2Q‘26 Earnings: Mixed Quarter as PPNR In-Line, but NIM Pressure Weighs on NII

Research evidence excerpt

2Q‘26 Earnings: Mixed Quarter as PPNR In-Line, but NIM Pressure Weighs on NII

et inflows, $1.1B of

CD growth, and $755M of growth in NOW and interest-bearing demand deposits, partially offset by a

$316M decline in noninterest-bearing deposits. As a result, noninterest-bearing deposits declined to

19% of total deposits from 20% last quarter. Management highlighted that deposit growth was broad-

based across customer channels and products, supported by continued market-share gains in its core

Midwest markets, a diversified deposit franchise, and strong organic customer acquisition. Positively,

funding costs remained well controlled despite strong balance-sheet growth, with the rate paid on

average interest-bearing deposits holding steady at 2.74% sequentially, while management noted that

deposit pricing has been strategically managed throughout the easing cycle and continues to benefit

from favorable deposit betas of 57% on interest-bearing deposits and 41% on total deposits.

NIM declined 4 bps sequentially to 3.52%, below both our estimate and consensus of 3.54%. Average

interest-earning asset yields declined 4 bps sequentially to 5.65%, driven primarily by a 7 bp decline

in loan yields to 6.07%, while securities yields improved 9 bps to 3.94%. Funding costs were better

controlled, with the cost of interest-bearing deposits remaining stable at 2.74% and the cost of

total interest-bearing liabilities unchanged at 2.81%, while the net free funds contribution remained

flat sequentially. NII of $597M missed our estimate of $602M and consensus of $604M, though it

increased 13% ann. linked-quarter, exceeding our prior forecast as strong earning-asset growth more

than offset modest margin pressure. Management characterized the quarter's NIM as remaining within