Wintrust Financial Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed February 25, 2022. Wintrust is an Illinois-based financial holding company operating community banking, specialty finance and wealth management businesses, principally in the Chicago area, southern Wisconsin and northwest Indiana.
Financial performance and condition
| Metric | FY2021 / Dec. 31, 2021 | Comparable period |
|---|---|---|
| Net revenue | $1.711 billion | $1.644 billion in 2020, up 4% |
| Net income | $466.2 million | $293.0 million in 2020; $355.7 million in 2019 |
| Diluted EPS | $7.58 | $4.68 in 2020 |
| Net interest income / margin | $1.125 billion / 2.57% (2.58% FTE) | $1.040 billion / 2.72% in 2020 |
| Provision for credit losses | $(59.3) million | $214.2 million expense in 2020 |
| Non-interest income / expense | $586.1 million / $1.133 billion | $604.2 million / $1.040 billion in 2020 |
| Total assets | $50.1 billion | $45.1 billion in 2020, up 11% |
| Loans / deposits | $34.8 billion / $42.1 billion | $32.1 billion / $37.1 billion in 2020 |
| Shareholders’ equity | $4.50 billion | $4.12 billion in 2020 |
| Regulatory capital ratios | CET1 8.6%; Tier 1 9.6%; total capital 11.6%; leverage 8.0% | All above applicable well-capitalized standards; capital conservation buffer met |
Profitability improved substantially year over year, with return on average assets of 1.00% versus 0.71% and return on average common equity of 11.27% versus 7.50%. Operating cash flow was $1.131 billion; investing cash flow was $(5.929) billion and financing cash flow was $4.887 billion. Cash and cash equivalents ended the year at $411.2 million. The company separately reported $5.8 billion of overnight liquid funds and interest-bearing bank deposits.
Year-end funding included $42.1 billion of deposits, $1.24 billion of Federal Home Loan Bank advances, $494 million of other borrowings, $437 million of subordinated notes and $254 million of junior subordinated debentures. The company had $80.3 million outstanding under its term facility and no draw on its $100 million revolving facility. Its average loans-to-deposits ratio declined to 84.7% from 88.8%.
Segment net income was $319.1 million for community banking, $109.2 million for specialty finance and $37.9 million for wealth management. Wealth-management assets under administration were approximately $35.5 billion, including $5.3 billion owned by Wintrust and its banks.
Material changes versus 2020
- Net interest income rose 8%, primarily from growth in average earning assets, despite a 15-basis-point margin decline as liquidity balances increased and loan yields fell.
- The negative credit-loss provision reflected improved economic forecasts and loan portfolio characteristics; net charge-offs fell to $21.5 million from $40.3 million. The allowance for loan and unfunded commitment losses declined to $299.7 million from $379.9 million.
- Mortgage banking revenue fell 21% to $273.0 million as sale originations declined to $6.8 billion from $8.0 billion and production margins narrowed. Wealth-management revenue increased 24% to $124.0 million.
- Non-interest expense increased 9%, led by higher salaries and benefits, software and equipment, and marketing costs.
- Loans grew 8% and deposits 13%. Non-performing loans declined to $74.4 million from $127.5 million; non-performing loans were 0.21% of total loans versus 0.40%.
- In November, Wintrust acquired an Allstate agent loan portfolio, acquiring approximately $581.6 million in loans and recording $9.3 million of goodwill. It also sold three Wisconsin branches in April for $81.3 million.
Outlook, commentary and risks
The filing gives no specific numerical earnings or revenue guidance. Management described the company as asset-sensitive and anticipated short-term rate increases; approximately 80% of current loan balances were projected to reprice or mature in 2022. Interest-rate simulations estimated one-year net interest income increases of 12.4% under a static +100-basis-point shock and 6.9% under a gradual +100-basis-point ramp, with declines under rate decreases. These are modeled scenarios, not forecasts or guarantees.
Management cited continued investment in digital capabilities, technology and information security, while aiming to control expenses and grow through lending, specialty finance and selective expansion. COVID-19 uncertainty, inflation, supply-chain disruption and potential rate changes remain relevant. Key exposures include concentrated commercial real estate lending (78.9% of that portfolio in Illinois and Wisconsin), local economic conditions, credit-loss estimation, premium-finance agent/broker fraud and insurer credit quality, mortgage production volatility, cybersecurity and vendor risks, regulation, and the LIBOR transition. COVID-related modified loans totaled $44.3 million at year-end; PPP loans had fallen to $558.3 million from their original $4.8 billion balance.
Other notable items: the 2021 credit-loss release materially benefited earnings; available-for-sale securities had $28.7 million of gross unrealized losses at year-end, which management attributed to market-rate and spread changes and did not consider credit losses. The company reported no goodwill impairment, no potential problem loans under its stated definition, and no going-concern uncertainty. Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- How sensitive future earnings are to the reversal of the unusually large negative provision, and whether credit quality remains sound as forecasts and economic conditions change.
- Whether net interest margin stabilizes or improves as rates rise, and how deposit pricing, loan repricing and modeled asset sensitivity compare with actual results.
- The sustainability of mortgage banking revenue after lower originations and production margins, and the assumptions behind mortgage servicing rights valuations.
- Commercial real estate concentration, especially in the primary markets, and the adequacy of collateral values and credit-loss reserves.
- Liquidity, deposit composition and capital distributions: confirm regulatory capital headroom, subsidiary dividend capacity and compliance with debt-facility covenants.
- Execution and integration of the Allstate agent-loan acquisition, alongside specialty-finance growth and associated third-party risks.