Wintrust Financial Corporation (WTFC)
Q4 2009 Earnings Call
January 27, 2010 02:00 p.m. ET
Edward Wehmer - President and CEO
Dave Dykstra - SVP and COO
Jon Arfstrom - RBC Capital Markets
Dennis Klaeser - Raymond James
Adam Klauber - Macquarie
Mac Hodgson - Suntrust Robinson Humphrey
Brad Milsaps - Sandler O'Neill
Peyton Green - Sterne Agee
Previous Statements by WTFC
» Wintrust Financial Corporation Q3 2009 Earnings Call Transcript
» Wintrust Financial Corporation Q3 2008 Earnings Call Transcript
» Wintrust Financial Corporation Q2 2008 Earnings Call Transcript
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 SEC. I’ll now like to turn the conference over to Mr. Edward Wehmer. Please go ahead, sir.
Thank you and welcome everybody, good afternoon and thanks for participating in our fourth quarter earnings call. With me as always are Dave Dykstra, our Chief Operating Officer and Dave Stoehr, our Chief Financial Officer. As we’ve always done I will give some general opening comments. Dave Dykstra will follow with a review of some of the actual numbers and then I will make some closing summary comments. As always there will be plenty of time for your questions.
We are pleased to report net income for the year of $73. 1 million or $2.18 per share, for the quarter we made $28.2 million or $0.90 a share. Our annualized pre-tax, pre-provision, pre-bargain purchase, pre-credit has rolled up to about a $176 million, up a little bit from the third quarter.
We expect to achieve even better results going forward and we are going to get there a little bit later. But we are very pleased with those numbers, given the economic situation at the time during the course of the year and are consistent. We’ve been able to achieve the plans and goals and objectives we laid out earlier in the year.
The margin for the period decreased quarter-to-quarter from 3% in a quarter to 3.10%. This is in spite of the fact that our cost of funds was down 20 basis points quarter-over-quarter. So, it's really the asset side that contributed to what we believe to be just a temporary margin phenomenon. Two factors affected the asset side, the first is the fact that for the entire quarter, we had about a $1 billion of overnight money, earning basically nothing.
In the third quarter if you remember we did two transactions. One, we bought the AIG portfolio earlier in the third quarter and then later in that quarter we did our securitization transaction. Accordingly, we had probably on an average basis, a little over $600 million more in overnight money as opposed to being deployed and that had an affect on the asset side of the equation.
The other thing that affected the asset side were less pre-payments in the AIG portfolio experienced in the fourth quarter as opposed to the third quarter. These numbers are kind of hard to predict. I think going forward it’s going to be somewhat lumpy if you will. I will point out that we estimated around a five year average life for these loans. If you look at the prepayments over the third and fourth quarters, they equate to a 55-month average life of the portfolio.
So I guess you could say the third quarter was high and the fourth quarter was a little bit low. But if you put them both together, they're pretty close to what we had anticipated. So although we envision that this will be a little bit lumpy going forward, the portfolio is acting as we had anticipated and that business is still going very well for us. And so the margin going forward, one of our main objects, notwithstanding growth which I'll talk about later is to deploy that extra liquidity that we were carrying over the course of the fourth quarter.
That liquidity redeployment, we're running it at about 85% loan-to-deposits right now. We want to run between 85% and 90% loan-to-deposit. That equates to about $500 million worth of capacity for loans to take us to that high end of the loan-to-deposit ratio. Again redeploying those assets, the overnight money into higher earning loans is a priority. We made some progress in that regard.
We had talked earlier and I'll mention this again about this type of, this time in the economy, all these dislocated assets and dislocated people and dislocated banks. The dislocated people say we are finding that there are lots of folks out there who want to come and work for us. We've equated it somewhat to, if you remember the refugees leaving Cuba, we call it our Cuban life boat now. There's a lot of folks who are working for entities that may not be in good shape and don’t lend and would really like to come and join our crew.
During the course of the fourth quarter, we hired 20 new lenders. There is two more that will be joining us in the first quarter. That’s 22 new people coming from all sorts of places, around the system, not all from one place. I think if there was any common denominator to them, many of them had started their carrier back, it’s been some time at the old American National Bank in Chicago.
The American National use to vie with LaSalle Bank for the total middle market of Chicago. I think at one point in time, LaSalle had 45%, The American National had 45%, everybody else split the other 10%. I think if you talk to those guys back then, I think every year they probably exchanged five clients a piece and just drove their pricing down but the fact is these people have that in their DNA. So it really is part of our movement into the commercial side to be more of a force and a presence in Chicago in the commercial side of the market.