Image source: The Motley Fool.
Date
Tuesday, Oct. 21, 2025 at 11 a.m. ET
Call participants
President & Chief Executive Officer — Timothy S. Crane
Senior Executive Vice President & Chief Operating Officer — David Alan Dykstra
Executive Vice President & Chief Financial Officer — David L. Stoehr
Chief Legal Officer — Kate Bogie
Executive Vice President — Richard B. Murphy
Need a quote from a Motley Fool analyst? Email [email protected]
Takeaways
Net income -- Net income reached $216 million in Q3 2025, up nearly 11% sequentially from just over $195 million in the previous quarter, setting a new record for the third consecutive quarter.
Net interest income -- Net interest income totaled $567 million in Q3 2025, an increase of $20 million compared to Q2 2025, driven by higher average earning assets.
Loan growth -- Loans increased by just over $1 billion during Q3 2025, with total loans reaching $52 billion at quarter-end, reflecting an 11% annualized year-to-date growth rate.
Deposit growth -- Deposits rose by $895 million in Q3 2025, reaching almost $57 billion, corresponding to a 6% annualized increase over the previous quarter.
Net interest margin -- 3.5% for the quarter, slightly down from the previous period, but in line with management’s stated target range.
Non-interest income -- Total non-interest income was $130.8 million in Q3 2025, up $6.7 million sequentially, supported by gains in wealth management, mortgage revenue, and securities.
Non-interest expense -- Non-interest expense was $380 million in Q3 2025, a slight decrease from $381.5 million in the previous quarter; efficiency and overhead ratios improved quarter over quarter.
Credit quality -- Nonperforming loans declined from $189 million (37 basis points) to $163 million (31 basis points) in Q3 2025; net charge-offs rose to 19 basis points in Q3 2025, primarily due to the resolution of previously reserved credits.
CRE exposure -- Commercial real estate nonperforming loans decreased from 0.25% to 0.21% of total CRE loans in Q3 2025, with CRE office exposure steady at 3% of total loans.
Interest-bearing deposit cost -- The rate paid was essentially flat, increasing by one basis point compared to the previous quarter.
Preferred stock transaction impact -- Redemption and reissuance of preferred shares reduced fully diluted EPS by $0.28 in Q3 2025, with no impact to operating net income.
Market share -- Wintrust (WTFC +2.26%) is third in deposit market share in Illinois, with continued share gains across key markets; management highlighted national reputational ranking at sixth.
M&A and capital deployment -- Management stated discipline in acquisitions, noting small bank transactions are less impactful economically at current scale.
Expense outlook -- Management expects non-interest expenses to stay in the low $380 million to $385 million range going forward, adjusted for seasonal marketing spend fluctuations.
Summary
The call provided explicit confirmation that management expects continued mid- to high-single-digit growth in loans and deposits for Q4 2025, supported by a stable net interest margin of 3.5% throughout the remainder of 2025, even under scenarios with multiple Federal Reserve rate cuts. Detailed commentary confirmed loan pipelines benefit from market share shifts away from larger banks and are supported by cross-sell opportunities in treasury management and wealth services. Credit quality remained stable in Q3 2025, with special focus on proactively managing CRE and office exposure, and no material retrenchment from core lending verticals. Management reiterated expense discipline, portfolio diversification across niche finance areas, and an ability to organically expand within core Midwestern markets when attractive acquisition targets are unavailable.
Management emphasized, We believe our approach to credit underwriting and our diversified portfolio serve us well, signalling conviction in current portfolio management strategy.
David Alan Dykstra said, we're pretty comfortable within a fairly tight range around 3.50. Given the 3 or 4 rate cuts that a lot of people are talking about over the next year, we expect to maintain that 3.50 margin, plus or minus a few basis points.
Loan pipelines are reportedly stable, sustained by opportunities from clients migrating from larger institutions, according to direct management discussion during Q&A.
Leadership indicated potential for future organic expansion into adjacent markets, with recent examples cited in Rockford and Northwest Indiana facilities.
Nonbank or branch acquisitions remain on the table should strategic fit and timing align, though management preference leans toward organic growth when viable.
Management attributed rising non-interest income in part to increased mortgage applications following brief dips in rates in Q3 2025; however, sustained improvement is contingent upon further declines in mortgage rates.
Management said, If it got to be too big, you know that we have offshoots. We've been demonstrating that we can sell off excess production. And so if we get to a point where we didn't like the concentration, if that number started to get, you know, 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, showing a willingness to balance concentration risk as niche asset classes increase in size.
Industry glossary
CRE: Commercial Real Estate; loans collateralized by commercial property including office, retail, industrial, and multifamily assets.
NDFI: Non-Depository Financial Institutions; entities such as mortgage warehouse lenders and capital call lenders not taking deposits but engaging in specialized lending.
Premium finance: Lending to cover insurance premiums, typically with short-duration loans secured by underlying policy collateral.
SOFR: Secured Overnight Financing Rate; a benchmark interest rate for dollar-denominated derivatives and loans, replacing LIBOR.
MOE: Merger of Equals; a transaction structure where two companies combine with similar market capitalizations and governance influence.
Full Conference Call Transcript
Timothy S. Crane: In addition to the introductions that Latif just made, I'm joined by our Chief Financial Officer, David L. Stoehr, and our Chief Legal Officer, Kate Bogie. I'll begin this morning with a quick overview of our results, David Dykstra will speak to the financials in more detail, and Richard Murphy will speak to the loan activity and credit performance. I'll be back with some final thoughts, and as always, following our remarks, we'll be happy to take your questions. Wintrust reported a third consecutive quarter of record net income driven by our differentiated approach to understanding our clients' needs and delivering the right solutions to help them meet their financial goals.
Net income of $216 million was up from just over $195 million last quarter, an increase of almost 11% quarter over quarter. Net interest income was up $20 million from the second quarter to $567 million, driven by another quarter of solid loan and overall balance sheet growth. Loan growth of just over $1 billion was broad-based and continues to reflect the diversified composition of our earning assets. Total loans were $52 billion at quarter-end, up 11% year-to-date on an annualized basis. Deposit growth of just under $900 million kept pace with the loan growth.
Total deposits were almost $57 billion at the end of the third quarter, and the rate paid on interest-bearing deposits was essentially flat compared to the prior quarter, up just one basis point. Interest margin was 3.5% for the quarter, down slightly from the prior quarter, but square in the middle of our targeted range. Credit quality remains very good, and we continue to proactively work with a small number of clients who are experiencing challenges. Before I turn it over to David, 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. Our Wintrust franchises in Wisconsin and West Michigan showed strong growth as well, also with lots of upside potential. Given our advantaged position in these markets, we remain focused on continued core deposit growth as a key tenet of our franchise. Secondly, I'm proud to say Wintrust debuted at number six on American Bankers' nationwide survey of bank reputation. Survey results reflect our commitment to earning the trust of our customers every day. It also speaks to our ability to grow and strengthen the franchise. So once again, a solid and straightforward quarter. And I'll turn it over to David for additional insights.
David Alan Dykstra: 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 the other aspects of the balance sheet results, total assets grew $646 million to just under $70 billion in total assets. Turning to the income statement results, it was a very solid operating quarter.
As Tim said, we had another record level of quarterly net income. Our net interest income represented another record high quarterly amount also. A $2.4 billion increase in the average earning assets drove the $20.3 million increase in net interest income over the prior quarter. Given the current interest rate environment and even with a few rate changes in either direction, we remain confident that our net interest margin can continue to be relatively stable throughout the remainder of 2025 at roughly 3.5%.
I would note that period-end loans are approximately $660 million higher than the average loans for the third quarter, giving us a good start on achieving higher average earning assets for the fourth quarter and combined with that stable net interest margin I referenced should provide for increased net interest income in the fourth quarter as well. The provision for credit losses remained relatively flat with the prior quarter as the overall credit environment and asset quality has remained relatively stable. As to 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. Expenses are well controlled with both the quarterly net overhead ratio and efficiency ratio improving from the prior quarter. In summary, we're pleased with the record quarterly results in net income and net interest income.
The results were supported by good franchise-building loan and deposit growth, a solid net interest margin, low credit costs, and well-controlled expenses. We also continue to build our tangible book value per share during the first 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 in the quarterly 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. In short, while there was no impact to operating net income, the portion of these transactions that were of a 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. So with that, I'll turn it over to Richard to discuss credit.
Richard B. Murphy: Thanks, David. As Tim and David 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, growing by $252 million. 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 market 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. From a credit quality perspective, as detailed on slide 15, we continue to see strong credit performance across the portfolio. This can be seen in a number of metrics. Nonperforming loans decreased from $189 million or 37 basis points to $163 million or 31 basis points.
Charge-offs for the quarter were 19 basis points, up from 11 basis points in the prior quarter, but down from 23 basis points in 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 on substandard loans on slide 15. This quarter is a perfect example of our commitment to identify problems early and charging them down where appropriate.
Our goal, as always, is to stay ahead of any credit challenges. As noted in our last few earnings calls, we continue to be highly focused on our exposure to commercial real estate loans, which comprise roughly 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 office exposure. Currently, this portfolio remains steady, although it represents only 3% of our total loan portfolio.
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, disciplined diversification, and a proactive approach to resolving credit challenges. In summary, we continue to be encouraged by our credit performance in the third quarter.
And we believe that our portfolio is well-positioned, very diversified, and appropriately reserved. This concludes my comments on credit. And now I'll turn it back to Tim.
Timothy S. Crane: Great. Thanks, Richard. 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 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. 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, both 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 ask Latif to open the floor to your questions.
Operator: Thank you. Star one on your telephone. To remove yourself from the queue, you may press star one again. Please stand by while we compile the Q&A roster.
Jon Arfstrom: Our first question comes from the line of Jon Arfstrom of RBC Capital Markets. Your line is open, Jon. Hey. Thanks. Good morning.
Timothy S. Crane: Good morning, Jon.
Jon Arfstrom: Hey, Tim. Maybe for Tim or Richard, on the loan growth drivers, can you talk a little bit more about the pipelines and what you're seeing? Are they changing at all one way or the other? And then if you could just because it's topical, if you could comment on any NDFI exposure you might have.
Richard B. Murphy: 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 in the Chicago market, where there's, you know, a lot of much bigger banks and a lot of smaller banks. And for the banks that are significantly larger, they have a huge amount of market share that we have slowly been taking away from them. We just landed a very nice relationship, a long-time customer at one of the predominant banks in Chicago. And, you know, they just didn't even know who to talk to anymore. And those are the opportunities that have just continued to feed that C&I pipeline and CRE pipeline.
Really over the last, you know, ten, fifteen years as we've continued to just really press in that area. So it's really when I look down the list, that's what the pipeline largely consists of. It's just more and more opportunities coming from larger banks where they just feel like, you know, they don't know anybody at those institutions. Their credit's getting decided at a place where they don't even know who's doing it. And it's just that they really like to bank with somebody where they know their banker, they know, you know, who's making the decision. So that's really the pipeline. You know, as it relates to NDFI, anything further on that, Jon?
Jon Arfstrom: No. I think you're saying it's market share and the environment both, but maybe market share and the environment.
Timothy S. Crane: That's right. And Jon, the only thing I would add to that, I mean, they tend to be relationships where we will also have treasury management opportunities and wealth opportunities over time. So the pipelines are stable, and we continue to be encouraged by what we're hearing from our clients in the market.
Jon Arfstrom: Right. Okay. NDFI, that'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, you know, businesses that we've been in for years and we've experienced no losses in. The balance is primarily made up of loans to leasing and premium finance companies. You know, again, businesses that we are very familiar with and customers that we know well. So that, you know, I would say the predominant piece of that puzzle really is mortgage warehouse.
Jon Arfstrom: And, I think you know that story well having followed us for so long.
Jon Arfstrom: Yeah. And then this comes up on your company as well a little bit just in terms of the margin and the margin range. How do you guys feel about the ability to hold the margin in the current range kind of over the medium term with the Fed starting to cut rates? Is this something that you can, you know, hold through the medium term? Do you feel like you're protected there?
David Alan Dykstra: Yeah, Jon. 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 3.50 range. The balance sheet is relatively variable on the loan side, but we also have some swaps in place to manage that downside risk. But our deposits are also, you know, quite variable with, you know, 80% of them being non-term deposits. And given the rational market here in Chicago, you know, we've been able to cut rates fairly evenly with the Fed cuts going down.
So as market rates have gone down, our deposit costs have gone down, and we're fairly balanced on both sides of the equation. So we're pretty comfortable within a fairly tight range around 3.50. Given the three or four rate cuts that a lot of people are talking about over the next year, that will hold that 3.50 margin plus or minus a few basis points.
Jon Arfstrom: Okay. Alright. Thanks, David.
Operator: Thank you. Our next question comes from the line of Terry McEvoy of Stephens Inc. Please go ahead, Terry.
Terry McEvoy: Thanks. Good morning, everybody. Maybe a question on the commercial loan growth. Ex the finance receivables, it was $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?
Richard B. Murphy: Terry, I don't think there's anything that I would read into that. I think it's just more timing than anything else. You know, I would say that, you know, when you look at just overall pipelines, you know, you're seeing pretty consistent, you know, opportunities. It just kind of depends on when they close, you know, you got some utilization issues there. So I would say, you know, it's been a pretty consistent story in terms of overall commercial pipelines and opportunities and balances.
Terry McEvoy: Thanks. And maybe a question for Tim. Could you just expand on the strategy to play more offense in your markets when competitors may be focused on Texas or elsewhere? And would you step up hiring and marketing to take advantage of that situation?
Timothy S. Crane: Sure, Terry. I mean, there's a lot of conversation about people finding the Southeast or Texas attractive. And we think we've got four, three, four depending on how you look at it, very attractive markets. The Chicagoland community, including Northwest Indiana, is a dense business-rich community with transportation and health care and good education. And although it may not be growing as fast, we've consistently been able to take share from some of our peers. And so we continue to feel very good about that. West Michigan grows a little bit faster. And with the Makatawa integration activities behind us, we're making progress. You see that in terms of the deposit share that we've gained over the last year.
And we continue to feel very good about Wisconsin. So we just like our backyard and the markets that we understand better than we like others. And we'll continue to follow clients periodically to Florida or other geographies maybe. But we're very comfortable in the Midwest and our ability to continue to grow on a consistent basis.
Terry McEvoy: You bet.
Operator: Our next question comes from the line of Christopher Edward McGratty of KBW. Please go ahead, Chris.
Christopher Edward McGratty: Hi. Good morning. Thanks for the question.
Timothy S. Crane: Yeah. You bet, Chris.
Christopher Edward McGratty: Tim, my question is around operating leverage. This year, you're poised to produce, I think, about a couple of hundred basis points. I'm interested if that gets perhaps a little more challenging next year with the rate outlook. But also the, I guess, the offset of deregulation might alleviate some of those pressures. But any thoughts on operating leverage trends?
Timothy S. Crane: Well, just that as we kind of approach our end-of-year planning for '26, we expect we'll continue to get operating leverage. And if we can grow the balance sheet mid to high single digits, we can keep expense growth in the kind of mid-single-digit range, we would still expect to see improvement. And that's what our team will be aiming at as we get through the budget process.
Christopher Edward McGratty: Okay. Perfect. And then 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.
Timothy S. Crane: Well, you know, 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 Makatawa in our track record. So we'll continue to look at opportunities. But that said, we work for our shareholders. And so if anything else were to arise, our board is well prepared and well equipped to deal with that. So we'll keep looking at stuff, and as we've talked about in prior calls, the very, very small transactions are probably tougher for us at this point. They just don't move the needle enough.
Christopher Edward McGratty: Okay. And just so I understand, Tim, the comment, I guess, are you implying the optionality of going either way? Is that what your comments were?
Timothy S. Crane: Well, I'm just saying we're clear. We work for our shareholders. Our board's equipped to address any opportunity either side of the equation that comes up.
Christopher Edward McGratty: Alright. Thank you. Appreciate it.
Operator: Thank you. Our next question comes from the line of Nathan James Race of Piper Sandler. Please go ahead, Nathan.
Nathan James Race: 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, just given the runway that you've described already on this call. And can you just maybe size up if you were to do an acquisition type of asset size or geographies you would be entertaining?
Timothy S. Crane: Yeah. I mean, obviously, track record is sort of bolt-on stuff. Makatawa is in the $3 billion range. We think we're good at those types of transactions, but we've also spoken that we're making investments in people and capabilities to be a larger financial institution and serve larger clients. So I think without getting into specifics, 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.
Nathan James Race: Okay, great. Again, maybe to put the two fences on it though, again, the very small transactions are just tougher from an economic standpoint. And we've said on prior calls, MOEs are complex and cultural issues. And I don't think our view on those has changed.
Nathan James Race: Understood. That's really helpful. Just going back to fee income. You know, curious if you've seen any change in your lock volumes on the mortgage side of things just given the drop in rates late in the quarter and how you're thinking about that revenue opportunity now that rates have come down in the fourth quarter and perhaps into 2026 as well?
David Alan Dykstra: Yeah. Well, you can see, you know, there's just a little bit of a pickup in mortgage banking revenue for the quarter, but still in the low twenty to mid-twenty range. We saw a pickup in applications early in the third quarter when rates came down. So there was a little bit of a flurry of people that wanted to refinance that maybe had rates in the sevens, eight percent range. And then that, you know, that went away fairly quickly in the middle of September, and applications have stayed fairly low. So, you know, I think our thoughts are that, you know, the lower rates are better.
I probably need another, you know, 25 to 50 basis points of mortgage rate cuts to see that number improve significantly. So I think based upon the seasonality of the fourth quarter being low and what we're currently seeing in applications, you know, probably still the mid-twenties on plus or minus on mortgage revenue. We'll see how the quarter ends up here and see whether the ten-year comes down further with any of the Fed actions and whether that influences the ten-year portion of the curve, which in the past is they don't necessarily move in sync as you know.
But we're optimistic that it will get better next year with the slightly lower rates and home buying season starting in the early part of next year. But right now, it still seems like applications are sluggish.
Nathan James Race: Okay. Gotcha. I could sneak one last one in on margin and kind of the outlook for loan yields. You know, I think you guys have, you know, swaps or hedges on, you know, $4 billion or so of your floating rate loans. So, you know, just curious if we get to five rate cuts over the next twelve months or so, David, 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?
David Alan Dykstra: Well, you know, the swaps are effective all the time. They're just tied to the three-month, you know, the three-month SOFR or the one-month SOFR rate. And so 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, you know, and vice versa. So I, you know, those are effective for us in hedging those variable rate loans regardless of where SOFR moves to because of the swap nature of it. Loan rates are, you know, well, they're still in the sort of mid-sixes to 7% range depending on our mix. Premium finance PNC is higher than other categories.
So it sort of depends on the mix. But we're still thinking right now, without any further rate cuts, that you're probably in the mid to high sixes as far as blended new loan rates.
Timothy S. Crane: And, Nate, the flip there is deposits coming on, you know, incrementally in the mid-threes, and that kind of matches the 3.5% margin that we believe will hold kind of for the near term.
Nathan James Race: I'm sorry, Tim. Were you saying your kind of blended cost of new deposits coming in, or around mid-threes these days? That seems a bit high.
Timothy S. Crane: The incremental cost of the deposits. So again, we grew $1 billion on both sides. So at the margin with the promotional activities, sort of mid-threes with loan yields around seven, that sort of matches the 3.5% margin that we're talking about.
Nathan James Race: Gotcha. I'm with you. I appreciate all the color. Thanks, guys.
Timothy S. Crane: You bet. Thank you.
Operator: Our next question comes from the line of Casey Haire of Autonomous Research. Your line is open, Casey.
Jackson Singleton: Hi. Good morning. This is Jackson Singleton on for Casey Haire. My first question is on NIM. What is the total cumulative interest-bearing deposit beta expectation underlying the stable NIM guide? During the hiking cycle, it looks like the beta was around 65%. Versus 55% at the end of 3Q. So just any color here would be appreciated.
David Alan Dykstra: Yeah. We still think mid-60s is probably the right number. You know, our interest-bearing deposit costs are above 3% higher than some of our peers. So if you were to get more rate cuts, we feel a little bit good in this regard that we have room to move our deposit costs down more than maybe some others do. So again, we feel comfortable, a couple of cuts or a couple of moves either way, the 3.50 is still about the right number.
Jackson Singleton: Okay. Great. Thank you. And then for my follow-up, just on premium finance. So PNC growth has been very good this year despite being in a hard market. I think it's up around 15% on a year-to-date basis for end of period. So I guess just what is the outlook for PNC going forward?
Richard B. Murphy: Yeah. We continue to be pretty bullish on PNC. I mean, we continue to take market share. We deliver, I think, a very good product for our customers, and you look at over the course of, like, the last five years, you can just see just steady growth. You know, even if you exclude, you know, the market, you see, you know, the number of accounts going up. You know, in addition to which, you know, while there may be some softening in some lines, you know, overall, I would say the market continues to look firm for us. So we continue to be pretty optimistic in that space.
Jackson Singleton: Okay. Great. Thank you for taking my questions.
Timothy S. Crane: Thank you.
Operator: Our next question comes from the line of Jeffrey Allen Rulis of D.A. Davidson. Please go ahead, Jeff.
Jeffrey Allen Rulis: Thanks. Good morning. Just wanted to maybe check in on credit. Richard, I think you mentioned your sort of growing comparability on CRE. Just looking at kind of the past dues linked quarter inched up a little bit. I'm curious as to maybe just timing on those. I mean, that's early stage. Could you maybe speak to a little pickup there?
Richard B. Murphy: Yeah. Pickup where in the charge-offs or is it in kind of the past due? The not quite nonaccrual, but just early delinquency stuff was a linked quarter increase. Yeah. You know, I wouldn't say anything that would appear, you know, anything probably more episodic than anything else. You know, we, as we have pointed out and kind of limited our comments during the call on the CRE in the office. But 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 out, try to find a reasonable solution for things that get maybe a little sideways.
And those conversations take some time. So as you're working through those, you know, you really want to be very thoughtful. You want to work with your customer. And occasionally, those may extend out past maturity. But those are that's part of the business. That's something we do, you know, week in, week out as working with our customers, and it's not always linear. So, you know, you may have quarter to quarter some changes up or down. But nothing that I would look at as problematic.
David Alan Dykstra: Yeah. Jeff, I would just chime in there a little bit. I mean, you look at, like, 30 to 59s, although they're up from the second quarter, you know, they're way down from the prior three quarters ahead of that. So over the last five quarters, still the second lowest. So I think a lot of this is just timing. Nonaccruals are down, sort of the classified, you know, some special mention substandard together categories are down. You know, the problematic areas, I think we're showing improvement on. And the shorter-term delinquencies, I think, are just timing issues.
Jeffrey Allen Rulis: 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 gonna kind of focus on certain things. But maybe on the charge-offs, any particular segment that those tended to come from in terms of the makeup?
Richard B. Murphy: No. Really unrelated. And, you know, a handful of credits that had, as we have pointed out, you know, had reserves attached to them previously. And just got the final resolution and, you charged off the reserved amount and moved on. But no commonality.
Jeffrey Allen Rulis: Got it. Okay. Appreciate it. And then maybe one last one. Just on the expense side, particularly within marketing, seasonality, Q2, Q3 tend to be a little heavier. Could we maybe see a step down as we have historically in the fourth quarter and first quarter? Just and then if you have any comment on the overall expense run rate? Thanks.
David Alan Dykstra: Yeah. Well, 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. And none of our Chicago or Milwaukee teams aren't any longer in the playoffs, that expense will stop. But so we would expect that to come back down a little bit. There are some fluctuations in things like employee insurance expense and claims and like that it's hard to get a beat on sometimes. We had a pretty good quarter this quarter in that regard. Second quarter was a little higher.
So there are fluctuations in some other areas, but, you know, I think we're sort of sticking with what we said last quarter. Is that the other expenses we would expect to be in sort of the low 380s, $380 to $385 range, you know, depending on fluctuations for certain things. And we obviously were at the very low end of that range this quarter and controlled those expenses well. But, you know, plus or minus a couple million dollars, you know, I think in that, you know, low to mid 380 range is where our focus is right now.
Jeffrey Allen Rulis: Great. Thank you.
David Alan Dykstra: You bet.
Operator: Thank you. Our next question comes from the line of Benjamin Tyson Gerlinger of Citi. Please go ahead.
Kylie Wong: Hey. Good morning. This is Kylie Wong on for Ben today. Thank you for taking my questions. I guess you've touched on this a bit, but when you think about, you know, the Chicagoland marketplace, in terms of deposits, it seems like pricing has been rather rational relative to other large cities. And since your bank is more of a price setter when you think about, you know, the next couple of months and the next couple of quarters? How do you guys think about, you know, the ability to both gather deposits while also pricing down rate? Is there a relative level at the Fed where, you know, overall competition might actually become more competitive?
Timothy S. Crane: Yeah. Well, number one, we would continue to focus on core deposit growth as part of our target, and we would expect to continue to take share from some of our competitors. I think we can do that at, you mentioned, promotional rates that are fairly rational. And so as the Fed cuts rates, I think we'll still be able to get the stabilized margin with deposit growth. So I don't think that there's a trade or a yet in terms of our ability to continue to perform, if that's the question.
Kylie Wong: Great. Thanks for the color.
Timothy S. Crane: You bet.
Operator: Thank you. Our next question comes from the line of David Joseph Long of Raymond James. Your question, please, David.
David Joseph Long: Good morning, everyone.
Timothy S. Crane: Hi, David.
David Joseph Long: I just wanted to follow-up on credit. Maybe this is also a lending question. But on the credit front, are there any segments or specific industries you're paying more attention to here? And then any lending verticals or, again, industries where you may be pulling back your appetite to lend in?
Richard B. Murphy: No. You know, I wouldn't say we're necessarily pulling away from anything. I think that, you know, we've talked about obviously office and transportation in prior calls. So as I think we've largely got our arms around, you know, now I think and we kind of addressed this in the commentary. Yeah. There's just, you know, a number of things that go on with the government and in terms of, you know, some of the things that we're seeing in terms of higher education and health care and things like that. You know, we're paying very, very close attention to. You know, nothing, you know, that, you know, 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, you know, that if we can help in any way or if we can, you know, give them some guidance. But, you know, that's an area that I think we're watching very closely. I'd say if I were to stack rank those, I'd probably put higher right at the top.
David Joseph Long: Got it. Thank you, Richard. Appreciate that. And then 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 3.50 level?
Timothy S. Crane: The way I would answer that, David, would be irrational competition. So if something happened in our markets, which by the way, we don't see at the moment, to dramatically alter pricing of either loans or deposit costs, we could get some pressure there. But again, we don't see that right now. We think other banks are focused on their margin and kind of remaining rational. So I wouldn't say there's a high likelihood of that happening, but that would be the risk.
David Alan Dykstra: Yeah, I guess the other risk would be, which again, we don't see happening, is if for some reason, the yield curve would go back inverted. But we quite frankly see the slope and the steepness staying in place. So we don't see either of those risks as real prevalent right now.
Timothy S. Crane: Yeah. David, I think our team has done a nice job staying very disciplined with pricing, loans, and deposits. That's part of our MO and how we pursue business. I mean, we've talked about on prior calls, we at times could have more business if we were willing to dramatically sacrifice our pricing methodology. We wouldn't sacrifice our credit methodology. But we don't see any need to do that right now. Everything feels relatively rational.
David Joseph Long: Got it. Thanks, guys. Appreciate that color.
Operator: Thank you. Our next question comes from the line of Janet Leigh of TD Cowen. Please go ahead, Janet.
Janet Leigh: 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 know that there's a seasonality component to it. Should we expect this to become a bigger part of your loan portfolio? And 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?
David Alan Dykstra: Yeah. Well, 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? So 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 offshoots. We've been demonstrating that we can sell off excess production. And so if we get to a point where we didn't like the concentration, if that number started to get, you know, around 40% between all of the premium finance divisions, then you might say, well, we want to sell some of that and take a profit off of that excess production. But I don't think we would take our foot off the accelerator as long as the pricing and the credit metrics of that portfolio held up like they have, you know, for the last few decades that we've been in the business.
Janet Leigh: Got it. Thank you. And 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 CRE. So just wanted to get some color. Thank you.
Timothy S. Crane: I think your projection is correct. It's mostly the timing around the loan yields. But again, we've seen the market get more competitive for fully funded loans in some cases as people try to get loan growth. We've said we remain selective in terms of acquiring clients and loan opportunities that bring with them other business. And so we continue to feel good where we are in terms of going forward on loan yields and the ability to hold the margin.
Operator: Our next question comes from the line of Jared Shaw of Barclays. Please go ahead, Jared.
John Rao: 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 nonbank M&A from you guys, like, in the insurance space or maybe in, like, fee-generating business, what would that look like if anything?
Timothy S. Crane: Yeah, John. I mean, there could be. We've certainly acquired either businesses or branches or something other than whole banks at times. So we look at those. Just depends when they surface, if you will. And so there's it's hard to comment on anything specific, but we certainly would and have in the past looked at those.
John Rao: Okay. Great. And then I guess, just maybe on the competitive environment, any change in the overall competitive landscape among, like, the larger banks, smaller banks, like private lenders, as we move throughout the year?
Timothy S. Crane: Not materially. I mean, we certainly see private credit popping up some. And they occasionally will win deals that might have considered bank space in prior periods. But we continue to stay very disciplined in terms of how we underwrite credit, in terms of how we pursue business. And so if it gets a little tougher, we'll work a little harder. It's not an environment that we believe is an impediment at this point.
John Rao: Okay. Great. Thanks for the rest of my questions have been asked.
Operator: Thank you. Our next question comes from the line of Nicholas Joseph Holowko of UBS. Please go ahead, Nicholas.
Nicholas Joseph Holowko: 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 other nearby markets? Or is M&A the preferred way to go to new adjacent markets at this point?
Timothy S. Crane: It would be situational, but we certainly feel like our track record supports organic growth opportunities. We'll continue to open locations and enter markets that we believe are important if we can't find acquisition opportunities. Rockford is a great example. In the Chicago area, we certainly have examples in Northwest Indiana as well, where we've done very well with newly opened facilities and teams of talented people. So yes, I mean, we 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.
David Alan Dykstra: We certainly have done that our entire banking careers here at Wintrust as organic growth is the most preferable way to grow. But as Tim says, it's not always as fast, but we certainly do it well. So we'll continue to do that.
Nicholas Joseph Holowko: Got it. And then maybe just one on the competition from private credit. When you are coming up against private credit lenders and deals, and I know it's important that you guys stay disciplined in terms of how you underwrite. 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.
Richard B. Murphy: Yeah. I would say not so much price, but really structure. And when you, you know, things like amortization, things like term, just covenant structure. Those are the things that typically we feel very strongly about, and a private lender comes in and, you know, they have a covenant-light deal or, you know, a deal that has, you know, nominal amortization. We're just probably going to have more problems with that. So those are the areas where I think we struggle more. Again, it doesn't mean that they're, you know, they're wrong, but, you know, it's just a risk appetite that's different from ours.
Nicholas Joseph Holowko: Perfect. Thanks for taking my questions.
Operator: I would now like to turn the conference back to Timothy S. Crane for closing remarks. Sir?
Timothy S. Crane: Yes. Thank you, Latif. And for those of you on the phone, thank you for spending time with us this morning. We will see many of you before year-end in person, but for those we don't, best wishes for the upcoming holiday season for you and your families. And thank you for your interest in Wintrust. Have a good day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.