NB Bancorp Inc.
05/08/2026 | Press release | Distributed by Public on 05/08/2026 13:02
Quarterly Report for Quarter Ending March 31, 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 months ended March 31, 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; 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 asset, 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 Securities and Exchange Commission or the Public Company Accounting Oversight Board; |
| ● | our ability to attract and retain key employees; and |
| ● | changes in the financial condition, results of operations or future prospects of issuers of securities that we own. |
Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
Critical Accounting Policies and Estimates
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 |
||||
|
|
March 31, 2026 |
|
March 31, 2025 |
||
|
|
|
|
|
|
|
|
Net income (GAAP) |
$ |
14,984 |
|
$ |
12,655 |
|
Add (Subtract): |
|
|
|
|
|
|
Adjustments to net income: |
|
|
|
|
|
|
Defined benefit pension termination expense |
|
- |
|
|
1,217 |
|
Non-recurring fees for business line expansion |
|
500 |
|
|
- |
|
BOLI surrender tax and modified endowment contract penalty |
|
50 |
|
|
154 |
|
Merger and acquisition expenses |
|
534 |
|
|
- |
|
Total adjustments to net income |
$ |
1,084 |
|
$ |
1,371 |
|
Less net tax benefit associated with pre-tax non-GAAP adjustments to net income |
|
(277) |
|
|
(333) |
|
Non-GAAP adjustments, net of tax |
|
807 |
|
|
1,038 |
|
Operating net income (non-GAAP) |
$ |
15,791 |
|
$ |
13,693 |
|
Weighted average common shares outstanding, basic |
|
40,969,748 |
|
|
38,755,746 |
|
Weighted average common shares outstanding, diluted |
|
41,421,002 |
|
|
38,755,746 |
|
Operating earnings per share, basic (non-GAAP) |
$ |
0.39 |
|
$ |
0.35 |
|
Operating earnings per share, diluted (non-GAAP) |
$ |
0.38 |
|
$ |
0.35 |
|
|
|
|
|
|
|
|
Pre-tax income (GAAP) |
$ |
20,352 |
|
$ |
17,569 |
|
Add (Subtract): |
|
|
|
|
|
|
Adjustments to pre-tax income: |
|
|
|
|
|
|
Defined benefit pension termination refund |
|
- |
|
|
1,217 |
|
Non-recurring fees for business line expansion |
|
500 |
|
|
- |
|
Merger and acquisition expenses |
|
534 |
|
|
- |
|
Total adjustments to pre-tax income |
|
1,034 |
|
|
1,217 |
|
Operating pre-tax income (non-GAAP) |
$ |
21,386 |
|
$ |
18,786 |
|
|
|
|
|
|
|
|
Noninterest expense (GAAP) |
$ |
42,701 |
|
$ |
28,681 |
|
Subtract (Add): |
|
|
|
|
|
|
Adjustments to noninterest expense: |
|
|
|
|
|
|
Defined benefit pension termination refund |
|
- |
|
|
1,217 |
|
Non-recurring fees for business line expansion |
|
500 |
|
|
- |
|
Merger and acquisition expenses |
|
534 |
|
|
- |
|
Total impact of non-GAAP noninterest expense adjustments |
$ |
1,034 |
|
$ |
1,217 |
|
Noninterest expense on an operating basis (non-GAAP) |
$ |
41,667 |
|
$ |
27,464 |
|
|
|
|
|
|
|
|
Operating net income (non-GAAP) |
$ |
15,791 |
|
$ |
13,693 |
|
Average assets |
|
6,970,059 |
|
|
5,146,528 |
|
Operating return on average assets (non-GAAP) |
|
0.92% |
|
|
1.08% |
|
Average shareholders' equity |
$ |
861,505 |
|
$ |
757,341 |
|
Operating return on average shareholders' equity (non-GAAP) |
|
7.43% |
|
|
7.33% |
|
|
|
|
|
|
|
|
Noninterest expense on an operating basis (non-GAAP) |
$ |
41,667 |
|
$ |
27,464 |
|
Total pre-provision net revenue (net interest income plus total noninterest income) |
|
69,381 |
|
|
47,408 |
|
Operating efficiency ratio (non-GAAP) |
|
60.06% |
|
|
57.93% |
|
|
|
|
|
|
|
|
Income tax expense (GAAP) |
$ |
5,368 |
|
$ |
4,914 |
|
Subtract (Add): |
|
|
|
|
|
|
Adjustments to income tax expense: |
|
|
|
|
|
|
Net tax benefit associated with pre-tax non-GAAP adjustments to net income |
|
(277) |
|
|
(333) |
|
BOLI surrender tax and modified endowment contract penalty |
|
(50) |
|
|
(154) |
|
Total impact of non-GAAP income tax expense adjustments |
$ |
(327) |
|
$ |
(487) |
|
Income tax expense on an operating basis (non-GAAP) |
$ |
5,041 |
|
$ |
4,427 |
|
Operating effective tax rate (non-GAAP) |
|
23.6% |
|
|
23.6% |
|
|
|
|
|
|
|
|
|
As of |
||||
|
|
March 31, 2026 |
|
December 31, 2025 |
||
|
|
|
|
|
|
|
|
Total shareholders' equity (GAAP) |
$ |
842,778 |
|
$ |
858,932 |
|
Subtract: |
|
|
|
|
|
|
Intangible assets (core deposit intangible) |
|
36,923 |
|
|
37,815 |
|
Total tangible shareholders' equity (non-GAAP) |
|
805,855 |
|
|
821,117 |
|
|
|
|
|
|
|
|
Total assets (GAAP) |
$ |
7,226,437 |
|
$ |
7,006,130 |
|
Subtract: |
|
|
|
|
|
|
Intangible assets (core deposit intangible) |
|
36,923 |
|
|
37,815 |
|
Total tangible assets (non-GAAP) |
$ |
7,189,514 |
|
$ |
6,968,315 |
|
Tangible shareholders' equity / tangible assets (non-GAAP) |
|
11.21% |
|
|
11.78% |
|
Total common shares outstanding |
|
44,765,178 |
|
|
45,770,128 |
|
Tangible book value per share (non-GAAP) |
$ |
18.00 |
|
$ |
17.94 |
Comparison of Financial Condition as of March 31, 2026 and December 31, 2025
Total Assets. Total assets increased $220.3 million, or 3.1%, to $7.23 billion as of March 31, 2026 from $7.01 billion as of December 31, 2025. The increase was primarily driven by increases in net loans, partially offset by decreases in cash and cash equivalents.
Cash and Cash Equivalents. Cash and cash equivalents decreased $32.2 million, or 7.9%, to $375.4 million as of March 31, 2026 from $407.6 million as of December 31, 2025. The decrease in cash and cash equivalents was primarily due to loan originations and the repurchase of 1,288,509 shares totaling $27.8 million, partially offset by the increase in deposits of $243.5 million during the current quarter.
Available-for-Sale Securities. Available-for-sale securities increased $8.3 million, or 3.1%, to $277.2 million as of March 31, 2026 from $269.0 million as of December 31, 2025 primarily due to purchases of U.S. treasuries, mortgage backed-securities and corporate bonds.
Loans. Net loans increased $231.0 million, or 3.9%, to $6.13 billion as of March 31, 2026 from $5.90 billion as of December 31, 2025. The increase resulted primarily from increases in: commercial and industrial loans, which increased $135.4 million, or 13.4%, construction and development loans, which increased $52.1 million, or 7.1% and multi-family residential loans, which increased $20.6 million, or 4.0%. The increase in our loan portfolio reflects our strategy to prudently grow the balance sheet by continuing to diversify into these higher-yielding loans to improve net margins and manage interest rate risk.
The Company had approximately $466.8 million and $404.8 million in loans to borrowers in the cannabis industry at March 31, 2026 and December 31, 2025, respectively. Of that total, $321.0 million and $228.8 million were direct loans to cannabis companies and were primarily collateralized by real estate at March 31, 2026 and December 31, 2025, respectively.
Deposits. Deposits increased $243.5 million, or 4.2%, to $6.10 billion as of March 31, 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 $209.1 million, or 3.9%, to $5.53 billion as of March 31, 2026 from $5.32 billion as of December 31, 2025. The increase in deposits was the result of growth in customer deposits, primarily money market accounts, which increased $92.3 million, or 5.6%, noninterest bearings demand deposits of $44.6 million, or 5.4%, certificates of deposit of $39.1 million, or 2.0%, brokered deposits of $34.4 million, or 6.4% and NOW accounts of $30.4 million, or 4.6%.
The Company had $455.6 million and $453.0 million in deposits from the cannabis industry, representing 7.5% and 7.7% of total deposits, as of March 31, 2026 and December 31, 2025, respectively.
Shareholders' Equity. Total shareholders' equity decreased $16.2 million, or 1.9%, to $842.8 million as of March 31, 2026 from $858.9 million as of December 31, 2025, primarily as a result of the repurchase of 1,288,509 shares of common stock at an all-in weighted average cost of $21.55 per share totaling $27.8 million and $3.2 million in dividends paid during the quarter, partially offset by net income of $15.0 million during the three months ended March 31, 2026.
Comparison of Operating Results for the Three Months Ended March 31, 2026 and March 31, 2025
Net Income. Net income was $15.0 million for the quarter ended March 31, 2026, compared to net income of $12.7 million for the quarter ended March 31, 2025, an increase of approximately $2.3 million, or 18.4%. An increase of $21.3 million, or 49.0%, in net interest income was partially offset by a $14.0 million, or 48.9%, increase in noninterest expense and a $5.2 million, or 446.5%, increase in the provision for credit losses.
Operating net income, excluding one-time charges, amounted to $15.8 million, or $0.38 per diluted share, for the quarter ended March 31, 2026, compared to operating net income of $13.7 million, or $0.35 per diluted share, for the quarter ended March 31, 2025, representing an increase of $2.1 million, or 15.3%.
The material one-time charges for the quarter ended March 31, 2026 include:
| ● | Pre-tax trailing merger and acquisition costs of $534 thousand ($390 thousand net of tax) related to the Company's completed acquisition of Provident Bancorp, Inc. and its wholly owned subsidiary BankProv (collectively, "Provident"); |
| ● | Non-recurring fees for business line expansion of $500 thousand ($367 thousand net of tax); and |
| ● | Tax expense and a modified endowment contract penalty of $50 thousand related to the surrender of BOLI policies from policies acquired from Provident. |
The material one-time charges for the quarter ended March 31, 2025 include:
| ● | Pension expense related to the final liquidation of the employee pension plan totaling $1.2 million ($884 thousand net of tax); and |
| ● | Tax expense and a modified endowment contract penalty related to the surrender of BOLI policies of $154 thousand. |
Interest and Dividend Income. Interest and dividend income increased $28.8 million, or 37.5%, to $105.7 million for the quarter ended March 31, 2026, from $76.9 million for the quarter ended March 31, 2025, primarily due to a $28.6 million, or 40.0% increase in interest and fees on loans. The increase in interest and fees on loans was primarily due to an increase of $1.72 billion, or 39.5%, in the average balance of the loan portfolio to $6.09 billion for the quarter ended March 31, 2026, from $4.37 billion for the quarter ended March 31, 2025, reflecting the growth of our commercial loan portfolio.
Average interest-earning assets increased $1.79 billion, or 36.7% to $6.68 billion for the quarter ended March 31, 2026, from $4.89 billion for the quarter ended March 31, 2025. The significant increase in the average balance of loans was a result of the Provident acquisition which closed during the quarter ending December 31, 2025. The yield on interest-earning assets was 6.41% for the quarter ended March 31, 2026, compared to 6.38% for the quarter ended March 31, 2025, representing a 3 basis point expansion. The ending balance of gross loans of $6.21 billion, is $119.7 million or 2.0%, higher than the average balance of gross loans at the end of the quarter, primarily the result of one large cannabis loan of $115.0 million closing near the end of the quarter, which includes a credit enhancement on a first out basis, and did not have a significant impact on loan yields during the quarter.
Interest Expense. Total interest expense increased $7.5 million, or 22.5%, to $40.8 million for the quarter ended March 31, 2026, from $33.3 million for the quarter ended March 31, 2025.
Interest expense on deposit accounts increased $7.3 million, or 22.8%, to $39.6 million for the quarter ended March 31, 2026, from $32.2 million for the quarter ended March 31, 2025. The increase was due to the Provident acquisition and organic growth which resulted in increases in the average balance of money market accounts of $638.6 million, 59.5%, to $1.71 billion for the quarter ended March 31, 2026, from $1.07 billion for the quarter ended March 31, 2025 and certificates of deposit and individual retirement accounts of $518.0 million, or 26.2%, to $2.50 billion for the quarter ended March 31, 2026, from $1.98 billion for the quarter ended March 31, 2025; offset partially by decreases in the weighted average rate on certificates of deposit and individual retirement accounts of 60 basis points to 3.99% for the quarter ended March 31, 2026, from 4.59% for the quarter ended March 31, 2025 and money market accounts of 28 basis points to 3.02% for the quarter ended March 31, 2026, from 3.29% for the quarter ended March 31, 2025.
Net Interest Income. Net interest income increased $21.3 million, or 49.0%, to $64.9 million for the quarter ended March 31, 2026, from $43.5 million for the quarter ended March 31, 2025, primarily due to a $1.79 billion, or 36.7%, increase in the average balance of interest-earning assets to $6.68 billion for the quarter ended March 31, 2026, from $4.89 billion for the quarter ended March 31, 2025 and a decrease in the weighted average rate on interest-bearing liabilities of 44 basis points from 3.63% for the quarter ended March 31, 2025 to 3.19% for the quarter ended March 31, 2026. These increases were offset partially by a $1.46 billion increase in the average balance of interest-bearing liabilities to $5.19 billion for the quarter ended March 31, 2026, from $3.73 billion for the quarter ended March 31, 2025.
Provision for Credit Losses. Based on management's analysis of the adequacy of the ACL, a total provision for credit losses of $6.3 million was recorded for the quarter ended March 31, 2026, of which $6.4 million related to the provision for credit losses on loans, compared to a total provision for credit losses of $1.2 million for the quarter ended March 31, 2025, which included a $947 thousand provision for credit losses on loans. The provision for credit losses on unfunded commitments decreased $265,000, or 125.6%, during the three months ended March 31, 2026, as a result of an increase in net unfunded commitments of $58 million in the prior quarter, compared to a $14.5 million increase in the current quarter. The increase of $5.2 million, or 446.5%, in the total provision for credit losses was primarily due to growth in the balance of commercial and industrial loans, larger peer commercial real estate credit losses realized in the prior quarter impacting quantitative reserves, and an elevated qualitative factor risk grade for the commercial and industrial loan portfolio.
The Company recorded charge-offs of $13.9 million during the quarter ended March 31, 2026, compared to $1.6 million during the quarter ended March 31, 2025. The increase in charge-offs was primarily driven by two large charge-offs of PCD commercial and industrial loans, in amounts of $10.6 million and $1.8 million. These loans were previously reserved for through purchase accounting adjustments as of the acquisition date and resulted in no additional loss to the Company.
Noninterest Income. Noninterest income increased $631 thousand, or 16.3%, to $4.5 million for the quarter ended March 31, 2026, from $3.9 million for the quarter ended March 31, 2025. The increase resulted primarily from increases in customer service fees of $573 thousand, or 22.4%, due to higher loan and cash management fees. The table below sets forth our noninterest income for the quarters ended March 31, 2026 and 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Change |
|||||||
|
|
|
March 31, 2026 |
|
March 31, 2025 |
|
Amount |
|
Percent |
|||
|
|
|
(Dollars in thousands) |
|||||||||
|
Customer service fees |
|
$ |
3,131 |
|
$ |
2,558 |
|
$ |
573 |
|
22.40% |
|
Increase in cash surrender value of BOLI |
|
|
853 |
|
|
1,031 |
|
|
(178) |
|
(17.26)% |
|
Mortgage banking income |
|
|
119 |
|
|
149 |
|
|
(30) |
|
(20.13)% |
|
Swap contract income |
|
|
201 |
|
|
88 |
|
|
113 |
|
128.41% |
|
(Loss) gain on sale of loans, net |
|
|
(1) |
|
|
27 |
|
|
(28) |
|
(103.70)% |
|
Other income |
|
|
210 |
|
|
29 |
|
|
181 |
|
624.14% |
|
Total noninterest income |
|
$ |
4,513 |
|
$ |
3,882 |
|
$ |
631 |
|
16.25% |
Noninterest Expense. Noninterest expense increased $14.0 million, or 48.9%, to $42.7 million for the quarter ended March 31, 2026, from $28.7 million for the quarter ended March 31, 2025. Salaries and employee benefit expenses increased $6.3 million, or 33.0%, resulting primarily from a $4.5 million increase in employee compensation, an $819 thousand increase in medical and dental benefits and $803 thousand increase in employee bonus expense due to a full quarter of increased headcount from the Provident acquisition and continued growth, along with a $495 thousand increase in stock compensation expense as result from grants made subsequent to March 31, 2025; partially offset by a $1.2 million decrease in pension expense due to completion of the plan liquidation during 2025. General and administrative expenses increased $2.2 million, or 156.2%, primarily due to a full quarter's worth of core deposit intangible amortization resulting in an $854 thousand increase, a $353 thousand increase in tax credit amortization expenses resulting from additional investments and a $124 thousand increase in loan workout expenses related to the acquired Provident enterprise value loan portfolio. Director and professional service fees increased $1.9 million, or 88.5%, resulting from director stock compensation from grants made subsequent to March 31, 2025 of $948 thousand and the non-recurring $500 thousand business line expansion fee.
Data processing expenses increased $1.7 million, or 60.5%, primarily the result of our significant investment in technology and systems, as well as a full quarter of increased transactional volume from the Provident acquisition.
The table below sets forth our noninterest expense for the quarters ended March 31, 2026 and 2025:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Change |
|||||||
|
|
|
March 31, 2026 |
|
March 31, 2025 |
|
Amount |
|
Percent |
|||
|
|
|
(Dollars in thousands) |
|||||||||
|
Salaries and employee benefits |
|
$ |
25,468 |
|
$ |
19,149 |
|
$ |
6,319 |
|
33.00% |
|
Data processing expenses |
|
|
4,439 |
|
|
2,765 |
|
|
1,674 |
|
60.54% |
|
Director and professional service fees |
|
|
4,049 |
|
|
2,148 |
|
|
1,901 |
|
88.50% |
|
Occupancy and equipment expenses |
|
|
2,491 |
|
|
1,580 |
|
|
911 |
|
57.66% |
|
FDIC and state insurance assessments |
|
|
1,152 |
|
|
813 |
|
|
339 |
|
41.70% |
|
Marketing and charitable contribution expenses |
|
|
1,033 |
|
|
846 |
|
|
187 |
|
22.10% |
|
Merger and acquisition expenses |
|
|
534 |
|
|
- |
|
|
534 |
|
100.00% |
|
General and administrative expenses |
|
|
3,535 |
|
|
1,380 |
|
|
2,155 |
|
156.16% |
|
Total noninterest expense |
|
$ |
42,701 |
|
$ |
28,681 |
|
$ |
14,020 |
|
48.88% |
Income Tax Expense. Income tax expense increased $454 thousand, or 9.2%, to $5.4 million for the quarter ended March 31, 2026, from $4.9 million for the quarter ended March 31, 2025. The increase was due to the increase in pretax income of $2.8 million, or 15.8%. The effective tax rate was 26.4% and 28.0% for the quarter ended March 31, 2026 and 2025, respectively, with the decline attributable to increased investments in tax credits.
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 |
|
||||||||||||||
|
|
|
March 31, 2026 |
|
March 31, 2025 |
|
||||||||||||
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
||
|
|
|
Outstanding |
|
|
|
|
Average |
|
Outstanding |
|
|
|
|
Average |
|
||
|
|
|
Balance |
|
Interest |
|
Yield/Rate (4) |
|
Balance |
|
Interest |
|
Yield/Rate (4) |
|
||||
|
|
|
(Dollars in thousands) |
|
||||||||||||||
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Loans |
|
$ |
6,090,227 |
|
$ |
100,042 |
6.66 |
% |
$ |
4,366,206 |
|
$ |
71,440 |
6.64 |
% |
||
|
Securities |
|
273,308 |
|
2,708 |
4.02 |
% |
230,406 |
|
2,290 |
4.03 |
% |
||||||
|
Other investments (5) |
|
28,275 |
|
265 |
3.80 |
% |
27,529 |
|
219 |
3.23 |
% |
||||||
|
Short-term investments (5) |
|
290,385 |
|
2,671 |
3.73 |
% |
264,343 |
|
2,902 |
4.45 |
% |
||||||
|
Total interest-earning assets |
|
6,682,195 |
|
105,686 |
6.41 |
% |
4,888,484 |
|
76,851 |
6.38 |
% |
||||||
|
Non-interest-earning assets |
|
375,966 |
|
|
|
|
|
296,729 |
|
|
|
|
|||||
|
Allowance for credit losses |
|
(88,102) |
|
|
|
|
|
(38,685) |
|
|
|
|
|||||
|
Total assets |
|
$ |
6,970,059 |
|
|
|
|
|
$ |
5,146,528 |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Savings accounts |
|
$ |
207,681 |
|
263 |
0.51 |
% |
$ |
113,750 |
|
46 |
0.16 |
% |
||||
|
NOW accounts |
|
639,347 |
|
2,006 |
1.27 |
% |
470,469 |
|
1,074 |
0.93 |
% |
||||||
|
Money market accounts |
|
1,711,672 |
|
12,732 |
3.02 |
% |
1,073,041 |
|
8,716 |
3.29 |
% |
||||||
|
Certificates of deposit and individual retirement accounts |
|
2,497,213 |
|
24,578 |
3.99 |
% |
1,979,184 |
|
22,403 |
4.59 |
% |
||||||
|
Total interest-bearing deposits |
|
5,055,913 |
|
39,579 |
3.17 |
% |
3,636,444 |
|
32,239 |
3.60 |
% |
||||||
|
FHLB borrowings |
|
135,441 |
|
1,239 |
3.71 |
% |
91,168 |
|
1,086 |
4.83 |
% |
||||||
|
Total interest-bearing liabilities |
|
5,191,354 |
|
40,818 |
3.19 |
% |
3,727,612 |
|
33,325 |
3.63 |
% |
||||||
|
Non-interest-bearing deposits |
|
819,830 |
|
|
|
|
571,552 |
|
|
|
|
||||||
|
Other non-interest-bearing liabilities |
|
97,370 |
|
|
|
|
|
90,023 |
|
|
|
|
|||||
|
Total liabilities |
|
6,108,554 |
|
|
|
|
|
4,389,187 |
|
|
|
|
|||||
|
Shareholders' equity |
|
861,505 |
|
|
|
|
|
757,341 |
|
|
|
|
|||||
|
Total liabilities and shareholders' equity |
|
$ |
6,970,059 |
|
|
|
|
|
$ |
5,146,528 |
|
|
|
|
|||
|
Net interest income |
|
|
|
|
$ |
64,868 |
|
|
|
|
$ |
43,526 |
|
|
|||
|
Net interest rate spread (1) |
|
|
|
|
|
|
3.22 |
% |
|
|
|
2.75 |
% |
||||
|
Net interest-earning assets (2) |
|
$ |
1,490,841 |
|
|
|
|
|
$ |
1,160,872 |
|
|
|
|
|
||
|
Net interest margin (3) |
|
|
|
|
|
|
3.94 |
% |
|
|
|
3.61 |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets to interest-bearing liabilities |
|
128.72 |
% |
|
|
|
|
131.14 |
% |
|
|
|
|||||
| (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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|||||||
|
|
|
March 31, 2026 vs. 2025 |
|||||||
|
|
|
Increase (Decrease) Due to |
|
Total |
|||||
|
|
|
|
|
|
|
|
|
Increase |
|
|
|
|
Volume |
|
Rate |
|
(Decrease) |
|||
|
|
|
(In thousands) |
|||||||
|
Interest-earning assets: |
|
|
|
|
|
|
|||
|
Loans |
|
$ |
28,319 |
|
$ |
283 |
|
$ |
28,602 |
|
Securities |
|
425 |
|
(7) |
|
418 |
|||
|
Other investments |
|
6 |
|
40 |
|
46 |
|||
|
Short-term investments |
|
358 |
|
(589) |
|
(231) |
|||
|
Total interest-earning assets |
|
29,108 |
|
(273) |
|
28,835 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|||
|
Savings accounts |
|
61 |
|
156 |
|
217 |
|||
|
NOW accounts |
|
456 |
|
476 |
|
932 |
|||
|
Money market accounts |
|
4,678 |
|
(662) |
|
4,016 |
|||
|
Certificates of deposit and individual retirement accounts |
|
4,338 |
|
(2,163) |
|
2,175 |
|||
|
Total interest-bearing deposits |
|
9,533 |
|
(2,193) |
|
7,340 |
|||
|
Federal Home Loan Bank advances |
|
293 |
|
(140) |
|
153 |
|||
|
Total interest-bearing liabilities |
|
9,826 |
|
(2,333) |
|
7,493 |
|||
|
|
|
|
|
|
|
|
|
|
|
|
Change in net interest income |
|
$ |
19,282 |
|
$ |
2,060 |
|
$ |
21,342 |
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 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 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 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 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 below.
The following table sets forth, as of March 31, 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 March 31, 2026 |
||||||
|
Change in Interest Rates |
|
Net Interest Income |
|
Year 1 Change from |
||
|
(basis points) (1) |
|
Year 1 Forecast |
|
Level |
||
|
(Dollars in thousands) |
|
|||||
|
|
|
275,608 |
5.5 |
% |
||
|
|
271,756 |
4.0 |
% |
|||
|
|
267,723 |
2.5 |
% |
|||
|
Level |
|
261,269 |
- |
% |
||
|
(100) |
|
257,262 |
(1.5) |
% |
||
|
(200) |
|
254,567 |
(2.6) |
% |
||
|
(300) |
|
252,994 |
(3.2) |
% |
||
| (1) | Assumes an immediate uniform change in interest rates at all maturities. |
The table above indicates that as of March 31, 2026, we would have experienced a 4.0% increase in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 2.6% 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 March 31, 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 March 31, 2026 |
|
Estimated |
|
(Decrease) in EVE |
|||||
|
Change in Interest Rates (basis points) (1) |
|
EVE (2) |
|
Amount |
|
Percent |
|||
|
(Dollars in thousands) |
|||||||||
|
|
|
1,160,382 |
|
|
(120,052) |
(9.4) |
% |
||
|
|
1,210,126 |
|
(70,308) |
(5.5) |
% |
||||
|
|
1,257,033 |
|
(23,401) |
(1.8) |
% |
||||
|
Level |
|
1,280,434 |
|
N/A |
- |
% |
|||
|
(100) |
|
1,291,870 |
|
11,436 |
0.9 |
% |
|||
|
(200) |
|
1,272,992 |
|
(7,442) |
(0.6) |
% |
|||
|
(300) |
|
1,221,726 |
|
(58,708) |
(4.6) |
% |
|||
| (1) | Assumes an immediate uniform change in interest rates at all maturities. |
The table above indicates that as of March 31, 2026, we would have experienced a 5.5% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 0.6% 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 EVE 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, 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 Federal Reserve Bank of Boston ("FRB"). As of March 31, 2026, we had outstanding advances of $189.7 million from the FHLB and an unused borrowing capacity of $892.7 million with the FHLB. At March 31, 2026, the Bank had $1.01 billion available from a line under the Borrower in Custody ("BIC") program at the FRB. Additionally, as of March 31, 2026, we had $570.1 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 $1.2 billion of brokered deposits.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities.
At March 31, 2026, we had $11.3 million in outstanding commitments to originate loans. In addition, we had $822.8 million in unused lines of credit to borrowers, $386.7 million in unconditionally cancelable unadvanced mortgage warehouse loans, $380.4 million in unadvanced construction loans and $9.0 million in letters of credit outstanding.
Non-brokered certificates of deposit due within one year of March 31, 2026 totaled $1.93 billion, or 31.6%, 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 March 31, 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 March 31, 2026.
Our primary investing activity is originating loans. During the three months ended March 31, 2026, we originated $226.7 million of loans, net of repayments.
Financing activities consist primarily of activity in deposit accounts and FHLB advances. We experienced net increases in deposits of $243.5 million for the three months ended March 31, 2026. At March 31, 2026 and December 31, 2025, the level of brokered deposits was $570.1 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 $6.5 million during the three months ended March 31, 2026.
For additional information, see the consolidated statements of cash flows for the three months ended March 31, 2026 and 2025 included as part of the consolidated financial statements appearing elsewhere in this Form 10-Q.
We are committed to maintaining a strong liquidity position. We continuously monitor our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate by management. Liquidity risk management is an important element in our asset/liability management process. We regularly model liquidity stress scenarios to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding planning process, which provides the basis for the identification of our liquidity needs. We anticipate that we will have sufficient funds to meet our current funding commitments. In addition, based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.
As of March 31, 2026, Needham Bank and NB Bancorp, Inc. 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.
Impact of Inflation and Changing Prices
The consolidated financial statements and related data presented in this Form 10-Q have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution's performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.
NB Bancorp Inc. published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 08, 2026 at 19:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]