Wintrust Financial Corporation (WTFC)

Q2 2010 Earnings Call

July 28, 2010 02:00 pm ET


Edward Wehmer - President and CEO

Dave Stoehr - EVP and CFO

Dave Dykstra - SEVP and COO


Jon Arfstrom - RBC Capital Markets

Brad Milsaps - Sandler O'Neill

Emlen Harmon - Bank of America

Mac Hodgson - SunTrust Bank

Dan Johnson - Citadel

Stephen Guyan - Stifel Nicolaus

Daniel Cardenas - Howe Barnes



Welcome to Wintrust Financial Corporation's 2010 second quarter earnings conference call. Following a review of the results by Edward Wehmer, Chief Executive Officer and President, and Dave Dykstra, Senior Executive Vice President and Chief Operating Officer, there will be a formal question-and-answer session. The company's forward-looking assumptions are detailed in the first quarter's earnings Press Release and in the company's Form 10-K on file with the SEC.

I will now turn the conference call over to Mr. Edward Wehmer. Please go ahead.

Edward Wehmer

Good afternoon and welcome to our second quarter conference call. I love it when we get on, I always have to say my name and I get Waymer, Wimer, and I go just remember, I weigh more. So it always comes across is Wehmer.

With me today are Dave Dykstra, our Chief Operating Officer and Dave Stoehr, our CFO. For our normal operating procedures I will provide some general comments. Dave Dykstra will get into some details on the actual numbers, and as we said, we'll have time for questions.

Outside of our normal procedure, I'll let you know we are conducting this call from our new offices down on 190 South LaSalle Street, where our commercial initiative has taken off to a great start, and it's kind of fun to be down here with the big bankers, with the big guys having this call.

I'll start with earnings. Continued profitability in these challenging times for the second quarter and year-to-date, net income of $13 million or $0.25 per diluted share. Good progress in core earnings. As we have defined them and in the press release itself, our core earnings for the quarter were $47.5 million, up from $25 million a year ago. So, our objective to increase core earnings and to continue to increase core earnings, we are doing it and we think going forward that we'll be able to continue to take advantage of opportunities, both in the market and our own balance sheet. And I'll talk about those a little later.

For the quarter, the margin did increase 5 basis points to 3.43%. Cost of funds was the biggest contributor to that as we continue to bring down our cost of funds. The yield on earning assets however was down a bit. As you recall, last quarter we had about $1.2 billion of overnight liquidity because of our growth this quarter, which I'll talk about in a second. That number stayed relatively the same. So, there are opportunities to redeploy that liquidity, but because of how that is affecting us right now, that is holding our margin down a bit. But then again, the margin was up for the quarter.

Core growth for the quarter, we feel very good about this. If you strip away the two FDIC deals, total assets grew by $363 million with deposits up close to $400 million and loans up around $255 million. The deposits were up even as we continue to drop rates. These are core deposit relationships, both commercial and households. The market is in such disarray here with banks closing and alike. We are picking up market share and we think this is a good thing. I think in the short-term it will hurt you a little, but long-term, adding core business and core households to our franchise at costs that are relatively low is a good thing for building overall franchise growth. And over the long term, I think it will serve us extremely well.

The FDIC acquisition about Lincoln Park and Wheatland added assets of $506 million, deposits of $502 million and covered loans of $276 million. So in total, the Company grew assets for the quarter by $869 million and deposits by $900 million. Again, good solid core growth. I will mention that, I'll do that in a second, never mind. We're particularly pleased with loan growth. Quarter's growth represents solid relationship banking and our pipelines remain very strong. I was just talking to the fellows down here, and what's very interesting is the amount of looks that we're getting just out of Chicago. I will say the growth occurred throughout the system but Chicago is off to a terrific start.

We booked a number of loans, but what's most interesting is the number of loans that we haven't booked. It's not like we're taking everything that comes in. We've turned down, we've looked at numbers, so qualified leads and we've turned down or decided not to bid on close to $250 million already, the six months that we've been operating here. Which is a good thing because, opening up downtown we have a very strict credit culture around here and we brought fellows in who had the exact same credit culture as we had.

I told one of the gentlemen, John McKinnon, I said, he's a little bit older, then I said, John I think the way we think I think we were separated at birth. It was a very long labor, but I think we were separated at birth. But the issue is that their culture, their credit culture fits right in to our credit culture and they are having solid success in building, the commercial side of our equation in very short order.

The FDIC deals, just a word on that. We really have had no surprises to date. The integration is going extremely well. We look forward to completing the conversions which are to schedule now for the next three months. They will take place within the next three months and continue the assimilation in starting the market in these new geographic areas.

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