NB Bancorp, Inc. Reports First Quarter 2025 Financial Results

SELECTED FINANCIAL HIGHLIGHTS FOR THE FIRST QUARTER OF 2025

• Net income of $12.7 million, or $0.33 per diluted common share, compared to net income of $15.6 million, or $0.40 per diluted common share, for the prior quarter. Operating net income, excluding one-time charges, amounted to $13.7 million, or $0.35 per diluted common share, compared to operating net income of $13.3 million, or $0.34 per diluted common share for the prior quarter. One-time charges during the current quarter include:
  • Pension expense related to the final liquidation of the employee pension plan totaling $884 thousand (net of tax);
  • Tax expense and a modified endowment contract penalty related to the surrender of bank-owned life insurance ("BOLI") policies of $154 thousand.
• Net interest margin expanded nine basis points to 3.61% during the current quarter from 3.52% in the prior quarter.
• Gross loans increased $131.3 million, or 3.0%, to $4.46 billion, from $4.33 billion the prior quarter.
• Total deposits increased $149.0 million, or 3.6%, from the prior quarter. Core deposits, which the Company considers to be all non-brokered deposits, increased $149.5 million, or 3.9%, for the current quarter.
• Book value per share and tangible book value per share were $18.23 and $18.20, respectively, which increased from $17.92 and $17.89, respectively in the prior quarter. The increase in tangible book value per share was a result of $12.7 million in net income for the quarter, partially offset by the repurchase of 2,135,286 shares during the current quarter at an all-in weighted average cost of $19.06 per share.

BALANCE SHEET 
Total assets amounted to $5.24 billion as of March 31, 2025, representing an increase of $84.4 million, or 1.6%, from December 31, 2024.

• Cash and cash equivalents decreased $50.4 million, or 13.9%, to $313.4 million from $363.9 million in the prior quarter, as a result of the repurchase of shares during the quarter, along with the paydown of FHLB borrowings.
• Net loans increased to $4.43 billion, representing an increase of $131.8 million, or 3.1%, from the prior quarter as demand for new loan originations and advances continued. The current quarter growth was primarily seen in construction and land development loans, which increased $62.5 million, or 10.7%, commercial and industrial loans, which increased $49.6 million, or 8.9%, and commercial real estate loans, which increased $12.6 million, or 0.9%.
• Deposits totaled $4.33 billion, representing an increase of $149.0 million, or 3.6%, from $4.18 billion in the prior quarter. The increase in deposits was the result of growth in customer deposits, primarily money market accounts, which increased $127.1 million, or 12.7%; certificates of deposit, which increased $19.5 million, or 1.2%; and savings accounts, which increased $11.7 million, or 10.8%; partially offset by NOW accounts which decreased $11.3 million, or 2.4%, from the prior quarter.
• FHLB borrowings decreased to $90.8 million from $120.8 million, a $30.0 million, or 24.8%, decrease during the current quarter as a result of a paydown of outstanding borrowings due to deposit growth outpacing loan growth.
• Shareholders' equity was $739.6 million, representing a decrease of $25.6 million, or 3.3%, from the prior quarter, primarily as a result of the repurchase of shares during the quarter, which resulted in a $40.7 million decrease to shareholders' equity, partially offset by $12.7 million in net income. Shareholders' equity to total assets and tangible shareholders' equity to tangible assets were both 14.1% at the end of the quarter, both down from 14.8% in the prior quarter.

NET INTEREST INCOME
Net interest income was $43.5 million for the quarter ended March 31, 2025, compared to $42.5 million for the prior quarter, representing an increase of $1.0 million, or 2.4%. Net interest margin expanded nine basis points to 3.61% for the quarter from 3.52% from the prior quarter.

• The decrease in interest income during the quarter ended March 31, 2025 was primarily attributable to decreases in the average balance of short-term investments, as cash was utilized to repurchase shares during the quarter, partially offset by increases in interest income on loans and securities, both as a result of increases in average balances and rates earned.
• The decrease in interest expense for the quarter ended March 31, 2025 was primarily driven by decreases in the average rate on certificates of deposit and individual retirement accounts.

NONINTEREST INCOME
Noninterest income was $3.9 million for the quarter ended March 31, 2025, compared to $3.8 million for the prior quarter, representing an increase of $80 thousand, or 2.1%.

• Customer service fee income was $2.6 million, compared to $2.1 million in the prior quarter, representing an increase of $490 thousand, or 23.7%, as a result of a higher loan fees earned during the current quarter.
• Swap contract income was $88 thousand, compared to $531 thousand in the prior quarter, representing a decrease of $443 thousand, or 83.4%, due to reduced swap contract demand.

NONINTEREST EXPENSE
Noninterest expense for the quarter ended March 31, 2025 was $28.7 million, representing an increase of $3.0 million, or 11.9%, from the prior quarter.

• Salaries and employee benefits were $19.1 million for the quarter ended March 31, 2025, representing an increase of $3.4 million, or 21.6%, from the prior quarter, primarily driven by the $1.2 million final pension liquidation expense during the current quarter, increased employee payroll taxes due to annual FICA reset and annual bonus payments, increased salaries and health benefits expenses due to increased headcount.

INCOME TAXES
Income tax expense for the quarter ended March 31, 2025 was $4.9 million, representing a $1.3 million, or 34.1%, increase from the prior quarter. The increase was primarily driven by the prior quarter reversal of a deferred tax liability related to the proportional amortization method ("PAM") under ASU 2023-02, which reduced tax expense in the prior quarter. The effective tax rate for the current quarter was 28.0%, compared to 19.0% in the prior quarter. The primary driver of the increase in the effective tax rate was the prior quarter reversal of a deferred tax liability related to the adoption of PAM under ASU 2023-02, which reduced tax expense in the prior quarter and the significant amount of solar income tax credits earned during the prior year.  

COMMERCIAL REAL ESTATE PORTFOLIO
Commercial real estate loans increased $21.2 million, or 1.2%, to $1.72 billion, during the quarter ended March 31, 2025.

• Cannabis facility commercial real estate loans decreased $3.4 million, or 1.0%, during the quarter ended March 31, 2025. The Company's cannabis facility commercial real estate portfolio is secured entirely by the underlying commercial real estate of the borrower operation. The vast majority of the loan portfolio balances have a loan-to-value ratio of 65% or lower, with appraisal reports taking a blended approach (using both cannabis and non-cannabis use comparable real estate sales, which we believe are generally more conservative).
• The cannabis facility portfolio has geographic dispersion, with lower dollar exposure loans remaining local and larger dollar exposure loans generally tied to multi-state operators with a more national footprint. All cannabis facility loan relationships were pass-rated and current at the end of the current quarter.
• The Company's $341.6 million multi-family real estate loan portfolio consists of high-quality, performing loans primarily located in the Greater Boston area, primarily all of which are adjustable-rate loans.
• The Company's $186.9 million office portfolio consists principally of suburban Class A and B office space used as medical and traditional offices. The portfolio does not consist of high-rise towers located in Boston.

ASSET QUALITY

• The allowance for credit losses ("ACL") amounted to $38.3 million as of March 31, 2025, or 0.86% of total gross loans, compared to $38.7 million, or 0.89% of total loans at December 31, 2024. The Company recorded provisions for credit losses of $1.2 million during the quarter ended March 31, 2025, which included a provision of $947 thousand for loans and a provision of $211 thousand for unfunded commitments, compared to provisions for credit losses of $1.4 million during the prior quarter. The decrease in the ACL for the quarter ended March 31, 2025 was the result of net charge-offs of $1.4 million, partially offset by provisions of $947 thousand.
• Non-performing loans totaled $11.4 million as of March 31, 2025, a decrease of $2.5 million, or 17.9%, from $13.9 million at the end of the prior quarter. The decrease was primarily due to the reduction in commercial real estate loans on non-accrual of $2.2 million during the quarter ended March 31, 2025 from the resolution of a large commercial real estate loan.
• During the quarter ended March 31, 2025, the Company recorded total net charge-offs of $1.4 million, or 0.12% of average total loans on an annualized basis, compared to $479 thousand, or 0.04% of average total loans on an annualized basis, in the prior quarter. The increase in net charge-offs during the quarter ended March 31, 2025 was due to a $715 thousand increase in purchased consumer loan charge-offs during the quarter.
• The Company's loan portfolio consists primarily of commercial real estate and multi-family loans, one-to-four-family residential real estate loans, construction and land development loans, commercial and industrial loans and consumer loans. These loans are primarily made to individuals and businesses located in our primary lending market area, which is the Greater Boston metropolitan area and surrounding communities in Massachusetts, eastern Connecticut, southern New Hampshire and Rhode Island.

ABOUT NB BANCORP, INC.
NB Bancorp, Inc. (Nasdaq Capital Market: NBBK) is the registered bank holding company of Needham Bank. Needham Bank is headquartered in Needham, Massachusetts, which is approximately 17 miles southwest of Boston's financial district. Known as the "Builder's Bank," Needham Bank has been helping individuals, businesses and non-profits build for their futures since 1892. Needham Bank offers an array of tech-forward products and services that businesses and consumers use to manage their financial needs. We have the financial expertise typically found at much larger institutions and the local knowledge and commitment you can only find at a community bank. For more information, please visit https://NeedhamBank.com. Needham Bank is a member of FDIC.

Non-GAAP Financial Measures 
In addition to results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), this press release contains certain non-GAAP financial measures, including operating net income, operating noninterest expense, operating noninterest income, operating effective tax rate, operating earnings per share, basic, operating earnings per share, diluted, operating return on average assets, operating return on average shareholders' equity, operating efficiency ratio, tangible shareholders' equity, tangible assets and tangible book value per share. The Company's management believes that the supplemental non-GAAP information is utilized by regulators and market analysts to evaluate a Company's financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Forward-Looking Statements
Statements in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We may also make forward-looking statements in other documents we file with the Securities and Exchange Commission (the "SEC"), in our annual reports to our stockholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "assume," "outlook," "will," "should," and other expressions that predict or indicate future events and trends and which do not relate to historical matters.

Although the Company believes that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors. You should not place undue reliance on our forward-looking statements. You should exercise caution in interpreting and relying on forward-looking statements because they are subject to significant risks, uncertainties and other factors which are, in some cases, beyond the Company's control. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in general business and economic conditions on a national basis and in the local markets in which the Company operates, including changes which adversely affect borrowers' ability to service and repay loans; changes in customer behavior due to political, business and economic conditions, including inflation and concerns about liquidity; turbulence in the capital and debt markets; reductions in net interest income resulting from interest rate volatility as well as changes in the balances and mix of loans and deposits; changes in interest rates and real estate values; changes in loan collectability and increases in defaults and charge-off rates; decreases in the value of securities and other assets, adequacy of credit loss reserves, or deposit levels necessitating increased borrowing to fund loans and investments; changing government regulation; competitive pressures from other financial institutions; changes in legislation or regulation and accounting principles, policies and guidelines; cybersecurity incidents, fraud, natural disasters, and future pandemics; the risk that the Company may not be successful in the implementation of its business strategy; the risk that intangibles recorded in the Company's financial statements will become impaired; changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company's Form 10-K and updated by our Quarterly Report on Form 10-Q and other filings submitted to the SEC. These statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any of these forward-looking statements to reflect events or circumstances occurring after the date of this communication or to reflect the occurrence of unanticipated events.