Wintrust Financial Corporation
Earnings Release
Presentation
Q1 2024
Forward Looking Statements
This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as "intend," "plan," "project," "expect," "anticipate," "believe," "estimate," "contemplate," "possible," "will," "may," "should," "would" and "could." Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management's expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, and which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company's 2023 Annual Report on Form 10-K and in any of the Company's subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company's future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time,the Company's business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices, and management's long-term performance goals, as well as statements relating to the anticipated effects on the Company's financial condition and results of operations from expected developments or events. Actual results could differ materially from those addressed in the forward- looking statements as a result of numerous factors, including the following:
- economic conditions and events that affect the economy, housing prices, the job market and other factors that may adversely affect the Company's liquidity and the performance of its loan portfolios, including an actual or threatened U.S. government debt default or rating downgrade, particularly in the markets in which it operates;
- negative effects suffered by us or our customers resulting from changes in U.S. trade policies;
- the extent of defaults and losses on the Company's loan portfolio, which may require further increases in its allowance for credit losses;
- estimates of fair value of certain of the Company's assets and liabilities, which could change in value significantly from period to period;
- the financial success and economic viability of the borrowers of our commercial loans;
- commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;
- the extent of commercial and consumer delinquencies and declines in real estate values, which may require further increases in the Company's allowance for credit losses;
- inaccurate assumptions in our analytical and forecasting models used to manage our loan portfolio;
- changes in the level and volatility of interest rates, the capital markets and other market indices that may affect, among other things, the Company's liquidity and the value of its assets and liabilities;
- the interest rate environment, including a prolonged period of low interest rates or rising interest rates, either broadly or for some types of instruments, which may affect the Company's net interest income and net interest margin, and which could materially adversely affect the Company's profitability;
- competitive pressures in the financial services business which may affect the pricing of the Company's loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products;
- failure to identify and complete favorable acquisitions in the future or unexpected losses, difficulties or developments related to the Company's recent or future acquisitions;
- unexpected difficulties and losses related to FDIC-assisted acquisitions;
- harm to the Company's reputation;
- any negative perception of the Company's financial strength;
- ability of the Company to raise additional capital on acceptable terms when needed;
- disruption in capital markets, which may lower fair values for the Company's investment portfolio;
- ability of the Company to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations and to manage risks associated therewith;
- failure or breaches of our security systems or infrastructure, or those of third parties;
- security breaches, including denial of service attacks, hacking, social engineering attacks, malware intrusion and similar events or data corruption attempts and identity theft;
- adverse effects on our information technology systems, or those of third parties, resulting from failures, human error or cyberattacks (including ransomware);
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Forward Looking Statements
- adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors;
- increased costs as a result of protecting our customers from the impact of stolen debit card information;
- accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions;
- ability of the Company to attract and retain senior management experienced in the banking and financial services industries, and ability of the Company to effectively manage the transition of the chief executive officer role;
- environmental liability risk associated with lending activities;
- the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation;
- losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith;
- the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank;
- the soundness of other financial institutions and the impact of recent failures of financial institutions, including broader financial institution liquidity risk and concerns;
- the expenses and delayed returns inherent in opening new branches and de novo banks;
- liabilities, potential customer loss or reputational harm related to closings of existing branches;
- examinations and challenges by tax authorities, and any unanticipated impact of the Tax Act;
- changes in accounting standards, rules and interpretations, and the impact on the Company's financial statements;
- the ability of the Company to receive dividends from its subsidiaries;
- the impact of the Company's transition from LIBOR to an alternative benchmark rate for current and future transactions;
- a decrease in the Company's capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;
- legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies;
- changes in laws, regulations, rules, standards and contractual obligations regarding data privacy and cybersecurity;
- a lowering of our credit rating;
- changes in U.S. monetary policy and changes to the Federal Reserve's balance sheet, including changes in response to persistent inflation or otherwise;
- regulatory restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business;
- increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory environment;
- the impact of heightened capital requirements;
- increases in the Company's FDIC insurance premiums, or the collection of special assessments by the FDIC;
- delinquencies or fraud with respect to the Company's premium finance business;
- credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company's premium finance loans;
- the Company's ability to comply with covenants under its credit facility;
- fluctuations in the stock market, which may have an adverse impact on the Company's wealth management business and brokerage operation;
- widespread outages of operational, communication, or other systems, whether internal or provided by third parties, natural or other disasters (including acts of terrorism, armed hostilities and pandemics), and the effects of climate change could have an adverse effect on the Company's financial condition and results of operations, lead to material disruption of the Company's operations or the ability or willingness of clients to access the Company's products and services; and
- the severity, magnitude and duration of the COVID-19 pandemic, including the continued emergence of variant strains, and the direct and indirect impact of such pandemic, as well as responses to the pandemic by the government, businesses and consumers, on the economy, our financial results, operations and personnel, commercial activity and demand across our business and our customers' businesses.
Therefore, there can be no assurances that future actual results will correspond to these forward-looking statements. The reader is cautioned not to place undue reliance on any forward- looking statement made by the Company. Any such statement speaks only as of the date the statement was made or as of such date that may be referenced within the statement. The Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events after the date of the press release and this presentation. Persons are advised, however, to consult further disclosures management makes on related subjects in its reports filed with the Securities and Exchange Commission and in its press releases and presentations.
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Q1 2024 Highlights (Comparative to Q4 2023)
Net Income | Pre-Tax,Pre-Provision1 | Diluted EPS |
$187.3 million | $271.6 million | $2.89 |
+$63.8 million | +$63.5 million | +$1.02 |
Return on Assets
1.35%
+46 bps
Total Assets
ROE | / ROTCE |
(GAAP) | (non-GAAP) |
14.42% | 16.75% |
+449 bps | +502 bps |
Total Loans
Efficiency Ratio
(GAAP) | (non-GAAP) |
55.21% | 54.95% |
-860 bps | -856 bps |
Total Deposits
$57.6 billion | $43.2 billion | $46.5 billion |
+$1.3 billion | +$1.1 billion | +$1.1 billion |
Diversified Balance
Sheet
Stable Margin
Supports Earnings
Consistently Strong
Credit Quality
- Strong deposit growth of $1.1 billion, or 9% annualized, driven by our diversified product offerings
- Robust loan growth of $1.1 billion, or 10% annualized, primarily driven by commercial and residential real estate portfolios along with draws on existing commercial real-estate loan facilities
- Record quarterly net revenue of $605 million driven by the multi-faceted business model with the mortgage banking and wealth management businesses supporting the increase in net revenue
- Q1 2024 net interest margin (non-GAAP) of 3.59% remained within our expected range, decreasing by five basis points from the prior quarter
- NPLs of $148.4 million, or 0.34% of total loans, remain relatively low compared to historical levels and consistent with prior quarters
- Allowance for credit losses on total core loans was 1.51%
1 Pre-tax income, excluding provision for credit losses (non-GAAP) - See non-GAAP reconciliation in the Appendix for all metrics denoted as non-GAAP | 44 |
Earnings Summary
Differentiated, highly diversified and sustainable business model
Record Quarterly Net Income
($ in Millions)
$180.2 | $187.3 | |
$164.2 | ||
$154.8 | ||
1.40% | $123.5 | 1.35% |
1.20% | ||
1.18% | ||
0.89% |
Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | ||
Net Income | ROA | |||||
Diluted EPS Quarterly Trend
$2.80$2.89
$2.38 $2.53
$1.87
Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 |
Diluted EPS
Quarterly Pre-Tax Income, excluding Provision for Credit Losses
($ in Millions)
$266.6 | $271.6 |
$239.9 | $244.8 |
$208.2 |
Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 |
Pre-Tax Income, excluding Provision for Credit Losses (non-GAAP)
Q1 2024 Highlights
- Strong start to the year with record quarterly net income of $187.3 million
- Tangible book value per common share (non-GAAP) increased to $70.40 which is the highest in Company history
- Net gain of RBA division sale of $19.3 million
- Non-interestexpense was negatively impacted by an accrual of $5.2 million for estimated amounts owed as a result of the FDIC special assessment on uninsured deposits in response to certain bank failures occurring in 2023
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Loan Portfolio
Diversified loan portfolio
Robust Loan Growth Coupled with Higher Loan Yield | Diversified Loan Mix (as of 3/31/2024) | |||
($ in Billions) | 7% | |||
Year-over-Year Change | ||||
$3.6B or 9% in Total Loans | $43.2 | 18% | 1% | |
$42.1 | ||||
$39.6 | 6.80% | 16% | ||
6.69% | ||||
5.82% |
31%
27%
3/31/2023 | 12/31/2023 | 3/31/2024 | Commercial | Commercial Real Estate | ||||
Total Loans | Average Total Loan Yield | |||||||
PFR - Property and Casualty Insurance | PFR - Life Insurance | |||||||
Residential Real Estate | All Other Loans | |||||||
Strong Loan Growth Driven by Commercial and Commercial Real Estate
($ in Millions)
$289$121
$671
$18
$43,231
$42,132
12/31/2023 | Commercial | Commercial Real | Residential Real | All Other Loans | 3/31/2024 |
Estate | Estate | 66 | |||
Deposit Portfolio
Enviable core deposit franchise in Chicago and Milwaukee market areas
Deposit Growth Supported by Strong Franchise
($ in Billions) | $46.5 | |
$45.4 | ||
3.32% | 3.48% | |
$42.7 | ||
1.97% |
3/31/2023 | 12/31/2023 | 3/31/2024 |
Total Deposits
Rate Paid on Average Total Interest-Bearing Deposits
Highlights
- Robust first quarter deposit growth totaling $1.1 billion
- Deposit base and liquidity remained strong despite a volatile market
- Year-over-yeardeposit growth of $3.8 billion or 9%
- The quarterly decline in Non-Interest-Bearing was driven by seasonality during the first quarter and deposit migration to Interest- Bearing products
Strong Quarterly Growth Primarily Driven by CDs
($ in Millions)
$1,269 | $126 | $46,449 |
$45,397
$169
$(512)
12/31/2023 | Non-Interest-Bearing | Savings | CDs | Other Interest- | 3/31/2024 |
Bearing1 |
1Includes: NOW, Interest-bearing Demand Deposits, Money Market and deposit balances of the Company's subsidiary banks | 77 |
from brokerage customers of Wintrust Investments, Chicago Deferred Exchange Company, LLC ("CDEC"), trust and asset |
management customers of the Company
Deposit Portfolio
Deposit beta increase driven by competitive deposit pricing to fund quality loan growth
Deposit Beta Moderation Continues in Q1 2024
Fed Funds Upper Target up 525 bps
5.50%
Total Interest-Bearing Deposit Beta 62%
Total Deposit Beta 48%
3.48% | 2.70% | ||||||
0.25% | 0.24% | 0.16% | |||||
12/31/21 | 3/31/2024 | 12/31/21 | 3/31/2024 | 12/31/21 | 3/31/2024 | ||
Fed Target | Total Interest-Bearing Deposit Costs | Total Deposit Costs |
Deposit Mix Shift Into Interest-Bearing due to Interest Rate Environment
($ in Billions) | $42.7 | $46.5 |
13% | 17% | |
12% | 13% | |
32% | 34% | |
4% | 3% | |
13% | ||
12% |
Q1 2024 Highlights
- Total cycle-to-dateinterest-bearing deposit beta was at 62% as of Q1 2024
- No material deposit concentrations
- Non-interest-bearingat 21% of total deposits as of March 31, 2024
26% | 21% | ||||
Q1 2023 | Q1 2024 | ||||
Time Certificates of Deposit | Savings | ||||
Money Market | Wealth Management Deposits | ||||
NOW and Interest-Bearing Demand Deposits | Non-Interest-Bearing | 88 | |||
Capital/Liquidity
Current capital levels are well in excess of regulatory thresholds with the Company's capital levels increasing slightly as strong earnings fund robust growth
Capital Levels Remained Stable Supporting Strong Growth
12.1% | 12.1% | 12.2% | ||
10.1% | 10.3% | 10.3% | ||
9.2% | 9.4% | 9.5% | ||
9.1% | 9.3% | 9.5% | ||
3/31/2023 | 12/31/2023 | 3/31/20241 | ||
CET1 Ratio | Tier 1 Capital Ratio | |||
Total Capital Ratio | Tier 1 Leverage Ratio | |||
Strategically Balanced Investment Portfolio (as of 3/31/2024) | ||||
($ in Billions) | Total Investment | |||
Portfolio |
Yield (Q1 '24): 3.38%
Duration: 6.6 Years
$4.4
$8.3
$3.8
$0.1
Available-for-SaleHeld-to-Maturity Other
CET1 Increased Primarily due to Strong Earnings
CET1 Ratio
0.3% | ||
9.4% | (0.2)% | 9.5% |
12/31/2023 | Retained | Change in | 3/31/20241 |
Earnings and | RWA | ||
other equity | |||
changes |
Q1 2024 Highlights
- The Company's capital levels are well in excess of regulatory thresholds and it is expected that the Company would remain well capitalized in the event the Company were to liquidate its entire investment portfolio
- Investment portfolio size has remained relatively unchanged quarter over quarter at 14% of total assets
1 Ratios for Q1 2024 are estimated | 99 |
Net Interest Margin/Income
Net interest margin within guidance range; coupled with earning asset growth and strong net interest income
Q1 2024 NIM Decreased Primarily Due to Declines in Non-Interest-Bearing Deposit Balances, Deposit Migration to Interest-Bearing Products and Competitive Deposit Pricing to Fund Quality Loan Growth
Q4 '23 NII | Q1 '24 NII | ||
$470.0MM | 0.09% | $464.2MM | |
3.64% | 0.01% | ||
(0.15)% | 3.59% | ||
NIM (non-GAAP) | Earning Asset Yield | Interest-Bearing Liability | Net Free Funds | NIM (non-GAAP) | |||||||||||
Q4 2023 | Rate | Q1 2024 | |||||||||||||
Repositioning the Balance Sheet to Mitigate Interest Rate Risk | |||||||||||||||
Percentage Change in Net Interest Income Over a One-Year Time Horizon | Percentage Change in Net Interest Income Over a One-Year Time Horizon | ||||||||||||||
Falling Rates Scenario | Rising Rates Scenario | ||||||||||||||
- 100 Basis Points | + 100 Basis Points | ||||||||||||||
1.5% | 1.3% | ||||||||||||||
2.4% | |||||||||||||||
1.7% | 1.4% | ||||||||||||||
(1.3)% | |||||||||||||||
0.6% | |||||||||||||||
(2.4)% | |||||||||||||||
3/31/2023 | 3/31/2024 | 3/31/2023 | 3/31/2024 | ||||||||||||
Static1 | Ramp2 | Static1 | Ramp2 | ||||||||||||
-
Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel
change in market rates based upon a static (i.e. no growth or constant) balance sheet
2 Ramp Scenario results incorporate management's projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months
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Wintrust Financial Corporation published this content on 17 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 April 2024 21:44:10 UTC.