Wintrust(US:WTFC)2023-05-09 20:59PART I — FINANCIAL INFORMATION Financial Statements Presents Wintrust Financial Corporation's unaudited consolidated financial statements for Q1 2023, detailing financial condition, income, and accounting policies Consolidated Statement of Condition Highlights (Unaudited) | (In thousands) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $52,873,511 | $52,949,649 | | Net Loans | $39,277,499 | $38,926,312 | | Total Deposits | $42,718,211 | $42,902,544 | | Total Liabilities | $47,858,005 | $48,152,811 | | Total Shareholders' Equity | $5,015,506 | $4,796,838 | Consolidated Statement of Income Highlights (Unaudited) | (In thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Interest Income | $457,995 | $299,294 | | Provision for Credit Losses | $23,045 | $4,106 | | Net Income | $180,198 | $127,391 | | Net Income Applicable to Common Shares | $173,207 | $120,400 | | Net Income per Common Share—Diluted | $2.80 | $2.07 | Notes to Unaudited Consolidated Financial Statements Detailed notes explain the company's accounting policies, financial statement components, and recent accounting developments including ASU 2022-02 adoption - The company adopted ASU 2022-02, eliminating separate guidance for Troubled Debt Restructurings (TDRs), resulting in a cumulative-effect adjustment of $741,000 to the allowance for loan losses, recorded as a direct adjustment to retained earnings20 Investment Securities Summary (March 31, 2023) | (In thousands) | Amortized Cost | Fair Value | | :--- | :--- | :--- | | Available-for-sale securities | $3,739,980 | $3,259,845 | | Mortgage-backed securities | $3,395,928 | $2,935,974 | | Held-to-maturity securities | $3,606,854 | $2,976,198 | | Mortgage-backed securities | $3,034,465 | $2,479,816 | Loan Portfolio Composition | (In thousands) | March 31, 2023 | March 31, 2022 | | :--- | :--- | :--- | | Commercial | $12,576,985 | $11,583,963 | | Commercial real estate | $10,239,078 | $9,235,074 | | Premium finance receivables | $13,864,682 | $12,291,571 | | Residential real estate | $2,505,545 | $1,799,985 | | Total loans, net of unearned income | $39,565,471 | $35,280,547 | Allowance for Credit Losses Activity (Q1 2023 vs Q1 2022) | (In thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Beginning Balance | $357,448 | $299,653 | | Provision for credit losses | $23,070 | $4,025 | | Net charge-offs | ($5,465) | ($2,532) | | Ending Balance | $375,798 | $301,168 | - On April 3, 2023, the Company completed its acquisition of Rothschild & Co Asset Management US Inc. and Rothschild & Co Risk Based Investments LLC, which were merged into its subsidiary, Great Lakes Advisors, LLC174 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q1 2023 financial performance, highlighting record net income, net interest income growth, and analyses of key financial metrics - Q1 2023 net income reached a record $180.2 million, a 41% increase from $127.4 million in Q1 2022, driven by a 53% year-over-year increase in net interest income to $458.0 million and a higher net interest margin of 3.81% (up from 2.60% year-over-year)179181198 - Non-interest income decreased by 34% to $107.8 million in Q1 2023 from $162.8 million in Q1 2022, primarily due to a $59.0 million (76%) decline in mortgage banking revenue as rising interest rates reduced origination volumes182209212 - Total loans grew 12% year-over-year to $39.6 billion at March 31, 2023, driven by organic growth in commercial, commercial real estate, and life insurance premium finance portfolios180 - Credit quality remains strong, with total non-performing loans (excluding government-guaranteed loans) at 0.25% of total loans; the allowance for credit losses to total loans increased to 0.95% at March 31, 2023, from 0.85% a year prior, reflecting loan growth and macroeconomic forecasts253260 - As of March 31, 2023, the company had approximately $13.0 billion of uninsured and uncollateralized deposits, representing about 30% of total deposits, with total liquidity sources of $10.9 billion covering approximately 84% of these deposits270271 Quantitative and Qualitative Disclosures About Market Risk Details the company's market risk management, focusing on interest rate risk and using simulation analysis to model its impact on net interest income - The company manages interest rate risk by balancing risk, credit, liquidity, and yield, with policies monitored by management and overseen by the Board's Risk Management Committee286 Net Interest Income Sensitivity Analysis (Static Shock Scenario) | Change in Interest Rates | % Change in Net Interest Income (as of Mar 31, 2023) | % Change in Net Interest Income (as of Mar 31, 2022) | | :--- | :--- | :--- | | +200 Basis Points | +4.2% | +21.4% | | +100 Basis Points | +2.4% | +11.0% | | -100 Basis Points | -2.4% | -11.3% | | -200 Basis Points | -7.3% | -18.7% | - The company has actively reduced its exposure to interest rate fluctuations by executing derivative instruments and originating more longer-term fixed-rate loans292 Controls and Procedures Confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2023, with no material changes to internal controls - The CEO and CFO concluded that the Company's disclosure controls and procedures are effective in all material respects as of the end of the reporting period295 - No material changes occurred in the Company's internal control over financial reporting during the quarter296 PART II — OTHER INFORMATION Legal Proceedings Discloses several pending legal actions against the company, including ERISA, PAGA, and fair lending class actions, not expected to materially affect financial condition - The company faces an ERISA class action lawsuit filed in July 2022, alleging breach of fiduciary duty related to 401(k) plan fund selection, which Wintrust believes is meritless299 - A former employee filed a California PAGA suit in May 2022, alleging wage and hour violations, which the company disputes and has moved to compel arbitration300 - A putative class action was filed in May 2022, alleging Wintrust Mortgage discriminated against Black/African American borrowers, which the company disputes and has moved to dismiss301 - Management believes the eventual outcome of all pending legal actions will not materially adversely affect the company's operations or financial condition303 Risk Factors Indicates no material changes to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - No material changes occurred from the risk factors set forth in the 2022 Form 10-K304 Unregistered Sales of Equity Securities and Use of Proceeds States that no purchases of the company's common stock were made by or on behalf of the company during Q1 2023 - The Company made no purchases of its own common shares during the three months ended March 31, 2023305 Other Information Reports Jeffrey D. Hahnfeld's promotion to EVP, Controller and Chief Accounting Officer, and the Series D Preferred Stock's benchmark change from LIBOR to SOFR - Effective May 5, 2023, Jeffrey D. Hahnfeld was promoted to Executive Vice President, Controller and Chief Accounting Officer, becoming the company's principal accounting officer307 - On May 5, 2023, the company filed a Restated Certificate of Designations for its Series D Preferred Stock, replacing the three-month LIBOR benchmark with Three-Month CME Term SOFR plus a tenor spread adjustment of 0.26161% for dividend calculations during the floating rate period beginning July 15, 2025310312313 Exhibits Provides a list of all exhibits filed with the Form 10-Q report, including the Restated Certificate of Designations for Series D Preferred Stock, amended employment agreements, and SOX certifications - The report includes several key exhibits, such as the Restated Certificate of Designations for Series D Preferred Stock and amended employment agreements for key executives316