.5 million | $8.7 million | +$0.8M | | Diluted EPS | $0.24 | $0.22 | +$0.02 | | Gross Loans Growth (QoQ) | 3.6% | - | - | | Total Deposits Growth (QoQ) | 3.9% | - | - | | Net Interest Margin (FTE) | 3.45% | 3.60% | -15 bps | | NPLs / Total Loans | 0.51% | 0.27% | +24 bps | | Tangible Book Value per Share | $17.41 | $17.16 | +$0.25 | - Management highlighted strong loan demand in their market and a continued ability to generate core deposits to fund this growth, leading to a strong balance sheet position entering the third quarter[3] - Asset quality remains strong, although non-performing loans increased, primarily due to a single $6.2 million office loan being placed on non-accrual status during the quarter[3] - The allowance for credit losses (ACL) was increased to 0.92% of total loans, up from 0.87% in the prior quarter, strengthening the company's reserve position[3] Detailed Financial Analysis Balance Sheet Analysis Total assets grew to $4.81 billion, driven by robust increases in net loans and total deposits, with shareholders' equity also rising Balance Sheet Changes (Q2 2024 vs Q1 2024) | Account | Q2 2024 Balance | QoQ Change ($) | QoQ Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | $4.81 billion | +$155.4 million | +3.3% | | Net Loans | $4.06 billion | +$139.1 million | +3.5% | | Total Deposits | $3.92 billion | +$145.9 million | +3.9% | | Shareholders' Equity | $744.5 million | +$10.6 million | +1.4% | - Key drivers of loan growth were commercial and industrial loans (+$87.3M, +17.5%) and construction and land development loans (+$43.1M, +8.0%)[7] - The increase in deposits was primarily due to growth in certificates of deposit, which rose by $131.3 million, or 9.0%, from the prior quarter[7] Income Statement Analysis Income statement reflects stable net interest income, decreased noninterest income, increased noninterest expenses, and lower tax expense Net Interest Income Net interest income remained stable at $38.7 million, as increased interest income from loans was offset by higher interest expense on deposits - Net interest income for Q2 2024 was $38.7 million, a minor increase of $89 thousand from the prior quarter[5] - The increase in interest income was primarily due to higher average loan balances, while the rise in interest expense was driven by both higher rates and volumes on deposits[7] Noninterest Income Noninterest income decreased to $3.0 million, primarily due to a one-time prior quarter bonus and lower swap income, partially offset by mortgage banking growth - The primary reason for the decrease in noninterest income was a 98.1% drop in 'Other income' following a one-time debit card signing bonus in Q1 2024[7] - Mortgage banking income showed strong growth, increasing by 289.1% due to a higher volume of residential loan sales[7] Noninterest Expense Noninterest expense rose to $26.2 million, driven by increased professional fees, marketing, and data processing, partially offset by lower salaries and benefits - Salaries and employee benefits, the largest expense category, decreased by $814 thousand (4.6%), primarily due to lower payroll taxes and a one-time pension charge in the prior quarter[11] - Increases were noted in several areas, including data processing (+$330k) from technology investments, professional fees (+$362k), and marketing (+$353k)[7][11] Income Taxes Income tax expense decreased significantly to $2.4 million, driven by investment tax credits that lowered the effective tax rate to 20.0% - The effective tax rate for Q2 2024 was 20.0%, compared to 28.3% in Q1 2024[8] - The decrease in the tax rate and expense was primarily due to investment tax credits received during the current quarter[8] Loan Portfolio and Asset Quality Loan portfolio quality remains solid despite an increase in non-performing loans due to a single office loan, with increased ACL and low net charge-offs Commercial Real Estate Portfolio CRE portfolio decreased to $1.49 billion due to multi-family loan payoff; office portfolio concentrated in suburban medical and lab spaces - The multi-family loan portfolio decreased by 16.7% due to a large loan payoff and fewer originations[12] - The office portfolio is concentrated in the Greater Boston suburbs and consists mainly of medical and lab space, not downtown high-rises[12] Overall Asset Quality Asset quality remains strong despite NPLs increasing to $20.7 million due to one office loan, with ACL rising to 0.92% and minimal net charge-offs Asset Quality Metrics (Q2 2024 vs Q1 2024) | Metric | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | Non-Performing Loans | $20.7 million | $10.8 million | | ACL as % of Total Loans | 0.92% | 0.87% | | Annualized Net Charge-offs | 0.09% | 0.19% | - The significant increase in non-performing loans was primarily driven by a single office loan placed on non-accrual status[12] - All net charge-offs during the quarter were from the purchased consumer loan portfolio, mainly home improvement and solar loans[12] Financial Tables Selected Financial Highlights This table summarizes key financial performance indicators: earnings, per share, profitability, balance sheet, asset quality, and capital ratios - Presents key performance indicators including net income, EPS, net interest margin, ROA, ROE, and asset quality ratios for the current and comparative quarters[19] Consolidated Balance Sheets This table details the company's consolidated balance sheets, presenting assets, liabilities, and shareholders' equity for current and comparative periods - Provides a detailed breakdown of assets (cash, securities, loans), liabilities (deposits, borrowings), and shareholders' equity for the current and comparative periods[20] Consolidated Statements of Income This table presents the consolidated statements of income, detailing revenues and expenses to derive net income and earnings per share for the periods - Details the components of the income statement, including interest income, interest expense, provision for credit losses, noninterest income, noninterest expense, and income taxes[21] Average Balances, Interest Earned/Paid & Average Yields This table analyzes net interest margin by detailing average balances, interest earned/paid, and average yields for interest-earning assets and liabilities - Offers a comprehensive breakdown of net interest income, detailing average balances, interest amounts, and yields for various loan, investment, deposit, and borrowing categories, which is used to calculate net interest spread and margin[22] Commercial Real Estate by Collateral Type This table segments the commercial real estate loan portfolio by collateral type and occupancy status, providing balances for current and comparative periods - Provides a granular view of the $1.49 billion commercial real estate portfolio, segmented by property type such as Industrial (29%), Multi-Family (18%), and Office (13%)[24] Asset Quality Details These tables provide detailed asset quality information, including non-performing assets by loan category and the allowance for credit losses roll-forward - Details non-performing loans by category, showing the increase in commercial real estate NPLs to $7.1 million from $0.4 million in the prior quarter[26] - Presents the allowance for credit losses roll-forward, showing a $4.4 million provision and $878 thousand in net charge-offs for the quarter[27] Non-GAAP Reconciliation This table reconciles GAAP to non-GAAP financial measures, including tangible book value per share and efficiency ratio, for a clearer view of core performance - Provides reconciliations for key non-GAAP metrics, including tangible book value per share, which is calculated by subtracting intangible assets from total shareholders' equity and dividing by shares outstanding[25] Company Information and Disclosures About NB Bancorp, Inc. NB Bancorp, Inc. is the holding company for Needham Bank, a community bank founded in 1892, serving the Greater Boston area - NB Bancorp, Inc. (NBBK) is the holding company for Needham Bank, a community bank founded in 1892 and headquartered near Boston, MA[14] Non-GAAP Financial Measures This section discloses non-GAAP financial measures, like tangible book value per share, useful for analysis but not a substitute for GAAP results - The report uses non-GAAP measures like tangible book value per share, which management believes are utilized by regulators and analysts to evaluate financial condition[15] Forward-Looking Statements This safe harbor warns that forward-looking statements are subject to risks and uncertainties, and actual results may differ materially - The document contains forward-looking statements that are not guarantees of future performance and are subject to risks and uncertainties[16] - Factors that could cause actual results to differ include changes in economic conditions, interest rates, real estate values, and government regulation[17]