All right, good afternoon, everyone. We're in session with a company I've covered for 25 years, this fall. And I have Tim Crane, the new CEO, and Rich Murphy, who I think you do a little bit of everything, but Vice Chairman of Lending. We'll just kind of talk through some of the trends that you guys are seeing and then get into some of the Q&A. And as always, if the audience has any questions, go ahead and fire away. So, 30,000-foot view of Wintrust. Most of you are familiar with the company, but why don't you go ahead and give us, you know, your description of the company?
Yeah. John, thank you for having us here. Wintrust, $56 billion. Our retail footprint's 175 or so locations in Southeastern Wisconsin and primarily Northeastern Illinois. We creep into Canada from a commercial standpoint in 16 states, primarily Midwestern for traditional commercial mid-market business. And then we've got both nationwide and, in one case, in Canada, kind of focus on, you know, blocking and tackling relatively conservative growth, steady in terms of both loan growth and deposit growth, and, you know, just try to win in the market. And, John, I think the interesting thing is we've seen Chicago's been a pretty dynamic market over the past 4 or 5 years, and, we're entrepreneurial and I think have done a good job taking advantage of the disruption in the market as some of our independent competitors.
Yep. Okay, great. So, and then it's your first year as CEO. You're following under, and, but the company's done well, and you've done a nice job. But just give us some impressions of what the first year was like, some of the successes and some of the challenges.
You bet. And I'd be remiss if I didn't mention my predecessor. Many of you probably met Ed Wehmer at one point or another. Just a terrific banker. And he and our board. A relatively smooth transition. And, you know, I'm fortunate that this has occurred at a time when the bank has performed pretty well and credit's pretty benign. So, been one smooth transition, great opportunities for the bank going forward. Spent a fair amount of time on talent. So not only is this a transition. We don't have a lot of hair here. So there are others in the company that are really just doing a nice job, re-energized about running parts of our company, taking advantage of opportunities. So. Best in terms of the scenario we started here, and I think we're in a pretty good place.
Okay. I joke that we go to the same barber and same ophthalmologist. Okay. Rich, maybe to you a little bit, or Tim, I guess. But, we hear mixed reviews on the Chicago economy. Obviously, it really has an impact on your footprint is like, the health of the footprint, and what you're generally seeing in your markets?
Yeah, it's, I think the obituaries on Chicago are a little premature. I think, you know. And I'm born and raised there, so I'm obviously biased. But, it's, you look at from Milwaukee on down into Northwest Indiana, it's an incredibly vibrant market. Obviously, the pandemic wasn't kind to Chicago or really any major city. But, you know, one of the things that kind of goes along with the other side of that is that, you know, And, you know, the South and, Southeast, you know, you're really starting to see some challenges there. You know, Chicago never really runs that hot or that cold. You know, we're still seeing, incredibly good signs in terms of multifamily, rent growth, you know, unemployment. We're still seeing, you know, Chicago in terms of, having, good wage growth. You know, downtown is coming back. Hospitality.
Generally speaking, we're feeling pretty good about Chicago right now. As Tim points out, the competitive dynamics for Wintrust are really good right now because that we used to go and compete with day in and day out, they're all gone. So it does leave us with a really good opportunity and what we think is a really good market.
Okay. Similar in Milwaukee? Other parts of your footprint?
I think Milwaukee's a great market, and it's doing very well. But, you know, one of the challenges is it's, you know, a fraction of the Chicago size, and you still have all the same competitors. So it is probably a little tighter than it is in Chicago.
Okay.
But, John, good healthcare, good education. We've got water, transportation. I mean, it again, to Rich's. Pretty good place with, you know, 10 or 11 million people.
Yep. Okay. Yep. Makes sense. You touched on it. It feels like you've you've grown up into a much bigger bank, and I know that that's maybe changed some of the opportunities that you've had. You touched on it, Rich. I don't know if one of you you're seeing to compete against the bigger guys?
Yeah, it's interesting. I mean, you've been around us a long time, and, you know, having been with Wintrust from the start, you know. Opportunities that we'd be seeing. I mean, you know, we have a, you know, cultural icons like, you know, Museum of Science and Industry. It's a, you know, a customer that we now have as. You know, those are things that we could have only dreamed of, you know, 10 years ago, 5 years ago. Large manufacturing companies, you know, it's. Banks that we talked about have exited. That has given us a lot of opportunity. Probably the best opportunity we've had is just Chase's footprint has, you know, dominated our market so much that it really gives us the opportunity to see customers that really are wonderful opportunities for us. So, it.
Seems like it's kind of hollowed out within the.
Yeah, it really has. One of the challenges to stay entrepreneurial and stay true to our culture, which has been to be hungry and to take better care. And so it, you know, we reinforce that every day.
Yeah. One of the things, too, is, I mean, you're again familiar with the story, but Wintrust is a known local name now, and. The very large banks really involved in local, non-for-profits and a lot of the civic causes. And so our name is everywhere. So. Quite a bit.
You've altered the branding a bit for that?
Mm-hmm. Yeah, we have. I mean, we still use local branding for retail purposes. But, see, Wintrust. You'd see Wintrust Mortgage. You'd see Wintrust Wealth Management. You'd see Wintrust Commercial. So. But local in Chicago, you may not, you know, see that name.
Okay. Always in any of these sessions, if you have questions, just put your hand up, and we'll get your questions answered. Comfortable pace of loan growth for the company. You guys have given some guidance. How long is the runway ahead for you?
Yeah, I think it's okay. I mean, we've talked about broad-based loan growth. We've got a number of niche businesses, plus. The niche businesses have been terrific, and having a number of different businesses helps. So the P&C premium finance business is good. Leasing business is good. Our middle market business is good. So, I think we still feel pretty comfortable. We've said mid- to high single digits, and we're pretty comfortable. That's.
Have you seen any change in the demand from clients recently?
Yeah, you know, again, it's just kind of, you know, you have all these different pillars that make up the loan portfolio. So they all, like, in C&I, you're seeing line utilization really getting a little bit reduced, as people are paying down with their cash but coming out of other banks. So, you know, that offsets that quite a bit. You know, CRE is another interesting story. A lot of banks are completely out of the CRE space. And we, you know, because we think we have a reasonably good portfolio, and we've been pretty smart about how we've managed that portfolio. So we're still open for business. But, you know, we want to do, and there's a lot of deals that we don't want to do.
So, you know, right now, you could get good structure, good pricing, really good clients where you can probably get. So that's a good story. You know, life finance is probably a little bit tougher right now because, with rates higher, that's a little bit less attractive. It's a great story. The hard market brings higher loan sizes, and you can really kind of get a lot of growth there. So just, you know, some up, some down, but I'm.
Can you spend a minute explaining the business, the premium finance business, for those that might not be familiar with it?
Sure. There are two. One's life insurance related. Premium finance related. On the life insurance side's primarily an estate planning tool. The loan advance is covered by the cash values. In the history of our operation have been zero in that business. As Rich mentioned, when rates move up, it gets a little bit tougher because the arbitrage. Financing their insurance, and whether they would want to invest in their own business gets a little bit tougher, but very attractive when rates were low. The other side is a $50,000, you know, property and casualty policy. They want to pay for that insurance over a period of time. And so we finance over a 9 generally over insurance premium. And then, our collateral is the unpaid unearned premium.
So that if a business doesn't make their loan payment to us, we basically surrender the policy premium from the carrier. So in many cases, we're dealing with primarily the insurance agents and the carriers in terms of our risk profile, as opposed to the end customers.
Marcus?
Yeah, we're about, you know, bigger than a third in the P&C side, and probably 40+% on the life side.
Deposits a bit.
Sure.
It was a hot topic a day after this conference and a year ago, but touch a little bit on to some of the recent trends. But, you know, give us an idea of, you know, what it was like managing through it as a new CEO, and kind of where you are today.
I mean, our focus, one, we were a nice deposit franchise. We've got terrific clients. We focused heavily on communication. We just said, here are the facts. We went out. We talked. And with the exception of a handful of clients that I would say in almost all instances had fiduciary responsibilities. So think of a fund business or. Deposits to a, you know, too big to fail bank. We retained those deposits. And so it was a, you know, a 12-week period where you really didn't want to be on CNBC and Down, talk to our customers. And ended up growing deposits as we have very regularly. And Chicago remains one of the most fragmented deposit markets in the country, and. Opportunity to continue to grow. And so we've always said we'd like to fund our loan growth with deposits, and that's our objective.
You feel like that it's mid- to high single-digit.
Yeah, probably mid. We've got a couple of, you know, nice deposit niche businesses that, you know, kind of ebb and flow a little bit. But first quarter for most banks, slowest deposit growth period. But, we're optimistic that we've got opportunities in Chicago and we'll grow deposits.
Okay. Anything on the pricing environment? It's changed.
Well, it's subsided. I mean, the urgency that was present last summer is kind of gone. People order with their promotional activity. So where we were promoting 15-month deposits last summer, we're, you know, 9 months right now, 8 or 9 months. We're doing more money market to get money in the bank. So in that regard, we're just trying to be a little bit more careful with our interest rate sensitivity, which for us has gone from being very neutral at this point.
Okay. Where's the competition coming from on deposits? Is it everywhere?
Yeah, it's everywhere. But it's really. Clients just managing their money differently. You know, when rates were 0, they didn't. Not a great incentive to kind of watch that. And now corporate treasurers and wealthy individuals are.
Okay. Okay. How about the non-interest-bearing trends? It's been a focus that investors are.
Yeah.
You know that we've had. What have you seen in terms of non-interest bearing trends?
Yeah, I mean, our non-interest bearing has stayed pretty steady for the last 3 or 4 quarters, in terms of absolute. Going down as the denominator changes. But we think that the challenges there have been offset by new business that we continue to bring in. So. But I think we've seen most of the outflow or most of the change there already occur.
Okay. Okay, good. On the margin. You've talked about a margin within a range over time. For years we talked about the beach ball.
Yeah.
I don't know where the beach is. The beach ball. Is it bouncing along, or?
Ed should be here. We sat in meetings like this two years ago, and our margin was 2. The Fed earning eight basis points, and people were beating us up. You got to invest this money. You got to do something. You got to invest this money. And we kept trying to figure out why, you know, one was a good solution. And at the time, you know, our margin was 260, and we were like, we just can't do this. And so we ended up having pretty good years as a result of primarily. And we were patient in terms of investing those excess funds and had a loan book that repriced very quickly. And so our margin 1st quarter of 2023. Had it not been for the activities, really, of the second half of March probably would have been 4%.
So we're 360 now. We've said, you know, plus or minus. We think we can stay in that range, and we're very comfortable there. We think, you know, we ought to be improving our results by winning new business, not by betting on interest rates, and not to see a 2 handle on a margin ever again. And we're doing everything we can to make sure that never happens.
So you feel like it's a comfortable range?
I think so. Yeah.
Okay. Yeah. Is there an ideal interest rate environment?
It would have been, you know, for a number of years. It was rates up. I think again, we're pretty neutral right now. And so we're comfortable with higher for longer or 2. But we, you know, we would get pressure at, you know, 150 down, 200 down. The offset would be. Our mortgage business would pick up. But, we're pretty comfortable where we are.
Okay. Yeah. Higher for longer doesn't bother you?
No. I mean, if you had a couple cuts, and then the opportunity to get some mortgage volume. I mean, that's probably the perfect spot for us.
Right. Right. Okay. Okay. Any, just out of curiosity, any differences between the. Is there an ability to do that?
Yeah, there is. We didn't talk about it at the beginning. We're somewhat unique in that we maintain 15 independent charters or actual legal entities. All of the back office that's not customer facing is combined. And so from an efficiency standpoint, while there are some expenses related to the 15 charters, the. And one of them is a good understanding of what happens in the market. So whether it's loan pricing or deposit pricing, we have standards, and we have profitability models, but flexibility to address business needs in their communities. And, you know, Hinsdale's different than Winnetka, and different than Joliet, and different than Milwaukee. And so leaders, exploiting those opportunities that we think others miss with just a broad brush approach.
Yep. Okay, good. You touched on mortgage, and you guys, as I remember, you know, a lot of these acquisitions over time. And you made a couple recently. But let's cover mortgage first. We'll say it's the big one, but some business, and it's not so much now. But what are you seeing? What does it look like this spring? Give us an idea of how you see it, and what kind of outlook you have there.
Yeah. You know. So, but we are seeing, the January was a decent month off in December, and it was better than the year. A little better than January. The 1st couple of days in March look good. Lots of pre-qual activity. There's a tremendous amount of interest in the purchase side of the. The inventory is the problem. I mean, there's just a lot of people out looking right now, but they're having a hard time finding something. So, we're optimistic that things are going to shake loose. Base. And it's going to be better, but it's going to take a while, I think, before it comes really back to where anywhere close to where it had been in the past.
Just more of an inventory issue.
I think it's right now. It's more of an inventory issue. You know, I think there's people out there willing to buy, you know, but there's just not a whole lot to buy.
thing, though, is this market has certainly chased out a lot of the independent mortgage providers. And so, you know, when the refinance business went, there are many, many fewer providers. Pool of businesses left. We're getting a much bigger share of, and we'll try to defend that over time.
Is there a way to size it for us?
They're probably, you know, with me here.
Okay.
But a lot are gone. A lot.
Yep. Okay. Got it. Other fee opportunities for your company. Maybe touch on there in wealth.
Yeah. I mean, the wealth business is another fee income business pretty steady for us, you know, $30 million, $33 million, $40 million, $35 million a quarter. They're fully integrated at this point. We're starting to get some momentum. Probably two-thirds institutional, a third kind of private wealth. Those should grow steadily for us over time. We did announce two changes over the last, you know, three weeks or so. One was a partnership related to. The other was, basically a partnership or a platform change with LPL. In terms of our brokerage business. Both, we think, steps to get us better capability to invest the amount of money we needed to on our own. And probably some modest efficiency gains. And so, you know. It's a nice. We just bolt on the wealth, and, you know, our.
Fortunately, we have many successful clients, and we just help them along the way. The other would be our fee-based business around service charges growing nicely, probably 2-3 times the market rate. We have relatively sophisticated services that the bigger banks, and certainly outclass the smaller banks in our market. The 2 things that we've talked a little bit about today, John, or the, you know, one. Fees about a year ago. And so the risk there that other banks face in terms of those revenues either getting compressed or eliminated doesn't exist. Fees are relatively modest. And so if those were to get cut by a 1/3 ±, which is kind of out there for discussion, there's relatively little impact on us. So, regulatory defensive, in terms of our positioning.
Okay, good. Enrich the treasury management product. Your lenders don't come back and say, we don't have what we need.
I think actually the opposite. I think people are surprised when they stack us. Well, certainly, looking at the smaller competitors, I think we have a pretty much more. But when you look at like the Chases of the world, I think we stack up very closely, and we're priced just way better than they are. So, I think most people out of Chase come over to us, and they see the, you know, it's a very robust product. But you know, their CFO is usually saying, this is way cheaper, too.
Right. Anything to note on expenses in terms of what you're expecting?
We'll make sure they stay relative to each other appropriate. So if our revenue growth slows, we'll spend more time focusing on expenses. But we've been steadily. The reason we do that is we think if you stop doing that, you really get stuck, and then you can't spend enough to catch up, and your results kind of get poor. And you know, in the last couple of years, I mean, we've worked on a loan origination system. We've replaced essentially all of the digital capabilities for our consumer platform, our insurance finance business. We're looking at all sorts of efficiencies and robotics. We just don't make a big deal out of it. But we're always looking for efficiencies, and we've got a business process days meeting with our folks.
You know, I would expect, you know, that the expense growth will be in line with the revenue growth.
Okay.
And if it's not, we'll act very quickly.
A higher variable component.
Yeah.
In your expenses.
I think that's right. And mortgage is a little bit of a swing. Obviously, if the mortgage business heats up, the expenses will go up quite a bit. But that'll be.
Okay. Rich, we can't let you go without credit. Okay. Give us a big picture view on what you see on credit. And, I want to talk about.
Again, I think we've been pretty overt about, you know, where we try to position ourselves. Would anticipate normalization would continue. We would think that CRE is probably the area that we're probably, you know, most concerned with, is that everybody to try to understand what the pending maturities are looking like, and where the holes are in the portfolio. And so far we feel pretty good about what we see. Nobody's going to be. But, you know, that normalization, you know, I think won't be, you know, surprising to anybody. I think it's going to be pretty much in line with, you know, kind of where we. So CRE, I think, is a story that we've got our arms around. The C&I side, generally speaking, feels pretty good right now. I mean, most of our overall business volumes are good.
A lot of pressure is off now as it relates to staffing costs. So that's good. So we're feeling okay right now. I never like to jinx myself. So, you know, we're working hard to make sure things land in the right spot.
Okay. How far ahead can you look and work on potential?
You know, we work. We disclose 3 quarters, but we try to, you know, go out a little bit, you know, almost double that, you know, to try to have. You certainly want to get ahead of big problems where there are meaningful challenges in terms of vacancies, or, you know, and having conversations. They, you know, we constantly preach with our bankers and our workout teams. Time is your friend. You know, just have those conversations right at the maturity date with no options, you know. So, we spend a lot of time, and we disclosed, you know, on the quarterly calls, you know, exactly how that process works. The problem areas that we've identified, you know, we've worked our way through them. I mean, where customers have said, you know, we can pay down the loan.
We can give you some that will allow them to buy time. You know, most of these customers have said, you know, we think the long end of the curve is going to come down, or I think cap rates are going to come down, and, you know, we can sell them. Need time. So that's our job is to figure out a way to kind of give them that time.
Okay. Okay. So nothing new or new stresses in the portfolio that are.
Behaving pretty much as we had anticipated.
Okay. Okay. Good.
Historically, you've been a pretty active acquirer in the market. Priorities around inorganic growth, whether they be in the regular way banking business or any of your kind of specialty theme businesses?
Yeah, sure.
Question was around M&A.
Yeah.
And your appetite.
To do kind of a regular traditional bank type acquisition for a number of years. So our last couple have been the acquisition of the Allstate Finance business, and then, you know, part of the wealth business. Bank acquisitions right now, you know, if there are kind of loan marks and or securities marks. And so there's a handful of people or we're called a. But we'll be opportunistic, I think. We've been good at acquisitions. We integrate them relatively quickly and smoothly. So we're hoping we get some. So even with loan growth in the mid single digits, you know, we've been building capital over the last several quarters. And so I think we'll be well positioned to look at stuff when it gets. But math's tough.
How do you balance that capital build and potentially returning it to shareholders versus harboring it for opportunities that you may see in the coming?
You know, it's really for a number of years. Our growth has outpaced our capital formation, and it's really only the last year or so when we've been a position where we're building. Probably premature to talk about, you know, a return to shareholders in ways other than loan growth, intelligent acquisitions. We've got reset next year. We can redeem some of those shares if we choose to. And then you get to the dividend and or share repurchases, but probably in that order or something like.
That's all we have today for time on Wintrust. We won't ask about Justin Fields versus Caleb Williams. I'm sure it's.
That's great.
Dominates everything. But.
John, thank you for having us.
Thanks very much.