Lauren C. Ranalli, President and CEO, stated, "Our strong momentum from 2025 carried into the first quarter of 2026 with record quarterly net income of $2.5 million, up 47% year-over-year, driven by continued loan growth, expanding net interest margin, and disciplined balance sheet management. This quarter's performance reflects the strength of our strategy and our ongoing commitment to delivering sustainable value to our shareholders, customers, employees and community. "
First Quarter 2026 Highlights
Net income of $2.5 million exceeded the prior year by 47% and the prior quarter by 7%
Earnings per common share increased to $0.82, up 46% from the prior year
Annualized return on average equity was 16.64%
Annualized return on average assets was 1.24%
Net interest margin expanded 3 basis points to 3.80%
Net interest income increased 33% year over year
Total loans grew 4% during the quarter, or 16% on an annualized basis
Book value per share increased 4% to $20.30
Paid first quarterly dividend of $0.02 per common share
Earnings and Profitability
For the quarter ended March 31, 2026, net income totaled $2.5 million, compared to $1.7 million for the same period a year ago and $2.3 million for the prior quarter. Earnings per share increased to $0.82, up from $0.56 in the first quarter of 2025 and $0.78 in the fourth quarter of 2025.
Annualized return on average assets rose to 1.24% for the first quarter of 2026, compared to 1.06% for the same period in 2025. Annualized return on average equity increased to 16.64%, up from 13.31% year over year, reflecting improved operating leverage and balance sheet growth.
Net Interest Income and Net Interest Margin
Net interest income totaled $7.3 million for the first quarter of 2026, representing an increase of $221 thousand, or 3%, compared to the prior quarter and an increase of 33% compared to the same period a year ago. The net interest margin expanded to 3.80%, up from 3.77% in the fourth quarter of 2025 and 3.60% in the first quarter of 2025.
Total interest income increased to $12.0 million, representing a 1% increase from the prior quarter and a 23% increase compared to the first quarter of 2025. Quarterly growth was driven primarily by a 4% increase in average loan balances, partially offset by modestly lower loan yields. Year-over-year growth reflected a 17% increase in loan balances and overall higher loan yields.
Total interest expense declined 2% compared to the prior quarter, primarily due to a 14 basis point reduction in the cost of interest-bearing deposits and lower time deposit balances. These decreases were partially offset by higher balances in checking and money market accounts, as well as increased subordinated debt balances. Compared to the first quarter of 2025, total interest expense increased 11%, driven by higher volumes of interest-bearing deposits and borrowings, partially mitigated by lower deposit rates.
Asset Quality and Provision for Credit Losses and Allowance for Credit Losses on Loans
The provision for credit losses totaled $377 thousand for the first quarter of 2026, compared to $369 thousand in the fourth quarter of 2025 and $174 thousand in the first quarter of 2025. As of March 31, 2026, the allowance for credit losses represented 0.76% of total loans, compared to 0.73% at December 31, 2025.
Non-performing assets totaled $3.0 million, representing 0.37% of total assets, compared to $731 thousand, or 0.09% of total assets, at December 31, 2025, and 0.04% at March 31, 2025. One of the Company's two non-accrual loan relationships is fully secured by real estate collateral, while the second required a specific reserve of $62 thousand during the first quarter.
"Non-performing assets increased during the first quarter due to one new relationship being placed on non-accrual," stated Ranalli. "We are working through that credit expeditiously and anticipate a successful outcome later this year."
Non-Interest Income and Expense
Non-interest income totaled $544 thousand for the quarter, representing an increase of 62% from the prior quarter and 56% from the same period last year. Gains on the sale of SBA loans were $274 thousand, compared to none in the prior quarter and $87 thousand in first quarter of 2025. There was no swap referral fee income in the first quarter, compared to $70 thousand in the prior quarter and $24 thousand in the first quarter of 2025.
Non-interest expenses increased 5% from the prior quarter and 23% compared to the first quarter of 2025, reflecting higher costs across all operating categories. The ratio of non-interest expense to average assets was 2.21%, compared to 2.15% in the prior quarter and 2.25% in the first quarter of 2025. The efficiency ratio was 55.8%, compared to 56.2% in the prior quarter and 61.0% in the first quarter of 2025.
Balance Sheet
Total deposits decreased $7.3 million, or 1%, during the first quarter of 2026, reflecting a shift in deposit mix. Money market balances increased significantly, while time deposits declined. Checking and non-interest-bearing deposits experienced modest decreases. On a year-over-year basis, total deposits increased 25%, driven by growth across all deposit categories except time deposits. Approximately 80% of total deposits were insured or collateralized as of March 31, 2026.
"The significant expansion of deposits in the fourth quarter of 2025 enabled a strategic reduction of non-core deposits in the first quarter of 2026," stated Ranalli. "Although total deposits declined on a quarter-over-quarter basis, customer deposits grew a net $7.5 million, or 1%, during the period."
Total loans increased $26.8 million, or 4%, during the first quarter of 2026 to $705.3 million, driven primarily by strong growth in commercial real estate and commercial construction lending. Compared to March 31, 2025, total loans increased $100.3 million, or 17%, reflecting continued strength in our core lending markets.
The following table illustrates the composition of the loan portfolio, net of unearned loan origination fees and costs:
March 31,
December 31,
March 31,
2026
2025
2025
Commercial real estate
$ 531,440,586
$ 525,443,319
$ 476,539,433
Commercial construction
88,293,400
68,110,339
46,800,635
Commercial business
67,016,443
66,353,744
63,018,850
Consumer
18,541,133
18,548,853
18,681,505
Total loans
$ 705,291,562
$ 678,456,255
$ 605,040,423
Investment securities totaled $31.8 million at March 31, 2026, compared to $27.6 million at December 31, 2025. The Company's held-to-maturity investment portfolio had a book value of $9.1 million and a fair market value of $8.4 million, resulting in an unrealized loss of $683 thousand, virtually unchanged from December 31, 2025. On an after-tax basis, this unrealized loss totaled $539 thousand, representing approximately 0.9% of total stockholders' equity as of March 31, 2026.
The remainder of the Company's investment portfolio was classified as available-for-sale and had a book value of $23.8 million and a fair value of $22.7 million at March 31, 2026. This resulted in an unrealized loss of $1.1 million, compared to $798 thousand at December 31, 2025. The after-tax unrealized loss of $844 thousand is reflected in accumulated other comprehensive loss within stockholders' equity.
Total assets decreased 1% during the quarter, primarily reflecting the planned reduction in non-core time deposits.
Total stockholders' equity increased $2.3 million, or 4%, during the first quarter of 2026, rising from $58.8 million at December 31, 2025, to $61.0 million at March 31, 2026. This increase was driven primarily by net income earned during the quarter. During the quarter, the Company paid a cash dividend of $0.02 per common share. Book value per share increased by $0.74, or 4%, during the first quarter to $20.30 per share at March 31, 2026.
Selected Financial Data:
Consolidated Balance Sheets (unaudited)
March 31,
December 31,
2026
2025
Assets:
Cash and due from banks
$ 52,953,190
$ 90,422,400
Time deposits at other banks
100,000
100,000
Investments
31,759,063
27,634,611
Loans receivable
705,291,562
678,456,255
Allowance for credit losses
(5,338,337)
(4,977,305)
Premises & equipment
7,312,947
7,360,342
Other assets
18,923,756
18,359,879
Total assets
$ 811,002,181
$ 817,356,182
Liabilities:
Noninterest-bearing deposits
$ 119,590,197
$ 120,359,227
Interest-bearing checking
66,652,272
69,271,915
Money market
349,036,565
326,603,007
Time deposits
182,731,610
209,098,258
