NB Bancorp Inc.
11/07/2025 | Press release | Distributed by Public on 11/07/2025 14:02
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
General
Management's discussion and analysis of the financial condition and results of operations at and for the three and nine months ended September 30, 2025 and 2024 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "assume," "plan," "seek," "expect," "will," "may," "should," "indicate," "would," "contemplate," "continue," "target" and words of similar meaning. These forward-looking statements include, but are not limited to:
| ● | statements of our goals, intentions and expectations; |
| ● | statements regarding our business plans, prospects, growth and operating strategies; |
| ● | statements regarding the quality of our loan portfolio; and |
| ● | estimates of our risks and future costs and benefits. |
These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.
In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
| ● | weakening in the United States economy in general and the regional and local economies within the Company's market area; |
| ● | the effects of inflationary pressures, labor market shortages and/or supply chain issues; |
| ● | the instability or volatility in financial markets and unfavorable general business conditions, globally, nationally or regionally, whether caused by geopolitical concerns, recent disruptions in the banking industry, or other factors; |
| ● | unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other external events; |
| ● | changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; |
| ● | failure to consummate or a delay in consummating the pending acquisition of Provident Bancorp, Inc. and BankProv, including as a result of any failure to satisfy any of the conditions to the proposed transaction on a timely basis or at all; |
| ● | risks related to the Company's pending acquisition of Provident Bancorp, Inc. and BankProv and acquisitions generally, including disruptions to current plans and operations; difficulties in customer and employee retention; fees, expenses and charges related to these transactions being significantly higher than anticipated; unforeseen integration issues or impairment of goodwill and/or other intangibles; and the Company's inability to achieve expected revenues, cost savings, synergies, and other benefits at levels or within the timeframes originally anticipated; |
| ● | changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses on loans; |
| ● | the effect of any change in federal government enforcement of federal laws affecting the cannabis industry; |
| ● | changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio; |
| ● | our ability to access cost-effective funding; |
| ● | fluctuations in real estate values and both residential and commercial real estate market conditions; |
| ● | demand for loans and deposits in our market area; |
| ● | our ability to implement and change our business strategies; |
| ● | competition among depository and other financial institutions; |
| ● | adverse changes in the securities or secondary mortgage markets; |
| ● | changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums; |
| ● | changes in the quality or composition of our loan or investment portfolios; |
| ● | technological changes that may be more difficult or expensive than expected; |
| ● | the inability of third-party providers to perform as expected; |
| ● | a failure or breach of our operational or security systems or infrastructure, including cyberattacks; |
| ● | our ability to manage market risk, interest rate risk, credit risk, compliance risk, and operational risk; |
| ● | our ability to enter new markets successfully and capitalize on growth opportunities; |
| ● | changes in consumer spending, borrowing and savings habits; |
| ● | changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; |
| ● | our ability to attract and retain key employees; and |
| ● | changes in the financial condition, results of operations or future prospects of issuers of securities that we own. |
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
Critical Accounting Policies
There are no material changes to the critical accounting policies disclosed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 7, 2025.
Non-GAAP Financial Measures
In addition to results presented in accordance with U.S. GAAP, this quarterly report on Form 10-Q contains certain non-GAAP financial measures, including operating net income, operating noninterest expense, operating noninterest income, 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, 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 U.S. 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.
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NB BANCORP, INC. |
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NON-GAAP RECONCILIATION |
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(Unaudited) |
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(Dollars in thousands) |
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For the Three Months Ended |
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For the Nine Months Ended |
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September 30, 2025 |
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September 30, 2024 |
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September 30, 2025 |
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September 30, 2024 |
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Net income (GAAP) |
$ |
15,362 |
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$ |
8,383 |
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$ |
42,596 |
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$ |
26,537 |
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Add (Subtract): |
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Adjustments to net income: |
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Defined benefit pension termination expense (refund) |
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(739) |
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- |
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|
480 |
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- |
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State tax expense - voluntary disclosure agreements |
|
561 |
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- |
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|
561 |
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- |
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Income tax expense on solar tax credit investment basis reduction |
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- |
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2,503 |
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- |
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2,503 |
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BOLI surrender tax and modified endowment contract penalty |
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- |
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1,552 |
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|
218 |
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1,552 |
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Losses on sales of securities available for sale, net |
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- |
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1,868 |
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- |
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|
1,868 |
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Merger and acquisition expenses |
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994 |
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- |
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1,525 |
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- |
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Adjustment for adoption of ASU 2023-02 |
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- |
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(913) |
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- |
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- |
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Total adjustments to net income |
$ |
816 |
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$ |
5,010 |
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$ |
2,784 |
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$ |
5,923 |
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Less net tax benefit associated with pre-tax non-GAAP adjustments to net income |
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176 |
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277 |
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|
639 |
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542 |
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Non-GAAP adjustments, net of tax |
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640 |
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4,733 |
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2,145 |
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5,381 |
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Operating net income (non-GAAP) |
$ |
16,002 |
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$ |
13,116 |
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$ |
44,741 |
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$ |
31,918 |
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Weighted average common shares outstanding, basic |
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35,372,205 |
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39,289,271 |
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37,100,616 |
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39,423,214 |
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Weighted average common shares outstanding, diluted |
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35,579,456 |
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39,289,271 |
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37,289,349 |
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39,423,214 |
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Operating earnings per share, basic (non-GAAP) |
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0.45 |
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0.33 |
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1.21 |
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0.81 |
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Operating earnings per share, diluted (non-GAAP) |
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0.45 |
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0.33 |
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1.20 |
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0.81 |
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Noninterest expense (GAAP) |
$ |
30,368 |
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$ |
24,586 |
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$ |
88,333 |
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$ |
76,367 |
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Subtract (Add): |
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Noninterest expense components: |
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Defined benefit pension termination refund |
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(739) |
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- |
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|
480 |
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- |
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Merger and acquisition expenses |
|
994 |
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- |
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1,525 |
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- |
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Adjustment for adoption of ASU 2023-02 |
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- |
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(913) |
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- |
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- |
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Total impact of non-GAAP noninterest expense adjustments |
$ |
255 |
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$ |
(913) |
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$ |
2,005 |
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$ |
- |
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Noninterest expense on an operating basis (non-GAAP) |
$ |
30,113 |
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$ |
25,499 |
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$ |
86,328 |
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$ |
76,367 |
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For the Three Months Ended |
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For the Nine Months Ended |
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September 30, 2025 |
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September 30, 2024 |
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September 30, 2025 |
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September 30, 2024 |
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Noninterest income (GAAP) |
$ |
3,551 |
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$ |
1,265 |
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$ |
11,591 |
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$ |
7,750 |
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Subtract (Add): |
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Noninterest income components: |
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Losses on sales of securities available for sale, net |
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- |
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(1,868) |
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- |
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(1,868) |
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Total impact of non-GAAP noninterest income adjustments |
$ |
- |
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$ |
(1,868) |
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$ |
- |
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$ |
(1,868) |
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Noninterest income on an operating basis (non-GAAP) |
$ |
3,551 |
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$ |
3,133 |
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$ |
11,591 |
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$ |
9,618 |
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Operating net income (non-GAAP) |
$ |
16,002 |
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$ |
13,116 |
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$ |
44,741 |
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$ |
31,918 |
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Average assets |
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5,272,435 |
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4,890,053 |
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5,199,473 |
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4,697,038 |
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Operating return on average assets (non-GAAP) |
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1.20% |
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1.07% |
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1.15% |
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0.91% |
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Average shareholders' equity |
$ |
729,979 |
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$ |
754,609 |
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$ |
744,230 |
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$ |
743,251 |
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Operating return on average shareholders' equity (non-GAAP) |
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8.70% |
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6.91% |
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8.04% |
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5.74% |
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Noninterest expense on an operating basis (non-GAAP) |
$ |
30,113 |
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$ |
25,499 |
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$ |
86,328 |
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$ |
76,367 |
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Total revenue (net interest income plus total noninterest income) (non-GAAP) |
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51,726 |
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44,457 |
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150,298 |
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128,296 |
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Operating efficiency ratio (non-GAAP) |
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58.22% |
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57.36% |
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57.44% |
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59.52% |
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Income tax expense (GAAP) |
$ |
4,600 |
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$ |
6,997 |
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$ |
13,654 |
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$ |
12,805 |
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Subtract (Add): |
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State tax expense - voluntary disclosure agreements |
|
561 |
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|
- |
|
|
561 |
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|
- |
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Income tax expense on solar tax credit investment basis reduction |
|
- |
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|
2,503 |
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|
- |
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|
2,503 |
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BOLI surrender tax and modified endowment contract penalty |
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- |
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|
1,552 |
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|
218 |
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|
1,552 |
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Total impact of non-GAAP income tax expense adjustments |
$ |
561 |
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$ |
4,055 |
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|
779 |
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$ |
4,055 |
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Income tax expense on an operating basis (non-GAAP) |
$ |
4,039 |
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$ |
2,942 |
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12,875 |
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$ |
8,750 |
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Operating effective tax rate (non-GAAP) |
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20.2% |
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19.1% |
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22.9% |
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22.2% |
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As of |
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September 30, 2025 |
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September 30, 2024 |
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Total shareholders' equity (GAAP) |
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$ |
737,034 |
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$ |
747,449 |
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Subtract: |
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Intangible assets (core deposit intangible) |
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|
967 |
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1,116 |
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Total tangible shareholders' equity (non-GAAP) |
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736,067 |
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746,333 |
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Total assets (GAAP) |
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$ |
5,442,390 |
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$ |
5,002,394 |
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Subtract: |
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Intangible assets (core deposit intangible) |
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|
967 |
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|
1,116 |
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Total tangible assets (non-GAAP) |
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$ |
5,441,423 |
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$ |
5,001,278 |
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Tangible shareholders' equity / tangible assets (non-GAAP) |
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|
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|
13.53% |
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|
14.92% |
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Total common shares outstanding |
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|
|
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|
|
|
39,826,446 |
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|
42,705,729 |
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Tangible book value per share (non-GAAP) |
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|
$ |
18.48 |
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$ |
17.48 |
Comparison of Financial Condition as of September 30, 2025 and December 31, 2024
Total Assets. Total assets increased $284.7 million, or 5.5%, to $5.44 billion as of September 30, 2025 from $5.16 billion as of December 31, 2024. The increase was primarily driven by increases in net loans and non-public investments, offset partially by decreases in cash and cash equivalents and BOLI.
Cash and Cash Equivalents. Cash and cash equivalents decreased $68.5 million, or 18.8%, to $295.4 million as of September 30, 2025 from $363.9 million as of December 31, 2024. The decrease in cash and cash equivalents was primarily a result of increased loan originations and the repurchase of 4,163,808 shares during the nine months ended September 30, 2025.
Securities Available for Sale. Securities available for sale increased $2.8 million, or 1.2%, to $231.0 million as of September 30, 2025 from $228.2 million as of December 31, 2024 due to purchases of government agency debt securities and mortgage-backed securities.
Loans.Net loans increased $378.7 million, or 8.8%, to $4.67 billion as of September 30, 2025 from $4.29 billion as of December 31, 2024. The increase resulted primarily from increases in: multi-family residential loans, which increased $97.4 million, or 29.2%, commercial and industrial loans, which increased $91.9 million, or 16.4%, commercial real estate loans, which increased $86.3 million, or 6.3%, construction and land development loans, which increased $71.2 million, or 12.2%, consumer loans, which increased $18.7 million, or 7.6%, and total residential real estate loans, which increased $18.0 million, or 1.4%. The increase in our loan portfolio reflects our strategy to prudently grow the balance sheet by continuing to diversify into higher-yielding loans to improve net margins and manage interest rate risk.
The Company had approximately $418.6 million and $459.6 million in loans to borrowers in the cannabis industry at September 30, 2025 and December 31, 2024, respectively. Of that total, $258.5 million and $321.9 million were direct loans to cannabis companies and were collateralized by real estate at September 30, 2025 and December 31, 2024, respectively.
Non-Public Investments. Non-public investments consist primarily of equity investments and FHLB and FRB stock holdings. These assets increased $20.2 million, or 82.8%, to $44.5 million as of September 30, 2025 from $24.4 million as of December 31, 2024. The increase resulted primarily from two new solar tax credit equity investments of $10.9 million, as well as increases in FHLB stock and FRB stock holdings of $4.8 million and $689,000, respectively.
BOLI. During the nine months ended September 30, 2025, the Company received proceeds on surrendered BOLI policies of $48.8 million, resulting in a decrease of $46.4 million, or 45.2%, in BOLI from December 31, 2024. The Company surrendered BOLI policies in September 2024, which allowed the insurance carriers a period of time to pay out the proceeds, resulting in the Company carrying higher BOLI balances prior to the receipt of the proceeds from the surrender. During the three and nine months ended September 30, 2025, the Company recorded an increase in the cash surrender value of the BOLI policies of $631,000 and $2.4 million, respectively, compared to an increase in the cash surrender value of the BOLI policies of $414,000 and $1.2 million, respectively, during the three and nine months ended September 30, 2024.
Deposits. Deposits increased $388.0 million, or 9.3%, to $4.57 billion as of September 30, 2025 from $4.18 billion as of December 31, 2024. Core deposits (which we define as all deposits including certificates of deposit, other than brokered deposits) increased $309.1 million, or 8.0%, to $4.18 billion as of September 30, 2025 from $3.87 billion as of December 31, 2024. The increase in deposits was the result of growth in customer deposits, primarily money market accounts, which increased $212.8 million, or 21.3%, customer time deposits, which increased $104.5 million, or 6.3%, and savings accounts, which increased $11.8 million, or 10.8%, from December 31, 2024; partially offset by a decrease in non-interest bearing demand deposits of $15.9 million, or 2.6%. Additionally, brokered deposits increased $78.9 million, or 25.5%, due to lower utilization of FHLB borrowings to fund loan growth.
The Company had $466.8 million and $395.2 million in deposits from the cannabis industry as of September 30, 2025 and December 31, 2024, respectively.
FHLB Borrowings.FHLB borrowings decreased $79.4 million, or 65.7%, to $41.5 million as of September 30, 2025 from $120.8 million as of December 31, 2024. The decrease in FHLB borrowings was the result of overall deposit growth.
Shareholders' Equity. Total shareholders' equity decreased $28.1 million, or 3.7%, to $737.0 million as of September 30, 2025 from $765.2 million as of December 31, 2024, primarily due to the $74.7 million, or 17.9%, decrease in additional paid-in capital resulting from the completion of two share repurchase programs and dividends paid of $2.8 million, partially offset by net income of $42.6 million and a decrease of $5.0 million, or 61.8%, in accumulated other comprehensive loss during the nine months ended September 30, 2025.
Comparison of Operating Results for the Three Months Ended September 30, 2025 and 2024
Net Income.Net income was $15.4 million for the quarter ended September 30, 2025, compared to net income of $8.4 million for the quarter ended September 30, 2024, an increase of approximately $7.0 million, or 83.3%. An increase of $6.9 million, or 16.6%, in net interest income, a $2.3 million, or 180.7%, increase in noninterest income, a $2.4 million, or 34.3%, decrease in income tax expense and a $1.2 million, or 46.8%, decrease in the provision for credit losses was partially offset by a $5.8 million, or 23.5%, increase in noninterest expense.
Operating net income, excluding one-time charges, amounted to $16.0 million, or $0.45 per basic and diluted share, for the quarter ended September 30, 2025, compared to operating net income, excluding one-time charges, of $13.1 million, or $0.33 per basic and diluted share, for the quarter ended September 30, 2024, an increase of $2.9 million, or 22.0%. The material one-time pre-tax amounts for the three months ended September 30, 2025 were:
| ● | Merger and acquisition costs of $994,000 related to the Company's pending acquisition of Provident Bancorp Inc. and BankProv; and |
| ● | State voluntary disclosure agreement tax expenses of $561,000 for new state income tax expenses; partially offset by |
| ● | Defined benefit pension termination refund of $739,000. |
Compared to the material one-time pre-tax amounts for the three months ended September 30, 2024, which included:
| ● | Tax expense related to a basis write-down of solar income tax credits of $2.5 million; |
| ● | Loss on sale of available-for-sale securities amounting to $1.9 million; and |
| ● | Tax expense and a managed endowment contract penalty related to the surrender of BOLI policies of $1.6 million; partially offset by |
| ● | Reversal of previously recognized amortization related to solar income tax credit investments during the first nine months of the year, amounting to $913,000. |
Interest and Dividend Income.Interest and dividend income increased $5.7 million, or 7.5%, to $81.7 million for the quarter ended September 30, 2025 from $76.0 million for the quarter ended September 30, 2024, primarily due to a $6.8 million, or 9.7%, increase in interest and fees on loans. The increase in interest and fees on loans was primarily due to an increase of $424.3 million, or 10.1%, in the average balance of the loan portfolio to $4.61 billion for the quarter ended September 30, 2025 from $4.19 billion for the quarter ended September 30, 2024, reflecting the growth of our commercial and construction loan portfolios. The increase in interest and fees on loans was partially offset by an $87.5 million decrease in the average balance of short-term investments to $176.9 million for the quarter ended September 30, 2025 from $264.4 million for the quarter ended September 30, 2024, driven by the reduction in cash from the share repurchase plans.
Average interest-earning assets increased $375.0 million, or 8.0%, to $5.06 billion for the quarter ended September 30, 2025 from $4.68 billion for the quarter ended September 30, 2024. The yield on interest-earning assets decreased 5 basis points to 6.41% for the quarter ended September 30, 2025 from 6.46% for the quarter ended September 30, 2024.
Interest Expense. Total interest expense decreased $1.2 million, or 3.4%, to $33.5 million for the quarter ended September 30, 2025 from $34.7 million for the quarter ended September 30, 2024.
Interest expense on deposits decreased $2.3 million, or 7.0%, to $31.3 million for the quarter ended September 30, 2025 from $33.6 million for the quarter ended September 30, 2024, primarily from a reduction in the weighted-average rate on certificates of deposit and individual retirement accounts of 84 basis points to 4.18% for the quarter ended September 30, 2025 from 5.02% for the quarter ended September 30, 2024, a decrease in the weighted average rate on money market accounts of 20 basis points to 3.32% for the quarter ended September 30, 2025 from 3.52% for the quarter ended September 30, 2024, a decrease in the average balance of certificates of deposits and individual retirement accounts of $7.3 million, or 0.4%, to $1.93 billion for the quarter ended September 30, 2025 from $1.94 billion for the quarter ended September 30, 2024 and a decrease in the average balance of NOW accounts of $6.9 million, or 1.5%, to $468 million for the quarter ended September 30, 2025 from $475 million for the quarter ended September 30, 2024, offset by an increase in the average balance of money market accounts of $242.3 million, or 27.6%, to $1.12 billion for the quarter ended September 30, 2025 from $877.2 million for the quarter ended September 30, 2024. Interest expense on borrowings increased $1.2 million, or 109.9%, to $2.2 million for the quarter ended September 30, 2025 from $1.1 million for the quarter ended September 30, 2024 primarily from the increase in the average balance of FHLB advances of $114.7 million, or 134.7%, to $199.9 million for the quarter ended September 30, 2025 from $85.2 million for the quarter ended September 30, 2024 due to the decreased utilization of FHLB borrowings due to overall deposit growth.
Net Interest Income.Net interest income increased $6.9 million, or 16.6%, to $48.2 million for the quarter ended September 30, 2025 from $41.3 million for the quarter ended September 30, 2024, primarily due to a $375.0 million, or 8.0%, increase in the average balance of interest-earning assets to $5.06 billion for the quarter ended September 30, 2025 from $4.68 billion for the quarter ended September 30, 2024 and a decrease in the weighted average rate on interest-bearing liabilities of 49 basis points from 3.95% for the quarter ended September 30, 2024 to 3.46% for the quarter ended September 30, 2025. These increases were partially offset by an increase in the average balance of interest-bearing liabilities of $352.1 million, or 10.1%, to $3.84 billion at September 30, 2025 from $3.49 billion at September 30, 2024.
Provision for Credit Losses. Based on management's analysis of the adequacy of the ACL, a provision of $1.4 million was recorded for the quarter ended September 30, 2025, of which $1.0 million related to the provision for credit losses on loans, compared to a provision of $2.6 million for the quarter ended September 30, 2024, which included a $5.0 million provision for credit losses on loans. The provision for credit losses on unfunded commitments increased $2.7 million, or 115.0%, for the quarter ended September 30, 2025 primarily driven by an increase in the balance of unfunded commitments during the quarter ended September 30, 2025. The decrease of $1.2 million, or 46.8%, in the total provision for credit losses was primarily driven by construction and development loans transitioning to permanent financing in multi-family residential loans, which carry lower reserve rates, during the three months ended September 30, 2025.
Noninterest Income.Noninterest income increased $2.3 million, or 180.7%, to $3.6 million for the quarter ended September 30, 2025 from $1.3 million for the quarter ended September 30, 2024. The increase resulted primarily from a $1.9 million loss earn back trade on securities available for sale executed during the quarter ended September 30, 2024 and a $535,000 increase in customer service fees during the quarter ended September 30, 2025.
The table below sets forth our noninterest income for the quarters ended September 30, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
||||
|
|
|
September 30, |
|
Change |
|||||||
|
|
|
2025 |
|
2024 |
|
Amount |
|
Percent |
|||
|
|
|
(Dollars in thousands) |
|||||||||
|
Customer service fees |
|
$ |
2,498 |
|
$ |
1,963 |
|
$ |
535 |
|
27.25% |
|
Loss on sale of available-for-sale securities, net |
|
|
- |
|
|
(1,868) |
|
|
1,868 |
|
(100.00)% |
|
Increase in cash surrender value of BOLI |
|
|
631 |
|
|
414 |
|
|
217 |
|
52.42% |
|
Mortgage banking income |
|
|
193 |
|
|
367 |
|
|
(174) |
|
(47.41)% |
|
Swap contract income |
|
|
208 |
|
|
375 |
|
|
(167) |
|
(44.53)% |
|
Other income |
|
|
21 |
|
|
14 |
|
|
7 |
|
50.00% |
|
Total noninterest income |
|
$ |
3,551 |
|
$ |
1,265 |
|
$ |
2,286 |
|
180.71% |
Noninterest Expense. Noninterest expense increased $5.8 million, or 23.5%, to $30.4 million for the quarter ended September 30, 2025 from $24.6 million for the quarter ended September 30, 2024.
Salaries and employee benefit expenses increased $1.4 million, or 8.4%, resulting primarily from a $1.4 million increase in employee compensation, a $375,000 increase in medical and dental benefits and a $325,000 increase in payroll taxes, all due to headcount increases related to the Company's continued growth, a $352,000 increase in stock-based compensation as a result of the grants made during the prior quarter and a $294,000 increase in bonus expense as a result of the Company's performance; partially offset by an $854,000 decrease in LTIP expenses resulting from reduced balances in the LTIP and a $739,000 reduction in pension expenses due to the final liquidation refund during the quarter ended September 30, 2025. General and administrative expenses increased $1.4 million, or 1,174.8%, as a result of the election of the proportional amortization method of accounting for solar income tax credit investments during the quarter ended September 30, 2024, which resulted in a $1.0 million increase in depreciation and income on solar income tax credit investments during the quarter ended September 30, 2025. Merger and acquisition expenses increased $994,000 from $0 resulting from the announcement of the Provident Bancorp, Inc. and BankProv acquisition during the prior quarter. Director and professional service fees increased $925,000, or 46.4%, primarily driven by $709,000 in stock compensation to directors related to grants made during the prior quarter, a $144,000 increase in Director's fee expenses and a $112,000 increase in legal expenses. Data processing expenses increased $685,000, or 30.8%, primarily from the continued investment in the Company's technology resulting in the increase in management information system expenses of $287,000, electronic banking expenses of $262,000 and general servicing systems of $141,000 during the quarter ended September 30, 2025.
The table below sets forth our noninterest expense for the quarters ended September 30, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
||||
|
|
|
September 30, |
|
Change |
|||||||
|
|
|
2025 |
|
2024 |
|
Amount |
|
Percent |
|||
|
|
|
(Dollars in thousands) |
|||||||||
|
Salaries and employee benefits |
|
$ |
18,641 |
|
$ |
17,202 |
|
$ |
1,439 |
|
8.37% |
|
Data processing expenses |
|
|
2,911 |
|
|
2,226 |
|
|
685 |
|
30.77% |
|
Director and professional service fees |
|
|
2,920 |
|
|
1,995 |
|
|
925 |
|
46.37% |
|
Occupancy and equipment expenses |
|
|
1,559 |
|
|
1,394 |
|
|
165 |
|
11.84% |
|
Marketing and charitable contribution expenses |
|
|
949 |
|
|
842 |
|
|
107 |
|
12.71% |
|
FDIC and state insurance assessments |
|
|
928 |
|
|
812 |
|
|
116 |
|
14.29% |
|
Merger and acquisition expenses |
|
|
994 |
|
|
- |
|
|
994 |
|
100.00% |
|
General and administrative expenses |
|
|
1,466 |
|
|
115 |
|
|
1,351 |
|
1174.78% |
|
Total noninterest expense |
|
$ |
30,368 |
|
$ |
24,586 |
|
$ |
5,782 |
|
23.52% |
Income Tax Expense.Income tax expense decreased $2.4 million, or 34.3%, to $4.6 million for the quarter ended September 30, 2025 from $7.0 million for the quarter ended September 30, 2024. The effective tax rate was 23.0% and 45.5% for the quarter ended September 30, 2025 and 2024, respectively. The decrease in tax expense was the result of higher income tax expense incurred on solar income tax credit investments during the quarter ended September 30, 2024 compared to September 30, 2025. Excluding one-time charges, the operating effective tax rate for the quarter ended September 30, 2025 and 2024 would have been 20.2% and 19.1%, respectively.
Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. Non-accrual loans were included in the computation of average balances. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense; such fees, discounts and premiums were not material for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||||||||||||||
|
|
|
September 30, 2025 |
|
September 30, 2024 |
|
||||||||||||
|
|
Average |
|
|
|
Average |
|
|
|
|
||||||||
|
|
|
Outstanding |
|
|
|
|
Average |
|
Outstanding |
|
|
|
|
Average |
|
||
|
|
|
Balance |
|
Interest |
|
Yield/Rate (4) |
|
Balance |
|
Interest |
|
Yield/Rate (4) |
|
||||
|
Interest-earning assets: |
|
|
|
|
|
|
|||||||||||
|
Loans |
|
$ |
4,612,837 |
|
$ |
77,365 |
6.65 |
% |
$ |
4,188,504 |
|
$ |
70,518 |
6.70 |
% |
||
|
Securities |
|
236,187 |
|
2,253 |
3.78 |
% |
204,273 |
|
1,768 |
3.44 |
% |
||||||
|
Other investments (5) |
|
32,510 |
|
223 |
2.72 |
% |
26,239 |
|
223 |
3.38 |
% |
||||||
|
Short-term investments (5) |
|
176,884 |
|
1,847 |
4.14 |
% |
264,394 |
|
3,494 |
5.26 |
% |
||||||
|
Total interest-earning assets |
|
5,058,418 |
|
81,688 |
6.41 |
% |
4,683,410 |
|
76,003 |
6.46 |
% |
||||||
|
Non-interest-earning assets |
|
256,763 |
|
|
|
|
|
245,138 |
|
|
|
|
|||||
|
Allowance for credit losses |
|
(42,746) |
|
|
|
|
|
(38,495) |
|
|
|
||||||
|
Total assets |
|
$ |
5,272,435 |
|
|
|
|
|
$ |
4,890,053 |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|||||||||||
|
Savings accounts |
|
$ |
121,704 |
|
181 |
0.59 |
% |
$ |
112,347 |
|
15 |
0.05 |
% |
||||
|
NOW accounts |
|
467,761 |
|
1,365 |
1.16 |
% |
474,697 |
|
1,361 |
1.14 |
% |
||||||
|
Money market accounts |
|
1,119,539 |
|
9,363 |
3.32 |
% |
877,218 |
|
7,762 |
3.52 |
% |
||||||
|
Certificates of deposit and individual retirement accounts |
|
1,933,665 |
|
20,364 |
4.18 |
% |
1,940,992 |
|
24,474 |
5.02 |
% |
||||||
|
Total interest-bearing deposits |
|
3,642,669 |
|
31,273 |
3.41 |
% |
3,405,254 |
|
33,612 |
3.93 |
% |
||||||
|
FHLB and FRB advances |
|
199,852 |
|
2,240 |
4.45 |
% |
85,156 |
|
1,067 |
4.98 |
% |
||||||
|
Total interest-bearing liabilities |
|
3,842,521 |
|
33,513 |
3.46 |
% |
3,490,410 |
|
34,679 |
3.95 |
% |
||||||
|
Non-interest-bearing deposits |
|
604,631 |
|
|
|
566,353 |
|
|
|||||||||
|
Other non-interest-bearing liabilities |
|
95,304 |
|
|
|
|
78,681 |
|
|
||||||||
|
Total liabilities |
|
4,542,456 |
|
|
|
|
4,135,444 |
|
|
||||||||
|
Shareholders' equity |
|
729,979 |
|
|
|
|
754,609 |
|
|
||||||||
|
Total liabilities and shareholders' equity |
|
$ |
5,272,435 |
|
|
|
|
$ |
4,890,053 |
|
|
||||||
|
Net interest income |
|
|
|
$ |
48,175 |
|
|
$ |
41,324 |
|
|||||||
|
Net interest rate spread (1) |
|
|
|
|
|
2.95 |
% |
|
2.51 |
% |
|||||||
|
Net interest-earning assets (2) |
|
$ |
1,215,897 |
|
|
|
|
$ |
1,193,000 |
|
|
|
|
||||
|
Net interest margin (3) |
|
|
|
|
|
|
3.78 |
% |
|
3.51 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to interest-bearing liabilities |
|
131.64 |
% |
|
|
|
134.18 |
% |
|
||||||||
| (1) | Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. |
| (2) | Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. |
| (3) | Net interest margin represents net interest income divided by average total interest-earning assets. |
| (4) | Annualized. |
| (5) | Other investments are comprised of FRB stock, FHLB stock and swap collateral accounts. Short-term investments are comprised of cash and cash equivalents |
Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to volume and the changes due to rate. There were no out-of-period items or adjustments required to be excluded from the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
||||||||
|
|
|
September 30, 2025 vs. 2024 |
|||||||
|
|
|
Increase (Decrease) Due to |
|
Total |
|||||
|
|
|
|
|
|
|
|
|
Increase |
|
|
|
Volume |
Rate |
(Decrease) |
||||||
|
|
|
(In thousands) |
|||||||
|
Interest-earning assets: |
|
|
|
||||||
|
Loans |
|
$ |
7,116 |
|
$ |
(269) |
|
$ |
6,847 |
|
Securities |
|
293 |
|
192 |
|
485 |
|||
|
Other investments |
|
- |
|
- |
|
- |
|||
|
Short-term investments |
|
(1,008) |
|
(639) |
|
(1,647) |
|||
|
Total interest-earning assets |
|
6,401 |
|
(716) |
|
5,685 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|||||
|
Savings accounts |
|
1 |
|
165 |
|
166 |
|||
|
NOW accounts |
|
(18) |
|
22 |
|
4 |
|||
|
Money market accounts |
|
1,997 |
|
(396) |
|
1,601 |
|||
|
Certificates of deposit and individual retirement accounts |
|
(92) |
|
(4,018) |
|
(4,110) |
|||
|
Total interest-bearing deposits |
|
1,888 |
|
(4,227) |
|
(2,339) |
|||
|
Federal Home Loan Bank advances |
|
1,273 |
|
(100) |
|
1,173 |
|||
|
Total interest-bearing liabilities |
|
3,161 |
|
(4,327) |
|
(1,166) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income |
|
$ |
3,240 |
|
$ |
3,611 |
|
$ |
6,851 |
Comparison of Operating Results for the Nine Months Ended September 30, 2025 and 2024
Net Income.Net income was $42.6 million for the nine months ended September 30, 2025, compared to net income of $26.5 million the nine months ended September 30, 2024, an increase of approximately $16.1 million, or 60.5%. The increase was primarily due to a $20.0 million, or 16.9%, increase in net interest income, a $5.0 million, or 46.7%, decrease in the provision for credit losses and a $3.8 million, or 49.6%, increase in noninterest income, partially offset by a $12.0 million, or 15.7%, increase in noninterest expense and an $849,000, or 6.6%, increase in income tax expense.
Operating net income, excluding one-time charges, amounted to $44.7 million, or $1.21 per basic share and $1.20 per diluted share, for the nine months ended September 30, 2025 compared to operating net income, excluding one-time charges, of $31.9 million, or $0.81 per basic and diluted share, for the nine months ended September 30, 2024, an increase of $12.8 million, or 40.2%. The material one-time pre-tax amounts for the nine months ended September 30, 2025 were:
| ● | Merger and acquisition costs of $1.5 million related to the Company's pending acquisition of Provident; |
| ● | State voluntary disclosure agreement tax expenses of $561,000 for new state income tax expenses; |
| ● | Net defined benefit pension termination expense of $478,000; and |
| ● | Tax expense and a managed endowment contract penalty related to the surrender of BOLI policies of $218,000. |
Compared to the material one-time pre-tax amounts for the nine months ended September 30, 2024:
| ● | Income tax expense related to a basis write-down of solar income tax credits of $2.5 million; |
| ● | Loss on sale of available-for-sale securities amounting to $1.9 million; and |
| ● | Income tax expense and managed endowment contract penalty related to the surrender of BOLI policies of $1.6 million. |
Interest and Dividend Income.Interest and dividend income increased $23.1 million, or 10.7%, to $238.4 million for the nine months ended September 30, 2025 from $215.3 million for the nine months ended September 30, 2024, primarily due to a $23.7 million, or 11.9%, increase in interest and fees on loans, reflecting the growth of our commercial and construction loan portfolios, and a $2.1 million, or 44.6% increase in interest on securities, reflecting management's replacement of maturing securities at higher yields; partially offset by a decrease in interest on short-term investments of $2.8 million, or 25.8%, resulting from the decrease in cash and declining rate environment. The increase in interest and fees on loans was primarily due to an increase of $460.3 million, or 11.4%, in the average balance of the loan portfolio to $4.49 billion for the nine months ended September 30, 2025 from $4.03 billion for the nine months ended September 30, 2024 reflecting the growth of our commercial and construction loan portfolios. The increase in interest on securities was primarily a result of a 78 basis point increase in the weighted-average rate on securities to 3.93% for the nine months ended September 30, 2024 from 3.15% for the nine months ended September 30, 2024. The above increases were partially offset by a 112 basis point decrease in the weighted-average rate on short-term investments to 4.37% for the nine months ended September 30, 2025 from 5.49% for the nine months ended September 30, 2024 and a decrease in the average balance of short-term investments of $26.8 million, or 11.2%, for the nine months ended September 30, 2025.
Average interest-earning assets increased $470.2 million, or 10.5%, to $4.96 billion for the nine months ended September 30, 2025 from $4.49 billion for the nine months ended September 30, 2024. The yield on interest-earning assets increased 2 basis points to 6.42% for the nine months ended September 30, 2025 from 6.40% for the nine months ended September 30, 2024.
Interest Expense. Total interest expense increased $3.0 million, or 3.1%, to $99.7 million for the nine months ended September 30, 2025 from $96.6 million for the nine months ended September 30, 2024. Interest expense on deposit accounts increased $1.8 million, or 1.9%, to $95.2 million for the nine months ended September 30, 2025 from $93.4 million for the nine months ended September 30, 2024. The increase was primarily driven by an increase in the average balance of certificate of deposit and individual retirement accounts of $143.7 million, or 7.9%, to $1.96 billion for the nine months ended September 30, 2025 from $1.82 billion for the nine months ended September 30, 2024 and an increase in the average balance of money market accounts of $238.7 million, or 27.9% to $1.09 million for the nine months ended September 30, 2025 from $855.7 million for the nine months ended September 30, 2024, partially offset by a decrease in the weighted average rate on certificates of deposit and individual retirement accounts of 62 basis points to 4.37% for the nine months ended September 30, 2025 from 4.98% for the nine months ended September 30, 2024.
Net Interest Income.Net interest income increased $20.0 million, or 16.9%, to $138.7 million for the nine months ended September 30, 2025 from $118.7 million for the nine months ended September 30, 2024, primarily due to a $470.2 million, or 10.5%, increase in the average balance of interest-earning assets to $4.96 billion for the nine months ended September 30, 2025 from $4.49 billion for the nine months ended September 30, 2024 and a decrease in the weighted-average rate on interest-bearing liabilities of 37 basis points to 3.53% for the nine months ended September 30, 2025 from 3.90% for the nine months ended September 30, 2024. These increases were offset partially by an increase in the average balance of interest-bearing liabilities of $461.5 million, or 13.9%, to $3.77 billion for the nine months ended September 30, 2025 from $3.31 billion for the nine months ended September 30, 2024.
Provision for Credit Losses. Based on management's analysis of the adequacy of the ACL, a provision of $5.7 million was recorded for the nine months ended September 30, 2025, of which $6.2 million related to the provision for credit losses on loans, compared to a provision of $10.7 million for the nine months ended September 30, 2024, which included a $13.3 million provision for credit losses on loans.
The release of credit losses on unfunded commitments decreased $2.1 million, or 80.1%, during the nine months ended September 30, 2025 primarily driven by an increase in the balance of unfunded commitments. The decrease of $5.0 million, or 46.7%, in the total provision for credit losses was primarily due to construction loans transitioning to permanent financing as multi-family loans which carry lower required reserves during the nine months ended September 30, 2025 and the settlement of a commercial real estate participation loan which carried a specific reserve of $4.0 million as of September 30, 2024. The commercial real estate participation loan was ultimately resolved with a $923,000 recovery during the nine months ended September 30, 2025.
Noninterest Income.Noninterest income increased $3.8 million, or 49.6%, to $11.6 million for the nine months ended September 30, 2025 from $7.8 million for the nine months ended September 30, 2024. The increase resulted primarily from increases in customer service fees of $1.9 million, or 33.1%, due to higher loan and cash management fees; decreases in losses on securities available for sale of $1.9 million, or 100.0%, due to the loss earn back trade executed during the nine months ended September 30, 2024; and increases in the change in the cash surrender value of BOLI of $1.2 million, or 100.9%, resulting from new BOLI policies which carry higher-earning rates, along with a higher carrying balance of BOLI policies as the Company was waiting for proceeds from surrendered policies during the nine months ended September 30, 2025; offset partially by decreases in other income of $447,000, or 68.9%, due to the $610,000 one-time MasterCard brand incentive eared during the nine months ended September 30, 2024; decreased mortgage banking income of $395,000, or 43.6%, from a reduction in the volume of loan sales and decreased swap contract income of $308,000, or 27.3%, resulting from a reduced volume of swap originations during the nine months ended September 30, 2025.
The table below sets forth our noninterest income for the nine months ended September 30, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
||||
|
|
|
September 30, |
|
Change |
|||||||
|
|
|
2025 |
|
2024 |
|
Amount |
|
Percent |
|||
|
|
|
(Dollars in thousands) |
|||||||||
|
Customer service fees |
|
$ |
7,610 |
|
$ |
5,717 |
|
$ |
1,893 |
|
33.11% |
|
Loss on sale of available-for-sale securities, net |
|
|
- |
|
|
(1,868) |
|
|
1,868 |
|
(100.00)% |
|
Increase in cash surrender value of BOLI |
|
|
2,449 |
|
|
1,219 |
|
|
1,230 |
|
100.90% |
|
Mortgage banking income |
|
|
510 |
|
|
905 |
|
|
(395) |
|
(43.65)% |
|
Swap contract income |
|
|
820 |
|
|
1,128 |
|
|
(308) |
|
(27.30)% |
|
Other income |
|
|
202 |
|
|
649 |
|
|
(447) |
|
(68.88)% |
|
Total noninterest income |
|
$ |
11,591 |
|
$ |
7,750 |
|
$ |
3,841 |
|
49.56% |
Noninterest Expense. Noninterest expense increased $12.0 million, or 15.7%, to $88.3 million for the nine months ended September 30, 2025 from $76.4 million for the nine months ended September 30, 2024. Salaries and employee benefit expenses increased $4.8 million, or 9.4%, primarily from a $3.4 million increase in employee compensation expense, a $1.1 million increase in medical and dental benefits expense and a $712,000 increase in payroll taxes from the increase in the Company's headcount consistent with our growth, a $614,000 increase in stock compensation due to restricted stock award grants during the nine months ended September 30, 2025, a $437,000 increase in ESOP compensation expense as a result of the Company's stock price appreciation, a $411,000 increase in bonus expense due to increases in headcount and the Company's performance and a $266,000 increase in officer pension plan expenses during the nine months ended September 30, 2025; offset partially by a $2.4 million decrease in LTIP expenses resulting from reduced balances in the LTIP during the nine months ended September 30, 2025, a $417,000 increase in directors' fee expenses and a $247,000 increase in legal expenses. Data processing expenses increased $1.6 million, or 24.8%, during the nine months ended September 30, 2025, primarily a result of continued investment in the technology infrastructure at the Company including increases of $772,000 in management information systems expenses, $479,000 in general servicing system expenses and $201,000 in electronic banking expenses. Merger and acquisition expenses increased $1.5 million from $0 due to the Company's pending acquisition of Provident Bancorp, Inc. and BankProv. General and administrative expenses increased $834,000, or 24.1%, during the nine months ended September 30, 2025, mainly as a result of an increase in shareholder relations expenses of $194,000 and an increase of $226,000 in credit card rewards expenses, along with various other smaller expense increases. FDIC and state assessment expenses increased $818,000, or 45.3%, during the nine months ended September 30, 2025 primarily due to the Company's continued growth.
The table below sets forth our noninterest expense for the nine months ended September 30, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
||||
|
|
|
September 30, |
|
Change |
|||||||
|
|
|
2025 |
|
2024 |
|
Amount |
|
Percent |
|||
|
|
|
(Dollars in thousands) |
|||||||||
|
Salaries and employee benefits |
|
$ |
56,358 |
|
$ |
51,509 |
|
$ |
4,849 |
|
9.41% |
|
Data processing expenses |
|
|
8,169 |
|
|
6,547 |
|
|
1,622 |
|
24.77% |
|
Director and professional service fees |
|
|
8,010 |
|
|
6,174 |
|
|
1,836 |
|
29.74% |
|
Occupancy and equipment expenses |
|
|
4,604 |
|
|
4,192 |
|
|
412 |
|
9.83% |
|
Marketing and charitable contribution expenses |
|
|
2,750 |
|
|
2,680 |
|
|
70 |
|
2.61% |
|
FDIC and state insurance assessments |
|
|
2,624 |
|
|
1,806 |
|
|
818 |
|
45.29% |
|
Merger and acquisition expenses |
|
|
1,525 |
|
|
- |
|
|
1,525 |
|
100.00% |
|
General and administrative expenses |
|
|
4,293 |
|
|
3,459 |
|
|
834 |
|
24.11% |
|
Total noninterest expense |
|
$ |
88,333 |
|
$ |
76,367 |
|
$ |
11,966 |
|
15.67% |
Income Tax Expense.Income tax expense increased $849,000, or 6.6%, to $13.7 million for the nine months ended September 30, 2025 from $12.8 million for the nine months ended September 30, 2024, primarily a result of the increase in net income during the quarter ended September 30, 2025, partially offset by the income tax expense on solar tax credit investment basis reduction and BOLI surrender tax and managed endowment contract penalty expense during the nine months ended September 30, 2024. The effective tax rate was 24.3% and 32.5% for the nine months ended September 30, 2025 and 2024, respectively. The decrease in the effective tax rate was primarily a result of the income tax expense on solar tax credit investment basis reduction and BOLI surrender tax and managed endowment contract penalty expense during the nine months ended September 30, 2024. Excluding one-time charges, the operating effective tax rate for the nine months ended September 30, 2025 and 2024 would have been 22.9% and 22.2%, respectively.
Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. Non-accrual loans were included in the computation of average balances. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense; such fees, discounts and premiums were not material for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|||||||||||||||
|
|
|
September 30, 2025 |
|
September 30, 2024 |
|
||||||||||||
|
|
Average |
|
|
|
Average |
|
|
|
|
||||||||
|
|
|
Outstanding |
|
|
|
|
Average |
|
Outstanding |
|
|
|
|
Average |
|
||
|
|
|
Balance |
|
Interest |
|
Yield/Rate (4) |
|
Balance |
|
Interest |
|
Yield/Rate (4) |
|
||||
|
Interest-earning assets: |
|
|
|
|
|
|
|||||||||||
|
Loans |
|
$ |
4,487,211 |
|
$ |
223,524 |
6.66 |
% |
$ |
4,026,925 |
|
$ |
199,788 |
6.63 |
% |
||
|
Securities |
|
233,156 |
|
6,850 |
3.93 |
% |
200,648 |
|
4,736 |
3.15 |
% |
||||||
|
Other investments (5) |
|
29,490 |
|
1,046 |
4.74 |
% |
25,270 |
|
939 |
4.96 |
% |
||||||
|
Short-term investments (5) |
|
213,179 |
|
6,966 |
4.37 |
% |
239,946 |
|
9,853 |
5.49 |
% |
||||||
|
Total interest-earning assets |
|
4,963,036 |
|
238,386 |
6.42 |
% |
4,492,789 |
|
215,316 |
6.40 |
% |
||||||
|
Non-interest-earning assets |
|
276,905 |
|
|
|
|
|
239,585 |
|
|
|
|
|||||
|
Allowance for credit losses |
|
(40,468) |
|
|
|
|
|
(35,336) |
|
|
|
||||||
|
Total assets |
|
$ |
5,199,473 |
|
|
|
|
|
$ |
4,697,038 |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
||||||||||||
|
Savings accounts |
|
$ |
118,426 |
|
360 |
0.41 |
% |
$ |
118,532 |
|
46 |
0.05 |
% |
||||
|
NOW accounts |
|
469,225 |
|
3,632 |
1.03 |
% |
439,866 |
|
3,409 |
1.04 |
% |
||||||
|
Money market accounts |
|
1,094,418 |
|
27,204 |
3.32 |
% |
855,720 |
|
22,212 |
3.47 |
% |
||||||
|
Certificates of deposit and individual retirement accounts |
|
1,959,009 |
|
64,005 |
4.37 |
% |
1,815,336 |
|
67,741 |
4.98 |
% |
||||||
|
Total interest-bearing deposits |
|
3,641,078 |
|
95,201 |
3.50 |
% |
3,229,454 |
|
93,408 |
3.86 |
% |
||||||
|
FHLB and FRB advances |
|
131,874 |
|
4,478 |
4.54 |
% |
82,015 |
|
3,230 |
5.26 |
% |
||||||
|
Total interest-bearing liabilities |
|
3,772,952 |
|
99,679 |
3.53 |
% |
3,311,469 |
|
96,638 |
3.90 |
% |
||||||
|
Non-interest-bearing deposits |
|
589,472 |
|
|
|
558,825 |
|
|
|||||||||
|
Other non-interest-bearing liabilities |
|
92,819 |
|
|
|
|
83,493 |
|
|
||||||||
|
Total liabilities |
|
4,455,243 |
|
|
|
|
3,953,787 |
|
|
||||||||
|
Shareholders' equity |
|
744,230 |
|
|
|
|
743,251 |
|
|
||||||||
|
Total liabilities and shareholders' equity |
|
$ |
5,199,473 |
|
|
|
|
$ |
4,697,038 |
|
|
||||||
|
Net interest income |
|
|
|
$ |
138,707 |
|
|
$ |
118,678 |
|
|||||||
|
Net interest rate spread (1) |
|
|
|
|
|
2.89 |
% |
|
2.50 |
% |
|||||||
|
Net interest-earning assets (2) |
|
$ |
1,190,084 |
|
|
|
|
$ |
1,181,320 |
|
|
|
|
||||
|
Net interest margin (3) |
|
|
|
|
|
|
3.74 |
% |
|
3.53 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to interest-bearing liabilities |
|
131.54 |
% |
|
|
|
135.67 |
% |
|
||||||||
| (1) | Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. |
| (2) | Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. |
| (3) | Net interest margin represents net interest income divided by average total interest-earning assets. |
| (4) | Annualized. |
| (5) | Other investments are comprised of FRB stock, FHLB stock and swap collateral accounts. Short-term investments are comprised of cash and cash equivalents |
Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
||||||||
|
|
|
September 30, 2025 vs. 2024 |
|||||||
|
|
|
Increase (Decrease) Due to |
|
Total |
|||||
|
|
|
|
|
|
|
|
|
Increase |
|
|
|
Volume |
Rate |
(Decrease) |
||||||
|
|
|
(In thousands) |
|||||||
|
Interest-earning assets: |
|
|
|
||||||
|
Loans |
|
$ |
22,925 |
|
$ |
811 |
|
$ |
23,736 |
|
Securities |
|
842 |
|
1,272 |
|
2,114 |
|||
|
Other |
|
147 |
|
(40) |
|
107 |
|||
|
Short-term investments |
|
(1,020) |
|
(1,867) |
|
(2,887) |
|||
|
Total interest-earning assets |
|
22,894 |
|
176 |
|
23,070 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|||||
|
Savings accounts |
|
- |
|
314 |
|
314 |
|||
|
NOW accounts |
|
227 |
|
(4) |
|
223 |
|||
|
Money market accounts |
|
5,886 |
|
(894) |
|
4,992 |
|||
|
Certificates of deposit and individual retirement accounts |
|
6,527 |
|
(10,263) |
|
(3,736) |
|||
|
Total interest-bearing deposits |
|
12,640 |
|
(10,847) |
|
1,793 |
|||
|
Federal Home Loan Bank advances |
|
1,614 |
|
(366) |
|
1,248 |
|||
|
Total interest-bearing liabilities |
|
14,254 |
|
(11,213) |
|
3,041 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income |
|
$ |
8,640 |
|
$ |
11,389 |
|
$ |
20,029 |
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We are also able to borrow from the FHLB and the Discount Window at the Federal Reserve Bank of Boston ("FRB"). As of September 30, 2025, we had outstanding advances of $41.5 million from the FHLB. As of September 30, 2025, we had unused borrowing capacity of $816.3 million with the FHLB. At September 30, 2025, the Bank had $606.3 million available from the discount window under the Borrower in Custody ("BIC") program at the FRB. Additionally, as of September 30, 2025, we had $388.7 million of brokered deposits and pursuant to our internal liquidity policy, which allows us to utilize brokered deposits up to 25.0% of our total assets, we had an additional capacity of up to approximately $971.9 million of brokered deposits.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities.
At September 30, 2025, we had $22.1 million in commitments to originate loans outstanding. In addition, we had $636.6 million in unused lines of credit to borrowers, $425.9 million in unadvanced construction loans and $5.6 million in letters of credit outstanding.
Non-brokered certificates of deposit due within one year of September 30, 2025 totaled $1.72 billion, or 31.5%, of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including brokered deposits, FHLB advances and FRB borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the non-brokered certificates of deposit due on or before September 30, 2026, or on our other interest-bearing deposit accounts. We believe, however, based on historical experience and current market interest rates that we will retain upon maturity a large portion of our certificates of deposit with maturities of one year or less as of September 30, 2025.
Our primary investing activity is originating loans. During the nine months ended September 30, 2025, we originated $369.5 million of loans, net of repayments.
Financing activities consist primarily of activity in deposit accounts and FHLB advances. We experienced net increases in deposits of $388.0 million for the nine months ended September 30, 2025. At September 30, 2025 and December 31, 2024, the level of brokered time deposits was $388.7 million and $309.8 million, respectively. Deposit flows are affected primarily by the overall level of interest rates and the interest rates and products offered by us and our competitors. FHLB advances decreased $79.4 million during the nine months ended September 30, 2025.
For additional information, see the consolidated statements of cash flows for the nine months ended September 30, 2025 and 2024 included as part of the consolidated financial statements appearing elsewhere in this Form 10-Q.
We are committed to maintaining a strong liquidity position. We continuously monitor our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate by management. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding planning process, which provides the basis for the identification of our liquidity needs. We anticipate that we will have sufficient funds to meet our current funding commitments. In addition, based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.
As of September 30, 2025, the Bank and the Company exceeded all of their regulatory capital requirements and were categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category. See Note 10 of the notes to consolidated financial statements.
Impact of Inflation and Changing Prices
The consolidated financial statements and related data presented in this Form 10-Q have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution's performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
NB Bancorp Inc. published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 07, 2025 at 20:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]