Webster Financial NII Rises as Margin Compresses on Asset Yields
Net interest income reached $632.7 million in the second quarter as loan growth offset margin pressure.
Net interest income rose to $632.7 million in the second quarter of 2026, up from $621.2 million in the same period last year. The growth in nominal income occurred despite a compression in net interest margin, which fell 18 bps year-over-year to 3.26%.
Margin pressure was primarily driven by a 32 bps decrease in the average yield on interest-earning assets. This decline was partially mitigated by a 16 bps decrease in the average cost of deposits and interest-bearing liabilities. On a sequential basis, the margin compressed 10 bps from 3.36% in the first quarter.
The Connecticut-based regional bank (WBS) expanded its balance sheet to support income growth. Loans and leases grew 7.8% year-over-year to $57.9 billion. This expansion was led by a $2.4 billion increase in commercial loans and a $1.4 billion increase in commercial real estate. Deposits rose 6.0% year-over-year to $70.3 billion, with growth concentrated in money market accounts and interest-bearing checking.
Non-interest income contributed $107.2 million to the quarterly result, an increase from $94.7 million in the prior-year period. The gain was driven by higher miscellaneous income and fees related to loans and leases.
Capital strength improved as the common equity tier 1 ratio rose to 11.69%. This represents an increase from 11.35% in the second quarter of 2025 and 11.42% in the first quarter of 2026.
Credit quality metrics showed a mixed trajectory. The provision for credit losses fell to $31.5 million, down from $46.5 million a year ago and $54.0 million in the previous quarter. The non-performing loans and leases ratio improved to 0.74%, compared to 1.00% in the second quarter of 2025. However, net charge-offs as a percentage of average loans and leases rose to 0.30%, up from 0.27% in the prior-year period.
Operating leverage weakened as the efficiency ratio deteriorated to 47.74%. The figure rose from 45.40% in the second quarter of 2025, impacted by $8.7 million in transaction expenses and higher costs for benefits and compensation. Consequently, return on average tangible common stockholders' equity declined to 16.67% from 17.96% a year ago.