Wintrust Financial Corporation Stock

Welcome to Wintrust Financial Corporation's Second Quarter and Year-to-Date 2026 Earnings Conference Call. A review of the results will be made by Tim Crane, President and Chief Executive Officer; David Dykstra, Vice Chairman and Chief Operating Officer; and Richard Murphy, Vice Chairman and Chief Lending Officer. As part of their reviews, the presenters may make reference to both the earnings press release and the earnings release presentation. Following their presentation, there will be a formal question-and-answer session.

During the course of today's call, Wintrust's management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements. Actual results could differ materially from the results anticipated or projected in any such forward-looking statements. The company's forward-looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the company's most recent Form 10-K and any subsequent filings with the SEC.

Also, our remarks may reference certain non-GAAP financial measures. Our earnings press release and earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure. As a reminder, this conference call is being recorded.

I will now turn the conference call over to Mr. Tim Crane.

Good morning, everybody, and welcome to Wintrust's Second Quarter 2026 Earnings Call. In addition to those that Latif introduced, I'm joined by our Chief Financial Officer, Dave Stoehr; and Chief Legal Officer, Kate Boege. As we do every quarter, I'll provide a brief overview of the quarter. Dave Dykstra will discuss key financial results. Rich will review loan activity and credit quality, and I'll be back to share some final thoughts before we open up to your questions. .

As a reminder, we're focused on 3 key strategic priorities to drive financial results and build shareholder value, delivering an exceptional and differentiated customer experience, generating strategic and disciplined growth, and continuing to build on our foundation by investing for the future. Delivering on these priorities, we reported very strong loan and deposit growth, net interest margin in line with expectations, well-managed expenses and stable credit quality. All of this produced our sixth consecutive record quarter of net income. Second quarter net income was $233.7 million, up from just over $227 million in the first quarter. Year-to-date net income was $461 million, up 20% from the same period last year.

Net interest income, the biggest driver of our revenue growth was up 13% quarter-over-quarter on an annualized basis. Our growth this quarter was all organic, 1 client, 1 relationship at a time. We continue to deliver our differentiated value proposition to gain market share by adding new households and deepening relationships with existing clients. I'm particularly pleased with the strong operating leverage we delivered in the first 2 quarters of the year. Not only are we growing revenue nicely, we are also managing expenses to ensure we can continue to invest in the tools, capabilities and the people that lead to stronger client relationships.

On our last call, we shared plans to open branches between now and the end of the year. Our newest location, Chicago's Lakeview neighborhood and in the Illinois towns of Montgomery and [indiscernible] Village will open in the coming weeks with several others to follow later in the quarter, including 3 in Northwest Indiana. In all cases, we look to open branches either as fill-ins within an existing footprint or in new communities that are a strategic fit for our community banking model.

Additionally, on July 6, we announced an important investment in our wealth management business with the intent to purchase the Guardian ship services business from Northern Trust. This is a good bolt-on acquisition to a business we know well and will cement our position as a leading provider of Guardian ship services in Chicago area. We expect that transaction will close later this year. Finally, we continue to make enhancements to our digital banking experience with new features and functionality coming in the third quarter that will make it easier for consumers and businesses alike to manage their relationship online. These investments are part of our effort to build for our future, so that we can continue to deliver the exceptional experience our customers and the market expect from us. All in all, a very strong straightforward quarter with the consistent performance you have seen from us for many quarters.

Now let me return things over to Dave to give a little bit more detail on the results.

Great. Thanks, Tim. Let me start with the balance sheet. Specifically, deposit growth was approximately $2.2 billion of growth during the quarter, representing a 15% increase over the prior quarter on an annualized basis. The strong deposit growth funded continued solid second quarter loan growth of approximately $1.6 billion, representing 12% growth on an annualized basis. Yields and rates on major balance sheet categories were slightly lower with loan yields moving down 7 basis points from the prior quarter to 6.07%. This was primarily due to back book repricing of the commercial insurance premium finance portfolio and slight spread compression due to competitive market pressures. Interest-bearing deposits, which were up substantially were flat to the prior quarter at 2.74%.

I would note that the period-end loans were approximately $1.2 billion higher than the average loans for the second quarter giving us a great start to achieving higher level of average earning assets in the third quarter of 2026. Turning to the income statement results. This was again a very solid operating quarter producing another record level of quarterly net income. Net interest income improved $18.3 million compared to the first quarter of 2026. The benefit to net interest income from an increase of $2.1 billion in average earning assets, was offset by a 4 basis point decline in the net interest margin. The net interest margin was negatively impacted by 1 basis point due to 1 additional day in the quarter 2 basis points related to the back book reprice of the premium finance portfolio and 1 basis point related to other items, including mix and the spread compression that I discussed.

The result was a margin of 3.52% for the second quarter of 2026 and has ranged from 3.50% to 3.59% during the last 10 quarters, showing the sustained stability of this metric. The provision for credit losses continue to remain consistent with prior quarters staying in the $20 million to $30 million range for the sixth consecutive quarter as the overall credit environment and our asset quality has remained stable. Regarding the noninterest income and noninterest expense sections. Noninterest income totaled $141.3 million in the second quarter, which was an increase from the $134.1 million recorded in the prior quarter. The roughly $7 million increase was primarily the result of a $4 million improvement in mortgage banking revenue as the spring buying season provided a modest amount of increased purchase volume and related revenues.

Another contributing factor to the increase in this category is that the company recorded approximately $2 million of higher BOLI income, which was primarily related to higher earnings on BOLI investments that support certain deferred compensation plan [indiscernible]. And I'll note that this $2 million increase in BOLI income had a similar offsetting increase in compensation expense during the quarter. So as a result, noninterest income and net interest expense were both equally elevated for the quarter by almost $2 million. The company also recorded approximately $1.8 million more security gains in the second quarter compared to the first quarter.

The impact of the increases just noted, mortgage banking, BOLI and security gain revenue was about $8 million. These items tend to have some volatility related to market conditions and may or may not occur in the third quarter. In fact, we currently expect mortgage revenues to fall back into the low $20 million range as the home buying seasonality subsides. Noninterest expenses totaled $397.5 million in the second quarter up from the $382.6 million recorded in the prior quarter. The primary reasons for the increase other than to support the exceptional growth where salary and employee benefits expense increased by approximately $5.6 million as compared to the first quarter due primarily to the second quarter having a full effect of annual merit increases that were effective February 1, and increased commissions that support the higher mortgage production and $2 million impact from the BOLI related deferred comp expense I just discussed.

Advertising and marketing expenses increased by $7.2 million in the second quarter when compared to the prior quarter. As we've discussed many times in the past, this category of expenses tends to be higher in the second and the third quarters of the year due to expenditures related to various sports sponsorships and other summertime sponsorship events held in the communities that we serve. Offsetting the aforementioned increases was a reversal of crude FDIC assessment expense of $5.2 million related to the final true-up the special assessment previously imposed by the FDIC to pay for the 2 bank failures that occurred in 2023. The quarterly net overhead ratio improved slightly over the prior quarter, helping the company produce solid operating leverage during the second quarter and for the first half of 2026.

In summary, I'll reiterate that this was a very solid quarter and first half of the year. The company accomplished exceptional loan and deposit growth relatively stable net interest margin, another record level of net income, sustained growth in tangible book value per share and a continued low level of nonperforming assets. So with that, I'll conclude my comments and turn it over to Rich to discuss credit.

Thanks, Dave. As detailed on Slide 7 of the investor presentation, the loan growth during the second quarter was strong and broad-based with total portfolio growth of $1.6 billion or 12% annualized. Every lending segment saw positive growth during the second quarter and year-over-year loan growth was $4.6 billion or 9%. Of note, the first insurance funding portfolio grew $722 million, as mentioned during prior calls, the second quarter is typically our largest funding quarter for this business. In addition, commercial loans grew by $518 million, fueled by solid production in our asset base and leasing groups. Commercial real estate loans grew by $108 million and the Wintrust Life Finance team continued to build their portfolio by $116 million.

From a credit quality perspective, as detailed on Slide 15, we continue to see strong credit performance across the portfolio. Nonperforming loans decreased from $182.7 million or 0.34% to $179.3 million or 0.32% and remained at a very manageable level. Charge-offs for the quarter were 10 basis points, down from 14 basis points in the quarter -- in the prior quarter. The level of NPLs and charge-offs in the second quarter reflect a stable credit environment as evidenced by the chart of historical nonperforming asset levels on Slide 16 and the consistent level of our special mention and substandard loans on Slide 15.

This quarter is another example of our commitment to identify problems early and charging them down where appropriate. Our goal, as always, is to stay ahead of any credit challenges. Also, as noted in our last few earnings calls, we continue to be highly focused on our exposure to commercial real estate loans, which comprised roughly 1/4 of our total loan portfolio. As detailed on Slide 19, we continue to deliver solid performance in this portfolio during the second quarter as CRE NPLs remained at a very low level, remaining unchanged from the first quarter at 0.12% and CRE charge-offs continue to remain at historically low levels.

On Slide 25, we continue to provide enhanced detail on our CRE office exposure. Currently, this portfolio remained steady at $1.6 billion or 11.3% of our total CRE portfolio and only 2.9% of our total loan portfolio. We monitor this portfolio very closely and we continue to perform deep dive analysis on a quarterly basis. The most recent deep dive analysis showed very consistent results when compared to prior quarters.

Finally, as we have discussed on previous calls, our teams stay in very close contact with our customers, and these conversations continue to reflect a measured optimism around the business climate. That concludes my comments on lending and credit, and now I'll turn it back over to Tim.

Okay. Thank you, Rich. Just some final thoughts. With respect to the third quarter and the remainder of the year, our targets remain unchanged. We're working toward loan growth in the mid- to high single digits and deposit growth to largely fund that loan growth. The fact this quarter that we generated over $2 billion in core deposits without increasing deposit costs is evidence of our strength in the market and our ability to consistently build long-term franchise value.

As Rich mentioned, our clients continue to be cautiously optimistic. They're managing the impact of the war in the Middle East and persistent inflation relatively well. As such, our pipelines are solid across all of our loan categories. We continue to expect our net interest margin to be a few basis points either side of 350. We're very neutral in terms of rates up or down in the market. So where we land will depend on whether the competitive pricing pressures that Dave mentioned continue and to what degree. Independent of the actual margin, we expect solid net interest income growth and good operating leverage.

Finally, we expect expenses to remain well managed, solid credit performance and an increase in CET1 and our other capital ratios in the coming quarters. To sum up, we continue to feel good about our position in the market and our ability to deliver our differentiated customer experience to grow our business. We believe with the continued focus of our dedicated team, along with the sophisticated financial solutions we offer, we are well positioned to continue to deliver strong results for our shareholders for the remainder of 2026.

Latif, with that, we'll open this up to questions, please.

[Operator Instructions] Our first question comes from the line of Jon Arfstrom of RBC Capital Markets.

Tim, maybe a question for you, just to follow up in your prepared comments. You had just really strong deposit growth for the quarter. And I'm curious if there's anything you would call out in terms of what's driving that growth? And then any updates on your outlook for expected deposit pricing from here? Obviously, a good quarter. But how do you see things as we roll forward into Q3 and Q4?

Yes. You bet, John. Yes, we were obviously very pleased with the deposit growth in the quarter. We do get a little bit of municipal seasonality that, in some ways, matches the seasonality of our loan growth business in the second quarter, but very good commercial growth, which will lead to increases over time in our treasury management fees and that activity and frankly, good retail growth as well. And that's in advance of opening a number of branches in the second half of the year here that will continue to help with the deposit growth. .

I believe on the last call, we said that both the loan yields and the deposit costs were going to be relatively stable. We were very pleased that even with that growth, the deposit cost was flat. So -- all in all, a very strong deposit growth quarter. And I think we would look to not quite the same number, but strong deposit growth in the second half of the year. Pricing remains relatively rational in the market. And if anything, our position continues to improve from a competitive standpoint.

Okay. Good. And then on lending, you guys mentioned competitive pressures a couple of times, and I know we kind of went through this a few quarters ago. But just curious what you're seeing from the marketplace, the growth number is obviously very strong, but anything at all the concerns here or anything less rational in terms of the competitive environment?

Jon, this is Dave. I would say -- as I said, if you broke the margin down, maybe a basis point relates to sort of mix and competitive pressure. So it's not dramatic. We're seeing a little bit on the commercial and the commercial real estate side. And -- but it's not widespread. It's a little episodic. So there are deals that we are -- we are turning down for pricing. And we're doing the same thing on the premium finance side. We had really good growth there, $722 million of growth in the quarter, probably could have had a little bit more, but some of the larger deals on the premium finance side were just being priced off [indiscernible], and we just took passes on them. So we're going to stay disciplined on doing loans at reasonable prices and getting paid for the risk.

And even with that 12% loan growth for the quarter on an annualized basis and strong pipelines are good. So just a little bit of pressure there, but not dramatic. Again, as I said, if you broke the margin down 2 basis points, what's the back book repricing of premium finance, which those aren't tied to but correlate closely to prime. And the last prime change we had was in December of last year. So it takes a full 9 months for those to reprice through. So probably a basis point or 2 next quarter on that. But other than that, it would just be the competitive pressures that we see that we either move the margin up or down from there. But nothing dramatic, just a slight a bit.

Our next question comes from the line of Nathan Race of Piper Sandler.

Yes. Dave, I was wondering if you could kind of unpack the expense outlook a bit more for the back half of the year. You mentioned some of the adjustments around the fully that have the impact in both other fees and expenses. But just any thoughts on how you see kind of the run rate trending in the back half of the year, you get to that kind of mid-single-digit guidance that we've talked about in the past.

Yes. Well, if you adjust for the FDIC credit that we took for the assessment true-up, our expenses for the quarter would probably have been about $403 million roughly. If you factor in the good growth that we had in the second quarter and has substantial growth and then, again, expecting to grow nicely in the third quarter including the branch, some of the branches Tim talked about, you probably expect that number to go from 4 or 3 up just a little bit. So say 405 plus or minus, probably a good range. Again, you can't always predict what's going to happen with some of the market things with BOLI. So that would just sort of assume that BOLI was flat. But -- so I think if you look at that and then project that out, we're still on track to be mid-single-digit expense growth, 26 over 25. And so I think that, that target is still right on what we expected to happen.

Got you. That's really helpful. And then just going back to the trajectory for loan yields going forward. I appreciate the comments around some of the pricing pressures on the P&C side of things that impacted the 2Q loan yields. But just generally, maybe outside of P&C, which can be seasonal in 2Q -- any thoughts on just in terms of kind of the blended rate on new loan production these days when you strip out insurance for your finance.

Yes. Well, I said overarching, I would say we probably still expect 1 or 2 basis point impact to the margin from the premium finance back book in the third quarter, and then we're done with that. We're through with the back book reprice. So -- if you take that into account and there's 1 day impact that we had this quarter, which is a basis point, we'll have that again next quarter. So if you take that and put everything else aside, you're probably right at a $3.50 margin roughly, and then it will just depend on competitive pricing up or down. But we still think the incremental difference between what the incremental deposit pricing and loan pricing is in total. -- is roughly a $3.50 margin. So we think we can hold that with incremental pricing on both the side and maintain a margin that is plus or minus a few basis points. And really, that will depend on mix and competitive pressures. But right now, we would think we can still hold that like we've been talking about.

Okay. Great. If I could just sneak 1 last 1 in for Tim. Just on M&A. There's some increased chatter these days in the market. And we've seen some continued trickle of small bank deals across the region. So just curious kind of what you're seeing in terms of some additional bite-sized acquisition opportunities consistent with what we've seen in the past from you guys? And just any thoughts on anything more transformational or larger in terms of what those conversations may or may not be trending along these days?

Yes, Nate, I think your summary was sort of right. I mean, the deals that we've seen so far have been sort of smaller, including in our market. We continue to stay in touch with people, as you would expect. And again, in addition to the wealth-related deal we did this quarter, we would look for opportunities, but we would continue to be very disciplined. And as you know, good strategic good cultural fit. And I would still characterize the M&A conversations as exploratory at this point.

Okay. Great. I appreciate all the color. .

Next question comes from the line of Jeff Rulis of D.A. Davidson.

Just checking back in on the loan growth. It sounded like ended the first quarter with some momentum and it sounds like that's sort of the period end in the second quarter kind of surged as well. I guess -- looking into the second half, kind of stick into that guidance, I guess, is it simply visibility to kind of stay within the mid- to high single-digit range? Or anything I guess what takes place for you to kind of exceed the -- or be at the high end for the full year from what you see?

Well, I think we've been pretty consistent recently and probably over the last few years, say, mid- to high single digits is generally what we've been producing given the diversified nature of the portfolio, excluding the second quarter where it is outsized a little bit for premium finance. So we still feel comfortable with the pipelines where they're at, and it really is -- it will just sort of depend on customer preferences. You could potentially see if the mortgage market get better, the mortgage warehouse could go up, you could have less paydowns on CRE for those fluctuate a couple of hundred million either direction per quarter, just very nuanced changes. But Yes, I would say this was a broad base, as Rich said, this was a broad-based growth quarter. Every major category was up a little bit. And the customers are feeling pretty good. So we still think that mid- to high single digits is a really good target. And we'll see how it flows from just customer timing as far as closing on these deals. But we expect both the third and the fourth quarters to be in that range right now. And I can't tell you anything specific that would change it other than if the mortgage market heated up, we'd probably get a little bit more in mortgage warehouse, but the rest of them is just blocking and tackling and taking advantage of our market position in Chicago and West Michigan and Southeast Wisconsin, which is fantastic, and we'll just keep doing what we're doing.

Sounds encouraging. One last 1 just on expenses again. But within the advertising, marketing, understanding the seasonality, the leg up, is there any more that you're leaning into that line? Or would that -- for the full year growth for the advertising marketing still align with the overall expense growth? Is that kind of mid-single digit for that line? Or is it something a little heavier than that? And and maybe you've got other leverage in other lines.

Well, usually, the second and third quarters, as we said, are elevated due to the sports sponsorships with some of the major league teams. So unless they all go to the World Series this year, and it leaks into the fourth quarter, we would expect that to trend down a little bit in the fourth quarter. As you can look at 2025 and probably get the sort of the the magnitude of the changes from quarter-to-quarter in the marketing line. But that seasonality has been that way for a number of years. .

Right. I guess I'm trying to exclude that seasonality for the full year, are you looking for that line item to be kind of mid- or high single-digit growth knowing that you're going to back down at the end of the year?

Yes, this is Tim. Sorry. Probably, but we do have a number of new brand open openings, and we've been very successful in growing the new branches. And so will support with marketing dollars, the entry into those markets. But the overall expense guidelines that Dave gave include those branch expenses. So we're having a lot of success in the market right now, and we're going to press that advantage. And if we need to spend marketing dollars to do that, we will. But we're adding clients right now. We're winning business. We believe we're adding share. And so there's no reason not to continue to be aggressive on that front. .

Our next question comes from the line of Jared Shaw of Barclays.

I guess maybe going back to the deposits. Any -- could you give us an update on what the end-of-period cost of deposits was going into third quarter?

Yes. The cost of deposits was flat as we said, with the first quarter and end of period was roughly flat, too. So we're steady as she goes. Even with that 15% growth during the quarter, we held them fairly steady. So end of period was basically where the average was for the period. .

Okay. And then how should we think about the DDA growth in third quarter off of sort of looking at that delta between average and then the period anything to call out there? Was that some of the impact from the muni trends that you were talking about?

No, I don't think too much related to the municipal deposits. As you suggest, I think looking at the averages makes sense. I think on an average basis, we were up $300 million in DDA deposits for the quarter. And -- if you look at the past year, the mix has stayed kind of 19.3%, 19.4%, 19.5% in terms of percentage of total deposits as we've grown total deposits pretty significantly. So we're pretty happy with that, and it's just kind of steady growth as we move forward. And obviously, we're trying to win checking accounts and households every day. So the average is the right way to look at it. .

Okay. All right. And then on the Northern Trust deal, any color you can share with us on how we should think about modeling the fee in expenses going forward from that?

Yes. Jared, I mean we -- you can appreciate, we're between announcement and closing here. And so there really isn't much more we can say other than what was in the press release. So I would sort of aim you back there. It's a modest-sized, nice bolt-on for us.

Our next question comes from the line of Chris McGratty of KBW.

Dave or Tim, you mentioned in your prepared remarks, just the expectation for CET1 to continue to grow even with the balance sheet expectations to grow. Does that at all when you -- especially with Basel III reform to consider layering in buybacks into the narrative.

Yes, Chris, I mean, I think it may. Just to give everybody a background, the CET1 was 10.4% this quarter, and that's flat given obviously the very substantial growth in the balance sheet. We feel very comfortable with that capital level given our risk profile. And as I suggested, we think that ratio will go up in the third and fourth quarters, and then we'll see what happens with respect to any rule changes. But I think we're closer to the point where we'll be discussing what we do with excess capital. And maybe just to head off the kind of part B of that question, our preference would be to continue to use that capital to invest in our business and grow loans.

We certainly would look at appropriate acquisitions if they were a good fit and further down the chain, you get buybacks and/or kind of repayment of some debt and followed by dividends. So the good news is I think we're going to have some flexibility on that front going forward.

Okay. Great. And then I guess a follow-up, just more of a modeling true-up. The -- any reason why earning assets won't grow at the same rate as loans? And then second, Dave, any outlook on the tax rate?

Yes. Well, the tax rate first quarter is usually a little bit lower and the second quarter was more normal. So the second quarter tax rate, 26.5% is a pretty good estimate for that. And I'd expect earning assets to grow similar to loan growth. We usually try to match deposit growth to loan growth. And so I would think your earning asset growth would polysuit there. This quarter, we've outperformed a little bit on the deposit growth over loan growth. But as Tim said, we're really happy to grow the franchise and bring in those new clients. So that's a good thing. But I would expect loans, deposits, earning assets, all to be very similar growth rates.

Our next question comes from the line of Casey Haire of Autonomous.

Sorry to beat a dead horse, but another NIM question. Apologies if I missed this, but the spot loan yields at June 30 and then new money bond yields, that's been a very nice story for you guys over the last year. I'm just wondering if that could continue on where new money is coming in on the bond book.

Yes. Well, again, we expect loan and deposit rates to be relatively flat other than the basis point or 2 compression from the premium finance commercial back book repricing -- and then it'll just depend as we said, on competitive pressure. So spot rates on everything are pretty close to where we're at on this, and mix could change, obviously, depending on which the asset class comes in.

But again, we're very neutral, we think, on the margin and plus or minus a few basis points from 350. And if you have mid- to high single-digit loan and deposit growth, we think we grow NII mid- to high single digits. So we think that's a really good story, a very consistent story, and we think we can perform to that.

Okay. Great. And on the bond side of things, new money loan yields on the bond book.

We don't have that much runoff. We do a lot of Ginnie Mae, Fannie Mae sort of mortgage-backed products. So a few hundred million of cash flow off of that quarter, plus anything that maybe we invest from the growth. But -- those are around 5%-ish.

Okay. Very good. And just last one for me. So look, the deposit costs have been great. Obviously, you're taking advantage of your your position as kind of the last bank standing in Chicago. Just wondering with Chase as the #1 in your market and their Smart Cash product obviously, not seeing any impact today, but are your clients asking for this? Like what sort of dynamics that you're seeing playing out in the Chicago market?

Yes. I mean as you all know, we're third in share in the Chicago market. And over the last couple of years have continued to grow that nicely. I think we expect that to continue and the cash sorting, AI, new product introductions are something we deal with every day. And the impact so far has been modest. We're certainly watching those types of developments and we'll react accordingly. But nothing significant yet.

Our next question comes from the line of David Chiaverini of Jefferies.

I had a follow-up on the competitive environment. Would you say that is your sense that the competitive pressure in premium finance and CRE is transitory? Or could it be more lasting? And then as a follow-up to that, how would you rate the intensity of the competitive environment. Is this an 8 out of 10 on the intensity scale?

This is Rich Murphy. I don't know how you would raise it on the intensity scale. I think we've always been in a pretty competitive market as it relates to good quality assets. So I don't think things are all that different. But there is definitely -- I would point to you noted it CRE -- fully funded CRE deals of good quality. There is definitely a lot of competition out there. Obviously, in the C&I space, those deals that come with a lot of deposits are very, very competitive. We feel though that we're going to be aggressive because we want to win market share. But I think we also have historically shown a lot of discipline to get things priced right. We think we offer a good value proposition and we are going to compete hard. But when things get a little too aggressive, whether that's on your scale of 8 or 9 or 10, we will step away. But as of this point, we still see a lot of deals. Our pipelines are full. It is different from a year ago. There's no doubt about that. But it's still, I think, we compete very effectively in the space we're in right now. So a sharp [indiscernible], but we're winning more than we're losing.

Very helpful color. And then shifting over to the branch openings. Can you remind us of the plans there, the number of branches per year for the next couple of years? And any early read as to how those new branches are performing?

Sure. At least to a degree, we don't kind of forecast out several years on the branch activity. But obviously, the 3 that I mentioned in my comments, plus several more this year, including the 3 in Northwest Indiana. And I would tell you, frankly, we're pretty good at this. We recently as a branch in a community that we weren't in from an organization elected to close it. And in just a little bit over 90 days, we've got $70 million in deposits. And -- the communities that we're going into are largely attractive communities to us. And so I feel very comfortable we're going to be growing nicely in terms of those new branches.

But -- we haven't done really other than Macatawa now 2 years ago in the acquisition. So this organic growth opportunity is what the market's given us right now.

Our next question comes from the line of Timur Braziler of UBS.

I guess as you're thinking about funding future loan growth, in terms of that deposit mix for future funding, is that expectation to change at all going forward? Or are you still expecting kind of broader deposit growth? I guess I'm trying to get at the ability to continue growing DDAs in this environment? Or maybe we're going to see more of that growth being funded by higher costing funding products.

Well, as Dave said, we expect to continue to grow deposits. And with respect to mix, the challenge for us is we tend to outperform the market in terms of our deposit growth. And so -- if that happens, we'd like to keep DDA at 19% to 20% in terms of the mix. Just hard to say how much we're going to have to grow. But we like growing deposits. We like adding clients. We think that grow the value of the franchise. And so we're happy to take that deposit growth. And we'll see what the market gives us. But again, $2 billion-plus worth of deposit growth with no change in deposit cost in our minds was very good performance in the quarter. .

Yes. No, absolutely. And I guess, to that point, SP247054559 The fact that deposit costs were flat in this environment. It sounds like that 350 margin expectation kind of furthers that flat deposit trajectory from a cost standpoint? Is that the way we should be thinking about it as margins 350 as long as those deposit costs could be kept flat?

Yes, plus or minus a couple of basis points, but yes. .

Okay. Great. And then just last for me. It looks like you added a couple of fixed-rate swaps here that started in June with some higher swap rates I guess, has this gone to offset some of the lower yielding swaps that are already in place for this year and next? And I guess, as you look at the current contribution from the derivatives book here, is it still pretty neutral? Or is it leaning maybe 1 direction or another?

Well, the last part of the -- this is Dave. The last part of the question, it's a 1 basis point positive impact to us for this quarter. So fairly neutral we did add some swaps during the quarter. As we said before, we're trying to add on to the swap position to cover those that are going to mature off. But if you notice those swaps during the quarter, the strike rates were rates were actually higher than what the 1-month SOFR rate was. So for example, 1 of them had a strike rate of 4%. So that was in the money. We typically did a 1-year forward start and then went 4 or 5 years. But since these were in the money, we decided to put them as an immediate start and just get a slight benefit from for the first year. But we're just really -- we're not trying to add to the swap portfolio in total generally. We're just trained to fill out with the later years as some of these mature off and probably keep around a $6 billion plus or minus a notional value in that portfolio. .

Question [indiscernible] line of Janet Lee.

For Premium Finance, since like the property insurance premiums industry-wide seems to be flattening out a bit and you mentioned some competitive pressure. Does that change your outlook on the growth trajectory of premium finance business, like what kind of growth should we forecast for 2026 or '27?

Yes. The -- well, this is Dave. There are pressures on the property side. That's the softest part of the market, and we are seeing those rates down and particularly condo rates in Florida there's a lot of softening there. Those run up really high and now they've sort of come back down. But you are also seeing other professional coverages besides property that are up a little bit. So we sort of think of the aggregate of the portfolio of loans. If you put in the property coverage, the casualty and the liability coverages to be roughly flat to maybe up just very low single-digit basis points or single percentage increases. So -- we also then are growing units that we believe we're growing units year-over-year. So we would expect premium finance year-over-year and taking the seasonality out of the equation, first quarter, second quarter service seasonality to grow low single digits right now. So we still like the business. It's still out there. We're still competitive. It's just there's a few of the competitors that will chase the larger deals out there and price them way down and but we're just not going to chase what we consider to be irrational pricing there. But that's not the majority of the book. It's just a little bit of the book that we away from. So we would still expect growth there to be in the low single digits year-over-year. .

Got it. All other questions have been asked and answered.

Thank you. Our next question comes from the line of Ben Gerlinger of Citi.

Great deposit growth quarter, especially the pace all pretty much in 1 majority I get that you guys have the branches that you're expecting to build Northwest and mean to front run the bars. When you think about or just like kind of commercial deposits or silos and deposits that really aren't associated like the bricks and sticks branches. Is there anything on that? Because I mean, I get billets is good. It's just kind of here and there. I don't know how much that's going to really impact the broader balance sheet because it's considerably larger than you were a decade ago?

Yes. I mean it's a good question, Brandon. And I guess what I would point to is if you look at the loan growth, particularly C&I loan growth in some of the other verticals when we win business in those categories, we expect those customers to bring us deposits. And so as you see commercial loan growth and you see loan growth in some of our niches like the ESOP business and our construction business we're winning treasury management service fee income. We're asking for deposits. And so as you say, we're bigger. And so to show good deposit growth, as we have done regularly, we need deposit growth across the board, including the commercial sectors. And so that's built in the branches, as you say, will be more retail and small business. But they do increase our presence in Northwest Indiana, and that makes a difference with some of the commercial entities as well. .

Got you. That's helpful. And then when you think about the hiring effort like -- can you think about like LPOs or anything beyond Chicago or kind of touching like Michigan, could you think other larger MSAs within the Midwest?

Well, we do have a small number of people in other markets that is sort of our way to start to penetrate those markets. And West Michigan was an example. We had a lot of business in West Michigan before we made the Macatawa purchase. And I think we're competitive in some of the other Midwestern cities where we don't yet have a footprint. And we'll continue to do that. And when it makes sense, we'll add physical footprint, which kind of is the next leg of the stool. So -- we've done that in Rockford. We did that in West Michigan. There are other markets we can do that in coming up.

Next question comes from the line of Brandon Rud of Stephens Inc.

So most of my questions have been already been answered. Maybe just 1 more on the expenses. I noticed the step-up in software and equipment in the quarter. Is that related to the digital banking investments that you mentioned, Tim, and is that a good run rate that's $39 million to look at on a go-forward basis?

Yes. We're investing in technology as all institutions are. And so whether it's cybersecurity or whether it's customer feature functionality, that's a line where you're likely to see more growth than others. And so I think you should expect some upward trajectory in that expense, but it's really across the board, better data management, the early phases of AI, the customer feature functionality, we're delivering cyber. So it's sort of all sorts of stuff in that bucket. .

Perfect. And then maybe just 1 on credit. I know the 1 at the bottom left of Page 18, there is a bit of a step-up in the allowance on the commercial portfolio. I'm just wondering, is that -- is that a change in macro assumptions? Or is there a particular loan category that drove that increase?

No, it would be the more macro assumptions. There's nothing specific out there that's driving any change in those factors. .

Our next question comes from the line of Daniel Tamayo of Raymond James.

Maybe just taking a step back here. So just kind of looking at your history here, it looks like long history of efficiency ratio really trending down, and you're at a point now where I'm not sure you've been before in the kind of low to mid-50s. You talked about positive operating leverage this year, but just curious your thoughts with the margin relatively stable in this range, your ability to continue to drive that operating leverage going forward? Or where you think it might start to stabilize?

Yes. I mean, we're targeting continued operating leverage. And as we start to work on 2027, that will be part of our target as well. And -- so we hope there are scale benefits with some of the investments that we're making. And so kind of built into the expectations for our teams. We're going to add clients, and we're going to continue to win business in kind of a well-positioned market. And so that would be our expectation.

Tim. And then maybe one qualitative one for you also on the -- just on the M&A environment. I appreciate your commentary on you're at the exploratory stages, but you guys are kind of well known as a buyer in the region. Just curious your view on, given the run-up we've had in stock prices, what that's done to seller expectations, any conversations you've had.

Well, I can't speak to any specific conversations, but in some way, I think it's helped. People are always cautious about exploring alternatives when their stock price is perceived to be low and so as long as our performance and our securities move up relative to others, there's not a huge change. It's just that somebody feels like they're getting a better price. So I -- the math is the math. And I know there are a lot of social and emotional factors that go into any transaction. But I think in general, it's probably a little helpful. .

Thank you. I would now like to turn the conference back to Tim Crane for closing remarks. Sir?

Yes. Thanks, Latif. For everybody, good questions. We certainly understand why you ask what you do, and we appreciate your interest. I would leave you with this. This was a really strong quarter, once again creating value for our shareholders. We continue to deliver on our 3 priorities, which keeps our team focused on delivering strong results. And over the last several quarters, we've consistently outperformed peers without compromising our credit standards or our commitment to clients and our communities. We believe we're well positioned for the second half of the year and quite frankly, well positioned for time periods beyond that. So I hope everybody is enjoying the summer and thank you for joining us and for your interest today. Have a great day.

Thank you for participating. You may now disconnect. This concludes today's conference call.

Welcome to Wintrust Financial Corporation's First Quarter 2026 Earnings Conference Call. A review of the results will be made by Tim Crane, President and Chief Executive Officer; David Dykstra, Vice Chairman and Chief Operating Officer; and Richard Murphy, Vice Chairman and Chief Lending Officer. As part of their reviews, the presenters may make reference to both earnings press release and the earnings release presentation. Following their presentations, there will be a formal question-and-answer session.

During the course of today's call, Wintrust management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements. Actual results could differ materially from the results anticipated or projected in any such forward-looking statements. The company's forward-looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the company's most recent Form 10-K.

Also, our remarks may reference certain non-GAAP financial measures. Our earnings press release and earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure. As a reminder, this conference call is being recorded.

I will now turn the conference call over to Mr. Tim Crane.

Good morning, and thank you for joining us for Wintrust's First Quarter 2026 Earnings Call. In addition to the introductions that Latif made, I'm joined by our Chief Financial Officer, Dave Stoehr, our Chief Legal Officer, Kate Boege.

We'll follow our usual format this morning. I'll begin with a few highlights. Dave Dykstra will review the financial results. Rich will share some thoughts on loan activity and credit quality. And I'll be back with some closing thoughts, including a look at expectations for the second quarter and generally for the remainder of the year. As always, we'll be happy to take your questions.

Before we begin, I would like to bring your attention to some changes to the presentation document that accompanies the release of our results. We've modified the design, making some updates to how we present the data based on valuable feedback we've received from many of you. We hope you find the format helpful and informative as we continue to try and provide clear information that highlights our strong market position and our disciplined operating approach.

Looking at the first quarter 2026 results, I'm very pleased that we delivered a fifth consecutive quarter of record net income. Overall, it was a very solid and straightforward quarter. We continue to focus on our strategic priorities of providing an exceptional customer experience, delivering disciplined and strategic growth across our businesses with a focus on prudent risk management and investing to build upon our foundation to drive a successful future. That said, despite 2 fewer days in the quarter, we achieved net income of $227 million, up from $223 million last quarter and $189 million in the first quarter of 2025.

While Dave and Rich will provide more detail, in summary, net interest income, net interest margin and both loan and deposit growth were in line with our expectations. We delivered solid growth in noninterest income, led by our Wealth Management business. Expenses were well managed and credit quality remained stable.

I would highlight that all of our growth is organic. We continue to see good new customer acquisition and market momentum as our clients appreciate our differentiated approach and relentless focus on customer service. In fact, during the quarter, we were recognized once again by J.D. Power for Illinois banking services and by Coalition Greenwich with multiple awards for our commercial middle market banking services. These awards are evidence of our continued success in delivering for our clients in ways that many of our competitors cannot. Overall, a solid quarter.

Let me turn it over to Dave.

Great. Thanks, Tim. Let me start with the balance sheet. Specifically, deposit growth was right at $1.2 billion during the quarter, representing an 8% increase over the prior quarter on an annualized basis. This deposit growth helped to fund continued solid first quarter loan growth of approximately $1 billion, representing a 7% growth rate on an annualized basis.

Yields and rates on the major balance sheet categories were slightly lower because of the recent market declines in short-term interest rates with loan yields moving down 13 basis points in the first quarter from the prior quarter while interest-bearing deposit costs declined 16 basis points from the prior quarter, thus resulting in a slightly improved growth spread.

I'd like to note that loan growth during the quarter was heavily back-end loaded and accordingly, period-end loans are approximately $1.2 billion higher than average loans for the first quarter. That's giving us a great start on achieving higher average earning assets in the second quarter of 2026.

Turning to the income statement. This was a very solid operating quarter producing record levels of quarterly net income. Net interest income declined slightly compared to the fourth quarter of 2025. The benefit to net interest income from an increase of $555 million in average earning asset growth and a 2 basis point increase in the net interest margin was almost enough to offset having 2 fewer days in the quarter.

The net interest margin was 3.56% for the first quarter and the 2 fewer days in the quarter positively impacted net interest margin by 2 basis points. The net interest margin has ranged from 3.50% to 3.59% during the last 9 quarters, exhibiting sustained stability of our net interest margin. The provision for credit losses was relatively consistent with prior quarters remaining in the $20 million to $30 million range experienced in all the quarterly periods of 2025 as the overall credit environment, our asset quality has remained stable as we enter 2026.

Regarding other noninterest income and noninterest expense sections. Total noninterest income amounted to $134.1 million in the first quarter which was an increase from the $130.4 million recorded in the prior quarter. The increase was primarily a result of strong wealth management and operating lease revenues.

Mortgage banking activity continued to be subdued and production-related volumes and revenue were essentially unchanged from the prior quarter. As to noninterest expense categories, total noninterest expenses were $382.6 million in the first quarter, which was slightly lower than the $384.5 million recorded in the prior quarter.

Increases in salaries and employee benefits were primarily due to annual merit increases that were offset by lower OREO expenses, travel and entertainment and various other small expense decreases. Overall, expenses were very well controlled Additionally, both the quarterly net overhead ratio and efficiency ratio improved slightly relative to the prior quarter.

In summary, I'll reiterate this was a very solid quarter. The company accomplished good loan and deposit growth, a stable net interest margin a record level of net income, sustained growth in tangible book value per share and a continued low level of nonperforming assets.

So with that, I'll conclude my comments and turn it over to Rich Murphy to discuss credit.

Thanks, Dave. As detailed on Slide 6 of the investor presentation, the solid loan growth of approximately $966 million or 7% on an annualized basis, was broad-based. Commercial loans grew by $719 million, including growth in mortgage warehouse of approximately $286 million. Commercial real estate loans grew by $222 million. The Wintrust Life Finance team continued to build their portfolio by $173 million, and our residential mortgage group also had a very solid quarter.

From a credit quality perspective, as detailed on Slide 14, we continue to see strong credit performance across the portfolio. This can be seen in a number of metrics. Nonperforming loans decreased slightly from $185.8 million or 0.35% of total loans to 182.8% -- $182.8 million or 34% of total loans and remain at very manageable levels. Charge-offs for the quarter were 14 basis points, down from 17 basis points in the prior quarter.

We believe that the level of NPLs and charge-offs in the first quarter reflect a stable credit environment as evidenced by the chart of historical nonperforming asset levels on Slide 15 and the consistent level of our special mention and substandard loans on Slide 14. This quarter is another example of our commitment to identify problems early and charging them down where appropriate. Our goal is always is to stay ahead of any credit challenges.

Turning to Slide 21. I want to briefly highlight our exposure to nondepository financial institutions, which totals approximately $3.2 billion or about 6% of our overall loan portfolio. Importantly, the majority of this exposure is in areas where we have long-standing experience and strong performance. Of our $3.2 billion exposure, approximately $1.8 billion is tied to our mortgage warehouse business. a line of business we've been into for over 30 years with deep client relationships, robust operating systems and well-established risk management practices.

In addition, about $341 million consists of capital call facilities which are structured with strong underlying investor support and have historically demonstrated very favorable credit characteristics. The balance of the portfolio is broadly diversified across a granular group of relationships with leasing companies, captive finance companies associated with commercial borrowers, insurance carriers and broker-dealers. Overall, we view this portfolio is well diversified and aligned with our disciplined approach to specialty finance focused on areas where we have expertise, strong structures and a track record of consistent performance.

Also, as noted in the last few earnings calls, we continue to be highly focused on our exposure to commercial real estate loans, which comprise roughly 1/4 of our total loan portfolio. As detailed on Slide 18, we continue to see signs of stabilization during the first quarter as CRE NPLs remained at very low levels, decreasing from 0.18% to 0.12%. The and CRE charge-offs continue to remain at historically low levels.

On Slide 24, we continue to provide enhanced detail on our CRE office exposure. Currently, this portfolio remains steady at $1.7 billion or 11.7% of our total CRE portfolio and only 3.1% of our total loan portfolio. We monitor this portfolio very closely, and we will continue to perform deep dive analysis on a quarterly basis. The most recent deep dive analysis showed very consistent results when compared to prior quarters. Finally, as we have discussed on previous calls, our team stayed very close contact with our customers, and those conversations continue to reflect measured optimism around the business climate.

That concludes my comments on credit, and I'll turn it back to Tim.

Great. Thank you, Rich. At the beginning of the call, I briefly mentioned our 3 strategic priorities: delivering an exceptional customer service generating disciplined and strategic growth across our businesses with prudent risk management, and I would add through all market cycles and investing in our foundation and the future of our bank. I want to spend just 1 minute on the first one.

Whether high tech or high touch, we offer a more personalized level of service than our larger bank or money center bank competitors. And relative to our smaller competitors, we offer more tools and sophistication to meet their needs. As a result, we occupy a unique and advantaged position in what we believe to be attractive markets and in attractive businesses.

In the second half of the year, we will open several branches to continue to expand market share and to build franchise value in key communities. We'll also supplement that with combined continued investment in the digital capabilities that provide flexibility and convenience for our customers. For us, it's all about the customer, and this unwavering focus is largely what has led to the consistent results we have delivered.

So what does this mean for the second quarter and to a degree for the remainder of the year? We expect outsized loan growth in the second quarter largely from our property and casualty premium finance business, which is seasonally very strong in Q2. Longer term, our pipelines are solid, and we expect to deliver mid- to high single-digit loan growth for the remainder of the year. Combined with the stable margin Dave mentioned earlier at around 3.5%, we expect solid net interest income growth in the coming quarters.

As always, we will work hard to fund our loan growth with a similar level of deposit growth, expanding our base of deposit clients and building franchise value. Expenses will be seasonally higher in Q2 as a result of a full quarter of annual salary increases, increased marketing expense, and you can expect a normalized tax rate for the remainder of the year. That said, we expect overall expenses will be well managed in line with our revenue growth and will result in operating leverage for the year.

With respect to capital, we have reviewed the new proposal. With the proposed standardized approach, we estimate an approximate 6% to 7% reduction in risk-weighted assets or said differently about a 60 to 70 basis point improvement in CET1, if adopted in their present form. We're evaluating the Urba approach, which is a bit more involved and requires some assumptions at this point. If it turns out to be more beneficial, it would likely be a result of the treatment on investment-grade loans and some of the retail activity. Overall, we feel good about our momentum and believe we are well positioned for the remainder of 2026.

One final note. I'd like to take a moment to thank 2 of our long-standing board members who will conclude their service at our annual meeting next month. Pat Hackett joined our board in 2008 and has served as Chairman of the Board for the past 9 years, and Bill Doyle, who joined the Board in 2017. Both Pat and Bill have provided invaluable guidance over the years, and we are grateful for all they have done to help us deliver value for our shareholders.

I also want to congratulate Brian Kenney who is expected to succeed Pat as Chairman pending his reelection at the upcoming annual meeting. We are very fortunate to have an engaged and thoughtful group of directors. Their perspective and insights are helpful to me and our entire management team and are certainly a big part of our success.

With that, Latif, we're happy to take questions.

[Operator Instructions] Our first question comes from the line of Jon Arfstrom of RBC Capital Markets.

Maybe Rich or Tim, a question for you on the perm loan growth that you talked about the period end being higher than average. Anything you would call out in terms of the trends from early in the quarter versus the period end strength? And then any impacts you've seen at all from some of the macro uncertainty in terms of the pipelines?

No. We had some payoffs at the first part of the year that kind of subdued some of that growth. I mean it was just kind of timing, nothing more than that. Good momentum really through the quarter. We did have some strong warehouse line growth right at the end of the quarter that helped as well. But I wouldn't say anything really atypical that I would point to just kind of timing on prepayments and some end of quarter warehouse line growth. And as it relates to overall sentiment out there, I think that we still feel pretty good.

The customers we talk to, I'd say, feel that the economy, certainly in the Midwest still feels pretty good. As Tim pointed this out, we're having our pipelines in the C&I space right now are probably as good as they've ever been. Part of that is because of some of that optimism. Part of it is just because where we sit relative to the competition in Chicago. So right now, it feels like we're in a pretty good spot there.

Okay. Good. And then maybe for you, Dave, on mortgage, it's probably the quarter to ask about mortgage given some of the typical seasonalities, but I think it was a little better than I expected. And just curious what kind of an outlook you have for the typical seasonal increase in volumes? And then, I guess, warehouse balances as well, some of the puts and takes.

Yes. I guess I'd say it was a little bit better first quarter than maybe we'd expect, as you said, because during part of the quarter, rates got down below 6% for just a little bit of time. So there was a period there where applications did pick up. But then rates pop back up and really applications came down to sort of scraping the bottom again. So I think for 3 years now, I said I've been hopeful about a good spring buying season, and we are hopeful again this year. But given our rates that we aren't seeing a huge pickup yet. But hopefully, as we get into the spring season here, that does pick up.

But again, I think we think that rates have to get down around 6% or below for there to be any meaningful pickup. So barring that, I think we probably stick with our revenue in the $20 million to $30 million range as we've been fairly consistently for a number of quarters here. And if you remember, half of that is servicing income. So mortgage warehouse. Again, I think that's going to just be dependent upon rates. If we see the rate tenure come down and mortgage rates get close to 6%, and I think we do pretty well in that regard. If they stay up in the mid-6s as far as mortgage rates go, it's probably again subdued on that front also.

Yes. I would only add on the mortgage warehouse. Our growth is a little larger there than it is mortgage in general because we've taken share from some of our competitors and continue to do a nice job of adding very high-quality mortgage originators generally on the larger side.

Our next question comes from the line of Nathan Race of Piper Sandler.

Tim, going back to your comments around the insurance refinance portfolio and the outsized growth that you expect here in 2Q as we've discussed in the past. I mean, overall loan growth was, I think, 19% in the quarter annualized in the second quarter of last year led by the P&C portfolio. I guess I'm just curious, are you seeing any softening in volumes just given what's going on in the P&C market these days and also kind of what you're seeing within pricing as well within that book.

Yes. And Rich can help me here. But we don't have as much tailwind as we've had from premium growth in prior years. I think premiums are pretty flat to maybe up slightly as opposed to up quite a bit in prior periods. So that will play a little bit of a role. But we continue to grow units, which is encouraging for the growth of our business. I think pricing is fairly rational in that market. As we've talked about in the past, a lot of these are smaller loans where clients, frankly, are just managing their cash flow. And so small differences in rate tend not to move that very much. And so we continue to expect a good second quarter from a volume standpoint and pricing is rational.

Yes. The only thing I would add is we've made a significant investment in the technology associated with that business. And I think that, as Tim pointed out, the volume that you see is reflective of that. I think that for our customers, they really do see us as the go-to provider in that space. And so we're just going to continue to do that. The overall market can move up or down. Our job is just to provide -- be the premier provider in that space, and it continues to as Tim pointed out, show in the numbers.

Okay. Great. That's helpful. And then a question for Dave. Maybe -- curious if you can help us just in terms of kind of a guidepost in terms of a starting point for expenses in light of the seasonality and the full quarter impact of the increases that you mentioned within the comp line for the second quarter? And if you're still kind of thinking about annualizing the 4Q expense number from last year and layer on some mid-single-digit growth to get to the full year number for 2026?

Yes. The first quarter tends to be a low expense core. I think the last 3 years now, we've seen it actually dip a little bit from the fourth quarter. So that trend is consistent with what we've seen in the last couple of years. And I'd say our outlook is still -- I guess the way I'll frame it is mid-single-digit year-over-year expense growth. which means, as you know, we generally have a pickup in the second quarter and the third quarter because of the advertising and marketing spend that we have for baseball sponsorships and summertime sponsorships and the like.

And we also generally have a little bit higher base salaries because we get a full quarter of the base salary increases going into effect February 1 versus 2 months. And then TME is generally seasonally low in the first quarter, so you'd expect a little increase there. So I would say, if you looked at the increases from the prior few years' quarters and looked at that directionally, I think you can look at that as a guide to what to expect as far as overall expense growth going into the second quarter here. But overall, we still expect sort of mid-single-digit year-over-year expense growth of '26 versus '25.

Okay. Great. If I could just sneak one last one in on the margin. It seems like you guys have kind of outperformed kind of the expectations within the last couple of quarters and imagine with some of the swaps and colleges have rolling off this year, there may not be a need or an appetite to replace some of those.

So I'm just curious, they're kind of thinking about kind of can the margin grind higher, you think from here as long as the Fed remains on pause, particularly with some of the hedges rolling off and just given the more rational deposit pricing competition in Chicago these days and I imagine new loan production is probably accretive to the portfolio yield of, call it, 6.14% come out of the quarter.

Yes, I think our view on it is, like we said before, we think we're fairly neutral on the margin now, even if rates go up 1x or 2x or down 1x or 2x, we really feel we're fairly neutral. You'll notice in the deck, we added 3 new swaps during the quarter with swap rates ranging in the mid-3 range happened to the 360s. So they're actually very close to what the 1-month of is right now. So we continue to replace the swaps out into the future. because we do think that managing the margin to try to stay neutral in the 350s range is still prudent.

So we believe we'll stay there. We actually think probably loans are coming on in the low 6% range and deposits will be relatively flat, too. So we just -- we think we sort of hold the yields and the rates right now and hold the margin relatively flat in the 350s range going forward. And remember, this quarter had 2 basis points of benefit from the day count. So you'll get 1 of those back next quarter because you have 1 more day in the quarter. But very neutral, very flat, and we're trying to maintain that.

Understood. And just to clarify, Dave, you mentioned kind of incremental deposit growth these days is kind of neutral to your all-in and interest-bearing deposit costs. Is that what you're alluding to?

Yes. I would think that the loan rates and the deposit rates will be relatively consistent next quarter, barring some move by the Fed in our market rates.

Our next question comes from the line of Janet Lee of TD Cowen.

So not only is your period-end loans, almost $1.2 billion above your average for the quarter, but your period-end noninterest-bearing deposits is also $1.1 billion above the average. I would assume a lot of that is you're just taking market share with your service as a differentiator, but I wanted to see if there's any adjustments that should be happening in the second quarter? Or is that a good run rate heading into the second quarter?

Yes. Janet, a couple of things there. One, you're correct. We think we continue to win business in the market and grow our deposit base. End of year is a little bit lumpy with respect to noninterest-bearing deposits. And I think the better way to look at that is probably to look at the average noninterest-bearing deposits over the period. It will continue to move around a little bit. But we had a very nice quarter end and continue to look to build the deposit franchise at the bank.

Got it. And for -- so your net interest margin in the 3.5 handle for the rest of the 3 quarters in 2026. Your second quarter NII should be it should benefit a lot from that strength and period-end balances. It seems to me that double-digit kind of NII growth in 2026 is not unrealistic. Am I -- is there anything that I'm missing here? And would you still be looking for that mid-single-digit kind of growth in expense if that were to be the case? How should we think about the level of PL that you want to achieve for the year?

Yes. Well, I don't -- if we have a stronger loan growth, for instance, I don't think we're going to have a significant increase in our expenses. I think we have an infrastructure that can handle that. And you're right that the second quarter will be a very strong quarter because of the seasonality of the premium finance loans. Generally, that's sort of plus or minus $1 billion in the second quarter, we would expect just the premium finance to be that way.

So -- and we do expect a very strong second quarter, which should be at above obviously, the -- our range. But looking on 2 more quarters beyond that, given the volatile interest rate environment, I think we still stay in that mid- to high single-digit year expectations. It's impossible that the economy keeps plugging along really great, and we do better than expected, possibly. But we've always consistently thought the pipelines in the business plan would produce at least mid- to high single-digit loan growth. And we think for the year, that's probably still something we'll be with, although given the results so far, you'd probably be at the higher end of that range.

Our next question comes from the line of David Chiaverini of Jefferies.

I wanted to drill into deposit competition. We're hearing some mixed messages from one of the larger regional banks in the Midwest and saying competition is fairly intense in the Midwest. Is this impacting Wintrust much?

I'd say it's still actually fairly reasonable in Chicago. As you know, we have a strong market share in kind of 3 markets: Southeastern Wisconsin, Northern Illinois, Chicago area and Grand Rapids. Pretty rational pricing, promotional CDs kind of at the 4% range, promotional money market in the low 3s. I don't think we're seeing anything atypical at this point, but we appreciate that certainly other markets and maybe some of the Midwest markets are a little frothy, but it feels okay to us.

Great. And then shifting over to -- you touched on expenses earlier just in terms of positive operating leverage. I think you've spoken previously about 20 basis points or so for this year. Is that still the expectation? Or could we do a little bit better?

Well, we obviously had a strong first quarter and to some of the other questions we've answered here, expect a good second quarter. We'll have to see. We continue to invest in the business. We want to make sure that we're positioning the bank for growth going forward. But to your point, the 200 basis points isn't out of the question and we would obviously work harder to improve on that.

Our next question comes from the line of Brandon Rud of Stephens Inc.

I guess a few of my questions have been already answered. If I could ask one on credit. I know the special mention increased about 20% during the quarter. And if I connect the dots with the allowance by loan portfolios, it looks like a stem from the commercial portfolio. Is that accurate? And if not, could you maybe go into that increase a bit?

Yes, it is accurate. I mean it's in the commercial portfolio. It's hard when you look at those numbers because we're at such low levels that periodic increases draw attention like this does we try to be very active in our loan ratings and when there are customers that have a little bit of a miss on a quarter, we will make that adjustment. But I don't think there's anything systemic here. I think it's really just kind of one-off situations in a couple of different customers, really no, I'd say, consistency in terms of industry or anything like that.

So I think it's really just more coincidental. We would anticipate that it will probably hang around this level here for the next few quarters as far as we can see. Customers generally are operating reasonable results so far. So nothing that I would read into it.

Got it. Okay. If I could ask on fees, the step-up in the operating lease income. I think if I look back historically, it's not abnormal to see 1 or 2 quarters where it steps up and then goes back down again. So on a go-forward basis, should we look at that as more of like a $15 million -- $16 million run rate? Or is this $19 million really the new rate going forward? .

It's probably somewhere between the $16 million and the $19 million. Occasionally, you get some gains on some sale of equipment during the quarter. But that's normal course of business. We get those each quarter. So it's just sort of what's the size of each of those. But probably somewhere in between there. would be a good bet. But it's not all the question I could be $19 million again next quarter, but there are just some residual gains that come into the portfolio off and on. and they have been on a recurring basis is just -- you can't always judge the size of them each quarter.

Our next question comes from the line of Jeff Rulis of D.A. Davidson.

Just sticking on the fee income conversation, the wealth management side, really pretty impressive and wanted to reorient with your thoughts on kind of year-over-year growth? Or how you see that line item at $42 million is pretty strong. Just the outlook you see from here for this year.

Yes. Good question, Jeff. On the wealth side, a really nice quarter and a business we like and 1 that we're growing steadily. There is an element to the strong growth this quarter that's seasonal and accounts for little bit more revenue than we would expect in coming quarters. But overall, good news and good momentum for us in that business. Kind of to Dave's answer to the prior question, I would look for something in between kind of the fourth quarter and the first quarter as a better number going forward.

Okay. I appreciate it. And then maybe just checking in on the maybe the M&A conversations on, as you guys target smaller institutions, just trying to get a sense for the appetite and the level of conversations on that front.

Yes. I would say not much change since we last spoke, obviously, some high-level conversations, but I'd characterize some of that as more exploration than anything else. And no change to our posture. We consider ourselves a disciplined and skilled acquirer, we'll look at opportunities and believe we're well positioned to take advantage of them if they present themselves, but it'd be based on a good strategic fit, good cultural fit, and we'll see how things play out here, but well equipped to be opportunistic if the opportunities arise.

Our next question comes from the line of Ben Gerlinger of Citi.

I was wondering if we could talk about the branch build-out in your prepared remarks. I think you said 7%. Were these Chicago and then for [indiscernible], I'm assuming that's in the expense guide you provided?

Yes, Ben, I should [indiscernible]. I said several, not 7. But there -- in each of our 3 markets, we actually have new branch activity for the second half of the year. These are, in some cases, markets -- submarkets that we're not in, in other cases, opportunistic to kind of build as the populations move in these various areas. But nice opportunities for us, and they'll just help us to continue to build out the franchise and the deposit base of the company. And it would be included in our expense forecast that we just talked about.

Got you. Okay. That's helpful. And then with these kind of new branches, should we expect any sort of kind of intentional marketing potentially like over market rate? I know you guys are usually the price setter because you're growing faster. But is there anything that we should maybe expect in terms of like just spinning up deposits faster given that branches take roughly 3 to 4 years to breakeven.

Well, yes would be the answer to that question. I mean when we enter new markets, we would want to be aggressive, and we would want to build the size of those branches quickly. I don't think on an overall basis, it's going to change much trajectory of the financials. So I don't think you're going to see something that is easily recognizable, but we will try to be very aggressive in the markets we enter.

Our next question comes from the line of Jared Shaw of Barclays.

Just, I guess, listening to the optimism around loan growth and the ability for more of a stable margin, I don't know, I guess it feels like mid- to high single-digit revenue growth feels pretty conservative just given some of those tailwinds? Is that the right way to think about it, that maybe there's a little bit of conservatism built in on economic uncertainty? Or as we get through second quarter and some of the benefits from the premium finance growth that maybe third and fourth quarter tail off a little bit.

Yes. I don't know what I would add to what we've already said. I mean, we have visibility to what we think is a very good start to the second quarter and then, obviously, the seasonal P&C business. pipelines look good for the second half of the year. So to Dave's point earlier, if that continues, we might be on the high end. We're certainly working to be on the high end, but just don't know what's going on sort of in the market right now with some of the geopolitical stuff.

And to Rich's point, our clients are still cautiously optimistic, but you get out much more than the 6 months or so and the visibility gets a little less clear.

Okay. And then on capital, I appreciate the comments on sort of the M&A side, but how should we think about capital continuing to grow from here? And if there isn't a deal, is there a limit to how high you want to see that go in the near to midterm?

Yes, sure. So we ended the quarter, CET1 at 10.4%, with substantial growth in the second quarter. That number probably won't move much. And if we do really well, it might actually move down a little bit. But we would expect to grow CET1, the remainder of the year at mid- to high single-digit loan growth. once we sort of cross 10.5% or so and depending what happens with these proposals, we'll evaluate appropriate capital levels and make some decisions.

But our approach is probably still ordered in the same fashion, organic growth. If we happen to find an appropriate acquisition, there may be a need for capital there. And then as most of you know, we have an authorization in place for stock buybacks. And certainly, if we ended up with a lot more capital, we could consider that as an alternative. So I hope that helps.

Our next question comes from the line of Brian Foran of Truist.

Maybe actually piggybacking off that, if no M&A emerges scenario with some activity happening in and around some markets you touch, are there any opportunities you're watching for team hires de novo market expansion, opportunists to client acquisitions, any benefit from M&A happening around you right now?

Well, let me try to take pieces of that. We certainly would always look for talented people that we could hire that tends to happen when somebody gets frustrated with their ability to take care of customers at their financial institution. And we've had some success in that area. We typically don't highlight it on these calls.

The de novo expansion, we're certainly excited about a number of these communities that will enter are very attractive and we believe represent good opportunities. And on the M&A front, it happens, when it happens. We'll continue to talk to institutions, we think, would be a cultural and strategic fit. But again, I would say more exploration at this point than a serious conversation. That obviously can change, but that'd be candid right now.

Okay. And then on the expenses, I've gotten tripped up on this before. So just to clarify, the mid-single digits is off the fourth quarter annualized base, not the full year 2025.

Yes. I think the way to just simplify this is full year 2025, the full year 2026 mid-single digits.

Our next question comes from the line of Christopher McGratty of KBW.

Tim or Dave, on the capital, we've heard from some of your peers like the rating agencies are obviously 1 of the constituents you have to be mindful of as you consider the Basel III opportunities. How important is the TCE ratio over the next couple of years, I had one bank said at 8% is kind of a fine line. But any thoughts on balancing the ratios would be great.

Yes. Well, the rating agencies, I think, acknowledge that our capital levels are sufficient given our risk profile. I think most of them understand 1/3 of our portfolio is in premium finance, which is low risk and life which is fortunately, for us, been 0 basis points of loss over the year. So from a risk-adjusted perspective, I think our capital is more than sufficient. And I think the rating agencies understand that. So we're very comfortable with where we're at right now.

Our ratings have stayed stable and our capital has been growing. So even if we did a buyback and brought that down a little bit, I think we have room there. So we're comfortable with our capital levels, and we're comfortable with how the rating agencies look at it right now.

And then as a follow-up, within the NII expectations, what's your mix assumption? I mean, DDA has grown on an unpaid basis pretty solidly in the last 6 months. Interested in kind of the seasonal patterns there and also just what's in your expectations going forward?

Yes. Well, as Tim said, I think the better way to look at DDA because sometimes the quarter ends and year-end, there's fluctuations in the DDA. I'd look at the average demand deposits. But I would suspect that the mix of the balance sheet would stay relatively the same as we have good growth quarters. We tend to add more interest-bearing deposits and noninterest-bearing deposits but the absolute dollar amount of DDA should stay relatively consistent on an average basis and then grow as we bring more customers and -- but other than that growth in interest-bearing being a little bit faster than noninterest-bearing just because we need to do so to support the loan growth. I wouldn't expect big changes in the deposit mix.

I would now like to turn the conference back to Tim Crane for closing remarks. Sir?

Latif, thank you. Again, a good start to the year. We feel good about the outlook for 2026, and that's really a tribute to the great team we have at Wintrust. They are very focused on our strategic priorities. I want to thank them for all they do for the customers and the communities in which we operate and most importantly, for our shareholders. So with that, Latif, thank you, and hope everybody has a nice day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Jon, we always enjoy the conference.

Yes. It's great to have you here. Just maybe give us -- we have a lot more generalists here at the conference. There's a lot more interest in the bank stocks. It depends on the week. But generally, a lot more interest. So just give us a 30,000-foot description of Wintrust.

Sure. Happy to do that. And again, thank you for having us. Wintrust founded in 1991, predominantly a Midwest retail bank with commercial operations that are national and in some cases, international now. So 210 branches, West Michigan, predominantly Grand Rapids area, Northwest Indiana, Chicago land or Northern Illinois and then Southeast Wisconsin. A couple of branches in Florida where we follow our customers. Offices in 16 states, about 1/3 of our business, were $71 billion. About 1/3 of our business is related to insurance.

And then in terms of the loan portfolio, about 1/4 related to commercial real estate and the remainder, a little over 1/3 in C&I.

Okay. Good. And as with all these sessions, if you have questions, just put your hand up and we'll get to you, but we have a lot of ground to cover, but we're open for questions.

You Bet.

Just how you feel about the state of the economy and your markets in general and just overall business activity?

Yes, Jon, we feel really good. In fact, and I think we said this last year, if you weren't watching the news, you'd feel fantastic. Loan growth is good. Pipelines are pretty solid for us. We typically grow a little bit faster than the market in terms of our loans, slowish first quarter and then kind of a heavy seasonal benefit from our Property & Casualty business in the second quarter. Clients are reasonably optimistic. Deposit pricing is rational in the Midwest, and credit remains very good.

Okay. And what are you working on for '26 kind of key priorities?

Yes. Well, a couple of things. We continue to invest in our core businesses. So the C&I business, we like quite a bit in addition to kind of the normal loan growth and deposit-taking activities. We provide services. We provide wealth services for the owners and for the executives. That's grown nicely for us. Continue to work on efficiency. We talked earlier in 2025, we grew about 10%. We did that really adding very few, if any, people in terms of headcount. Obviously, there were some ins and outs. We're a little over a year into the complete integration of Macatawa in West Michigan. That's our most recent acquisition. We feel very good about the momentum that we have there in terms of giving them a better toolbox, a bigger toolbox to win clients. And so it's a lot of blocking and tackling efficiency on the radar for us but more of the same.

Business as usual.

Yes.

Okay. Good. You touched on the first quarter generally being a little bit slower. Just kind of review why that is take care, everybody understands it.

Yes. Just in terms of both loans and deposits, the first quarter tends to be our slowest quarter. One of our loan verticals, our insurance finance business tends to be a little bit seasonal, its slowest in the first quarter. strongest in the second quarter and then the second half of the year is pretty steady for us typically. On the deposit front, little bit with end of year type activities for corporate clients and then tax payments and kind of outflows in the first quarter. Deposit growth tends to be a little bit slower in the first quarter as well. But our objective has been and continues to be to match our loan growth with core deposit growth where we can. And building the franchise, adding deposit clients is important to us on a regular basis.

So nothing to flag for the first quarter. It's just...

No, not at this point. And again, credit still looks good. In terms of our portfolio, some folks are talking about a K-shaped economy and inflation. We really have very little consumer lending in terms of our portfolio. And so most of it is as I described.

Okay. Good. Premium Finance, an interesting business. I think it's somewhat unique to what you do. Do you feel like it's well understood or appreciated or maybe just explain it and why it makes sense for you.

Sure, happy to. So really 3 legs of the insurance stool for us. And again, it's about 1/3 of our assets. We have about $8 billion or $9 billion worth of life insurance premium finance. It's typically affluent individuals and business owners looking to do estate planning. The play here is that it's cheaper to finance your insurance relative to the returns you would get investing in your business. And so a little bit rate sensitive as rates come down, the arbitrage is better.

Second, almost same size piece, about $8 billion or $9 billion is our P&C, property and casualty finance business. That's much lower loan size is typically about $50,000 of premium. We would have many hundreds of thousands of dollars of these loans that are very automated basically taking care of the vanilla insurance needs of a business. So whether it was workman's comp or directors' insurance or their straight property casualty. Again, very automated, good barriers to entry, life insurance rules that are different in 50 states. in a business that we've been in a long time.

And then the third piece of the stool, and you'll recall, we purchased the Allstate Life insurer or the Allstate Agent Finance business a number of years ago. We help insurance agencies just generally with their banking outside of those 2 premium finance businesses, and that's a nice complementary business for us as well.

Okay. Good. You talk about commercial real estate, what you're seeing there? I know Rich usually gets the question in every earnings call, but how are you feeling about the health of the portfolio and the outlook as well?

Sure. And our commercial real estate activity is predominantly Midwest-based, but we follow clients throughout the country. And in some cases, our clients have found more attractive opportunities outside of the Chicago area. But very solid, focused on multifamily, a little bit of industrial, not very much retail. We think the worst is kind of over for the central business district activity, although we have very little of that. We do deep dives regularly with respect to our clients in terms of the change in interest rates. We obviously stress test our portfolios in terms of taxes. And relative to our peers, we're probably a little bit smaller, so about 25% of our loan book, commercial real estate. Our peers might be 30% to 35% or so. But it feels pretty good right now. And we're very careful in terms of client selection, I'd say we're probably on the conservative end in terms of advance ratios, and it feels like kind of pretty good.

And good growth opportunities.

And good, yes, steady growth opportunities for sure. We've seen some of the high payoff type activities. We're fine with that. We like it when clients pay back their loans. And in many cases, with these successful real estate investors, they have their next project waiting in the wings. And so it's a good flow for us, and we like the business. We just like it in the right proportion to the rest of the balance sheet.

Okay. The mortgage -- we can split maybe mortgage in the 2. We can talk mortgage originations later, but the warehouse business. How is that performing for you? What's your objective there?

Yes. We've been in the mortgage warehouse business for a long time. Again, client selection important to us. About 2.5 years ago, we added the mortgage warehouse team from Comerica Bank. They exited the business voluntarily. A number of those folks came to us with clients that were top shelf in terms of their mortgage operations that while not particularly thrilling these days, operate very nice businesses and continue to make money. And so we've won share there by taking business from others and continue to grow that business nicely even in a pretty tough mortgage market.

Okay. Good. And then just on Chicago, we all seem to focus on the faster-growing geographies. There's a lot of M&A focus in those markets as well. Why is Chicago a good market? What has allowed you to put up this mid- to high single-digit loan growth in Chicago. I'm not asking me to defend it, but It just seems like it gets less attention.

Well, yes. And we don't have any problem defending it. To be honest with you, we're a little curious to us why many of our competitors are going elsewhere. I mean Chicago third largest city in the United States, Milwaukee and West Michigan, both very vibrant markets on either side of Chicago, great health care, great transportation in the world of data centers. We've got water. We've got power. It's really an attractive market. And with fewer competitors, we like it a lot. It's affluent, roughly 175 of our branches are in Chicago, the other split between the other 2 markets. For all the headlines, it's a great place to do business. I can appreciate why people from the out of the area politically might look at us sort of sideways, but the business environment is great.

Okay. Good. And then you mentioned Macatawa earlier. Give us kind of a debrief on how Macatawa was performing and how Western Michigan is doing generally.

So Macatawa was a little about $2.5 billion bank in West Michigan, predominantly Holland and Grand Rapids, 26 very tightly centered branches. The bank had sort of a challenging history. They've got a local entrepreneur to kind of get the bank back on its feet. He did so very effectively. They reached a point where they didn't feel like they could make the investments to compete with the larger banks. And so we had known them for many years, acquired the bank, we think, a very attractive deal. They had excess capital. They had low-cost deposits, their loan-to-deposit ratio was low. They essentially had no nonperforming loans. They just needed more weapons. And so we're about a year since the full integration, and we're already seeing clients that had grown out of Macatawa come back and say, we'd like you to lead our deal. We'd like to use the other services that the bank offers. And so for us, it's been really a terrific acquisition, almost a model acquisition in terms of what you'd like to see.

Yes. Unique, but definitely fits.

Yes, hard to find ones that look like that. But again, we are very pleased and the folks that at Macatawa we've lost very few, if any, of the customer-facing people very effective now with more resources.

Yes. Okay. Good. It's one of the first IPOs that I worked on.

Was it really? Yes, that's perfect.

A long time ago. A long time ago. You mentioned this about bringing bigger products and services and just kind of the last one on lending. But as you grow, you become larger, do you have to do anything different from a lending point of view?

Well, No. Well, no would be the answer because we've tried to stay very disciplined in terms of our underwriting and the culture that we bring around credit. I would say relative to many of our peers, and frankly, many of the banks smaller than we are, we're very interested in concentrations. We're very cautious about the hold sizes that we take. And when we look at other banks, we would often see a much, much greater concentration in their top 20 or top 30 loans than we have. We do have some specialty units, and that's part of what can be effective as you get a little bit bigger. And so whether it's construction, architecture and engineering or a little bit of franchise finance, primarily around quick service restaurants, and we've probably got 10 of those specialty niches where we think we can differentiate ourselves and that's where we play nationally as opposed to in the Midwest.

Okay. Good. You mentioned rational deposit pricing. Give us an update on what you're seeing there and kind of the objective of funding loan growth with core deposit growth.

Yes. So we're 1/3 in terms of deposit share in Chicago land. One of the few large markets where you have a non-money center bank in the top several positions. We've got about 8.5%, 9% share. We've traditionally tried to match deposit growth with loan growth, but it's not about the loan-to-deposit ratio for us. It's about the deposit franchise, and we try to continue to acquire deposit clients that will be able to sell other products and service to. So today, promotional rates for CDs, for example, around 4% for about a 5-month CD, money market rates in the low 3s. And then we typically, as we acquire clients, work them even down a little bit from there. But bigger than us in the market, JPMorgan and BMO, both rational, not offering very high rates. And then we occupy a very unique position. So if you move away from the very largest banks. You'd have Wintrust at $70 billion and the next meaningful bank below us is about $10 billion.

And so if you're looking for Chicago-based or a Midwest-based bank that offers sophisticated wealth services, sophisticated treasury management services, we really like where we are. We're in a very unique spot.

Okay. On the margin you guys have talked about maintaining it in the current range. Any -- maybe it's a short conversation. We don't have to go to the Bullpen for Dijkstra here. But how do you feel about the current range? Any puts or takes one way or the other in terms of the margin outlook?

Yes. So for everybody here, what we've said is plus or minus 350 and that's whether rates go up a couple or down a couple. The short history there is a number of years ago when rates were 0, our margin was in the 260s, 270s. And obviously, that's not an area where we feel comfortable performing at a high level. Fortunately, we had the mortgage business at the time and for part of that, a little bit of PPP fees. So we've taken the opportunity to position the balance sheet for a very stable margin in the mid-3s, where we essentially can grow the bank's income and continue to grow our franchise by adding clients. And so it's not an interest rate bet. It's essentially our ability to continue to win and market and steal share.

And so again, we feel very comfortable in the 350 range. And at that level, even with mid- to high single-digit loan growth, we add capital. So...

Okay. We used to talk about the beach ball.

Beachball underwater. Absolutely.

Yes. Bringing that out from the archives. Fee businesses, obviously, as you become a larger bank, maybe the fee business is set to change a little bit. maybe not. But what are your longer-term aspirations and where are you focused?

Well, we'd like them to grow. We're very similar to our peers. About 20% of our revenue is fee-based in 3 businesses. So it's Treasury Services business, which as we continue to grow our commercial franchise in Chicago is growing very nicely. The wealth business, which we continue to grow, it's not trajectory changing, but it's been a good several years. We basically integrated into or moved on to the LPL platform to help us from a recruiting and sort of a product standpoint. And then our third fee-based business is a mortgage business and it's probably a little larger than most for our sized bank. And for the last 2.5 years, it has bounced along the bottom. It's been pretty tough. We've rationalized the expenses. We don't think it can really go much lower than it is right now, and we think we either break even or make a little bit of money. But we've also increased our share. So as the refinance shops and the independents have struggled we've acquired originators from those organizations.

And of the current share, we're up considerably from where we were. And it's really 2 things. One, it's a great upside for the bank. If interest rates come down and the 10-year comes down, and it's also a good hedge, a natural hedge against lower rates. And so again, when rates were 0, we performed much better than many of our peers, in part because of the mortgage business.

Any early read on the spring mortgage volumes or expectations?

Well, we've said -- Dave said we've been hopeful the last couple of years that there would at least be a spring buying season of some consequence. And there's some signs of that a few weeks back when Wall Street Journal said mortgage rates under 6%. We saw 2 or 3 pretty significant days. And what I mean significant, probably double what it had been for a period of time and then the 10 year has gone back up and mortgage rates back up. And so it appears that there's a high level of sensitivity around 6%. And as we've talked about on our calls, our servicing book, the average yield is about 4.25% or so. And so there's a lot of business that's just not going to move even as rates come down. But you get below 6% and there's some business that would look helpful to us.

And there's obviously a lot of leverage in that business line for you.

There is a lot of leverage. I mean, we have a reasonably large operation, we think, pretty efficient. But it's not a super high efficiency business either. So we would get more income, but the efficiency ratio on some of our expenses would go up a little bit as well.

Yes. Okay. Okay. On expenses, just talk about your expense outlook and any priorities or pressure points that you have as you think through the expense outlook.

So we've normally talked about it in terms of operating leverage. And so in 2025, we had over 300 basis points of operating leverage. And our objective would be to grow revenues faster than expenses revenue is a bigger number to start with, so that would create a widening effect. We talked about 2025 with really the same FTE count. We grew the bank about 10% I don't know that you can do that every year, but our objective would be, obviously, to keep headcount, which is 50%, 60% of our expenses as flat as we can while we continue to grow the bank. And I don't know that we want to talk about AI here today, but the definition of AI is pretty broad, and there's all sorts of efficiency initiatives in the bank to help us automate things that we can automate and really deploy those resources either into better technology or more revenue-producing people. And so our objective is to continue to look for efficiencies that will allow us to grow the bank without increasing the expense base at a commensurate rate.

Do you have examples of AI being used in your business?

Very early on for us. And for a bank our size, $70 billion or so I think early on, it's going to be turning on the feature functionality in a lot of the third-party packages that we have. So whether it's Workiva, Workday or Encino or some of the products that FIS will offer I think our initial lift will be making those tools implemented into our teams. And so -- we're starting to see some of that. And of course, we've put in place a good governance program that make sure that we protect the client data that's so important to us.

Yes. Okay. Good. The $100 billion in asset threshold is kind of an expense trigger for a lot of banks. Maybe it goes away, maybe it doesn't. How do you think about that broadly?

Well, I guess a couple of things. One, we're optimistic that we'll get some relief there and that hopefully, we'll learn about that in the next 90 days or 120 days here. But we've really been evolving into a bigger bank for the last several years. And so again, taking some of these cost savings and the cost control and investing it into the infrastructure to be larger. And on that front, really 2 things. One, the people that run many of our control functions in the bank, so compliance and audit and BSA and the like generally come from larger banks. And being in Chicago, we have access to talent that many people don't. And so those folks have seen what it takes to operate a larger bank. They know the tools.

The other thing is we've -- we're evolving into the capabilities you need to have at $100 billion. And those might be required, but in many cases, you would want them to run a larger bank. And so whether it's more liquidity or capital stress testing or more frequent reporting, we're on that path already. And so if we get close to $100 billion at some point and the regulators start asking those questions, we think we're in pretty good shape. And in any case, it looks like with the current administration it's more the letter of the law, which is you have to exceed $100 billion for 4 quarters and then you get a little bit of runway to deliver those capabilities as opposed to some of the banks that got caught in the year $85 billion, how are you operating, right?

Yes. So okay. Does the multiple charter question come up very often with investors?

Yes. It comes up periodically. So for those of you that don't know us, Wintrust operates 16 community bank charters, and they range from $3 billion banks to $10 billion banks right now. What's important to know is that it allows us the best of both worlds. We get a connection to markets that the big banks don't get and we get basically the synergies that many of the larger banks do. So all of the noncustomer-facing activities are centralized. So our compliance function, our finance functions, all of those activities are completely centralized. But from a marketing perspective, we believe -- continue to believe there's value in these individual brands. And the best example I can give you is that in the most affluent and meaningful markets in Chicago, we have a 1 or 2 deposit share. And so if you go to Lake Forest, we have a 50% market share. If you go to Hinnesdale, we have a 35%, 40% market share.

And it's allowed us to do what others can't and that is continue to stay close to the leaders in those markets, continue to win business locally while getting some of the scale efficiencies. So we get asked about it. One of the big benefits is our MaxSafe product. We have about $6 billion or $7 billion of MaxSafe deposits. That's our name for it, where we can provide up to $4 million worth of insurance seamlessly. And so in periods when you get a lot of volatility in the market, people come in and say, I know you can give me more insurance than your peers, please open my account.

Home run in 2023.

Home run. In 2023, they just said, I'd like my money to be here when I get back -- and so that was helpful.

Yes. Okay. Good. Credit quality, any updates there? How is it tracking generally against your expectations?

Yes. Knock on wood, still very good. we're not seeing any systemic deterioration in credit. Again, we don't have much consumer. So we're not as much of an early warning signal as some banks are in terms of that. We watch the hold sizes, we watch concentrations. We continue to feel very good about the credit environment.

And then provision and reserve level outlook and thought process there.

Yes, I'm glad you asked that because if you just look at the reported results for Wintrust, our allowance looks low. And the reason it looks low is, again, 1/3 of our business is this insurance business. The Life business is a 0 loss business. The P&C business is a 20 basis point loss business. And so relative to other banks, particularly our peer banks, we believe that our loan portfolio is much less risky just on a structural basis, forget underwriting and what else we might do. So our provision has been in the kind of low 20s to high 20s I wouldn't expect that to move much. The number we watch is sort of the core provision, which is easier to compare to our peers, which is about 135 basis points right in the peer range that others have.

Okay. Good. We can touch on this briefly, but a couple of sessions ago, this was the BDC panel role, and it was standing room only, Usually, it's not -- but NDFI, any updates there in terms of your exposure.

Well, not much of an update. It hasn't changed, but we're between $2 billion and $3 billion. The great, great majority of that is in mortgage warehouse and capital call lines, which we believe to be if not 0 loss, very low loss opportunities. Not much of a sponsor finance activity that's outside of those parameters. A little bit of leasing where we help fund some customers that have other clients, but it's very modest for us. And Jon, what I'd tell you is for the last 3 or 4 years, we would go to some of these clients, and again, not on NDFI particularly, but if you take clients looking for more leverage and you go down that path, we'd offer a deal at SOFR plus 300, somebody else would offer a deal with more leverage, but it's SOFR plus 500. They go for the leverage every time.

And so I think a lot of the activity, whether it's leverage activity or lending money to people that lend it to somebody else is probably moving away from the banking system or has, at least in our case. And so -- we think our exposure there is very, very modest.

Yes. Okay. Last couple of topics here. Kind of near to medium-term capital priorities, when could capital return maybe be part of the story for Wintrust. I know you've always been a growth bank and the dividend has been lower and you've raised capital periodically, but it seems like you're almost getting to the point.

We think we've turned the corner. The last several years, our CET1 ratio was in the 9s. And we talked about that wanting that to be higher. And -- but with the margin at 350 and even with mid- to high single-digit loan growth, we produce capital. And so it's been a steady climb to 10:30 right now -- we'll add capital in the first quarter. Second quarter, I think our loan growth will probably put us neutral or even maybe use a little capital, but then we'll be back up for the remainder of the year. So I would anticipate absent something strange happening that will be well north of 10.5% or between 10.5% and 11% in the second half of the year. And that appears to be sort of the more norm number where you see some people coming down from in the 11s, talking about kind of 11 or the mid-10s being the right number. So at that point, we'll evaluate what makes the most sense, and we have buyback authorizations in place, and we'll do the right thing for our shareholders.

Yes. Okay. Maybe good. M&A topic. Any updated thoughts on M&A? I know Macatawa was kind of unique asset, but how are you thinking about that?

Well, we've done a lot of M&A in the last 15, 18 years. Some of it FDIC assisted, some branches, some banks, some businesses. I would say we'll be disciplined. We've seen more activity kind of on the smaller side, which on the very small side is tough for us as we've grown, it's harder to move the needle. But we look for strategic fit, cultural fit, and then we have to be doing the right thing for our shareholders. So growth for growth's sake is not enough. And as much as some of the investment bank community has kind of been forming at the mouth. We're not saying it.

Yes. I read an article on SNL that says investment bankers say, the time to do a deal is now.

It' always the time. They're an investment bank.

Any last questions before we wrap up? Okay. Thanks a lot, Tim.

Thank you, Jon. Appreciate it.

Yes.

Welcome, everyone. Welcome to Raymond James' 47th Annual Institutional Investors Conference. I'm David Long, one of the bank analysts here at Raymond James. And this morning, we are excited to welcome Wintrust Financial to the conference. Wintrust has become a staple at the conference. Wintrust is a $71 billion asset bank with a market capital of about $10 billion and the stock trades under the ticker WTFC.

Joining us for discussion today is President and CEO, Tim Crane. Also on site is Dave Dykstra, Chief Operating Officer and Vice Chairman. Wintrust has grown to become the largest commercial bank headquartered in Chicago. And they've done that through mostly organic growth. They have supplemented some acquisitions in there and they've done that by taking market share from a lot of their larger bank peers in the marketplace. They've also done this while keeping credit quality pristine for the last -- or really throughout the history of the bank. With all that said, Tim, welcome to Orlando.

Thank you, David.

Thanks for joining us today. You've been at Wintrust now almost 20 years, 6 as President, I think now coming up on 3 as CEO. And during your time there, as I said, you've had some great growth. Maybe just reflect a bit on how the bank has been able to grow so rapidly over the -- let's maybe keep the last decade or so.

Yes, sure. So 2015 we would have been low 20s in terms of assets. I think a couple of pieces in terms of the growth. One is the strategy, which has been consistent through really Wintrust's existence, which is provide better service than the big banks do and provide better capabilities than the small banks. And in Chicago, in particular, although we're in Southeast Wisconsin and the Grand Rapids, West Michigan area as well, there are the money center banks obviously present, and then there's Wintrust at $70 billion. And then the next largest bank is really $10 billion. And so we sort of have a unique position in Chicago and have for some time as there's been a fair amount of disruption to continue to win share. And so again, taking great care of customers is the foundation.

We like our markets. We're a little bit curious about the movement to the Southeast and Texas and California. Chicago has got a wealth of middle-market companies. Our area grows, it's affluent. So we like the markets. And then lastly, we've been opportunistic. And so whether that's been adding teams as we've had the opportunity to do so in the insurance business and the mortgage warehouse business or whether it's been acquisitions, we've pursued those. And we think we're pretty disciplined and pretty good at all those things.

Good. Good. What is it that you'd say you're most proud of? And maybe it's being part of the organization and maybe the culture? What is it being there for 20 years now or close to 20 years?

Well certainly proud to be part of an organization that's become well known in our markets is providing great service, being very consistent for our customers. But I'd say on consistency and the consistency of performance is what I'm really proud of. If you -- at the end of each year and our fourth quarter report, we provide charts that show our 10-year progress on a number of key indicators. So whether that's net income growth, tangible book value growth or loan and deposit type activity, we've been very, very consistent over those 10-year periods. And we focus on that and talk about that with our team.

And if you just took tangible book value as an example, since Wintrust went public in 1996, our tangible book value has increased every year. When we look at peers, we think there's only 1 or 2 other banks that can say that. And that's with the acquisitions that we've done along the way. And so very pleased with just the performance expectations that we put on our teams and how we deliver.

Got it. And then you've been in the seat as CEO for about 3 years now. Have there been any material changes in the strategy or how you're running the organization versus how former CEO, Ed Wehmer did?

Yes and no. The foundational part of the strategy hasn't changed, which is focused on customers first. The market continues to give us opportunities as big banks go upmarket, as there's acquisitions in the market, those kind of things. What we have done is continue to focus on operating leverage, and we've looked at investments that we're making in the foundation of the company. So better capabilities, more automation, more efficiency, those types of investment we make along the way while continuing to basically deliver results. And so that would be the only change. And that's just more a function of what's happening in the market and the competition.

Sure. Okay. When you look out the next 3 to 5 years, what are some of your biggest goals for the next 3 to 5 years for the organization?

Well, continue to deliver the consistent performance. I mean at the end of the day, our shareholders are focused on the company moving in the right direction, making disciplined growth decisions. So we've always been a growth bank. We want to continue to grow the organization, very comfortable with the bulk of our footprint being in the Midwest with our sort of specialized businesses where we can differentiate ourselves, delivered nationally or in some cases, internationally.

We like the insurance business very much. As you know, about 1/3 of our balance sheet is related to insurance finance in one form or another. It's one of the reasons the credit quality is so good. If you operate a company, insurance is about the last thing you're going to give up. And so lending against these insurance policies is very attractive. It's a business that we believe has material barriers to entry that we can protect. So I'd say continue to be one of, if not the leading independent player in the Midwest and then continue to build out the niches as they make sense.

Sure. What do you expect your footprint to look like over the next 5 years?

Yes. Retail banking for us is plus or minus 215 branches, Southeast Wisconsin, Northern Illinois, Northwest Indiana and most recently, West Michigan with the Macatawa acquisition. I think we'll try to do concentric in terms of our physical footprint. And then again, the niche businesses that we can differentiate ourselves nationally, operate out of about another 15 offices in other states. We'll continue to do that. But there are great aspirations to get to Texas or California. We have 8.5%, 9% market share in Chicago deposit market share. If we can get that number to 10% or 12%, that's very valuable. It's building the franchise.

And like I said, $71-ish billion in assets, does $100 billion? Does that -- is that a barrier for you at the print? Or how are you looking at that?

Yes, hard to say. I think we all believe that in the coming months, we're going to get some revision to the asset thresholds that operate. And I think the most punitive rules around exceeding $100 billion are probably going away. So we're, again, building the foundation for a bigger bank. We're evolving into the capabilities that you would need, whether those are LFI-type capabilities or just better management in terms of stress testing for capital and liquidity. But I think we'll see in the next couple of months. And we're operating as if we're going to continue on our growth trajectory. And if $100 billion has capabilities and rules, we'll be prepared to meet those.

Great. And then just overall, on the regulatory backdrop, a lot of talk of how it's gotten easier for the last little over a year, and we've got a few more years left, maybe it will change again. For Wintrust, at this point, what stands out as being -- is there anything that stands out in particular that benefits you more so than others?

Well, we've always had terrific relationships with our regulators and the size of acquisitions that we've done historically haven't been problematic. And so even a few years back under the prior administration acquiring Macatawa Bank in West Michigan, we were approved in 49 days. And so that traditionally hasn't been an issue for us. We have terrific relationships with our regulators. All 16 of our independent chartered banks are regulated by the OCC.

I think the freeze or the change in rules around CRA, around 1031, I mean all of those rules either stabilizing or rolling back allows us to focus elsewhere as opposed to compliance-related activities. But it's marginal at this point for us. We've just always had such a good relationship and large acquisitions haven't been on the radar for us.

Great. And then what can you tell us about the Wintrust culture that allows you to continue to grow and put up such attractive growth metrics?

Yes. It's really one of the other things that I'm proud of. We could have added that, but it's customer first. And if you take to care of customers, a lot of the other things that they're running a business or running a line of business require fall into place. And the market has given us this unique space where the bigger banks sometimes look up market that makes -- gives us opportunities. The smaller banks can't provide the capabilities we provide, but it's very entrepreneurial. And so if somebody comes and says, I want to borrow money for a restaurant. Most banks don't like restaurants. We would say we might not like restaurants, but we can find a way to lend that individual money. It's just structured differently and it's a more focused approach on what that customer is trying to accomplish.

And so we take a lot of pride in the success of our customers. The great news at Macatawa for example, which was a very nice $2 billion bank, but many of their customers were outgrowing that bank. We provide a bigger toolbox. And so the capabilities that we provide rival those of the biggest banks. And so we really have a unique model with better service and very good, if not top-tier capabilities.

You mentioned Macatawa again, so I'm going to go in that direction with M&A. They were in Michigan across -- I know it's across the pond, if you want to call it that. But what are your aspirations from an acquisition perspective? And how far would you go outside of the Chicago MSA?

Always been very disciplined. And Macatawa was a terrific property, again, prior administration from a political standpoint, but great deposit base, low loan-to-deposit ratio, a lot of capital, 26 branches, fairly densely populated in the Holland Grand Rapids area, which is growing faster than Chicago. So a lot of really terrific attributes that made that a very nice acquisition for us, and it's going very, very well.

We'd like to do more concentric-type things. We'd like to build on to markets that we understand. Again, if in the Chicago area, and it's similar in West Michigan and Southeast Wisconsin, we have high single-digit deposit share. There's all sorts of opportunity for us. And so we don't need to go to California or we don't need to go to Florida to find opportunities. We'll continue to take share from larger banks, other banks in our markets, and we'll take very good care of those customers, and they'll be with us for a long time.

On the loan growth side, the bank has typically talked about mid- to high single-digit loan growth. Is that still appropriate on an organic basis as we're looking forward here?

Yes, we think so. It's a little bit uneven over the year. So there's some seasonality. First quarter tends to be our lowest loan and deposit growth quarter. But we still believe mid- to high single digits makes sense. Pipelines are good. Everything we're seeing right now is consistent.

There's obviously a lot of noise in the environment. What are the biggest risks to getting to that type of growth?

Yes. I mean, I don't know if noise is tariffs or the activities of the last couple of days, but the risk is really kind of irrational competition. So you talked about the fact that we're very disciplined from a credit perspective, and that's an important part of our equation that we just don't compromise on. So what we have seen over the last couple of years is that banks that haven't been able to grow loans will look for larger, fully funded deals and they'll do those on a transactional basis. We typically do not. We want full relationships if only for credit reasons, but more importantly, because we want the opportunity to sell them other products and services that they'll use over time.

So irrational competition would be one risk. Obviously, there are macro elements that could slow growth dramatically. That certainly could affect what we do. But again, our pipelines, which give you pretty good visibility for 4 to 6 months look pretty good. And we continue to believe that we're on the mid- to high single-digit track, and we'll see what happens.

That type of growth would put you above that of most of your peers. How do you manage the credit side of the equation when putting up better than peer growth?

Yes. I mean decentralized credit as close to the customer as we can get it with very thorough behind-the-scene reviews to make sure that we're not missing anything. Now what I would tell you, though, for us, concentration is a huge issue. We spend a ton of time looking at individual concentrations in the portfolio to make sure that we're not overexposed in areas. And relative to our peers, we often screen low, for example, if you look at allowance.

One, we have better credit quality. So we think lower allowance makes sense. But the other thing that's important to notice is that, again, 1/3 of our book is insurance-related finance. And so whether it's financing life policies for affluent individuals or it's financing, property and casualty policies for local businesses, very good credit quality, very predictable performance, very granular in terms of the loans. And so when you look at whether it's allowances or you look at capital, we think on a risk-adjusted basis, we're probably better positioned than most of our peers.

Great. On the deposit side of the equation, how is competition right now?

Yes, pretty rational, I would say, in Chicago. Again, one of the things that in 2025, we were very pleased with is we assumed the third largest deposit share in Chicago behind BMO and JPMorgan. So the 3 of us combined probably half the market, call it that, pretty reasonable pricing, I would say. And without loan growth, you're not seeing huge pressure from other banks to grow deposits irrationally. And so I would say pretty rational at the moment. And we hear that's not necessarily the case in the Southeast markets and maybe some other areas, but I don't think we've seen anything problematic in Chicago yet.

Great. On the fee revenue side, you guys have a few different drivers there. Where do you see the biggest opportunity to grow the fee revenues?

Yes. For us, 3 fee-based businesses. One is sort of the treasury services business generally described that way. As we continue to take share in the middle market, that business grows very nicely and has grown very nicely each year for the last several. So that will continue to grow. We're very excited about the wealth business. It continues to grow, not rapidly, but again, as either business owners sell or we continue to penetrate the market, we get wealth opportunities.

In 2025, we completed the migration to the LPL platform, which was an important kind of piece of the equation for us to allow us to recruit more effectively and then also to offer a broader base of services. So continued optimism on the wealth side. And the third piece for us is mortgage. And mortgage has kind of been bouncing along the bottom for a couple of years. Over the last 9 months, we've seen very small windows where things got attractive and you'd get a couple of days where rates got at the right level and the business would pick up. But -- so that's a wildcard for us. We know we're growing our share of the mortgage market in Chicago as the independents that did primarily refinance activity have largely gone out of business. But that would be the biggest opportunity in terms of a wildcard, but we'll continue to grow the treasury services business really nicely in '26.

Got you. And then on the expense side, maybe talk maybe first about operating leverage. How important is positive operating leverage for the bank?

Well, it's really important. Increasingly, we have to invest in capabilities to stay current with the big guys. And we can't just do that as an incremental add to our expense base. And so we're always working to become more efficient, and we talk about taking those gains and reinvesting them in the business. And so I think you gave me the statistic. I didn't go back and get it, but 7 of the last 10 years, we've had positive operating leverage. 2 of the 3 years we didn't. We had extraordinary expenses around acquisitions. And last year, we were 340 basis points different in terms of revenue growth versus expense growth.

So for us, it's sort of simplistic mid- to high single-digit loan growth, and our loans are 85%, 90% of our assets with sort of mid single-digit expense growth should yield operating leverage. And our target would be to do that every year as we can, again, save some extraordinary type circumstances, but it's very important. And I think it's important to our shareholders. They recognize that we're making investments that are paying off and that we're growing a franchise in a productive way.

A lot has been said about some of the bigger banks, the Wells Fargos, the JPMorgans, BofAs that have big IT expense budgets. How do you compete with them in that regard?

Well, part of it is the fact that we buy most of the basic underlying services from somebody like an FIS or from a Salesforce or nCino or pick your kind of vendor. And by and large, they do a reasonable job. And what we've tended to do is surround those core services with customer interfaces that make us attractive in the market. Obviously, the numbers that JPMorgan and BofA are investing are staggering. But we -- with rare exceptions, typically around international type products, we haven't found ourselves to be behind or to be disadvantaged.

And again, it's the rare customer that needs something that we can't provide that may choose to go elsewhere. But in a lot of cases, we can partner to provide those services. So it's a focus and managing partners is a big part of the differentiation, and I think we do a good job.

And then on thinking about the mid-single-digit growth in expenses, what type of growth rate are you seeing in IT? And then also how -- where are you spending on AI right now?

Well, the IT component of the expense growth would be much higher. So if you took the HR side of equation, in 2025, we grew the bank 10%, 11%. We did it essentially with flat headcount. And so a lot of the expense growth in 2025 went to new technology, went to becoming more efficient. If you think about merit increases being, call it, 3% and your overall expense growth in the 4% to 6% range, the rest of it would be disproportionately technology and cybersecurity would be the other kind of big piece of it. Yes.

AI, we focused on getting the governance piece first. So I'd say we're in the early stages, but AI has become such a broad term. You don't exactly know what it includes. We certainly do dozens of robotics type efficiency type plays. We're doing all sorts of modeling in terms of what makes sense for our customers. And so we're pretty optimistic that it will be a meaningful expense opportunity for us, but very likely a lot of that will get reinvested in the business.

Right. Okay. Your net interest margin, historically, you guys have been viewed as being more asset sensitive. And here we are with a 3.50-ish net interest margin for several quarters despite 725 basis point rate cuts.

Think several years, but go ahead.

Yes. What is your outlook for the NIM? Is it still the 350-ish? And then how do you guys manage that despite what most people think of as asset sensitive?

Yes, 3.50 is the outlook. And we've said for probably the remainder of this year, a couple of cuts or a couple of increases probably doesn't move the margin for us. In 2020, kind of during the 0 rate environment, our margin got into the 2.60s, which didn't feel very good. And at that point, the mortgage business, which is sort of a natural hedge for us, performed very well, and so we still delivered record earnings. But we didn't want the margin to go back sub-3% if we could avoid it. And so we've done a fair amount of hedging.

So we've got about $6 billion worth of hedges that protect us against rates down. Those hedges cost us money for a number of years. They're actually now in the money helping us. And our portfolio, just the mix of the balance sheet, we managed to stay pretty neutral. And so if you take our CD book, for example, versus some of the insurance portfolios, they're actually a pretty good offset for each other. So we're pretty comfortable with the margin at 3.50 where we can grow net income by growing the business. And so if we add clients and we add assets intelligently at a stable margin, we'll add net income.

Great. Anyone in the audience here? Any questions for the team? All right. I'll keep going. When you're looking out to the growth and getting the mid-single-digit to high single-digit loan growth, how much hiring is involved with that? And what is your appetite to add veteran bankers in the marketplace?

Some hiring, for sure. We don't spend -- we've come to the investor conferences and some of our peers talk about we added 3 bankers in Nashville and we added 2 bankers in Pennsylvania that's just normal course of business for us. As competitors and talented people that work at competitors find they can't take care of their clients. So it's either throw the baby out with the bathwater approach or a strategic change or an acquisition. We're a pretty attractive home for bankers that want to take good care of their customers. And so we always have a good inflow of names of people that want to come work for us.

And we're pretty selective about who we take, but we added a mortgage warehouse team from Comerica a couple of years ago. We recently added an insurance team that worked for a bank that was acquired that didn't think they were going to fit in the new bank's kind of plans. And these are 3, 5, 8 people at a time in some cases. And again, normal course of business for us. So we'll continue to be opportunistic doing that. And a lot of our adds to the extent we're adding people are on the revenue side. I mean we don't see a great need to add to the infrastructure of the bank as we get closer to scale in a number of these areas.

When you're bringing in other new bankers, do they come mostly from the larger banks? Or do they come from some of the smaller banks where they can benefit from having your larger balance sheet?

Both. I probably skewed toward larger banks where somebody has told them they can't take care of their customer or somebody who is reorganized or they feel like there's not a future for them. We're very entrepreneurial and very accommodating to somebody that has clients that has been known in the market, active in the market and wants to continue. And we create, we think, really good career opportunities for those folks.

Yes. The Chicago MSA, how would you characterize the health of the economy?

Yes. Despite the political headlines, some of which are real, some overblown at times, whether it's crime or tax policy, Chicago is a big, big market. It's second or depending on kind of how you're measuring, second or third largest market in the United States. And the surrounding area is a very large market. So we're not just Chicago proper, but the 8 collar counties in Southeast Wisconsin and Northwest Indiana. So I'd say it's reasonably healthy. I mean we have transportation. We have health care. We have education. We've got water.

Wintrust doesn't do a lot of financing in data centers, but we've got great power and water, which is pretty attractive to data centers around the Lake Michigan kind of footprint. We will benefit from the ancillary activities that go into building those data centers. We think very attractive. And if we can continue to grow our share, deposit share, and we think core deposit growth is the foundation of the franchise. If we can continue to grow deposits in our 3 or 4 core markets and occupy the second, third, fourth position, extraordinarily valuable and virtually impossible to replicate.

We haven't seen commercial real estate in the headlines like we did, as much as we did a few years ago, what is the background? What does the Chicago commercial real estate market look like to you?

Yes, pretty good, actually. The downtown area is still kind of working through the office space challenges. Wintrust is not a lender to a large central business district type areas. But housing underbuilt in Chicago. So multifamily is really good. Our construction projects are terrific. We see large payoffs as others do. We actually like that. We want our customers to pay us back and get to the next project. I think we're through, except on an episodic basis, I think we're through the worst of the CRE issues.

Last chance. Anyone in the crowd? Question in the back.

[indiscernible]

Yes. And just if you couldn't hear that, the question was about size of acquisitions. I think you're right. With exceptions, deals under a couple of billion dollars, it would be hard to move the needles. The exception being if we just got in a market that we hadn't been in with some overlap type situations being the other example, we might consider doing those. But we also don't want to take the company's resources for something that's not going to move the needle very much. And so we've talked about 2 to 10 maybe being kind of the right target zone. We certainly could do something larger. We think we bring a lot to Macatawa as an example. The bigger toolbox for them is incredibly helpful.

They have great relationships. They're in great markets. They just didn't have the capabilities to compete with larger banks. And so any of those situations where we can find somebody that is well positioned in their market but needs resources, we think we can help. That said, we're going to be pretty disciplined. We grow $1 billion to $1.5 billion a quarter on average. Again, there's some seasonality to that. So to do a bank that's $1 billion, it's less than a quarter's worth of growth. So I hope that helps a little bit.

[indiscernible]

Yes, I'm going to knock on our plastic podium here. It's been very good for a number of years. And all the banks have been talking about credit normalizing at some point. We just don't see it yet. I mean it continues to be very, very good. Our nonperforming assets and nonperforming loans have stayed in a very narrow range for several years now, kind of got through the real estate kind of concerns on particularly office. We're not a big player in leverage-type space. We have some leverage, some sponsor finance activity, but not a lot of the 4x, 5x leverage type stuff that you're seeing a little bit of conversation about right now.

So we were very proud of how we've performed, charge-offs last couple of quarters have averaged about 15 basis points. And I think we're probably thinking we'll be in that same range for the next few quarters here.

[indiscernible].

So I didn't hear the second part of that. I heard private equity exposure. A little bit, yes. But we're so selective in terms of the sponsors that we do business with that we feel very comfortable, and a lot of that, for example, is capital call line. So the actual leverage lending is a very, very small part of what we do, and we do it on a very selective basis.

All right. We will conclude there. Thank you, everyone, for joining us today. Tim, this was great. Thank you so much.

Thank you, David.

If you'd like to continue the discussion, we're going to head downstairs to Cordova 6.

Welcome to Wintrust Financial Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. A review of the results will be made by Tim Crane, President and Chief Executive Officer. David Dykstra, Vice Chairman and Chief Operating Officer; and Richard Murphy, Vice Chairman and Chief Lending Officer. As part of their reviews, the presenters may make reference to both the earnings press release and the earnings release presentation. Following their presentations, there will be a formal question-and-answer session.

During the course of today's call, Wintrust management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements. Actual results could differ materially from the results anticipated or projected in any such forward-looking statements of the company's forward-looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the company's most recent Form 10-K and any subsequent filings with the SEC.

Also, our remarks may reference certain non-GAAP financial measures. Our earnings press release and earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure. As a reminder, this conference call is being recorded.

I will now turn the conference call over to Mr. Tim Crane.

Good morning. And for those of you we haven't seen or talked to recently Happy New Year. Thank you for joining us for the Wintrust Fourth Quarter and Full year '25 earnings call. In addition to the introductions, Latif made, I'm joined by our Chief Financial Officer, Dave Stoehr; and Chief Legal Officer, Kate Boege. As we usually do on these calls, I'll begin the morning with a few highlights. Dave Dykstra will review the financial results. Rich will speak to loan activity and credit performance, and I will return with some summary comments on 2025 and early thoughts on 2026.

As always, following our remarks, we'll be happy to take questions. With that, Wintrust delivered solid performance in 2025. The results reflect our focus on generating strategic and disciplined growth. I'm proud to say our efforts drove record net income for the year. For full year 2025, we reported net income of $824 million, up 19% from $695 million in 2024. Earnings per diluted share was $11.40, up from $10.31 in 2024 and tangible book value increased by over $13 to nearly $89 a share.

Total assets at year-end were just over $71 billion. Our fourth quarter was also strong. Net income was $223 million, also a record up 3% or $7 million from the prior quarter. Solid loan and deposit growth during the quarter and a slightly improved margin led to continued growth in net interest income. Credit quality remains solid and overall noninterest expenses were well managed.

When I look back over the year, I want to highlight 3 things that I am particularly pleased by. First, we delivered disciplined growth at a level above most of our peers with a stable margin. As we've discussed, we are adding new relationships, consumer and commercial that we expect will be with us for years to come as we continue to build the franchise. In fact, in 2025, our steady and consistent approach moved us into third position in deposit market share in the Chicago area, and we showed strong gains in both Wisconsin and West Michigan.

Second, we achieved solid operating leverage. On a percentage basis, net revenue was up 11.2%, 340 basis points higher than our noninterest expense. We did this while investing in the tools, technology and people to both run a bank our size today and to build the foundation for future growth. Lastly, we saw improved Net Promoter Scores that were already best-in-class in both retail and commercial banking in 2025 as our focus on exceptional customer service continues to differentiate us from many of our peers.

Before I turn this over to Dave, I want to call your attention to the charts we included in our press release at the end of each year, showing our 10-year performance on key metrics. What you will see here is the continued consistent performance that we stress with our teams. I'm very proud of these results and how they translate into real value for our shareholders.

Now let me turn this over to Dave.

Great. Thanks, Tim. We finished off 2025 with another quarter of strong loan and deposit growth with both falling within our stated range of mid- to high single digits growth. Specifically, the deposit growth was right at $1 billion during the quarter, representing a 7% increase over the prior quarter on an annualized basis. This deposit growth helped to fund continued strong fourth quarter loan growth of a similar $1.0 billion amount that represented 8% growth on an annualized basis.

On a full year basis, loans and deposits grew 11% and 10%, respectively. Turning to income statement results. This was a very solid operating quarter for interest producing a record level of quarterly net income. Speaking to the major components of the income statement, our net interest income also reached another high record quarterly amount, a $1.1 billion increase in the average earning assets as well as a 4 basis point increase in the net interest margin drove the $16.9 million increase in net interest income over the prior quarter. The net interest margin range from 3.50% to 3.56% during the 4 quarters of 2025 and the 3.54% net interest margin for the fourth quarter fell squarely in that range. I would note that period-end loans were once again higher than the average loans for the fourth quarter, giving us a good start on achieving higher average earning assets in the first quarter of 2026.

The provision for credit losses was relatively consistent with prior quarters remaining in the $20 million to $30 million range experienced in all quarterly periods of 2025 and as the overall credit environment and asset quality has remained relatively stable. Regarding other noninterest income and other noninterest expenses. Noninterest income totaled $130.4 million in the fourth quarter similar to the $130.8 million recorded in the prior quarter. The very slight decline was impacted by lower security gains. But overall, other than the continued softness in the mortgage revenue was a solid outcome for noninterest income for the fourth quarter.

As the noninterest expense categories, noninterest expenses totaled $384.5 million in the fourth quarter which represented a slight increase from the $380 million recorded in the prior quarter. Increases in employees' health insurance claims, OREO expenses, travel and entertainment and various other small expense increases were offset somewhat by seasonally lower marketing costs. Overall, expenses were well controlled and within the expected range we discussed on our last call.

Additionally, both the quarterly net overhead ratio and the efficiency ratio remained relatively stable during the quarter from the prior quarter. In summary, I'll reiterate what I said on our last call, with this being another very solid quarter. The company accomplished good loan and deposit growth, a stable net interest margin with a steady outlook, a record level of net interest income and a continued low level of nonperforming assets.

Our team delivered net income that was a record for any full fiscal year in the company's history, and we have a positive outlook for continued growth in assets, revenues and earnings.

So with that, I'll conclude my comments and turn it over to Rich Murphy to discuss credit.

Thanks, Dave. As Tim and Dave both noted, credit performance continued to be very solid in the fourth quarter. As detailed on Slide 7, loan growth of approximately $1 billion came from a number of different categories. Commercial real estate loans grew by $322 million. Our mortgage warehouse team grew their outstanding by $310 million. The Wintrust Life Finance team had another strong quarter and grew by $265 million. And our leasing and residential mortgage groups also had a very solid quarter.

We believe loan growth for the first quarter, while typically our slowest quarter, will continue to be solid for a number of reasons. Our core C&I and CRE pipelines remain consistent, and we continue to benefit from our unique market positioning in our core markets of Chicagoland, Wisconsin, West Michigan and Northwest Indiana. In addition, we continue to have a very good momentum in a number of our lending verticals, including mortgage warehouse, leasing and premium finance.

From a credit quality perspective, as detailed on Slide 15, and we continue to see strong credit performance across the portfolio. This can be seen in a number of metrics. Nonperforming loans increased slightly from $162.6 million or 31 basis points to $185.8 million or 35 basis points, but remained at a very manageable level and in line with levels we had seen in the first half of the year.

Charge-offs for the quarter were 17 basis points, down from 19 basis points in the prior quarter. We continue to believe the level of NPLs and charge-offs in the fourth quarter reflect a stable credit environment as evidenced by the chart of historical nonperforming asset levels on Slide 16 and the consistent level in our special mention and substandard loans on Slide 15. This quarter is another example of our commitment to identify problems early and charging them down where appropriate. Our goal, as always, is to say ahead of any credit challenges.

As noted in our last few earnings calls, we continue to be highly focused on our exposure to commercial real estate loans, which comprise roughly 1/4 of our total portfolio. As detailed on Slide 19, we continue to see signs of stabilization during the fourth quarter as CRE NPLs remained at a very low level, decreasing from 0.21% to 0.18%. And CRE charge-offs continue to remain at historically low levels.

On Slide 20, we continue to provide enhanced detail on our CRE office exposure. Currently, this portfolio remained steady at $1.7 billion or 12.1% of our total CRE portfolio and only 3.2% of our total loan portfolio. We monitor this portfolio very closely, and we will continue to perform our deep dive analysis on a quarterly basis. The most recent deep dive analysis showed very consistent results when compared to prior quarters.

Finally, as we have discussed on previous calls, our teams stay in close contact with our customers, and those conversations continue to reflect a measured optimism. With solid visibility into our loan pipelines and continued discipline around our portfolio, we would expect loan growth in 2026 to be within our guidance and portfolio performance in line with our historical experience. That concludes my comments on credit, and I'll turn it back to Tim.

Great. Thank you, Rich. Again, really good financial results in 2025. Our primary objective for 2026 is to continue to deliver solid and consistent financial performance. We expect our teams will continue to provide a differentiated level of service to drive organic growth. At the same time, we will continue to invest in the tools, technology and people needed to support that growth. .

Our targets for 2026 are straightforward. We expect mid- to high single-digit loan growth funded by a similar level of deposit growth as we continue to expand share. Given the current interest rate environment and even with a few rate changes in either direction, we expect the margin to remain relatively stable around 3.5%. We plan to deliver positive operating leverage while continuing to make the important investments that position us for the future.

We expect to see improved noninterest income in our wealth management and service-based fee income businesses and are hopeful for the mortgage market to pick up. We remain focused on our Midwestern footprint, and we'll continue to make the most of opportunities across the United States for our specialty businesses where our expertise and unique solutions give us a competitive advantage.

Our pipelines remain solid. And although we have strong momentum going into the year, we are mindful of the typical seasonality that can make our quarterly growth uneven, particularly in the first half of the year. With this in mind, I feel good about our business heading into 2026.

Let me end by saying that we could not generate the results that we do without the dedication and commitment of our Wintrust team. We have the best people in the business, and I want to thank each of our colleagues for all that you do to ensure we deliver results for our clients and our shareholders while we work to drive sustainable growth in the communities we serve.

Thank you for joining us this morning, and let me turn it back to Latif for your questions.

[Operator Instructions] Our first question comes from the line of Jon Arfstrom of RBC Capital Markets.

Can we usually start with loan growth. But can you talk a little bit more about that, Tim, kind of the -- what takes you to the mid-single digit, what takes you to the high single-digit. Sounds like you're off to a stronger start, even though you're flagging some -- how the first quarter and second quarter can sometimes be a little bit softer, but it feels like you're entering the year with pretty good momentum. Can you just unpack that a little bit for us?

Sure. A little bit, Jon and Rich can help me here. But again, we're cautiously optimistic about what we're hearing in the local economies where we operate employment levels, unemployment levels are low, and it was a pretty solid quarter for us broad-based in terms of loan growth. So I think we feel pretty good. As you mentioned, the first quarter can be a little bit softer than the second quarter for us, but the first half of the year tends to be in line with our targets. So again, I think we feel pretty good. And Rich.

Yes. No, I think you answered that very well. First quarter last year was 653, so down from -- we're about 6%. And then we picked it up in the second quarter as you -- Jon, you know that story. -- how our first insurance business really kind of picks up the pace there in the second quarter. So we had a really good second half, but there's -- but where that comes from, is, as I mentioned, some really good market positioning right now in our C&I and CRE space that we feel pretty good about. When we talk to customers, as I mentioned, they feel pretty good about where the economy stands right now and I think our -- there's enough stability in the general picture where they're willing to invest.

And then you look at the different verticals that we saw really good success with in the fourth quarter in particular, mortgage warehouse lines. And if we get some pickup here on the mortgage side of the business, I think you'll continue to see that in the first half of the year. Leasing resi mortgage also had a good quarter. So there's a lot of different things that feel pretty good right now. But again, the effect of the first quarter phenomenon in the premium finance business is something that we would expect to see usually reversing then back in the second quarter.

Okay. Good. And then maybe Tim or Dave, you talked about the positive operating leverage. I mean there was a big lift in 2025. What are some of the puts and takes on expenses and overall thoughts on the expense plans for 2026?

Well, I think it's probably sort of more of the same story that we've had before. If we have that mid- to high single-digit revenue growth, so far to say, 7.5% to 8% is sort of the middle of the target. We would expect that off of the fourth quarter run rate. We would expect expenses off of the fourth quarter run rate probably to be in that 4% to 5% range. And so we expect to get positive operating leverage again.

And if you had revenue that was at the lower end of that range, then we would -- we have tightened up on expenses. So the -- the goal is to get a positive operating expense, invest in the business to support stronger growth as we've always done and grow the franchise. So as you know, second and third quarter is a little bit higher for marketing and sponsorships for us in the first and the fourth quarters are lower. But health insurance claims tend to -- are tending to be up a little bit in this market. And so they may rise a little bit. But all of that is sort of baked into this, say, 4% to 5% expected growth based on the fourth quarter run rate.

And again, that gets you operating leverage. If loan growth was lower for some reason, which we don't expect right now, we see a lot of good opportunities, and we would we would probably trim back a little bit on expenses, but we're big believers in investing in the business to grow the franchise.

Yes, John, the 2 kind of wild cards. One, I think everybody is seeing benefit expense go up fairly substantially. The other is if the mortgage business picks up, we'll get more expense, but that would be good news for us because we would get obviously more revenue as well. Otherwise, I think Dave got the answer there.

Our next question comes from the line of Nathan Race of Piper Sandler.

I was hoping to unpack just the decline in deposit costs in the quarter, some of the drivers there. So maybe, Tim, could you just speak to how much of the opportunity to reduce deposit costs in the quarter was just a function of more rational competition in Chicago these days or maybe just some complexion changes in terms of the Wintrust deposit composition over the years that has allowed you guys to put up some favorable deposit reductions slightly?

Yes, Nate. I guess 2 things. One, our team did a really nice job moving deposits as the Fed moved, and we talked about the expectation that we would be able to do that. And that, in fact, did play out in the fourth quarter. We also had kind of a nice trend in terms of DDA deposits during the quarter. That can be a little bit lumpy at year-end as companies position themselves for their reporting activities. But we continue to see good growth in terms of the commercial deposits of the bank and the treasury services they use, and we're going to continue to work that mix. It's just -- it can be a little bit lumpy. But -- we were very pleased with the way deposit costs were managed in the quarter.

Okay. Great. That's helpful. And then just looking at some of the deposit growth drivers, it looked like it mainly came in the non-maturity segment. So just curious, do you see additional opportunities to run off higher cost. CDs going forward? And can you kind of just speak to maybe the CD repricing benefit that you have with like 95% or so of your deposits that are CDs maturing by end of this year.

Yes. I think there's probably a minor benefit. Again, I would emphasize minor on the CD book rolling as we continue into 2026. But the noninterest or the interest-bearing deposit growth supports our loan growth. And as we continue to grow loans at a pretty healthy level, we've stated that we would try to continue to fund that with new deposits. And our deposit costs can be a little bit higher than some of our peers. We're fine with that as we add clients to the bank that will be with us for a long time.

Our next question comes from the line of Chris McGratty of KBW. .

Tim or Dave, I guess, what's not where you want it to be? It seems like a lot of positives in one column. What's not where you want it to be in terms of either growth by asset class or anything operationally.

Well, we'd like the mortgage business to be stronger. We think we've done a good job of paring back the expense related to that business. So it's not damaging to us at these relatively low levels from a volume standpoint. We'd always like more commercial activity, but we remain pretty disciplined about trying to pick relationships versus transaction activity. And periodically, as some of our peers try to get loan growth, we've seen some transactional activity and some odd pricing. But we think we're -- we continue to be well positioned in the market. .

Size-wise, there are very few local institutions near where we are. We think that's an advantage for us. And net-net, we continue to feel like we're in a pretty good position.

Okay. And then just following up, Tim, you don't need to do a deal with that kind of growth, but you have historically kind of entertained tuck-ins. Like what's the latest on M&A appetite?

Yes, Chris, you're right. I mean we're aiming for organic growth, and that would be our plan. If we get an opportunity to do an acquisition, we think we're reasonably good at acquisitions, at least the smaller ones that we've done. Conversations continue. There's a little bit of fits and starts, but nothing that's worth talking about right now. And our business plan for 2026 is based on growing our business organically. .

Our next question comes from the line of Brendan Nosal of Hovde Group.

Just to start off on capital. You've built ratios nicely over the last 12 months despite robust loan growth. Is there a point at which you see alternative deployment outlets for capital beyond the dividend and organic growth.

Well, I think as we talked before, I mean, generally, if you grow the mid- to high single digits, we're probably growing capital at 10 basis points a quarter, plus or minus. And so -- and we've been doing that. I think, as we said before, we want to focus on organic growth and see how strong that is. If that number starts to get to 10.5% or above, and we don't have any good acquisition opportunities and organic growth is mid- to high single digits. That number would keep growing. So then I think you would look at buybacks and the dividend increases. But generally, it would be organic growth, well-priced acquisitions, smaller acquisitions, I think, would be #2 than a buyback.

And just for reference. We haven't talked about this in a while, but we do have a little over $200 million of an authorized buyback plan in place that we could use down the road if we wanted to. But right now, I think we're we're letting to grow a little bit, going to see how the organic growth opportunities go and whether we can use it for that, and then we'll play by year after a couple of quarters down the road.

Okay. Okay. That's helpful. One more for me, just pivoting to credit and specifically the reserve. I think if I look back over the past 2 years, you've been gradually saving a couple of basis points here and there off reserve ratios, whether it's the stated reserve alone or ACL to the core loan portfolio. I guess that a lot of that is formulaic and driven by outside doctors. So just kind of take us through the thought process on gradually bringing down reserves? And where do you see coverage ratios trending across 2026?

Well, we don't plan whether to build reserves or take reserves away, the CECL process and the macroeconomic factors and the mix of the portfolio and the process we go through to determine reserves really determines the level of those reserves. So if the economic forecast gets much worse for some reason if the economy gets worse, and you're going to see that coverage ratio go up. What we saw started during the year is that the economic forecast, generally, we're getting better. And so the model just spits out the results.

But our credit, as we talked about, has been very good. Our criticized and classified levels are very low. Our NPAs are very low. Our charge-offs are low. And so we had economic conditions or even some commercial real estate pricing index got better early in the year and the like. And so we really do a fairly thorough process of using economic data digging down with our teams on the loan side to build what that reserve should be. So we don't go into it with some preconceived notion that we should build reserves, release reserves, we look at all the factors and record the provision accordingly.

So I don't want to give you an outlook as to whether you're going to build or release because I don't know what the economic factors are going to be in the future. And remember, CECL is a forward-looking concept, not a backward-looking concept.

Our next question comes from the line of Jeff Rulis of D.A. Davidson.

Tim, maybe just back to the -- you talked about the macro environment being pretty favorable or optimistic with the customers. I wanted to touch on the competitive landscape, but some of your larger Midwest peers are engage with deal activity down in the Southeast and Texas and wanted to kind of -- is a portion of your growth or market share gains from maybe competitors being focused elsewhere? Just a thought on -- if you could touch on that.

Sure. We've always benefited from disruption, distraction, call it whatever you want. But -- we believe our position in the Midwest is an attractive one. We believe the markets we compete in are actually very good markets. There's a lot of density. There's a lot of wealth. And to the extent that others elect to focus elsewhere at times, I think that's only helpful to us. But we compete with all of the big banks every day and a handful of Chicago-based competitors and, in some cases, credit unions in some of our markets.

And so we believe we differentiate based on service and the people at the company, and we'll continue to do that.

And I guess, Tim, just to kind of follow up then. I mean, you've outstripped a little bit of the -- even the high single digit, I think, 11% loan growth. And just trying to think about timing do you look at '26 as equal opportunity on that disruption as you've had in maybe the prior year? I guess the question being, any change to that is that closing? Are you seeing folks kind of reorient with the Midwest and might be a more competitive year ahead loaded question.

No. Well, it's hard to say. I think there certainly are lots of fits and starts for various competitors, and we have some folks that are trying to open more locations in Chicago and people that are trying to move teams. So I don't think that's anything really new. The only piece that I would say on loan growth relative to the last few years is -- we've obviously had a little bit of a tailwind in terms of premium finance with premiums rising in addition to the bank growing the number of units that we produce.

And I think there is some flattening in terms of the premium environment for insurance companies. I don't -- people use soft and hard in all those terms. I just I just think it's probably up to us to grow the loans now as opposed to getting help from the market.

Appreciate it. And just one other one. Rich, looking at the linked quarter commercial nonperforming loan increase, again, not big and that probably flat to down from the second quarter. So the balances are kind of moving around. But anything you'd point to on the commercial linked quarter increase on nonperforming loans.

No, not really. It's more episodic in nature, and we've said this in the past where we see things as just kind of one-off things and we work to solve them and move along. I think when I look at credit quality in the portfolio, we really focus on where the special mention, substandard numbers are, which we're seeing at a pretty consistent level. So things will occasionally go bump in the night, and that's our job to fix those. But this is really more for this quarter, at least more of a -- we would kind of identify it as more episodic. .

And Rich, on the -- I guess, as we approach a year from kind of the tariff liberation day noise, your sense of customers, is there more maybe relative to ease. I mean, that threat is always out there. But from a customer standpoint, do you sense any more comfortability than you were 9 months ago?

Yes. I think the ease around the tariffs is real. I think probably maybe even more so is I think labor costs, if you go back a year or two years ago, labor costs and finding labor was really problematic. I think that, that's improved quite a bit. And I think people kind of look at just a more stable labor environment. More predictable from an expense perspective. And so they're a little more comfortable today. .

Our next question comes from the line of David Long of Raymond James.

We talked about M&A, and I understand you guys have an excellent organic growth opportunity in front of you and fully taking advantage of it. But in the past, you've talked about other MSAs and looking to replicate what you do in Chicago and other MSAs, Minneapolis, St. Louis, Indianapolis have been mentioned. Is there any appetite to move outside of the Chicago MSA at this point?

Well, I mean we're in Southeast Wisconsin and West Michigan now, which you know, David. I mean we would be opportunistic in other Midwest geographies that we don't cover today, but that would be on a disciplined basis. And where we haven't been able to acquire, we've, in some cases, open branches, and we've been effective in doing so.

We've talked in the past about Rockford, and we've got some branches opening in Northwest Indiana this coming year. So we'll take the opportunities as they come to us. But if we need to go to other geographies organically, we think we've proven our ability to do that.

Our next question comes from the line of Terry McEvoy of Stephens Inc.

Maybe, Tim, just a question for you. As the industry continues to evolve, what are your current thoughts on the strategic benefits of operating 16 banking charters kind of relative to some of the costs and leveraging the Wintrust brand?

Yes. The charter question comes up periodically and we currently have 16 for those of you that are following along. We believe they continue to be a benefit for us. They keep us closer to the market than many of our competitors. We've centralized most of the infrastructure and expense that goes along with the charters. And so -- it's really more of a marketing and market function that we believe is valuable to us.

And if you look at the communities in which we operate in many of those communities, we're the #1 or #2 market share in very attractive markets. That's not a benefit we want to give up at this point. So -- we watch it carefully. The expense is not trajectory changing. It's a structure that we believe we operate well and we'll continue to evaluate it as we go. But for the time being, we like it. There are clearly benefits. Deposit insurance is one of them, our MaxSafe product, obviously gives us the ability to provide customers more insurance than they might otherwise get. There are other benefits. And as you would expect, there are some other trade-offs, but the net balance for us remains positive.

And then as a follow-up, about 1/3 of last quarter's loan growth was in mortgage warehouse. And I think in the past, you've talked about gaining market share. But when you kind of look at the forward curve, is that portfolio kind of a headwind, a tailwind to growth expectations for '26.

Obviously, it depends on what happens to the mortgage market. We've been successful in growing that business in a stable mortgage market because of the expertise our team brings and the job our folks do from an operational standpoint. But for us, that's a 0 loss business with very attractive dynamics. We think we're very efficient. It will move a little bit with the mortgage volume over time. And if the mortgage market gets stronger, as we've talked about, it's a benefit to us both in terms of our core business and the warehouse business.

In addition to which I think it's a great point, Tim brings up. It's the market, obviously, but they have done a really nice job of bringing new names in, and that comes with if you get the volume, you also get some fee income out of that and some very nice deposits. So I mean, it's really -- it's been a great story in spite of the fact that you might get some volatility in overall rates. So we like where we sit in that space right now.

But Terry, this is Dave Dykstra. I would just add, the mortgage market has been bouncing around the bottom for so long. I say, a period of time, there's way more upside than downside there. It just doesn't seem like the the volumes are going to go much lower in the mortgage market. So I would think net-to-net over quarter-to-quarter, it may change a little bit. But net-net, has probably more upside than downside there. [indiscernible].

Our next question comes from the line of Casey Haire of Autonomous Research.

Wanted to clarify your comments about the operating leverage dynamics. I think you said -- do you expect mid- to high single-digit revenue off of [indiscernible] and then expenses to grow mid- to high 4% to 5% versus the fourth quarter run rate. There's a little bit of excitement that you meant or that you said mid- to high single digits revenue growth off the fourth quarter run rate. Just wanted to clarify that.

Yes. No, we're talking off of the -- something we generally have had acquisitions in past years, and we grow organically so good. we generally try to give you guidance of the fourth quarter run rate versus the full year. So when I talk -- when you're talking about forward growth, we're talking about off of the fourth quarter run rate on both sides there.

Okay. All right. And then just a follow-up on the -- a couple of follow-ups on the NIM. So first off, on I have your interest-bearing deposit beta cycle to date around 57%. Just some updated thoughts as to where that can trend to in '26?

Yes. As we've talked about on prior calls, our guess on the deposit beta in terms of total cycle is going to be in the low 60s. And we continue to believe if we get rate cuts that will do a nice job managing the deposit, the interest-bearing deposit expense. And so I don't think our view has changed there.

Okay. Very good. And just last one for me. The hedge program that you guys detailed on Slide 12, you do have a number of hedges that mature this year. Does that hurt your ability to hold the NIM stable? Or is there a plan to backfill with new hedges as they come off?

No. Our guidance fully contemplates those hedging programs running off. But we would expect to pay market conditions to backfill that and just probably do some forward starts and fill in the gaps going forward as they mature. But -- we think, given our current position, our current swaps in place and our growth projections is that we will hold the margin in the 350s. And as Tim said, if rates go up 2 or 3x or down 2 or 3x, we still think we're there. So we think we're very neutral for a full year with the margin. .

Next question comes from the line of David Chiaverini of Jefferies.

Maybe just starting off with a further clarification on that run rate comment. So are we talking 4Q '26 versus 4Q '25, those growth rate figures? Or are we talking full year versus the 4Q 25 annualized?

Taken 4Q '25 annualize that to get to a number, and then you can put the growth rates on top of that for the full year of '26.

Perfect. And then I wanted to ask about the mortgage banking outlook. It sounds like that could be a nice swing factor for 2026. Can you talk about your expectations in terms of volume, gain on sale margins, whether those could increase or be under pressure? And just give us a sense of how optimistic you are on that business.

Well, I guess we've always been optimistic. And I think the last 2 years, I've been optimistic for a great spring buying season, it hasn't occurred, but we are optimistic. There's still a supply shortage out there. But I mean if you look at our mix of business in the fourth quarter, it was about 50-50 purchase and refi. In the prior 3 quarters, it was probably 3 quarters purchase and [indiscernible] refi. So as rates have come down, we've seen a little bit of a pickup in refi, but also a slow winter buying season in the fourth quarter.

But if you sort of look at the service portfolio that we have out there, which is a sizable portfolio. We've got maybe at the current rates around in the low 6s, we've got between 10% and 15% of that portfolio is sort of in the money to refi. But if rates go down another 25 basis points or let's say, 50 basis points, you'd have more like 1/4 of that portfolio would be reliable. So we think if rates go down 25 to 50 basis points on the mortgage side that we could have some pickup. But the tenure has been going up. And so I can't predict interest rates, but we are optimistic that if the mortgage rates stay where they are now, and drop a little bit further into '26 that there's some pickup there. There's upside. And we don't think that going out going down much further is really that probable. We've been in the low 20s for quite a while here and with very low application volumes. So unless rates really shoot up in the mortgage market we think we can hold this revenue. So we look at it as upside and we're optimistic it happens, but we can't control the mortgage rates.

Yes. And maybe the other benefit, which has been the case now for a couple of years is as these low rates have continued many of the sort of refinance independent broker mortgage operations have gone out of business. And so our share of the market, we think, is up considerably. And when it comes back, we expect to do well. .

Our next question comes from the line of Ben Gerlinger of Citi.

Sorry, I just wanted to double check and maybe fine-tune a little bit here. And I apologize for a little [indiscernible] on it. But you talked through the -- or the property casualty insurance market, an agree softening versus strengthening, I don't know either. But it seems like the pricing is a little limited year-over-year. So is it fair to think like 2Q will still be a good growth quarter, but maybe not as heroic as we've seen previously. And I'm just trying to fine-tune the first half of the year in terms of modeling growth?

Yes. I think the only point we were trying to make is that for the last couple of years, we've had the benefit of premiums going up. That may not be the case right now. We don't think they're working against us. But we still expect a strong second quarter. It's seasonal component of the Property & Casualty premium finance business, and we would expect to have a good second quarter. .

Got you. And then just kind of at a 50,000-foot view, you guys generally trend to show loan growth and deposit growth in roughly the same quarter. Is that a fair way to think about this year given kind of what's transpired over rates and your outlook for growth?

Yes. We certainly aim for deposit growth to mirror our loan growth, and we would take more deposit growth if we could get it. Again, that's adding clients that will be with us for a long time. It can be lumpy. So I can't tell you they're going to exactly mirror each other, but that would be our target. .

Our next question comes from the line of Jared Shaw of Barclays.

Most have been asked and answered. But I guess just as you look at hiring incremental revenue producers here, are you seeing competition impacting what you have to pay for new people here? Or what's sort of driving the movement of revenue producers among companies right now?

Yes, I don't think there's been a hugely material change. Obviously, top-tier producers can be expensive. And we think we do a good job of not only working our own team and periodically finding others. We don't talk about it a lot here just because it's a normal part of our business. And so we're always looking to add folks that are very good at taking care of customers and help us differentiate our services. .

Okay. And then just finally, looking at construction down this quarter, any color on the build-out of construction and how that could potentially be funded up as we move through next year or this year? .

You're talking about just general construction lending? .

Yes. Yes, it was down this quarter, I'm guessing from completions, but sort of what's the growth outlook there?

Yes. I would say it's kind of -- Chicago hasn't been a huge construction market. We've seen a little bit, but I think there's more upside there. I mean, multifamily, for instance, in Chicago, continues to be very strong. Some other markets are maybe struggling a little bit more because of oversupply. So I actually think we're feeling okay about where construction activity will be for this coming year.

Our next question comes from the line of Janet Lee of TD Cowen.

Not to beat on a dead horse, but just to clarify on your outlook for resi mortgage and mortgage warehouse, is your mid- to high single-digit loan growth for 2026 [indiscernible] a level of bullish, like are you assuming that mortgage rate perhaps step to the 5% handle? Like are you baking in a level of mortgage rate reduction in your mid- to high single-digit outlook? Or were you referring to an additional upside to the mid- to high single-digit loan growth if mortgage rates do dip below 6%?

Janet, the assumption would be a slightly improved mortgage market in line with the Mortgage Bankers Association projections, not any dramatic drop in rates. And Dave, a couple of minutes ago, gave you a little bit of a sense for how much volume you could get if the rates dropped. But I think to get any very, very material lift rates would have to go below 6%. .

Got it. And on your NIM outlook for stable, I think there is room for interpretation and you're characterizing 4 basis point increase in NIM this quarter as being stable, you're pretty neutral to rates of seams and 60% beta also seems solid. What are some of the drivers that could put you to either perhaps increasing net interest margin through 2026. And are you still seeing the phenomenon of seeing some spread compressions on fully funded CRE, which you've talked about in the past quarters.

Well, we've talked about competitive pressures largely from folks that maybe haven't grown as quickly as we have and kind of desire to do that. And so I think there still is a fairly competitive environment for fully funded loans. But some of that's transaction-based, and we're really much more focused on relationship-based arrangements. If the competitive environment changed dramatically, you could get some pressure on the margin Obviously, the first quarter with a couple of fewer days has a math impact on the margin. But we're actually pretty neutral almost independent of rate changes and given the visibility to the competitive environment, that would be the case there, too. .

Our next question comes from the line of Bill Happel of [indiscernible] Research.

Can you just maybe talk through the fixed asset reprice that you're seeing on both the loan and the security side, kind of where roll-on, roll-off yields are in both books?

Yes. We really haven't talked about the roll-off yield on them. We have still very little commercial and commercial real estate fixed asset repricing, most of our fixed asset repricing comes out of the premium finance portfolios. Life is fixed for a year, and so it reprices once a year. So it takes a full year for that portfolio to reprice -- that portfolio is generally 12 months CMT plus 200 basis points. So if you look back a year and see where the 12 months CMT was and at current rates, you can kind of calculate that impact and commercial premium finance is generally. It's not tied to prime, but generally has good correlation to the prime rate and their 9-month loans that are fixed rate that pay monthly. So it takes 9 to 10 months for them to generally turn over.

So again, if you look back at what the prime rate was 9 to 12 months ago and look at where they are now, you and probably get some good feel for that repricing. The commercial portfolio repricing on securities, it's very little cash flow. So a basis point or 2 here or there impact of nothing material.

Got it. And where are you adding -- the securities that you added in the available-for-sale book, where were those yields coming on? Where were you purchasing?

Around the 5% level. .

High 4s, 5.

I would now like to turn the conference back to Tim Crane for closing remarks. Sir?

Thank you, Latif. As always, for those of you on the phone, we appreciate you joining us and for your support. We start 2026 in a good place. I hope we've answered your questions. If not, you know where to find us, and we'll be working hard for all of you and for our shareholders. Thank you. .

This concludes today's conference call. Thank you for participating. You may now disconnect.

Welcome to Wintrust Financial Corporation's Third Quarter and Year-to-Date 2025 Earnings Conference Call. A review of the results will be made by Tim Crane, President and Chief Executive Officer; David Dykstra, Vice Chairman and Chief Operating Officer; and Richard Murphy, Vice Chairman and Chief Lending Officer. As part of their reviews, the presenters may make reference to both the earnings press release and the earnings release presentation. [Operator Instructions]

During the course of today's call, Wintrust management may make statements that constitute projections, expectations, beliefs or similar forward-looking statements. Actual results could differ materially from the results anticipated or projected in any such forward-looking statements. The company's forward-looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the company's most recent Form 10-K and any subsequent filings with the SEC.

Also, our remarks may make -- may reference certain non-GAAP financial measures. Our earnings press release and earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure. As a reminder, this conference call is being recorded. I will now turn the conference over to Mr. Tim Crane.

Good morning. Thank you for joining us for the Wintrust Financial Corporation Third Quarter Earnings Call. In addition to the introductions that Latif just made, I'm joined by our Chief Financial Officer, Dave Dykstra; and our Chief Legal Officer, Kate Boege. I'll begin this morning with a quick overview of our results. Dave Dykstra will speak to the financials in more detail and Rich will speak to the loan activity and credit performance. I'll be back with some final thoughts. And as always, following our remarks, we'll be happy to take your questions.

Wintrust reported a third consecutive quarter of record net income, driven by our differentiated approach to understanding our clients' needs and delivering the right solutions to help them meet their financial goals. Net income of $216 million was up from just over $195 million last quarter, an increase of almost 11% quarter-over-quarter.

Net interest income was up $20 million from the second quarter to $567 million, driven by another quarter of solid loan and overall balance sheet growth. Loan growth of just over $1 billion was broad-based and continues to reflect the diversified composition of our earning assets. Total loans were $52 billion at quarter end, up 11% year-to-date on an annualized basis.

Deposit growth of just under $900 million kept pace with the loan growth. Total deposits were almost $57 billion at the end of the third quarter, and the rate paid on interest-bearing deposits was essentially flat compared to the prior quarter, up just 1 basis point. Net interest margin was $3.50 for the quarter, down slightly from the prior quarter, but square in the middle of our targeted range. Credit quality remains very good, and we continue to proactively work with a small number of clients who are experiencing challenges.

Before I turn it over to Dave, just a couple of highlights. First, the FDIC's annual deposit market share report was released last month, and we continue to achieve deposit share gains in each of our key markets. In Illinois, Wintrust is now third in deposit market share up 1 position. Our Wintrust franchises in Wisconsin and West Michigan showed strong growth as well, also with lots of upside potential. Given our advantaged position in these markets, we remain focused on continued core deposit growth as a key tenet of our franchise.

Secondly, I'm proud to say Wintrust debuted at #6 on American Bankers nationwide survey of bank reputation. The survey results reflect our commitment to earning the trust of our customers every day. It also speaks to our ability to grow and strengthen the franchise. So once again, a solid and straightforward quarter, and I'll turn it over to Dave for additional insights.

Great. Thanks, Tim. With respect to the balance sheet growth in the third quarter, we once again had strong loan and deposit growth, which fell within our stated mid- to high single digits targeted growth range. Specifically, the deposit growth was $895 million during the quarter, representing a 6% increase over the prior quarter on an annualized basis. The deposit growth helped to fund solid third quarter loan growth of $1 billion or 8% on an annualized basis. As to other aspects of the balance sheet results, total assets grew $646 million to just under $70 billion in total assets.

Turning to the income statement results. It was a very solid operating quarter. As Tim said, we had another record level of quarterly net income. Our net interest income represented another record high quarterly amount also a $2.4 billion increase in the average earning assets drove the $20.3 million increase in net interest income over the prior quarter. Given the current interest rate environment and even with a few rate changes in either direction, we remain confident that our net interest margin can continue to be relatively stable throughout the remainder of 2025 at roughly 3.5%.

I would note that period-end loans are approximately $660 million higher than the average loans for the third quarter, giving us a good start on achieving higher average earning assets for the fourth quarter and combined with that stable net interest margin, I referenced, should provide for increased net interest income in the fourth quarter as well.

The provision for credit losses remained relatively flat with the prior quarter as the overall credit environment and asset quality has remained relatively stable. As to noninterest income and noninterest expense, total noninterest income totaled $130.8 million in the third quarter, which was up approximately $6.7 million when compared with the prior quarter. The increase was supported by slightly higher wealth management and mortgage revenue, higher security gains and a variety of smaller changes to other noninterest income categories as shown in the table in our earnings release.

Overall, a solid and consistent outcome for noninterest income during the third quarter. Noninterest expenses totaled $380 million in the third quarter, which represented a slight decline from the $381.5 million recorded in the prior quarter. The expenses are well controlled with both the quarterly net overhead ratio and efficiency ratio improving from the prior quarter.

In summary, we're pleased with the record quarterly results in net income and net interest income. The results were supported by good franchise building loan and deposit growth, a solid net interest margin, low credit costs and well controlled expenses. We also continue to build our tangible book value per share during the first 3 quarters of this year. And as you can see in our published materials, we have grown tangible book value per common share every year since we've been [indiscernible] become a public company, and we're on track to do so again in 2025.

Also, as we mentioned on our last call in the -- quarterly call [indiscernible] prevent any confusion, I just want to revisit the onetime impact of our preferred stock redemption and the new preferred stock issuance. We included an overview of the impact on Slide 24 of the presentation deck. In short, while there was no impact to operating net income with a portion of these transactions that were a onetime nature reduced fully diluted net income per common share by $0.28 in the third quarter. Without this impact, fully diluted net income per common share would have been $3.06. If anybody has any questions on the details of that preferred stock issuance or redemption, please contact me, and I'm happy to walk you through it.

So with that, I'll turn it over to Rich to discuss credit.

Thanks, Dave. As Tim and Dave both noted, credit performance continued to be very solid in the third quarter. As detailed on Slide 7, loan growth for the quarter came from a number of different categories. Commercial real estate loans grew by $327 million. Wintrust Life Finance team had another solid quarter and grew by $252 million, and our leasing of residential mortgage groups also had a very solid quarter. We believe loan growth for the fourth quarter will continue to be strong and within our target range for a few reasons.

Our core C&I and CRE pipelines remain very solid and we continue to benefit from our unique market positioning in our core markets of Chicago land, Wisconsin, West Michigan and Northwest Indiana. In addition, we continue to have very strong momentum in a number of our lending verticals, including leasing and premium finance.

From a credit quality perspective, as detailed on Slide 15, we continue to see strong credit performance across the portfolio. This can be seen in a number of metrics. Nonperforming loans decreased from $189 million or 37 basis points to $163 million or 31 basis points. Charge-offs for the quarter were 19 basis points, up from 11 basis points in the prior quarter, but down from 23 basis points in Q3 of 2024. This quarter's charge-offs were primarily related to the resolution of previously reserved credits that have now been fully resolved.

We continue to believe that the level of NPLs and charge-offs in the third quarter reflect a stable credit environment as evidenced by the chart of historical nonperforming asset levels on Slide 16, and the consistent level in our special mention and substandard loans on Slide 15. This quarter is a perfect example of our commitment to identify problems early and charging them down where appropriate. Our goal, as always, is to stay ahead of any credit challenges.

As noted in our last few earnings calls, we continue to be highly focused on our exposure to commercial real estate loans, which comprise roughly [ 1/4 ] of our total loan portfolio. As detailed on Slide 19, we continue to see signs of stabilization during the third quarter, as CRE NPLs remained at a very low level, decreasing from 0.25% to 0.21% and CRE charge-offs continue to remain at historically low levels.

On Slide 20, we continue to provide enhanced detail on our CRE and CRE office exposure. Currently, this portfolio will remain steady, although it represents only 3% of our total loan portfolio. We monitor this portfolio very closely, and we continue to form our deep dive analysis on a quarterly basis. The most recent deep dive analysis showed very consistent results when compared to prior quarters. Regarding overall economic conditions, particularly in light of tariffs, funding and government shutdowns, we maintain an active dialogue with our customers to assess business sentiment.

Overall, these conversations reflect a sense of measured optimism as we approach year-end. We continue to expect strong portfolio performance consistent with our historical experience, supported by strong underwriting disciplined diversification and a proactive approach to resolving credit challenges. In summary, we continue to be encouraged by our credit performance in the third quarter, and we believe that our portfolio is well positioned, very diversified and appropriately reserved.

That concludes my comments on credit, and now I'll turn it back to Tim.

Great. Thanks, Rich. Just a few final thoughts. This past week has been bumpy for many financial institutions. What's important to highlight from my perspective is that Wintrust once again delivered strong, predictable growth and solid credit performance. We are very disciplined in our approach to underwriting. As we've said before, there's a lot of the -- I'm sorry, as we've said before, there's a lot of liquidity in the system and many providers will take risks that we don't. We pass on deals that do not meet our rigorous standards, we believe our approach to credit underwriting and our diversified portfolio serve us well and will continue to do so as we grow.

As we enter the final quarter of the year, we believe we will continue to generate loan and deposit growth in the mid- to high single-digit range. while growing net income and maintaining a stable net interest margin. We continue to manage our expenses thoughtfully while we regularly invest in our business. We like where we're positioned in the Midwest, while others may be turning their attention to other geographies, we're focused here where our customers, consumer and commercial appreciate the relationship-based approach. Our team is focused on putting our customers first and delivering the financial solutions they need to create impact in our communities and to deliver results for our shareholders.

We believe there's a lot of growth potential and relatively rational competition in our core Midwestern markets. Our clear focus and differentiated approach drive consistent, meaningful financial results and we expect to continue to deliver in that manner as we finish the year.

At this point, I'll pause, and I'll ask Latif to open the floor to your questions.

[Operator Instructions] Our first question comes from the line of Jon Arfstrom of RBC Capital Markets.

Maybe for Tim or Rich, on the loan growth drivers, can you talk a little bit more about the pipelines and what you're seeing? Are they changing at all one way or the other? And then if you could -- just because it's topical, if you could comment on any NDFI exposure you might have.

Yes, I'll take the first one. What we're seeing in the pipelines is really, as I talked about in my commentary, we have this unique market positioning, particularly in the Chicago market where there's a lot of much bigger banks and a lot of smaller banks. And for the banks that are significantly larger, they have a huge amount of market share that we have slowly been taking away from them. We just landed a very nice relationship, long time customer at one of the predominant banks in Chicago, and they just didn't even know who to talk to anymore. And those are the opportunities that have just continued to feed that C&I pipeline and CRE pipeline really over the last 10, 15 years, as we've continued to just really press in that area. So it's really -- when I look down the list, that's what the pipeline largely consists of. It's just more and more opportunities coming from larger banks where they just feel like they don't know anybody at those institutions, their credits getting decisioned at a place where they don't even know who's doing it. It's just they really like to bank with somebody where they know their banker, they know who's making the decision. So that's really the pipeline. As it relates to NDFI, anything further on that, Jon?

No. I think you're saying its market share and the environment, both but maybe more [indiscernible]

Yes. And Jon, the only thing I would add to that, I mean, these tend to be relationships where we will also have treasury management opportunities and wealth opportunities over time. So the pipelines are stable, and we continue to be encouraged by what we're hearing from our clients in the market.

NDFI, that it's a pretty broad category, which for us totals just over $2 billion. Approximately 70% of that is made up of mortgage warehouse lines and capital call lines, businesses that we've been in for years, and we've experienced no losses in. The balance is primarily made up of loans to leasing and premium finance companies again, businesses that we are very familiar with and customers that we know well. So I'd say the predominant piece of that puzzle really is mortgage warehouse. And again, piece of the -- I think you know that story well, having followed us for so long.

Yes. Okay. And then this comes up on your company as well a little bit just in terms of the margin and the margin range. How do you guys feel about the ability to hold the margin in the current range kind of over the medium term with the Fed starting to cut rates. Is this something that you can hold through the medium term? Do you feel like you're protected there?

Yes, Jon, this is Dave Dykstra. Yes, we really do. We've said in prior calls that if rates go down cut 3 or 4x, we still believe that we can hold the margin in the $3.50 range. The balance sheet is relatively variable on the loan side, but we also have some swaps in place to manage that downside risk. But our deposits are also quite variable with 80% of them being non-term deposits. And given the rational market here in Chicago, we've been able to cut rates fairly evenly with the Fed cuts going down. So as market rates have gone down, our deposit costs have gone down, and we're fairly balanced on both sides of the equation. So we're pretty comfortable within a fairly tight range around [ 3 50 ] given the 3 or 4 rate cuts that a lot of people are talking about over the next year, that we'll hold that [ 3 50 ] margin, plus or minus a few basis points.

Our next question comes from the line of Terry McEvoy of Stephens Inc.

Maybe a question on the commercial loan growth. Ex the finance receivables, it was, call it, $150 million in the third quarter versus $450 million in the prior quarter. And I'm just wondering, is that decline in market competition, you being more selective or maybe something within the composition of that commercial portfolio.

Terry, I don't think there's anything that I would read into that. I think it's just more timing than anything else. We -- I would say that when you look at just overall pipelines, you're seeing pretty consistent opportunities. It just kind of depends on when they close. You've got some utilization issues there. So I would say it's been a pretty consistent story in terms of overall commercial pipelines and opportunities and balances.

And maybe a question for Tim. Could you just expand on the strategy to play more offense in your markets when competitors may be focused on Texas or elsewhere? And would you step up hiring and marketing to take advantage of that situation?

Sure, Terry. I mean the -- there's a lot of conversation about people finding the Southeast or Texas attractive. And we think we've got 4 -- 3, 4, depending on how you look at it, very attractive market areas, the Chicago land community, including Northwest Indiana is a dense business-rich community with transportation and healthcare and good education. And although it may not be growing as fast, we've consistently been able to take share from some of our peers. And so we continue to feel very good about that. West Michigan grows a little bit faster. And with the Macatawa integration activities behind us, we're making progress. You can see that in terms of the deposit share that we've gained over the last year, and we continue to feel very good about Wisconsin. So we just like our backyard in the markets that we understand better than we like others. And we'll continue to follow clients periodically to Florida or other geographies maybe, but we're very comfortable in the Midwest and our ability to continue to grow on a consistent basis.

Our next question comes from the line of Chris McGratty of KBW.

My question is around operating leverage. This year, you're poised to produce, I think, about a couple of hundred basis points. I'm interested if that gets perhaps a little more challenging next year with the rate outlook but also the -- I guess, the offset of deregulation might alleviate some of those pressures. But any thoughts on operating leverage trends?

Well, just that as we kind of approach our end of year planning for '26 that we expect we'll continue to get operating leverage. And if we can grow the balance sheet mid- to high single digits, and we can keep expense growth in the kind of mid-single-digit range, we would still expect to see improvement, and that's what our team will be aiming at as we get through the budget process.

Okay. Perfect. And then on capital, you're building capital. Is there a scenario where you might consider more acquisitions in a friendlier environment, [indiscernible] history of doing fairly small but profitable deals.

Well, our sense is that some of the conversations around acquisitions, particularly around small banks are picking up. We're -- I think we're reasonably good. We're a disciplined acquirer, evidenced by Macatawa and our track record. So we'll continue to look at opportunities. But that said, we work for our shareholders. And so if anything else were to arise, our Board is well prepared and well equipped to deal with that. So we'll keep looking at stuff. And as we've talked about in prior calls, the very, very small transactions are probably tougher for us at this point. They just -- they don't move the needle enough.

Okay. And just so I understand, Tim, the comment, I guess, are you implying the optionality of going either way. Is that what your comments [indiscernible]

Well, I'm just saying we're clear. We work for our shareholders. Our Board is equipped to address any opportunity either side of the equation that comes up.

Our next question comes from the line of Nathan Race, Piper Sandler.

Just going back to the M&A line of question previously. Just curious if you're really just focused on organic growth, just given the runway that you've described, already on this call. And can you just maybe size up if you were to do an acquisition, what type of asset size or geographies you would be entertaining?

Yes. I mean, obviously, our track record is sort of bolt-on stuff. Macatawa is the $3 billion range. We think we're good at those types of transactions, but we've also spoken that we're making investments in people and capabilities to be a larger financial institution and serve larger clients. So I think without getting any specifics, there's really not a large change to our approach at this point. Again, we'll look at things that make sense strategically and from a cultural standpoint. Again, maybe to put the two fences on it, though, again, the very small transactions are just tougher from an economic standpoint. And as we said on prior calls, MOEs are complex and cultural issues, and I don't think our view on those has changed.

Understood. That's really helpful. Maybe just going back to fee income. Curious if you've seen any change in your lock volumes on the mortgage side of things, just given the drop in rates late in the quarter and how you're thinking about that revenue opportunity now that rates have come down in the fourth quarter and perhaps into 2026 as well.

Well, you can see there's just a little bit of a pickup in mortgage banking revenue for the quarter, but still in the low 20 to mid-20 range. We saw a pickup in applications early in the third quarter when rates came down. So there was a little bit of a flurry of people that wanted to refinance it maybe had rates in the 7%, 8% range. And then that went away fairly quickly in the middle of September and applications have stayed fairly low. So I think our thoughts are that the lower rates are better. Probably need another 25 to 50 basis points of mortgage rate cuts to see that number improve significantly. So I think based upon the seasonality of the fourth quarter being low and what we're currently seeing in applications probably still the mid-20s on plus or minus on mortgage revenue. We'll see how the order ends up here and see whether the 10-year comes down further with any of the Fed actions and whether that influences the 10-year portion of the curve, which, in the past, they don't necessarily move in sync as you know. But we're optimistic that it will get better next year with the slightly lower rates and home buying season starting in the early part of next year. But right now, it still seems like applications are sluggish.

Okay. Got you. If I could sneak one last one in on margin and kind of the outlook for loan yields. I think you guys have swaps or hedges on $4 billion or so of your floating rate loans. So just curious if we get 4 to 5 rate cuts over the next 12 months or so. Dave, can you maybe help us just in terms of where you could see [indiscernible] yields trough based on where you're putting new loan production on these days and relative to some of the swaps you have becoming effective as well?

Well, the swaps are effective all the time. They're just tied to the 3 months, SOFR -- the 1-month SOFR. And so if SOFR goes down a basis point, those help us a basis point as they go up 1 basis point, it hurts us a basis point and vice versa. So I -- those are effective for us in hedging those variable rate loans regardless of where SOFR moves to because of the swap nature of it. Loan rates are -- they're still in the sort of mid 6% to 7% range, depending on our mix. Premium Finance, P&C is higher than than other categories. So it sort of depends on the mix. But we're still thinking right now without any further rate cuts you're probably in the mid- to high 6s as far as blended new loan rates.

And Nate, the flip there is deposits coming on incrementally in the mid-3s, and that kind of matches the 3.5% margin that we believe will hold kind of for the near term.

I'm sorry, Tim, were you saying your kind of blended cost of new deposits coming in or around mid-3s these days. That seems a bit high.

The incremental cost of the deposits. So again, we grew $1 billion both sides. So at the margin with the promotional activities sort of mid-3s with loan yields around 7%, that sort of matches the 3% -- 3.5% margin that we're talking about.

Our next question comes from the line of Casey Haire of Autonomous Research.

This is Jackson Singleton on for Casey Haire. My first question is on NIM. What is the total cumulative interest-bearing deposit beta expectation underlying the stable NIM guide? During the hiking cycle, it looks like the beta was around 65% versus 55% at the end of 3Q. So just any color here would be appreciated.

Yes. We still think mid-60s is probably the right number. Our interest-bearing deposit costs are above 3% higher than some of our peers. So if you were to get more rate cuts, we feel a little bit good in this regard that we have room to move our deposit costs down more than maybe some others do. So again, we feel comfortable a couple of cuts or a couple of moves either way that [ 3 50 ] is still about the right number.

Okay. Great. And then for my follow-up, just on Premium Finance. So P&C growth has been very good this year despite being in a hard market. I think it's up around 15% on a year-to-date basis for end of period. So I guess just what is the outlook for P&C going forward?

We continue to be pretty bullish on P&C. I mean it's -- we continue to take market share. We deliver I think, a very good product for our customers. If you look over the course of like the last 5 years, you can just see just steady growth even if you ex the market, you'll see the number of accounts going up in addition to which, while there may be some softening in some lines, overall, I would say the market continues to look firm for us. So we continue to be pretty optimistic in that space.

Our next question comes from the line of Jeff Rulis of D.A. Davidson

Just wanted to maybe check in on credit. Rich, I think you mentioned you're sort of growing comfortability on CRE. Just looking at kind of the past dues linked quarter inched up a little bit. I'm curious as to maybe just timing on those. I mean those are early stage. Could you maybe speak to a little pickup there.

Pick up? Where in charge-offs or [indiscernible]

Kind of the past due not quite nonaccrual, but just early delinquency stuff was a linked quarter increase.

Yes. I wouldn't say anything that would appear -- I think probably more episodic than anything else. We as we have pointed out and we kind of limited our comments in the -- during the call on the CRE and the office. But one of the things that we spend a lot of time with our customers on is getting ahead of maturities and making sure that we are working with them to try to find a reasonable solution for things that get maybe a little sideways. And those conversations take some time. And so as you're working through those, you really want to be very thoughtful. You want to work with your customer. And occasionally, those may extend out past maturity. But those are -- that's part of the business. It's something we do week in, week out is working with our customers, and it's not always linear. So you may have quarter-to-quarter some changes up or down, but nothing that I would look at as problematic.

Yes. Jeff, I would just chime in here a little bit. I mean if you look at like 30 to 59s, although they're up from the second quarter, they're way down from the prior 3 quarters ahead of that. So over the last 5 quarters, still the second lowest. So I think a lot of this is just timing. Nonaccruals are down sort of the classified [indiscernible] substandard together categories are down. So the problematic areas we're showing improvement on and the shorter-term delinquencies, I think, are just timing issues.

Right. Yes. I didn't mean to -- I think your overall trends of credit, I guess, kind of the climate that we're at and just lower balances, we're going to kind of focus on certain things. But maybe on the charge-offs, any particular segment that those tended to come from in terms of the makeup.

No, really unrelated a handful of credits that had -- as we have pointed out, had reserves attached to them previously. And we just got the final resolution and charged off the reserve amount and moved down.

No commonality.

Got it. Okay. Appreciate it. And then maybe one last one. Just on the expense side, particularly within marketing seasonality, Q2, Q3 tend to be a little heavier. Could we maybe see a step down as we have historically in the fourth quarter and first quarter? Just -- and then if you have any comment on the overall expense run rate.

Yes. Well, we typically do see a step down in the fourth and first quarters on marketing because we don't have the -- as much of the major league, minor league baseball sponsorships and some of the summer sponsorships we do in the communities. And since none of our Chicago, our Milwaukee teams are any longer in the playoffs that expense will stop. But -- so we would expect that to come back down a little bit. There is some fluctuations in things like employee insurance expense and claims and things like that, that it's hard to get a beat on sometimes. We had a pretty good quarter this quarter in that regard. Second quarter was a little higher. So there are fluctuations in some other areas. But I think we're sort of sticking with what we said last quarter is that the other expenses we would expect to be in sort of the low 380s -- [ 3 80 to 3 85 ] range depending on fluctuations for certain things. And we obviously were at the very low end of that range this quarter and control those expenses well. But plus or minus a couple of million dollars. I think in that low to mid- [ 3 80 ] ranges were to focus right now. .

Our next question comes from the line of Ben Gerlinger of Citi.

This is [indiscernible] for Ben today. I guess you touched on this a bit, but when you think about the Chicago land marketplace, in terms of deposits, it seems like pricing has been rather rational relative to other large cities since your bank is more a price setter when you think about the next couple of months. In the next couple of quarters, how do you guys think about the ability to both gather deposits while also pricing down rate? Is there a relative level [indiscernible] Fed where overall competition might actually become more competitive?

Yes. I -- well, number one, we would continue to focus on core deposit growth as part of our target, and we would expect to continue to take share from some of our competitors. I think we can do that, as you mentioned, promotional rates that are fairly rational. And so as the Fed cuts rates, I think we'll still be able to get the stabilized margin with deposit growth. So I don't think that there's a trade or a sacrifice yet in terms of our ability to continue to perform, if that's the question.

Our next question comes from the line of David Long of Raymond James.

I just wanted to follow up on credit. Maybe this is also a lending question, but on the credit front, are there any segments or specific industries you're paying more attention to here? And then any lending verticals or again, industries where you may be pulling back your appetite to lend into.

No. I wouldn't say we're necessarily pulling away from anything. I think that we've talked about, obviously, office and transportation in prior calls. Almost I think we've largely got our arms around. Now I think -- and we kind of addressed this in the commentary, there's just a number of things that go on with the government and in terms of some of the things that we're seeing in terms of higher education and healthcare and things like that. We're paying very, very close attention to. Nothing that our customers generally are pretty well capitalized. I think they'll be able to weather the storm, but we are working with them very, very closely to make sure that if we can help in any way or if we can give them some guidance. But that's an area that we're watching very closely. I'd say if I were to stack ranking those, I'd probably put higher [indiscernible] at the top.

Got it, Richard. Appreciate that. And then on the net interest margin, you've talked about being able to keep it stable here for quite some time. What is the biggest risk to being able to keep the NIM stable or within a few basis points of that [ 3 50 ] level?

The way I would answer that, David, would be irrational competition. So if something happened in our markets, which, by the way, we don't see at the moment dramatically alter pricing of either loans or deposit costs, we could get some pressure there. But, again, we don't see that right now. We think other banks are focused on their margin and kind of remaining rational. So I wouldn't say there's a high likelihood of that happening, but that would be the risk.

Yes, I think that's the other risk would be, which, again, we don't see happening is, for some reason, the yield curve would go back inverted, but we quite frankly see the slope and the steepness staying in place. So we don't see either of those risks as a really prevalent right now.

David, I think our team has done a nice job staying very disciplined with pricing, both loans and deposits. And that's part of our MO and how we pursue business. I mean we've talked about on prior calls, we, at times, could have more business if we were willing to dramatically sacrifice our pricing methodology. We wouldn't sacrifice our credit methodology. But we don't see any need to do that right now everything feels relatively rational.

Our next question comes from the line of Janet Lee of TD Cowen.

I want to follow up on premium finance. Directionally and strategically, how should we think about the growth trajectory of premium finance loans? I understand that there is a seasonality component to it. Should we expect this to become a bigger part of your loan portfolio? And if C&I [indiscernible] pick up in 2026, how would your appetite to grow premium finance loans versus C&I would change relative to the maybe yields that it's generating? How I understand is it's generating yields that are comparable to C&I, but with lower credit risk, but not bringing in deposits, how would your appetite change if C&I were to pick up?

Well, I think we've always looked at our niche businesses as being about 1/3 of our balance sheet and the biggest one has been premium finance, both life and property and casualty. We like to grow the business in all aspects of its good business growth, right? So I don't see us getting the overall premium finance business much more than 1/3 of the balance sheet because it just never has. We've always been able to grow the rest of the balance sheet. In the short run, if C&I grew more or less, I don't think we would take our foot off of the accelerator for Premium Finance. If it got to be too big, you know that we have an offshoot, we've been demonstrating that we can sell off excess production. And so if we get to a point where we didn't like the concentration of that number started to get around 40% between all of the premium finance divisions, then you might say, well, we want to sell some of that and take a profit off of that excess production. But I don't think we would take our foot off the accelerator as long as the pricing and the credit metrics of that portfolio held up like they have for the last few decades that we've been in the business.

Got it. And just on NIM again. In terms of the 4 basis point decline in loan yields that you saw, was that all driven just by the variable impact from -- I mean, the impact from the variable rate loans in the quarter? Or did you see any incremental pressure on loan yields. Some of your peers have talked about some spread compression, particularly on CRE. So I just wanted to get some color.

No, I think your projection is correct. It's mostly the timing around the loan yields. But again, we've seen the market get more competitive for fully funded loans in some cases as people try to get loan growth. We've said we remain selective in terms of acquiring clients and loan opportunities that bring with them other business. And so we continue to feel good where we are in terms of going forward on loan yields and the ability to hold the margin.

[Operator Instructions] Our next question comes from the line of Jared Shaw of Barclays.

This is [indiscernible] on for Jared. Maybe just expanding a little bit more on the M&A side. Would there be any opportunities for nonbank M&A from you guys like in the insurance space or maybe in like a fee-generating business. What would that look like if anything?

Yes, John, I mean, there could be. We've certainly acquired either businesses or branches or something other than whole banks at times. So we look at those. It just depends when they surface, if you will. And so there's -- it's hard to comment on anything specific, but we certainly would and have in the past looked at those.

Okay. Great. And then I guess just maybe on the competitive environment. Any change in the overall competitive landscape among like the larger banks, smaller banks like private lenders as we move throughout the year.

Not materially. I mean, we certainly see private credit popping up some. And they occasionally will win deals that you might have considered bank space in prior periods. But we continue to stay very disciplined in terms of how we underwrite credit in terms of how we pursue business. And so if it gets a little tougher, we'll work a little harder. It's not an environment that we believe is an impediment at this point.

Our next question comes from the line of Nicholas Holowko of UBS.

Maybe just one for me and coming back to your ability to continue to gain deposit market share in your markets. Does your success there had give you any incremental confidence to organically expand in other nearby markets? Or is M&A the preferred way to go to new adjacent markets at this point?

It would be situational, but we certainly feel like our track record supports organic growth opportunities. We will continue to open locations and enter markets that we believe are important if we can't find acquisition opportunities. Rockford is a great example. In the Chicago area, we certainly have examples in Northwest Indiana as well where we've done very well with newly opened facilities and teams of talented people. So yes, I mean, I think we're good at growing organically where we need to. And it doesn't happen as fast, but we certainly wouldn't shy away from it.

We certainly have done that. Our entire banking [indiscernible] organic growth is the most preferable way to grow. But Tim says it's not always as fast, but it's -- we certainly do it well. So we'll continue to do that.

Got it. And then maybe just one on the competition from private credit when you are coming up against private credit lenders and deals. And I know it's important that you guys stay disciplined in terms of how you underwrite. Where do you tend to see the biggest differentiation? Is it a function of price or structure? Anything in particular that stands out to you there?

Yes. I would say not so much price, but really structure. When you -- things like amortization, things like term, just covenant structure, those are the things that typically we feel very strongly about. And if a private lender comes in and they have a covenant-light deal or a deal that has nominal amortization. We're just probably going to have more problems with that. So those are the areas where I think we struggle more. Again, it doesn't mean that they're wrong, but it's just a risk appetite that's different from ours.

Thank you. I would now like to turn the conference back to Tim Crane for closing remarks. Sir?

Yes. Thank you, Latif. And for those of you on the phone, thank you for spending time with us this morning. We will see many of you before year-end in person. But for those we don't best wishes for the upcoming holiday season for you and your families. And thank you for your interest in Wintrust. Have a good day.

This concludes today's conference call. Thank you for participating. You may now disconnect.