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Wintrust (WTFC) Diversifies Operations With Latest Buyout

Diversifying its operations, Wintrust Financial Corporation WTFC has acquired Elektra Holding Company, LLC in a cash-deal worth around $51.9 million. The company expects this transaction to slightly impact its 2018 earnings.

Elektra, the parent company of Chicago Deferred Exchange Company, LLC (CDEC), provides Qualified Intermediary services for taxpayers who need to constitute tax-deferred like-kind exchanges under Internal Revenue Code Section 1031.

Notably, more than 8,000 like-kind exchanges have been assisted by CDEC for taxpayers globally. The proceeds of sold property are being kept as deposits of customers which are low cost, until a replacement property has been purchased. During 2018, CDEC customers’ deposits came in at around $1 billion.

Edward J. Wehmer, president and CEO of Wintrust, commented on the completion of the transaction, “With the acquisition of CDEC, we establish ourselves as a major player in the Qualified Intermediary market for tax-deferred exchanges under IRC Section 1031. CDEC’s services will augment the comprehensive range of services that Wintrust provides to our customers in the commercial real estate market. This transaction also provides Wintrust with a new fee-generating business and a significant new potential source of low-cost deposits. Together, we are well-positioned to employ our expanded resources and scale to further enhance CDEC’s growth, strategies and client service.”

Prior Acquisitions by Wintrust in 2018

In December, Wintrust completed the acquisition of certain assets and the assumption of certain liabilities of American Enterprise Bank through its subsidiary — Northbrook Bank & Trust Company. The company does not expect it to have a material impact on the current or next year’s earnings.

In August, Wintrust announced the completion of Chicago Shore Corporation, the parent company of Delaware Place Bank. Per the terms, Delaware Place Bank was merged into Wintrust’s wholly-owned banking subsidiary, Wintrust Bank. Though the company does not anticipate this transaction to have much impact on its 2018 earnings, the buyout has strengthened its foothold in Chicago.

Wintrust acquired certain assets and liabilities of iFreedom Direct Corporation DBA Veterans First Mortgage in January. The deal is expected to be slightly accretive to the company’s earnings per share in 2018. Also, the acquisition has provided Wintrust Mortgage with Veterans First Mortgage’s servicing rights on nearly 8,300 loans, which total $1.4 billion in principal balance.

The company’s acquisition spree supports Wintrust’s growth plan in the United States. Its involvement in such strategic deals is indicative of the strong balance-sheet position. In addition to strengthening its footprint, the recent deal diversifies its revenue sources as well.

Shares of Wintrust have lost around 27.7% over the past six months compared with 19.9% decline registered by the industry. Currently, the stock carries a Zacks Rank #3 (Hold).


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