Fitch Affirms Wintrust Financial at 'BBB/F2' Following Mid-Tier Regional Peer Review; Outlook Stable

Wed Feb 5, 2014 4:36pm EST

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(The following statement was released by the rating agency) NEW YORK, February 05 (Fitch) Fitch Ratings affirms Wintrust Financial Corp.'s (WTFC) ratings at 'BBB'/'F2'. The Rating Outlook remains Stable. A full list of rating actions is provided at the end of this rating action commentary. KEY RATING DRIVERS - IDRS, VRs, AND SENIOR DEBT WTFC's ratings were affirmed at 'BBB' reflecting its consistent and conservative management through the credit cycle leading to superior asset quality performance relative to similarly rated and similarly sized institutions. Further, Fitch believes WTFC's loan portfolio structure provides the company unique credit diversification relative to peers, especially when considering the loss history of its premium finance loan portfolio. Fitch recognizes WTFC's relatively strong asset quality compared to similarly rated peers and believes it is a reflection of management's credit risk management philosophy. Nonperforming assets (NPAs) have remained somewhat elevated relative to historical norms at 1.72% as of the fourth quarter of 2013 (4Q'13) but have dropped 61 basis points (bps) year-over-year and compare favourably to similarly rated peers. Fitch also views the company's premium finance loan book as generally positive given its relative size to the overall loan portfolio and the low credit losses generated out of it. Fitch believes that WTFC is constrained at its current rating given the company's fairly tepid earnings performance relative to higher rated peers. The company's year-to-date (YTD) 2013 return on assets (ROA) of 79 bps is lower than similarly rated institutions but is also taken in the context of WTFC's overall risk profile. Fitch believes that going forward earnings will continue to be challenged by the expected prolonged period of low interest rates coupled with the company's short-term balance sheet. At year-end 2012, 70% of WTFC's loans were either variable or repriced within 12 months. However, Fitch expects this to be advantageous when interest rates do begin to rise. RATING SENSITIVITIES - IDRS, VRs, AND SENIOR DEBT Negative trends in earnings or a reversal in current AQ trends leading to earnings and capital deterioration could lead to negative rating action. Further, if the company growth (either through acquisition or organic) were to exceed Fitch's comfort level and capital levels fell materially below their current levels, ratings could be adversely impacted. While Fitch sees little upside to the company's rating in the near term, if earnings performance improves and comes in line with higher rated peers while AQ trends maintain their positive course and risk management practices remain conservative, Fitch could take positive rating action. KEY RATING DRIVERS - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and other hybrid capital issued by WTFC, and its subsidiaries are all notched down from WTFC's Viability Rating (VR) of 'bbb' in accordance with Fitch's assessment of each instrument's respective non-performance and relative Loss Severity risk profiles, which vary considerably. RATING SENSITIVITIES - SUBORDINATED DEBT AND OTHER HYBRID SECURITIES WTFC's subordinated debt and other hybrid capital ratings are sensitive to changes in WTFC's VR. Rating sensitivities for the VR are listed above. SUBSIDIARY AND AFFILIATED COMPANY KEY RATING DRIVERS The below ratings factor in a high probability of support from the parent to its subsidiary. This reflects the fact that performing parent banks have very rarely allowed subsidiaries to default. It also considers the high level of integration, brand, management, financial and reputational incentives to avoid subsidiary defaults. SUBSIDIARY AND AFFILIATED COMPANY RATING SENSITIVITIES All 15 subsidiary banks' ratings are linked together and equalized due to cross-collateralization conditions found in Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Consequently, any movement in the parent's VR would equally impact all related subsidiary banks. Rating sensitivities for the VR are listed above. KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR WTFC's Support Rating and Support Rating Floor of '5' and 'NF' reflect Fitch's view that the company is unlikely to procure extraordinary support should such support be needed. KEY RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR WTFC's Support Rating and Support Rating Floor are sensitive to Fitch's assumption around capacity to procure extraordinary support in case of need. Fitch Ratings reviewed WTFC's ratings as part of the mid-tier regional bank review. The 19 banks in today's review include: Associated Banc-Corp (ASBC), BOK Financial Corp (BOKF), Cathay General Bancorp (CATY), City National Bancorp (CYN), Cullen/Frost Bankers, Inc. (CFR), East West Bancorp, Inc. (EWBC), First Horizon National Corp. (FHN), First National of Nebraska, Inc. (FNNI), First Niagara Financial Group, Inc. (FNFG), First Republic Bank (FRC), First Merit (FMER), Fulton Financial Corp. (FULT), Hancock Holding Company (HBHC), People's United Financial, Inc. (PBCT), Synovus Financial Corp. (SNV), TCF Financial Corp (TCB), UMB Financial Corporation (UMB), Webster Financial Corp. (WBS), Wintrust (WTFC). Fitch has affirmed the following ratings with a Stable Outlook: Wintrust Financial Corporation Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Subordinated Debt at 'BBB-'; Preferred Stock at 'B+'; Support at '5'; Support Rating Floor at 'NF'. Lake Forest Bank and Trust Company Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating at 'NF'. Hinsdale Bank and Trust Company Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. North Shore Community Bank and Trust Company Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Libertyville Bank and Trust Company Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Barrington Bank and Trust Company, NA Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Crystal Lake Bank and Trust Company, NA Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Northbrook Bank and Trust Company Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Schaumburg Bank and Trust Company, NA Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Village Bank and Trust Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Beverly Bank and Trust Company, NA Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Town Bank Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Wheaton Bank and Trust Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. State Bank of the Lakes Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Old Plank Trail Community Bank, NA Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. St. Charles Bank and Trust Company Long-Term IDR at 'BBB'; Short-Term IDR at 'F2'; Viability Rating at 'bbb'; Long-Term Deposits at 'BBB+'; Short-Term Deposits at 'F2'; Support at '5'; Support Rating Floor at 'NF'. Contact: Primary Analyst Bain Rumohr, CFA Associate Director +1-312-368-3153 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Julie Solar Senior Director +1-312-368-5472 Committee Chairperson Christopher Wolfe Managing Director +1-212-908-0771 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --2014 Outlook: U.S. Banks (Nov. 21, 2013); --U.S. Banks: Liquidity and Deposit Funding (Aug. 08, 2013); --U.S. Banks: Interest Rate Risks (What Happens When Rates Rise) (June 18, 2013) --U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In? (July 11, 2013); --Global Trading and Universal Banks - Periodic Review (Dec. 12, 2013); --Fitch Fundamentals Index - U.S.; Index Trend Analysis 4Q13 (Jan. 15, 2014); --Risk Radar Global - Q313 (Sept 05, 2013); --Fitch Global Corporate Rating Activity – Third Quarter 2013 (Dec. 5, 2013); --U.S. Banking Quarterly Comment: 4Q13 (Earnings Continue to Tick Up, but Challenges Remain) (Jan. 27, 2014); --Global Financial Institutions Rating Criteria (Jan. 31, 2014;) --Assessing and Rating Bank Subordinated and Hybrid Securities (Jan. 31, 2014). Applicable Criteria and Related Research: 2014 Outlook: U.S. Banks here U.S. Banks: Liquidity and Deposit Funding here U.S. Banks: Interest Rate Risks (What Happens When Rates Rise) here U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In? here Global Trading and Universal Banks - Periodic Review here Fitch Fundamentals Index here Risk Radar Global - Q313 here Fitch Global Corporate Rating Activity —Third-Quarter 2013 here U.S. Banking Quarterly Comment: 4Q13 (Earnings Continue to Tick Up, but Challenges Remain) here Global Financial Institutions Rating Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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