For the first quarter, Wintrust Financial Corp (NASDAQ:WTFC) continued its winning ways. Net income came to $82 million, or $1.40 per share, up from $58.4 million or $1.00 per share in the same period a year ago. It was the ninth consecutive quarter of record gains. The Street consensus called for earnings of $1.28 per share.
And yes, the top line was solid. For the quarter, revenues hit $310.8 million, compared to the consensus of $301 million.
The Drivers for WTFC Stock
Wintrust Financial Corp likes to refer to itself as the “alternative” to the big banks like Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM) and Citigroup Inc (NYSE:C). Founded in 1991, the bank has more than 150 locations in Chicago, Illinois, southern Wisconsin and northwest Indiana.
According to the company’s website:
“We believe there’s still a need, and desire, for a true community bank: where tellers know their customers by name; bankers care about local businesses because they frequent them; and the bank invests in the neighborhood because it’s actually part of the neighborhood.”
Yes, it’s a compelling vision. And it has resulted in standout returns for holders of Wintrust Financial Corp stock. During the past three years, the average compound annual growth rate was 22.53%.
Yet Wintrust Financial Corp still has reasonable scale, with assets of $28.5 billion. This means that the firm can deal with the onerous regulatory costs but also diversify its business.
For example, the company has been aggressive in moving into specialty finance categories, such as with creating a sizable life insurance premium finance portfolio. Then there is a thriving wealth-management business.
But WTFC has also been creative with its product offerings. Just look at the Total Access Checking account. Unlike many other banks, this account has zero fees, and there are reimbursements for ATMs outside of the company’s own network. Last year, over 17,000 accounts were set up.
WTFC then expanded on this and launched its Student Checking account, which includes a debit card.
Macro Factors
There are certainly strong tailwinds for banks. First of all, the Trump administration has been focused on reducing and eliminating regulations, which should be a catalyst for WTFC stock.
Then there is the overall positive economic environment. In other words, WTFC continues to see traction with its loan growth. The bank has also been disciplined with its underwriting. On an annualized basis, the charge-offs are at a measly 12 basis points. There was also a drop from 0.47% to 0.44% in the nonperforming assets as a percentage of total assets.
But perhaps the most important factor for WTFC stock is the rise in interest rates. A good deal of the firm’s profits come from the difference between what it pays on its deposits and what it receives on its loan portfolio. On a quarter-over-quarter basis, there was a $6-million increase in net interest income, and the return on average assets rose from 1% to 1.20%.
Bottom Line on Wintrust Financial Corp Stock
Given the strength in the quarter, the response for WTFC stock seems a bit tepid. But then again, it looks like Wall Street has been discounting much of the good news. For the past 12 months, WTFC stock is up about 38%.
But for long-term investors, the shares do look attractive. The growth story is likely to remain intact because of rising interest rates and the strong economy. Besides, the valuation is reasonable, with the forward price-to-earnings ratio at 16X.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
