NB Bancorp(NBBK) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section presents the unaudited consolidated financial statements and management's discussion and analysis for NB Bancorp, Inc Item 1. Financial Statements Presents unaudited consolidated financial statements for NB Bancorp, Inc. for periods ending June 30, 2025, and December 31, 2024 Consolidated Balance Sheets Details the company's financial position, including assets, liabilities, and shareholders' equity, as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $5,226,554 | $5,157,737 | | Total Liabilities | $4,489,432 | $4,392,570 | | Total Shareholders' Equity | $737,122 | $765,167 | Consolidated Statements of Income Presents the company's revenues, expenses, and net income for the three and six months ended June 30, 2025, and 2024 | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Interest Income | $47,007 | $38,722 | $90,532 | $77,354 | | Total Noninterest Income | $4,178 | $2,981 | $8,040 | $6,485 | | Total Noninterest Expense | $29,305 | $26,214 | $57,965 | $51,781 | | Income Before Taxes | $18,719 | $11,822 | $36,288 | $23,962 | | Net Income | $14,579 | $9,453 | $27,234 | $18,154 | | Earnings Per Share, Basic | $0.39 | $0.24 | $0.72 | $0.46 | | Earnings Per Share, Diluted | $0.39 | $0.24 | $0.72 | $0.46 | Consolidated Statements of Comprehensive Income Outlines net income and other comprehensive income components for the three and six months ended June 30, 2025, and 2024 | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Income | $14,579 | $9,453 | $27,234 | $18,154 | | Net change in fair value of AFS securities | $323 | $550 | $2,025 | $762 | | Total Comprehensive Income | $14,902 | $10,003 | $29,259 | $18,916 | Consolidated Statements of Changes in Shareholders' Equity Details changes in shareholders' equity, including net income, other comprehensive income, and share repurchases, for periods ended June 30, 2025, and 2024 | Item | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Balance, December 31 | $765,167 | $757,959 | | Net income | $27,234 | $18,154 | | Other comprehensive income, net of tax | $2,025 | $762 | | Repurchase of common shares | $(59,593) | — | | Restricted stock award issued | — | — | | Stock-based compensation | $787 | — | | ESOP shares committed to be released | $1,502 | $1,209 | | Balance, June 30 | $737,122 | $744,462 | Consolidated Statements of Cash Flows Summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net Cash Provided by Operating Activities | $36,986 | $13,294 | | Net Cash Used in Investing Activities | $(179,282) | $(231,029) | | Net Cash Provided by Financing Activities | $37,140 | $274,086 | | Net Change in Cash and Cash Equivalents | $(105,156) | $56,351 | | Cash and Cash Equivalents at End of Period | $258,699 | $328,942 | Notes to Consolidated Financial Statements Provides detailed explanations and disclosures supporting the consolidated financial statements Note 1 – Corporate Structure and Nature of Operations; Basis of Presentation Describes the company's structure, banking operations, pending acquisition of Provident Bancorp, and accounting basis as an emerging growth company - NB Bancorp, Inc. is a bank holding company operating through Needham Bank, providing banking services in eastern Massachusetts[20] - The Company announced a definitive merger agreement to acquire Provident Bancorp, Inc. for approximately $211.8 million, with closing expected in Q4 2025[22] - The Company qualifies as an emerging growth company (EGC) and has elected to defer the adoption of new or revised accounting standards[27] - The Company has one reportable segment: its banking business[30] Note 2 – Summary of Significant Accounting Policies Outlines significant accounting policies, emphasizing estimates for credit losses, fair value, and income taxes, and notes recent accounting pronouncements - Management's preparation of financial statements requires estimates and assumptions, particularly for allowance for credit losses, valuation and fair value measurements, benefit obligations, and income taxes[31] - ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Improvements to Income Tax Disclosures) have been issued but are not expected to have a material impact on the Company's consolidated financial statements upon adoption[32][33][34] Note 3 – Securities Details available-for-sale securities, their fair value measurement, unrealized losses, and the absence of credit loss provisions | Category | Amortized Cost (in thousands) | Unrealized Gain (in thousands) | Unrealized Loss (in thousands) | Fair Value (in thousands) | | :-------------------------------- | :---------------------------- | :----------------------------- | :----------------------------- | :------------------------ | | June 30, 2025 | | | | | | U.S. Treasury securities | $75,874 | $286 | $(222) | $75,938 | | U.S. Government agencies | $10,503 | $3 | $(1) | $10,505 | | Agency mortgage-backed securities | $46,744 | $77 | $(2,062) | $44,759 | | Corporate bonds | $86,044 | $159 | $(5,277) | $80,926 | | Total | $242,664 | $642 | $(7,898) | $235,408 | | December 31, 2024 | | | | | | U.S. Treasury securities | $69,469 | $104 | $(489) | $69,084 | | U.S. Government agencies | $9,005 | $9 | $(7) | $9,007 | | Agency mortgage-backed securities | $42,083 | — | $(2,899) | $39,184 | | Corporate bonds | $90,219 | $163 | $(6,337) | $84,045 | | Total | $238,159 | $425 | $(10,379) | $228,205 | - No provision for estimated credit losses on available-for-sale securities was recorded for the three and six months ended June 30, 2025 and 2024[40] - Available-for-sale debt securities had unrealized losses with aggregate depreciation of 4.8% from amortized cost basis at June 30, 2025, primarily due to changes in market interest rates[47] Note 4 – Loans Receivable, Allowance for Credit Losses and Credit Quality Details the loan portfolio, allowance for credit losses, credit quality, and specific loan categories including cannabis industry exposure | Loan Category | June 30, 2025 (in thousands) | Percent (June 30, 2025) | December 31, 2024 (in thousands) | Percent (December 31, 2024) | | :------------------------------ | :--------------------------- | :---------------------- | :------------------------------- | :-------------------------- | | One-to-four-family residential | $1,122,161 | 24.68% | $1,130,791 | 26.06% | | Home equity | $131,952 | 2.90% | $124,041 | 2.86% | | Commercial real estate | $1,373,405 | 30.20% | $1,363,394 | 31.42% | | Multi-family residential | $316,745 | 6.97% | $333,047 | 7.67% | | Construction and land development | $724,275 | 15.92% | $583,809 | 13.45% | | Commercial and industrial | $625,187 | 13.75% | $559,828 | 12.90% | | Consumer | $253,705 | 5.58% | $244,558 | 5.64% | | Total loans | $4,547,430 | 100.00% | $4,339,468 | 100.00% | | Allowance for credit losses | $(42,601) | | $(38,744) | | | Net loans | $4,498,574 | | $4,294,408 | | - Loans to borrowers in the cannabis industry totaled approximately $441.9 million at June 30, 2025, with $268.3 million collateralized by real estate[60] - The Company recorded a $0.923 million recovery from a previously modified commercial real estate participation loan during the three months ended June 30, 2025[77] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Provision for credit losses - loans | $4,244 | $4,429 | $5,191 | $8,319 | | Release of credit losses - unfunded commitments | $(1,083) | $(762) | $(872) | $(223) | | Total provision for credit losses | $3,161 | $3,667 | $4,319 | $8,096 | Note 5 – Employee Benefits Outlines various employee benefit plans, including 401(k), ESOP, and stock-based compensation from the 2025 Equity Incentive Plan | Plan | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | 401(k) Plan Contributions | $728 | $726 | $1,400 | $1,300 | | ESOP Compensation Expense | $842 | $628 | $1,600 | $1,200 | | Stock-based Compensation Expense | $787 | — | $787 | — | - The Company withdrew from the CBERA Plan in the second quarter of 2024 and contributed an additional $1.2 million to the plan during the six months ended June 30, 2025[81] - The NB Bancorp, Inc. 2025 Equity Incentive Plan was approved, allowing for the issuance of up to 5,987,802 shares, including 1,284,525 restricted stock awards granted during the six months ended June 30, 2025[93][95] Note 6 – Fair Value Measurements Details the fair value measurement hierarchy for financial instruments, including available-for-sale securities and derivatives - The Company classifies financial assets and liabilities measured at fair value into three levels based on the reliability of valuation inputs: Level 1 (active exchange markets), Level 2 (less active dealer/broker markets), and Level 3 (derived from other methodologies with unobservable inputs)[98][99][100] | Asset Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Fair Value (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------------ | | June 30, 2025 | | | | | | U.S. Treasury securities | $75,938 | — | — | $75,938 | | U.S. Government agencies | — | $10,505 | — | $10,505 | | Agency mortgage-backed securities | — | $44,759 | — | $44,759 | | Corporate bonds | — | $71,937 | $8,989 | $80,926 | | Total AFS Debt Securities | $75,938 | $150,481 | $8,989 | $235,408 | | Derivative assets | — | $23,980 | — | $23,980 | | Collateral-dependent loans, net of reserve | — | — | $9,298 | $9,298 | Note 7 – Commitments and Contingencies Outlines off-balance sheet credit risk, including loan commitments and letters of credit, and the associated allowance | Off-Balance Sheet Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------- | :------------------------------- | | Commitments to originate loans | $35,479 | $34,050 | | Unadvanced funds on lines of credit | $584,268 | $495,796 | | Unadvanced funds on construction loans | $434,275 | $416,450 | | Letters of credit | $5,679 | $6,043 | | Total | $1,059,701 | $952,339 | - The allowance for off-balance sheet commitments was $2.3 million at June 30, 2025, with a release of $1.1 million for the three months ended June 30, 2025[119] Note 8 – Derivatives and Hedging Activities Describes the use of derivative financial instruments, such as interest rate swaps and RPAs, for managing interest rate risk - The Company uses interest rate swaps and cap agreements (72 agreements, $460.3 million notional at June 30, 2025) to manage interest rate exposures, primarily for commercial banking customers[124][125] - Risk Participation Agreements (RPAs) totaled 17 with an aggregate notional amount of $44.8 million at June 30, 2025, representing assumed credit risk[126] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Swap contract income | $524 | $265 | $612 | $752 | Note 9 – Other Comprehensive Income (Loss) Presents components of other comprehensive income (loss), primarily from fair value changes in available-for-sale securities | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Change in fair value of AFS securities | $323 | $550 | $2,025 | $762 | | Total other comprehensive income (loss) | $323 | $550 | $2,025 | $762 | | Component of AOCI | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------------- | :--------------------------- | :------------------------------- | | Net unrealized holding losses on AFS securities, net of tax | $(5,362) | $(7,387) | | Unrecognized director pension plan benefits, net of tax | $(780) | $(780) | | Total accumulated other comprehensive loss | $(6,142) | $(8,167) | Note 10 – Regulatory Capital Requirements Confirms that both the Company and Needham Bank met all 'well capitalized' regulatory capital requirements - The Company and the Bank were categorized as 'well capitalized' under the regulatory framework for prompt corrective action as of June 30, 2025, and December 31, 2024[135] | Capital Ratio (Company) | Actual Ratio (June 30, 2025) | Minimum for Well Capitalized | | :-------------------------------- | :--------------------------- | :--------------------------- | | Total Capital (to RWA) | 16.2% | 10.0% | | Tier 1 Capital (to RWA) | 15.2% | 8.0% | | Common Equity Tier 1 Capital (to RWA) | 15.2% | 6.5% | | Tier 1 Capital (to Total Average Assets) | 14.3% | 5.0% | Note 11 – Earnings Per Share ("EPS") Explains the calculation of basic and diluted EPS, including the impact of potentially dilutive common shares | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income applicable to common shares (in thousands) | $14,579 | $9,453 | $27,234 | $18,154 | | Average common shares outstanding (basic) | 37,191,460 | 39,289,271 | 37,668,741 | 39,490,552 | | Average common shares outstanding (diluted) | 37,550,409 | 39,289,271 | 37,848,215 | 39,490,552 | | Earnings per common share - basic | $0.39 | $0.24 | $0.72 | $0.46 | | Earnings per common share - diluted | $0.39 | $0.24 | $0.72 | $0.46 | - 959,865 securities had a dilutive effect on EPS during the three months ended June 30, 2025[139] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition and operating results, covering balance sheet, income statement, and liquidity General Aids in understanding the Company's financial condition and operating results in conjunction with financial statements - This section aims to assist in understanding the Company's financial condition and results of operations and should be read in conjunction with the unaudited financial statements[141] CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Highlights forward-looking statements subject to significant business, economic, and competitive uncertainties and risks - The report contains forward-looking statements, identifiable by words such as 'estimate,' 'project,' 'believe,' 'intend,' and 'anticipate,' which are subject to significant business, economic, and competitive uncertainties[142] - Factors that could cause actual results to differ materially include weakening economy, inflationary pressures, financial market volatility, loan delinquencies, interest rate changes, risks related to the pending acquisition of Provident Bancorp, Inc. and BankProv, and changes in laws or regulations[144] Critical Accounting Policies Discusses critical accounting policies, emphasizing areas requiring significant management judgment and no material changes - There are no material changes to the critical accounting policies disclosed in the Company's Annual Report on Form 10-K filed on March 7, 2025[146] - Key areas requiring significant management judgment include the Allowance for Credit Losses (ACL) under the CECL methodology, Income Taxes (deferred tax assets and liabilities), and Securities Valuation (fair value estimates for available-for-sale debt securities)[147][153][154] Non-GAAP Financial Measures Presents non-GAAP financial measures used to supplement GAAP results for evaluating financial condition - The Company uses non-GAAP financial measures, such as operating net income and operating EPS, to provide supplemental information for evaluating financial condition, which are not substitutes for GAAP results[158] | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating net income (non-GAAP) (in thousands) | $15,043 | $9,858 | $28,736 | $19,164 | | Operating earnings per share, basic (non-GAAP) | $0.40 | $0.25 | $0.76 | $0.49 | | Operating earnings per share, diluted (non-GAAP) | $0.40 | $0.25 | $0.76 | $0.49 | | Operating efficiency ratio (non-GAAP) | 56.22% | 61.65% | 57.03% | 60.21% | Comparison of Financial Condition as of June 30, 2025 and December 31, 2024 Compares the Company's financial condition, including assets, liabilities, and equity, between June 30, 2025, and December 31, 2024 - Total assets increased by $68.8 million (1.3%) to $5.23 billion, primarily due to increases in net loans, non-public investments, and available-for-sale securities, partially offset by decreases in cash and cash equivalents and BOLI[160] - Net loans increased by $204.2 million (4.8%) to $4.50 billion, driven by a 24.1% increase in construction and land development loans and an 11.7% increase in commercial and industrial loans[163] - Deposits increased by $90.4 million (2.2%) to $4.27 billion, with core deposits up 3.8% and brokered deposits down 18.0%[167] - Shareholders' equity decreased by $28.0 million (3.7%) to $737.1 million, mainly due to a $59.6 million decrease in additional paid-in capital from share repurchases, partially offset by net income[169] Comparison of Operating Results for the Three Months Ended June 30, 2025 and 2024 Compares operating results, including net income, net interest income, and noninterest expenses, for the three months ended June 30, 2025, and 2024 - Net income increased by $5.1 million (54.2%) to $14.6 million, driven by an $8.3 million increase in net interest income and a $1.2 million increase in noninterest income, partially offset by higher noninterest expense and income tax[170] - Net interest income increased by $8.3 million (21.4%) to $47.0 million, primarily due to a 9.9% increase in average interest-earning assets and a 12 basis point increase in the yield on interest-earning assets[176] - Noninterest income increased by $1.2 million (40.2%) to $4.2 million, mainly from customer service fees (+36.4%), increase in BOLI cash surrender value (+94.8%), and swap contract income (+97.7%)[178] - Noninterest expense increased by $3.1 million (11.8%) to $29.3 million, primarily due to increases in salaries and employee benefits (+10.9%), director and professional service fees (+29.7%), and merger and acquisition expenses ($0.53 million)[179][180] Comparison of Operating Results for the Six Months Ended June 30, 2025 and 2024 Compares operating results, including net income, net interest income, and provision for credit losses, for the six months ended June 30, 2025, and 2024 - Net income increased by $9.1 million (50.0%) to $27.2 million, driven by a $13.2 million increase in net interest income and a $3.8 million decrease in the provision for credit losses[188] - Net interest income increased by $13.2 million (17.0%) to $90.5 million, due to an 11.8% increase in average interest-earning assets and a 6 basis point increase in the weighted average yield[193] - Provision for credit losses decreased by $3.8 million (46.7%) to $4.3 million, primarily due to a specific reserve established in 2024 and a recovery in 2025[194] - Noninterest expense increased by $6.2 million (11.9%) to $58.0 million, mainly from salaries and employee benefits (+9.9%), data processing expenses (+21.7%), and FDIC and state insurance assessments (+70.6%)[195] Liquidity and Capital Resources Discusses the Company's liquidity sources, borrowing capacity, off-balance sheet commitments, and regulatory capital adequacy - Primary sources of funds include deposits, loan/security payments, and borrowings from the FHLB and FRB[201] - As of June 30, 2025, the Company had $724.2 million in unused borrowing capacity with the FHLB and $593.4 million available from the FRB discount window[201] - Off-balance sheet commitments totaled $1.06 billion, including commitments to originate loans, unused lines of credit, unadvanced construction loans, and letters of credit[204] - Needham Bank and NB Bancorp, Inc. exceeded all regulatory capital requirements and were categorized as 'well-capitalized' as of June 30, 2025[210] Impact of Inflation and Changing Prices Examines the impact of inflation and changing prices on the Company's operations, noting interest rates as a more significant factor - The primary impact of inflation on operations is increased operating costs; however, interest rates generally have a more significant impact on a financial institution's performance than inflation[211] Item 3. Quantitative and Qualitative Disclosures About Market Risk States that this section is not applicable as the Registrant qualifies as an emerging growth company - This item is not applicable as the Registrant is an emerging growth company[212] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[213] - There have been no material changes in the Company's internal controls over financial reporting during the quarter ended June 30, 2025[214] Part II. Other Information Presents other required information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Details legal actions in the normal course of business, not expected to materially impact financial condition - Legal actions are not expected to have a material adverse effect on the Company's financial condition or results of operations[216] Item 1A. Risk Factors Confirms no material changes to risk factors previously disclosed in the Annual Report on Form 10-K - No material changes in risk factors from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[217] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities Reports on common stock repurchases and the authorization of a new stock repurchase program | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :----------------------------- | :--------------------------- | | June 1 - June 30, 2025 | 1,106,588 | $17.08 | - A second stock repurchase program was announced on May 7, 2025, authorizing the Company to purchase up to 2,028,522 shares (5%) of its outstanding common stock[219] Item 3. Defaults Upon Senior Securities Confirms no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[220] Item 4. Mine Safety Disclosures States that this item is not applicable to the Company - This item is not applicable[221] Item 5. Other Information Reports on a new Change in Control Agreement with the Chief Financial Officer, Jean-Pierre Lapointe - On June 5, 2025, the Bank entered into a new Change in Control Agreement with Jean-Pierre Lapointe, Chief Financial Officer, providing a 24-month term and severance equal to two times his annual compensation upon a qualifying termination[221][222] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents - Exhibits include certifications from the Chief Executive Officer (31.1) and Chief Financial Officer (31.2), a joint certification (32), and various XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[226] Signature Page Confirms the report's signing by the Chairman, President, CEO, and CFO on August 8, 2025 - The report is signed by Joseph Campanelli (Chairman, President, and CEO) and Jean-Pierre Lapointe (Executive Vice President and CFO) on August 8, 2025[230]