Wintrust Financial Corporation (NASDAQ:WTFC), a leading regional bank holding company, has reported another solid quarter, showcasing its ability to navigate the current economic landscape. For the second quarter of 2024, the company reported net income of $152.0 million, bringing its year-to-date net income to a record $339.3 million. The company's annual net income for 2023 was $622.6 million, while its annual revenue reached $3.33 billion. Additionally, Wintrust generated annual operating cash flow of $744.4 million and annual free cash flow of $698.0 million.

Financials

The quarter's performance was driven by several positive factors, including balanced loan and deposit growth, stable net interest margin, and continued credit discipline. Wintrust's loan portfolio grew by $1.4 billion, or 13% on an annualized basis, during the quarter, with growth across all major product categories. This growth was partially offset by the company's strategic decision to sell $698 million in premium finance loans to maintain appropriate liquidity, capital, and loan-to-deposit ratios. Adjusting for this sale, the company's total loans would have increased by $2.1 billion, or 20% on an annualized basis.

On the deposit side, Wintrust reported strong growth of $1.6 billion, or 14% on an annualized basis, during the quarter. The company's non-interest-bearing deposits remained stable at 21% of total deposits, reflecting the company's ability to attract and retain a diverse deposit base.

Wintrust's net interest margin for the quarter was 3.52%, in line with the company's expectations. The stable margin, combined with the strong loan and deposit growth, resulted in a record quarterly net interest income of $471.0 million, up $6.4 million from the previous quarter.

The company's credit quality metrics remained solid, though the company did see some normalization from the exceptionally low levels experienced in recent years. Nonperforming loans as a percentage of total loans increased slightly from 34 basis points to 39 basis points, while net charge-offs increased from 21 basis points to 28 basis points. Wintrust's management team remains focused on proactively identifying and addressing any potential credit challenges.

Wintrust's non-interest income totaled $121.1 million for the quarter, down from $140.6 million in the previous quarter. This decrease was primarily due to a $20.0 million gain recognized in the first quarter related to the sale of the company's Retirement Benefits Advisors division within its wealth management business, which was not repeated in the second quarter. The company's mortgage banking revenue increased by $1.5 million compared to the previous quarter, driven by higher production revenue, which was partially offset by less favorable market value adjustments on the mortgage servicing rights portfolio.

On the expense side, Wintrust's non-interest expenses increased by $7.2 million to $340.4 million, primarily due to higher salaries and employee benefits, advertising and marketing, and professional fees related to the pending acquisition of Macatawa Bank Corporation.

Outlook

Wintrust's management team remains optimistic about the company's growth prospects, with guidance for mid- to high-single-digit loan growth for the second half of 2024. The company's core commercial and industrial, commercial real estate, and leasing pipelines remain strong, and the team expects continued growth in the premium finance portfolio, albeit at a slower pace than the second quarter.

Recent Developments

Regarding the pending acquisition of Macatawa Bank Corporation, Wintrust received regulatory approval in June 2024 and expects to close the transaction shortly after Macatawa's shareholder meeting scheduled for July 31, 2024. Macatawa, a $2.7 billion bank holding company, operates a network of 26 full-service branches in Kent, Ottawa, and northern Allegan counties in Michigan. The acquisition is expected to be marginally accretive to Wintrust's net interest margin and provide additional growth opportunities in the Michigan market.

Liquidity

Wintrust's balance sheet remains strong, with total assets of $59.8 billion as of June 30, 2024. The company's regulatory capital ratios remained relatively stable despite the strong growth, with a Tier 1 leverage ratio of 9.3% and a common equity Tier 1 ratio of 9.5% as of the end of the second quarter.

Geographic Breakdown

In terms of geographic breakdown, Wintrust's primary markets continue to be the Chicago metropolitan area and southern Wisconsin, which accounted for 67.8% of the company's commercial real estate loan portfolio as of March 31, 2024. The company also has a significant presence in other Midwest markets, including Indiana, Florida, Michigan, Colorado, and Texas.

Business Overview

Wintrust's diverse business model, which includes community banking, specialty finance, and wealth management, has proven to be a key strength in navigating the current economic environment. The company's focus on building long-term customer relationships, maintaining credit discipline, and prudent capital management has positioned it well for continued success.

Conclusion

Overall, Wintrust's second quarter results demonstrate the company's ability to deliver consistent performance and growth, even in the face of a challenging market landscape. The company's balanced approach to loan and deposit growth, stable net interest margin, and proactive credit management have contributed to its strong financial position. With the pending acquisition of Macatawa Bank Corporation and a positive outlook for the second half of 2024, Wintrust appears well-positioned to continue its track record of success.