Wintrust Financial Corp Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Thanks. Good morning, everyone.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Hey, Tim or Rich, you've touched on it, but can you talk a little bit more about the loan growth outlook and the drivers? Just jotting down notes, Rich, in your comments, you talked about both new customers and higher line utilization. And I think the line utilization is maybe a little bit different than what some of the peer banks are talking about. So can you break that down a little bit more and talk a little bit more about the mix and the expected drivers of loan growth?

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Yes, it does, okay. So this feels like a comfortable pace of growth for the company, what you just put up from an organic perspective.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay, that's helpful. And then Richie, it's either you or Dave on this one, but I appreciate the carve-out of that, the day-one CECL provision, the $15.5 million, and we would carve that out. It suggests a higher run rate for EPS, but the $6.8 million for, call it, legacy Wintrust core seemed a little bit lower than we were expecting. So I don't know if you can help us think through what the provision might look like in the fourth quarter. I know that's a little bit granular, but that might help us set expectations a little bit. Is this a new lower core run rate for provision, or should we think about maybe a reversion to a higher number? Thanks.

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Yes, yes, okay. I think that gets us there. I think you saw Moody's upgraded the banking sector last night, so maybe that helps. But thank you, guys, I appreciate it.

Question: David Long - Raymond James Financial Services, Inc. - Analyst : Morning, everyone. Good morning. Now that we've got a rate cut out there, how has your deposit cost trended? I mean, what has been your deposit beta since then, and how have you seen the competition react to this first rate cut, both on the commercial side and then maybe on the consumer side too?

Question: David Long - Raymond James Financial Services, Inc. - Analyst : Got it. Thank you, Tim. And then closing the acquisition of Macatawa and Grand Rapids, I know that's still going through the integration process, but as you look forward there, what are your plans for potentially adding veteran bankers and really leveraging that franchise?

Question: David Long - Raymond James Financial Services, Inc. - Analyst : Great. Thanks, Tim.

Question: Jeff Rulis - D.A. Davidson & Company - Analyst : Thanks, good morning. A couple questions on the credit side. I think you said the majority of the charge-offs came in that C&I segment, and particularly one relationship. Could you just remind us, again, the industry there, and is that fully exited?

Question: Jeff Rulis - D.A. Davidson & Company - Analyst : Got it. Okay. And Rich, hopping over to the office slide, it was an increase in that 30 to 89 bucket. Your commentary was pretty positive. I just want to see if that increase was largely administrative. Any kind of concerns with that early delinquency number? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 3:00PM, WTFC.OQ - Q3 2024 Wintrust Financial Corp Earnings Call

Question: Jeff Rulis - D.A. Davidson & Company - Analyst : Okay, sounds like the overriding thread was more positive. It's the front end, just some mechanics. Maybe just one last one, maybe for Dave, just on the expense run rate, trying to figure out. We've got full quarter of Macatawa, maybe some cost saves in there. X outs and merger costs. So any type of discussion about where that settles in, and if you could hazard a guess on maybe '25 growth rate, that would be great, thanks.

Question: Jeff Rulis - D.A. Davidson & Company - Analyst : Okay. That's helpful. Thank you.

Question: Chris McGratty - Keefe, Bruyette & Woods North America - Analyst : Good morning. Dave or team, the capital improvement from the deal, that was, I think, telegraphed, but a nice bump up for the growth. As you go into the next few quarters, can you just remind us where you'd like that CET1 ratio? Dave, I believe you have some preferreds that get reset. Maybe there's a swap opportunity, but just capital philosophy going into next year.

Question: Chris McGratty - Keefe, Bruyette & Woods North America - Analyst : Okay, perfect. And then maybe a couple of housekeeping on the average share count for the fourth quarter and then the tax rate, Dave? Thanks.

Question: Chris McGratty - Keefe, Bruyette & Woods North America - Analyst : Okay, perfect. Thank you.

Question: Brandon Rud - Stephens Inc. - Analyst : Good morning. This is Brandon Rud on for Terry.

Question: Brandon Rud - Stephens Inc. - Analyst : Most of my questions have been asked and answered. It's maybe a couple modeling questions. Kind of following up on the expense question earlier, I heard the mid-single-digit comment. Maybe it's more of a medium or longer-term target for expenses. I think historically, you've looked at the net overhead ratio. And Dave, today, you mentioned the expenses to average assets. Do you have maybe a target you could maybe share for us where you like those ratios to settle out over the medium term?

Question: Brandon Rud - Stephens Inc. - Analyst : Okay. Thank you for that. And maybe just my last one. On the mid to high single-digit loan growth, I'm sorry if we said this, but where are those incremental yields coming on at or maybe a spread because of the SOFR or something?

Question: Brandon Rud - Stephens Inc. - Analyst : Got it. Thanks very much.

Question: Jared Shaw - Barclays Bank PLC - Analyst : Hi, thanks. Yes, I think just the last thing I had was the impact of the hedges to margin going forward. I think it was 17 basis points in this quarter. What's the ballpark that we should expect going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 3:00PM, WTFC.OQ - Q3 2024 Wintrust Financial Corp Earnings Call

Question: Jared Shaw - Barclays Bank PLC - Analyst : Great. Thanks a lot.

Question: Nathan Race - Piper Sandler Companies - Analyst : Yes. Hey, guys. Good morning. Thanks for taking the time.

Question: Nathan Race - Piper Sandler Companies - Analyst : I apologize I got in a little late. But just in terms of the gain-on-sale margin compression that we saw this quarter, it was a little bit more so than what we saw from some other larger banks that reported last week. So just curious if you have any thoughts on maybe a starting point for 4Q.

Question: Nathan Race - Piper Sandler Companies - Analyst : Okay, great, very helpful. Thanks, Dave. And again, I apologize if you already touched on it, but in terms of NII growth expectations, I know it's kind of a fluid environment in terms of thinking about next year. But assuming the margin kind of holds in around 350, even if we get another 100 basis points of Fed cuts next year, just any thoughts on just how much NII can grow, assuming balance sheet growth remains in that mid to high single-digit range? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 22, 2024 / 3:00PM, WTFC.OQ - Q3 2024 Wintrust Financial Corp Earnings Call

Question: Nathan Race - Piper Sandler Companies - Analyst : Okay, great. Always helpful just to hear you guys indicate that. And then just lastly, just in terms of the expected growth in capital going forward, I think you mentioned you're just going to kind of remain optimistic on the M&A front going forward. But just any other thoughts on just how you would like to manage capital? Are you guys just comfortable kind of building excess capital over the next several quarters here in light of the preferred reset next year?

Question: Nathan Race - Piper Sandler Companies - Analyst : Okay, great. Thanks, guys.