The First Bancorp Q3 2026 Earnings: Margin Expansion Lifts Net Income 17.5%

The First Bancorp (Nasdaq: FNLC) reported Q3 2026 revenue of approximately $27.5 million, up about 12.0% from $24.5 million a year earlier, while diluted EPS rose 16.8% to $0.95 from $0.81. Net income increased 17.5% to a quarterly record of $10.7 million, supported by earning-asset growth, lower funding costs, and higher fee income.

Core Earnings Data

For the three months ended September 30, growth came from both net interest income and non-interest income. Net interest margin expanded as earning-asset yields remained stable and the cost of total liabilities fell 32 basis points.

Non-interest expenses increased more slowly than revenue, improving the non-GAAP efficiency ratio. However, total credit loss expense rose by $279,000 year over year.

*Total revenue is calculated as net interest income plus non-interest income. Figures may not add precisely because of rounding.

Lower Funding Costs Expanded Margins Faster Than Expenses Grew

Interest income rose only modestly, from $41.0 million to $41.5 million, but interest expense declined from $20.9 million to $19.0 million. This difference drove most of the $2.4 million year-over-year increase in net interest income.

The funding benefit came primarily from lower deposit interest expense, which fell to $17.2 million from $19.4 million. Combined with stable earning-asset yields, this lifted net interest margin for the ninth consecutive quarter. Revenue growth then outpaced the 6.2% increase in non-interest expense, resulting in a lower efficiency ratio and faster net income growth.

Business and Segment Performance

Loan balances increased by $17.8 million during the quarter, representing a 2.92% annualized portfolio growth rate. Commercial and industrial loans provided most of the increase, rising $11.1 million. Agricultural loans grew $3.2 million, residential mortgages increased $2.5 million, and commercial real estate loans added $2.5 million, while multifamily balances declined $1.9 million.

New loan production reached $180 million, nearly $50 million above the second quarter. Average earning assets increased by $14.8 million sequentially, contributing to the 6.3% quarter-over-quarter increase in net interest income.

Fee-generating businesses also contributed. Wealth management revenue increased 8.9% year over year, supported by growth in assets under management. Payments revenue rose 6.2%, while other operating income increased 26.8%, mainly because of derivative fees associated with new loan transactions.

Deposits increased $106.9 million during the quarter to $2.79 billion. Non-maturity deposits rose $139.7 million, allowing the bank to reduce time deposits by $32.8 million and borrowings by $69.2 million. This shift supported the decline in funding costs.

Profitability, Asset Quality, and Capital

Return on average assets increased to 1.31% from 1.13% a year earlier, while return on average tangible common equity rose to 15.99% from 15.04%. These improvements reflected the combination of margin expansion, asset growth, fee income, and operating expense control.

Asset quality improved from the second quarter but remained weaker than a year earlier. Non-performing loans declined to 0.58% of total loans from 0.71% sequentially, but remained above 0.40% in Q3 2025. Non-performing assets followed the same pattern, falling to 0.44% of total assets from 0.54% in Q2 but exceeding the year-earlier level of 0.30%.

Loans at least 30 days past due improved to 0.67% of total loans from 0.93% in the second quarter. The allowance for credit losses stood at 0.98% of loans, compared with 1.01% sequentially and 1.05% a year earlier. Management attributed the lower coverage ratio partly to the resolution of non-performing loans that had carried specific reserves. Third-quarter net loan charge-offs totaled $1.6 million.

The estimated leverage capital ratio increased to 9.29%, and the estimated total risk-based capital ratio reached 14.27%. Available day-one liquidity was $763 million, equivalent to 149% of estimated uninsured deposits. Uninsured deposits represented 18.4% of total deposits, with 74% fully collateralized.

Tangible book value was $22.81 per share, up 4.9% year over year but down from $23.25 in the second quarter. The sequential decline resulted from higher unrealized losses on available-for-sale securities as interest rates changed during the quarter.

Management Perspective

President and CEO Tony C. McKim attributed the quarter’s earnings growth to expanding net interest margin, earning-asset growth, higher non-interest income, and controlled expenses. Management expects local deposit volumes to remain steady through year-end and said it has taken steps to protect recent margin gains from interest-rate pressure.

Management also characterized capital and liquidity as sufficient and noted that resolving several non-performing credits contributed to the sequential improvement in asset quality.

Risks Investors Need to Watch

• Credit metrics remain above year-earlier levels. Non-performing loan and non-performing asset ratios improved sequentially, but both were higher than in Q3 2025.
• Credit costs increased. Total credit loss expense rose to $979,000 from $700,000, while third-quarter net loan charge-offs totaled $1.6 million.
• Margin gains depend on funding conditions. Lower liability costs and growth in non-maturity deposits were central to the quarter’s results, while management acknowledged continuing rate pressure in the market.
• Securities marks are affecting book value. The unrealized loss on available-for-sale securities widened to $44.1 million from $32.4 million at the end of Q2, reducing tangible book value and the tangible common equity ratio sequentially.

Summary

The First Bancorp’s Q3 2026 results were primarily driven by lower funding costs, continued net interest margin expansion, and growth across fee-income categories. Deposit inflows improved the funding mix, while loan growth remained positive. The main areas to monitor are whether margin gains can be sustained, whether sequential credit improvement continues, and how interest-rate movements affect securities valuations and tangible book value.