Wintrust Financial Corporation Reports Record First Quarter 2023 Net Income
ROSEMONT, Ill., April 19, 2023 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust”, “the Company”, “we” or “our”) (Nasdaq: WTFC) announced record quarterly net income of $180.2 million or $2.80 per diluted common share for the first quarter of 2023, an increase in diluted earnings per common share of 26% compared to the fourth quarter of 2022. Pre-tax, pre-provision income (non-GAAP) totaled a record $266.6 million as compared to $242.8 million for the fourth quarter of 2022.
Edward J. Wehmer, Founder and Chief Executive Officer, commented, “Wintrust successfully navigated the first quarter with limited disruption thanks to our strong deposit franchise and balanced business model. Total deposits remained stable in the first quarter as the diversity of our deposit base showed its resilience in a volatile market. Credit metrics remained very strong with non-performing assets unchanged from the prior quarter, remaining at historic lows. Finally, the Company’s net interest margin increased during the quarter contributing to record quarterly net income.”
*Highlights of the first quarter of 2023:*
Comparative information to the fourth quarter of 2022, unless otherwise noted
· Total deposits remained relatively stable decreasing by $184 million or 0.4%.
· Total loans increased by $369 million. In addition, total loans as of March 31, 2023 were $472 million higher than average total loans in the first quarter of 2023 which is expected to benefit future quarters.
· Total assets were relatively unchanged declining by $76 million.
· Net interest income increased by $1.2 million as compared to the fourth quarter of 2022 primarily due to improvement in net interest margin, partially offset by the impact of two fewer days in the quarter.
· Net interest margin increased by 10 basis points to 3.81% (3.83% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2023 as the upward repricing of earnings assets outpaced increases in total funding cost.
· Recorded a provision for credit losses of $23.0 million in the first quarter of 2023 as compared to a provision for credit losses of $47.6 million in the fourth quarter of 2022.
· The allowance for credit losses on our core loan portfolio as of March 31, 2023 is approximately 1.46% of the outstanding balance. See Table 11 for more information.
· Net charge-offs totaled $5.5 million or six basis points of average total loans on an annualized basis in the first quarter of 2023 as compared to $5.1 million or five basis points of average total loans on an annualized basis in the fourth quarter of 2022.
· Non-performing assets were unchanged at 0.21% of total assets.
· The Company recorded a net negative fair value adjustment of $3.0 million in the first quarter of 2023 as compared to a $702,000 net negative fair value adjustment in the fourth quarter of 2022 related to fair value changes in certain mortgage assets, see “Non-Interest Income” section for more information.
· The total risk-based capital ratio improved to 12.1% as of March 31, 2023 as compared to 11.9% as of December 31, 2022 due to strong earnings.
· Book value per common share increased by $3.12 to $75.24 as of March 31, 2023. Tangible book value per common share (non-GAAP) increased to $64.22 as of March 31, 2023 as compared to $61.00 as of December 31, 2022.
Mr. Wehmer continued, “Our well-established position as Chicago’s and Wisconsin’s bank proved its value as our deposit base was steady in the first quarter of 2023. Wintrust has a granular consumer and business deposit portfolio and does not have any material, at-risk deposit concentrations. In addition, we experienced growth in consumer deposits in the first quarter of 2023. Expanding our retail deposit market share and footprint remains among our top objectives. We expect to leverage our distinguished customer service, competitive rate offerings and diversified products including MaxSafe® to grow deposits in future quarters.”
Mr. Wehmer noted, “Maintaining sufficient liquidity is a fundamental part of our operation and we plan to continue to operate prudently. During the lower interest rate environment, Wintrust was measured in deploying excess liquidity into investment securities opting to both maintain interest rate sensitivity and ensure adequate liquidity for potential loan growth. As a result, if either a regulatory rule change caused Wintrust to recognize unrealized losses on our available-for-sale and held-to-maturity portfolios as a reduction to regulatory capital or if we fully liquidated our investment portfolio, our regulatory capital ratios would still be expected to exceed the well-capitalized thresholds.”
Mr. Wehmer commented, “Net interest margin increased by 10 basis points in the first quarter of 2023 as compared to the fourth quarter of 2022. The Company continued its efforts to moderate its interest rate sensitivity in the first quarter of 2023 by hedging its variable rate loan portfolio with receive-fixed interest rate swap derivatives. Due to prevailing interest rates and the inversion of the yield curve, hedging activities had a seven basis point negative impact on the first quarter net interest margin. However, these derivatives will benefit the Company if interest rates fall materially. Our net interest margin finished lower at quarter end and was approximately 3.70% due to an acceleration in deposit pricing, an unfavorable shift in deposit mix and the impact of hedging activity. We believe that we can hold the net interest margin around this level for the next two quarters as we expect further upward repricing in our premium finance receivables to generally offset additional deposit pricing pressure.”
Commenting on credit quality, Mr. Wehmer stated, “Credit metrics remain strong as non-performing assets totaled $110 million and comprised only 0.21% of total assets as of March 31, 2023, essentially unchanged from levels as of December 31, 2022. Net charge-offs totaled $5.5 million or six basis points of average total loans on an annualized basis in the first quarter of 2023 as compared to $5.1 million or five basis points of average total loans on an annualized basis in the fourth quarter of 2022. The allowance for credit losses totaled $376.3 million as of March 31, 2023, an increase of $18.4 million as compared to $357.9 million as of December 31, 2022. The allowance for credit losses on our core loan portfolio as of March 31, 2023 is approximately 1.46% of the outstanding balance. We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit.”
Mr. Wehmer concluded, “Our first quarter of 2023 results continued to demonstrate the multi-faceted nature of our business model which we believe uniquely positions us to be successful. We remain focused on growing deposits to support future asset growth. We are closely watching our expenses, striving to grow without a commensurate increase in expense. We are opportunistically evaluating the acquisition market for both banks and business lines of various sizes and are excited about our recent wealth management acquisition that closed in early April 2023. Of course, we remain diligent in our consideration of acquisition targets and intend to be prudent in our decision making, always seeking to minimize tangible book value dilution.”
The graphs below illustrate certain financial highlights of the first quarter of 2023 as well as historical financial performance. See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 16 for additional information with respect to non-GAAP financial measures/ratios, including the reconciliations to the corresponding GAAP financial measures/ratios.
Graphs available at the following link: http://ml.globenewswire.com/Resource/Download/3118e7fe-b104-49b4-96de-9b527f49673b
*SUMMARY OF RESULTS:*
*BALANCE SHEET *
Total assets remained relatively unchanged from December 31, 2022 to March 31, 2023. Total loans increased by $369 million as compared to the fourth quarter of 2022 primarily due to growth in the commercial and residential real estate loan portfolios. Certain securities were called by option holders on March 31, 2023 which resulted in the recognition of a trade date receivable of $940 million as of March 31, 2023. In April 2023, the Company received proceeds related to the called securities which increased interest bearing cash on the balance sheet.
Total liabilities decreased by $295 million in the first quarter of 2023 as compared to the fourth quarter of 2022 primarily due to a $184 million decrease in total deposits. During the quarter, the Company experienced a change in the mix of deposits as non-interest bearing deposits migrated to interest bearing products. This included a notable migration to products offering enhanced FDIC insurance coverage such as the Company’s MaxSafe® product balances which increased by $1.1 billion as well as fully-insured reciprocal products which increased by $258 million. The majority of the Company’s deposits are insured as approximately 70% of the total deposit balance is either fully FDIC-insured or fully collateralized as of March 31, 2023.
For more information regarding changes in the Company’s balance sheet, see Consolidated Statements of Condition and Table 1 through Table 3 in this report.
*NET INTEREST INCOME*
For the first quarter of 2023, net interest income totaled $458.0 million, an increase of $1.2 million as compared to the fourth quarter of 2022. The $1.2 million increase in net interest income in the first quarter of 2023 compared to the fourth quarter of 2022 was primarily due to net interest margin improvement partially offset by the impact of having two fewer days in the quarter.
Net interest margin was 3.81% (3.83% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2023 compared to 3.71% (3.73% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2022. The net interest margin increase as compared to the fourth quarter of 2022 was due to a 61 basis point increase in yield on earning assets and a 17 basis point increase in the net free funds contribution. These improvements were partially offset by a 68 basis point increase in the rate paid on interest-bearing liabilities. The 61 basis point increase in the yield on earning assets in the first quarter of 2023 as compared to the fourth quarter of 2022 was primarily due to a 67 basis point expansion on loan yields and a higher liquidity management asset yield as the Company earned higher yields on interest-bearing deposits with banks. The 68 basis point increase in the rate paid on interest-bearing liabilities in the first quarter of 2023 as compared to the fourth quarter of 2022 is primarily due to a 67 basis point increase in the rate paid on interest-bearing deposits primarily related to the increasing rate environment.
For more information regarding net interest income, see Table 4 through Table 7 in this report.
*ASSET QUALITY*
The allowance for credit losses totaled $376.3 million as of March 31, 2023, an increase of $18.4 million as compared to $357.9 million as of December 31, 2022. A provision for credit losses totaling $23.0 million was recorded for the first quarter of 2023 as compared to $47.6 million recorded in the fourth quarter of 2022. For more information regarding the provision for credit losses, see Table 10 in this report.
Management believes the allowance for credit losses is appropriate to account for expected credit losses. The Current Expected Credit Losses (“CECL”) accounting standard requires the Company to estimate expected credit losses over the life of the Company’s financial assets as of the reporting date. There can be no assurances, however, that future losses will not significantly exceed the amounts provided for, thereby affecting future results of operations. A summary of the allowance for credit losses calculated for the loan components in each portfolio as of March 31, 2023, December 31, 2022, and September 30, 2022 is shown on Table 11 of this report.
Net charge-offs totaled $5.5 million in the first quarter of 2023, as compared to $5.1 million of net charge-offs in the fourth quarter of 2022. Net charge-offs as a percentage of average total loans were reported as six basis points in the first quarter of 2023 on an annualized basis compared to five basis points on an annualized basis in the fourth quarter of 2022. For more information regarding net charge-offs, see Table 9 in this report.
The Company’s delinquency rates remain low and manageable. For more information regarding past due loans, see Table 12 in this report.
Non-performing assets totaled $110 million and comprised only 0.21% of total assets as of March 31, 2023, essentially unchanged from levels as of December 31, 2022. Non-performing loans also remained flat totaling $101 million, or 0.25% of total loans, at March 31, 2023. For more information regarding non-performing assets, see Table 13 in this report.
*NON-INTEREST INCOME*
Wealth management revenue decreased $782,000 in the first quarter of 2023 as compared to the fourth quarter of 2022 primarily related to lower fees associated with our tax-deferred like-kind exchange business. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.
Mortgage banking revenue increased by $857,000 in the first quarter of 2023 as compared to the fourth quarter of 2022 primarily due to higher production margins. The Company recorded net negative fair value adjustments of $3.0 million in the first quarter of 2023 related to fair value changes in certain mortgage assets. This included a $6.0 million decrease in the value of mortgage servicing rights related to changes in fair value model assumptions net of economic hedges and a positive $2.4 million valuation related adjustment on the Company’s held-for-sale portfolio of early buy-out exercised loans guaranteed by U.S. government agencies which are held at fair value. In addition, in miscellaneous non-interest income, the Company recorded a positive $545,000 valuation related adjustment on the Company’s held-for-investment portfolio of early buy-out exercised loans guaranteed by U.S. government agencies which are held at fair value. The Company intends to monitor the relationship of these assets and will seek to minimize the earnings impact of fair value changes in future quarters.
Net gain on investment securities totaled $1.4 million in the first quarter of 2023 related to changes in the value of equity securities as compared to net losses of $6.7 million in the fourth quarter of 2022.
Fees from covered call options increased $2.4 million in the first quarter of 2023 as compared to the fourth quarter of 2022. The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio. These option transactions are designed to mitigate overall interest rate risk and do not qualify as hedges pursuant to accounting guidance.
For more information regarding non-interest income, see Table 14 in this report.
*NON-INTEREST EXPENSE*
Salaries and employee benefits expense decreased by $3.6 million in the first quarter of 2023 as compared to the fourth quarter of 2022. The $3.6 million decrease is primarily related to lower incentive compensation expense due to elevated bonus accruals in the fourth quarter of 2022. This was partially offset by increased base salaries primarily related to annual merit increases as well as approximately $1.0 million of severance expense primarily related to mortgage staffing reductions.
Advertising and marketing expenses in the first quarter of 2023 totaled $11.9 million, which is a $2.3 million decrease as compared to the fourth quarter of 2022 primarily due to a decrease in radio, digital advertising, and sport sponsorships. Marketing costs are incurred to promote the Company’s brand, commercial banking capabilities and the Company’s various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company’s non-bank businesses. The level of marketing expenditures depends on the timing of sponsorship programs utilized which are determined based on the market area, targeted audience, competition and various other factors. Generally, these expenses are elevated in the second and third quarters of each year.
Lending expenses, net of deferred origination costs decreased by $3.2 million as compared to the fourth quarter of 2022 primarily due to decreased loan originations in the first quarter of 2023.
FDIC insurance expense increased by $1.9 million in the first quarter of 2023 as compared to the fourth quarter of 2022 due to an increase in the assessment rate that was effective January 1, 2023.
For more information regarding non-interest expense, see Table 15 in this report.
*INCOME** TAXES *
The Company recorded income tax expense of $63.4 million in the first quarter of 2023 compared to $50.4 million in the fourth quarter of 2022. The effective tax rates were 26.01% in the first quarter of 2023 compared to 25.80% in the fourth quarter of 2022. Primarily as a result of fluctuations in currency rates in the fourth quarter of 2022, the Company’s effective tax rate was impacted by a $1.7 million tax benefit related to a reduction in the Global Intangible Low-taxed Income tax. The effective tax rates were also partially impacted by the tax effects related to share-based compensation which fluctuate based on the Company’s stock price and timing of employee stock option exercises and vesting of other share-based awards. The Company recorded excess tax benefits of $2.8 million in the first quarter of 2023, compared to excess tax benefits of $437,000 in the fourth quarter of 2022 related to share-based compensation.
*BUSINESS* *UNIT* *SUMMARY*
Community Banking
Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the first quarter of 2023, this unit expanded its commercial real estate and residential real estate loan portfolios and grew consumer deposits.
Mortgage banking revenue was $18.3 million for the first quarter of 2023, an increase of $857,000 as compared to the fourth quarter of 2022, primarily due to higher production margins. Service charges on deposit accounts totaled $12.9 million in the first quarter of 2023, a decrease of $151,000 as compared to the fourth quarter of 2022, primarily due to a reduction in overdraft fees. The Company’s gross commercial and commercial real estate loan pipelines remained robust as of March 31, 2023 indicating momentum for expected continued loan growth in the second quarter of 2023.
Specialty Finance
Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries, accounts receivable financing and value-added, out-sourced administrative services and other services. Originations within the insurance premium financing receivables portfolio were $3.8 billion during the first quarter of 2023 and average balances decreased by $39.1 million as compared to the fourth quarter of 2022. The Company’s leasing portfolio balance increased in the first quarter of 2023, with its portfolio of assets, including capital leases, loans and equipment on operating leases, totaling $3.1 billion as of March 31, 2023 as compared to $3.0 billion as of December 31, 2022. Revenues from the Company’s out-sourced administrative services business were $1.6 million in the first quarter of 2023, a decrease of $121,000 from the fourth quarter of 2022.
Wealth Management
Through four separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, tax-deferred like-kind exchange services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue totaled $29.9 million in the first quarter of 2023, a decrease of $782,000 compared to the fourth quarter of 2022. The decline in wealth management revenue in the first quarter of 2023 was primarily related to lower fees associated with our tax-deferred like-kind exchange business. At March 31, 2023, the Company’s wealth management subsidiaries had approximately $35.2 billion of assets under administration, which included $7.4 billion of assets owned by the Company and its subsidiary banks, representing an increase from the $34.4 billion of assets under administration at December 31, 2022.
*ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS*
Common Stock Offering
In June 2022, the Company sold through a public offering a total of 3,450,000 shares of its common stock. Net proceeds to the Company totaled approximately $285.7 million, net of estimated issuance costs.
*WINTRUST FINANCIAL **CORPORATION*
*Key Operating Measures*
Wintrust’s key operating measures and growth rates for the first quarter of 2023, as compared to the fourth quarter of 2022 (sequential quarter) and first quarter of 2022 (linked quarter), are shown in the table below:
*% or *^*(1)*
*basis point
(bp) change from*
*4th Quarter*
*2022* *% or*
*basis point
(bp) change from*
*1st Quarter*
*2022* *Three Months Ended*
(Dollars in thousands, except per share data) *Mar 31, 2023* Dec 31, 2022 Mar 31, 2022
Net income *$* *180,198* $ 144,817 $ 127,391 24 % 41 %
Pre-tax income, excluding provision for credit losses (non-GAAP) ^(2) *266,595* 242,819 177,786 10 50
Net income per common share – diluted *2.80* 2.23 2.07 26 35
Cash dividends declared per common share *0.40* 0.34 0.34 18 18
Net revenue ^(3) *565,764* 550,655 462,084 3 22
Net interest income *457,995* 456,816 299,294 53
Net interest margin *3.81* * %* 3.71 % 2.60 % 10 bps 121 bps
Net interest margin – fully taxable-equivalent (non-GAAP) ^(2) *3.83* 3.73 2.61 10 122
Net overhead ratio ^(4) *1.49* 1.63 1.00 (14 ) 49
Return on average assets *1.40* 1.10 1.04 30 36
Return on average common equity *15.67* 12.72 11.94 295 373
Return on average tangible common equity (non-GAAP) ^(2) *18.55* 15.21 14.48 334 407
*At end of period*
Total assets *$* *52,873,511* $ 52,949,649 $ 50,250,661 (1 ) % 5 %
Total loans ^(5) *39,565,471* 39,196,485 35,280,547 4 12
Total deposits *42,718,211* 42,902,544 42,219,322 (2 ) 1
Total shareholders’ equity *5,015,506* 4,796,838 4,492,256 18 12
(1) Period-end balance sheet percentage changes are annualized.
(2) See Table 16: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.
(3) Net revenue is net interest income plus non-interest income.
(4) The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s average total assets. A lower ratio indicates a higher degree of efficiency.
(5) Excludes mortgage loans held-for-sale.
Certain returns, yields, performance ratios, or quarterly growth rates are “annualized” in this presentation to represent an annual time period. This is done for analytical purposes to better discern, for decision-making purposes, underlying performance trends when compared to full-year or year-over-year amounts. For example, a 5% growth rate for a quarter would represent an annualized 20% growth rate. Additional supplemental financial information showing quarterly trends can be found on the Company’s website at www.wintrust.com by choosing “Financial Reports” under the “Investor Relations” heading, and then choosing “Financial Highlights.”
*WINTRUST FINANCIAL **CORPORATION*
*Selected Financial Highlights*
*Three Months Ended*
(Dollars in thousands, except per share data) *Mar 31, 2023* Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022
*Selected Financial Condition Data (at end of period):*
Total assets *$* *52,873,511* $ 52,949,649 $ 52,382,939 $ 50,969,332 $ 50,250,661
Total loans ^(1) *39,565,471* 39,196,485 38,167,613 37,053,103 35,280,547
Total deposits *42,718,211* 42,902,544 42,797,191 42,593,326 42,219,322
Total shareholders’ equity *5,015,506* 4,796,838 4,637,980 4,727,623 4,492,256
*Selected Statements of Income Data:*
Net interest income *$* *457,995* $ 456,816 $ 401,448 $ 337,804 $ 299,294
Net revenue ^(2) *565,764* 550,655 502,930 440,746 462,084
Net income *180,198* 144,817 142,961 94,513 127,391
Pre-tax income, excluding provision for credit losses (non-GAAP) ^(3) *266,595* 242,819 206,461 152,078 177,786
Net income per common share – Basic *2.84* 2.27 2.24 1.51 2.11
Net income per common share – Diluted *2.80* 2.23 2.21 1.49 2.07
Cash dividends declared per common share *0.40* 0.34 0.34 0.34 0.34
*Selected Financial Ratios and Other Data:*
Performance Ratios:
Net interest margin *3.81* *%* 3.71 % 3.34 % 2.92 % 2.60 %
Net interest margin – fully taxable-equivalent (non-GAAP) ^(3) *3.83* 3.73 3.35 2.93 2.61
Non-interest income to average assets *0.84* 0.71 0.79 0.84 1.33
Non-interest expense to average assets *2.33* 2.34 2.32 2.35 2.33
Net overhead ratio ^(4) *1.49* 1.63 1.53 1.51 1.00
Return on average assets *1.40* 1.10 1.12 0.77 1.04
Return on average common equity *15.67* 12.72 12.31 8.53 11.94
Return on average tangible common equity (non-GAAP) ^(3) *18.55* 15.21 14.68 10.36 14.48
Average total assets *$* *52,075,318* $ 52,087,618 $ 50,722,694 $ 49,353,426 $ 49,501,844
Average total shareholders’ equity *4,895,271* 4,710,856 4,795,387 4,526,110 4,500,460
Average loans to average deposits ratio *93.0* * %* 90.5 % 88.8 % 86.8 % 83.8 %
Period-end loans to deposits ratio *92.6* 91.4 89.2 87.0 83.6
Common Share Data at end of period:
Market price per common share *$* *72.95* $ 84.52 $ 81.55 $ 80.15 $ 92.93
Book value per common share *75.24* 72.12 69.56 71.06 71.26
Tangible book value per common share (non-GAAP) ^(3) *64.22* 61.00 58.42 59.87 59.34
Common shares outstanding *61,176,415* 60,794,008 60,743,335 60,721,889 57,253,214
Other Data at end of period:
Tier 1 leverage ratio ^(5) *9.1* * %* 8.8 % 8.8 % 8.8 % 8.1 %
Risk-based capital ratios:
Tier 1 capital ratio ^(5) *10.1* 10.0 9.9 9.9 9.6
Common equity tier 1 capital ratio ^(5) *9.2* 9.1 9.0 9.0 8.6
Total capital ratio ^(5) *12.1* 11.9 11.8 11.9 11.6
Allowance for credit losses ^(6) *$* *376,261* $ 357,936 $ 315,338 $ 312,192 $ 301,327
Allowance for loan and unfunded lending-related commitment losses to total loans *0.95* * %* 0.91 % 0.83 % 0.84 % 0.85 %
Number of:
Bank subsidiaries *15* 15 15 15 15
Banking offices *174* 174 174 173 174
(1) Excludes mortgage loans held-for-sale.
(2) Net revenue is net interest income and non-interest income.
(3) See Table 16: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.
(4) The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s average total assets. A lower ratio indicates a higher degree of efficiency.
(5) Capital ratios for current quarter-end are estimated.
(6) The allowance for credit losses includes the allowance for loan losses, the allowance for unfunded lending-related commitments and the allowance for held-to-maturity securities losses.
*WINTRUST** FINANCIAL CORPORATION AND SUBSIDIARIES*
*CONSOLIDATED STATEMENTS **OF CONDITION*
(Unaudited) (Unaudited) (Unaudited) (Unaudited) *Mar 31,* Dec 31, Sep 30, Jun 30, Mar 31,
(In thousands) *2023* 2022 2022 2022 2022
*Assets*
Cash and due from banks *$* *445,928* $ 490,908 $ 489,590 $ 498,891 $ 462,516
Federal funds sold and securities purchased under resale agreements *58* 58 57 475,056 700,056
Interest-bearing deposits with banks *1,563,578* 1,988,719 3,968,605 3,266,541 4,013,597
Available-for-sale securities, at fair value *3,259,845* 3,243,017 2,923,653 2,970,121 2,998,898
Held-to-maturity securities, at amortized cost *3,606,391* 3,640,567 3,389,842 3,413,469 3,435,729
Trading account securities *102* 1,127 179 1,010 852
Equity securities with readily determinable fair value *111,943* 110,365 114,012 93,295 92,689
Federal Home Loan Bank and Federal Reserve Bank stock *244,957* 224,759 178,156 136,138 136,163
Brokerage customer receivables *16,042* 16,387 20,327 21,527 22,888
Mortgage loans held-for-sale, at fair value *302,493* 299,935 376,160 513,232 606,545
Loans, net of unearned income *39,565,471* 39,196,485 38,167,613 37,053,103 35,280,547
Allowance for loan losses *(287,972* *)* (270,173 ) (246,110 ) (251,769 ) (250,539 )
Net loans *39,277,499* 38,926,312 37,921,503 36,801,334 35,030,008
Premises, software and equipment, net *760,283* 764,798 763,029 762,381 761,213
Lease investments, net *256,301* 253,928 244,822 223,813 240,656
Accrued interest receivable and other assets *1,413,795* 1,391,342 1,316,305 1,112,697 1,066,750
Trade date securities receivable *939,758* 921,717 — — —
Goodwill *653,587* 653,524 653,079 654,709 655,402
Other acquisition-related intangible assets *20,951* 22,186 23,620 25,118 26,699
*Total assets* *$* *52,873,511* $ 52,949,649 $ 52,382,939 $ 50,969,332 $ 50,250,661
*Liabilities and Shareholders’ Equity*
Deposits:
Non-interest-bearing *$* *11,236,083* $ 12,668,160 $ 13,529,277 $ 13,855,844 $ 13,748,918
Interest-bearing *31,482,128* 30,234,384 29,267,914 28,737,482 28,470,404
Total deposits *42,718,211* 42,902,544 42,797,191 42,593,326 42,219,322
Federal Home Loan Bank advances *2,316,071* 2,316,071 2,316,071 1,166,071 1,241,071
Other borrowings *583,548* 596,614 447,215 482,787 482,516
Subordinated notes *437,493* 437,392 437,260 437,162 437,033
Junior subordinated debentures *253,566* 253,566 253,566 253,566 253,566
Trade date securities payable *—* — — — 437
Accrued interest payable and other liabilities *1,549,116* 1,646,624 1,493,656 1,308,797 1,124,460
Total liabilities *47,858,005* 48,152,811 47,744,959 46,241,709 45,758,405
Shareholders’ Equity:
Preferred stock *412,500* 412,500 412,500 412,500 412,500
Common stock *61,198* 60,797 60,743 60,722 59,091
Surplus *1,913,947* 1,902,474 1,891,621 1,880,913 1,698,093
Treasury stock *(1,966* *)* (304 ) — — (109,903 )
Retained earnings *2,997,263* 2,849,007 2,731,844 2,616,525 2,548,474
Accumulated other comprehensive loss *(367,436* *)* (427,636 ) (458,728 ) (243,037 ) (115,999 )
Total shareholders’ equity *5,015,506* 4,796,838 4,637,980 4,727,623 4,492,256
*Total liabilities and shareholders’ equity* *$* *52,873,511* $ 52,949,649 $ 52,382,939 $ 50,969,332 $ 50,250,661
*WINTRUST** FINANCIAL CORPORATION AND **SUBSIDIARIES*
*CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)*
*Three Months Ended*
(In thousands, except per share data) *Mar 31,*
*2023* Dec 31,
2022 Sep 30,
2022 Jun 30,
2022 Mar 31,
2022
*Interest income*
Interest and fees on loans *$* *558,692* $ 498,838 $ 402,689 $ 320,501 $ 285,698
Mortgage loans held-for-sale *3,528* 3,997 5,371 5,740 6,087
Interest-bearing deposits with banks *13,468* 20,349 15,621 5,790 1,687
Federal funds sold and securities purchased under resale agreements *70* 1,263 1,845 1,364 431
Investment securities *59,943* 53,092 38,569 36,541 32,398
Trading account securities *14* 6 7 4 5
Federal Home Loan Bank and Federal Reserve Bank stock *3,680* 2,918 2,109 1,823 1,772
Brokerage customer receivables *295* 282 267 205 174
Total interest income *639,690* 580,745 466,478 371,968 328,252
*Interest expense*
Interest on deposits *144,802* 95,447 45,916 18,985 14,854
Interest on Federal Home Loan Bank advances *19,135* 13,823 6,812 4,878 4,816
Interest on other borrowings *7,854* 5,313 4,008 2,734 2,239
Interest on subordinated notes *5,488* 5,520 5,485 5,517 5,482
Interest on junior subordinated debentures *4,416* 3,826 2,809 2,050 1,567
Total interest expense *181,695* 123,929 65,030 34,164 28,958
*Net interest income* *457,995* 456,816 401,448 337,804 299,294
Provision for credit losses *23,045* 47,646 6,420 20,417 4,106
Net interest income after provision for credit losses *434,950* 409,170 395,028 317,387 295,188
*Non-interest income*
Wealth management *29,945* 30,727 33,124 31,369 31,394
Mortgage banking *18,264* 17,407 27,221 33,314 77,231
Service charges on deposit accounts *12,903* 13,054 14,349 15,888 15,283
Gains (losses) on investment securities, net *1,398* (6,745 ) (3,103 ) (7,797 ) (2,782 )
Fees from covered call options *10,391* 7,956 1,366 1,069 3,742
Trading gains (losses), net *813* (306 ) (7 ) 176 3,889
Operating lease income, net *13,046* 12,384 12,644 15,007 15,475
Other *21,009* 19,362 15,888 13,916 18,558
Total non-interest income *107,769* 93,839 101,482 102,942 162,790
*Non-interest expense*
Salaries and employee benefits *176,781* 180,331 176,095 167,326 172,355
Software and equipment *24,697* 24,699 24,126 24,250 22,810
Operating lease equipment *9,833* 10,078 9,448 8,774 9,708
Occupancy, net *18,486* 17,763 17,727 17,651 17,824
Data processing *9,409* 7,927 7,767 8,010 7,505
Advertising and marketing *11,946* 14,279 16,600 16,615 11,924
Professional fees *8,163* 9,267 7,544 7,876 8,401
Amortization of other acquisition-related intangible assets *1,235* 1,436 1,492 1,579 1,609
FDIC insurance *8,669* 6,775 7,186 6,949 7,729
OREO expenses, net *(207* *)* 369 229 294 (1,032 )
Other *30,157* 34,912 28,255 29,344 25,465
Total non-interest expense *299,169* 307,836 296,469 288,668 284,298
Income before taxes *243,550* 195,173 200,041 131,661 173,680
Income tax expense *63,352* 50,356 57,080 37,148 46,289
*Net income* *$* *180,198* $ 144,817 $ 142,961 $ 94,513 $ 127,391
Preferred stock dividends *6,991* 6,991 6,991 6,991 6,991
*Net income applicable to common shares* *$* *173,207* $ 137,826 $ 135,970 $ 87,522 $ 120,400
*Net income per common share - Basic* *$* *2.84* $ 2.27 $ 2.24 $ 1.51 $ 2.11
*Net income per common share - Diluted* *$* *2.80* $ 2.23 $ 2.21 $ 1.49 $ 2.07
*Cash dividends declared per common share* *$* *0.40* $ 0.34 $ 0.34 $ 0.34 $ 0.34
Weighted average common shares outstanding *60,950* 60,769 60,738 58,063 57,196
Dilutive potential common shares *873* 1,096 837 775 862
Average common shares and dilutive common shares *61,823* 61,865 61,575 58,838 58,058
*TABLE 1**: **LOAN PORTFOLIO MIX AND GROWTH RATES*
% Growth From ^(1)
(Dollars in thousands) *Mar 31, 2023* Dec 31, 2022 Sep 30, 2022 Jun 30,
2022 Mar 31, 2022 Dec 31, 2022 ^(2) Mar 31, 2022
*Balance:*
Mortgage loans held-for-sale, excluding early buy-out exercised loans guaranteed by U.S. government agencies *$* *155,687* $ 156,297 $ 216,062 $ 294,688 $ 296,548 (2)% (48)%
Mortgage loans held-for-sale, early buy-out exercised loans guaranteed by U.S. government agencies *146,806* 143,638 160,098 218,544 309,997 9 (53 )
Total mortgage loans held-for-sale *$* *302,493* $ 299,935 $ 376,160 $ 513,232 $ 606,545 3 % (50)%
*Core loans:*
Commercial
Commercial and industrial *$* *5,855,035* $ 5,852,166 $ 5,818,959 $ 5,502,584 $ 5,348,266 % 9 %
Asset-based lending *1,482,071* 1,473,344 1,545,038 1,552,033 1,365,297 2 9
Municipal *655,301* 668,235 608,234 535,586 533,357 (8 ) 23
Leases *1,904,137* 1,840,928 1,582,359 1,592,329 1,481,368 14 29
Commercial real estate
Residential construction *69,998* 76,877 66,957 55,941 57,037 (36 ) 23
Commercial construction *1,234,762* 1,102,098 1,176,407 1,145,602 1,055,972 49 17
Land *292,293* 307,955 282,147 304,775 283,397 (21 ) 3
Office *1,392,040* 1,337,176 1,269,729 1,321,745 1,273,705 17 9
Industrial *1,858,088* 1,836,276 1,777,658 1,746,280 1,668,516 5 11
Retail *1,309,680* 1,304,444 1,331,316 1,331,059 1,395,021 2 (6 )
Multi-family *2,635,411* 2,560,709 2,305,433 2,171,583 2,175,875 12 21
Mixed use and other *1,446,806* 1,425,412 1,368,537 1,330,220 1,325,551 6 9
Home equity *337,016* 332,698 328,822 325,826 321,435 5 5
Residential real estate
Residential real estate loans for investment *2,309,393* 2,207,595 2,086,795 1,965,051 1,749,889 19 32
Residential mortgage loans, early buy-out eligible loans guaranteed by U.S. government agencies *119,301* 80,701 57,161 34,764 13,520 NM NM
Residential mortgage loans, early buy-out exercised loans guaranteed by U.S. government agencies *76,851* 84,087 91,503 79,092 36,576 (35 ) NM
*Total core loans* *$* *22,978,183* $ 22,490,701 $ 21,697,055 $ 20,994,470 $ 20,084,782 9 % 14 %
*Niche loans:*
Commercial
Franchise *$* *1,131,913* $ 1,169,623 $ 1,118,478 $ 1,136,929 $ 1,181,761 (13)% (4)%
Mortgage warehouse lines of credit *235,684* 237,392 297,374 398,085 261,847 (3 ) (10 )
Community Advantage - homeowners association *389,922* 380,875 365,967 341,095 324,383 10 20
Insurance agency lending *905,727* 897,678 879,183 906,375 833,720 4 9
Premium Finance receivables
U.S. property & casualty insurance *5,043,486* 5,103,820 4,983,795 4,781,042 4,271,828 (5 ) 18
Canada property & casualty insurance *695,394* 745,639 729,545 760,405 665,580 (27 ) 4
Life insurance *8,125,802* 8,090,998 8,004,856 7,608,433 7,354,163 2 10
Consumer and other *42,165* 50,836 47,702 44,180 48,519 (69 ) (13 )
*Total niche loans* *$* *16,570,093* $ 16,676,861 $ 16,426,900 $ 15,976,544 $ 14,941,801 (3)% 11 %
*Commercial PPP loans:*
Originated in 2020 *$* *7,429* $ 7,898 $ 8,724 $ 18,547 $ 40,016 (24)% (81)%
Originated in 2021 *9,766* 21,025 34,934 63,542 213,948 NM (95 )
*Total commercial PPP loans* *$* *17,195* $ 28,923 $ 43,658 $ 82,089 $ 253,964 NM (93)%
*Total loans, net of unearned income* *$* *39,565,471* $ 39,196,485 $ 38,167,613 $ 37,053,103 $ 35,280,547 4 % 12 %
(1) NM - Not meaningful.
(2) Annualized
*TABLE 2**: **DEPOSIT PORTFOLIO MIX AND GROWTH RATES*
% Growth From
(Dollars in thousands) *Mar 31,*
*2023* Dec 31,
2022 Sep 30,
2022 Jun 30,
2022 Mar 31,
2022 Dec 31,
2022^ (1) Mar 31,
2022
*Balance:*
Non-interest-bearing *$* *11,236,083* $ 12,668,160 $ 13,529,277 $ 13,855,844 $ 13,748,918 (46)% (18 )%
NOW and interest-bearing demand deposits *5,576,558* 5,591,986 5,676,122 5,918,908 5,089,724 (1 ) 10
Wealth management deposits ^(2) *1,809,933* 2,463,833 2,988,195 3,182,407 2,542,995 (108 ) (29 )
Money market *13,552,277* 12,886,795 12,538,489 12,273,350 13,012,460 21 4
Savings *5,192,108* 4,556,635 3,988,790 3,686,596 4,089,230 57 27
Time certificates of deposit *5,351,252* 4,735,135 4,076,318 3,676,221 3,735,995 53 43
Total deposits *$* *42,718,211* $ 42,902,544 $ 42,797,191 $ 42,593,326 $ 42,219,322 (2)% 1 %
*Mix:*
Non-interest-bearing *26* *%* 30 % 32 % 33 % 32 %
NOW and interest-bearing demand deposits *13* 13 13 13 12
Wealth management deposits ^(2) *4* 5 7 7 6
Money market *32* 30 29 29 31
Savings *12* 11 9 9 10
Time certificates of deposit *13* 11 10 9 9
Total deposits *100* *%* 100 % 100 % 100 % 100 %
(1) Annualized.
(2) Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wintrust Investments, Chicago Deferred Exchange Company, LLC (“CDEC”), trust and asset management customers of the Company.
*TABLE 3**: **TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS*
*As of **March 31, 2023*
(Dollars in thousands) *Total Time*
*Certificates of*
*Deposit* *Weighted-Average*
*Rate of Maturing*
*Time Certificates*
* of Deposit *^*(1)*
1-3 months *$* *1,318,052* *2.93* *%*
4-6 months *1,081,367* *2.42*
7-9 months *922,367* *2.24*
10-12 months *885,299* *3.11*
13-18 months *655,805* *3.12*
19-24 months *348,591* *2.77*
24+ months *139,771* *2.14*
Total *$* *5,351,252* *2.73* *%*
(1) Weighted-average rate excludes the impact of purchase accounting fair value adjustments.
*TABLE 4: QUARTERLY AVERAGE BALANCES*
*Average Balance for three months ended,* *Mar 31,* Dec 31, Sep 30, Jun 30, Mar 31,
(In thousands) *2023* 2022 2022 2022 2022
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents ^(1) *$* *1,235,748* $ 2,449,889 $ 3,039,907 $ 3,265,607 $ 4,563,726
Investment securities ^(2) *7,956,722* 7,310,383 6,655,215 6,589,947 6,378,022
FHLB and FRB stock *233,615* 185,290 142,304 136,930 135,912
Liquidity management assets ^(3) *9,426,085* 9,945,562 9,837,426 9,992,484 11,077,660
Other earning assets ^(3)(4) *18,445* 18,585 21,805 24,059 25,192
Mortgage loans held-for-sale *270,966* 308,639 455,342 560,707 664,019
Loans, net of unearned income ^(3)(5) *39,093,368* 38,566,871 37,431,126 35,860,329 34,830,520
Total earning assets ^(3) *48,808,864* 48,839,657 47,745,699 46,437,579 46,597,391
Allowance for loan and investment security losses *(282,704* *)* (252,827 ) (260,270 ) (260,547 ) (253,080 )
Cash and due from banks *488,457* 475,691 458,263 476,741 481,634
Other assets *3,060,701* 3,025,097 2,779,002 2,699,653 2,675,899
Total assets *$* *52,075,318* $ 52,087,618 $ 50,722,694 $ 49,353,426 $ 49,501,844
NOW and interest-bearing demand deposits *$* *5,271,740* $ 5,598,291 $ 5,789,368 $ 5,230,702 $ 4,788,272
Wealth management deposits *2,167,081* 2,883,247 3,078,764 2,835,267 2,505,800
Money market accounts *12,533,468* 12,319,842 12,037,412 11,892,948 12,773,805
Savings accounts *4,830,322* 4,403,113 3,862,579 3,882,856 3,904,299
Time deposits *5,041,638* 4,023,232 3,675,930 3,687,778 3,861,371
Interest-bearing deposits *29,844,249* 29,227,725 28,444,053 27,529,551 27,833,547
Federal Home Loan Bank advances *2,474,882* 2,088,201 1,403,573 1,197,390 1,241,071
Other borrowings *602,937* 480,553 478,909 489,779 494,267
Subordinated notes *437,422* 437,312 437,191 437,084 436,966
Junior subordinated debentures *253,566* 253,566 253,566 253,566 253,566
Total interest-bearing liabilities *33,613,056* 32,487,357 31,017,292 29,907,370 30,259,417
Non-interest-bearing deposits *12,171,631* 13,404,036 13,731,219 13,805,128 13,734,064
Other liabilities *1,395,360* 1,485,369 1,178,796 1,114,818 1,007,903
Equity *4,895,271* 4,710,856 4,795,387 4,526,110 4,500,460
Total liabilities and shareholders’ equity *$* *52,075,318* $ 52,087,618 $ 50,722,694 $ 49,353,426 $ 49,501,844
Net free funds/contribution ^(6) *$* *15,195,808* $ 16,352,300 $ 16,728,407 $ 16,530,209 $ 16,337,974
(1) Includes interest-bearing deposits from banks and securities purchased under resale agreements with original maturities of greater than three months. Cash equivalents include federal funds sold and securities purchased under resale agreements with original maturities of three months or less.
(2) Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.
(3) See Table 16: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.
(4) Other earning assets include brokerage customer receivables and trading account securities.
(5) Loans, net of unearned income, include non-accrual loans.
(6) Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
*TABLE 5**: **QUARTERLY NET INTEREST INCOME*
*Net Interest Income for three months ended,* *Mar 31,* Dec 31, Sep 30, Jun 30, Mar 31,
(In thousands) *2023* 2022 2022 2022 2022
*Interest income:*
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents *$* *13,538* $ 21,612 $ 17,466 $ 7,154 $ 2,118
Investment securities *60,494* 53,630 39,071 37,013 32,863
FHLB and FRB stock *3,680* 2,918 2,109 1,823 1,772
Liquidity management assets ^(1) *77,712* 78,160 58,646 45,990 36,753
Other earning assets ^(1) *313* 289 275 210 181
Mortgage loans held-for-sale *3,528* 3,997 5,371 5,740 6,087
Loans, net of unearned income ^(1) *560,564* 500,432 403,719 321,069 286,125
Total interest income *$* *642,117* $ 582,878 $ 468,011 $ 373,009 $ 329,146
*Interest expense:*
NOW and interest-bearing demand deposits *$* *18,772* $ 14,982 $ 8,041 $ 2,553 $ 1,990
Wealth management deposits *12,258* 14,079 11,068 3,685 918
Money market accounts *68,276* 45,468 18,916 8,559 7,648
Savings accounts *15,816* 8,421 2,130 347 336
Time deposits *29,680* 12,497 5,761 3,841 3,962
Interest-bearing deposits *144,802* 95,447 45,916 18,985 14,854
Federal Home Loan Bank advances *19,135* 13,823 6,812 4,878 4,816
Other borrowings *7,854* 5,313 4,008 2,734 2,239
Subordinated notes *5,488* 5,520 5,485 5,517 5,482
Junior subordinated debentures *4,416* 3,826 2,809 2,050 1,567
Total interest expense *$* *181,695* $ 123,929 $ 65,030 $ 34,164 $ 28,958
Less: Fully taxable-equivalent adjustment *(2,427* *)* (2,133 ) (1,533 ) (1,041 ) (894 )
Net interest income (GAAP) ^(2) *457,995* 456,816 401,448 337,804 299,294
Fully taxable-equivalent adjustment *2,427* 2,133 1,533 1,041 894
Net interest income, fully taxable-equivalent (non-GAAP) ^(2) *$* *460,422* $ 458,949 $ 402,981 $ 338,845 $ 300,188
(1) Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period.
(2) See Table 16: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.
*TABLE 6**: **QUARTERLY NET INTEREST MARGIN*
*Net Interest Margin for three months ended,* *Mar 31,
2023* Dec 31,
2022 Sep 30,
2022 Jun 30,
2022 Mar 31,
2022
*Yield earned on:*
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents *4.44* *%* 3.50 % 2.28 % 0.88 % 0.19 %
Investment securities *3.08* 2.91 2.33 2.25 2.09
FHLB and FRB stock *6.39* 6.25 5.88 5.34 5.29
Liquidity management assets *3.34* 3.12 2.37 1.85 1.35
Other earning assets *6.87* 6.17 5.01 3.49 2.91
Mortgage loans held-for-sale *5.28* 5.14 4.68 4.11 3.72
Loans, net of unearned income *5.82* 5.15 4.28 3.59 3.33
Total earning assets *5.34* *%* 4.73 % 3.89 % 3.22 % 2.86 %
*Rate paid on:*
NOW and interest-bearing demand deposits *1.44* *%* 1.06 % 0.55 % 0.20 % 0.17 %
Wealth management deposits *2.29* 1.94 1.43 0.52 0.15
Money market accounts *2.21* 1.46 0.62 0.29 0.24
Savings accounts *1.33* 0.76 0.22 0.04 0.03
Time deposits *2.39* 1.23 0.62 0.42 0.42
Interest-bearing deposits *1.97* 1.30 0.64 0.28 0.22
Federal Home Loan Bank advances *3.14* 2.63 1.93 1.63 1.57
Other borrowings *5.28* 4.39 3.32 2.24 1.84
Subordinated notes *5.02* 5.05 5.02 5.05 5.02
Junior subordinated debentures *6.97* 5.90 4.33 3.20 2.47
Total interest-bearing liabilities *2.19* *%* 1.51 % 0.83 % 0.46 % 0.39 %
Interest rate spread^ (1)(2) *3.15* *%* 3.22 % 3.06 % 2.76 % 2.47 %
Less: Fully taxable-equivalent adjustment *(0.02* *)* (0.02 ) (0.01 ) (0.01 ) (0.01 )
Net free funds/contribution^ (3) *0.68* 0.51 0.29 0.17 0.14
Net interest margin (GAAP)^ (2) *3.81* *%* 3.71 % 3.34 % 2.92 % 2.60 %
Fully taxable-equivalent adjustment *0.02* 0.02 0.01 0.01 0.01
Net interest margin, fully taxable-equivalent (non-GAAP)^ (2) *3.83* *%* 3.73 % 3.35 % 2.93 % 2.61 %
(1) Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(2) See Table 16: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.
(3) Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
*TABLE 7**: **INTEREST RATE SENSITIVITY*
As an ongoing part of its financial strategy, the Company attempts to manage the impact of fluctuations in market interest rates on net interest income. Management measures its exposure to changes in interest rates by modeling many different interest rate scenarios.
The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases and decreases of 100 and 200 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months. Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenario is as follows:
Static Shock Scenario *+200 Basis
Points* *+100 Basis
Points* *-100 Basis
Points* *-200 Basis
Points*
*Mar 31, 2023* *4.2* *%* *2.4* *%* *(2.4)**%* *(7.3)**%*
Dec 31, 2022 7.2 3.8 (5.0) (12.1)
Sep 30, 2022 12.9 7.1 (8.7) (18.9)
Jun 30, 2022 17.0 9.0 (12.6) (23.8)
Mar 31, 2022 21.4 11.0 (11.3) (18.7)
Ramp Scenario *+200 Basis
Points* *+100 Basis
Points* *-100 Basis
Points* *-200 Basis
Points*
*Mar 31, 2023* *3.0* *%* *1.7* *%* *(1.3)**%* *(3.4)**%*
Dec 31, 2022 5.6 3.0 (2.9) (6.8)
Sep 30, 2022 6.5 3.6 (3.9) (8.6)
Jun 30, 2022 10.2 5.3 (6.9) (14.3)
Mar 31, 2022 11.2 5.8 (7.1) (12.4)
As shown above, the magnitude of potential changes in net interest income in various interest rate scenarios has continued to diminish. Given the recent unprecedented rise in interest rates, the Company has made a conscious effort to reposition its exposure to changing interest rates given the uncertainty of the future interest rate environment. To this end, management has executed various derivative instruments including collars and receive fixed swaps to hedge variable rate loan exposures and originated a higher percentage of its loan originations in longer term fixed rate loans. The Company will continue to monitor current and projected interest rates and expects to execute additional derivatives to mitigate potential fluctuations in the net interest margin in future years.
*TABLE 8**: **MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES*
*Loans repricing or maturity period*
*As of March 31, 2023* *One year or*
*less* *From one to*
*five years* *From five to
fifteen years* *After fifteen
years* *Total*
(In thousands) �