Northwest's Net Interest Margin Reverses After Two Expansions

The Tip Desk · October 27, 2026 · 3 min read

Net interest income still hit a record $149.0 million as the margin compressed 5 bps to 3.70% and GAAP net income fell to $50.7 million.

Northwest Bancshares (NWBI), the Columbus-based bank holding company, posted GAAP net income of $50.7 million, or $0.34 a share, for the quarter ended September 30, 2026, down from a record $53.5 million, or $0.36 a share, in the prior quarter.

The sequential decline reversed a second-quarter record. Annualized return on average equity was 10.42% and return on average assets 1.18%.

The company said the $3 million drop in adjusted net income, to $51 million, or $0.35 a share, was driven primarily by a $2 million increase in provision for credit losses and a $5 million increase in noninterest expense, partly offset by $2 million increases in both net interest income and noninterest income.

Net interest margin reversed two consecutive quarters of expansion, compressing 5 bps to 3.70% from 3.75%. Loan yields fell on lower acquired-loan mark accretion and a change in portfolio mix, while the average cost of interest-bearing deposits ticked up to 1.85% from 1.83%.

Net interest income still rose to a record $149.0 million, up $2.0 million from $146.9 million, as higher average earning assets more than offset the margin squeeze. Interest income was $210.2 million and interest expense $61.2 million.

Average loans receivable growth slowed to 1.6% sequentially, a $208 million increase, from 0.1% in the second quarter. Commercial and industrial and consumer loans rose; commercial real estate declined. C&I average growth was 31% year over year, versus 32% in the second quarter. Average loans were $13.30 billion.

Average deposits were essentially flat sequentially at $14.14 billion, a sharp deceleration from 0.6% growth in the second quarter, as noninterest-bearing and money-market balances rose as time deposits matured. Average borrowed funds jumped 62.8% to $617.5 million from $379.3 million as loan and investment growth outpaced deposit growth.

Total provision for credit losses rose 37.4% to $9.1 million from $6.6 million, driven by commercial lending growth including unfunded commitments. The loan provision was $5.2 million and the unfunded-commitment provision $3.9 million. Classified loans fell $55 million to $469.0 million, or 3.50% of loans, from $524.1 million, or 3.96%, a continuation of the commercial-real-estate payoff-driven decline. Annualized net charge-offs were 0.15% and nonperforming loans 0.74%.

Noninterest income increased $1.7 million to $35.9 million, with service charges and fees up $1.0 million and trust and other financial services up $1.0 million on wealth-management growth.

Noninterest expense rose $4.7 million to $109.0 million, lifting the efficiency ratio to 58.94% from 57.56%, as FDIC insurance premiums swung to a $3.2 million expense after a $0.3 million benefit in the prior quarter.

The board kept the quarterly cash dividend at $0.20 a share, the 128th consecutive quarterly payout. President and CEO Louis J. Torchio said the company opened its first two financial centers in Columbus, added talent there and to senior leadership, and maintained an efficiency ratio of 58.9% and an adjusted efficiency ratio of 57.8%. He said the company looks forward to a strong finish in the fourth quarter as it builds on Columbus momentum and its retail and commercial network.