ROSEMONT, Ill., July 15, 2019 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq: WTFC) announced net income of $81.5 million or $1.38 per diluted common share for the second quarter of 2019, a decrease in diluted earnings per common share of 9.2% compared to the prior quarter and 9.8% compared to the second quarter of 2018. The Company recorded net income of $170.6 million or $2.91 per diluted common share for the first six months of 2019 compared to net income of $171.6 million or $2.93 per diluted common share for the same period of 2018.

Highlights of the Second Quarter of 2019:
Comparative information to the first quarter of 2019

  • Total assets increased by $1.3 billion, including $220 million from the acquisition of Rush-Oak Corporation ("ROC"), the parent company of Oak Bank (the "Oak Bank Acquisition"), or 16% on an annualized basis.
  • Total loans increased by $1.1 billion, including $114 million from the Oak Bank Acquisition, or 18% on an annualized basis.
  • Total deposits increased by $714 million, including $158 million from the Oak Bank Acquisition, or 11% on an annualized basis.
  • Net interest income increased by $4.2 million as the impact of a $797 million increase in average earning assets was partially offset by an eight basis point decline in net interest margin.
  • Mortgage banking production revenue increased by $13.3 million as mortgage originations for sale totaled $1.2 billion in the second quarter of 2019 as compared to $678 million in the first quarter of 2019.

Other highlights of the second quarter of 2019

  • Total period end loans were $751 million higher than average total loans in the current quarter.
  • Recorded the following activity related to mortgage servicing rights:
    • Current period capitalization of $9.8 million;
    • Reduction in value related to payoffs and paydowns of $4.1 million; and
    • Reduction in value related to changes in fair value model assumptions, net of derivative contract activity held as an economic hedge, of $3.4 million.
  • Recognized $24.6 million of provision for credit losses and $22.3 million of net charge-offs, of which $15.2 million of provision for credit losses and $18.4 million of net charge-offs related to three credits.
  • Completed a subordinated debt issuance which generated proceeds of $297.5 million, net of the underwriting discount, and contributed to increase the total capital ratio to approximately 12.3%.
  • Opened a new branch in Waukegan, Illinois, as well as completed the Oak Bank Acquisition, with one branch in the city of Chicago.
  • Announced an agreement to acquire STC Bancshares Corp., the parent company of STC Capital Bank, which is expected to close in the third quarter of 2019.

Edward J. Wehmer, President and Chief Executive Officer, commented, "Wintrust reported net income of $81.5 million for the second quarter of 2019, down from $89.1 million in the first quarter of 2019. The Company experienced strong balance sheet growth as total assets were $1.3 billion higher than the prior quarter end and $4.2 billion higher than the second quarter of 2018. The second quarter was characterized by strong balance sheet growth,  increased mortgage banking revenue, resolution of problem credits, and a continued focus to increase franchise value in our market area."

Mr. Wehmer continued, "This quarter demonstrated our asset-driven mentality as we generated high quality assets while leveraging our retail banking footprint to grow core deposit funding. The Company experienced significant loan growth in the quarter as total loans grew by $1.1 billion and the yield on loans remained relatively flat to the prior quarter. Additionally, the loan growth was diversified across various loan portfolios as we experienced growth of $380 million of commercial premium finance receivables, $303 million of commercial real estate loans and $277 million of commercial loans. Total deposits increased by $714 million in the current quarter although the rate on interest bearing deposits increased by eight basis points.  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 noted, “Our mortgage banking business production increased dramatically in the current quarter as loan volumes originated for sale increased to $1.2 billion from $678 million in the first quarter of 2019.  The favorable increase in origination volume was a result of the seasonal purchase market combined with increased refinance activity due to the declining interest rate environment. Declining long-term interest rates also contributed to a $4.1 million reduction in our mortgage servicing rights portfolio related to payoffs and paydowns as well as a $3.4 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 $9.8 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, "During the current quarter, the Company recorded $24.6 million of provision for credit losses and $22.3 million of net charge-offs, of which $15.2 million of provision for credit losses and $18.4 million of net charge-offs related to three credits. This contributed to a four basis point reduction in non-performing loans as a percent of total loans to 0.45%. The Company recorded additional provision expense during the current quarter in recognition of the significant loan growth as well as certain specific reserves on other non-performing loans. We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit. We do not believe that the charges taken during the current quarter represent any pervasive issues that may have broader implications on the credit quality of our loan portfolio."

Turning to the future, Mr. Wehmer stated, “We have experienced significant franchise growth in the first two quarters of 2019 and believe that our opportunities for both internal and external growth remain consistently strong. Total period-end loans exceeded total average loans by $751 million in the current quarter, providing momentum for an increase in net interest income in the third quarter of 2019 despite market conditions that are applying pressure to the net interest margin. We plan to continue to emphasize core deposit growth and we will remain diligent in monitoring the interest rate environment to ensure that we react quickly in adjusting deposit pricing in the event of further interest rate reductions. We plan to continue in 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 Oak Bank Acquisition and the announced acquisition of STC Bancshares Corp., and 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 second quarter of 2019.

http://ml.globenewswire.com/Resource/Download/dd8200b6-3ef9-46d7-a9e0-472e4a79dfcc

*See Table 16 in this report for the MSR Valuation Adjustment, net of gain on derivative contract held as an economic hedge.

SUMMARY OF RESULTS:

BALANCE SHEET

Total assets grew by $1.3 billion in the second quarter of 2019 primarily driven by $1.1 billion of loan growth as well as an increase in mortgage loans held-for-sale of $146.4 million.  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 held $1.4 billion of interest bearing cash as of June 30, 2019 in order to maintain adequate liquidity.

Total liabilities grew by $1.2 billion in the second quarter of 2019 primarily comprised of growth in total deposits of $714.1 million and an increase of $296.8 million in subordinated notes. Management believes in substantially funding the 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.

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 second quarter of 2019, net interest income totaled $266.2 million, an increase of $4.2 million as compared to the first quarter of 2019 and an increase of $28.0 million as compared to the second quarter of 2018. The $4.2 million increase in net interest income in the second quarter of 2019 compared to the first quarter of 2019 was attributable to a $6.6 million increase related to balance sheet growth and a $2.9 million increase from one more day in the quarter partially offset by a $5.3 million decrease due to a reduction in net interest margin.

Net interest margin was 3.62% (3.64% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2019 compared to 3.70% (3.72% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2019 and 3.61% (3.63% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2018. The eight basis point decrease in net interest margin in the second quarter of 2019 as compared to the first quarter of 2019 is primarily due to an increase in the rate on interest bearing liabilities of 11 basis points partially offset by a three basis point increase in the contribution of net free funds.  The 11 basis point increase in the rate on interest bearing liabilities was primarily due to an eight basis point increase in deposit pricing related to promotional efforts to expand our market penetration, including at new branches. Additionally, the rate on interest bearing liabilities was negatively impacted by three basis points due to a higher mix of wholesale borrowings including the subordinated debt issuance in the current quarter and the utilization of Federal Home Loan Bank borrowings to fund asset growth.  The yield on earning assets remained unchanged in the second quarter as compared to first quarter as the yield on loans remained relatively consistent quarter over quarter.

For the first six months of 2019, net interest income totaled $528.2 million, an increase of $64.9 million as compared to the first six months of 2018. Net interest margin was 3.66% (3.68% on a fully taxable-equivalent basis) for the first six months of 2019 compared to 3.58% (3.60% on a fully taxable-equivalent basis) for the first six 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 second quarter of 2019 totaled 36 basis points on an annualized basis compared to nine basis points on an annualized basis in the first quarter of 2019 and two basis points on an annualized basis in the second quarter of 2018.  Net charge-offs totaled $22.3 million in the second quarter of 2019, a $17.2 million increase from $5.1 million in the first quarter of 2019 and a $21.2 million increase from $1.1 million in the second quarter of 2018.  The provision for credit losses totaled $24.6 million for the second quarter of 2019 compared to $10.6 million for the first quarter of 2019 and $5.0 million for the second quarter of 2018. Of the $24.6 million of provision for credit losses and $22.3 million of net charge-offs recognized in the current quarter, $18.4 million of net charge-offs and $15.2 million of provision expense, respectively, related to three credits.  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 June 30, 2019 and March 31, 2019 is shown on Table 12 of this report.

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. As of March 31, 2019, $19.2 million of all loans, or 0.1%, were 60 to 89 days past due and $176.2 million, or 0.7%, 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 June 30, 2019 that are current with regard to the contractual terms of the loan agreement represent 97.9% of the total home equity portfolio. Residential real estate loans at June 30, 2019 that are current with regards to the contractual terms of the loan agreements comprise 98.2% 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 $160.4 million of allowance for loan losses, there was $6.9 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 June 30, 2019.

The ratio of non-performing assets to total assets was 0.40% as of June 30, 2019, compared to 0.43% at March 31, 2019, and 0.40% at June 30, 2018. Non-performing assets, excluding PCI loans, totaled $133.5 million at June 30, 2019, compared to $139.4 million at March 31, 2019 and $118.9 million at June 30, 2018. Non-performing loans, excluding PCI loans, totaled $113.4 million, or 0.45% of total loans, at June 30, 2019 compared to $117.6 million, or 0.49% of total loans, at March 31, 2019 and $83.3 million, or 0.37% of total loans, at June 30, 2018. Other real estate owned ("OREO") of $19.8 million at June 30, 2019 decreased $1.7 million compared to $21.5 million at March 31, 2019 and decreased $15.5 million compared to $35.3 million at June 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 increased by $162,000 during the second quarter of 2019 as compared to the first quarter of 2019 primarily due to increased brokerage commissions and asset management fees. 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 $19.3 million in the second quarter of 2019 as compared to the first 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 second quarter of 2019.  Production revenue increased by $13.3 million in the second quarter of 2019 as compared to the first quarter of 2019 primarily due to a significant increase in origination volumes as a result of the seasonal purchase market and increased refinancing activity.  The percentage of origination volume from refinancing activities was 37% in the second quarter of 2019 as compared to 33% in the first quarter of 2019. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market.

During the second quarter of 2019, the fair value of the mortgage servicing rights portfolio increased as retained servicing rights led to the capitalization of $9.8 million partially offset by negative fair value adjustments of $4.3 million and a reduction in value of $4.1 million due to payoffs and paydowns of the existing portfolio. The Company purchased an option at the beginning of the second 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 $920,000 which was recorded in mortgage banking revenue.

The net gains recognized on investment securities in the second quarter of 2019 and first quarter of 2019, respectively, were primarily due to unrealized gains recognized on equity securities held by the Company, including a large cap value mutual fund.

The Company recorded $643,000 of fees from covered call options in the second quarter of 2019 as compared to $1.8 million in the first quarter of 2019.  The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio by using fees generated from these options to compensate for net interest margin compression. These option transactions are designed to mitigate overall interest rate risk and do not qualify as hedges pursuant to accounting guidance. There were no outstanding call option contracts at June 30, 2019, March 31, 2019 or June 30, 2018.

Miscellaneous non-interest income decreased by $2.3 million in the second quarter of 2019 as compared to the first quarter of 2019 primarily due to reduced income from investments in partnerships.

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 $8.0 million in the second quarter of 2019 as compared to the first quarter of 2019. The $8.0 million increase is comprised of an increase of $1.3 million in salaries expense, $4.9 million in commissions and incentive compensation and $1.8 million in benefits expense.  The increase in salaries expense is primarily due to increased staffing as the Company grows, including additional salaries from the Oak Bank Acquisition as well as a full quarter impact of annual merit increases that were effective in February.  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 $12.8 million in the second quarter of 2019, an increase of $1.0 million as compared to the first quarter of 2019. The increase in the current quarter relates primarily to increased software depreciation and licensing expenses and maintenance and repairs.

Data processing expenses decreased by $1.3 million in the second quarter of 2019 as compared to the first quarter of 2019 primarily due to the realization of a full quarter impact of favorable contract negotiations on various data processing contracts which were completed in the first quarter of 2019.

Advertising and marketing expenses in the second quarter of 2019 increased by $3.0 million as compared to the first quarter of 2019 primarily related to higher corporate sponsorship costs, which are typically higher in the spring and summer due to our marketing efforts related to baseball sponsorships, as well as increased spending related to deposit generation and brand awareness to grow our loan and deposit portfolios.

Miscellaneous expenses increased by $2.4 million during the second quarter of 2019 as compared to the first quarter of 2019 primarily as a result of loan expenses and travel and entertainment expenses. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors' fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses, operating losses and lending origination costs that are not deferred.

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

INCOME TAXES

The Company recorded income tax expense of $28.7 million in the second quarter of 2019 compared to $29.5 million in the first quarter of 2019 and $32.0 million in the second quarter of 2018. The effective tax rates were 26.06% in the second quarter of 2019 compared to 24.86% in the first quarter of 2019 and 26.33% in the second quarter of 2018. During the first six months of 2019, the Company recorded income tax expense of $58.2 million compared to $58.1 million for the first six months of 2018. The effective tax rates were 25.44% for the first six months of 2019 and 25.30% for the first six months of 2018.

The quarterly and year-to-date effective tax rates were impacted by excess tax benefits related to share-based compensation. These excess tax benefits were $69,000 in the second quarter of 2019 and $1.6 million in the first quarter of 2019 compared to $712,000 in the second quarter of 2018 and $2.6 million in the first quarter 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 second quarter of 2019, revenue within this unit was primarily driven by increased net interest income due to increased earning assets and one additional day in the second quarter, partially offset by higher rates on interest bearing liabilities.  Mortgage banking revenue increased significantly from $18.2 million for the first quarter of 2019 to $37.4 million for the second quarter of 2019. Services charges on deposit accounts totaled $9.3 million in the second quarter of 2019 an increase of $429,000 as compared to the first 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 June 30, 2019. When adjusted for the probability of closing, the pipelines were estimated to be approximately $750 million to $800 million at June 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 second quarter of 2019, the specialty finance unit experienced higher revenue primarily as a result of increased volumes and higher yields within its insurance premium financing receivables portfolio. Originations within the insurance premium financing receivables portfolio were $2.4 billion during the second quarter of 2019 and average balances increased by $228.0 million as compared to the first quarter of 2019. The increase in average balances along with higher yields on these loans resulted in a $5.2 million increase in interest income attributed to the insurance premium finance receivables portfolio. The Company's leasing business grew during the second quarter of 2019, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing $80.4 million to $1.4 billion at the end of the second quarter of 2019. Revenues from the Company's out-sourced administrative services business remained relatively steady, totaling approximately $1.0 million in both the first quarter and 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 increased by $162,000 in the second quarter of 2019 compared to the first quarter of 2019, totaling $24.1 million in the current period. At June 30, 2019, the Company’s wealth management subsidiaries had approximately $25.9 billion of assets under administration, which included $3.6 billion of assets owned by the Company and its subsidiary banks, representing a $772.9 million increase from the $25.1 billion of assets under administration at March 31, 2019. The increase in the second quarter of 2019 was primarily due to market appreciation as well as 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 certain assets and assumed certain liabilities of the mortgage banking business of Veterans First, in a business combination. The Company also acquired mortgage servicing rights assets from Veterans First on approximately 10,000 loans, totaling an estimated $1.6 billion in unpaid principal balance. Veterans First is a consumer direct lender with two offices, operating one in Salt Lake City and one in San Diego. 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 second quarter of 2019, as compared to the first quarter of 2019 (sequential quarter) and second quarter of 2018 (linked quarter), are shown in the table below:

       % or(4)
basis point  (bp) change from
1st Quarter
2019
 % or
basis point  (bp)
change from
2nd Quarter
2018
  Three Months Ended 
(Dollars in thousands, except per share data) June 30,
 2019
 March 31,
 2019
 June 30,
 2018
 
Net income $81,466  $89,146  $89,580 (9)% (9)%
Net income per common share – diluted 1.38  1.52  1.53 (9)  (10) 
Net revenue (1) 364,360  343,643  333,403 6   9  
Net interest income 266,202  261,986  238,170 2   12  
Net interest margin 3.62% 3.70% 3.61%(8)bp 1 bp
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.64  3.72  3.63 (8)  1  
Net overhead ratio (3) 1.64  1.72  1.57 (8)  7  
Return on average assets 1.02  1.16  1.26 (14)  (24) 
Return on average common equity 9.68  11.09  11.94 (141)  (226) 
Return on average tangible common equity (non-GAAP) (2) 12.28  14.14  14.72 (186)  (244) 
At end of period           
Total assets $33,641,769  $32,358,621  $29,464,588 16 % 14 %
Total loans (5) 25,304,659  24,214,629  22,610,560 18   12  
Total deposits 27,518,815  26,804,742  24,365,479 11   13  
Total shareholders’ equity 3,446,950  3,371,972  3,106,871 9   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 EndedSix Months Ended
(Dollars in thousands, except per share data) June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
 June 30,
 2018
June 30,
 2019
 June 30,
 2018
Selected Financial Condition Data (at end of period):                       
Total assets $33,641,769  $32,358,621  $31,244,849  $30,142,731  $29,464,588    
Total loans (1) 25,304,659  24,214,629  23,820,691  23,123,951  22,610,560    
Total deposits 27,518,815  26,804,742  26,094,678  24,916,715  24,365,479    
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566    
Total shareholders’ equity 3,446,950  3,371,972  3,267,570  3,179,822  3,106,871    
Selected Statements of Income Data:   
Net interest income $266,202  $261,986  $254,088  $247,563  $238,170 $528,188  $463,252 
Net revenue (2) 364,360  343,643  329,396  347,493  333,403 708,003  644,164 
Net income 81,466  89,146  79,657  91,948  89,580 170,612  171,561 
Net income per common share – Basic 1.40  1.54  1.38  1.59  1.55 2.94  2.98 
Net income per common share – Diluted 1.38  1.52  1.35  1.57  1.53 2.91  2.93 
Selected Financial Ratios and Other Data:   
Performance Ratios:   
Net interest margin 3.62% 3.70% 3.61% 3.59% 3.61%3.66% 3.58%
Net interest margin - fully taxable equivalent (non-GAAP) (3) 3.64  3.72  3.63  3.61  3.63 3.68  3.60 
Non-interest income to average assets 1.23  1.06  0.99  1.34  1.34 1.15  1.29 
Non-interest expense to average assets 2.87  2.79  2.78  2.87  2.90 2.83  2.87 
Net overhead ratio (4) 1.64  1.72  1.79  1.53  1.57 1.68  1.58 
Return on average assets 1.02  1.16  1.05  1.24  1.26 1.09  1.23 
Return on average common equity 9.68  11.09  10.01  11.86  11.94 10.37  11.62 
Return on average tangible common equity (non-GAAP) (3) 12.28  14.14  12.48  14.64  14.72 13.19  14.38 
Average total assets $32,055,769  $31,216,171  $30,179,887  $29,525,109  $28,567,579 $31,638,289  $28,190,683 
Average total shareholders’ equity 3,414,340  3,309,078  3,200,654  3,131,943  3,064,154 3,362,000  3,030,062 
Average loans to average deposits ratio 93.9% 92.7% 92.4% 92.2% 95.5%93.3% 95.3%
Period-end loans to deposits ratio 92.0  90.3  91.3  92.8  92.8    
Common Share Data at end of period:   
Market price per common share $73.16  $67.33  $66.49  $84.94  $87.05    
Book value per common share 58.62  57.33  55.71  54.19  52.94    
Tangible book value per common share (non-GAAP) (3) 47.48  46.38  44.67  44.16  43.50    
Common shares outstanding 56,667,846  56,638,968  56,407,558  56,377,169  56,329,276    
Other Data at end of period:   
Tier 1 leverage ratio (5) 9.1% 9.1% 9.1% 9.3% 9.4%   
Risk-based capital ratios:             
Tier 1 capital ratio (5) 9.6  9.8  9.7  10.0  10.0    
Common equity tier 1 capital ratio(5) 9.2  9.3  9.3  9.5  9.6    
Total capital ratio (5) 12.3  11.7  11.6  12.0  12.1    
Allowance for credit losses (6) $161,901  $159,622  $154,164  $151,001  $144,645    
Non-performing loans 113,447  117,586  113,234  127,227  83,282    
Allowance for credit losses to total loans (6) 0.64% 0.66% 0.65% 0.65% 0.64%   
Non-performing loans to total loans 0.45  0.49  0.48  0.55  0.37    
Number of:             
Bank subsidiaries 15  15  15  15  15    
Banking offices 172  170  167  166  162    
  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) 
   June 30,   March 31,   December 31,   September 30,   June 30, 
(In thousands)  2019   2019   2018   2018   2018 
Assets                    
                     
Cash and due from banks $300,934  $270,765  $392,142  $279,936  $304,580 
Federal funds sold and securities purchased under resale agreements 58  58  58  57  62 
Interest bearing deposits with banks 1,437,105  1,609,852  1,099,594  1,137,044  1,221,407 
Available-for-sale securities, at fair value 2,186,154  2,185,782  2,126,081  2,164,985  1,940,787 
Held-to-maturity securities, at amortized cost 1,191,634  1,051,542  1,067,439  966,438  890,834 
Trading account securities 2,430  559  1,692  688  862 
Equity securities with readily determinable fair value 44,319  47,653  34,717  36,414  37,839 
Federal Home Loan Bank and Federal Reserve Bank stock 92,026  89,013  91,354  99,998  96,699 
Brokerage customer receivables 13,569  14,219  12,609  15,649  16,649 
Mortgage loans held-for-sale 394,975  248,557  264,070  338,111  455,712 
Loans, net of unearned income 25,304,659  24,214,629  23,820,691  23,123,951  22,610,560 
Allowance for loan losses (160,421) (158,212) (152,770) (149,756) (143,402)
Net loans 25,144,238  24,056,417  23,667,921  22,974,195  22,467,158 
Premises and equipment, net 711,214  676,037  671,169  664,469  639,345 
Lease investments, net 230,111  224,240  233,208  199,241  194,160 
Accrued interest receivable and other assets 1,023,896  888,492  696,707  700,568  666,673 
Trade date securities receivable 237,607  375,211  263,523    450 
Goodwill 584,911  573,658  573,141  537,560  509,957 
Other intangible assets 46,588  46,566  49,424  27,378  21,414 
Total assets $33,641,769  $32,358,621  $31,244,849  $30,142,731  $29,464,588 
Liabilities and Shareholders’ Equity          
Deposits:          
Non-interest bearing $6,719,958  $6,353,456  $6,569,880  $6,399,213  $6,520,724 
Interest bearing 20,798,857  20,451,286  19,524,798  18,517,502  17,844,755 
 Total deposits 27,518,815  26,804,742  26,094,678  24,916,715  24,365,479 
Federal Home Loan Bank advances 574,823  576,353  426,326  615,000  667,000 
Other borrowings 418,057  372,194  393,855  373,571  255,701 
Subordinated notes 436,021  139,235  139,210  139,172  139,148 
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566 
Accrued interest payable and other liabilities 993,537  840,559  669,644  664,885  676,823 
Total liabilities 30,194,819  28,986,649  27,977,279  26,962,909  26,357,717 
Shareholders’ Equity:          
Preferred stock 125,000  125,000  125,000  125,000  125,000 
Common stock 56,794  56,765  56,518  56,486  56,437 
Surplus 1,569,969  1,565,185  1,557,984  1,553,353  1,547,511 
Treasury stock (6,650) (6,650) (5,634) (5,547) (5,355)
Retained earnings 1,747,266  1,682,016  1,610,574  1,543,680  1,464,494 
Accumulated other comprehensive loss (45,429) (50,344) (76,872) (93,150) (81,216)
Total shareholders’ equity 3,446,950  3,371,972  3,267,570  3,179,822  3,106,871 
Total liabilities and shareholders’ equity $33,641,769  $32,358,621  $31,244,849  $30,142,731  $29,464,588 


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

 Three Months Ended Six Months Ended
(In thousands, except per share data)June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
 June 30,
 2018
 June 30,
 2019
 June 30,
 2018
Interest income             
Interest and fees on loans$309,161  $296,987  $283,311  $271,134  $255,063  $606,148  $490,057 
Mortgage loans held-for-sale3,104  2,209  3,409  5,285  4,226  5,313  7,044 
Interest bearing deposits with banks5,206  5,300  5,628  5,423  3,243  10,506  6,039 
Federal funds sold and securities purchased under resale agreements        1    1 
Investment securities27,721  27,956  26,656  21,710  19,888  55,677  39,016 
Trading account securities5  8  14  11  4  13  18 
Federal Home Loan Bank and Federal Reserve Bank stock1,439  1,355  1,343  1,235  1,455  2,794  2,753 
Brokerage customer receivables178  155  235  164  167  333  324 
Total interest income346,814  333,970  320,596  304,962  284,047  680,784  545,252 
Interest expense             
Interest on deposits67,024  60,976  55,975  48,736  35,293  128,000  61,842 
Interest on Federal Home Loan Bank advances4,193  2,450  2,563  1,947  4,263  6,643  7,902 
Interest on other borrowings3,525  3,633  3,199  2,003  1,698  7,158  3,397 
Interest on subordinated notes2,806  1,775  1,788  1,773  1,787  4,581  3,560 
Interest on junior subordinated debentures3,064  3,150  2,983  2,940  2,836  6,214  5,299 
Total interest expense80,612  71,984  66,508  57,399  45,877  152,596  82,000 
Net interest income266,202  261,986  254,088  247,563  238,170  528,188  463,252 
Provision for credit losses24,580  10,624  10,401  11,042  5,043  35,204  13,389 
Net interest income after provision for credit losses241,622  251,362  243,687  236,521  233,127  492,984  449,863 
Non-interest income                 
Wealth management24,139  23,977  22,726  22,634  22,617  48,116  45,603 
Mortgage banking37,411  18,158  24,182  42,014  39,834  55,569  70,794 
Service charges on deposit accounts9,277  8,848  9,065  9,331  9,151  18,125  18,008 
Gains (losses) on investment securities, net864  1,364  (2,649) 90  12  2,228  (339)
Fees from covered call options643  1,784  626  627  669  2,427  2,266 
Trading (losses) gains, net(44) (171) (155) (61) 124  (215) 227 
Operating lease income, net11,733  10,796  10,882  9,132  8,746  22,529  18,437 
Other14,135  16,901  10,631  16,163  14,080  31,036  25,916 
Total non-interest income98,158  81,657  75,308  99,930  95,233  179,815  180,912 
Non-interest expense             
Salaries and employee benefits133,732  125,723  122,111  123,855  121,675  259,455  234,111 
Equipment12,759  11,770  11,523  10,827  10,527  24,529  20,599 
Operating lease equipment depreciation8,768  8,319  8,462  7,370  6,940  17,087  13,473 
Occupancy, net15,921  16,245  15,980  14,404  13,663  32,166  27,430 
Data processing6,204  7,525  8,447  9,335  8,752  13,729  17,245 
Advertising and marketing12,845  9,858  9,414  11,120  11,782  22,703  20,606 
Professional fees6,228  5,556  9,259  9,914  6,484  11,784  13,133 
Amortization of other intangible assets2,957  2,942  1,407  1,163  997  5,899  2,001 
FDIC insurance4,127  3,576  4,044  4,205  4,598  7,703  8,960 
OREO expense, net1,290  632  1,618  596  980  1,922  3,906 
Other24,776  22,228  19,068  20,848  20,371  47,004  39,654 
Total non-interest expense229,607  214,374  211,333  213,637  206,769  443,981  401,118 
Income before taxes110,173  118,645  107,662  122,814  121,591  228,818  229,657 
Income tax expense28,707  29,499  28,005  30,866  32,011  58,206  58,096 
Net income$81,466  $89,146  $79,657  $91,948  $89,580  $170,612  $171,561 
Preferred stock dividends2,050  2,050  2,050  2,050  2,050  4,100  4,100 
Net income applicable to common shares$79,416  $87,096  $77,607  $89,898  $87,530  $166,512  $167,461 
Net income per common share - Basic$1.40  $1.54  $1.38  $1.59  $1.55  $2.94  $2.98 
Net income per common share - Diluted$1.38  $1.52  $1.35  $1.57  $1.53  $2.91  $2.93 
Cash dividends declared per common share$0.25  $0.25  $0.19  $0.19  $0.19  $0.50  $0.38 
Weighted average common shares outstanding56,662  56,529  56,395  56,366  56,299  56,596  56,218 
Dilutive potential common shares699  699  892  918  928  700  909 
Average common shares and dilutive common shares57,361  57,228  57,287  57,284  57,227  57,296  57,127 

 

TABLE 1: LOAN PORTFOLIO MIX AND GROWTH RATES

          % Growth From
(Dollars in thousands)June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
 June 30,
 2018
December 31, 2018 (1) June 30,
 2018
Balance:            
Commercial$8,270,774  $7,994,191  $7,828,538  $7,473,958  $7,289,060 11% 13%
Commercial real estate7,276,244  6,973,505  6,933,252  6,746,774  6,575,084 10  11 
Home equity527,370  528,448  552,343  578,844  593,500 (9) (11)
Residential real estate1,118,178  1,053,524  1,002,464  924,250  895,470 23  25 
Premium finance receivables - commercial3,368,423  2,988,788  2,841,659  2,885,327  2,833,452 37  19 
Premium finance receivables - life insurance4,634,478  4,555,369  4,541,794  4,398,971  4,302,288 4  8 
Consumer and other109,192  120,804  120,641  115,827  121,706 (19) (10)
Total loans, net of unearned income$25,304,659  $24,214,629  $23,820,691  $23,123,951  $22,610,560 13% 12%
Mix:            
Commercial33% 33% 33% 32% 32%   
Commercial real estate29  29  29  29  29    
Home equity2  2  2  3  3    
Residential real estate4  4  4  4  4    
Premium finance receivables - commercial13  12  12  12  12    
Premium finance receivables - life insurance18  19  19  19  19    
Consumer and other1  1  1  1  1    
Total loans, net of unearned income100% 100% 100% 100% 100%   
  1. Annualized.

TABLE 2: COMMERCIAL AND COMMERCIAL REAL ESTATE LOAN PORTFOLIOS

 As of June 30, 2019
   % of
Total
Balance
 Nonaccrual > 90 Days
Past Due
and Still
Accruing
 Allowance
For Loan
Losses
Allocation
   
(Dollars in thousands)Balance 
Commercial:         
Commercial, industrial and other$5,295,775  34.0% $35,902  $488  $52,756 
Franchise926,521  6.0  11,076    8,314 
Mortgage warehouse lines of credit275,170  1.8      2,195 
Asset-based lending1,068,226  6.9  568    9,335 
Leases680,757  4.4  58    1,879 
PCI - commercial loans (1)24,325  0.2    1,451  414 
Total commercial$8,270,774  53.3% $47,604  $1,939  $74,893 
Commercial Real Estate:         
Construction$838,499  5.3% $1,030  $  $9,343 
Land145,639  0.9  1,226    4,193 
Office957,218  6.2  8,981    9,778 
Industrial956,530  6.2  368    6,591 
Retail976,201  6.3  6,867    6,515 
Multi-family1,240,067  8.0  296    11,983 
Mixed use and other2,035,099  13.0  2,107    14,813 
PCI - commercial real estate (1)126,991  0.8    5,124  54 
Total commercial real estate$7,276,244  46.7% $20,875  $5,124  $63,270 
Total commercial and commercial real estate$15,547,018  100.0% $68,479  $7,063  $138,163 
          
Commercial real estate - collateral location by state:         
Illinois$5,505,290  75.7%      
Wisconsin740,288  10.2       
Total primary markets$6,245,578  85.9%      
Indiana179,977  2.5       
Florida60,343  0.8       
Arizona62,607  0.9       
Michigan37,271  0.5       
California68,497  0.9       
Other621,971  8.5       
Total commercial real estate$7,276,244  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)June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
 June 30,
 2018
December 31, 2018 (1) June 30,
 2018
Balance:            
Non-interest bearing$6,719,958  $6,353,456  $6,569,880  $6,399,213  $6,520,724 5% 3%
NOW and interest bearing demand deposits2,788,976  2,948,576  2,897,133  2,512,259  2,452,474 (8) 14 
Wealth management deposits (2)3,220,256  3,328,781  2,996,764  2,520,120  2,523,572 15  28 
Money market6,460,098  6,093,596  5,704,866  5,429,921  5,205,678 27  24 
Savings2,823,904  2,729,626  2,665,194  2,595,164  2,763,062 12  2 
Time certificates of deposit5,505,623  5,350,707  5,260,841  5,460,038  4,899,969 9  12 
Total deposits$27,518,815  $26,804,742  $26,094,678  $24,916,715  $24,365,479 11% 13%
Mix:            
Non-interest bearing24% 24% 25% 26% 27%   
NOW and interest bearing demand deposits10  11  11  10  10    
Wealth management deposits (2)12  12  12  10  11    
Money market24  23  22  22  21    
Savings10  10  10  10  11    
Time certificates of deposit20  20  20  22  20    
Total deposits100% 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 June 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$75,122  $32,378  $103,079  $745,645  $956,224  1.68%
4-6 months  22,108    653,009  675,117  1.78 
7-9 months  22,094    778,564  800,658  2.04 
10-12 months  10,439    1,072,876  1,083,315  2.19 
13-18 months  15,064    520,874  535,938  2.17 
19-24 months  9,844    850,748  860,592  2.71 
24+ months1,000  9,301    583,478  593,779  2.60 
Total$76,122  $121,228  $103,079  $5,205,194  $5,505,623  2.15%
  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,
  June 30, March 31, December 31, September 30, June 30,
(In thousands) 2019 2019 2018 2018 2018
Interest-bearing deposits with banks and cash equivalents (1) $893,332  $897,629  $1,042,860  $998,004  $759,425 
Investment securities (2) 3,653,580  3,630,577  3,347,496  3,046,272  2,890,828 
FHLB and FRB stock 105,491  94,882  98,084  88,335  115,119 
Liquidity management assets (6) 4,652,403  4,623,088  4,488,440  4,132,611  3,765,372 
Other earning assets (3)(6) 15,719  13,591  16,204  17,862  21,244 
Mortgage loans held-for-sale 281,732  188,190  265,717  380,235  403,967 
Loans, net of unearned income (4)(6) 24,553,263  23,880,916  23,164,154  22,823,378  22,283,541 
Total earning assets (6) 29,503,117  28,705,785  27,934,515  27,354,086  26,474,124 
Allowance for loan losses (164,231) (157,782) (154,438) (148,503) (147,192)
Cash and due from banks 273,679  283,019  271,403  268,006  270,240 
Other assets 2,443,204  2,385,149  2,128,407  2,051,520  1,970,407 
Total assets $32,055,769  $31,216,171  $30,179,887  $29,525,109  $28,567,579 
           
NOW and interest bearing demand deposits $2,878,021  $2,803,338  $2,671,283  $2,519,445  $2,295,268 
Wealth management deposits 2,605,690  2,614,035  2,289,904  2,517,141  2,365,191 
Money market accounts 6,095,285  5,915,525  5,632,268  5,369,324  4,883,645 
Savings accounts 2,752,828  2,715,422  2,553,133  2,672,077  2,702,665 
Time deposits 5,322,384  5,267,796  5,381,029  5,214,637  4,557,187 
Interest-bearing deposits 19,654,208  19,316,116  18,527,617  18,292,624  16,803,956 
Federal Home Loan Bank advances 869,812  594,335  551,846  429,739  1,006,407 
Other borrowings 419,064  465,571  385,878  268,278  240,066 
Subordinated notes 220,771  139,217  139,186  139,155  139,125 
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566 
Total interest-bearing liabilities 21,417,421  20,768,805  19,858,093  19,383,362  18,443,120 
Non-interest bearing deposits 6,487,627  6,444,378  6,542,228  6,461,195  6,539,731 
Other liabilities 736,381  693,910  578,912  548,609  520,574 
Equity 3,414,340  3,309,078  3,200,654  3,131,943  3,064,154 
Total liabilities and shareholders’ equity $32,055,769  $31,216,171  $30,179,887  $29,525,109  $28,567,579 
           
Net free funds/contribution (5) $8,085,696  $7,936,980  $8,076,422  $7,970,724  $8,031,004 
  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,
  June 30, March 31, December 31, September 30, June 30,
(In thousands) 2019 2019 2018 2018 2018
Interest income:          
Interest-bearing deposits with banks and cash equivalents $5,206  $5,300  $5,628  $5,423  $3,244 
Investment securities 28,290  28,521  27,242  22,285  20,454 
FHLB and FRB stock 1,439  1,355  1,343  1,235  1,455 
Liquidity management assets (2) 34,935  35,176  34,213  28,943  25,153 
Other earning assets (2) 184  165  253  178  172 
Mortgage loans held-for-sale 3,104  2,209  3,409  5,285  4,226 
Loans, net of unearned income (2) 310,191  298,021  284,291  272,075  255,875 
Total interest income $348,414  $335,571  $322,166  $306,481  $285,426 
           
Interest expense:          
NOW and interest bearing demand deposits $5,553  $4,613  $4,007  $2,479  $1,901 
Wealth management deposits 7,091  7,000  7,119  8,287  6,992 
Money market accounts 21,451  19,460  16,936  13,260  8,111 
Savings accounts 4,959  4,249  3,096  2,907  2,709 
Time deposits 27,970  25,654  24,817  21,803  15,580 
Interest-bearing deposits 67,024  60,976  55,975  48,736  35,293 
Federal Home Loan Bank advances 4,193  2,450  2,563  1,947  4,263 
Other borrowings 3,525  3,633  3,199  2,003  1,698 
Subordinated notes 2,806  1,775  1,788  1,773  1,787 
Junior subordinated debentures 3,064  3,150  2,983  2,940  2,836 
Total interest expense $80,612  $71,984  $66,508  $57,399  $45,877 
           
Less:  Fully taxable-equivalent adjustment (1,600) (1,601) (1,570) (1,519) (1,379)
Net interest income (GAAP) (1) 266,202  261,986  254,088  247,563  238,170 
Fully taxable-equivalent adjustment 1,600  1,601  1,570  1,519  1,379 
Net interest income, fully taxable-equivalent (non-GAAP) (1) $267,802  $263,587  $255,658  $249,082  $239,549 
  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. The total adjustments for the three months ended June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018 were $1.6 million, $1.6 million,  $1.6 million, $1.5 million and $1.4 million, respectively.

TABLE 7: QUARTERLY NET INTEREST MARGIN

  Net Interest Margin for three months ended,
  June 30,
 2019
 March 31,
 2019
 December 31,
 2018
 September 30,
 2018
 June 30,
 2018
Yield earned on:          
Interest-bearing deposits with banks and cash equivalents 2.34% 2.39% 2.14% 2.16% 1.71%
Investment securities 3.11  3.19  3.23  2.90  2.84 
FHLB and FRB stock 5.47  5.79  5.43  5.54  5.07 
Liquidity management assets 3.01  3.09  3.02  2.78  2.68 
Other earning assets 4.68  4.91  6.19  3.95  3.24 
Mortgage loans held-for-sale 4.42  4.76  5.09  5.51  4.20 
Loans, net of unearned income 5.07  5.06  4.87  4.73  4.61 
Total earning assets 4.74% 4.74% 4.58% 4.45% 4.32%
           
Rate paid on:          
NOW and interest bearing demand deposits 0.77% 0.67% 0.60% 0.39% 0.33%
Wealth management deposits 1.09  1.09  1.23  1.31  1.19 
Money market accounts 1.41  1.33  1.19  0.98  0.67 
Savings accounts 0.72  0.63  0.48  0.43  0.40 
Time deposits 2.11  1.98  1.83  1.66  1.37 
Interest-bearing deposits 1.37  1.29  1.20  1.06  0.84 
Federal Home Loan Bank advances 1.93  1.67  1.84  1.80  1.70 
Other borrowings 3.37  3.16  3.29  2.96  2.84 
Subordinated notes 5.08  5.10  5.14  5.10  5.14 
Junior subordinated debentures 4.78  4.97  4.60  4.54  4.42 
Total interest-bearing liabilities 1.51% 1.40% 1.33% 1.17% 1.00%
           
Interest rate spread  (1)(3) 3.23% 3.34% 3.25% 3.28% 3.32%
Less:  Fully taxable-equivalent adjustment (0.02) (0.02) (0.02) (0.02) (0.02)
Net free funds/contribution (2) 0.41  0.38  0.38  0.33  0.31 
Net interest margin (GAAP) (3) 3.62% 3.70% 3.61% 3.59% 3.61%
Fully taxable-equivalent adjustment 0.02  0.02  0.02  0.02  0.02 
Net interest margin, fully taxable-equivalent (non-GAAP) (3) 3.64% 3.72% 3.63% 3.61% 3.63%
  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 six months ended,Interest  for six months ended,Yield/Rate   for six months ended,
(Dollars in thousands)June 30,
 2019
 June 30,
 2018
June 30,
 2019
 June 30,
 2018
June 30,
 2019
 June 30,
 2018
Interest-bearing deposits with banks and cash equivalents (1)$895,497  $754,725 $10,506  $6,040 2.37% 1.61%
Investment securities (2)3,642,142  2,891,718 56,811  40,113 3.15  2.80 
FHLB and FRB stock100,187  110,293 2,794  2,753 5.62  5.04 
Liquidity management assets (3)(8)$4,637,826  $3,756,736 $70,111  $48,906 3.05% 2.63%
Other earning assets (3)(4)(8)14,661  24,390 349  346 4.79  2.86 
Mortgage loans held-for-sale235,220  342,914 5,313  7,044 4.55  4.14 
Loans, net of unearned income (3)(5)(8)24,218,946  21,999,022 608,212  491,539 5.06  4.51 
Total earning assets (8)$29,106,653  $26,123,062 $683,985  $547,835 4.74% 4.23%
Allowance for loan losses(161,024) (145,161)      
Cash and due from banks278,324  262,408       
Other assets2,414,336  1,950,374       
Total assets$31,638,289  $28,190,683       
          
NOW and interest bearing demand deposits$2,840,886  $2,275,589 $10,166  $3,286 0.72% 0.29%
Wealth management deposits2,609,839  2,307,983 14,091  12,433 1.09  1.09 
Money market accounts6,005,902  4,703,135 40,911  12,778 1.37  0.55 
Savings accounts2,734,228  2,757,911 9,208  5,440 0.68  0.40 
Time deposits5,295,241  4,440,299 53,624  27,905 2.04  1.27 
Interest-bearing deposits$19,486,096  $16,484,917 $128,000  $61,842 1.32% 0.76%
Federal Home Loan Bank advances732,834  939,978 6,643  7,902 1.83  1.70 
Other borrowings442,189  251,532 7,158  3,397 3.26  2.72 
Subordinated notes180,219  139,110 4,581  3,560 5.08  5.12 
Junior subordinated debentures253,566  253,566 6,214  5,299 4.88  4.16 
Total interest-bearing liabilities$21,094,904  $18,069,103 $152,596  $82,000 1.46% 0.91%
Non-interest bearing deposits6,466,122  6,589,511       
Other liabilities715,263  502,007       
Equity3,362,000  3,030,062       
Total liabilities and shareholders’ equity$31,638,289  $28,190,683       
Interest rate spread (6)(8)      3.28% 3.32%
Less:  Fully taxable-equivalent adjustment   (3,201) (2,583)(0.02) (0.02)
Net free funds/contribution (7)$8,011,749  $8,053,959    0.40  0.28 
Net interest income/ margin (GAAP) (8)   $528,188  $463,252 3.66% 3.58%
Fully taxable-equivalent adjustment   3,201  2,583 0.02  0.02 
Net interest income/ margin, fully taxable-equivalent (non-GAAP) (8)   $531,389  $465,835 3.68% 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. The total adjustments for the six months ended June 30, 2019 and 2018 were $3.2 million and $2.6 million respectively.
  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
June 30, 2019 17.3% 8.9% (10.2)%
March 31, 2019 14.9  7.8  (8.5)
December 31, 2018 15.6  7.9  (8.6)
September 30, 2018 18.1  9.1  (10.0)
June 30, 2018 19.3  9.7  (10.7)

 

Ramp Scenario+200
Basis
Points
 +100
Basis
Points
 -100
Basis
Points
June 30, 20198.3% 4.3% (4.6)%
March 31, 20196.7  3.5  (3.3)
December 31, 20187.4  3.8  (3.6)
September 30, 20188.5  4.3  (4.2)
June 30, 20188.7  4.5  (4.4)

These results indicate that the Company has positioned its balance sheet to benefit from a rise in interest rates.  This analysis also indicates that the Company would benefit to a greater magnitude should a rise in interest rates be significant (i.e., 200 basis points) and immediate (Static Shock Scenario).

TABLE 10: MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES

 Loans repricing or maturity period  
As of June 30, 2019One year or less From one to five years Over five years  
(In thousands)   Total
        
Commercial       
Fixed rate174,882  1,151,480  795,619  2,121,981 
Variable rate6,142,234  6,418  141  6,148,793 
Total commercial$6,317,116  $1,157,898  $795,760  $8,270,774 
Commercial real estate       
Fixed rate436,317  2,047,111  327,794  2,811,222 
Variable rate4,435,060  29,954  8  4,465,022 
Total commercial real estate$4,871,377  $2,077,065  $327,802  $7,276,244 
Home equity       
Fixed rate21,140  8,325  9,019  38,484 
Variable rate488,886      488,886 
Total home equity$510,026  $8,325  $9,019  $527,370 
Residential real estate       
Fixed rate28,796  20,535  238,940  288,271 
Variable rate50,646  336,681  442,580  829,907 
Total residential real estate$79,442  $357,216  $681,520  $1,118,178 
Premium finance receivables - commercial       
Fixed rate3,302,806  65,617    3,368,423 
Variable rate       
Total premium finance receivables - commercial$3,302,806  $65,617  $  $3,368,423 
Premium finance receivables - life insurance       
Fixed rate12,537  116,560  10,389  139,486 
Variable rate4,494,992      4,494,992 
Total premium finance receivables - life insurance$4,507,529  $116,560  $10,389  $4,634,478 
Consumer and other       
Fixed rate71,568  10,562  1,988  84,118 
Variable rate25,074      25,074 
Total consumer and other$96,642  $10,562  $1,988  $109,192 
        
Total per category       
Fixed rate4,048,046  3,420,190  1,383,749  8,851,985 
Variable rate15,636,892  373,053  442,729  16,452,674 
Total loans, net of unearned income$19,684,938  $3,793,243  $1,826,478  $25,304,659 
        
Variable Rate Loan Pricing by Index:       
Prime      $2,308,201 
One- month LIBOR      8,507,875 
Three- month LIBOR      417,452 
Twelve- month LIBOR      4,988,875 
Other      230,271 
Total variable rate      $16,452,674 

 

http://ml.globenewswire.com/Resource/Download/2af2045d-0af5-4205-b37e-afe936036c86

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 increases as the Prime rate when the Federal Reserve raises interest rates.  Specifically, the Company has $8.5 billion of variable rate loans tied to one-month LIBOR and $5.0 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
 
Second Quarter 2019 +0bps-9bps-53bps
First Quarter 2019 +0 -1 -30 
Fourth Quarter 2018 +25 +24 +9 
Third Quarter 2018 +25 +17 +16 
Second Quarter 2018 +25 +21 +10 

 

TABLE 11: ALLOWANCE FOR CREDIT LOSSES

  Three Months EndedSix Months Ended
  June 30, March 31, December 31, September 30, June 30,June 30, June 30,
(Dollars in thousands) 2019 2019 2018 2018 20182019 2018
Allowance for loan losses at beginning of period $158,212  $152,770  $149,756  $143,402  $139,503 $152,770  $137,905 
Provision for credit losses 24,580  10,624  10,401  11,042  5,043 35,204  13,389 
Other adjustments (11) (27) (79) (18) (44)(38) (84)
Reclassification (to) from allowance for unfunded lending-related commitments (70) (16) (150) (2)  (86) 26 
Charge-offs:             
Commercial 17,380  503  6,416  3,219  2,210 17,883  4,897 
Commercial real estate 326  3,734  219  208  155 4,060  968 
Home equity 690  88  715  561  612 778  969 
Residential real estate 287  3  267  337  180 290  751 
Premium finance receivables - commercial 5,009  2,210  1,741  2,512  3,254 7,219  7,975 
Premium finance receivables - life insurance             
Consumer and other 136  102  148  144  459 238  588 
Total charge-offs 23,828  6,640  9,506  6,981  6,870 30,468  16,148 
Recoveries:             
Commercial 289  318  225  304  666 607  928 
Commercial real estate 247  480  1,364  193  2,387 727  4,074 
Home equity 68  62  105  142  171 130  294 
Residential real estate 140  29  47  466  1,522 169  1,562 
Premium finance receivables - commercial 734  556  567  1,142  975 1,290  1,360 
Premium finance receivables - life insurance             
Consumer and other 60  56  40  66  49 116  96 
Total recoveries 1,538  1,501  2,348  2,313  5,770 3,039  8,314 
Net charge-offs (22,290) (5,139) (7,158) (4,668) (1,100)(27,429) (7,834)
Allowance for loan losses at period end $160,421  $158,212  $152,770  $149,756  $143,402 $160,421  $143,402 
Allowance for unfunded lending-related commitments at period end 1,480  1,410  1,394  1,245  1,243 1,480  1,243 
Allowance for credit losses at period end $161,901  $159,622  $154,164  $151,001  $144,645 $161,901  $144,645 
              
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average:   
Commercial 0.85% 0.01% 0.33% 0.16% 0.09%0.44% 0.11%
Commercial real estate 0.00  0.19  (0.07) 0.00  (0.14)0.10  (0.09)
Home equity 0.47  0.02  0.43  0.28  0.29 0.25  0.22 
Residential real estate 0.06  (0.01) 0.10  (0.06) (0.64)0.03  (0.20)
Premium finance receivables - commercial 0.55  0.23  0.16  0.19  0.34 0.40  0.51 
Premium finance receivables - life insurance             
Consumer and other 0.30  0.16  0.30  0.23  1.21 0.23  0.76 
Total loans, net of unearned income 0.36% 0.09% 0.12% 0.08% 0.02%0.23% 0.07%
              
Net charge-offs as a percentage of the provision for credit losses 90.68% 48.37% 68.82% 42.27% 21.80%77.92% 58.51%
Loans at period-end $25,304,659  $24,214,629  $23,820,691  $23,123,951  $22,610,560    
Allowance for loan losses as a percentage of loans at period end 0.63% 0.65% 0.64% 0.65% 0.63%   
Allowance for credit losses as a percentage of loans at period end 0.64  0.66  0.65  0.65  0.64    

 

Provision for credit losses by component for the periods presented:

  Three Months EndedSix Months Ended
  June 30, March 31, December 31, September 30, June 30,June 30, June 30,
(Dollars in thousands) 2019 2019 2018 2018 20182019 2018
Provision for loan losses $24,510  $10,608  $10,251  $11,040  $5,043 $35,118  $13,415 
Provision for unfunded lending-related commitments 70  16  150  2   86  (26)
Provision for credit losses $24,580  $10,624  $10,401  $11,042  $5,043 $35,204  $13,389 

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 June 30, 2019 and March 31, 2019.

 As of June 30, 2019As of March 31, 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$4,529,952  $49,451  1.09%$4,460,202  $46,436  1.04%
Asset-based lending1,066,231  9,335  0.88 1,037,632  8,868  0.85 
Tax exempt489,524  2,808  0.57 514,789  3,255  0.63 
Leases674,251  1,879  0.28 615,015  1,675  0.27 
Commercial real estate: (1)          
Residential construction39,633  797  2.01 38,986  879  2.25 
Commercial construction792,782  8,523  1.08 759,826  8,240  1.08 
Land138,255  4,193  3.03 146,654  4,194  2.86 
Office925,150  9,778  1.06 891,365  6,266  0.70 
Industrial921,116  6,589  0.72 931,343  6,532  0.70 
Retail930,594  6,515  0.70 863,435  6,065  0.70 
Multi-family1,184,025  11,983  1.01 1,073,431  10,874  1.01 
Mixed use and other1,944,182  14,800  0.76 1,931,079  14,641  0.76 
Home equity (1)489,813  3,595  0.73 500,636  8,584  1.71 
Residential real estate (1)1,089,496  8,042  0.74 1,027,586  7,524  0.73 
Total core loan portfolio$15,215,004  $138,288  0.91%$14,791,979  $134,033  0.91%
Commercial:          
Franchise$891,481  $8,255  0.93%$834,911  $11,975  1.43%
Mortgage warehouse lines of credit275,170  2,195  0.80 174,284  1,399  0.80 
Community Advantage - homeowner associations192,056  481  0.25 185,488  465  0.25 
Aircraft11,305  9  0.08 11,491  15  0.13 
Purchased commercial loans (2)140,804  480  0.34 160,379  550  0.34 
Purchased commercial real estate (2)400,507  92  0.02 337,386  159  0.05 
Purchased home equity (2)37,557  36  0.10 27,812  43  0.15 
Purchased residential real estate (2)28,682  104  0.36 25,938  106  0.41 
Premium finance receivables          
U.S. commercial insurance loans2,914,625  6,789  0.23 2,620,703  6,251  0.24 
Canada commercial insurance loans (2)453,798  725  0.16 368,085  592  0.16 
Life insurance loans (1)4,487,921  1,426  0.03 4,389,599  1,376  0.03 
Purchased life insurance loans (2)146,557     165,770     
Consumer and other (1)105,966  1,538  1.45 117,561  1,246  1.06 
Purchased consumer and other (2)3,226  3  0.09 3,243  2  0.06 
Total consumer, niche and purchased loan portfolio$10,089,655  $22,133  0.22%$9,422,650  $24,179  0.26%
Total loans, net of unearned income$25,304,659  $160,421  0.63%$24,214,629  $158,212  0.65%
  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 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% % 0.1% 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)     0.4  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.
    90+ days 60-89 30-59    
As of March 31, 2019   and still days past days past    
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:            
Commercial (1) $55,792  $2,499  $1,787  $49,700  $7,884,413  $7,994,191 
Commercial real estate (1) 15,933  4,265  5,612  54,872  6,892,823  6,973,505 
Home equity 7,885    810  4,315  515,438  528,448 
Residential real estate (1) 15,879  1,481  509  11,112  1,024,543  1,053,524 
Premium finance receivables - commercial 14,797  6,558  5,628  20,767  2,941,038  2,988,788 
Premium finance receivables - life insurance (1)   168  4,788  35,046  4,515,367  4,555,369 
Consumer and other (1) 326  280  47  350  119,801  120,804 
Total loans, net of unearned income $110,612  $15,251  $19,181  $176,162  $23,893,423  $24,214,629 
Aging as a % of Loan Balance:            
Commercial (1) 0.7% 0.0% 0.0% 0.6% 98.7% 100.0%
Commercial real estate (1) 0.2  0.1  0.1  0.8  98.8  100.0 
Home equity 1.5    0.2  0.8  97.5  100.0 
Residential real estate (1) 1.5  0.1    1.1  97.3  100.0 
Premium finance receivables - commercial 0.5  0.2  0.2  0.7  98.4  100.0 
Premium finance receivables - life insurance (1)     0.1  0.8  99.1  100.0 
Consumer and other (1) 0.3  0.2    0.3  99.2  100.0 
Total loans, net of unearned income 0.5% 0.1% 0.1% 0.7% 98.6% 100.0%

TABLE 14: NON-PERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS ("TDRs")

 June 30, March 31, December 31, September 30, June 30,
(Dollars in thousands)2019 2019 2018 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 - commercial6,940  6,558  7,799  7,028  5,159 
Premium finance receivables - life insurance  168       
Consumer and other172  218  109  233  224 
Total loans past due greater than 90 days and still accruing7,600  6,974  7,908  12,383  5,383 
Non-accrual loans (2):         
Commercial47,604  55,792  50,984  58,587  18,388 
Commercial real estate20,875  15,933  19,129  17,515  19,195 
Home equity8,489  7,885  7,147  8,523  9,096 
Residential real estate14,236  15,879  16,383  16,062  15,825 
Premium finance receivables - commercial13,833  14,797  11,335  13,802  14,832 
Premium finance receivables - life insurance590         
Consumer and other220  326  348  355  563 
Total non-accrual loans105,847  110,612  105,326  114,844  77,899 
Total non-performing loans:         
Commercial48,092  55,792  50,984  63,709  18,388 
Commercial real estate20,875  15,933  19,129  17,515  19,195 
Home equity8,489  7,885  7,147  8,523  9,096 
Residential real estate14,236  15,909  16,383  16,062  15,825 
Premium finance receivables - commercial20,773  21,355  19,134  20,830  19,991 
Premium finance receivables - life insurance590  168       
Consumer and other392  544  457  588  787 
Total non-performing loans$113,447  $117,586  $113,234  $127,227  $83,282 
Other real estate owned9,920  9,154  11,968  14,924  18,925 
Other real estate owned - from acquisitions9,917  12,366  12,852  13,379  16,406 
Other repossessed assets263  270  280  294  305 
Total non-performing assets$133,547  $139,376  $138,334  $155,824  $118,918 
TDRs performing under the contractual terms of the loan agreement$45,862  $48,305  $33,281  $31,487  $57,249 
Total non-performing loans by category as a percent of its own respective category’s period-end balance:         
Commercial0.58% 0.70% 0.65% 0.85% 0.25%
Commercial real estate0.29  0.23  0.28  0.26  0.29 
Home equity1.61  1.49  1.29  1.47  1.53 
Residential real estate1.27  1.51  1.63  1.74  1.77 
Premium finance receivables - commercial0.62  0.71  0.67  0.72  0.71 
Premium finance receivables - life insurance0.01         
Consumer and other0.36  0.45  0.38  0.51  0.65 
Total loans, net of unearned income0.45% 0.49% 0.48% 0.55% 0.37%
Total non-performing assets as a percentage of total assets0.40% 0.43% 0.44% 0.52% 0.40%
Allowance for loan losses as a percentage of total non-performing loans141.41% 134.55% 134.92% 117.71% 172.19%
  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 June 30, 2019, March 31, 2019, December 31, 2018 and June 30, 2018, no TDRs were past due greater than 90 days and still accruing interest.
  2. Non-accrual loans included TDRs totaling $30.1 million, $40.1 million, $32.8 million, $34.7 million and $8.1 million as of June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018 and June 30, 2018, respectively.

Non-performing Loans Rollforward, excluding PCI loans:

 Three Months EndedSix Months Ended
 June 30, March 31, December 31, September 30, June 30,June 30, June 30,
(Dollars in thousands)2019 2019 2018 2018 20182019 2018
Balance at beginning of period$117,586  $113,234  $127,227  $83,282  $89,690 $113,234  $90,162 
Additions, net20,567  24,030  18,553  56,864  10,403 44,597  17,011 
Return to performing status(47) (14,077) (6,155) (3,782) (759)(14,124) (4,512)
Payments received(5,438) (4,024) (16,437) (6,212) (4,589)(9,462) (7,158)
Transfer to OREO and other repossessed assets(1,486) (82) (970) (659) (3,528)(1,568) (5,509)
Charge-offs(16,817) (3,992) (7,161) (3,108) (1,968)(20,809) (5,523)
Net change for niche loans (1)(918) 2,497  (1,823) 842  (5,967)1,579  (1,189)
Balance at end of period$113,447  $117,586  $113,234  $127,227  $83,282 $113,447  $83,282 
  1. This includes activity for premium finance receivables and indirect consumer loans.

TDRs

 June 30, March 31, December 31, September 30, June 30,
(Dollars in thousands)2019 2019 2018 2018 2018
Accruing TDRs:         
Commercial$15,923  $19,650  $8,545  $8,794  $37,560 
Commercial real estate12,646  14,123  13,895  14,160  15,086 
Residential real estate and other17,293  14,532  10,841  8,533  4,603 
Total accrual$45,862  $48,305  $33,281  $31,487  $57,249 
Non-accrual TDRs: (1)         
Commercial$21,850  $34,390  $27,774  $30,452  $1,671 
Commercial real estate2,854  1,517  1,552  1,326  1,362 
Residential real estate and other5,435  4,150  3,495  2,954  5,028 
Total non-accrual$30,139  $40,057  $32,821  $34,732  $8,061 
Total TDRs:         
Commercial$37,773  $54,040  $36,319  $39,246  $39,231 
Commercial real estate15,500  15,640  15,447  15,486  16,448 
Residential real estate and other22,728  18,682  14,336  11,487  9,631 
Total TDRs$76,001  $88,362  $66,102  $66,219  $65,310 
  1. Included in total non-performing loans.

Other Real Estate Owned

 Three Months Ended
 June 30, March 31, December 31, September 30, June 30,
(Dollars in thousands)2019 2019 2018 2018 2018
Balance at beginning of period$21,520  $24,820  $28,303  $35,331  $36,598 
Disposals/resolved(2,397) (2,758) (3,848) (7,291) (4,557)
Transfers in at fair value, less costs to sell1,746  32  997  349  4,801 
Additions from acquisition    160  1,418   
Fair value adjustments(1,032) (574) (792) (1,504) (1,511)
Balance at end of period$19,837  $21,520  $24,820  $28,303  $35,331 
          
 Period End
 June 30, March 31, December 31, September 30, June 30,
Balance by Property Type:2019 2019 2018 2018 2018
Residential real estate$1,312  $3,037  $3,446  $3,735  $5,155 
Residential real estate development1,282  1,139  1,426  1,952  2,205 
Commercial real estate17,243  17,344  19,948  22,616  27,971 
Total$19,837  $21,520  $24,820  $28,303  $35,331 

TABLE 15: NON-INTEREST INCOME

 Three Months Ended Q2 2019 compared to
Q1 2019
 Q2 2019 compared to
Q2 2018
 June 30, March 31, December 31, September 30, June 30,  
(Dollars in thousands)2019 2019 2018 2018 2018 $ Change % Change $ Change % Change
Brokerage$4,764  $4,516  $4,997  $5,579  $5,784  $248  5% $(1,020) (18)%
Trust and asset management19,375  19,461  17,729  17,055  16,833  (86)   2,542  15 
Total wealth management$24,139  $23,977  $22,726  $22,634  $22,617  $162  1% $1,522  7%
Mortgage banking37,411  18,158  24,182  42,014  39,834  19,253  106% (2,423) (6)
Service charges on deposit accounts9,277  8,848  9,065  9,331  9,151  429  5  126  1 
Gains (losses) on investment securities, net864  1,364  (2,649) 90  12  (500) (37) 852  NM
Fees from covered call options643  1,784  626  627  669  (1,141) (64) (26) (4)
Trading (losses) gains, net(44) (171) (155) (61) 124  127  (74) (168) NM
Operating lease income, net11,733  10,796  10,882  9,132  8,746  937  9  2,987  34 
Other:                 
Interest rate swap fees3,224  2,831  2,602  2,359  3,829  393  14  (605) (16)
BOLI1,149  1,591  (466) 3,190  1,544  (442) (28) (395) NM
Administrative services1,009  1,030  1,260  1,099  1,205  (21) (2) (196) (16)
Foreign currency remeasurement gains (losses)113  464  (1,149) 348  (544) (351) (76) 657  NM
Early pay-offs of capital leases  5  3  11  554  (5) (100) (554) (100)
Miscellaneous8,640  10,980  8,381  9,156  7,492  (2,340) (21) 1,148  15 
Total Other$14,135  $16,901  $10,631  $16,163  $14,080  $(2,766) (16)% $55  %
Total Non-Interest Income$98,158  $81,657  $75,308  $99,930  $95,233  $16,501  20% $2,925  3%

NM - Not meaningful.

  Six Months Ended    
  June 30, June 30, $ %
(Dollars in thousands) 2019 2018 Change Change
Brokerage $9,280  $11,815  $(2,535) (21)%
Trust and asset management 38,836  33,788  5,048  15 
Total wealth management 48,116  45,603  2,513  6 
Mortgage banking 55,569  70,794  (15,225) (22)
Service charges on deposit accounts 18,125  18,008  117  1 
Gains on investment securities, net 2,228  (339) 2,567  NM
Fees from covered call options 2,427  2,266  161  7 
Trading (losses) gains, net (215) 227  (442) NM
Operating lease income, net 22,529  18,437  4,092  22 
Other:        
Interest rate swap fees 6,055  6,066  (11)  
BOLI 2,740  2,258  482  21 
Administrative services 2,039  2,266  (227) (10)
Foreign currency remeasurement