First Bank earnings totaled $12.2 million, or $0.49 per diluted share, in the third quarter of 2026 as higher loan yields and lending growth lifted net interest income. In its October 23 results discussion, the bank also outlined a higher 2027 loan-growth target, a larger quarterly dividend and a new share-repurchase authorization, while credit losses remained concentrated in its Business Express portfolio.
Key Takeaways
- Tax-equivalent net interest margin widened six basis points to 3.74% as loan yields rose faster than deposit costs.
- Loans increased $50.2 million during the quarter, and management is targeting approximately $300 million of growth in 2027.
- The quarterly dividend rose 33% to $0.12 per share, while net charge-offs increased to $1.9 million.
Table of Contents
- First Bank earnings benefit from higher loan yields
- Lending pipeline supports a higher 2027 growth target
- Business Express remains the main credit challenge
- Capital returns increase as efficiency improves
- Conclusion
First Bank earnings benefit from higher loan yields
Net interest income increased $2 million, or 5.6%, from the second quarter and $1.2 million, or 3.4%, from a year earlier. Chief Financial Officer Andrew Hibshman attributed the sequential improvement to growth in average earning assets, higher loan yields and disciplined deposit pricing.
Loan yields rose 15 basis points from the previous quarter to 6.48%, while the total cost of deposits increased five basis points to 2.47%. That difference helped widen the bank’s tax-equivalent net interest margin despite more expensive funding.
Management expects the margin to remain stable or improve slightly, but that is an outlook rather than a reported result. Hibshman identified deposit competition and declining acquisition-accounting accretion as headwinds.
| Item | Details |
|---|---|
| Return on average assets | 1.18% in Q3 2026 |
| Pre-provision return on average assets | 1.79%, up eight basis points from Q2 |
| Noninterest income | $2.0 million, versus $2.1 million in Q2 |
| Provision expense | $2.2 million, essentially unchanged sequentially |
| Allowance for credit losses | 1.37% of total loans; approximately 132% of nonperforming loans |
| Tangible book value per share | $16.59, versus $16.27 at June 30 |
Lending pipeline supports a higher 2027 growth target
Quarterly loan growth was led by commercial and industrial lending, owner-occupied commercial real estate and construction. First Bank closed and funded $124 million of new loans during the quarter, while loan payoffs totaled $53 million.
Chief Lending Officer Peter Cahill said the probable funding pipeline stood at $363 million on September 30, about 12% above the average of the March and June levels. Management is targeting approximately $300 million of loan growth in 2027, compared with its previous annual target of roughly $200 million. The pipeline does not represent completed lending.
Deposits increased $43 million during the quarter, or $87 million excluding a $44 million reduction in brokered deposits. Noninterest-bearing deposits fell $48.7 million between June 30 and September 30, although their average balance increased $32 million during the quarter. The contrasting measures show that the quarter-end decline did not reflect the average funding position throughout the period.
Business Express remains the main credit challenge
Net charge-offs rose to $1.9 million from $1.6 million in the second quarter, primarily because of Business Express loans. Chief Executive Patrick Ryan said roughly $8.5 million of year-to-date charge-offs came almost entirely from that portfolio, with charge-offs elsewhere close to zero.
First Bank’s Business Express lending options include term loans, lines of credit, and vehicle and equipment financing for businesses. The product offering excludes start-ups, nonprofits and real estate transactions, distinguishing it from the bank’s property-lending activities.
Ryan said new problems were slowing and delinquencies were improving, but he did not provide a firm timetable for credit costs to normalize. Nonperforming assets ended the quarter slightly higher at $35.7 million.
Cahill said a $5.5 million paydown on a problem real estate loan had been received after quarter-end. Separately, a $9.5 million participation in a senior-living facility loan was expected to be repaid in full later in the fourth quarter following court acceptance of an agreement. That repayment remained pending.
Capital returns increase as efficiency improves
First Bank raised its quarterly dividend by 33% to $0.12 per share and approved repurchases of up to 1.2 million shares, with an aggregate limit of $24 million, through September 2027. The authorization permits purchases; it does not establish that the shares have already been bought.
The efficiency ratio improved to 52.4% from 54.5%, even as noninterest expense rose modestly to $20.3 million, mainly because of salaries and benefits. Ryan said the bank aims to reduce noninterest expense relative to average assets to 1.90% through 2027, potentially by midyear.
Conclusion
First Bank’s stronger lending income supported higher profitability and capital returns, but deposit pricing and Business Express losses remain constraints. The next period to watch is the fourth quarter, including whether the expected senior-living loan repayment is completed and the lending pipeline converts into funded loans.
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