Wintrust Financial Corporation Reports Record Third Quarter 2019 Net Income of $99.1 million and Year-to-Date Net Income of $269.7 million

ROSEMONT, Ill., Oct. 16, 2019 (GLOBE NEWSWIRE) — Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq: WTFC) announced net income of $99.1 million or $1.69 per diluted common share for the third quarter of 2019, an increase in diluted earnings per common share of 22.5% compared to the prior quarter and 7.6% compared to the third quarter of 2018. The Company recorded net income of $269.7 million or $4.60 per diluted common share for the first nine months of 2019 compared to net income of $263.5 million or $4.50 per diluted common share for the same period of 2018.

Highlights of the Third Quarter of 2019:
Comparative information to the second quarter of 2019

  • Total assets increased by $1.3 billion or 15% on an annualized basis.
  • Total loans increased by $406 million or 6% on an annualized basis.
  • Total deposits increased by $1.2 billion or 17% on an annualized basis, the increase was net of a $552 million reduction in brokered deposits.
  • Mortgage banking production revenue increased by $12.8 million as mortgage loans originated for sale totaled $1.4 billion in the third quarter of 2019 as compared to $1.2 billion in the second quarter of 2019.
  • Net interest income decreased by $1.3 million as a 25 basis point decline in net interest margin was partially offset by a $1.7 billion increase in average earning assets.
  • The net overhead ratio declined by 24 basis points to 1.40%, effectively offsetting the impact of the net interest margin decline.
  • Recorded net charge-offs of $9.4 million in the third quarter of 2019 as compared to $22.3 million in the second quarter of 2019. The $9.4 million includes $4.0 million of additional net charge-offs related to the three non-performing credits disclosed in the second quarter of 2019.
  • The ratio of non-performing assets to total assets declined by two basis points to 0.38%.

Other highlights of the third quarter of 2019

  • Total period end loans were $364 million higher than average total loans in the current quarter.
  • Loans to deposits ratio ended the period at 89.6%.
  • Recorded a $3.9 million reduction to FDIC insurance expense related to assessment credits received from the FDIC.
  • Recorded a reduction in value of mortgage servicing rights related to changes in fair value model assumptions, net of derivative contract activity held as an economic hedge, of $4.0 million.
  • Recorded acquisition related costs of $1.3 million in the third quarter of 2019 as compared to $238,000 in the second quarter of 2019.

Expansion activity

  • Opened two new branches in the city of Chicago.
  • Completed the previously announced acquisition of STC Bancshares Corp., the parent company of STC Capital Bank, early in the fourth quarter of 2019. STC Capital Bank had approximately $190 million in loans and approximately $244 million in deposits as of June 30, 2019.
  • Announced an agreement to acquire SBC, Incorporated, the parent company of Countryside Bank, which is expected to close in the fourth quarter of 2019. Countryside Bank had approximately $420 million in loans and approximately $511 million in deposits as of June 30, 2019.

Edward J. Wehmer, President and Chief Executive Officer, commented, “Wintrust reported record net income of $99.1 million for the third quarter of 2019, up from $81.5 million in the second quarter of 2019. The Company experienced strong balance sheet growth as total assets were $1.3 billion higher than the prior quarter end and $4.8 billion higher than at the third quarter of 2018. The third quarter was characterized by strong balance sheet growth, decreased net interest margin, increased mortgage banking revenue, improved credit quality, and a continued focus to increase franchise value in our market area.”

Mr. Wehmer continued, “The Company experienced significant growth in retail deposits demonstrating the value of our local brand and branch network. We are pleased to now have the largest deposit base in the Chicago market area among locally headquartered banks. Total deposits increased by $1.2 billion in the third quarter of 2019 which was net of a reduction of $552 million in brokered deposits to optimize our funding base. Non-brokered deposits now comprise approximately 96% of total deposits. Additionally, the Company grew total loans by $406 million with growth diversified across various loan portfolios including the commercial real estate, commercial premium finance receivables, life insurance premium finance receivables and residential real estate portfolios. We remain aggressive in growing quality assets that meet our standards and will seek to fund that by expanding deposit market share and household penetration.”

Mr. Wehmer commented, “Net interest margin declined by 25 basis points in the third quarter of 2019 as compared to the second quarter of 2019 primarily due to downward repricing of variable rate loans and increased levels of interest bearing cash. However, net interest income only decreased slightly as compared to the prior quarter due to growth in earning assets. We expect to begin to realize the benefit of declining deposit rates in the fourth quarter of 2019 as this typically lags changes in the interest rate environment. We plan to deploy the excess liquidity gathered in the third quarter of 2019 to enhance net interest income and also believe that the announced acquisitions will be accretive to net interest margin. As always, we will strive to grow without a commensurate increase in expenses and will primarily measure that with the net overhead ratio which improved to 1.40%, or by 24 basis points in the third quarter compared to the prior quarter.”

Mr. Wehmer noted, “Our mortgage banking business production increased in the current quarter as loan volumes originated for sale increased to $1.4 billion from $1.2 billion in the second quarter of 2019.  The favorable increase in origination volumes was primarily a result of increased refinancing activity due to the declining interest rate environment. Additionally, production margin expanded due to strategic efforts to enhance our origination channel mix. Declining long-term interest rates also contributed to a $7.2 million reduction in our mortgage servicing rights portfolio related to payoffs and paydowns as well as a $4.0 million reduction due to changes in fair value assumptions, net of hedging gain.  However, those declines were more than offset by capitalization of retained servicing rights of $14.0 million in the current quarter. We continue to focus on efficiencies in our delivery channels and our operating costs in our mortgage banking area. We believe that the mortgage rate outlook bodes well for mortgage origination demand in future quarters.”

Commenting on credit quality, Mr. Wehmer stated, “Overall credit quality metrics improved in the third quarter of 2019. The Company recorded net charge-offs of $9.4 million in the third quarter of 2019 as compared to $22.3 million in the second quarter of 2019.  The $9.4 million includes $4.0 million of additional net charge-offs (which were substantially reserved for in prior quarters) related to the three non-performing credits disclosed in the second quarter of 2019 and represents a return to lower levels of net charge-offs. These three credits are substantially resolved and are not expected to materially impact future quarters. The ratio of non-performing assets as a percent of total assets declined by two basis points to a historically low level of 0.38%.  We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit.”

Turning to the future, Mr. Wehmer stated, “We have experienced significant franchise growth in 2019 and believe that our opportunities for both internal and external growth remain consistently strong. We plan to continue our steady and measured approach to achieve our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and continuing to increase shareholder value. Evaluating strategic acquisitions, like the recently completed acquisition of STC Bancshares Corp. and the announced acquisition of SBC, Incorporated, as well as focusing on organic branch growth will continue to be a part of our overall growth strategy with the goal of becoming Chicago’s bank and Wisconsin’s bank.”

The graphs below illustrate certain highlights of the third quarter of 2019.
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SUMMARY OF RESULTS:

BALANCE SHEET

Total assets grew by $1.3 billion in the third quarter of 2019 primarily due to an $823.7 million increase in interest bearing deposits with banks and $405.5 million of loan growth.  There were no material additions to the Company’s investment portfolio during the current quarter due to the lack of acceptable financial returns given the current interest rate environment. The Company believes that the $2.3 billion of interest bearing deposits with banks held as of September 30, 2019 is more than sufficient liquidity to operate its business plan. Excess liquidity is expected to be deployed in future quarters to enhance net interest income.

Total liabilities grew by $1.2 billion in the third quarter of 2019 primarily comprised of a $1.2 billion increase in total deposits.   The Company successfully leveraged its retail deposit base in the third quarter of 2019 to generate new deposits. In addition, the total deposit growth was net of a $552 million reduction in brokered deposits. Management believes in substantially funding the Company’s balance sheet with core deposits and utilizes brokered or wholesale funding sources as appropriate to manage its liquidity position as well as for interest rate risk management purposes. Non-brokered deposits now comprise approximately 96% of total deposits.

For more information regarding changes in the Company’s balance sheet, see Consolidated Statements of Condition and Tables 1 through 4 in this report.

NET INTEREST INCOME

For the third quarter of 2019, net interest income totaled $264.9 million, a decrease of $1.3 million as compared to the second quarter of 2019 and an increase of $17.3 million as compared to the third quarter of 2018. The $1.3 million decrease in net interest income in the third quarter of 2019 compared to the second quarter of 2019 was attributable to a $16.3 million decrease due to a reduction in net interest margin partially offset by a $12.1 million increase related to balance sheet growth and a $2.9 million increase from one more day in the quarter.

Net interest margin was 3.37% (3.39% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2019 compared to 3.62% (3.64% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2019 and 3.59% (3.61% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2018. The 25 basis point decrease in net interest margin in the third quarter of 2019 as compared to the second quarter of 2019 was attributable to a 21 basis point decline in the yield on earnings assets and a five basis point increase in the rate paid on interest bearing liabilities, partially offset by a one basis point increase in the net free funds contribution.  The 21 basis point decline in the yield on earning assets in the current quarter as compared to the second quarter of 2019 was primarily due to a 14 basis point decline in the yield on loans along with the impact of a higher average balance of interest bearing cash. The five basis point increase in the rate paid on interest bearing liabilities in the current quarter as compared to the prior quarter is primarily due to a six basis point increase on the rate paid on interest bearing deposits largely due to retail deposit promotions.

For the first nine months of 2019, net interest income totaled $793.0 million, an increase of $82.2 million as compared to the first nine months of 2018. Net interest margin was 3.56% (3.58% on a fully taxable-equivalent basis, non-GAAP) for the first nine months of 2019 compared to 3.58% (3.60% on a fully taxable-equivalent basis, non-GAAP) for the first nine months of 2018.

For more information regarding net interest income, see Tables 5 through 10 in this report.

ASSET QUALITY

The allowance for credit losses is comprised of the allowance for loan losses and the allowance for unfunded lending-related commitments. The allowance for loan losses is a reserve against loan amounts that are actually funded and outstanding while the allowance for unfunded lending-related commitments (separate liability account) relates to certain amounts that Wintrust is committed to lend but for which funds have not yet been disbursed. The provision for credit losses may contain both a component related to funded loans (provision for loan losses) and a component related to lending-related commitments (provision for unfunded loan commitments and letters of credit).

Net charge-offs as a percentage of average total loans, in the third quarter of 2019 totaled 15 basis points on an annualized basis compared to 36 basis points on an annualized basis in the second quarter of 2019 and eight basis points on an annualized basis in the third quarter of 2018.  Net charge-offs totaled $9.4 million in the third quarter of 2019, a $12.8 million decrease from $22.3 million in the second quarter of 2019 and a $4.8 million increase from $4.7 million in the third quarter of 2018. The $9.4 million of net charge-offs in the current quarter includes $4.0 million of additional net charge-offs (which were substantially reserved for in prior quarters) related to the three non-performing credits disclosed in the second quarter of 2019 and represents a return to lower levels of net charge-offs. These three credits are substantially resolved and are not expected to materially impact future quarters. The provision for credit losses totaled $10.8 million for the third quarter of 2019 compared to $24.6 million for the second quarter of 2019 and $11.0 million for the third quarter of 2018.  For more information regarding net charge-offs, see Table 11 in this report.

Management believes the allowance for credit losses is appropriate to provide for inherent losses in the portfolio. There can be no assurances, however, that future losses will not exceed the amounts provided for, thereby affecting future results of operations. The amount of future additions to the allowance for credit losses will be dependent upon management’s assessment of the appropriateness of the allowance based on its evaluation of economic conditions, changes in real estate values, interest rates, the regulatory environment, the level of past-due and non-performing loans and other factors.

As part of the regular quarterly review performed by management to determine if the Company’s allowance for loan losses is appropriate, an analysis is prepared on the loan portfolio based upon a breakout of core loans and consumer, niche and purchased loans. A summary of the allowance for loan losses calculated for the loan components in both the core loan portfolio and the consumer, niche and purchased loan portfolio as of September 30, 2019 and June 30, 2019 is shown on Table 12 of this report.

As of September 30, 2019, $51.1 million of all loans, or 0.2%, were 60 to 89 days past due and $134.2 million, or 0.5%, were 30 to 59 days (or one payment) past due. As of June 30, 2019, $54.9 million of all loans, or 0.2%, were 60 to 89 days past due and $129.1 million, or 0.5%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at September 30, 2019 that are current with regard to the contractual terms of the loan agreement represent 97.8% of the total home equity portfolio. Residential real estate loans at September 30, 2019 that are current with regards to the contractual terms of the loan agreements comprise 98.4% of total residential real estate loans outstanding. For more information regarding past due loans, see Table 13 in this report.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. In accordance with accounting guidance, credit deterioration on purchased loans is recorded as a credit discount at the time of purchase. In addition to the $161.8 million of allowance for loan losses, there was $6.8 million of non-accretable credit discount on purchased loans reported in accordance with ASC 310-30 that is available to absorb credit losses as of September 30, 2019.

The ratio of non-performing assets to total assets was 0.38% as of September 30, 2019, compared to 0.40% at June 30, 2019, and 0.52% at September 30, 2018. Non-performing assets, excluding PCI loans, totaled $132.0 million at September 30, 2019, compared to $133.5 million at June 30, 2019 and $155.8 million at September 30, 2018. Non-performing loans, excluding PCI loans, totaled $114.3 million, or 0.44% of total loans, at September 30, 2019 compared to $113.4 million, or 0.45% of total loans, at June 30, 2019 and $127.2 million, or 0.55% of total loans, at September 30, 2018. Other real estate owned (“OREO”) of $17.5 million at September 30, 2019 decreased $2.3 million compared to $19.8 million at June 30, 2019 and decreased $10.8 million compared to $28.3 million at September 30, 2018. Management is pursuing the resolution of all non-performing assets. At this time, management believes reserves are appropriate to absorb inherent losses and OREO is appropriately valued at the lower of carrying value or fair value less estimated costs to sell. For more information regarding non-performing assets, see Table 14 in this report.

NON-INTEREST INCOME

Wealth management revenue decreased by $140,000 during the third quarter of 2019 as compared to the second quarter of 2019 primarily due to decreased brokerage commissions. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

Mortgage banking revenue increased by $13.5 million in the third quarter of 2019 as compared to the second quarter of 2019 primarily as a result of higher production revenues and an increase in the fair value of the mortgage servicing rights portfolio in the third quarter of 2019.  Production revenue increased by $12.8 million in the third quarter of 2019 as compared to the second quarter of 2019 primarily due to an increase in origination volumes as a result of increased refinancing activity.  The percentage of origination volume from refinancing activities was 52% in the third quarter of 2019 as compared to 37% in the second quarter of 2019. Additionally, production margin improved from 2.59% in the second quarter of 2019 to 3.01% in the third quarter of 2019 primarily due to a favorable shift in origination channel mix. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market.

During the third quarter of 2019, the fair value of the mortgage servicing rights portfolio increased as retained servicing rights led to the capitalization of $14.0 million partially offset by negative fair value adjustments of $4.1 million and a reduction in value of $7.2 million due to payoffs and paydowns of the existing portfolio. The Company purchased an option at the beginning of the third quarter of 2019 to economically hedge a portion of the potential negative fair value changes recorded in earnings related to its mortgage servicing rights portfolio. The option was exercised during the current quarter resulting in a net gain of $82,000 which was recorded in mortgage banking revenue.

The net gains recognized on investment securities in the third quarter of 2019 and second quarter of 2019, respectively, were primarily due to gains on investment securities that were called and unrealized gains recognized on equity securities held by the Company.

Other non-interest income increased by $3.4 million in the third quarter of 2019 as compared to the second quarter of 2019 primarily due to increased income from investments in partnerships and interest rate swaps.

For more information regarding non-interest income, see Tables 15 and 16 in this report.

NON-INTEREST EXPENSE

Salaries and employee benefits expense increased by $7.3 million in the third quarter of 2019 as compared to the second quarter of 2019. The $7.3 million increase is comprised of an increase of $2.7 million in salaries expense, $3.8 million in commissions and incentive compensation and $782,000 in benefits expense. The increase in salaries expense is primarily due to increased staffing as the Company grows and acquisition related expenses. Commissions and incentive compensation increased in the current quarter primarily related to the increased volume of mortgage originations for sale. The increase in benefits expense relates primarily to increases in employee insurance expense in the current quarter.

Equipment expense totaled $13.3 million in the third quarter of 2019, an increase of $555,000 as compared to the second quarter of 2019. The increase in the current quarter relates primarily to increased software licensing expenses.

Advertising and marketing expenses in the third quarter of 2019 increased by $530,000 as compared to the second quarter of 2019 primarily related to higher corporate sponsorship costs as well as increased spending related to deposit generation and brand awareness to grow our loan and deposit portfolios. The level of marketing expenditures depends on the timing of sponsorship programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

FDIC insurance expense totaled $148,000 in the third quarter of 2019, a decrease of $4.0 million as compared to the second quarter of 2019. The decrease in the current quarter relates primarily to FDIC assessment credits received by the 15 Wintrust affiliate banks.

Professional fees expense totaled $8.0 million in the third quarter of 2019, an increase of $1.8 million as compared to the second quarter of 2019. The increase in the current quarter relates primarily to increased fees on consulting services and legal fees. Professional fees include legal, audit, and tax fees, external loan review costs, consulting arrangements and normal regulatory exam assessments.

For more information regarding non-interest expense, see Table 17 in this report.

INCOME TAXES

The Company recorded income tax expense of $35.5 million in the third quarter of 2019 compared to $28.7 million in the second quarter of 2019 and $30.9 million in the third quarter of 2018. The effective tax rates were 26.36% in the third quarter of 2019 compared to 26.06% in the second quarter of 2019 and  25.13% in the third quarter of 2018. During the first nine months of 2019, the Company recorded income tax expense of $93.7 million compared to $89.0 million for the first nine months of 2018. The effective tax rates were 25.78% for the first nine months of 2019 and 25.24% for the first nine months of 2018.

The year-to-date effective tax rates were impacted by excess tax benefits related to share-based compensation. These excess tax benefits were $1.7 million in the first nine months of 2019 and $3.7 million in the first nine months of 2018. Excess tax benefits are expected to be higher in the first quarter when the majority of the Company’s shared-based awards vest, and will fluctuate throughout the year based on the Company’s stock price and timing of employee stock option exercises and vesting of other share-based awards.

BUSINESS UNIT SUMMARY

Community Banking

Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the third quarter of 2019, this unit generated significant retail deposit growth.  However, the banking segment also experienced net interest margin compression in part due to current market conditions.

Mortgage banking revenue increased from $37.4 million for the second quarter of 2019 to $50.9 million for the third quarter of 2019. Services charges on deposit accounts totaled $10.0 million in the third quarter of 2019 an increase of $695,000 as compared to the second quarter of 2019 primarily due to higher account analysis fees. The Company’s gross commercial and commercial real estate loan pipelines remain strong. Before the impact of scheduled payments and prepayments, gross commercial and commercial real estate loan pipelines were estimated to be approximately $1.2 billion to $1.3 billion at September 30, 2019. When adjusted for the probability of closing, the pipelines were estimated to be approximately $730 million to $810 million at September 30, 2019.

Specialty Finance

Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries and accounts receivable financing, value-added, out-sourced administrative services, and other services. In the third quarter of 2019, the specialty finance unit experienced higher revenue primarily as a result of increased volumes within its insurance premium financing receivables portfolio. Originations within the insurance premium financing receivables portfolio were $2.4 billion during the third quarter of 2019 and average balances increased by $446.4 million as compared to the second quarter of 2019. The increase in average balances primarily resulted in a $6.5 million increase in interest income attributed to the insurance premium finance receivables portfolio. The Company’s leasing business grew during the third quarter of 2019, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing $98.0 million to $1.5 billion at the end of the third quarter of 2019. Revenues from the Company’s out-sourced administrative services business increased to $1.1 million in the third quarter of 2019 as compared to $1.0 million in the second quarter of 2019.

Wealth Management

Through four separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, tax-deferred like-kind exchange services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue decreased by $140,000 in the third quarter of 2019 compared to the second quarter of 2019, totaling $24.0 million in the current period. At September 30, 2019, the Company’s wealth management subsidiaries had approximately $26.1 billion of assets under administration, which included $3.3 billion of assets owned by the Company and its subsidiary banks, representing a $188.4 million increase from the $25.9 billion of assets under administration at June 30, 2019. The increase in the third quarter of 2019 was primarily due to increased business.

ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS

Acquisitions

On May 24, 2019, the Company completed the Oak Bank Acquisition. Through this business combination, the Company acquired Oak Bank’s one banking location in Chicago, Illinois, as well as approximately $223.8 million in assets, including approximately $126.1 million in loans, and approximately $161.2 million in deposits. The Company recorded goodwill of $10.7 million on the acquisition.

On December 14, 2018, the Company acquired Elektra Holding Company, LLC (“Elektra”), the parent company of Chicago Deferred Exchange Company, LLC (“CDEC”). CDEC is a provider of Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code Section 1031.  CDEC has successfully facilitated more than 8,000 like-kind exchanges in the past decade for taxpayers nationwide.  These transactions typically generate customer deposits during the period following the sale of the property until such proceeds are used to purchase a replacement property.  The Company recorded goodwill of $37.6 million on the acquisition.

On December 7, 2018, the Company completed its acquisition of certain assets and the assumption of certain liabilities of American Enterprise Bank (“AEB”). Through this asset acquisition, the Company acquired approximately $164.0 million in assets, including approximately $119.3 million in loans, and approximately $150.8 million in deposits.

On August 1, 2018, the Company completed its acquisition of Chicago Shore Corporation (“CSC”). CSC was the parent company of Delaware Place Bank. Through this business combination, the Company acquired Delaware Place Bank’s one banking location in Chicago, Illinois as well as approximately $282.8 million in assets, including approximately $152.7 million in loans, and approximately $213.1 million in deposits. The Company recorded goodwill of $26.6 million on the acquisition.

On January 4, 2018, the Company acquired iFreedom Direct Corporation DBA Veterans First Mortgage (“Veterans First”) with assets including mortgage-servicing-rights on approximately 10,000 loans, totaling an estimated $1.6 billion in unpaid principal balance. The Company recorded goodwill of $9.1 million on the acquisition.

WINTRUST FINANCIAL CORPORATION
Key Operating Measures

Wintrust’s key operating measures and growth rates for the third quarter of 2019, as compared to the second quarter of 2019 (sequential quarter) and third quarter of 2018 (linked quarter), are shown in the table below:

            % or(4)
basis point  (bp) change from
2nd Quarter
2019
  % or
basis point  (bp)
change from
3rd Quarter
2018
  Three Months Ended  
(Dollars in thousands, except per share data) Sep 30, 2019   Jun 30, 2019   Sep 30, 2018  
Net income $ 99,121     $ 81,466     $ 91,948   22   %   8   %
Net income per common share – diluted 1.69     1.38     1.57   22       8    
Net revenue (1) 379,989     364,360     347,493   4       9    
Net interest income 264,852     266,202     247,563   (1 )     7    
Net interest margin 3.37 %   3.62 %   3.59 % (25 ) bp   (22 ) bp
Net interest margin – fully taxable equivalent (non-GAAP) (2) 3.39     3.64     3.61   (25 )     (22 )  
Net overhead ratio (3) 1.40     1.64     1.53   (24 )     (13 )  
Return on average assets 1.16     1.02     1.24   14       (8 )  
Return on average common equity 11.42     9.68     11.86   174       (44 )  
Return on average tangible common equity (non-GAAP) (2) 14.36     12.28     14.64   208       (28 )  
At end of period                    
Total assets $ 34,911,902     $ 33,641,769     $ 30,142,731   15   %   16   %
Total loans (5) 25,710,171     25,304,659     23,123,951   6       11    
Total deposits 28,710,379     27,518,815     24,916,715   17       15    
Total shareholders’ equity 3,540,325     3,446,950     3,179,822   11       11    
  1. Net revenue is net interest income plus non-interest income.  
  2. See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance measure/ratio.  
  3. The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s average total assets. A lower ratio indicates a higher degree of efficiency.  
  4. Period-end balance sheet percentage changes are annualized.  
  5. Excludes mortgage loans held-for-sale.  

Certain returns, yields, performance ratios, or quarterly growth rates are “annualized” in this presentation to represent an annual time period. This is done for analytical purposes to better discern for decision-making purposes underlying performance trends when compared to full-year or year-over-year amounts. For example, a 5% growth rate for a quarter would represent an annualized 20% growth rate. Additional supplemental financial information showing quarterly trends can be found on the Company’s website at www.wintrust.com by choosing “Financial Reports” under the “Investor Relations” heading, and then choosing “Financial Highlights.”

WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights  

  Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Sep 30,
2018
Sep 30,
2019
  Sep 30,
2018
Selected Financial Condition Data (at end of period):
       
Total assets $ 34,911,902     $ 33,641,769     $ 32,358,621     $ 31,244,849     $ 30,142,731        
Total loans (1) 25,710,171     25,304,659     24,214,629     23,820,691     23,123,951        
Total deposits 28,710,379     27,518,815     26,804,742     26,094,678     24,916,715        
Junior subordinated debentures 253,566     253,566     253,566     253,566     253,566        
Total shareholders’ equity 3,540,325     3,446,950     3,371,972     3,267,570     3,179,822        
Selected Statements of Income Data:      
Net interest income $ 264,852     $ 266,202     $ 261,986     $ 254,088     $ 247,563   $ 793,040     $ 710,815  
Net revenue (2) 379,989     364,360     343,643     329,396     347,493   1,087,992     991,657  
Net income 99,121     81,466     89,146     79,657     91,948   269,733     263,509  
Net income per common share – Basic 1.71     1.40     1.54     1.38     1.59   4.65     4.57  
Net income per common share – Diluted 1.69     1.38     1.52     1.35     1.57   4.60     4.50  
Selected Financial Ratios and Other Data:      
Performance Ratios:      
Net interest margin 3.37 %   3.62 %   3.70 %   3.61 %   3.59 % 3.56 %   3.58 %
Net interest margin – fully taxable equivalent (non-GAAP) (3) 3.39     3.64     3.72     3.63     3.61   3.58     3.60  
Non-interest income to average assets 1.35     1.23     1.06     0.99     1.34   1.22     1.31  
Non-interest expense to average assets 2.74     2.87     2.79     2.78     2.87   2.80     2.87  
Net overhead ratio (4) 1.40     1.64     1.72     1.79     1.53   1.58     1.56  
Return on average assets 1.16     1.02     1.16     1.05     1.24   1.11     1.23  
Return on average common equity 11.42     9.68     11.09     10.01     11.86   10.74     11.71  
Return on average tangible common equity (non-GAAP) (3) 14.36     12.28     14.14     12.48     14.64   13.60     14.47  
Average total assets $ 33,954,592     $ 32,055,769     $ 31,216,171     $ 30,179,887     $ 29,525,109   $ 32,418,875     $ 28,640,380  
Average total shareholders’ equity 3,496,714     3,414,340     3,309,078     3,200,654     3,131,943   3,407,398     3,064,396  
Average loans to average deposits ratio 90.6 %   93.9 %   92.7 %   92.4 %   92.2 % 92.4 %   94.2 %
Period-end loans to deposits ratio 89.6     92.0     90.3     91.3     92.8        
Common Share Data at end of period:      
Market price per common share $ 64.63     $ 73.16     $ 67.33     $ 66.49     $ 84.94        
Book value per common share 60.24     58.62     57.33     55.71     54.19        
Tangible book value per common share (non-GAAP) (3) 49.16     47.48     46.38     44.67     44.16        
Common shares outstanding 56,698,429     56,667,846     56,638,968     56,407,558     56,377,169        
Other Data at end of period:      
Tier 1 leverage ratio (5) 8.8 %   9.1 %   9.1 %   9.1 %   9.3 %      
Risk-based capital ratios:                        
Tier 1 capital ratio (5) 9.7     9.6     9.8     9.7     10.0        
Common equity tier 1 capital ratio(5) 9.3     9.2     9.3     9.3     9.5        
Total capital ratio (5) 12.4     12.4     11.7     11.6     12.0        
Allowance for credit losses (6) $ 163,273     $ 161,901     $ 159,622     $ 154,164     $ 151,001        
Non-performing loans 114,284     113,447     117,586     113,234     127,227        
Allowance for credit losses to total loans (6) 0.64 %   0.64 %   0.66 %   0.65 %   0.65 %      
Non-performing loans to total loans 0.44     0.45     0.49     0.48     0.55        
Number of:                        
Bank subsidiaries 15     15     15     15     15        
Banking offices 174     172     170     167     166        
  1. Excludes mortgage loans held-for-sale.   
  2. Net revenue includes net interest income and non-interest income.  
  3. See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance measure/ratio.  
  4. The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.  
  5. Capital ratios for current quarter-end are estimated.  
  6. The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments.  

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

  (Unaudited)   (Unaudited)   (Unaudited)       (Unaudited)
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(In thousands) 2019   2019   2019   2018   2018
Assets                                      
Cash and due from banks $ 448,755     $ 300,934     $ 270,765     $ 392,142     $ 279,936  
Federal funds sold and securities purchased under resale agreements 59     58     58     58     57  
Interest bearing deposits with banks 2,260,806     1,437,105     1,609,852     1,099,594     1,137,044  
Available-for-sale securities, at fair value 2,270,059     2,186,154     2,185,782     2,126,081     2,164,985  
Held-to-maturity securities, at amortized cost 1,095,802     1,191,634     1,051,542     1,067,439     966,438  
Trading account securities 3,204     2,430     559     1,692     688  
Equity securities with readily determinable fair value 46,086     44,319     47,653     34,717     36,414  
Federal Home Loan Bank and Federal Reserve Bank stock 92,714     92,026     89,013     91,354     99,998  
Brokerage customer receivables 14,943     13,569     14,219     12,609     15,649  
Mortgage loans held-for-sale 464,727     394,975     248,557     264,070     338,111  
Loans, net of unearned income 25,710,171     25,304,659     24,214,629     23,820,691     23,123,951  
Allowance for loan losses (161,763 )   (160,421 )   (158,212 )   (152,770 )   (149,756 )
Net loans 25,548,408     25,144,238     24,056,417     23,667,921     22,974,195  
Premises and equipment, net 721,856     711,214     676,037     671,169     664,469  
Lease investments, net 228,647     230,111     224,240     233,208     199,241  
Accrued interest receivable and other assets 1,087,864     1,023,896     888,492     696,707     700,568  
Trade date securities receivable     237,607     375,211     263,523      
Goodwill 584,315     584,911     573,658     573,141     537,560  
Other intangible assets 43,657     46,588     46,566     49,424     27,378  
Total assets $ 34,911,902     $ 33,641,769     $ 32,358,621     $ 31,244,849     $ 30,142,731  
Liabilities and Shareholders’ Equity                  
Deposits:                  
Non-interest bearing $ 7,067,960     $ 6,719,958     $ 6,353,456     $ 6,569,880     $ 6,399,213  
Interest bearing 21,642,419     20,798,857     20,451,286     19,524,798     18,517,502  
 Total deposits 28,710,379     27,518,815     26,804,742     26,094,678     24,916,715  
Federal Home Loan Bank advances 574,847     574,823     576,353     426,326     615,000  
Other borrowings 410,488     418,057     372,194     393,855     373,571  
Subordinated notes 435,979     436,021     139,235     139,210     139,172  
Junior subordinated debentures 253,566     253,566     253,566     253,566     253,566  
Trade date securities payable 226                  
Accrued interest payable and other liabilities 986,092     993,537     840,559     669,644     664,885  
Total liabilities 31,371,577     30,194,819     28,986,649     27,977,279     26,962,909  
Shareholders’ Equity:                  
Preferred stock 125,000     125,000     125,000     125,000     125,000  
Common stock 56,825     56,794     56,765     56,518     56,486  
Surplus 1,574,011     1,569,969     1,565,185     1,557,984     1,553,353  
Treasury stock (6,799 )   (6,650 )   (6,650 )   (5,634 )   (5,547 )
Retained earnings 1,830,165     1,747,266     1,682,016     1,610,574     1,543,680  
Accumulated other comprehensive loss (38,877 )   (45,429 )   (50,344 )   (76,872 )   (93,150 )
Total shareholders’ equity 3,540,325     3,446,950     3,371,972     3,267,570     3,179,822  
Total liabilities and shareholders’ equity $ 34,911,902     $ 33,641,769     $ 32,358,621     $ 31,244,849     $ 30,142,731  

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

  Three Months Ended Nine Months Ended
(In thousands, except per share data) Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Sep 30,
2018
  Sep 30,
2019
  Sep 30,
2018
Interest income                                                       
Interest and fees on loans $ 314,277     $ 309,161     $ 296,987     $ 283,311     $ 271,134     $ 920,425     $ 761,191  
Mortgage loans held-for-sale 3,478     3,104     2,209     3,409     5,285     8,791     12,329  
Interest bearing deposits with banks 10,326     5,206     5,300     5,628     5,423     20,832     11,462  
Federal funds sold and securities purchased under resale agreements 310                     310     1  
Investment securities 24,758     27,721     27,956     26,656     21,710     80,435     60,726  
Trading account securities 20     5     8     14     11     33     29  
Federal Home Loan Bank and Federal Reserve Bank stock 1,294     1,439     1,355     1,343     1,235     4,088     3,988  
Brokerage customer receivables 164     178     155     235     164     497     488  
Total interest income 354,627     346,814     333,970     320,596     304,962     1,035,411     850,214  
Interest expense                          
Interest on deposits 76,168     67,024     60,976     55,975     48,736     204,168     110,578  
Interest on Federal Home Loan Bank advances 1,774     4,193     2,450     2,563     1,947     8,417     9,849  
Interest on other borrowings 3,466     3,525     3,633     3,199     2,003     10,624     5,400  
Interest on subordinated notes 5,470     2,806     1,775     1,788     1,773     10,051     5,333  
Interest on junior subordinated debentures 2,897     3,064     3,150     2,983     2,940     9,111     8,239  
Total interest expense 89,775     80,612     71,984     66,508     57,399     242,371     139,399  
Net interest income 264,852     266,202     261,986     254,088     247,563     793,040     710,815  
Provision for credit losses 10,834     24,580     10,624     10,401     11,042     46,038     24,431  
Net interest income after provision for credit losses 254,018     241,622     251,362     243,687     236,521     747,002     686,384  
Non-interest income                          
Wealth management 23,999     24,139     23,977     22,726     22,634     72,115     68,237  
Mortgage banking 50,864     37,411     18,158     24,182     42,014     106,433     112,808  
Service charges on deposit accounts 9,972     9,277     8,848     9,065     9,331     28,097     27,339  
Gains (losses) on investment securities, net 710     864     1,364     (2,649 )   90     2,938     (249 )
Fees from covered call options     643     1,784     626     627     2,427     2,893  
Trading gains (losses), net 11     (44 )   (171 )   (155 )   (61 )   (204 )   166  
Operating lease income, net 12,025     11,733     10,796     10,882     9,132     34,554     27,569  
Other 17,556     14,135     16,901     10,631     16,163     48,592     42,079  
Total non-interest income 115,137     98,158     81,657     75,308     99,930     294,952     280,842  
Non-interest expense                          
Salaries and employee benefits 141,024     133,732     125,723     122,111     123,855     400,479     357,966  
Equipment 13,314     12,759     11,770     11,523     10,827     37,843     31,426  
Operating lease equipment depreciation 8,907     8,768     8,319     8,462     7,370     25,994     20,843  
Occupancy, net 14,991     15,921     16,245     15,980     14,404     47,157     41,834  
Data processing 6,522     6,204     7,525     8,447     9,335     20,251     26,580  
Advertising and marketing 13,375     12,845     9,858     9,414     11,120     36,078     31,726  
Professional fees 8,037     6,228     5,556     9,259     9,914     19,821     23,047  
Amortization of other intangible assets 2,928     2,957     2,942     1,407     1,163     8,827     3,164  
FDIC insurance 148     4,127     3,576     4,044     4,205     7,851     13,165  
OREO expense, net 1,170     1,290     632     1,618     596     3,092     4,502  
Other 24,138     24,776     22,228     19,068     20,848     71,142     60,502  
Total non-interest expense 234,554     229,607     214,374     211,333     213,637     678,535     614,755  
Income before taxes 134,601     110,173     118,645     107,662     122,814     363,419     352,471  
Income tax expense 35,480     28,707     29,499     28,005     30,866     93,686     88,962  
Net income $ 99,121     $ 81,466     $ 89,146     $ 79,657     $ 91,948     $ 269,733     $ 263,509  
Preferred stock dividends 2,050     2,050     2,050     2,050     2,050     6,150     6,150  
Net income applicable to common shares $ 97,071     $ 79,416     $ 87,096     $ 77,607     $ 89,898     $ 263,583     $ 257,359  
Net income per common share – Basic $ 1.71     $ 1.40     $ 1.54     $ 1.38     $ 1.59     $ 4.65     $ 4.57  
Net income per common share – Diluted $ 1.69     $ 1.38     $ 1.52     $ 1.35     $ 1.57     $ 4.60     $ 4.50  
Cash dividends declared per common share $ 0.25     $ 0.25     $ 0.25     $ 0.19     $ 0.19     $ 0.75     $ 0.57  
Weighted average common shares outstanding 56,690     56,662     56,529     56,395     56,366     56,627     56,268  
Dilutive potential common shares 773     699     699     892     918     724     912  
Average common shares and dilutive common shares 57,463     57,361     57,228     57,287     57,284     57,351     57,180  

TABLE 1: LOAN PORTFOLIO MIX AND GROWTH RATES

                    % Growth From
(Dollars in thousands) Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Sep 30,
2018
Dec 31,
2018 (1)
  Sep 30,
2018
Balance:                        
Commercial $ 8,195,602     $ 8,270,774     $ 7,994,191     $ 7,828,538     $ 7,473,958   6 %   10 %
Commercial real estate 7,448,667     7,276,244     6,973,505     6,933,252     6,746,774   10     10  
Home equity 512,303     527,370     528,448     552,343     578,844   (10 )   (11 )
Residential real estate 1,218,666     1,118,178     1,053,524     1,002,464     924,250   29     32  
Premium finance receivables – commercial 3,449,950     3,368,423     2,988,788     2,841,659     2,885,327   29     20  
Premium finance receivables – life insurance 4,795,496     4,634,478     4,555,369     4,541,794     4,398,971   7     9  
Consumer and other 89,487     109,192     120,804     120,641     115,827   (35 )   (23 )
Total loans, net of unearned income $ 25,710,171     $ 25,304,659     $ 24,214,629     $ 23,820,691     $ 23,123,951   11 %   11 %
Mix:                        
Commercial 32 %   33 %   33 %   33 %   32 %      
Commercial real estate 29     29     29     29     29        
Home equity 2     2     2     2     3        
Residential real estate 5     4     4     4     4        
Premium finance receivables – commercial 13     13     12     12     12        
Premium finance receivables – life insurance 19     18     19     19     19        
Consumer and other 0     1     1     1     1        
Total loans, net of unearned income 100 %   100 %   100 %   100 %   100 %      
  1. Annualized.

TABLE 2: COMMERCIAL AND COMMERCIAL REAL ESTATE LOAN PORTFOLIOS

  As of September 30, 2019
(Dollars in thousands) Balance   % of
Total
Balance
  Nonaccrual   > 90 Days
Past Due
and Still
Accruing
  Allowance
For Loan
Losses
Allocation
Commercial:                  
Commercial, industrial and other $ 5,150,567     32.9 %   $ 34,397     $     $ 51,463  
Franchise 914,774     5.9     3,752         8,308  
Mortgage warehouse lines of credit 314,697     2.0             2,481  
Asset-based lending 1,045,869     6.7     5,782         8,445  
Leases 754,163     4.8             2,069  
PCI – commercial loans (1) 15,532     0.1         382     361  
Total commercial $ 8,195,602     52.4 %   $ 43,931     $ 382     $ 73,127  
Commercial Real Estate:                  
Construction $ 850,575     5.4 %   $ 1,030     $     $ 9,405  
Land 175,386     1.1     994         4,801  
Office 996,931     6.4     8,158         10,066  
Industrial 1,009,680     6.5     100         7,021  
Retail 1,004,720     6.4     7,174         6,718  
Multi-family 1,291,825     8.3     690         12,504  
Mixed use and other 2,002,267     12.8     3,411         14,370  
PCI – commercial real estate (1) 117,283     0.7         4,992     53  
Total commercial real estate $ 7,448,667     47.6 %   $ 21,557     $ 4,992     $ 64,938  
Total commercial and commercial real estate $ 15,644,269     100.0 %   $ 65,488     $ 5,374     $ 138,065  
                   
Commercial real estate – collateral location by state:                  
Illinois $ 5,654,827     75.9 %            
Wisconsin 744,577     10.0              
Total primary markets $ 6,399,404     85.9 %            
Indiana 193,350     2.6              
Florida 80,120     1.1              
Arizona 62,657     0.8              
California 67,999     0.9              
Other 645,137     8.7              
Total commercial real estate $ 7,448,667     100.0 %            
  1. Purchased credit impaired (“PCI”) loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments.

TABLE 3: DEPOSIT PORTFOLIO MIX AND GROWTH RATES

                    % Growth From
(Dollars in thousands) Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Sep 30,
2018
Dec 31,
2018 (1)
  Sep 30,
2018
Balance:                        
Non-interest bearing $ 7,067,960     $ 6,719,958     $ 6,353,456     $ 6,569,880     $ 6,399,213   10 %   10 %
NOW and interest bearing demand deposits 2,966,098     2,788,976     2,948,576     2,897,133     2,512,259   3     18  
Wealth management deposits (2) 2,795,838     3,220,256     3,328,781     2,996,764     2,520,120   (9 )   11  
Money market 7,326,899     6,460,098     6,093,596     5,704,866     5,429,921   38     35  
Savings 2,934,348     2,823,904     2,729,626     2,665,194     2,595,164   14     13  
Time certificates of deposit 5,619,236     5,505,623     5,350,707     5,260,841     5,460,038   9     3  
Total deposits $ 28,710,379     $ 27,518,815     $ 26,804,742     $ 26,094,678     $ 24,916,715   13 %   15 %
Mix:                        
Non-interest bearing 25 %   24 %   24 %   25 %   26 %      
NOW and interest bearing demand deposits 10     10     11     11     10        
Wealth management deposits (2) 10     12     12     12     10        
Money market 25     24     23     22     22        
Savings 10     10     10     10     10        
Time certificates of deposit 20     20     20     20     22        
Total deposits 100 %   100 %   100 %   100 %   100 %      
  1. Annualized.
  2. Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wintrust Investments, CDEC, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts.

TABLE 4: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS
As of September 30, 2019

(Dollars in thousands) CDARs &
Brokered
Certificates
  of Deposit (1)
  MaxSafe
Certificates
  of Deposit (1)
  Variable Rate
Certificates
  of Deposit (2)
  Other Fixed
Rate Certificates
  of Deposit (1)
  Total Time
Certificates of
Deposit
  Weighted-Average
Rate of Maturing
Time Certificates
  of Deposit (3)
1-3 months $     $ 32,568     $ 91,118     $ 701,268     $ 824,954     1.66 %
4-6 months     27,147         845,167     872,314     2.01  
7-9 months     11,048         1,155,153     1,166,201     2.18  
10-12 months     18,177         529,793     547,970     1.92  
13-18 months     15,977         733,072     749,049     2.36  
19-24 months 1,000     9,714         1,128,392     1,139,106     2.62  
24+ months     5,042         314,600     319,642     2.30  
Total $ 1,000     $ 119,673     $ 91,118     $ 5,407,445     $ 5,619,236     2.17 %
  1. This category of certificates of deposit is shown by contractual maturity date.
  2. This category includes variable rate certificates of deposit and savings certificates with the majority repricing on at least a monthly basis.
  3. Weighted-average rate excludes the impact of purchase accounting fair value adjustments.

TABLE 5: QUARTERLY AVERAGE BALANCES

  Average Balance for three months ended,
  Sep 30,     Jun 30,     Mar 31,     Dec 31,     Sep 30,  
  2019     2019     2019     2018     2018  
(In thousands) $ 1,960,898     $ 893,332     $ 897,629     $ 1,042,860     $ 998,004  
Interest-bearing deposits with banks and cash equivalents (1)                            
Investment securities (2) 3,410,090     3,653,580     3,630,577     3,347,496     3,046,272  
FHLB and FRB stock 92,583     105,491     94,882     98,084     88,335  
Liquidity management assets (6) 5,463,571     4,652,403     4,623,088     4,488,440     4,132,611  
Other earning assets (3)(6) 17,809     15,719     13,591     16,204     17,862  
Mortgage loans held-for-sale 379,870     281,732     188,190     265,717     380,235  
Loans, net of unearned income (4)(6) 25,346,290     24,553,263     23,880,916     23,164,154     22,823,378  
Total earning assets (6) 31,207,540     29,503,117     28,705,785     27,934,515     27,354,086  
Allowance for loan losses (168,423 )   (164,231 )   (157,782 )   (154,438 )   (148,503 )
Cash and due from banks 297,475     273,679     283,019     271,403     268,006  
Other assets 2,618,000     2,443,204     2,385,149     2,128,407     2,051,520  
Total assets $ 33,954,592     $ 32,055,769     $ 31,216,171     $ 30,179,887     $ 29,525,109  
                   
NOW and interest bearing demand deposits $ 2,912,961     $ 2,878,021     $ 2,803,338     $ 2,671,283     $ 2,519,445  
Wealth management deposits 2,888,817     2,605,690     2,614,035     2,289,904     2,517,141  
Money market accounts 6,956,755     6,095,285     5,915,525     5,632,268     5,369,324  
Savings accounts 2,837,039     2,752,828     2,715,422     2,553,133     2,672,077  
Time deposits 5,590,228     5,322,384     5,267,796     5,381,029     5,214,637  
Interest-bearing deposits 21,185,800     19,654,208     19,316,116     18,527,617     18,292,624  
Federal Home Loan Bank advances 574,833     869,812     594,335     551,846     429,739  
Other borrowings 416,300     419,064     465,571     385,878     268,278  
Subordinated notes 436,041     220,771     139,217     139,186     139,155  
Junior subordinated debentures 253,566     253,566     253,566     253,566     253,566  
Total interest-bearing liabilities 22,866,540     21,417,421     20,768,805     19,858,093     19,383,362  
Non-interest bearing deposits 6,776,786     6,487,627     6,444,378     6,542,228     6,461,195  
Other liabilities 814,552     736,381     693,910     578,912     548,609  
Equity 3,496,714     3,414,340     3,309,078     3,200,654     3,131,943  
Total liabilities and shareholders’ equity $ 33,954,592     $ 32,055,769     $ 31,216,171     $ 30,179,887     $ 29,525,109  
                   
Net free funds/contribution (5) $ 8,341,000     $ 8,085,696     $ 7,936,980     $ 8,076,422     $ 7,970,724  
  1. Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.
  2. Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.
  3. Other earning assets include brokerage customer receivables and trading account securities.
  4. Loans, net of unearned income, include non-accrual loans.
  5. Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
  6. See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance measure/ratio.

TABLE 6: QUARTERLY NET INTEREST INCOME

  Net Interest Income for three months ended,
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(In thousands) 2019   2019   2019   2018   2018
Interest income:                  
Interest-bearing deposits with banks and cash equivalents $ 10,636     $ 5,206     $ 5,300     $ 5,628     $ 5,423  
Investment securities 25,332     28,290     28,521     27,242     22,285  
FHLB and FRB stock 1,294     1,439     1,355     1,343     1,235  
Liquidity management assets (2) 37,262     34,935     35,176     34,213     28,943  
Other earning assets (2) 189     184     165     253     178  
Mortgage loans held-for-sale 3,478     3,104     2,209     3,409     5,285  
Loans, net of unearned income (2) 315,255     310,191     298,021     284,291     272,075  
Total interest income $ 356,184     $ 348,414     $ 335,571     $ 322,166     $ 306,481  
                   
Interest expense:                  
NOW and interest bearing demand deposits $ 5,291     $ 5,553     $ 4,613     $ 4,007     $ 2,479  
Wealth management deposits 9,163     7,091     7,000     7,119     8,287  
Money market accounts 25,426     21,451     19,460     16,936     13,260  
Savings accounts 5,622     4,959     4,249     3,096     2,907  
Time deposits 30,666     27,970     25,654     24,817     21,803  
Interest-bearing deposits 76,168     67,024     60,976     55,975     48,736  
Federal Home Loan Bank advances 1,774     4,193     2,450     2,563     1,947  
Other borrowings 3,466     3,525     3,633     3,199     2,003  
Subordinated notes 5,470     2,806     1,775     1,788     1,773  
Junior subordinated debentures 2,897     3,064     3,150     2,983     2,940  
Total interest expense $ 89,775     $ 80,612     $ 71,984     $ 66,508     $ 57,399  
                   
Less: Fully taxable-equivalent adjustment (1,557 )   (1,600 )   (1,601 )   (1,570 )   (1,519 )
Net interest income (GAAP) (1) 264,852     266,202     261,986     254,088     247,563  
Fully taxable-equivalent adjustment 1,557     1,600     1,601     1,570     1,519  
Net interest income, fully taxable-equivalent (non-GAAP) (1) $ 266,409     $ 267,802     $ 263,587     $ 255,658     $ 249,082  

 

  1. See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance measure/ratio.  
  2. Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period.  

TABLE 7: QUARTERLY NET INTEREST MARGIN

  Net Interest Margin for three months ended,
  Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2018
  Sep 30,
2018
Yield earned on:                  
Interest-bearing deposits with banks and cash equivalents 2.15 %   2.34 %   2.39 %   2.14 %   2.16 %
Investment securities 2.95     3.11     3.19     3.23     2.90  
FHLB and FRB stock 5.55     5.47     5.79     5.43     5.54  
Liquidity management assets 2.71     3.01     3.09     3.02     2.78  
Other earning assets 4.20     4.68     4.91     6.19     3.95  
Mortgage loans held-for-sale 3.63     4.42     4.76     5.09     5.51  
Loans, net of unearned income 4.93     5.07     5.06     4.87     4.73  
Total earning assets 4.53 %   4.74 %   4.74 %   4.58 %   4.45 %
                   
Rate paid on:                  
NOW and interest bearing demand deposits 0.72 %   0.77 %   0.67 %   0.60 %   0.39 %
Wealth management deposits 1.26     1.09     1.09     1.23     1.31  
Money market accounts 1.45     1.41     1.33     1.19     0.98  
Savings accounts 0.79     0.72     0.63     0.48     0.43  
Time deposits 2.18     2.11     1.98     1.83     1.66  
Interest-bearing deposits 1.43     1.37     1.29     1.20     1.06  
Federal Home Loan Bank advances 1.22     1.93     1.67     1.84     1.80  
Other borrowings 3.30     3.37     3.16     3.29     2.96  
Subordinated notes 5.02     5.08     5.10     5.14     5.10  
Junior subordinated debentures 4.47     4.78     4.97     4.60     4.54  
Total interest-bearing liabilities 1.56 %   1.51 %   1.40 %   1.33 %   1.17 %
                   
Interest rate spread  (1)(3) 2.97 %   3.23 %   3.34 %   3.25 %   3.28 %
Less:  Fully taxable-equivalent adjustment (0.02 )   (0.02 )   (0.02 )   (0.02 )   (0.02 )
Net free funds/contribution (2) 0.42     0.41     0.38     0.38     0.33  
Net interest margin (GAAP) (3) 3.37 %   3.62 %   3.70 %   3.61 %   3.59 %
Fully taxable-equivalent adjustment 0.02     0.02     0.02     0.02     0.02  
Net interest margin, fully taxable-equivalent (non-GAAP) (3) 3.39 %   3.64 %   3.72 %   3.63 %   3.61 %

 

 

 

  1. Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.  
  2. Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.  
  3. See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance measure/ratio.  

TABLE 8: YEAR-TO-DATE AVERAGE BALANCES, AND NET INTEREST INCOME AND MARGIN

  Average Balance
for nine months ended,
Interest
for nine months ended,
Yield/Rate
for nine months ended,
(Dollars in thousands) Sep 30,
2019
  Sep 30,
2018
Sep 30,
2019
  Sep 30,
2018
Sep 30,
2019
  Sep 30,
2018
Interest-bearing deposits with banks and cash equivalents (1) $ 1,254,534     $ 836,710   $ 21,142     $ 11,463   2.26 %   1.83 %
Investment securities (2) 3,563,941     2,943,802   82,142     62,398   3.08     2.83  
FHLB and FRB stock 97,624     102,893   4,088     3,988   5.60     5.18  
Liquidity management assets (3)(8) $ 4,916,099     $ 3,883,405   $ 107,372     $ 77,849   2.92 %   2.68 %
Other earning assets (3)(4)(8) 15,722     22,190   538     524   4.56     3.15  
Mortgage loans held-for-sale 283,966     355,491   8,791     12,329   4.14     4.64  
Loans, net of unearned income (3)(5)(8) 24,598,857     22,276,827   923,468     763,614   5.02     4.58  
Total earning assets (8) $ 29,814,644     $ 26,537,913   $ 1,040,169     $ 854,316   4.66 %   4.30 %
Allowance for loan losses (163,518 )   (146,287 )            
Cash and due from banks 284,779     264,294              
Other assets 2,482,970     1,984,460              
Total assets $ 32,418,875     $ 28,640,380              
                   
NOW and interest bearing demand deposits $ 2,865,175     $ 2,357,768   $ 15,457     $ 5,765   0.72 %   0.33 %
Wealth management deposits 2,703,853     2,378,468   23,254     20,721   1.15     1.16  
Money market accounts 6,326,336     4,927,639   66,337     26,038   1.40     0.71  
Savings accounts 2,768,875     2,728,986   14,830     8,348   0.72     0.41  
Time deposits 5,394,651     4,701,247   84,290     49,706   2.09     1.41  
Interest-bearing deposits $ 20,058,890     $ 17,094,108   $ 204,168     $ 110,578   1.36 %   0.86 %
Federal Home Loan Bank advances 679,589     768,029   8,417     9,849   1.66     1.71  
Other borrowings 433,465     257,175   10,624     5,400   3.28     2.81  
Subordinated notes 266,430     139,125   10,051     5,333   5.03     5.11  
Junior subordinated debentures 253,566     253,566   9,111     8,239   4.74     4.28  
Total interest-bearing liabilities $ 21,691,940     $ 18,512,003   $ 242,371     $ 139,399   1.49 %   1.01 %
Non-interest bearing deposits 6,570,815     6,546,269              
Other liabilities 748,722     517,712              
Equity 3,407,398     3,064,396              
Total liabilities and shareholders’ equity $ 32,418,875     $ 28,640,380              
Interest rate spread (6)(8)             3.17 %   3.29 %
Less:  Fully taxable-equivalent adjustment       (4,758 )   (4,102 ) (0.02 )   (0.02 )
Net free funds/contribution (7) $ 8,122,704     $ 8,025,910         0.41     0.31  
Net interest income/ margin (GAAP) (8)       $ 793,040     $ 710,815   3.56 %   3.58 %
Fully taxable-equivalent adjustment       4,758     4,102   0.02     0.02  
Net interest income/ margin, fully taxable-equivalent (non-GAAP) (8)       $ 797,798     $ 714,917   3.58 %   3.60 %

 

  1. Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.  
  2. Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.  
  3. Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on a marginal federal corporate tax rate in effect as of the applicable period.  
  4. Other earning assets include brokerage customer receivables and trading account securities.  
  5. Loans, net of unearned income, include non-accrual loans.  
  6. Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.  
  7. Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.  
  8. See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance ratio.  

TABLE 9: INTEREST RATE SENSITIVITY

As an ongoing part of its financial strategy, the Company attempts to manage the impact of fluctuations in market interest rates on net interest income. Management measures its exposure to changes in interest rates by modeling many different interest rate scenarios.

The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases of 100 and 200 basis points and a decrease of 100 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months.  Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenario is as follows:

Static Shock Scenario +200
Basis 
Points
  +100
 Basis
 Points
  -100
Basis
 Points
Sep 30, 2019 20.7 %   10.5 %   (11.9 )%
Jun 30, 2019 17.3     8.9     (10.2 )
Mar 31, 2019 14.9     7.8     (8.5 )
Dec 31, 2018 15.6     7.9     (8.6 )
Sep 30, 2018 18.1     9.1     (10.0 )
Ramp Scenario +200
Basis
Points
  +100
Basis
Points
  -100
Basis
Points
Sep 30, 2019 10.1 %   5.2 %   (5.6 )%
Jun 30, 2019 8.3     4.3     (4.6 )
Mar 31, 2019 6.7     3.5     (3.3 )
Dec 31, 2018 7.4     3.8     (3.6 )
Sep 30, 2018 8.5     4.3     (4.2 )

TABLE 10: MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES

  Loans repricing or maturity period    
As of September 30, 2019         From one to            
(In thousands) One year or less   five years   Over five years   Total
               
               
Commercial              
Fixed rate 206,052     1,213,099     822,338     2,241,489  
Variable rate 5,947,908     6,067     138     5,954,113  
Total commercial $ 6,153,960     $ 1,219,166     $ 822,476     $ 8,195,602  
Commercial real estate              
Fixed rate 463,155     2,043,088     341,511     2,847,754  
Variable rate 4,573,350     27,555     8     4,600,913  
Total commercial real estate $ 5,036,505     $ 2,070,643     $ 341,519     $ 7,448,667  
Home equity              
Fixed rate 23,952     5,642     19,614     49,208  
Variable rate 462,790     305         463,095  
Total home equity $ 486,742     $ 5,947     $ 19,614     $ 512,303  
Residential real estate              
Fixed rate 28,980     19,581     302,634     351,195  
Variable rate 57,238     345,029     465,204     867,471  
Total residential real estate $ 86,218     $ 364,610     $ 767,838     $ 1,218,666  
Premium finance receivables – commercial              
Fixed rate 3,365,631     84,319         3,449,950  
Variable rate              
Total premium finance receivables – commercial $ 3,365,631     $ 84,319     $     $ 3,449,950  
Premium finance receivables – life insurance              
Fixed rate 12,242     121,600     26,667     160,509  
Variable rate 4,634,987             4,634,987  
Total premium finance receivables – life insurance $ 4,647,229     $ 121,600     $ 26,667     $ 4,795,496  
Consumer and other              
Fixed rate 51,386     9,802     1,943     63,131  
Variable rate 26,356             26,356  
Total consumer and other $ 77,742     $ 9,802     $ 1,943     $ 89,487  
               
Total per category              
Fixed rate 4,151,398     3,497,131     1,514,707     9,163,236  
Variable rate 15,702,629     378,956     465,350     16,546,935  
Total loans, net of unearned income $ 19,854,027     $ 3,876,087     $ 1,980,057     $ 25,710,171  
               
Variable Rate Loan Pricing by Index:              
Prime             $ 2,252,517  
One- month LIBOR             8,439,173  
Three- month LIBOR             400,567  
Twelve- month LIBOR             5,222,025  
Other             232,653  
Total variable rate             $ 16,546,935  
 

http://ml.globenewswire.com/Resource/Download/20597901-9267-4190-859a-8e64a47f0076
Source: Bloomberg

As noted in the table on the previous page, the majority of the Company’s portfolio is tied to LIBOR indices which, as shown in the table above, do not mirror the same changes as the Prime rate when the Federal Reserve raises or lowers interest rates.  Specifically, the Company has $8.4 billion of variable rate loans tied to one-month LIBOR and $5.2 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:

  Basis Points (bps) Change in
  Prime   1-month
LIBOR
  12-month
LIBOR
 
Third Quarter 2019 -50  bps -38  bps -15  bps
Second Quarter 2019 +0   -9   -53  
First Quarter 2019 +0   -1   -30  
Fourth Quarter 2018 +25   +24   +9  
Third Quarter 2018 +25   +17   +16  

TABLE 11: ALLOWANCE FOR CREDIT LOSSES

    Three Months Ended Nine Months Ended
    Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30, Sep 30,   Sep 30,
(Dollars in thousands)   2019   2019   2019   2018   2018 2019   2018
Allowance for loan losses at beginning of period   $ 160,421     $ 158,212     $ 152,770     $ 149,756     $ 143,402   $ 152,770     $ 137,905  
Provision for credit losses   10,834     24,580     10,624     10,401     11,042   46,038     24,431  
Other adjustments   (13 )   (11 )   (27 )   (79 )   (18 ) (51 )   (102 )
Reclassification (to) from allowance for unfunded lending-related commitments   (30 )   (70 )   (16 )   (150 )   (2 ) (116 )   24  
Charge-offs:                          
Commercial   6,775     17,380     503     6,416     3,219   24,658     8,116  
Commercial real estate   809     326     3,734     219     208   4,869     1,176  
Home equity   1,594     690     88     715     561   2,372     1,530  
Residential real estate   25     287     3     267     337   315     1,088  
Premium finance receivables – commercial   1,866     5,009     2,210     1,741     2,512   9,085     10,487  
Premium finance receivables – life insurance                          
Consumer and other   117     136     102     148     144   355     732  
Total charge-offs   11,186     23,828     6,640     9,506     6,981   41,654     23,129  
Recoveries:                          
Commercial   367     289     318     225     304   974     1,232  
Commercial real estate   385     247     480     1,364     193   1,112     4,267  
Home equity   183     68     62     105     142   313     436  
Residential real estate   203     140     29     47     466   372     2,028  
Premium finance receivables – commercial   563     734     556     567     1,142   1,853     2,502  
Premium finance receivables – life insurance                          
Consumer and other   36     60     56     40     66   152     162  
Total recoveries   1,737     1,538     1,501     2,348     2,313   4,776     10,627  
Net charge-offs   (9,449 )   (22,290 )   (5,139 )   (7,158 )   (4,668 ) (36,878 )   (12,502 )
Allowance for loan losses at period end   $ 161,763     $ 160,421     $ 158,212     $ 152,770     $ 149,756   $ 161,763     $ 149,756  
Allowance for unfunded lending-related commitments at period end   1,510     1,480     1,410     1,394     1,245   1,510     1,245  
Allowance for credit losses at period end   $ 163,273     $ 161,901     $ 159,622     $ 154,164     $ 151,001   $ 163,273     $ 151,001  
                           
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average:      
Commercial   0.31 %   0.85 %   0.01 %   0.33 %   0.16 % 0.39 %   0.13 %
Commercial real estate   0.02     0.00     0.19     (0.07 )   0.00   0.07     (0.06 )
Home equity   1.08     0.47     0.02     0.43     0.28   0.52     0.24  
Residential real estate   (0.07 )   0.06     (0.01 )   0.10     (0.06 ) (0.01 )   (0.15 )
Premium finance receivables – commercial   0.15     0.55     0.23     0.16     0.19   0.31     0.39  
Premium finance receivables – life insurance                          
Consumer and other   0.27     0.30     0.16     0.30     0.23   0.24     0.58  
Total loans, net of unearned income   0.15 %   0.36 %   0.09 %   0.12 %   0.08 % 0.20 %   0.08 %
                           
Net charge-offs as a percentage of the provision for credit losses   87.22 %   90.68 %   48.37 %   68.82 %   42.27 % 80.10 %   51.17 %
Loans at period-end   $ 25,710,171     $ 25,304,659     $ 24,214,629     $ 23,820,691     $ 23,123,951        
Allowance for loan losses as a percentage of loans at period end   0.63 %   0.63 %   0.65 %   0.64 %   0.65 %      
Allowance for credit losses as a percentage of loans at period end   0.64     0.64     0.66     0.65     0.65        

 

 

Provision for credit losses by component for the periods presented:

  Three Months Ended Nine Months Ended
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30, Sep 30,   Sep 30,
(Dollars in thousands) 2019   2019   2019   2018   2018 2019   2018
Provision for loan losses $ 10,804     $ 24,510     $ 10,608     $ 10,251     $ 11,040   $ 45,922     $ 24,455  
Provision for unfunded lending-related commitments 30     70     16     150     2   116     (24 )
Provision for credit losses $ 10,834     $ 24,580     $ 10,624     $ 10,401     $ 11,042   $ 46,038     $ 24,431  

TABLE 12: ALLOWANCE BY LOAN PORTFOLIO

The table below summarizes the calculation of allowance for loan losses for the Company’s core loan portfolio and consumer, niche and purchased loan portfolio, as of September 30, 2019 and June 30, 2019.

  As of September 30, 2019 As of June 30, 2019
(Dollars in thousands) Recorded
Investment
  Calculated
Allowance
  % of its
category’s balance
Recorded
Investment
  Calculated
Allowance
  % of its
category’s balance
Commercial: (1)                    
Commercial and industrial $ 4,368,580     $ 47,983     1.10 % $ 4,529,952     $ 49,451     1.09 %
Asset-based lending 1,043,384     8,445     0.81   1,066,231     9,335     0.88  
Tax exempt 503,495     2,957     0.59   489,524     2,808     0.57  
Leases 749,135     2,069     0.28   674,251     1,879     0.28  
Commercial real estate: (1)                    
Residential construction 35,662     625     1.75   39,633     797     2.01  
Commercial construction 810,919     8,757     1.08   792,782     8,523     1.08  
Land 168,092     4,801     2.86   138,255     4,193     3.03  
Office 964,557     10,066     1.04   925,150     9,778     1.06  
Industrial 972,859     7,015     0.72   921,116     6,589     0.72  
Retail 960,762     6,718     0.70   930,594     6,515     0.70  
Multi-family 1,239,217     12,504     1.01   1,184,025     11,983     1.01  
Mixed use and other 1,918,510     14,362     0.75   1,944,182     14,800     0.76  
Home equity (1) 479,627     3,702     0.77   489,813     3,595     0.73  
Residential real estate (1) 1,191,153     9,314     0.78   1,089,496     8,042     0.74  
Total core loan portfolio $ 15,405,952     $ 139,318     0.90 % $ 15,215,004     $ 138,288     0.91 %
Commercial:                    
Franchise $ 881,287     $ 8,251     0.94 % $ 891,481     $ 8,255     0.93 %
Mortgage warehouse lines of credit 314,697     2,481     0.79   275,170     2,195     0.80  
Community Advantage – homeowner associations 202,724     507     0.25   192,056     481     0.25  
Aircraft 11,112     9     0.08   11,305     9     0.08  
Purchased commercial loans (2) 121,188     425     0.35   140,804     480     0.34  
Purchased commercial real estate (2) 378,089     90     0.02   400,507     92     0.02  
Purchased home equity (2) 32,676     18     0.06   37,557     36     0.10  
Purchased residential real estate (2) 27,513     97     0.35   28,682     104     0.36  
Premium finance receivables                    
U.S. commercial insurance loans 3,016,644     7,207     0.24   2,914,625     6,789     0.23  
Canada commercial insurance loans (2) 433,306     648     0.15   453,798     725     0.16  
Life insurance loans (1) 4,552,555     1,511     0.03   4,487,921     1,426     0.03  
Purchased life insurance loans (2) 242,941           146,557          
Consumer and other (1) 86,437     1,199     1.40   105,966     1,538     1.45  
Purchased consumer and other (2) 3,050     2     0.07   3,226     3     0.09  
Total consumer, niche and purchased loan portfolio $ 10,304,219     $ 22,445     0.22 % $ 10,089,655     $ 22,133     0.22 %
Total loans, net of unearned income $ 25,710,171     $ 161,763     0.63 % $ 25,304,659     $ 160,421     0.63 %

 

  1. Excludes purchased loans reported in accordance with ASC 310-20 and ASC 310-30.  
  2. Purchased loans represent loans reported in accordance with ASC 310-20 and ASC 310-30.  

TABLE 13: LOAN PORTFOLIO AGING

        90+ days   60-89   30-59        
As of September 30, 2019       and still   days past   days past        
(Dollars in thousands)   Nonaccrual   accruing   due   due   Current   Total Loans
Loan Balances: 
Commercial (1)   $ 43,931     $ 382     $ 12,860     $ 51,487     $ 8,086,942     $ 8,195,602  
Commercial real estate (1)   21,557     4,992     9,629     33,098     7,379,391     7,448,667  
Home equity   7,920         95     3,100     501,188     512,303  
Residential real estate (1)   13,447     3,244     1,868     1,433     1,198,674     1,218,666  
Premium finance receivables – commercial   15,950     10,612     8,853     16,972     3,397,563     3,449,950  
Premium finance receivables – life insurance (1)   590         17,753     27,795     4,749,358     4,795,496  
Consumer and other (1)   224     117     55     272     88,819     89,487  
Total loans, net of unearned income   $ 103,619     $ 19,347     $ 51,113     $ 134,157     $ 25,401,935     $ 25,710,171  
Aging as a % of Loan Balance:                        
Commercial (1)   0.5 %   0.0 %   0.2 %   0.6 %   98.7 %   100.0 %
Commercial real estate (1)   0.3     0.1     0.1     0.4     99.1     100.0  
Home equity   1.6         0.0     0.6     97.8     100.0  
Residential real estate (1)   1.1     0.3     0.1     0.1     98.4     100.0  
Premium finance receivables – commercial   0.5     0.3     0.2     0.5     98.5     100.0  
Premium finance receivables – life insurance (1)   0.0         0.4     0.6     99.0     100.0  
Consumer and other (1)   0.2     0.1     0.1     0.3     99.3     100.0  
Total loans, net of unearned income   0.4 %   0.1 %   0.2 %   0.5 %   98.8 %   100.0 %
  1. Including PCI loans. PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30.  Loan agings are based upon contractually required payments.  
            90+ days   60-89   30-59                
As of June 30, 2019           and still   days past   days past                
(Dollars in thousands)   Nonaccrual   accruing   due   due   Current   Total Loans 
Loan Balances:                                                 
Commercial (1)   $ 47,604     $ 1,939     $ 5,283     $ 16,102     $ 8,199,846     $ 8,270,774  
Commercial real estate (1)   20,875     5,124     11,199     72,987     7,166,059     7,276,244  
Home equity   8,489         321     2,155     516,405     527,370  
Residential real estate (1)   14,236     1,867     1,306     1,832     1,098,937     1,118,178  
Premium finance receivables – commercial   13,833     6,940     17,977     16,138     3,313,535     3,368,423  
Premium finance receivables – life insurance (1)   590         18,580     19,673     4,595,635     4,634,478  
Consumer and other (1)   220     235     242     227     108,268     109,192  
Total loans, net of unearned income   $ 105,847     $ 16,105     $ 54,908     $ 129,114     $ 24,998,685     $ 25,304,659  
Aging as a % of Loan Balance:                                                
Commercial (1)   0.6 %   0.0 %   0.1 %   0.2 %   99.1 %   100.0 %
Commercial real estate (1)   0.3     0.1     0.2     1.0     98.4     100.0  
Home equity   1.6         0.1     0.4     97.9     100.0  
Residential real estate (1)   1.3     0.2     0.1     0.2     98.2     100.0  
Premium finance receivables – commercial   0.4     0.2     0.5     0.5     98.4     100.0  
Premium finance receivables – life insurance (1)   0.0         0.4     0.4     99.2     100.0  
Consumer and other (1)   0.2     0.2     0.2     0.2     99.2     100.0  
Total loans, net of unearned income   0.4 %   0.1 %   0.2 %   0.5 %   98.8 %   100.0 %
  1. Including PCI loans. PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30.  Loan agings are based upon contractually required payments.

TABLE 14: NON-PERFORMING ASSETS, EXCLUDING PCI LOANS, AND TROUBLED DEBT RESTRUCTURINGS (“TDRs”)

  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(Dollars in thousands) 2019   2019   2019   2018   2018
Loans past due greater than 90 days and still accruing (1):                  
Commercial $     $ 488     $     $     $ 5,122  
Commercial real estate                  
Home equity                  
Residential real estate         30          
Premium finance receivables – commercial 10,612     6,940     6,558     7,799     7,028  
Premium finance receivables – life insurance         168          
Consumer and other 53     172     218     109     233  
Total loans past due greater than 90 days and still accruing 10,665     7,600     6,974     7,908     12,383  
Non-accrual loans (2):                  
Commercial 43,931     47,604     55,792     50,984     58,587  
Commercial real estate 21,557     20,875     15,933     19,129     17,515  
Home equity 7,920     8,489     7,885     7,147     8,523  
Residential real estate 13,447     14,236     15,879     16,383     16,062  
Premium finance receivables – commercial 15,950     13,833     14,797     11,335     13,802  
Premium finance receivables – life insurance 590     590              
Consumer and other 224     220     326     348     355  
Total non-accrual loans 103,619     105,847     110,612     105,326     114,844  
Total non-performing loans:                  
Commercial 43,931     48,092     55,792     50,984     63,709  
Commercial real estate 21,557     20,875     15,933     19,129     17,515  
Home equity 7,920     8,489     7,885     7,147     8,523  
Residential real estate 13,447     14,236     15,909     16,383     16,062  
Premium finance receivables – commercial 26,562     20,773     21,355     19,134     20,830  
Premium finance receivables – life insurance 590     590     168          
Consumer and other 277     392     544     457     588  
Total non-performing loans $ 114,284     $ 113,447     $ 117,586     $ 113,234     $ 127,227  
Other real estate owned 8,584     9,920     9,154     11,968     14,924  
Other real estate owned – from acquisitions 8,898     9,917     12,366     12,852     13,379  
Other repossessed assets 257     263     270     280     294  
Total non-performing assets $ 132,023     $ 133,547     $ 139,376     $ 138,334     $ 155,824  
TDRs performing under the contractual terms of the loan agreement $ 45,178     $ 45,862     $ 48,305     $ 33,281     $ 31,487  
Total non-performing loans by category as a percent of its own respective category’s period-end balance:                  
Commercial 0.54 %   0.58 %   0.70 %   0.65 %   0.85 %
Commercial real estate 0.29     0.29     0.23     0.28     0.26  
Home equity 1.55     1.61     1.49     1.29     1.47  
Residential real estate 1.10     1.27     1.51     1.63     1.74  
Premium finance receivables – commercial 0.77     0.62     0.71     0.67     0.72  
Premium finance receivables – life insurance 0.01     0.01     0.00          
Consumer and other 0.31     0.36     0.45     0.38     0.51  
Total loans, net of unearned income 0.44 %   0.45 %   0.49 %   0.48 %   0.55 %
Total non-performing assets as a percentage of total assets 0.38 %   0.40 %   0.43 %   0.44 %   0.52 %
Allowance for loan losses as a percentage of total non-performing loans 141.54 %   141.41 %   134.55 %   134.92 %   117.71 %

 

  1. Loans past due greater than 90 days and still accruing interest included TDRs totaling $5.1 million as of September 30, 2018. As of September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, no TDRs were past due greater than 90 days and still accruing interest.
  2. Non-accrual loans included TDRs totaling $21.1 million, $30.1 million, $40.1 million, $32.8 million and $34.7 million as of September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018 and September 30, 2018, respectively.

Non-performing Loans Rollforward, excluding PCI loans:

  Three Months Ended Nine Months Ended
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30, Sep 30,   Sep 30,
(Dollars in thousands) 2019   2019   2019   2018   2018 2019   2018
Balance at beginning of period $ 113,447     $ 117,586     $ 113,234     $ 127,227     $ 83,282   $ 113,234     $ 90,162  
Additions, net 20,781     20,567     24,030     18,553     56,864   65,378     73,875  
Return to performing status (407 )   (47 )   (14,077 )   (6,155 )   (3,782 ) (14,531 )   (8,294 )
Payments received (16,326 )   (5,438 )   (4,024 )   (16,437 )   (6,212 ) (25,788 )   (13,370 )
Transfer to OREO and other repossessed assets (1,493 )   (1,486 )   (82 )   (970 )   (659 ) (3,061 )   (6,168 )
Charge-offs (6,984 )   (16,817 )   (3,992 )   (7,161 )   (3,108 ) (27,793 )   (8,631 )
Net change for niche loans (1) 5,266     (918 )   2,497     (1,823 )   842   6,845     (347 )
Balance at end of period $ 114,284     $ 113,447     $ 117,586     $ 113,234     $ 127,227   $ 114,284     $ 127,227  
  1. This includes activity for premium finance receivables and indirect consumer loans.

TDRs

  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(Dollars in thousands) 2019   2019   2019   2018   2018
Accruing TDRs:                  
Commercial $ 14,099     $ 15,923     $ 19,650     $ 8,545     $ 8,794  
Commercial real estate 10,370     12,646     14,123     13,895     14,160  
Residential real estate and other 20,709     17,293     14,532     10,841     8,533  
Total accrual $ 45,178     $ 45,862     $ 48,305     $ 33,281     $ 31,487  
Non-accrual TDRs: (1)                  
Commercial $ 7,451     $ 21,850     $ 34,390     $ 27,774     $ 30,452  
Commercial real estate 7,673     2,854     1,517     1,552     1,326  
Residential real estate and other 6,006     5,435     4,150     3,495     2,954  
Total non-accrual $ 21,130     $ 30,139     $ 40,057     $ 32,821     $ 34,732  
Total TDRs:                  
Commercial $ 21,550     $ 37,773     $ 54,040     $ 36,319     $ 39,246  
Commercial real estate 18,043     15,500     15,640     15,447     15,486  
Residential real estate and other 26,715     22,728     18,682     14,336     11,487  
Total TDRs $ 66,308     $ 76,001     $ 88,362     $ 66,102     $ 66,219  
  1. Included in total non-performing loans.

Other Real Estate Owned

  Three Months Ended
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
(Dollars in thousands) 2019   2019   2019   2018   2018
Balance at beginning of period $ 19,837     $ 21,520     $ 24,820     $ 28,303     $ 35,331  
Disposals/resolved (4,501 )   (2,397 )   (2,758 )   (3,848 )   (7,291 )
Transfers in at fair value, less costs to sell 3,008     1,746     32     997     349  
Additions from acquisition             160     1,418  
Fair value adjustments (862 )   (1,032 )   (574 )   (792 )   (1,504 )
Balance at end of period $ 17,482     $ 19,837     $ 21,520     $ 24,820     $ 28,303  
                   
  Period End
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,
Balance by Property Type: 2019   2019   2019   2018   2018
Residential real estate $ 1,250     $ 1,312     $ 3,037     $ 3,446     $ 3,735  
Residential real estate development 1,282     1,282     1,139     1,426     1,952  
Commercial real estate 14,950     17,243     17,344     19,948     22,616  
Total $ 17,482     $ 19,837     $ 21,520     $ 24,820     $ 28,303  

 

TABLE 15: NON-INTEREST INCOME

  Three Months Ended   Q3 2019 compared to   Q3 2019 compared to
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,   Q2 2019   Q3 2018
(Dollars in thousands) 2019   2019   2019   2018   2018   $ Change   % Change   $ Change   % Change
Brokerage $ 4,686     $ 4,764     $ 4,516     $ 4,997     $ 5,579     $ (78 )   (2 )%   $ (893 )   (16 )%
Trust and asset management 19,313     19,375     19,461     17,729     17,055     (62 )       2,258     13  
Total wealth management 23,999     24,139     23,977     22,726     22,634     (140 )   (1 )   1,365     6  
Mortgage banking 50,864     37,411     18,158     24,182     42,014     13,453     36     8,850     21  
Service charges on deposit accounts 9,972     9,277     8,848     9,065     9,331     695     7     641     7  
Gains (losses) on investment securities, net 710     864     1,364     (2,649 )   90     (154 )   (18 )   620     NM
Fees from covered call options     643     1,784     626     627     (643 )   (100 )   (627 )   (100 )
Trading gains (losses), net 11     (44 )   (171 )   (155 )   (61 )   55     (125 )   72     NM
Operating lease income, net 12,025     11,733     10,796     10,882     9,132     292     2     2,893     32  
Other:                                  
Interest rate swap fees 4,811     3,224     2,831     2,602     2,359     1,587     49     2,452     104  
BOLI 830     1,149     1,591     (466 )   3,190     (319 )   (28 )   (2,360 )   NM
Administrative services 1,086     1,009     1,030     1,260     1,099     77     8     (13 )   (1 )
Foreign currency remeasurement (losses) gains (55 )   113     464     (1,149 )   348     (168 )   (149 )   (403 )   NM
Early pay-offs of capital leases 6         5     3     11     6     NM   (5 )   (45 )
Miscellaneous 10,878     8,640     10,980     8,381     9,156     2,238     26     1,722     19  
Total Other 17,556     14,135     16,901     10,631     16,163     3,421     24     1,393     9  
Total Non-Interest Income $ 115,137     $ 98,158     $ 81,657     $ 75,308     $ 99,930     $ 16,979     17 %   $ 15,207     15 %

NM – Not meaningful.

    Nine Months Ended        
    Sep 30,   Sep 30,   $   %
(Dollars in thousands)   2019   2018   Change   Change
Brokerage   $ 13,966     $ 17,394     $ (3,428 )   (20 )%
Trust and asset management   58,149     50,843     7,306     14  
Total wealth management   72,115     68,237     3,878     6  
Mortgage banking   106,433     112,808     (6,375 )   (6 )
Service charges on deposit accounts   28,097     27,339     758     3  
Gains on investment securities, net   2,938     (249 )   3,187     NM
Fees from covered call options   2,427     2,893     (466 )   (16 )
Trading (losses) gains, net   (204 )   166     (370 )   NM
Operating lease income, net   34,554     27,569     6,985     25  
Other:                
Interest rate swap fees   10,866     8,425     2,441     29  
BOLI   3,570     5,448     (1,878 )   (34 )
Administrative services   3,125     3,365     (240 )   (7 )
Foreign currency remeasurement gain (loss)   522     (524 )   1,046     NM
Early pay-offs of leases   11     598     (587 )   (98 )
Miscellaneous   30,498     24,767     5,731     23  
Total Other   48,592     42,079     6,513     15  
Total Non-Interest Income   $ 294,952     $ 280,842     $ 14,110     5 %

NM – Not meaningful.

TABLE 16: MORTGAGE BANKING REVENUE

  Three Months Ended Nine Months Ended
(Dollars in thousands) Sep 30,
2019
  Jun 30,
2019
  Mar 31,
2019
  Dec 31,
2019
  Sep 30,
2018
Sep 30,
2019
  Sep 30,
2018
Originations:                        
Retail originations $ 913,631     $ 669,510     $ 365,602     $ 463,196     $ 642,213   $ 1,948,743     $ 1,949,036  
Correspondent originations 50,639     182,966     148,100     289,101     310,446   381,705     559,896  
Veterans First originations 456,005     301,324     164,762     175,483     199,774   922,091     518,726  
Total originations for sale (A) $ 1,420,275     $ 1,153,800     $ 678,464     $ 927,780     $ 1,152,433   $ 3,252,539     $ 3,027,658  
Originations for investment 154,897     106,237     93,689     93,275     54,172   354,823     165,655  
Total originations $ 1,575,172     $ 1,260,037     $ 772,153     $ 1,021,055     $ 1,206,605   $ 3,607,362     $ 3,193,313  
                         
Purchases as a percentage of originations for sale 48 %   63 %   67 %   71 %   76 % 57 %   77 %
Refinances as a percentage of originations for sale 52     37     33     29     24   43     23  
Total 100 %   100 %   100 %   100 %   100 % 100 %   100 %
                         
Production Margin:                        
Production revenue (B) (1) $ 42,713     $ 29,895     $ 16,606     $ 18,657     $ 25,253   $ 89,214     $ 73,593  
Production margin (B / A) 3.01 %   2.59 %   2.45 %   2.01 %   2.19 % 2.74 %   2.43 %
                         
Mortgage Servicing:                        
Loans serviced for others (C) $ 7,901,045     $ 7,515,186     $ 7,014,269     $ 6,545,870     $ 5,904,300        
MSRs, at fair value (D) 75,585     72,850     71,022     75,183     74,530        
Percentage of MSRs to loans serviced for others (D / C) 0.96 %   0.97 %   1.01 %   1.15 %   1.26 %      
                         
Components of Mortgage Banking Revenue:      
Production revenue $ 42,713     $ 29,895     $ 16,606     $ 18,657     $ 25,253   $ 89,214     $ 73,593  
MSR – current period capitalization 14,029     9,802     6,580     9,683     11,330   30,411     23,378  
MSR – collection of expected cash flows – paydowns (456 )   (457 )   (505 )   (496 )   (689 ) (1,418 )   (1,771 )
MSR – collection of expected cash flows – payoffs (6,781 )   (3,619 )   (1,492 )   (896 )   (392 ) (11,892 )   (1,876 )
MSR – changes in fair value model assumptions (4,058 )   (4,305 )   (8,744 )   (7,638 )   1,077   (17,107 )   7,307  
Gain on derivative contract held as an economic hedge, net 82     920               1,002      
MSR valuation adjustment, net of gain on derivative contract held as an economic hedge (3,976 )   (3,385 )   (8,744 )   (7,638 )   1,077   (16,105 )   7,307  
Servicing income 5,989     5,460     5,460     4,917     3,942   16,909     10,352  
Other (654 )   (285 )   253     (45 )   1,493   (686 )   1,825  
Total mortgage banking revenue $ 50,864     $ 37,411     $ 18,158     $ 24,182     $ 42,014   $ 106,433     $ 112,808  

 

  1. Production revenue represents revenue earned from the origination and subsequent sale of mortgages, including gains on loans sold and fees from originations, processing and other related activities, and excludes servicing fees, changes in the fair value of servicing rights and changes to the mortgage recourse obligation.

TABLE 17: NON-INTEREST EXPENSE

  Three Months Ended   Q3 2019 compared to   Q3 2019 compared to
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30,   Q2 2019   Q3 2018
(Dollars in thousands) 2019   2019   2019   2018   2018   $ Change   % Change   $ Change   % Change
Salaries and employee benefits:                                  
Salaries $ 78,067     $ 75,360     $ 74,037     $ 67,708     $ 69,893     $ 2,707     4 %   $ 8,174     12 %
Commissions and incentive compensation 40,289     36,486     31,599     33,656     34,046     3,803     10     6,243     18  
Benefits 22,668     21,886     20,087     20,747     19,916     782     4     2,752     14  
Total salaries and employee benefits 141,024     133,732     125,723     122,111     123,855     7,292     5     17,169     14  
Equipment 13,314     12,759     11,770     11,523     10,827     555     4     2,487     23  
Operating lease equipment depreciation 8,907     8,768     8,319     8,462     7,370     139     2     1,537     21  
Occupancy, net 14,991     15,921     16,245     15,980     14,404     (930 )   (6 )   587     4  
Data processing 6,522     6,204     7,525     8,447     9,335     318     5     (2,813 )   (30 )
Advertising and marketing 13,375     12,845     9,858     9,414     11,120     530     4     2,255     20  
Professional fees 8,037     6,228     5,556     9,259     9,914     1,809     29     (1,877 )   (19 )
Amortization of other intangible assets 2,928     2,957     2,942     1,407     1,163     (29 )   (1 )   1,765     NM
FDIC insurance 148     4,127     3,576     4,044     4,205     (3,979 )   (96 )   (4,057 )   (96 )
OREO expense, net 1,170     1,290     632     1,618     596     (120 )   NM   574     96  
Other:                                  
Commissions – 3rd party brokers 734     749     718     779     1,059     (15 )   (2 )   (325 )   (31 )
Postage 2,321     2,606     2,450     2,047     2,205     (285 )   (11 )   116     5  
Miscellaneous 21,083     21,421     19,060     16,242     17,584     (338 )   (2 )   3,499     20  
Total other 24,138     24,776     22,228     19,068     20,848     (638 )   (3 )   3,290     16  
Total Non-Interest Expense $ 234,554     $ 229,607     $ 214,374     $ 211,333     $ 213,637     $ 4,947     2 %   $ 20,917     10 %

NM – Not meaningful.

    Nine Months Ended      
    Sep 30,   Sep 30, $   %
(Dollars in thousands)   2019   2018 Change   Change
Salaries and employee benefits:              
Salaries   $ 227,464     $ 198,855   $ 28,609     14 %
Commissions and incentive compensation   108,374     101,902   6,472     6  
Benefits   64,641     57,209   7,432     13  
Total salaries and employee benefits   400,479     357,966   42,513     12  
Equipment   37,843     31,426   6,417     20  
Operating lease equipment depreciation   25,994     20,843   5,151     25  
Occupancy, net   47,157     41,834   5,323     13  
Data processing   20,251     26,580   (6,329 )   (24 )
Advertising and marketing   36,078     31,726   4,352     14  
Professional fees   19,821     23,047   (3,226 )   (14 )
Amortization of other intangible assets   8,827     3,164   5,663     NM
FDIC insurance   7,851     13,165   (5,314 )   (40 )
OREO expense, net   3,092     4,502   (1,410 )   (31 )
Other:              
Commissions – 3rd party brokers   2,201     3,485   (1,284 )   (37 )
Postage   7,377     6,638   739     11  
Miscellaneous   61,564     50,379   11,185     22  
Total other   71,142     60,502   10,640     18  
Total Non-Interest Expense   $ 678,535     $ 614,755   $ 63,780     10 %

 

NM – Not meaningful.

TABLE 18: SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES/RATIOS

The accounting and reporting policies of Wintrust conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components), taxable-equivalent net interest margin (including its individual components), the taxable-equivalent efficiency ratio, tangible common equity ratio, tangible book value per common share and return on average tangible common equity. Management believes that these measures and ratios provide users of the Company’s financial information a more meaningful view of the performance of the Company’s interest-earning assets and interest-bearing liabilities and of the Company’s operating efficiency. Other financial holding companies may define or calculate these measures and ratios differently.

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a fully taxable-equivalent basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity.  The Company references the return on average tangible common equity as a measurement of profitability.

 

  Three Months Ended Nine Months Ended
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30, Sep 30,   Sep 30,
(Dollars and shares in thousands) 2019   2019   2019   2018   2018 2019   2018
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:      
(A) Interest Income (GAAP) $ 354,627     $ 346,814     $ 333,970     $ 320,596     $ 304,962   $ 1,035,411     $ 850,214  
Taxable-equivalent adjustment:                        
 – Loans 978     1,031     1,034     980     941   3,043     2,423  
 – Liquidity Management Assets 574     568     565     586     575   1,707     1,672  
 – Other Earning Assets 5     1     2     4     3   8     7  
(B) Interest Income (non-GAAP) $ 356,184     $ 348,414     $ 335,571     $ 322,166     $ 306,481   $ 1,040,169     $ 854,316  
(C) Interest Expense (GAAP) $ 89,775     $ 80,612     $ 71,984     $ 66,508     $ 57,399   $ 242,371     $ 139,399  
(D) Net Interest Income (GAAP) (A minus C) $ 264,852     $ 266,202     $ 261,986     $ 254,088     $ 247,563   $ 793,040     $ 710,815  
(E) Net Interest Income (non-GAAP) (B minus C) $ 266,409     $ 267,802     $ 263,587     $ 255,658     $ 249,082   $ 797,798     $ 714,917  
Net interest margin (GAAP) 3.37 %   3.62 %   3.70 %   3.61 %   3.59 % 3.56 %   3.58 %
Net interest margin, fully taxable-equivalent (non-GAAP) 3.39 %   3.64 %   3.72 %   3.63 %   3.61 % 3.58 %   3.6 %
(F) Non-interest income $ 115,137     $ 98,158     $ 81,657     $ 75,308     $ 99,930   $ 294,952     $ 280,842  
(G) Gains (losses) on investment securities, net 710     864     1,364     (2,649 )   90   2,938     (249 )
(H) Non-interest expense 234,554     229,607     214,374     211,333     213,637   678,535     614,755  
Efficiency ratio (H/(D+F-G)) 61.84 %   63.17 %   62.63 %   63.65 %   61.50 % 62.53 %   61.98 %
Efficiency ratio (non-GAAP) (H/(E+F-G)) 61.59 %   62.89 %   62.34 %   63.35 %   61.23 % 62.26 %   61.72 %
                         
Reconciliation of Non-GAAP Tangible Common Equity Ratio:      
Total shareholders’ equity (GAAP) $ 3,540,325     $ 3,446,950     $ 3,371,972     $ 3,267,570     $ 3,179,822        
Less: Non-convertible preferred stock (GAAP) (125,000 )   (125,000 )   (125,000 )   (125,000 )   (125,000 )      
Less: Intangible assets (GAAP) (627,972 )   (631,499 )   (620,224 )   (622,565 )   (564,938 )      
(I) Total tangible common shareholders’ equity (non-GAAP) $ 2,787,353     $ 2,690,451     $ 2,626,748     $ 2,520,005     $ 2,489,884        
(J) Total assets (GAAP) $ 34,911,902     $ 33,641,769     $ 32,358,621     $ 31,244,849     $ 30,142,731        
Less: Intangible assets (GAAP) (627,972 )   (631,499 )   (620,224 )   (622,565 )   (564,938 )      
(K) Total tangible assets (non-GAAP) $ 34,283,930     $ 33,010,270     $ 31,738,397     $ 30,622,284     $ 29,577,793        
Common equity to assets ratio (GAAP) (L/J) 9.8 %   9.9 %   10.0 %   10.1 %   10.1 %      
Tangible common equity ratio (non-GAAP) (I/K) 8.1 %   8.2 %   8.3 %   8.2 %   8.4 %      
  Three Months Ended Nine Months Ended
  Sep 30,   Jun 30,   Mar 31,   Dec 31,   Sep 30, Sep 30,   Sep 30,
(Dollars and shares in thousands) 2019   2019   2019   2018   2018 2019   2018
Reconciliation of Non-GAAP Tangible Book Value per Common Share:      
Total shareholders’ equity $ 3,540,325     $ 3,446,950     $ 3,371,972     $ 3,267,570     $ 3,179,822        
Less: Preferred stock (125,000 )   (125,000 )   (125,000 )   (125,000 )   (125,000 )      
(L) Total common equity $ 3,415,325     $ 3,321,950     $ 3,246,972     $ 3,142,570     $ 3,054,822        
(M) Actual common shares outstanding 56,698     56,668     56,639     56,408     56,377        
Book value per common share (L/M) $ 60.24     $ 58.62     $ 57.33     $ 55.71     $ 54.19        
Tangible book value per common share (non-GAAP) (I/M) $ 49.16     $ 47.48     $ 46.38     $ 44.67     $ 44.16        
                         
Reconciliation of Non-GAAP Return on Average Tangible Common Equity:      
(N) Net income applicable to common shares $ 97,071     $ 79,416     $ 87,096     $ 77,607     $ 89,898   $ 263,583     $ 257,359  
Add: Intangible asset amortization 2,928     2,957     2,942     1,407     1,163   8,827     3,164  
Less: Tax effect of intangible asset amortization (773 )   (771 )   (731 )   (366 )   (292 ) (2,277 )   (798 )
After-tax intangible asset amortization 2,155     2,186     2,211     1,041     871   6,550     2,366  
(O) Tangible net income applicable to common shares (non-GAAP) $ 99,226     $ 81,602     $ 89,307     $ 78,648     $ 90,769   $ 270,133     $ 259,725  
Total average shareholders’ equity $ 3,496,714     $ 3,414,340     $ 3,309,078     $ 3,200,654     $ 3,131,943   $ 3,407,398     $ 3,064,396  
Less: Average preferred stock (125,000 )   (125,000 )   (125,000 )   (125,000 )   (125,000 ) (125,000 )   (125,000 )
(P) Total average common shareholders’ equity $ 3,371,714     $ 3,289,340     $ 3,184,078     $ 3,075,654     $ 3,006,943   $ 3,282,398     $ 2,939,396  
Less: Average intangible assets (630,279 )   (624,794 )   (622,240 )   (574,757 )   (547,552 ) (625,800 )   (539,281 )
(Q) Total average tangible common shareholders’ equity (non-GAAP) $ 2,741,435     $ 2,664,546     $ 2,561,838     $ 2,500,897     $ 2,459,391   $ 2,656,598     $ 2,400,115  
Return on average common equity, annualized (N/P) 11.42 %   9.68 %   11.09 %   10.01 %   11.86 % 10.74 %   11.71 %
Return on average tangible common equity, annualized (non-GAAP) (O/Q) 14.36 %   12.28 %   14.14 %   12.48 %   14.64 % 13.6 %   14.47 %

 

WINTRUST SUBSIDIARIES AND LOCATIONS

Wintrust is a financial holding company whose common stock is traded on the Nasdaq Global Select Market (Nasdaq: WTFC). Its 15 community bank subsidiaries are: Lake Forest Bank & Trust Company, N.A., Hinsdale Bank & Trust Company, Wintrust Bank, N.A., in Chicago, Libertyville Bank & Trust Company, N.A., Barrington Bank & Trust Company, N.A., Crystal Lake Bank & Trust Company, N.A., Northbrook Bank & Trust Company, N.A., Schaumburg Bank & Trust Company, N.A., Village Bank & Trust, N.A., in Arlington Heights, Beverly Bank & Trust Company, N.A. in Chicago, Wheaton Bank & Trust Company, N.A., State Bank of The Lakes, N.A., in Antioch, Old Plank Trail Community Bank, N.A. in New Lenox, St. Charles Bank & Trust Company and Town Bank, N.A., in Hartland, Wisconsin.

The banks also operate facilities in Illinois in Addison, Algonquin, Aurora, Bloomingdale, Buffalo Grove, Cary, Clarendon Hills, Crete, Deerfield, Des Plaines, Downers Grove, Elgin, Elk Grove Village, Elmhurst, Evanston, Evergreen Park, Frankfort, Geneva, Glen Ellyn, Glencoe, Glenview, Gurnee, Grayslake, Hanover Park, Highland Park, Highwood, Hoffman Estates, Island Lake, Itasca, Joliet, Lake Bluff, Lake Villa, Lansing, Lemont, Lindenhurst, Lynwood, Markham, McHenry, Mokena, Mount Prospect, Mundelein, Naperville, North Chicago, Northfield, Norridge, Oak Lawn, Orland Park, Palatine, Park Ridge, Prospect Heights, Ravinia, Riverside, Rolling Meadows, Roselle, Round Lake Beach, Shorewood, Skokie, South Holland, Spring Grove, Steger, Stone Park, Vernon Hills, Wauconda, Waukegan, Western Springs, Willowbrook, Wilmette, Winnetka and Wood Dale, in Albany, Burlington, Clinton, Darlington, Delafield, Delavan, Elm Grove, Genoa City, Kenosha, Lake Geneva, Madison, Menomonee Falls, Milwaukee, Monroe, Pewaukee, Racine, Sharon, Wales, Walworth and Wind Lake, Wisconsin, in Dyer, Indiana and in Naples, Florida.

Additionally, the Company operates various non-bank business units:

  • FIRST Insurance Funding, a division of Lake Forest Bank & Trust Company, N.A., and Wintrust Life Finance, a division of Lake Forest Bank & Trust Company, N.A., serve commercial and life insurance loan customers, respectively, throughout the United States.
  • First Insurance Funding of Canada serves commercial insurance loan customers throughout Canada.
  • Tricom, Inc. of Milwaukee provides high-yielding, short-term accounts receivable financing and value-added out-sourced administrative services, such as data processing of payrolls, billing and cash management services, to temporary staffing service clients located throughout the United States.
  • Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., engages primarily in the origination and purchase of residential mortgages for sale into the secondary market through origination offices located throughout the United States. Loans are also originated nationwide through relationships with wholesale and correspondent offices.
  • Wintrust Investments, LLC is a broker-dealer providing a full range of private client and brokerage services to clients and correspondent banks located primarily in the Midwest.
  • Great Lakes Advisors LLC provides money management services and advisory services to individual accounts.
  • The Chicago Trust Company, N.A., a trust subsidiary, allows Wintrust to service customers’ trust and investment needs at each banking location.
  • Wintrust Asset Finance offers direct leasing opportunities.
  • CDEC provides Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code Section 1031.

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 2018 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

  • economic conditions that affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;
  • negative effects suffered by us or our customers resulting from changes in U.S. trade policies;
  • the extent of defaults and losses on the Company’s loan portfolio, which may require further increases in its allowance for credit losses;
  • estimates of fair value of certain of the Company’s assets and liabilities, which could change in value significantly from period to period;
  • the financial success and economic viability of the borrowers of our commercial loans;
  • commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;
  • the extent of commercial and consumer delinquencies and declines in real estate values, which may require further increases in the Company’s allowance for loan and lease losses;
  • inaccurate assumptions in our analytical and forecasting models used to manage our loan portfolio;
  • changes in the level and volatility of interest rates, the capital markets and other market indices that may affect, among other things, the Company’s liquidity and the value of its assets and liabilities;
  • competitive pressures in the financial services business which may affect the pricing of the Company’s loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products;
  • failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of the Company’s recent or future acquisitions;
  • unexpected difficulties and losses related to FDIC-assisted acquisitions;
  • harm to the Company’s reputation;
  • any negative perception of the Company’s financial strength;
  • ability of the Company to raise additional capital on acceptable terms when needed;
  • disruption in capital markets, which may lower fair values for the Company’s investment portfolio;
  • ability of the Company to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations and to manage risks associated therewith;
  • failure or breaches of our security systems or infrastructure, or those of third parties;
  • security breaches, including denial of service attacks, hacking, social engineering attacks, malware intrusion or data corruption attempts and identity theft;
  • adverse effects on our information technology systems resulting from failures, human error or cyberattacks;
  • adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors;
  • increased costs as a result of protecting our customers from the impact of stolen debit card information;
  • accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions;
  • ability of the Company to attract and retain senior management experienced in the banking and financial services industries;
  • environmental liability risk associated with lending activities;
  • the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation;
  • losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith;
  • the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank;
  • the soundness of other financial institutions;
  • the expenses and delayed returns inherent in opening new branches and de novo banks;
  • examinations and challenges by tax authorities, and any unanticipated impact of the Tax Act;
  • changes in accounting standards, rules and interpretations such as the new CECL standard, and the impact on the Company’s financial statements;
  • the ability of the Company to receive dividends from its subsidiaries;
  • uncertainty about the future of LIBOR;
  • a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;
  • legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies;
  • a lowering of our credit rating;
  • changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet as a result of the end of its program of quantitative easing or otherwise;
  • restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business resulting from the Dodd-Frank Act;
  • increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory environment;
  • the impact of heightened capital requirements;
  • increases in the Company’s FDIC insurance premiums, or the collection of special assessments by the FDIC;
  • delinquencies or fraud with respect to the Company’s premium finance business;
  • credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans;
  • the Company’s ability to comply with covenants under its credit facility; and
  • fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation.

Therefore, there can be no assurances that future actual results will correspond to these forward-looking statements. The reader is cautioned not to place undue reliance on any forward-looking statement made by the Company. Any such statement speaks only as of the date the statement was made or as of such date that may be referenced within the statement. The Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events after the date of the press release. Persons are advised, however, to consult further disclosures management makes on related subjects in its reports filed with the Securities and Exchange Commission and in its press releases.

CONFERENCE CALL, WEBCAST AND REPLAY

The Company will hold a conference call on Thursday, October 17, 2019 at 1:00 p.m. (Central Time) regarding third quarter 2019 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #6168809. A simultaneous audio-only webcast and replay of the conference call as well as an accompanying slide presentation may be accessed via the Company’s website at https://www.wintrust.com, Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the third quarter 2019 earnings press release will be available on the home page of the Company’s website at https://www.wintrust.com and at the Investor Relations, Investor News and Events, Press Releases link on its website.

FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Senior Executive Vice President & Chief Operating Officer
(847) 939-9000
Web site address: www.wintrust.com

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