NB Bancorp, Inc. Reports Full Year 2023 Financial Results
- The IPO raised transformative capital for growth.
- Total assets increased by 26.2% to $4.53 billion.
- Net loans grew by 29.0% to $3.86 billion.
- Net interest income rose by 23.9% to $130.1 million.
- Noninterest income increased by 67.9% to $15.6 million.
- Noninterest expense surged by 68.5% to $119.9 million, including one-time costs.
- The allowance for credit losses was $32.2 million.
- Non-performing loans totaled $10.8 million.
- The 2024 annual meeting of shareholders is set for May 22, 2024.
- Net income declined to $9.8 million due to one-time expenses.
- The net interest margin decreased to 3.41%.
- Noninterest expense increased by 68.5% to $119.9 million.
- The Company recorded provisions for credit losses of $13.9 million.
- Delinquencies were $10.0 million at December 31, 2023.
Insights
Reviewing NB Bancorp, Inc.'s financial results reveals a complex year influenced by significant one-time expenses. The net income of $9.8 million, when adjusted for conversion and IPO-related expenses, suggests an underlying operational strength with a $34.3 million figure, surpassing the previous year's net income. This indicates a robust core business performance, despite the superficial dip in reported net income.
The $19.1 million charitable contribution, while substantial, is a strategic move that could yield long-term community goodwill and potential tax benefits. However, investors should note the dilutive effect of the additional 1.7 million shares issued. The balance sheet expansion by 26.2% and the growth in net loans by 29.0%, particularly in commercial and industrial loans, signal aggressive expansion and could suggest confidence in future economic conditions or a strategic shift to capture more market share.
The financial results indicate NB Bancorp, Inc. is actively responding to market demands, with significant growth in commercial real estate and commercial and industrial loans. This pivot towards commercial lending is a trend seen across the banking sector, as institutions seek higher yields in a rising interest rate environment. The increase in net interest income by 23.9% reflects effectively capitalizing on higher rates, although the slight decrease in net interest margin suggests a competitive lending landscape and possibly rising funding costs.
The growth in customer deposits, particularly certificates of deposit, indicates successful deposit-gathering strategies amid a competitive rate environment. This could suggest customer loyalty and trust in the institution, which is crucial for sustaining growth. Additionally, the substantial increase in noninterest income, including swap contract income and Employee Retention Credit income, diversifies revenue streams, reducing reliance on traditional interest-based income.
The financial results from NB Bancorp, Inc. provide insights into broader economic trends. The rapid asset growth and the increase in loan originations, particularly adjustable-rate residential loans, suggest that the housing market in their operating regions remains active. However, this could also expose the bank to interest rate risk if rates continue to rise. The adoption of the CECL methodology for credit losses indicates compliance with recent regulatory changes aimed at more accurately forecasting loan losses, which is critical in the current economic climate of uncertainty and potential for increased loan defaults.
Investors should consider the potential impact of economic slowdowns on NB Bancorp's aggressive growth strategy. While the current expansion appears sustainable, a downturn could increase the risk profile of the new loans. The decrease in non-performing loans and delinquencies is a positive sign, but continuous monitoring of asset quality is essential, especially given the bank's focus on commercial lending, which can be more volatile than consumer lending.
Concurrent with its mutual-to-stock conversion and as described in the prospectus for its initial public offering ("IPO"), the Company made a one-time donation of
"The capital that the Company raised from its IPO will be transformative as we move forward. It will provide us with the ability to grow in a safe and prudent manner, allowing us to be selective in how we deploy the capital into growing market share and serving our customers' needs," said Joseph Campanelli, Chairman, President and Chief Executive Officer. "The team's efforts in completing the IPO were exceptional. We look forward to continue building on our 132-year history of serving the local communities."
SELECTED FINANCIAL HIGHLIGHTS
- Net income was
$9.8 million $19.1 million - Net income, excluding conversion and IPO-related expenses, was
$34.3 million - Book value and tangible book value per share were
$17.75 $17.72
BALANCE SHEET
Total assets were
- Cash and cash equivalents increased to
$272.6 million $156.5 million $116.0 million 74.1% , increase from the prior year as a result of the conversion and IPO on December 27, 2023. - Net loans were
$3.86 billion $866.6 million 29.0% , from the prior year as demand for new originations continued. The main driver of the new growth was in commercial real estate loans, which grew$372.0 million 36.8% , commercial and industrial loans, which grew$240.5 million 97.2% , and residential real estate, which grew$187.1 million 18.6% , year-over-year. The growth in residential lending was driven from new originations, of which$38.9 million $144.4 million 6.77% at December 31, 2023. - Deposits totaled
$3.39 billion $500.6 million 17.3% , from the prior year. The increase in deposits from December 31, 2022 was the result of growth in customer deposits, primarily certificates of deposit, which increased$287.4 million 23.8% from prior year, along with money market account and noninterest-bearing demand deposit accounts, which increased by$229.1 million 34.7% , and$83.0 million 18.6% , respectively from December 31, 2022. - Shareholders' equity was
$758.0 million $413.9 million 120.3% , from the prior year. The primary driver for the increase was the capital raised during the Company's mutual-to-stock conversion and IPO, which was completed on December 27, 2023.
NET INTEREST INCOME
Net interest income was
NONINTEREST INCOME
Noninterest income was
- Customer service fees increased
$2.7 million 52.1% , from prior year, primarily driven by higher account cash management service charges. - Swap contract income was
$2.2 million $1.3 million $891 thousand - Employee Retention Credit income was
$3.5 million
NONINTEREST EXPENSE
Noninterest expense for 2023 was
- Charitable contributions expense in 2023 of
$20.3 million $19.1 million - Salaries and benefits were
$68.3 million $20.9 million $8.3 million $5.5 million $1.1 million $1.5 million - Federal Deposit Insurance Corporation and state insurance assessments expense increased by
$2.9 million 157.4% , to$4.7 million
ASSET QUALITY
- The allowance for credit losses was
$32.2 million 0.83% of total gross loans, compared to$25.0 million 0.83% of total loans at December 31, 2022. The Company recorded provisions for credit losses of$13.9 million $6.7 million $4.2 million - Non-performing loans totaled
$10.8 million $2.1 million $12.9 million $10.0 million $2.9 million $3.6 million - The Company's loan portfolio consists of primarily commercial real estate and multifamily 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 inMassachusetts , easternConnecticut , southernNew Hampshire andRhode Island . - The Company's
$210.0 million Greater Boston area, primarily all of which are adjustable-rate loans. - The Company's
$197.2 million Greater Boston suburbs and mostly consists of Class A and B office space. The typical use of these office loans are medical and lab space and do not consist of high-rise towers located inBoston .
ANNOUNCEMENT OF THE 2024 ANNUAL MEETING OF SHAREHOLDERS
The Company's Board of Directors has set the date for its 2024 annual meeting of shareholders to be held on Wednesday, May 22, 2024. The annual meeting will be held over the Internet in a virtual meeting format. The record date for shareholders entitled to vote at the meeting will be Monday, April 1, 2024. Shareholders of record will receive additional details and instructions for meeting participation in the proxy materials that will be made available to them in April.
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
Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles ("GAAP"), this press release contains certain non-GAAP financial measures, including net income excluding conversion and IPO-related expenses, noninterest expense excluding conversion and IPO-related expenses, earnings per share excluding conversion and IPO-related expenses, return on average assets excluding conversion and IPO-related expenses, return on average shareholders' equity excluding conversion and IPO-related expenses, efficiency ratio excluding conversion and IPO-related expenses, tangible shareholders' equity, tangible assets, tangible book value per share, and efficiency ratio. 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 Registration Statement Form S-1 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.
NB BANCORP, INC. | |||||
December 31, 2023 | December 31, 2022 | ||||
Assets | |||||
Cash and due from banks | $ | 90,485 | $ | 131,073 | |
Federal funds sold | 182,106 | 25,472 | |||
Total cash and cash equivalents | 272,591 | 156,545 | |||
Available-for-sale securities, at fair value | 189,465 | 245,480 | |||
Total loans | 3,889,279 | 3,015,445 | |||
Allowance for credit losses | (32,222) | (25,028) | |||
Net loans | 3,857,057 | 2,990,417 | |||
Accrued interest receivable | 17,284 | 10,837 | |||
Banking premises and equipment, net | 35,531 | 35,344 | |||
Depositors Insurance Fund, at cost | 139 | 139 | |||
Federal Home Loan Bank stock, at cost | 14,558 | 13,182 | |||
Federal Reserve Bank stock, at cost | 10,323 | 8,104 | |||
Non-public investments | 13,713 | 10,592 | |||
Bank-owned life insurance ("BOLI") | 50,516 | 49,006 | |||
Prepaid expenses and other assets | 53,109 | 57,167 | |||
Income tax refunds receivable | - | 4,134 | |||
Deferred income tax asset | 19,126 | 11,388 | |||
Total assets | $ | 4,533,412 | $ | 3,592,335 | |
Liabilities and shareholders' equity | |||||
Deposits | $ | 3,387,348 | $ | 2,886,743 | |
Mortgagors' escrow accounts | 4,229 | 4,064 | |||
FHLB borrowings | 283,338 | 293,082 | |||
Accrued expenses and other liabilities | 81,325 | 52,399 | |||
Accrued retirement liabilities | 19,213 | 11,982 | |||
Total liabilities | 3,775,453 | 3,248,270 | |||
Commitments and contingencies | |||||
Shareholders' equity | |||||
Preferred stock, | - | - | |||
Common stock, at December 31, 2023, no shares issued and outstanding at December 31, 2022 | 427 | - | |||
Additional paid-in capital | 417,030 | - | |||
Unallocated common shares held by Employee Stock Ownership Plan | (13,774) | - | |||
Retained earnings | 366,173 | 358,466 | |||
Accumulated other comprehensive loss | (11,897) | (14,401) | |||
Total shareholders' equity | 757,959 | 344,065 | |||
Total liabilities and shareholders' equity | $ | 4,533,412 | $ | 3,592,335 | |
NB BANCORP, INC. | ||||||
For the years ended December 31, | ||||||
2023 | 2022 | |||||
INTEREST AND DIVIDEND INCOME | ||||||
Interest and fees on loans | $ | 211,973 | $ | 113,760 | ||
Interest and dividends on investment securities | 4,773 | 4,954 | ||||
Interest on cash equivalents and other | 3,755 | 1,798 | ||||
Total interest and dividend income | 220,501 | 120,512 | ||||
INTEREST EXPENSE | ||||||
Interest on deposits | 76,394 | 12,689 | ||||
Interest on FHLB borrowings | 14,050 | 2,859 | ||||
Total interest expense | 90,444 | 15,548 | ||||
NET INTEREST INCOME | 130,057 | 104,964 | ||||
PROVISION FOR CREDIT LOSSES | ||||||
Provision for credit losses – allowance for credit losses | 9,657 | 6,700 | ||||
Provision for credit losses – allowance for unfunded commitments | 4,228 | - | ||||
Total provision for credit losses | 13,885 | 6,700 | ||||
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 116,172 | 98,264 | ||||
NONINTEREST INCOME | ||||||
Gain from bargain purchase and assumption agreement | - | 1,070 | ||||
Customer service fees | 7,817 | 5,138 | ||||
Increase in cash surrender value of BOLI | 1,510 | 1,157 | ||||
Mortgage banking income | 581 | 595 | ||||
Swap contract income | 2,153 | 1,262 | ||||
Employee retention credit income | 3,452 | - | ||||
Other income | 64 | 53 | ||||
Total noninterest income | 15,577 | 9,275 | ||||
NONINTEREST EXPENSE | ||||||
Salaries and employee benefits | 68,344 | 47,466 | ||||
Director and professional service fees | 6,232 | 4,758 | ||||
Occupancy and equipment expenses | 5,192 | 4,354 | ||||
Data processing expenses | 7,500 | 5,657 | ||||
Charitable contribution expense | 20,335 | 1,066 | ||||
Marketing expenses | 2,747 | 2,338 | ||||
FDIC and state insurance assessments | 4,707 | 1,829 | ||||
General and administrative expenses | 4,848 | 3,683 | ||||
Total noninterest expense | 119,905 | 71,151 | ||||
INCOME BEFORE TAXES | 11,844 | 36,388 | ||||
INCOME TAXES | 2,019 | 6,323 | ||||
NET INCOME | $ | 9,825 | $ | 30,065 | ||
Weighted average common shares outstanding | 42,018,229 | N/A | ||||
Earnings per share (basic) | $ | 0.23 | N/A | |||
NB BANCORP, INC. | ||||||
Years Ended December 31, | ||||||
2023 | 2022 | |||||
Net income (GAAP) | $ | 9,825 | $ | 30,065 | ||
Add: | ||||||
Noninterest expense components: | ||||||
Needham Bank Charitable Foundation contribution resulting from IPO | 19,082 | - | ||||
One-time conversion and IPO-related compensation expense | 7,931 | - | ||||
Defined benefit pension termination expense | 1,900 | - | ||||
Permanent tax differences resulting from public company tax laws (1) | 3,680 | - | ||||
Total impact of non-GAAP adjustment | $ | 32,593 | $ | - | ||
Less net tax benefit associated with non-GAAP adjustments | 8,096 | - | ||||
Non-GAAP adjustments, net of tax | 24,497 | - | ||||
Net income excluding conversion and IPO-related expenses (non-GAAP) | $ | 34,322 | $ | 30,065 | ||
Weighted average common shares outstanding | 42,018,229 | N/A | ||||
Earnings per share excluding conversion and IPO-related expenses (non-GAAP) | $ | 0.82 | N/A | |||
(1) | These amounts are reflected in income tax expense and reflect amounts related to current year compensation and a write-down for future | |||||
Years Ended December 31, | ||||||
2023 | 2022 | |||||
Noninterest expense (GAAP) | $ | 119,905 | $ | 71,151 | ||
Subtract: | ||||||
Noninterest expense components: | ||||||
Needham Bank Charitable Foundation contribution resulting from IPO | 19,082 | - | ||||
One-time conversion and IPO-related compensation expense | 7,931 | - | ||||
Defined benefit pension termination expense | 1,900 | - | ||||
Total impact of non-GAAP noninterest expense adjustments | 28,913 | - | ||||
Noninterest expense excluding conversion and IPO-related expenses (non-GAAP) | $ | 90,992 | $ | 71,151 | ||
Years Ended December 31, | ||||||
2023 | 2022 | |||||
Net income excluding conversion and IPO-related expenses (non-GAAP) | $ | 34,322 | $ | 30,065 | ||
Average assets | 3,973,093 | 3,118,890 | ||||
Return on average assets excluding conversion and IPO-related expenses (non-GAAP) | 0.86 % | 0.96 % | ||||
Average shareholders' equity | 365,120 | 331,872 | ||||
Return on average shareholders' equity excluding conversion and IPO-related expenses (non-GAAP) | 9.40 % | 9.06 % | ||||
As of December 31, | ||||||
2023 | 2022 | |||||
Total shareholders' equity (GAAP) | $ | 757,959 | $ | 344,065 | ||
Subtract: | ||||||
Intangible assets (core deposit intangible) | 1,227 | 1,377 | ||||
Total tangible shareholders' equity (non-GAAP) | 756,732 | 342,688 | ||||
Total assets (GAAP) | 4,533,412 | 3,592,335 | ||||
Subtract: | ||||||
Intangible assets (core deposit intangible) | 1,227 | 1,377 | ||||
Total tangible assets (non-GAAP) | $ | 4,532,185 | $ | 3,590,958 | ||
Tangible stockholders' equity / tangible assets (non-GAAP) | 16.7 % | 9.5 % | ||||
Total common shares outstanding | 42,705,729 | N/A | ||||
Tangible book value per share (non-GAAP) | $ | 17.72 | N/A | |||
HIDDEN_ROW | ||||||
Years Ended December 31, | ||||||
2023 | 2022 | |||||
Noninterest expense excluding conversion and IPO-related expenses (non-GAAP) | $ | 90,992 | $ | 71,151 | ||
Total revenue | 145,634 | 114,239 | ||||
Efficiency ratio excluding conversion and IPO-related expenses (non-GAAP) | 62.5 % | 62.3 % | ||||
NB BANCORP, INC. | |||||
As of and for the years ended | |||||
2023 | 2022 | ||||
Earnings data | |||||
Net interest income | $ | 130,057 | $ | 104,964 | |
Noninterest income | 15,577 | 9,275 | |||
Total revenue | 145,634 | 114,239 | |||
Provision for credit losses | 13,885 | 6,700 | |||
Noninterest expense | 119,905 | 71,151 | |||
Pre-tax income | 11,844 | 36,388 | |||
Net income | 9,825 | 30,065 | |||
Net income excluding conversion and IPO-related expenses (non-GAAP) | 34,322 | 30,065 | |||
Noninterest expense excluding conversion and IPO-related expenses (non-GAAP) | 90,992 | 71,151 | |||
Per share data | |||||
Earnings per share | $ | 0.23 | N/A | ||
Earnings per share excluding conversion and IPO-related expenses (non-GAAP) | 0.82 | N/A | |||
Book value per share | 17.75 | N/A | |||
Tangible book value per share (non-GAAP) | 17.72 | N/A | |||
Profitability | |||||
Return on average assets | 0.25 % | 0.96 % | |||
Return on average assets excluding conversion and IPO-related expenses (non-GAAP) | 0.86 % | 0.96 % | |||
Return on average shareholders' equity | 2.69 % | 9.06 % | |||
Return on average shareholders' equity excluding conversion and IPO-related expenses (non-GAAP) | 9.40 % | 9.06 % | |||
Net interest margin | 3.41 % | 3.49 % | |||
Cost of deposits | 2.34 % | 0.48 % | |||
Efficiency ratio | 82.3 % | 62.3 % | |||
Efficiency ratio excluding conversion and IPO-related expenses (non-GAAP) | 62.5 % | 62.3 % | |||
Balance sheet | |||||
Total assets | $ | 4,533,412 | $ | 3,592,335 | |
Total loans | 3,889,279 | 3,015,445 | |||
Total deposits | 3,387,348 | 2,886,743 | |||
Total shareholders' equity | 757,959 | 344,065 | |||
Asset quality | |||||
Allowance for credit losses (ACL) | $ | 32,222 | $ | 25,028 | |
ACL / Total nonperforming loans (NPLs) | 297.8 % | 194.5 % | |||
Total NPLs / Total loans | 0.28 % | 0.43 % | |||
Net charge-offs / Average total loans | 0.10 % | 0.00 % | |||
Capital ratios | |||||
Shareholders' equity / Total assets | 16.7 % | 9.6 % | |||
Tangible shareholders' equity / tangible assets (non-GAAP) | 16.7 % | 9.5 % | |||
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SOURCE Needham Bank
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