Guam Banks

Return on assets reached 0.68% in Q1 2026, up 27 basis points year-over-year from 0.41% in Q1 2025 but down 12 basis points quarter-over-quarter from 0.80% in Q4 2025—marking the first QoQ decline in the series shown. The YoY improvement (+27 bps) reflects credit-quality normalization, while the QoQ decline (-12 bps) signals a deceleration in profitability momentum. The current 0.68% ROA sits 52 basis points below the national 1.20% benchmark, placing Guam banks in the bottom quartile of the FDIC-insured universe. Net interest margin at 4.93% leads the national 3.82% by 112 basis points, but the margin contracted 24 basis points YoY and 47 basis points QoQ, with the QoQ pace of compression nearly double the YoY pace, indicating the margin squeeze is accelerating.

Two ways to measure profitability: ROA at 0.68% is the asset-weighted aggregate for this two-bank cohort; with only two institutions, the per-bank average is nearly identical and offers no additional insight. The drivers of the YoY ROA improvement are credit-related: delinquency fell 2.84 percentage points YoY to 2.17%, and nonperforming assets declined 1.75 points to 1.10%, reducing provisioning drag. The QoQ ROA decline, however, traces to margin compression: NIM fell 47 basis points QoQ as deposit growth (10.84% YoY) outpaced loan growth (-0.38% YoY), mechanically shifting the asset mix toward lower-yielding cash and securities. The efficiency ratio deteriorated to 82.92%, up 3.45 percentage points QoQ from 79.47% and essentially flat YoY at -5 basis points from 82.97%, now 18.78 points above the national 64.14%. The QoQ efficiency deterioration coincided with the NIM contraction, suggesting revenue compression outpaced any cost discipline.

With only two banks in the cohort, tier and specialization gradients are not applicable. The forward observation is margin trajectory: if NIM continues to compress at the current 47-basis-point quarterly pace, the 112-basis-point cushion above the national benchmark will erode to parity by Q3 2026. The deposit-led asset expansion, while supporting capital and liquidity, pressures profitability unless loan growth resumes or the institutions redeploy excess liquidity into higher-yielding securities.

Asset growth accelerated to 10.40% year-over-year in Q1 2026, up from 2.54% in Q1 2025 and from 9.14% in Q4 2025—the fastest expansion in the series shown and 5.24 percentage points above the national 5.15% benchmark. The YoY acceleration of 309.78 percentage points vastly exceeds the QoQ acceleration of 13.73 points, indicating the growth trend is accelerating sharply rather than stabilizing. Deposit growth at 10.84% YoY (up from 2.04% a year prior) is the primary driver, accelerating 430.71 percentage points YoY and 17.93 points QoQ. Loan growth, by contrast, decelerated to -0.38% YoY from 3.04% in Q1 2025, marking the first contraction in the series shown and placing Guam banks 6.58 percentage points below the national 6.20% loan-growth benchmark.

The honest measure of balance-sheet expansion is asset growth at 10.40%, which reflects the aggregate trajectory for this two-bank cohort; no asset-weighted versus equal-weighted distinction exists. The composition of the growth is deposit-led: deposit growth at 10.84% YoY outpaced loan growth at -0.38%, with the 11.22-percentage-point spread the widest in the series shown. The mechanical result is a 6.49-percentage-point YoY decline in the loan-to-deposit ratio to 57.70%, compressing lending capacity despite robust deposit inflows. Quarter-over-quarter, deposit growth accelerated 17.93 percentage points (from 9.19% to 10.84%), while loan growth remained negative, amplifying the imbalance. The asset-growth acceleration is therefore liquidity-driven rather than loan-driven, with excess deposits likely deployed into cash and securities.

With only two institutions, tier and specialization gradients are not present. The forward indicator is the deposit-versus-loan divergence: if deposit growth sustains its current 10.84% pace while loan growth remains negative, asset growth will continue but at the cost of margin compression (NIM fell 47 bps QoQ) and efficiency deterioration (efficiency ratio rose 3.45 pp QoQ to 82.92%). The growth profile is expansion without lending, a pattern that supports capital and liquidity but pressures profitability unless loan demand resumes or the institutions redeploy liquidity into higher-yielding portfolios.

Delinquency fell to 2.17% in Q1 2026, down 2.84 percentage points year-over-year from 5.00% in Q1 2025 and down 33 basis points quarter-over-quarter from 2.50% in Q4 2025—the lowest level in the series shown but still 1.47 percentage points above the national 0.70% benchmark. The YoY improvement of 2.84 points vastly exceeds the QoQ improvement of 33 basis points, indicating the credit-quality normalization is decelerating rather than accelerating. Nonperforming assets declined 1.75 percentage points YoY to 1.10% and 21 basis points QoQ, remaining 59 basis points above the national 0.51%. Tier 1 capital at 20.56% sits 6.30 percentage points above the national 14.26%, down 12 basis points QoQ from 20.68% but up 1.25 points YoY from 19.31%, providing a substantial cushion despite the elevated credit metrics.

The honest measure of credit risk is the delinquency rate at 2.17%; with only two banks, no asset-weighted versus equal-weighted distinction exists. The driver of the YoY improvement is workout resolution: delinquency fell 2.84 percentage points YoY as nonperforming assets declined 1.75 points, suggesting charge-offs or cures reduced problem-loan inventory. The QoQ pace of improvement (33 bps delinquency, 21 bps NPA) is materially slower than the YoY pace, indicating the easiest credit-quality gains are behind the cohort. Tier 1 capital at 20.56% declined 12 basis points QoQ but rose 1.25 points YoY, with the YoY accretion driven by retained earnings (ROA at 0.68% YoY, up from 0.41%) and the QoQ decline reflecting asset growth at 10.40% outpacing capital accretion. The 6.30-point cushion above the national 14.26% provides ample capacity to absorb the elevated delinquency and NPA levels.

With only two institutions, tier and specialization gradients are not applicable. The forward observation is delinquency trajectory: if delinquency continues to decline at the current 33-basis-point quarterly pace, the 2.17% level will converge to the national 0.70% by Q1 2027. However, the deceleration in the improvement pace (2.84 pp YoY versus 33 bps QoQ) suggests the normalization may plateau before reaching national parity. The elevated capital ratio at 20.56% provides a buffer, but the combination of above-national delinquency (2.17% versus 0.70%) and below-national ROA (0.68% versus 1.20%) signals ongoing credit and profitability headwinds.

Guam banks' loan-to-deposit ratio fell to 57.70% in Q1 2026, down 6.49 percentage points year-over-year from 64.19% in Q1 2025 and down 2.21 points quarter-over-quarter from 59.91% in Q4 2025—the lowest level in the series shown and 18.67 points below the national 76.38%. The decline marks the continuation of a multi-quarter deleveraging trend, with YoY compression (-6.49 pp) substantially exceeding QoQ compression (-2.21 pp), indicating the trend is accelerating rather than stabilizing. Noninterest-bearing deposit share fell 2.18 percentage points YoY to 31.01% and 1.97 points QoQ, though it remains 9.41 points above the national 21.60%, suggesting the franchise retains a low-cost funding advantage despite the erosion.

The honest measure of funding-versus-lending posture is the loan-to-deposit ratio itself; no asset-weighted versus equal-weighted gap exists for this two-institution cohort. The driver of the decline is mechanical: deposit growth at 10.84% YoY vastly outpaced loan growth at -0.38% YoY (a contraction), widening the funding surplus. Quarter-over-quarter, deposit growth accelerated 17.93 percentage points (from 9.19% to 10.84%) while loan growth remained negative, amplifying the imbalance. Net interest income as a percent of revenue fell sharply QoQ from 1.28% to 0.30% (a 98-basis-point drop), though the YoY comparison shows stability at -4 basis points, placing the current 0.30% just 3 basis points below the national 0.32%.

The deposit-versus-loan divergence is concentrated in this two-bank cohort with no tier or specialization gradient to parse. The forward indicator is the deposit growth trajectory: if the current 10.84% YoY pace continues while loan growth remains negative, the loan-to-deposit ratio will compress further, potentially falling below 55% by Q2 2026. Excess liquidity at this scale, while capital-supportive, pressures net interest margin as low-yielding cash and securities replace loan assets—a dynamic visible in the 47-basis-point QoQ NIM contraction discussed in the profitability section.