Wintrust Financial Corporation WTFC has struck a cash-only deal to buy IL-based North Bank for about $17 million, through its banking subsidiary Wintrust Bank. This represents the company’s second acquisition in Illinois so far this year. Notably, Wintrust entered into a definitive agreement to acquire Community Financial Shares, Inc. for $42.4 million earlier this month.
The latest acquisition provides Wintrust access to North Bank’s two banking locations in Chicago, besides adding $108 million in assets, $96 million in deposits and $55 million in loans (as of Dec 31, 2014). Moreover, North Bank’s community banking approach will likely enhance the performance of Wintrust’s Community Banking segment.
Reportedly, the deal, expected to close in second-quarter 2015 or beginning of the preceding quarter, is not likely to materially impact earnings in 2015. Further, the terms of the transaction, including the total purchase consideration, are subject to approvals from the shareholders of North Bank, banking regulators and other customary closing conditions.
The 2008 financial crisis proved to be a blessing in disguise for this Midwest bank. Sailing against the tide, the bank had intelligently focused on acquiring several small troubled banks in the Chicago area, backed by its pre-crisis build-up capital, which positioned it better to capitalize on strategic opportunities and expand its geographical footprints.
Moreover, Wintrust has been able to maintain a favorable asset quality despite taking over distressed banks. Over the last 5 years (2010–2014), allowance for credit losses have declined at a CAGR of 5.9%, and non-performing loans, as a percentage of total loans (excluding covered loans), have reduced to 0.55% in 2014 from 1.48% in 2010.
Moreover, the company, which aspires to become the largest bank in Chicago, has seen its total assets, deposits and loans (excluding loans held-for-sale and covered loans) grow at 3-year (2012–2014) CAGR of 6.9%, 6.2% and 14.4%, respectively.
While the company is poised to grow on meaningful acquisitions supported by its healthy capital position and sound asset quality, we believe location-centric deals like this will increase its exposure to a downturn in the local economy. Further, with the economy gradually recovering, condition of banks across the country is expected to improve, making it difficult for Wintrust to identify potential targets.
Currently, Wintrust holds a Zacks Rank #2 (Buy). Better-ranked stocks in the finance space include Bank of the Ozarks, Inc. OZRK, Pinnacle Financial Partners Inc. PNFP and Malvern Bancorp, Inc. MLVF. All these stocks sport a Zacks Rank #1 (Strong Buy).
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