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 – diluted1.69  1.38  1.57 22   8  
Net revenue (1)379,989  364,360  347,493 4   9  
Net interest income264,852  266,202  247,563 (1)  7  
Net interest margin3.37% 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 assets1.16  1.02  1.24 14   (8) 
Return on average common equity11.42  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 deposits28,710,379  27,518,815  24,916,715 17   15  
Total shareholders’ equity3,540,325  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 EndedNine 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 deposits28,710,379  27,518,815  26,804,742  26,094,678  24,916,715    
Junior subordinated debentures253,566  253,566  253,566  253,566  253,566    
Total shareholders’ equity3,540,325  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 income99,121  81,466  89,146  79,657  91,948 269,733  263,509 
Net income per common share – Basic1.71  1.40  1.54  1.38  1.59 4.65  4.57 
Net income per common share – Diluted1.69  1.38  1.52  1.35  1.57 4.60  4.50 
Selected Financial Ratios and Other Data:   
Performance Ratios:   
Net interest margin3.37% 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 assets1.35  1.23  1.06  0.99  1.34 1.22  1.31 
Non-interest expense to average assets2.74  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 assets1.16  1.02  1.16  1.05  1.24 1.11  1.23 
Return on average common equity11.42  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’ equity3,496,714  3,414,340  3,309,078  3,200,654  3,131,943 3,407,398  3,064,396 
Average loans to average deposits ratio90.6% 93.9% 92.7% 92.4% 92.2%92.4% 94.2%
Period-end loans to deposits ratio89.6  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 share60.24  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 outstanding56,698,429  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 loans114,284  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 loans0.44  0.45  0.49  0.48  0.55    
Number of:            
Bank subsidiaries15  15  15  15  15    
Banking offices174  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 agreements59  58  58  58  57 
Interest bearing deposits with banks2,260,806  1,437,105  1,609,852  1,099,594  1,137,044 
Available-for-sale securities, at fair value2,270,059  2,186,154  2,185,782  2,126,081  2,164,985 
Held-to-maturity securities, at amortized cost1,095,802  1,191,634  1,051,542  1,067,439  966,438 
Trading account securities3,204  2,430  559  1,692  688 
Equity securities with readily determinable fair value46,086  44,319  47,653  34,717  36,414 
Federal Home Loan Bank and Federal Reserve Bank stock92,714  92,026  89,013  91,354  99,998 
Brokerage customer receivables14,943  13,569  14,219  12,609  15,649 
Mortgage loans held-for-sale464,727  394,975  248,557  264,070  338,111 
Loans, net of unearned income25,710,171  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 loans25,548,408  25,144,238  24,056,417  23,667,921  22,974,195 
Premises and equipment, net721,856  711,214  676,037  671,169  664,469 
Lease investments, net228,647  230,111  224,240  233,208  199,241 
Accrued interest receivable and other assets1,087,864  1,023,896  888,492  696,707  700,568 
Trade date securities receivable  237,607  375,211  263,523   
Goodwill584,315  584,911  573,658  573,141  537,560 
Other intangible assets43,657  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 bearing21,642,419  20,798,857  20,451,286  19,524,798  18,517,502 
 Total deposits28,710,379  27,518,815  26,804,742  26,094,678  24,916,715 
Federal Home Loan Bank advances574,847  574,823  576,353  426,326  615,000 
Other borrowings410,488  418,057  372,194  393,855  373,571 
Subordinated notes435,979  436,021  139,235  139,210  139,172 
Junior subordinated debentures253,566  253,566  253,566  253,566  253,566 
Trade date securities payable226         
Accrued interest payable and other liabilities986,092  993,537  840,559  669,644  664,885 
Total liabilities31,371,577  30,194,819  28,986,649  27,977,279  26,962,909 
Shareholders’ Equity:         
Preferred stock125,000  125,000  125,000  125,000  125,000 
Common stock56,825  56,794  56,765  56,518  56,486 
Surplus1,574,011  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 earnings1,830,165  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’ equity3,540,325  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-sale3,478  3,104  2,209  3,409  5,285  8,791  12,329 
Interest bearing deposits with banks10,326  5,206  5,300  5,628  5,423  20,832  11,462 
Federal funds sold and securities purchased under resale agreements310          310  1 
Investment securities24,758  27,721  27,956  26,656  21,710  80,435  60,726 
Trading account securities20  5  8  14  11  33  29 
Federal Home Loan Bank and Federal Reserve Bank stock1,294  1,439  1,355  1,343  1,235  4,088  3,988 
Brokerage customer receivables164  178  155  235  164  497  488 
Total interest income354,627  346,814  333,970  320,596  304,962  1,035,411  850,214 
Interest expense             
Interest on deposits76,168  67,024  60,976  55,975  48,736  204,168  110,578 
Interest on Federal Home Loan Bank advances1,774  4,193  2,450  2,563  1,947  8,417  9,849 
Interest on other borrowings3,466  3,525  3,633  3,199  2,003  10,624  5,400 
Interest on subordinated notes5,470  2,806  1,775  1,788  1,773  10,051  5,333 
Interest on junior subordinated debentures2,897  3,064  3,150  2,983  2,940  9,111  8,239 
Total interest expense89,775  80,612  71,984  66,508  57,399  242,371  139,399 
Net interest income264,852  266,202  261,986  254,088  247,563  793,040  710,815 
Provision for credit losses10,834  24,580  10,624  10,401  11,042  46,038  24,431 
Net interest income after provision for credit losses254,018  241,622  251,362  243,687  236,521  747,002  686,384 
Non-interest income             
Wealth management23,999  24,139  23,977  22,726  22,634  72,115  68,237 
Mortgage banking50,864  37,411  18,158  24,182  42,014  106,433  112,808 
Service charges on deposit accounts9,972  9,277  8,848  9,065  9,331  28,097  27,339 
Gains (losses) on investment securities, net710  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), net11  (44) (171) (155) (61) (204) 166 
Operating lease income, net12,025  11,733  10,796  10,882  9,132  34,554  27,569 
Other17,556  14,135  16,901  10,631  16,163  48,592  42,079 
Total non-interest income115,137  98,158  81,657  75,308  99,930  294,952  280,842 
Non-interest expense             
Salaries and employee benefits141,024  133,732  125,723  122,111  123,855  400,479  357,966 
Equipment13,314  12,759  11,770  11,523  10,827  37,843  31,426 
Operating lease equipment depreciation8,907  8,768  8,319  8,462  7,370  25,994  20,843 
Occupancy, net14,991  15,921  16,245  15,980  14,404  47,157  41,834 
Data processing6,522  6,204  7,525  8,447  9,335  20,251  26,580 
Advertising and marketing13,375  12,845  9,858  9,414  11,120  36,078  31,726 
Professional fees8,037  6,228  5,556  9,259  9,914  19,821  23,047 
Amortization of other intangible assets2,928  2,957  2,942  1,407  1,163  8,827  3,164 
FDIC insurance148  4,127  3,576  4,044  4,205  7,851  13,165 
OREO expense, net1,170  1,290  632  1,618  596  3,092  4,502 
Other24,138  24,776  22,228  19,068  20,848  71,142  60,502 
Total non-interest expense234,554  229,607  214,374  211,333  213,637  678,535  614,755 
Income before taxes134,601  110,173  118,645  107,662  122,814  363,419  352,471 
Income tax expense35,480  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 dividends2,050  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 outstanding56,690  56,662  56,529  56,395  56,366  56,627  56,268 
Dilutive potential common shares773  699  699  892  918  724  912 
Average common shares and dilutive common shares57,463  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 estate7,448,667  7,276,244  6,973,505  6,933,252  6,746,774 10  10 
Home equity512,303  527,370  528,448  552,343  578,844 (10) (11)
Residential real estate1,218,666  1,118,178  1,053,524  1,002,464  924,250 29  32 
Premium finance receivables - commercial3,449,950  3,368,423  2,988,788  2,841,659  2,885,327 29  20 
Premium finance receivables - life insurance4,795,496  4,634,478  4,555,369  4,541,794  4,398,971 7  9 
Consumer and other89,487  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:            
Commercial32% 33% 33% 33% 32%   
Commercial real estate29  29  29  29  29    
Home equity2  2  2  2  3    
Residential real estate5  4  4  4  4    
Premium finance receivables - commercial13  13  12  12  12    
Premium finance receivables - life insurance19  18  19  19  19    
Consumer and other0  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 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 
Franchise914,774  5.9  3,752    8,308 
Mortgage warehouse lines of credit314,697  2.0      2,481 
Asset-based lending1,045,869  6.7  5,782    8,445 
Leases754,163  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 
Land175,386  1.1  994    4,801 
Office996,931  6.4  8,158    10,066 
Industrial1,009,680  6.5  100    7,021 
Retail1,004,720  6.4  7,174    6,718 
Multi-family1,291,825  8.3  690    12,504 
Mixed use and other2,002,267  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%      
Wisconsin744,577  10.0       
Total primary markets$6,399,404  85.9%      
Indiana193,350  2.6       
Florida80,120  1.1       
Arizona62,657  0.8       
California67,999  0.9       
Other645,137  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 deposits2,966,098  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 market7,326,899  6,460,098  6,093,596  5,704,866  5,429,921 38  35 
Savings2,934,348  2,823,904  2,729,626  2,665,194  2,595,164 14  13 
Time certificates of deposit5,619,236  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 bearing25% 24% 24% 25% 26%   
NOW and interest bearing demand deposits10  10  11  11  10    
Wealth management deposits (2)10  12  12  12  10    
Money market25  24  23  22  22    
Savings10  10  10  10  10    
Time certificates of deposit20  20  20  20  22    
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 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 months1,000  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 stock92,583  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-sale379,870  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 banks297,475  273,679  283,019  271,403  268,006 
Other assets2,618,000  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 deposits2,888,817  2,605,690  2,614,035  2,289,904  2,517,141 
Money market accounts6,956,755  6,095,285  5,915,525  5,632,268  5,369,324 
Savings accounts2,837,039  2,752,828  2,715,422  2,553,133  2,672,077 
Time deposits5,590,228  5,322,384  5,267,796  5,381,029  5,214,637 
Interest-bearing deposits21,185,800  19,654,208  19,316,116  18,527,617  18,292,624 
Federal Home Loan Bank advances574,833  869,812  594,335  551,846  429,739 
Other borrowings416,300  419,064  465,571  385,878  268,278 
Subordinated notes436,041  220,771  139,217  139,186  139,155 
Junior subordinated debentures253,566  253,566  253,566  253,566  253,566 
Total interest-bearing liabilities22,866,540  21,417,421  20,768,805  19,858,093  19,383,362 
Non-interest bearing deposits6,776,786  6,487,627  6,444,378  6,542,228  6,461,195 
Other liabilities814,552  736,381  693,910  578,912  548,609 
Equity3,496,714  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 securities25,332  28,290  28,521  27,242  22,285 
FHLB and FRB stock1,294  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-sale3,478  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 deposits9,163  7,091  7,000  7,119  8,287 
Money market accounts25,426  21,451  19,460  16,936  13,260 
Savings accounts5,622  4,959  4,249  3,096  2,907 
Time deposits30,666  27,970  25,654  24,817  21,803 
Interest-bearing deposits76,168  67,024  60,976  55,975  48,736 
Federal Home Loan Bank advances1,774  4,193  2,450  2,563  1,947 
Other borrowings3,466  3,525  3,633  3,199  2,003 
Subordinated notes5,470  2,806  1,775  1,788  1,773 
Junior subordinated debentures2,897  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 adjustment1,557  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 equivalents2.15% 2.34% 2.39% 2.14% 2.16%
Investment securities2.95  3.11  3.19  3.23  2.90 
FHLB and FRB stock5.55  5.47  5.79  5.43  5.54 
Liquidity management assets2.71  3.01  3.09  3.02  2.78 
Other earning assets4.20  4.68  4.91  6.19  3.95 
Mortgage loans held-for-sale3.63  4.42  4.76  5.09  5.51 
Loans, net of unearned income4.93  5.07  5.06  4.87  4.73 
Total earning assets4.53% 4.74% 4.74% 4.58% 4.45%
          
Rate paid on:         
NOW and interest bearing demand deposits0.72% 0.77% 0.67% 0.60% 0.39%
Wealth management deposits1.26  1.09  1.09  1.23  1.31 
Money market accounts1.45  1.41  1.33  1.19  0.98 
Savings accounts0.79  0.72  0.63  0.48  0.43 
Time deposits2.18  2.11  1.98  1.83  1.66 
Interest-bearing deposits1.43  1.37  1.29  1.20  1.06 
Federal Home Loan Bank advances1.22  1.93  1.67  1.84  1.80 
Other borrowings3.30  3.37  3.16  3.29  2.96 
Subordinated notes5.02  5.08  5.10  5.14  5.10 
Junior subordinated debentures4.47  4.78  4.97  4.60  4.54 
Total interest-bearing liabilities1.56% 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 adjustment0.02  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 stock97,624  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-sale283,966  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 banks284,779  264,294       
Other assets2,482,970  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 deposits2,703,853  2,378,468 23,254  20,721 1.15  1.16 
Money market accounts6,326,336  4,927,639 66,337  26,038 1.40  0.71 
Savings accounts2,768,875  2,728,986 14,830  8,348 0.72  0.41 
Time deposits5,394,651  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 advances679,589  768,029 8,417  9,849 1.66  1.71 
Other borrowings433,465  257,175 10,624  5,400 3.28  2.81 
Subordinated notes266,430  139,125 10,051  5,333 5.03  5.11 
Junior subordinated debentures253,566  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 deposits6,570,815  6,546,269       
Other liabilities748,722  517,712       
Equity3,407,398  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, 201920.7% 10.5% (11.9)%
Jun 30, 201917.3  8.9  (10.2)
Mar 31, 201914.9  7.8  (8.5)
Dec 31, 201815.6  7.9  (8.6)
Sep 30, 201818.1  9.1  (10.0)


Ramp Scenario+200
Basis
Points
 +100
Basis
Points
 -100
Basis
Points
Sep 30, 201910.1% 5.2% (5.6)%
Jun 30, 20198.3  4.3  (4.6)
Mar 31, 20196.7  3.5  (3.3)
Dec 31, 20187.4  3.8  (3.6)
Sep 30, 20188.5  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 rate206,052  1,213,099  822,338  2,241,489 
Variable rate5,947,908  6,067  138  5,954,113 
Total commercial$6,153,960  $1,219,166  $822,476  $8,195,602 
Commercial real estate       
Fixed rate463,155  2,043,088  341,511  2,847,754 
Variable rate4,573,350  27,555  8  4,600,913 
Total commercial real estate$5,036,505  $2,070,643  $341,519  $7,448,667 
Home equity       
Fixed rate23,952  5,642  19,614  49,208 
Variable rate462,790  305    463,095 
Total home equity$486,742  $5,947  $19,614  $512,303 
Residential real estate       
Fixed rate28,980  19,581  302,634  351,195 
Variable rate57,238  345,029  465,204  867,471 
Total residential real estate$86,218  $364,610  $767,838  $1,218,666 
Premium finance receivables - commercial       
Fixed rate3,365,631  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 rate12,242  121,600  26,667  160,509 
Variable rate4,634,987      4,634,987 
Total premium finance receivables - life insurance$4,647,229  $121,600  $26,667  $4,795,496 
Consumer and other       
Fixed rate51,386  9,802  1,943  63,131 
Variable rate26,356      26,356 
Total consumer and other$77,742  $9,802  $1,943  $89,487 
        
Total per category       
Fixed rate4,151,398  3,497,131  1,514,707  9,163,236 
Variable rate15,702,629  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 EndedNine Months Ended
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,Sep 30, Sep 30,
(Dollars in thousands) 2019 2019 2019 2018 20182019 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 EndedNine Months Ended
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,Sep 30, Sep 30,
(Dollars in thousands)2019 2019 2019 2018 20182019 2018
Provision for loan losses$10,804  $24,510  $10,608  $10,251  $11,040 $45,922  $24,455 
Provision for unfunded lending-related commitments30  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, 2019As 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 lending1,043,384  8,445  0.81 1,066,231  9,335  0.88 
Tax exempt503,495  2,957  0.59 489,524  2,808  0.57 
Leases749,135  2,069  0.28 674,251  1,879  0.28 
Commercial real estate: (1)          
Residential construction35,662  625  1.75 39,633  797  2.01 
Commercial construction810,919  8,757  1.08 792,782  8,523  1.08 
Land168,092  4,801  2.86 138,255  4,193  3.03 
Office964,557  10,066  1.04 925,150  9,778  1.06 
Industrial972,859  7,015  0.72 921,116  6,589  0.72 
Retail960,762  6,718  0.70 930,594  6,515  0.70 
Multi-family1,239,217  12,504  1.01 1,184,025  11,983  1.01 
Mixed use and other1,918,510  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 credit314,697  2,481  0.79 275,170  2,195  0.80 
Community Advantage - homeowner associations202,724  507  0.25 192,056  481  0.25 
Aircraft11,112  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 loans3,016,644  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