Wintrust Financial Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are primarily with December 31, 2023 and March 31, 2023. Wintrust is a financial holding company operating community banking, specialty finance and wealth management businesses, principally in the Chicago region and surrounding markets, with specialty finance operations nationally and in Canada. Figures below are in U.S. dollars; financial statement amounts are generally in millions.
Key financial results and position
| Metric | Q1 2024 / March 31, 2024 | Comparable period |
|---|---|---|
| Net interest income | $464.2 million | $458.0 million in Q1 2023 |
| Net interest margin | 3.57% GAAP; 3.59% fully taxable-equivalent | 3.81%; 3.83% fully taxable-equivalent in Q1 2023 |
| Provision for credit losses | $21.7 million | $23.0 million in Q1 2023 |
| Non-interest income | $140.6 million | $107.8 million in Q1 2023 |
| Non-interest expense | $333.1 million | $299.2 million in Q1 2023 |
| Income before taxes / income tax expense | $250.0 million / $62.7 million | $243.6 million / $63.4 million in Q1 2023 |
| Net income / diluted EPS | $187.3 million / $2.89 | $180.2 million / $2.80 in Q1 2023 |
| Operating cash flow | $71.1 million | $68.4 million in Q1 2023 |
| Total assets / loans / deposits | $57.6 billion / $43.2 billion / $46.4 billion | Assets $52.9 billion, loans $39.6 billion and deposits $42.7 billion at March 31, 2023 |
| Shareholders’ equity | $5.44 billion | $5.02 billion at March 31, 2023 |
| Capital ratios | Tier 1 leverage 9.4%; Tier 1 10.3%; CET1 9.5%; total capital 12.2% | At or above applicable capital minimums and conservation-buffer levels |
Operating cash flow was positive, but investing activities used $1.42 billion, mainly reflecting $1.14 billion of net loan growth and securities purchases. Financing activities provided $1.30 billion, principally from a $1.05 billion increase in deposits and $350.7 million of net FHLB advances. Cash and cash equivalents decreased $43.6 million to $379.9 million during the quarter.
At quarter-end, FHLB advances were $2.68 billion; other borrowings, $575.4 million; subordinated notes, $438.0 million; and junior subordinated debentures, $253.6 million. Total deposits included $9.91 billion of non-interest-bearing deposits, or 21% of deposits, down from 26% a year earlier. Time certificates of deposit were $7.89 billion, with a 4.42% weighted-average rate.
Material changes versus prior periods
- Net income rose 4% year over year and diluted EPS increased from $2.80 to $2.89. Net revenue increased 7% to $604.8 million.
- Net interest income increased only 1% year over year as loan and other earning-asset growth was largely offset by higher funding costs. Interest expense on deposits more than doubled, to $299.5 million from $144.8 million; net interest margin declined 24 basis points.
- Non-interest income increased 30%, including a $20.0 million gain from the sale of the Retirement Benefits Advisors division. Mortgage banking revenue rose 51% to $27.7 million, supported by higher production and favorable MSR valuation changes.
- Non-interest expense rose 11%. Salaries and benefits increased $18.4 million, and FDIC expense included a $5.2 million special-assessment accrual. Software and equipment expense rose $3.0 million.
- Loans grew 9% year over year to $43.2 billion; deposits grew 9% to $46.4 billion. Quarter-over-quarter loans increased about $1.1 billion and deposits about $1.1 billion.
- Comprehensive income fell to $63.4 million from $240.4 million, largely reflecting $123.9 million of other comprehensive loss, including declines in securities and derivative values. Accumulated other comprehensive loss widened to $485.1 million.
- Net charge-offs increased to $21.8 million from $5.5 million. Non-performing loans rose to $148.4 million from $100.7 million a year earlier, and non-performing assets increased to $162.9 million from $110.1 million. The allowance for loan and unfunded commitment losses was $427.2 million, or 0.99% of loans.
Outlook, commentary, risks and unusual items
- Management highlighted growth in earning assets, a strong deposit franchise and continued credit monitoring. It stated that reserves were appropriate, while noting that macroeconomic uncertainty could lead to higher provisions or charge-offs. The filing provides no specific earnings, margin, growth or credit-loss guidance.
- Management reported total liquidity sources of $14.9 billion, approximately 120% of estimated uninsured and uncollateralized deposits of $12.4 billion. Estimated uninsured deposits were $14.9 billion, of which $2.5 billion were fully collateralized.
- Interest-rate sensitivity simulations showed modeled one-year net-interest-income increases under both static and ramp scenarios for rate shocks of plus or minus 100 and 200 basis points. These are model estimates, not forecasts; management noted that results depend on market conditions and assumptions. It uses derivatives and balance-sheet actions to manage interest-rate exposure.
- Available-for-sale securities had $556.8 million of gross unrealized losses at March 31, 2024; held-to-maturity securities had a fair value of $3.11 billion versus $3.81 billion amortized cost. Management attributed losses primarily to higher market rates and stated it did not intend, and was not more likely than not required, to sell the available-for-sale securities before recovery.
- On April 15, 2024, after quarter-end, Wintrust announced an agreement to acquire Macatawa Bank Corporation, which had approximately $2.7 billion of assets, $2.4 billion of deposits and $1.3 billion of loans at December 31, 2023. The filing does not provide a closing date or pro forma financial impact.
- Legal matters include a California wage-related PAGA claim and putative fair-lending and ERISA matters. Wintrust disputes the claims; management said it could not estimate potential liability for the described matters and did not expect their outcomes to have a material adverse effect on operations or financial condition, while acknowledging an unfavorable resolution could be material for a particular period.
- Other risks discussed include credit quality and commercial real estate conditions, deposit pricing and competition, interest-rate movements, liquidity and market disruption, cybersecurity and third-party technology, regulatory and FDIC costs, and acquisition execution. The company reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether deposit costs and the shift from non-interest-bearing accounts continue to pressure net interest margin, and how deposit balances and funding needs develop.
- Trends in delinquencies, non-performing loans, net charge-offs and allowance adequacy—particularly commercial real estate and property-and-casualty premium finance exposures.
- How much reported earnings depend on the nonrecurring $20.0 million RBA sale gain and fair-value changes in mortgage servicing rights.
- Unrealized securities losses, AOCI, collateral pledged, and the practical liquidity and capital effects if market conditions require asset sales.
- Macatawa transaction terms, regulatory and shareholder approvals, expected timing, integration risks and pro forma capital and earnings effects.
- Potential outcomes and costs of the disclosed legal matters; the filing does not provide clear estimated loss ranges.