Wintrust Financial Corp 2026 Q3 Earnings Call

Good morning, and welcome to Wintrust's third quarter 2026 earnings call. In addition to those Lateef introduced, I am joined by Chief Financial Officer Dave Stoehr and Chief Legal Officer Kate Boege. I will begin with a brief overview of the quarter. Dave Dykstra and Rich will provide a deeper look at the key results, and I will be back to share some final thoughts before we open to your questions. In the third quarter, we recorded our seventh consecutive quarter of record net income. Net income was $239 million, up from $234 million in the prior quarter. Net income and net interest income growth continue to be a function of a stable margin and solid core business growth. Both loans and deposits were up nicely during the quarter, in line with our historical results and our expectations for the quarter.

Our efficiency ratio improved, and we continue to generate operating leverage as expenses remain appropriate relative to revenue growth. To generate these results, we continue to deliver on our three key strategic priorities: to deliver an exceptional and differentiated customer experience, to pursue strategic and disciplined growth, and further build out our foundation by investing for our future. On September 1st, we closed the previously announced acquisition to grow our guardianship services business. This transaction will help boost wealth management revenues and income going forward. We also opened four new branches during the quarter, with two others opening this month. They are all off to a good start in terms of deposit gathering and growing new Wintrust households. These new branches help fill in our Midwestern footprint as we continue to deliver our high-touch, high-tech approach to meeting customer banking needs.

In fact, the latest FDIC deposit market share data shows that Wintrust outperformed both Illinois and the U.S. banking industry on deposit growth. To be more specific, in our core Illinois market, Wintrust continued to gain market share, growing deposits 9.2% year-over-year, more than double the state's 4.4% growth rate, and well above the U.S. industry average of 5.2%. We remain well-positioned in Wisconsin and West Michigan as well, with plenty of growth opportunities in all of our markets. Growing core deposits remains the single most important thing we do to enhance the value of our franchise and to ensure our continued success. Overall, I'm pleased with our results this quarter. Another consistent quarter of solid performance driving continued value for our shareholders. Let me turn it over to Dave for more on what drove our results.

Great. Thanks, Tim. Let me start with the balance sheet. Both loans and deposits grew at an annualized rate of 8% for the third quarter relative to the prior quarter. Total deposits were up approximately $1.3 billion during the quarter, which funded solid third-quarter loan growth of roughly $1.1 billion. Yields and rates on major balance sheet categories were essentially flat with the prior quarter. We were particularly pleased that given the strong deposit growth during the quarter, that interest-bearing deposit costs were actually down 1 basis point, matching the 1 basis point decline in loan yields. I would note that period-end loans were approximately $822 million higher than average loans for the third quarter, giving us a great start to achieving a higher level of average earning assets in the final quarter of 2026.

Turning to the income statement results, this was a very solid operating quarter, producing another record level of quarterly net income. Net interest income improved by $24.2 million compared to the second quarter of 2026 to $621.6 million. The improvement in net interest income was primarily the result of an increase of $2.1 billion in average earning assets, which was offset slightly by a 1 basis point decline in the net interest margin, which was 3.51% for the third quarter. The 1 basis point decline in the net interest margin was caused by the impact of having 1 additional day in the quarter. Interest rate changes and business mix changes essentially netted to no impact on the margin. The net interest margin has remained in the range of 350 to 359 during the last 11 quarters, showing the sustainability of this metric.

Given our balance sheet structure and our established interest rate hedging positions, we believe that our interest rate sensitivity should continue to remain relatively neutral, even with a few rate cuts in either direction. The provision for credit losses continued to remain relatively consistent with prior quarters, staying in the $20 million-$30 million range for the seventh consecutive quarter as the overall credit environment and our asset quality has remained stable. Turning to other non-interest income and non-interest expenses. Total non-interest income was $136.3 million in the third quarter, which was a decrease from the $141.3 million recorded in the prior quarter.

This roughly $5 million decline was primarily a result of a $1.9 million of lower mortgage banking revenue as higher rates weighed on mortgage loan originations and approximately $3.5 million less security gains and losses as the unrealized gains in the second quarter swung around to unrealized losses in the third quarter. As to non-interest expense categories, non-interest expenses were consistent with our expectations noted during the second quarter conference call and totaled $405.7 million in the third quarter, up $8.1 million from the prior quarter. The second quarter included a $5.2 million reversal of an accrued FDIC insurance expense related to the final true-up of the previously imposed special assessments by the FDIC.

If we adjust for that reversal, expenses were up only $2.9 million from the prior quarter and reflect smaller levels of increases in a variety of other expense categories to support the continued growth of the company. Additionally, the net overhead efficiency ratios have remained relatively stable through the first nine months of the year, helping the company produce solid operating leverage thus far in 2026. In summary, I'll reiterate what Tim said. This was another very solid and consistent operating quarter. The company achieved strong loan and deposit growth, a relatively stable net interest margin, another record of level of net income, and a continued low level of non-performing assets. In addition to the operating performance, I'll add one additional comment regarding the planned use of cash in the fourth quarter.

The company has already or intends to redeem seven issuances of our trust-preferred securities, which are shown on our balance sheet as junior subordinated debentures. The redemptions will total approximately $108 million and will retire higher-priced floating rate debentures that on average have a spread to three months SOFR of approximately 309 basis points. Some of our highest rate debt will be retired during the fourth quarter. With that, I'll conclude my comments and turn it over to Rich to discuss credit.

Thanks, Dave. As detailed on slide 7 of the investor presentation, third quarter loan growth was strong and broad-based. The three primary drivers were $690 million in core commercial real estate loan growth, reflecting both new lending opportunities and funding of previously committed loans, $226 million in growth in Wintrust Life loans, and $153 million in residential mortgage loan growth. Every lending segment recorded positive growth during the quarter. On a year-over-year basis, total loans increased by $4.7 billion or 9%. Turning to credit quality, slide 15 details continued strong performance across our portfolio. Non-performing loans decreased slightly from $179.3 million, or 0.32% of total loans, to $176.9 million, or 0.31%, and remained at very manageable levels. Charge-offs were 15 basis points for the quarter, up slightly from the prior quarter and continue to reflect a stable and benign credit environment.

That assessment is further supported by the historical non-performing asset trends on slide 16 and the consistent levels of special mention and substandard loans on slide 15. This quarter again demonstrates our commitment to identifying problems early and charging down loans where appropriate. Our goal, as always, is to stay ahead of potential credit challenges. As we've noted on recent calls, we remain highly focused on our commercial real estate exposure, particularly in light of potential higher interest rates in the environment. As detailed on slide 19, this portfolio continued to perform well during the third quarter. CRE non-performing loans declined from 12 basis points to 9 basis points. Charge-offs of 2 basis points in the second quarter shifted to 5 basis points of recoveries in the third quarter. Overall, customers have remained resilient despite continued uncertainty around the geopolitical environment, interest rates, inflation, and the broader economy.

We continue to see healthy activity across our markets, and client conversations reflect cautious optimism about the business environment. These close relationships provide valuable real-time insights into changing conditions, while our disciplined risk management approach positions us well as the economic environment continues to evolve. That concludes my comments on lending and credit. Tim, I'll turn it back to you.