[10-Q] Avidia Bancorp, Inc. Quarterly Earnings Report
Avidia Bancorp's filing includes planned corporate reorganization, credit portfolio descriptions, selected debt and tax items, and a broad list of business and risk factors. The company describes a two-step merger where Assabet Valley Bancorp will become a Massachusetts stock corporation, merge into the holding company, and the holding company will offer common stock to depositors and others under an SEC-registered prospectus. The filing reports income tax benefits related to reclassification adjustments of $22,000 and $174,000 for the three- and six-month periods ended June 30, 2025, and $384,000 for comparable 2024 periods. Subordinated debt was recorded at $27.7 million net of issuance costs at June 30, 2025. Expense items tied to certain plans totaled $258,000 and $810,000 for the three- and six-month periods ended June 30, 2025. The filing also outlines loan segment collateral types, advance rates, definitions of nonperforming loans, and many operational, market, regulatory, credit and cyber risk factors.
Avidia Bancorp segnala nella sua comunicazione una prevista riorganizzazione societaria, la descrizione del portafoglio crediti, alcune poste selezionate di debito e fiscali e un ampio elenco di fattori di rischio e di business. La società illustra una fusione in due fasi per cui Assabet Valley Bancorp diventerà una società per azioni del Massachusetts, si fonderà nella holding e quest’ultima offrirà azioni ordinarie a correntisti e terze parti tramite un prospetto registrato presso la SEC. Nel documento vengono riportati benefici fiscali sul reddito legati ad adeguamenti di riclassificazione pari a $22.000 e $174.000 per i periodi di tre e sei mesi conclusi il 30 giugno 2025, nonché $384.000 per i periodi comparabili del 2024. Al 30 giugno 2025 il debito subordinato è stato contabilizzato per $27,7 milioni al netto dei costi di emissione. Le spese legate a specifici piani sono state pari a $258.000 e $810.000 rispettivamente per i tre e i sei mesi chiusi il 30 giugno 2025. Il documento descrive inoltre i tipi di garanzia per i segmenti di prestito, i tassi di anticipo, le definizioni di crediti non performanti e numerosi rischi operativi, di mercato, regolamentari, di credito e informatici.
Avidia Bancorp incluye en su presentación la reorganización corporativa prevista, la descripción de la cartera de crédito, partidas seleccionadas de deuda e impuestos y una amplia lista de factores comerciales y de riesgo. La compañía detalla una fusión en dos pasos en la que Assabet Valley Bancorp se convertirá en una sociedad por acciones de Massachusetts, se fusionará con la holding y ésta ofrecerá acciones ordinarias a depositantes y otros bajo un prospecto registrado ante la SEC. La presentación informa beneficios fiscales sobre la renta relacionados con ajustes de reclasificación de $22,000 y $174,000 para los periodos de tres y seis meses terminados el 30 de junio de 2025, y $384,000 para los periodos comparables de 2024. La deuda subordinada se registró en $27.7 millones netos de costos de emisión al 30 de junio de 2025. Los gastos vinculados a ciertos planes sumaron $258,000 y $810,000 para los periodos de tres y seis meses cerrados el 30 de junio de 2025. El documento también detalla los tipos de colateral por segmento de préstamos, las tasas de anticipación, las definiciones de préstamos en mora y numerosos riesgos operativos, de mercado, regulatorios, de crédito y cibernéticos.
Avidia Bancorp의 제출서류에는 계획된 기업 재편, 여신 포트폴리오 설명, 선택된 부채 및 세무 항목과 광범위한 사업·위험 요인 목록이 포함되어 있습니다. 회사는 Assabet Valley Bancorp가 매사추세츠 주의 주식회사로 전환된 후 지주회사로 합병되고, 지주회사가 SEC에 등록된 설명서를 통해 예금주 등에게 보통주를 제공하는 두 단계 합병 방식을 설명합니다. 제출서류는 2025년 6월 30일로 종료된 3개월 및 6개월 기간에 대해 각각 $22,000 및 $174,000의 재분류 조정 관련 소득세 혜택과 2024년 비교 기간에 대한 $384,000를 보고합니다. 2025년 6월 30일 기준으로 후순위 부채는 발행비용 차감 후 $27.7백만으로 계상되었습니다. 특정 계획과 관련된 비용은 2025년 6월 30일로 종료된 3개월 및 6개월 기간에 각각 $258,000 및 $810,000였습니다. 또한 제출서류는 대출 부문별 담보 유형, 선지급 비율, 부실여신 정의 및 다수의 운영·시장·규제·신용·사이버 리스크를 개괄합니다.
Avidia Bancorp indique dans son dépôt la réorganisation corporative prévue, la description du portefeuille de crédits, des postes sélectionnés de dette et d’impôts ainsi qu’une longue liste de facteurs commerciaux et de risque. La société décrit une fusion en deux étapes selon laquelle Assabet Valley Bancorp deviendra une société par actions du Massachusetts, sera fusionnée dans la société holding, et cette holding proposera des actions ordinaires aux déposants et autres via un prospectus enregistré auprès de la SEC. Le dépôt signale des avantages fiscaux sur le revenu liés à des ajustements de reclassement de $22,000 et $174,000 pour les périodes de trois et six mois closes le 30 juin 2025, et $384,000 pour les périodes comparables de 2024. La dette subordonnée a été comptabilisée à $27,7 millions net des coûts d’émission au 30 juin 2025. Les charges liées à certains plans se sont élevées à $258,000 et $810,000 pour les périodes de trois et six mois closes le 30 juin 2025. Le dépôt décrit aussi les types de garanties par segment de prêt, les taux d’avance, les définitions de prêts non performants et de nombreux risques opérationnels, de marché, réglementaires, de crédit et cybersécurité.
Avidia Bancorp führt in der Einreichung eine geplante gesellschaftliche Reorganisation, Beschreibungen des Kreditportfolios, ausgewählte Schulden- und Steuerposten sowie eine umfangreiche Liste von Geschäfts- und Risikofaktoren auf. Das Unternehmen erläutert einen zweistufigen Zusammenschluss, bei dem Assabet Valley Bancorp zu einer Massachusetts-Aktiengesellschaft wird, in die Holding verschmolzen wird und die Holding anschließend Stammaktien an Einleger und andere über einen bei der SEC registrierten Prospekt anbietet. In der Einreichung werden Ertragsteuer-Vorteile im Zusammenhang mit Umgliederungsanpassungen in Höhe von $22.000 bzw. $174.000 für die zum 30. Juni 2025 endenden drei- bzw. sechsmonatigen Perioden und $384.000 für vergleichbare Perioden 2024 berichtet. Nachrangige Verbindlichkeiten waren zum 30. Juni 2025 netto Emissionskosten mit $27,7 Millionen bilanziert. Aufwendungen im Zusammenhang mit bestimmten Plänen beliefen sich auf $258.000 bzw. $810.000 für die drei- und sechsmonatigen Perioden zum 30. Juni 2025. Die Einreichung skizziert zudem Sicherheitenarten nach Kreditsegment, Vorabauszahlungsquoten, Definitionen notleidender Kredite sowie zahlreiche operative, Markt-, aufsichtsrechtliche, Kredit- und Cyber-Risiken.
- Planned holding company reorganization and registered offering to provide a route for capital formation and shareholder structure change
- Explicit disclosure of subordinated debt terms and balance (recorded balance $27.7 million), enhancing transparency
- Clear identification of loan collateral types and underwriting features, which aids investor understanding of credit composition
- Disclosure of specific tax benefits and plan-related expenses ($22k, $174k, $258k, $810k) for transparency
- Subordinated debt outstanding of $27.7 million increases leverage and interest expense obligations
- Filing lists numerous risk factors (credit, market, regulatory, operational, cyber, third-party) that could materially affect results
- No consolidated revenue, net income, or clear earnings metrics are present in the provided excerpt, limiting assessment of performance
Insights
TL;DR: Routine quarter with a holding-company reorganization plan, modest tax reclassification benefits, and $27.7M of subordinated debt recorded.
The filing discloses a structural recapitalization through a two-step merger and an intended registered offering of common stock to depositors and others, which is material for capitalization and shareholder structure. Reported income tax benefits for reclassification adjustments are small (<$400k). Subordinated debt of $27.7 million net of issuance costs is explicitly stated and contractual interest expense and amortization amounts for recent periods are provided, which affect interest cost trends. Loan-segment descriptions and nonperforming loan definitions are included but specific aggregated earnings or revenue metrics are not present in the provided text.
TL;DR: The filing lists extensive operational, credit, market and regulatory risks; no new material adverse events are explicitly reported.
The disclosure enumerates many potential risk drivers including interest rate movements, deposit composition, credit quality, real estate market fluctuations, payments-processing exposures, cyber risk and third-party provider dependence. Specific quantitative stress metrics are limited in the excerpt, though nonperforming loan thresholds and advance rates are mentioned. The explicit reporting of plan-related expenses ($258k and $810k) and subordinated debt balances informs near-term expense and leverage monitoring but does not by itself indicate a material deterioration in risk profile within the provided content.
Avidia Bancorp segnala nella sua comunicazione una prevista riorganizzazione societaria, la descrizione del portafoglio crediti, alcune poste selezionate di debito e fiscali e un ampio elenco di fattori di rischio e di business. La società illustra una fusione in due fasi per cui Assabet Valley Bancorp diventerà una società per azioni del Massachusetts, si fonderà nella holding e quest’ultima offrirà azioni ordinarie a correntisti e terze parti tramite un prospetto registrato presso la SEC. Nel documento vengono riportati benefici fiscali sul reddito legati ad adeguamenti di riclassificazione pari a $22.000 e $174.000 per i periodi di tre e sei mesi conclusi il 30 giugno 2025, nonché $384.000 per i periodi comparabili del 2024. Al 30 giugno 2025 il debito subordinato è stato contabilizzato per $27,7 milioni al netto dei costi di emissione. Le spese legate a specifici piani sono state pari a $258.000 e $810.000 rispettivamente per i tre e i sei mesi chiusi il 30 giugno 2025. Il documento descrive inoltre i tipi di garanzia per i segmenti di prestito, i tassi di anticipo, le definizioni di crediti non performanti e numerosi rischi operativi, di mercato, regolamentari, di credito e informatici.
Avidia Bancorp incluye en su presentación la reorganización corporativa prevista, la descripción de la cartera de crédito, partidas seleccionadas de deuda e impuestos y una amplia lista de factores comerciales y de riesgo. La compañía detalla una fusión en dos pasos en la que Assabet Valley Bancorp se convertirá en una sociedad por acciones de Massachusetts, se fusionará con la holding y ésta ofrecerá acciones ordinarias a depositantes y otros bajo un prospecto registrado ante la SEC. La presentación informa beneficios fiscales sobre la renta relacionados con ajustes de reclasificación de $22,000 y $174,000 para los periodos de tres y seis meses terminados el 30 de junio de 2025, y $384,000 para los periodos comparables de 2024. La deuda subordinada se registró en $27.7 millones netos de costos de emisión al 30 de junio de 2025. Los gastos vinculados a ciertos planes sumaron $258,000 y $810,000 para los periodos de tres y seis meses cerrados el 30 de junio de 2025. El documento también detalla los tipos de colateral por segmento de préstamos, las tasas de anticipación, las definiciones de préstamos en mora y numerosos riesgos operativos, de mercado, regulatorios, de crédito y cibernéticos.
Avidia Bancorp의 제출서류에는 계획된 기업 재편, 여신 포트폴리오 설명, 선택된 부채 및 세무 항목과 광범위한 사업·위험 요인 목록이 포함되어 있습니다. 회사는 Assabet Valley Bancorp가 매사추세츠 주의 주식회사로 전환된 후 지주회사로 합병되고, 지주회사가 SEC에 등록된 설명서를 통해 예금주 등에게 보통주를 제공하는 두 단계 합병 방식을 설명합니다. 제출서류는 2025년 6월 30일로 종료된 3개월 및 6개월 기간에 대해 각각 $22,000 및 $174,000의 재분류 조정 관련 소득세 혜택과 2024년 비교 기간에 대한 $384,000를 보고합니다. 2025년 6월 30일 기준으로 후순위 부채는 발행비용 차감 후 $27.7백만으로 계상되었습니다. 특정 계획과 관련된 비용은 2025년 6월 30일로 종료된 3개월 및 6개월 기간에 각각 $258,000 및 $810,000였습니다. 또한 제출서류는 대출 부문별 담보 유형, 선지급 비율, 부실여신 정의 및 다수의 운영·시장·규제·신용·사이버 리스크를 개괄합니다.
Avidia Bancorp indique dans son dépôt la réorganisation corporative prévue, la description du portefeuille de crédits, des postes sélectionnés de dette et d’impôts ainsi qu’une longue liste de facteurs commerciaux et de risque. La société décrit une fusion en deux étapes selon laquelle Assabet Valley Bancorp deviendra une société par actions du Massachusetts, sera fusionnée dans la société holding, et cette holding proposera des actions ordinaires aux déposants et autres via un prospectus enregistré auprès de la SEC. Le dépôt signale des avantages fiscaux sur le revenu liés à des ajustements de reclassement de $22,000 et $174,000 pour les périodes de trois et six mois closes le 30 juin 2025, et $384,000 pour les périodes comparables de 2024. La dette subordonnée a été comptabilisée à $27,7 millions net des coûts d’émission au 30 juin 2025. Les charges liées à certains plans se sont élevées à $258,000 et $810,000 pour les périodes de trois et six mois closes le 30 juin 2025. Le dépôt décrit aussi les types de garanties par segment de prêt, les taux d’avance, les définitions de prêts non performants et de nombreux risques opérationnels, de marché, réglementaires, de crédit et cybersécurité.
Avidia Bancorp führt in der Einreichung eine geplante gesellschaftliche Reorganisation, Beschreibungen des Kreditportfolios, ausgewählte Schulden- und Steuerposten sowie eine umfangreiche Liste von Geschäfts- und Risikofaktoren auf. Das Unternehmen erläutert einen zweistufigen Zusammenschluss, bei dem Assabet Valley Bancorp zu einer Massachusetts-Aktiengesellschaft wird, in die Holding verschmolzen wird und die Holding anschließend Stammaktien an Einleger und andere über einen bei der SEC registrierten Prospekt anbietet. In der Einreichung werden Ertragsteuer-Vorteile im Zusammenhang mit Umgliederungsanpassungen in Höhe von $22.000 bzw. $174.000 für die zum 30. Juni 2025 endenden drei- bzw. sechsmonatigen Perioden und $384.000 für vergleichbare Perioden 2024 berichtet. Nachrangige Verbindlichkeiten waren zum 30. Juni 2025 netto Emissionskosten mit $27,7 Millionen bilanziert. Aufwendungen im Zusammenhang mit bestimmten Plänen beliefen sich auf $258.000 bzw. $810.000 für die drei- und sechsmonatigen Perioden zum 30. Juni 2025. Die Einreichung skizziert zudem Sicherheitenarten nach Kreditsegment, Vorabauszahlungsquoten, Definitionen notleidender Kredite sowie zahlreiche operative, Markt-, aufsichtsrechtliche, Kredit- und Cyber-Risiken.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the quarterly period ended |
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
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For the transition period from _______________ to _______________ |
Commission File No.
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. YES ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act:
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES
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Avidia Bancorp, Inc.
Form 10-Q
Index
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Part I. – Financial Information |
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Item 1. |
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Financial Statements |
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1 |
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Consolidated Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024 |
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Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited) |
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Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited) |
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Consolidated Statements of Changes in Capital for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited) |
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Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 (unaudited) |
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Notes to Consolidated Financial Statements (unaudited) |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Quantitative and Qualitative Disclosures about Market Risk |
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Controls and Procedures |
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Part II. – Other Information |
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Legal Proceedings |
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Risk Factors |
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Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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Mine Safety Disclosures |
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Other Information |
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Exhibits |
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Signature Page |
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Table of Contents
EXPLANATORY NOTE
Avidia Bancorp, Inc. (the “Company,” “we” or “us”) was incorporated on February 28, 2025, to serve as the bank holding company for Avidia Bank upon the consummation of the conversion of Assabet Valley Bancorp, the mutual holding company and sole stockholder of Avidia Bank, from the mutual form of organization to the stock form of organization. The conversion was completed on July 31, 2025. As of June 30, 2025, the conversion had not yet been completed and the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the unaudited consolidated financial statements, and related notes, and other financial information included in this report relate to Assabet Valley Bancorp.
The unaudited consolidated financial statements and other financial information contained in this report should be read in conjunction with the audited consolidated financial statements, and related notes, of Assabet Valley Bancorp as of and for each of the years ended December 31, 2024 and 2023, contained in the Company’s definitive prospectus dated May 13, 2025, as filed with the Securities and Exchange Commission on May 21, 2025.
Table of Contents
Part I. – Financial Information
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Assabet Valley Bancorp and Subsidiary
June 30, 2025 (Unaudited) and December 31, 2024
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December 31, |
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Assets: |
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Cash and due from banks |
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Short-term investments |
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Total cash and cash equivalents |
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Securities available for sale, at fair value (amortized cost $ |
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Securities held to maturity, at amortized cost (fair value $ |
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Total securities |
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Federal Home Loan Bank stock, at cost |
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Loans held for sale |
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Total loans |
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Allowance for credit losses |
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Net loans |
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Premises and equipment, net |
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Bank-owned life insurance |
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Accrued interest receivable |
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Net deferred tax asset |
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Goodwill |
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Mortgage servicing rights |
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Other assets |
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Total assets |
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Liabilities: |
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Deposits |
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Subordinated debt |
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Accrued expenses and other liabilities |
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Total liabilities |
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Retained earnings |
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Total capital |
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Total liabilities and capital |
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The accompanying notes are an integral part of these consolidated financial statements.
1
Table of Contents
Assabet Valley Bancorp and Subsidiary
Consolidated Statements of Operations (Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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(In thousands) |
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2025 |
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2024 |
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2025 |
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2024 |
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Interest and dividend income: |
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Loans, including fees |
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$ |
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$ |
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$ |
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$ |
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Securities |
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Other |
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Total interest and dividend income |
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Interest expense: |
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Deposits |
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Federal Home Loan Bank advances |
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Subordinated debt |
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Total interest expense |
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Net interest income |
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Credit loss expense (reversal) - loans |
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( |
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Credit loss (reversal) expense - off-balance sheet credit exposures |
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( |
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( |
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Net interest income, after credit loss expense (reversal) |
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Non-interest income: |
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Customer service fees |
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Net loss on sale of securities available for sale |
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( |
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( |
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( |
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( |
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Net recognized gain on equity securities |
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— |
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— |
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Net write down on premises and equipment no longer in use |
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— |
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— |
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( |
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— |
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Payment processing income |
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Income on bank-owned life insurance |
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Mortgage banking income |
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Investment commissions |
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Debit card income |
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Credit card income |
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Other |
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Total non-interest income |
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Non-interest expense: |
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Salaries and employee benefits |
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Occupancy and equipment |
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Data processing |
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Professional fees |
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Payment processing |
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Deposit insurance |
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Advertising |
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Telecommunications |
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Problem loan and foreclosed real estate, net |
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Other general and administrative |
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Total non-interest expense |
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Income (loss) before income tax expense (benefit) |
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Income tax expense (benefit) |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
2
Table of Contents
Assabet Valley Bancorp and Subsidiary
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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(In thousands) |
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2025 |
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2024 |
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2025 |
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2024 |
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Net income (loss) |
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$ |
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$ |
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$ |
( |
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$ |
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Other comprehensive income: |
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Securities available for sale |
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Unrealized holding gains (losses) arising during period |
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Reclassification adjustment for losses realized in income (1) |
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Cash flow hedge |
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Unrealized holding (loss) gain |
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Other comprehensive income, before tax |
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Deferred tax effect |
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( |
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( |
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Other comprehensive income |
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Comprehensive income (loss) |
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$ |
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$ |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
3
Table of Contents
Assabet Valley Bancorp and Subsidiary
Consolidated Statements of Changes in Capital (Unaudited)
(In thousands) |
Retained |
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Accumulated |
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Total |
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Balance at March 31, 2024 |
$ |
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$ |
( |
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$ |
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Net income |
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— |
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Other comprehensive income |
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— |
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Balance at June 30, 2024 |
$ |
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$ |
( |
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$ |
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Balance at March 31, 2025 |
$ |
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$ |
( |
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$ |
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Net income |
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— |
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Other comprehensive income |
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— |
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Balance at June 30, 2025 |
$ |
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$ |
( |
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$ |
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(In thousands) |
Retained |
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Accumulated |
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Total |
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Balance at December 31, 2023 |
$ |
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$ |
( |
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$ |
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Net income |
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— |
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Other comprehensive income |
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— |
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Balance at June 30, 2024 |
$ |
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$ |
( |
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$ |
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Balance at December 31, 2024 |
$ |
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$ |
( |
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$ |
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Net loss |
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( |
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— |
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( |
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Other comprehensive income |
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— |
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Balance at June 30, 2025 |
$ |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
4
Table of Contents
Assabet Valley Bancorp and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
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Six Months Ended June 30, |
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(In thousands) |
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2025 |
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2024 |
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Cash flows from operating activities: |
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Net (loss) income |
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$ |
( |
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$ |
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Adjustments to reconcile net (loss) income to net cash |
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(used) provided by operating activities: |
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Depreciation and amortization of premises and equipment |
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Credit loss expense - loans |
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Credit loss (reversal) expense - off-balance sheet credit exposures |
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( |
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Net loss on sale of securities available for sale |
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Net recognized gains on equity securities |
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— |
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( |
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(Gain) loss on sale of loans |
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( |
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Net write down on premises and equipment no longer in use |
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— |
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Gain on sale of other real estate owned |
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— |
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( |
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Net (amortization) accretion of securities |
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Proceeds from sale of loans |
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Loans originated for sale |
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( |
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Amortization of right of use assets |
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Amortization of subordinated debt issuance costs |
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Increase in cash surrender value of bank-owned life insurance |
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( |
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( |
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(Increase) decrease in income tax receivable |
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( |
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Net change in accrued interest receivable |
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( |
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( |
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Other, net |
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( |
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( |
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Net cash (used) provided by operating activities |
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( |
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Cash flows from investing activities: |
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Securities available for sale |
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Maturities, principal payments, calls and sales |
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Purchases |
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( |
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( |
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Securities held to maturity |
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Purchases |
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— |
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( |
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Equity securities |
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Sales |
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— |
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Purchases |
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— |
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( |
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Redemption of Federal Home Loan Bank stock |
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Purchases of Federal Home Loan Bank stock |
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( |
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( |
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Loan originations, net of principal payments |
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( |
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( |
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Proceeds from sale of premises and equipment |
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— |
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Purchases of premises and equipment |
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( |
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( |
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Proceeds from sale of other real estate owned |
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— |
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Net cash used by investing activities |
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( |
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( |
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The accompanying notes are an integral part of these consolidated financial statements.
5
Table of Contents
Assabet Valley Bancorp and Subsidiary
Consolidated Statements of Cash Flows (Unaudited) (continued)
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Six Months Ended June 30, |
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(In thousands) |
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2025 |
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2024 |
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Cash flows from financing activities: |
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Net change in deposits |
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Net change in short-term Federal Home Loan Bank advances |
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( |
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( |
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Repayment of long-term Federal Home Loan Bank advances |
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( |
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( |
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Net change in mortgagors' escrow accounts |
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( |
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( |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Cash and due from banks at beginning of year |
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Cash and due from banks at end of year |
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$ |
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$ |
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Supplementary cash flow information: |
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Interest paid on deposits and borrowed funds |
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$ |
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$ |
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Income taxes paid, net of refunds |
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The accompanying notes are an integral part of these consolidated financial statements.
6
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1. NATURE OF OPERATIONS AND CONVERSION PLAN
Avidia Bancorp, Inc. (the “Company,” “we” or “us”) was incorporated on February 28, 2025, to serve as the bank holding company for Avidia Bank upon the consummation of the conversion of Assabet Valley Bancorp, the mutual holding company and sole stockholder of Avidia Bank, from the mutual form of organization to the stock form of organization. As of June 30, 2025, the conversion had not yet been completed and the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the unaudited consolidated financial statements, and related notes, and other financial information included in this report relate to Assabet Valley Bancorp.
Plan of Conversion and Change in Corporate Form - On March 11, 2025, Assabet Valley Bancorp and Avidia Bank adopted a Plan of Conversion (the “Plan”) pursuant to which Assabet Valley Bancorp will convert from the mutual to stock form of organization and Avidia Bank will become the wholly-owned subsidiary of a new stock holding company incorporated under Maryland law and known as Avidia Bancorp, Inc. (the “Holding Company"). Pursuant to the Plan:
Avidia Bank will adopt an employee stock ownership plan which will subscribe for
At the time of conversion, the Holding Company and Avidia Bank will establish liquidation accounts in an amount equal to Assabet Valley Bancorp’s total equity as reflected in the latest consolidated balance sheets contained in the final offering prospectus for the conversion. The liquidation accounts will be maintained for the benefit of eligible account holders (as defined in the Plan) and supplemental eligible account holders (as defined in the Plan) (collectively, “eligible depositors”) who continue to maintain their deposit accounts in Avidia Bank after the conversion. In the event of a complete liquidation of either (i) Avidia Bank or (ii) Avidia Bank and the Holding Company (and only in such events), eligible depositors who continue to maintain their deposit accounts will be entitled to receive a distribution from the liquidation account before any distribution may be made with respect to the common stock of the Holding Company or Avidia Bank.
Neither the Holding Company nor Avidia Bank may declare or pay a cash dividend if the effect thereof would cause its equity to be reduced below either the amount required for the liquidation account or the regulatory capital requirements imposed by its respective bank regulators.
The transactions contemplated by the Plan are subject to approval by the corporators of Assabet Valley Bancorp, the Massachusetts Division of Banks and the Board of Governors of the Federal Reserve System. The corporators of Assabet Valley Bancorp approved the Plan at a special meeting of corporators held on April 28, 2025. The conversion and stock offering was completed on July 31, 2025, and eligible conversion and offering costs were deducted from the stock offering proceeds. As of June 30, 2025, the Company had incurred $
7
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Assabet Valley Bancorp have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.
The interim consolidated financial statements include the accounts of Assabet Valley Bancorp (the “Company”), a mutual holding company, and its wholly owned subsidiary, Avidia Bank (the “Bank”), and its subsidiaries, Hudson Security Corporation, Eli Whitney Securities Corporation and 42 Main Street Corporation. The Bank is a state-chartered savings bank that provides depository and loan products to individual and corporate customers primarily in the central Massachusetts region. Hudson Security Corporation and Eli Whitney Securities Corporation engage in the investment of securities. 42 Main Street Corporation was established to hold, manage, and sell the Bank’s foreclosed real estate property. All significant intercompany balances and transactions have been eliminated in consolidation.
Management has evaluated subsequent events through the date these financial statements were issued. As previously disclosed, Avidia Bancorp, Inc. was incorporated on February 28, 2025, to serve as the bank holding company for Avidia Bank upon the consummation of the conversion of Assabet Valley Bancorp, the mutual holding company and sole stockholder of Avidia Bank, from the mutual form of organization to the stock form of organization. The conversion was completed on July 31, 2025. Besides the conversion, there were no other subsequent events that require recognition and/or disclosure in the consolidated financial statements.
In the opinion of management, the accompanying interim consolidated financial statements of Assabet Valley Bancorp include all normal and recurring adjustments necessary for a fair presentation. Such adjustments are the only adjustments included in such financial statements. The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements and notes hereto should be read in conjunction with the audited consolidated financial statements, and related notes, of Assabet Valley Bancorp as of and for each of the years ended December 31, 2024 and 2023, contained in the Company’s definitive prospectus dated May 13, 2025, as filed with the Securities and Exchange Commission on May 21, 2025.
The significant accounting policies used in preparation of the Company's consolidated financial statements are disclosed in its 2024 Audited Consolidated Financial Statements, contained in the Company's definitive prospectus.
Use of Estimates
In preparing consolidated financial statements in conformity with U.S GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses and the realizability of deferred tax assets.
Reclassification
Certain items in prior financial statements have been reclassified to conform to the current presentation.
Tax Credit Investments
The Company invests in qualified affordable housing projects through limited liability entities to obtain tax benefits and to contribute to its local community. The Company has elected to account for these investments using the proportional amortization method whereby the amortization of the investment in the limited liability entity is in proportion to the tax credits utilized each year and amortization is recognized in the consolidated statements of operations as a component of
8
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
income tax expense (benefit). These investments are reported in other assets in the consolidated balance sheets in the amounts of $
Segment Information
The Company's reportable segment is determined by the Chief Financial Officer, who is the designated , based upon information provided about the Company's products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided by the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products/services, and customers are similar. The chief operating decision maker will evaluate the financial performance of the Company's business components such as by evaluating revenue streams, significant expenses, and budget to actual results in assessing the Company's segment and in the determination of allocating resources. The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision maker uses consolidated net (loss) income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessing performance and in establishing compensation. Loans, investments, and deposit product service fees provide the revenues in the banking operation. Interest expense, credit loss expense, and salaries and employee benefits, as reported on the consolidated statements of operations, provide the significant expenses in the banking operation. All operations are domestic.
Accounting policies for segments are the same as those described herein. Segment performance is evaluated using consolidated net income. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. Noncash items, such as depreciation and amortization, as well as expenditures for premises and equipment, are reported on the consolidated statements of cash flows.
Sale of Direct Merchant Portfolio
During the second quarter of 2025, the Company sold the Direct Merchant Processing Book, which had gross sales volume of approximately $
NOTE 3. RECENT ACCOUNTING DEVELOPMENTS
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The ASU provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information, such as requiring the disclosure of specific categories in the rate reconciliation and the disaggregation of income tax expense and income taxes paid by federal, state, and foreign taxes. The ASU is effective for annual periods beginning after December 15, 2024. The Company does not believe the ASU will have a material impact on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU will require public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company does not expect this ASU to have a material impact on the consolidated financial statements.
9
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
NOTE 4. INVESTMENT SECURITIES
The following tables summarize the amortized cost and fair value of securities available for sale and held to maturity, with gross unrealized gains and losses at the dates indicated:
(In thousands) |
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Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government and government-sponsored |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Municipal securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Residential mortgage-backed securities(1) |
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Other |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Subordinated debt securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total securities held to maturity |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
(In thousands) |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Government and government-sponsored |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Municipal securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Residential mortgage-backed securities(1) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Subordinated debt securities |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total securities held to maturity |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Management determined there was no ACL required for securities available for sale and securities held to maturity as of June 30, 2025 and December 31, 2024.
10
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The amortized cost and fair value of debt securities by contractual maturity at June 30, 2025 follows. Expected maturities will differ from contractual maturities because the issuers have, in certain instances, the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
|
|
Available for Sale |
|
|
Held to Maturity |
|
||||||||||||
(In thousands) |
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
|
Fair |
|
|||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
||||||||
Within 1 year |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
- |
|
$ |
— |
|
||
After 1 year through 5 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
After 5 years through 10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Over 10 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total securities with defined maturities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|||
Residential mortgage-backed securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
|||||
Investment securities with a carrying value of $
During the three and six months ended June 30, 2025, proceeds from sales of securities available for sale amounted to $
The following table summarizes securities in an unrealized loss position for which an ACL has not been recorded. Information pertaining to securities with gross unrealized losses at June 30, 2025 and December 31, 2024 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
|
|
Less Than Twelve Months |
|
|
Twelve Months or Greater |
|
|
Total |
|
|||||||||||||||
(In thousands) |
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
||||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. Government and government-sponsored |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Municipal securities |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Residential mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
11
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
|
|
Less Than Twelve Months |
|
|
Twelve Months or Greater |
|
|
Total |
|
|||||||||||||||
(In thousands) |
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
|
Gross |
|
|
Fair Value |
|
||||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. Government and government-sponsored |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Residential mortgage-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total securities available for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
The unrealized losses on the Company’s available for sale residential mortgage-backed securities (residential MBS) and debt securities have not been recognized into income because management does not intend to sell, and it is not more-likely-than-not it will be required to sell any of the available for sale securities before recovery of its amortized cost basis. Furthermore, the unrealized losses were due to changes in market interest rates and other market conditions, were not reflective of credit events, and the issuers continue to make timely principal and interest payments on the residential MBS and debt security instruments. Agency-backed and government-sponsored enterprise securities have a long history with no credit losses, including during times of severe stress. The principal and interest payments on agency guaranteed debt and residential MBS are backed by the U.S. government. Government-sponsored enterprises similarly guarantee principal and interest payments and carry an implicit guarantee from the U.S. Department of the Treasury. Additionally, government-sponsored enterprise securities are exceptionally liquid, readily marketable, and provide a substantial amount of price transparency and price parity, indicating a perception of zero credit risk. The Company’s unrealized losses from municipal bonds were due to changes in the market interest rate environment and not reflective of credit events. The issuers of these bonds are all Massachusetts based and have no history of credit losses. The contractual terms of these investments do not permit the issuers to settle the security at a price less than the par value of the investments. The Company does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the municipal bonds.
Held to maturity corporate bond and subordinated debt holdings are comprised of high credit quality financial institutions. High credit quality corporate bonds and subordinated debt obligations have a history of zero to near-zero credit loss. Corporate bonds are primarily comprised of well capitalized and strong performing financial institutions. Accordingly, the Company determined that the expected credit loss on its held to maturity portfolio was immaterial, and therefore, an allowance was not carried on its held to maturity debt securities at June 30, 2025 and December 31, 2024.
12
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
NOTE 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES
During the first quarter of 2025, the Company's loan portfolio segments were updated to more closely align with regulatory call report classifications. This change resulted in a $
The following tables show the impact of the segment updates to the loan portfolio and the allowance for credit losses ("ACL"):
(In thousands) |
|
December 31, 2024 Portfolio Balance |
|
Updated Segment |
January 1, 2025 Portfolio Balance |
|
||
Business manager |
|
$ |
|
|
|
|
||
Dental commercial & industrial |
|
|
|
|
|
|
||
Other business |
|
|
|
|
|
|
||
Solar |
|
|
|
|
|
|
||
Vehicle financing |
|
|
|
|
|
|
||
|
|
|
|
Commercial & industrial |
$ |
|
||
|
|
|
|
|
|
|
||
Condominium associations |
|
|
|
Condominium associations |
|
|
||
Construction & land |
|
|
|
Construction & land |
|
|
||
Commercial real estate |
|
|
|
Commercial real estate |
|
|
||
Commercial real estate multi-family |
|
|
|
Commercial real estate multi-family |
|
|
||
PPP loans |
|
|
|
PPP loans |
|
|
||
Home equity |
|
|
|
Home equity and second mortgages |
|
|
||
Residential |
|
|
|
One to four family residential |
|
|
||
|
|
|
|
|
|
|
||
Overdraft and unsecured |
|
|
|
|
|
|
||
Consumer installment |
|
|
|
|
|
|
||
Passbook CD loans |
|
|
|
|
|
|
||
|
|
|
|
Consumer |
|
|
||
|
|
|
|
|
|
|
||
Total loans |
|
$ |
|
Total loans |
$ |
|
||
13
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
(In thousands) |
|
December 31, 2024 ACL |
|
Updated Segment |
January 1, 2025 ACL |
|
||
Business manager |
|
$ |
|
|
|
|
||
Dental commercial & industrial |
|
|
|
|
|
|
||
Other business |
|
|
|
|
|
|
||
Solar |
|
|
|
|
|
|
||
Vehicle financing |
|
|
|
|
|
|
||
|
|
|
|
Commercial & industrial |
$ |
|
||
|
|
|
|
|
|
|
||
Condominium associations |
|
|
|
Condominium associations |
|
|
||
Construction & land |
|
|
|
Construction & land |
|
|
||
Commercial real estate |
|
|
|
Commercial real estate |
|
|
||
Commercial real estate multi-family |
|
|
|
Commercial real estate multi-family |
|
|
||
Home equity |
|
|
|
Home equity and second mortgages |
|
|
||
Residential |
|
|
|
One to four family residential |
|
|
||
|
|
|
|
|
|
|
||
Overdraft and unsecured |
|
|
|
|
|
|
||
Consumer installment |
|
|
|
|
|
|
||
|
|
|
|
Consumer |
|
|
||
|
|
|
|
|
|
|
||
Total |
|
$ |
|
Total |
$ |
|
||
The composition of net loans as of June 30, 2025 was as follows:
|
|
June 30, 2025 |
|
|
(In thousands) |
|
|
|
|
Real estate loans |
|
|
|
|
Home equity and second mortgages |
|
$ |
|
|
One to four family residential |
|
|
|
|
Commercial real estate |
|
|
|
|
Commercial real estate multi-family |
|
|
|
|
Construction & land |
|
|
|
|
Total real estate loans |
|
|
|
|
Commercial loans |
|
|
|
|
Commercial & industrial |
|
|
|
|
Condominium associations |
|
|
|
|
PPP loans |
|
|
|
|
Total commercial loans |
|
|
|
|
Consumer loans |
|
|
|
|
Consumer |
|
|
|
|
Total consumer loans |
|
|
|
|
Total loans |
|
|
|
|
Allowance for credit losses |
|
|
( |
) |
Net deferred loan costs |
|
|
|
|
Loans, net |
|
$ |
|
|
14
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The composition of net loans as of December 31, 2024 was as follows:
|
|
December 31, 2024 |
|
|
(In thousands) |
|
|
|
|
Commercial loans: |
|
|
|
|
Business manager |
|
$ |
|
|
Condominium associations |
|
|
|
|
Construction & land |
|
|
|
|
Commercial real estate |
|
|
|
|
Commercial real estate multi-family |
|
|
|
|
Dental commercial & industrial |
|
|
|
|
Other business |
|
|
|
|
PPP loans |
|
|
|
|
Solar |
|
|
|
|
Vehicle financing |
|
|
|
|
Total commercial loans |
|
|
|
|
Residential real estate: |
|
|
|
|
Home equity |
|
|
|
|
Residential |
|
|
|
|
Total residential real estate |
|
|
|
|
Consumer: |
|
|
|
|
Overdraft and unsecured |
|
|
|
|
Consumer installment |
|
|
|
|
Passbook CD loans |
|
|
|
|
Total consumer loans |
|
|
|
|
Total loans |
|
|
||
Allowance for credit losses |
|
|
( |
) |
Net deferred loan costs |
|
|
|
|
Loans, net |
|
$ |
|
|
The Company manages its loan portfolio proactively to effectively identify problem credits and assess trends early, implement effective work-out strategies, and take charge-offs as promptly as practical. In addition, the Company continuously reassesses its underwriting standards in response to credit risk posed by changes in economic conditions. The Company monitors and manages credit risk through the following governance structure: The Chief Credit Officer (CCO) maintains the Credit Risk Rating System, which is comprised of 10 levels of risk, inclusive of 4 Criticized and Classified ratings that align with regulatory definitions of Special Mention, Substandard, Doubtful and Loss. The CCO or the Credit Manager reviews all recommended risk rating changes and controls the final assessment of risk rating. The Company maintains a Loan Review Policy which addresses internal and external review requirements and process, which is approved annually by the Board of Director’s Risk Committee and the Board of Directors. The CCO provides quarterly reporting and updates to the Risk Committee, including the presentation of the ACL calculation and balance.
15
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
For purposes of determining the ACL on loans, the Company disaggregates its loans into portfolio segments. Each portfolio segment possesses unique risk characteristics that are considered when determining the appropriate level of allowance. As noted above, the Company's loan portfolio segments were updated during the first quarter of 2025. As of June 30, 2025 the Company’s loan portfolio segments, as determined based on the unique risk characteristics of each, included the following:
Home Equity and Second Mortgages: The Company generally has first or second liens on the property securing the loans in this segment and repayment is dependent on the credit quality of the individual borrower.
One to Four Family Residential: Loans in this segment consist of 1-4 family residential real estate loans. The Company generally does not originate loans with a loan-to-value ratio greater than
Commercial Real Estate (CRE): Loans in this segment are primarily owner-occupied or income-producing properties. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment.
Commercial Real Estate Multi-Family (CRE MF): Loans in this segment are primarily income-producing properties. The underlying cash flows generated by the properties are impacted by the economy and vacancy rates, which thus will have an effect on the credit quality in this segment.
Construction & Land: Loans in this segment include speculative construction loans for residential properties, construction loans for commercial properties and land loans for residential or commercial development for which payment is derived from sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.
Commercial & Industrial: Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment also include business manager loans, which are actively followed borrowing base lines of credit, secured by accounts receivable that have been purchased from the bank’s customer with recourse. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.
Condominium Associations: Loans in this segment are secured by the assignment of association fees and dues paid by the individual condominium unit owners. The funds are typically used for major improvements and repairs to the structures, landscape and parking lots or garages, and are repaid over
Paycheck Protection Program (PPP) Loans: Loans in this segment are unsecured business term loans
Consumer: Loans in this segment primarily consist of personal loans that are fully amortizing over a fixed term, such as auto loans, education loans, or home improvement loans. This segment also includes personal lines of credit. These loans may be secured or unsecured. The overall health of the economy, including unemployment rates and the credit quality of the individual borrower, will have an effect on the credit quality in this segment.
16
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
As of December 31, 2024, the Company’s loan portfolio segments, as determined based on the unique risk characteristics of each, included the following:
Business Manager: Loans in this segment are actively followed borrowing base lines of credit, secured by accounts receivable that have been purchased from the bank’s customer with recourse. The account creditors pay each invoice via a direct credit to our customer’s deposit account at the Company or via the US Post Office to the Company lockbox. The deposit account is not accessible by the Company's’s customer and is swept nightly to paydown the line of credit. These customers may or may not be eligible for traditional lines of credit (which are not subject to the same controls), as they may be experiencing tighter liquidity and / or equity positions due to life stage of the business. These lines are considered to have somewhat elevated risk over the Commercial and Industrial (C&I) portfolio due to (generally)
Condominium Associations: Loans in this segment are secured by the assignment of association fees and dues paid by the individual condominium unit owners. The funds are typically used for major improvements and repairs to the structures, landscape and parking lots or garages, and are repaid over
Construction & Land: Loans in this segment include speculative construction loans for residential properties, construction loans for commercial properties and land loans for residential or commercial development for which payment is derived from sale of the property. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.
Commercial Real Estate (CRE): Loans in this segment are primarily owner-occupied or income-producing properties. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment.
Commercial Real Estate Multi-Family (CRE MF): Loans in this segment are primarily income-producing properties. The underlying cash flows generated by the properties are impacted by the economy and vacancy rates, which thus will have an effect on the credit quality in this segment.
Dental Commercial & Industrial (Dental C&I): Loans in this segment are made to finance dental practice acquisitions, expansions, equipment purchases or to refinance existing debt. They are secured by all business assets and carry the guarantees of the owners. Credit risk is affected by declining population or a weakened economy, and resultant decreased consumer spending.
Other Business: Loans in this segment are made to businesses and are generally secured by assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.
Paycheck Protection Program (PPP) Loans: Loans in this segment are unsecured business term loans
Solar: Loans in this segment are secured by the solar generation rights and equipment of commercial solar farms and systems. The credit quality is affected by the credit quality of the borrower and environmental conditions.
Vehicle Financing: Loans in this segment are secured by the assignment of vehicles and other modes of personal transportation and carry the guarantees of the individual company owners as well as the associated dealerships. Repayment is dependent on the credit quality of the underlying borrower; the liquidation proceeds of any repossessions and the Bank customer honoring its guaranty.
Home Equity: The Company generally has first or second liens on the property securing the loans in this segment and repayment is dependent on the credit quality of the individual borrower.
Residential Real Estate: Loans in this segment consist of 1-4 family residential real estate loans. The Company generally does not originate loans with a loan-to-value ratio greater than
17
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
loans that would be classified as subprime upon origination. Loans in this segment are collateralized by owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.
Consumer Overdraft and Unsecured (Cons OD and Unsec): Loans in this segment consist of personal lines of credit or single pay notes. These loans are unsecured and repayment is dependent on the credit quality of the individual borrower.
Consumer Installment: Loans in this segment consist of personal loans that are fully amortizing over a fixed term, such as auto loans, education loans, or home improvement loans. These loans may be secured or unsecured and repayment is dependent on the credit quality of the individual borrower.
Passbook CD Loans: Loans in this segment are personal loans secured by a Bank deposit (DDA or Certificate) account. Credit risk is limited to internal operational risk that results in the accidental release of collateral.
The following tables present the activity in the ACL by portfolio segment for the three months ended June 30, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Balance |
|
|
Credit loss |
|
|
|
|
|
|
|
|
Balance |
|
|||||
|
|
March 31, |
|
|
expense / |
|
|
Loans |
|
|
|
|
|
June 30, |
|
|||||
(In thousands) |
|
2025 |
|
|
(reversal) |
|
|
charged-off |
|
|
Recoveries |
|
|
2025 |
|
|||||
Three Months Ended June 30, 2025 |
|
|
|
|||||||||||||||||
Real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Home equity and second mortgages |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
One to four family residential |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Commercial real estate |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Commercial real estate multi-family |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Construction & land |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total real estate loans |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial & industrial |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Condominium associations |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
||
PPP loans |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
||
Total commercial loans |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consumer |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Credit cards |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Total consumer loans |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Total ACL on loans: |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
18
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
|
|
Balance |
|
|
Credit loss |
|
|
|
|
|
|
|
|
Balance |
|
|||||
|
|
March 31, |
|
|
expense / |
|
|
Loans |
|
|
|
|
|
June 30, |
|
|||||
(In thousands) |
|
2024 |
|
|
(reversal) |
|
|
charged-off |
|
|
Recoveries |
|
|
2024 |
|
|||||
Three Months Ended June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Business manager |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Condominium associations |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Construction & land |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Corporate credit card |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Commercial real estate |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Commercial real estate multi-family |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Dental commercial and industrial |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Other business |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|||
Solar |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
||
Vehicle financing |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
||
Home equity |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Residential real estate |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Overdraft and unsecured |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Consumer credit card |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|||
Consumer installment |
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
|
|||
Total ACL on loans: |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
The following tables present the activity in the ACL by portfolio segment for the six months ended June 30, 2025 and 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Balance |
|
|
Credit loss |
|
|
|
|
|
|
|
|
Balance |
|
|||||
|
|
Decmeber 31, |
|
|
expense / |
|
|
Loans |
|
|
|
|
|
June 30, |
|
|||||
(In thousands) |
|
2024 |
|
|
(reversal) |
|
|
charged-off |
|
|
Recoveries |
|
|
2025 |
|
|||||
Six Months Ended June 30, 2025 |
|
|
|
|||||||||||||||||
Real estate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Home equity and second mortgages |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
One to four family residential |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Commercial real estate |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Commercial real estate multi-family |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
||
Construction & land |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|||
Total real estate loans |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Commercial loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial & industrial |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Condominium associations |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
||
PPP loans |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total commercial loans |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Consumer loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Consumer |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Credit cards |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
- |
|
|
Total consumer loans |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Total ACL on loans: |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
19
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
|
|
Balance |
|
|
Credit loss |
|
|
|
|
|
|
|
|
Balance |
|
|||||
|
|
December 31, |
|
|
expense / |
|
|
Loans |
|
|
|
|
|
June 30, |
|
|||||
(In thousands) |
|
2023 |
|
|
(reversal) |
|
|
charged-off |
|
|
Recoveries |
|
|
2024 |
|
|||||
Six Months Ended June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Business manager |
|
$ |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Condominium associations |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Construction & land |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Corporate credit card |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
- |
|
||
Commercial real estate |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Commercial real estate multi-family |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Dental commercial and industrial |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Other business |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Solar |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Vehicle financing |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
||
Home equity |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Residential real estate |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Overdraft and unsecured |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|||
Consumer credit card |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
— |
|
||
Consumer installment |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|||
Total ACL on loans: |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Credit Quality Indicators
To further identify loans with similar risk profiles, the Company categorizes each portfolio segment into classes by credit risk characteristic and applies a credit quality indicator to each portfolio segment. The indicators for commercial and commercial real estate segments are represented by Grades 1 through 10 as outlined below. In general, risk ratings are adjusted periodically throughout the year as updated analysis and review warrants. This process may include, but is not limited to, annual credit and loan reviews, periodic reviews of loan performance metrics, such as delinquency rates, and quarterly reviews of adversely risk rated loans. The Company uses the following definitions when assessing grades for the purpose of evaluating the risk and adequacy of the ACL on loans:
Loans rated 1 – 5: Loans in these categories are considered “pass” rated loans with low to average risk.
Loans rated M: Loans in this category are typically smaller loans that have met the Company’s underwriting criteria and are monitored based on repayment history. Financial statements and other data may or may not be requested from the borrower.
Loans rated P: Loans in this category are considered
Loans rated 6 – 7: Loans in this category are considered “marginally acceptable” and “special mention” respectively. These loans are starting to show signs of potential weakness and are being closely monitored by management.
Loans rated 8: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.
Loans rated 9: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. All loans rated 9 are individually evaluated.
Loans rated 10: Loans in this category are considered uncollectible and of such little value that their continuance as a loan asset is not warranted.
20
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
On an annual basis, or more often if needed, the Company formally reviews the ratings on substantially all commercial real estate, construction, and commercial loans. Annually, the Company engages an independent third-party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. Loans considered transactional in nature, such as residential and consumer are reviewed on an exception basis with emphasis placed on debt repayment performance. Factored accounts receivable included in commercial loans are not risk rated unless determined to be impaired.
The Company periodically reassesses asset quality indicators to appropriately reflect the risk composition of the Company’s loan portfolio. Home equity and consumer loans are not individually risk rated, but rather analyzed as groups taking into account delinquency rates and other economic conditions that may affect the ability of borrowers to meet debt service requirements, including interest rates and energy costs. Performing loans include loans that are current and loans that are past due less than
21
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The risk ratings within the loan portfolio and current period charge-offs for the six months ended June 30, 2025, by loan segment and origination year were as follows:
|
|
Term Loans Amortized Cost Basis by Origination Year |
|
|
|
|
|
|
|
|||||||||||||||||||||||
(In thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Home equity and second mortgages: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
One to four family residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Special Mention (6-7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Substandard (8) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial real estate multi-family: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Construction & land: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Special Mention (6-7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Substandard (8) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Current period gross charge-off |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial & Industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Special Mention (6-7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Substandard (8) |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
Doubtful (9) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Loss (10) |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-off |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Condominiumn associations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
PPP Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Current period gross charge-off |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
The risk ratings within the loan portfolio and current period charge-offs for the year ended December 31, 2024, by loan segment and origination year were as follows:
22
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
|
|
Term Loans Amortized Cost Basis by Origination Year |
|
|
|
|
|
|
|
|||||||||||||||||||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Business manager: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Condominium associations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Special Mention (6-7) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Construction & land: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Corporate credit card: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Special Mention (6-7) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Substandard (8) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial real estate multi-family: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Special Mention (6-7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Dental commercial & industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Special Mention (6-7) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Substandard (8) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Doubtful (9) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Other business: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Special Mention (6-7) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Substandard (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||||
Doubtful (9) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Solar: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Total |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
23
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
|
|
Term Loans Amortized Cost Basis by Origination Year |
|
|
|
|
|
|
|
|||||||||||||||||||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|
Prior |
|
|
Revolving |
|
|
Total |
|
||||||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Vehicle financing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Special Mention (6-7) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Doubtful (9) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Home equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Substandard (8) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Residential: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Substandard (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Overdraft and unsecured: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Consumer credit card: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Consumer installment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Passbook CD loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
PPP loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Risk Rating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pass (Rated 1-5, M, P) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Current period gross charge-offs |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial loans include factored accounts receivable in the recorded amount of $
At June 30, 2025 and December 31, 2024, funded accounts receivable unpaid 120 days or more in total were $
24
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The following table presents the amortized cost basis of loans on nonaccrual status as of the dates presented. There were
|
|
June 30, 2025 |
|
|||||
(In thousands) |
|
Nonaccrual |
|
|
Total |
|
||
One to four family residential |
|
$ |
|
|
$ |
|
||
Construction & land |
|
|
|
|
|
|
||
Commercial & industrial |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
|
|
December 31, 2024 |
|
|||||
(In thousands) |
|
Nonaccrual |
|
|
Total |
|
||
Dental commercial & industrial |
|
$ |
— |
|
|
$ |
|
|
Home equity |
|
|
|
|
|
|
||
Other business |
|
|
|
|
|
|
||
Residential |
|
|
|
|
|
|
||
Vehicle financing |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The Company did
The following is an aging analysis of past due loans (including non-accrual) as of the balance sheet dates, by portfolio segment:
|
|
|
|
|
|
|
|
|
|
|||||||||||
(In thousands) |
|
Loans Receivable (Amortized Cost) |
|
|
Current |
|
|
30-89 Days |
|
|
90 Days or |
|
|
Total |
|
|||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Home equity and second mortgages |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
One to four family residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Commercial real estate multi-family |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Construction & land |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Commercial & industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Condominium associations |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
PPP loans |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total Loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
25
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
|
|
|
|
|
|
|
|
|
|
|||||||||||
(In thousands) |
|
Loans Receivable (Amortized Cost) |
|
|
Current |
|
|
30-89 Days |
|
|
90 Days or |
|
|
Total Past |
|
|||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Business manager |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
||
Condominium associations |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Contruction & land |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Commercial real estate multi-family |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Dental commercial & industrial |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Other business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
PPP loans |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Solar |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Vehicle financing |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Home equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Overdraft and unsecured |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Consumer installment |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Passbook CD loans |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
For all loan segments, loans over
The following table presents the amortized cost basis of collateral-dependent loans by collateral type as of the balance sheet date:
|
|
|
|
|||||||||||||||||
(In thousands) |
|
Real Estate |
|
|
All Business |
|
|
Cash |
|
|
Accounts Receivable |
|
|
Total |
|
|||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
One to four family residential |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial real estate |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Construction & land |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Commercial & industrial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|||||||||
(In thousands) |
|
Real Estate |
|
|
All Business |
|
|
Total |
|
|||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|||
Construction & land |
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Commercial real estate |
|
|
|
|
|
|
|
|
|
|||
Commercial real estate multi-family |
|
|
|
|
|
— |
|
|
|
|
||
Dental commercial & industrial |
|
|
— |
|
|
|
|
|
|
|
||
Other business |
|
|
|
|
|
|
|
|
|
|||
Vehicle financing |
|
|
— |
|
|
|
|
|
|
|
||
Home equity |
|
|
|
|
|
— |
|
|
|
|
||
Residential |
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Collateral-dependent loans are loans for which the repayment is expected to be provided substantially by the underlying collateral and there are no other available and reliable sources of repayment.
26
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
Modified Loans
Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL.
In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period.
The following tables present the amortized cost basis of loans on June 30, 2025 and June 30, 2024, that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2025 and 2024, respectively, by class and by type of modification. Only segments displayed in the table below have modified loans; there were no other loans experiencing financial difficulty and modified. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
(In thousands) |
|
Principal Re- |
|
|
Combination Payment Delay and Term Extension |
|
|
Percent |
|
|||
Three Months Ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
Commercial & industrial |
|
$ |
|
|
$ |
|
|
|
% |
|||
Total |
|
$ |
|
|
$ |
|
|
|
% |
|||
|
|
|
|
|
|
|
||
(In thousands) |
|
Payment |
|
|
Percent |
|
||
Three Months Ended June 30, 2024 |
|
|
|
|||||
Other business |
|
$ |
|
|
|
% |
||
Total |
|
$ |
|
|
|
% |
||
(In thousands) |
|
Payment Delay |
|
|
Principal Re- |
|
|
Combination Payment Delay and Term Extension |
|
|
Percent |
|
||||
Six Months Ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial real estate |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
% |
||
Commercial & industrial |
|
|
|
|
|
|
|
|
|
|
|
% |
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
% |
||||
(In thousands) |
|
Payment |
|
|
Percent |
|
||
Six Months Ended June 30, 2024 |
|
|
|
|||||
Other business |
|
$ |
|
|
|
% |
||
Residential |
|
|
|
|
|
% |
||
Total |
|
$ |
|
|
|
% |
||
The Company does
27
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three and six months ended June 30, 2025. For the three and six months ended June 30, 2025 and three and six months ended June 30, 2024, modifications related to payment delays had minimal financial effect.
(In thousands) |
|
Weighted- |
|
|
Three Months Ended June 30, 2025 |
|
|
|
|
Commercial & industrial |
|
|
|
|
(In thousands) |
|
Weighted- |
|
|
Six Months Ended June 30, 2025 |
|
|
|
|
Commercial & industrial |
|
|
|
|
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to evaluate the effectiveness of its modification efforts.
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(In thousands) |
|
30 - 59 |
|
|
60 - 89 |
|
|
90 Days or More Past Due |
|
|
Total Past |
|
||||
June 30, 2025 |
|
|
|
|||||||||||||
One to four family residential |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|||||||||||||
(In thousands) |
|
30 - 59 |
|
|
60 - 89 |
|
|
90 Days or More Past Due |
|
|
Total Past |
|
||||
June 30, 2024 |
|
|
|
|||||||||||||
Other business |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Residential |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
The following tables present the amortized cost basis of loans that had a payment default during the three and six months ended June 30, 2025 and 2024, and were modified in the 12 months prior to that default to borrowers experiencing financial difficulty.
|
|
|
|
|||||
(In thousands) |
|
Payment |
|
|
Total |
|
||
Three Months Ended June 30, 2025 |
|
|
|
|
|
|
||
One to four family residential |
|
$ |
— |
|
|
$ |
— |
|
Total: |
|
$ |
— |
|
|
$ |
— |
|
28
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
(In thousands) |
|
Payment |
|
|
Total |
|
||
Three Months Ended June 30, 2024 |
|
|
|
|
|
|
||
Residential |
|
$ |
|
|
$ |
|
||
Total: |
|
$ |
|
|
$ |
|
||
(In thousands) |
|
Payment |
|
|
Total |
|
||
Six Months Ended June 30, 2025 |
|
|
|
|
|
|
||
One to four family residential |
|
$ |
|
|
$ |
|
||
Total: |
|
$ |
|
|
$ |
|
||
(In thousands) |
|
Payment |
|
|
Total |
|
||
Six Months Ended June 30, 2024 |
|
|
|
|
|
|
||
Other business |
|
$ |
|
|
$ |
|
||
Residential |
|
|
|
|
|
|
||
Total: |
|
$ |
|
|
$ |
|
||
Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.
At June 30, 2025, residential real estate loans in process of foreclosure totaled $
The Company has transferred a portion of its originated commercial mortgage loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying consolidated balance sheets. The Company and participating lenders share ratably in any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments (net of servicing fees) to participating lenders and disburses required escrow funds to relevant parties. At June 30, 2025 and December 31, 2024, the Company was servicing commercial and commercial mortgage loans for participants aggregating $
Residential real estate mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balances of these loans serviced for others were $
The Company records mortgage servicing rights (“MSRs”) on residential real estate loans sold and serviced for others. The risks inherent in MSRs relate primarily to changes in prepayments that result from shifts in mortgage interest rates. The Company accounts for MSRs at fair value. The Company obtains valuations from independent third parties to determine the fair value of servicing rights. Key assumptions and inputs used in the estimation of fair value include prepayment speeds, discount rates, default rates, cost to service, and contractual servicing fees. At June 30, 2025, the following weighted average assumptions were used in the calculation of fair value of MSRs: prepayment speed
29
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The following summarizes changes to MSRs:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(Payoffs) additions |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Changes in fair value |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 6. DERIVATIVES
The Company is party to International Swap and Derivative Association (ISDA) interest rate swap contracts to manage its exposure to interest rate changes. The Company may execute “back-to-back” swap agreements with select commercial banking customers who are eligible and desire to manage their interest rate exposure. Policy also allows the Company to execute macro level swap agreements.
Derivatives Not Designated As Hedges: The Company enters into interest rate swap agreements executed with commercial banking customers to facilitate customer risk management strategies. In addition to the swap agreement with the borrower, the Company enters into a second “back-to-back” swap agreement with a third party; the general terms of this swap mirror those of the first swap agreement. In entering into this transaction, the Company has offset its interest rate risk exposure to the swap agreement with the borrower. All interest rate swaps are valued at observable market prices for similar instruments or observable market interest rates.
Cash Flow Hedges: The Company is party to interest rate swaps to manage its exposure to interest rate changes. Interest rate swaps with notional amounts totaling $
The Company presents derivative positions gross on the consolidated balance sheets.
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
(In thousands) |
|
Notional |
|
|
Fair Value |
|
|
Notional |
|
|
Fair Value |
|
||||
Included in other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps related to FHLB advances and agency securities |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||
Derivatives not designated as hedging |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps related to customer loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total included in other assets |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Included in other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives not designated as hedging |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps related to customer loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total included in other liabilities |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
30
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
NOTE 7. DEPOSITS
A summary of deposit balances, by type is as follows:
(In thousands) |
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
NOW and demand |
|
$ |
|
|
$ |
|
||
Money market |
|
|
|
|
|
|
||
Regular and other savings |
|
|
|
|
|
|
||
Total non-certificate accounts |
|
|
|
|
|
|
||
Term certificate accounts of $250,000 and greater |
|
|
|
|
|
|
||
Term certificate accounts less than $250,000 |
|
|
|
|
|
|
||
Term certificate accounts |
|
|
|
|
|
|
||
Total deposits |
|
$ |
|
|
$ |
|
||
As of June 30, 2025, the aggregate amount of deposits, excluding subsidiary deposits, that meet or exceed the FDIC insurance limit of $250 thousand was $
Scheduled maturities and weighted average rates of timed deposits for the next five years were as follows:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
(Dollars in thousands) |
|
Amount |
|
|
Weighted |
|
|
Amount |
|
|
Weighted |
|
||||
Within 1 year |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Over 1 year to 2 years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Over 2 years to 3 years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Over 3 years to 4 years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Over 4 years to 5 years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
All deposits are fully insured due to the additional insurance provided to Massachusetts member banks, such as, Avidia Bank, under the Depositor's Insurance Fund, a private industry-sponsored insurance fund in Massachusetts that insures all deposits at the Company above FDIC limits.
NOTE 8. FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
FHLB of Boston advances consist of the following:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
Maturity |
|
Amount |
|
|
Weighted |
|
|
Amount |
|
|
Weighted |
|
||||
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Within 1 year |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Over 1 year to 2 years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Over 2 years to 3 years |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total FHLB advances |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
The Bank also has an available $
31
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The Bank also has $
The Bank has agreements with the Federal Reserve Bank of Boston for borrowings at the discount window and through the borrower-in-custody program. The terms of these agreements call for the pledging of assets as security for all obligations of the Bank under these agreements (See Note 4). At June 30, 2025 and December 31, 2024, there were
NOTE 9. SUBORDINATED DEBT
On
The subordinated debt is payable in full by ;
NOTE 10. OTHER COMMITMENTS AND CONTINGENCIES
Leases
The Company has leases pertaining to bank premises and vehicles with remaining lease terms of
The following table represents the classification of the Company’s ROU assets and lease liabilities on the consolidated balance sheets:
(In thousands) |
|
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Lease right-of-use assets: |
|
|
|
|
|
|
|
|
||
Operating leases |
|
|
$ |
|
|
$ |
|
|||
Finance leases |
|
|
|
|
|
|
— |
|
||
Total lease right-of-use assets |
|
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
||
Lease liabilities: |
|
|
|
|
|
|
|
|
||
Operating leases |
|
|
$ |
|
|
$ |
|
|||
Finance leases |
|
|
|
|
|
|
— |
|
||
Total lease liabilities |
|
|
|
$ |
|
|
$ |
|
||
32
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease payments when the rate implicit in a lease is not known. The Company’s incremental borrowing rate is based on the FHLB amortizing advance rate, adjusted for the lease term and other factors.
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Weighted-average remaining lease term (in years) |
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
|
|
||
Finance leases |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
|
|
|
|
||
Operating leases liabilities |
|
|
% |
|
|
% |
||
Finance lease liabilities |
|
|
% |
|
|
% |
||
The following table presents the components of lease expense for operating leases:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Operating lease expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease cost, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table presents the components of lease expense for finance leases:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Finance lease expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of right-of-use asset |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Interest on lease liabilities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total lease cost, net |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Supplemental cash flow information related to leases was as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(In thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating cash flows from finance leases |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Financing cash flows from finance leases |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
33
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
Future undiscounted lease payments for operating leases with initial terms of one year or more as of June 30, 2025 are as follows:
(In thousands) |
|
Operating Leases |
|
|
Finance Leases |
|
||
2025 |
|
$ |
|
|
$ |
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total undiscounted lease payments |
|
$ |
|
|
$ |
|
||
Less: imputed interest |
|
|
|
|
|
|
||
Net lease liabilities |
|
$ |
|
|
$ |
|
||
Employment Agreements
The Company has entered into employment agreements with certain executives. The agreements generally provide for specified minimum levels of annual compensation and benefits for a certain period of time. In addition, the agreements provide for specified lump sum payments and the continuation of benefits upon certain events of termination, as defined in the agreements.
Litigation
The Company is involved in various legal proceedings arising in the normal course of business, none of which is believed by management to have merit. Based on the advice of legal counsel, management believes that these matters are not material to the consolidated financial condition or results of operations of the Company.
34
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the accompanying consolidated balance sheets.
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Off-balance-sheet financial instruments whose contract amounts represent credit risk include the following:
(In thousands) |
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Unadvanced lines of credit |
|
$ |
|
|
$ |
|
||
Unadvanced construction loans |
|
|
|
|
|
|
||
Residential mortgage loan commitments |
|
|
|
|
|
|
||
Commercial and mortgage loan commitments |
|
|
|
|
|
|
||
Standby letters of credit |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained upon extension of the credit is based on management’s credit evaluation of the customer.
Collateral held varies but may include residential real estate, inventory, property, plant and equipment, and income-producing commercial real estate.
Letters-of-credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Substantially all letters-of-credit have expiration dates within one year. The credit risk involved in issuing letters-of-credit is essentially the same as that involved in extending loan facilities to customers. The Company fully collateralized those commitments for which collateral is deemed necessary.
NOTE 11. MINIMUM REGULATORY CAPITAL REQUIREMENTS
The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.
The regulations require minimum ratios of total capital, common equity Tier 1 capital and Tier 1 capital to risk-weighted assets and a minimum leverage ratio for all banking organizations as set forth in the following table. Additionally, community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital in an amount greater than
35
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
bonuses. The capital conservation buffer and certain deductions from and adjustments to regulatory capital and risk-weighted assets were phased in over several years. The required minimum conservation buffer was
As of June 30, 2025 and December 31, 2024, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To remain categorized as well capitalized, the Bank must maintain minimum Total Risk-Based Capital, Common Equity Tier 1 Risk-based, Tier 1 Risk-based, and Tier 1 Leverage Ratios as set forth in the following table. There are no conditions or events since the notification that management believes have changed the Bank’s category.
The Company’s and the Bank’s actual capital amounts and ratios as of June 30, 2025 and December 31, 2024 are presented in the following tables:
|
|
Actual |
|
|
Minimum Capital |
|
|
Minimum To Be |
|
|||||||||||||||
(Dollars in thousands) |
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Risk-Based Capital: |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
N/A |
|
|
N/A |
|
||||||
Common Equity Tier 1 Risk-Based |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||||||
Tier 1 Risk-Based Capital: |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||||||
Tier 1 Leverage Capital: |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||||||
Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Risk-Based Capital: |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
Common Equity Tier 1 Risk-Based |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Tier 1 Risk-Based Capital: |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Tier 1 Leverage Capital: |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
|
|
Actual |
|
|
Minimum Capital |
|
|
Minimum To Be |
|
|||||||||||||||
(Dollars in thousands) |
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
|
Amount |
|
|
Ratio |
|
||||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Risk-Based Capital: |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
N/A |
|
|
N/A |
|
||||||
Common Equity Tier 1 Risk-Based |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||||||
Tier 1 Risk-Based Capital: |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||||||
Tier 1 Leverage Capital: |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
N/A |
|
|
N/A |
|
||||||
Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Risk-Based Capital: |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
Common Equity Tier 1 Risk-Based |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Tier 1 Risk-Based Capital: |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Tier 1 Leverage Capital: |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
36
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
The Bank may not declare or pay a dividend if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of the Bank’s net income during the current calendar year and the retained net income of the prior two calendar years, unless the dividend has been approved by the FDIC and the Massachusetts Division of Banks.
NOTE 12. ACCUMULATED OTHER COMPREHENSIVE (LOSS)
Components of accumulated other comprehensive (loss) are as follows:
(In thousands) |
|
June 30, |
|
|
December 31, |
|
||
Net unrealized loss on securities available for sale |
|
$ |
( |
) |
|
$ |
( |
) |
Tax effect |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net (loss) gain on swaps |
|
|
( |
) |
|
|
|
|
Tax effect |
|
|
|
|
|
( |
) |
|
Accumulated other comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
NOTE 13. EMPLOYEE BENEFIT PLANS
Director and Executive Retirement Plans
The Company has adopted retirement benefit plans for the benefit of all members of the Board of Trustees of the Company and certain senior executives. Benefits are being accrued over the directors’ and executives’ required service periods. At June 30, 2025 and December 31, 2024, the Company has accrued $
NOTE 14. FAIR VALUE MEASUREMENTS
The Company determines the fair value of its instruments based on the requirements established in the Accounting Standards Codification Topic 820: Fair Value Measurements (“ASC 820”), which provides a framework for measuring fair value under U.S. GAAP and requires an entity to maximize the use of observable inputs when measuring fair value. ASC 820 defines fair value as the exit price, the price that would be received for an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date under current market conditions. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
ASC 820 establishes a hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The Company groups assets and liabilities which are recorded at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. The fair value hierarchy is as follows:
37
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
Level 1 – |
Quoted prices (unadjusted) in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. |
Level 2 – |
Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liability. An adjustment to a Level 2 input that is significant to the fair value measurement in its entirety might render the measurement into a Level 3 measurement, depending on the level in the fair value hierarchy within which the inputs used to determine the adjustment fall. |
Level 3 – |
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability. Level 3 assets or liabilities include financial instruments whose value is determined using unobservable inputs to pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
The following methods and assumptions are used by the Company in estimating its fair value measurements:
Securities – Securities represent securities available for sale. Fair value measurements are obtained from a third-party pricing service and are not adjusted by management. The securities measured at fair value in Level 2 are based on pricing models that consider standard observable input factors such as benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data for debt securities.
MSRs – The Company accounts for MSRs at fair value using the amortized method. The Company obtains loan level valuations from independent third parties to determine the fair value of servicing rights. The Company classifies MSRs as recurring Level 2.
Interest rate swaps – The fair value of derivative arrangements is estimated by the Company using a third- party derivative valuation expert who relies on Level 2 inputs, namely interest cash flow models to determine a fair value by calculating a settlement termination value with the counterparty.
Individually analyzed loans - Certain individually analyzed loans were adjusted to the fair value, less costs to sell, of the underlying collateral securing these loans resulting in losses. The loss is not recorded directly as an adjustment to current earnings, but rather as a component in determining the ACL. Fair value was measured using appraised values of collateral and adjusted as necessary by management based on unobservable Level 3 inputs for specific properties. The ACL calculated for the collateral-based individually analyzed loans outstanding at June 30, 2025 and December 31, 2024 was $
Loans held for sale – Loans held for sale are carried at the lower of cost or fair value, which is evaluated on a pool-level basis. The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan or other observable market data. Management has estimated fair values of loans held for sale using Level 2 inputs.
38
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are summarized below:
|
|
June 30, 2025 |
|
|||||||||||||
(In thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total Fair |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debt securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
MSRs |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Interest rate swaps |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total assets |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
December 31, 2024 |
|
|||||||||||||
(In thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total Fair |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debt securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
MSRs |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Interest rate swaps |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total assets |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total liabilities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Assets Measured at Fair Value on a Non-recurring Basis
The Company may also be required, from time to time, to measure certain other assets at fair value on a nonrecurring basis in accordance with U.S. GAAP. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There are
The following table summarizes the fair value hierarchy used to determine each adjustment and the carrying value of the related individual assets:
|
|
June 30, 2025 |
|
|||||||||||||
(In thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total Fair |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Individually analyzed loans |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Loans held for sale |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
39
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
|
|
December 31, 2024 |
|
|||||||||||||
(In thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total Fair |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Individually analyzed loans |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Loans held for sale |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
There were no transfers between levels during the six months ended June 30, 2025.
Fair Value of Financial Instruments
FASB ASC Topic 825, “Financial Instruments”, requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet, if the fair values can be reasonably determined. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques using observable inputs when available. Those techniques are significantly affected but the assumptions used, including discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Topic 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The carrying amounts and estimated fair values of the Company’s consolidated financial instruments as of the balance sheet dates were as follows:
|
|
June 30, 2025 |
|
|||||||||||||||||
(In thousands) |
|
Carrying |
|
|
Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and due from banks |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Securities available for sale |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Securities held to maturity |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Federal Home Loan Bank stock |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Loans, net |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Accrued interest receivable |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Bank-owned life insurance |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
MSRs |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits, other than certificates of deposit |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Federal Home Loan Bank advances |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Subordinated debt |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Accrued interest payable |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
40
Table of Contents
Assabet Valley Bancorp and Subsidiary
Notes to Consolidated Financial Statements (continued)
|
|
December 31, 2024 |
|
|||||||||||||||||
(In thousands) |
|
Carrying |
|
|
Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and due from banks |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Securities available for sale |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Securities held to maturity |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Federal Home Loan Bank stock |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Loans, net |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Loans held for sale |
|
|
|
|
|
|
— |
|
|
|
|
|
— |
|
||||||
Accrued interest receivable |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Bank-owned life insurance |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
MSRs |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deposits, other than certificates of deposit |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Certificates of deposit |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Federal Home Loan Bank advances |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Subordinated debt |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Accrued interest payable |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
The following methods and assumptions were used to estimate the fair value of financial instruments:
Cash and cash equivalents – The carrying amount of these items is a reasonable estimate of their fair value. Cash and cash equivalents are reported in the Level 1 fair value category.
Securities available for sale and held to maturity – Securities are primarily priced using model pricing based on the securities’ relationship to other benchmark quoted prices as provided by an independent third-party and are considered a Level 2 input method.
Federal Home Loan Bank Stock – The fair value is based upon the par value of the stock that equates to its carry value and are reported in the Level 2 fair value category.
Loans – Fair value for these instruments is calculated using FASB’s exit pricing guidelines and are considered Level 3.
Accrued interest receivable – The carrying amount approximates fair value for these instruments and are reported in the Level 2 category.
Bank-owned life insurance (BOLI) – BOLI is carried at net cash surrender value of the policies which approximates fair value since that is the approximate liquidation value of these assets. BOLI is reported in the Level 2 fair value category.
Deposits – The fair value of deposits with no stated maturity date, such as noninterest-bearing demand deposits, savings, NOW, and money market accounts, is based on the carrying value. The fair value of certificates of deposit is based upon the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar maturities. Deposits are reported in the Level 2 fair value category
Federal Home Loan Bank advances – Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms and are considered Level 2.
Subordinated debt - Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms and are considered Level 2.
Accrued interest payable – The carrying amount approximates fair value for these instruments and are reported in the Level 2 category.
41
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
Management’s discussion and analysis is intended to enhance your understanding of our financial condition and results of operations. The financial information in this section is derived from the accompanying consolidated financial statements and related notes. You should read the financial information in this section in conjunction with the business and financial information contained in this report and in the Company’s definitive prospectus dated May 13, 2025, as filed with the Securities and Exchange Commission on May 21, 2025.
Cautionary Note Regarding Forward-Looking Statements
This report 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,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:
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:
42
Table of Contents
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. Except as required by applicable law or regulation, the Company assumes no obligation and disclaims any obligation to update any forward-looking statements.
Critical Accounting Policies and Use of Critical Accounting Estimates
The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared to conform with U.S. GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policy discussed below to be our critical accounting policy. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.
The Jumpstart Our Business Startups Act of 2012 contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to take advantage of the benefits of this extended transition period. Accordingly, our consolidated financial statements may not be comparable to companies that comply with such new or revised accounting standards.
We consider the following accounting policies to be our critical accounting policies:
Allowance for Credit Losses. The allowance for credit losses (“ACL”) is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Management evaluates the appropriateness of the ACL on loans quarterly. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change from period to period.
Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. A reversion methodology is applied beyond the reasonable and supportable forecasts. Qualitative adjustments are then considered for differences in current loan-specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors, that may include, but are not limited to, results of internal loan reviews, examinations by bank regulatory agencies, or other such events such as a natural disaster. The ACL on loans represents our estimated risk of loss within its loan portfolio as of the reporting date. To appropriately measure expected credit losses, management disaggregates the loan portfolio into pools of similar risk characteristics.
Management may also adjust its assumptions to account for differences between expected and actual losses from period-to-period. The variability of management’s assumptions could alter the ACL on loans materially and impact future results of
43
Table of Contents
operations and financial condition. The loss estimation models and methods used to determine the ACL are continually refined and enhanced.
Off-Balance Sheet Credit Exposures. In the ordinary course of business, we enter into commitments to extend credit, including commercial letters of credit and standby letters of credit. Such financial instruments are recorded as loans when they are funded. We estimate expected credit losses over the contractual period in which we are exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by us. The ACL on off-balance sheet credit exposures is adjusted through credit loss expense. To appropriately measure expected credit losses, management disaggregates the off-balance sheet credit exposures into similar risk characteristics, identical to those determined for the loan portfolio. An estimated funding rate is then applied to the qualifying unfunded loan commitments and letters of credit using historical information or industry benchmarks provided by a reputable and independent source, to estimate the expected funded amount for each loan segment as of the reporting date. Once the expected funded amount for each loan segment is determined, the loss rate, which is the calculated expected loan loss as a percent of the amortized cost basis for each loan segment, is applied to calculate the ACL on off-balance sheet credit exposures as of the reporting date.
Securities Valuation and Allowance for Credit Loss. Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Debt securities not classified as held to maturity are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss), net of tax. For available for sale debt securities in an unrealized loss position, we first assesses whether we intend to sell, or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available for sale debt securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an ACL is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income.
Changes in the ACL are recorded as credit loss expense (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.
Management measures expected credit losses on held to maturity debt securities on an individual basis by major security types that share similar risk characteristics, which may include, but is not limited to, credit ratings, financial asset type, collateral type, size, effective interest rate, term, geographical location, industry, and vintage. Management classifies the held to maturity portfolio into the following major security types: subordinated debt and corporate bonds. We invest in subordinated debt issued only by financial institutions.
The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. Given the rarity of subordinated debt and corporate bond defaults and losses, we utilize external third-party financial analysis models as the sole source of default and loss rates. Management may exercise discretion to make adjustments based on various qualitative factors. Changes in the ACL are recorded as credit loss expense (or reversal). A held to maturity debt security is written-off in the period in which a determination is made that all or a portion of the financial asset is uncollectible. Any previously recorded allowance, if any, is reversed and then the amortized cost basis is written down to the amount deemed to be collectible, if any.
Income Taxes. We use the asset and liability (or balance sheet) method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments may require us to make projections of future taxable income and/or to carryback to taxable income in prior years. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis
44
Table of Contents
as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets.
Goodwill. Goodwill is recognized when the fair value of consideration transferred in an acquisition is greater than the fair value of assets acquired and liabilities assumed. Goodwill has an indefinite useful life and is evaluated on at least an annual basis for potential impairment, and more often if circumstances warrant more frequent evaluations. An impairment loss is recognized to the extent that the carrying value exceeds fair value. Significant judgment and assumptions are utilized by management in the impairment analysis. Avidia Bank was created by a merger between Hudson Savings Bank and The Westborough Savings Bank in 2007. Goodwill of $11.9 million resulting from the merger is not amortized but is evaluated for impairment on an annual basis. Impairment of goodwill is recognized in earnings. As of June 30, 2025, no impairment has been recognized.
Mortgage Servicing Rights. Servicing rights are recognized as separate assets when rights are acquired through sale of financial assets and recorded at fair value. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Changes in fair value are reported in mortgage banking income.
Comparison of Financial Condition at June 30, 2025 and December 31, 2024
Total Assets. Total assets increased $301.4 million, or 11.3%, to $2.96 billion at June 30, 2025 from $2.66 billion at December 31, 2024. The increase was primarily the result of increases in cash and cash equivalents and in net loans.
Cash and Cash Equivalents. Cash and short-term investments increased $246.1 million, or 394.2%, to $308.6 million at June 30, 2025 from $62.4 million at December 31, 2024. The increase was primarily related to the funds received from the IPO subscription offering.
Securities Available for Sale. Securities available for sale increased $316 thousand, or 0.1%, to $266.2 million at June 30, 2025 from $265.9 million at December 31, 2024. During the first half of 2025, $8.9 million in securities were sold at a net loss of $619 thousand.
Federal Home Loan Bank Stock. Federal Home Loan Bank stock decreased $2.6 million, or 18%, to $12.1 million at June 30, 2025 from $14.7 million at December 31, 2024. The amount of stock we are required to own is in proportion to our Federal Home Loan Bank borrowings and our total assets.
Net Loans. Net loans increased $48.1 million, or 2.2%, to $2.22 billion at June 30, 2025 from $2.18 billion at December 31, 2024. Loan growth from December 31, 2024 to June 30, 2025 related to increases in commercial real estate loans of $28.4 million, or 5.9%, home equity and second mortgages of $8.1 million, or 12.2%, multi-family real estate loans of $7.9 million, or 9.5%, one to four family residential mortgage loans of $2.6 million, or 0.5%, and commercial and industrial loans of $2.5 million, or 0.5%.
This loan growth was partially offset by a decrease from December 31, 2024 to June 30, 2025 of $517 thousand, or 10.2% in consumer loans.
The growth in loans reflects our strategy to grow the balance sheet by continuing to diversify into higher-yielding loans to improve net margins and manage interest rate risk.
Bank-owned Life Insurance. We invest in bank-owned life insurance to help offset the costs of our employee benefit plan obligations. Bank-owned life insurance also generally provides noninterest income that is non-taxable. Bank-owned life insurance increased $567 thousand, or 1.6%, to $36.1 million at June 30, 2025 from $35.5 million at December 31, 2024. The increase was primarily due to an increase in the cash surrender value of existing policies.
Deposits. Deposits increased $376.4 million, or 18.2%, to $2.44 billion at June 30, 2025 from $2.06 billion at December 31, 2024. Core deposits (which we define as all deposits, other than certificates of deposit and brokered deposits) increased $428.5 million, or 25.6%, to $2.10 billion at June 30, 2025 from $1.67 billion at December 31, 2024. The increase was primarily related to the funds received from the IPO subscription offering and growth in most core deposits categories during the period with a $399.0 million, or 58.4%, increase in interest-bearing checking accounts, a $25.4 million, or 6.6%, increase in regular and other savings accounts, a $18.4 million, or 7.3%, increase in money market accounts, offset by a $14.2 million, or 4.0%, decrease in non-interest bearing checking. Certificates of deposit (excluding brokered certificates of deposit) decreased $37.1 million, or 10.2%, to $326.4 million at June 30, 2025 from $363.6 million at December 31, 2024. Brokered deposits decreased $15.0 million to $12.0 million at June 30, 2025 from $27.0 million from December 31, 2024.
45
Table of Contents
Federal Home Loan Bank Advances. Advances decreased $65.0 million, or 20.0%, to $260.0 million at June 30, 2025 from $325.0 million at December 31, 2024 due to repayment of advances.
Total Capital. Total capital decreased $2.4 million, or 1.2%, to $191.4 million at June 30, 2025 from $193.8 million at December 31, 2024, due to a net loss of $7.7 million for the six months ended June 30, 2025, offset by a decrease in accumulated other comprehensive loss of $5.3 million. The decrease in accumulated other comprehensive loss was primarily due to the impact of the lower market interest rate environment on our unrealized loss on securities available for sale and interest rate swaps.
46
Table of Contents
Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. Yields on tax-exempt securities have not been computed on a tax-equivalent basis, as the effects are immaterial. Average balances are calculated using daily average balances. Non-accrual loans are included in average balances only. Average yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees are immaterial. Loan balances include loans held for sale.
|
|
For the Three Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
(Dollars in thousands) |
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and short-term investments |
|
$ |
67,357 |
|
|
$ |
421 |
|
|
|
2.51 |
% |
|
$ |
49,032 |
|
|
$ |
568 |
|
|
|
4.66 |
% |
Securities |
|
|
296,321 |
|
|
|
2,555 |
|
|
|
3.46 |
|
|
|
352,204 |
|
|
|
2,833 |
|
|
|
3.24 |
|
Loans |
|
|
2,229,893 |
|
|
|
28,883 |
|
|
|
5.20 |
|
|
|
2,140,977 |
|
|
|
27,492 |
|
|
|
5.16 |
|
Total interest-earning assets |
|
|
2,593,571 |
|
|
|
31,859 |
|
|
|
4.93 |
|
|
|
2,542,213 |
|
|
|
30,893 |
|
|
|
4.89 |
|
Noninterest-earning assets |
|
|
122,176 |
|
|
|
|
|
|
|
|
|
104,623 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
2,715,747 |
|
|
|
|
|
|
|
|
$ |
2,646,836 |
|
|
|
|
|
|
|
||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
NOW accounts |
|
$ |
697,452 |
|
|
|
700 |
|
|
|
0.40 |
% |
|
$ |
605,633 |
|
|
|
737 |
|
|
|
0.49 |
% |
Money market accounts |
|
|
270,969 |
|
|
|
848 |
|
|
|
1.26 |
|
|
|
299,203 |
|
|
|
1,117 |
|
|
|
1.50 |
|
Regular and other savings accounts |
|
|
401,215 |
|
|
|
2,278 |
|
|
|
2.28 |
|
|
|
348,440 |
|
|
|
2,231 |
|
|
|
2.58 |
|
Certificates of deposit |
|
|
347,419 |
|
|
|
3,416 |
|
|
|
3.94 |
|
|
|
371,674 |
|
|
|
4,200 |
|
|
|
4.54 |
|
Total interest-bearing deposits |
|
|
1,717,055 |
|
|
|
7,242 |
|
|
|
1.69 |
|
|
|
1,624,950 |
|
|
|
8,285 |
|
|
|
2.05 |
|
Federal Home Loan Bank advances |
|
|
333,834 |
|
|
|
3,647 |
|
|
|
4.38 |
|
|
|
362,083 |
|
|
|
3,985 |
|
|
|
4.43 |
|
Subordinated debt |
|
|
27,782 |
|
|
|
352 |
|
|
|
5.08 |
|
|
|
27,592 |
|
|
|
315 |
|
|
|
4.59 |
|
Total interest-bearing liabilities |
|
|
2,078,671 |
|
|
|
11,241 |
|
|
|
2.17 |
|
|
|
2,014,625 |
|
|
|
12,585 |
|
|
|
2.51 |
|
Noninterest-bearing demand |
|
|
415,035 |
|
|
|
|
|
|
|
|
|
388,380 |
|
|
|
|
|
|
|
||||
Other noninterest-bearing liabilities |
|
|
33,242 |
|
|
|
|
|
|
|
|
|
43,526 |
|
|
|
|
|
|
|
||||
Total liabilities |
|
|
2,526,948 |
|
|
|
|
|
|
|
|
|
2,446,531 |
|
|
|
|
|
|
|
||||
Total capital |
|
|
188,799 |
|
|
|
|
|
|
|
|
|
200,305 |
|
|
|
|
|
|
|
||||
Total liabilities and capital |
|
$ |
2,715,747 |
|
|
|
|
|
|
|
|
$ |
2,646,836 |
|
|
|
|
|
|
|
||||
Net interest income |
|
|
|
|
$ |
20,618 |
|
|
|
|
|
|
|
|
$ |
18,308 |
|
|
|
|
||||
Net interest rate spread (1) |
|
|
|
|
|
|
|
|
2.76 |
% |
|
|
|
|
|
|
|
|
2.38 |
% |
||||
Net interest-earning assets (2) |
|
$ |
514,900 |
|
|
|
|
|
|
|
|
$ |
525,223 |
|
|
|
|
|
|
|
||||
Net interest margin (3) |
|
|
|
|
|
|
|
|
3.19 |
% |
|
|
|
|
|
|
|
|
2.90 |
% |
||||
Average interest-earning assets |
|
|
|
|
|
|
|
|
124.77 |
% |
|
|
|
|
|
|
|
|
126.19 |
% |
||||
47
Table of Contents
|
|
For the Six Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
(Dollars in thousands) |
|
Average |
|
|
Interest |
|
|
Average |
|
|
Average |
|
|
Interest |
|
|
Average |
|
||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and short-term investments |
|
$ |
52,314 |
|
|
$ |
636 |
|
|
|
2.45 |
% |
|
$ |
47,081 |
|
|
$ |
1,038 |
|
|
|
4.43 |
% |
Securities |
|
|
300,168 |
|
|
|
5,206 |
|
|
|
3.50 |
|
|
|
342,177 |
|
|
|
4,953 |
|
|
|
2.91 |
|
Loans |
|
|
2,222,464 |
|
|
|
57,067 |
|
|
|
5.18 |
|
|
|
2,136,326 |
|
|
|
54,750 |
|
|
|
5.15 |
|
Total interest-earning assets |
|
|
2,574,946 |
|
|
|
62,909 |
|
|
|
4.93 |
|
|
|
2,525,584 |
|
|
|
60,741 |
|
|
|
4.84 |
|
Noninterest-earning assets |
|
|
116,726 |
|
|
|
|
|
|
|
|
|
103,380 |
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
2,691,672 |
|
|
|
|
|
|
|
|
$ |
2,628,964 |
|
|
|
|
|
|
|
||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
NOW accounts |
|
$ |
693,753 |
|
|
|
1,407 |
|
|
|
0.41 |
% |
|
$ |
600,102 |
|
|
|
1,493 |
|
|
|
0.50 |
% |
Money market accounts |
|
|
268,184 |
|
|
|
1,690 |
|
|
|
1.27 |
|
|
|
306,137 |
|
|
|
2,273 |
|
|
|
1.49 |
|
Regular and other savings accounts |
|
|
392,166 |
|
|
|
4,376 |
|
|
|
2.25 |
|
|
|
315,281 |
|
|
|
3,821 |
|
|
|
2.44 |
|
Certificates of deposit |
|
|
367,373 |
|
|
|
7,500 |
|
|
|
4.12 |
|
|
|
364,511 |
|
|
|
8,285 |
|
|
|
4.57 |
|
Total interest-bearing deposits |
|
|
1,721,476 |
|
|
|
14,973 |
|
|
|
1.75 |
|
|
|
1,586,031 |
|
|
|
15,872 |
|
|
|
2.01 |
|
Federal Home Loan Bank advances |
|
|
337,016 |
|
|
|
7,439 |
|
|
|
4.45 |
|
|
|
372,789 |
|
|
|
8,344 |
|
|
|
4.50 |
|
Subordinated debt |
|
|
27,891 |
|
|
|
667 |
|
|
|
4.82 |
|
|
|
27,575 |
|
|
|
630 |
|
|
|
4.59 |
|
Total interest-bearing liabilities |
|
|
2,086,383 |
|
|
|
23,079 |
|
|
|
2.23 |
|
|
|
1,986,395 |
|
|
|
24,846 |
|
|
|
2.52 |
|
Noninterest-bearing demand |
|
|
375,739 |
|
|
|
|
|
|
|
|
|
391,606 |
|
|
|
|
|
|
|
||||
Other noninterest-bearing liabilities |
|
|
39,167 |
|
|
|
|
|
|
|
|
|
48,478 |
|
|
|
|
|
|
|
||||
Total liabilities |
|
|
2,501,289 |
|
|
|
|
|
|
|
|
|
2,426,479 |
|
|
|
|
|
|
|
||||
Total capital |
|
|
190,383 |
|
|
|
|
|
|
|
|
|
202,485 |
|
|
|
|
|
|
|
||||
Total liabilities and capital |
|
$ |
2,691,672 |
|
|
|
|
|
|
|
|
$ |
2,628,964 |
|
|
|
|
|
|
|
||||
Net interest income |
|
|
|
|
$ |
39,830 |
|
|
|
|
|
|
|
|
$ |
35,895 |
|
|
|
|
||||
Net interest rate spread (1) |
|
|
|
|
|
|
|
|
2.70 |
% |
|
|
|
|
|
|
|
|
2.32 |
% |
||||
Net interest-earning assets (2) |
|
$ |
488,563 |
|
|
|
|
|
|
|
|
$ |
539,189 |
|
|
|
|
|
|
|
||||
Net interest margin (3) |
|
|
|
|
|
|
|
|
3.12 |
% |
|
|
|
|
|
|
|
|
2.86 |
% |
||||
Average interest-earning assets |
|
|
|
|
|
|
|
|
123.42 |
% |
|
|
|
|
|
|
|
|
127.14 |
% |
||||
Comparison of Operating Results for the Three and Six Months Ended June 30, 2025 and 2024
Net Loss/Income. Net income for the three months ended June 30, 2025 was $3.9 million, compared to net income of $2.4 million for the three months ended June 30, 2024, an increase of $1.5 million. The increase was primarily due to a $2.3 million increase in net interest income, $1.8 million increase in non-interest income, partially offset by a $1.4 million increase in credit loss expense for credit losses and $800 thousand increase in non-interest expense.
Net loss for the six months ended June 30, 2025 was $7.7 million, compared to net income of $5.9 million for the six months ended June 30, 2024, a decrease of $13.6 million. The decrease was primarily due to a $18.4 million increase in the credit loss expense, a $4.5 million increase in non-interest expense, and a $370 thousand decrease in non-interest income, partially offset by a $3.9 million increase in net interest income.
Interest and Dividend Income. Interest and dividend income increased $1.0 million, or 3.1%, to $31.9 million for the three months ended June 30, 2025, from $30.9 million for the three months ended June 30, 2024, primarily due to a $1.4 million increase in interest on loans. The increase in interest on loans resulted primarily from an increase of $88.9 million in the average balance of loans to $2.23 billion for the three months ended June 30, 2025 from $2.14 billion for the three months ended June 30, 2024. The weighted average yield on loans increased to 5.20% for the three months ended June 30, 2025 compared to 5.16% for the three months ended June 30, 2024.
48
Table of Contents
Interest and dividend income increased $2.2 million, or 3.6%, to $62.9 million for the six months ended June 30, 2025, from $60.7 million for the six months ended June 30, 2024, primarily due to a $2.3 million increase in interest on loans. The increase in interest on loans resulted primarily from an increase of $86.1 million in the average balance of loans to $2.22 billion for the six months ended June 30, 2025 from $2.14 billion for the six months ended June 30, 2024. The weighted average yield on loans increased to 5.18% for the six months ended June 30, 2025 compared to 5.15% for the six months ended June 30, 2024.
Average interest-earning assets increased $51.4 million, to $2.59 billion for the three months ended June 30, 2025, from $2.54 billion for the three months ended June 30, 2024. The yield on interest-earning assets increased to 4.93% for the three months ended June 30, 2025, from 4.89% for the three months ended June 30, 2024.
Average interest-earning assets increased $49.4 million, to $2.57 billion for the six months ended June 30, 2025, from $2.53 billion for the six months ended June 30, 2024. The yield on interest-earning assets increased to 4.93% for the six months ended June 30, 2025, from 4.84% for the six months ended June 30, 2024.
Interest Expense. Total interest expense decreased $1.3 million, or 10.7%, to $11.2 million for the three months ended June 30, 2025, from $12.6 million for the three months ended June 30, 2024. Interest expense on deposit accounts decreased $1.0 million, or 12.6%, to $7.2 million for the three months ended June 30, 2025, from $8.3 million for the three months ended June 30, 2024, due to a decrease in the weighted average rate on interest-bearing deposits to 1.69% for the three months ended June 30, 2025, from 2.05% for the three months ended June 30, 2024. Interest expense on Federal Home Loan Bank advances decreased $338 thousand, or 8.5%, to $3.6 million for the three months ended June 30, 2025, from $4.0 million for the three months ended June 30, 2024, due to a decrease in the average advances of $28.2 million between periods.
Total interest expense decreased $1.8 million, or 7.1%, to $23.1 million for the six months ended June 30, 2025, from $24.8 million for the six months ended June 30, 2024. Interest expense on Federal Home Loan Bank advances decreased $905 thousand, or 10.8%, to $7.4 million for the six months ended June 30, 2025, from $8.3 million for the six months ended June 30, 2024, due to a decrease in the average advances of $35.8 million between periods. Interest expense on deposit accounts decreased $900 thousand, or 5.7%, to $15.0 million for the six months ended June 30, 2025, from $15.9 million for the six months ended June 30, 2024, due to a decrease in the weighted average rate on interest-bearing deposits to 1.75% for the six months ended June 30, 2025, from 2.01% for the six months ended June 30, 2024.
Net Interest Income. Net interest income increased $2.3 million, or 12.6%, to $20.6 million for the three months ended June 30, 2025, from $18.3 million for the three months ended June 30, 2024, primarily due to an increase in net interest margin to 3.19% for the three months ended June 30, 2025, from 2.90% for the three months ended June 30, 2024 and a $51.4 million increase in the average balance of interest-earning assets during the three months ended June 30, 2025. Net interest rate spread increased to 2.76%, for the three months ended June 30, 2025, compared to 2.38% for the three months ended June 30, 2024. The increase in net interest margin and spread was driven by an increase in the weighted average yield on interest earning assets combined with a decrease in the weighted average rate paid on interest-bearing liabilities to 2.17% for the three months ended June 30, 2025, from 2.51% for the three months ended June 30, 2024.
Net interest income increased $3.9 million, or 11.0%, to $39.8 million for the six months ended June 30, 2025, from $35.9 million for the six months ended June 30, 2024, primarily due to an increase in net interest margin to 3.12% for the six months ended June 30, 2025, from 2.86% for the six months ended June 30, 2024 and $49.4 million increase in the average balance of interest-earning assets during the six months ended June 30, 2025. Net interest rate spread increased to 2.70%, for the six months ended June 30, 2025, compared to 2.32% for the six months ended June 30, 2024. The increase in net interest margin and spread was driven by an increase in the weighted average yield on interest earning assets combined with a decrease in the weighted average rate paid on interest-bearing liabilities to 2.23% for the six months ended June 30, 2025, from 2.52% for the six months ended June 30, 2024.
Allowance for Credit Losses. Based on management’s analysis of the adequacy of allowance for credit losses, a credit loss expense of $1.1 million was recorded for the three months ended June 30, 2025, compared to a credit loss reversal of $320 thousand for the three months ended June 30, 2024.
A credit loss expense of $18.7 million was recorded for the six months ended June 30, 2025, compared to a provision of $310 thousand for the six months ended June 30, 2024. The $18.4 million increase is primarily due to the $16.7 million charge-off in the first quarter related to a land loan, as previously disclosed.
Non-interest Income. Non-interest income increased $1.8 million, or 52.3%, to $5.2 million for the three months ended June 30, 2025, from $3.4 million for the three months ended June 30, 2024. The increase was primarily due to the $1.3 million decrease in net loss on securities available for sale, from a loss of $78 thousand for the three months ended June 30,
49
Table of Contents
2025, compared to a $1.4 million loss for the three months ended June 30, 2024. Non-interest income was also impacted by a $281 thousand increase in payment processing income, $193 thousand increase in commercial loan fees and $143 thousand increase in swap fees for the three months ended June 30, 2025.
Non-interest income decreased $370 thousand, or 4.0%, to $9.0 million for the six months ended June 30, 2025, from $9.3 million for the six months ended June 30, 2024. The decrease was primarily due to a $1.6 million decrease in net gains on equity securities, from no gains for the six months ended June 30, 2025, compared to a $1.6 million gain for the six months ended June 30, 2024. The decrease was also due to a $747 thousand decrease in net loss on securities available for sale, from losses of $619 thousand for the six months ended June 30, 2025, compared to a $1.4 million loss for the six months ended June 30, 2024. Non-interest income was also impacted by a $356 thousand write-down of equipment no longer in use and a $498 thousand decrease in the valuation of mortgage servicing rights for the six months ended June 30, 2025, compared to June 30, 2024, resulting from a decline in market interest rates. This was partially offset by a $611 thousand increase in payment processing income and a $250 thousand gain on the sale of the Direct Merchant Processing Book for the six months ended June 30, 2025.
Non-interest Expense. Non-interest expense increased $800 thousand, or 4.2%, to $19.8 million for the three months ended June 30, 2025, from $19.0 million for the three months ended June 30, 2024. Data processing costs increased $776 thousand, or 35.0%, primarily due to the new on-line banking platform, increased account volume and licensing costs. All other non-interest expenses increased $24 thousand, or 0.1%, to $16.8 million for the three months ended June 30, 2025, from $16.7 million for the three months ended June 30, 2024, due to higher salaries and employee benefits, higher consulting expenses, and lower occupancy and equipment expense.
Non-interest expense increased $4.5 million, or 12.2%, to $41.6 million for the six months ended June 30, 2025, from $37.1 million for the six months ended June 30, 2024. Salary and employee benefit expenses increased $3.2 million, or 18.3%, primarily due to a $756 thousand increase in the long-term incentive expense which was primarily the result of the termination of the plan and immediate vesting of participants, a $1.3 million increase in short-term incentives, payroll taxes and retirement expenses, and a $879 thousand increase in salaries. Data processing costs increased $1.9 million, or 44.1%, primarily due to a new on-line banking platform, increased account volume and licensing costs, and one-time expenses of $379 thousand related to contract terminations. All other non-interest expenses decreased $580 thousand, or 3.8%, to $14.7 million for the six months ended June 30, 2025, from $15.3 million for the six months ended June 30, 2024, due to lower occupancy and equipment expense and the sale of the credit card portfolio.
Income Tax Benefit/Expense. Income tax expense was $1.2 million for the three months ended June 30, 2025, compared to an income tax expense of $759 thousand for the three months ended June 30, 2024. The effective tax rate was 23.0% and 24.4% for the three months ended June 30, 2025, and June 30, 2024, respectively.
Income tax benefit was $3.8 million for the six months ended June 30, 2025, compared to an income tax expense of $2.0 million for the six months ended June 30, 2024. The effective tax rate was 32.8% and 25.1% for the six months ended June 30, 2025, and June 30, 2024, respectively.
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. In addition, we have available credit facilities with the Federal Home Loan Bank of Boston, correspondent banks, and the Federal Reserve Bank of Boston. At June 30, 2025, we had the ability to borrow $680.4 million from the Federal Home Loan Bank of Boston, of which $260.0 million was outstanding. At June 30, 2025, we also had a $500 thousand line of credit with the Federal Home Loan Bank of Boston with no borrowings outstanding. At June 30, 2025, we had $18.0 million of available lines of credit with correspondent banks with no borrowings outstanding under any of them. At June 30, 2025, we also had aggregate available borrowing capacity of $324.1 million through the discount window and the borrower-in-custody program at the Federal Reserve Bank of Boston with no borrowings under either facility.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets depend on our operating, financing, lending, and investing activities during any given period.
50
Table of Contents
Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. See the accompanying Consolidated Statements of Cash Flows for further information.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained. The net proceeds from the stock offering will significantly increase our liquidity.
At June 30, 2025, Avidia Bank exceeded all of its regulatory capital requirements and was 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 this categorization.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. We anticipate that we will have sufficient funds available to meet our current lending commitments. At June 30, 2025, off-balance sheet commitments totaled $426.9 million.
Contractual Obligations. In the ordinary course of business, we enter into certain contractual obligations, including operating leases for premises and equipment, among others.
Management of Market Risk
General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in market interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. Our Asset Liability Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk according to the policy and guidelines approved by our board of directors. The Asset Liability Committee meets at least quarterly, is comprised of executive officers and certain senior management, and reports to the full board of directors on at least a quarterly basis. We currently utilize a third-party modeling program, prepared on a quarterly basis, to evaluate our sensitivity to changing interest rates, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.
We seek to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. We have implemented the following strategies to manage our interest rate risk:
Shortening the average term of our interest-earning assets by increasing our investments in shorter-term assets, as well as originating loans with variable interest rates, helps to match the maturities and interest rates of our assets and liabilities better, thereby reducing the exposure of our net interest income to changes in market interest rates.
51
Table of Contents
Interest Rate Swaps. We employ various financial risk methodologies that limit, or “hedge,” the adverse effects of increasing or decreasing market interest rates on our investment portfolio, loan portfolio and short-term liabilities, such as Federal Home Loan Bank advances. At June 30, 2025, we had interest rate swaps related to Federal Home Loan Bank advances with a notional amount of $100.0 million and interest rate swaps on agency securities with a notional amount of $35.0 million. We also engage in hedging strategies with respect to arrangements where our commercial banking customers swap floating interest rate obligations for fixed interest rate obligations, or vice versa. At June 30, 2025, we had interest rate swaps related to customer loans of a notional amount of $105.3 million. Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions.
Change in Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings.
The following table sets forth, as of June 30, 2025, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve. The changes indicated in the following table are within policy guidelines adopted by the board of directors.
June 30, 2025 |
|
|||||||
Change in Interest Rates |
|
Net Interest Income Year 1 |
|
|
Year 1 Change from Level |
|
||
|
|
(Dollars in thousands) |
|
|
|
|
||
400 |
|
$ |
95,799 |
|
|
|
(5.7 |
)% |
300 |
|
|
97,388 |
|
|
|
(4.1 |
)% |
200 |
|
|
98,905 |
|
|
|
(2.6 |
)% |
100 |
|
|
100,375 |
|
|
|
(1.2 |
)% |
Level |
|
|
101,589 |
|
|
|
|
% |
(100) |
|
|
99,517 |
|
|
|
(2.0 |
)% |
(200) |
|
|
97,178 |
|
|
|
(4.3 |
)% |
(300) |
|
|
94,598 |
|
|
|
(6.9 |
)% |
(400) |
|
|
92,524 |
|
|
|
(8.9 |
)% |
The table above indicates that at June 30, 2025, we would have experienced a 2.6% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 4.3% decrease in net interest income in the event of an instantaneous 200 basis point decrease in market interest rates.
Economic Value of Equity. We also compute amounts by which the net present value of our assets and liabilities (economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases instantaneously by 100, 200, 300 and 400 basis point increments or decreases instantaneously by 100 or 200 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.
52
Table of Contents
The following table sets forth, as of June 30, 2025, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. The changes indicated in the following table are within policy guidelines adopted by our board of directors.
June 30, 2025 |
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
EVE as a Percentage of |
|
||||||||
|
|
|
|
|
Estimated Increase (Decrease) in EVE |
|
|
|
|
|
Increase |
|
||||||||
Change in Interest Rates |
|
Estimated |
|
|
Amount |
|
|
Percent |
|
|
EVE Ratio (4) |
|
|
(Decrease) |
|
|||||
(Dollars in thousands) |
|
|||||||||||||||||||
400 |
|
$ |
293,399 |
|
|
$ |
(97,165 |
) |
|
|
(24.9 |
)% |
|
|
11.8 |
% |
|
-228 |
|
|
300 |
|
|
320,584 |
|
|
|
(69,980 |
) |
|
|
(17.9 |
)% |
|
|
12.5 |
% |
|
-153 |
|
|
200 |
|
|
346,424 |
|
|
|
(44,140 |
) |
|
|
(11.3 |
)% |
|
|
13.1 |
% |
|
-89 |
|
|
100 |
|
|
370,364 |
|
|
|
(20,200 |
) |
|
|
(5.2 |
)% |
|
|
13.7 |
% |
|
-36 |
|
|
Level |
|
|
390,564 |
|
|
|
- |
|
|
|
0 |
% |
|
|
14.0 |
% |
|
|
- |
|
(100) |
|
|
395,510 |
|
|
|
4,946 |
|
|
|
1.3 |
% |
|
|
13.8 |
% |
|
-19 |
|
|
(200) |
|
|
387,089 |
|
|
|
(3,475 |
) |
|
|
(0.9 |
)% |
|
|
13.2 |
% |
|
-81 |
|
|
(300) |
|
|
369,819 |
|
|
|
(20,745 |
) |
|
|
(5.3 |
)% |
|
|
12.3 |
% |
|
-171 |
|
|
(400) |
|
|
318,333 |
|
|
|
(72,231 |
) |
|
|
(18.5 |
)% |
|
|
10.5 |
% |
|
-357 |
|
|
The table above indicates that at June 30, 2025, we would have experienced a 11.3% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 0.9% decrease in EVE in the event of an instantaneous 200 basis point decrease in market interest rates.
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ.
Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, mortgage servicing rights, deposits and borrowings.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information in Item 2 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Market Risk” is incorporated in this Item 3 by reference.
Item 4. Controls and Procedures
Disclosure Controls and Procedures. An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of June 30, 2025. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective
Changes in Internal Controls Over Financial Reporting. During the quarter ended June 30, 2025, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
53
Table of Contents
Part II – Other Information
Item 1. Legal Proceedings
The Company is not subject to any pending legal proceedings. Avidia Bank is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s consolidated financial condition or results of operations.
Item 1A. Risk Factors
Not applicable, as the Company is a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended June 30, 2025, none of the Company’s directors or executive officers
54
Table of Contents
Item 6. Exhibits
3.1 |
Articles of Incorporation of Avidia Bancorp, Inc. (1) |
3.2 |
Bylaws of Avidia Bancorp, Inc. (2) |
31.1 |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 |
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 |
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 |
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101 |
The following materials for the quarter ended June 30, 2025, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Capital, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101) |
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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AVIDIA BANCORP, INC. |
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Date: August 14, 2025 |
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/s/ Robert D. Cozzone |
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Robert D. Cozzone |
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President and Chief Executive Officer (Duly Authorized Representative and Principal Executive Officer) |
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Date: August 14, 2025 |
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/s/ Jonathan Nelson |
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Jonathan Nelson |
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Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
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FAQ
What corporate reorganization is Avidia Bancorp (AVBC) planning?
How much subordinated debt did Avidia report at June 30, 2025?
What income tax benefits were reported for reclassification adjustments?
What plan-related expenses were disclosed for H1 2025?
Does the filing describe loan risk or nonperforming loan criteria?
