Part I. – Financial Information

 

Item 1. Financial Statements

 

ECB Bancorp, Inc. and Subsidiary

Consolidated Balance Sheets

(unaudited)

(Dollars in thousands)

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

ECB Bancorp, Inc. and Subsidiary

Consolidated Statements of Income

(unaudited)

(Dollars in thousands, except share data)

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

ECB Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income

(unaudited)

(Dollars in thousands)

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

ECB Bancorp, Inc. and Subsidiary

Statements of Changes in Shareholders' Equity

(unaudited)

(in thousands except share data)

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

ECB Bancorp, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

ECB Bancorp, Inc. and Subsidiary

Form 10-Q

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

NOTE 1 - CONVERSION

 

Effective July 27, 2022, Everett Co-operative Bank (the "Bank") completed its conversion to a Massachusetts stock co-operative bank and became the wholly owned subsidiary of ECB Bancorp, Inc. (the “Company”). In the offering, the Company sold 8,915,247 shares of common stock at a per share price of $10.00 for gross offering proceeds of $89.2 million. Additionally, the Company contributed 260,000 shares and $600,000 in cash to the Everett Co-operative Bank Charitable Foundation (the “Foundation”).

 

The Bank has established a Liquidation Account in an amount equal to the net worth of the Bank as of the date of the latest consolidated balance sheet contained in the final prospectus distributed in connection with the Company’s stock conversion and stock offering. The function of the Liquidation Account is to establish a priority on liquidation of the Bank. The Liquidation Account will be maintained by the Bank for the benefit of the eligible account holders who continue to maintain deposit accounts with the Bank, following the conversion. Each eligible account holder, with respect to each deposit account, holds a related inchoate interest in a portion of the Liquidation Account balance, in relation to each deposit account balance at the eligibility record date, or to such balance as it may be subsequently reduced, as hereinafter provided. The initial Liquidation Account balance will not be increased, and is subject to downward adjustment to the extent of any downward adjustment of any subaccount balance of any eligible account holder in accordance with the regulations of the Division of Banks of the Commonwealth of Massachusetts.

 

In the unlikely event of a complete liquidation of the Bank (and only in such event), following all liquidation payments to creditors (including those to depositors to the extent of their deposit accounts) each eligible account holder shall be entitled to receive a liquidating distribution from the Liquidation Account, in the amount of the then-adjusted subaccount balances for his or her deposit accounts then held, before any liquidating distribution may be made to any holder of the Bank’s capital stock.

 

The Bank may not declare or pay a cash dividend on its outstanding capital stock if the effect thereof would cause its regulatory capital to be reduced below the amount required to maintain the Liquidation Account and under FDIC rules and regulations.

   

NOTE 2 – BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements of ECB Bancorp, Inc. have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements of ECB Bancorp, Inc. (referred to herein as "the Company," “we,” “us,” or “our”) include the balances and results of operations of the Company and the Bank, its wholly-owned subsidiary, as well as First Everett Securities Corporation, a wholly-owned subsidiary of the Bank. Intercompany transactions and balances are eliminated in consolidation.

 

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the Company's financial position as of  March 31, 2026 and the results of operations and cash flows for the interim periods ended March 31, 2026 and 2025. Such adjustments were of a normal recurring nature. Interim amounts have not been audited, and the results of operations for the interim periods herein are not necessarily indicative of the results of operations to be expected for the fiscal year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended  December 31, 2025 and accompanying notes thereto included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission.

 

The Company qualifies as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act of 2012 and has elected to defer the adoption of new or revised accounting standards until the nonpublic company effective dates. As such, the Company will adopt standards on the nonpublic company effective dates until such time that we no longer qualify as an EGC.

 

Certain previously reported amounts have been reclassified to conform to the current period’s presentation.

 

RECENT ACCOUNTING STANDARDS

 

In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosures, but expects additional disclosures upon adoption.

 

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NOTE 3 – INVESTMENTS IN SECURITIES

 

Available-for-Sale Securities

 

Investments in securities have been classified in the consolidated balance sheets according to management’s intent. The following table summarizes the amortized cost, gross unrealized gains and losses, allowance for credit losses and fair value of available-for-sale securities at the dates indicated:

 

						Gross				Gross				Allowance
		Amortized				Unrealized				Unrealized				for Credit				Fair
Available-for-sale		Cost				Gains				Losses				Losses				Value
		(in thousands)
March 31, 2026
Mortgage-backed securities		$	6,316			$	25			$	(4	)		$	—			$	6,337
Collateralized mortgage obligations			12,271				12				(48	)			—				12,235
Corporate bonds			18,233				294				(33	)			—				18,494
Total available-for-sale securities		$	36,820			$	331			$	(85	)		$	—			$	37,066
December 31, 2025
Mortgage-backed securities		$	6,411			$	51			$	(3	)		$	—			$	6,459
Collateralized mortgage obligations			10,937				48				(37	)			—				10,948
Corporate bonds			16,732				225				(47	)			—				16,910
Total available-for-sale securities		$	34,080			$	324			$	(87	)		$	—			$	34,317

 

The Company's available-for-sale securities are carried at fair value. For available-for-sale securities in an unrealized loss position, management will first evaluate whether there is intent to sell a security, or if it is more likely than not that the Company will be required to sell a security prior to anticipated recovery of its amortized cost basis. If either of these criteria are met, the Company will record a write-down of the security's amortized cost basis to fair value through income. For those available-for-sale securities which do not meet the intent or requirement to sell criteria, management will evaluate whether the decline in fair value is a result of credit related matters or other factors. In performing this assessment, management considers the creditworthiness of the issuer including whether the security is guaranteed by the U.S. federal government or other government agency, the extent to which fair value is less than amortized cost, and changes in credit rating during the period, among other factors. If this assessment indicates the existence of credit losses, an allowance for credit losses will be established, as determined by a discounted cash flow analysis. To the extent the estimated cash flows do not support the amortized cost, the deficiency is considered to be due to credit loss and is recognized in earnings. Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when a security is determined to be uncollectible, or when either of the aforementioned criteria surrounding intent or requirement to sell have been met. No allowance for credit losses was recorded for available-for-sale securities as of  March 31, 2026 and December 31, 2025.

 

The Company did not record a provision for estimated credit losses on any available-for-sale securities for the three months ended March 31, 2026 and 2025. Excluded from the table above is accrued interest on available-for-sale securities of $289,000 and $335,000 at  March 31, 2026 and December 31, 2025, respectively, which is included within accrued interest receivable in the Consolidated Balance Sheets. Additionally, the Company did not record any write-offs of accrued interest income on available-for-sale securities for the three months ended March 31, 2026 and 2025. No securities held by the Company were delinquent on contractual payments at  March 31, 2026 and December 31, 2025, nor were any securities placed on non-accrual status for the three months ended March 31, 2026 and 2025.

 

When securities are sold, the amortized cost of the specific security sold is used to compute the gain or loss on the sale. There were no sales of securities during the three months ended March 31, 2026 and 2025.

 

The aggregate fair value and unrealized losses of available-for-sale securities that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more, and have no allowance for credit losses, are as follows as of  March 31, 2026 and December 31, 2025:

 

						Less than 12 Months								12 Months or Longer								Total
		# of				Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Holdings				Value				Losses				Value				Losses				Value				Losses
														(Dollars in thousands)
March 31, 2026
Available-for-Sale:
Mortgage-backed securities			1			$	—			$	—			$	1,356			$	(4	)		$	1,356			$	(4	)
Collateralized mortgage obligations			6				8,174				(30	)			1,407				(18	)			9,581				(48	)
Corporate bonds			1				2,646				(33	)			—				—				2,646				(33	)
Total			8			$	10,820			$	(63	)		$	2,763			$	(22	)		$	13,583			$	(85	)
December 31, 2025
Available-for-Sale:
Mortgage-backed securities			1			$	—			$	—			$	1,362			$	(3	)		$	1,362			$	(3	)
Collateralized mortgage obligations			3				3,778				(15	)			1,405				(22	)			5,183				(37	)
Corporate bonds			4				7,666				(47	)			—				—				7,666				(47	)
Total			8			$	11,444			$	(62	)		$	2,767			$	(25	)		$	14,211			$	(87	)

 

Management evaluates securities for expected credit losses at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

 

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Held-to-Maturity Securities

 

The following table summarizes the amortized cost, gross unrealized gains and losses, allowance for credit losses and fair value of held-to-maturity securities at the dates indicated:

 

						Gross				Gross				Allowance
		Amortized				Unrealized				Unrealized				for Credit				Fair
Held-to-maturity:		Cost				Gains				Losses				Losses				Value
		(in thousands)
March 31, 2026
Mortgage-backed securities		$	35,492			$	37			$	(3,465	)		$	—			$	32,064
Corporate bonds			16,132				200				(352	)			—				15,980
Total held-to-maturity securities		$	51,624			$	237			$	(3,817	)		$	—			$	48,044
December 31, 2025
Mortgage-backed securities			36,645				88				(3,453	)			—				33,280
Corporate bonds			19,119				262				(335	)			—				19,046
Total held-to-maturity securities		$	55,764			$	350			$	(3,788	)		$	—			$	52,326

 

The Company measures expected credit losses on held-to-maturity securities on a collective basis by major security type. Management classifies the held-to-maturity portfolio into the following major security types: Agency Mortgage-Backed Securities and Corporate Bonds.

 

Mortgage-backed securities are guaranteed by U.S. government sponsored agencies and have a long history of no credit losses. As a result, management has determined these securities to have a zero loss expectation. The Company's investments in corporate bonds are deemed “investment grade” and (a) the Company does not intend to sell these securities before recovery and (b) it is more likely than not that the Company will not be required to sell these securities before recovery. Therefore the Company did not record a provision for estimated credit losses on any held-to-maturity securities during the three months ended March 31, 2026 and 2025. Excluded from the table above is accrued interest on held-to-maturity securities of $271,000 and $237,000 at  March 31, 2026 and December 31, 2025, respectively, which is included within accrued interest receivable in the Consolidated Balance Sheets. Additionally, the Company did not record any write-offs of accrued interest income on held-to-maturity securities for the three months ended March 31, 2026 and 2025. No securities held by the Company were delinquent on contractual payments at  March 31, 2026 and December 31, 2025, nor were any securities placed on non-accrual status for the three months ended March 31, 2026 and 2025.

 

Held-to-Maturity and Available-for-Sale Securities

 

The actual maturities of certain available-for-sale or held-to-maturity securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. A schedule of the contractual maturities of available-for-sale and held-to-maturity securities as of  March 31, 2026 is presented below:

 

		Available-for-sale				Held-to-maturity
		Fair				Amortized				Fair
		Value				Cost				Value
		(in thousands)
Within 1 year		$	6,955			$	6,038			$	6,034
After 1 year through 5 years			4,189				8,017				8,052
After 5 years through 10 years			12,895				11,715				10,960
After 10 years			13,027				25,854				22,998
Total		$	37,066			$	51,624			$	48,044

 

The carrying value of securities pledged to secure advances from the Federal Home Loan Bank of Boston (“FHLB”) was $48.7 million and $48.5 million as of  March 31, 2026 and December 31, 2025, respectively.

 

The carrying value of securities pledged to secure advances from the Federal Reserve Bank (“FRB”) was $15.6 million and $18.7 million as of  March 31, 2026 and December 31, 2025, respectively.

 

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NOTE 4 – LOANS, ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

 

Loans

 

Loans that the Company has the intent and ability to hold until maturity or payoff are carried at amortized cost (net of the allowance for credit losses). Amortized cost is the principal amount outstanding, adjusted by partial charge-offs and net of deferred loan origination costs and fees. For originated loans, loan fees and certain direct origination costs are deferred and amortized into interest income over the contractual life of the loan using the level-yield method. When a loan is paid off, the unamortized portion is recognized in interest income. Interest income on loans is accrued based upon the daily principal amount outstanding except for loans on non-accrual status. As a general rule, loans more than 90 days past due with respect to principal or interest, or sooner if management considers such action to be prudent, are classified as non-accrual loans. However, loans that are more than 90 days past due may be kept on an accruing status if the loan is well secured and in the process of collection. Income accruals are suspended on all non-accrual loans in a timely manner and all previously accrued and uncollected interest is reversed against current income. A loan can be returned to accrual status when collectibility of principal and interest is reasonably assured and the loan has performed for a period of time, generally six months. When doubt exists as to the collectibility of a loan, any payments received are applied to reduce the amortized cost of the loan to the extent necessary to eliminate such doubt. For all loan portfolios, a charge-off occurs when the Company determines that a specific loan, or portion thereof, is uncollectible. This determination is made based on management's review of specific facts and circumstances of the individual loan, including the expected cash flows to repay the loan, the value of the collateral and the ability and willingness of any guarantors to perform.

 

Allowance for Credit Losses - Loans Held for Investment

 

The allowance for credit losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Credit losses are charged against the allowance when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the allowance. Under the current expected credit loss (CECL) methodology, the Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics. The Company segments financial assets with similar risk characteristics and has elected to segment its loans based on Federal Call codes used for reporting loans to the Federal Deposit Insurance Corporation as part of the Call Report process. These segments are collectively evaluated for expected credit losses using a quantitative Discounted Cash Flow ("DCF") model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The Company has elected to use this approach because DCF models allow for effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner and peer data is available for certain inputs such as the probability of default and the loss given default. The quantitative model utilizes a loss factor based approach to estimate expected credit losses, which are derived from internal historical and industry peer loss experience. The model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the historical long-run average using the straight-line reversion method. Management periodically evaluates a reasonable and supportable forecast period and a reversion period to be appropriate for purposes of estimating expected credit losses. The qualitative risk factors impacting the expected risk of loss within the portfolio include the following:

 

●

Lending policies and procedures

 

●

Economic and business conditions

 

●

Nature and volume of loans

 

●

Changes in management

 

●

Changes in credit quality

 

●

Changes in loan review system

 

●

Changes to underlying collateral values

 

●

Concentrations of credit risk

 

●

Other external factors

 

Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools to avoid double counting. This includes loans on non-accrual and loans that are 90 days or greater past due. For the loans that will be individually evaluated, the Company will use either a discounted cash flow ("DCF") approach or a fair value of collateral approach. The latter approach will be used for loans deemed to be collateral dependent or when foreclosure is probable. Accrued interest receivable amounts are excluded from balances of loans held at amortized cost and are included within accrued interest receivable in the consolidated balance sheets. Management has elected not to measure an allowance for credit losses on these amounts as the Company employs a timely write-off policy. Consistent with the Company's policy for non-accrual loans, accrued interest receivable is typically written off when loans reach 90 days past due and are placed on non-accrual status.

 

In the ordinary course of business, the Company enters into commitments to extend credit. Such financial instruments are recorded in the financial statements when they are funded. The credit risk associated with these commitments is evaluated in a manner similar to the allowance for credit losses on loans with an additional assumption of probability of funding. The reserve for unfunded lending commitments is included in other liabilities in the consolidated balance sheets.

 

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Loans consisted of the following as of the dates indicated:

 

		At March 31,								At December 31,
		2026								2025
		Amount				Percent				Amount				Percent
		(Dollars in thousands)
Real estate loans:
One-to-four family residential		$	491,460				35.0	%		$	473,394				34.2	%
Multi-family			421,085				30.0	%			425,428				30.8	%
Commercial			335,381				23.9	%			336,412				24.3	%
Home equity lines of credit and loans			52,173				3.7	%			49,866				3.6	%
Construction			94,531				6.8	%			88,957				6.4	%
Other loans:
Commercial			7,861				0.6	%			7,938				0.6	%
Consumer			165				0.0	%			869				0.1	%
Total loans, gross			1,402,656				100.0	%			1,382,864				100.0	%
Less:
Net deferred loan fees			(755	)							(790	)
Allowance for credit losses			(10,412	)							(10,255	)
Total loans, net		$	1,391,489							$	1,371,819

 

The carrying value of loans pledged to secure advances from the FHLBB were $919.2 million and $920.9 million as of  March 31, 2026 and December 31, 2025, respectively.

 

The carrying value of loans pledged to secure advances from the FRB were $118.7 million and $114.7 million as of  March 31, 2026 and December 31, 2025, respectively.

 

The following tables set forth information regarding the allowance for credit losses on loans as of and for the three months ended March 31, 2026 and 2025:

 

		For the three months ended March 31, 2026
		(in thousands)
		Beginning												Provision				Ending
		Balance				Charge-offs				Recoveries				(benefit)				Balance(1)
Real estate loans:
One-to-four family residential		$	3,069			$	—			$	—			$	103			$	3,172
Multi-family			2,260				—				—				(39	)			2,221
Commercial			3,640				—				—				10				3,650
Home equity lines of credit and loans			170				—				—				5				175
Construction			1,009				—				—				87				1,096
Other loans:
Commercial			102				—				—				(5	)			97
Consumer			5				—				—				(4	)			1
Total		$	10,255			$	—			$	—			$	157			$	10,412

 

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		For the three months ended March 31, 2025
		(in thousands)
		Beginning												(Benefit)				Ending
		Balance				Charge-offs				Recoveries				provision				Balance(1)
Real estate loans:
One-to-four family residential		$	2,928			$	—			$	—			$	(230	)		$	2,698
Multi-family			2,422				—				—				210				2,632
Commercial			2,260				—				—				272				2,532
Home equity lines of credit and loans			118				—				—				1				119
Construction			1,036				—				—				(328	)			708
Other loans:
Commercial			119				(81	)			—				80				118
Consumer			1				(1	)			—				1				1
Total		$	8,884			$	(82	)		$	—			$	6			$	8,808

 

(1) Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $4.7 million and $4.6 million as of  March 31, 2026 and December 31, 2025, respectively.

 

The following table sets forth information regarding the provision (benefit) for credit losses for the periods indicated:

 

		Three months ended
		March 31, 2026				March 31, 2025
Provision for losses on loans			157				6
Benefit for losses on off-balance sheet credit exposures			(4	)			(16	)
Total provision (benefit) for credit losses			153				(10	)

 

The following tables show the age analysis of past due loans as of the dates indicated:

 

																										90 days or
										90 Days				Total				Total				Total				more past due				Loans on
		30–59 Days				60–89 Days				or More				Past Due				Current				Loans				and accruing				Non-accrual
		(in thousands)
As of March 31, 2026
Real estate loans:
One-to-four family residential		$	61			$	871			$	103			$	1,035			$	490,425			$	491,460			$	—			$	1,090
Multi-family			—				—				—				—				421,085				421,085				—				—
Commercial			418				—				—				418				334,963				335,381				—				—
Home equity lines of credit and loans			236				—				100				336				51,837				52,173				—				140
Construction			—				—				—				—				94,531				94,531				—				—
Other loans:
Commercial			—				—				—				—				7,861				7,861				—				—
Consumer			—				—				—				—				165				165				—				—
		$	715			$	871			$	203			$	1,789			$	1,400,867			$	1,402,656			$	—			$	1,230

 

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																										90 days or
										90 Days				Total				Total				Total				more past due				Loans on
		30–59 Days				60–89 Days				or More				Past Due				Current				Loans				and accruing				Non-accrual
		(in thousands)
As of December 31, 2025
Real estate loans:
One-to-four family residential		$	519			$	104			$	—			$	623			$	472,771			$	473,394			$	—			$	1,096
Multi-family			—				—				—				—				425,428				425,428				—				—
Commercial			246				—				—				246				336,166				336,412				—				—
Home equity lines of credit and loans			370				—				3				373				49,493				49,866				—				43
Construction			—				—				—				—				88,957				88,957				—				—
Other loans:
Commercial			—				—				—				—				7,938				7,938				—				—
Consumer			—				—				—				—				869				869				—				—
		$	1,135			$	104			$	3			$	1,242			$	1,381,622			$	1,382,864			$	—			$	1,139

 

During the three months ended March 31, 2026 and 2025, interest income recognized on non-accrual loans amounted to $16,000 and $39,000, respectively. The following tables show information regarding non-accrual loans as of the dates indicated:

 

														Three Months Ended
		As of March 31, 2026												March 31, 2026
		With an				Without an
		Allowance for				Allowance for								Interest Income
		Credit Losses				Credit Losses				Total				Recognized
		(in thousands)
Real estate loans:
One-to-four family residential		$	—			$	1,090			$	1,090			$	15
Home equity lines of credit and loans			—				140				140				1
Total non-accrual loans		$	—			$	1,230			$	1,230			$	16

 

														Year Ended
		As of December 31, 2025												December 31, 2025
		With an				Without an
		Allowance for				Allowance for								Interest Income
		Credit Losses				Credit Losses				Total				Recognized
		(in thousands)
Real estate loans:
One-to-four family residential		$	—			$	1,096			$	1,096			$	74
Home equity lines of credit and loans			—				43				43				25
Total non-accrual loans		$	—			$	1,139			$	1,139			$	99

 

Credit Quality Information

 

The Company's loan rating system for multi-family and commercial real estate, construction, commercial loans and certain residential and home equity lines of credit is as follows:

 

Loans rated 1 – 6: Loans in these categories are considered “pass” rated loans with low to average risk.

 

Loans rated 7: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

 

Loans rated 8: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Bank will sustain some loss if the weakness is not corrected.

 

Loans rated 9: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

 

Loans rated 10: Loans in this category are considered uncollectible (loss) and of such little value that their continuance as loans is not warranted.

 

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial loans with aggregate potential outstanding balances of $500,000 or more, and all commercial real estate loans (including multi-family and construction loans as well as residential and home equity line of credit loans to commercial borrowers) with aggregate potential outstanding balances of $2.0 million or more. For loans that are not formally rated, the Company initially assesses credit quality based upon the borrower’s ability to pay and subsequently monitors these loans based on the borrower’s payment activity.

 

---

 

The following tables detail the amortized cost balances of the Company's loan portfolios, presented by credit quality indicator and origination year as of  March 31, 2026 and December 31, 2025:

 

																										Revolving
																										Loans
																										Amortized
		Term Loans Amortized Cost Basis by Origination Year																								Cost Basis				Total
		2026				2025				2024				2023				2022				Prior
		(in thousands)
As of March 31, 2026
One-to-four family residential
Pass		$	11,151			$	44,666			$	9,255			$	13,895			$	33,250			$	31,390			$	—			$	143,607
Special Mention			—				—				—				518				—				622				—				1,140
Substandard			—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—
Loans not formally rated (1)			11,259				42,137				23,978				38,885				75,973				154,481				—				346,713
Total		$	22,410			$	86,803			$	33,233			$	53,298			$	109,223			$	186,493			$	—			$	491,460
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Multi-family
Pass		$	11,335			$	79,098			$	26,660			$	51,255			$	205,610			$	35,901			$	11,226			$	421,085
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				—				—				—				—				—				—				—
Total		$	11,335			$	79,098			$	26,660			$	51,255			$	205,610			$	35,901			$	11,226			$	421,085
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Commercial real estate
Pass		$	11,862			$	97,608			$	22,132			$	34,371			$	96,055			$	64,608			$	8,745			$	335,381
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				—				—				—				—				—				—				—
Total		$	11,862			$	97,608			$	22,132			$	34,371			$	96,055			$	64,608			$	8,745			$	335,381
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Home equity lines of credit and loans
Pass		$	—			$	—			$	195			$	317			$	—			$	—			$	7,829			$	8,341
Special Mention			—				—				—				—				—				—				190				190
Substandard			—				—				—				—				—				—				99				99
Doubtful			—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				140				168				335				25				706				42,169				43,543
Total		$	—			$	140			$	363			$	652			$	25			$	706			$	50,287			$	52,173
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Construction
Pass		$	10,596			$	39,616			$	32,415			$	8,127			$	—			$	2,988			$	—			$	93,742
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				789				—				—				—				—				—				789
Total		$	10,596			$	40,405			$	32,415			$	8,127			$	—			$	2,988			$	—			$	94,531
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Commercial
Pass		$	—			$	339			$	4,499			$	204			$	2,031			$	397			$	391			$	7,861
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				—				—				—				—				—				—				—
Total		$	—			$	339			$	4,499			$	204			$	2,031			$	397			$	391			$	7,861
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Consumer
Pass		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Special Mention			—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				71				6				—				18				33				37				165
Total		$	—			$	71			$	6			$	—			$	18			$	33			$	37			$	165
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—

 

---

 

																										Revolving				Revolving
																										Loans				Loans
																										Amortized				Converted
		Term Loans Amortized Cost Basis by Origination Year																								Cost Basis				to Term				Total
		2025				2024				2023				2022				2021				Prior
		(in thousands)
As of December 31, 2025
One-to-four family residential
Pass		$	40,466			$	9,290			$	13,941			$	33,430			$	14,226			$	14,488			$	—			$	—			$	125,841
Special Mention			—				—				519				—				—				629				—				—				1,148
Substandard			—				—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—				—
Loans not formally rated (1)			44,560				25,284				41,495				76,803				64,756				93,507				—				—				346,405
Total		$	85,026			$	34,574			$	55,955			$	110,233			$	78,982			$	108,624			$	—			$	—			$	473,394
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Multi-family
Pass		$	87,627			$	26,358			$	51,235			$	207,128			$	24,712			$	16,769			$	11,599			$	—			$	425,428
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				—				—				—				—				—				—				—				—
Total		$	87,627			$	26,358			$	51,235			$	207,128			$	24,712			$	16,769			$	11,599			$	—			$	425,428
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Commercial real estate
Pass		$	102,619			$	24,301			$	38,665			$	96,593			$	24,203			$	41,656			$	8,375			$	—			$	336,412
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				—				—				—				—				—				—				—				—
Total		$	102,619			$	24,301			$	38,665			$	96,593			$	24,203			$	41,656			$	8,375			$	—			$	336,412
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Home equity lines of credit and loans
Pass		$	—			$	196			$	319			$	—			$	—			$	—			$	7,099			$	—			$	7,614
Special Mention			—				—				—				—				—				3				90				—				93
Substandard			—				—				—				—				—				—				99				—				99
Doubtful			—				—				—				—				—				—				—				—				—
Loans not formally rated (1)			142				170				347				25				2				54				40,760				560				42,060
Total		$	142			$	366			$	666			$	25			$	2			$	57			$	48,048			$	560			$	49,866
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Construction
Pass		$	39,339			$	37,484			$	7,603			$	—			$	—			$	2,988			$	—			$	—			$	87,414
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—				—
Loans not formally rated (1)			790				753				—				—				—				—				—				—				1,543
Total		$	40,129			$	38,237			$	7,603			$	—			$	—			$	2,988			$	—			$	—			$	88,957
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Commercial
Pass		$	355			$	4,500			$	213			$	2,091			$	258			$	159			$	362			$	—			$	7,938
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—				—
Loans not formally rated (1)			—				—				—				—				—				—				—				—				—
Total		$	355			$	4,500			$	213			$	2,091			$	258			$	159			$	362			$	—			$	7,938
Current-period gross charge-offs		$	—			$	—			$	—			$	—			$	—			$	16			$	65			$	—			$	81
Consumer
Pass		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Special Mention			—				—				—				—				—				—				—				—				—
Substandard			—				—				—				—				—				—				—				—				—
Doubtful			—				—				—				—				—				—				—				—				—
Loans not formally rated (1)			705				6				8				20				31				4				95				—				869
Total		$	705			$	6			$	8			$	20			$	31			$	4			$	95			$	—			$	869
Current-period gross charge-offs		$	6			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	6

 

(1) All loans not formally rated were accruing as of March 31, 2026 and  December 31, 2025.

 

---

 

At March 31, 2026, the Company had one consumer mortgage loan secured by residential real estate property in the process of foreclosure for $103,000. At  December 31, 2025, the Company had no consumer mortgage loans secured by residential real estate property in the process of foreclosure. 

 

For the three months ended March 31, 2026 and 2025, the Company did not provide loan restructurings involving borrowers that are experiencing financial difficulty.

 

NOTE 5 - STOCK-BASED COMPENSATION

 

On September 7, 2023, the Company adopted the ECB Bancorp, Inc. 2023 Equity Incentive Plan ("2023 Equity Plan”). The 2023 Equity Plan authorizes 1,248,133 shares of common stock for equity based compensation awards including restricted stock awards, restricted stock units and stock options, including incentive stock options.

 

The following table summarizes the Company's stock option activities for the periods indicated:

 

		Three months ended March 31, 2026
		Outstanding and exercisable								Non-vested
						Weighted-Average								Weighted-Average
		Shares				Exercise Price				Shares				Exercise Price
Balance at beginning of period			288,092			$	10.43				440,885			$	10.45
Granted			—				—				—				—
Vested			—				—				—				—
Exercised			—				—				—				—
Forfeited or expired			—				—				—				—
Balance at end of period			288,092			$	10.43				440,885			$	10.45

 

---

 

The restricted stock awards are measured based on grant-date fair value, which reflects the closing price of our stock on the date of grant. All of the restricted stock awards which have been granted to date vest over five years in equal portions beginning on the first anniversary date of the restricted stock award, except the restricted stock awards granted in 2025 which vest in one year. The following table represents information regarding non-vested restricted stock award activities for the periods indicated:

 

		Three Months Ended
		March 31, 2026
						Weighted-Average
						Grant Date
						Fair Value
		Number of Shares				Per Share
Balance at beginning of period			178,526			$	10.51
Granted			—				—
Vested			—				—
Forfeited			—				—
Balance at end of period			178,526			$	10.51

 

		Three Months Ended
		March 31, 2025
						Weighted-Average
						Grant Date
						Fair Value
		Number of Shares				Per Share
Balance at beginning of period			245,766			$	10.51
Granted			—				—
Vested			—				—
Forfeited			—				—
Balance at end of period			245,766			$	10.51

 

The following table represents the compensation expense and income tax benefits recognized for stock options and restricted stock awards for the periods indicated:

 

		Three months ended
		March 31, 2026				March 31, 2025
		(in thousands)
Stock-based compensation expense
Stock options		$	156			$	163
Restricted stock awards, net of forfeitures			157				159
Total stock-based compensation expense		$	313			$	322
Related tax benefits recognized in earnings		$	67			$	70

 

---

 

The following table sets forth the total compensation cost related to non-vested awards not yet recognized and the weighted average period (in years) over which it is expected to be recognized as of the periods indicated:

 

		March 31, 2026								December 31, 2025
						Weighted average								Weighted average
		Amount				period				Amount				period
		(Dollars in thousands)
Stock options		$	1,612				2.56			$	1,767				2.80
Restricted stock awards			1,592				2.55				1,749				2.80
Total		$	3,204							$	3,516

 

NOTE 6 - FAIR VALUE MEASUREMENTS

 

ASC 820-10, Fair Value Measurement – Overall, provides a framework for measuring fair value under U.S. GAAP. This guidance also allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis.

 

In accordance with ASC 820-10, the Company groups its financial assets and financial liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

Level 1 – Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

 

Level 2 – Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or comparable assets or liabilities.

 

Level 3 – Valuations for assets and liabilities that are derived from other methodologies, including option pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets and liabilities.

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value for  March 31, 2026 and December 31, 2025.

 

Cash and Cash Equivalents

 

For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value.

 

Available-for-Sale and Held-to-Maturity Securities

 

The Company’s investments in debt securities are generally classified within Level 2 of the fair value hierarchy. The Company obtains fair value measurements from independent pricing services which are not adjusted by management. The fair value measurements consider observable data that considers standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.

 

FHLB Stock

 

The fair value of FHLB stock approximates the carrying amount based on the redemption provisions of the FHLB. These assets were classified as Level 2.

 

Loans

 

The fair value of loans is measured on an exit price basis incorporating discounts for credit, liquidity and marketability factors. Loans were classified as Level 3 since the valuation methodology utilizes significant unobservable inputs.

 

Loans Held for Sale

 

The fair value of loans held for sale, whose carrying amounts approximate fair value, was estimated using quoted market prices provided by investors. These assets were classified as Level 2 given the use of observable inputs.

 

---

 

Accrued Interest Receivable

 

For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value.

 

Deposits

 

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing demand deposits, savings and money market accounts, was equal to their carrying amount. The fair value of certificates of deposits is valued using a replacement cost of funds approach, and discounted to the market rates and based on weighted remaining maturity. Deposits were classified as Level 2 given the use of observable market inputs.

 

Accrued Interest Payable

 

For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value.

 

Derivative Instruments

 

The fair value of interest rate swaps was determined using discounted cash flow analysis on the expected cash flows of the interest rate swaps. This analysis reflects the contractual terms of the interest rate swaps, including the period of maturity, and uses observable market-based inputs including interest rate curves. The inputs used to value the Company’s interest rate swaps fall within Level 2 of the fair value hierarchy and as a result, the interest rate swaps were categorized as Level 2 within the fair value hierarchy.

 

As of  March 31, 2026 and December 31, 2025, the following summarizes assets and liabilities measured at fair value on a recurring basis:

 

		Fair Value Measurements at Reporting Date Using
						Quoted Prices				Significant
						in Active				Other				Significant
						Markets for				Observable				Unobservable
						Identical Assets				Inputs				Inputs
		Total				Level 1				Level 2				Level 3
						(in thousands)
March 31, 2026
Assets:
Available-for-sale securities
Mortgage-backed securities		$	6,337			$	—			$	6,337			$	—
Collateralized mortgage obligations			12,235				—				12,235				—
Corporate bonds			18,494				—				18,494				—
Derivative instruments			266				—				266				—
Total assets measured at fair value on a recurring basis		$	37,332			$	—			$	37,332			$	—
Liabilities:
Derivative instruments			831			$	—			$	831			$	—
Total liabilities measured at fair value on a recurring basis		$	831			$	—			$	831			$	—
December 31, 2025
Assets:
Available-for-sale securities
Mortgage-backed securities		$	6,459			$	—			$	6,459			$	—
Collateralized mortgage obligations			10,948				—				10,948				—
Corporate bonds			16,910				—				16,910				—
Derivative instruments			2				—				2				—
Total assets measured at fair value on a recurring basis		$	34,319			$	—			$	34,319			$	—
Liabilities:
Derivative instruments		$	1,603			$	—			$	1,603			$	—
Total liabilities measured at fair value on a recurring basis		$	1,603			$	—			$	1,603			$	—

 

Under certain circumstances, the Company makes fair value adjustments to its assets and liabilities although they are not measured at fair value on a recurring basis.

 

As of  March 31, 2026 and December 31, 2025, the Bank had no assets or liabilities for which a nonrecurring change in fair value had been recorded.

 

---

 

ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value are discussed above. The estimated fair values and related carrying amounts of assets and liabilities for which fair value is only disclosed are shown below at the dates indicated:

 

		March 31, 2026
		Carrying				Fair
		Amount				Value				Level 1				Level 2				Level 3
						(in thousands)
Financial assets:
Cash and cash equivalents		$	111,291			$	111,291			$	111,291			$	—			$	—
Interest-bearing time deposits			11,497				11,497				—				11,497				—
Held-to-maturity securities			51,624				48,044				—				48,044				—
Federal Home Loan Bank stock			11,142				11,142				—				11,142				—
Loans, net			1,391,489				1,357,510				—				—				1,357,510
Accrued interest receivable			5,329				5,329				5,329				—				—
Financial liabilities:
Deposits, other than certificates of deposit		$	403,784			$	403,784			$	—			$	403,784			$	—
Certificates of deposit			795,611				796,149				—				796,149				—
Federal Home Loan Bank advances			260,815				261,638				—				261,638				—
Accrued interest payable			1,578				1,578				1,578				—				—

 

		December 31, 2025
		Carrying				Fair
		Amount				Value				Level 1				Level 2				Level 3
						(in thousands)
Financial assets:
Cash and cash equivalents		$	86,922			$	86,922			$	86,922			$	—			$	—
Interest-bearing time deposits			7,998				7,998				—				7,998				—
Held-to-maturity securities			55,764				52,326				—				52,326				—
Federal Home Loan Bank stock			11,852				11,852				—				11,852				—
Loans held-for-sale			357				357				—				357				—
Loans, net			1,371,819				1,343,233				—				—				1,343,233
Accrued interest receivable			5,214				5,214				5,214				—				—
Financial liabilities:
Deposits, other than certificates of deposit		$	404,033			$	404,033			$	—			$	404,033			$	—
Certificates of deposit			728,311				730,175				—				730,175				—
Federal Home Loan Bank advances			284,815				286,754				—				286,754				—
Accrued interest payable			1,905				1,905				1,905				—				—

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

 

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

 

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies but usually includes income producing commercial properties or residential real estate.

 

---

 

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance by a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. As of  March 31, 2026 and December 31, 2025, the maximum potential amount of the Company’s obligation was $50,000, for standby letters of credit. The Company’s outstanding letters of credit generally have a term of less than one year. If a letter of credit is drawn upon, the Company may seek recourse through the customer’s underlying line of credit. If the customer’s line of credit is also in default, the Company may take possession of the collateral, if any, securing the line of credit.

 

Amounts of financial instruments whose contract amounts represent off-balance sheet credit risk are as follows as of  March 31, 2026 and December 31, 2025:

 

		March 31, 2026				December 31, 2025
		(in thousands)
Commitments to originate loans		$	23,788			$	30,588
Unadvanced funds on lines of credit			99,507				93,241
Unadvanced funds on construction loans			49,101				47,665
Letters of credit			50				50
		$	172,446			$	171,544

 

The Company accrues for credit losses related to off-balance sheet financial instruments. Expected losses on off-balance sheet loan commitments are estimated using the same risk factors used to determine the allowance for credit losses on loans, adjusted for the likelihood that funding will occur. The allowance for off-balance sheet commitments is recorded within other liabilities on the consolidated balance sheets and amounted to $706,000 and $711,000 as of  March 31, 2026 and December 31, 2025, respectively. 

 

NOTE 8 – OTHER COMPREHENSIVE INCOME (LOSS)

 

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the shareholders' equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income.

 

The components of other comprehensive income (loss) and related tax effects are as follows for the three months ended March 31, 2026 and 2025:

 

		Three months ended
		March 31,
		2026				2025
		(in thousands)
Available-for-sale securities:
Change in fair value of available-for-sale securities		$	9			$	73
Reclassification adjustment for realized gains in net income			—				—
Total			9				73
Income tax expense			(2	)			(20	)
Net-of-tax amount			7				53
Cash flow hedges:
Change in fair value of cash flow hedges		$	1,016			$	(1,044	)
Reclassification adjustment for cash flow hedge gains into net income			20				(96	)
Total			1,036				(1,140	)
Income tax (expense) benefit			(291	)			320
Net-of-tax amount			745				(820	)
Other comprehensive income (loss), net of tax		$	752			$	(767	)

 

---

 

Accumulated other comprehensive loss as of  March 31, 2026 and  December 31, 2025 consists of unrecognized benefit costs, net of taxes, unrealized holding gains on securities available for sale, net of tax, and fair value of cash flow hedges, net of tax as follows:

 

		As of March 31, 2026				As of December 31, 2025
		(in thousands)
Net unrealized holding gain on securities available-for-sale, net of tax		$	180			$	173
Unrecognized SERP gain, net of tax			36				36
Unrecognized DFCP gain, net of tax			45				45
Fair value of cash flow hedges, net of tax			(405	)			(1,150	)
Accumulated other comprehensive loss		$	(144	)		$	(896	)

 

NOTE 9 – REGULATORY MATTERS

 

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.

 

Management believes, as of March 31, 2026, that the Bank meets all capital adequacy requirements to which it is subject.

 

As of March 31, 2026, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, Common Equity Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

 

The Bank’s actual capital amounts and ratios are presented in the table as of the dates indicated:

 

										Minimum For Capital								Minimum To Be Well
										Adequacy Purposes								Capitalized Under
										Plus Capital								Prompt Corrective
		Actual								Conservation Buffer								Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
										(dollars in thousands)
As of March 31, 2026
Total Capital (to Risk Weighted Assets)		$	169,318				14.55	%		$	122,171				10.50	%		$	116,353				10.00	%
Tier 1 Capital (to Risk Weighted Assets)			158,199				13.60	%			98,900				8.50	%			93,082				8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)			158,199				13.60	%			81,447				7.00	%			75,629				6.50	%
Tier 1 Capital (to Average Assets)			158,199				9.83	%			64,365				4.00	%			80,456				5.00	%
As of December 31, 2025
Total Capital (to Risk Weighted Assets)		$	165,616				14.29	%		$	121,710				10.50	%		$	115,914				10.00	%
Tier 1 Capital (to Risk Weighted Assets)			154,650				13.34	%			98,527				8.50	%			92,731				8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)			154,650				13.34	%			81,140				7.00	%			75,344				6.50	%
Tier 1 Capital (to Average Assets)			154,650				9.86	%			62,736				4.00	%			78,420				5.00	%

 

---

 

NOTE 10 - EARNINGS PER SHARE ("EPS")

 

Basic earnings per share is calculated by dividing the income available to common shares by the weighted-average number of common shares outstanding during the period. Diluted earnings per share have been calculated in a manner similar to that of basic earnings per share except that the weighted average number of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares (such as those resulting from the exercise of stock options) were issued during the period, computed using the treasury stock method. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations.

 

		Three months ended
		March 31,
		2026				2025
		(Dollars in thousands, except per share data)
Net income allocated to common stock		$	3,122			$	1,297
Weighted-average common shares outstanding used to calculate basic earnings per common share			8,026,026				8,210,782
Add: Dilutive effect of restricted stock awards			82,022				132,989
Add: Dilutive effect of stock options			191,662				—
Weighted-average common shares outstanding used to calculate diluted earnings per common share			8,299,710				8,343,771
Earnings per common share
Basic		$	0.39			$	0.16
Diluted		$	0.38			$	0.16

 

For the three months ended March 31, 2026, there were no anti-dilutive shares. For the three months ended March 31, 2025, the shares that were anti-dilutive, and therefore excluded from the calculation of diluted earnings per share, included options to purchase 169,128 shares of common stock.

 

NOTE 11 - DERIVATIVE AND HEDGING ACTIVITIES

 

The Company uses derivative financial instruments to manage its interest rate risk resulting from the differences in the amount, timing, and duration of known or expected cash payments. The Company has entered into interest rate swaps to add stability to interest expense and manage exposure to interest rate movements as part of an overall risk management strategy.

 

An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The Company has entered into interest rate swaps in which it pays fixed and receives floating interest in order to manage its interest rate risk exposure to the variability in interest cash flows on certain floating-rate FHLB Advances and brokered certificates of deposit. The interest rate swaps effectively convert the floating rate payments made on the FHLB Advances and brokered certificates of deposit to a fixed rate and consequently reduce the Company’s exposure to variability in short-term interest rates.

 

Derivative instruments are carried at fair value in the Company’s Consolidated Financial Statements. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not the instrument qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship.

 

The Company’s interest rate swaps have been designated as and are accounted for as cash flow hedges. The changes in fair value are included in other comprehensive income and reclassified into net income in the same period or periods during which the hedged forecasted transaction affects net income. 

 

Cash flow hedges are initially assessed for effectiveness using regression analysis. Changes in the fair value of derivatives that are designated as and that qualify as cash flow hedges are recorded in OCI and are subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings. Quarterly, a quantitative analysis is performed to monitor the ongoing effectiveness of the hedging instrument. All derivative positions were initially, and continue to be, highly effective at March 31, 2026.

 

---

 

The following table reflects the Company's derivative position at the date indicated below for the interest rate swaps:

 

		As of March 31, 2026				As of December 31, 2025
		(Dollars in thousands)
Notional amount		$	150,000			$	120,000
Weighted-average pay rate			3.69	%			3.79	%
Weighted-average receive rate			3.67	%			3.80	%
Weighted-average maturity in years			2.97				3.24

 

The table below presents the fair value of the Company's derivative financial instruments, as well as their classification on the Consolidated Balance Sheets as of the dates indicated:

 

	Asset Derivatives					Liability Derivatives
	Balance Sheet					Balance Sheet
	Location		Fair Value			Location		Fair Value
March 31, 2026	(in thousands)
Derivatives designated as hedging instruments
Interest rate swaps	Other assets		$	266		Other liabilities		$	(831	)
Total			$	266				$	(831	)
December 31, 2025
Derivatives designated as hedging instruments
Interest rate swaps	Other assets		$	2		Other liabilities		$	(1,603	)
Total			$	2				$	(1,603	)

 

For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of the gains or losses is reported as a component of other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company expects approximately $42,000 to be reclassified as an increase to interest expense from OCI related to the Company’s cash flow hedges in the twelve months following March 31, 2026. This reclassification is due to anticipated payments that will be paid to counterparty on the swaps based upon the forward curve at March 31, 2026.

 

The maximum length of time over which the Company is currently hedging its exposure to the variability in future cash flows for forecasted transactions related to the payment of variable interest on existing financial instruments is 4.2 years.

 

The pre-tax effects of cash flow hedges on accumulated other comprehensive income and current earnings for the period indicated are as follows:

 

		Three Months Ended				Three Months Ended
		March 31, 2026				March 31, 2025
		(in thousands)
Interest rate swaps
Amount of gain (loss) recognized in OCI on derivatives		$	1,036			$	(1,140	)
(Loss) gain reclassified from OCI into interest expense		$	(20	)		$	96

 

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty not secured by variation margin plus any initial margin collateral posted. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on derivative contracts with those counterparties is remote. As of March 31, 2026, the Company has pledged cash collateral to a derivative counterparty totaling $2.4 million. The Company may need to post additional collateral or may receive additional collateral in the future in proportion to potential changes in the overall unrealized gain or loss position.

 

 

---

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

General

 

Management’s discussion and analysis of the financial condition at March 31, 2026 compared to December 31, 2025 and results of operations 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,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “intend,” “target” and words of similar meaning. 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:

 

●

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;

 

●

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;

 

●

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

 

●

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, credit 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;

 

●

the risk of adverse changes in business conditions due to geo-political tensions;

 

●

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.

 

Significant Accounting Policies

 

There are no material changes to the significant accounting policies disclosed in ECB Bancorp, Inc.’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 2026.

 

Critical Accounting Estimates

 

The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with generally accepted accounting principles used in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting estimates. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

 

Allowance for Credit Losses

 

The Company estimates the allowance for credit losses in accordance with the CECL methodology for loans measured at amortized cost. The allowance for credit losses is established based upon the Company's current estimate of expected lifetime credit losses. Arriving at an appropriate amount of allowance for credit losses involves a high degree of judgment.

 

The Company estimates credit losses on a collective basis for loans sharing similar risk characteristics using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. Management's judgment is required for the selection and application of these factors which are derived from historical loss experience as well as assumptions surrounding expected future losses and economic forecasts.

 

Loans that no longer share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting. For the loans that are individually assessed, the Company uses either a discounted cash flow (“DCF”) approach or a fair value of collateral approach. The latter approach is used for loans deemed to be collateral dependent or when foreclosure is probable. Changes in these judgments and assumptions could be due to a number of circumstances which may have a direct impact on the provision for credit losses and may result in changes to the amount of allowance. The allowance for credit losses is increased by the provision for credit losses and by recoveries of loans previously charged off. Credit losses are charged against the allowance when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan.

 

Comparison of Financial Condition at March 31, 2026 and December 31, 2025

 

Total Assets. Total assets were $1.65 billion at March 31, 2026, as compared to $1.61 billion at December 31, 2025, or an increase of $44.6 million, or 2.8%.

 

Cash and Cash Equivalents. Cash and cash equivalents were $111.3 million at March 31, 2026, as compared to $86.9 million at December 31, 2025, or an increase of $24.4 million, or 28.0%. The increase in cash and cash equivalents was driven by strong deposit growth that outpaced our loan growth for the quarter.

 

Interest-Bearing Time Deposits. Interest-bearing time deposits were $11.5 million at March 31, 2026, as compared to $8.0 million at December 31, 2025, or an increase of $3.5 million, or 43.7%. This increase was due to purchases of new short-term interest-bearing time deposits.

Investment Securities Available for Sale. Investments in securities available for sale were $37.1 million at March 31, 2026, as compared to $34.3 million at December 31, 2025, or an increase of $2.7 million, or 8.0%. This increase was due to purchases of new securities.

 

Investment Securities Held to Maturity. Investments in securities held to maturity were $51.6 million at March 31, 2026, as compared to $55.8 million at December 31, 2025, or a decrease of $4.1 million, or 7.4%. This decrease was due to maturities and principal paydowns of securities.

 

Loans. Total gross loans were $1.40 billion at March 31, 2026, as compared to $1.38 billion at December 31, 2025, or an increase of $19.8 million, or 1.4%.

 

●

One-to-four family residential real estate loans increased $18.1 million, or 3.8%, to $491.5 million at March 31, 2026, from $473.4 million at December 31, 2025.

 

●

Construction loans increased $5.6 million, or 6.3%, to $94.5 million at March 31, 2026 from $89.0 million at December 31, 2025.

 

●

Home equity lines of credit increased $2.3 million, or 4.6%, to $52.2 million at March 31, 2026, from $49.9 million at December 31, 2025.

 

●

Commercial loans decreased $77,000, or 1.0%, to $7.86 million at March 31, 2026 from $7.94 million at December 31, 2025.

 

●

Consumer loans decreased $704,000, or 81.0%, to $165,000 at March 31, 2026, from $869,000 at December 31, 2025.

 

●

Commercial real estate loans decreased $1.0 million, or 0.3%, to $335.4 million at March 31, 2026 from $336.4 million at December 31, 2025.

 

●

Multi-family real estate loans decreased $4.3 million, or 1.0%, to $421.1 million at March 31, 2026 from $425.4 million at December 31, 2025.

 

Federal Home Loan Bank stock. The Federal Home Loan Bank (FHLB) is a cooperative bank that provides services to its member banking institutions. The primary reason for our membership in the FHLB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk. The purchase of stock in the FHLB is a requirement for a member to gain access to funding. We purchase and/or are subject to redemption of FHLB stock proportional to the volume of funding received and view the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return. We held an investment in FHLB stock of $11.1 million and $11.9 million at March 31, 2026 and December 31, 2025, respectively. The amount of stock we are required to purchase is in proportion to our FHLB borrowings and level of total assets.

 

Bank-owned Life Insurance. We invest in bank-owned life insurance to help offset the costs of our employee benefit plan obligations. Bank-owned life insurance also generally provides noninterest income that is nontaxable. Bank-owned life insurance was $15.5 million at March 31, 2026, as compared to $15.4 million at December 31, 2025, or an increase of $117,000, or 0.8%. The increase was due to an increase of the cash surrender value of our bank-owned life insurance portfolio.

 

 

Deposits. Total deposits were $1.20 billion at March 31, 2026, as compared to $1.13 billion at December 31, 2025, or an increase of $67.1 million, or 5.9%.

 

●

Certificates of deposit increased $67.3 million, or 9.2%, to $795.6 million at March 31, 2026 from $728.3 million at December 31, 2025.

 

●

Interest-bearing checking accounts increased $6.4 million, or 32.8%, to $25.7 million at March 31, 2026 from $19.4 million at December 31, 2025.

 

●

Money market deposit accounts increased $1.8 million, or 0.8%, to $213.5 million at March 31, 2026 from $211.8 million at December 31, 2025.

 

●

Demand deposit accounts decreased $1.3 million, or 1.6%, to $80.2 million at March 31, 2026 from $81.5 million at December 31, 2025.

 

●

Savings accounts decreased $7.1 million, or 7.8%, to $84.3 million at March 31, 2026 from $91.4 million at December 31, 2025.

 

Federal Home Loan Bank Advances. FHLB advances were $260.8 million at March 31, 2026, as compared to $284.8 million at December 31, 2025, or a decrease of $24.0 million, or $8.4%.

 

Shareholders' Equity. Total shareholders' equity was $175.9 million as of March 31, 2026, as compared to $171.9 million as of December 31, 2025, or an increase of $4.0 million, or 2.3%. This increase is primarily the result of earnings of $3.1 million and a decrease in accumulated other comprehensive loss ("AOCL") of $752,000. The decrease in AOCL was driven by an increase in the fair value of cash flow hedges. Our book value per share increased by $0.50 to $20.05 at March 31, 2026 from $19.55 at December 31, 2025.

 

Comparison of Operating Results for the Three Months Ended March 31, 2026 and March 31, 2025

 

Net Income. We recorded net income of $3.1 million for the three months ended March 31, 2026, as compared to net income of $1.3 million for the three months ended March 31, 2025, or an increase of $1.8 million, or 140.7%.

 

Interest and Dividend Income. Interest and dividend income was $21.6 million for the three months ended March 31, 2026, as compared to $17.6 million for the three months ended March 31, 2025, or an increase of $4.0 million, or 22.7%. This increase was driven by a $4.4 million increase in interest and fees on loans, a $277,000 increase in interest and dividends on securities and a $92,000 increase in interest on interest-bearing time deposits, partially offset by an $811,000 decrease in interest on short-term investments. The increase in interest and fees on loans was driven by an increase of $224.3 million in the average balance of the loan portfolio to $1.38 billion for the three months ended March 31, 2026 from $1.16 billion for the three months ended March 31, 2025, as well as an increase in the average yield of 44 basis points to 5.74% during the three months ended March 31, 2026 from 5.30% during the three months ended March 31, 2025. The yield for the three months ended March 31, 2026 benefited primarily from new loans with higher rates. The increase in interest and dividends on securities was driven by an increase in the average yield of 101 basis points to 4.38% during the three months ended March 31, 2026 from 3.37% during the three months ended March 31, 2025 as well as an increase of $6.5 million in the average balance of the investment portfolio to $87.4 million for the three months ended March 31, 2026 from $80.9 million for the three months ended March 31, 2025. The increase in interest income on interest-bearing time deposits was driven by an increase in the average balance of interest-bearing time deposits to $8.9 million for the three months ended March 31, 2026 from $100,000 for the three months ended March 31, 2025. The decrease in interest income on short-term investments was driven by a decrease of $58.3 million in the average balance of the short-term investments to $90.0 million for the three months ended March 31, 2026 from $148.3 million for the three months ended March 31, 2025, as well as a decrease in the average yield of 78 basis points to 3.67% during the three months ended March 31, 2026 from 4.45% during the three months ended March 31, 2025. 

 

Average interest-earning assets increased $181.4 million to $1.57 billion for the three months ended March 31, 2026 from $1.39 billion for the three months ended March 31, 2025. The yield on interest-earning assets increased 44 basis points to 5.54% for the three months ended March 31, 2026 from 5.10% for the three months ended March 31, 2025.

 

Interest Expense. Total interest expense was $11.8 million for the three months ended March 31, 2026, as compared to $11.0 million for the three months ended March 31, 2025, an increase of $807,000, or 7.4%. The increase was driven by a $468,000 increase in interest expense on FHLB advances as well as a $339,000 increase in interest expense on deposit accounts. The increase in interest expense on FHLB advances was primarily due to an increase in the average balance of FHLB advances of $46.5 million, or 21.4%, to $263.6 million for the three months ended March 31, 2026 from $217.1 million for the three months ended March 31, 2025. The increase in interest expense on deposit accounts was due to an increase in the average balance of interest-bearing deposits of $128.6 million, or 13.6%, to $1.07 billion for the three months ended March 31, 2026 from $944.4 million for the three months ended March 31, 2025, partially offset by a decrease in the cost of interest-bearing deposits of 32 basis points to 3.48% for the three months ended March 31, 2026 from 3.80% for the three months ended March 31, 2025.

 

Net Interest and Dividend Income. Net interest and dividend income increased $3.2 million, or 47.9%, to $9.8 million for the three months ended March 31, 2026 from $6.6 million for the three months ended March 31, 2025. This increase was driven by increases in the average balance and yields on loans as well as a decrease in the average cost of interest-bearing deposits. The resulting net interest margin expanded by 60 basis points to 2.49% for the three months ended March 31, 2026, as compared to 1.89% for the three months ended March 31, 2025.

 

Provision for Credit Losses. The provision for credit losses was $153,000 for the quarter ended March 31, 2026, as compared to a benefit of $10,000 for the three months ended March 31, 2025. The three months ended March 31, 2025 benefited from reduced qualitative reserve factors. 

 

 

Noninterest Income. Noninterest income was $327,000 for the three months ended March 31, 2026, as compared to $271,000 for the three months ended March 31, 2025, or an increase of $56,000, or 20.7%.  The table below sets forth our noninterest income for the three months ended March 31, 2026 and 2025:

 

		Three Months Ended
		March 31,								Change
		2026				2025				Amount				Percent
		(Dollars in thousands)
Customer service fees		$	155			$	140			$	15				10.7	%
Income from bank-owned life insurance			117				116				1				0.9
Net gain on sales of loans			36				—				36				—
Other income			19				15				4				26.7
Total noninterest income		$	327			$	271			$	56				20.7	%

 

Noninterest Expense. Noninterest expense was $5.7 million for the three months ended March 31, 2026, as compared to $5.2 million for the three months ended March 31, 2025, or an increase of $537,000, or 10.3%. The table below sets forth our noninterest expense for the three months ended March 31, 2026 and 2025:

 

 

		Three Months Ended
		March 31,								Change
		2026				2025				Amount				Percent
		(Dollars in thousands)
Salaries and employee benefits		$	3,460			$	3,260			$	200				6.1	%
Director compensation			199				216				(17	)			(7.9	)
Occupancy and equipment			314				281				33				11.7
Data processing			335				311				24				7.7
Computer software and licensing fees			121				109				12				11.0
Advertising and promotions			198				132				66				50.0
Professional fees			447				310				137				44.2
FDIC deposit insurance			251				185				66				35.7
Other expense			420				404				16				4.0
Total noninterest expense		$	5,745			$	5,208			$	537				10.3	%

 

●

Salaries and employee benefits were $3.5 million for the three months ended March 31, 2026, as compared to $3.3 million for the three months ended March 31, 2025, or an increase of $200,000, or 6.1%. This increase was primarily due to annual salary increases and increased health insurance costs.

 

●

Advertising and promotions were $198,000 for the three months ended March 31, 2026, as compared to $132,000 for the three months ended March 31, 2025, or an increase of $66,000, or 50.0%. The increase was primarily attributable to higher marketing expenditures, including the engagement of a new marketing firm to support enhanced marketing initiatives.

 

●

Professional fees were $447,000 for the three months ended March 31, 2026, as compared to $310,000 for the three months ended March 31, 2025, or an increase of $137,000, or 44.2%. The increase was driven by higher consultant fees and audit-related costs.

 

●

FDIC deposit insurance was $251,000 for the three months ended March 31, 2026, as compared to $185,000 for the three months ended March 31, 2025, or an increase of $66,000, or 35.7%. The increase was driven by asset growth.

 

Income Tax Expense. We recorded a provision for income tax expense of $1.1 million for the quarter ended March 31, 2026, as compared to $424,000 for the three months ended March 31, 2025, reflecting effective tax rates of 26.8% and 24.6%, respectively.

 

 

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. Average balances are daily average balances. Non-accrual loans are included in average balances only. Average yields include the effect of deferred costs and fees, discounts, and premiums that are amortized or accreted to interest income or interest expense.

 

		For the Three Months Ended March 31,
		2026												2025
		Average												Average
		Outstanding								Yield/				Outstanding								Yield/
		Balance				Interest				Rate(5)				Balance				Interest				Rate(5)
		(Dollars in thousands)
Interest-earning assets:
Total loans		$	1,382,221			$	19,577				5.74	%		$	1,157,934			$	15,142				5.30	%
Securities (1)			87,438				944				4.38				80,925				672				3.37
Short-term investments			89,970				814				3.67				148,262				1,625				4.45
Interest-bearing time deposits			8,964				93				4.21				100				1				4.06
Total interest-earning assets			1,568,593				21,428				5.54	%			1,387,221				17,440				5.10	%
Non-interest-earning assets			40,827												38,096
Total assets		$	1,609,420											$	1,425,317
Interest-bearing liabilities:
Checking accounts			18,707				4				0.09	%			17,462				3				0.07	%
Savings accounts			86,152				341				1.61				98,934				513				2.10
Money market accounts			212,755				1,508				2.87				189,339				1,564				3.35
Certificates of deposit			755,407				7,345				3.94				638,676				6,779				4.30
Total interest-bearing deposits			1,073,021				9,198				3.48				944,411				8,859				3.80
Federal Home Loan Bank advances			263,592				2,582				3.97				217,111				2,114				3.95
Total interest-bearing liabilities			1,336,613				11,780				3.57	%			1,161,522				10,973				3.83	%
Noninterest-bearing demand deposits			82,279												79,781
Noninterest-bearing liabilities			15,777												14,741
Total liabilities			1,434,669												1,256,044
Shareholders' equity			174,751												169,273
Total liabilities and shareholders' equity		$	1,609,420											$	1,425,317
Net interest income						$	9,648											$	6,467
Net interest rate spread (2)											1.97	%											1.27	%
Net interest-earning assets (3)		$	231,980											$	225,699
Net interest margin (4)											2.49	%											1.89	%
Average interest-earning assets to interest-bearing liabilities			117.36	%											119.43	%

 

(1) Excludes interest and dividends on cost method investments of $186,000 and $181,000 for the three months ended March 31, 2026 and 2025, respectively.

(2) 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.

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

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

(5) Annualized

 

 

Rate/Volume Analysis. The following tables present 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 period 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		$	3,103			$	1,332			$	4,435
Securities			58				214				272
Short-term investments			(562	)			(249	)			(811	)
Interest-bearing time deposits			92				—				92
Total interest-earning assets		$	2,691			$	1,297			$	3,988
Interest-bearing liabilities:
Checking accounts		$	—			$	1			$	1
Savings accounts			(61	)			(111	)			(172	)
Money market accounts			181				(237	)			(56	)
Certificates of deposit			1,168				(602	)			566
Total interest-bearing deposits			1,288				(949	)			339
Federal Home Loan Bank advances			455				13				468
Total interest-bearing liabilities		$	1,743			$	(936	)		$	807
Change in net interest income		$	948			$	2,233			$	3,181

 

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 loans and securities. We are also able to borrow from the Federal Home Loan Bank of Boston ("FHLB"), the Federal Reserve Bank and the Atlantic Community Bankers Bank. At March 31, 2026, we had outstanding advances of $260.8 million from the FHLB. At March 31, 2026, we had unused borrowing capacity of $427.9 million with the FHLB, $71.4 million with the Federal Reserve Bank and $15.0 million with the Atlantic Community Bankers Bank.

 

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 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 $23.8 million in loan commitments outstanding. In addition to commitments to originate loans, we had $99.5 million in unused lines of credit to borrowers and $49.1 million in unadvanced construction loans.

 

Non-brokered certificates of deposit due within one year of March 31, 2026 totaled $430.9 million, or 35.9%, of total deposits. If these deposits do not remain with us, we may be required to seek other sources of funds, including brokered deposits and FHLB advances. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before March 31, 2027, or on our savings and money market 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 and the year ended December 31, 2025, we originated $79.5 million and $429.6 million of loans, respectively.

 

Financing activities consist primarily of activity in deposit accounts and FHLB advances. We experienced net increases in deposits of $67.1 million and $133.8 million for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively. At March 31, 2026 and December 31, 2025, the level of brokered time deposits was $152.3 million and $134.0 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. At March 31, 2026 and December 31, 2025, the level of FHLB advances was $260.8 million and $284.8 million, respectively.

 

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.

 

At March 31, 2026, Everett Co-operative Bank exceeded all of its regulatory capital requirements, and was categorized as well-capitalized at that date. Management is not aware of any conditions or events since the most recent notification of well-capitalized status that would change our category. See Note 9 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.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable, as the Registrant is a smaller reporting company.

 

Item 4. Controls and Procedures

 

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2026. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective.

 

During the quarter ended March 31, 2026, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

Part II – Other Information

 

Item 1. Legal Proceedings

 

The Company is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Bank’s or the Company’s financial condition or results of operations.

 

Item 1A. Risk Factors

 

Not applicable, as the Registrant is a smaller reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

There were no sales of unregistered securities during the period covered by this Report.

 

On August 10, 2023, the Company announced the commencement of a stock repurchase program to acquire up to 458,762 shares, or 5% of the Company’s then outstanding common stock. On April 11, 2025, the Company completed the stock repurchase plan. On May 8, 2025, the Company announced an additional stock repurchase plan that authorizes the Company to repurchase up to 451,092 shares, or approximately 5% of the Company's then outstanding common stock. Repurchases will be made from time to time depending on market conditions and other factors, and will be conducted through open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. There is no guarantee as to the exact number of shares to be repurchased by the Company. The following table sets forth the information regarding the Company's common stock repurchase activities during the three months ended March 31, 2026:

 

										Total Number of				Maximum Number
										Shares Purchased				of Shares That May
		Total Number of				Average Price				as Part of Publicly				Yet Be Purchased
		Shares Purchased				Paid Per Share				Announced Programs				Under the Programs
From January 1, 2026 to January 31, 2026			—			$	—				—				224,575
From February 1, 2026 to February 28, 2026			3,896			$	17.71				3,896				220,679
From March 1, 2026 to March 31, 2026			15,798			$	16.79				15,798				204,881
Total			19,694			$	16.97				19,694

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

During the three months ended March 31, 2026, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as that term is used in SEC regulations.

 

 

 

Item 6. Exhibits

 

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	ECB BANCORP, INC.
Date: May 8, 2026	/s/Richard J. O'Neil, Jr.
	Richard J. O’Neil, Jr.
	President and Chief Executive Officer
Date: May 8, 2026	/s/Brandon N. Lavertu
	Brandon N. Lavertu
	Executive Vice President and Chief Financial Officer