Financial Institutions' Net Interest Income Hits a Quarterly High

The Tip Desk · November 10, 2026 · 3 min read

Net interest income reached $54.3 million in the third quarter as the margin held at 3.70% and loans grew 2.2% to $4.86 billion.

Financial Institutions, Inc. (FISI), a financial holding company with about $6.5 billion in assets, reported net interest income of $54.3 million for the third quarter ended September 30, 2026, a new quarterly high, up $930 thousand from the second quarter and $2.5 million from a year earlier.

Net income available to common shareholders was $19.6 million, or $0.99 a share, down 5.7% from $20.8 million, or $1.04 a share, in the second quarter. Return on average assets was 1.26%, and the efficiency ratio was 56.84%.

The net interest margin of 3.70% was unchanged from the linked quarter and 5 basis points higher than a year earlier, which the company attributed to lower interest-bearing liability costs. Average interest-earning assets were $5.84 billion. The linked-quarter increase reflected a $114.5 million rise in average loans, partly offset by lower average investment securities and Federal Reserve cash. Average interest-bearing liabilities were $4.57 billion, with an average cost of 2.67%.

Total loans were $4.86 billion, up 2.2% from June 30 and 5.8% from September 30, 2025, which the company said was driven by commercial lending. Commercial business and commercial mortgage loans were $3.31 billion, up 3.0% from the linked quarter and 10.6% from a year earlier. Consumer indirect and other consumer loans were $809.8 million. Residential real estate loans were $740.5 million.

Total deposits were $5.47 billion, up 3.3% from the linked quarter and 2.2% from a year earlier. The company said the linked-quarter increase was primarily due to seasonally higher public deposit balances, with growth across all deposit types. Public deposits were 22% of the total.

Noninterest income was $10.5 million, down from $11.0 million in the second quarter and $12.1 million a year earlier. Investment advisory income, the largest noninterest line, was $3.3 million, up 1.7% from the linked quarter and 10.6% from a year earlier, which the company said reflected new business and market performance. Swap fees were $106 thousand. The company recorded a $274 thousand loss on investments in limited partnerships, compared with a $140 thousand loss in the second quarter and a $223 thousand gain a year earlier. There was no gain or loss on investment securities in the third quarter.

Noninterest expense was $36.8 million. Salaries and employee benefits were $19.7 million, up $489 thousand from the second quarter, which the company said was primarily driven by higher health insurance benefit expense. Professional services were $1.5 million.

Credit costs rose. The annualized net charge-off ratio was 0.33%, up 22 basis points from 0.11% in the second quarter and 15 basis points from 0.18% a year earlier. President and Chief Executive Officer Martin K. Birmingham said the ratio was up from lower-than-typical levels but remains within full-year guidance. The provision for credit losses was $3.9 million, which the company said was driven by loan growth and fluctuation in unfunded commitments. Non-performing loans were $38.5 million, or 0.79% of total loans. The allowance for credit losses on loans was $48.0 million, or 0.99% of loans.

Regulatory capital ratios continued to exceed requirements for well-capitalized status. Common equity Tier 1 was 11.36%. Tangible common equity to tangible assets was 8.40%. Shareholders’ equity was $619.0 million, which the company said declined primarily because of an increase in accumulated other comprehensive loss on available-for-sale securities and share repurchases, partly offset by net income net of dividends. The company repurchased 185,833 shares at an average $40.92 a share; 320,480 shares remained available under the September 2025 program. It declared a $0.32 common dividend, returning 32% of third-quarter net income to common shareholders.