Wintrust Financial Corp (WTFC) 2025 Q4 法說會逐字稿

Welcome to Wintrust Financial Corporation's fourth quarter and full-year 2025 earnings conference call. A review of the results will be made by Tim Crane, President and Chief Executive Officer; David Dykstra, Vice Chairman and Chief Operating Officer; and Richard Murphy, Vice Chairman and Chief Lending Officer. As part of their reviews, the presenters may make reference to both the earnings press release and the earnings release presentation. Following their presentations, there will be a formal question-and-answer session.

During the course of today's call, Wintrust management may make statements that constitute projections, expectations, beliefs, or similar forward-looking statements. Actual results could differ materially from the results anticipated or projected in any such forward-looking statements of the company's forward-looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed in our earnings press release and in the company's most recent Form 10-K and any subsequent filings with the SEC.

Also, our remarks may reference certain non-GAAP financial measures. Our earnings press release and earnings release presentation include a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure. As a reminder, this conference call is being recorded.

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

Good morning. And for those of you we haven't seen or talked to recently, Happy New Year. Thank you for joining us for the Wintrust fourth quarter and full-year '25 earnings call. In addition to the introductions Latif made, I'm joined by our Chief Financial Officer, Dave Stoehr; and Chief Legal Officer, Kate Boege.

As we usually do on these calls, I'll begin the morning with a few highlights. Dave Dykstra will review the financial results. Rich will speak to loan activity and credit performance, and I will return with some summary comments on 2025 and early thoughts on 2026. As always, following our remarks, we'll be happy to take questions.

With that, Wintrust delivered solid performance in 2025. The results reflect our focus on generating strategic and disciplined growth. I'm proud to say our efforts drove record net income for the year. For full-year 2025, we reported net income of $824 million, up 19% from $695 million in 2024. Earnings per diluted share was $11.40, up from $10.31 in 2024, and tangible book value increased by over $13 to nearly $89 a share. Total assets at year-end were just over $71 billion.

Our fourth quarter was also strong. Net income was $223 million, also a record up 3% or $7 million from the prior quarter. Solid loan and deposit growth during the quarter and a slightly improved margin led to continued growth in net interest income. Credit quality remains solid, and overall noninterest expenses were well managed.

When I look back over the year, I want to highlight three things that I am particularly pleased by. First, we delivered disciplined growth at a level above most of our peers with a stable margin. As we've discussed, we are adding new relationships, consumer and commercial, that we expect will be with us for years to come as we continue to build the franchise. In fact, in 2025, our steady and consistent approach moved us into third position in deposit market share in the Chicago area, and we showed strong gains in both Wisconsin and West Michigan.

Second, we achieved solid operating leverage. On a percentage basis, net revenue was up 11.2%, 340 basis points higher than our noninterest expense. We did this while investing in the tools, technology, and people to both run a bank our size today and to build a foundation for future growth. Lastly, we saw improved Net Promoter Scores that were already best-in-class in both retail and commercial banking in 2025 as our focus on exceptional customer service continues to differentiate us from many of our peers.

Before I turn this over to Dave, I want to call your attention to the charts we included in our press release at the end of each year, showing our 10-year performance on key metrics. What you will see here is the continued consistent performance that we stress with our teams. I'm very proud of these results and how they translate into real value for our shareholders.

Now let me turn this over to Dave.

Great. Thanks, Tim. We finished off 2025 with another quarter of strong loan and deposit growth with both falling within our stated range of mid- to high-single-digits growth. Specifically, the deposit growth was right at $1 billion during the quarter, representing a 7% increase over the prior quarter on an annualized basis. This deposit growth helped to fund continued strong fourth-quarter loan growth of a similar $1.0 billion amount that represented 8% growth on an annualized basis. On a full-year basis, loans and deposits grew 11% and 10%, respectively.

Turning to income statement results. This was a very solid operating quarter for Wintrust, producing a record level of quarterly net income. Speaking to the major components of the income statement, our net interest income also reached another high record quarterly amount, a $1.1 billion increase in the average earning assets as well as a 4-basis-point increase in the net interest margin drove the $16.9 million increase in net interest income over the prior quarter. The net interest margin range from 3.50% to 3.56% during the four quarters of 2025, and the 3.54% net interest margin for the fourth quarter fell squarely in that range. I would note that period-end loans were once again higher than the average loans for the fourth quarter, giving us a good start on achieving higher average earning assets in the first quarter of 2026.

The provision for credit losses was relatively consistent with prior quarters remaining in the $20 million to $30 million range experienced in all quarterly periods of 2025 and as the overall credit environment and asset quality has remained relatively stable. Regarding other noninterest income and other noninterest expenses, noninterest income totaled $130.4 million in the fourth quarter similar to the $130.8 million recorded in the prior quarter. The very slight decline was impacted by lower security gains. But overall, other than the continued softness in the mortgage revenue, it was a solid outcome for noninterest income for the fourth quarter.

As the noninterest expense categories, noninterest expenses totaled $384.5 million in the fourth quarter, which represented a slight increase from the $380 million recorded in the prior quarter. Increases in employees' health insurance claims, OREO expenses, travel and entertainment, and various other small expense increases were offset somewhat by seasonally lower marketing cost. Overall, expenses were well controlled and within the expected range we discussed on our last call.

Additionally, both the quarterly net overhead ratio and the efficiency ratio remained relatively stable during the quarter from the prior quarter. In summary, I'll reiterate what I have said on our last call, with this being another very solid quarter. The company accomplished good loan and deposit growth, a stable net interest margin with a steady outlook, a record level of net interest income, and a continued low level of nonperforming assets.

Our team delivered net income that was a record for any full fiscal year in the company's history, and we have a positive outlook for continued growth in assets, revenues, and earnings.

So with that, I'll conclude my comments and turn it over to Rich Murphy to discuss credit.

Thanks, Dave. As Tim and Dave both noted, credit performance continued to be very solid in the fourth quarter. As detailed on slide 7, loan growth of approximately $1 billion came from a number of different categories. Commercial real estate loans grew by $322 million. Our mortgage warehouse team grew their outstanding by $310 million. The Wintrust Life Finance team had another strong quarter and grew by $265 million. And our leasing and residential mortgage groups also had a very solid quarter.

We believe loan growth for the first quarter, while typically our slowest quarter, will continue to be solid for a number of reasons. Our core C&I and CRE pipelines remain consistent, and we continue to benefit from our unique market positioning in our core markets of Chicagoland, Wisconsin, West Michigan, and Northwest Indiana. In addition, we continue to have a very good momentum in a number of our lending verticals, including mortgage warehouse, 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 increased slightly from $162.6 million or 31 basis points to $185.8 million or 35 basis points, but remained at a very manageable level and in line with levels we had seen in the first half of the year.

Charge-offs for the quarter were 17 basis points, down from 19 basis points in the prior quarter. We continue to believe the level of NPLs and charge-offs in the fourth quarter reflect a stable credit environment as evidenced by the chart of historical nonperforming asset levels on slide 16 and the consistent level in our special mention and substandard loans on slide 15. This quarter is another 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 1/4 of our total portfolio. As detailed on slide 19, we continue to see signs of stabilization during the fourth quarter as CRE NPLs remained at a very low level, decreasing from 0.21% to 0.18%. 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 remained steady at $1.7 billion or 12.1% of our total CRE portfolio and only 3.2% of our total loan portfolio. We monitor this portfolio very closely, and we will 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.

Finally, as we have discussed on previous calls, our teams stay in close contact with our customers, and those conversations continue to reflect a measured optimism. With solid visibility into our loan pipelines and continued discipline around our portfolio, we would expect loan growth in 2026 to be within our guidance and portfolio performance in line with our historical experience.

That concludes my comments on credit, and I'll turn it back to Tim.

Great. Thank you, Rich. Again, really good financial results in 2025. Our primary objective for 2026 is to continue to deliver solid and consistent financial performance. We expect our teams will continue to provide a differentiated level of service to drive organic growth. At the same time, we will continue to invest in the tools, technology, and people needed to support that growth.

Our targets for 2026 are straightforward. We expect mid- to high-single-digit loan growth funded by a similar level of deposit growth as we continue to expand share. Given the current interest rate environment and even with a few rate changes in either direction, we expect the margin to remain relatively stable around 3.5%. We plan to deliver positive operating leverage while continuing to make the important investments that position us for the future.

We expect to see improved noninterest income in our wealth management and service-based fee income businesses and are hopeful for the mortgage market to pick up. We remain focused on our Midwestern footprint, and we'll continue to make the most of opportunities across the United States for our specialty businesses where our expertise and unique solutions give us a competitive advantage.

Our pipelines remain solid. And although we have strong momentum going into the year, we are mindful of the typical seasonality that can make our quarterly growth uneven, particularly in the first half of the year. With this in mind, I feel good about our business heading into 2026.

Let me end by saying that we could not generate the results that we do without the dedication and commitment of our Wintrust team. We have the best people in the business, and I want to thank each of our colleagues for all that you do to ensure we deliver results for our clients and our shareholders while we work to drive sustainable growth in the communities we serve.

Thank you for joining us this morning, and let me turn it back to Latif for your questions.

(Operator Instructions) Jon Arfstrom, RBC Capital Markets.

Can we -- we usually start with loan growth, but can you talk a little bit more about that, Tim, kind of the -- what takes you to the mid-single digit, what takes you to the high single-digit? Sounds like you're off to a stronger start even though you're flagging some -- how the first quarter and second quarter can sometimes be a little bit softer, but it feels like you're entering the year with pretty good momentum. Can you just unpack that a little bit for us?

Sure. A little bit, Jon and Rich can help me here. But again, we're cautiously optimistic about what we're hearing in the local economies where we operate employment levels, unemployment levels are low, and it was a pretty solid quarter for us broad-based in terms of loan growth. So I think we feel pretty good. As you mentioned, the first quarter can be a little bit softer than the second quarter for us, but the first half of the year tends to be in line with our targets.

So again, I think we feel pretty good. And Rich?

Yeah. No, I think you answered that very well. First quarter last year was 6.53%, so down from -- we're about 6%. And then we picked it up in the second quarter as you -- Jon, you know that story, how our first insurance business really kind of picks up the pace there in the second quarter.

So we had a really good second half, but there's -- but where that comes from, is, as I mentioned, some really good market positioning right now in our C&I and CRE space that we feel pretty good about. When we talk to customers, as I mentioned, they feel pretty good about where the economy stands right now, and I think our -- there's enough stability in the general picture where they're willing to invest.

And then you look at the different verticals that we saw really good success with in the fourth quarter in particular with mortgage warehouse lines. And if we get some pickup here on the mortgage side of the business, I think you'll continue to see that in the first half of the year. Leasing resi mortgage also had a good quarter. So there's a lot of different things that feel pretty good right now.

But again, the effect of the first-quarter phenomenon in the premium finance business is something that we would expect to see usually reversing then back in the second quarter.

Okay. Good. And then maybe Tim or Dave, you talked about the positive operating leverage. I mean, there was a big lift in 2025. What are some of the puts and takes on expenses and overall thoughts on the expense plans for 2026?

Well, I think it's probably sort of more of the same story that we've had before. If we have that mid- to high-single-digit revenue growth such as per se 7.5% to 8% is sort of the middle of the target. We would expect that off of the fourth quarter run rate. We would expect expenses off of the fourth quarter run rate probably to be in that 4% to 5% range. And so we expect to get positive operating leverage again.

And if you had revenue that was at the lower end of that range, then we would -- we have tightened up on expenses. So the -- the goal is to get a positive operating expense, invest in the business to support stronger growth as we've always done and grow the franchise. So as you know, second and third quarter is a little bit higher for marketing and sponsorships for us and the first and the fourth quarters are lower. But health insurance claims tend to -- are tending to be up a little bit in this market. And so they may rise a little bit. But all of that is sort of baked into this, say, 4% to 5% expected growth based on the fourth quarter run rate.

And again, that gets you operating leverage. If loan growth was lower for some reason, which we don't expect right now, we see a lot of good opportunities, and we would we would probably trim back a little bit on expenses, but we're big believers in investing in the business to grow the franchise.

Yeah, John, the two kind of wild cards. One, I think everybody is seeing benefit expense go up fairly substantially. The other is if the mortgage business picks up, we'll get more expense, but that would be good news for us because we would get obviously more revenue as well. Otherwise, I think Dave got the answer there.

Nathan Race, Piper Sandler.

I was hoping to unpack just the decline in deposit costs in the quarter, some of the drivers there. So maybe, Tim, could you just speak to how much of the opportunity to reduce deposit costs in the quarter was just a function of more rational competition in Chicago these days or maybe just some complexion changes in terms of the Wintrust deposit composition over the years that has allowed you guys to put up some favorable deposit reductions slightly?

Yeah, you bet, Nate. I guess two things. One, our team did a really nice job moving deposits as the Fed moved, and we talked about the expectation that we would be able to do that. And that, in fact, did play out in the fourth quarter. We also had kind of a nice trend in terms of DDA deposits during the quarter.

That can be a little bit lumpy at year-end as companies position themselves for their reporting activities. But we continue to see good growth in terms of the commercial deposits of the bank and the treasury services they use, and we're going to continue to work that mix. It's just -- it can be a little bit lumpy. But we were very pleased with the way deposit costs were managed in the quarter.

Okay. Great. That's helpful. And then just looking at some of the deposit growth drivers, it looked like it mainly came in the non-maturity segment. So just curious, do you see additional opportunities to run off higher cost CDs going forward? And can you kind of just speak to maybe the CD repricing benefit that you have with like 95% or so of your deposits that are CDs maturing by end of this year?

Yeah. I think there's probably a minor benefit. Again, I would emphasize minor on the CD book rolling as we continue into 2026. But the noninterest or the interest-bearing deposit growth supports our loan growth. And as we continue to grow loans at a pretty healthy level, we've stated that we would try to continue to fund that with new deposits.

And our deposit costs can be a little bit higher than some of our peers. We're fine with that as we add clients to the bank that will be with us for a long time.

Chris McGratty, KBW.

Tim or Dave, I guess, what's not where you want it to be? It seems like a lot of positives in one column. What's not where you want it to be in terms of either growth by asset class or anything operationally?

Well, we'd like the mortgage business to be stronger. We think we've done a good job of paring back the expense related to that business. So it's not damaging to us at these relatively low levels from a volume standpoint. We'd always like more commercial activity, but we remain pretty disciplined about trying to pick relationships versus transaction activity. And periodically, as some of our peers try to get loan growth, we've seen some transactional activity and some odd pricing.

But we think we're -- we continue to be well positioned in the market. Size-wise, there are very few local institutions near where we are. We think that's an advantage for us. And net-net, we continue to feel like we're in a pretty good position.

Okay. And then just following up, Tim, you don't need to do a deal with that kind of growth, but you have historically kind of entertained tuck-ins. Like what's the latest on M&A appetite?

Yeah, Chris, you're right. I mean, we're aiming for organic growth, and that would be our plan. If we get an opportunity to do an acquisition, we think we're reasonably good at acquisitions, at least the smaller ones that we've done. Conversations continue. There's a little bit of fits and starts, but nothing that's worth talking about right now.

And our business plan for 2026 is based on growing our business organically.

Brendan Nosal, Hovde Group.

Just to start off on capital. You've built ratios nicely over the last 12 months despite robust loan growth. Is there a point at which you see alternative deployment outlets for capital beyond the dividend and organic growth?

Well, I think as we talked before, I mean, generally, if you grow the mid- to high single digits, we're probably growing capital at 10 basis points a quarter, plus or minus. And so -- and we've been doing that. I think, as we said before, we want to focus on organic growth and see how strong that is. If that number starts to get to 10.5% or above and we don't have any good acquisition opportunities and organic growth is mid- to high single digits, that number would keep growing. So then I think you would look at buybacks and the dividend increases. But generally, it would be organic growth, well-priced acquisitions, smaller acquisitions, I think, would be number two than a buyback.

And just for reference. We haven't talked about this in a while, but we do have a little over $200 million of an authorized buyback plan in place that we could use down the road if we wanted to. But right now, I think we're letting it grow a little bit, going to see how the organic growth opportunities go and whether we can use it for that, and then we'll play by ear after a couple of quarters down the road.

Okay. Okay. That's helpful. One more for me, just pivoting to credit and specifically the reserve. I think if I look back over the past two years, you've been gradually saving a couple of basis points here and there off reserve ratios, whether it's the stated reserve alone or ACL to the core loan portfolio.

I guess that a lot of that is formulaic and driven by outside doctors. So just kind of take us through the thought process on gradually bringing down reserves? And where do you see coverage ratios trending across 2026?

Well, we don't plan whether to build reserves or take reserves away, the CECL process and the macroeconomic factors and the mix of the portfolio and the process we go through to determine reserves really determines the level of those reserves. So if the economic forecast gets much worse for some reason if the economy gets worse, and you're going to see that coverage ratio go up. What we saw started during the year is that the economic forecast generally were getting better. And so the model just spits out the results.

But our credit, as we talked about, has been very good. Our criticized and classified levels are very low. Our NPAs are very low. Our charge-offs are low. And so we had economic conditions or even some commercial real estate pricing index got better early in the year and the like.

And so we really do a fairly thorough process of using economic data digging down with our teams on the loan side to build what that reserve should be. So we don't go into it with some preconceived notion that we should build reserves or release reserves, we look at all the factors and record the provision accordingly.

So I don't want to give you an outlook as to whether you're going to build or release because I don't know what the economic factors are going to be in the future. And remember, CECL is a forward-looking concept, not a backward-looking concept.

Jeff Rulis, D.A. Davidson.

Tim, maybe just back to the -- you talked about the macro environment being pretty favorable or optimistic with the customers. I wanted to touch on the competitive landscape, some of your larger Midwest peers are engage with deal activity down in the Southeast and Texas and wanted to kind of -- is a portion of your growth or market share gains from maybe competitors being focused elsewhere? Just a thought on -- if you could touch on that.

Sure. We've always benefited from disruption, distraction, call it whatever you want. But we believe our position in the Midwest is an attractive one. We believe the markets we compete in are actually very good markets. There's a lot of density. There's a lot of wealth.

And to the extent that others elect to focus elsewhere at times, I think that's only helpful to us. But we compete with all of the big banks every day and a handful of Chicago-based competitors and, in some cases, credit unions in some of our markets. And so we believe we differentiate based on service and the people at the company, and we'll continue to do that.

And I guess, Tim, just to kind of follow up then. I mean, you've outstripped a little bit of the -- even the high-single-digit, I think, 11% loan growth. And just trying to think about timing, do you look at '26 as equal opportunity on that disruption as you've had in maybe the prior year? I guess the question being, any change to that is that closing? Are you seeing folks kind of reorient with the Midwest and might be a more competitive year ahead? Loaded question.

No. Well, it's hard to say. I think there certainly are lots of fits and starts for various competitors, and we have some folks that are trying to open more locations in Chicago and people that are trying to move teams. So I don't think that's anything really new. The only piece that I would say on loan growth relative to the last few years is, we've obviously had a little bit of a tailwind in terms of premium finance with premiums rising in addition to the bank growing the number of units that we produce.

And I think there is some flattening in terms of the premium environment for insurance companies. I don't -- people use soft and hard in all those terms. I just I just think it's probably up to us to grow the loans now as opposed to getting help from the market.

Appreciate it. And just one other one. Rich, looking at the linked quarter commercial nonperforming loan increase, again, not big and that probably flat to down from the second quarter. So the balances are kind of moving around. But anything you'd point to on the commercial linked quarter increase on nonperforming loans.

No, not really. It's more episodic in nature, and we've said this in the past where we see things as just kind of one-off things and we work to solve them and move along. I think when I look at credit quality in the portfolio, we really focus on where the special mention, substandard numbers are, which we're seeing at a pretty consistent level. So things will occasionally go bump in the night, and that's our job to fix those. But this is really more, for this quarter at least, more of a -- we would kind of identify it as more episodic.

And Rich, on the -- I guess, as we approach a year from kind of the tariff liberation day noise, your sense of customers, is there more maybe relative to ease. I mean, that threat is always out there. But from a customer standpoint, do you sense any more comfortability than you were nine months ago?

Yeah. I think the ease around the tariffs is real. I think probably maybe even more so is I think labor costs, if you go back a year or two years ago, labor costs and finding labor was really problematic. I think that, that's improved quite a bit. And I think people kind of look at just a more stable labor environment, more predictable from an expense perspective. And so they're a little more comfortable today.

David Long, Raymond James.

We talked about M&A, and I understand you guys have an excellent organic growth opportunity in front of you and fully taking advantage of it. But in the past, you've talked about other MSAs and looking to replicate what you do in Chicago and other MSAs, Minneapolis, St. Louis, Indianapolis have been mentioned. Is there any appetite to move outside of the Chicago MSA at this point?

Well, I mean, we're in Southeast Wisconsin and West Michigan now, which you know, David. I mean, we would be opportunistic in other Midwest geographies that we don't cover today, but that would be on a disciplined basis. And where we haven't been able to acquire, we've, in some cases, open branches, and we've been effective in doing so.

We've talked in the past about Rockford, and we've got some branches opening in Northwest Indiana this coming year. So we'll take the opportunities as they come to us. But if we need to go to other geographies organically, we think we've proven our ability to do that.

Terry McEvoy, Stephens Inc.

Maybe, Tim, just a question for you. As the industry continues to evolve, what are your current thoughts on the strategic benefits of operating 16 banking charters kind of relative to some of the costs and leveraging the Wintrust brand?

Yeah. The charter question comes up periodically, and we currently have 16 for those of you that are following along. We believe they continue to be a benefit for us. They keep us closer to the market than many of our competitors. We've centralized most of the infrastructure and expense that goes along with the charters. And so it's really more of a marketing and market function that we believe is valuable to us.

And if you look at the communities in which we operate in many of those communities, we're the number one or number two market share in very attractive markets. That's not a benefit we want to give up at this point. So we watch it carefully. The expense is not trajectory changing. It's a structure that we believe we operate well, and we'll continue to evaluate it as we go.

But for the time being, we like it. There are clearly benefits. Deposit insurance is one of them, our MaxSafe product, obviously gives us the ability to provide customers more insurance than they might otherwise get. There are other benefits. And as you would expect, there are some other trade-offs, but the net balance for us remains positive.

And then as a follow-up, about 1/3 of last quarter's loan growth was in mortgage warehouse. And I think in the past, you've talked about gaining market share. But when you kind of look at the forward curve, is that portfolio kind of a headwind, a tailwind to growth expectations for '26?

Obviously, it depends on what happens to the mortgage market. We've been successful in growing that business in a stable mortgage market because of the expertise our team brings and the job our folks do from an operational standpoint. But for us, that's a zero loss business with very attractive dynamics. We think we're very efficient.

It will move a little bit with the mortgage volume over time. And if the mortgage market gets stronger, as we've talked about, it's a benefit to us both in terms of our core business and the warehouse business.

In addition to which, I think it's a great point Tim brings up. It's the market, obviously, but they have done a really nice job of bringing new names in, and that comes with if you get the volume, you also get some fee income out of that and some very nice deposits. So I mean, it's really -- it's been a great story in spite of the fact that you might get some volatility in overall rates. So we like where we sit in that space right now.

But Terry, this is Dave Dykstra. I would just add, the mortgage market has been bouncing around the bottom for so long. I say, a period of time, there's way more upside than downside there. It just doesn't seem like the the volumes are going to go much lower in the mortgage market. So I would think net-to-net over quarter-to-quarter, it may change a little bit.

But net-net, has probably more upside than downside there exactly.

Casey Haire, Autonomous Research.

Dave, I want to clarify your comments about the operating leverage dynamics. I think you said you expect mid- to high single-digit revenue off of '25 and then expenses to grow mid- to -- 4% to 5% versus the fourth quarter run rate. There's a little bit of excitement that you meant or that you said mid- to high-single-digits revenue growth off the fourth quarter run rate. Just wanted to clarify that.

Yeah. No, we're talking off of the -- something we generally have had acquisitions in past years, and we grow organically so good. we generally try to give you guidance of the fourth quarter run rate versus the full year. So when I talk -- when you're talking about forward growth, we're talking about off of the fourth quarter run rate on both sides there.

Okay. All right. And then just a follow-up on the -- a couple of follow-ups on the NIM. So first off, I have your interest-bearing deposit beta cycle to date around 57%. Just some updated thoughts as to where that can trend to in '26?

Yeah. As we've talked about on prior calls, our guess on the deposit beta in terms of total cycle is going to be in the low 60s. And we continue to believe if we get rate cuts, that will do a nice job managing the deposit, the interest-bearing deposit expense. And so I don't think our view has changed there.

Okay. Very good. And just last one for me. The hedge program that you guys detailed on slide 12, you do have a number of hedges that mature this year. Does that hurt your ability to hold the NIM stable, or is there a plan to backfill with new hedges as they come off?

No. Our guidance fully contemplates those hedging programs running off. But we would expect to pay market conditions to backfill that and just probably do some forward starts and fill in the gaps going forward as they mature. But we think given our current position, our current swaps in place and our growth projections is that we will hold the margin in the 350s. And as Tim said, if rates go up 2 or 3 times or down 2 or 3 times, we still think we're there.

So we think we're very neutral for a full year with the margin.

David Chiaverini, Jefferies.

Maybe just starting off with further clarification on that run rate comment. So are we talking 4Q '26 versus 4Q '25, those growth rate figures? Or are we talking full-year '26 versus the 4Q '25 annualized?

Taken 4Q '25 annualize that to get to a number, and then you can put the growth rates on top of that for the full year of '26.

Perfect. And then I wanted to ask about the mortgage banking outlook. It sounds like that could be a nice swing factor for 2026. Can you talk about your expectations in terms of volume, gain on sale margins, whether those could increase or be under pressure? And just give us a sense of how optimistic you are on that business.

Well, I guess we've always been optimistic. And I think the last two years, I've been optimistic for a great spring buying season, it hasn't occurred, but we are optimistic. There's still a supply shortage out there. But I mean, if you look at our mix of business in the fourth quarter, it was about 50-50 purchase and refi. In the prior three quarters, it was probably three quarters purchase and a quarter refi. So as rates have come down, we've seen a little bit of a pickup in refi, but also a slow winter buying season in the fourth quarter.

But if you sort of look at the service portfolio that we have out there, which is a sizable portfolio. We've got maybe at the current rates around in the low 6s, we've got between 10% and 15% of that portfolio is sort of in the money to refi. But if rates go down another 25 basis points or, let's say, 50 basis points, you'd have more like 1/4 of that portfolio would be reliable. So we think if rates go down 25 to 50 basis points on the mortgage side that we could have some pickup. But the tenure has been going up.

And so I can't predict interest rates, but we are optimistic that if the mortgage rates stay where they are now, and drop a little bit further into '26 that there's some pickup there. There's upside. And we don't think that going out -- going down much further is really that probable. We've been in the low 20s for quite a while here and with very low application volumes. So unless rates really shoot up in the mortgage market, we think we can hold this revenue.

So we look at it as upside, and we're optimistic it happens, but we can't control the mortgage rates.

Yeah. And maybe the other benefit, which has been the case now for a couple of years is as these low rates have continued, many of the sort of refinance independent broker mortgage operations have gone out of business. And so our share of the market, we think, is up considerably. And when it comes back, we expect to do well.

Ben Gerlinger, Citi.

Sorry, I just wanted to double check and maybe fine-tune a little bit here. And I apologize for being a little myopic on it. But you talked through the -- or the property casualty insurance market, and I agree, softening versus strengthening, I don't know either. But it seems like the pricing is a little limited year over year. So is it fair to think like 2Q will still be a good growth quarter, but maybe not as heroic as we've seen previously?

And I'm just trying to fine-tune the first half of the year in terms of modeling growth.

Yeah. I think the only point we were trying to make is that for the last couple of years, we've had the benefit of premiums going up. That may not be the case right now. We don't think they're working against us. But we still expect a strong second quarter.

It's a seasonal component of the Property & Casualty premium finance business, and we would expect to have a good second quarter.

Got you. And then just kind of at a 50,000-foot view, you guys generally trend to show loan growth and deposit growth in roughly the same quarter. Is that a fair way to think about this year given kind of what's transpired over rates and your outlook for growth?

Yeah. We certainly aim for deposit growth to mirror our loan growth, and we would take more deposit growth if we could get it. Again, that's adding clients that will be with us for a long time. It can be lumpy. So I can't tell you they're going to exactly mirror each other, but that would be our target.

Jared Shaw, Barclays.

Most have been asked and answered. But I guess just as you look at hiring incremental revenue producers here, are you seeing competition impacting what you have to pay for new people here? Or what's sort of driving the movement of revenue producers among companies right now?

Yeah, I don't think there's been a hugely material change. Obviously, top-tier producers can be expensive. And we think we do a good job of not only working our own team and periodically finding others. We don't talk about it a lot here just because it's a normal part of our business. And so we're always looking to add folks that are very good at taking care of customers and help us differentiate our services.

Okay. And then just finally, looking at construction down this quarter, any color on the build-out of construction and how that could potentially be funded up as we move through next year or this year?

You're talking about just general construction lending?

Yeah. Yeah, it was down this quarter, I'm guessing from completions, but sort of what's the growth outlook there?

Yeah. I would say it's kind of -- Chicago hasn't been a huge construction market. We've seen a little bit, but I think there's more upside there. I mean, multifamily, for instance, in Chicago, continues to be very strong. Some other markets are maybe struggling a little bit more because of oversupply. So I actually think we're feeling okay about where construction activity will be for this coming year.

Janet Lee, TD Cowen.

Not to beat on a dead horse, but just to clarify on your outlook for resi mortgage and mortgage warehouse, is your mid- to high-single-digit loan growth for 2026 contemplate a level of bullish, like are you assuming that mortgage rate perhaps step to the 5% handle? Like are you baking in a level of mortgage rate reduction in your mid- to high single-digit outlook? Or were you referring to an additional upside to the mid- to high single-digit loan growth if mortgage rates do dip below 6%?

Janet, the assumption would be a slightly improved mortgage market in line with the Mortgage Bankers Association projections, not any dramatic drop in rates. And Dave, a couple of minutes ago, gave you a little bit of a sense for how much volume you could get if the rates dropped. But I think to get any very, very material lift rates would have to go below 6%.

Got it. And on your NIM outlook for stable, I think there is room for interpretation and you're characterizing 4-basis-point increase in NIM this quarter as being stable, you're pretty neutral to rates it seems, and 60% beta also seems solid. What are some of the drivers that could put you to either perhaps increasing net interest margin through 2026? And are you still seeing the phenomenon of seeing some spread compressions on fully funded CRE, which you've talked about in the past quarters?

Well, we've talked about competitive pressures largely from folks that maybe haven't grown as quickly as we have and kind of desire to do that. And so I think there still is a fairly competitive environment for fully funded loans. But some of that's transaction-based, and we're really much more focused on relationship-based arrangements. If the competitive environment changed dramatically, you could get some pressure on the margin.

Obviously, the first quarter with a couple of fewer days has a math impact on the margin. But we're actually pretty neutral, almost independent of rate changes, and given the visibility to the competitive environment, that would be the case there, too.

Bill Hebel, 22v Research.

Can you just maybe talk through the fixed asset reprice that you're seeing on both the loan and the security side, kind of where roll-on, roll-off yields are in both books?

Yeah. We really haven't talked about the roll-off yield on them. We have still very little commercial and commercial real estate fixed asset repricing, most of our fixed asset repricing comes out of the premium finance portfolios. Life is fixed for a year, and so it reprices once a year. So it takes a full year for that portfolio to reprice. That portfolio is generally 12 months CMT plus 200 basis points.

So if you look back a year and see where the 12 months CMT was and at current rates, you can kind of calculate that impact and commercial premium finance is generally. It's not tied to prime, but generally has good correlation to the prime rate and their nine-month loans that are fixed rate that pay monthly. So it takes 9 to 10 months for them to generally turn over.

So again, if you look back at what the prime rate was 9 to 12 months ago and look at where they are now, you can probably get some good feel for that repricing. The commercial portfolio repricing on securities, it's very little cash flow. So a basis point or two here or there impact nothing material.

Got it. And where are you adding -- the securities that you added in the available-for-sale book, where were those yields coming on? Where were you purchasing?

Around the 5% level.

Yeah, high 4s, 5.

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

Thank you, Latif. As always, for those of you on the phone, we appreciate you joining us and for your support. We start 2026 in a good place. I hope we've answered your questions. If not, you know where to find us, and we'll be working hard for all of you and for our shareholders. Thank you.

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