NB Bancorp, Inc. Fair Value Disclosure
Note 14 – Fair Value Measurements
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The Company records fair value adjustments to certain assets and liabilities and determines fair value disclosures utilizing a definition of the fair value of assets and liabilities that states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is best determined using quoted market prices, however additional considerations are involved to determine the fair value of financial assets in markets that are not active. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about pricing the asset or liability developed based on the best information available to management. FASB ASC 820, “Fair Value Measurement and Disclosures Topic,” (“ASC 820”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.
U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, and gives the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 – Observable inputs such as quoted prices in active markets.
Level 2 – Observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market data and are significant to the fair value measurement of the assets or liabilities. Level 3 inputs include fair value measurements that use pricing models, discounted cash flow methodologies, or similar techniques, as well as significant management judgment or estimation.
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements.
AFS securities – Where quoted prices are available in an active market, AFS securities are classified within Level 1 of the valuation hierarchy. Level 1 AFS securities would include highly-liquid government bonds (such as US Treasuries), mortgage products and exchange traded equities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 AFS securities would include U.S. agency securities, mortgage-backed agency securities, obligations of states and political subdivisions, and certain corporate, asset-backed and other securities. In certain cases where there is limited activity or less transparency around inputs to the valuation, AFS securities are classified within Level 3 of the valuation hierarchy.
Derivative arrangements – The fair values of derivative arrangements are estimated by the Company using a third-party derivative valuation expert who relies on Level 2 inputs, namely interest cash flow models to determine a fair value by calculating a settlement termination value with the counterparty.
Assets measured and reported at estimated fair value on a recurring basis are summarized below:
December 31, 2025 | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||
Assets: | (in thousands) | |||||||||||
Available-for-sale securities: | ||||||||||||
U.S. Treasury securities | $ | 95,783 | $ | — | $ | — | $ | 95,783 | ||||
U.S. Government agencies | — | 9,212 | — | 9,212 | ||||||||
Agency mortgage-backed securities | — | 68,591 | — | 68,591 | ||||||||
Agency collateralized mortgage obligations | — | 12,237 | — | 12,237 | ||||||||
Corporate bonds | — | 55,664 | 14,221 | 69,885 | ||||||||
Municipal obligations | — | 6,524 | — | 6,524 | ||||||||
SBA securities | — | 6,727 | 6,727 | |||||||||
Total available-for-sale securities | $ | 95,783 | $ | 158,955 | $ | 14,221 | $ | 268,959 | ||||
$ | — | $ | 23,562 | $ | — | $ | 23,562 | |||||
Liabilities: | ||||||||||||
$ | — | $ | 22,295 | $ | — | $ | 22,295 | |||||
December 31, 2024 | Level 1 | Level 2 | Level 3 | Fair Value | ||||||||
Assets: | (in thousands) | |||||||||||
Available-for-sale securities: | ||||||||||||
U.S. Treasury securities | $ | 69,084 | $ | — | $ | — | $ | 69,084 | ||||
U.S. Government agencies | — | 9,007 | 9,007 | |||||||||
Agency mortgage-backed securities | — | 39,184 | — | 39,184 | ||||||||
Agency collateralized mortgage obligations | — | 10,833 | — | 10,833 | ||||||||
Corporate bonds | — | 75,147 | 8,898 | 84,045 | ||||||||
Municipal obligations | — | 9,806 | — | 9,806 | ||||||||
SBA securities | — | 6,246 | 6,246 | |||||||||
Total available-for-sale securities | $ | 69,084 | $ | 150,223 | $ | 8,898 | $ | 228,205 | ||||
$ | — | $ | 27,174 | $ | — | $ | 27,174 | |||||
Liabilities: | ||||||||||||
$ | — | $ | 27,177 | $ | — | $ | 27,177 | |||||
During the year ended December 31, 2025 and 2024, the Company purchased one Level 3 bank holding company subordinated debenture for $500,000 and $1.0 million, respectively. During the year ended December 31, 2024, the Company transferred one Level 3 bank holding company subordinated debenture to Level 2 approximating $2.0 million as it is valued by quoted prices in markets that are not active. There were no sales or of Level 3 assets during the year ended December 31, 2025. Other than the purchases and transfer noted above, the changes in Level 3 subordinated debentures during the years ended December 31, 2025 and 2024 are attributable to total net gains (losses) included in OCI.
The Company may also be required from time to time to measure certain other assets on a non-recurring basis in accordance with U.S. GAAP. Any adjustments to fair value usually result in write-downs of individual assets.
Collateral-Dependent Loans – Collateral-dependent loans with specific reserves are carried at fair value, which equals the estimated market value of the collateral less estimated costs to sell. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. A loan may have multiple types of collateral; however, the majority of the Company’s loan collateral is real estate. The value of real estate collateral is generally determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral value is significantly adjusted due to differences in the comparable properties or is discounted by the Company because of lack of marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant or the net book value on the applicable borrower’s financial statements if not considered significant.
Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of income.
Enterprise value is defined as imputed value for the entire underlying business. To determine an appropriate range of enterprise value, management relies on a standardized set of valuation methodologies that take into account future projected cash flows, market-based multiples, as well as, asset values. Valuations involve both quantitative and qualitative considerations and professional judgments concerning differences in financial and operating characteristics in addition to other factors that may impact values over time (Level 3).
The Company had no liabilities measured at fair value on a non-recurring basis.
The following table summarizes assets measured at fair value on a non-recurring basis:
December 31, 2025 | ||||||||||||
(in thousands) | ||||||||||||
| Level 1 | | Level 2 | | Level 3 | | Fair Value | |||||
Collateral-dependent loans, net of reserve | $ | — | $ | — | $ | 42,041 | $ | 42,041 | ||||
December 31, 2024 | ||||||||||||
(in thousands) | ||||||||||||
| Level 1 | | Level 2 | | Level 3 | | Fair Value | |||||
Collateral-dependent loans, net of reserve | $ | — | $ | — | $ | 10,951 | $ | 10,951 | ||||
For Level 3 assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2025 and 2024, the significant unobservable inputs used in the fair value measurements were as follows:
| Significant | | Significant | | | |
Valuation | Observable | Unobservable | ||||
Technique | Inputs | Inputs | ||||
Collateral-dependent (previously known as impaired loans) |
| Appraisal Value / Comparison Sales / Enterprise Value |
| Appraisals and/or sales of comparable properties or financial statements of the business |
| Appraisals discounted 5 to 20% for sales commission and other holding costs; Enterprise value discounts of assets, liabilities and equity; industry EBITDA multiples |
Fair Value of Financial Instruments – The following table includes the estimated fair value of the Company’s financial assets and liabilities. The methodologies for estimating the fair value of financial assets and liabilities measured on a recurring and nonrecurring basis are discussed above. The methodologies for estimating the fair value for other financial assets and liabilities are discussed below. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation techniques may have a material effect on the estimated fair value amounts at December 31, 2025 and 2024.
The following tables present the estimated fair values, related carrying amounts, and valuation level of the financial instruments as of the dates stated:
December 31, 2025 | |||||||||||||||
Carrying | Fair | ||||||||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | |||||||||||
(In thousands) | |||||||||||||||
Financial Assets: | |||||||||||||||
Cash and cash equivalents | $ | 407,596 | $ | 407,596 | $ | 407,596 | $ | — | $ | — | |||||
Loans held for sale, at fair value | 66,447 | 66,447 | 66,447 | — | — | ||||||||||
Loans receivable, net | 5,898,729 | 5,893,652 | — | — | 5,893,652 | ||||||||||
Accrued interest receivable | 25,390 | 25,390 | 25,390 | — | — | ||||||||||
Non-public investments | 33,740 | 33,740 | — | 16,594 | 17,146 | ||||||||||
BOLI | 104,335 | 104,335 | — | 104,335 | — | ||||||||||
Financial Liabilities: | |||||||||||||||
Deposits, other than time deposits | $ | 3,348,643 | $ | 3,348,643 | $ | 3,348,643 | $ | — | $ | — | |||||
Time deposits | 2,504,891 | 2,506,499 | — | 2,506,499 | — | ||||||||||
FHLB Borrowings | 196,235 | 191,970 | — | 191,970 | — | ||||||||||
December 31, 2024 | |||||||||||||||
Carrying | Fair | ||||||||||||||
Amount | Value | Level 1 | Level 2 | Level 3 | |||||||||||
(In thousands) | |||||||||||||||
Financial Assets: | |||||||||||||||
Cash and cash equivalents | $ | 363,855 | $ | 363,855 | $ | 363,855 | $ | — | $ | — | |||||
Loans receivable, net | 4,294,185 | 4,196,079 | — | — | 4,196,079 | ||||||||||
Accrued interest receivable | 19,685 | 19,685 | 19,685 | — | — | ||||||||||
Non-public investments | 24,364 | 24,364 | — | 18,870 | 5,494 | ||||||||||
BOLI | 102,785 | 102,785 | — | 102,785 | — | ||||||||||
Financial Liabilities: | |||||||||||||||
Deposits, other than time deposits | $ | 2,214,372 | $ | 2,214,372 | $ | 2,214,372 | $ | — | $ | — | |||||
Time deposits | 1,963,280 | 1,964,801 | — | 1,964,801 | — | ||||||||||
FHLB Borrowings | 120,835 | 120,778 | — | 120,778 | — | ||||||||||
Cash and cash equivalents – The carrying amount approximates fair value for cash and cash equivalents.
Loans receivable, net – The fair value of performing loans by loan type is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect observable market information incorporating the credit, liquidity, yield and other risks inherent in the loan. The estimate of maturity is based upon the Company’s historical experience with repayments for each loan classification, modified, as required, by an estimate of the effect of the current economic and lending conditions. Fair value for significant non-performing loans is generally based upon recent external appraisals, if collateral dependent. If appraisals are not available or the non-performing loan is not collateral dependent, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows and discounted rates are judgmentally determined using available market information and specific borrower information.
Loans held for sale – The fair values of loans held for sale is the lower of cost or market, these loans were marked to fair value based on the purchase price of the underlying loans committed to be sold.
Accrued interest receivable – The carrying amount approximates fair value for accrued interest receivable.
Non-public investments – Non-public investments include FHLB stock, FRB Stock, tax credit investments and other non-public investments. FHLB and FRB stock’s carrying amounts approximate fair value. All other non-public investments are carried at the original cost basis or accounted for using the equity method. This approximates fair value as there is no ready market for such investments.
BOLI – BOLI is carried at net cash surrender value of the polices which approximates fair value since that is the approximate liquidation value of these assets.
Deposits – The fair value of deposits with no stated maturity date, such as noninterest-bearing demand deposits, savings, NOW and money market accounts, approximates its carrying value. The fair value of time deposits is based upon the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for time deposits of similar remaining maturities.
FHLB borrowings – Fair value is estimated based on discounted cash flows using current market rates for borrowings with similar terms.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 3, 2026 | Showing above |
| 2024 | Mar 7, 2025 | |
| 2023 | Mar 28, 2024 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.