First Carolina Financial Reports Strong Q3 2026 Earnings of $7.9 Million
First Carolina Financial Services, Inc. (NYSE: FCBM) has announced a significant improvement in its financial performance for the third quarter of 2026, reporting net income of $7.9 million, or $0.26 per diluted share. The results represent a substantial turnaround from the net loss of $2.0 million, or $0.08 per diluted share, recorded during the corresponding quarter of 2025.
The company’s latest financial performance reflects stronger net interest income, improved lending activity, disciplined funding management, and substantial reductions in operating expenses. First Carolina achieved a year-over-year improvement of $9.9 million in quarterly net income, highlighting the progress made in strengthening its financial position and improving operational efficiency.
All earnings-per-share figures have been adjusted to reflect the two-for-one stock split completed on June 17, 2026.
The third-quarter results also demonstrate the company’s efforts to expand its commercial banking operations, develop its payments business, strengthen customer relationships, and maintain sound credit quality.
First Carolina Financial Delivers Significant Earnings Growth
First Carolina Financial’s third-quarter performance marked an important milestone in the company’s financial development, supported by improvements across several core banking operations.
Net income increased by $2.8 million, representing approximately 55% growth compared with the second quarter of 2026. The improvement was supported by higher loan yields, effective deposit pricing strategies, and stronger net interest margins.
Ron Day, Chairman, President, and Chief Executive Officer of First Carolina Financial Services, described the quarter as a pivotal period for the organization.
Day emphasized that the company had focused on strengthening its core funding base during the previous quarter, creating a foundation for improved profitability and sustainable business growth.
According to management, the company’s expanding commercial banking relationships, continued loan repricing, and disciplined approach to funding costs have contributed to stronger earnings.
The company’s net interest margin reached 3.38% during the third quarter, supported by higher yields on newly originated loans and the continued repricing of existing lending arrangements.
First Carolina also continued developing treasury management relationships with commercial banking customers, supporting growth in operating deposits and reducing reliance on higher-cost funding sources.
Management believes these developments demonstrate the company’s ability to generate sustainable earnings while maintaining its focus on asset quality and long-term financial stability.
Third Quarter 2026 Financial Performance Highlights
First Carolina reported several important financial and operational achievements during the quarter ended September 30, 2026.
- Net income: $7.9 million, representing a $9.9 million improvement from the third quarter of 2025.
- Diluted earnings per share: $0.26, compared with a loss of $0.08 per diluted share in the prior-year quarter.
- Quarterly loan growth: $154.1 million, equivalent to an annualized growth rate of 22.3%.
- Net interest income: $28.1 million, increasing 10.0% year over year.
- Net interest margin: 3.38%, improving by 32 basis points from the corresponding quarter of 2025.
- Noninterest expenses: $25.8 million, declining 19.6% year over year.
- Total assets: $3.67 billion as of September 30, 2026.
- Total gross loans: $2.90 billion, increasing 7.5% year over year.
- Total deposits: $3.16 billion, representing annual growth of 3.0%.
- Return on average assets: 0.89%.
- Return on average equity: 7.24%.
- Return on average tangible common equity: 8.61%.
- Book value per share: $13.93.
- Tangible book value per share: $11.73.
The company also maintained a strong capital position, with average shareholders’ equity representing 12.33% of average assets.
These results highlight improvements in profitability, lending activity, funding efficiency, and overall balance sheet management.
Net Interest Income Rises 10% to $28.1 Million
Net interest income remained a major contributor to First Carolina’s improved quarterly performance.
The company generated $28.1 million in net interest income during the third quarter of 2026, compared with approximately $25.5 million during the corresponding quarter of 2025.
The $2.6 million increase represents year-over-year growth of 10.0%.
This improvement reflects the company’s efforts to optimize its lending portfolio, manage deposit expenses, and strengthen its overall funding structure.
Net interest margin increased to 3.38%, representing a 32-basis-point improvement from the third quarter of 2025.
Compared with the second quarter of 2026, the margin expanded by 15 basis points.
The sequential improvement was partly influenced by seasonal deposit activity within First Carolina’s Payments business.
The company typically experiences higher noninterest-bearing deposit balances during the third quarter because of financial activity associated with the academic calendar.
These seasonal deposits provide an additional source of relatively low-cost funding, supporting net interest income and overall profitability.
Beyond seasonal factors, management attributed the improvement to disciplined loan pricing, deposit repricing initiatives, and stronger returns from lending operations.
Higher Loan Yields Support Banking Profitability
First Carolina continued benefiting from higher yields on newly originated loans and the repricing of existing credit facilities.
The yield on average interest-earning assets reached 5.97% during the third quarter of 2026.
This compared with 6.02% during the third quarter of 2025, representing a decline of five basis points.
The year-over-year reduction primarily reflected lower yields on investment securities and short-term floating-rate investments.
However, the yield improved from 5.92% in the second quarter of 2026, reflecting stronger loan portfolio returns.
Higher loan yields helped offset declining returns on available-for-sale securities, supporting the company’s overall interest income performance.
First Carolina’s lending strategy continues to emphasize disciplined pricing, relationship banking, and opportunities that align with its profitability objectives.
Management expects its commercial banking franchise and ongoing loan repricing activities to remain important contributors to financial performance.
Deposit Cost Management Strengthens Funding Efficiency
One of the most significant developments during the quarter was First Carolina’s continued reduction in funding costs.
The company’s total cost of funds declined to 2.81% during the third quarter of 2026, representing a 31-basis-point reduction from the same period in 2025.
Deposit costs decreased to 2.71%, compared with 3.04% in the prior-year quarter.
This represents an improvement of 33 basis points.
Deposit costs also declined by four basis points from 2.75% in the second quarter of 2026.
Meanwhile, the cost of interest-bearing liabilities stood at 3.58%, compared with 3.97% during the third quarter of 2025.
The 39-basis-point year-over-year reduction reflects the company’s efforts to improve its funding composition.
First Carolina has been shifting its deposit base away from relatively expensive certificates of deposit toward core deposits, including money market and savings accounts.
This strategy has helped reduce funding expenses while supporting stronger net interest margins.
Management considers the year-over-year improvement particularly meaningful because it provides a comparison less affected by seasonal deposit fluctuations in the Payments business.
First Carolina Reduces Reliance on Higher-Cost Deposits
First Carolina made substantial progress in reducing its dependence on higher-cost certificates of deposit and brokered funding.
Certificates of deposit totaled $571.7 million as of September 30, 2026.
This represents a decline of $815.3 million, or 58.8%, compared with September 30, 2025.
During the third quarter alone, certificates of deposit decreased by $106.6 million, equivalent to 15.7%.
The company also reduced the proportion of brokered deposits within its overall funding base.
Brokered deposits represented 14.3% of total deposits at September 30, 2026, compared with 31.0% one year earlier.
This significant reduction demonstrates the company’s progress toward developing a more relationship-oriented deposit franchise.
Core operating deposits generated through commercial banking and treasury management relationships remain central to this strategy.
By expanding these relationships, First Carolina aims to improve deposit stability, manage interest expenses, and support future lending opportunities.
Noninterest Expenses Decline Nearly 20%
Operating expense management played an important role in First Carolina’s return to profitability.
Noninterest expenses totaled $25.8 million during the third quarter of 2026, representing a reduction of $6.3 million, or 19.6%, compared with the third quarter of 2025.
The decline was primarily associated with lower employee compensation expenses, reduced data processing costs, and decreased professional service fees.
A portion of these savings resulted from workforce realignment activities following the company’s acquisition of BM Technologies.
The integration process has allowed First Carolina to streamline selected operations and improve cost efficiency.
Management continues to focus on maintaining an expense structure that supports profitability while preserving the resources necessary for business expansion.
The reduction in operating expenses helped offset lower noninterest income during the quarter.
The company’s performance indicates that cost discipline remains an important element of its broader financial strategy.
Noninterest Income Falls Following Strategic Business Changes
First Carolina reported noninterest income of $6.7 million for the third quarter of 2026.
This represents a decrease of $6.2 million, or 48.0%, compared with the corresponding quarter of 2025.
The decline was primarily attributable to strategic changes involving business operations acquired through BM Technologies.
The company discontinued a banking-as-a-service partnership inherited through the acquisition because it did not align with First Carolina’s long-term strategic priorities.
The planned discontinuation accounted for approximately $3.6 million of the year-over-year reduction in noninterest income.
Additionally, the third quarter of 2025 included $1.7 million in net gains from securities sales that did not recur in the third quarter of 2026.
These factors affected the comparability of the company’s quarterly revenue results.
Despite the decline in noninterest income, First Carolina improved overall profitability through stronger net interest income, lower operating expenses, and favorable credit loss developments.
Payments Business Expands Higher Education Services
First Carolina continued advancing its payments strategy during the third quarter, with particular emphasis on opportunities in higher education.
Toward the end of the quarter, the company began offering prepaid cards as an additional payment option for universities participating in its pilot program.
The new capability provides participating educational institutions and their students with another method for receiving disbursements.
This development expands the range of payment services available through First Carolina’s higher education platform.
Management views higher education as an important strategic growth market for the company’s Payments business.
The company is seeking to develop broader banking relationships with educational institutions by providing financial products and payment solutions tailored to their operational requirements.
The addition of prepaid card functionality represents another step toward expanding the company’s service offerings.
First Carolina believes its combination of payments expertise, banking infrastructure, and customer relationships can support additional opportunities within this market.
The company is also focused on strengthening its Commercial Banking, Consumer Banking, and Wealth Management businesses to provide a broader range of financial services.
Total Assets Reach $3.67 Billion
First Carolina’s balance sheet continued expanding during the third quarter of 2026.
Total assets reached $3.67 billion as of September 30, 2026, representing an increase of $154.1 million, or 4.4%, compared with September 30, 2025.
The growth reflects continued lending activity and the company’s broader business development efforts.
Gross loans increased to $2.90 billion, compared with approximately $2.70 billion one year earlier.
The $201.3 million year-over-year increase represents growth of 7.5%.
On a sequential basis, gross loans increased by $154.1 million, or 5.6%, from $2.74 billion at June 30, 2026.
This quarterly increase corresponds to an annualized growth rate of 22.3%.
The lending performance demonstrates continued demand for the company’s financing products and the strength of its commercial banking relationships.
Total deposits reached $3.16 billion at September 30, 2026, representing an increase of $92.6 million, or 3.0%, compared with the previous year.
The combination of loan growth and deposit mix improvements contributed to the company’s stronger financial performance.
Credit Quality Remains Stable as Nonperforming Assets Decline
First Carolina maintained relatively stable credit quality during the third quarter of 2026.
Nonperforming assets totaled $21.9 million as of September 30, 2026, representing 0.60% of total assets.
This compares with $22.3 million, or 0.63% of total assets, at September 30, 2025.
Nonperforming assets also declined from $22.3 million, or 0.65% of total assets, at June 30, 2026.
The improvement reflects the company’s continued attention to loan portfolio monitoring and credit risk management.
During the third quarter, First Carolina recorded a net release of $1.0 million in its provision for credit losses.
This compares with a $9.4 million provision expense during the third quarter of 2025 and a $273,000 provision expense during the second quarter of 2026.
The provision release was primarily associated with several favorable credit developments.
These included the transition of construction loans into permanent financing arrangements, which generally carry lower expected credit loss rates.
Additional factors included reduced unfunded lending commitments, improvements in economic assumptions used in credit loss estimates, and limited loan charge-offs.
The annualized net charge-off ratio for average loans held for investment was 0.01% during the third quarter of 2026.
This compares with 0.00% during the second quarter and 0.07% during the third quarter of 2025.
The prior-year provision expense was affected by a $5.8 million charge-off involving a held-to-maturity security and a $1.9 million charge-off on a commercial loan.
The lower credit loss expense in 2026 contributed to the company’s improved quarterly earnings.
Capital Position Supports Continued Business Expansion
First Carolina maintained solid capital levels during the third quarter.
Average shareholders’ equity represented 12.33% of average assets, reflecting the company’s capital position relative to its balance sheet.
The company reported a return on average assets of 0.89% and a return on average equity of 7.24%.
Return on average tangible common equity reached 8.61%.
Book value per share stood at $13.93 at September 30, 2026, while tangible book value per share was $11.73.
Tangible book value per share and return on average tangible common equity are non-GAAP financial measures that require reconciliation to the corresponding GAAP measures.
During early September, First Carolina also redeemed its 2019 subordinated debt issuance.
Management expects this action to reduce interest expenses in future reporting periods.
The redemption forms part of the company’s broader effort to optimize its capital and funding structure.
Effective Tax Rate Reaches 20.7%
First Carolina reported an effective tax rate of 20.7% during the third quarter of 2026.
This compares with 18.6% during the third quarter of 2025 and 21.5% during the second quarter of 2026.
The increase from the prior-year quarter was primarily associated with a higher effective state income tax rate.
According to the company, the change resulted from adjustments in the allocation of pretax income among First Carolina Financial Services, its banking subsidiary, and BM Technologies.
Although the effective tax rate increased year over year, it declined sequentially from the second quarter of 2026.
First Carolina Focuses on Sustainable Growth and Long-Term Profitability
Looking ahead, First Carolina Financial intends to build on the operational improvements achieved during the third quarter.
Management remains focused on expanding commercial banking relationships, improving deposit composition, strengthening payments capabilities, and maintaining disciplined credit management.
The company’s recent transition into the public markets has also contributed to increased visibility among customers and prospective business partners, according to management.
First Carolina believes its diversified business model, encompassing Commercial Banking, Payments, Consumer Banking, and Wealth Management, positions it to serve customers across different stages of their financial needs.
The company also sees continued opportunities in higher education banking, where its payments platform and broader financial services capabilities may support additional customer relationships.
At the same time, management intends to maintain its focus on funding efficiency and expense control as it pursues future growth.
First Carolina Financial Services delivered a substantial improvement in profitability during the third quarter of 2026, reporting net income of $7.9 million compared with a $2.0 million loss in the corresponding period of 2025.
The results were supported by 10.0% growth in net interest income, a 32-basis-point expansion in net interest margin, a 19.6% reduction in noninterest expenses, and continued improvement in funding costs.
Strong quarterly loan growth, declining reliance on brokered deposits, and stable credit quality further supported the company’s financial performance.
The expansion of higher education payment services and continued development of commercial banking relationships also demonstrate First Carolina’s efforts to diversify revenue opportunities and strengthen its customer franchise.
While the company continues to navigate changes in interest rates, funding conditions, and credit markets, its third-quarter results provide evidence of improved operating efficiency and earnings performance.
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