Wintrust Financial Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
October 21, 2025

Key Takeaways

  • Positive Sentiment: Wintrust reported a record quarterly net income of $216 million (up ~11% QoQ) with total loans at $52 billion and deposits near $57 billion, supporting higher net interest income.
  • Positive Sentiment: Management expects net interest margin to remain around 3.50% through the near term, citing variable-rate hedges (swaps) on ~ $4B of loans and a deposit beta in the mid-60s that should allow margin stability if rates fall.
  • Positive Sentiment: Credit metrics are described as strong and stable: non-performing loans fell to $163M (31 bps), CRE NPLs remain low (0.21%), and the quarter’s higher charge-offs were largely the resolution of previously reserved credits.
  • Negative Sentiment: A one-time preferred stock redemption/issuance reduced fully diluted net income per common share by $0.28 in the quarter, lowering reported EPS despite no operating net income impact.
  • Positive Sentiment: Management expects continued mid-to-high single-digit loan and deposit growth, ongoing operating leverage and tangible book value growth, and will pursue opportunistic, disciplined M&A while prioritizing organic expansion in its Midwest franchise.
AI Generated. May Contain Errors.
Earnings Conference Call
Wintrust Financial Q3 2025
00:00 / 00:00

There are 7 speakers on the call.

Speaker 3

Welcome to Wintrust Financial Corporation's third quarter end-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. 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.

Speaker 3

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 over to Mr. Tim Crane.

Speaker 5

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 Stoehr, 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.

Speaker 5

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 one 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.

Speaker 5

Credit quality remains very good, and we continue to proactively work with the 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 one position. Our Wintrust franchises in Wisconsin and West Michigan showed strong growth as well, also with lots of upside potential. Given our advantage 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 number six on American Banker’s nationwide survey of bank reputation. The survey results reflect our commitment to earning the trust of our customers every day.

Speaker 5

It also speaks to our ability to grow and strengthen the franchise. Once again, a solid and straightforward quarter, and I'll turn it over to Dave for additional insights.

Speaker 3

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.

Speaker 3

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 were 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.

Speaker 3

As to non-interest income and non-interest expense, total non-interest 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 non-interest income categories, as shown in the table in our earnings release. Overall, a solid and consistent outcome for non-interest income during the third quarter. Non-interest 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.

Speaker 3

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 continued to build our tangible book value per share during the first three 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 become a public company, and we're on track to do so again in 2025. Also, as we mentioned on our last call and to prevent any confusion, I just want to revisit the one-time 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.

Speaker 3

In short, while there was no impact to operating net income, the portion of these transactions that were one-time 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. With that, I'll turn it over to Rich to discuss credit.

Speaker 6

Thanks, Dave. As Tim and Dave both noted, credit performance continued to be very solid in the third quarter. As detailed on slide seven, loan growth for the quarter came from a number of different categories. Commercial real estate loans grew by $327 million. The Wintrust Life Finance team had another solid quarter and grew by $252 million, and our leasing and 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 Chicagoland, 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.

Speaker 6

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. Non-performing loans decreased from $189 million, or 37 bps, to $163 million, or 31 bps. Charge-offs for the quarter were 19 bps, up from 11 bps in the prior quarter, but down from 23 bps 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 non-performing asset levels on slide 16 and the consistent level in our special mention and substandard loans on slide 15.

Speaker 6

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 one quarter 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 remains steady, although it represents only 3% of our total loan portfolio.

Speaker 6

We monitor this portfolio very closely, and we 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. 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, discipline, 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.

Speaker 5

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 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 loan portfolio serve us well, and we'll 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.

Speaker 5

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.

Speaker 3

Thank you. As a reminder, to ask a question, you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jon Arfstrom of RBC Capital Markets. Your line is open, Jon.

Operator

Hey, thanks. Good morning.

Speaker 3

Morning, John.

Operator

Hey, Tim. 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? If you could, just because it's topical, if you could comment on any NDFI exposure you might have.

Speaker 6

Yeah, 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. 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. 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.

Speaker 6

When I look down the list, that's what the pipeline largely consists of, just more and more opportunities coming from larger banks where they just feel like they don't know anybody at those institutions. Their credit's getting decisioned at a place where they don't even know who's doing it. They really like to bank with somebody where they know their banker, they know who's making the decision. That's really the pipeline. As it relates to NDFI, anything further on that, John?

Operator

No, I think you're saying it's market share and the environment both, but maybe more.

Speaker 6

Yeah, market share and the environment. That's right.

Speaker 5

Yeah, John, 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. The pipelines are stable, and we continue to be encouraged by what we're hearing from our clients in the market.

Operator

Right. Okay.

Speaker 6

NDFI, you know, 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. The balance is primarily made up of loans to leasing and premium finance companies, businesses that we are very familiar with and customers that we know well. I would say the predominant piece of that puzzle really is mortgage warehouse. I think you know that story well, having followed us for so long.

Operator

Okay. 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 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?

Speaker 3

Yeah, John, this is David Dykstra. Yeah, we really do. We've said in prior calls that if rates go down, you know, cut three or four times, we still believe that we can hold the margin in the $350 range. The balance sheet is relatively variable on the loan side, but we also have some swaps in place to manage that downside risk. Our deposits are also, you know, quite variable with, you know, 80% of them being non-term deposits. Given the rational market here in Chicago, we've been able to cut rates fairly evenly with the Fed cuts going down. As market rates have gone down, our deposit costs have gone down, and we're fairly balanced on both sides of the equation.

Speaker 3

We're pretty comfortable within a fairly tight range around $350, given the three or four rate cuts that a lot of people are talking about over the next year that we'll hold that $350 margin plus or minus a few basis points.

Operator

Yeah, okay. All right. Thanks a lot, guys. Appreciate it.

Speaker 5

Great. Thanks, Jon.

Speaker 3

Thank you. Our next question comes from the line of Terry McEvoy, Stephens Inc. Please go ahead, Terry.

Speaker 5

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

Speaker 6

I don't think there's anything that I would read into that. I think it's just more timing than anything else. 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. I would say it's been a pretty consistent story in terms of overall commercial pipelines and opportunities and balances.

Speaker 5

Thanks. 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? Would you step up hiring and marketing to take advantage of that situation? Sure, Terry. There is a lot of conversation about people finding the Southeast or Texas attractive. We think we've got, you know, three, four, depending on how you look at it, very attractive market areas. The Chicagoland community, including Northwest Indiana, is a dense, business-rich community with transportation and healthcare and good education. Although it may not be growing as fast, we've consistently been able to take share from some of our peers. We continue to feel very good about that. West Michigan grows a little bit faster. With the McElhoway integration activities behind us, we're making progress.

Speaker 5

You can see that in terms of the deposit share that we've gained over the last year. We continue to feel very good about Wisconsin. We just like our backyard and the markets that we understand better than we like others. We'll continue to follow clients periodically to Florida or other geographies maybe. We're very comfortable in the Midwest and our ability to continue to grow on a consistent basis. Thanks for taking my questions.

Speaker 3

You bet. Thank you. Our next question comes from the line of Christopher McGratty of KBW. Please go ahead, Chris.

Speaker 3

Good morning. Thanks for the question.

Speaker 3

Yeah, you bet, Chris.

Speaker 3

Tim, my questions are on operating leverage. This year you're poised to produce, I think, about a couple hundred basis points. I'm interested if that gets perhaps a little more challenging next year with the rate outlook, also the, I guess, the offset of deregulation might alleviate some of those pressures. Any thoughts on operating leverage trends?

Speaker 5

As we kind of approach our end-of-year planning for 2026, we expect we'll continue to get operating leverage. 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. That's what our team will be aiming at as we get through the budget process.

Speaker 5

Okay. Perfect. On capital, you're building capital. Is there a scenario where you might consider more acquisitions in a friendlier environment? You guys have a history of doing fairly small but profitable deals.

Speaker 5

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

Speaker 5

Okay. Just so I understand, Tim, the comment, I guess, are you implying the optionality of going either way? Is that what your comments were?

Speaker 5

We are clear. We work for our shareholders. Our board is equipped to address any opportunity, either side of the equation that comes up.

Speaker 5

All right. Thank you. Appreciate it.

Speaker 3

Thank you. Our next question comes from the line of Nathan Race, Piper Sandler. Please go ahead, Nathan.

Speaker 4

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

Speaker 5

Yeah, I mean, obviously, our track record is sort of bolt-on stuff. You know, McElhoway is, you know, 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. I think, without getting any specifics, it'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.

Speaker 4

Okay, great.

Speaker 5

Maybe to put the two fences on it, though, the very small transactions are just tougher from an economic standpoint. As we've said on prior calls, MOEs are complex and cultural issues, and I don't think our view on those has changed.

Speaker 4

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 in 2026 as well.

Speaker 3

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. There was a little bit of a flurry of people that wanted to refinance that maybe had rates in the 7%, 8% range. That went away fairly quickly in the middle of September, and applications have stayed fairly low. I think our thoughts are that the lower rates are better. I probably need another 25 to 50 basis points of mortgage rate cuts to see that number improve significantly. 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.

Speaker 3

We'll see how the quarter 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. We're optimistic that it'll get better next year with the slightly lower rates and home buying season starting in the early part of next year. Right now, it still seems like applications are sluggish.

Speaker 4

Okay. Gotcha. 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. I'm just curious if we get four to five rate cuts over the next 12 months or so. Dave, can you maybe help us just in terms of where you could see loan yields drop 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?

Speaker 3

The swaps are effective all the time. They're just tied to the three-month SOFR or the one-month SOFR rate. If SOFR goes down a basis point, those help us a basis point. If they go up a basis point, it hurts us a basis point, and vice versa. 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, they're still in the sort of mid-6% to 7% range, depending on our mix. Premium finance, P&C is higher than other categories. It sort of depends on the mix. We're still thinking right now, without any further rate cuts, that you're probably in the mid to high 6% as far as blended new loan rates.

Speaker 5

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

Speaker 4

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

Speaker 5

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

Speaker 4

Gotcha. I'm with you. I appreciate all the color. Thanks, guys.

Speaker 5

You bet.

Speaker 3

Thank you. Our next question comes from the line of Casey Hare of Autonomous Research. Your line is open, Casey.

Speaker 3

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

Speaker 5

Yeah, we still think mid-60s is probably the right number. Our interest-bearing deposit costs are above 3%, higher than some of our peers. 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. We feel comfortable, a couple of cuts or a couple of moves either way, that $350 is still about the right number.

Speaker 5

Okay, great. Thank you. For my follow-up just on premium finance, 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. I guess just what is the outlook for P&C going forward?

Speaker 6

Yeah, we continue to be pretty bullish on P&C. We continue to take market share. We deliver, I think, a very good product for our customers. If you look out over the course of the last five years, you can just see steady growth. Even if you X the market, you just 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. We continue to be pretty optimistic in that space.

Speaker 6

Okay, great. Thank you for taking my questions.

Speaker 3

Thank you. Our next question comes from the line of Jeffrey Rulis of D.A. Davidson. Please go ahead, Jeff.

Speaker 2

Thanks. Good morning. Just wanted to maybe check in on credit. Richard, I think you mentioned your sort of growing comfortability on commercial real estate. Just looking at the kind of the past dues, late 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?

Speaker 6

Yeah, pickup, we're in the charge-offs, or?

Speaker 2

In kind of the past due, not quite non-accrual, but just early delinquency stuff, was a late quarter increase.

Speaker 6

Yeah, I wouldn't say anything that would appear, I think it's probably more episodic than anything else. As we have pointed out, we kind of limited our comments during the call on the commercial real estate and the office. One of the things that we spent 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. Those conversations take some time. As you're working through those, you really want to be very thoughtful. You want to work with your customer. Occasionally, those may extend out past maturity, but that's part of the business. That's something we do week in and week out, working with our customers. It's not always linear.

Speaker 6

You may have quarter to quarter some changes up or down, but nothing that I would look at as problematic.

Speaker 3

Yeah, Jeff, I would just chime in there 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 three quarters ahead of that. Over the last five quarters, still the second lowest. I think a lot of this is just timing. Non-accruals are down. The classified, special mention, substandard together categories are down. The problematic areas we're showing improvement on. The shorter-term delinquencies, I think, are just timing issues.

Speaker 2

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

Speaker 6

No, really unrelated. You know, a handful of credits that had, as we had pointed out, had reserves attached to them previously, and we just got to final resolution and charged off the reserved amount and moved on.

Speaker 5

There's no commonality, just.

Speaker 2

Got it. Okay. Appreciate it. Maybe one last one. Just on the expense side, particularly within marketing, you know, 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? If you have any comment on the overall expense run rate, thanks.

Speaker 3

Yeah, we typically do see a step down in the fourth and first quarters on marketing because we don't have as much of the major league and minor league and baseball sponsorships and some of the summer sponsorships we do in the communities. None of our Chicago or Milwaukee teams are any longer in the playoffs. That expense will stop. We would expect that to come back down a little bit. There are 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. There are fluctuations in some other areas.

Speaker 3

I think we're sort of sticking with what we said last quarter, that the other expenses we would expect to be in the low $380 million, $380 million to $385 million range, depending on fluctuations for certain things. We obviously were at the very low end of that range this quarter and controlled those expenses well. Plus or minus a couple million dollars, I think in that low to mid $380 million ranges is where to focus right now.

Speaker 2

Great, thank you.

Speaker 5

You bet.

Speaker 3

Thank you. Our next question comes from the line of Benjamin Gerlinger of Citigroup. Please go ahead.

Speaker 3

Good morning. This is Kylie Wong for Ben today. Thank you for taking my questions. I guess you touched on this a bit, but when you think about the Chicagoland marketplace in terms of deposits, it seems like pricing has been rather rational relative to other large cities. Since your bank is more of a price setter, when you think about the next couple of months and 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 at the Fed where overall competition might actually become more competitive?

Speaker 5

Number one, we would continue to focus on core deposit growth as part of our target. We would expect to continue to take share from some of our competitors. I think we can do that at, as you mentioned, promotional rates that are fairly rational. As the Fed cuts rates, I think we'll still be able to get, you know, the stabilized margin with deposit growth. 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.

Speaker 5

Great. Thanks for the color.

Speaker 5

You bet.

Speaker 3

Thank you. Our next question comes from the line of David Long of Raymond James. Your question, please, David.

Speaker 3

Good morning, everyone.

Speaker 5

Hi, David.

Speaker 5

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

Speaker 6

No, I wouldn't say we're necessarily pulling away from anything. I think that we've talked about, obviously, office and transportation on prior calls. Those, 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. That's an area that we're watching very closely.

Speaker 6

I'd say if I were stack ranking those, I'd probably put higher ed at the top.

Speaker 5

Got it. Thank you, Richard. Appreciate that. On the net interest margin, we'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 $350 level? The way I would answer that, David, would be irrational competition. If something happened in our markets, which by the way, we don't see at the moment, to dramatically alter pricing of either loans or deposit costs, we could get some pressure there. Again, we don't see that right now. We think other banks are focused on their margin and kind of remaining rational. I wouldn't say there's a high likelihood of that happening, but that would be the risk.

Speaker 3

Yeah, I think the other risk would be, which again, we don't see happening, is if for some reason the yield curve would go back inverted. We quite frankly see the slope and the steepness staying in place, so we don't see either of those risks as real prevalent right now.

Speaker 5

Yeah, David, I think our team has done a nice job staying very disciplined with pricing, both loans and deposits. That is 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. We don't see any need to do that right now. Everything feels relatively rational.

Speaker 5

Got it. Thanks, guys. Appreciate that color.

Speaker 3

Thank you. Our next question comes from the line of Jared Shaw of Wells Fargo. Please go ahead, Jared.

Speaker 3

Hello. 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's a seasonality component to it. Should we expect this to become a bigger part of your loan portfolio? If C&I were to pick up in 2026, how would your appetite to grow premium finance loans versus C&I 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?

Speaker 3

Yeah. Yeah, you know, I think we've always looked at our niche businesses as being about a third of our balance sheet, and the biggest one has been premium finance, both life and property and casualty. You know, we like to grow the business in all aspects if it's good business growth, right? I don't see us getting the overall premium finance business much more than a third 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.

Speaker 3

If we got to a point where we didn't like the concentration, if 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. 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.

Speaker 3

Thank you. Just on NIM again, in terms of the four 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 commercial real estate, so just wanted to get some color. Thank you.

Speaker 5

No, I think your projection is correct. It's mostly the timing around the loan yields. 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. We continue to feel good where we are in terms of going forward on loan yields and the ability to hold the margin.

Speaker 3

Thank you. Once again, to ask a question, please press star 11 on your telephone. Again, that's star 11 on your telephone to ask a question. Our next question comes from the line of Jared Shaw of Barclays. Please go ahead, Jared.

Speaker 3

Hi, this is John Rao on for Jared. Maybe just expanding a little bit more on the M&A side, would there be any opportunities for non-bank 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?

Speaker 5

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

Speaker 5

Okay, great. I guess just maybe on the competitive environment, any change in the overall competitive landscape among the larger banks, smaller banks, like private lenders as we've moved throughout the year?

Speaker 5

Not materially. I mean, we certainly see private credit popping up some. You know, they occasionally will win deals that you might have considered bank space in prior periods. We continue to stay very disciplined in terms of how we underwrite credit, in terms of how we pursue business. 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.

Speaker 5

Okay, great. Thanks for the rest of my questions being asked.

Speaker 3

Thank you. Our next question comes from the line of Nicholas Holowko of UBS. Please go ahead, Nicholas.

Speaker 4

Hi, good morning. 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 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?

Speaker 5

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, you know, 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. Yes, I mean, I think we're good at growing organically where we need to. It doesn't happen as fast, but we certainly wouldn't shy away from it.

Speaker 3

Yeah, we certainly have done that in our entire banking career. Organic growth is the most preferable way to grow. Tim says it's not always as fast, but we certainly do it well. We'll continue to do that.

Speaker 4

Got it. Maybe just one on the competition from private credit. When you are coming up against private credit lenders in 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? Thank you.

Speaker 6

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

Speaker 4

Perfect. Thanks for taking my questions.

Speaker 3

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

Speaker 5

Thank you, Latif. 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. For those we don't, best wishes for the upcoming holiday season for you and your families. Thank you for your interest in Wintrust. Have a good day.

Speaker 3

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

Powered by Quartr