Wintrust Financial Corporation (WTFC) Q3 2026 Earnings Report, Transcript and Summary

Welcome to Wintrust Financial Corporation's Third Quarter and Year to Date 26 Earnings Conference Call. A review of the results will be made by Timothy S. Crane, president and chief executive officer David Alan Dykstra, vice chairman and chief operating officer and Richard Murphy, vice chairman and chief lending officer. As part of their reviews, the presenters may make reference to both the earnings press release and the earnings release presentation. Following their presentations, there will be a formal question and answer session. During the course of today's call, Wintrust management may make statements that constitute projections, expectations, beliefs, or similar forward looking statements. Actual results could differ materially from the results anticipated or projected in any such forward looking statements. 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 in subsequent filings with the SEC. Also, our remarks may reference certain non GAAP financial measures. Our earnings press release and earnings release include a reconciliation of each non GAAP financial measure to the nearest comparable GAAP financial measure. As a reminder, this conference call is being recorded. I will now turn the conference over to Mr. Timothy S. Crane.

Good morning, and welcome to Wintrust's Third Quarter 26 Earnings Call. In addition to those Latif introduced, I am joined by Chief Financial Officer, David L. Stoehr and Chief Legal Officer, Kathleen Boege. I will begin with a brief overview of the quarter. David Alan Dykstra and Richard 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. 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 3 key strategic priorities, to deliver an exceptional and differentiated customer experience, to pursue strategic and disciplined growth, and further built out our foundation by investing for our future. On September 1, we closed the previously announced acquisition to grow our Guardian Ship Services business. This transaction will help boost wealth management revenues and income going forward. We also opened 4 new branches during the quarter. With 2 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 US 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 US 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 am pleased with our results this quarter another consistent quarter of solid performance driving continued value for our shareholders. Let me turn it over to David for more on what drove our results.

Great. Thanks, Timothy. 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 $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 26. 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 26. 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. Net interest margin has remained in the range of 3.50 to 3.59 during the last 11 quarters, showing the sustainability of this metric. And 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 continue to remain relatively consistent with prior quarters, staying in the $20 million to $30 million range for the seventh consecutive quarter as the overall credit environment and our asset quality has remained stable. Turning to other noninterest income and noninterest expenses. Total noninterest 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 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. So 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 and efficiency ratios have remained relatively stable. Through the first 9 months of the year, helping the company produce solid operating leverage thus far in 2026. In summary, I will reiterate what Timothy said, this was another very solid and consistent operating quarter The company achieved strong loan and deposit growth, a relatively net stable net interest margin, another record of level of net income, and a continued low level of nonperforming assets. In addition to the operating performance, I will add 1 additional comment. Regarding the planned use of cash in the fourth quarter. The company has already or intends to redeem 7 of our trust preferred securities which are shown on our balance sheet as junior subordinated debentures. Redemptions will total approximately $108 million and will retire higher priced floating rate debentures that on average have a spread to 3-month SOFR of approximately 309 basis points. So some of our highest, rate debt will be retired during the fourth quarter. So with that, I will conclude my comments and turn it over to Richard to discuss credit.

Thanks, David. As detailed on Slide 7 of the investor presentation, third quarter loan growth was strong and broad based. The 3 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 a $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. Nonperforming loans decreased slightly from a $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 nonperforming 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 have 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 nonperforming 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. And, Tim, I will turn it back to you.

Great. Thank you, Richard. Just some final thoughts. As we close out the year, our targets remain unchanged for the fourth quarter. Based on continued positive feedback from clients, solid pipelines and the unique market position we occupy, we expect loan and deposit growth in the mid to high single digits. We have consistently funded our loan growth with appropriately priced deposits and we expect that to continue in the fourth quarter. The net interest margin should remain stable plus or minus 3.5%. We believe that any further rate increases will result in loan yields and deposit costs moving roughly in concert, and accordingly should not materially impact the margin. That said, as our loan book is largely variable priced, increases in SOFR or other loan index rates in advance of a rate increase, or market factors that moderate increases in deposit cost could be supportive of a slightly higher margin. Our capital position remains strong and increased during the quarter. Capital priorities we have discussed on prior calls remain unchanged. As always, our team focuses on delivering the exceptional customer service that is our key differentiator. Going into 2027, we feel good about our competitive position in the market. Our ability to continue to grow our business and to deliver value for our shareholders. With that, Latif, could you please open the line for questions?

As a reminder, to ask a question, you will need to press 1-1 on your telephones. To remove yourself from the queue, you may press 1-1 again. Our first question comes from the line of Jon Arfstrom of RBC Capital Markets. Your line is open, Jon.

Hey. Good morning. Nice job. Thanks, Jon. Yep. Maybe Tim or Richard, let's just start with a lending pipelines. You know, Richard, any. Anything else you can share in terms of what you are seeing in terms of the pipelines? Whether they are strengthening or not? And then and then maybe help us understand the CRE growth a little bit more this quarter. I know you touched on it in your prepared comments, but what drove that?

Sure. Yeah. The pipelines are good, Jon. I mean, we have said this really for the last few calls. You know, it is I think it is indicative of the economy that is holding together pretty well. But you know, we continue to have a really nice position in our market, you know, both of them in you know, the Chicago, but, you know, Michigan, Wisconsin. All, you know, seem to be taking market share, you know, pretty nicely. And so you know, as long as we can continue to execute on that, you know, the pipelines are gonna reflect you know, some pretty good numbers. So, you know, if I look down the major categories, I mean, CRE shows you know, pretty good momentum there. You know, C&I, we have had some really nice wins here over the last couple quarters, and that continues to show up in the pipeline. So you know, again, feel pretty good about that. Now we do not know where the economy is gonna go and where things will happen, but generally speaking, as I look at the pipelines, you know, we feel good. As it relates to the CRE, I mean, CRE for the quarter is a little bit of a timing issue. If you look back at last quarter, we were just over $100 million in total fundings. And so if you add those 2 quarters together, they kind of come in right where the last 4 quarters are, which is right around $300 million or around 9%. So and as I look at what funded during the third quarter, yeah, we had a number of larger owner occupied and kind of strong investor type deals that we feel good about. The thing about real estate too for us is that you know, these are not, you know, transactional deals. These are very much relationship oriented deals. You know, if I look at the names that we funded in the third quarter, you know, are people that we have been doing business with for a long time. So, in general, it is more just it is a timing issue more than anything else.

Okay. Thanks on that. And then maybe David or Timothy, appreciate the comments on the variable rate loans. it is what I thought. But the other side of it, can you just comment a little on the deposit pricing environment? You obviously had a very nice quarter on deposit costs and just maybe help us understand the drivers of the deposit growth and how you are able to hold those costs steady?

Yeah. Jon, thanks. We do feel good about the deposit growth. Probably a little more commercial than retail. But the Chicago and both West Michigan and Milwaukee markets are largely rationed. rational. You know, we see promotional pricing, you know, 4% or low 4s. We continue to win business at those levels. We started to get a little bit of a lift from the new branches we have opened. We will get more of that in the fourth quarter. And continued build out of our commercial franchise as well. So a nice mix of deposits, as many of them interest bearing, but we controlled the interest bearing deposit costs well during the quarter. And overall, you know, feel like we did a very nice job during the quarter.

Okay. Thank you.

Thank you. Our next question comes from the line of Daniel Tamayo of Raymond James. Your line is open, Daniel.

Thank you. Good morning, everyone. Maybe the other side of the deposit question. So certainly, a really nice quarter on overall deposit growth, but the noninterest bearing came down a bit on the period end basis. Average has been trending up, but I guess, as a percentage of overall, kinda down below that 19% I do not know if I would call it a bogey or not, but seems like it is kind of trending down. Just curious your thoughts on the ability to hold that number at or close to that level, or if you do not. If you are not as concerned with it given kind of the overall level of deposit costs and deposit growth that you would be--

Well, I think it is both, Danny. We are growing the denominator rapidly and doing that at a reasonable cost. So we are comfortable that we continue to build the franchise and happy with those results. You know, that said, we very much would like the non interest to stay around 19%, and we will work to do that. But you know, the mix, you know, comes to us as our customers dictate at times. and just kind of look at it on an overall basis.

Yeah. Danny, this is David. I do think you pointed to the average balance. I do think you need to look at the average balance. A little bit more than point in time because money flowing in and out sometimes at quarter end and make that move around a little bit. But the average balance is trending up, which shows we are gaining general. Most of that is commercial. Obviously. And so we are gaining, middle market and small business accounts. And think we will keep doing that. But we are, you know, we are fortunate that we have to fund good loan growth. And if you fund that higher loan growth, you generally have to do some of that with interest bearing deposits more so than DDA. And so we will try to hold that number there, but, it is a good problem to have.

Agreed. And thanks for your thoughts on that. Maybe just a higher level question. You know, have you been seeing any impact? This sounds like pipelines are really strong, but with the rate increase, in September and then, you know, we have got another 1 probably coming to. Soon and maybe some more next year. Any early indications that is impacting borrowers at all and do you guys think that would potentially impact your ability to grow loans as fast as you have been growing them?

Yeah. You know, we can speculate on that. And my guess is it will have some impact. Certainly, costs in CRE space are a big driver. But at this point, we do not see that. And if you think back about you know, the last 4 quarters and really beyond that, you know, the Midwest economy that we pretty much lend into has been amazingly resilient. I mean, so whether it is been tariffs or increased rates or transportation costs or whatever, you know, those shocks have been. You know, they have continued to work their way through it. And our customers kind of reflect that same attitude, you know, that they will, you know, those might be impactful, but they think that they can manage through it. So at this point, I would not anticipate it would have a meaningful effect.

Yeah. I might just throw on there. You know, 80% of our loans reprice or mature within a year, and the short end of the curve was 50 basis points higher in June of last year. So prime was 50 basis points higher than where we are now, and our production was very good at that point in time. So, as Richard said, you will have to see what happens with the economy. And the shape of the curve is a little bit different, but we still think these rates are good for new business development.

Great. Well, thank you for that color. Appreciate it.

Thank you. Our next question comes from the line of Ben Gerlinger of Citi. Your line is open, Ben.

Hey. Good morning. Good morning, Ben. Morning, Ben. Did you want to dovetail off what you just said, Whoever wants to take it, go for it. If you have, like, roughly a year ago rates being lower, as we drift into early 27, The repricing aspect seems like it is a pretty big tailwind. So I get that the floating rate with Brunswick Sofer. You guys have been really, really, really good on deposit pricing. Why are we not talking like, a bias higher on the margin? Or maybe we are. You just maybe giving yourself a little rope here on deposit pricing because, like you said, mix is not always in your control.

Yeah. I would say if. You know, we do we do have the swaps in place that hedge part of that floating rate, SOFR portfolio. But I would say that in a rising rate scenario, as Timothy said in his comments, if you. If deposit rates lag a little bit as they historically do when rates go up, which our competition is doing, And then if SOFR gets out ahead of Fed increases, that would that would put us to a bias to the upside of the 3.50 plus or minus a few basis points. And then over time, all else being equal, you will have your premium finance books reprice over time. But you also have some CDs repricing over time. So I think you are right. An up rate environment, we have a slight bias to an increased margin, but a lot of moving parts there.

Got it. Okay. that is helpful. And then as you kind of think about the branch expansion, it is good to hear that early progress. Is there something we should look for? Is it more NIB deposits Is this very similar mix? I am just trying to think, like, branches, should equal what kind of correlation towards overall deposits.

I mean, given our overall size with more than 210 branches, I do not think the 5 or 6 that we have talked about are gonna be trajectory changing. But we continue to add households. We continue to add retail deposits, and we as you know, focus on deposits as the core of our franchise. And so filling in communities that we would like to have been in. We are building, you know, in adjacent communities. And I would just view it as kind of normal progress I do not think you are gonna see major changes, but it will contribute to the deposit growth over time.

Gotcha. that is really helpful. Appreciate it. Thank you.

Thank you. Our next question comes from the line of Nathan Race of Piper Sandler. Your line is open, Nathan.

Hey, guys. Good morning. Thanks for taking my questions. You bet. Hey, David. On slide sorry. Page 21 of the release, just looking at the sensitivity to rates going up, it looks like became a little bit more of a headwind to NII. Could you just unpack maybe some of the assumption changes that went into that Or and just curious within that context. Looks like you guys added more downside protection to rates going up. So just curious if you kind of unpack why the sensitivity to higher rates increased or was more detrimental relative to at the end of June.

Yeah. 1 of the things I will note in the in that table is that assumes instantaneous, you know, change on, of deposit rates. And to the extent we can lag deposit rates, that would that would actually probably, you know, bring that 2.9% to more of a neutral position. And so we assume our competition is gonna move quickly in our models but to the extent that the market moderates a little bit and deposit betas take time to get up to the full amount, then that will that will benefit us. So this is a conservative view of the world and really the impact of that is deposit lagging.

Okay. So it is just kind of conservative beta assumptions, which is not necessarily what you guys are seeing relative to Timothy's comments around some of the rational deposit pricing competition you are seeing these days? Is that a correct interpretation?

I think that is a good way to summarize it.

Okay. Great. And then maybe, Richard, Timothy, just curious if you can comment on what you are seeing from a loan pricing perspective. You know, To the earlier question, a good amount of growth on the CRE side in the quarter, but just curious what you are seeing in terms of coupons on loan production in the third quarter relative to the portfolio yield these days around 6.06%.

Yeah. You know, we have talked about this in the past, Nate, where we saw just a lot of competition out there particularly on fully funded CRE loans. And I think it is still very competitive, but you know, some of that downward pricing pressure, I think, is stabilized a little bit. You know, when they are when it is a really good credit and what. You get lots of deposits, still people are fighting very hard over it. But know, at this point, I think people are generally focused on getting reasonably paid, you know, given the, where we are at in the market and, you know, potential, you know, risks out there. But, you know, we like to kinda be in that 6.5% range when we are looking at opportunities. And, you know, if we cannot get appropriately priced in a decent relationship with it, you know, we will pass on it.

Gotcha. that is really helpful. I appreciate all the color, guys. Thank you.

Thank you. Our next question comes from the line of Terence McEvoy of Wells Fargo. Your line is open, Terry.

Hi. Thanks. Good morning. Maybe just start, David, a question for you. Could you provide any insight into fourth quarter expenses with a normal FDIC expense and then the deal that closed? And also, if you are willing to discuss kind of early thoughts on 2027 expense growth.

Yeah. Well, the FDIC recovery was the second quarter. So the third quarter here was a pretty clean quarter for us. I would expect it to be roughly the same in the fourth quarter. You know, plus or minus just a hair. So I think we will be able to hold the expenses fairly consistent in the fourth quarter. And then, you know, we have said this for years now in a row that probably without the impact of any acquisitions into the equation, or a big jump up in the mortgage that we would expect expenses generally to grow in the mid single digits, each year, if we are getting that mid to high single digit, loan growth. So I think we are. We have been consistent quarter after quarter, year after year here with the those forecasts. And given what we see right now, I think that is probably still a consistent way to look at us going forward.

Great. Thank you. And, Timothy, maybe just a question for you on scale. When I look at the Chicago MSA, you are you are now surrounded by these trillion dollar plus banks, which you as we see today, continue to outperform from a growth perspective. As a $75 billion bank today, do you need more scale for that trend to continue over the medium term?

No. I do not think so. Our relationship model and our presence in the market and our ability to differentiate with service will continue you know, regardless of size. I think on the technology front, we are well positioned from treasury management services and wealth services to compete effectively. I do not see scale being a limitation you know, given where we are right now.

And I would probably add to that. I think it is a benefit to be surrounded by those banks because we can provide better service and take market share. If you look at the deposit market share that slide that we put in on slide 22 of the deck, You know, we grew our market share more than those banks did, and a number of the big banks actually lost market share. So I think our relationship style of banking against the big guys is what we have always done for 30 years very effectively. So I think it is actually good for us.

Perfect. Thank you very much.

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

Yeah. Great. Thanks. Good morning, everyone. 1 more on the side of things. It all sounds kind of right in line, but just longer term, when we look back at the last cycle that the interest bearing deposit beta was 66% on a cumulative basis. and 53% on a total. Is that is there anything that would. This cycle that would change those kind of numbers, or is that still the expectation?

No. I think if you have gone through a number of different cycles, 60% to 65% has sort of been the beta on the ways up and the way down. And we would expect that to behave similarly on the way up here.

Gotcha. Okay. And then great. Thank you. And then the M&A commentary. Sorry, not the commentary. The M&A outlook, just some updated thoughts on what you guys are seeing in your markets from an opportunity point of view?

Yeah. Still, some conversations, mostly smaller banks. Would suggest exploring their options in an environment that still feels like a pretty good time to exit if that is your plan. I would say, you know, larger size conversations have been few and far between.

Thank you.

You bet.

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

Hi. Thanks for taking the questions. So circling back to loans. So solid trends overall. I was curious on your thoughts with premium finance P&C and it being a softer market. Could the headwinds here potentially lead to the lower end of the mid- to high single digit as we look out over the next 12 months? Or could the pipelines on the C&I side, you know, make up for it?

I think. Yeah. I mean, it is softer, but we would still think that, you know, we would see positive growth in deal sizes next year, albeit not at the same level that we used to see. Because of that softening in the market. But we are still taking share We continue to, I think, be a premium provider in that space. Our technology, you know, that we. The investments that we make. Allow us to continue to, take market share. So I am I am optimistic there that, we will continue to see that, that class continue to grow in line with you know, that mid to high single digits. But, you know, it depends on where those markets go. But I am I am pretty optimistic about that business right now.

Great. Thanks for that. And then on the capital front, does the increase in AOCI this quarter impact how you manage the business at all, such as tapping the brakes on loan growth, or does it not impact you know, the loan front or anything else at all?

Yeah. I do not think it affects our ability to continue to duct business. I mean, our long term approach is to add franchise value by adding clients know, you can tell from the way we have positioned the balance sheet for interest rates that, you know, we are very neutral and wanna continue to grow. Know, there is been a little bit of a recovery since the end of the quarter, and so some of the AOCI change, we have probably recovered. But it. it is. You know, 1 quarter, it is not a major element.

Very helpful. Thank you.

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

Good morning. Morning, Janet. Sorry for asking on the same topic, but if you were to assume 60%-ish beta on your interest bearing deposits, I mean, that would imply a significant uptick in deposit costs over the near term, but that does not really square away with what you saw in the third quarter at least and then your commentary around deposit competition. Maybe you are referring to the cycle or cumulative beta over Could you talk on, like, the are you able to share that the spot deposit cost as it stands today?

Yeah. So I was I was talking through the this cycle that 60 to 65 is the beta that we see through the cycle. You know, initially, I think we generally see most of, you know, 40%, so 10 basis points of the 25, and then it works its way up over time. So spot rates were just slightly higher 4 or 5 basis points higher than the average for the third quarter. So. But that, you know, that 40% initial beta or 10 basis points would then eventually work its way up to 60-65% through the cycle.

Right. And you are referring to the interest bearing deposits Yes. Thank you. On the resi mortgage piece, you have been consistent even in the third quarter, you have been consistently growing that category pretty nicely in the current backdrop, which is pretty impressive. Do you continue do you expect this line category to continue increasing from here? Just given where the rates are?

I think it is a little bit seasonal, Janet. We clearly think we will benefit from some of the what I would characterize as refinance shops or independents that have not survived the cycle. And so our share of the mortgage business, whatever that is, should be higher. And we believe that mortgages are a core component of our offering. So, I think the market will drive But as we have said for several quarters, it is it is a pretty tough market right now, and the you know, the financial changes that you will see over the next few quarters probably will not be very material. As we have said in the past too, about half of the mortgage related revenue is related to servicing. So it is it is just not a big impact anymore. At this level.

Yeah. And on the balance sheet, which you might be referring to, we have you know, add $100 million to $200 million a quarter, and they are generally our customers in our footprint and ones that we like to do. And, you know, works well within our asset liability. Positioning also. So probably that will grow gradually, but not dramatically.

Got it. And if I can squeeze out 1 quick 1, the back bug repricing for the premium finance that negative impact to NIM, is it still about 1 basis point in the fourth quarter at that set?

No. What we just talked about last quarter is that the 1 basis point impact was impacting the third quarter. And so we should be done in the third quarter. And now rates are going up. So we should start to see that actually start to benefit and price up.

Great. Thank you.

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

Oh, great. Good morning. Timothy or David, the 1's asked the buyback question. You are generating a lot of capital more than you have ever done. You have the helper from Basel III. Does that become more of the narrative even with the growth that you expect in the 2027?

Yeah. I think it could, Chris. I mean, we said when we get north of 10.5, we would start to more materially look at other options. As you know, even at 10.5, we feel like we are very well capitalized you know, from a risk adjusted basis. So I think fourth quarter and into 2027, we will be looking at other ways to deploy capital. In the same order and sort of with the same priorities we have talked about on prior calls.

Okay. Helpful. Helpful. Thank you. And, David, I know the mortgage market is not all that great right now. But what is any near term expectations mortgage contribution relative to recent levels?

Norah. Fourth quarter tends to be a soft quarter. Generally. And with the bump up in rates, would expect that to continue. So you know, originations in our markets in the winter months tend to be low. Lower generally. And I would just expect it to continue to be soft. But as Timothy said, you know, half of that revenue is $10-plus million, $10 million-$11 million of it is servicing income. So we will see where originations are, but, you know, probably low twenties. It may be just $20 million, plus or minus for the fourth quarter to because of the rates and the and the seasonality. cannot go much lower. I mean, there is a certain amount of purchases that just occur because people move or have other life events going on. And I think we are sort of close to that bottom. But it does not materially. If you think about it, it does not materially impact the bottom line you take that revenue and back off commissions and other expenses and taxes. So we are gonna stay in the business. We are we are committed to it to serve our customers. We are just gonna be as efficient as we can and wait for the rates to rebound and get more of the market share as Timothy referred to earlier.

Okay. Great. Thank you.

Thank you. Our next question comes from the line of Jeff Rulis of D.A. Davidson. Your line is open, Jeffrey.

I appreciate it. Thanks. On the guys have covered the margin pretty well. I just wanted to check-in, David. The impact from that higher rate sub debt retiring, is that it sounds like that is immaterial or a slight, positive. Just wanna check-in on the general margin outlook with that piece.

Yeah. I mean, think about it. it is $100 million on, you know, $76 billion balance sheet. So it is it is not a big impact, but, you know, maybe it adds 1 basis point to the margin. But it. Most of that. Of the, you know, it pays off during the quarter. A lot of it pays off on the last day of the quarter. So it is not gonna have much of an impact in the fourth quarter.

Okay. Got it. And then another kinda granular question. Just looking at the, premium finance life insurance had a little uptick in the nonperforming loan balance Look. Loss rates historically very, very low. So just checking in on that if that is any indication on anything uncredited within that segment?

Norah. I think if you look at it, it is it is in the over 90 and still accruing from time to time. We have administrative past dues, and, we do not see any loss in that. But if you go back, we have 1 of those every now and then. it is just administratively. We work on deals to accommodate customers or for whatever other reason. And so we do not think there is anything there. Yeah.

Please Okay. Appreciate it. And maybe if we could squeeze 1 last 1 in. Just the market share tables, appreciate those. The minor tick down in Michigan in terms of deposit market share, is that would you relate that kind of the deal that you did in finding your footing and then expect to grow from there? Any comment on the Michigan market?

Yeah. I mean, as you know, these are a little bit dated. They reflect the data as of, you know, June when the prior year. So you would have some conversion related activities. I think I would look at it over the 2 year period and we continue to have very good momentum in Michigan and feel great about the opportunities there. So I do not think there is anything to read into that.

Okay. Thank you.

Thank you. Our next question comes from the line of Jared Shaw, Barclays. Your line is open, Jared.

Thanks. Good morning. Yeah. I guess maybe just on the deposit side, any color around the growth that we saw in the quarter in the wealth management remix and what we can expect from that line, with the acquisition, closing now?

Yeah. I mean, we feel good about our wealth management business and have you know, kinda seen it moving the right direction in 2026 and expect that will continue in 2027. The guardianship deal brings a very, very small number of deposits. that is not gonna affect the number very materially there. But we continue to view the wealth business as an opportunity and, have good tracks in all of our markets.

Okay. Thanks. And then just you know, going back to the margin and, you know, the bias of, like, plus or minus a basis point, I guess, what would have to happen for you to be more comfortable with a higher margin here in the next few quarters? It feels like deposit costs are lagging. You still have the tailwind from Premium Finance. You have, you know, the little bit of benefit from the sub debt What would what would keep you back from being more optimistic on margin?

Just the competitive environment is really the biggest, Jared. I mean, we just do not know what we are gonna see. Again, we feel pretty good about pipelines, and you know, our MO has been a relatively stable margin and then grow the business to produce more net interest income and franchise value. So you know, we are we are hopeful that we get a little bit of help here, but we are not counting on it.

Okay. Thank you.

Thank you. Our next question comes from the line of Brendan Nosal of Hovde Group. Your line is open, Brendan.

Hey. Good morning. Just on the guardianship services business, it added the $1.2 billion in AUM. What was the revenue and expense impact in the quarter? And just a bigger question, what kind of investments are needed to integrate into your franchise? And any color, on expectations on AUM fees, and efficiency ratio for the business?

Yeah. Yeah. We have not disclosed all of it yet, Brendan. But we. You are right. We brought over $1.2 billion of assets under management related to that business. We were in that business already. We did not bring over their technology. We put we put the business on our systems. So it just gave us better leverage, and gave us a better market position in especially, the Chicago market area, for that. Those services. We think it is just a nice addition, to our wealth management business. And from a revenue perspective, generally, again, we have not disclosed the details. But our guardianship business, to get you sort of in the ballpark, gen. Generally, it is about a 1% fee range plus or minus. So you take $1.2 billion at 1%, it should get you in the range of the additive revenue.

And then maybe just on the deposit market share. Obviously, great presence in the Illinois market. But just the strategic importance in Wisconsin, Indiana, Michigan, is there, like, from those 3, where do you see the biggest market share opportunity? Outside the Chicago area?

I do not know that we would handicap any of the 3 against each other. They have their own elements and, in some ways, different competitors. We have talked about in the past Michigan and Wisconsin have more credit unions of makes the numbers a little bit harder to look at. But we feel good and would intend to grow in each of the markets. The branches we have opened, a couple were in Indiana, 1 that opens you know, this quarter is in Wisconsin. So again, we are not gonna do anything crazy. We are disciplined with respect to pricing. But we do add households. And small business activity is good. Wealth activity is good. And these branches are nice fill ins for us. So

K. Great. Thanks for taking my questions.

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

Good morning. Thanks for taking my questions. So most of my most of my have been asked. I guess just 1 follow-up. On your comments earlier, Richard, on the CRE portfolio. I think you are comment was that there was some funding. I am not pushing the third quarter that resulted in a stronger growth rate here. But when I look at the industrial portfolio specifically going back really over the last year, it is kind of been growing in quarter in and quarter out. Can you kinda help characterize that as. Is that new customer growth, or is that existing customers in investing more heavily?

I would say it is a combination of both. Getting new opportunities, from. As we as we talked about before, bringing in customers from some of the other larger banks. But it is also from long time customers that, you know, have a lot of experience in that space. it is it is an area that we have had a lot of success in over the years. We think we are pretty good at underwriting those opportunities, and definitely an asset class we feel pretty good about. Particularly with that type of sponsorship.

Got it. Good. Oh, okay. Thank you very much for taking my question.

You bet.

Thank you. Our next question comes from the line of Timur Braziler of UBS. Your line is open, Timur.

Hi. Thanks. Good morning. 1 more follow-up for me on commercial real estate. First, if you can just provide any color on payoff activity and if that headwind has now largely abated, And then maybe triangulate your comments on focusing on CRE exposure in light of the rate hikes with some of the growth and what that might mean for future growth rates?

Yeah. Payoff activity, it was pretty consistent over the first 3 quarters. So, you know, there is still borrowers who are going out to secondary markets and there is a lot of liquidity still out there. So. But I think you are right. I think that you know, what we would maybe anticipate here over Q4 and into next year is that if you are you know, you might wanna hold on to a property for an existing loan for a little bit longer and then wait for the end markets to right themselves So maybe that slows down payoff activity. Over the next few quarters, but to be seen. So we have not quite seen that yet, but I would agree with you that, you know, that might be an effect. As it relates to, you know, CRE growth, we have always been very, very disciplined. Mean, we. Our portfolio mix is we always talk about a third, a third, a third, which is a third C&I, third CRE, third in niche businesses. You know, right now, our CRE growth is actually, you know, less than that. Not to say that we wanna, you know, fill that out to that level. But, we would like to have a nice balanced portfolio. CRE has always been a piece of that. But, again, our. If you look at our performance over time, you look at the quality of the sponsors that we deal with, you look at the mix of different types of properties within that, that subset of CRE You know, we try to be very, very disciplined in that space we underwrite. I would say, very conservatively. So, while I would agree that as rates move up, you have to be very mindful of that. But we like our positioning right now. We like our customers. We like that portfolio.

K. And then just, I guess, from a competitive landscape, are you are you seeing anything that is either stretching from a pricing standpoint or more importantly from a structural standpoint from any of your pre competitors?

You know, last quarter, I got the question, you where we are on a spectrum of competitiveness. And I would have said at that time, you know, we would definitely been, you know, at the higher end of the curve. Seems to have moderated a little bit. You know, maybe for some of the reasons that you touched on. But you know, right now, it is it is competitive, as I said earlier in the call. You know, if you have a well structured you know, good credit that we are looking at, there is gonna be a lot of other people looking at it as well. So you have to be you know, thoughtful. But it is got a hurdle, and it is gotta bring relationship for us. To have it make sense.

Great. Thank you.

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

Thank you, Latif. And for those of you on the phone, always thank you for your questions. I know we will see some of you, but between now and the end of the year. For those that we do not, on behalf of David, Richard, and our team, we wanna wish you the best for safe and happy holiday season. Our team will be focused on finishing the year strong. We anticipate carrying our momentum into 2027, and, hopefully, we will do some celebrating too Thank you for joining us on the call today. Have a great rest of the day.

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