Q2 2026 Wintrust Financial Corp Earnings Call

July 21, 2026

Operator: Welcome to Wintrust Financial Corporation's Q2 and year-to-date 2026 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.

Speaker #1: 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.

Speaker #1: 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.

Operator: 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. 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.

Speaker #1: The company's forward-looking assumptions that could cause the actual results to differ materially from the information discussed during this call are detailed and are earnings press release and in the company's most recent form, 10-K, and any subsequent filings with the SEC.

Speaker #1: 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.

Speaker #1: As a reminder, this conference call is being recorded. I will now turn the conference call over to Mr. Tim Crane.

Speaker #2: Good morning, everybody, and welcome to Wintrust's second quarter 2026 earnings call. In addition to those that Latif introduced, I'm joined by our Chief Financial Officer, Dave Starr, and Chief Legal Officer, Kate Bogie.

Tim Crane: Good morning, everybody, and welcome to Wintrust's Q2 2026 earnings call. In addition to those that Lateef introduced, I'm joined by our Chief Financial Officer, Dave Stoehr, and Chief Legal Officer, Kate Boege. As we do every quarter, I'll provide a brief overview of the quarter. Dave Dykstra will discuss key financial results. Rich will review loan activity and credit quality, and I'll be back to share some final thoughts before we open up to your questions. As a reminder, we're focused on three key strategic priorities to drive financial results and build shareholder value. Delivering an exceptional and differentiated customer experience, generating strategic and disciplined growth, and continuing to build on our foundation by investing for the future. Delivering on these priorities, we reported very strong loan and deposit growth, a net interest margin in line with expectations, well-managed expenses, and stable credit quality.

Speaker #2: As we do every quarter, I'll provide a brief overview of the quarter. David Dykstra will discuss key financial results, Rich will review loan activity and credit quality, and I'll be back to share some final thoughts before we open up to your questions.

Speaker #2: As a reminder, we're focused on three key strategic priorities to drive financial results and build shareholder value. Delivering an exceptional and differentiated customer experience, generating strategic and disciplined growth, and continuing to build on our foundation by investing for the future.

Speaker #2: Delivering on these priorities, we reported very strong loan and deposit growth, a net interest margin in line with expectations, well-managed expenses, and stable credit quality.

Speaker #2: All of this produced our sixth consecutive record quarter of net income. Second quarter net income was $233.7 million, up from just over $227 million in the first quarter.

Tim Crane: All of this produced our sixth consecutive record quarter of net income. Q2 net income was $233.7 million, up from just over $227 million in Q1. Year-to-date net income was $461 million, up 20% from the same period last year. Net interest income, the biggest driver of our revenue growth, was up 13% quarter over quarter on an annualized basis. Our growth this quarter was all organic. One client, one relationship at a time. We continue to deliver our differentiated value proposition to gain market share by adding new households and deepening relationships with existing clients. I'm particularly pleased with the strong operating leverage we delivered in the first two quarters of the year. Not only are we growing revenue nicely, we are also managing expenses to ensure we can continue to invest in the tools, capabilities, and the people that lead to stronger client relationships.

Speaker #2: Year-to-date net income was $461 million, up 20% from the same period last year. Net interest income, the biggest driver of our revenue growth, was up 13% quarter over quarter, on an annualized basis.

Speaker #2: Our growth this quarter was all time. We continue to deliver our differentiated value proposition to gain market share by adding new households and deepening relationships with existing clients.

Speaker #2: I'm particularly pleased with the strong operating leverage we delivered in the first two quarters of the year. Not only are we growing revenue nicely, but we are also managing expenses to ensure we can continue to invest in the tools, capabilities, and people that lead to stronger client relationships.

Speaker #2: On our last call, we shared plans to open branches between now and the end of the year. Our newest locations—Chicago’s Lakeview neighborhood, as well as the Illinois towns of Montgomery and Elk Grove Village—will open in the coming weeks.

Tim Crane: On our last call, we shared plans to open branches between now and the end of the year. Our newest locations, Chicago's Lakeview neighborhood and in the Illinois towns of Montgomery and Elk Grove Village, will open in the coming weeks, with several others to follow later in the quarter, including three in Northwest Indiana. In all cases, we look to open branches either as fill-ins within an existing footprint or in new communities that are a strategic fit for our community banking model. Additionally, on 6 July, we announced an important investment in our wealth management business with the intent to purchase the guardianship services business from Northern Trust. This is a good bolt-on acquisition to a business we know well and will cement our position as a leading provider of guardianship services in the Chicago area. We expect that transaction will close later this year.

Speaker #2: With several others to follow later in the quarter, including three in Northwest Indiana. In all cases, we look to open branches either as fill-ins within an existing footprint or in new communities that are a strategic fit for our community banking model.

Speaker #2: Additionally, on July 6, we announced an important investment in our wealth management business with the intent to purchase the guardianship services business from Northern Trust.

Speaker #2: This is a good bolt-on acquisition to a business we know well, and we'll cement our position as a leading provider of guardianship services in the Chicago area.

Speaker #2: We expect that the transaction will close later this year. Finally, we continue to make enhancements to our digital banking experience, with new features and functionality coming in the third quarter that will make it easier for consumers and businesses alike to manage their relationship online.

Tim Crane: Finally, we continue to make enhancements to our digital banking experience with new features and functionality coming in Q3 that will make it easier for consumers and businesses alike to manage their relationship online. These investments are part of our effort to build for our future so that we can continue to deliver the exceptional experience our customers and the market expect from us. All in all, a very strong, straightforward quarter with the consistent performance you have seen from us for many quarters. Now let me return things over to Dave to give a little bit more detail on the results.

Speaker #2: These investments are part of our effort to build for our future so that we can continue to deliver the exceptional experience our customers and the market expect from us.

Speaker #2: All in all, a very strong, straightforward quarter, with the consistent performance you have seen from us for many quarters. Now, let me turn things over to Dave to give a little bit more detail on the results.

Speaker #1: Great. Thanks, Tim. Let me start with the balance sheet. Specifically, deposit growth was approximately 2.2 billion dollars of growth during the quarter, representing a 15% increase over the prior quarter on an annualized basis.

David Dykstra: Great. Thanks, Tim. Let me start with the balance sheet. Specifically, deposit growth was approximately $2.2 billion of growth during the quarter, representing a 15% increase over the prior quarter on an annualized basis. This strong deposit growth funded continued solid Q2 loan growth of approximately $1.6 billion, representing 12% growth on an annualized basis. Yields and rates in major balance sheet categories were slightly lower, with loan yields moving down seven basis points from the prior quarter to 6.07%. This was primarily due to back book repricing of the commercial insurance premium finance portfolio and slight spread compression due to competitive market pressures. Interest-bearing deposits, which were up substantially, were flat to the prior quarter at 2.74%.

Speaker #1: This strong deposit growth funded continued solid second quarter loan growth of approximately $1.6 billion, representing 12% growth on an annualized basis. Yields and rates on major balance sheet categories were slightly lower, with loan yields moving down 7 basis points from the prior quarter to 6.07%.

Speaker #1: This was primarily due to back book repricing of the commercial insurance premium finance portfolio and slight spread compression due to competitive market pressures. Interest-bearing deposits, which were up substantially, were flat to the prior quarter at 2.74%.

Speaker #1: I would note that the period-end loans were approximately $1.2 billion higher than the average loans for the second quarter, giving us a great start to achieving a higher level of average earning assets in the third quarter of 2026.

David Dykstra: I would note that the period-end loans were approximately $1.2 billion higher than the average loans for the Q2, giving us a great start to achieving higher level of average earning assets in the Q3 2026. Turning to the income statement results. This was, again, a very solid operating quarter, producing another record level of quarterly net income. Net interest income improved $18.3 million compared to the Q1 2026. The benefit to net interest income from an increase of $2.1 billion in average earning assets was offset by a 4 basis point decline in the net interest margin.

Speaker #1: Turning to the income statement results, this was again a very solid operating quarter, producing another record level of quarterly net income. Net interest income improved 18.3 million dollars compared to the first quarter of 2026.

Speaker #1: The benefit to net interest income from an increase of $2.1 billion in average earning assets was offset by a 4 basis point decline in the net interest margin.

Speaker #1: The net interest margin was negatively impacted by 1 basis point due to one additional day in the quarter, 2 basis points related to the back-book reprice of the premium finance portfolio, and 1 basis point related to other items—including mix and spread compression that I discussed.

David Dykstra: The net interest margin was negatively impacted by 1 basis point due to 1 additional day in the quarter, 2 basis points related to the back book reprice of the premium finance portfolio, and 1 basis point related to other items, including mix and the spread compression that I discussed. The result was a margin of 3.52% for the Q2 2026, and has ranged from 3.50 to 3.59 during the last 10 quarters, showing the sustained stability of this metric. The provision for credit losses continued to remain consistent with prior quarters, staying in the $20 to $30 million range for the sixth consecutive quarter as the overall credit environment on our asset quality has remained stable.

Speaker #1: The result was a margin of 3.52% for the second quarter of 2026 and has ranged from 3.50% to 3.59% during the last 10 quarters, showing the sustained stability of this metric.

Speaker #1: The provision for credit losses continued to remain consistent with prior quarters, staying in the $20 to $30 million range for the sixth consecutive quarter, as the overall credit environment on our asset quality has remained stable.

Speaker #1: Regarding the non-interest income and non-interest expense sections, non-interest income totaled $141.3 million in the second quarter, which was an increase from the $134.1 million recorded in the prior quarter.

David Dykstra: Regarding the non-interest income and non-interest expense sections, non-interest income totaled $141.3 million in the Q2, which was an increase from the $134.1 million recorded in the prior quarter. The roughly $7 million increase was primarily the result of a $4 million improvement in mortgage banking revenue as the spring buying season provided a modest amount of increased purchase volume and related revenues. Another contributing factor to the increase in this category is that the company recorded approximately $2 million of higher BOLI income, which was primarily related to higher earnings on BOLI investments that support certain deferred compensation plan benefits. I'll note that this $2 million increase in BOLI income had a similar offsetting increase in compensation expense during the quarter. As a result, non-interest income and non-interest expense were both equally elevated for the quarter by almost $2 million.

Speaker #1: The roughly $7 million increase was primarily the result of a $4 million improvement in mortgage banking revenue, as the spring buying season provided a modest amount of increased purchase volume and related revenues.

Speaker #1: Another contributing factor to the increase in this category is that the company recorded approximately $2 million of higher BOLI income, which was primarily related to higher earnings on BOLI investments that support certain deferred compensation plan benefits.

Speaker #1: And I'll note that this $2 million increase in BOLI income had a similar offsetting increase in compensation expense during the quarter. So, as a result, non-interest income and non-interest expense were both equally elevated for the quarter by almost $2 million.

Speaker #1: The company also recorded approximately $1.8 million more in security gains in the second quarter compared to the first quarter. The impact of the increase is just noted.

David Dykstra: The company also recorded approximately $1.8 million more security gains in the Q2 compared to the Q1. The impact of the increases just noted, mortgage banking, BOLI, and security gain revenue, was about $8 million. These items tend to have some volatility related to market conditions and may or may not occur in the Q3. In fact, we currently expect mortgage revenues to fall back into the low $20 million range as the home buying seasonality subsides. Non-interest expenses totaled $397.5 million in the Q2, up from the $382.6 million recorded in the prior quarter.

Speaker #1: Mortgage banking BOLI and security gain revenue was about $8 million dollars. These items tend to have some volatility related to market conditions and may or may not occur in the third quarter.

Speaker #1: In fact, we currently expect mortgage revenues to fall back into the low $20 million range as home buying seasonality subsides. Non-interest expenses totaled $397.5 million in the second quarter, up from the $382.6 million recorded in the prior quarter.

Speaker #1: The primary reasons for the increase, other than to support the exceptional growth, were salary and employee benefits expense increased by approximately 5.6 million dollars as compared to the first quarter due primarily to the second quarter having a full effect of annual merit increases that were effective February 1st, increased commissions that support the higher mortgage production, and $2 million impact from the BOLI-related deferred comp expense I just discussed.

David Dykstra: The primary reasons for the increase, other than to support the exceptional growth, were salary and employee benefits expense increased by approximately $5.6 million as compared to Q1, due primarily to Q2 having a full effect of annual merit increases that were effective 1 February, increased commissions that support the higher mortgage production, and $2 million impact from the BOLI-related deferred comp expense I just discussed. Advertising and marketing expenses increased by $7.2 million in Q2 when compared to the prior quarter. As we've discussed many times in the past, this category of expenses tends to be higher in Q2 and Q3 of the year due to expenditures related to various sports sponsorships and other summertime sponsorships events held in the communities that we serve.

Speaker #1: Advertising and marketing expenses increased by 7.2 million dollars in the second quarter, when compared to the prior quarter. As we 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 expenditures related to various sports sponsorships and other summertime sponsorships events held in the communities that we serve.

David Dykstra: Offsetting the aforementioned increases was a reversal of accrued FDIC assessment expense of $5.2 million related to the final true-up the special assessment previously imposed by the FDIC to pay for the two bank failures that occurred in 2023. The quarterly net overhead ratio improved slightly over the prior quarter, helping the company produce solid operating leverage during Q2 and for H1 of 2026. In summary, I'll reiterate that this was a very solid quarter and H1 of the year. The company accomplished exceptional loan and deposit growth, a relatively stable net interest margin, another record level of net income, sustained growth in tangible book value per share, and a continued low level of non-performing assets. With that, I'll conclude my comments and turn it over to Rich to discuss credit.

Speaker #1: Offsetting the aforementioned increases was a reversal of crude FDIC assessment expense of $5.2 million, related to the final true-up for the special assessment previously imposed by the FDIC to pay for the two bank failures that occurred in 2023.

Speaker #1: The quarterly net overhead ratio improved slightly over the prior quarter, helping the company produce solid operating leverage during the second quarter and for the first half of 2026.

Speaker #1: In summary, I'll reiterate that this was a very solid quarter and first half of the year. The company accomplished exceptional loan and deposit growth, a relatively stable net interest margin, another record level of net income, sustained growth in tangible value per share, and a continued low level of non-performing assets.

Speaker #1: So, with that, I'll conclude my comments and turn it over to Rich to discuss credit.

Speaker #2: Thanks, Dave. As detailed on slide 7 of the investor presentation, the loan growth during the second quarter was strong and broad-based, with total portfolio growth of 1.6 billion or 12% annualized.

Richard Murphy: Thanks, Dave. As detailed on slide seven of the investor presentation, the loan growth during Q2 was strong and broad-based, with total portfolio growth of $1.6 billion or 12% annualized. Every lending segment saw positive growth during Q2, and year-over-year loan growth was $4.6 billion or 9%. Of note, the FIRST Insurance Funding portfolio grew $722 million. As mentioned during prior calls, Q2 is typically our largest funding quarter for this business. In addition, commercial loans grew by $518 million, fueled by solid production in our asset base and leasing groups. Commercial real estate loans grew by $108 million, and the Wintrust Life Finance team continued to build their portfolio by $116 million. From a credit quality perspective, as detailed on slide 15, we continue to see strong credit performance across the portfolio.

Speaker #2: Every lending segment saw positive growth during the second quarter, and year-over-year loan growth was 4.6 billion or 9%. Of note, the first insurance funding portfolio grew 722 million as mentioned during prior calls, the second quarter is typically our largest funding quarter for this business.

Speaker #2: In addition, commercial loans grew by 518 million, fueled by solid production in our asset-based and leasing groups. Commercial real estate loans grew by 108 million, and the WINTRUST Life Finance team continued to build their portfolio by 116 million.

Speaker #2: From a credit quality perspective, as detailed on slide 15, we continue to see strong credit performance across the portfolio. Non-performing loans decreased from 182.7 million or 0.34% to 179.3 million or 0.32% and remained at a very manageable level.

Richard Murphy: Non-performing loans decreased from $182.7 million, or 0.34%, to $179.3 million or 0.32%, and remained at a very manageable level. Charge-offs for the quarter were 10 basis points down from 14 basis points in the prior quarter. The level of NPLs and charge-offs in Q2 reflect a stable credit environment, as evidenced by the chart of historical non-performing asset levels on slide 16 and the consistent level of 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. Also, 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 one quarter of our total loan portfolio.

Speaker #2: Charge-offs for the quarter were 10 basis points, down from 14 basis points in the prior quarter. The level of NPLs and charge-offs in the second quarter reflect a stable credit environment, as evidenced by the chart of historical non-performing asset levels on slide 16 and the consistent level of our special mention and substandard loans on slide 15.

Speaker #2: 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.

Speaker #2: Also, 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 one quarter of our total loan portfolio.

Speaker #2: As detailed on slide 19, we continue to deliver solid performance in this portfolio during the second quarter, as CRE NPLs remained at a very low level, unchanged from the first quarter at 0.12%.

Richard Murphy: As detailed on slide 19, we continue to deliver solid performance in this portfolio during Q2 as CRE NPLs remained at a very low level, remaining unchanged from Q1 at 0.12%. CRE charge-offs continue to remain at historically low levels. On slide 25, we continue to provide enhanced detail on our CRE office exposure. Currently, this portfolio remains steady at $1.6 billion or 11.3% of our total CRE portfolio and only 2.9% of our total loan portfolio. We monitor this portfolio very closely, and we continue to perform 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 very close contact with our customers, and these conversations continue to reflect a measured optimism around the business climate.

Speaker #2: And CRE charge-offs continue to remain at historically low levels. On slide 25, we continue to provide enhanced detail on our CRE office exposure. Currently, this portfolio remains steady at $1.6 billion, or 11.3% of our total CRE portfolio, and only 2.9% of our total loan portfolio.

Speaker #2: We monitor this portfolio very closely, and we continue to perform deep-dive analysis on a quarterly basis. The most recent deep-dive analysis showed very consistent results when compared to prior quarters.

Speaker #2: Finally, as we have discussed on previous calls, our teams stay in very close contact with our customers, and these conversations continue to reflect a measured optimism around the business climate.

Speaker #2: That concludes my comments on lending and credit, and I'll turn it back over to Tim.

Richard Murphy: That concludes my comments on lending and credit, and now I'll turn it back over to Tim.

Speaker #3: Okay. Thank you, Rich. Just some final thoughts with respect to the third quarter and the remainder of the year. Our targets remain unchanged. We're working toward loan growth in the mid- to high-single digits, and deposit growth to largely fund that loan growth.

Tim Crane: Okay. Thank you, Rich. Just some final thoughts. With respect to Q3 and the remainder of the year, our targets remain unchanged. We're working toward loan growth in the mid to high single digits and deposit growth to largely fund that loan growth. The fact this quarter that we generated over $2 billion in core deposits without increasing deposit costs is evidence of our strength in the market and our ability to consistently build long-term franchise value. As Rich mentioned, our clients continue to be cautiously optimistic. They're managing the impact of the war in the Middle East and persistent inflation relatively well. As such, our pipelines are solid across all of our loan categories. We continue to expect our net interest margin to be a few basis points either side of 350. We're very neutral in terms of rates up or down in the market.

Speaker #3: The fact that this quarter we generated over $2 billion in core deposits without increasing deposit costs is evidence of our strength in the market and our ability to consistently build long-term franchise value.

Speaker #3: As Rich mentioned, our clients continue to be cautiously optimistic; they're managing the impact of the war in the Middle East and persistent inflation relatively well.

Speaker #3: As such, our pipelines are solid across all of our loan categories. We continue to expect our net interest margin to be a few basis points either side of 3.50%.

Speaker #3: We're very neutral in terms of rates—up or down—in the market, so where we land will depend on whether the competitive pricing pressures that Dave mentioned continue, and to what degree.

Tim Crane: Where we land will depend on whether the competitive pricing pressures that Dave mentioned continue and to what degree. Independent of the actual margin, we expect solid net interest income growth and good operating leverage. Finally, we expect expenses to remain well managed, solid credit performance, and an increase in CET1 in our other capital ratios in the coming quarters. To sum up, we continue to feel good about our position in the market and our ability to deliver our differentiated customer experience to grow our business. We believe with the continued focus of our dedicated team, along with the sophisticated financial solutions we offer, we are well positioned to continue to deliver strong results for our shareholders for the remainder of 2026. Lateef, with that, we'll open this up to questions, please.

Speaker #3: Independent of the actual margin, we expect solid net interest income growth and good operating leverage. Finally, we expect expenses to remain well managed, solid credit performance, and an increase in CET1 and our other capital ratios in the coming quarters.

Speaker #3: To sum up, we continue to feel good about our position in the market and our ability to deliver our differentiated customer experience to grow our business.

Speaker #3: We believe that, with the continued focus of our dedicated team, along with the sophisticated financial solutions we offer, we are well positioned to continue delivering strong results for our shareholders for the remainder of 2026.

Speaker #3: Latif, with that, we'll open this up to questions, please.

Speaker #4: Thank you. As a reminder, to ask a question you will need to press *11 on your telephone. To remove yourself from the queue, you may press *11 again.

Operator: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jon Arfstrom of RBC Capital Markets. Your line is open, John.

Speaker #4: Please stand by while we compile the Q&A roster. Our first question comes from the line of John Armstrong of RBC Capital Markets. Your line is open, gentlemen.

Jon Arfstrom: Hi. Thanks. Good morning, everyone.

Speaker #5: Hi. Thanks. Good morning, everyone.

Speaker #6: Hi, John.

Richard Murphy: Hey, John.

Speaker #5: Tim may be a question for you, just follow up in your prepared comments. You had just really strong deposit growth for the quarter. And I'm curious if there's anything you would call out in terms of what's driving that growth, and then any updates on your outlook for expected deposit pricing from here.

Jon Arfstrom: Tim, maybe a question for you, just to follow up in your prepared comments. You had just really strong deposit growth for the quarter. I'm curious if there's anything you would call out in terms of what's driving that growth. Then any updates on your outlook for expected deposit pricing from here. Obviously, a good quarter, but how do you see things as we roll forward into Q3 and Q4?

Speaker #5: Obviously, a good quarter, but how do you see things as we roll forward into Q3 and Q4?

Speaker #3: Yeah, you bet, John. Yeah, we were obviously very pleased with the deposit growth in the quarter. We do get a little bit of municipal seasonality that, in some ways, matches the seasonality of our loan growth business in the second quarter.

Tim Crane: Yeah, you bet, John. We were obviously very pleased with the deposit growth in the quarter. We do get a little bit of municipal seasonality that in some ways matches the seasonality of our loan growth business in Q2, but very good commercial growth, which will lead to increases over time in our treasury management fees and that activity. Frankly, good retail growth as well. That's in advance of opening a number of branches in H2 here that will continue to help with the deposit growth. I believe on the last call, we said that both the loan yields and the deposit costs were going to be relatively stable. We were very pleased that even with that growth, the deposit cost was flat. All in all, a very strong deposit growth quarter.

Speaker #3: But very good commercial growth, which will lead to increases over time in our treasury management fees, and that activity and, frankly, good retail growth as well.

Speaker #3: And that's in advance of opening a number of branches in the second half of the year here that will continue to help with the deposit growth.

Speaker #3: I believe on the last call, we said that both the loan yields and the deposit costs were going to be relatively stable. We were very pleased that even with that growth, the deposit cost was flat.

Speaker #3: So, all in all, a very strong deposit growth quarter. And I think we would look to—not quite the same number, but strong deposit growth in the second half of the year. Pricing remains relatively rational in the market.

Tim Crane: I think we would look to not quite the same number, but strong deposit growth in H2. Pricing remains relatively rational in the market, and if anything, our position continues to improve from a competitive standpoint.

Speaker #3: If anything, our position continues to improve from a competitive standpoint.

Speaker #5: Okay. Good. Thank you. And then on lending, you guys mentioned competitive pressures a couple of times, and I know we kind of went through this a few quarters ago.

Jon Arfstrom: Okay. Good. Thank you. Then on lending, you guys mentioned competitive pressures a couple of times, and I know we kind of went through this a few quarters ago. Just curious what you're seeing from the marketplace. The growth number's obviously very strong, but anything at all that concerns you or anything less rational in terms of the competitive environment? Thanks.

Speaker #5: But just curious what you're seeing from the marketplace, the growth numbers obviously very strong, but anything at all that concerns you or anything less rational in terms of the competitive environment?

Speaker #5: Thanks.

Speaker #6: No, John, this is Dave. I would say, as I said if you broke that the margin down maybe a basis point relates to sort of mix and competitive pressure.

David Dykstra: John, this is Dave. I would say, as I said, if you broke the margin down maybe 1 basis point relates to sort of mix and competitive pressure. It's not dramatic. We're seeing a little bit on the commercial and the commercial real estate side. It's not widespread. It's a little episodic. There are deals that we are turning down for pricing, and we're doing the same thing on the premium finance side. We had really good growth there, $722 million of growth in the quarter. Probably could've had a little bit more. Some of the larger deals on the premium finance side were just being priced awfully thin, and we just took passes on them. We're going to stay disciplined on doing loans at reasonable prices and getting paid for the risk.

Speaker #6: So it's not dramatic. We're seeing a little bit on the commercial and the commercial real estate side, but it's not widespread. It's a little episodic.

Speaker #6: So there are deals that we are we are turning down for pricing, and we're doing the same thing on the premium finance side. We had really good growth there, 722 million dollars of growth in the quarter.

Speaker #6: Probably could have had a little bit more, but some of the larger deals on the premium finance side were just being priced awfully, awfully thin, and we just took passes on them.

Speaker #6: So we're going to stay disciplined on doing loans at reasonable prices and getting paid for the risk. And even with that, 12% loan growth for the quarter on an annualized basis, and strong pipelines, are good.

David Dykstra: Even with that, 12% loan growth for the quarter on an annualized basis and strong pipelines are good. Just a little bit of pressure there, but not dramatic. Again, as I said, if you broke the margin down two basis point was the back book repricing of premium finance, which those aren't tied to, but correlate closely to prime. The last prime change we had was in December of last year. It takes a full nine months for those to reprice through. Probably a basis point or two next quarter on that. Other than that, it would just be the competitive pressures that we see that we either move the margin up or down from there.

Speaker #6: So, just a little bit of pressure there, but not dramatic. Again, as I said, if you broke the margin down two basis points, what's the back book repricing of premium finance—which those aren't tied to, but correlate closely to prime—and the last prime change we had was in December of last year.

Speaker #6: So it takes a full nine months for those to reprice through. So probably a basis point or two next quarter on that. But other than that, it would just be the competitive pressures that we see that we either move the margin up or down from there.

Speaker #6: But nothing dramatic, just a slight bit.

Jon Arfstrom: Yeah

Jon Arfstrom: Yeah.

David Dykstra: nothing dramatic, just a slight bit.

David Dykstra: Nothing dramatic, just a slight bit.

Speaker #5: Yep. Okay, that's helpful. Thank you.

Jon Arfstrom: Yep. Okay. That's helpful. Thank you.

Speaker #3: Thanks, John.

Tim Crane: Thanks, Jon.

Speaker #4: Thank you. Our next question comes from the line of Nathan Ray with Piper Sandler. Please go ahead, Nathan.

Operator: Thank you. Our next question comes from the line of Nathan Race of Piper Sandler. Please go ahead, Nathan.

Speaker #6: Yeah. Hi, guys. Good morning. Thanks for taking the questions. Dave, I was wondering if you could kind of unpack the expense outlook a bit more for the back half of the year.

Nathan Race: Yeah. Hi, guys. Good morning. Thanks for taking the questions. Dave, I was wondering if you could kind of unpack the expense outlook a bit more for the back H2 of the year. You mentioned some of the adjustments around the BOLI that have impacted both other fees and expenses. Just any thoughts on how you see kind of the run rate trending the back H2 of the year to get to that kind of mid-single-digit guidance that we've talked about in the past?

Speaker #6: You mentioned some of the adjustments around the Foley that have impacted both other fees and expenses. But just any thoughts on how you see kind of the run rate turning the back half of the year to get to that kind of mid-single-digit guidance that we've talked about in the past?

Speaker #6: Yeah. Well, if you adjust for the FDIC credit that we took for the assessment throughout, our expenses for the quarter would probably have been about $403 million, roughly.

David Dykstra: Yeah. Well, if you adjust for the FDIC credit that we took for the assessment true-up, our expenses for the Q2 would probably have been about $403 million roughly. If you factor in the good growth that we had in the Q2 and a substantial growth, then again, expecting to grow nicely in the Q3, including some of the branches Tim talked about, you probably expect that number to go from 403 up just a little bit. Say $405 plus or minus is probably a good range. Again, you can't always predict what's going to happen with some of the market things with BOLI. That would just sort of assume that BOLI was flat. I think if you look at that and then project that out, we're still on track to be mid-single digit expense growth, 2026 over 2025.

Speaker #6: If you factor in the good growth that we had in the second quarter and a substantial growth, and then again, expecting to grow nicely in the third quarter, including the branch, some of the branches Tim talked about, you probably expect that number to go from 403 up just a little bit.

Speaker #6: So, say 405 plus or minus—it's probably a good range. Again, you can't always predict what's going to happen with some of the market things with Foley.

Speaker #6: So that would just sort of assume that Foley was flat. But I think if you look at that and then project that out, we're still on track to be mid-single-digit expense growth, '26 over '25.

Speaker #6: And so I think that that target is still right on what we expected to happen. Gotcha. That's really helpful. And then just going back to the trajectory for loan yields going forward, I appreciate the comments around some of the pricing pressures on the PMC side of things that impacted the Q2 loan yields.

David Dykstra: I think that target is still right on what we expected to happen.

Nathan Race: Got you. That's really helpful. Just going back to the trajectory for loan yields going forward. I appreciate the comments around some of the pricing pressures on the PNC side of things that impacted the Q2 loan yields. Just generally, maybe outside of PNC, which can be seasonal in Q2, any thoughts in just terms of kind of the blended rate on new loan production these days when you strip out insurance premium finance?

Speaker #6: But just generally, maybe outside of PMC, which can be seasonal in two Q, any thoughts and just terms of kind of the blended rate on new loan production these days, when you strip out insurance, premium finance?

Speaker #6: Yeah. Well, I said overarching, I would say we probably still expect one or two basis point impact to the margin from the premium finance backbook in the third quarter.

David Dykstra: Well, overarching, I would say we probably still expect 1 or 2 basis point impact to the margin from the premium finance back book in the Q3, then we're done with that. We're through with the back book reprice. If you take that into account and there's 1-day impact that we had this quarter, which is a basis point. We'll have that again next quarter. If you take that and put everything else aside, you're probably right at a 350 margin roughly, then it'll just depend on competitive pricings up or down. We still think the incremental difference between what the incremental deposit pricing and loan pricing is in total is roughly a 350 margin. We think we can hold that with incremental pricing on both the side and maintain a margin that is ± a few basis points.

Speaker #6: And then we're done with that. We're through with the back book reprice. So if you take that into account—and there's one day impact that we had this quarter, which is a basis point—we'll have that again next quarter.

Speaker #6: So, if you take that and put everything else aside, you're probably right at a 350 margin, roughly. And then it'll just depend on competitive pricing, up or down.

Speaker #6: But we still think the incremental difference between what the incremental deposit pricing and loan pricing is in total is roughly a 350 margin. So we think we can hold that with incremental pricing on both the.

Speaker #6: Side. And maintain a margin that is plus or minus a few basis points. And really, that'll depend on mix and competitive pressures. But right now, we would think we can still hold that like we've been talking about.

David Dykstra: Really, that'll depend on mix and competitive pressures. Right now, we would think we can still hold that like we've been talking about.

Speaker #6: Okay. Great. If I could just sneak one last one in for Tim, just on M&A. There's some increased chatter these days in the market, and we've seen some continue trickle of small bank deals across the region.

Nathan Race: Okay, great. If I could just sneak one last one in for Tim just on M&A. There's some increased chatter these days in the market, we've seen some continued trickle of small bank deals across the region. Just curious kind of what you're seeing in terms of some additional bite-sized acquisition opportunities consistent with what we've seen in the past from you guys. Just any thoughts on anything more transformational or larger in terms of what those conversations may or may not be trending along these days?

Speaker #6: So just curious kind of what you're seeing in terms of some additional bite-sized acquisition opportunities consistent with what we've seen in the past from you guys and just any thoughts on anything more transformational or larger in terms of what those conversations may or may not be trending along these days.

Speaker #3: Yeah, Nathan, I think your summary was sort of right. I mean, the deals that we've seen so far have been sort of smaller, including in our market.

Tim Crane: Nate, I think your summary was sort of right. The deals that we've seen so far have been sort of smaller, including in our market. We continue to stay in touch with people as you would expect. Again, in addition to the wealth-related deal we did this quarter, we would look for opportunities, but we would continue to be very disciplined and as you know, good strategic fit, good cultural fit. I would still characterize the M&A conversations as exploratory at this point.

Speaker #3: We continue to stay in touch with people, as you would expect. And again, in addition to the wealth-related deal we did this quarter, we would look for opportunities.

Speaker #3: But we would continue to be very disciplined and, as you know, ensure a good strategic fit and good cultural fit. I would still characterize the M&A conversations as exploratory at this point.

Speaker #6: Okay. Great. I appreciate all the color. Thanks, guys.

Nathan Race: Okay, great. I appreciate all the color. Thanks, guys.

Speaker #4: Thank you. Our next question, coming from the line of Jeff Rulis. Of DA Davidson. Please go ahead, Jeff.

Operator: Thank you. Our next question comes from the line of Jeff Rulis of D.A. Davidson. Please go ahead, Jeff.

Speaker #7: Thanks. Good morning. Just checking back in on the loan growth. It sounded like you ended the first quarter with some momentum and sounds like that's sort of the period end in the second quarter, kind of surge as well.

Jeff Rulis: Thanks. Good morning. Just checking back in on the loan growth. It sounded like you ended Q1 with some momentum, and sounds like that's sort of the period end in Q2 kind of surged as well. I guess looking into H2, kind of sticking to that guidance, I guess, is it simply visibility to kind of stay within the mid to high single-digit range or anything? I guess, what takes place for you to kind of exceed or be at the high end for the full year from what you see?

Speaker #7: I guess looking into the second half, kind of sticking to that guidance, I guess, is it simply visibility to kind of stay within the mid to high single-digit range or anything?

Speaker #7: I guess what takes place for you to kind of exceed the or be at the high end for the full year from what you see?

Speaker #6: Well, yeah, I think we've been pretty consistent recently and probably over the last few years saying mid to high single digits is generally what we've been producing.

David Dykstra: Well, yeah, I think we've been pretty consistent recently and probably over the last few years, saying mid to high single digits is generally what we've been producing given the diversified nature of the portfolio, excluding the Q2 where it is outsized a little bit for premium finance. We still feel comfortable with the pipelines where they're at. It will just sort of depend on customer preferences. You could potentially see if the mortgage market got better, that mortgage warehouse could go up. You could have less pay downs on CRE portfolios. Those fluctuate a couple hundred million either direction per quarter. Just very nuanced changes. Yeah, I would say this was a broad base, as Rich said. This was a broad-based growth quarter. Every major category was up a little bit, and the customers are feeling pretty good.

Speaker #6: Given the diversified nature of the portfolio, excluding the second quarter, where it is outsized a little bit for premium finance, we still feel comfortable with the pipelines where they're at.

Speaker #6: And it really was it will just sort of depend on customer preferences. You could potentially see if the mortgage market got better, that mortgage warehouse could go up.

Speaker #6: You could have less pay downs on CRE portfolios, those fluctuate a couple hundred million either direction per quarter. Just very nuanced changes. But yeah, I would say this was a broad base as Rich said, this was a broad base growth quarter.

Speaker #6: Every major category was up a little bit, and the customers are feeling pretty good. So, we still think that mid- to high-single digits is a really good target.

David Dykstra: We still think that mid to high single digits is a really good target, and we'll see how it flows from just customer timing as far as closing on these deals. We expect both the Q3 and the Q4 to be in that range right now. I can't tell you anything specific that would change it other than if the mortgage market heated up, we'd probably get a little bit more in mortgage warehouse. The rest of them, it's just blocking and tackling and taking advantage of our market position in Chicago and West Michigan and Southeast Wisconsin, which is fantastic, and we'll just keep doing what we're doing.

Speaker #6: And we'll see how it flows from just customer timing. As far as closing on these deals. But we expect both the third and the fourth quarters to be in that range right now.

Speaker #6: And I can't tell you anything specific that would change it other than if the mortgage market heated up, we'd probably get a little bit more in mortgage warehouse.

Speaker #6: But the rest of them, it's just blocking and tackling and taking advantage of our market position in Chicago and West Michigan and Southeast Wisconsin, which is fantastic.

Speaker #6: And we'll just keep doing what we're doing.

Speaker #7: Yep. Sounds encouraging. One last one, just on expenses again, but within the advertising and marketing—understanding the seasonality and that leg up—is there any more that you're leaning into that line, or would that, for the full-year growth for the advertising and marketing, still align with the overall expense growth?

Jeff Rulis: Yep. Sounds encouraging. One last one just on expenses again, within the advertising marketing, understanding the seasonality, the leg up. Is there any more that you're leaning into that line? Would that for the full year growth for the advertising marketing still align with the overall expense growth? Is that kind of mid-single digit for that line, or is it something a little heavier than that and maybe you got other leverage in other lines?

Speaker #7: Is that kind of mid single digit for that line or is it something a little heavier than that? And maybe you've got other leverage in other lines.

Speaker #6: Well, usually the second and third quarters, as we said, are elevated due to the sports sponsorships with some of the major league teams. So unless they all go to the World Series this year and it leaks into the fourth quarter, we would expect that to trend down a little bit in the fourth quarter.

David Dykstra: Well, usually the Q2 and Q3, as we said, are elevated due to the sports sponsorships with some of the major league teams. Unless they all go to the World Series this year, and it leaks into the Q4, we would expect that to trend down a little bit in the Q4. You can look at 2025 and probably get the sort of the magnitude of the changes from quarter to quarter in the marketing line. That seasonality's been that way for a number of years.

Speaker #6: You can look at 2025 and probably get a sense of the magnitude of the changes from quarter to quarter in the marketing line. But that seasonality has been that way for a number of years.

Speaker #7: Right. I guess I'm trying to exclude that seasonality for the full year you're looking for that line item to be kind of mid or high single-digit growth, knowing that you're going to back down in the end of the year.

Jeff Rulis: Right. I guess I'm trying to exclude that seasonality for the full year. Are you looking for that line item to be kind of mid or high single digit growth, knowing that you're going to back down in the end of the year?

David Dykstra: Yeah.

Speaker #3: Yeah, this is Tim. Sorry. Probably, but we do have a number of new branch openings, and we've been very successful in growing the new branches.

Tim Crane: Yeah. This is Tim, sorry. Probably. We do have a number of new branch openings, and we've been very successful in growing the new branches. We'll support with marketing dollars the entry into those markets. The overall expense guidelines that Dave gave include those branch expenses. We're having a lot of success in the market right now, and we're going to press that advantage, and if we need to spend marketing dollars to do that, we will. We're adding clients right now. We're winning business. We believe we're adding share. There's no reason not to continue to be aggressive on that front.

Speaker #3: And so we'll support, with marketing dollars, the entry into those markets. But the overall expense guidelines that Dave gave include those branch expenses. So we're having a lot of success in the market right now.

Speaker #3: And we're going to press that advantage. And if we need to spend marketing dollars to do that, we will. But we're adding clients right now.

Speaker #3: We're winning business. We believe we're adding share. And so there's no reason not to continue to be aggressive on that front.

Speaker #7: Okay. Thanks for the color.

Jeff Rulis: Okay. Thanks for the color.

Operator: Thank you. Our next question comes from the line of Jared Shaw of Barclays. Please go ahead, Jared.

Speaker #4: Thank you. Our next question comes from the line of Jared Shaw of Barclays. Please go ahead, Jared.

Speaker #8: Hi, good morning. Thanks. I guess maybe going back to the deposits, could you give us an update on what the end-of-period cost of deposits was going into the third quarter?

Jared Shaw: Hi, good morning. Thanks. I guess maybe going back to the deposits

Jared Shaw: Hi, good morning. Thanks. I guess maybe going back to the deposits, could you give us an update on what the end-of-period cost of deposits was going into Q3?

Jared Shaw: Could you give us an update on what the end-of-period cost of deposits was going into Q3?

Speaker #6: Yeah. It is the cost of deposits was flat, as we said, with the first quarter. And end of period was roughly flat too. So we're steady as she goes.

David Dykstra: Yeah. The cost of deposits was flat, as we said with the Q1, and end of period was roughly flat too. We're steady as she goes. Even with that 15% growth during the quarter, we held them fairly steady. End of period was basically where the average was for the period.

Speaker #6: Even with that 15% growth during the quarter, we held them fairly steady. So end of period was basically where they average was for the period.

Speaker #8: Okay. And then how should we think about the DDA growth in third quarter off of sort of looking at that delta between average and end of period?

Jared Shaw: Okay. Then how should we think about the DDA growth in Q3 off of looking at that delta between average and end-of-period? Anything to call out there? Was that some of the impact from the muni trends that you were talking about?

Speaker #8: Anything to call out there? Was that some of the impact from the muni trends that you were talking about?

Speaker #3: No, I don't think too much is related to the municipal deposits. As you suggested, I think looking at the averages makes sense. I think, on an average basis, we were up $300 million in DDA deposits for the quarter.

Tim Crane: No, I don't think too much related to the municipal deposits. As you suggested, I think looking at the averages makes sense. I think on an average basis, we were up $300 million in DDA deposits for the quarter. If you look at the past year, the mix has stayed kind of 19,345 in terms of percentage of total deposits as we've grown total deposits pretty significantly. We're pretty happy with that and it's just kind of steady growth as we move forward. Obviously, we're trying to win checking accounts and households every day. The average is the right way to look at it.

Speaker #3: And if you look at the past year, the mix has stayed kind of 19, 3, 4, 5 in terms of percentage of total deposits as we've grown total deposits pretty significantly.

Speaker #3: So we're pretty happy with that. And it's just kind of steady growth as we move forward. And obviously, we're trying to win checking accounts and households every day.

Speaker #3: So, the average is the right way to look at it.

Speaker #8: Okay. All right. Thanks. And then on the Northern Trust deal, is there any color you can share with us on how we should think about modeling the fee and expenses going forward from that?

Jared Shaw: Okay. All right, thanks. On the Northern Trust deal, any color you can share with us on how we should think about modeling the fee and expenses going forward from that?

Speaker #3: Yeah. Jared, I mean, we're as you can appreciate, we're between announcement and closing here. And so they're really isn't much more we can say other than what was in the press release.

Tim Crane: Yeah, Jared, as you can appreciate, we're between announcement and closing here, and so there really isn't much more we can say other than what was in the press release. I would aim you back there. It's a modest-sized, nice bolt-on for us.

Speaker #3: So, I would sort of aim you back there. It's a modest size, nice bolt-on for us.

Speaker #8: Great. Thank you.

Jared Shaw: Great. Thank you.

Speaker #4: Thank you. Our next question comes from the line of Chris McGrady of KBW. Your line is open, Chris.

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

Speaker #5: Oh, great. Good morning. Dave or Tim, you mentioned your prepared remarks. Just on the expectation for CEQ1 to continue to grow, even with the balance sheet expectations to grow.

Chris McGratty: Great. Good morning. Dave or Tim, you mentioned in your prepared remarks just the expectation for CET1 to continue to grow even with the balance sheet expectations to grow. Does that at all open you up, especially with Basel III reform, to consider layering in buybacks into the narrative?

Speaker #5: Does that at all open you up, especially with Basel III reform, to consider layering in buybacks into the narrative?

Speaker #3: Yeah, Chris, I mean, I think it may. Just to give everybody background, the CEQ1 was 10.4% this quarter, and that's flat given, obviously, the very substantial growth in the balance sheet.

Tim Crane: Chris, I think it may. Just to give everybody background, the CET1 was 10.4 this quarter, and that's flat given obviously the very substantial growth in the balance sheet. We feel very comfortable with that capital level given our risk profile. As I suggested, we think that ratio will go up in Q3 and Q4, then we'll see what happens with respect to any rule changes. I think we're closer to the point where we'll be discussing what we do with excess capital. Maybe just to head off the part B of that question, our preference would be to continue to use that capital to invest in our business and grow loans. We certainly would look at appropriate acquisitions if they were a good fit. Further down the chain, you get buybacks and/or repayment of some debt and followed by dividends.

Speaker #3: We feel very comfortable with that capital level, given our risk profile. And, as I suggested, we think that ratio will go up in the third and fourth quarters.

Speaker #3: And then we'll see what happens with respect to any rule changes. But I think we're closer to the point where we'll be discussing what we do with excess capital.

Speaker #3: And maybe just to head off the kind of part B of that question, our preference would be to continue to use that capital to invest in our business and grow loans.

Speaker #3: We certainly would look at appropriate acquisitions if they were a good fit. And further down the chain, you get buybacks and/or kind of repayment of some debt, and followed by dividends.

Speaker #3: So the good news is I think we're going to have some flexibility on that front going forward.

Tim Crane: The good news is I think we're going to have some flexibility on that front going forward.

Speaker #5: Okay. Great. And then I guess a follow-up, just more of a modeling true up the any reason why earning assets won't grow at the same rate as loans.

Chris McGratty: Okay, great. I guess a follow-up, just more of a modeling true up. Any reason why earning assets won't grow at the same rate as loans? Second, Dave, any outlook on the tax rate? Thanks.

Speaker #5: And then second, Dave, any outlook on the tax rate? Thanks.

Speaker #6: Yeah. Well, the tax rate, first quarter is usually a little bit lower. Second quarter was more normal. So the second quarter tax rate, 26.5% is a pretty good estimate for that.

David Dykstra: Yeah. Well, the tax rate Q1 is usually a little bit lower, Q2 was more normal. The Q2 tax rate, 26.5% is a pretty good estimate for that. I'd expect earning assets to grow similar to loan growth. We usually try to match deposit growth to loan growth, I would think earning asset growth would follow suit there. This quarter, we've outperformed a little bit on the deposit growth over loan growth. As Tim said, we're really happy to grow the franchise and bring in those new clients, so that's a good thing. I would expect loans, deposits, earning assets all to be very similar growth rates.

Speaker #6: And I’d expect earning assets to grow similar to loan growth. We usually try to match deposit growth to loan growth, and so I would think your earning asset growth would follow suit there this quarter.

Speaker #6: We outperformed a little bit on deposit growth over loan growth. But as Tim said, we're really happy to grow the franchise and bring in those new clients.

Speaker #6: So that's a good thing. But I would expect loans, deposits, and earning assets all to have very similar growth rates.

Speaker #5: Perfect. Thank you.

Chris McGratty: Perfect. Thank you.

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

Speaker #4: Thank you. Our next question comes from the line of Casey Hare of Autonomous. Please go ahead, Casey.

Casey Haire: Great. Thanks. Good morning, guys. Sorry to beat a dead horse, another NIM question. Apologies if I missed this, the spot and loan yields at 30 June and then new money bond yields, that's been a very nice story for you guys over the last year. I'm just wondering if that can continue on where new money's coming in on the bond book. Thanks.

Speaker #7: Great, thanks. Good morning, guys. Sorry to beat a dead horse, but another NIM question. Apologies if I missed this, but the spot loan yields at June 30th, and then new money bond yields—that's been a very nice story for you guys.

Speaker #7: Over the last year, I was wondering if that can continue on, where new money is coming into the bond book. Thanks.

Speaker #6: Yeah. Well, again, we expect loan and deposit rates to be relatively flat, other than the basis point or two of compression from the premium finance commercial back book repricing.

David Dykstra: Well, again, we expect loan and deposit rates to be relatively flat other than 1 or 2 basis points compression from the premium finance commercial back book repricing. It'll just depend, as we said, on competitive pressure. Spot rates on everything are pretty close to where we're at on this. Mix could change, obviously, depending on which asset class comes in. Again, we're very neutral we think on the margin and plus or minus a few basis points from 350. If you have mid to high single digit loan and deposit growth, we think we grow NII mid to high single digits. We think that's a really good story, very consistent story and-

Speaker #6: And then it'll just depend, as we said, on competitive pressure. So spot rates on everything are pretty close to where we're at on this.

Speaker #6: And mix could change, obviously, depending on which asset class comes in. But again, we're very neutral, we think, on the margin, and plus or minus a few basis points from 350.

Speaker #6: And if you have mid- to high-single-digit loan and deposit growth, we think we grow NII mid- to high-single-digit. So we think that's a really good story, very consistent story.

Speaker #6: And we think we can perform to that.

Richard Murphy: We think we can perform to that.

Speaker #7: Okay. Great. And on the bond side of things, new money loan yields on the bond book?

Casey Haire: Okay, great. On the bond side of things, new money loan yields on the bond book?

Speaker #6: We don't have that much runoff. We do a lot of Ginnie Maes, Fannie Maes, sort of mortgage-backed products. So, a few hundred million of cash flow off of that a quarter, plus anything that maybe we invest from the growth.

David Dykstra: We don't have that much runoff. We do a lot of Ginnie Mae, Fannie Mae sort of mortgage-backed products. A few hundred million of cash flow off of that a quarter, plus anything that maybe we invest from the growth. Those are around 5%-ish.

Speaker #6: But those are around 5%-ish.

Speaker #7: Okay, very good. And just one last question from me. The deposit costs have been great; obviously, you're taking advantage of your position as kind of the last bank standing in Chicago.

Casey Haire: Okay. Very good. Just last one for me. Looked at the deposit costs have been great. Obviously, you're taking advantage of your position as kind of the last bank standing in Chicago. Just wondering, with Chase as the number 1 in your market and their Smart Cash product, you're obviously not seeing any impact today, but are your clients asking for this? What sort of dynamics are you seeing playing out in the Chicago market?

Speaker #7: Just wondering, with Chase as the number one in your market and their Smart Cash product—obviously, we're not seeing any impact today—but are your clients asking for this?

Speaker #7: What sort of dynamics are you seeing playing out in the Chicago market?

Speaker #3: Yeah. I mean, as you all know, we're third in share in the Chicago market. And over the last couple of years, have continued to grow that nicely.

Tim Crane: Yeah. As you all know, we're third in share in the Chicago market, and over the last couple of years have continued to grow that nicely. I think we expect that to continue and the cash sorting, AI, new product introductions are something we deal with every day. The impact so far has been modest. We're certainly watching those types of developments, and we'll react accordingly. Nothing significant yet.

Speaker #3: I think we expect that to continue. And the cash sorting, AI, new product introductions, are something we deal with every day. And the impact so far has been modest.

Speaker #3: We're certainly watching those types of developments, and we'll react accordingly, but nothing significant yet.

Speaker #7: Great. Thank you.

Casey Haire: Great. Thank you.

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

Speaker #4: Thank you. Our next question comes from the line of David Chiaverini of Jefferies. Please go ahead, David.

Speaker #8: Hi. Thanks for taking the questions. I had a follow-up on the competitive environment. Would you say that it is your sense that the competitive pressure in premium finance and CRE is transitory, or could it be more lasting?

David Chiaverini: Hi. Thanks for taking the questions. I had a follow-up on the competitive environment. Would you say that is your sense that the competitive pressure in premium finance and CRE is transitory, or could it be more lasting? Then as a follow-up to that, how would you rate the intensity of the competitive environment? Is this an eight out of 10 on the intensity scale?

Speaker #8: And then as a follow-up to that, how would you rate the intensity of the competitive environment? Is this an 8 out of 10 on the intensity scale?

Richard Murphy: This is Rich Murphy. I don't know how you would rate it on the intensity scale. I think we've always been in a pretty competitive market as it relates to good quality assets. I don't think things are all that different. There is definitely, I would point to, you noted it, CRE, fully funded CRE deals of good quality. There is definitely a lot of competition out there. Obviously in the C&I space, those deals that come with a lot of deposits are very competitive. We feel though that we're going to be aggressive because we want to win market share. I think we also have historically shown a lot of discipline to get things priced right. We think we offer a good value proposition and we are going to compete hard.

Speaker #6: This is Rich Murphy. I don't know how you would rate it on the intensity scale. I think we've always been in a pretty competitive market as it relates to good quality assets.

Speaker #6: So I don't think things are all that different. But there is definitely—I would point to, you noted it's CRE, fully funded CRE deals, of good quality.

Speaker #6: There is definitely a lot of competition out there. Obviously, in the C&I space, those deals that come with a lot of deposits are very competitive.

Speaker #6: We feel, though, that we're going to be aggressive because we want to win market share. But I think we also have historically shown a lot of discipline to get things priced right.

Speaker #6: We think we offer a good value proposition, and we are going to compete hard. But when things get a little too aggressive, whether that's on your scale of 8, 9, or 10, we will step away.

Richard Murphy: When things get a little too aggressive, whether that's on your scale of eight or nine or 10, we'll step away. As of this point, we still see a lot of deals. Our pipelines are full. It is different from a year ago. There's no doubt about that. It's still, I think we compete very effectively in the space we're in right now. Sharp elbows sure. We're winning more than we're losing.

Speaker #6: But as of this point, we still see a lot of deals. Our pipelines are full. It is different from a year ago; there's no doubt about that.

Speaker #6: But it's still I think we compete very effectively in the space we're in right now. So sharp elbow, sure, but we're winning more than we're losing.

Speaker #8: Very helpful, color. And then shifting over to the branch openings, can you remind us of the plans there—the number of branches per year for the next couple of years?

David Chiaverini: Very helpful color. Shifting over to the branch openings, can you remind us of the plans there, the number of branches per year for the next couple of years, and any early read as to how those new branches are performing?

Speaker #8: And any early read as to how those new branches are performing?

Speaker #3: Sure, at least to a degree. We don't, kind of, forecast out several years on the branch activity. But obviously, the three that I mentioned in my comments—plus several more this year, including the three in Northwest Indiana—and I would tell you, frankly, we're pretty good at this.

Tim Crane: Sure. At least to a degree. We don't forecast out several years on the branch activity. Obviously the three that I mentioned in my comments, plus several more this year, including the three in Northwest Indiana. I would tell you, frankly, we're pretty good at this. We recently purchased a branch in a community that we weren't in from an organization that elected to close it. In just a little bit over 90 days, we've got $70 million in deposits. The communities that we're going into are largely attractive communities to us. I feel very comfortable we're going to be growing nicely in terms of those new branches. We haven't done really other than Macatawa now two years ago, any acquisitions. This organic growth opportunity is what the market's given us right now.

Speaker #3: We recently purchased a branch in a community that we weren't in from an organization that elected to close it. And in just a little bit over 90 days, we've got 70 million dollars in deposits.

Speaker #3: And the communities that we're going into are largely attractive communities to us. And so I feel very comfortable that we're going to be growing nicely in terms of those new branches.

Speaker #3: But we haven't done any, really, other than Macatawa. Now, two years ago, any acquisition. So this organic growth opportunity is what the market's given us right now.

Speaker #8: Thank you.

David Chiaverini: Thank you.

Speaker #4: Thank you. Our next question. Comes from the line of Tim Bresler of UBS. Your line is open, Tim.

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

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

Timur Presler: Hi. Good morning. Thanks for the question. I guess as you're thinking about funding future loan growth, in terms of that deposit mix for future funding, is that expectation to change at all going forward, or are you still expecting kind of broader deposit growth? I guess I'm trying to get at the ability to continue growing DDAs in this environment, or maybe we're going to see more of that growth being funded by higher costing funding products.

Timur Braziler: Hi. Good morning. Thanks for the question. I guess as you're thinking about funding future loan growth, in terms of that deposit mix for future funding, is that expectation to change at all going forward, or are you still expecting kind of broader deposit growth? I guess I'm trying to get at the ability to continue growing DDAs in this environment, or maybe we're going to see more of that growth being funded by higher costing funding products.

Speaker #5: Hi, good morning. Thanks for the question. As you're thinking about funding future loan growth, in terms of the deposit mix for future funding, is that expectation to change at all going forward, or are you still expecting broader deposit growth?

Speaker #5: I guess I'm trying to get at the ability to continue growing DDAs in this environment, or maybe we're going to see more of that growth being funded by higher-cost funding products.

Speaker #3: Well, as Dave said, we expect continued growth in deposits, and with respect to mix, the challenge for us is we tend to outperform the market in terms of our deposit growth.

Tim Crane: Well as Dave said, we expect to continue to grow deposits and with respect to mix, the challenge for us is we tend to outperform the market in terms of our deposit growth. If that happens, we'd like to keep DDA at 19% to 20% in terms of the mix. Just hard to say how much we're going to have to grow. We like growing deposits. We like adding clients. We think that grows the value of the franchise. We're happy to take that deposit growth. We'll see what the market gives us. Again, 2 billion plus worth of deposit growth with no change in deposit cost, in our minds, was very good performance in the quarter.

Speaker #3: And so, if that happens, we'd like to keep DDA at 19% to 20% in terms of the mix. It's just hard to say how much we're going to have to grow.

Speaker #3: But we like growing deposits. We like adding clients. We think that grows the value of the franchise, and so we're happy to take that deposit growth.

Speaker #3: And we'll see what the market gives us. But again, $2 billion-plus worth of deposit growth, with no change in deposit cost in our minds, was very good performance in the quarter.

Timur Presler: Yep. No, absolutely. I guess to that point, the fact that deposit costs were flat in this environment, it sounds like that 350 margin expectation kind of furthers that flat deposit trajectory from a cost standpoint. Is that the way we should be thinking about it, is margin is 350 as long as those deposit costs can be kept flat?

Timur Braziler: Yep. No, absolutely. I guess to that point, the fact that deposit costs were flat in this environment, it sounds like that 350 margin expectation kind of furthers that flat deposit trajectory from a cost standpoint. Is that the way we should be thinking about it, is margin is 350 as long as those deposit costs can be kept flat?

Speaker #5: Yeah, no, absolutely. And I guess to that point, the fact that deposit costs were flat in this environment, it sounds like that 3.50% margin expectation kind of furthers that flat deposit trajectory from a cost standpoint.

Speaker #5: Is that the way we should be thinking about it? Is margin 350 as long as those deposit costs could be kept flat?

Speaker #3: Yes, plus or minus a couple of basis points, but yes.

Tim Crane: Yes. Plus or minus a couple of basis points, yes.

Speaker #5: Okay, great. And then, just last for me—it looks like you added a couple of fixed-rate swaps here that started in June, with some higher swap rates.

Timur Presler: Okay, great. Just last for me, it looks like you added a couple fixed-rate swaps here that started in June with some higher swap rates. I guess, has this gone to offset some of the lower yielding swaps that are already in place for this year and next? I guess as you look at the current contribution from the derivatives book here, is this still pretty neutral, or is it leaning maybe one direction or another?

Timur Braziler: Okay, great. Just last for me, it looks like you added a couple fixed-rate swaps here that started in June with some higher swap rates. I guess, has this gone to offset some of the lower yielding swaps that are already in place for this year and next? I guess as you look at the current contribution from the derivatives book here, is this still pretty neutral, or is it leaning maybe one direction or another?

Speaker #5: I guess, does this help to offset some of the lower-yielding swaps that are already in place for this year and next? And as you look at the current contribution from the derivatives book here, is it still pretty neutral, or is it leaning maybe one direction or another?

Speaker #6: Well, the last part of this is Dave. The last part of the question—it's a one basis point positive impact to us for this quarter.

David Dykstra: Well, this is Dave. The last part of the question, it's a 1 basis point a positive impact to us for this quarter. Fairly neutral. We did add some swaps during the quarter. As we said before, we're trying to add on to the swap position to cover those that are going to mature off. If you notice those swaps during the quarter, the strike rates were actually higher than what the 1-month SOFR rate was. For example, one of them had a strike rate of 4%, so that was in the money. We typically did a 1-year forward start and then went 4 or 5 years. Since these were in the money, we decided to put them as an immediate start, and just get the slight benefit from it for the first year.

Speaker #6: So, fairly neutral. We did add some swaps during the quarter. As we said before, we're trying to add to the swap position to cover those that are going to mature.

Speaker #6: But if you notice, those swaps during the quarter—the strike rates were actually higher than what the one-month SOFR rate was. So, for example, one of them had a strike rate of 4%.

Speaker #6: So, that was in the money. We typically did a one-year forward start and then went four or five years. But since these were in the money, we decided to put them as an immediate start and just get the slight benefit from it for the first year.

Speaker #6: But really, we're not trying to add to the swap portfolio in total, generally. We're just trying to fill out the later years as some of these mature off.

David Dykstra: We're not trying to add to the swap portfolio in total generally. We're just trying to fill out what the later years as some of these mature off and probably keep around a $6 billion ± notional value in that portfolio.

Speaker #6: And probably keep around a $6 billion, plus or minus, notional value in that portfolio.

Timur Presler: Great. Thank you.

Timur Braziler: Great. Thank you.

Speaker #5: Great. Thank you.

Operator: Thank you. Question comes from the line of Janet Lee. Your line is open, Janet.

Speaker #4: Thank you. Next question comes from Janet Lee. Janet, your line is open.

Janet Lee: Hello.

Speaker #7: Hello. For premium.

David Dykstra: Morning, Janet.

Tim Crane: Morning, Janet.

Speaker #5: Morning, Janet.

Janet Lee: Morning. For premium finance, since the property insurance premiums industry-wide seems to be flattening out a bit, you mentioned some competitive pressure, does that change your outlook on the growth trajectory of premium finance business? What kind of growth should we forecast for 2026 or 2027?

Speaker #7: Good morning. For premium finance, since the property insurance premiums industry-wide seem to be flattening out a bit, and you mentioned some competitive pressure, does that change your outlook on the growth trajectory of the premium finance business?

Speaker #7: What kind of growth should we forecast for 2026 or '27?

Speaker #6: Yeah. Well, this is Dave. There are pressures on the property side. That's the softest part of the market, and we are seeing those rates down.

David Dykstra: Yeah. Well, this is Dave. There are pressures on the property side. That's the softest part of the market, and we are seeing those rates down. Particularly condo rates in Florida. There's a lot of softening there. Those ran up really high, and now they've sort of come back down. You're also seeing other professional coverages besides property that are up a little bit. We sort of think of the aggregate of the portfolio of loans if you put in the property coverage, the casualty, and the liability coverages to be roughly flat to maybe up just very low single-digit basis points or single-percentage increases. We also then are growing units. We believe we're growing units year over year.

Speaker #6: And particularly, condo rates in Florida—there's a lot of softening there. Those ran up really high, and now they've sort of come back down.

Speaker #6: But you're also seeing other professional coverages besides property that are up a little bit. So we sort of think of the aggregate of the portfolio of loans.

Speaker #6: If you put in the property coverage, the cash value, and the liability coverages, they're expected to be roughly flat to maybe up just very low, in single-digit basis points or single percentage.

Speaker #6: Increases. So we also then are growing units. We believe we're growing units year over year. So we would expect premium finance year over year, taking the seasonality out of the equation for the quarter—second quarter sort of seasonality—to grow low single digits right now.

David Dykstra: We would expect premium finance year over year, and taking the seasonality out of the equation Q1, Q2 sort of seasonality, to grow low single digits right now. We still like the business. It's still out there. We're still competitive. It's just there's a few of the competitors that will chase the larger deals out there and price them way down, and we're just not going to chase what we consider to be irrational pricing there. That's not the majority of the book. It's just a little bit of the book that we walk away from. We would still expect growth there to be in the low single digits year over year.

Speaker #6: We still like the business. It's still out there, and we're still competitive. It's just that there are a few competitors who will chase the larger deals and price them way down.

Speaker #6: And we're just not going to chase what we consider to be irrational pricing there. But that's not the majority of the book; it's just a little bit of the book that we walk away from.

Speaker #6: So we would still expect growth there to be in the low single digits, year over year.

Speaker #7: Got it. All other questions have been asked and answered. Thank you.

Janet Lee: Got it. All other questions have been asked and answered. Thank you.

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

Speaker #4: Thank you. Our next question comes from the line of Ben Gerlinger of Citi. Your line is open, Ben.

Ben Gerlinger: Hi. Good morning. Great deposit growth quarter, especially the pace all pretty much in one major city. I get that you guys have the branches that you're expecting to build Northwest Indiana to front-run the bears. Just kind of commercial deposits or silos of deposits that really aren't associated like the bricks-and-sticks branches. Is there anything on that? I get building branches is good. It was just kind of here and there. I don't know how much that's going to really impact the broader balance sheet because you're considerably larger than you were a decade ago.

Speaker #8: Hi, good morning. Great deposit growth quarter, especially the pace, all pretty much in one major city. I get that you guys have the branches that you're expecting to build in Northwest Indiana to front-run the bears.

Speaker #8: When you think about, just, kind of commercial deposits or silos of deposits that really aren't associated with the bricks-and-sticks branches, is there anything on that?

Speaker #8: Because, I mean, I get that building branches is good. It's just kind of here and there. I don't know how much that's going to really impact the broader balance sheet, because you're considerably larger than you were a decade ago.

Speaker #3: Yeah, I mean, it's a good question, Brandon. And I guess what I would point to is, if you look at the loan growth—particularly C&I loan growth and some of the other verticals—when we win business in those categories, we expect those customers to bring us deposits.

Tim Crane: Yeah. It's a good question, Ben. I guess what I would point to is if you look at the loan growth, particularly C&I loan growth and some of the other verticals, when we win business in those categories, we expect those customers to bring us deposits. As you see commercial loan growth and you see loan growth in some of our niches like the ESOP business and our construction business. We're winning treasury management service, fee income. We're asking for deposits. As you say, we're bigger. To show good deposit growth as we have done regularly, we need deposit growth across the board, including the commercial sectors. That's built in.

Speaker #3: And so, as you see commercial loan growth, and you see loan growth in some of our niches like the ESOP business and our construction business, we're winning treasury management service fee income.

Speaker #3: We're asking for deposits. And so, as you say, we're bigger. And so, to show good deposit growth, as we have done regularly, we need deposit growth across the board, including the commercial sectors.

Speaker #3: And so that's built in. The branches, as you say, will be more retail and small business, but they do increase our presence in Northwest Indiana.

Tim Crane: The branches, as you say, will be more retail and small business, they do increase our presence in Northwest Indiana, and that makes a difference with some of the commercial entities as well.

Speaker #3: And that makes a difference with some of the commercial entities as well.

Speaker #8: Gotcha, that's helpful. Let me just think about the hiring effort. Can you think about LPOs or anything beyond the Chicago area, or kind of touching Michigan?

Ben Gerlinger: Got you. That's helpful. When you think about the hiring effort, can you just think about LPOs or anything beyond the Chicago or kind of touching Lake Michigan? Could you think of the larger MSAs within the quote-unquote Midwest?

Speaker #8: Could you think of the larger MSAs within the, quote-unquote, Midwest?

Speaker #3: Well, we do have a small number of people in other markets. That is sort of our way to start to penetrate those markets, and West Michigan was an example.

Tim Crane: Well, we do have a small number of people in other markets that is sort of our way to start to penetrate those markets. West Michigan was an example. We had a lot of business in West Michigan before we made the Macatawa purchase. I think we're competitive in some of the other Midwestern cities where we don't yet have a footprint. We'll continue to do that. When it makes sense, we'll add physical footprint, which kind of is the next leg of the stool. We've done that in Rockford. We did that in West Michigan. There are other markets we can do that in coming up.

Speaker #3: We had a lot of business in West Michigan before we made the Macatawa purchase. And I think we're competitive in some of the other Midwestern cities where we don't yet have a footprint.

Speaker #3: And we'll continue to do that. And when it makes sense, we'll add physical footprint, which is kind of the next leg of the stool.

Speaker #3: So we've done that in Rockford. We did that in West Michigan. There are other markets we can do that in, coming up.

Speaker #8: Gotcha. That's helpful. Thank you.

Ben Gerlinger: Got you. That's helpful. Thank you.

Operator: Thank you. Our next question comes from the line of Brendan Nosal of Stephens Inc. Your line is open, Brendan.

Operator: Thank you. Our next question comes from the line of Brandon Run of Stephens Inc. Your line is open, Brandon.

Speaker #4: Thank you. Our next question comes from the line of Brandon Rudd of Stephens Inc. Your line is open, Brandon.

Speaker #5: Good morning. So, most of my questions have already been answered. Maybe just one more on the expenses. I know there's a step-up in software and equipment in the quarter.

Brendan Nosal: Morning. Most of my questions have already been answered. Maybe just one more on the expenses. I noticed the step-up in software and equipment in the quarter. Is that related to the digital banking investments that you mentioned, Tim? Is that a good run rate, that $39 million to look at on a go-forward basis?

Brandon Rud: Morning. Most of my questions have already been answered. Maybe just one more on the expenses. I noticed the step-up in software and equipment in the quarter. Is that related to the digital banking investments that you mentioned, Tim? Is that a good run rate, that $39 million to look at on a go-forward basis?

Speaker #5: Is that related to the digital banking investments that you mentioned, Tim? And is that a good run rate—that $39 million—to look at on a go-forward basis?

Speaker #3: Yeah, we're investing in technology, as all institutions are. Whether it's cybersecurity or customer feature functionality, that's a line where you're likely to see more growth than others.

Tim Crane: Yeah. We're investing in technology as all institutions are. Whether it's cybersecurity or whether it's customer feature functionality, that's a line where you're likely to see more growth than others. I think you should expect some upward trajectory in that expense. It's really across the board. Better data management, the early phases of AI, the customer feature functionality we're delivering, cyber. It's sort of all sorts of stuff in that bucket.

Speaker #3: And so I think you should expect some upward trajectory in that expense, but it's really across the board: better data management, the early phases of AI, the customer feature functionality we're delivering, and cyber.

Speaker #3: So it's sort of all sorts of stuff in that bucket.

Speaker #5: Okay, perfect. And maybe just one on credit. I noticed on the bottom left of page 18, there was a bit of a step-up in the allowance on the commercial portfolio.

Brendan Nosal: Okay, perfect. Maybe just one on credit. I noticed on the bottom left of page 18, there was a bit of a step-up in the allowance on the commercial portfolio. I'm just wondering, is that a change in macro assumptions? Or is there a particular loan category that drove that increase?

Brandon Rud: Okay, perfect. Maybe just one on credit. I noticed on the bottom left of page 18, there was a bit of a step-up in the allowance on the commercial portfolio. I'm just wondering, is that a change in macro assumptions? Or is there a particular loan category that drove that increase?

Speaker #5: I'm just wondering, is that a change in macro assumptions, or is there a particular loan category that drove that increase?

David Dykstra: No, it'd be the more macro assumptions. There's nothing specific out there that's driving any change in those factors.

Speaker #8: No, it would be the more macro assumptions. There's nothing specific out there that's driving any change in those factors.

Speaker #5: Okay, perfect. Thank you very much.

Brendan Nosal: Okay, perfect. Thank you very much.

Brandon Rud: Okay, perfect. Thank you very much.

Speaker #4: Thank you. Our next question comes from the line of Daniel Tamayo of Raymond James. Your line is open, Daniel.

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

Speaker #5: Thank you. Good morning, guys. Maybe just taking a step back here. So, just kind of looking at your history, it looks like you have a long history of your efficiency ratio really trending down.

Daniel Tamayo: Thank you. Good morning, guys. Maybe just taking a step back here. Just kind of looking at your history here. It looks like long history of efficiency ratio really trending down, and you're at a point now where I'm not sure you've been before in the kind of low to mid-50s. You talked about positive operating leverage this year, just curious your thoughts with the margin relatively stable in this range, your ability to continue to drive that operating leverage going forward or where you think it might start to stabilize.

Speaker #5: And you're at a point now where I'm not sure you've been before—in the kind of low to mid-50s. You talked about positive operating leverage this year.

Speaker #5: But just curious—your thoughts: with the margin relatively stable in this range, is your ability to continue to drive that operating leverage going forward intact? Or where do you think it might start to stabilize?

Speaker #3: Yeah, I mean, we're targeting continued operating leverage. And as we start to work on 2027, that'll be part of our target as well. We hope there are scale benefits with some of the investments that we're making, and that's kind of built into the expectations for our teams.

Tim Crane: Yeah. We're targeting continued operating leverage. As we start to work on 2027, that'll be part of our target as well. We hope there are scale benefits with some of the investments that we're making. Kind of built into the expectations for our teams. We're going to add clients and we're going to continue to win business in kind of a well-positioned market. That would be our expectation.

Speaker #3: We're going to add clients, and we're going to continue to win business in what is kind of a well-positioned market. That would be our expectation.

Speaker #5: Thanks, Tim. And then maybe one qualitative one for you also, just on the M&A environment. I appreciate your commentary on, you're at the exploratory stages.

Daniel Tamayo: Thanks, Tim. Then maybe one qualitative one for you also just on the M&A environment. I appreciate your commentary on you're at the exploratory stages, you guys are kind of well-known as a buyer in the region. Just curious your view on, given the run-up we've had in stock prices, what that's done to seller expectations. Any conversations you've had?

Speaker #5: But you guys are kind of well-known as a buyer in the region. Just curious—your view on, given the run-up we've had in stock prices, what that's done to seller expectations and in conversations you've had?

Tim Crane: Well, I can't speak to any specific conversations, but in some way, I think it's helped. People are always cautious about exploring alternatives when their stock price is perceived to be low. As long as our performance and our securities move up relative to others, there's not a huge change. It's just that somebody feels like they're getting a better price. The math is the math, and I know there are a lot of social and emotional factors that go into any transaction, but I think in general, it's probably a little helpful.

Speaker #3: Well, I can't speak to any specific conversations. But in some ways, I think it's helped. People are always cautious about exploring alternatives when their stock price is perceived to be low.

Speaker #3: And so, as long as our performance and our securities move up relative to others, there's not a huge change. It's just that somebody feels like they're getting a better price.

Speaker #3: So the math is the math. And I know there are a lot of social and emotional factors that go into any transaction. But I think, in general, it's probably a little helpful.

Speaker #5: Okay, great. Well, thanks for answering my questions.

Daniel Tamayo: Okay, great. Well, thanks for answering my questions.

Speaker #3: You bet.

Tim Crane: You bet.

Speaker #4: Thank you. I would now like to turn the conference back to Tim Crane for closing remarks. Sir.

Operator: Thank you. I would now like to turn the conference back to Tim Crane for closing remarks. Sir.

Speaker #3: Yeah. Thanks, Latif. And for everybody, good questions. We certainly understand why you ask what you do, and we appreciate your interest. I would leave you with this.

Tim Crane: Yeah. Thanks, Lateef. For everybody, good questions. We certainly understand why you ask what you do, and we appreciate your interest. I would leave you with this. This was a really strong quarter, once again, creating value for our shareholders. We continue to deliver on our three priorities, which keeps our team focused on delivering strong results. Over the last several quarters, we've consistently outperformed peers without compromising our credit standards or our commitment to clients and our communities. We believe we're well-positioned for H2 of the year and quite frankly, well-positioned for time periods beyond that. I hope everybody's enjoying the summer, and thank you for joining us and for your interest today. Have a great day.

Speaker #3: This was a really strong quarter, once again creating value for our shareholders. We continue to deliver on our three priorities, which keeps our team focused on delivering strong results.

Speaker #3: And over the last several quarters, we've consistently outperformed peers without compromising our credit standards or our commitment to clients in our communities. We believe we're well positioned for the second half of the year.

Speaker #3: And quite frankly, we are well-positioned for time periods beyond that. So, I hope everybody's enjoying the summer. Thank you for joining us and for your interest today.

Speaker #3: Have a great day.

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

Q2 2026 Wintrust Financial Corp Earnings Call

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