First Bank (NASDAQ:FRBA) reported second-quarter 2026 net income of $10.9 million, or $0.43 per diluted share, as loan and deposit growth accelerated and credit loss expense declined from the prior quarter.
Diluted earnings per share rose $0.13, or about 43%, from the first quarter and increased 6.6% from a year earlier, Chief Financial Officer Andrew Hibshman said during the company’s earnings call. Return on average assets was 1.09% for the three months ended June 30.
Loan and Deposit Growth Accelerates
Loans increased $68 million during the second quarter, bringing year-to-date loan growth to $79 million. Ryan said the company was nearing a pace that could allow it to meet or exceed its $200 million annual loan-growth target, absent unusual payoff activity.
Chief Lending Officer Peter Cahill said new loans closed and funded totaled $174 million in the quarter, up 64% from $106 million in the first quarter. Loan growth was 8.3% on an annualized basis during the period.
Commercial-and-industrial loans and owner-occupied real estate loans represented 61% of new lending in the first half of the year, while investor real estate accounted for 33%, Cahill said. The company ended the quarter with $323 million in probable loan fundings, broadly unchanged from $325 million at the end of March. C&I and owner-occupied loans comprised 62% of that pipeline.
Loan payoffs totaled $87 million in the second quarter, up 19% from the first quarter. For the first half, investor real estate loans represented 62% of payoffs, mainly due to refinancings or sales of underlying properties.
Deposits increased more than $96 million in the quarter, including a $45.1 million increase in non-interest-bearing balances. Hibshman said the growth was supported by new commercial relationships and higher balances from existing commercial clients. The company also added brokered and government deposits to support loan production.
Ryan said First Bank generally sees non-interest-bearing deposit balances decline in the first quarter before recovering during the second and third quarters, though he said customer balance movements are difficult to forecast precisely. The company expects to continue pursuing deposit growth to support lending opportunities, despite heightened competition for funding.
Margin Holds as Funding Competition Persists
Net interest income increased $798,000 from both the first quarter and the year-ago period. Compared with the prior quarter, the improvement was primarily driven by higher average loan balances.
Net interest margin was 3.68%, down one basis point from the first quarter. Hibshman said rates were essentially stable on both sides of the balance sheet. The margin was three basis points above the second quarter of 2025.
Total deposit costs declined one basis point sequentially to 2.42%. However, management said competition for deposits remained challenging. Ryan said new deposit pricing in the market was generally in the 4% to 4.25% range, while rising five- and 10-year Treasury yields and Federal Home Loan Bank rates have helped support pricing on new loans.
Cahill said the weighted-average rate on newly originated loans was between 6.50% and 6.75% during the second quarter, roughly in line with the first quarter. He said most loans are priced off FHLB rates, with the five-year Treasury serving as an alternative benchmark for some lending.
Management expects continuing declines in acquisition-accounting accretion over the coming quarters but said loan and deposit growth should support additional net interest income regardless of interest-rate movements.
Credit Costs Decline, With One CRE Loan Moving to Non-Accrual
A $3.3 million decline in credit loss expense from the first quarter was a major contributor to the improvement in quarterly earnings. Ryan said the provision for credit losses returned closer to normalized levels as trends improved in the company’s credit-scored small-business portfolio.
Hibshman said the bank recorded additional charge-offs that were “almost entirely” tied to that small-business portfolio, but management expects credit costs in that segment to continue improving. The company said it was not seeing red flags in other loan categories.
Nonperforming assets increased slightly after one commercial real estate loan was moved to non-accrual status. Cahill said the loan is backed by office space that is underperforming. While the property’s value has declined since the loan was originated, he said its discounted value is approximately equal to the loan amount and the guarantor has committed to cover any difference. Management expects full recovery.
The allowance for credit losses was 1.38% of total loans, essentially unchanged from the prior quarter. Ryan said the bank’s tangible common equity-to-tangible assets ratio was about 10%.
Expenses Fall as Bank Targets Operating Leverage
Non-interest income was $2.1 million, down from $2.4 million in the first quarter and $2.7 million a year earlier. The sequential decline reflected lower earnings from investments in certain small-business investment funds, while the year-over-year comparison included a $397,000 gain from the sale of a corporate facility in the second quarter of 2025.
Non-interest expense declined $797,000 sequentially to $20.1 million, primarily due to lower salary and benefit costs and, to a lesser extent, lower occupancy expenses. The efficiency ratio was 54.5%, marking First Bank’s 28th consecutive quarter with an efficiency ratio below 60%.
Ryan said the second-quarter expense level represented a more normalized run rate after seasonal factors increased first-quarter costs. Hibshman said the bank did not have major projects or major cost-saving initiatives underway, but expects to manage expenses relatively flat while identifying savings to offset inflationary pressures.
During the quarter, First Bank repurchased approximately 325,000 shares. Hibshman said 359,000 shares remained available under the company’s current repurchase authorization. Management said it intends to pursue shareholder value through core earnings, a stable cash dividend and share repurchases as applicable.
About First Bank (NASDAQ:FRBA)
First Bank provides various banking products and services to small to mid-sized businesses and individuals. The company accepts various deposits, including non-interest-bearing demand deposits, interest bearing demand accounts, money market accounts, savings accounts, and certificates of deposit, as well as commercial checking accounts. It also offers various loan products comprising commercial and industrial loans, which include line of credit, inventory, equipment, and short-term working capital financing; commercial real estate loans, such as owner-occupied, investor, construction and development, and multi-family loans; residential real estate loans comprising residential mortgages, first and second lien home equity loans, and revolving lines of credit; and consumer and other loans consists of auto, personal, traditional installment, and other loans.
