• Net Income: $170 million for the third quarter; $510 million for the first three quarters of 2024.
• Loan Growth: $2.4 billion total; $1.3 billion from Macatawa acquisition, $1.1 billion organically.
• Deposit Growth: $3.4 billion total; $2.3 billion from Macatawa acquisition, $1.1 billion organically.
• Net Interest Margin: 3.51%, stable compared to the previous quarter.
• Net Interest Income: Record $503 million, up $32 million from the second quarter.
• Provision for Credit Losses: $22.3 million, including a $15.5 million one-time provision related to Macatawa acquisition.
• Non-Interest Income: $113.1 million, down approximately $8 million from the prior quarter.
• Non-Interest Expenses: $360.7 million, up $20.3 million from the second quarter.
• Total Assets: Increased by $4 billion to $63.8 billion.
• Non-Performing Loans: 38 basis points of total loans, slightly down from the previous quarter.
• Charge-Offs: $26.7 million, down from $30 million in the second quarter.

• Warning! GuruFocus has detected 5 Warning Sign with WTFC.

Release Date: October 22, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Wintrust Financial Corp (NASDAQ:WTFC) reported record net income of just under $510 million for the first three quarters of 2024, indicating strong financial performance.
• The company achieved significant loan growth of $2.4 billion, with $1.1 billion coming from organic growth, showcasing its ability to expand its lending portfolio.
• WTFC successfully increased its deposit base by over $3.4 billion, with $1.1 billion from organic growth, reflecting its strong market presence and customer trust.
• The net interest margin remained stable at 3.51%, contributing to record net interest income of $503 million, demonstrating effective financial management.
• Credit performance was solid, with non-performing loans remaining low and charge-offs decreasing, indicating strong credit discipline and risk management.

Negative Points

• The quarter included a non-recurring day-one provision for credit losses related to the Macatawa Bank acquisition of $15.5 million, impacting overall financial results.
• Unfavorable mortgage servicing rights activity resulted in a negative impact of $11.4 million, highlighting challenges in the mortgage segment.
• Non-interest expenses increased by approximately $20.3 million from the second quarter, driven by acquisition-related costs and higher staffing expenses.
• The mortgage business remains relatively insignificant in terms of financial impact, with muted activity due to fluctuating interest rates.
• There is ongoing pressure on the commercial real estate portfolio, with higher borrowing costs and market forces affecting valuations, particularly in the office category.

Q & A Highlights

Q: Can you elaborate on the loan growth outlook and its drivers, particularly regarding new customers and line utilization? A: Richard Murphy, Vice Chairman and Chief Lending Officer, explained that Wintrust's diversified asset portfolio allows for growth in various areas. The company has seen strong performance in P&C premium finance and core C&I and CRE portfolios, with a robust pipeline of quality mid-market companies. Asset-based lending and leasing have also contributed to growth. Line utilization rates have increased, and while they may not remain high indefinitely, they are expected to continue at current levels for a while.

Q: How have deposit costs trended following the recent rate cut, and how have competitors reacted? A: Timothy Crane, President and CEO, stated that Wintrust's deposit beta was in the mid-60s on the way up and is expected to be similar on the way down. The reduction in deposit costs and loan yields has been about the same, maintaining the spread and margin. Competitors have lowered promotional rates, and Wintrust anticipates further reductions as rates trend down.

Q: What are the plans for leveraging the Macatawa acquisition in Grand Rapids, particularly regarding adding veteran bankers? A: Timothy Crane noted that Macatawa has a strong team, and Wintrust plans to add resources as needed to penetrate the market fully. The company is receiving inquiries in specialty areas like ESOP loans and construction loans, indicating positive early feedback from the market.

Q: Can you provide insights into the credit side, particularly regarding charge-offs in the C&I segment? A: Richard Murphy mentioned that most charge-offs were transportation-related. He also addressed concerns about early delinquencies in the office segment, explaining that these often result from ongoing negotiations with customers to appropriately renew or restructure loans, and he is not overly concerned about them.

Q: What is the expected impact of hedges on the margin going forward? A: Richard Murphy explained that for every 25 basis points reduction in SOFR, Wintrust should benefit by about 2.5 basis points. The third quarter saw a 17-basis-point drag, and future benefits will depend on SOFR movements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.