NB Bancorp Loan Growth Accelerates as Margin Reverses
Gross loans rose 5.3% sequentially to $6.77 billion while net interest margin compressed 3 bps to 3.97% in the third quarter.
NB Bancorp, Inc. (NBBK), the holding company of Needham Bank, accelerated loan growth in the third quarter of 2026 even as its net interest margin reversed a prior-quarter expansion. Gross loans rose 5.3%, or $343.0 million, to $6.77 billion, after a 3.4% sequential increase in the second quarter. Net loans rose 5.5% to $6.69 billion.
The margin turn was the operating inflection. Net interest margin declined 3 basis points to 3.97% from 4.00% after a 7 bps expansion in the second quarter. Excluding purchase accounting adjustments, the margin fell 6 bps to 3.81%. Cost of deposits ticked up to 2.69% from 2.68%. Net interest income still increased 3.3% to $71.4 million from $69.1 million, with interest income up on higher average loan balances and interest expense up on higher average certificate, IRA, and money-market balances and Federal Reserve borrowings.
The current-quarter loan increase was concentrated primarily in commercial real estate excluding multifamily, which rose $183.2 million, or 8.6%; construction and land development, which rose $80.8 million, or 10.6%; residential real estate, which rose $43.5 million, or 3.1%; and mortgage warehouse loans, which rose $20.4 million, or 9.4%. Commercial real estate including multifamily rose 7.5% to $2.89 billion. Multifamily real estate increased 3.0% to $585.0 million. Cannabis facility commercial real estate loans decreased 6.9% to $195.5 million.
Total deposits increased 3.2%, or $201.3 million, to $6.52 billion, after a 3.7% sequential rise in the second quarter. Core deposits, defined as all non-brokered balances, increased 4.1% to $5.83 billion. Brokered deposits decreased 3.8% to $692.6 million. Cash and cash equivalents fell $134.1 million, or 33.5%, to $266.1 million as loan growth of $346.7 million and FHLB paydowns of $30.9 million outpaced deposit growth. Total assets were $7.68 billion.
Credit metrics moved on acquired-portfolio items. Annualized net charge-offs rose to 0.31% of average loans, or $5.2 million, from 0.07%, or $1.1 million, primarily from a $4.0 million charge-off of a previously reserved purchased-credit-deteriorated commercial and industrial loan from BankProv. No additional provision was recognized against that loan in the quarter. Non-performing loans rose 30.4% to $36.1 million, or 0.53% of loans, from $27.7 million, or 0.43%, as a BankProv commercial real estate loan was placed on non-accrual. The allowance for credit losses declined to $78.3 million, or 1.16% of gross loans, from $82.1 million, or 1.28%. The ACL covered 217% of NPLs, down from 297%. The non-strategic enterprise value loan portfolio acquired from BankProv, which the company continues to reduce, stood at $95.9 million as of September 30, 2026, down from $207.0 million at acquisition.
The provision for credit losses decreased 61.0% to $1.2 million from $3.2 million. The loan provision fell to $1.4 million from $3.0 million, reflecting improved credit quality on individually evaluated loans and lower specific reserves, with a $145 thousand release on unfunded commitments.
Noninterest income decreased 8.2% to $5.1 million from $5.6 million. That included a $185 thousand loss on loan sales versus a $227 thousand gain, a $176 thousand drop in customer service fees, and a $192 thousand drop in other income after $229 thousand of credit-card branding income in the prior quarter. Swap contract income rose $407 thousand, or 565.3%, to $479 thousand on higher origination.
Noninterest expense increased 5.1% to $46.3 million from $44.0 million. Salaries and employee benefits rose $2.0 million, or 7.6%, to $27.5 million, reflecting hiring and business-line expansion, including branches. Occupancy and equipment rose $579 thousand, or 23.5%, to $3.0 million, including $347 thousand of contract settlement fees. Data processing rose $452 thousand, or 9.2%, to $5.4 million on parallel systems. Director and professional fees rose $342 thousand, or 9.0%, to $4.2 million, including $524 thousand of contract settlement fees. Marketing and charitable contributions fell $457 thousand, or 29.9%, and general and administrative expenses fell $452 thousand, or 13.8%. The efficiency ratio increased to 60.5% from 58.9%; the operating efficiency ratio increased to 59.3% from 57.7%.
Net income was $23.1 million, or $0.58 a share, compared with $21.1 million, or $0.53 a share, in the second quarter. Operating net income, which excluded $871 thousand of pre-tax contract settlement fees in the third quarter, increased 8.9% to $23.8 million, or $0.60 a share. Return on average assets was 1.23% and return on average equity was 10.73%. The effective tax rate was 20.3%, down from 23.2%, reflecting state tax credits.
Shareholders’ equity was $857.4 million. Shareholders’ equity to total assets was 11.2%. Tangible book value per share was $18.91. The board declared a $0.07 quarterly cash dividend, payable November 12, 2026. Chairman, President and Chief Executive Officer Joseph Campanelli said that through the first three quarters of 2026, total loans and total deposits have increased 17.4% and 15.2%, respectively, on an annualized basis, while operating EPS has increased 27%, and that the company remains confident in its ability to deliver sustainable growth.