Wintrust Financial Corporation Reports Record First Quarter 2024 Net Income
Published
ROSEMONT, Ill., April 17, 2024 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust”, “the Company”, “we” or “our”) (Nasdaq: WTFC) announced record quarterly net income of $187.3 million or $2.89 per diluted common share for the first quarter of 2024, an increase in diluted earnings per common share of 55% compared to the fourth quarter of 2023. Pre-tax, pre-provision income (non-GAAP) totaled a record $271.6 million, up 30% as compared to $208.2 million in the fourth quarter of 2023.
Timothy S. Crane, President and Chief Executive Officer, commented, “Following record net income in 2023, we continued our momentum with strong results to start 2024. We leveraged our balanced, multi-faceted business model and position as Chicago’s and Wisconsin’s bank to grow deposits and loans while maintaining our consistent credit standards coupled with expense management.”
Additionally, Mr. Crane noted, “The first quarter exhibited funding strong loan growth with competitively-priced deposits in accordance with the increased loan demand. Increasing our long-term franchise value and net interest income remains our focus as we consider opportunities in the markets we serve.”
*Highlights of the first quarter of 2024:*
Comparative information to the fourth quarter of 2023, unless otherwise noted
· Total loans increased by approximately $1.1 billion, or 10% annualized.
· Total deposits increased by approximately $1.1 billion, or 9% annualized.
· Total assets increased by $1.3 billion, or 9% annualized.
· Net interest margin decreased by five basis points to 3.57% (3.59% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2024.
· Net interest income decreased to $464.2 million in the first quarter of 2024 compared to $470.0 million in the fourth quarter of 2023, primarily due to one less day in the first quarter of 2024.
· Non-interest income was impacted by the following:
· Gains of approximately $20.0 million from the sale of the Company’s Retirement Benefits Advisors (“RBA”) division. This gain was partially offset by additional commissions and incentive compensation totaling $701,000 related to the sale transaction.
· Favorable net valuation adjustments related to certain mortgage assets totaled $2.3 million in the first quarter of 2024 compared to unfavorable net valuation adjustments of $9.7 million in the fourth quarter of 2023.
· Non-interest expense was negatively impacted by an accrual of $5.2 million for estimated amounts owed as a result of the FDIC special assessment on uninsured deposits in response to certain bank failures occurring in 2023. This is in addition to the related $34.4 million accrued in the fourth quarter of 2023 for the estimate of such FDIC special assessments.
· Provision for credit losses totaled $21.7 million in the first quarter of 2024 as compared to a provision for credit losses of $42.9 million in the fourth quarter of 2023.
· Net charge-offs totaled $21.8 million, or 21 basis points of average total loans on an annualized basis, in the first quarter of 2024 as compared to $14.9 million, or 14 basis points of average total loans on an annualized basis in the fourth quarter of 2023.
Mr. Crane noted, “Our net interest margin for the first quarter stayed within our expected range, decreasing by five basis points compared to the fourth quarter of 2023. The decrease in net interest margin was due primarily to certain seasonal declines in non-interest bearing deposit balances, deposit migration to interest-bearing products and competitive deposit pricing to fund quality loan growth. Loan growth during the first quarter totaled $1.1 billion, or 10% on an annualized basis. We are pleased with our diversified loan growth in the first quarter with strong loan origination activity in commercial and residential real estate portfolios, as well as growth in commercial real estate driven primarily by draws on existing loan facilities. Deposit growth in the first quarter of 2024 was utilized to fund our robust loan growth as deposits increased by approximately $1.1 billion, or 9% on an annualized basis. We continue to leverage our customer relationships and market positioning to generate deposits and build long term franchise value. Non-interest bearing deposits decreased due to seasonality during the first quarter while also experiencing some migration to interest-bearing products. Despite the slightly lower net interest income during the current period, we generated record quarterly net revenue through our diversified sources of revenue, including our mortgage banking and wealth management businesses.”
Commenting on credit quality, Mr. Crane stated, “Credit metrics have remained steady, aligning with historical averages. Net charge-offs totaled $21.8 million, or 21 basis points of average total loans on an annualized basis, in the first quarter of 2024 as compared to $14.9 million, or 14 basis points of average total loans on an annualized basis, in the fourth quarter of 2023. Approximately $11.9 million of charge-offs in the current quarter were previously reserved for in the fourth quarter of 2023 Non-performing loans totaled $148.4 million, or 0.34% of total loans, at the end of the first quarter of 2024 compared to $139.0 million, or 0.33% of total loans, at the end of the fourth quarter of 2023. We continue to conservatively and proactively review credit and maintain our consistently strong credit standards. The allowance for credit losses on our core loan portfolio as of March 31, 2024 was approximately 1.51% of the outstanding balance (see Table 11 for additional information). We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit.”
Mr. Crane added, “Late loan growth in the first quarter creates positive revenue momentum moving forward as period-end loan balances exceeded averages. We continue to see good opportunities in the markets we serve and feel well positioned to grow deposit and loan relationships in future quarters. Our focus remains on winning business and maximizing long term franchise value.”
In summary, Mr. Crane noted, “The quarter was strong, momentum remains good and we are excited about the agreement reached to acquire Macatawa Bank Corporation in Michigan (announced April 15, 2024). The ability to expand with a high quality bank with a strong low-cost core deposit base, excess liquidity, exceptional asset quality and a committed management team is a terrific fit for Wintrust.”
The graphs below illustrate certain financial highlights of the first quarter of 2024 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/813fc027-da7e-4253-a341-e3d12f08e2d6
*SUMMARY OF RESULTS:*
*BALANCE SHEET *
Total assets increased $1.3 billion in the first quarter of 2024 as compared to the fourth quarter of 2023. Total loans increased by $1.1 billion as compared to the fourth quarter of 2023. The increase in loans was the result of diversified loan growth primarily across the commercial and residential real estate portfolios coupled with draws on existing commercial real-estate loan facilities.
Total liabilities increased by $1.3 billion in the first quarter of 2024 as compared to the fourth quarter of 2023 primarily due to a $1.1 billion increase in total deposits. Non-interest bearing deposits as a percentage of total deposits was 21% at March 31, 2024 compared to 23% at December 31, 2023. The Company's loans to deposits ratio ended the quarter at 93.1%.
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 2024, net interest income totaled $464.2 million, a decrease of $5.8 million as compared to the fourth quarter of 2023. The $5.8 million decrease in net interest income in the first quarter of 2024 compared to the fourth quarter of 2023 was primarily due to one less day during the period as well as a five basis point decrease in the net interest margin, partially offset by a $755.8 million increase in average earning assets.
Net interest margin was 3.57% (3.59% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2024 compared to 3.62% (3.64% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2023. The net interest margin decrease as compared to the fourth quarter of 2023 was primarily due to a 15 basis point increase in the rate paid on interest-bearing liabilities. This decrease was partially offset by a nine basis point increase in yield on earning assets and a one basis point increase in the net free funds contribution. The 15 basis point increase on the rate paid on interest-bearing liabilities in the first quarter of 2024 as compared to the fourth quarter of 2023 was primarily due to a 16 basis point increase in the rate paid on interest-bearing deposits. The nine basis point increase in the yield on earning assets in the first quarter of 2024 as compared to the fourth quarter of 2023 was primarily due to an 11 basis point expansion on loan yields.
For more information regarding net interest income, see Table 4 through Table 7 in this report.
*ASSET QUALITY*
The allowance for credit losses totaled $427.5 million as of March 31, 2024, relatively unchanged compared to $427.6 million as of December 31, 2023. A provision for credit losses totaling $21.7 million was recorded for the first quarter of 2024 as compared to $42.9 million recorded in the fourth quarter of 2023. For more information regarding the allowance for credit losses and 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 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, 2024, December 31, 2023, and September 30, 2023 is shown on Table 11 of this report.
Net charge-offs totaled $21.8 million in the first quarter of 2024, as compared to $14.9 million of net charge-offs in the fourth quarter of 2023. The increase in net charge-offs during the first quarter of 2024 was primarily the result of increased net charge-offs within the commercial portfolio. Net charge-offs as a percentage of average total loans were 21 basis points in the first quarter of 2024 on an annualized basis compared to 14 basis points on an annualized basis in the fourth quarter of 2023. 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 $162.9 million and comprised 0.28% of total assets as of March 31, 2024, as compared to $152.3 million as of December 31, 2023. Non-performing loans totaled $148.4 million, or 0.34% of total loans, at March 31, 2024. The increase in the first quarter of 2024 was primarily due to an increase in certain credits within the commercial real estate portfolio becoming nonaccrual as well as increases within the property and casualty insurance premium finance receivables portfolio, partially offset by a decrease within the commercial portfolio. For more information regarding non-performing assets, see Table 13 in this report.
Though these credit metrics increased during the period, net charge-offs as a percentage of average total loans and non-performing loans as a percentage of total loans remained at historically low levels in the first quarter of 2024.
*NON-INTEREST INCOME*
Wealth management revenue increased by $1.5 million in the first quarter of 2024 as compared to the fourth quarter of 2023 primarily due to increased asset management fees from higher assets under management during the period. 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 $20.2 million in the first quarter of 2024 as compared to the fourth quarter of 2023 primarily due to a $5.0 million favorable valuation adjustment to the fair value of mortgage servicing rights, net of servicing hedge, in the first quarter of 2024 compared to a $16.1 million unfavorable adjustment in the fourth quarter of 2023, as well as $6.6 million higher in production revenue. This was partially offset by an unfavorable adjustment to 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, of $2.2 million in the first quarter of 2024 compared to a $4.9 million favorable adjustment in the fourth quarter of 2023. The Company monitors the relationship of these assets and seeks to minimize the earnings impact of fair value changes.
The Company recognized $1.3 million in net gains on investment securities in the first quarter of 2024 as compared to $2.5 million in net gains in the fourth quarter of 2023. The change from period to period was primarily the result of lower unrealized gains on the Company’s equity investment securities with a readily determinable fair value, partially offset by higher realized gains from the liquidation of an equity investment security without a readily determinable fair value in the first quarter of 2024.
Fluctuations in trading gains and losses in the first quarter of 2024 compared to the fourth quarter of 2023 were primarily the result of fair value adjustments related to interest rate derivatives not designated as hedges.
Other income increased by $17.6 million in the first quarter of 2024 compared to the fourth quarter of 2023 primarily due to a $20.0 million gain recognized related to the sale of the Company’s RBA division within its wealth management business. This was partially offset by an unfavorable adjustment to 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, of $2.1 million when compared to the fourth quarter of 2023, as well as lower interest rate swap fees and unfavorable foreign currency remeasurement adjustments.
For more information regarding non-interest income, see Table 14 in this report.
*NON-INTEREST EXPENSE*
Salaries and employee benefits expense increased by $1.2 million in the first quarter of 2024 as compared to the fourth quarter of 2023. The $1.2 million increase is primarily related to higher commissions from increased mortgage production as well as commissions related to the sale of the Company’s RBA division within its wealth management business in the first quarter of 2024. This was partially offset by lower employee benefits as employee insurance decreased in the first quarter of 2024.
Advertising and marketing expenses in the first quarter of 2024 totaled $13.0 million, which is a $4.1 million decrease as compared to the fourth quarter of 2023 primarily due to a decrease in digital advertising and sponsorships.
FDIC insurance, including amounts accrued for estimated special assessments, decreased $29.1 million in the first quarter of 2024 as compared to the fourth quarter of 2023. This was primarily the result of a lower accrual recognized in the first quarter of 2024 for estimated amounts owed as a result of the FDIC special assessment on uninsured deposits in response to certain bank failures occurring in 2023. The Company recognized $5.2 million in the first quarter of 2024 for such special assessment compared to $34.4 million in the fourth quarter of 2023.
The Company recorded OREO expense of $392,000 in the first quarter of 2024, compared to net OREO income of $1.6 million in the fourth quarter of 2023 related to realized gains on sales of OREO.
For more information regarding non-interest expense, see Table 15 in this report.
*INCOME TAXES*
The Company recorded income tax expense of $62.7 million in the first quarter of 2024 compared to $41.8 million in the fourth quarter of 2023. The effective tax rates were 25.07% in the first quarter of 2024 compared to 25.27% in the fourth quarter of 2023. The effective tax rates were 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 net excess tax benefits of $4.4 million in the first quarter of 2024, compared to net excess tax benefits of $53,000 in the fourth quarter of 2023 related to share-based compensation. The effective tax rates were also partially impacted due to an overall lower level of pre-tax net income in the comparable periods, primarily due to the accrual for the estimated amount owed as a result of the FDIC special assessment on uninsured deposits. The Company recorded an estimated FDIC special assessment accrual of $5.2 million in the first quarter of 2024, compared to a $34.4 million accrual in the fourth quarter of 2023.
*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 2024, the community banking unit expanded its commercial, commercial real estate and residential real estate loan portfolios.
Mortgage banking revenue was $27.7 million for the first quarter of 2024, an increase of $20.2 million as compared to the fourth quarter of 2023, primarily due to a $5.0 million favorable valuation adjustment to the fair value of mortgage servicing rights, net of servicing hedge, in the first quarter of 2024 compared to a $16.1 million unfavorable adjustment in the fourth quarter of 2023, as well as $6.6 million higher in production revenue. This was partially offset by an unfavorable adjustment to 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, of $2.2 million in the first quarter of 2024 compared to a $4.9 million favorable adjustment in the fourth quarter of 2023. Service charges on deposit accounts totaled $14.8 million in the first quarter of 2024, which was relatively stable compared to the fourth quarter of 2023. The Company’s gross commercial and commercial real estate loan pipelines remained solid as of March 31, 2024 indicating momentum for expected continued loan growth in the second quarter of 2024.
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 portfolios were $4.6 billion during the first quarter of 2024 and average balances increased by $12.5 million as compared to the fourth quarter of 2023. The Company’s leasing portfolio balance increased in the first quarter of 2024, with its portfolio of assets, including capital leases, loans and equipment on operating leases, totaling $3.6 billion as of March 31, 2024 as compared to $3.4 billion as of December 31, 2023. Revenues from the Company’s out-sourced administrative services business were $1.2 million in the first quarter of 2024, which was relatively stable compared to the fourth quarter of 2023.
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, and securities brokerage services. See “Items Impacting Comparative Results,” regarding the sale of the RBA division during the first quarter of 2024. Wealth management revenue totaled $34.8 million in the first quarter of 2024, increasing $1.5 million in the first quarter of 2024 as compared to the fourth quarter of 2023 primarily due to increased asset management fees from higher assets under management during the period. At March 31, 2024, the Company’s wealth management subsidiaries had approximately $48.7 billion of assets under administration, which included $8.8 billion of assets owned by the Company and its subsidiary banks, representing an increase from the $47.1 billion of assets under administration at December 31, 2023.
*ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS*
Division Sale
In the first quarter of 2024, the Company sold its RBA division and recorded a gain of approximately $20.0 million in other non-interest income from the sale.
Business Combination
On April 3, 2023, the Company completed its acquisition of Rothschild & Co Asset Management US Inc. and Rothschild & Co Risk Based Investments LLC from Rothschild & Co North America Inc. As the transaction was determined to be a business combination, the Company recorded goodwill of approximately $2.6 million on the purchase.
*WINTRUST FINANCIAL CORPORATION*
*Key Operating Measure**s*
Wintrust’s key operating measures and growth rates for the first quarter of 2024, as compared to the fourth quarter of 2023 (sequential quarter) and first quarter of 2023 (linked quarter), are shown in the table below:
*% or *^*(1)*
*basis point (bp) change from*
*4th Quarter*
*2023* *% or*
*basis point (bp) change from*
*1st Quarter*
*2023* *Three Months Ended*
(Dollars in thousands, except per share data) *Mar 31, 2024* Dec 31, 2023 Mar 31, 2023
Net income *$* *187,294* $ 123,480 $ 180,198 52 % 4 %
Pre-tax income, excluding provision for credit losses (non-GAAP) ^(2) *271,629* 208,151 266,595 30 2
Net income per common share – Diluted *2.89* 1.87 2.80 55 3
Cash dividends declared per common share *0.45* 0.40 0.40 13 13
Net revenue ^(3) *604,774* 570,803 565,764 6 7
Net interest income *464,194* 469,974 457,995 (1 ) 1
Net interest margin *3.57* *%* 3.62 % 3.81 % (5 ) bps (24 ) bps
Net interest margin – fully taxable-equivalent (non-GAAP) ^(2) *3.59* 3.64 3.83 (5 ) (24 )
Net overhead ratio ^(4) *1.39* 1.89 1.49 (50 ) (10 )
Return on average assets *1.35* 0.89 1.40 46 (5 )
Return on average common equity *14.42* 9.93 15.67 449 (125 )
Return on average tangible common equity (non-GAAP) ^(2) *16.75* 11.73 18.55 502 (180 )
*At end of period*
Total assets *$* *57,576,933* $ 56,259,934 $ 52,873,511 9 % 9 %
Total loans ^(5) *43,230,706* 42,131,831 39,565,471 10 9
Total deposits *46,448,858* 45,397,170 42,718,211 9 9
Total shareholders’ equity *5,436,400* 5,399,526 5,015,506 3 8
(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, 2024* Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023
*Selected Financial Condition Data (at end of period):*
Total assets *$* *57,576,933* $ 56,259,934 $ 55,555,246 $ 54,286,176 $ 52,873,511
Total loans ^(1) *43,230,706* 42,131,831 41,446,032 41,023,408 39,565,471
Total deposits *46,448,858* 45,397,170 44,992,686 44,038,707 42,718,211
Total shareholders’ equity *5,436,400* 5,399,526 5,015,613 5,041,912 5,015,506
*Selected Statements of Income Data:*
Net interest income *$* *464,194* $ 469,974 $ 462,358 $ 447,537 $ 457,995
Net revenue ^(2) *604,774* 570,803 574,836 560,567 565,764
Net income *187,294* 123,480 164,198 154,750 180,198
Pre-tax income, excluding provision for credit losses (non-GAAP) ^(3) *271,629* 208,151 244,781 239,944 266,595
Net income per common share – Basic *2.93* 1.90 2.57 2.41 2.84
Net income per common share – Diluted *2.89* 1.87 2.53 2.38 2.80
Cash dividends declared per common share *0.45* 0.40 0.40 0.40 0.40
*Selected Financial Ratios and Other Data:*
Performance Ratios:
Net interest margin *3.57* *%* 3.62 % 3.60 % 3.64 % 3.81 %
Net interest margin – fully taxable-equivalent (non-GAAP) ^(3) *3.59* 3.64 3.62 3.66 3.83
Non-interest income to average assets *1.02* 0.73 0.82 0.86 0.84
Non-interest expense to average assets *2.41* 2.62 2.41 2.44 2.33
Net overhead ratio ^(4) *1.39* 1.89 1.59 1.58 1.49
Return on average assets *1.35* 0.89 1.20 1.18 1.40
Return on average common equity *14.42* 9.93 13.35 12.79 15.67
Return on average tangible common equity (non-GAAP) ^(3) *16.75* 11.73 15.73 15.12 18.55
Average total assets *$* *55,602,695* $ 55,017,075 $ 54,381,981 $ 52,601,953 $ 52,075,318
Average total shareholders’ equity *5,440,457* 5,066,196 5,083,883 5,044,718 4,895,271
Average loans to average deposits ratio *94.5* *%* 92.9 % 92.4 % 94.3 % 93.0 %
Period-end loans to deposits ratio *93.1* 92.8 92.1 93.2 92.6
Common Share Data at end of period:
Market price per common share *$* *104.39* $ 92.75 $ 75.50 $ 72.62 $ 72.95
Book value per common share *81.38* 81.43 75.19 75.65 75.24
Tangible book value per common share (non-GAAP) ^(3) *70.40* 70.33 64.07 64.50 64.22
Common shares outstanding *61,736,715* 61,243,626 61,222,058 61,197,676 61,176,415
Other Data at end of period:
Common equity to assets ratio *8.7* *%* 8.9 % 8.3 % 8.5 % 8.7 %
Tangible common equity ratio (non-GAAP) ^(3) *7.6* 7.7 7.1 7.4 7.5
Tier 1 leverage ratio ^(5) *9.5* 9.3 9.2 9.3 9.1
Risk-based capital ratios:
Tier 1 capital ratio ^(5) *10.3* 10.3 10.2 10.1 10.1
Common equity tier 1 capital ratio ^(5) *9.5* 9.4 9.3 9.3 9.2
Total capital ratio ^(5) *12.2* 12.1 12.0 12.0 12.1
Allowance for credit losses ^(6) *$* *427,504* $ 427,612 $ 399,531 $ 387,786 $ 376,261
Allowance for loan and unfunded lending-related commitment losses to total loans *0.99* *%* 1.01 % 0.96 % 0.94 % 0.95 %
Number of:
Bank subsidiaries *15* 15 15 15 15
Banking offices *176* 174 174 175 174
(1) Excludes mortgage loans held-for-sale.
(2) Net revenue is net interest income plus 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 SUBSIDIAR**IES*
*CONSOLIDATED STATEMENTS OF **CONDITION*
(Unaudited) (Unaudited) (Unaudited) (Unaudited) *Mar 31,* Dec 31, Sep 30, Jun 30, Mar 31,
(In thousands) *2024* 2023 2023 2023 2023
*Assets*
Cash and due from banks *$* *379,825* $ 423,404 $ 418,088 $ 513,858 $ 445,928
Federal funds sold and securities purchased under resale agreements *61* 60 60 59 58
Interest-bearing deposits with banks *2,131,077* 2,084,323 2,448,570 2,163,708 1,563,578
Available-for-sale securities, at fair value *4,387,598* 3,502,915 3,611,835 3,492,481 3,259,845
Held-to-maturity securities, at amortized cost *3,810,015* 3,856,916 3,909,150 3,564,473 3,606,391
Trading account securities *2,184* 4,707 1,663 3,027 102
Equity securities with readily determinable fair value *119,777* 139,268 134,310 116,275 111,943
Federal Home Loan Bank and Federal Reserve Bank stock *224,657* 205,003 204,040 195,117 244,957
Brokerage customer receivables *13,382* 10,592 14,042 15,722 16,042
Mortgage loans held-for-sale, at fair value *339,884* 292,722 304,808 338,728 302,493
Loans, net of unearned income *43,230,706* 42,131,831 41,446,032 41,023,408 39,565,471
Allowance for loan losses *(348,612* *)* (344,235 ) (315,039 ) (302,499 ) (287,972 )
Net loans *42,882,094* 41,787,596 41,130,993 40,720,909 39,277,499
Premises, software and equipment, net *744,769* 748,966 747,501 749,393 760,283
Lease investments, net *283,557* 281,280 275,152 274,351 256,301
Accrued interest receivable and other assets *1,580,142* 1,551,899 1,674,681 1,455,748 1,413,795
Trade date securities receivable *—* 690,722 — — 939,758
Goodwill *656,181* 656,672 656,109 656,674 653,587
Other acquisition-related intangible assets *21,730* 22,889 24,244 25,653 20,951
*Total assets* *$* *57,576,933* $ 56,259,934 $ 55,555,246 $ 54,286,176 $ 52,873,511
*Liabilities and Shareholders’ Equity*
Deposits:
Non-interest-bearing *$* *9,908,183* $ 10,420,401 $ 10,347,006 $ 10,604,915 $ 11,236,083
Interest-bearing *36,540,675* 34,976,769 34,645,680 33,433,792 31,482,128
Total deposits *46,448,858* 45,397,170 44,992,686 44,038,707 42,718,211
Federal Home Loan Bank advances *2,676,751* 2,326,071 2,326,071 2,026,071 2,316,071
Other borrowings *575,408* 645,813 643,999 665,219 583,548
Subordinated notes *437,965* 437,866 437,731 437,628 437,493
Junior subordinated debentures *253,566* 253,566 253,566 253,566 253,566
Accrued interest payable and other liabilities *1,747,985* 1,799,922 1,885,580 1,823,073 1,549,116
Total liabilities *52,140,533* 50,860,408 50,539,633 49,244,264 47,858,005
Shareholders’ Equity:
Preferred stock *412,500* 412,500 412,500 412,500 412,500
Common stock *61,798* 61,269 61,244 61,219 61,198
Surplus *1,954,532* 1,943,806 1,933,226 1,923,623 1,913,947
Treasury stock *(5,757* *)* (2,217 ) (1,966 ) (1,966 ) (1,966 )
Retained earnings *3,498,475* 3,345,399 3,253,332 3,120,626 2,997,263
Accumulated other comprehensive loss *(485,148* *)* (361,231 ) (642,723 ) (474,090 ) (367,436 )
Total shareholders’ equity *5,436,400* 5,399,526 5,015,613 5,041,912 5,015,506
*Total liabilities and shareholders’ equity* *$* *57,576,933* $ 56,259,934 $ 55,555,246 $ 54,286,176 $ 52,873,511
* *
*WINTRUST FINANCIAL CORPORATION **AND** SUBSIDIAR**IES*
*CONSOLIDATED STATEMENTS OF **INCOME** (**UNAUDITED)*
*Three Months Ended*
(Dollars in thousands, except per share data) *Mar 31,*
*2024* Dec 31,
2023 Sep 30,
2023 Jun 30,
2023 Mar 31,
2023
*Interest income*
Interest and fees on loans *$* *710,341* $ 694,943 $ 666,260 $ 621,057 $ 558,692
Mortgage loans held-for-sale *4,146* 4,318 4,767 4,178 3,528
Interest-bearing deposits with banks *16,658* 21,762 26,866 16,882 13,468
Federal funds sold and securities purchased under resale agreements *19* 578 1,157 1 70
Investment securities *69,678* 68,237 59,164 51,243 59,943
Trading account securities *18* 15 6 6 14
Federal Home Loan Bank and Federal Reserve Bank stock *4,478* 3,792 3,896 3,544 3,680
Brokerage customer receivables *175* 203 284 265 295
Total interest income *805,513* 793,848 762,400 697,176 639,690
*Interest expense*
Interest on deposits *299,532* 285,390 262,783 213,495 144,802
Interest on Federal Home Loan Bank advances *22,048* 18,316 17,436 17,399 19,135
Interest on other borrowings *9,248* 9,557 9,384 8,485 7,854
Interest on subordinated notes *5,487* 5,522 5,491 5,523 5,488
Interest on junior subordinated debentures *5,004* 5,089 4,948 4,737 4,416
Total interest expense *341,319* 323,874 300,042 249,639 181,695
*Net interest income* *464,194* 469,974 462,358 447,537 457,995
Provision for credit losses *21,673* 42,908 19,923 28,514 23,045
Net interest income after provision for credit losses *442,521* 427,066 442,435 419,023 434,950
*Non-interest income*
Wealth management *34,815* 33,275 33,529 33,858 29,945
Mortgage banking *27,663* 7,433 27,395 29,981 18,264
Service charges on deposit accounts *14,811* 14,522 14,217 13,608 12,903
Gains (losses) on investment securities, net *1,326* 2,484 (2,357 ) 1,398
Fees from covered call options *4,847* 4,679 4,215 2,578 10,391
Trading gains (losses), net *677* (505 ) 728 106 813
Operating lease income, net *14,110* 14,162 13,863 12,227 13,046
Other *42,331* 24,779 20,888 20,672 21,009
Total non-interest income *140,580* 100,829 112,478 113,030 107,769
*Non-interest expense*
Salaries and employee benefits *195,173* 193,971 192,338 184,923 176,781
Software and equipment *27,731* 27,779 25,951 26,205 24,697
Operating lease equipment *10,683* 10,694 12,020 9,816 9,833
Occupancy, net *19,086* 18,102 21,304 19,176 18,486
Data processing *9,292* 8,892 10,773 9,726 9,409
Advertising and marketing *13,040* 17,166 18,169 17,794 11,946
Professional fees *9,553* 8,768 8,887 8,940 8,163
Amortization of other acquisition-related intangible assets *1,158* 1,356 1,408 1,499 1,235
FDIC insurance *14,537* 43,677 9,748 9,008 8,669
OREO expenses, net *392* (1,559 ) 120 118 (207 )
Other *32,500* 33,806 29,337 33,418 30,157
Total non-interest expense *333,145* 362,652 330,055 320,623 299,169
Income before taxes *249,956* 165,243 224,858 211,430 243,550
Income tax expense *62,662* 41,763 60,660 56,680 63,352
*Net income* *$* *187,294* $ 123,480 $ 164,198 $ 154,750 $ 180,198
Preferred stock dividends *6,991* 6,991 6,991 6,991 6,991
*Net income applicable to common shares* *$* *180,303* $ 116,489 $ 157,207 $ 147,759 $ 173,207
*Net income per common share - Basic* *$* *2.93* $ 1.90 $ 2.57 $ 2.41 $ 2.84
*Net income per common share - Diluted* *$* *2.89* $ 1.87 $ 2.53 $ 2.38 $ 2.80
*Cash dividends declared per common share* *$* *0.45* $ 0.40 $ 0.40 $ 0.40 $ 0.40
Weighted average common shares outstanding *61,481* 61,236 61,213 61,192 60,950
Dilutive potential common shares *928* 1,166 964 902 873
Average common shares and dilutive common shares *62,409* 62,402 62,177 62,094 61,823
* *
*TABLE 1**: **LOAN PORTFOLIO MIX AND GROWTH RATES*
% Growth From
(Dollars in thousands) *Mar 31, 2024* Dec 31, 2023 Sep 30, 2023 Jun 30,
2023 Mar 31, 2023 Dec 31, 2023 ^(1) Mar 31, 2023
*Balance:*
Mortgage loans held-for-sale, excluding early buy-out exercised loans guaranteed by U.S. government agencies *$* *193,064* $ 155,529 $ 190,511 $ 235,570 $ 155,687 97 % 24 %
Mortgage loans held-for-sale, early buy-out exercised loans guaranteed by U.S. government agencies *146,820* 137,193 114,297 103,158 146,806 28
Total mortgage loans held-for-sale *$* *339,884* $ 292,722 $ 304,808 $ 338,728 $ 302,493 65 % 12 %
*Core loans:*
Commercial
Commercial and industrial *$* *6,105,968* $ 5,804,629 $ 5,894,732 $ 5,737,633 $ 5,855,035 21 % 4 %
Asset-based lending *1,355,255* 1,433,250 1,396,591 1,465,848 1,482,071 (22 ) (9 )
Municipal *721,526* 677,143 676,915 653,117 655,301 26 10
Leases *2,344,295* 2,208,368 2,109,628 1,925,767 1,904,137 25 23
PPP loans *11,036* 11,533 13,744 15,337 17,195 (17 ) (36 )
Commercial real estate
Residential construction *57,558* 58,642 51,550 51,689 69,998 (7 ) (18 )
Commercial construction *1,748,607* 1,729,937 1,547,322 1,409,751 1,234,762 4 42
Land *344,149* 295,462 294,901 298,996 292,293 66 18
Office *1,566,748* 1,455,417 1,422,748 1,404,422 1,392,040 31 13
Industrial *2,190,200* 2,135,876 2,057,957 2,002,740 1,858,088 10 18
Retail *1,366,415* 1,337,517 1,341,451 1,304,083 1,309,680 9 4
Multi-family *2,922,432* 2,815,911 2,710,829 2,696,478 2,635,411 15 11
Mixed use and other *1,437,328* 1,515,402 1,519,422 1,440,652 1,446,806 (21 ) (1 )
Home equity *340,349* 343,976 343,258 336,974 337,016 (4 ) 1
Residential real estate
Residential real estate loans for investment *2,746,916* 2,619,083 2,538,630 2,455,392 2,309,393 20 19
Residential mortgage loans, early buy-out eligible loans guaranteed by U.S. government agencies *90,911* 92,780 97,911 117,024 119,301 (8 ) (24 )
Residential mortgage loans, early buy-out exercised loans guaranteed by U.S. government agencies *52,439* 57,803 71,062 70,824 76,851 (37 ) (32 )
*Total core loans* *$* *25,402,132* $ 24,592,729 $ 24,088,651 $ 23,386,727 $ 22,995,378 13 % 10 %
*Niche loans:*
Commercial
Franchise *$* *1,122,302* $ 1,092,532 $ 1,074,162 $ 1,091,164 $ 1,131,913 11 % (1 )%
Mortgage warehouse lines of credit *403,245* 230,211 245,450 381,043 235,684 302 71
Community Advantage - homeowners association *475,832* 452,734 424,054 405,042 389,922 21 22
Insurance agency lending *964,022* 921,653 890,197 925,520 905,727 18 6
Premium Finance receivables
U.S. property & casualty insurance *6,113,993* 5,983,103 5,815,346 5,900,228 5,043,486 9 21
Canada property & casualty insurance *826,026* 920,426 907,401 862,470 695,394 (41 ) 19
Life insurance *7,872,033* 7,877,943 7,931,808 8,039,273 8,125,802 (3 )
Consumer and other *51,121* 60,500 68,963 31,941 42,165 (62 ) 21
*Total niche loans* *$* *17,828,574* $ 17,539,102 $ 17,357,381 $ 17,636,681 $ 16,570,093 7 % 8 %
*Total loans, net of unearned income* *$* *43,230,706* $ 42,131,831 $ 41,446,032 $ 41,023,408 $ 39,565,471 10 % 9 %
(1) Annualized.
*TABLE 2**: **DEPOSIT PORTFOLIO MIX AND GROWTH RATES*
% Growth From
(Dollars in thousands) *Mar 31,*
*2024* Dec 31,
2023 Sep 30,
2023 Jun 30,
2023 Mar 31,
2023 Dec 31,
2023^ (1) Mar 31, 2023
*Balance:*
Non-interest-bearing *$* *9,908,183* $ 10,420,401 $ 10,347,006 $ 10,604,915 $ 11,236,083 (20 )% (12 )%
NOW and interest-bearing demand deposits *5,720,947* 5,797,649 6,006,114 5,814,836 5,576,558 (5 ) 3
Wealth management deposits ^(2) *1,347,817* 1,614,499 1,788,099 1,417,984 1,809,933 (66 ) (26 )
Money market *15,617,717* 15,149,215 14,478,504 14,523,124 13,552,277 12 15
Savings *5,959,774* 5,790,334 5,584,294 5,321,578 5,192,108 12 15
Time certificates of deposit *7,894,420* 6,625,072 6,788,669 6,356,270 5,351,252 77 48
Total deposits *$* *46,448,858* $ 45,397,170 $ 44,992,686 $ 44,038,707 $ 42,718,211 9 % 9 %
*Mix:*
Non-interest-bearing *21* *%* 23 % 23 % 24 % 26 %
NOW and interest-bearing demand deposits *12* 13 13 13 13
Wealth management deposits ^(2) *3* 4 4 3 4
Money market *34* 33 32 33 32
Savings *13* 13 13 12 12
Time certificates of deposit *17* 14 15 15 13
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”), and trust and asset management customers of the Company.
*TABLE 3**: **TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS*
*As of **March 31, 2024*
(Dollars in thousands) *Total Time*
*Certificates of*
*Deposit* *Weighted-Average*
*Rate of Maturing*
*Time Certificates*
* of Deposit *
1-3 months *$* *2,250,084* *4.53* *%*
4-6 months *2,431,414* *4.76*
7-9 months *1,658,270* *4.32*
10-12 months *991,137* *4.06*
13-18 months *438,441* *3.71*
19-24 months *55,853* *2.50*
24+ months *69,221* *1.78*
Total *$* *7,894,420* *4.42* *%*
* *
*TABLE 4**: **QUARTERLY AVERAGE BALANCES*
*Average Balance for three months ended,* *Mar 31,* Dec 31, Sep 30, Jun 30, Mar 31,
(In thousands) *2024* 2023 2023 2023 2023
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents ^(1) *$* *1,254,332* $ 1,682,176 $ 2,053,568 $ 1,454,057 $ 1,235,748
Investment securities ^(2) *8,349,796* 7,971,068 7,706,285 7,252,582 7,956,722
FHLB and FRB stock *230,648* 204,593 201,252 223,813 233,615
Liquidity management assets ^(3) *9,834,776* 9,857,837 9,961,105 8,930,452 9,426,085
Other earning assets ^(3)(4) *15,081* 14,821 17,879 17,401 18,445
Mortgage loans held-for-sale *290,275* 279,569 319,099 307,683 270,966
Loans, net of unearned income ^(3)(5) *42,129,893* 41,361,952 40,707,042 40,106,393 39,093,368
Total earning assets ^(3) *52,270,025* 51,514,179 51,005,125 49,361,929 48,808,864
Allowance for loan and investment security losses *(361,734* *)* (329,441 ) (319,491 ) (302,627 ) (282,704 )
Cash and due from banks *450,267* 443,989 459,819 481,510 488,457
Other assets *3,244,137* 3,388,348 3,236,528 3,061,141 3,060,701
Total assets *$* *55,602,695* $ 55,017,075 $ 54,381,981 $ 52,601,953 $ 52,075,318
NOW and interest-bearing demand deposits *$* *5,680,265* $ 5,868,976 $ 5,815,155 $ 5,540,597 $ 5,271,740
Wealth management deposits *1,510,203* 1,704,099 1,512,765 1,545,626 2,167,081
Money market accounts *14,474,492* 14,212,320 14,155,446 13,735,924 12,533,468
Savings accounts *5,792,118* 5,676,155 5,472,535 5,206,609 4,830,322
Time deposits *7,148,456* 6,645,980 6,495,906 5,603,024 5,041,638
Interest-bearing deposits *34,605,534* 34,107,530 33,451,807 31,631,780 29,844,249
Federal Home Loan Bank advances *2,728,849* 2,326,073 2,241,292 2,227,106 2,474,882
Other borrowings *627,711* 633,673 657,454 625,757 602,937
Subordinated notes *437,893* 437,785 437,658 437,545 437,422
Junior subordinated debentures *253,566* 253,566 253,566 253,566 253,566
Total interest-bearing liabilities *38,653,553* 37,758,627 37,041,777 35,175,754 33,613,056
Non-interest-bearing deposits *9,972,646* 10,406,585 10,612,009 10,908,022 12,171,631
Other liabilities *1,536,039* 1,785,667 1,644,312 1,473,459 1,395,360
Equity *5,440,457* 5,066,196 5,083,883 5,044,718 4,895,271
Total liabilities and shareholders’ equity *$* *55,602,695* $ 55,017,075 $ 54,381,981 $ 52,601,953 $ 52,075,318
Net free funds/contribution ^(6) *$* *13,616,472* $ 13,755,552 $ 13,963,348 $ 14,186,175 $ 15,195,808
(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) *2024* 2023 2023 2023 2023
*Interest income:*
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents *$* *16,677* $ 22,340 $ 28,022 $ 16,882 $ 13,538
Investment securities *70,228* 68,812 59,737 51,795 60,494
FHLB and FRB stock *4,478* 3,792 3,896 3,544 3,680
Liquidity management assets ^(1) *91,383* 94,944 91,655 72,221 77,712
Other earning assets ^(1) *198* 222 291 272 313
Mortgage loans held-for-sale *4,146* 4,318 4,767 4,178 3,528
Loans, net of unearned income ^(1) *712,587* 697,093 668,183 622,939 560,564
Total interest income *$* *808,314* $ 796,577 $ 764,896 $ 699,610 $ 642,117
*Interest expense:*
NOW and interest-bearing demand deposits *$* *34,896* $ 38,124 $ 36,001 $ 29,178 $ 18,772
Wealth management deposits *10,461* 12,076 9,350 9,097 12,258
Money market accounts *137,984* 130,252 124,742 106,630 68,276
Savings accounts *39,071* 36,463 31,784 25,603 15,816
Time deposits *77,120* 68,475 60,906 42,987 29,680
Interest-bearing deposits *299,532* 285,390 262,783 213,495 144,802
Federal Home Loan Bank advances *22,048* 18,316 17,436 17,399 19,135
Other borrowings *9,248* 9,557 9,384 8,485 7,854
Subordinated notes *5,487* 5,522 5,491 5,523 5,488
Junior subordinated debentures *5,004* 5,089 4,948 4,737 4,416
Total interest expense *$* *341,319* $ 323,874 $ 300,042 $ 249,639 $ 181,695
Less: Fully taxable-equivalent adjustment *(2,801* *)* (2,729 ) (2,496 ) (2,434 ) (2,427 )
Net interest income (GAAP) ^(2) *464,194* 469,974 462,358 447,537 457,995
Fully taxable-equivalent adjustment *2,801* 2,729 2,496 2,434 2,427
Net interest income, fully taxable-equivalent (non-GAAP) ^(2) *$* *466,995* $ 472,703 $ 464,854 $ 449,971 $ 460,422
(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, 2024* Dec 31, 2023 Sep 30,
2023 Jun 30, 2023 Mar 31,
2023
*Yield earned on:*
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents *5.35* *%* 5.27 % 5.41 % 4.66 % 4.44 %
Investment securities *3.38* 3.42 3.08 2.86 3.08
FHLB and FRB stock *7.81* 7.35 7.68 6.35 6.39
Liquidity management assets *3.74* 3.82 3.65 3.24 3.34
Other earning assets *5.25* 5.92 6.47 6.27 6.87
Mortgage loans held-for-sale *5.74* 6.13 5.93 5.45 5.28
Loans, net of unearned income *6.80* 6.69 6.51 6.23 5.82
Total earning assets *6.22* *%* 6.13 % 5.95 % 5.68 % 5.34 %
*Rate paid on:*
NOW and interest-bearing demand deposits *2.47* *%* 2.58 % 2.46 % 2.11 % 1.44 %
Wealth management deposits *2.79* 2.81 2.45 2.36 2.29
Money market accounts *3.83* 3.64 3.50 3.11 2.21
Savings accounts *2.71* 2.55 2.30 1.97 1.33
Time deposits *4.34* 4.09 3.72 3.08 2.39
Interest-bearing deposits *3.48* 3.32 3.12 2.71 1.97
Federal Home Loan Bank advances *3.25* 3.12 3.09 3.13 3.14
Other borrowings *5.92* 5.98 5.66 5.44 5.28
Subordinated notes *5.04* 5.00 4.98 5.06 5.02
Junior subordinated debentures *7.94* 7.96 7.74 7.49 6.97
Total interest-bearing liabilities *3.55* *%* 3.40 % 3.21 % 2.85 % 2.19 %
Interest rate spread^ (1)(2) *2.67* *%* 2.73 % 2.74 % 2.83 % 3.15 %
Less: Fully taxable-equivalent adjustment *(0.02* *)* (0.02 ) (0.02 ) (0.02 ) (0.02 )
Net free funds/contribution^ (3) *0.92* 0.91 0.88 0.83 0.68
Net interest margin (GAAP)^ (2) *3.57* *%* 3.62 % 3.60 % 3.64 % 3.81 %
Fully taxable-equivalent adjustment *0.02* 0.02 0.02 0.02 0.02
Net interest margin, fully taxable-equivalent (non-GAAP)^ (2) *3.59* *%* 3.64 % 3.62 % 3.66 % 3.83 %
(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, 2024* *1.9* *%* *1.4* *%* *1.5* *%* *1.6* *%*
Dec 31, 2023 2.6 1.8 0.4 (0.7 )
Sep 30, 2023 3.3 1.9 (2.0 ) (5.2 )
Jun 30, 2023 5.7 2.9 (2.9 ) (7.9 )
Mar 31, 2023 4.2 2.4 (2.4 ) (7.3 )
Ramp Scenario *+200 Basis Points* *+100 Basis Points* *-100 Basis Points* *-200 Basis Points*
*Mar 31, 2024* *0.8* *%* *0.6* *%* *1.3* *%* *2.0* *%*
Dec 31, 2023 1.6 1.2 (0.3 ) (1.5 )
Sep 30, 2023 1.7 1.2 (0.5 ) (2.4 )
Jun 30, 2023 2.9 1.8 (0.9 ) (3.4 )
Mar 31, 2023 3.0 1.7 (1.3 ) (3.4 )
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 may 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 contractual