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Wintrust (WTFC) Q2 2025 Earnings Call Transcript

July 22, 2025

02:38 PM

14 min read

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What caught my attention is Image source: The Motley Fool. DATETuesday, July 22, 2025, at 11 a, amid ongoing market uncertainty. EDTCALL PARTICIPANTSChief Executive Officer — Tim CraneChief Financial Officer...

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14 min read

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SUMMARYWintrust Financial (WTFC 3

Nevertheless, 02%) dered record net income and net interest income in Q2 2025, highlighting strong deposit and loan growth across multiple franchise segments

Commercial real estate exposure and credit metrics remained stable, with specific increases in nonperforming office loans explained as isolated due to the small portfolio denominator

Management expects continued NIM stability, deposits to adequately fund loan growth, and noninterest expenses to stay anchored near current run-rates

Strategic actions included a large-scale preferred stock issuance tied to the redemption of higher-cost series, which will cause a temporary upward adjustment to preferred dividends and alter the calculation of earnings per for Q3 2025

David Dykstra said, "Deposit growth was $2 (this bears monitoring), given current economic conditions. 2 billion, representing a 17% increase over the prior quarter on an annualized basis (this bears monitoring). " highlighting that new commercial and consumer households are fueling franchise expansion, in light of current trends

Deposit costs declined slightly while deposit growth significantly funded loan growth; Interest-bearing deposit costs excluding CDs rose six basis points sequentially

Meanwhile, Management confirmed preferred dividend costs will rise from apximately $7 million to $8

Furthermore, Moreover, 4 million per quarter over the next five years, beginning in Q4 2025, with a higher figure in Q3 2025 due to the ext dividend period and one-time accounting reclassification

This analysis suggests that hedging portfolio is expected to offer margin tection through the next year, with additional swap layers planned for later maturities, subject to market conditions

Noninterest income increases were tied largely to higher wealth management asset valuations and modest imvements in mortgage banking, which remains sensitive to the rate environment

Wintrust continues to maintain CET1 at or above a 10% floor, as stated by management, and anticipates gradual capital growth of apximately 10 basis points per quarter as long as mid to high single-digit loan growth persists, according to management ary on the earnings call

INDUSTRY GLOSSARYPremium Finance: Lending to finance insurance premium payments for es or consumers, often repaid in installments synchronized with policy periods

Maketawa Bank Acquisition: Reference to Wintrust's acquisition of Makatawa Bank, a transaction impacting loan and deposit growth and reported expenses (an important development)

Moreover, CRE: Commercial Real Estate, including office, industrial, retail, and multi-family perty lending

Net Interest Margin (NIM): A measure of the difference between interest income generated and interest paid out, as a percentage of average earning assets

Full Conference Call TranscriptTim Crane: Good morning, everyone (noteworthy indeed)

Thank you for joining us for the WinTrust Financial Second Quarter Earnings Call (something worth watching) (something worth watching)

In contrast, In addition to the introductions Latif made, I'm joined by our Chief Financial Officer, Dave Starr, and our Chief Legal Officer, Kate Bogie

I'll begin this morning with some high-level highlights

Meanwhile, Dave Dykstra will speak to the financial results, and Rich will add some additional information on loan activity and credit performance

As always, ing our remarks, we'll be happy to take your questions, considering recent developments

Our differentiated apach focused on understanding and meeting our client needs continues to der consistently strong financial results, given current economic conditions

We reported record quarterly net income of $195, in today's market environment. 5 million, up from $189 million last quarter

Furthermore, Net interest income, also a quarterly record, was $547 million

Furthermore, Driving the higher net interest income was second-quarter loan growth of $2

Moreover, The growth was broad-based and ly reflects the seasonally strong second quarter in our attractive premium finance

However, We saw good deposit growth during the quarter of over $2 billion

Assets grew to $69 billion

Going forward, our pipelines are strong, and we expect continued mid to high single-digit loan growth for the second half of the year

We also expect continued deposit growth that will fund our loan growth

What's particularly important the deposit growth is that it represents new commercial and consumer households that allow us to continue to grow our franchise (this bears monitoring)

However, Additionally, Given the strong growth in the quarter, it's important to highlight that we continue to be disciplined in our growth

We can and do pass on credit opportunities where we cannot get comfortable with the pricing or posed credit structure

However, This apach has served us well and will not change

Net interest margin for the quarter remained comfortably within our target range at 3

Dave will talk a little bit more the margin in just a minute

Residential mortgage activity, while up somewhat this quarter, remains muted in the current rate environment, in today's market environment

We continue to manage expenses in that to tect our current financial results while ensuring that we're positioned to capture when rates go down and mortgage activity increases

We continue to believe the mortgage is a core offering and vides a nice financial hedge against margin pressure in a lower rate environment

Credit quality remains very good

We continue to stay close to the small number of clients experiencing uncertainty in the current economic environment so that we can help get ahead of any challenges they may face (an important development)

Overall, another strong quarter, consistent results in line with our expectations

On the other hand, Let me turn it over to Dave

Moreover, David Dykstra: Great

Thanks, Tim (this bears monitoring)

As Tim said, we had strong deposit and loan growth this quarter

Furthermore, The deposit growth was $2

In contrast, 2 billion, representing a 17% increase over the prior quarter on an annualized basis

The solid deposit growth helped fund seasonally strong second-quarter loan growth of $2 (something worth watching), in today's market environment. 3 billion or 19% on an annualized basis

For the first half of the year, loan growth was $3 billion or 12% on an annualized basis

Furthermore, As for other aspects of the balance sheet results, total assets grew by $3. 1 billion to $69 billion, including the impact of a $425 million preferred stock offering, which I will discuss later in my s, given the current landscape

Turning to the income statement results, this was a very solid operating quarter, ducing a record level of quarterly net income with just a few moving pieces, in today's financial world

I'll start off by highlighting what we consider the uncommon items for the quarter, which included $2. 9 million of acquisition-related costs that were substantially related to the conversion of the Macau Bank acquisition and net security gains of $650,000

At the same time, Those items are discussed on the first page of the earnings release if you'd to refer to them later, amid market uncertainty

Our net interest income increased $20 (quite telling)

Moreover, Additionally, 2 million from the prior quarter as a result of a $1, in this volatile climate. 9 billion increase in average earning assets and a relatively stable net interest margin, in light of current trends

This quarter represented a record high amount of quarterly net interest income

Given the current interest rate environment and even with a few rate changes in either direction, we remain confident that our net interest margin will continue to be relatively stable throughout the remainder of 2025 (which is quite significant)

Moreover, With that stable net interest margin outlook and the jected future growth in average earning assets, we would again expect to increase net interest income in the third quarter

I would note that period-end loans were apximately $1 (something worth watching). 5 billion higher than the average loans for the second quarter, giving us a good start on achieving the higher average earning assets for the third quarter (an important development)

The slightly lower vision for credit losses recognized in the second quarter as compared to the prior quarter is primarily attributable to a slightly better set of macroeconomic factors, somewhat offset by the aforementioned strong loan growth, in today's market environment

On the other hand, Regarding other noninterest income and noninterest expense, total noninterest income totaled $124, in light of current trends

Meanwhile, 1 million in the second quarter, up apximately $7, in today's financial world. 5 million when compared with the prior quarter

Although persistently high mortgage rates dampened our optimism for a stronger spring buying season, the company generated apximately $2. 6 million more in mortgage banking revenue as we experienced higher duction revenue due to somewhat higher origination volumes offset by a bit less portfolio

Wealth management revenue increased by $2. 8 million in the second quarter, primarily as a result of asset valuation increases during the quarter

Furthermore, The company recorded a variety of smaller changes to other noninterest income as shown in the tables in the earnings release, but the changes relative to the prior quarter were not material or unusual

As far as noninterest expense go, noninterest expenses totaled $381. 5 million in the second quarter and were up apximately $15. 4 million from the prior quarter

Conversely, The primary reasons for the increase were all factors that we jected would occur on last quarter's earnings call

Specifically, salaries and employee benefits expense increased by apximately $8 million as compared to the first quarter due primarily to higher employee benefit expense due to an increased level of health insurance claims, higher mortgage and wealth management commissions because of the corresponding higher revenues in those lines, and the second quarter having a full effect of the annual merit increases that were effective on February 1

Advertising and marketing expenses increased by $6. 5 million in the second quarter compared to the first quarter (an important development)

As we've discussed many times in the past, this category of expenses tends to be higher in the second and the third quarters of the year due to the expenditures related to various major and minor league baseball sponsorships and other summertime sponsorship events held in the communities that we serve, given the current landscape

The remaining variances in noninterest expense, both positive and negative, were relatively normal, amounted to less than $1 million in the aggregate, and don't warrant any additional special mention on this call (which is quite significant)

However, Meanwhile, We also continued to build our tangible book value per during the first half of this year

Nevertheless, And as you can see on Slide 10 of the presentation deck, we have grown tangible book value per common every year since we've been a public company, and we are on track to do so again in 2025

As I mentioned earlier, I'd to take a moment to discuss the $25 million Series F preferred stock issuance at WinTrust, which closed on May 22 (which is quite significant), given the current landscape

This leads to the conclusion that issuance was to redeem $412

Meanwhile, 5 million of Series D and Series E preferred stock that was set to reprice on July 15, 2025, and they were set to reprice at rates higher than the existing market rates

Furthermore, In fact, WinTrust did redeem all the Series D and Series E preferred stock on July 15 and now has only the Series F preferred stock outstanding

Because the redemption of the preferred stock will impact the earnings per calculation in the third quarter, we've included an overview of such impact on Slide 24 of the presentation deck

What you'll see is that the third quarter Series F preferred dividends, when and if declared by the board at its July meeting, will be more than the normal quarterly dividend since it includes an ext first dividend period from the closing date of May 22 to the first payment date of October 15, 2025, so more than a quarter's worth of dividends

Dividends are recorded and declared in the third quarter will be larger than the normal Series F dividend declaration, and there will be no dividends for the Series D or Series E, given the current landscape

In addition, accounting rules require that the prior issuance costs on the Series D and Series E issuances need to be reclassified upon redemption from capital surplus and recognized for retained earnings

In contrast, It's just a reclass within the capital section, but the accounting rules require that reduction to be recorded through net income available to common holders, i, in this volatile climate. , below the net income line, in light of current trends

Importantly, these amounts will not impact third-quarter operating net income, but will impact third-quarter earnings per calculations, in this volatile climate

Again, Slide 24 in the presentation deck summarizes this information

But the long and the short of it is, the most recent quarters, the second quarter, had roughly $7 million of preferred dividends, in light of current trends

Furthermore, So for the past few quarters and going back five years, that number has been $7 million, in today's market environment

In the fourth quarter of this year and going forward for five years until they reprice again, that number will be $8

Moreover, The third quarter, for all the reasons I just talked,.

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