Quarterly Financial Highlights (in thousands, except per share data)
Q1 2026
Q4 2025
Q1 2025
Net Income
$3,044
$2,372
$2,188
EPS (basic and diluted)
$0.73
$0.57
$0.53
ROA
1.28 %
0.97 %
1.01 %
ROE
14.68 %
11.51 %
11.88 %
Non-GAAP Measures1:
Adj. Net Income
$2,865
$2,174
$2,188
Adj. EPS (basic and diluted)
$0.69
$0.52
$0.53
Adj. ROA
1.21 %
0.89 %
1.01 %
Adj. ROE
13.82 %
10.55 %
11.88 %
Adj. Pre-Provision, Pre-Tax Earnings
$3,860
$3,086
$2,982
Adj. Pre-Provision, Pre-Tax ROA
1.63 %
1.26 %
1.37 %
Net Interest Margin
3.66 %
3.55 %
3.51 %
Efficiency Ratio
64.84 %
70.29 %
67.47 %
1Non-GAAP financial measures provide additional insight into the Company's core operating performance by excluding certain non-recurring items. See "Non-GAAP Financial Measures" and "Non-GAAP Reconciliations" for additional information and detailed calculations of adjustments.
"Our first quarter results demonstrate strong team operational execution and our focus on long-term growth," said Alice Frazier, President and CEO. "Margin expansion, improved operating efficiency, and diversified fee income supported higher profitability, while our planned entry into a new market through new hires and branch expansion positions us well to extend our community banking model and establish client relationships in new markets."
Expansion in New and Existing Markets
The Bank announces its expansion into the Winchester-Frederick County, Virginia market. In April, the Bank hired experienced commercial bankers to lead the expansion and expects to open its first office in the City of Winchester in the second quarter of 2026. The Bank also recently hired an experienced commercial banker who will focus on expanding treasury and business deposit market share.
First Quarter Highlights
Key highlights of the three-month period ending March 31, 2026, are as follows, with comparisons to the three-month period ending December 31, 2025, unless otherwise noted:
Net income increased 28% linked‑quarter and 39% year‑over‑year
Return on assets improved to 1.28%
Return on equity increased to 14.68%
Net interest margin expanded to 3.66%
Loans increased by 1% on a linked‑quarter basis and 6% year‑over‑year
Deposits increased 4% on a linked‑quarter basis and 9% year‑over‑year
Book value per share increased to $20.42
Net Interest Income
Net interest income was $8.4 million for the first quarter of 2026, representing a 4% decrease from the fourth quarter of 2025. Total interest and dividend income decreased by $630 thousand, which was partially offset by a $239 thousand decrease in total interest expense.
The decrease in total interest and dividend income was primarily attributable to $405 thousand of interest income on loans recognized in the fourth quarter of 2025 from nonaccrual loan interest on paid off loans. Other interest and dividend income decreased in the first quarter of 2026 from lower average balances of interest-bearing deposits in other financial institutions.
The decrease in total interest expense was primarily attributable to lower interest expense on deposits as the Bank's cost of deposits decreased during the period.
The net interest margin increased to 3.66% compared to 3.55% for the fourth quarter of 2025, reflecting disciplined deposit pricing and a change in the earning asset composition. For better comparability between periods, the Bank excluded interest income collected on a paid-off nonaccrual loan from the net interest margin calculation for the fourth quarter of 2025.
Noninterest Income
Noninterest income totaled $2.8 million for the first quarter, up 39% from the fourth quarter of 2025, reflecting higher wealth and investment income, gains and fees on mortgage loan sales, gains on sales of SBA loans, and other operating income. Wealth management fees increased $209 thousand, or 39%, compared to the fourth quarter of 2025. The increase was attributable to $97 thousand in non-recurring estate fee income and the wealth management division's implementation of an updated fee schedule late in the first quarter. Gains on the sale of mortgage loans increased $51 thousand, or 12%, from higher client demand for mortgage loans. Gains on the sale of SBA loans totaled $408 thousand in the first quarter of 2026. The SBA loans sold in the first quarter were originated by the Bank in 2025. There were no sales of SBA loans during 2025. Although the Bank anticipates gains on sales of SBA loans in future periods, it expects gains to be less than the amount reported for the first quarter of 2026. Other operating income increased from a $227 thousand death benefit payment from bank-owned life insurance.
Noninterest Expense
Noninterest expense totaled $7.1 million for the first quarter, down 5% from the fourth quarter of 2025, with the linked-quarter decrease primarily driven by lower salaries and employee benefits, other professional fees, and other operating expenses. Salaries and employee benefits decreased $94 thousand and were primarily attributable to lower incentive expenses. Additional incentives related to exceeding performance goals impacted the fourth quarter of 2025. Other professional fees decreased $178 thousand and other operating costs decreased $92 thousand. Both categories were impacted by expenses related to the Bank's renaming initiative in the prior period. Renaming expenses totaled $154 thousand in the fourth quarter of 2025.
The Bank expects its plans to expand into new and existing markets to increase salaries and employee benefits, as well as occupancy and equipment expense beginning in the second quarter of 2026.
Asset Quality
Overview
There was no significant change in asset quality during the first quarter. While loans 30 to 89 days past due increased to $1.5 million, loans over 90 days past due decreased to zero and substandard loans still accruing decreased slightly to $432 thousand. Nonperforming assets totaled $257 thousand during the first quarter from one loan relationship placed on nonaccrual status during the period.
Provision for Credit Losses
Provision for credit losses totaled $200 thousand for the first quarter compared to $250 thousand for the fourth quarter of 2025. Net charge-offs totaled $17 thousand for the quarter, compared to $18 thousand in the fourth quarter of 2025. The specific reserve component of the allowance for credit losses increased by $78 thousand and the general reserve component increased by $98 thousand during the first quarter of 2026, primarily from growth of the loan portfolio.
Allowance for Credit Losses on Loans
The allowance for credit losses on loans totaled $8.0 million, or 1.05% of total loans on March 31, 2026, compared to 1.04% of total loans on December 31, 2025, and 1.00% of total loans on March 31, 2025.
The following table provides the changes in the allowance for credit losses on loans for the three-month periods ended:
(dollars in thousands)
Q1 2026
Q4 2025
Q1 2025
Allowance for credit losses on loans, beginning
$7,796
$7,505
$6,977
Net charge-offs
(17)
(18)
(1)
Provision for credit losses on loans
193
309
204
Allowance for credit losses on loans, ending
$7,972
$7,796
$7,180
Allowance for Credit Losses on Unfunded Commitments
The allowance for credit losses on unfunded commitments totaled $437 thousand on March 31, 2026, and $430 thousand on December 31, 2025. The provision for credit losses on unfunded commitments was $7 thousand, compared to the recovery of credit losses on unfunded commitments of $59 thousand for the fourth quarter of 2025.
Balance Sheet
Total assets were $975.8 million on March 31, 2026, compared to $944.3 million on December 31, 2025, and $895.6 million year-over-year. Total loans (gross) were $758.5 million, up 1% from the prior quarter and 6% year-over-year. Deposits totaled $845.4 million, up 4% linked-quarter and up 9% year-over-year.
Total (gross) loans increased $6.9 million, or 1% during the first quarter and was primarily attributable to an $11.4 million increase in other real estate loans (secured by commercial real estate) and an $11.6 million increase in loans secured by 1-4 family residential homes. The increases were partially offset by a $7.8 million decrease in construction and land development loans and an $8.6 million decrease in commercial and industrial loans. On a year-over-year basis, total loans increased $42.2 million, or 6%.
Total deposits increased by $32.4 million, or 4%, during the first quarter from growth in noninterest-bearing and interest-bearing deposits. Noninterest-bearing deposits represented 22% of total deposits at the end of the period. Total deposits increased $73.0 million, or 9%, year-over-year.
Securities available for sale increased by $11.8 million, or 15%, during the first quarter, and increased $16.0 million, or 21% from one year ago. Net unrealized losses on the securities portfolio totaled $5.2 million on March 31, 2026, which was an increase of $415 thousand from December 31, 2025, and a decrease of $1.2 million year-over-year.
Other borrowings totaled $29.2 million, compared to $31.5 million on December 31, 2025, and $32.1 million on March 31, 2025. This included $27.0 million borrowed from the Federal Home Loan Bank of Pittsburgh, with a weighted average fixed interest rate of 4.21% and maturities ranging from 2026 to 2028.
Total shareholders' equity totaled $84.6 million, an increase of $2.2 million, or 11%, annualized from December 31, 2025, and $8.6 million, or 11%, year-over-year. These increases were primarily driven by growth in retained earnings, which increased $2.5 million quarter-over-quarter and $7.7 million year-over-year. Accumulated other comprehensive loss increased by $311 thousand from the prior quarter and decreased by $931 thousand year-over-year.
Capital ratios remained strong at the end of the quarterly periods:
Q1 2026
Q4 2025
Q1 2025
Total capital ratio (2)
13.98 %
13.75 %
13.61 %
Tier 1 capital ratio (2)
12.87 %
12.65 %
12.55 %
Common equity Tier 1 capital ratio (2)
12.87 %
12.65 %
12.55 %
Leverage ratio (2)
10.02 %
9.71 %
10.06 %
Tangible common equity to tangible assets (1)(3)
8.67 %
8.73 %
8.49 %
Dividends
During the first quarter, the Company paid a quarterly cash dividend of $0.13 per common share, which was unchanged from the previous three quarterly periods.
More recently in the second quarter of 2026, the Company announced a 15% increase in the quarterly cash dividend to $0.15 per common share. The dividend was declared in April for all shareholders of record on May 7, 2026, and is payable on May 14, 2026.
Stock Repurchase Plan
On October 19, 2025, the Company's board of directors authorized a stock repurchase plan pursuant to which Potomac Bancshares, Inc. may repurchase up to the aggregate of 100,000 shares or $2.0 million of the Company's outstanding common stock. The plan ends on October 19, 2027, unless the entire amount authorized to be repurchased has been acquired before that date. There were no repurchases of common stock during the first quarter of 2026 or during 2025.
Renaming Initiative
On November 3, 2025, Bank of Charles Town was renamed Potomac Bank, reflecting the Bank's growth and expanding regional presence across the Potomac River region, while also aligning its brand with the holding company. The transition was a natural progression that honored the Bank's heritage and values while celebrating the shared connection that unites the Bank's identity with its clients, employees, communities, and shareholders. There were no renaming expenses in the first quarter of 2026. Renaming expenses totaled $154 thousand in the fourth quarter of 2025, $82 thousand in the third quarter of 2025, and $22 thousand in the second quarter of 2025.
Non-GAAP Financial Measures
In addition to financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company uses certain non-GAAP financial measures that management believes provide useful information for financial and operational decision making, evaluating trends, and comparing financial results to other financial institutions. Non-GAAP financial measures are supplemental and not a substitute for, or more important than, financial measures prepared in accordance with GAAP and may not be comparable to those reported by other financial institutions. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is included at the end of this release.
About Potomac Bancshares
Potomac Bancshares, Inc. (OTCID: PTBS) is the bank holding company of Potomac Bank, which was founded in 1871 as Bank of Charles Town and renamed Potomac Bank on November 3, 2025. The Bank conducts operations through its nine-branch network and one loan production office serving the Eastern Panhandle of West Virginia, Washington County, Maryland, and Northern Virginia. The Bank offers comprehensive financial solutions through its consumer and commercial banking divisions, Trust, Wealth, and BCT Investments divisions, and its Residential Lending mortgage division. The Bank is also proud to serve its communities as a Small Business Administration (SBA) Preferred Lender. Over the past several years, the Bank has received many awards and recognitions, including American Banker's "Top 200 Community Banks" and "Best Banks to Work For", the Journal-News "Best of the Best" award, and the LoudounNow "Loudoun's Favorite" award.
The Company's shares are quoted on the OTCID marketplace under the symbol "PTBS." For more information about Potomac Bancshares, Inc., and the Bank, please visit our website at www.potomac.bank.
Forward-Looking Statements
Certain statements made in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that include projections, predictions, expectations, or beliefs about events or results or otherwise are not statements of historical facts, such as statements about the Company's growth strategy and deployment of capital. Although the Company believes that its expectations with respect to such forward-looking statements are based upon reasonable assumptions within the bounds of its existing knowledge of its business and operations, there can be no assurance that actual results, performance, or achievements of the Company will not differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ from those discussed in such forward-looking statements include, but are not limited to, the following: (1) general economic conditions, especially in the communities and markets in which the Company conducts its business; (2) credit risk, including risk that negative credit quality trends may lead to a deterioration of asset quality, risk that our allowance for credit losses may not be sufficient to absorb actual losses in the Company's loan portfolio, and risk from concentrations in the Company's loan portfolio; (3) changes in the real estate market, including the value of collateral securing portions of the Company's loan portfolio; (4) changes in the interest rate environment; (5) operational risk, including cybersecurity risk and risk of fraud, data processing system failures, and network breaches; (6) changes in technology and increased competition, including competition from non-bank financial institutions; (7) changes in consumer preferences, spending and borrowing habits, demand for our products and services, and customers' performance and creditworthiness; (8) difficulty growing loan and deposit balances; (9) the Company's ability to effectively execute its business plan; (10) changes in regulations, laws, taxes, government policies, monetary policies and accounting policies affecting bank holding companies and their subsidiaries, including changes in deposit insurance premiums; (11) deterioration in the financial condition of the U.S. banking system may impact the valuations of investments the Company has made in the securities of other financial institutions; (12) regulatory enforcement actions and adverse legal actions; (13) difficulty attracting and retaining key employees; and (14) other economic, competitive, technological, operational, governmental, regulatory, and market factors affecting the Company's operations. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise, except as required by applicable law.
POTOMAC BANCSHARES, INC.
Performance Summary
(in thousands, except share and per share data)
(unaudited)
For the Three Months Ended
March 31,
December 31,
September 30,
June 30,
March 31,
2026
2025
2025
2025
2025
Income Statement
Interest and dividend income:
Interest and fees on loans
$ 10,485
$ 10,727
$ 10,447
$ 9,682
$ 9,501
Taxable interest on securities
796
732
709
710
715
Tax-exempt interest on securities
29
29
30
28
29
Other interest and dividends
833
1,285
1,060
989
674
Total interest and dividend income
$ 12,143
$ 12,773
$ 12,246
$ 11,409
$ 10,919
Interest expense:
Interest on deposits
$ 3,243
$ 3,445
$ 3,709
$ 3,324
$ 3,105
Interest on short term borrowings
3
8
9
2
6
Interest on long term borrowings
290
312
312
309
313
Interest on subordinated debt
214
224
152
140
141
Total interest expense
$ 3,750
$ 3,989
$ 4,182
$ 3,775
$ 3,565
Net interest income
$ 8,393
$ 8,784
$ 8,064
$ 7,634
$ 7,354
Provision for credit losses
200
250
200
225
250
Net interest income after provision for credit losses
$ 8,193
$ 8,534
$ 7,864
$ 7,409
$ 7,104
Noninterest Income:
Wealth and investments
$ 745
$ 536
$ 525
$ 498
$ 505
Service charges on deposit accounts
234
228
217
225
260
Gains / fees on sale of mortgage loans
494
443
408
351
247
ATM and check card fees
499
549
543
518
475
Income from bank owned life insurance
101
102
102
100
97
Net loss on disposal of premises & equipment
(9)
(9)
(1)
-
(2)
Net gain on sale of SBA loans
408
-
-
-
-
Other operating income
368
197
120
74
247
Total noninterest income
$ 2,840
$ 2,046
$ 1,914
$ 1,766
$ 1,829
Noninterest expenses:
Salaries and employee benefits
$ 4,049
$ 4,143
$ 3,717
$ 3,742
$ 3,350
Occupancy
334
339
310
310
344
Equipment
269
294
351
344
376
Accounting, audit, and compliance
73
72
72
70
69
Marketing
147
182
115
112
118
Data processing
485
442
413
453
452
FDIC assessment
108
107
111
104
99
Other professional fees
135
313
208
140
132
Trust professional fees
206
180
190
144
171
Director and committee fees
126
120
93
68
97
Legal fees
17
32
47
23
33
Supplies
89
61
55
66
79
Communications
121
120
119
112
112
ATM and check card expense
273
282
269
264
240
Other operating expenses
714
806
715
547
529
Total noninterest expenses
$ 7,146
$ 7,493
$ 6,785
$ 6,499
$ 6,201
Income before income tax expense
$ 3,887
$ 3,087
$ 2,993
$ 2,676
$ 2,732
Income tax expense
843
715
671
602
544
Net income
$ 3,044
$ 2,372
$ 2,322
$ 2,074
$ 2,188
POTOMAC BANCSHARES, INC.
Performance Summary
