Wintrust Financial Posts Record Year, Flags CRE Risks

Wintrust Financial ((WTFC)) has held its Q4 earnings call. Read on for the main highlights of the call.

Wintrust Financial Caps Record Year With Broad-Based Growth Despite Pockets of Pressure

Wintrust Financial’s latest earnings call painted a clearly upbeat picture: record full‑year and quarterly profits, double‑digit loan and deposit growth, and a stable, healthy net interest margin underscored strong operating momentum. Management emphasized positive operating leverage, rising tangible book value and expanding market share across its Midwest footprint, all while keeping credit losses low. Offsetting these strengths were softer mortgage revenues, a modest uptick in nonperforming loans, higher noninterest expenses in areas such as health insurance, and a concentrated commercial real estate (CRE) office book that remains under close watch. Overall, leadership framed these negatives as manageable against a backdrop of robust core performance.

Record Full-Year Net Income and Earnings Growth

Wintrust delivered record net income of $824 million for 2025, up 19% from $695 million in 2024, highlighting the strength of its balance sheet and franchise. Diluted earnings per share rose to $11.40 from $10.31, an increase of roughly 10.6%, reflecting both strong revenue growth and disciplined cost control. The earnings expansion demonstrates the bank’s ability to grow profitably in a competitive rate environment, and signals to investors that management has been effective in balancing growth, funding costs, and risk.

Record Quarterly Earnings and Solid Q4 Momentum

The fourth quarter capped the year with a quarterly record: net income of $223 million, up 3% from the prior quarter. Management attributed this performance to solid loan and deposit growth paired with a modestly better net interest margin. The quarter’s results suggest that momentum is not only intact but still building into the new year, with the bank continuing to add volume and maintain pricing discipline even as the broader industry feels pressure on funding and margins.

Robust Loan and Deposit Growth Across the Franchise

Wintrust posted strong balance sheet expansion, with loans up 11% and deposits up 10% for 2025. In the fourth quarter alone, the bank added about $1.0 billion in both loans and deposits, translating to annualized growth of roughly 8% and 7%, respectively. This growth supports the earnings story: the bank is winning business on both sides of the balance sheet, adding interest‑earning assets while maintaining deposit funding, which is crucial for sustaining profitability in a volatile rate environment.

Stable Net Interest Margin and Record Net Interest Income

Net interest margin (NIM) remained in a tight and healthy band of 3.50%–3.56% throughout 2025, finishing Q4 at 3.54%. The bank also reported record quarterly net interest income, powered by a $1.1 billion increase in average earning assets and a 4‑basis‑point NIM improvement, driving a $16.9 million sequential increase in net interest income. This stability and growth in core banking revenue stand out in a sector where many institutions are experiencing margin compression, reinforcing Wintrust’s effective balance sheet and pricing strategies.

Positive Operating Leverage Enhances Profitability

Management highlighted strong operating leverage, with net revenue rising 11.2% year over year while noninterest expenses grew at a slower pace, about 3.4 percentage points lower than revenue growth. This gap underscores the bank’s ability to scale its business efficiently, investing in growth while still expanding margins. For investors, positive operating leverage signals that incremental growth is adding more to profits than to costs, a key ingredient for sustainable earnings momentum.

Capital Strength and Tangible Book Value Growth

Wintrust’s capital position continued to improve, with tangible book value per share increasing by more than $13 to nearly $89. Management emphasized that capital is being built organically while still funding robust balance sheet growth. An authorized share repurchase program of roughly $200 million remains available as a potential tool, though the company appears focused primarily on supporting organic expansion. The steady rise in tangible book value enhances the bank’s loss‑absorbing capacity and offers a tangible underpinning to the stock’s long‑term value.

Market Share Gains and Regional Expansion

The bank is translating its financial performance into tangible market share wins, particularly in its core Midwest markets. Wintrust has moved into the third position in deposit market share in the Chicago area, while also posting strong gains in Wisconsin and West Michigan. Management noted continued momentum across its regional footprint, suggesting that the bank is successfully leveraging its relationship‑driven model to pry business away from larger competitors and deepen ties with local customers.

Credit Quality Stable With Low Losses

Credit metrics remained largely benign. The provision for credit losses stayed in the $20–$30 million per quarter range, and net charge‑offs declined to 17 basis points from 19 basis points quarter over quarter. Management stressed its disciplined approach to credit, including early identification of potential issues. In a period where investors are watching for cracks in asset quality—particularly following a rapid rate-hiking cycle—Wintrust’s low loss levels and consistent provisioning offer some comfort.

Managing CRE and Office Exposure Proactively

Commercial real estate nonperforming loans declined from 0.21% to 0.18%, indicating improved performance in that portfolio. Still, the bank’s $1.7 billion CRE office exposure—12.1% of its total CRE book and 3.2% of total loans—remains a focal point. Management conducts quarterly deep dives on this segment, underscoring a cautious stance amid ongoing uncertainty in office real estate. While current nonperforming and charge‑off metrics are low, investors will likely continue to monitor this concentrated exposure closely.

Customer Experience as a Competitive Advantage

Beyond balance sheet metrics, Wintrust highlighted customer experience as a meaningful differentiator. Net Promoter Scores improved and were described as best‑in‑class in both retail and commercial banking. This focus on service and relationship banking supports the bank’s growth in deposits and loans, and can be particularly valuable during periods of industry stress when customers may be more willing to switch providers.

Mortgage Revenue Weakness and a Cloudy Outlook

Mortgage banking remained a soft spot, with low volumes and applications continuing to weigh on mortgage revenue. Management flagged mortgage as a potential swing factor for 2026, acknowledging that a meaningful rebound is unlikely without mortgage rates falling below roughly 6%. While leadership expressed some hope for improvement, they are not building their core plan around a mortgage recovery, signaling prudence in expectations for this rate‑sensitive business line.

Nonperforming Loans Tick Up but Remain Manageable

Nonperforming loans increased to $185.8 million, or 35 basis points of total loans, from $162.6 million, or 31 basis points, the prior quarter. Management characterized the rise as manageable and largely episodic rather than systemic. Even with the uptick, overall levels remain low by historical standards, suggesting that while credit normalization is occurring at the margin, there is not yet evidence of broad‑based stress in the portfolio.

Noninterest Expense Pressures Emerge

Noninterest expenses climbed to $384.5 million in Q4 from $380 million in the prior quarter, driven by higher employee health insurance claims, OREO (other real estate owned) costs, travel and entertainment, and other items. Management pointed to elevated health insurance claims as part of a broader market trend rather than a bank‑specific issue. While expense growth is still running below revenue growth, this uptick reminds investors that inflationary and benefit‑related pressures can temper operating leverage if not carefully managed.

Noninterest Income Headwinds From Securities and Mortgage

Other noninterest income in Q4 came in at $130.4 million, slightly under the prior quarter’s $130.8 million, as lower securities gains and ongoing mortgage softness weighed on results. While the decline was modest, it highlights the bank’s sensitivity to market‑related income streams and the current weakness in mortgage‑related revenues. Management’s emphasis on growing fee‑based lines like wealth and service fees aims to offset some of this variability over time.

Concentrated Office CRE Portfolio Remains a Key Risk Area

Wintrust again called out its $1.7 billion office CRE portfolio as a specific area of concentration risk. Representing 12.1% of its CRE exposure and 3.2% of total loans, this segment is being monitored closely given ongoing structural questions around office demand. Although current nonperforming and loss levels are low, the bank’s repeated focus on this book signals that it remains a central risk factor if macro or sector‑specific conditions deteriorate.

Reserve Levels and Macroeconomic Sensitivity

Over the past two years, Wintrust modestly reduced its credit reserves, guided by CECL models and improving economic forecasts. While this reflects a more optimistic macro backdrop, it also creates some vulnerability if conditions worsen unexpectedly, given CECL’s forward‑looking nature. Investors should be aware that any negative shift in outlook—such as a sharper slowdown or stress in CRE—could prompt higher provisioning and reserve builds in future periods.

Seasonality and Near-Term Growth Variability

Management cautioned that the first quarter is typically the slowest of the year, especially for premium finance and mortgage lines, which can make near‑term quarterly growth uneven. This seasonality means that investors should avoid over‑interpreting short‑term fluctuations in volumes or earnings early in the year, and instead focus on the underlying full‑year trajectory and the bank’s ability to sustain mid‑ to high‑single‑digit growth over time.

Forward-Looking Guidance and Outlook

Looking to 2026, Wintrust guided to mid‑ to high‑single‑digit growth in both loans and deposits, aiming to fund its asset expansion with similar deposit growth while maintaining a relatively stable NIM around 3.5%. Management modeled mid‑ to high‑single‑digit revenue growth, with noninterest expenses growing roughly 4%–5% off the Q4 run‑rate, implying continued positive operating leverage. They plan to manage deposit betas in the low‑60% range over the full cycle and to backfill maturing hedges as needed to protect margin. Noninterest income is expected to improve on the back of stronger wealth and service fee businesses, with mortgage representing optional upside if rates decline by 25–50 basis points and unlock more refinance activity. Credit quality is expected to remain stable, with nonperforming loan and charge‑off levels similar to current trends, while CRE—especially office—remains under close scrutiny. Overall, the guidance is anchored to a balance sheet of more than $71 billion and the strong 2025 earnings base.

In closing, Wintrust’s earnings call underscored a bank firing on multiple cylinders: record profits, double‑digit balance sheet growth, strong operating leverage, and rising tangible book value. While investors must weigh pockets of risk—most notably in office CRE, mortgage softness, and some cost pressures—the tone of the call and the data presented point to a franchise with solid momentum and a disciplined approach to risk. If management delivers on its 2026 growth and margin targets while keeping credit in check, Wintrust appears well positioned to continue creating shareholder value in the years ahead.