KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to Needham, Massachusetts-based NB Bancorp, Inc. (NYSE:NBBK) ("the company"). KBRA also assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 to the company's primary subsidiary, Needham Bank ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

NBBK’s ratings reflect a strengthening earnings profile as the company deploys its post-conversion capital and gains scale from the 4Q25 acquisition of Provident Bancorp, Inc. ("BankProv"). ROA improved to 1.0% in 1H26, supported by organic loan growth, NIM expansion, and better operating leverage. Earnings remain primarily spread driven, with a healthy NIM of 3.91% in 1H26, supported by favorable asset repricing and lower deposit costs. Fee income remains modest at ~9% of revenue, but expanding commercial relationships, treasury management, and wealth management initiatives should help diversify the mix over time. Continued C&I growth and disciplined balance sheet deployment should support further earnings momentum.

NBBK’s asset quality remains sound, underpinned by a high-quality CRE book and disciplined underwriting, with recent volatility largely tied to identifiable BankProv-acquired exposures. The acquired Enterprise Value (EV) C&I portfolio, which represents roughly 2% of loans, has been the main source of recent credit pressure; however, these issues were largely identified at acquisition, with about 74% of initial PCD marks linked to EV credits. Management continues to work through these relationships, and balances have declined materially since the acquisition. Outside of this acquisition-related noise, credit performance remains solid, with no nonaccrual multifamily or C&D loans, while its NPA ratio improved to 0.4% in 2Q26, and reserve coverage remains strong at 3.0x of NPLs. Although ICRE concentration remains modestly above regulatory guidance at 305%, the associated risk is mitigated by management’s extensive CRE expertise, disciplined underwriting and stress testing practices, and established internal concentration limits.

Funding and liquidity profile remains constructive, supported by improving deposit costs and a lower loan-to-deposit ratio. Even so, the company’s legacy savings-bank orientation contributes to a comparatively higher-cost deposit mix and somewhat elevated reliance on noncore funding sources, which represented ~26% of total funding at 2Q26. Noninterest-bearing deposits remain modest at 15% of total deposits, though continued growth in C&I and treasury management relationships should support greater low-cost commercial deposit generation over time. Positively, the cost of deposits declined 23 bps from YE25 to 2.63% in 1H26, while the loan-to-deposit ratio improved to 103% from 115% in 2023, though it remains above rated peers. These factors are partly offset by a granular deposit base and substantial contingent liquidity, which provide ~1.4x coverage of uninsured and uncollateralized deposits. Moreover, further progress in deepening core commercial deposits would help reduce funding costs and strengthen flexibility over time.

Capital remains adequate for NBBK’s risk profile despite meaningful normalization from the substantial excess levels following the 2023 mutual-to-stock conversion. CET1 and TCE ratios peaked at ~16.5% and 14.8%, respectively, at YE24, before declining to 11.9% and 10.9%, respectively, at 2Q26 as management deployed capital through organic growth, share repurchases, and the BankProv acquisition. Despite the decline, current capital levels remain supportive of the credit profile and benefit from improving internal capital generation, modest dividend payout, and limited structural leverage.

Rating Sensitivities

While not currently expected, positive rating momentum could result from sustained improvement in profitability and revenue diversification, a stronger commercial deposit franchise, continued sound asset quality, and capital rebuilding toward rated peer levels. Rating pressure could emerge from material asset quality deterioration beyond identifiable BankProv acquired exposures, sustained earnings weakness, deterioration in the funding profile, or aggressive capital deployment with risk-based capital ratios falling materially below rated peers.

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Methodology

Financial Institutions: Bank & Bank Holding Company Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1016891

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Analytical Contacts

Israel Olugbade, Director (Lead Analyst)

+1 312-680-4196

israel.olugbade@kbra.com

Jason Szelc, Senior Director

+1 301-969-3174

jason.szelc@kbra.com

Ashley Phillips, Managing Director (Rating Committee Chair)

+1 301-969-3185

ashley.phillips@kbra.com

Business Development Contact

Justin Fuller, Managing Director

+1 312-680-4163

justin.fuller@kbra.com