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Coverage Initiation: Wintrust Financial
Many banks can trace their roots back to the 1800s and early part of the 1900s. While such lineage makes for an impressive back story, every bank has to start somewhere. Wintrust Financial’s (WTFC) history only goes back to 1991. It was founded that year by a group of bankers and local business people who believe that there was space for a locally controlled and managed, highly personal service-oriented bank in the Chicago metropolitan area.
The region had seen a number of large banks, some of which have histories spanning over 100 years, come in to acquire smaller banks. This is a common growth strategy in the financial industry, as banks look to gain access to or strengthen their footprints in specific regions. The local feel of the acquired banks, however, often gets lost as the acquiring bank steps in to run operations. Thus, the small banks start to feel more like large banks.
In the trend toward less personalized service, the founders of Wintrust saw opportunity for a bank started from the ground up that was locally controlled and managed, and focused on personal service. Lake Forest Bank and Trust Company was the first bank that Wintrust opened in December, 1991 to service the Lake Forest and Lake Bluff communities.
Through the first decade or so of its existence, the company focused on building banks from scratch. This allowed for complete control of the look and feel of each bank. In 2003, however, Wintrust started acquiring similarly positioned financial institutions in the region. The decision to use acquisitions in addition to building from the ground up helped expedite the bank’s growth. By the end of 2010, the company had over 80 banking locations with about $14 billion in assets.
Today, the company controls nine Illinois-chartered banks (Hinsdale Bank & Trust Company, Lake Forest Bank & Trust Company, Libertyville Bank & Trust Company, Northbrook Bank & Trust Company, North Shore Community Bank & Trust Company, St. Charles Bank & Trust, State Bank of The Lakes, Village Bank & Trust, and Wheaton Bank & Trust), one Wisconsin-chartered bank (Town Bank), and five nationally-chartered banks (Schaumburg Bank & Trust Company, N.A., Barrington Bank & Trust Company, N.A., Beverly Bank & Trust Company, N.A., Crystal Lake Bank & Trust Company, N.A.,and Old Plank Trail Community Bank, N.A.). Traditional banking accounted for 85% of the Wintrust’s revenues in 2010.
Over the years, the bank has expanded its offerings to include other services for both individuals and business clients. Here, wealth management services are provided through three separate subsidiaries (Wayne Hummer Investments, Great Lakes Advisors, and The Chicago Trust Company, N.A.), operating under one name, Wintrust Wealth Management. Wealth management accounted for 9% of revenues in 2010. Specialty lending and select services, which accounted for 17% of revenues in 2010, are provided through First Insurance Funding Corp. (FIRST), and its subsidiary Broadway Premium Funding Corp. (Broadway), and Tricom, Inc.
Wintrust continues to keep true to its focus of local, high service banking. To that end, all of the bank’s senior management are shareholders in Wintrust, though total ownership by the board and directors only amounted to about 4.4% of the common stock as of May 2011. Still, the bank states that it is controlled by “a strong, participatory, local board”. Management believes that its closeness to the community is a key differentiating factor and one that will lead to continued growth. The company’s MaxSafe deposit accounts are an example of the bank’s customer focus in that it makes use of the bank’s decentralized corporate structure to spread customer accounts over the 15 banks that are controlled by Wintrust. This allows customers with material cash sums to increase their Federal Deposit Insurance Corporation insurance coverage without having to take on additional banking relationships.
Although the bank weathered the 2007 to 2009 financially led recession well, it did not do so unscathed and has, since hitting a performance low in 2008 (earnings per share dropped to $0.76 that year, posting a loss in only one quarter of the year), has been working back toward previous earnings levels.
As a bank, the Wintrust faces material regulatory oversight. Longer term, regulatory action here will clearly have an impact on the company’s ability to grow both its top and bottom lines. That said, the bank’s tight focus on the greater Chicago area will also have an outsized impact on performance. If the Chicago market were to stumble badly, Wintrust’s performance would likely suffer. However, the opposite is also true. With its size in the generally desirable Chicago market, Wintrust could also be an acquisition target. Although selling to a larger organization would seem to against the bank’s founding principle, everyone has a price.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.