Wintrust Beats on Q1 Earnings, Lags Revs - Analyst Blog

Wintrust Financial Corporation WTFC reported earnings per share of 68 cents in first-quarter 2014, beating the Zacks Consensus Estimate of 66 cents per share. Further, results compared favorably with the prior-year quarter figure of 65 cents.
 
Wintrust's results primarily reflect higher net interest margin, robust growth in loans and deposits, and an increase in non-performing asset levels.

Wintrust's net income applicable to shareholders of $34.5 million in the reported quarter highlights an increase of 7.5% from the year-ago quarter.

Performance in Details

Net revenue increased 1.0% year over year to $189.5 million. However, the figure lagged the Zacks Consensus Estimate of $190 million marginally.

Net interest income at Wintrust on a fully tax equivalent basis rose 10% from the prior-year quarter to $144 million. The rise was primarily driven by increase in average earning assets and lower interest expenses. Net interest margin climbed 20 basis points (bps) year over year to 3.61%.

Wintrust's non-interest income fell 21% year over year to $45.5 million, primarily due to decreased mortgage banking revenues and some interest rate swap fees.

Non-interest expenses at Wintrust stood at $131.3 million, up 9% year over. The rise was primarily driven by a surge in other real estate owned expenses, and higher salary, occupancy and equipment expenses.

On a fully tax equivalent basis, efficiency ratio stood at 69.02%, signifying a 524 bps increase year over year. An increase in the ratio reflects low profitability.

Credit Quality

Credit quality metrics exhibited a marked improvement in the quarter. Wintrust's provision for credit losses fell 79% from the prior-year quarter to $3.3 million, mainly due to lower non-accrual loans and allowance for loan losses associated with charge-offs provided within the estimate for credit losses from non-accrual loans. Net charge-offs, as a percentage of loans, excluding covered loans, stood at 0.24% on an annualized basis, down 15 bps year over year, due to lower charge-offs within the commercial loan and residential real estate loan portfolio.

As of March 31, 2014, excluding the allowance for covered loan losses, the allowance for credit losses came in at $93 million or 0.71% of total loans, compared with $125.6 million or 1.06% of total loans as of March 31, 2013.

Balance Sheet

Net loans increased 11% year over year to $13.1 billion. Further, total deposits rose 8.4% year over year to $15.1 billion.

Capital and Profitability Ratios

Wintrust remains well capitalized. As of March 31, 2014, the tangible common equity ratio stood at 8.0%, up 30 bps year over year. Tier 1 capital to risk-weighted assets stood at 12.0%, down from 12.4% in the prior-year period. However, total capital to risk-weighted assets declined 90 bps to 12.6%.

Return on average assets stood at 0.78%, up 3 bps year over year, while return on average common equity increased 16 bps to 7.43%.

Zacks Rank

Wintrust currently carries a Zacks Rank #3 (Hold).

Among other better-ranked stocks in the banking sector, Chemical Financial Corporation CHFC, Peoples Bancorp Inc. PEBO and Enterprise Financial Services Corp. EFSC appear impressive at current levels. While Chemical Financial and Peoples Bancorp sport a Zacks Rank #1 (Strong Buy), Enterprise Financial carries a Zacks Rank #2 (Buy).