Wintrust Financial Corporation(WTFCM) - 2025 Q1 - Quarterly Report

PART I. — FINANCIAL INFORMATION This section presents the Company's unaudited consolidated financial statements and related disclosures for the reporting period ITEM 1. Financial Statements This section presents the unaudited consolidated financial statements of Wintrust Financial Corporation and its subsidiaries, including the statements of condition, income, comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, recent accounting developments, and specific financial instrument details Consolidated Statements of Condition Presents the Company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates Consolidated Statements of Condition (Dollars in thousands) | (Dollars in thousands) | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :--------------------- | :------------- | :---------------- | :------------- | | Assets | | | | | Total assets | $65,870,066 | $64,879,668 | $57,576,933 | | Liabilities | | | | | Total deposits | $53,570,038 | $52,512,349 | $46,448,858 | | Total liabilities | $59,269,529 | $58,535,371 | $52,140,533 | | Shareholders' Equity | | | | | Total shareholders' equity | $6,600,537 | $6,344,297 | $5,436,400 | Consolidated Statements of Income Details the Company's revenues, expenses, and net income over specific reporting periods Consolidated Statements of Income (Dollars in thousands, except per share data) | (Dollars in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Total interest income | $886,965 | $805,513 | | Total interest expense | $360,491 | $341,319 | | Net interest income | $526,474 | $464,194 | | Provision for credit losses | $23,963 | $21,673 | | Total non-interest income | $116,634 | $140,580 | | Total non-interest expense | $366,090 | $333,145 | | Net income | $189,039 | $187,294 | | Net income per common share—Diluted | $2.69 | $2.89 | | Cash dividends declared per common share | $0.50 | $0.45 | Consolidated Statements of Comprehensive Income Reports net income and other comprehensive income items, reflecting changes in equity from non-owner sources Consolidated Statements of Comprehensive Income (In thousands) | (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------- | :-------------------------------- | :-------------------------------- | | Net income | $189,039 | $187,294 | | Total other comprehensive income (loss) | $98,320 | $(123,917) | | Comprehensive income | $287,359 | $63,377 | - Total other comprehensive income significantly improved from a loss of $123.9 million in Q1 2024 to a gain of $98.3 million in Q1 2025, primarily driven by unrealized gains on available-for-sale securities and derivative instruments[9] Consolidated Statements of Changes in Shareholders' Equity Outlines the changes in each component of shareholders' equity over the reporting period Consolidated Statements of Changes in Shareholders' Equity (Dollars in thousands) | (Dollars in thousands) | Balance at January 1, 2025 | Net income | Other comprehensive income, net of tax | Cash dividends declared on common stock | Dividends on Preferred Stock | Stock-based compensation | Common stock issued for: | Balance at March 31, 2025 | | :--------------------- | :------------------------- | :--------- | :------------------------------------- | :-------------------------------------- | :--------------------------- | :----------------------- | :----------------------- | :------------------------ | | Total shareholders' equity | $6,344,297 | $189,039 | $98,320 | $(33,358) | $(6,991) | $10,411 | $1,822 | $6,600,537 | - Shareholders' equity increased from $6.34 billion at January 1, 2025, to $6.60 billion at March 31, 2025, primarily due to net income and other comprehensive income, partially offset by dividends[10] Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (In thousands) | (In thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------- | :-------------------------------- | :-------------------------------- | | Net Cash Provided by Operating Activities | $119,754 | $71,125 | | Net Cash Used for Investing Activities | $(973,374) | $(1,419,170) | | Net Cash Provided by Financing Activities | $1,011,363 | $1,304,467 | | Net Increase (Decrease) in Cash and Cash Equivalents | $157,743 | $(43,578) | | Cash and Cash Equivalents at End of Period | $616,279 | $379,886 | - The Company experienced a net increase in cash and cash equivalents of $157.7 million in Q1 2025, a significant improvement from a net decrease of $43.6 million in Q1 2024, driven by increased cash from operating and financing activities[12] Notes to Unaudited Consolidated Financial Statements Provides detailed explanations and additional information supporting the consolidated financial statements (1) Basis of Presentation Explains the accounting principles and assumptions used in preparing the interim financial statements - The interim consolidated financial statements are unaudited and reflect management's necessary adjustments for fair presentation, relying on estimates, assumptions, and judgments that could materially differ from reported results if conditions change[14][15][16] (2) Recent Accounting Developments Outlines recently issued accounting pronouncements and their potential impact on the Company's financial reporting - The FASB issued ASU No. 2023-09 (Income Tax Disclosures) effective for fiscal years beginning after December 15, 2024, which is expected to expand income tax disclosures[17] - ASU No. 2024-01 (Compensation – Stock Compensation) issued in March 2024, effective for public business entities for fiscal years beginning after December 15, 2024, did not impact the Company's consolidated financial statements[18] - ASU No. 2024-03 (Disaggregation of Income Statement Expenses) issued in November 2024, effective for fiscal years beginning after December 15, 2026, is currently being evaluated for its impact on the consolidated financial statements[19] - ASU No. 2024-04 (Induced Conversions of Convertible Debt Instruments) issued in November 2024, effective for fiscal years beginning after December 15, 2025, is expected to have no impact on the Company's consolidated financial statements[20] (3) Business Combinations Details significant acquisition activities, including the financial impact and key terms of completed transactions - On August 1, 2024, Wintrust completed the acquisition of Macatawa Bank Corporation for $499.3 million, issuing approximately 4.7 million shares of common stock[21] - Macatawa Bank Corporation had approximately $2.9 billion in assets, $2.3 billion in deposits, and $1.3 billion in loans as of the acquisition date[21] - In conjunction with the acquisition, the Company recorded $53.7 million discount on acquired loans, $33.5 million discount on securities, and $253.0 million in total intangibles[21] (4) Cash and Cash Equivalents Defines the components of cash and cash equivalents and their treatment in the financial statements - Cash and cash equivalents include cash on hand, cash items in collection, non-interest bearing amounts due from correspondent banks, federal funds sold, and securities purchased under resale agreements with original maturities of three months or less[22] (5) Investment Securities Provides a breakdown of the Company's investment securities portfolio, including fair value and unrealized gains/losses Available-for-sale securities (March 31, 2025) (in thousands) | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | | :------- | :---------------------------- | :------------------------ | | U.S. Treasury | $12,943 | $12,994 | | U.S. government agencies | $50,000 | $45,944 | | Municipal | $190,670 | $188,149 | | Corporate notes | $84,997 | $81,435 | | Mortgage-backed | $4,390,624 | $3,891,783 | | Total | $4,729,234 | $4,220,305 | Held-to-maturity securities (March 31, 2025) (in thousands) | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | | :------- | :---------------------------- | :------------------------ | | U.S. government agencies | $313,539 | $250,912 | | Municipal | $158,307 | $153,646 | | Mortgage-backed | $3,036,409 | $2,462,927 | | Corporate notes | $56,681 | $55,328 | | Total | $3,564,936 | $2,922,813 | - At March 31, 2025, available-for-sale securities had gross unrealized losses of $512.3 million, primarily in mortgage-backed securities, due to changes in interest rates and market conditions[23][29][31] - Net gains on investment securities increased to $3.2 million for the three months ended March 31, 2025, from $1.3 million in the prior year, mainly due to unrealized gains on equity securities with readily determinable fair value[34] (6) Loans Details the composition and growth of the Company's loan portfolio by category and risk mitigation strategies Loan Portfolio by Category (Dollars in thousands) | Category | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------- | :------------- | :---------------- | :------------- | | Commercial | $15,931,326 | $15,574,551 | $13,503,481 | | Commercial real estate | $12,914,901 | $12,903,944 | $11,633,437 | | Home equity | $455,683 | $445,028 | $340,349 | | Residential real estate | $3,685,159 | $3,612,765 | $2,890,266 | | Premium finance receivables—property & casualty | $7,239,862 | $7,272,042 | $6,940,019 | | Premium finance receivables—life insurance | $8,365,140 | $8,147,145 | $7,872,033 | | Consumer and other | $116,319 | $99,562 | $51,121 | | Total loans, net of unearned income | $48,708,390 | $48,055,037 | $43,230,706 | - The loan portfolio increased to $48.7 billion at March 31, 2025, from $43.2 billion at March 31, 2024, with commercial and commercial real estate loans comprising 33% and 26% respectively[35] - The Company maintains a diverse loan portfolio across loan type, industry, borrower, and geographic concentrations to mitigate economic downturn risks[35] (7) Allowance for Credit Losses Presents the allowance for credit losses, including changes, net charge-offs, and loan modifications Allowance for Credit Losses (Dollars in thousands) | Category | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------- | :------------- | :---------------- | :------------- | | Allowance for loan losses | $378,207 | $364,017 | $348,612 | | Allowance for unfunded lending-related commitments losses | $69,734 | $72,586 | $78,563 | | Allowance for held-to-maturity securities losses | $446 | $457 | $329 | | Total Allowance for credit losses | $448,387 | $437,060 | $427,504 | - The total allowance for credit losses increased to $448.4 million at March 31, 2025, from $427.5 million at March 31, 2024, primarily due to loan growth and a macroeconomic uncertainty qualitative overlay[50][55] - Net charge-offs for the three months ended March 31, 2025, totaled $12.6 million, a decrease from $21.8 million in the same period of 2024[55] - Loan modifications for borrowers experiencing financial difficulties totaled $19.8 million in Q1 2025, primarily involving extension of term and reduction of interest rate[59][60] (8) Goodwill and Other Acquisition-Related Intangible Assets Details the Company's goodwill and other acquisition-related intangible assets, including amortization expense Goodwill by Reporting Unit (Dollars in thousands) | Reporting Unit | December 31, 2024 | Goodwill Adjustments | March 31, 2025 | | :------------- | :---------------- | :------------------- | :------------- | | Community banking | $687,754 | — | $687,754 | | Specialty finance | $37,193 | $(10) | $37,183 | | Wealth management | $71,995 | — | $71,995 | | Total | $796,942 | $(10) | $796,932 | Total Other Acquisition-Related Intangible Assets, Net (Dollars in thousands) | Date | Net Carrying Amount | | :--- | :------------------ | | March 31, 2025 | $116,072 | | December 31, 2024 | $121,690 | | March 31, 2024 | $21,730 | - Total amortization expense for finite-lived acquisition-related intangibles increased significantly to $5.6 million for Q1 2025 from $1.2 million for Q1 2024, primarily due to the Macatawa acquisition[65] (9) Mortgage Servicing Rights ("MSRs") Reports the fair value and changes in mortgage servicing rights, including valuation adjustments Changes in Carrying Value of MSRs (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :-------------------------------- | :-------------------------------- | | Fair value at beginning of the period | $203,788 | $192,456 | | Additions from loans sold with servicing retained | $4,669 | $5,379 | | Estimate of changes in fair value due to: Payoffs, paydowns and repurchases | $(4,636) | $(4,386) | | Changes in valuation inputs or assumptions | $(7,514) | $7,595 | | Fair value at end of the period | $196,307 | $201,044 | - The fair value of MSRs decreased to $196.3 million at March 31, 2025, from $203.8 million at the beginning of the period, primarily due to unfavorable changes in valuation inputs and assumptions[66] - The unpaid principal balance of mortgage loans serviced for others increased to $12.4 billion at March 31, 2025, from $12.1 billion at March 31, 2024[66] (10) Deposits Provides a summary of deposit categories and their year-over-year growth Summary of Deposits (Dollars in thousands) | Category | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------- | :------------- | :---------------- | :------------- | | Non-interest-bearing | $11,201,859 | $11,410,018 | $9,908,183 | | Interest-bearing | $42,368,179 | $41,102,331 | $36,540,675 | | Total deposits | $53,570,038 | $52,512,349 | $46,448,858 | - Total deposits increased by 15% year-over-year to $53.6 billion at March 31, 2025, with interest-bearing deposits comprising 79% of the total[71] (11) FHLB Advances, Other Borrowings and Subordinated Notes Details the Company's FHLB advances, other borrowings, and subordinated notes, including changes and maturities Summary of FHLB Advances, Other Borrowings and Subordinated Notes (Dollars in thousands) | Category | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------- | :------------- | :---------------- | :------------- | | FHLB advances | $3,151,309 | $3,151,309 | $2,676,751 | | Other borrowings | $529,269 | $534,803 | $575,408 | | Subordinated notes | $298,360 | $298,283 | $437,965 | | Total | $3,978,938 | $3,984,395 | $3,690,124 | - The Company repaid $140.0 million of subordinated notes in Q2 2024, reducing the total outstanding from $438.0 million at March 31, 2024, to $298.4 million at March 31, 2025[79] - Secured borrowings, primarily from a Canadian transaction, totaled $319.6 million at March 31, 2025, with the facility limit increased to C$650 million and maturity extended to December 15, 2025[75][76] (12) Junior Subordinated Debentures Reports the outstanding balance and weighted average interest rate of junior subordinated debentures - Junior subordinated debentures remained stable at $253.6 million across all periods presented, with a weighted average contractual interest rate of 6.76% at March 31, 2025[82] (13) Segment Information Provides financial performance data for the Company's operating segments: community banking, specialty finance, and wealth management Net Income by Segment (In thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------ | :-------------------------------- | :-------------------------------- | | Community banking | $134,270 | $120,046 | | Specialty finance | $50,293 | $42,523 | | Wealth management | $4,476 | $24,725 | | Total | $189,039 | $187,294 | - Community banking net income increased by 11.8% year-over-year, while wealth management net income decreased significantly due to a gain on sale of a division in the prior year[88] - The Company's operations are divided into three primary segments: community banking, specialty finance, and wealth management, each with distinct products, services, and marketing strategies[83][84] (14) Derivative Financial Instruments Describes the Company's use of derivative instruments for risk management and their fair value Fair Value of Derivative Financial Instruments (Dollars in thousands) | Category | March 31, 2025 (Assets) | March 31, 2025 (Liabilities) | March 31, 2024 (Assets) | March 31, 2024 (Liabilities) | | :------- | :---------------------- | :--------------------------- | :---------------------- | :--------------------------- | | Derivatives designated as hedging instruments | $44,304 | $24,004 | $26,428 | $94,779 | | Derivatives not designated as hedging instruments | $159,953 | $157,194 | $232,836 | $229,585 | | Total Derivatives | $204,257 | $181,198 | $259,264 | $324,364 | - The Company uses derivatives primarily to manage interest rate risk, including interest rate swaps and collars for cash flow hedges, and interest rate swaps for fair value hedges[89][90][96][103] - For Q1 2025, $8.8 million is estimated to be reclassified from accumulated other comprehensive income/loss as an increase to net interest income over the next 12 months[102] (15) Fair Value of Assets and Liabilities Explains the methodologies and classifications for measuring the fair value of assets and liabilities Assets Measured at Fair Value on a Recurring Basis (March 31, 2025, in thousands) | Category | Total | Level 1 | Level 2 | Level 3 | | :------- | :---- | :------ | :------ | :------ | | Available-for-sale securities | $4,220,305 | $12,994 | $4,085,467 | $121,844 | | Equity securities with readily determinable fair value | $270,442 | $262,376 | $8,066 | — | | Mortgage loans held-for-sale | $316,804 | — | $260,480 | $56,324 | | Loans held-for-investment | $126,521 | — | $92,519 | $34,002 | | MSRs | $196,307 | — | — | $196,307 | | Derivative assets | $204,257 | — | $198,764 | $5,493 | | Total | $5,351,032 | $275,370 | $4,661,692 | $413,970 | - The Company classifies fair value measurements into three levels based on observability of inputs, with Level 3 requiring significant unobservable inputs and management judgment[123][125] - At March 31, 2025, Level 3 assets measured at fair value on a recurring basis totaled $414.0 million, primarily consisting of municipal securities, mortgage loans held-for-sale, loans held-for-investment, MSRs, and derivative assets[139] (16) Stock-Based Compensation Plans Details the Company's stock option and restricted share activity and related compensation expense - Stock-based compensation expense increased to $10.4 million in Q1 2025 from $9.2 million in Q1 2024[160] Stock Option Activity (Shares) | Item | Outstanding at January 1, 2025 | Exercised | Outstanding at March 31, 2025 | | :--- | :----------------------------- | :-------- | :---------------------------- | | Common Shares | 10,825 | (5,150) | 5,675 | Restricted Share Activity (Shares) | Item | Outstanding at January 1 | Granted | Vested and issued | Forfeited or canceled | Outstanding at March 31 | | :--- | :----------------------- | :------ | :---------------- | :-------------------- | :---------------------- | | Common Shares (2025) | 880,866 | 245,654 | (192,866) | (7,587) | 926,067 | | Common Shares (2024) | 746,123 | 305,807 | (219,622) | (3,154) | 829,154 | (17) Accumulated Other Comprehensive Income or Loss and Earnings Per Share Presents the components of accumulated other comprehensive income/loss and detailed earnings per share calculations Accumulated Other Comprehensive Income or Loss (In thousands) | Component | Balance at January 1, 2025 | Net other comprehensive income (loss) during the period, net of tax | Balance at March 31, 2025 | | :-------- | :------------------------- | :------------------------------------------------------------------ | :------------------------ | | Unrealized (Losses) Gains on Securities | $(429,580) | $55,586 | $(373,994) | | Unrealized Gains (Losses) on Derivative Instruments | $(11,227) | $42,974 | $31,747 | | Accumulated Foreign Currency Translation Adjustments | $(67,528) | $(240) | $(67,768) | | Total Accumulated Other Comprehensive (Loss) Income | $(508,335) | $98,320 | $(410,015) | Earnings Per Share (Dollars in thousands, except per share data) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :-------------------------------- | :-------------------------------- | | Net income applicable to common shares | $182,048 | $180,303 | | Weighted average common shares outstanding | 66,726 | 61,481 | | Net income per common share—Basic | $2.73 | $2.93 | | Net income per common share—Diluted | $2.69 | $2.89 | - Diluted EPS decreased to $2.69 in Q1 2025 from $2.89 in Q1 2024, despite an increase in net income applicable to common shares, due to a higher weighted average of common shares outstanding[168] (18) Subsequent Events Reports significant events that occurred after the balance sheet date but before the financial statements were issued - The Board of Directors declared a quarterly cash dividend of $0.50 per share in April 2025, payable on May 22, 2025[170] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition as of March 31, 2025, compared to prior periods, and results of operations for the three months ended March 31, 2025 and 2024. It covers key financial highlights, earnings performance, critical accounting estimates, and detailed analysis of net interest income, non-interest income, non-interest expense, segment results, financial condition, credit quality, funding, capital, and liquidity Introduction Provides an overview of Wintrust Financial Corporation's business and geographic operations - Wintrust Financial Corporation is a financial holding company providing community and commercial banking, wealth management services in the Chicago metropolitan area, southern Wisconsin, northwest Indiana, and west Michigan, and operates other financing businesses nationally and in Canada[173] Overview & First Quarter Highlights Summarizes key financial performance and operational achievements for the first quarter - Net income for Q1 2025 was $189.0 million, a 1% increase from $187.3 million in Q1 2024, driven by increased net interest income and partially offset by higher non-interest expense and lower non-interest income[174] - The loan portfolio grew to $48.7 billion at March 31, 2025, from $43.2 billion at March 31, 2024, reflecting growth in commercial, commercial real estate, residential real estate, and insurance premium finance receivables[175] - Net interest income increased by $62.3 million to $526.5 million in Q1 2025 compared to Q1 2024, primarily due to a $5.7 billion increase in average loans[176] - Non-interest income decreased by $23.9 million to $116.6 million in Q1 2025 compared to Q1 2024, mainly due to a $20.0 million gain on the sale of the RBA division in Q1 2024 and decreased mortgage banking revenue[177] - Non-interest expense rose by $32.9 million (10%) to $366.1 million in Q1 2025, driven by increased salaries and employee benefits and software and equipment expenses, partly due to organic growth and the Macatawa acquisition[178] RESULTS OF OPERATIONS Analyzes the Company's financial performance, including net income, net interest income, and non-interest income and expenses Earnings Summary Provides a concise overview of key financial metrics and their period-over-period changes Key Operating Measures (Three months ended March 31) | Metric | 2025 | 2024 | Change (%) or (bps) | | :----- | :--- | :--- | :------------------ | | Net income (in thousands) | $189,039 | $187,294 | 1 % | | Net income per common share—Diluted | $2.69 | $2.89 | (7) % | | Net revenue (in thousands) | $643,108 | $604,774 | 6 % | | Net interest income (in thousands) | $526,474 | $464,194 | 13 % | | Net interest margin | 3.54 % | 3.57 % | (3) bps | | Total assets (in thousands) | $65,870,066 | $57,576,933 | 14 % | | Total deposits (in thousands) | $53,570,038 | $46,448,858 | 15 % | | Return on average assets | 1.20 % | 1.35 % | (15) bps | | Return on average common equity | 12.21 % | 14.42 % | (221) bps | Supplemental Non-GAAP Financial Measures/Ratios Presents non-GAAP financial measures used by management to assess performance and provide additional insights - Management uses non-GAAP measures like taxable-equivalent net interest income and margin, efficiency ratio, tangible common equity ratio, tangible book value per common share, return on average tangible common equity, and pre-tax income excluding provision for credit losses to evaluate performance and provide a more meaningful view of operations[183][184][185] Non-GAAP Reconciliation Highlights (Three months ended March 31) | Metric | 2025 | 2024 | | :----- | :--- | :--- | | Net Interest Income, fully taxable-equivalent (non-GAAP) (in thousands) | $529,373 | $466,995 | | Net interest margin, fully taxable-equivalent (non-GAAP) | 3.56 % | 3.59 % | | Efficiency ratio (non-GAAP) | 56.95 % | 54.95 % | | Tangible common equity ratio (non-GAAP) | 8.1 % | 7.6 % | | Tangible book value per common share (non-GAAP) | $78.83 | $70.40 | | Return on average tangible common equity, annualized (non-GAAP) | 14.72 % | 16.75 % | | Pre-tax income, excluding provision for credit losses (non-GAAP) (in thousands) | $277,018 | $271,629 | Critical Accounting Estimates Discusses accounting estimates that require significant judgment and are susceptible to material changes - Critical accounting estimates include the determination of the allowance for credit losses, estimations of fair value, goodwill impairment testing, derivative instrument valuation, and income taxes, all requiring significant judgment and susceptible to change[188] - The allowance for credit losses is a critical estimate due to its reliance on fair value of collateral, expected future cash flows, and reasonable and supportable macroeconomic forecasts, which are subject to significant change[189] Sensitivity Analysis for Commercial Real Estate Portfolio (10% change in CREPI) | CRE Price Index | Impact to estimated allowance for credit losses | | :-------------- | :---------------------------------------------- | | Increases | Construction: Decreases estimate by 30%-35% | | | Non-Construction: Decreases estimate by 25%-30% | | Decreases | Construction: Increases estimate by 150%-155% | | | Non-Construction: Increases estimate by 40%-45% | Net Income Analyzes the drivers of net income and diluted earnings per share for the reporting period - Net income for Q1 2025 was $189.0 million, a 1% increase from $187.3 million in Q1 2024, while diluted EPS decreased to $2.69 from $2.89[193] - The increase in net income was primarily due to higher net interest income, partially offset by decreased non-interest income (due to a prior-year gain on sale) and increased non-interest expense (due to growth and acquisition-related costs)[194] Net Interest Income Examines the components of net interest income and net interest margin, including volume and rate changes - Net interest income increased to $526.5 million in Q1 2025, up $62.3 million from Q1 2024, primarily driven by growth in earning assets, specifically a $5.7 billion increase in average loans[176][202] - Net interest margin was 3.54% (3.56% FTE) in Q1 2025, a slight decrease from 3.57% (3.59% FTE) in Q1 2024, mainly due to a decline in loan and other earning asset yields, partially offset by reduced funding costs[176][202] Analysis of Changes in Net Interest Income (FTE basis, in thousands) | Change Factor | Q1 2025 Compared to Q4 2024 | Q1 2025 Compared to Q1 2024 | | :------------ | :-------------------------- | :-------------------------- | | Volume | $3,995 | $98,837 | | Rate | $8,898 | $(31,271) | | Number of days | $(11,738) | $(5,188) | Non-interest Income Analyzes the various sources of non-interest income and their period-over-period fluctuations Non-interest Income by Category (Dollars in thousands) | Category | March 31, 2025 | March 31, 2024 | $ Change | % Change | | :------- | :------------- | :------------- | :------- | :------- | | Total wealth management | $34,042 | $34,815 | $(773) | (2)% | | Mortgage banking | $20,529 | $27,663 | $(7,134) | (26)% | | Service charges on deposit accounts | $19,362 | $14,811 | $4,551 | 31% | | Gains on investment securities, net | $3,196 | $1,326 | $1,870 | NM | | Fees from covered call options | $3,446 | $4,847 | $(1,401) | (29)% | | Total Other | $20,836 | $42,331 | $(21,495) | (51)% | | Total Non-interest Income | $116,634 | $140,580 | $(23,946) | (17)% | - The 17% decrease in total non-interest income was primarily due to a $20.0 million gain from the sale of the RBA division in Q1 2024 and a $7.1 million decrease in mortgage banking revenue[177][204][212] - Service charges on deposit accounts increased by 31% ($4.6 million) due to higher commercial account analysis fees and the Macatawa acquisition[204][209] Non-interest Expense Examines the components of non-interest expense and the factors contributing to their changes Non-interest Expense by Category (Dollars in thousands) | Category | March 31, 2025 | March 31, 2024 | $ Change | % Change | | :------- | :------------- | :------------- | :------- | :------- | | Total salaries and employee benefits | $211,526 | $195,173 | $16,353 | 8% | | Software and equipment | $34,717 | $27,731 | $6,986 | 25% | | Amortization of other acquisition-related intangible assets | $5,618 | $1,158 | $4,460 | NM | | FDIC insurance | $10,926 | $9,381 | $1,545 | 16% | | FDIC insurance - special assessment | — | $5,156 | $(5,156) | (100)% | | Total other | $38,821 | $32,500 | $6,321 | 19% | | Total Non-interest Expense | $366,090 | $333,145 | $32,945 | 10% | - Total non-interest expense increased by 10% ($32.9 million) in Q1 2025, primarily due to higher salaries and employee benefits ($16.4 million), increased software and equipment expenses ($7.0 million), and higher amortization of acquisition-related intangibles ($4.5 million)[216][217][218][219] - FDIC insurance expense decreased due to the absence of the $5.2 million special assessment recognized in Q1 2024[216][220] Income Taxes Reports income tax expense and effective tax rates, highlighting influencing factors - Income tax expense for Q1 2025 was $64.0 million, up from $62.7 million in Q1 2024, with effective tax rates of 25.30% and 25.07% respectively[222] - The effective tax rates were influenced by tax effects related to share-based compensation, which provided net excess tax benefits of $3.7 million in Q1 2025 compared to $4.4 million in Q1 2024[223] Operating Segment Results Analyzes the net income and performance of the Company's community banking, specialty finance, and wealth management segments Net Income by Segment (In thousands) | Segment | Q1 2025 Net Income | Q1 2024 Net Income | Change ($) | Change (%) | | :------ | :----------------- | :----------------- | :--------- | :--------- | | Community banking | $134,270 | $120,046 | $14,224 | 11.8% | | Specialty finance | $50,293 | $42,523 | $7,770 | 18.3% | | Wealth management | $4,476 | $24,725 | $(20,249) | (81.9)% | - Community banking net interest income increased by 15% to $419.0 million, driven by growth in average earning assets and stable net interest margin[225] - Specialty finance net interest income increased by 11% to $91.3 million, primarily due to loan growth from effective marketing and customer servicing[226] - Wealth management net income decreased significantly due to a $20.0 million gain recognized in Q1 2024 from the sale of its RBA division[227][228] Financial Condition Assesses the Company's financial position, including total assets, funding sources, and interest-earning assets Total Assets and Funding Reports the growth in total assets and the composition of the Company's funding sources - Total assets increased by $8.3 billion (14%) to $65.9 billion at March 31, 2025, compared to March 31, 2024[229] - Total funding, including deposits, notes, advances, and subordinated debentures, reached $57.8 billion at March 31, 2025[229] Interest-Earning Assets Details the composition of average interest-earning assets, including loans and liquidity management assets Composition of Average Earning Asset Balances (Three Months Ended March 31, 2025, in thousands) | Category | Balance | Percent of Total | | :------- | :------ | :--------------- | | Mortgage loans held-for-sale | $286,710 | 1% | | Total average loans | $47,833,380 | 79% | | Liquidity management assets | $12,211,485 | 20% | | Other earning assets | $13,140 | 0% | | Total average earning assets | $60,344,715 | 100% | - Total average loans comprised 79% of total average earning assets in Q1 2025, with combined commercial and commercial real estate loans making up 59% of the average loan portfolio[230][233] - Residential real estate loans averaged $3.5 billion in Q1 2025, a 30% increase from Q1 2024, driven by the origination of non-agency mortgages held-for-investment[234] - Premium finance receivables increased due to effective marketing and customer servicing, with $4.8 billion originated in Q1 2025[235] Maturities and Sensitivities of Loans to Changes in Interest Rates Analyzes the loan portfolio's repricing and maturity characteristics, highlighting interest rate sensitivity Loan Portfolio by Repricing/Maturity and Rate Type (March 31, 2025, in thousands) | Category | One year or less | From one to five years | From five to fifteen years | After fifteen years | Total | | :------- | :--------------- | :--------------------- | :------------------------- | :------------------ | :---- | | Fixed rate | $8,617,862 | $6,687,371 | $2,567,510 | $1,144,359 | $19,017,102 | | Variable rate | $27,240,166 | $635,425 | $1,815,697 | — | $29,691,288 | | Total loans, net of unearned income | $35,858,028 | $7,322,796 | $4,383,207 | $1,144,359 | $48,708,390 | - A significant portion of the loan portfolio, $29.7 billion, is variable rate, with SOFR tenors being the largest index at $18.3 billion[239][240] CREDIT QUALITY Evaluates the Company's credit risk profile, including loan portfolios, non-performing assets, and allowance for credit losses Commercial and Commercial Real Estate Loan Portfolios Details the commercial and commercial real estate loan portfolios, including allowance for credit losses and geographic concentrations Commercial and Commercial Real Estate Loan Portfolios (Dollars in thousands) | Category | March 31, 2025 Balance | March 31, 2025 Allowance for Credit Losses | March 31, 2024 Balance | March 31, 2024 Allowance for Credit Losses | | :------- | :--------------------- | :----------------------------------------- | :--------------------- | :----------------------------------------- | | Commercial, industrial, and other | $15,931,326 | $201,183 | $13,503,481 | $166,518 | | Construction and development | $2,448,881 | $71,388 | $2,150,314 | $96,052 | | Non-construction | $10,466,020 | $138,622 | $9,483,123 | $130,000 | | Total commercial and commercial real estate | $28,846,227 | $411,193 | $25,136,918 | $392,570 | - The allowance for credit losses in the commercial loan portfolio increased to $201.2 million at March 31, 2025, from $166.5 million at March 31, 2024, due to growth and a macroeconomic uncertainty overlay[241] - 67.4% of the commercial real estate loan portfolio is concentrated in the Chicago metropolitan area, southern Wisconsin, and west Michigan[242] Past Due Loans and Non-Performing Assets Reports on past due loans, non-performing assets, and the allowance for credit losses coverage Non-Performing Assets (Dollars in thousands) | Category | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------- | :------------- | :---------------- | :------------- | | Total loans past due greater than 90 days and still accruing | $21,187 | $16,182 | $25,951 | | Total nonaccrual loans | $151,203 | $154,641 | $122,408 | | Total non-performing loans | $172,390 | $170,823 | $148,359 | | Other real estate owned | $22,625 | $23,116 | $14,538 | | Total non-performing assets | $195,015 | $193,939 | $162,897 | - Total non-performing assets increased to $195.0 million at March 31, 2025, from $162.9 million at March 31, 2024[248] - The allowance for credit losses as a percentage of nonaccrual loans was 296.25% at March 31, 2025, indicating strong coverage[248] Non-performing Loans Rollforward Tracks the changes in non-performing loans, including additions, payments, and charge-offs Non-performing Loans Rollforward (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :-------------------------------- | :-------------------------------- | | Balance at beginning of period | $170,823 | $139,030 | | Additions from becoming non-performing | $27,721 | $23,142 | | Payments received | $(15,965) | $(8,336) | | Charge-offs | $(8,600) | $(14,810) | | Balance at end of period | $172,390 | $148,359 | - Non-performing loans increased by $1.6 million in Q1 2025, with additions of $27.7 million partially offset by payments received and charge-offs[250] Allowance for Credit Losses Details the activity in the allowance for credit losses, including provisions, charge-offs, and recoveries Allowance for Credit Losses Activity (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :-------------------------------- | :-------------------------------- | | Allowance for credit losses at beginning of period | $436,603 | $427,265 | | Provision for credit losses - other | $23,974 | $21,691 | | Total charge-offs | $17,449 | $23,841 | | Total recoveries | $4,809 | $2,091 | | Net charge-offs | $(12,640) | $(21,750) | | Allowance for credit losses at period end | $447,941 | $427,175 | - The allowance for credit losses increased to $447.9 million at March 31, 2025, from $427.2 million at March 31, 2024, reflecting management's estimate of lifetime expected credit losses[251][255] - Annualized net charge-offs as a percentage of total loans decreased to 0.11% in Q1 2025 from 0.21% in Q1 2024[255] Other Real Estate Owned Reports the balance and changes in other real estate owned, including fair value adjustments Other Real Estate Owned (OREO) Activity (In thousands) | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :-------------------------------- | :-------------------------------- | | Balance at beginning of period | $23,116 | $13,309 | | Fair value adjustments | $(491) | $(207) | | Balance at end of period | $22,625 | $14,538 | - OREO balance decreased slightly to $22.6 million at March 31, 2025, from $23.1 million at the beginning of the period, with fair value adjustments of $(0.5) million[257] Deposits Analyzes the growth and composition of the Company's deposit base, including interest-bearing and non-interest-bearing categories - Total deposits increased by $7.1 billion (15%) to $53.6 billion at March 31, 2025, compared to March 31, 2024, driven by marketing efforts, loan growth support, the Macatawa acquisition, and deposit base diversity[258][259] Composition of Average Deposit Balances (Three Months Ended March 31, 2025, in thousands) | Category | Balance | Percent | | :------- | :------ | :------ | | Non-interest-bearing | $10,732,156 | 21% | | NOW and interest-bearing demand deposits | $6,046,189 | 11% | | Wealth management deposits | $1,574,480 | 3% | | Money market | $17,581,141 | 34% | | Savings | $6,479,444 | 13% | | Time certificates of deposit | $9,406,126 | 18% | | Total average deposits | $51,819,536 | 100% | - Brokered deposits represented 7.9% of total deposits at March 31, 2025, primarily used as an asset-liability management tool[261] Other Funding Sources Describes the Company's various non-deposit funding sources, including FHLB advances and subordinated debt Average Balances of Other Funding Sources (Three Months Ended March 31, 2025, in thousands) | Category | Balance | | :------- | :------ | | FHLB advances | $3,151,309 | | Other borrowings | $582,139 | | Subordinated notes | $298,306 | | Junior subordinated debentures | $253,566 | | Total other funding sources | $4,285,320 | - The Company utilizes FHLB advances, notes payable, short-term borrowings, secured borrowings, subordinated debt, and junior subordinated debentures to support growth and manage its asset-liability position[262] Shareholders' Equity Presents key capital measures and ratios, demonstrating compliance with regulatory standards and dividend declarations Consolidated Capital Measures | Ratio | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :---- | :------------- | :---------------- | :------------- | | Tier 1 leverage ratio | 9.6 % | 9.4 % | 9.4 % | | Tier 1 capital ratio | 10.8 % | 10.7 % | 10.3 % | | Common equity tier 1 capital ratio | 10.1 % | 9.9 % | 9.5 % | | Total capital ratio | 12.5 % | 12.3 % | 12.2 % | | Total average equity-to-total average assets | 10.1 % | 10.1 % | 9.4 % | - The Company maintains capital levels above the 'Well Capitalized' standards established by the Federal Reserve for bank holding companies[269] - A quarterly cash dividend of $0.50 per common share was declared in January 2025, an increase from $0.45 per common share declared in 2024[169][268] LIQUIDITY Explains the Company's liquidity management framework, including sources of funds and stress testing - The Company manages liquidity to ensure sufficient funds for customer needs and loan withdrawals, utilizing stress testing and a liquidity management framework[270] - Liquidity is provided by maturing assets, liquid assets (money market assets, available-for-sale debt securities, equity securities), and access to external funding sources like FHLB and FRB[271][272] INFLATION Discusses the impact of inflation and interest rate changes on the Company's financial condition - Changes in interest rates typically have a greater impact on a banking organization's financial condition than changes in the rate of inflation[273] FORWARD-LOOKING STATEMENTS Highlights the inherent uncertainties and risks associated with forward-looking statements in the report - The document contains forward-looking statements regarding future financial performance, loan portfolio, credit reserves, growth plans, and regulatory developments, which are subject to risks and uncertainties[274] - Actual results could differ materially due to factors such as economic conditions, loan portfolio losses, changes in interest rates, competitive pressures, acquisition difficulties, cybersecurity risks, and regulatory changes[274][275][276] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk This section details the Company's approach to managing market risk, particularly interest rate risk, through asset-liability management policies, simulation analysis, and the use of derivative financial instruments to mitigate potential fluctuations in net interest income Interest Rate Risk Management Describes the Company's strategies and policies for identifying, measuring, and mitigating interest rate risk - The Company manages interest rate risk to balance it with credit risk, liquidity risk, and yield maintenance, with policies established and monitored by management and the boards of directors[279] - Interest rate risk arises from mismatches in maturity or repricing periods and interest rate indices of assets, liabilities, and derivatives, potentially causing disproportionate changes in net earnings[280] Interest Rate Sensitivity Analysis Presents the potential impact of hypothetical interest rate changes on net interest income through simulation analysis Static Shock Scenarios (Percentage change in net interest income over one year) | Scenario | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------- | :------------- | :---------------- | :------------- | | +200 Basis Points | (1.8)% | (1.6)% | 1.9% | | +100 Basis Points | (0.6)% | (0.6)% | 1.4% | | -100 Basis Points | (0.2)% | (0.3)% | 1.5% | | -200 Basis Points | (1.2)% | (1.5)% | 1.6% | Ramp Scenarios (Percentage change in net interest income over one year) | Scenario | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :------- | :------------- | :---------------- | :------------- | | +200 Basis Points | 0.2% | (0.2)% | 0.8% | | +100 Basis Points | 0.2% | (0.0)% | 0.6% | | -100 Basis Points | (0.1)% | 0.0% | 1.3% | | -200 Basis Points | (0.5)% | (0.3)% | 2.0% | - The Company's interest rate sensitivity has remained relatively neutral, with management executing various derivative instruments (collars and receive-fixed swaps) to hedge variable-rate loan exposures and mitigate potential fluctuations in net interest margin[285] ITEM 4. Controls and Procedures Management, under the supervision of the CEO and CFO, evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective as of March 31, 2025. No material changes to internal control over financial reporting were reported during the period - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[288] - No changes in the Company's internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal controls during the period[289] PART II. — OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings and risk factors ITEM 1. Legal Proceedings This section outlines the Company's legal proceedings, including a settled California PAGA matter and an ongoing Fair Lending matter. Management believes the eventual outcome of these and other ordinary course legal actions will not have a material adverse effect on the Company's operations or financial condition - A California Private Attorney General Act (PAGA) suit against Wintrust Mortgage was settled for an immaterial amount, with court approval and fund disbursement completed by December 31, 2024[291] - A putative class action alleging fair lending discrimination against Wintrust Mortgage and Wintrust Financial Corporation is ongoing, with Wintrust vigorously disputing the allegations and unable to estimate potential liability[292] - Management believes that the eventual outcome of all pending or threatened legal actions will not have a material adverse effect on the Company's operations or financial condition[294] ITEM 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the Company's 2024 Annual Report on Form 10-K - No material changes have occurred in the risk factors since the 2024 Form 10-K filing[295] ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities This section reports that the Company did not make any purchases of its common shares, nor did any affiliated purchasers, during the three months ended March 31, 2025 - No purchases of the Company's common shares were made by or on behalf of the Company or any affiliated purchaser during the three months ended March 31, 2025[296] ITEM 3. Defaults Upon Senior Securities No information to report for this item ITEM 4. Mine Safety Disclosures No information to report for this item ITEM 5. Other Information This section confirms that no directors or officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the first quarter of 2025 - None of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[297] ITEM 6. Exhibits This section lists all exhibits filed as part of the 10-Q report, including certifications from the Chief Executive Officer and Chief Financial Officer, and various XBRL taxonomy documents - Exhibits include certifications (31.1, 31.2, 32.1) from the CEO and CFO, and various XBRL taxonomy extension documents (101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF) for financial information[298] Signatures This section contains the required signatures for the quarterly report, including those of the Executive Vice President and Chief Financial Officer, and the Executive Vice President, Controller and Chief Accounting Officer - The report is signed by David L. Stoehr, Executive Vice President and Chief Financial Officer, and Jeffrey D. Hahnfeld, Executive Vice President, Controller and Chief Accounting Officer, on May 5, 2025[301]