Northwest Bancshares, Inc., announced net income for the quarter ended Sept. 30 of $33.4 million, or $0.31 per diluted share. This represents an increase of $5.7 million, or 20.5%, compared to the same quarter last year when net income was $27.7 million or $0.27 per diluted share. The annualized returns on average shareholders’ equity and average assets for the quarter ended Sept. 30 were 9.90% and 1.25% compared to 8.93% and 1.15% for the same quarter last year.
The company also announced that its board of directors declared a quarterly cash dividend of $0.18 per share payable on Nov. 15, to shareholders of record as of Nov. 1. This is the 100th consecutive quarter in which the company has paid a cash dividend. Based on the market value of the company’s stock as of Sept. 30, this represents an annualized dividend yield of approximately 4.39%.
In making this announcement, Ronald J. Seiffert, chairman, president and CEO, said, “We were very pleased with the record earnings that we achieved this quarter despite the continued challenges that we, and the rest of the industry, are experiencing with net interest margin compression as a result of the inverted yield curve. Our annualized loan growth is steady at mid-single digits and diversified among all loan categories. In addition, we are encouraged with the expansion of our mortgage banking capabilities which will continue to enhance core fee income.” Seiffert continued, “As always, we continue to focus on efficiency. We were very pleased with the progress that we made this quarter as almost all expense categories showed improvement over the linked second quarter. As a result, our efficiency ratio for the quarter decreased to 58.8%.”
Net interest income increased by $5.1 million, or 6.0%, to $90.9 million for the quarter ended Sept. 30, from $85.8 million for the quarter ended Sept. 30, 2018, primarily due to a $10.4 million, or 11.4%, increase in interest income on loans receivable. This increase was primarily due to an increase of $819.2 million, or 10.3%, in the average balance of loans. Partially offsetting this improvement was an increase in interest expense on deposits of $5.5 million, or 66.3%, due to recent increases in market interest rates, resulting in an increase in the cost of our interest-bearing liabilities to 0.89% from 0.60%. The net impact of these changes caused the Company’s net interest margin to decrease to 3.79% for the quarter ended September 30, 2019 from 3.92% for the same quarter last year.
The provision for loan losses decreased by $3.7 million, or 52.7%, to $3.3 million for the quarter ended September 30, 2019, from $7.0 million for the quarter ended September 30, 2018. The provision was elevated in the prior year due primarily to a $4.6 million write-down of a land development loan in the third quarter of 2018.
Noninterest income increased by $3.6 million, or 16.0%, to $26.2 million for the quarter ended Sept. 30, from $22.6 million for the quarter ended Sept. 30, 2018. This increase was due to a $1.8 million increase in mortgage banking income as a result of expanding our secondary market sales capabilities. In addition, there was a $696,000, or 38.6%, increase in other operating income from increases in swap income and Visa dividend income, a $400,000, or 3.0%, increase in service charges and fees as a result of increased customer activity from the Union Community Bank acquisition, and a $355,000, or 8.3%, increase in trust and other financial services income due to new brokerage production. In addition, we recognized a gain of $826,000 in the current quarter on the sale of approximately $50 million of one- to four- family mortgage loans from our portfolio. We chose to sell these loans as they were identified as most likely to refinance due to declining market interest rates and we redeployed the proceeds into shorter duration consumer and commercial loans at an equivalent yield.
Noninterest expense increased by $4.0 million, or 6.0%, to $70.6 million for the quarter ended Sept. 30, from $66.6 million for the quarter ended Sept. 30, 2018. This increase resulted primarily from a $3.3 million, or 8.7%, increase in compensation and employee benefits due to both internal growth in compensation and staff as well as the addition of UCB employees. In addition, processing expenses increased by $1.5 million, or 15.6%, as we continue to invest in technology and infrastructure and refresh our loan origination platforms. Partially offsetting this increase was a decrease in federal deposit insurance premiums of $1.4 million due to an assessment credit received during the quarter as a result of the deposit insurance fund becoming fully funded.
Net income for the nine-month period ended September 30, 2019 was $84.8 million, or $0.80 per diluted share. This represents an increase of $5.8 million, or 7.4%, compared to the nine-month period ended September 30, 2018, when net income was $79.0 million, or $0.76 per diluted share. The annualized returns on average shareholders’ equity and average assets for the nine-month period ended September 30, 2019 were 8.65% and 1.10% compared to 8.67% and 1.11% for the same period last year. This increase in net income was the result of an increase in net interest income after provision of $21.8 million, or 9.3%, which was partially offset by an increase in non-interest expense of $15.7 million, or 7.7%. Contributing to the additional expense is the added cost of UCB operations, including new marketing costs, additional processing costs associated with our new commercial and residential mortgage platforms as well as increased online banking usage fees, and the acquisition costs associated with the UCB conversion in March 2019.