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NB Bancorp Inc.

11/04/2026 | Press release | Distributed by Public on 11/04/2026 14:46

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Management's discussion and analysis of the financial condition and results of operations at and for the three and nine months ended September 30, 2026 and 2025 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing on Part I, Item 1 of this quarterly report on Form 10-Q.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "assume," "plan," "seek," "expect," "will," "may," "should," "could," "might," "indicate," "would," "contemplate," "continue," "target," "forecast," "outlook," "guidance," "objective," "goal," "strategy," "potential," "predict," "projection," "trend," "designed to," "opportunity," "positioned to," and other similar expressions or the negative of these terms. These forward-looking statements include, but are not limited to:

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the quality of our loan portfolio;

●

statements of our future exposure to the interest rate risk inherent in our assets and liabilities; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●

weakening in the United States economy in general and the regional and local economies within the Company's market area;

●

the effects of inflationary pressures, labor market shortages and/or supply chain issues;

●

the instability or volatility in financial markets and unfavorable general business conditions, globally, nationally or regionally, whether caused by geopolitical concerns, recent disruptions in the banking industry, or other factors;

●

unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other external events;

●

changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments, including our mortgage servicing rights assets, or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

●

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses on loans;

●

the effect of any change in federal government enforcement of federal laws affecting the cannabis industry;

●

changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;

●

our ability to access cost-effective funding;

●

fluctuations in real estate values and both residential and commercial real estate market conditions;

●

demand for loans and deposits in our market area;

●

our ability to implement and change our business strategies;

●

competition among depository and other financial institutions;

●

adverse changes in the securities or secondary mortgage markets;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;

●

changes in the quality or composition of our loan or investment portfolios;

●

technological changes that may be more difficult or expensive than expected;

●

the inability of third-party providers to perform as expected;

●

a failure or breach of our operational or security systems or infrastructure, including cyberattacks;

●

our ability to manage market risk, interest rate risk, credit risk, compliance risk, and operational risk;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

●

changes in consumer spending, borrowing and savings habits;

●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the SEC or the Public Company Accounting Oversight Board;

●

our ability to attract and retain key employees; and

●

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2026.

Non-GAAP Financial Measures

In addition to results presented in accordance with U.S. GAAP, this quarterly report on Form 10-Q contains certain non-GAAP financial measures, including pre-provision net revenue, operating net income, operating pre-tax income, operating noninterest expense, operating noninterest income, operating effective tax rate, operating earnings per share, basic, operating earnings per share, diluted, operating return on average assets, operating return on average shareholders' equity, operating efficiency ratio, tangible shareholders' equity, tangible assets and tangible book value per share. The Company presents certain non-GAAP financial measures, which management uses to evaluate the Company's performance, and which exclude the effects of certain transactions, non-cash items and U.S. GAAP adjustments that we believe are unrelated to our core business and are therefore not necessarily indicative of the Company's current performance or financial position. Management believes excluding these items facilitates greater visibility for investors into our core businesses as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding U.S. GAAP financial measures. These unaudited disclosures should not be viewed as a substitute for financial results determined in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2026		September 30, 2025		September 30, 2026		September 30, 2025

Net income (GAAP)	$	23,133	$	15,362	$	59,240	$	42,596
Add (Subtract):
Adjustments to net income:
Contract settlement fees		871		-		871		-
Defined benefit pension termination (refund) expense		-		(739)		-		480
Non-recurring fees for business line expansion		-		-		1,149		-
State tax expense - voluntary disclosure agreements		-		561		-		561
BOLI surrender tax and modified endowment contract penalty		-		-		78		218
Merger and acquisition expenses		-		994		830		1,525
Total adjustments to net income	$	871	$	816	$	2,928	$	2,784
Less net tax benefit associated with pre-tax non-GAAP adjustments to net income		176		176		653		639
Non-GAAP adjustments, net of tax		695		640		2,275		2,145
Operating net income (non-GAAP)	$	23,828	$	16,002	$	61,515	$	44,741
Weighted average common shares outstanding, basic		39,432,499		35,372,205		40,030,768		37,100,616
Weighted average common shares outstanding, diluted		39,833,964		35,579,456		40,417,396		37,289,349
Operating earnings per share, basic (non-GAAP)	$	0.60	$	0.45	$	1.54	$	1.21
Operating earnings per share, diluted (non-GAAP)	$	0.60	$	0.45	$	1.52	$	1.20

Pre-tax income (GAAP)	$	29,018	$	19,962	$	76,864	$	56,250
Add (Subtract):
Adjustments to pre-tax income:
Contract settlement fees		871		-		871		-
Defined benefit pension termination expense (refund)		-		(739)		-		480
Non-recurring fees for business line expansion		-		-		1,149		-
Merger and acquisition expenses		-		994		830		1,525
Total adjustments to pre-tax income		871		255		2,850		2,005
Operating pre-tax income (non-GAAP)	$	29,889	$	20,217	$	79,714	$	58,255


Net interest income (GAAP)	$	71,440	$	48,175	$	205,452	$	138,707
Subtract (Add):
Adjustments to net interest income:
Purchase accounting adjustments		2,614		-		6,209		-
Total impact of non-GAAP net interest income adjustments	$	2,614	$	-	$	6,209	$	-
Net interest income, excluding purchase accounting adjustments (non-GAAP)	$	68,826	$	48,175	$	199,243	$	138,707

Noninterest expense (GAAP)	$	46,281	$	30,499	$	132,998	$	88,878
Subtract (Add):
Adjustments to noninterest expense:
Contract settlement fees		871		-		871		-
Defined benefit pension termination refund		-		(739)		-		480
Non-recurring fees for business line expansion		-		-		1,149		-
Merger and acquisition expenses		-		994		830		1,525
Total impact of non-GAAP noninterest expense adjustments	$	871	$	255	$	2,850	$	2,005
Noninterest expense on an operating basis (non-GAAP)	$	45,410	$	30,244	$	130,148	$	86,873

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2026		September 30, 2025		September 30, 2026		September 30, 2025

Operating net income (non-GAAP)	$	23,828	$	16,002	$	61,515	$	44,741
Average assets		7,474,341		5,273,875		7,232,140		5,200,691
Operating return on average assets (non-GAAP)		1.26%		1.20%		1.14%		1.15%
Average shareholders' equity	$	855,206	$	729,979	$	853,695	$	744,230
Operating return on average shareholders' equity (non-GAAP)		11.05%		8.70%		9.63%		8.04%

Operating noninterest expense (non-GAAP)	$	45,410	$	30,244	$	130,148	$	86,873
Total pre-provision net revenue (net interest income plus total noninterest income)		76,545		51,857		220,629		150,843
Operating efficiency ratio (non-GAAP)		59.32%		58.32%		58.99%		57.59%

Income tax expense (GAAP)	$	5,885	$	4,600	$	17,624	$	13,654
Subtract (Add):
Adjustments to income tax expense:
State tax expense - voluntary disclosure agreements		-		(561)		-		(561)
Net tax benefit associated with pre-tax non-GAAP adjustments to net income		176		176		653		639
BOLI surrender tax and modified endowment contract penalty		-		-		(78)		(218)
Total impact of non-GAAP income tax expense adjustments	$	176	$	(385)		575	$	(140)
Income tax expense on an operating basis (non-GAAP)	$	6,061	$	4,215		18,199	$	13,514
Operating effective tax rate (non-GAAP)		20.3%		20.8%		23.7%		24.0%


	As of
	September 30, 2026		December 31, 2025

Total shareholders' equity (GAAP)	$	857,403	$	858,932
Subtract:
Intangible assets (core deposit intangible)		28,814		37,815
Total tangible shareholders' equity (non-GAAP)		828,589		821,117
Total assets (GAAP)	$	7,683,996	$	7,006,388
Subtract:
Intangible assets (core deposit intangible)		28,814		37,815
Total tangible assets (non-GAAP)	$	7,655,182	$	6,968,573
Tangible shareholders' equity / tangible assets (non-GAAP)		10.82%		11.78%
Total common shares outstanding		43,818,490		45,770,128
Tangible book value per share (non-GAAP)	$	18.91	$	17.94

Comparison of Financial Condition as of September 30, 2026 and December 31, 2025

Total Assets. Total assets increased $677.6 million, or 9.7%, to $7.68 billion as of September 30, 2026 from $7.01 billion as of December 31, 2025. The increase was primarily driven by increases in net loans, non-public investments and deferred tax assets, offset partially by decreases in cash and cash equivalents.

Cash and Cash Equivalents. Cash and cash equivalents decreased $141.8 million, or 34.8%, to $266.1 million as of September 30, 2026 from $407.9 million as of December 31, 2025. The decrease in cash and cash equivalents was primarily a result of gross loan growth of $779.7 million outpacing deposit growth of $667.6 million and the repurchase of 2,207,236 shares during the nine months ended September 30, 2026.

Available-for-Sale Securities. Available-for-sale securities increased $10.6 million, or 3.9%, to $279.5 million as of September 30, 2026 from $269.0 million as of December 31, 2025, primarily as a result of purchases of mortgage-backed securities.

Loans. Net loans increased $788.8 million, or 13.4%, to $6.69 billion as of September 30, 2026 from $5.90 billion as of December 31, 2025. The increase resulted primarily from increases in: commercial real estate loans, which increased $380.7 million, or 19.8%; commercial and industrial loans, which increased $129.7 million, or 12.9%; construction and land development loans, which increased $115.9 million, or 15.9%; residential real estate loans, including home equity loans, which increased $100.0 million, or 7.5%; multi-family loans, which increased $67.4 million, or 13.0%; and consumer loans, which increased $32.3 million, or 15.9%, partially offset by a decrease in mortgage warehouse loans of $42.9 million, or 15.3%. The increase in our loan portfolio reflects our strategy to prudently grow the balance sheet by continuing to diversify into higher-yielding loans to improve net margins while managing interest rate risk.

Loans to borrowers in the cannabis industry increased $171.5 million, or 42.4%, to $576.3 million as of September 30, 2026 from $404.8 million as of December 31, 2025. Of those totals, $401.3 million and $228.8 million at September 30, 2026 and December 31, 2025, respectively, were direct loans to cannabis companies and were collateralized by real estate.

Collateral dependent loans increased $126.9 million, or 301.8%, to $168.9 million as of September 30, 2026, from $42.0 million as of December 31, 2025, primarily attributable to one commercial and industrial relationship totaling $71.5 million and one non-owner occupied commercial real estate relationship totaling $38.1 million. Both relationships are actively being managed through workout strategies. Based on management's evaluation as of September 30, 2026, only one commercial and industrial PCD loan required a specific reserve of $1.6 million, with no additional losses expected on the three relationships.

Non-Public Investments. Non-public investments increased $15.4 million, or 45.7%, to $49.2 million as of September 30, 2026 compared to $33.7 million as of December 31, 2025, primarily as a result of the Company's continued investment in income tax credit entities.

Deferred Income Tax Assets. Deferred income tax assets increased $13.5 million, or 27.7%, to $62.4 million as of September 30, 2026 compared to $48.8 million as of December 31, 2025, primarily as a result of the purchase of low-income housing tax credits during the three months ended September 30, 2026.

Deposits. Deposits increased $667.6 million, or 11.4%, to $6.52 billion as of September 30, 2026 from $5.85 billion as of December 31, 2025. Core deposits (which we define as all deposits including certificates of deposit, other than brokered deposits) increased $510.6 million, or 9.6%, to $5.83 billion as of September 30, 2026 from $5.32 billion as of December 31, 2025. The increase in deposits was the result of growth in customer deposits, which primarily included the following: noninterest-bearing demand deposits, which increased $170.2 million, or 20.6%; money market accounts, which increased $126.8 million, or 7.7%; NOW accounts, which increased $107.2 million, or 16.2%; and customer certificates of deposit, which increased $94.3 million, or 4.8%. Brokered deposits increased $156.9 million, or 29.3%, to $692.6 million as of September 30, 2026 from $535.7 million as of December 31, 2025.

Deposits from customers in the cannabis industry increased $122.1 million, or 26.9%, to $575.1 million as of September 30, 2026 from $453.0 million as of December 31, 2025.

FHLB Borrowings. FHLB borrowings decreased $45.9 million, or 23.4%, to $150.3 million as of September 30, 2026 from $196.2 million as of December 31, 2025, primarily driven by paydowns of FHLB borrowings and increased usage of brokered deposits.

Accrued Expenses and Other Liabilities. Accrued expenses and other liabilities increased $56.7 million, or 80.2%, to $127.4 million as of September 30, 2026 from $70.7 million as of December 31, 2025, primarily as a result of the Company calling $21.4 million in collateral on our derivatives and a $16.5 million increase in our derivative liabilities driven by market rate changes, and $8.5 million increase in accrued federal taxes, a $6.3 million increase in lease liabilities as a result of the opening of three new branches and a $4.8 million increase in deferred solar investments for two new solar tax credit investment commitments.

Shareholders' Equity. Total shareholders' equity decreased $1.5 million, or 0.2%, to $857.4 million as of September 30, 2026 from $858.9 million as of December 31, 2025, due to the $40.9 million decrease in additional paid-in capital resulting from the completion of our share repurchase program in which we repurchased a total of 2,207,236 shares during the nine months ended September 30, 2026 at an all-in weighted average cost of $20.96 per share totaling $46.3 million, together with a $12.2 million, or 390.1%, increase in other comprehensive loss as a result of the interest rate environment negatively impacting the value of our AFS securities portfolio and our balance sheet hedges and dividends paid of $9.4 million, partially offset by net income of $59.2 million during the nine months ended September 30, 2026.

Comparison of Operating Results for the Three Months Ended September 30, 2026 and 2025

Net Income. Net income increased $7.8 million, or 50.6%, to $23.1 million, or $0.58 per diluted common share, for the quarter ended September 30, 2026, compared to net income of $15.4 million, or $0.43 per diluted common share, for the quarter ended September 30, 2025. Net interest income increased $23.3 million, or 48.3%, and noninterest income increased $1.4 million, or 38.6%, partially offset by increased noninterest expense of $15.8 million, or 51.7%, and increased income tax expense of $1.3 million, or 27.9%.

Operating net income, excluding one-time charges, amounted to $23.8 million, or $0.60 per basic and diluted common share for the quarter ended September 30, 2026 compared to operating net income, excluding one-time charges, of $16.0 million, or $0.45 per basic and diluted common share, for the quarter ended September 30, 2025, which represents an increase of $7.8 million, or 48.9%.

The material one-time charges for the quarter ended September 30, 2026 were:

●

Contract settlement fees of $871,000 ($695,000 net of tax).

The material one-time charges for the quarter ended September 30, 2025 were:

●

Merger and acquisition costs of $994,000 ($766,000 net of tax) related to the Company's acquisition of Provident; and

●

State voluntary disclosure agreement tax expenses of $561,000 ($443,000 net of federal income tax) for new state income tax expenses; partially offset by

●

Defined benefit pension termination refund of $739,000 ($569,000 net of tax).

Interest and Dividend Income. Interest and dividend income increased $34.5 million, or 42.2%, to $116.2 million for the quarter ended September 30, 2026 from $81.7 million for the quarter ended September 30, 2025, primarily due to increased interest and fees on loans of $33.4 million, or 43.1%. The increase in interest and fees on loans was primarily due to an increase of $1.99 billion, or 43.1%, in the average balance of the loan portfolio to $6.60 billion for the quarter ended September 30, 2026 from $4.61 billion for the quarter ended September 30, 2025, reflecting both the Provident acquisition, which was completed on November 15, 2025, and the growth of our commercial and construction loan portfolios.

Average interest-earning assets increased $2.09 billion, or 41.2%, to $7.15 billion for the quarter ended September 30, 2026 from $5.06 billion for the quarter ended September 30, 2025. The yield on interest-earning assets increased 4 basis points to 6.45% for the quarter ended September 30, 2026 from 6.41% for the quarter ended September 30, 2025.

Interest and dividend income included $2.6 million of fair value mark accretion related to the acquisition of Provident, representing 3.8%, or 15 basis points, of net interest margin, during the three months ended September 30, 2026. The Company recorded no fair value mark accretion during the three months ended September 30, 2025, as the acquisition of Provident closed on November 15, 2025.

Interest Expense. Total interest expense increased $11.2 million, or 33.4%, to $44.7 million for the quarter ended September 30, 2026 from $33.5 million for the quarter ended September 30, 2025. Interest expense on deposits increased $11.6 million, or 37.2%, to $42.9 million for the quarter ended September 30, 2026 from $31.3 million for the quarter ended September 30, 2025. The increase in interest expense on deposits was primarily driven by an increase in the average balance of certificates of deposit and individual retirement accounts of $749.2 million, or 38.7%, to $2.68 billion for the quarter ended September 30, 2026 from $1.93 billion for the quarter ended September 30, 2025; an increase in the average balance of money market accounts of $616.3 million, or 55.1%, to $1.74 billion for the quarter ended September 30, 2026 from $1.12 billion for the quarter ended September 30, 2025; and an increase in the average balance of NOW accounts of $302.6 million, or 64.7%, to $770.4 million for the quarter ended September 30, 2026 from $467.8 million for the quarter ended September 30, 2025, partially offset by a decrease in the weighted average rate on certificates of deposit and individual retirement accounts of 28 basis points to 3.89% for the quarter ended September 30, 2026 from 4.18% for the quarter ended September 30, 2025.

Interest expense on FHLB and FRB borrowings decreased $420,000, or 18.8%, to $1.8 million for the quarter ended September 30, 2026 from $2.2 million for the quarter ended September 30, 2025, primarily from a decrease in the average balance of FHLB borrowings of $121.2 million, or 60.6%, to $78.7 million during the quarter ended September 30, 2026 from $199.9 million for the quarter ended September 30, 2025, partially offset by an increase in the average balance of FRB borrowings of $100.5 million, or 100%, to $100.5 million during the quarter ended September 30, 2026 from $0 during the quarter ended September 30, 2025.

Net Interest Income. Net interest income increased $23.3 million, or 48.3%, to $71.4 million for the quarter ended September 30, 2026 from $48.2 million for the quarter ended September 30, 2025, primarily due to a $2.09 billion, or 41.2%, increase in the average balance of interest-earning assets to $7.15 billion for the quarter ended September 30, 2026 from $5.06 billion for the quarter ended September 30, 2025 and a decrease in the weighted average rate on interest-bearing liabilities of 28 basis points to 3.18% for the quarter ended September 30, 2026 from 3.46% for the quarter ended September 30, 2025. These increases were partially offset by an increase in the average balance of interest-bearing liabilities of $1.74 billion, or 45.4%, to $5.59 billion at September 30, 2026 from $3.84 billion at September 30, 2025.

Provision for Credit Losses. Based on management's analysis of the adequacy of the ACL, a provision of $1.2 million was recorded for the quarter ended September 30, 2026, of which $1.4 million related to the provision for credit losses on loans, compared to a provision of $1.4 million for the quarter ended September 30, 2025, which included a $1.0 million provision for credit losses on loans. The increase in the provision for credit losses on loans was primarily driven by loan growth, charge-off replenishment and lower prepayment speed forecasts updated with rising interest rates. The provision for credit losses on unfunded commitments decreased $500,000 during the three months ended September 30, 2026 as a result of commercial and industrial drawdowns and credit line reductions.

Noninterest Income. Noninterest income increased $1.4 million, or 38.6%, to $5.1 million for the quarter ended September 30, 2026 from $3.7 million for the quarter ended September 30, 2025. The increase resulted primarily from increased customer service fees of $1.0 million, or 40.3%, due to higher cash management, loan and debit card fees.

The table below sets forth our noninterest income for the three months ended September 30, 2026 and 2025:



	Three Months Ended				Change
	September 30, 2026		September 30, 2025		Amount		Percent

	(Dollars in thousands)
Customer service fees	$	3,505	$	2,498	$	1,007	40.31%
Increase in cash surrender value of BOLI		808		631		177	28.05%
Mortgage banking income		165		148		17	11.49%
Swap contract income		479		208		271	130.29%
(Loss) gain on sale of loans, net		(185)		45		(230)	(511.11)%
Other income		333		152		181	119.08%
Total noninterest income	$	5,105	$	3,682	$	1,423	38.65%

Noninterest Expense. Noninterest expense increased $15.8 million, or 51.7%, to $46.3 million for the quarter ended September 30, 2026 from $30.5 million for the quarter ended September 30, 2025. Salaries and employee benefit expenses increased $8.9 million, or 47.5%, resulting primarily from a $4.8 million increase in employee compensation, a $980,000 increase in medical and dental benefits, a $964,000 increase in employee bonus expense, a $335,000 increase in federal employer taxes and a $308,000 increase in 401(k) match expenses, all due to headcount increases related to the Provident acquisition and the Company's continued organic growth; a $739,000 increase in pension expense resulting from a liquidation refund for the same amount during the quarter ended September 30, 2025; and a $434,000 increase in stock-based compensation as a result of the grants made during the current year. Data processing expenses increased $2.4 million, or 83.8%, primarily driven by our continued investment in technology and related systems in support of upcoming revenue initiatives, requiring the operation of systems in parallel for a period of time while new systems are implemented. Occupancy and equipment expenses increased $1.5 million, or 95.4%, primarily driven by the Provident acquisition, as well as the opening of three new branches and contract settlement fees. Director and professional service fees increased $1.2 million, or 42.4%, primarily driven by increased legal expenses resulting from contract settlement fees of $651,000. Core deposit intangible amortization expense increased $855,000, or 2,310.8%, primarily driven by amortization of the core deposit intangible acquired with Provident.

The table below sets forth our noninterest expense for the three months ended September 30, 2026 and 2025:



	Three Months Ended				Change
	September 30, 2026		September 30, 2025		Amount		Percent

	(Dollars in thousands)
Salaries and employee benefits	$	27,499	$	18,641	$	8,858	47.52%
Data processing expenses		5,351		2,911		2,440	83.82%
Director and professional service fees		4,158		2,920		1,238	42.40%
Occupancy and equipment expenses		3,047		1,559		1,488	95.45%
FDIC and state insurance assessments		1,434		928		506	54.53%
Marketing and charitable contribution expenses		1,073		949		124	13.07%
Core deposit intangible amortization expense		892		37		855	2310.81%
General and administrative expenses		2,827		2,554		273	10.69%
Total noninterest expense	$	46,281	$	30,499	$	15,782	51.75%

Income Tax Expense. Income tax expense increased $1.3 million, or 27.9%, to $5.9 million for the quarter ended September 30, 2026 from $4.6 million for the quarter ended September 30, 2025. The increase in tax expense was from higher pre-tax income during the quarter ended September 30, 2026 compared to September 30, 2025. The effective tax rate was 20.3% and 23.0% for the quarters ended September 30, 2026 and 2025, respectively. The decrease in the effective tax rate was driven by investment in two income tax credit entities, as well as the purchase of low-income housing tax credits during the quarter ended September 30, 2026.

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. Non-accrual loans were included in the computation of average balances. All average balances are daily average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense; such fees, discounts and premiums were not material for the periods presented.


		Three Months Ended
		September 30, 2026							September 30, 2025
		Average							Average
		Outstanding					Average		Outstanding					Average
		Balance			Interest		Yield/Rate ⁽⁴⁾		Balance			Interest		Yield/Rate ⁽⁴⁾

		(Dollars in thousands)
Interest-earning assets:
Loans		$	6,599,690		$	110,730	6.66	%	$	4,612,631		$	77,365	6.65	%
Securities			280,383			3,144	4.45	%		236,187			2,253	3.78	%
Other investments ⁽⁵⁾			22,788			252	4.39	%		32,585			223	2.72	%
Short-term investments ⁽⁵⁾			243,386			2,030	3.31	%		178,290			1,847	4.11	%
Total interest-earning assets			7,146,247			116,156	6.45	%		5,059,693			81,688	6.41	%
Non-interest-earning assets			409,580							256,928
Allowance for credit losses			(81,486)							(42,746)
Total assets		$	7,474,341						$	5,273,875

Interest-bearing liabilities:
Savings accounts		$	218,715			488	0.89	%	$	121,704			181	0.59	%
NOW accounts			770,406			2,771	1.43	%		467,761			1,397	1.18	%
Money market accounts			1,735,863			13,305	3.04	%		1,119,539			9,331	3.31	%
Certificates of deposit and individual retirement accounts			2,682,909			26,332	3.89	%		1,933,665			20,364	4.18	%
Total interest-bearing deposits			5,407,893			42,896	3.15	%		3,642,669			31,273	3.41	%
FHLB borrowings			78,665			868	4.38	%		199,852			2,240	4.45	%
FRB borrowings			100,543			952	3.76	%		-			-	-	%
Total interest-bearing liabilities			5,587,101			44,716	3.18	%		3,842,521			33,513	3.46	%
Non-interest-bearing deposits			915,117							606,046
Other non-interest-bearing liabilities			116,917							95,329
Total liabilities			6,619,135							4,543,896
Shareholders' equity			855,206							729,979
Total liabilities and shareholders' equity		$	7,474,341						$	5,273,875
Net interest income					$	71,440						$	48,175
Net interest rate spread ⁽¹⁾							3.27	%						2.95	%
Net interest-earning assets ⁽²⁾		$	1,559,146						$	1,217,172
Net interest margin ⁽³⁾							3.97	%						3.78	%

Average interest-earning assets to interest-bearing liabilities			127.91	%						131.68	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.

(4)	Annualized.

(5)	Other investments are comprised of FRB stock, FHLB stock and swap collateral accounts. Short-term investments are comprised of cash and cash equivalents

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to volume and the changes due to rate. There were no out-of-period items or adjustments required to be excluded from the table below.


		Three Months Ended
		September 30, 2026 vs. 2025
		Increase (Decrease) Due to				Total
						Increase
		Volume		Rate		(Decrease)

		(In thousands)
Interest-earning assets:
Loans		$	33,339	$	26	$	33,365
Securities			460		431		891
Other investments			(28)		57		29
Short-term investments			392		(209)		183
Total interest-earning assets			34,163		305		34,468

Interest-bearing liabilities:
Savings accounts			189		118		307
NOW accounts			1,044		330		1,374
Money market accounts			4,653		(679)		3,974
Certificates of deposit and individual retirement accounts			7,239		(1,271)		5,968
Total interest-bearing deposits			13,125		(1,502)		11,623
FHLB borrowings			(1,338)		(34)		(1,372)
FRB borrowings			952		-		952
Total interest-bearing liabilities			12,739		(1,536)		11,203

Change in net interest income		$	21,424	$	1,841	$	23,265

Comparison of Operating Results for the Nine Months Ended September 30, 2026 and 2025

Net Income. Net income increased approximately $16.6 million, or 39.1%, to $59.2 million, or $1.47 per diluted common share, for the nine months ended September 30, 2026, compared to net income of $42.6 million, or $1.14 per diluted common share, for the nine months ended September 30, 2025. The increase was primarily due to increased net interest income of $66.7 million, or 48.1%, partially offset by increased noninterest expense of $44.1 million, or 49.6%, and increased provision for credit losses of $5.1 million, or 88.4%.

Operating net income, excluding one-time charges, amounted to $61.5 million, or $1.52 per diluted common share, for the nine months ended September 30, 2026 compared to operating net income, excluding one-time charges, of $44.7 million, or $1.20 per diluted common share, for the nine months ended September 30, 2025, an increase of $16.8 million, or 37.5%.

The material one-time charges for the nine months ended September 30, 2026 were:

●

Contract settlement fees of $871,000 ($671,000 net of tax);

●

Non-recurring fees for business line expansion of $1.2 million ($885,000 net of tax);

●

Final merger and acquisition costs of $830,000 ($639,000 net of tax) related to the Company's completed acquisition of Provident; and

●

Tax expense and a modified endowment contract penalty of $78,000 related to the surrender of BOLI policies acquired from Provident.

The material one-time charges for the nine months ended September 30, 2025 were:

●

Merger and acquisition costs of $1.5 million ($1.2 million net of tax) related to the Company's acquisition of Provident;

●

State voluntary disclosure agreement tax expenses of $561,000 ($443,000 net of tax) for new state income tax expenses;

●

Net defined benefit pension termination expense of $480,000 ($366,000 net of tax); and

●

Tax expense and a modified endowment contract penalty of $218,000 ($154,000 net of tax) related to the surrender of BOLI policies.

Interest and Dividend Income. Interest and dividend income increased $95.2 million, or 40.0%, to $333.6 million for the nine months ended September 30, 2026 from $238.4 million for the nine months ended September 30, 2025, primarily due to a $93.8 million, or 42.0%, increase in interest and fees on loans, reflecting the Provident acquisition and the growth of our commercial and construction loan portfolios. The increase in interest and fees on loans was primarily due to an increase of $1.87 billion, or 41.7%, in the average balance of the loan portfolio to $6.36 billion for the nine months ended September 30, 2026 from $4.49 billion for the nine months ended September 30, 2025 reflecting the Provident acquisition, which was completed on November 15, 2025, and the growth of our commercial and construction loan portfolios.

Average interest-earning assets increased $1.96 billion, or 39.4%, to $6.92 billion for the nine months ended September 30, 2026 from $4.96 billion for the nine months ended September 30, 2025. The yield on interest-earning assets increased 2 basis points to 6.44% for the nine months ended September 30, 2026 from 6.42% for the nine months ended September 30, 2025.

Interest Expense. Total interest expense increased $28.5 million, or 28.6%, to $128.2 million for the nine months ended September 30, 2026 from $99.7 million for the nine months ended September 30, 2025. Interest expense on deposit accounts increased $28.0 million, or 29.4%, to $123.2 million for the nine months ended September 30, 2026 from $95.2 million for the nine months ended September 30, 2025. The increase was primarily due to an increase in the average balance of certificate of deposit and individual retirement accounts of $633.8 million, or 32.4%, to $2.59 billion for the nine months ended September 30, 2026 from $1.96 billion for the nine months ended September 30, 2025 and an increase in the average balance of money market accounts of $621.0 million, or 56.7%, to $1.72 billion for the nine months ended September 30, 2026 from $1.09 billion for the nine months ended September 30, 2025, partially offset by a decrease in the weighted average rate on certificate of deposit and individual retirement accounts of 43 basis points to 3.94% for the nine months ended September 30, 2026 from 4.37% for the nine months ended September 30, 2025.

Net Interest Income. Net interest income increased $66.7 million, or 48.1%, to $205.5 million for the nine months ended September 30, 2026 from $138.7 million for the nine months ended September 30, 2025, primarily due to a $1.96 billion, or 39.4%, increase in the average balance of interest-earning assets to $6.92 billion for the nine months ended September 30, 2026 from $4.96 billion for the nine months ended September 30, 2025 and a decrease in the weighted average rate on interest-bearing liabilities of 36 basis points to 3.17% for the nine months ended September 30, 2026 from 3.53% for the nine months ended September 30, 2025. These increases were partially offset by an increase in the average balance of interest-bearing liabilities of $1.63 billion, or 43.1%, to $5.40 billion for the nine months ended September 30, 2026 from $3.77 billion for the nine months ended September 30, 2025.

Provision for Credit Losses. Based on management's analysis of the adequacy of the ACL, a provision of $10.8 million was recorded for the nine months ended September 30, 2026, all of which related to the provision for credit losses on loans, compared to a provision of $5.7 million for the nine months ended September 30, 2025, which included a $6.2 million provision for credit losses on loans. The increase of $4.5 million, or 72.8%, in the provision for credit losses on loans was primarily driven by loan growth, larger peer commercial real estate credit losses impacting quantitative reserves, and an elevated qualitative factor risk grade for the commercial and industrial loan portfolio. The Company did not record a provision for credit losses on unfunded commitments during the nine months ended September 30, 2026, while recording a release of credit losses on unfunded commitments of $517,000 during the nine months ended September 30, 2025. The change was driven by an increase in unfunded commitments during the nine months ended September 30, 2026.

Noninterest Income. Noninterest income increased $3.0 million, or 25.1%, to $15.2 million for the nine months ended September 30, 2026 from $12.1 million for the nine months ended September 30, 2025. The increase resulted primarily from increased customer service fees of $2.7 million, or 35.6%, due to higher cash management, debit card and interchange fees. The table below sets forth our noninterest income for the nine months ended September 30, 2026 and 2025:


	Nine Months Ended
	September 30,				Change
	2026		2025		Amount		Percent

	(Dollars in thousands)
Customer service fees	$	10,317	$	7,610	$	2,707	35.57%
Increase in cash surrender value of BOLI		2,623		2,449		174	7.10%
Mortgage banking income		376		417		(41)	(9.83)%
Swap contract income		751		820		(69)	(8.41)%
(Loss) gain on sale of loans, net		41		93		(52)	(55.91)%
Other income		1,069		747		322	43.11%
Total noninterest income	$	15,177	$	12,136	$	3,041	25.06%

Noninterest Expense. Noninterest expense increased $44.1 million, or 49.6%, to $133.0 million for the nine months ended September 30, 2026 from $88.9 million for the nine months ended September 30, 2025. Salaries and employee benefit expenses increased $22.2 million, or 39.3%, primarily from a $13.4 million increase in employee compensation expense, a $2.9 million increase in medical and dental benefits expense, a $2.3 million increase in employee bonus expense, an $855,000 increase in 401(k) employer match expenses and an $874,000 increase in employer federal income tax withholding expenses driven by three quarters of increased headcount from the Provident acquisition and the hiring of additional employees consistent with our organic growth, as well as a $1.5 million increase in employee stock compensation expense resulting from the original grants being awarded in April 2025 driving lower expense during the nine months ended September 30, 2025, offset partially by a $778,000 decrease in LTIP expenses and a $480,000 decrease in pension expenses due to completion of the Plan liquidation during 2025. Data processing expenses increased $6.5 million, or 79.8%, primarily driven by our continued investment in technology and related systems in support of upcoming revenue initiatives, requiring the operation of systems in parallel for a period of time while new systems are implemented. Director and professional service fees increased $4.0 million, or 50.1%, primarily driven by a $1.6 million increase in director stock compensation expense, a $1.2 million increase in consulting expense from business line expansion fees and a $731,000 increase in contract settlement legal expenses. General and administrative expenses increased $3.0 million, or 48.5%, primarily driven by our acquisition of Provident resulting in $2.6 million in additional core deposit intangible amortization expenses. Also contributing to the increase in general and administrative expenses was $275,000 in utility expenses, $230,000 in courier expenses and $213,000 in loan workout expenses driven by the Provident acquisition and the opening of three new branches during 2026. Data processing expenses increased $6.5 million, or 79.8%, during the nine months ended September 30, 2026, primarily the result of our significant investment in technology and systems, as well as three full quarters of increased transactional volume from the Provident acquisition. Occupancy and equipment expenses increased $3.4 million, or 73.9%, primarily driven by our acquisition of Provident, as well as the opening of three new branches and contract settlement fees. Core deposit intangible amortization expense increased $2.6 million, or 2,288.4%, primarily driven by amortization of the core deposit intangible acquired with Provident.

The table below sets forth our noninterest expense for the nine months ended September 30, 2026 and 2025:


	Nine Months Ended
	September 30,				Change
	2026		2025		Amount		Percent

	(Dollars in thousands)
Salaries and employee benefits	$	78,515	$	56,358	$	22,157	39.31%
Data processing expenses		14,689		8,169		6,520	79.81%
Director and professional service fees		12,023		8,010		4,013	50.10%
Occupancy and equipment expenses		8,005		4,604		3,401	73.87%
Marketing and charitable contribution expenses		3,636		2,750		886	32.22%
FDIC and state insurance assessments		4,170		2,624		1,546	58.92%
Core deposit intangible amortization expense		2,675		112		2,563	2288.39%
General and administrative expenses		9,285		6,251		3,034	48.54%
Total noninterest expense	$	132,998	$	88,878	$	44,120	49.64%

Income Tax Expense. Income tax expense increased $4.0 million, or 29.1%, to $17.6 million for the nine months ended September 30, 2026 from $13.7 million for the nine months ended September 30, 2025, mainly resulting from the increase in net income during the quarter ended September 30, 2026. The effective tax rate was 22.9% and 24.3% for the nine months ended September 30, 2026 and 2025, respectively. The decrease in the effective tax rate was driven by continued income tax credit purchases and investments.


		Nine Months Ended
		September 30, 2026							September 30, 2025
		Average							Average
		Outstanding					Average		Outstanding					Average
		Balance			Interest		Yield/Rate ⁽⁴⁾		Balance			Interest		Yield/Rate ⁽⁴⁾
Interest-earning assets:
Loans		$	6,357,513		$	317,345	6.67	%	$	4,487,007		$	223,524	6.66	%
Securities			277,655			8,609	4.15	%		233,156			6,850	3.93	%
Other investments ⁽⁵⁾			28,435			1,130	5.31	%		29,565			1,046	4.73	%
Short-term investments ⁽⁵⁾			258,625			6,549	3.39	%		214,386			6,966	4.34	%
Total interest-earning assets			6,922,228			333,633	6.44	%		4,964,114			238,386	6.42	%
Non-interest-earning assets			393,509							277,045
Allowance for credit losses			(83,597)							(40,468)
Total assets		$	7,232,140						$	5,200,691

Interest-bearing liabilities:
Savings accounts		$	212,354			1,075	0.68	%	$	118,426			360	0.41	%
NOW accounts			704,120			6,949	1.32	%		469,224			3,632	1.03	%
Money market accounts			1,715,378			38,818	3.03	%		1,094,418			27,204	3.32	%
Certificates of deposit and individual retirement accounts			2,592,828			76,319	3.94	%		1,959,009			64,005	4.37	%
Total interest-bearing deposits			5,224,680			123,161	3.15	%		3,641,077			95,201	3.50	%
FHLB borrowings			140,645			4,063	3.86	%		131,691			4,472	4.54	%
FRB borrowings			34,066			957	3.76	%		183			6	4.38	%
Total interest-bearing liabilities			5,399,391			128,181	3.17	%		3,772,951			99,679	3.53	%
Non-interest-bearing deposits			874,812							590,686
Other non-interest-bearing liabilities			104,242							92,824
Total liabilities			6,378,445							4,456,461
Shareholders' equity			853,695							744,230
Total liabilities and shareholders' equity		$	7,232,140						$	5,200,691
Net interest income					$	205,452						$	138,707
Net interest rate spread ⁽¹⁾							3.27	%						2.89	%
Net interest-earning assets ⁽²⁾		$	1,522,837						$	1,191,163
Net interest margin ⁽³⁾							3.97	%						3.74	%

Average interest-earning assets to interest-bearing liabilities			128.20	%						131.57	%

(1)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)	Net interest margin represents net interest income divided by average total interest-earning assets.

(4)	Annualized.

(5)	Other investments are comprised of FRB stock, FHLB stock and swap collateral accounts. Short-term investments are comprised of cash and cash equivalents

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.


		Nine Months Ended
		September 30, 2026 vs. 2025
		Increase (Decrease) Due to				Total
						Increase
		Volume		Rate		(Decrease)

		(In thousands)
Interest-earning assets:
Loans		$	93,368	$	453	$	93,821
Securities			1,363		396		1,759
Other			(38)		122		84
Short-term investments			6,007		(6,424)		(417)
Total interest-earning assets			100,700		(5,453)		95,247

Interest-bearing liabilities:
Savings accounts			389		326		715
NOW accounts			2,141		1,176		3,317
Money market accounts			13,792		(2,178)		11,614
Certificates of deposit and individual retirement accounts			17,750		(5,436)		12,314
Total interest-bearing deposits			34,072		(6,112)		27,960
FHLB borrowings			342		(751)		(409)
FRB borrowings			952		(1)		951
Total interest-bearing liabilities			35,366		(6,864)		28,502

Change in net interest income		$	65,334	$	1,411	$	66,745

Management of Market Risk

General. The Bank's most significant form of market risk is interest rate risk as the majority of our assets and liabilities are sensitive to changes in 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 ERM 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 consistent with the policy and guidelines approved by our Board of Directors. The ERM Committee meets at least quarterly, is comprised of directors, executive officers and certain members of 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 have sought 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:

●

maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations;

●

maintaining a prudent level of liquidity;

●

maintaining a prudent level of off-balance sheet funding capacity;

●

growing our volume of core deposit accounts;

●

utilizing our AFS securities portfolio and interest rate swaps as part of our balance sheet asset and liability and interest rate risk management strategy intended to reduce the impact of movements in interest rates on net interest income and the economic value of equity;

●

managing our utilization of wholesale funding with borrowings from the FHLB, FRB and brokered deposits in a prudent manner;

●

continuing to diversify our loan portfolio by adding more commercial-related loans and consumer loans, which typically have shorter maturities and/or balloon payments; and

●

continuing to price our one-to-four family residential real estate loan products in a way that encourages borrowers to select our adjustable-rate loans as opposed to longer-term, fixed-rate loans.

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.

On occasion, we have employed various financial risk methodologies that are intended to limit, or "hedge," the adverse effects of rising or decreasing interest rates on our loan portfolios and short-term liabilities. We also engage in hedging strategies with respect to arrangements where our customers swap floating interest rate obligations for fixed interest rate obligations, or vice versa. Our hedging activity varies based on the level and volatility of interest rates and other changing market conditions.

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. We first estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by various basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100-basis point increase in the "Change in Interest Rates" column in the table below.

The following table sets forth, as of September 30, 2026, 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.


At September 30, 2026
Change in Interest Rates	Net Interest Income		Year 1 Change from
(basis points) ⁽¹⁾	Year 1 Forecast		Level
(Dollars in thousands)
		313,603	6.8	%
		307,671	4.8	%
		301,449	2.6	%
Level		293,698	-	%
(100)		285,737	(2.7)	%
(200)		280,513	(4.5)	%
(300)		276,082	(6.0)	%

(1)	Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that as of September 30, 2026, we would have experienced a 4.8% increase in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 4.5% decrease in net interest income in the event of an instantaneous 200 basis point decrease in market interest rates.

Economic Value of Equity ("EVE"). We also compute amounts by which the net present value of our assets and liabilities, 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 and 300 basis point increments or decreases instantaneously by 100, 200 and 300 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The following table sets forth, as of September 30, 2026, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.


					Estimated Increase
At September 30, 2026		Estimated			(Decrease) in EVE
Change in Interest Rates (basis points) ⁽¹⁾		EVE			Amount			Percent
(Dollars in thousands)
			1,313,557			(162,159)		(11.0)	%
			1,372,841			(102,875)		(7.0)	%
			1,429,845			(45,871)		(3.1)	%
Level			1,475,716			N/A		-	%
(100)			1,502,117			26,401		1.8	%
(200)			1,498,494			22,778		1.5	%
(300)			1,464,219			(11,497)		(0.8)	%

(1)	Assumes an immediate uniform change in interest rates at all maturities.

(2)	EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

The table above indicates that as of September 30, 2026, we would have experienced a 7.0% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 1.5% increase 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 EVE tables presented above 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 materially. 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, deposits, derivatives and borrowings.

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We are also able to borrow from the FHLB and the Discount Window at the FRB. As of September 30, 2026, we had outstanding advances of $150.3 million from the FHLB. As of September 30, 2026, we had unused borrowing capacity of $680.3 million with the FHLB. At September 30, 2026, the Bank had $1.16 billion available from the discount window under the Borrower in Custody ("BIC") program at the FRB. Additionally, as of September 30, 2026, we had $692.6 million of brokered deposits and pursuant to our internal liquidity policy, which allows us to utilize brokered deposits up to 25.0% of our total assets, we had an additional capacity of up to approximately $1.23 billion of brokered deposits. Uninsured deposits were $2.00 billion and $1.66 billion as of September 30, 2026 and December 31, 2025, respectively.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities.

At September 30, 2026, we had $34.7 million in outstanding commitments to originate loans. In addition, we had $796.8 million in unused lines of credit to borrowers, $475.0 million in unused mortgage warehouse lines, $440.7 million in unadvanced construction loans and $7.5 million in letters of credit outstanding.

Non-brokered certificates of deposit due within one year of September 30, 2026 totaled $1.83 billion, or 28.0%, of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including brokered deposits, FHLB advances and FRB borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the non-brokered certificates of deposit due on or before September 30, 2027, or on our other interest-bearing deposit accounts. We believe, however, based on historical experience and current market interest rates that we will retain upon maturity a large portion of our certificates of deposit with maturities of one year or less as of September 30, 2026.

Our primary investing activity is originating loans. During the nine months ended September 30, 2026, we originated $766.8 million of loans, net of repayments.

Financing activities consist primarily of activity in deposit accounts and FHLB advances. We experienced net increases in total deposits of $667.6 million for the nine months ended September 30, 2026. At September 30, 2026 and December 31, 2025, the level of brokered time deposits was $692.6 million and $535.7 million, respectively. Deposit flows are affected primarily by the overall level of interest rates and the interest rates and products offered by us and our competitors. FHLB advances decreased $45.9 million during the nine months ended September 30, 2026.

For additional information, see the consolidated statements of cash flows for the nine months ended September 30, 2026 and 2025 included as part of the consolidated financial statements appearing elsewhere in this quarterly report on Form 10-Q.

We are committed to maintaining a strong liquidity position. We continuously monitor our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate by management. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding planning process, which provides the basis for the identification of our liquidity needs. We anticipate that we will have sufficient funds to meet our current funding commitments. In addition, based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

As of September 30, 2026, the Bank and the Company exceeded all of their regulatory capital requirements, and were categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category. See Note 11 of the notes to consolidated financial statements for more information.

Impact of Inflation and Changing Prices

The consolidated financial statements and related data presented in this quarterly report on Form 10-Q have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution's performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

NB Bancorp Inc. published this content on November 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 04, 2026 at 20:47 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]