First Carolina Financial Services — Third Quarter 2026 Earnings Summary

Financial Performance:

• Reported net income of $7.9 million ($0.26 per diluted share) for the third quarter of 2026, compared to a net loss of $2.0 million ($0.08 per diluted share) in the third quarter of 2025.
• Net income increased $9.9 million year-over-year and $2.8 million (55%) on a linked-quarter basis.
• Net interest income totaled $28.1 million, a 10.0% increase from the prior year quarter.
• Net interest margin expanded 32 basis points year-over-year to 3.38% and 15 basis points quarter-over-quarter to 3.38%.
• Noninterest income decreased $6.2 million (48.0%) to $6.7 million year-over-year, primarily due to the discontinuation of a banking-as-a-service partnership and the absence of $1.7 million in non-recurring net gains on securities sales from the prior year.
• Noninterest expense decreased $6.3 million (19.6%) to $25.8 million year-over-year, driven by lower salaries, employee benefits, data processing costs, and professional fees.
• Total cost of funds decreased 31 basis points year-over-year to 2.81%; deposit costs decreased 33 basis points to 2.71%.
• Recorded a net release of the provision for credit losses of $1.0 million, compared to a provision of $9.4 million in the prior year quarter.
• Return on average assets (ROAA) was 0.89%; return on average equity (ROAE) was 7.24%; return on average tangible common equity (ROATCE) was 8.61%.
• Total assets were $3.67 billion at September 30, 2026, up 4.4% from the prior year.
• Gross loans were $2.90 billion, up 7.5% year-over-year and $154.1 million (5.6%) quarter-over-quarter.
• Total deposits were $3.16 billion, up 3.0% year-over-year.
• Brokered deposits declined to 14.3% of total deposits at September 30, 2026, from 31.0% a year ago.
• Certificates of deposit decreased 15.7% quarter-over-quarter and 58.8% year-over-year.
• Book value per share was $13.93; tangible book value per share was $11.73.
• Average shareholders' equity represented 12.33% of average assets.

Guidance and Future Outlook:

• Management stated that demand for the company's services has never been higher and believes the company is positioned to meet demand across all client financial journey stages.
• The company expects the redemption of its 2019 subordinated debt in early September to positively impact interest expense in coming periods.
• Management expressed confidence in the durable earnings power of the franchise heading into the remainder of the year.

Business Segments and Product Lines:

• The Payments business continues to expand service offerings, beginning a pilot program to offer prepaid cards as a payment modality for universities.
• The company is actively penetrating the higher education market, which remains a strategic growth vertical.
• Commercial Banking, Payments, Consumer Banking, and Wealth Management businesses are positioned to meet customer demand.
• Deepening treasury management relationships with commercial clients continues to drive operating deposit growth.
• Construction loans migrated to permanent financing, which carry lower expected loss rates.

Market and Competitive Landscape:

• Customers have responded positively to the company's status as a public entity.
• The company maintains a competitive position through a broad range of business segments and service offerings.

Risks and Challenges:

• Noninterest income results are not directly comparable to the prior year due to the planned discontinuation of a banking-as-a-service partnership and the non-recurring nature of prior year securities gains.
• The effective tax rate increased to 20.7% in the third quarter of 2026 from 18.6% in the prior year quarter, attributed to a higher state income effective tax rate due to changes in income allocation.

Management Commentary and Tone:

• Ron Day, Chairman, President, and CEO, described the quarter as "pivotal," highlighting the strengthening of the core funding base and the demonstration of what that foundation enables.
• Management emphasized disciplined cost control, operational efficiency, and maintaining credit quality while nonperforming assets held steady.
• The tone was confident regarding the company's ability to manage funding costs and generate loan growth despite rising rates.

Other Key Points:

• A two-for-one stock split was completed on June 17, 2026; all per share data has been adjusted to reflect this split.
• The company redeemed its 2019 subordinated debt issuance in early September 2026.
• Nonperforming assets declined to 0.60% of total assets at September 30, 2026, compared to 0.63% a year ago.
• The annualized net charge-offs to average loans held for investment ratio was 0.01% for the third quarter of 2026.
• The company operates 9 branches and employed 271 full-time equivalent employees as of the quarter end.
• The company serves businesses, higher education institutions, and individuals across North Carolina, Virginia, South Carolina, and Georgia.