SEC Filing Document

Company: Forbright, Inc.
Ticker: 
CIK: 1925062
Filing Type: S-1
Document Type: S-1
Date Filed: 2026-05-15
Accession Number: 0001628280-26-035713
Exchange: 
SIC Code: 6022
SIC Description: State Commercial Banks
URL: https://www.sec.gov/Archives/edgar/data/1925062/000162828026035713/forbright-sx1publicflip.htm

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1,863 (3,198) N/M Other non-interest income 4,670 4,609 61 1.3 % Total non-interest income $ 15,584 $ 14,055 $ 1,529 10.9 % N/M - not meaningful Total non-interest income was $15.6 million for the three months ended March 31, 2026, an increase of $1.5 million, or 10.9%, compared with the three months ended March 31, 2025, primarily due to solar loan servicing and administration fees related to the solar servicing business acquired during the third quarter of 2025, the recognition of net losses on loan sales during 2026, compared to net gains during 2025, the recognition of unrealized losses on loan fair value marks, compared to net gains during 2025, and a decrease in net fees on FHA/HUD originations in 2026 compared to 2025. Servicing income was $7.1 million for the three months ended March 31, 2026, related to the solar servicing business acquired during the third quarter of 2025.

Investment advisory fees were $3.2 million for the three months ended March 31, 2026, a decrease of $1.1 million, or 26.0%, compared to the three months ended March 31, 2025. This decrease was primarily due to advisory loan pay-offs exceeding new distributions to advisory clients during 2025, which resulted in a net reduction in total fee-generating assets held by advisory clients during the three months ended March 31, 2026. In addition, the advisory fee rates charged on loans distributed in 2025 were generally lower than the advisory fee rates charged on loans distributed in earlier years, as the advisory fee amounts scale based on the interest rates of the loans being distributed and there were generally lower interest rates on the loans being distributed in 2025.

Fee income on loans was $2.0 million for the three months ended March 31, 2026, an increase of $0.6 million, or 39.0%, compared to the three months ended March 31, 2025, primarily due to an increase in unused line of credit fees.

(Losses)/gains on sales of loans and investment securities, net for the three months ended, March 31, 2026 decreased $1.9 million compared to the three months ended March 31, 2025, primarily due to gains related to the sale of U.S. Treasury investment securities during the first quarter 2025 and losses on corporate finance loan sales during the first quarter 2026.

Unrealized (losses)/gains on loans and financing receivables, net were a net loss of $1.3 million for the three months ended March 31, 2026, compared to a net gain of $1.9 million for the three months ended March 31, 2025, primarily due to a decline in fair values caused by changes in the prices of individual loans in the held-for-sale loan portfolio.

Other non-interest income was $4.7 million for the three months ended March 31, 2026, an increase of $0.1 million, or 1.3%, compared to the three months ended March 31, 2025, primarily due to solar loan administration fees related to the solar servicing business acquired during the third quarter of 2025, offset by a decrease in FHA/HUD originations, and write-downs on OREO values during 2026.

Non-interest Expense

The following table presents non-interest expense for three months ended March 31, 2026 and 2025 and the change between periods, by major component:

For the Three Months Ended March 31,
(dollars in thousands) 2026 2025 $ Change % Change
Compensation and benefits $	31,642 $	30,102 $	1,540 5.1	%
Information technology 7,540 6,011 1,529 25.4	%
Professional fees 7,823 3,742 4,081 109.1	%
Loan administration and servicing 4,125 1,667 2,458 147.5	%
Advertising and marketing 2,304 3,319 (1,015) (30.6)	%
FDIC insurance 902 2,662 (1,760) (66.1)	%
Other non-interest expense 4,121 4,157 (36) (0.9)	%
Total non-interest expense $	58,457 $	51,660 $	6,797 13.2	%

Total non-interest expense was $58.5 million for the three months ended March 31, 2026, an increase of $6.8 million, or 13.2%, compared with the three months ended March 31, 2025, primarily due to an increase in professional fees, loan administration and servicing expense, compensation and benefits, and information technology expense, partially offset by a decrease in FDIC insurance and advertising and marketing expense.

Compensation and benefits expenses were $31.6 million for the three months ended March 31, 2026, an increase of $1.5 million, or 5.1%, compared to $30.1 million for the three months ended March 31, 2025, primarily due to an increase in full-time equivalent employees from approximately 525 to approximately 545, primarily driven by the solar servicing acquisition.

Information technology expenses were $7.5 million and $6.0 million for the three months ended March 31, 2026 and 2025, respectively. The increase of $1.5 million, or 25.4%, was primarily due to the addition of software costs related to the solar servicing acquisition and an increase in information technology services and processing fees.

Professional fees were $7.8 million and $3.7 million for the three months ended March 31, 2026 and 2025, respectively. The increase of $4.1 million, or 109.1%, was primarily due to $2.0 million for solar servicing legal fees associated with its related administration, which are largely reimbursed by counterparties to the loans and recognized in other non-interest income, and $2.2 million related to estimated initial public offering costs.

Loan administration and servicing expenses were $4.1 million and $1.7 million for the three months ended March 31, 2026 and 2025, respectively. The increase of $2.5 million, or 147.5%, was due to sub-servicer fees following the solar servicing acquisition.

Advertising and marketing expenses were $2.3 million and $3.3 million for the three months ended March 31, 2026 and 2025, respectively. The decrease of $1.0 million, or 30.6%, primarily due to a reduction in advertising of the growth savings product offered on the digital deposit platform.

FDIC insurance expenses were $0.9 million and $2.7 million for the three months ended March 31, 2026 and 2025, respectively. The decrease of $1.8 million, or 66.1%, was primarily due to a decrease in the assessment rate in the beginning of the second quarter of 2025.

Other non-interest expense, which consists of occupancy expense, referral fees, travel and meals, dues and subscriptions, directors’ compensation, and other miscellaneous expenses, remained relatively flat at $4.1 million for the three months ended March 31, 2026 compared to $4.2 million for the three months ended March 31, 2025.

Efficiency Ratio

The efficiency ratio for the three months ended March 31, 2026 increased to 77.80% compared to 68.77% for the three months ended March 31, 2025, primarily related to an increase in non-interest expense and relatively flat total revenue.

Income Taxes

For the three months ended March 31, 2026, income tax expense and the effective tax rate were $1.6 million and 12.0%, respectively, compared to $3.9 million and 25.8%, respectively for the three months ended March 31, 2025. The decrease in income tax expense for the three months ended March 31, 2026 was due primarily due to a benefit of $1.7 million from accretion of the deferred credit associated with the solar servicing acquisition, which is released in proportion to the use of deferred tax assets obtained through the acquisition of the solar servicing business that closed in the third quarter of 2025.

Excluding the benefit of the deferred credit accretion, income tax expense and the effective tax rate for the three months ended March 31, 2026 were $3.3 million and 24.9%, respectively, compared to $3.9 million and 25.8%, respectively, for the three months ended March 31, 2025. Although pretax income increased for three months ended March 31, 2026, income tax expense decreased due to the lower effective tax rate in the period, which is primarily due to a lower state effective rate resulting from the impact of interest deduction on U.S. Treasury investment securities and excess tax benefits related to restricted stock awards vesting during the quarter.

During the three months ended March 31, 2026, the deferred credit balance decreased by $4.0 million, comprised of a decrease of $1.7 million related to accretion, which was recognized in income tax expense, and a decrease of $2.3 million related to purchase accounting adjustments. The ending balance of the deferred credit as of March 31, 2026 was $50.3 million.

We have recorded gross deferred tax assets primarily related to federal and state net operating loss carryforwards. In accordance with ASC 740 - Income Taxes, we assess the realizability of these deferred tax assets each reporting period by evaluating all available positive and negative evidence to determine whether it is more likely than not that some or all of the deferred tax assets will be realized.

Based on this weighted evidence, management concluded that it is more likely than not that the net operating loss carryforwards, net of valuation allowances, recorded as of March 31, 2026 will be realized. As of March 31, 2026, we maintain a valuation allowance only for the portion of state net operating loss carryforwards likely to expire unused due to shorter carryforward periods. We will continue to monitor these assumptions going forward; any significant decline in actual results versus our projections may require an increase to the valuation allowance.