Wintrust Financial Corp Q4 2024 Earnings Call Transcript

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

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Tim, just on some of your -- and maybe, Rich, as well, some of your comments on loan growth. I think I understand what you're saying, you alluded to it, you've grown when others have not, but you're seeing some more competition. Can you just talk about what you're hearing from your clients from a sentiment point of view? And curious what you're really saying and what you're flagging for growth expectations for '25 based on what you're seeing today?

Question: Jon Arfstrom - RBC Capital Markets - Analyst : Okay. Fair enough on that. And then maybe Tim or Dave, for you. It's a difficult question, but Tim, you mentioned muted activity in mortgage. I actually thought you had a decent production quarter given the environment. But curious how you guys are feeling about the near- to medium-term outlook. And is there a rate level or a mortgage rate level where activity really starts to pick up?

Question: Jeff Rulis - D.A. Davidson & Company - Analyst : Early part of the press release, you called out some of the thematics or the focal points for '25. And you included the expense management and just wanted to recheck if that's a course of just general good practice or if there's some real focal points you want to tighten up or areas that you're looking at on that front -- on the expense specifically? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 22, 2025 / 3:00PM, WTFC.OQ - Q4 2024 Wintrust Financial Corp Earnings Call

Question: Jeff Rulis - D.A. Davidson & Company - Analyst : Okay. On the -- maybe if I can just check in on M&A and appetite post Macatawa see about interest levels on your end? And then maybe if you could just touch on the priorities on capital if M&A is quiet, if you don't find those partnerships.

Question: Jeff Rulis - D.A. Davidson & Company - Analyst : Okay. And then just a housekeeping item, nice NPL move lower, did see OREO up. Just anything on -- is that acquired or legacy or just things flowing through on the OREO side.

Question: Terry McEvoy - Stephens Inc. - Analyst : Maybe just starting with the 3.50%-ish margin outlook, could you just talk about some of your deposit repricing and beta assumptions in that 3.50% and also where you see noninterest-bearing deposits trending?

Question: Terry McEvoy - Stephens Inc. - Analyst : Understood. And then as a follow-up, Rich, I think you talked about just larger banks committing to loan growth in 2025, and it sounds like more of that is back-end loaded. But when you look at your mix of businesses, core leasing niche, what areas have a moat around it where you think you're better protected from market competition should that occur this year or as this occurs this year?

Question: Nathan Race - Piper Sandler Companies - Analyst : Going back to the discussion around the margin outlook, if the Fed remains on pause this year, maybe we get one cut in early 3Q. Curious if you think the margin can expand under that outlook just given what you have in terms of additional deposit cost leverage, or is some of the repricing headwinds that lag that cuts on the insurance premium finance side of things somewhat of a headwind? I know there's a number of other yield curve dynamics that play into that, but just curious if you think there's some potential for margin expansion that is on hold for 2025.

Question: Nathan Race - Piper Sandler Companies - Analyst : Got it. That's helpful. And Dave, while I have you, I think last quarter, we were discussing maybe that the gain on sale margin in mortgage can get back to 2%. Obviously, there were a number of factors that may be inhibited that this quarter, but just curious how you're thinking about the gain on sale margin trajectory in 2025?

Question: Nathan Race - Piper Sandler Companies - Analyst : Right. That's helpful. If I could just sneak one more question. I know we have some time until some of the preferred series reset or they're callable, but would just be curious to get your updated thoughts on managing capital and just in light of potentially refinancing or redeeming some of those preferred series.

Question: Chris McGratty - Keefe, Bruyette & Woods North America - Analyst : Dave, maybe for you on the -- just the expense clarity, the mid-single-digit that you talked about, given the partial contribution of Macatawa, is that a comment of growth off of Q4's run rate, and should we be growing 5%? Or should I just simply look at '25 over '24 and say 5% and then revenues grow a little bit better?

Question: Chris McGratty - Keefe, Bruyette & Woods North America - Analyst : Got it. Okay. And then given that, is there anything as you are now only -- you're only $65 billion, is there anything in terms of like a down payment to eventually considering going to 100 in that growth rate? Or is that too far where you're not yet quite building the expense build.

Question: Chris McGratty - Keefe, Bruyette & Woods North America - Analyst : Okay. And then maybe one for Rich, I don't want to leave Rich out. On slide 20 -- I got to get everybody involved. The nonaccruals in the office book went down. Was that a curing or a charge-off, just more kind of the cadence.

Question: Ben Gerlinger - Citi - Analyst : I know we talked through quite a bit with NII and spread and then also mortgage. But could you just also just look at fee income ex-mortgage? It seems like you guys are looking to hire bankers and relationship in the footprint. But is there anything you can do from a supplemental or additional hiring perspective that would help drive those fee income items? Albeit they're significantly smaller than your core banking, but just any thoughts there, potentially down the road, that would be an area for M&A deployment on a supplemental add.

Question: Ben Gerlinger - Citi - Analyst : Got you. That's helpful. And then from the expense front, just to follow up on Chris' question in terms of like the 4Q annualized time is roughly 5%. Is there anything within that outside of just kind of normal marketing at baseball games and things like that? What should we look for in terms of seasonality now that you do have the Western Michigan franchise? Or is it kind of just back to legacy kind of seasonality trends?

Question: Brendan Nosal - Hovde Group - Analyst : If I look at slide 24 of the deck, the hedging strategy, it looks like you added about $1 billion of forward starting swaps during the quarter. Maybe just walk us through the thinking here and what you're trying to accomplish. I mean, is it as simple as you're thinking that rate cuts have been pushed out, so you want to extend that downside protection?

Question: Brendan Nosal - Hovde Group - Analyst : Yeah, that makes a good deal of sense. Then maybe turning to the premium finance business, just a few there. Wondering if you can add some color on what drove the increase in P&C loss content this quarter. And then just any color on new money origination yields in that business versus what is rolling off today?

Question: Jared Shaw - Barclays Bank PLC - Analyst : I guess maybe just looking at the DDA growth this quarter, that was good. How should we be thinking about that sort of growing on a relative basis or an absolute basis throughout 2025? Do you think that you see that increasing as a percentage of the funding base from here now?

Question: Jared Shaw - Barclays Bank PLC - Analyst : Any color on commercial line utilization rates during the quarter and where you expect that to sort of go within your guidance? Do you expect growth in that?

Question: Jared Shaw - Barclays Bank PLC - Analyst : Okay. And then just finally for me, maybe more of a modeling housekeeping question. Dave, do you have the accretion from Macatawa that's within third and fourth-quarter NII and then what an estimate would be for '25.