Earnings Call Transcript - WTFC Q4 2025

Operator, Operator

Welcome to Wintrust Financial Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. Tim Crane, President and Chief Executive Officer, will review the results, along with David Dykstra, Vice Chairman and Chief Operating Officer, and Richard Murphy, Vice Chairman and Chief Lending Officer. They may refer to both the earnings press release and the earnings release presentation during their reviews. Throughout today's call, Wintrust management may make statements that reflect projections, expectations, beliefs, or similar forward-looking statements. Actual results may differ significantly from those anticipated or projected in any forward-looking statements. The company's forward-looking assumptions that could cause actual results to vary are detailed in our earnings press release, as well as in the company's most recent Form 10-K and any subsequent filings with the SEC. Additionally, 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. This conference call is being recorded. I will now turn the call over to Mr. Tim Crane.

Timothy Crane, CEO

Good morning. And for those of you we haven't seen or talked to recently, happy New Year. Thank you for joining us for the Wintrust Fourth Quarter and Full Year '25 Earnings Call. In addition to the introductions Latif made, I'm joined by our Chief Financial Officer, Dave Stoehr; and Chief Legal Officer, Kate Boege. As we usually do on these calls, I'll begin the morning with a few highlights. Dave Dykstra will review the financial results. Rich will speak to loan activity and credit performance, and I will return with some summary comments on 2025 and early thoughts on 2026. As always, following our remarks, we'll be happy to take questions. With that, Wintrust delivered solid performance in 2025. The results reflect our focus on generating strategic and disciplined growth. I'm proud to say our efforts drove record net income for the year. For full year 2025, we reported net income of $824 million, up 19% from $695 million in 2024. Earnings per diluted share was $11.40, up from $10.31 in 2024 and tangible book value increased by over $13 to nearly $89 a share. Total assets at year-end were just over $71 billion. Our fourth quarter was also strong. Net income was $223 million, also a record, up 3% or $7 million from the prior quarter. Solid loan and deposit growth during the quarter and a slightly improved margin led to continued growth in net interest income. Credit quality remains solid and overall noninterest expenses were well managed. When I look back over the year, I want to highlight three things that I am particularly pleased by. First, we delivered disciplined growth at a level above most of our peers with a stable margin. As we've discussed, we are adding new relationships, consumer and commercial that we expect will be with us for years to come as we continue to build the franchise. In fact, in 2025, our steady and consistent approach moved us into third position in deposit market share in the Chicago area, and we showed strong gains in both Wisconsin and West Michigan. Second, we achieved solid operating leverage. On a percentage basis, net revenue was up 11.2%, 340 basis points higher than our noninterest expense. We did this while investing in the tools, technology, and people to both run a bank our size today and to build the foundation for future growth. Lastly, we saw improved Net Promoter Scores that were already best-in-class in both retail and commercial banking in 2025 as our focus on exceptional customer service continues to differentiate us from many of our peers. Before I turn this over to Dave, I want to call your attention to the charts we include in our press release at the end of each year, showing our 10-year performance on key metrics. What you will see here is the continued consistent performance that we stress with our teams. I'm very proud of these results and how they translate into real value for our shareholders. Now let me turn this over to Dave.

David Dykstra, CFO

Great. Thanks, Tim. We finished off 2025 with another quarter of strong loan and deposit growth with both falling within our stated range of mid- to high single digits growth. Specifically, the deposit growth was right at $1 billion during the quarter, representing a 7% increase over the prior quarter on an annualized basis. This deposit growth helped to fund continued strong fourth quarter loan growth of a similar $1.0 billion amount that represented 8% growth on an annualized basis. On a full year basis, loans and deposits grew 11% and 10%, respectively. Turning to income statement results. This was a very solid operating quarter for Wintrust producing a record level of quarterly net income. Speaking to the major components of the income statement, our net interest income also reached another high record quarterly amount, a $1.1 billion increase in the average earning assets as well as a 4 basis point increase in the net interest margin drove the $16.9 million increase in net interest income over the prior quarter. The net interest margin ranged from 3.50% to 3.56% during the four quarters of 2025 and the 3.54% net interest margin for the fourth quarter fell squarely in that range. I would note that period-end loans were once again higher than the average loans for the fourth quarter, giving us a good start on achieving higher average earning assets in the first quarter of 2026. The provision for credit losses was relatively consistent with prior quarters remaining in the $20 million to $30 million range experienced in all quarterly periods of 2025, as the overall credit environment and asset quality has remained relatively stable. Regarding other noninterest income and other noninterest expenses, noninterest income totaled $130.4 million in the fourth quarter similar to the $130.8 million recorded in the prior quarter. The very slight decline was impacted by lower security gains. But overall, other than the continued softness in the mortgage revenue, it was a solid outcome for noninterest income for the fourth quarter. As the noninterest expense categories, noninterest expenses totaled $384.5 million in the fourth quarter, which represented a slight increase from the $380 million recorded in the prior quarter. Increases in employees' health insurance claims, OREO expenses, travel and entertainment and various other small expense increases were offset somewhat by seasonally lower marketing costs. Overall, expenses were well controlled and within the expected range we discussed on our last call. Additionally, both the quarterly net overhead ratio and the efficiency ratio remained relatively stable during the quarter from the prior quarter. In summary, I'll reiterate what I said on our last call, with this being another very solid quarter. The company accomplished good loan and deposit growth, a stable net interest margin with a steady outlook, a record level of net interest income, and a continued low level of nonperforming assets. Our team delivered net income that was a record for any full fiscal year in the company's history, and we have a positive outlook for continued growth in assets, revenues and earnings. So with that, I'll conclude my comments and turn it over to Rich Murphy to discuss credit.

Richard Murphy, Vice Chairman and Chief Lending Officer

Thanks, Dave. As Tim and Dave both noted, credit performance continued to be very solid in the fourth quarter. As detailed on Slide 7, loan growth of approximately $1 billion came from a number of different categories. Commercial real estate loans grew by $322 million. Our mortgage warehouse team grew their outstanding by $310 million. The Wintrust Life Finance team had another strong quarter and grew by $265 million. And our leasing and residential mortgage groups also had a very solid quarter. We believe loan growth for the first quarter, while typically our slowest quarter, will continue to be solid for a number of reasons. Our core C&I and CRE pipelines remain consistent, and we continue to benefit from our unique market positioning in our core markets of Chicagoland, Wisconsin, West Michigan, and Northwest Indiana. In addition, we continue to have very good momentum in a number of our lending verticals, including mortgage warehouse, leasing, and premium finance. From a credit quality perspective, as detailed on Slide 15, we continue to see strong credit performance across the portfolio. This can be seen in a number of metrics. Nonperforming loans increased slightly from $162.6 million or 31 basis points to $185.8 million or 35 basis points, but remained at a very manageable level and in line with levels we had seen in the first half of the year. Charge-offs for the quarter were 17 basis points, down from 19 basis points in the prior quarter. We continue to believe the level of NPLs and charge-offs in the fourth quarter reflects a stable credit environment as evidenced by the chart of historical nonperforming asset levels on Slide 16 and the consistent level in our special mention and substandard loans on Slide 15. This quarter is another example of our commitment to identify problems early and charge them down where appropriate. Our goal, as always, is to stay ahead of any credit challenges. As noted in our last few earnings calls, we continue to be highly focused on our exposure to commercial real estate loans, which comprise roughly one-fourth of our total portfolio. As detailed on Slide 19, we continue to see signs of stabilization during the fourth quarter as CRE NPLs remained at a very low level, decreasing from 0.21% to 0.18%. And CRE charge-offs continue to remain at historically low levels. On Slide 20, we continue to provide enhanced detail on our CRE office exposure. Currently, this portfolio remained steady at $1.7 billion or 12.1% of our total CRE portfolio and only 3.2% of our total loan portfolio. We monitor this portfolio very closely, and we will continue to perform our deep dive analysis on a quarterly basis. The most recent deep dive analysis showed very consistent results when compared to prior quarters. Finally, as we have discussed on previous calls, our teams stay in close contact with our customers, and those conversations continue to reflect a measured optimism. With solid visibility into our loan pipelines and continued discipline around our portfolio, we would expect loan growth in 2026 to be within our guidance, and portfolio performance in line with our historical experience. That concludes my comments on credit, and I'll turn it back to Tim.

Timothy Crane, CEO

Great. Thank you, Rich. Again, really good financial results in 2025. Our primary objective for 2026 is to continue to deliver solid and consistent financial performance. We expect our teams will continue to provide a differentiated level of service to drive organic growth. At the same time, we will continue to invest in the tools, technology, and people needed to support that growth. Our targets for 2026 are straightforward. We expect mid- to high single-digit loan growth funded by a similar level of deposit growth as we continue to expand share. Given the current interest rate environment and even with a few rate changes in either direction, we expect the margin to remain relatively stable around 3.5%. We plan to deliver positive operating leverage while continuing to make the important investments that position us for the future. We expect to see improved noninterest income in our wealth management and service-based fee income businesses and are hopeful for the mortgage market to pick up. We remain focused on our Midwestern footprint, and we'll continue to make the most of opportunities across the United States for our specialty businesses where our expertise and unique solutions give us a competitive advantage. Our pipelines remain solid. And although we have strong momentum going into the year, we are mindful of the typical seasonality that can make our quarterly growth uneven, particularly in the first half of the year. With this in mind, I feel good about our business heading into 2026. Let me end by saying that we could not generate the results that we do without the dedication and commitment of our Wintrust team. We have the best people in the business, and I want to thank each of our colleagues for all that you do to ensure we deliver results for our clients and our shareholders while we work to drive sustainable growth in the communities we serve. Thank you for joining us this morning, and let me turn it back to Latif for your questions.

Operator, Operator

Our first question comes from Jon Arfstrom of RBC Capital Markets.

Jon Arfstrom, Analyst

Can you discuss loan growth more in-depth? What factors contribute to achieving mid-single digits versus high single digits? It seems like you're starting the year strong, even though you mentioned that the first and second quarters can be softer. It appears you have good momentum going into the year. Could you elaborate on that for us?

Timothy Crane, CEO

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

Richard Murphy, Vice Chairman and Chief Lending Officer

Yes, you answered that well. The first quarter last year was $653 million, which is a decline of about 6%. We were able to recover in the second quarter, as you know how our first insurance business tends to gain momentum at that time. The latter half of the year performed really well due to some strong market positioning in our commercial and industrial and commercial real estate sectors, which we are optimistic about. Our conversations with customers indicate they are confident in the current economic situation, and there's enough stability that encourages them to invest. We had notable success in various sectors in the fourth quarter, especially with mortgage warehouse lines. If the mortgage side of the business picks up, we expect to see continued progress in the first half of the year. Leasing and residential mortgages also had a strong quarter. Overall, there are many positive indicators at the moment. However, the first quarter dip in the premium finance business is something we anticipate will typically reverse in the second quarter.

Jon Arfstrom, Analyst

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

David Dykstra, CFO

I believe we're looking at a continuation of our previous trends. We're targeting mid- to high single-digit revenue growth, around 7.5% to 8%, based on our fourth quarter run rate. We anticipate expenses also following the fourth quarter run rate, expected to be in the 4% to 5% range. This should allow us to achieve positive operating leverage. If revenue comes in at the lower end of our forecast, we have taken measures to tighten expenses. Our aim is to maintain positive operating expenses while investing in the business to support growth and expand our franchise. As a reminder, marketing and sponsorship costs are higher in the second and third quarters, while the first and fourth quarters tend to be lower. Health insurance claims are slightly increasing in the current market, which might push them up a bit. However, this is already factored into our expected growth of 4% to 5% based on the fourth quarter run rate, which will help us achieve operating leverage. If loan growth were to decline unexpectedly, which is not anticipated at this time, we would adjust expenses accordingly, but we remain committed to investing in the business to foster growth.

Timothy Crane, CEO

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

Operator, Operator

Our next question comes from the line of Nathan Race of Piper Sandler.

Nathan Race, Analyst

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

Timothy Crane, CEO

Yes, absolutely, Nate. There are two points to highlight. First, our team effectively shifted deposits in line with the Federal Reserve's movements, which we had anticipated, and this actually materialized in the fourth quarter. Additionally, we observed a positive trend in DDA deposits throughout the quarter. It can be somewhat variable at year-end as companies prepare for their reporting, but we’re still seeing solid growth in our commercial deposits and the treasury services they utilize. We'll keep focusing on managing that mix, even though it may fluctuate. Overall, we were very satisfied with how we managed deposit costs during the quarter.

Nathan Race, Analyst

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

Timothy Crane, CEO

Yes. I think there's probably a minor benefit. Again, I would emphasize minor on the CD book rolling as we continue into 2026. But the noninterest or the interest-bearing deposit growth supports our loan growth. And as we continue to grow loans at a pretty healthy level, we've stated that we would try to continue to fund that with new deposits. And our deposit costs can be a little bit higher than some of our peers. We're fine with that as we add clients to the bank that will be with us for a long time.

Operator, Operator

Our next question comes from the line of Christopher McGratty of KBW.

Christopher McGratty, Analyst

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

Timothy Crane, CEO

We would like the mortgage business to be stronger. We believe we've effectively reduced expenses associated with that business, so it isn't hurting us at these relatively low volume levels. While we always desire more commercial activity, we remain disciplined in choosing relationships over transactional activity. Occasionally, we've noticed some of our competitors pursuing loan growth, leading to increased transactional activity and unusual pricing. However, we believe we are well positioned in the market. There are very few local institutions near us, which we see as an advantage. Overall, we feel we are in a good position.

Christopher McGratty, Analyst

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

Timothy Crane, CEO

Yes, Chris, you're right. I mean we're aiming for organic growth, and that would be our plan. If we get an opportunity to do an acquisition, we think we're reasonably good at acquisitions, at least the smaller ones that we've done. Conversations continue. There's a little bit of fits and starts, but nothing that's worth talking about right now. And our business plan for 2026 is based on growing our business organically.

Operator, Operator

Our next question comes from the line of Brendan Nosal of Hovde Group.

Brendan Nosal, Analyst

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

David Dykstra, CFO

I think, as we previously discussed, if we achieve mid- to high single-digit growth, we're likely to see our capital growing at about 10 basis points per quarter, give or take. We have been maintaining that trend. Our primary focus will continue to be on organic growth and gauging its strength. If our growth rate exceeds 10.5% and we lack attractive acquisition opportunities while still seeing mid- to high single-digit organic growth, our capital would keep increasing. In that scenario, we might consider share buybacks and increasing our dividends. Typically, our approach will prioritize organic growth, followed by reasonably priced smaller acquisitions as a second option, and then buybacks. Just as a point of reference, we have an authorized buyback plan exceeding $200 million that we could utilize in the future if needed. For now, we are allowing our capital to grow a bit while we assess organic growth opportunities, and we'll decide on the next steps in a couple of quarters.

Brendan Nosal, Analyst

Okay. Okay. That's helpful. One more for me, just pivoting to credit and specifically the reserve. I think if I look back over the past two years, you've been gradually saving a couple of basis points here and there off reserve ratios, whether it's the stated reserve to loan or the ACL to the core loan portfolio. I guess that a lot of that is formulaic and driven by outside factors. So just kind of take us through the thought process on gradually bringing down reserves? And where do you see coverage ratios trending across 2026?

David Dykstra, CFO

Well, we don't plan whether to build reserves or take reserves away, the CECL process and the macroeconomic factors and the mix of the portfolio and the process we go through to determine reserves really determines the level of those reserves. So if the economic forecast gets much worse for some reason, if the economy gets worse, then you're going to see that coverage ratio go up. What we saw sort of during the year is that the economic forecast, generally, we're getting better. And so the model just spits out the results. But our credit, as we talked about, has been very good. Our criticized and classified levels are very low. Our NPAs are very low. Our charge-offs are low. And so we had economic conditions or even some commercial real estate price indexes got better early in the year and the like. And so we really do a fairly thorough process of using economic data, digging down with our teams on the loan side to build what that reserve should be. So we don't go into it with some preconceived notion that we should build reserves or release reserves. We look at all the factors and record the provision accordingly. So I don't want to give you an outlook as to whether you're going to build or release because I don't know what the economic factors are going to be in the future. And if you remember, CECL is a forward-looking concept, not a backward-looking concept.

Operator, Operator

Our next question comes from the line of Jeff Rulis of D.A. Davidson.

Jeff Rulis, Analyst

Tim, you mentioned that the macro environment is looking quite favorable or optimistic for your customers. I'd like to discuss the competitive landscape. Some of your larger competitors in the Midwest are engaged in deal activity down in the Southeast and Texas. Could you share if a part of your growth or market share gains comes from competitors focusing on other regions?

Timothy Crane, CEO

Sure. We've always benefited from disruption and distraction. We believe our position in the Midwest is an attractive one. The markets we compete in are actually very good, with a lot of density and wealth. When others choose to focus elsewhere, it’s beneficial for us. We compete with all the big banks daily, along with some Chicago-based competitors and, in certain markets, credit unions. We believe our differentiation comes from our service and the people in the company, and we will continue to emphasize that.

Jeff Rulis, Analyst

And I guess, Tim, just to follow up, you've surpassed even the high single-digit expectations with 11% loan growth. I'm trying to consider the timing; do you see 2026 as presenting similar opportunities for disruption as you had in the previous year? Is there any change to that outlook? Are you noticing shifts in focus among competitors in the Midwest, suggesting a more competitive year ahead?

Timothy Crane, CEO

No, it's difficult to say. There are definitely various competitors experiencing fits and starts, and some companies are looking to open more locations in Chicago while others are trying to adjust their teams. This isn't anything particularly new. Regarding loan growth in comparison to the last few years, we've benefited somewhat from rising premiums in premium finance, along with the bank increasing our production units. However, I believe there's a leveling off in the premium environment for insurance companies. People often use terms like soft and hard to describe it, but I think the emphasis is now on us to grow loans rather than relying on market support.

Jeff Rulis, Analyst

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

Richard Murphy, Vice Chairman and Chief Lending Officer

No, not really. It's more episodic in nature, and we've mentioned this before where we see certain issues as one-off problems that we address and move on from. When I assess credit quality in the portfolio, we concentrate on the special mention and substandard figures, which have remained rather stable. While there may be occasional disruptions, it's our responsibility to resolve them. For this quarter, we would describe it as more episodic.

Jeff Rulis, Analyst

And Rich, as we approach the one-year mark from when the tariffs were lifted, what is your perception of customer sentiment? Is there a sense of more ease? The threat is still present, but do you feel customers are more comfortable now compared to nine months ago?

Richard Murphy, Vice Chairman and Chief Lending Officer

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

Operator, Operator

Our next question comes from the line of David Long of Raymond James.

David Long, Analyst

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

Timothy Crane, CEO

Well, I mean we're in Southeast Wisconsin and West Michigan now, which you know, David. I mean, we would be opportunistic in other Midwest geographies that we don't cover today, but that would be on a disciplined basis. And where we haven't been able to acquire, we've, in some cases, opened branches, and we've been effective in doing so. We've talked in the past about Rockford, and we've got some branches opening in Northwest Indiana this coming year. So we'll take the opportunities as they come to us. But if we need to go to other geographies organically, we think we've proven our ability to do that.

Operator, Operator

Our next question comes from the line of Terence McEvoy of Stephens Inc.

Terence McEvoy, Analyst

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

Timothy Crane, CEO

Yes. The charter question comes up periodically and we currently have 16 for those of you that are following along. We believe they continue to be a benefit for us. They keep us closer to the market than many of our competitors. We've centralized most of the infrastructure and expense that goes along with the charters. And so it's really more of a marketing and market function that we believe is valuable to us. And if you look at the communities in which we operate in many of those communities, we're the number one or number two market share in very attractive markets. That's not a benefit we want to give up at this point. So we watch it carefully. The expense is not trajectory changing. It's a structure that we believe we operate well and we'll continue to evaluate it as we go. But for the time being, we like it. There are clearly benefits. Deposit insurance is one of them; our MaxSafe product, obviously gives us the ability to provide customers more insurance than they might otherwise get. There are other benefits. And as you would expect, there are some other trade-offs, but the net balance for us remains positive.

Terence McEvoy, Analyst

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

Timothy Crane, CEO

Obviously, it depends on what happens to the mortgage market. We've been successful in growing that business in a stable mortgage market because of the expertise our team brings and the job our folks do from an operational standpoint. But for us, that's a zero loss business with very attractive dynamics. We think we're very efficient. It will move a little bit with the mortgage volume over time. And if the mortgage market gets stronger, as we've talked about, it's a benefit to us both in terms of our core business and the warehouse business.

Richard Murphy, Vice Chairman and Chief Lending Officer

I think Tim makes a great point. The market is performing well, and they have successfully introduced new names, which brings in volume and generates fee income along with attractive deposits. It's been a positive story despite some potential volatility in overall rates. We are pleased with our current position in that area.

David Dykstra, CFO

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

Operator, Operator

Our next question comes from the line of Casey Haire of Autonomous Research.

Casey Haire, Analyst

Dave, I wanted to clarify your comments regarding the operating leverage dynamics. I believe you mentioned that you anticipate mid- to high single-digit revenue growth for '25, with expenses increasing by mid- to high 4% to 5% compared to the fourth quarter run rate. There's some excitement about your indication of mid- to high single-digit revenue growth relative to the fourth quarter run rate. I just wanted to confirm that.

David Dykstra, CFO

Yes. We're looking at our past acquisitions and organic growth. We typically provide guidance on the fourth quarter run rate compared to the full year. So when we discuss forward growth, we're referring to the fourth quarter run rate for both aspects.

Casey Haire, Analyst

Okay. I have your interest-bearing deposit beta cycle to date at around 57%. What are your updated thoughts on where that might trend in 2026?

Timothy Crane, CEO

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

Casey Haire, Analyst

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

David Dykstra, CFO

No. Our guidance fully contemplates those hedging programs running off, but we would expect depending on market conditions to backfill that and just probably do some forward starts and fill in the gaps going forward as they mature. But we think given our current position, our current swaps in place and our growth projections, is that we will hold the margin in the 3.50s. And as Tim said, if rates go up two or three times or down two or three times, we still think we're there. So we think we're very neutral for a full year with the margin.

Operator, Operator

Next question comes from the line of David Chiaverini of Jefferies.

David Chiaverini, Analyst

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

David Dykstra, CFO

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

David Chiaverini, Analyst

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

David Dykstra, CFO

We've always been optimistic. For the past two years, I've hoped for a strong spring buying season, which hasn't happened, but we remain hopeful. A supply shortage still exists. In the fourth quarter, our business mix was fairly balanced between purchases and refinances, unlike the earlier three quarters where it was primarily purchases. As interest rates have decreased, we've noticed a slight increase in refinances despite a slow winter buying season. Looking at our service portfolio, which is substantial, we estimate that at current rates in the low 6s, about 10% to 15% of that portfolio is eligible for refinancing. If rates fall by another 25 to 50 basis points, we could see around a quarter of the portfolio becoming refiable. We believe that if mortgage rates drop within that range, we could experience some increase. However, tenure has been rising, and while I can't predict interest rates, we're optimistic that if mortgage rates stay where they are or dip slightly into '26, there could be some growth. We see potential upside and remain hopeful, but ultimately, we don’t have control over mortgage rates.

Timothy Crane, CEO

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

Operator, Operator

Our next question comes from the line of Ben Gerlinger of Citi.

Benjamin Gerlinger, Analyst

I just wanted to double-check and refine my understanding here. I apologize for my narrow focus, but regarding the property casualty insurance market, I agree there are signs of softening rather than strengthening. However, it seems that year-over-year pricing is somewhat limited. So, is it reasonable to expect that the second quarter will still show good growth, but perhaps not as exceptional as what we've seen in the past? I'm trying to clarify the growth outlook for the first half of the year.

Timothy Crane, CEO

Yes. I think the only point we were trying to make is that for the last couple of years, we've had the benefit of premiums going up. That may not be the case right now. We don't think they're working against us. But we still expect a strong second quarter. It's a seasonal component of the Property & Casualty premium finance business, and we would expect to have a good second quarter.

Benjamin Gerlinger, Analyst

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

Timothy Crane, CEO

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

Operator, Operator

Our next question comes from the line of Jared Shaw of Barclays.

Jared Shaw, Analyst

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

Timothy Crane, CEO

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

Jared Shaw, Analyst

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

Richard Murphy, Vice Chairman and Chief Lending Officer

Yes, I would say that Chicago hasn't been a significant construction market. We've observed some activity, but I believe there is more potential for growth. Multifamily developments in Chicago, for example, remain quite robust. Some other markets may be facing challenges due to oversupply. Overall, I feel optimistic about the level of construction activity for the upcoming year.

Operator, Operator

Our next question comes from the line of Sun Young Lee of TD Cowen.

Sun Young Lee, Analyst

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

Timothy Crane, CEO

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

Sun Young Lee, Analyst

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

Timothy Crane, CEO

Well, we've talked about competitive pressures largely from folks that maybe haven't grown as quickly as we have and kind of desire to do that. And so I think there still is a fairly competitive environment for fully funded loans. But some of that's transaction-based, and we're really much more focused on relationship-based arrangements. If the competitive environment change dramatically, you could get some pressure on the margin. Obviously, the first quarter with a couple of fewer days has a math impact on the margin. But we're actually pretty neutral almost independent of rate changes and given the visibility to the competitive environment, that would be the case there, too.

Operator, Operator

Our next question comes from the line of Bill Hebel of 22V Research.

Bill Hebel, Analyst

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

David Dykstra, CFO

We haven't discussed the roll-off yields much. Our exposure to commercial and commercial real estate fixed asset repricing is minimal, as most of it stems from the premium finance portfolios. These have a one-year fixed term, with repricing happening annually. Therefore, it requires a full year for that portfolio to adjust. Typically, this portfolio is priced at the 12-month CMT plus 200 basis points. By examining the 12-month CMT from a year ago and comparing it to current rates, you can estimate the impact. Although commercial premium finance isn't directly tied to the prime rate, it generally correlates well with it, as these are typically 9-month fixed-rate loans with monthly payments. They usually roll over after about 9 to 10 months. Looking back at the prime rate from 9 to 12 months ago and comparing it to the current rate should give you a sense of the repricing. Additionally, the repricing impact on the commercial portfolio related to securities has very little cash flow, resulting in only minor effects.

Operator, Operator

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

Timothy Crane, CEO

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

Operator, Operator

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