Alabama Banks

Alabama banks' return on assets reached 1.14% in Q1 2026, up 8 basis points from 1.06% a year earlier and marking the strongest profitability in the series shown, though 6 basis points below the national benchmark of 1.20%. Quarter-over-quarter, ROA rose 3 basis points from 1.11%. The trend is decelerating—YoY expansion of 8 bps versus QoQ expansion of 3 bps—but remains positive, signaling sustained if moderating earnings momentum.

Net interest margin at 3.95% exceeded the national 3.82% by 13 basis points and widened 20 bps YoY from 3.75%, driven by Alabama banks' above-average noninterest-bearing deposit share of 23.89% (2.29 points above national). Quarter-over-quarter, NIM slipped 3 basis points from 3.98%, a modest compression that reflects the 47-bp decline in NIB share from 24.36% last quarter. The efficiency ratio deteriorated to 65.46% from 64.78% last quarter (up 68 bps QoQ), now 1.31 percentage points above the national 64.14%. Year-over-year, efficiency improved 1.13 points from 66.59%, so the YoY trend is favorable but the QoQ trend is adverse. The QoQ deterioration coincides with the sharp 61-bp drop in noninterest income from 0.77% of assets in Q4 2025 to 0.16% in Q1 2026, which mechanically raised the efficiency ratio by compressing the revenue denominator.

Specialization dynamics within Alabama show meaningful variation. Mortgage specialists posted an efficiency ratio of 76.96%, 12.81 points above the national 64.14% and the highest among specializations, reflecting the structural cost burden of mortgage origination and servicing. Credit Card specialists at 54.43% and International specialists at 57.89% operated well below the national average, though these categories represent only 13 banks combined. Agricultural specialists at 59.51% and Commercial specialists at 64.09% clustered near the state average. The YoY efficiency improvement of 1.13 points was led by Mortgage specialists (down 5.43 points), Agricultural (down 3.45 points), and Commercial (down 2.91 points), per the TOP SPECIALIZATION MOVERS block.

Alabama banks' asset growth decelerated to 4.74% in Q1 2026 from 5.91% a year earlier, down 19.81 percentage points in growth-rate terms, and from 5.39% last quarter, down 11.93 points. The trend is decelerating on both timeframes, and the current 4.74% pace sits 41 basis points below the national benchmark of 5.15%. Asset growth remains positive but is losing momentum at a faster rate than the national average.

Loan growth decelerated to 5.29% from 6.52% a year earlier (down 18.84 points) and from 6.04% last quarter (down 12.43 points), now 91 basis points below the national 6.20%. Deposit growth decelerated to 4.13% from 6.17% a year earlier (down 33.06 points) but accelerated to 4.13% from 3.85% last quarter (up 7.39 points), sitting 89 bps below the national 5.02%. The divergence between QoQ and YoY deposit trends is notable: deposits are reaccelerating in the near term after a prolonged YoY slowdown. The QoQ deposit acceleration of 7.39 points partially offset the loan deceleration of 12.43 points, limiting the widening of the loan-to-deposit ratio to 17 bps QoQ.

The composition of growth shows Alabama banks are growing loans faster than deposits on a YoY basis (5.29% versus 4.13%), which mechanically tightened the loan-to-deposit ratio by 1.31 percentage points YoY to 67.08%. However, both loan and deposit growth are decelerating sharply YoY, and both trail the national pace by roughly 90 basis points. The asset-growth deceleration of 19.81 points YoY is severe, but the metric remains in positive territory at 4.74%, so this is a slowdown, not a contraction. The QoQ asset deceleration of 11.93 points is also material, suggesting the slowdown is recent and ongoing rather than stabilizing.

Alabama banks' delinquency rate fell to 0.64% in Q1 2026 from 0.71% a year earlier (down 7 basis points) and from 0.69% last quarter (down 5 bps), now 5 basis points below the national benchmark of 0.70%. Year-over-year, delinquency decreased 7 bps; quarter-over-quarter, 5 bps. The improvement is consistent across both timeframes, marking the lowest delinquency rate in the series shown and signaling sustained credit-quality strength.

The nonperforming asset ratio held essentially flat at 0.53% versus 0.53% last quarter (up 0 bps) and 0.50% a year earlier (up 3 bps), now 2 basis points above the national 0.51%. The YoY increase of 3 bps is modest and the QoQ stability suggests NPA levels are plateauing rather than deteriorating. Tier 1 capital fell to 14.63% from 14.82% last quarter (down 20 bps) but rose from 14.42% a year earlier (up 21 bps), remaining 37 basis points above the national 14.26%. The QoQ decline of 20 bps is the largest capital compression in the series shown, driven by the 4.74% asset growth outpacing internal capital generation. The YoY capital increase of 21 bps reflects sustained profitability over the four-quarter window, with ROA averaging above 1.10%.

Credit quality among Alabama banks remains strong, with delinquency at 0.64% below the national average and falling on both QoQ and YoY bases. The NPA ratio at 0.53% is stable and only marginally above national, indicating problem assets are not accumulating. Tier 1 capital at 14.63% sits well above the national 14.26% and provides a 37-bp cushion, though the 20-bp QoQ decline warrants monitoring. The capital compression reflects the mechanical relationship between asset growth (4.74% annualized from the QoQ pace) and earnings retention; if asset growth continues to decelerate, the capital ratio should stabilize or rebound. Alabama banks' risk profile is favorable relative to national benchmarks, with credit quality improving and capital levels elevated despite modest QoQ compression.

Alabama banks' loan-to-deposit ratio rose to 67.08% in Q1 2026, up 1.31 percentage points from 65.77% a year earlier and marking the highest lending intensity in the series shown. Quarter-over-quarter, the ratio increased 17 basis points from 66.90%. The trend is accelerating modestly—YoY growth of 1.31 points versus QoQ growth of 0.17 points—but the absolute level remains 9.30 percentage points below the national benchmark of 76.38%, indicating Alabama banks continue to hold significantly more liquidity than the industry average.

Two forces drove the ratio higher. Loan growth at 5.29% YoY outpaced deposit growth at 4.13% YoY, mechanically tightening the funding-lending gap. However, both metrics decelerated sharply: loan growth slowed from 6.52% a year ago to 5.29% now (down 18.84 percentage points), while deposit growth slowed from 6.17% to 4.13% (down 33.06 points). The QoQ picture shows divergence: deposit growth accelerated 7.39 points to 4.13% from 3.85% last quarter, while loan growth decelerated 12.43 points to 5.29% from 6.04%. The deposit acceleration partially offset the loan deceleration, limiting the LDR expansion to 17 bps QoQ.

Noninterest-bearing deposit share fell to 23.89% from 24.36% last quarter (down 47 bps), yet remained 2.29 percentage points above the national 21.60%, preserving Alabama banks' funding-cost advantage. Year-over-year, NIB share is essentially stable at 23.89% versus 23.88% (up 1 bp). Noninterest income as a percent of assets collapsed from 0.77% in Q4 2025 to 0.16% in Q1 2026 (down 61 bps QoQ), sitting 16 bps below the national 0.32%. The YoY comparison shows stability at 0.16% versus 0.19% (down 3 bps). The QoQ drop suggests a one-time event or seasonal pattern rather than a structural decline, but the metric now trails the national average by a material margin.