NB Bancorp, Inc. — 2023 Form 10-K Summary
Business context and reporting period
For the year ended December 31, 2023, NB Bancorp reported consolidated results principally reflecting Needham Bank, a Massachusetts community bank serving Greater Boston and nearby markets. NB Bancorp was formed in June 2023 and completed its mutual-to-stock conversion and initial public offering on December 27, 2023; it had no material standalone operations before the conversion. Accordingly, the filing compares 2023 with 2022, before NB Bancorp became a public company. It does not provide a separate fourth-quarter income statement.
The Company sold 40,997,500 shares at $10 per share, raising approximately $410 million gross and $400.4 million net of offering costs. It contributed $2 million cash and 1,708,229 shares, valued at $19.1 million at the offering price, to the Needham Bank Charitable Foundation.
Financial performance and condition
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Total assets | $4.53 billion | $3.59 billion | Up 26.2% |
| Total loans | $3.89 billion | $3.02 billion | Up 29.1%; net loans $3.86 billion |
| Deposits | $3.39 billion | $2.89 billion | Up 17.3% |
| Net interest income | $130.1 million | $105.0 million | Up 23.9% |
| Net interest margin | 3.41% | 3.49% | Down 8 basis points |
| Provision for credit losses | $13.9 million | $6.7 million | Includes $4.2 million for unfunded commitments |
| Net income | $9.8 million | $30.1 million | Down 67.3%; 2023 EPS was $0.23 |
| Net cash from operating activities | $53.0 million | $39.7 million | Investing cash flow was $(831.6) million; financing cash flow was $894.7 million |
Interest and dividend income rose 83.0% to $220.5 million, while interest expense rose 481.7% to $90.4 million as deposit and borrowing costs increased. Average loan yield rose to 6.12% from 4.58%; average cost of interest-bearing liabilities rose to 3.05% from 0.68%. The resulting net interest spread was 2.73%, compared with 3.33% in 2022.
Reported noninterest income was $15.6 million, including $3.5 million of employee retention tax credit income. Noninterest expense was $119.9 million, including the $19.1 million foundation contribution and other conversion-related and unusual costs. Management stated that adjusted operating noninterest expense, excluding conversion costs and certain other non-operating items, was $91.0 million, up 27.9% from 2022.
At year-end, shareholders’ equity was $758.0 million, up from $344.1 million, primarily reflecting the offering. Cash and cash equivalents were $272.6 million, versus $156.5 million. Available-for-sale securities were $189.5 million, down from $245.5 million, with $14.8 million of gross unrealized losses. The allowance for credit losses was $32.2 million, or 0.83% of loans, versus $25.0 million and the same loan coverage ratio in 2022. Net charge-offs increased to $3.6 million from $87,000, mainly due to purchased consumer loans.
FHLB borrowings were $283.3 million, down from $293.1 million. Brokered deposits were $183.6 million; core deposits, as defined by the Company, were $3.2 billion, or 94.6% of total deposits. Management reported $608.6 million of unused FHLB borrowing capacity and $46.2 million of available Federal Reserve Discount Window capacity. The Bank reported a 13.6% community bank leverage ratio, above the 9% requirement, and stated it was well-capitalized.
Material changes, outlook, and key risks
- Loan growth was broad-based, led by commercial real estate and multifamily loans, up 36.8%, and commercial and industrial loans, up 97.2%. Commercial real estate, multifamily, and construction and land development loans together represented 51.5% of loans.
- Management plans to pursue measured growth in commercial real estate and multifamily lending, diversify commercial and industrial lending, continue residential mortgage lending, modestly grow consumer loans, and expand core deposits and commercial banking relationships. No quantified earnings or balance-sheet guidance was provided.
- The 2023 adoption of CECL reduced opening retained earnings by $2.1 million, net of tax. The filing cautions that 2023 and 2022 credit-loss measures use different accounting methodologies.
- Significant risks include real-estate and geographic concentration, construction and speculative construction lending, rapid growth and seasoning of structured finance loans, interest-rate and funding-cost pressure, and deposit competition. Cannabis-related lending and deposits add regulatory, compliance, and federal-law uncertainty; the Bank also serves money-service businesses.
- Management described liquidity as adequate and expected a substantial portion of maturing time deposits to be retained, but warned that deposit outflows could require more expensive funding. The Company did not pay cash dividends in 2023 and gave no assurance that future dividends will be paid.
- The Company reported no material pending legal proceedings and no cybersecurity incident known to have materially affected it. Management assessed disclosure controls and internal control over financial reporting as effective; the independent auditor was not required to attest to internal control effectiveness.
Important facts for investors to verify
- Reconcile the filing’s differing disclosures of cannabis-related deposits: one section reports $277.2 million across 817 relationships, while other sections report $316.0 million. Confirm the applicable definition and balance.
- Review the composition and performance of the rapidly growing commercial real estate, construction, commercial and industrial, and purchased consumer loan portfolios, including larger borrower exposures and collateral values.
- Assess the sustainability of earnings excluding the foundation contribution, conversion-related costs, discretionary compensation, pension expense, and employee retention credit income; confirm management’s adjustment methodology.
- Confirm available liquidity and contingent borrowing capacity, including the different facility amounts described in the filing, and monitor deposit pricing, brokered funding, and uninsured time-deposit maturities.
- Track net interest margin, deposit costs, credit-loss provisions and charge-offs, CECL assumptions, and unrealized securities losses as interest rates and local commercial real estate conditions change.