Rhode Island Banks

Rhode Island banks returned to profitability in Q1 2026 with a 0.55% return on assets, up 78 basis points from the -0.23% loss in Q4 2025 and 31 basis points from 0.24% in Q1 2025, marking the first profitable quarter since Q3 2025 in the series shown. The QoQ swing (78 bps) was more than double the YoY improvement (31 bps), suggesting a sharp one-quarter correction rather than sustained momentum. ROA at 0.55% remains 64 basis points below the national benchmark of 1.20%, placing Rhode Island banks in the bottom quartile of profitability nationally.

The profitability turnaround was driven by two forces: net interest margin expansion and efficiency-ratio improvement. NIM rose to 3.87% in Q1 2026, up 36 basis points QoQ from 3.51% in Q4 2025 and 47 basis points YoY from 3.40% in Q1 2025. The QoQ pace (36 bps) was three-quarters of the YoY pace (47 bps), indicating the expansion is decelerating but still positive. NIM at 3.87% now sits 6 basis points above the national 3.82%, a rare outperformance for the cohort. The efficiency ratio improved sharply to 75.28%, down 18.52 percentage points QoQ from 93.80% in Q4 2025 and 11.40 percentage points YoY from 86.68% in Q1 2025. The QoQ drop was nearly twice the YoY improvement, consistent with the Q4 2025 efficiency ratio being an outlier (likely driven by one-time expenses or the -0.23% ROA loss compressing the denominator). The efficiency ratio at 75.28% remains 11.14 percentage points above the national 64.14%, indicating higher operating costs relative to revenue. Noninterest income as a percentage of assets fell to 0.18%, down 71 basis points QoQ from 0.90% but stable YoY at 4 basis points from 0.22%, reinforcing that Q4 2025 was an anomaly.

The profitability recovery hinges on NIM sustainability and efficiency discipline. NIM at 3.87% exceeds the national 3.82% despite a noninterest-bearing deposit share of 13.45% (8.15 percentage points below national 21.60%), suggesting Rhode Island banks are extracting yield through loan pricing rather than low-cost deposit funding. The efficiency ratio at 75.28%, while improved, remains elevated nationally, and the 64-basis-point ROA gap to the national 1.20% indicates structural profitability challenges persist beyond the Q4 2025 one-quarter loss.

Rhode Island banks posted 2.03% annualized asset growth in Q1 2026, a turnaround from the -2.53% contraction in Q4 2025 and the -1.87% decline in Q1 2025. The data tables flag insufficient historical data for formal acceleration/deceleration classification, but the directional shift from negative to positive is clear. Asset growth at 2.03% trails the national benchmark of 5.15% by 3.13 percentage points, placing Rhode Island banks in the slower-growth segment of the industry.

Loan growth accelerated sharply to 4.66% annualized in Q1 2026, up from 0.74% in Q4 2025 and 2.95% in Q1 2025. The QoQ acceleration was 529.36 percentage points and the YoY acceleration was 57.95 percentage points, both marking the fastest loan growth in the quarterly series shown. Loan growth at 4.66% trails the national 6.20% by 1.54 percentage points but significantly outpaced the cohort's own deposit growth at 4.36%, mechanically driving the loan-to-deposit ratio to 96.02%, up 116 basis points QoQ and 37 basis points YoY. Deposit growth accelerated 52.88 percentage points QoQ from 2.85% in Q4 2025 but decelerated 13.39 percentage points YoY from 5.03% in Q1 2025, creating a QoQ-versus-YoY tension: deposits are growing faster this quarter than last, but slower than a year ago. Deposit growth at 4.36% trails the national 5.02% by 66 basis points, a narrower gap than the 1.54-percentage-point loan-growth shortfall.

The growth profile is unbalanced: loan growth at 4.66% exceeds deposit growth at 4.36%, compressing liquidity and pushing the LDR to 96.02%, the highest in the series shown and 19.64 percentage points above the national 76.38%. Asset growth at 2.03% lags both loan and deposit growth, suggesting balance-sheet contraction in non-loan, non-deposit categories (likely securities or cash). If loan growth continues at 4.66% and deposit growth holds at 4.36%, the LDR will approach 97% by Q2 2026, limiting further loan expansion without deposit-gathering or wholesale-funding initiatives.

Rhode Island banks' delinquency ratio rose to 1.32% in Q1 2026, up 13 basis points from 1.19% in Q4 2025 and 43 basis points from 0.89% in Q1 2025, marking the highest delinquency rate in the quarterly series shown. The YoY increase (43 bps) was more than three times the QoQ increase (13 bps), indicating the deterioration is decelerating but not stabilizing. Delinquency at 1.32% sits 62 basis points above the national benchmark of 0.70%, placing Rhode Island banks in the top quartile of credit risk nationally.

The nonperforming asset ratio climbed to 0.86%, up 8 basis points QoQ from 0.78% in Q4 2025 and 30 basis points YoY from 0.56% in Q1 2025. The YoY increase (30 bps) was nearly four times the QoQ increase (8 bps), consistent with the delinquency pattern of decelerating but ongoing deterioration. The NPA ratio at 0.86% sits 35 basis points above the national 0.51%, and the spread between delinquency (1.32%) and NPAs (0.86%) of 46 basis points suggests a portion of delinquent loans remain accruing, not yet classified as nonperforming. Tier 1 capital rose to 27.03%, up 17 basis points QoQ from 26.86% and 3.87 percentage points YoY from 23.17%, marking the highest capital ratio in the series shown. The Tier 1 ratio at 27.03% sits 12.78 percentage points above the national 14.26%, nearly double the national benchmark and providing a substantial cushion against the elevated delinquency and NPA levels.

The risk profile is mixed: credit quality is deteriorating, but capital is strengthening. Delinquency at 1.32% and NPAs at 0.86% are both well above national benchmarks and rising, but the pace of increase is slowing (QoQ gains smaller than YoY). The 27.03% Tier 1 capital ratio — 12.78 percentage points above national — provides ample loss-absorption capacity, but the combination of high LDR (96.02%), rising delinquency (1.32%), and elevated NPAs (0.86%) creates a concentrated risk posture. If delinquency continues at the current QoQ pace of 13 basis points per quarter, the ratio will exceed 1.50% by Q3 2026, approaching stress levels despite the capital cushion.

Rhode Island banks operated at a 96.02% loan-to-deposit ratio in Q1 2026, up 116 basis points from 94.86% in Q4 2025 and 37 basis points from 95.65% in Q1 2025, marking the highest LDR in the quarterly series shown. The ratio sits 19.64 percentage points above the national benchmark of 76.38%, signaling an aggressive lending posture relative to deposit funding. QoQ the LDR rose faster (116 bps) than YoY (37 bps), indicating accelerating balance-sheet extension rather than a stable structural stance.

The LDR expansion reflects loan growth at 4.66% annualized outpacing deposit growth at 4.36%. Deposit growth accelerated 52.88 percentage points QoQ from 2.85% in Q4 2025 but decelerated 13.39 percentage points YoY from 5.03% in Q1 2025, creating a QoQ-versus-YoY tension: deposits are growing faster this quarter than last, but slower than a year ago. Noninterest-bearing deposit share fell to 13.45%, down 6 basis points QoQ and 80 basis points YoY, now 8.15 percentage points below the national 21.60%. The decline in NIB share is stable YoY (only 4 basis points) but the multi-quarter erosion from 14.25% a year ago suggests ongoing migration to interest-bearing products. Noninterest income as a percentage of assets dropped sharply to 0.18% from 0.90% in Q4 2025 — a 71-basis-point QoQ decline — but remained stable YoY at 22 basis points versus 18 basis points, suggesting the Q4 2025 figure was an outlier rather than a sustainable revenue stream.

The 96.02% LDR, while well above national norms, is not unprecedented for a small-state cohort with six institutions, but the QoQ acceleration (116 bps) is notable. If loan growth continues at the current 4.66% pace and deposit growth holds at 4.36%, the LDR will approach 97% by Q2 2026. The low NIB share at 13.45% — 8.15 percentage points below national — indicates deposit pricing pressure and limited zero-cost funding, compressing the funding advantage typically associated with community deposit franchises.