Vermont Banks

Vermont banks posted return on assets of 0.81% in Q1 2026, up 7 basis points from 0.73% in Q4 2025 and 15 basis points from 0.66% a year earlier, marking the strongest profitability in the period shown. QoQ the gain was 7 basis points; YoY, 15 basis points. The expansion is accelerating, not stabilizing, as the YoY pace more than doubles the QoQ advance. The 0.81% ROA remains 39 basis points below the national benchmark of 1.20%, but the trajectory is favorable.

Net interest margin drove the profitability gain, rising to 3.55% from 3.43% QoQ and 3.28% YoY. The 12-basis-point QoQ expansion matches the pace of the prior quarter, suggesting sustained repricing discipline rather than a one-time adjustment. The margin remains 26 basis points below the national 3.82%, reflecting Vermont's small-bank composition: the twelve institutions lack the scale economies and funding advantages of larger peers. Efficiency ratio improved to 76.06% from 77.36% QoQ and 77.90% YoY, a 1.84-percentage-point YoY decline that indicates expense discipline kept pace with revenue growth. The ratio remains 11.92 percentage points above the national 64.14%, consistent with the cost structure of smaller institutions where fixed overhead cannot be spread across large asset bases.

Vermont's twelve-bank universe precludes meaningful tier stratification, but the detected-stories block flags national specialization patterns worth monitoring: Mortgage specialists nationwide posted efficiency ratios of 76.96%, nearly matching Vermont's 76.06%, while Credit Card specialists achieved 54.43% through scale economies Vermont banks cannot replicate. The 1.84-percentage-point YoY efficiency improvement suggests Vermont banks are managing the structural cost disadvantage through operating discipline. If NIM continues its current quarterly expansion pace of 12 basis points, Vermont banks will reach the national 3.82% benchmark by Q3 2026, closing the profitability gap absent a national margin reversal.

Vermont banks' asset growth decelerated to 4.36% in Q1 2026 from 4.80% in Q4 2025 and 5.18% a year earlier, slowing 9.27 percentage points QoQ and 15.93 percentage points YoY. The 4.36% pace remains positive but now trails the national 5.15% benchmark by 80 basis points. QoQ the deceleration was 9.27 percentage points; YoY, 15.93 percentage points. The slowdown is accelerating, not stabilizing, as the YoY deceleration far exceeds the QoQ pace.

Loan growth decelerated more sharply than asset growth, falling to 4.81% from 5.46% QoQ and 8.92% YoY, a 46.11-percentage-point YoY deceleration that marks the steepest slowdown in the series shown. Deposit growth decelerated to 3.93% from 5.02% QoQ and 5.09% YoY, declining 21.85 percentage points QoQ and 22.86 percentage points YoY. The loan-growth deceleration (46.11 pp YoY) outpaced the deposit-growth deceleration (22.86 pp YoY) by more than two-to-one, yet the loan-to-deposit ratio still rose because the absolute loan-growth rate of 4.81% exceeded the deposit-growth rate of 3.93%. This mechanical relationship—slowing loan growth still outpacing slowing deposit growth—explains the rising LDR despite broad-based balance-sheet deceleration.

Vermont's twelve-bank universe is too small to support tier analysis, but the national detected-stories block shows Mortgage specialists facing efficiency pressures (76.96% ratio, down 5.43 pp YoY) that may constrain lending capacity. The 4.81% loan-growth rate, while decelerating, remains ahead of the 3.93% deposit-growth rate, sustaining the liquidity compression documented in the engagement section. If loan growth continues decelerating at the current quarterly pace (roughly 65 basis points per quarter over the two quarters shown), Vermont banks will reach zero loan growth by Q2 2027, though deposit-growth deceleration at a similar pace would preserve the current LDR trajectory.

Vermont banks' delinquency rate held stable at 0.54% in Q1 2026, down 3 basis points from 0.58% in Q4 2025 and 6 basis points from 0.60% a year earlier. The 0.54% rate stands 15 basis points below the national 0.70% benchmark, marking the lowest credit stress in the period shown. QoQ the decline was 3 basis points; YoY, 6 basis points. The improvement is decelerating, not accelerating, as the YoY pace only doubles the QoQ move, but the absolute level remains favorable.

The nonperforming asset ratio held stable at 0.47%, down 3 basis points from 0.50% both QoQ and YoY, now 4 basis points below the national 0.51%. Tier 1 capital declined 7 basis points QoQ to 15.07% from 15.13% but rose 15 basis points YoY from 14.92%, now 81 basis points above the national 14.26%. The QoQ capital decline is modest and likely reflects the 0.81% ROA generating retained earnings at a slower pace than risk-weighted asset growth, a mechanical relationship consistent with the 4.81% loan-growth rate. The 15.07% Tier 1 ratio provides substantial cushion above regulatory minimums and above national norms, indicating Vermont banks remain well-capitalized despite the marginal QoQ erosion.

Vermont's twelve-bank universe precludes tier stratification, but the national detected-stories block flags Credit Card specialists posting 2.57% delinquency nationwide, nearly five times Vermont's 0.54%, while Agricultural specialists posted 0.63% delinquency. Vermont's small-bank composition skews away from high-delinquency specializations, supporting the favorable credit metrics. The 7-basis-point QoQ capital decline, if sustained at the current pace, would erode the 81-basis-point cushion over national norms within three years, though the 15-basis-point YoY gain suggests the QoQ move may be seasonal noise rather than a structural trend.

Vermont banks' loan-to-deposit ratio reached 85.29% in Q1 2026, up 85 basis points from 84.44% in Q4 2025 and 2.50 percentage points from 82.79% a year earlier. The ratio now stands 8.92 percentage points above the national benchmark of 76.38%, marking the highest lending intensity in the series shown. QoQ the ratio rose 85 basis points; YoY, 2.50 percentage points. The upward trend is accelerating, driven by the gap between loan growth and deposit accumulation.

The move reflects a mechanical imbalance: loan growth of 4.81% YoY outpaced deposit growth of 3.93% YoY, compressing liquidity. Noninterest-bearing deposit share rose 1.66 percentage points QoQ to 22.48%, now 89 basis points above the national 21.60%, suggesting improved deposit mix quality even as total deposit growth slowed. Net interest income as a percentage of revenue fell sharply to 0.16% from 0.68% QoQ, though the metric remained stable YoY at 0.17% versus 0.17% a year earlier, now 16 basis points below the national 0.32%. The QoQ decline in NII revenue share appears anomalous given the simultaneous NIM expansion and likely reflects a composition effect in noninterest income rather than core margin compression.

The 85.29% loan-to-deposit ratio, while elevated relative to national norms, reflects Vermont's small-bank universe: all twelve institutions fall within asset bands where higher lending intensity is typical. The rising noninterest-bearing share at 22.48% provides a partial offset to liquidity pressure, as zero-cost deposits improve funding mix. If the current quarterly pace of LDR expansion (+85 bps QoQ over the two quarters shown) continues, Vermont banks will approach 90% by year-end 2026, a threshold that may constrain further loan growth without corresponding deposit franchise gains.