Wintrust Financial Q2 2025 Earnings Report

Wintrust Financial EPS Results

• Actual EPS: $2.78
• Consensus EPS: $2.59
• Beat/Miss: Beat by +$0.19
• One Year Ago EPS: $2.32

Wintrust Financial Revenue Results

• Actual Revenue: $670.78 million
• Expected Revenue: $661.43 million
• Beat/Miss: Beat by +$9.36 million
• YoY Revenue Growth: N/A

Wintrust Financial Announcement Details

• Quarter: Q2 2025
• Date: 7/21/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, July 22, 2025
• Conference Call Time: 11:00AM ET

Wintrust Financial (NASDAQ:WTFC) operates as a financial holding company. It operates in three segments: Community Banking, Specialty Finance, and Wealth Management. The Community Banking segment offers non-interest bearing deposits, non-brokered interest-bearing transaction accounts, and savings and domestic time deposits; home equity, consumer, and real estate loans; safe deposit facilities; and automatic teller machine (ATM), online and mobile banking, and other services. It also engages in the retail origination and purchase of residential mortgages; and provision of lending, deposits, and treasury management services to condominium, homeowner, and community associations, as well as asset-based lending for middle-market companies. In addition, this segment offers loan and deposit services to mortgage brokerage companies; lending to restaurant franchisees; direct leasing; small business administration loans; commercial mortgages and construction loans; and financial solutions. It provides personal and commercial banking services primarily to individuals, small to mid-sized businesses, local governmental units, and institutional clients. The Specialty Finance segment offers commercial and life insurance premiums financing for businesses and individuals; accounts receivable financing, value-added, and out-sourced administrative services; other specialty finance services; equipment financing through structured loan and lease products; and property and casualty premium financing; as well as data processing of payrolls, billing, and cash management services to temporary staffing industry. The Wealth Management segment provides wealth management services, such as trust and investment, asset management, tax-deferred exchange, securities brokerage, and retirement plan services. Wintrust Financial Corporation was founded in 1991 and is headquartered in Rosemont, Illinois.

Wintrust Financial Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record quarterly net income of $195.5M and net interest income of $547M were driven by broad-based loan growth of $2.3B in Q2.
• Positive Sentiment: Pipelines remain strong across core and niche businesses, supporting an outlook for mid to high single digit loan and deposit growth in H2 2025.
• Positive Sentiment: The net interest margin remained within target at 3.54%, and management expects margin stability to drive further net interest income growth in Q3.
• Positive Sentiment: Credit metrics stayed healthy with nonperforming loans steady and charge-offs at 11bps, reflecting strong underwriting and disciplined growth practices.
• Negative Sentiment: Issuance of $425M Series F preferred stock to redeem higher-cost Series D/E shares will increase preferred dividends and temporarily pressure third quarter EPS.

Presentation

[Operator]

Welcome to WinTrust Financial Corporation's Second Quarter and Year to Date 2025 Earnings and Results will be Mr. Colby May, 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. Their presentation, 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.

[Operator]

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 ks 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.

[Operator]

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

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Good morning, everyone. Thank you for joining us for the WinTrust Financial second quarter earnings call. In addition to the introductions Latif made, I'm joined by our Chief Financial Officer, Dave Starr and our Chief Legal Officer, Kate Bogue. I'll begin this morning with some high level highlights, Dave Dykstra will speak to the financial results and Rich will add some additional information on loan activity and credit performance. As always, following our remarks, we'll be happy to take your questions.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Our differentiated approach focused on understanding and meeting our client needs continues to deliver consistently strong financial results. We reported record quarterly net income of $195,500,000 up from $189,000,000 last quarter. Net interest income also a quarterly record was $547,000,000 Driving the higher net interest income was second quarter loan growth of $2,300,000,000 The growth was broad based and clearly reflects the seasonally strong second quarter in our attractive premium finance business. We saw good deposit growth during the quarter of over $2,000,000,000 and assets grew to $69,000,000,000 Going forward, our pipelines are strong and we expect continued mid to high single digit loan growth for the second half of the year. We also expect continued deposit growth that will fund our loan growth.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

What's particularly important about the deposit growth is that it represents new commercial and consumer households that allow us to continue to grow our franchise. Given the strong growth in the quarter, it's important to highlight that we continue to be disciplined in our growth. Opportunities where we cannot get comfortable with the pricing or proposed credit structure. This approach has served us well and will not change. Net interest margin for the quarter remained comfortably within our target range at 3.54%.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Dave will talk a little bit more about the margin in just a minute. Residential mortgage activity, while up somewhat this quarter, remains muted in the current rate environment. We continue to manage expenses in that business to protect our current financial results, while ensuring that we're positioned to capture business when rates go down and mortgage activity increases. We continue to believe the mortgage business is a core offering and provides a nice financial hedge against margin pressure in a lower rate environment. Credit quality remains very good.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

We continue to stay close to the small number of clients experiencing uncertainty in the current economic environment, so that we can help get ahead of any challenges they may face. Overall, another strong quarter, consistent results in line with our expectations. Let me turn it over to Dave.

[David Stoehr, EVP & CFO at Wintrust Financial]

Great. Thanks, Tim. As Tim said, we had a strong deposit and loan growth quarter. The deposit growth was $2,200,000,000 representing a 17% increase over the prior quarter on an annualized basis. The solid loan or the solid deposit growth helped to fund seasonally strong second quarter loan growth of $2,300,000,000 or 19% on an annualized basis.

[David Stoehr, EVP & CFO at Wintrust Financial]

For the first half of the year loan growth was $3,000,000,000 or 12% on an annualized basis. As other aspects of the balance sheet results total assets grew by $3,100,000,000 to $69,000,000,000 including the impact of the $425,000,000 preferred stock offering which I will discuss later in my comments. Turning to the income statement results, this was a very solid operating quarter producing a record level of quarterly net income and with just a few moving pieces. I'll start off by highlighting what we consider the uncommon items to be for the quarter, which included $2,900,000 of acquisition related costs that were substantially concluded related to the conversion of the Mackintawa Bank acquisition and net security gains of $650,000 Those items are discussed on the first page of the earnings release if you'd like to refer to them later. Our net interest income increased $20,200,000 from the prior quarter as a result of a $1,900,000,000 increase in average earning assets and a relatively stable net interest margin.

[David Stoehr, EVP & CFO at Wintrust Financial]

This quarter represented a record high amount of quarterly net interest income. Given the current interest rate environment and even with a few rate changes in either direction, we remain confident that our net interest margin will continue to be relatively stable throughout the remainder of 2025. With that stable net interest margin outlook and the projected future growth in average earning assets, we would again expect to increase net interest income in the third quarter. I would note that period end loans were approximately $1,500,000,000 higher than the average loans for the second quarter giving us a good start on achieving the higher average earning assets for the third quarter. The slightly lower provision for credit losses recognized in the second quarter as compared to the prior quarter is primarily attributable to a slightly better set of macroeconomic factors offset somewhat by the aforementioned strong loan growth.

[David Stoehr, EVP & CFO at Wintrust Financial]

Regarding other non interest income and non interest expense sections, total non interest income totaled $124,100,000 in the second quarter, which was up approximately $7,500,000 when compared with the prior quarter. Although persistently high mortgage rates dampened our optimism for a stronger spring buying season, the company generated approximately 2,600,000 more in mortgage banking revenue as we experienced higher production revenue due to somewhat higher origination volumes offset by a bit less portfolio. Wealth management revenue increased by $2,800,000 in the second quarter primarily as a result of asset valuation increases during the quarter. The company recorded a variety of smaller changes to other non interest income categories as shown in the tables in the earnings release, but the changes relative to the prior quarter were not material or unusual. As far as non interest expense categories go, non interest expenses totaled $381,500,000 in the second quarter and were up approximately $15,400,000 from the prior quarter.

[David Stoehr, EVP & CFO at Wintrust Financial]

The primary reasons for the increase were all factors that we projected would occur on last quarter's earnings call. Specifically salaries and employee benefits expense increased by approximately $8,000,000 as compared to the first quarter due primarily to higher employee benefit expense due to an increased level of health insurance claims, higher mortgage and wealth management commissions because of the corresponding higher revenues in those business lines and the second quarter having a full effect of the annual merit increases that were effective on February 1. Advertising and marketing expenses increased by $6,500,000 in the second quarter when compared to the first 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 the expenditures related to various major and minor league baseball sponsorships and other summertime sponsorship events held in the communities that we serve. The remaining variances in non interest expense both positive and negative were relatively normal amount of less than $1,000,000 in the aggregate and don't warrant any additional special mention on this call.

[David Stoehr, EVP & CFO at Wintrust Financial]

We also continue to build our tangible book value per share during the first half of this year and as you can see on Slide 10 of the presentation deck, we have grown tangible book value per common share every year since we've been a public company and we are on track to do so again in 2025. As I mentioned earlier, I'd like to take a moment to discuss the $425,000,000 Series F preferred stock issuance that Wincrest closed on May 22. The issuance was to redeem $412,500,000 of Series D and Series E preferred stock that was set to reprice on 07/15/2025 and they were set to reprice at rates higher than the existing market rates. In fact, WinTrust did redeem all the Series D and Series E preferred stock on July 15 and now has only the Series F preferred stock outstanding. Because the redemption of the preferred stock will impact the earnings per share calculation in the third quarter, we've included an overview of such impact on Slide 24 of the presentation deck.

[David Stoehr, EVP & CFO at Wintrust Financial]

What you'll see is that the third quarter Series F preferred dividends when and if declared by the board at its July meeting will be more than the normal quarterly dividend since it includes an extended first dividend period from the closing date of May 22 to the first payment date of 10/15/2025, so more than a quarter's worth of dividends. Dividends are recorded and declared in the third quarter will larger than the normal Series F dividend declaration and there will be no dividends for the Series D or Series E. In addition, accounting rules require that the prior issuance costs on the Series D and Series E issuances need to be reclassified upon redemption from capital surplus and recognized for retained earnings. It's just a reclass within the capital section. But the accounting rules require that reduction to be recorded through net income available to common shareholders I.

[David Stoehr, EVP & CFO at Wintrust Financial]

E. Below the net income line. Importantly, these amounts will not impact third quarter operating net income, but will impact third quarter earnings per share calculations. Again slide 24 in the presentation deck summarizes this information. But the long and the short of it is the most recent quarters including the second quarter had roughly $7,000,000 of preferred dividends.

[David Stoehr, EVP & CFO at Wintrust Financial]

So for the past few quarters and going back five years that number spent $7,000,000 In the fourth quarter of this year and going forward for five years until they reprice again that number will be $8,400,000 The third quarter for all the reasons I just talked about will have a slightly higher number due to the issuance costs of the Series D and E redemption and the extended quarterly dividend payment period. So with that, again refer to Slide 24 for all the details. And if anyone has any questions, I'd be happy to take any calls and walk you through the information. So with that, Tim, I'll conclude my comments and turn it over to Rich.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Thanks, Dave. As Tim and Dave both noted, credit performance continued to be very solid in the second quarter. As detailed in our release, property and casualty premium finance group in the second quarter. This past quarter was no exception as we saw just over $1,000,000,000 of growth in this portfolio in line with our forecast. While we have seen some moderation in insurance premium rate increases, the overall market remains firm.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

In addition, we continue to benefit from new opportunities as a result of consolidation and dislocation within the premium finance industry. We also saw good growth from a number of other segments. Commercial real estate grew by $377,000,000 The mortgage warehouse team continues to build momentum and grew by $213,000,000 as we continue to onboard new relationships, which also come with some meaningful deposit opportunities. And our leasing team, life premium finance and residential mortgage groups also had a very solid quarter. As Tim said, we believe loan growth for the 2025 will continue to be strong and within our guidance of mid to high single digits for a number of reasons.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Core C and I and CRE pipelines remain very solid, and we continue to benefit from our market positioning in our core markets of Chicagoland, Wisconsin, West Michigan and Northwest Indiana. In addition, we have very strong momentum in our niche businesses, including leasing and mortgage warehouse. Last quarter, we spoke of growing uncertainty in economic conditions as a result of potential tariffs, tax law changes and funding cuts. Reviewing our portfolio, we have a relatively small number of credits at risk of greatest impacts, and we continue to stay very close to them. Overall, we believe there is greater clarity on many of these issues driving that uncertainty, and we believe the impacts on our portfolio will be very limited given our strong underwriting standards and disciplined approach to diversification.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

We are cautiously optimistic about the overall business environment as we enter the second half of the year. 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 as a percentage of total loans were relatively stable. Charge offs for the quarter were 11 basis points unchanged from Q1.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

We continue to believe that the level of NPLs and charge offs in the second 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. Finally, are firmly committed to identifying 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 portfolio. As detailed on Slide 19, we continue to see signs of stabilization during the first during the second quarter as CRE NPLs remained at a very low level, increasing slightly from 0.2% to 0.25.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

CRE charge offs remain at historically low levels. On Slide 20, we continue to provide enhanced detail of our CRE and office exposure. Currently, this portfolio remains steady at $1,600,000,000 or 12.1% of our total CRE portfolio and only 3.1% of our total loan portfolio. Of the $1,600,000,000 of office exposure, 48% is medical office or owner occupied. The average size loan in this office portfolio is relatively small at $1,500,000 and we have five loans over $20,000,000 only two of which are non medical or owner occupied.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

We continue to perform portfolio reviews regularly in our CRE portfolio and we stay very engaged with our borrowers. As mentioned on prior calls, our CRE credit team regularly updates our deep dive analysis of every non owner occupied loan over $2,500,000 that will be maturing between now and the end of the year. This analysis, which covered 84% of all non owner occupied CRE loans maturing during this period showed very consistent results compared to prior quarters. In summary, we continue to be encouraged by our credit performance in the second quarter, and we believe that our portfolio is well positioned and appropriately reserved. That concludes my comments on credit and I'll turn it back to Tim.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Thanks, Rich. Just a few kind of quick final thoughts. Midway through the year, we feel very good about our business and the momentum going into the second half of the year. We continue to deliver sophisticated financial solutions across all our businesses with a differentiated client first focus. And what's important to note is that our approach is driving consistent meaningful financial results.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Over the last year, we've produced steady quarterly increases in loans, deposits and net income. We manage our expenses thoughtfully while continuing to invest in our business to support our future growth. As Dave mentioned, the expenses trend higher in the second and third quarters and reflect both investments in our business and some of these seasonal fluctuations. As always, we work with our clients to help them address focused on delivering a differentiated experience, and our disciplined approach continues to drive real value for our shareholders. With that, I thank you for your time, and we'll open the line to questions. Latif?

[Operator]

Thank you. Our first question comes from the line of Jon Arfstrom of RBC. Please go ahead, Jon.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Good morning. Hey, thanks. Morning, Jon.

[Jon Arfstrom, MD & Associate Director - US Research at RBC Capital Markets]

Yeah, good morning. Question for you on the loan growth numbers, obviously very strong this quarter. You mentioned seasonality in expenses and I guess I'm curious about third quarter expectations. You have a higher period end balance, but I think that growth is typically a little slower in the third quarter. Is it fair to look at maybe prior third quarter trends from second quarter as a benchmark for what you might expect in Q3 in terms of growth?

[David Stoehr, EVP & CFO at Wintrust Financial]

Expense growth or loan growth, John?

[Jon Arfstrom, MD & Associate Director - US Research at RBC Capital Markets]

Loan growth, sorry.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Loan growth, if you look at the third quarter, excluding Makatawa and then fourth quarter, I think that we'd be pretty much in line with what we would anticipate for this year. So again, in the range, but at the higher end of the range.

[David Stoehr, EVP & CFO at Wintrust Financial]

Yes. Think if we just think mid to high single digits based off of the June 30 balance going forward for the second half of the year, that's sort of our view right now.

[Jon Arfstrom, MD & Associate Director - US Research at RBC Capital Markets]

Okay. Got it. And then, Tim, a question for you on deposits. You guys where are you finding the best places to gather deposits? I mean, it looks like money markets were strong, but you mentioned commercial, consumer, and warehouse.

[Jon Arfstrom, MD & Associate Director - US Research at RBC Capital Markets]

Can you just talk a little bit more about where you're finding that kind of deposit growth and and can that keep pace with loan growth?

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Latif?

[Operator]

Yes, please proceed.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Okay. John, I'm sorry. We had a little bit of a technical glitch on our end. I think your question was about deposits and where we're finding them. It's fairly broad based and we continue to believe that in our markets where we have kind of a sub 10% share in all of them, we can continue to grow.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

The commercial growth in deposits is particularly helpful because obviously we get treasury management revenues and other activities related to that. But this was a very solid deposit growth quarter for us funding the seasonal loan growth. Continue to think we'll have opportunities, $2,000,000,000 of deposit growth should not be kind of the norm going forward.

[Jon Arfstrom, MD & Associate Director - US Research at RBC Capital Markets]

Okay. And then just one small one. Anything on the wealth management outsourcing? Can you just talk about longer term goal there and how that's gone?

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Yes. That conversion to the LPL platform, which as we've described in prior calls was really an upgrade for the tools and technology for our financial advisors and our wealth employees is largely behind us. And we've migrated out of conversion mode into serving our clients. And obviously, the markets have been pretty terrific for the last month or so here. We continue to look at the wealth business as an attractive opportunity for us and would love to continue to grow it.

[Jon Arfstrom, MD & Associate Director - US Research at RBC Capital Markets]

Okay. Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Chris McGratty of KBW. Your line is open, Chris.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Great. Good morning.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Hi, Chris.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

How are doing? In terms of the NII growth, the 4% linked quarter, 16 year on year, numbers. I guess the question, if we put the pieces together with earning asset growth, loan growth, margin stability, does that become a little bit more challenging given the deposit competition that's increasing? Or is this degree of NII growth, I guess, the near term still reasonable?

[David Stoehr, EVP & CFO at Wintrust Financial]

Well, yes, we said, we expect mid to high single digit loan growth from here on out and a relatively stable margin. The three we've been roughly in the 3.52253% range on average over the last few quarters. If we stay in that in the mid to low three range, our $3.50 range, then I think it's just what is your average asset growth. And that's what we're looking at. So if we have that mid to high single digit average asset growth, we should see the mid to high single digit net interest income growth. It's just simple math, think, from our perspective.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Okay.

[David Stoehr, EVP & CFO at Wintrust Financial]

And our deposit pricing, if you're growing as much as we did this quarter, maybe the pricing was a little high. But as Tim said, the markets are still really good and we have great position in all those markets. So we think we can fund the growth with deposits right now. It's never easy, but we've always been able to do that.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

And Chris, even with this quarter's $2,000,000,000 worth of growth, our deposit costs were down slightly. And so our hope as long as markets remain rational, we'll continue to add clients and importantly, deposits as well.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Dave, you addressed the earning asset. There's not anything materially you're going to turn the earning assets to fund the growth. It's just right, there's no material changes you're doing to the mix of the earning assets?

[David Stoehr, EVP & CFO at Wintrust Financial]

No. I mean, the only odd thing is second quarter is always really strong on commercial premium finance. Recall, last couple of years, we sold some in the middle of the year. And this year, we had more liquidity and more capital, and we had good deposit growth. So we kept those assets on our balance sheet and funded them internally versus the sale like we did a couple of years ago.

[David Stoehr, EVP & CFO at Wintrust Financial]

But going forward, we're not going to have $1,000,000,000 P and C premium finance growth quarter in the third quarter. The second quarter is seasonally high. But other than that, commercial real estate pipelines are very consistently strong. So we would expect to have sort of the normal growth absent the outsized premium finance seasonality in the second quarter.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Great. And my follow-up maybe for Tim is the deregulatory narrative. What does it mean for Wintrust? Anything you might be doing differently? Do deals become you don't need to do a deal given the growth you're putting up.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Does that become more of a possibility? Anything you can unpack there on deregulation? Thanks.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Chris, I mean, we're obviously hopeful that there's some sort of tailoring or inflation adjustment, whatever you want to call it to relax the rules growth. And we continue to build the foundation for a bigger and better bank. A lot of that is acquiring good talent in the market and we continue to do that. We'll continue to look at acquisition opportunities. It looks like that activity has picked up a little bit.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

We think we have a strong track record there. Mocatawala, for example, is terrific. So we'll be disciplined but opportunistic.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Great. Thank you.

[Operator]

Thank you. Our next question comes from the line of David Long of Raymond James. Please go ahead, David.

[David Long, Managing Director at Raymond James Financial]

Good morning, everyone. Thanks for taking my questions. The on the core C and I side, sentiment across the industry seemed much lower when you held your call back in April. As you looked at the growth throughout the quarter, did it accelerate throughout the quarter? Or was it pretty steady throughout the quarter?

[David Long, Managing Director at Raymond James Financial]

And how are your core commercial clients how is their sentiment now?

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

It's interesting, David. I think that I wouldn't say there was a material difference during the quarter in terms of just production, but I would say sentiment, and I touched on in my comments, if we look back in April, there was just so much noise around all these regulatory changes, all the tariffs that we're still not out of the woods obviously there. But I think there is more confidence here that the economy is not the bottom side coming out. I think most customers are feeling, again, in the term I use cautiously optimistic about where things are at right now. So that coupled with the market dynamics in the Chicago market in particular, but certainly in our other core markets, it feels like things are going to be in a pretty good spot, and you can see that in our pipelines.

[David Long, Managing Director at Raymond James Financial]

Got it. Thanks, Rich. And then the follow-up question as it relates to the CRE office portfolio on Slide 20. You guys highlighted the nonperformers within that portfolio increased a bit. Just curious if I can get a little more color on what happened there and maybe a little not looking for the name of the building or anything like that, but just want to get a little color around the non performers on the office side.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Yes. It's really I mean, the numbers are so small that all it takes is a couple of deals, and that's what it was here. Nothing neither of them particularly large, but combined when you look at it relative to the total kind of causes a little bit of a blip. Nothing that we're overly concerned about. We think we're marked appropriately and we'll get through those relatively quickly.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

But I kind of refer in that portfolio kind of because the denominator is so small that every new loan makes it look like a pop. But we're just managing through the portfolio like we do every day.

[David Long, Managing Director at Raymond James Financial]

Great. Thanks, Rich. Appreciate it. Thank you.

[Operator]

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

[Nathan Race, MD & Senior Research Analyst at Piper Sandler Companies]

Hey, guys. Good morning. Thanks for taking the questions.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Hey, Nate.

[Nathan Race, MD & Senior Research Analyst at Piper Sandler Companies]

One of your Midwest peers this morning kind of tempered loan growth expectations, citing some increased competition. So just curious what you guys are seeing from a competitive pricing perspective. Obviously, loan yields came down a little bit this quarter. So curious if that's driving some of that loan yield compression that we saw in the quarter. And if you could just comment in particular on the commercial insurance premium finance portfolio in terms of what new rates on production look like there relative to the roll off yield?

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Yes. I'll talk a little bit about the core portfolio and what we're seeing and some of the niche portfolios as well. I mean, we talked about it at the end of last year that we would anticipate that banks as they continue to try to ramp up their loan production would become a little more aggressive. And we have seen that. But as Tim talked about in his opening remarks, we have a pretty disciplined approach to where we're going to be on pricing.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

But has there been margin compression in certain categories? The answer is yes. Fully funded CRE deals of high credit quality definitely have we've seen some compression there. But our job is to manage through that. One of the things you've known our story for a long time, when you have a multi pronged asset approach, some things get compressed a little bit while other things give you some opportunity.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

And that's what we're seeing now. So we think that in the core C and I space, we continue to hold our line pretty well on pricing. In leasing, same thing. In the specifically to your P and C question, we continue to be in pretty good shape. I mean, are coming a little bit tighter on larger credit oriented deals.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

But we have a very, very granular portfolio there that we continue to be able to price pretty well.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

And Nate, the second quarter, I think a number in the mid-7s would be about the right range for the P and C loan yield.

[Nathan Race, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. And Tim, that's pretty close to the roll off yield, if I heard?

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Yeah, not too far off.

[Nathan Race, MD & Senior Research Analyst at Piper Sandler Companies]

Okay, great. And then you mentioned on deposit costs, it looks like they were kind of stable in the quarter volume. But if I strip out CDs, it looks like your interest bearing deposit costs were up six basis points quarter over quarter. So just curious as long as the Fed remains on hold, do you think deposit costs kind of hold in there? Do you think we see kind of a little grind higher from here?

[Timothy Crane, President, CEO & Director at Wintrust Financial]

I think pretty stable to where we were in the second quarter. I mean, again, we had to raise $2,000,000,000 worth of deposits, which we were thrilled to do because it's new customers to us. I think we'll be in the same range. And if we get a cut, obviously, we feel reasonably good that we can handle that without much impact on the margin.

[Nathan Race, MD & Senior Research Analyst at Piper Sandler Companies]

Okay, great. Maybe one last one for Dave on expenses. Going back a couple of quarters, I think you guided to kind of a mid single digit increase this year off the 4Q level of last year. Just curious if you still think that holds true, which I think translates about $1,000,000,000 to $1.6 in expenses for this year.

[David Stoehr, EVP & CFO at Wintrust Financial]

Yes. I think maybe the best way to answer that right now is, I think the level we're at in the second quarter, plus or minus a couple of million dollars is probably what we think will happen in the third and the fourth quarter. So the low three eighty million s, I think is probably a good thought. But we had some growth here as we projected last quarter, but we also grew the balance sheet $3,000,000,000 We have some growth from here. So I think if we can hold this relatively stable in all three eighty system for the last two quarters, that's probably what we're shooting for right now.

[Nathan Race, MD & Senior Research Analyst at Piper Sandler Companies]

Okay, perfect. I appreciate all the color. Congrats on great quarter, guys. Thank you.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Yes. Thanks, Nate.

[Operator]

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

[Terry Mcevoy, Managing Director at Stephens Inc]

Hi, thanks. Good morning. Maybe just a question on Western Michigan. Could you just talk about banker and client retention? And is the broader product offering, is it driving some growth in that market?

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Yes. Thanks, Terry. Yes, still feel very good about West Michigan. I actually spent a couple of days over there with clients. The conversion is behind us.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

We're excited to have that part of the equation done. And a number of clients are looking for us to provide more services to them and the prospecting opportunities are very good. So feel actually like we're in the right spot to begin accelerating the results in West Michigan.

[Terry Mcevoy, Managing Director at Stephens Inc]

And then as a follow-up, the $456,000,000 of commercial growth, Rich, did about half of that occur in the mortgage finance portfolio? And how much volatility would you expect what's the size of that portfolio today? And how much kind of volatility would you expect during the year?

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Yes. Well, there is I mean, as we talk about in our own mortgage book, I mean, there is a fair amount volatility in that book in total. But generally speaking, what we've seen is a lot of onboarding of new opportunities, which is driving the growth in a kind of muted market. So we are taking share in that portfolio. So right now that total book sits at $1,200,000,000 $1,200,000,000

[Terry Mcevoy, Managing Director at Stephens Inc]

Great. Thanks for taking my questions.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Sure.

[Terry Mcevoy, Managing Director at Stephens Inc]

You bet.

[Operator]

Thank you. Our next question comes from the line of Ben Gerlinger of Citi. Please go ahead, Ben.

[Ben Gerlinger, VP - Equity Research at Citigroup]

Hey, good morning, guys. I know we talked through the rate paid across the different deposit silos. And then I get that you grew like a weed this quarter, which is good. But when you think about like if there is a cut or two in the back half of the year, the next six plus months, do you think you can have the immediate impact of kind of the same deposit beta we've seen given that you just increased it? Could you kind of lower it pretty quickly thereafter? I'm just trying to think about the the behavioral finance relative to what we just saw on kind of the growth aspects?

[David Stoehr, EVP & CFO at Wintrust Financial]

Yes, I think Tim touched on it a little bit earlier, but I think if the Fed cut 25, we would be have the ability to cut 25 on our discretionary account. CDs would obviously take time to roll, but a lot of our CD offerings now are certainly less than a year, seven months and eleven month term. So, I think that we would see a similar deposit cut as we saw in the prior cuts that we saw a while back that we could get the full 25 on most of our discretionary accounts.

[Ben Gerlinger, VP - Equity Research at Citigroup]

Got you. That's helpful. And then you just answered the question on the expense front. So that is everything I have. Appreciate it. Thanks, guys.

[David Stoehr, EVP & CFO at Wintrust Financial]

Thanks, Ben.

[Operator]

Thank you. Our next question comes from the line of Casey Haire of Autonomous. Please go ahead, Casey.

[Casey Haire, Senior Analyst - US Mid-Cap Banks at Autonomous Research]

Yeah, thanks. Good morning, guys. Just wanted to follow-up on loan growth again. So the premium finance, it sounds like it's obviously got great momentum, up 17% year over year. Rich, I think you said it is showing some signs of moderating.

[Casey Haire, Senior Analyst - US Mid-Cap Banks at Autonomous Research]

Just wondering where that is in terms of that hard market cycle, like terms of later innings? Just some big picture thoughts on how that tailwind is going.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Yes, it's a really good question, something we look a lot at. If you look at our that portfolio over the last six years and on a month to month comparison, it's a very consistent growth pattern fueled by two things. One is the dislocation of other competitors, some changes in the dynamics of the individual agents, things like that. But there's just been a lot of opportunity for us to pick up market share. So that year over year continues to drive not only dollars, but numbers of units.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

And the other piece to the puzzle is just a market that we saw hardening pretty consistently over the last four or five years. So those two things have really allowed that portfolio to grow very nicely, plus just great execution on the team's part and some investments we've made in technology that really helped kind of drive the product offering. So that put us in good shape. But then with the hardening market, things continue to move up. That market, I'd say, still in a lot of product lines continues to be pretty hard and we see some upward momentum.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

But we are starting to see some moderation there. So we use the term firm that the unit the dollar amounts of units continues to stay pretty consistent. So we feel pretty good overall with where that portfolio is going and where it should be for the next year, because a lot of those dynamics continue to be the case. So I guess the only maybe just slight thought there is maybe not as the premium rates maybe not with the same upward trajectory, but still solid to, I'd say, firm to slightly up.

[Casey Haire, Senior Analyst - US Mid-Cap Banks at Autonomous Research]

Got you. And then just, Tim, a follow-up question. You mentioned M and A is picking up a little bit. Just wondering is that I know Makatawa was great for you guys last year, but it was a little bit bigger than I think the market is used to and it was obviously outside your core Chicago footprint. Just wondering where size and location wise and what's driving sort of the uptick in terms of the M and A opportunity.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Well, with respect to the market, I think there's a whole host of reasons. I mean, people dealing with succession issues, people feeling like the market is a little better than it had been a couple of years ago. Frankly, as we've talked about it, it gets tougher and tougher to run a small bank with the expenses attached to compliance and regulatory issues and finance and the like. So I think you're getting people

[Operator]

Ladies and gentlemen, please stand by. Ladies and gentlemen, please remain on your line. Thank you for your patience. Yes, sir. Please proceed.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Casey, I'm sorry. Somehow we've got a line dropping somewhere between Chicago and where all of you are. Yes, no worries, guys. So again, I think we feel like we could execute on a wide range of opportunities if they became available to us. It just has to fit from a cultural standpoint, from a market standpoint.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

But again, for the reasons I mentioned earlier, I think there is some pickup in kind of market M and A activity.

[Casey Haire, Senior Analyst - US Mid-Cap Banks at Autonomous Research]

Thank you.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

You bet.

[Operator]

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

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

Thanks. Good morning. Rich, I wanted to circle back and not to get too granular, but you touched on the CRE non performers and we're off a low base. But maybe same question on look like a little pickup in commercial non performing loans. Any specifics to that?

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

I'm guessing a similar answer to CRE, it's pretty granular, but by type or geography on C and I.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Again, very granular. We had one in particular credit that just had we'd seen performance suffer for a little while here over the last couple of quarters and finally decided that this was a credit that probably is going to need more meaningful remediation and just took it to nonperforming. We think that we've got it marked right. But again, just kind of a one off situation.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

And Rich, if you were to flag sort of concern or just is it the small ticket business arena that you'd say maybe in this environment the most pressured or anywhere in C and I that you'd highlight the most?

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

Yes. There's nothing that I would necessarily point to specifically. I think it's more a question of leveraging the balance sheet, liquidity on the balance sheet. It's just those are some of the operating things that we kind of take a look at. Last year about this time, we were really focused on transportation.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

We had pretty much across the board a number of transportation related issues with P and C leasing, core C and I. I think we weathered our way through that. So I think we're feeling better in that space. But right now, it's really more, think, event driven than industry driven.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

Got it. Okay. And then

[David Stoehr, EVP & CFO at Wintrust Financial]

I'd like to maybe add in there, Jeff. I mean, if you look at the total nonperforming loan ratio, it's right in the middle of the range. I mean, we range from 35 to 39 basis points, and we're at 37, and it's an awfully low number. So just one credit here or there can move it a little bit. But again, it's low and right in the middle of our historical range over the last five quarters.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

Got you. Yes, good perspective. And then just one other one. I just continue to try to model the covered call option, sort of the outlook there, and that's on a quarterly basis between, call it, dollars 1,000,000 to $6,000,000 a quarter. Anything that you could lead us to or drivers of that plus or minus as what could a lower or higher quarter there?

[David Stoehr, EVP & CFO at Wintrust Financial]

No. It sort of really depends on what happens to whether we're writing calls on government agencies like Fannie Mae. So it sort of really depends on what that part of the curve does as far as if it comes down the security, so we called and we'll rewrite and then it also depends on what volatility is at the time that we buy the security. So my crystal ball isn't good enough predict what it's going to be at the end of the third quarter. But if rates go down a little bit and securities get called, then we'll generally have more call option.

[David Stoehr, EVP & CFO at Wintrust Financial]

If rates go up, then it's usually less. But you're right, it's generally in the 1,000,000 to $5,000,000 $6,000,000 range and it really can fluctuate. But it's really sort of a hedge to down rates for us. It supplements revenue if rates go down. So if those rates do go down, call option will go up, which will supplement revenue and offset any pressure you could have on margin.

[Jon Arfstrom, MD & Associate Director - US Research at RBC Capital Markets]

Got it. Thanks, Dave.

[Operator]

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

[Jared Shaw, Managing Director at Barclays Capital]

Hi. Good morning.

[Jared Shaw, Managing Director at Barclays Capital]

Maybe just any thoughts on capital targets as we move through the rest of the year here with what you've done on the preferred and just overall in terms of maybe CET1 targets?

[David Stoehr, EVP & CFO at Wintrust Financial]

Yes. Well, CET1, we had such good growth this quarter. It came down zero zero one percent, but we would expect that probably to grow 10 basis points a quarter going forward if we have the mid to high single digit loan growth. And the other categories and we put this in the earnings release roughly 60 basis points higher at the June, because we had both preferred all preferred issuances outstanding. So we had the four twenty five Series F outstanding and the four twelve point five of the Series D and E.

[David Stoehr, EVP & CFO at Wintrust Financial]

So somewhat elevated at the June. Those Tier one ratios will come down 60 basis points, not the CET1 because preferred is not in the common, but the total Tier 1s will come down roughly 60 basis points. But we put those numbers in the press release. From here on out, we would just expect to gradually grow capital 10 basis points or so with earnings and mid to high single digit loan growth.

[Jared Shaw, Managing Director at Barclays Capital]

I guess what's the would you be comfortable bringing it back down below 10% if there was a good opportunity, a good deal? Or should we think that 10% CET1 is more of a floor for the time being?

[David Stoehr, EVP & CFO at Wintrust Financial]

I think it's more of a floor. I think staying at 10% is not a bad level to indicate a floor. But we'd like to grow that. If there was a great opportunity and it was down just I would look at 10% as a floor in our minds right now.

[Jared Shaw, Managing Director at Barclays Capital]

Great. Thank you.

[Operator]

Thank you. Our next question comes from the line of David Ciavarini of Jefferies. Please go ahead, David.

[David Chiaverini, Equity Research Analyst - US Mid-Cap Banks at Jefferies]

Hi, thanks. Follow-up on loan growth. Curious on non premium finance, so more on the core C and I and CRE sides. Can you talk about borrower sentiment? Are you seeing more borrowers come off the sidelines here?

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

As I mentioned before, the sentiment, I think, is better than it was at the last earnings call because there was so much disruption in terms of some of the challenges coming out of Washington. So I think that there is more stability. I don't think it's there was a talk at the end of last year of animal spirits and just there's a tremendous uptick in overall business sentiment. I wouldn't say that. I would say people continue to be cautiously optimistic.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

I think that they see that the clouds are partnering a little bit on some of these issues that may affect their business. So I feel in talking to a lot of these customers directly that people generally feel better than they did last quarter, but there's still, I think, a fair amount of wait and see on what these the tax code changes are going to look like, seeing what rates are going to do. There's just there's still a fair amount of questions that are out there. But we feel pretty good. The other thing we feel good about and we've talked about in prior calls is just the market positioning that we have.

[Richard Murphy, Vice Chairman & Chief Lending Officer at Wintrust Financial]

There's just been a huge change in terms of the competitive dynamic in Chicago that's really allowed us the opportunity to get into a lot more doors. And so we think that, that is a huge part of the growth story for us. So generally, as we talked about, pipelines look good, and that's probably a function of the market dynamics, but also just general clarity on the overall economic environment.

[David Chiaverini, Equity Research Analyst - US Mid-Cap Banks at Jefferies]

Very helpful. Thank you.

[Operator]

Thank you. Our next question comes from the line of Brendan Nosso of Hovde Group. Please go ahead, Brendan.

[Brendan Nosal, Director at Hovde Group]

Hey, good morning, everybody. Thanks for taking the question. If I look at the ACL calculation on Slide 15, it looks like the baseline macro factors drove an increase, but the macro uncertainty drove a decline. I'm just kind of curious how that shapes up. Was that a shift from the uncertainty bucket into the baseline forecast?

[Brendan Nosal, Director at Hovde Group]

Or maybe just help us kind of square that circle.

[David Stoehr, EVP & CFO at Wintrust Financial]

Yes,

[David Stoehr, EVP & CFO at Wintrust Financial]

I think that's right. I mean, last quarter, we had I think, 36,000,000 number for macro uncertainty, which included the Baa spread factor and market volatility. The stock market volatility actually factors into some of our models. And we maintain sort of the Baa credit spread overlay, but the market volatility sort of went away this quarter. So probably an overlay in the low 20s million dollars range versus the mid-30s.

[David Stoehr, EVP & CFO at Wintrust Financial]

So that's about that $10,000,000 difference that you're seeing in that slide in the far right. And so the macroeconomic baseline actually increased a bit and the overlay decreased a bit and they generally offset each other. Okay. Thanks for taking the question.

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Thanks, Brennan.

[Operator]

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

[Nicholas Holowko, Director at UBS Group]

Hi, good morning. Thanks for taking my question. Just one for me on the margin. So you've had a ton of success stabilizing the margin in this 3.5% range for about a year now with the help of the hedges that you have in place and your deposit gathering efforts. And loan growth is obviously trending very strong.

[Nicholas Holowko, Director at UBS Group]

So how do you think about your appetite or your need to grow that hedging portfolio at a faster pace alongside your loan growth to keep a similar degree of margin protection beyond this year? Thank you.

[David Stoehr, EVP & CFO at Wintrust Financial]

Nick, I think if you look at the disclosure that we put on Slide 25, we list out the collar in place and we feel pretty good for the next year or so. Then some of them start to mature off. So we'll look to fill out the buckets in 2027 and 2028. But for the next year or so, we feel pretty good about our position. And we're just waiting for sort of opportune times in the market to add on to those swap positions.

[David Stoehr, EVP & CFO at Wintrust Financial]

But the last few you can see, we did one year forward starts and then we did them out four or five years. So just trying to opportunistically and not fill them all up at the same time from a diversification standpoint add to those as we go along. But I think you will see us add on to those later maturities over time.

[Nicholas Holowko, Director at UBS Group]

Thank you.

[Operator]

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

[Timothy Crane, President, CEO & Director at Wintrust Financial]

Thank you very much and guys apologize for the technical difficulties. We certainly appreciate your time and interest in WinTrust. As you can tell, we feel well positioned for the second half of the year and actually enter the third quarter with a lot of momentum. As always, please don't hesitate to reach out if there's anything we can do for you or as Dave said, if there's any questions on the accounting for the preferreds. But we appreciate your time this morning. Thank you very much.

[Operator]

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

Participants

Executives

• Timothy Crane, President, CEO & Director
• David Stoehr, EVP & CFO
• Richard Murphy, Vice Chairman & Chief Lending Officer

Analysts

• Jon Arfstrom, MD & Associate Director - US Research at RBC Capital Markets
• Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)
• David Long, Managing Director at Raymond James Financial
• Nathan Race, MD & Senior Research Analyst at Piper Sandler Companies
• Terry Mcevoy, Managing Director at Stephens Inc
• Ben Gerlinger, VP - Equity Research at Citigroup
• Casey Haire, Senior Analyst - US Mid-Cap Banks at Autonomous Research
• Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies
• Jared Shaw, Managing Director at Barclays Capital
• David Chiaverini, Equity Research Analyst - US Mid-Cap Banks at Jefferies
• Brendan Nosal, Director at Hovde Group
• Nicholas Holowko, Director at UBS Group