Narragansett Financial Q3 Net Income Rises to $4.4 Million

Narragansett Financial Corporation, the parent company of BayCoast Bank, reported net income of $4.4 million for the quarter ended September 30, 2026, compared with $3.5 million for the prior quarter, an increase of $954,000, according to the company’s third-quarter results announcement released October 27, 2026 from Swansea, Massachusetts.

The company attributed the increase to a $1.4 million rise in net interest income, a $1.1 million decrease in the provision for credit losses and a $562,000 decrease in operating expenses, partially offset by a $1.2 million decrease in non-interest income and a $929,000 increase in the provision for income taxes.

The company stated that, following completion of its pending reorganization and related stock offering, Narragansett Bancorp, Inc. will become the consolidated reporting entity. SEC filing records for Narragansett Bancorp, Inc. show a Maryland-incorporated registrant based in Swansea, listed under SIC code 6036 for savings institutions not federally chartered and classified as a non-accelerated filer, smaller reporting company and emerging growth company. The registration file, numbered 333-296731, shows an initial S-1 filed June 12, 2026, an amendment filed July 23, 2026, a notice of effectiveness dated August 11, 2026 and two Rule 424(b)(3) prospectuses filed August 20, 2026. The registrant subsequently filed a quarterly report for the period ended June 30, 2026 on September 21, 2026 and a current report on October 5, 2026.

Net interest income was $22.8 million for the three months ended September 30, 2026, versus $21.4 million in the prior quarter, an increase of $1.4 million or 6.7%. Versus $19.5 million in the same quarter of 2025, net interest income rose $3.3 million or 16.8%. Total interest and dividend income was $36.764 million, versus $35.144 million in the prior quarter, including interest and fees on loans of $33.061 million, versus $31.880 million. Total interest expense was $13.967 million, versus $13.770 million, including interest on deposits of $11.480 million, versus $11.175 million.

Net interest margin was 3.42% for the quarter, a 21-basis-point improvement from the prior quarter and 55 basis points wider than the year-earlier quarter. The company defines the measure as net interest income as a percentage of average interest-earning assets. It attributed the increase in interest income primarily to higher loan and investment securities yields, partially offset by lower average balances of loans and investment securities. Interest expense was consistent with the prior quarter, the company stated, as increases in total average deposits and in the yield on subordinated debt were partially offset by a decrease in the average balance of other borrowings.

According to the company’s average-balance tables, the average yield on loans was 5.83% for the quarter, versus 5.60% in the prior quarter and 5.71% a year earlier, while the average yield on debt securities was 3.90%, versus 3.39% and 3.02%. The average rate on total interest-bearing deposits was 2.24%, versus 2.22% in the prior quarter and 2.58% a year earlier. The net interest rate spread was 3.03%, versus 2.80% and 2.44%.

Balance Sheet Movements

Total assets were $2.96 billion at September 30, 2026, up $87.9 million or 3.1% from the prior quarter. Cash and cash equivalents rose to $98.0 million, an increase of $45.2 million or 85.8%, which the company said was due to proceeds from its minority stock offering being held in escrow pending completion of the offering. Investment securities totaled $390.2 million, up $30.4 million or 8.4%.

Gross loans were $2.3 billion at September 30, 2026, up $21.6 million or 1.0% from the prior quarter. Home equity loans and lines of credit increased $39.6 million and residential real estate loans increased $7.0 million, partially offset by a $14.6 million decrease in consumer loans and an $11.3 million decrease in commercial and multi-family loans.

Deposits totaled $2.6 billion, up $125.6 million or 5.1% from the prior quarter. Demand deposits increased $105.7 million, which the company attributed to the escrowed offering proceeds; money market accounts rose $32.7 million and interest-bearing accounts rose $9.7 million, partially offset by a $22.2 million decrease in certificates of deposit. Federal Home Loan Bank borrowings fell $40.0 million, or 46.8%, to $45.5 million, a decrease the company attributed to an improved liquidity position. Subordinated debt was $94.8 million, up $206,000 or 0.22%.

Retained earnings were $187.4 million at September 30, 2026, down $1.8 million from the prior quarter. The company stated that net income of $4.4 million was offset by a $6.2 million increase in accumulated other comprehensive losses, driven primarily by unrealized losses in the U.S. Treasury portfolio resulting from higher market interest rates during the quarter.

Credit Quality and Expenses

The provision for credit losses decreased $1.1 million from the prior quarter, and the company recorded a benefit of $250,000 in the third quarter of 2026 due to a decrease in the allowance on individually evaluated loans. The allowance for credit losses to total loans was 1.31% at September 30, 2026, versus 1.34% at June 30, 2026 and 1.36% at September 30, 2025.

Non-performing loans were 1.55% of total loans at September 30, 2026, versus 1.90% at June 30, 2026; the company attributed the decrease to the payoff during the quarter of a $6.0 million commercial real estate loan and a $1.1 million commercial loan. Versus 0.28% at September 30, 2025, the year-over-year increase in non-performing loans reflected four commercial real estate loans and one commercial loan, with total balances of $35.8 million, being placed on non-accrual status; the company stated all four loans were performing as of September 30, 2026. The allowance for credit losses on loans equaled 84.85% of non-performing loans, versus 70.78% at June 30, 2026 and 480.80% at September 30, 2025.

Non-interest income was $12.8 million for the quarter, down $1.2 million from the prior quarter. Bank-owned life insurance income decreased $1.4 million, which the company attributed to market-related changes in the value of assets associated with its non-qualified deferred compensation plan, and mortgage banking income decreased $328,000 due to lower loan sale volume. Those decreases were partially offset by a $436,000 increase in gain (loss) on portfolio loans, which the company tied to more favorable pricing on private investor sales, and a $249,000 increase in net loan servicing fee income tied to a decrease in mortgage servicing rights amortization.

Non-interest expense was $30.0 million for the quarter, down $562,000 from the prior quarter. Salaries and employee benefits decreased $1.2 million on lower deferred compensation attributed to market fluctuations in the non-qualified deferred compensation plan, partially offset by an increase in bonus expense. Other general and administrative expenses increased $665,000, due primarily to what the company described as a significant one-time charitable donation.

Income tax expense increased $929,000 for the quarter, which the company attributed to a decrease in tax-exempt income. The effective tax rates were 24.4% and 12.6% for the quarters ended September 30, 2026 and June 30, 2026, respectively; the company stated each period’s rate was below the statutory rate due to tax-exempt income.

On an annualized basis, the company reported a third-quarter return on average assets of 0.60%, versus 0.48% in the prior quarter and 0.41% a year earlier; return on average equity of 9.32%, versus 7.41% and 2.35%; and an efficiency ratio of 84.25%, versus 86.49% and 90.70%. The efficiency ratio represents operating expenses divided by the sum of net interest income and other income, according to the release. The loans-to-deposits ratio was 88.40%, versus 92.05% at June 30, 2026 and 93.94% at September 30, 2025.

For the nine months ended September 30, 2026, the company reported net income of $9.142 million, versus $3.186 million for the same period of 2025. Nine-month net interest income was $64.336 million, versus $55.743 million, and the net interest margin was 3.20%, versus 2.72%. The nine-month return on average assets was 0.42%, versus 0.14% a year earlier, return on average equity was 6.52%, versus 2.44%, and the efficiency ratio was 86.85%, versus 89.99%.