Investment Thesis
Headquartered in Rosemont, Illinois, Wintrust Financial Corporation (NASDAQ:WTFC) is a $43 billion asset holding company. Through 15 wholly-owned bank subsidiaries and over 180 banking locations, Wintrust provides community-oriented, personal and commercial banking services to customers located throughout the greater Chicago MSA.
Wintrust also operates several non-bank operating subsidiaries that provide additional services, including insurance premium financing through First Insurance Funding Corporation, short-term accounts receivable financing through Tricom, Inc., residential mortgage origination and purchase through Wintrust Mortgage and wealth management services through three separate subsidiaries operating under the Wintrust Wealth Management name.
In the quarters leading up to the Great Financial Crisis, WTFC took a few proactive measures in order to limit its riskier credit exposure in hopes to limit future credit losses. While management did successfully ease up on the gas in time to have an “average” peak-to-trough credit cycle performance, that was a financial crisis and this is a sudden pandemic.
On a very fundamental level, while WTFC might have $43 billion in assets and $31 billion in loans, the premium finance loans makeup $9.2 billion of the portfolio and don’t really carry much credit risk. While PPP loans have hindered the net interest margin (NIM) as of late, I believe WTFC is at its economic cycle lows. Also, the bank's higher loan-to-deposit ratio and soon to fall deposit costs should limit the NIM from continually falling lower for any material period of time.
From a valuation perspective, in terms of price to tangible book value, we are basically at the 25-year low last experienced during the previous recession. While I am not advocating that the bank should double in price anytime soon, I do believe that this price is a prime opportunity to start buying at a once-in-a-decade low-level valuation. When the market does start to see some economic stability, I believe
