Wintrust Financial Corporation Reports Second Quarter 2019 Net Income of $81.5 million and Year-to-Date Net Income of $170.6 million

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.

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*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 Ended																													Six 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-sale	3,104						2,209						3,409						5,285						4,226						5,313						7,044
Interest bearing deposits with banks	5,206						5,300						5,628						5,423						3,243						10,506						6,039
Federal funds sold and securities purchased under resale agreements	—						—						—						—						1						—						1
Investment securities	27,721						27,956						26,656						21,710						19,888						55,677						39,016
Trading account securities	5						8						14						11						4						13						18
Federal Home Loan Bank and Federal Reserve Bank stock	1,439						1,355						1,343						1,235						1,455						2,794						2,753
Brokerage customer receivables	178						155						235						164						167						333						324
Total interest income	346,814						333,970						320,596						304,962						284,047						680,784						545,252
Interest expense
Interest on deposits	67,024						60,976						55,975						48,736						35,293						128,000						61,842
Interest on Federal Home Loan Bank advances	4,193						2,450						2,563						1,947						4,263						6,643						7,902
Interest on other borrowings	3,525						3,633						3,199						2,003						1,698						7,158						3,397
Interest on subordinated notes	2,806						1,775						1,788						1,773						1,787						4,581						3,560
Interest on junior subordinated debentures	3,064						3,150						2,983						2,940						2,836						6,214						5,299
Total interest expense	80,612						71,984						66,508						57,399						45,877						152,596						82,000
Net interest income	266,202						261,986						254,088						247,563						238,170						528,188						463,252
Provision for credit losses	24,580						10,624						10,401						11,042						5,043						35,204						13,389
Net interest income after provision for credit losses	241,622						251,362						243,687						236,521						233,127						492,984						449,863
Non-interest income
Wealth management	24,139						23,977						22,726						22,634						22,617						48,116						45,603
Mortgage banking	37,411						18,158						24,182						42,014						39,834						55,569						70,794
Service charges on deposit accounts	9,277						8,848						9,065						9,331						9,151						18,125						18,008
Gains (losses) on investment securities, net	864						1,364						(2,649				)		90						12						2,228						(339				)
Fees from covered call options	643						1,784						626						627						669						2,427						2,266
Trading (losses) gains, net	(44				)		(171				)		(155				)		(61				)		124						(215				)		227
Operating lease income, net	11,733						10,796						10,882						9,132						8,746						22,529						18,437
Other	14,135						16,901						10,631						16,163						14,080						31,036						25,916
Total non-interest income	98,158						81,657						75,308						99,930						95,233						179,815						180,912
Non-interest expense
Salaries and employee benefits	133,732						125,723						122,111						123,855						121,675						259,455						234,111
Equipment	12,759						11,770						11,523						10,827						10,527						24,529						20,599
Operating lease equipment depreciation	8,768						8,319						8,462						7,370						6,940						17,087						13,473
Occupancy, net	15,921						16,245						15,980						14,404						13,663						32,166						27,430
Data processing	6,204						7,525						8,447						9,335						8,752						13,729						17,245
Advertising and marketing	12,845						9,858						9,414						11,120						11,782						22,703						20,606
Professional fees	6,228						5,556						9,259						9,914						6,484						11,784						13,133
Amortization of other intangible assets	2,957						2,942						1,407						1,163						997						5,899						2,001
FDIC insurance	4,127						3,576						4,044						4,205						4,598						7,703						8,960
OREO expense, net	1,290						632						1,618						596						980						1,922						3,906
Other	24,776						22,228						19,068						20,848						20,371						47,004						39,654
Total non-interest expense	229,607						214,374						211,333						213,637						206,769						443,981						401,118
Income before taxes	110,173						118,645						107,662						122,814						121,591						228,818						229,657
Income tax expense	28,707						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 dividends	2,050						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 outstanding	56,662						56,529						56,395						56,366						56,299						56,596						56,218
Dilutive potential common shares	699						699						892						918						928						700						909
Average common shares and dilutive common shares	57,361						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 estate	7,276,244						6,973,505						6,933,252						6,746,774						6,575,084					10							11
Home equity	527,370						528,448						552,343						578,844						593,500					(9					)		(11		)
Residential real estate	1,118,178						1,053,524						1,002,464						924,250						895,470					23							25
Premium finance receivables - commercial	3,368,423						2,988,788						2,841,659						2,885,327						2,833,452					37							19
Premium finance receivables - life insurance	4,634,478						4,555,369						4,541,794						4,398,971						4,302,288					4							8
Consumer and other	109,192						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:
Commercial	33				%		33				%		33				%		32				%		32				%
Commercial real estate	29						29						29						29						29
Home equity	2						2						2						3						3
Residential real estate	4						4						4						4						4
Premium finance receivables - commercial	13						12						12						12						12
Premium finance receivables - life insurance	18						19						19						19						19
Consumer and other	1						1						1						1						1
Total loans, net of unearned income	100				%		100				%		100				%		100				%		100				%

1. Annualized.

TABLE 2: COMMERCIAL AND COMMERCIAL REAL ESTATE LOAN PORTFOLIOS

	As of 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
Franchise	926,521				6.0			11,076				—				8,314
Mortgage warehouse lines of credit	275,170				1.8			—				—				2,195
Asset-based lending	1,068,226				6.9			568				—				9,335
Leases	680,757				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
Land	145,639				0.9			1,226				—				4,193
Office	957,218				6.2			8,981				—				9,778
Industrial	956,530				6.2			368				—				6,591
Retail	976,201				6.3			6,867				—				6,515
Multi-family	1,240,067				8.0			296				—				11,983
Mixed use and other	2,035,099				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	%
Wisconsin	740,288				10.2
Total primary markets	$	6,245,578			85.9	%
Indiana	179,977				2.5
Florida	60,343				0.8
Arizona	62,607				0.9
Michigan	37,271				0.5
California	68,497				0.9
Other	621,971				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 deposits	2,788,976						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 market	6,460,098						6,093,596						5,704,866						5,429,921						5,205,678					27							24
Savings	2,823,904						2,729,626						2,665,194						2,595,164						2,763,062					12							2
Time certificates of deposit	5,505,623						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 bearing	24				%		24				%		25				%		26				%		27				%
NOW and interest bearing demand deposits	10						11						11						10						10
Wealth management deposits (2)	12						12						12						10						11
Money market	24						23						22						22						21
Savings	10						10						10						10						11
Time certificates of deposit	20						20						20						22						20
Total deposits	100				%		100				%		100				%		100				%		100				%

1. Annualized.
2. Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wintrust Investments, CDEC, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts.

TABLE 4: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS
As of 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+ months	1,000						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 stock	100,187										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-sale	235,220										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 banks	278,324										262,408
Other assets	2,414,336										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 deposits	2,609,839										2,307,983					14,091										12,433					1.09							1.09
Money market accounts	6,005,902										4,703,135					40,911										12,778					1.37							0.55
Savings accounts	2,734,228										2,757,911					9,208										5,440					0.68							0.40
Time deposits	5,295,241										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 advances	732,834										939,978					6,643										7,902					1.83							1.70
Other borrowings	442,189										251,532					7,158										3,397					3.26							2.72
Subordinated notes	180,219										139,110					4,581										3,560					5.08							5.12
Junior subordinated debentures	253,566										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 deposits	6,466,122										6,589,511
Other liabilities	715,263										502,007
Equity	3,362,000										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, 2019	8.3		%		4.3		%		(4.6		)%
March 31, 2019	6.7				3.5				(3.3		)
December 31, 2018	7.4				3.8				(3.6		)
September 30, 2018	8.5				4.3				(4.2		)
June 30, 2018	8.7				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, 2019	One year or less				From one to five years				Over five years
(In thousands)													Total
Commercial
Fixed rate	174,882				1,151,480				795,619				2,121,981
Variable rate	6,142,234				6,418				141				6,148,793
Total commercial	$	6,317,116			$	1,157,898			$	795,760			$	8,270,774
Commercial real estate
Fixed rate	436,317				2,047,111				327,794				2,811,222
Variable rate	4,435,060				29,954				8				4,465,022
Total commercial real estate	$	4,871,377			$	2,077,065			$	327,802			$	7,276,244
Home equity
Fixed rate	21,140				8,325				9,019				38,484
Variable rate	488,886				—				—				488,886
Total home equity	$	510,026			$	8,325			$	9,019			$	527,370
Residential real estate
Fixed rate	28,796				20,535				238,940				288,271
Variable rate	50,646				336,681				442,580				829,907
Total residential real estate	$	79,442			$	357,216			$	681,520			$	1,118,178
Premium finance receivables - commercial
Fixed rate	3,302,806				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 rate	12,537				116,560				10,389				139,486
Variable rate	4,494,992				—				—				4,494,992
Total premium finance receivables - life insurance	$	4,507,529			$	116,560			$	10,389			$	4,634,478
Consumer and other
Fixed rate	71,568				10,562				1,988				84,118
Variable rate	25,074				—				—				25,074
Total consumer and other	$	96,642			$	10,562			$	1,988			$	109,192
Total per category
Fixed rate	4,048,046				3,420,190				1,383,749				8,851,985
Variable rate	15,636,892				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

+0

bps

-9

bps

-53

bps

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 Ended																			Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,			June 30,				June 30,
(Dollars in thousands)		2019				2019				2018				2018				2018			2019				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 Ended																			Six Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,			June 30,				June 30,
(Dollars in thousands)		2019				2019				2018				2018				2018			2019				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, 2019										As 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 lending	1,066,231				9,335				0.88		1,037,632				8,868				0.85
Tax exempt	489,524				2,808				0.57		514,789				3,255				0.63
Leases	674,251				1,879				0.28		615,015				1,675				0.27
Commercial real estate: (1)
Residential construction	39,633				797				2.01		38,986				879				2.25
Commercial construction	792,782				8,523				1.08		759,826				8,240				1.08
Land	138,255				4,193				3.03		146,654				4,194				2.86
Office	925,150				9,778				1.06		891,365				6,266				0.70
Industrial	921,116				6,589				0.72		931,343				6,532				0.70
Retail	930,594				6,515				0.70		863,435				6,065				0.70
Multi-family	1,184,025				11,983				1.01		1,073,431				10,874				1.01
Mixed use and other	1,944,182				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 credit	275,170				2,195				0.80		174,284				1,399				0.80
Community Advantage - homeowner associations	192,056				481				0.25		185,488				465				0.25
Aircraft	11,305				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 loans	2,914,625				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 - commercial	6,940				6,558				7,799				7,028				5,159
Premium finance receivables - life insurance	—				168				—				—				—
Consumer and other	172				218				109				233				224
Total loans past due greater than 90 days and still accruing	7,600				6,974				7,908				12,383				5,383
Non-accrual loans (2):
Commercial	47,604				55,792				50,984				58,587				18,388
Commercial real estate	20,875				15,933				19,129				17,515				19,195
Home equity	8,489				7,885				7,147				8,523				9,096
Residential real estate	14,236				15,879				16,383				16,062				15,825
Premium finance receivables - commercial	13,833				14,797				11,335				13,802				14,832
Premium finance receivables - life insurance	590				—				—				—				—
Consumer and other	220				326				348				355				563
Total non-accrual loans	105,847				110,612				105,326				114,844				77,899
Total non-performing loans:
Commercial	48,092				55,792				50,984				63,709				18,388
Commercial real estate	20,875				15,933				19,129				17,515				19,195
Home equity	8,489				7,885				7,147				8,523				9,096
Residential real estate	14,236				15,909				16,383				16,062				15,825
Premium finance receivables - commercial	20,773				21,355				19,134				20,830				19,991
Premium finance receivables - life insurance	590				168				—				—				—
Consumer and other	392				544				457				588				787
Total non-performing loans	$	113,447			$	117,586			$	113,234			$	127,227			$	83,282
Other real estate owned	9,920				9,154				11,968				14,924				18,925
Other real estate owned - from acquisitions	9,917				12,366				12,852				13,379				16,406
Other repossessed assets	263				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:
Commercial	0.58		%		0.70		%		0.65		%		0.85		%		0.25		%
Commercial real estate	0.29				0.23				0.28				0.26				0.29
Home equity	1.61				1.49				1.29				1.47				1.53
Residential real estate	1.27				1.51				1.63				1.74				1.77
Premium finance receivables - commercial	0.62				0.71				0.67				0.72				0.71
Premium finance receivables - life insurance	0.01				—				—				—				—
Consumer and other	0.36				0.45				0.38				0.51				0.65
Total loans, net of unearned income	0.45		%		0.49		%		0.48		%		0.55		%		0.37		%
Total non-performing assets as a percentage of total assets	0.40		%		0.43		%		0.44		%		0.52		%		0.40		%
Allowance for loan losses as a percentage of total non-performing loans	141.41		%		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 Ended																			Six Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,			June 30,				June 30,
(Dollars in thousands)	2019				2019				2018				2018				2018			2019				2018
Balance at beginning of period	$	117,586			$	113,234			$	127,227			$	83,282			$	89,690		$	113,234			$	90,162
Additions, net	20,567				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 estate	12,646				14,123				13,895				14,160				15,086
Residential real estate and other	17,293				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 estate	2,854				1,517				1,552				1,326				1,362
Residential real estate and other	5,435				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 estate	15,500				15,640				15,447				15,486				16,448
Residential real estate and other	22,728				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 sell	1,746				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 development	1,282				1,139				1,426				1,952				2,205
Commercial real estate	17,243				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 management	19,375				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 banking	37,411				18,158				24,182				42,014				39,834				19,253				106	%		(2,423		)		(6	)
Service charges on deposit accounts	9,277				8,848				9,065				9,331				9,151				429				5			126				1
Gains (losses) on investment securities, net	864				1,364				(2,649		)		90				12				(500		)		(37	)		852				NM
Fees from covered call options	643				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, net	11,733				10,796				10,882				9,132				8,746				937				9			2,987				34
Other:
Interest rate swap fees	3,224				2,831				2,602				2,359				3,829				393				14			(605		)		(16	)
BOLI	1,149				1,591				(466		)		3,190				1,544				(442		)		(28	)		(395		)		NM
Administrative services	1,009				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	)
Miscellaneous	8,640				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 gain (loss)		577										(872				)		1,449						NM
Early pay-offs of leases		5										587						(582				)		(99		)
Miscellaneous		19,620										15,611						4,009						26
Total Other		31,036										25,916						5,120						20
Total Non-Interest Income		$							179,815			$			180,912			$			(1,097	)		(1		)%

NM - Not meaningful.

TABLE 16: MORTGAGE BANKING REVENUE

 

	Three Months Ended																			Six Months Ended
(Dollars in thousands)	June 30,  2019				March 31,  2019				December 31,  2018				September 30,  2018				June 30,  2018			June 30,  2019				June 30,  2018
Originations:
Retail originations	$	669,510			$	365,602			$	463,196			$	642,213			$	769,279		$	1,035,112			$	1,309,190
Correspondent originations	182,966				148,100				289,101				310,446				122,986			331,066				249,450
Veterans First originations	301,324				164,762				175,483				199,774				204,108			466,086				316,585
Total originations for sale (A)	$	1,153,800			$	678,464			$	927,780			$	1,152,433			$	1,096,373		$	1,832,264			$	1,875,225
Originations for investment	106,237				93,689				93,275				54,172				68,234			199,926				111,483
Total originations	$	1,260,037			$	772,153			$	1,021,055			$	1,206,605			$	1,164,607		$	2,032,190			$	1,986,708
Purchases as a percentage of originations for sale	63		%		67		%		71		%		76		%		80		%	64		%		77		%
Refinances as a percentage of originations for sale	37				33				29				24				20			36				23
Total	100		%		100		%		100		%		100		%		100		%	100		%		100		%
Production Margin:
Production revenue (B) (1)	$	29,895			$	16,606			$	18,657			$	25,253			$	27,814		$	46,501			$	48,340
Production margin (B / A)	2.59		%		2.45		%		2.01		%		2.19		%		2.54		%	2.54		%		2.58		%
Mortgage Servicing:
Loans serviced for others (C)	$	7,515,186			$	7,014,269			$	6,545,870			$	5,904,300			$	5,228,699
MSRs, at fair value (D)	72,850				71,022				75,183				74,530				63,194
Percentage of MSRs to loans serviced for others (D / C)	0.97		%		1.01		%		1.15		%		1.26		%		1.21		%
Components of Mortgage Banking Revenue:
Production revenue	$	29,895			$	16,606			$	18,657			$	25,253			$	27,814		$	46,501			$	48,340
MSR - current period capitalization	9,802				6,580				9,683				11,340				7,889			16,382				12,048
MSR - collection of expected cash flows - paydowns	(457		)		(505		)		(496		)		(689		)		(639		)	(962		)		(1,082		)
MSR - collection of expected cash flows - payoffs	(3,619		)		(1,492		)		(896		)		(392		)		(725		)	(5,111		)		(1,484		)
MSR - changes in fair value model assumptions	(4,305		)		(8,744		)		(7,638		)		1,077				2,097			(13,049		)		6,230
Gain on derivative contract held as an economic hedge, net	920				—				—				—				—			920				—
MSR valuation adjustment, net of gain on derivative contract held as an economic hedge	(3,385		)		(8,744		)		(7,638		)		1,077				2,097			(12,129		)		6,230
Servicing income	5,460				5,460				4,917				3,942				3,505			10,920				6,410
Other	(285		)		253				(45		)		1,483				(107		)	(32		)		332
Total mortgage banking revenue	$	37,411			$	18,158			$	24,182			$	42,014			$	39,834		$	55,569			$	70,794

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

 

TABLE 17: NON-INTEREST EXPENSE

	Three Months Ended																				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
Salaries and employee benefits:
Salaries	$	75,360			$	74,037			$	67,708			$	69,893			$	66,976			$	1,323			2	%		$	8,384			13	%
Commissions and incentive compensation	36,486				31,599				33,656				34,046				35,907				4,887				15			579				2
Benefits	21,886				20,087				20,747				19,916				18,792				1,799				9			3,094				16
Total salaries and employee benefits	133,732				125,723				122,111				123,855				121,675				8,009				6			12,057				10
Equipment	12,759				11,770				11,523				10,827				10,527				989				8			2,232				21
Operating lease equipment depreciation	8,768				8,319				8,462				7,370				6,940				449				5			1,828				26
Occupancy, net	15,921				16,245				15,980				14,404				13,663				(324		)		(2	)		2,258				17
Data processing	6,204				7,525				8,447				9,335				8,752				(1,321		)		(18	)		(2,548		)		(29	)
Advertising and marketing	12,845				9,858				9,414				11,120				11,782				2,987				30			1,063				9
Professional fees	6,228				5,556				9,259				9,914				6,484				672				12			(256		)		(4	)
Amortization of other intangible assets	2,957				2,942				1,407				1,163				997				15				1			1,960				NM
FDIC insurance	4,127				3,576				4,044				4,205				4,598				551				15			(471		)		(10	)
OREO expense, net	1,290				632				1,618				596				980				658				NM			310				32
Other:
Commissions - 3rd party brokers	749				718				779				1,059				1,174				31				4			(425		)		(36	)
Postage	2,606				2,450				2,047				2,205				2,567				156				6			39				2
Miscellaneous	21,421				19,060				16,242				17,584				16,630				2,361				12			4,791				29
Total other	24,776				22,228				19,068				20,848				20,371				2,548				11			4,405				22
Total Non-Interest Expense	$	229,607			$	214,374			$	211,333			$	213,637			$	206,769			$	15,233			7	%		$	22,838			11	%

NM - Not meaningful.

		Six Months Ended
		June 30,										June 30,					$						%
(Dollars in thousands)		2019										2018					Change						Change
Salaries and employee benefits:
Salaries		$							149,397			$			128,962		$			20,435			16		%
Commissions and incentive compensation		68,085										67,856					229						—
Benefits		41,973										37,293					4,680						13
Total salaries and employee benefits		259,455										234,111					25,344						11
Equipment		24,529										20,599					3,930						19
Operating lease equipment depreciation		17,087										13,473					3,614						27
Occupancy, net		32,166										27,430					4,736						17
Data processing		13,729										17,245					(3,516				)		(20		)
Advertising and marketing		22,703										20,606					2,097						10
Professional fees		11,784										13,133					(1,349				)		(10		)
Amortization of other intangible assets		5,899										2,001					3,898						NM
FDIC insurance		7,703										8,960					(1,257				)		(14		)
OREO expense, net		1,922										3,906					(1,984				)		(51		)
Other:
Commissions - 3rd party brokers		1,467										2,426					(959				)		(40		)
Postage		5,056										4,433					623						14
Miscellaneous		40,481										32,795					7,686						23
Total other		47,004										39,654					7,350						19
Total Non-Interest Expense		$							443,981			$			401,118		$			42,863			11		%

NM - Not meaningful.

TABLE 18: SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES/RATIOS

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

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

	Three Months Ended																			Six Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,			June 30,				June 30,
(Dollars and shares in thousands)	2019				2019				2018				2018				2018			2019				2018
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:
(A) Interest Income (GAAP)	$	346,814			$	333,970			$	320,596			$	304,962			$	284,047		$	680,784			$	545,252
Taxable-equivalent adjustment:
- Loans	1,031				1,034				980				941				812			2,065				1,482
- Liquidity Management Assets	568				565				586				575				566			1,133				1,097
- Other Earning Assets	1				2				4				3				1			3				4
(B) Interest Income (non-GAAP)	$	348,414			$	335,571			$	322,166			$	306,481			$	285,426		$	683,985			$	547,835
(C) Interest Expense (GAAP)	$	80,612			$	71,984			$	66,508			$	57,399			$	45,877		$	152,596			$	82,000
(D) Net Interest Income (GAAP) (A minus C)	$	266,202			$	261,986			$	254,088			$	247,563			$	238,170		$	528,188			$	463,252
(E) Net Interest Income (non-GAAP) (B minus C)	$	267,802			$	263,587			$	255,658			$	249,082			$	239,549		$	531,389			$	465,835
Net interest margin (GAAP)	3.62		%		3.70		%		3.61		%		3.59		%		3.61		%	3.66		%		3.58		%
Net interest margin, fully taxable-equivalent (non-GAAP)	3.64		%		3.72		%		3.63		%		3.61		%		3.63		%	3.68		%		3.60		%
(F) Non-interest income	$	98,158			$	81,657			$	75,308			$	99,930			$	95,233		$	179,815			$	180,912
(G) Gains (losses) on investment securities, net	864				1,364				(2,649		)		90				12			2,228				(339		)
(H) Non-interest expense	229,607				214,374				211,333				213,637				206,769			443,981				401,118
Efficiency ratio (H/(D+F-G))	63.17		%		62.63		%		63.65		%		61.50		%		62.02		%	62.91		%		62.24		%
Efficiency ratio (non-GAAP) (H/(E+F-G))	62.89		%		62.34		%		63.35		%		61.23		%		61.76		%	62.62		%		61.99		%
Reconciliation of Non-GAAP Tangible Common Equity Ratio:
Total shareholders’ equity	$	3,446,950			$	3,371,972			$	3,267,570			$	3,179,822			$	3,106,871
Less: Non-convertible preferred stock	(125,000		)		(125,000		)		(125,000		)		(125,000		)		(125,000		)
Less: Intangible assets	(631,499		)		(620,224		)		(622,565		)		(564,938		)		(531,371		)
(I) Total tangible common shareholders’ equity	$	2,690,451			$	2,626,748			$	2,520,005			$	2,489,884			$	2,450,500
(J) Total assets	$	33,641,769			$	32,358,621			$	31,244,849			$	30,142,731			$	29,464,588
Less: Intangible assets	(631,499		)		(620,224		)		(622,565		)		(564,938		)		(531,371		)
(K) Total tangible assets	$	33,010,270			$	31,738,397			$	30,622,284			$	29,577,793			$	28,933,217
Common equity to assets ratio (GAAP) (L/J)	9.9		%		10.0		%		10.1		%		10.1		%		10.1		%
Tangible common equity ratio (non-GAAP) (I/K)	8.2		%		8.3		%		8.2		%		8.4		%		8.5		%

 

	Three Months Ended																			Six Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,			June 30,				June 30,
(Dollars and shares in thousands)	2019				2019				2018				2018				2018			2019				2018
Reconciliation of Non-GAAP Tangible Book Value per Common Share:
Total shareholders’ equity	$	3,446,950			$	3,371,972			$	3,267,570			$	3,179,822			$	3,106,871
Less: Preferred stock	(125,000		)		(125,000		)		(125,000		)		(125,000		)		(125,000		)
(L) Total common equity	$	3,321,950			$	3,246,972			$	3,142,570			$	3,054,822			$	2,981,871
(M) Actual common shares outstanding	56,668				56,639				56,408				56,377				56,329
Book value per common share (L/M)	$	58.62			$	57.33			$	55.71			$	54.19			$	52.94
Tangible book value per common share (non-GAAP) (I/M)	$	47.48			$	46.38			$	44.67			$	44.16			$	43.50
Reconciliation of Non-GAAP Return on Average Tangible Common Equity:
(N) Net income applicable to common shares	$	79,416			$	87,096			$	77,607			$	89,898			$	87,530		$	166,512			$	167,461
Add: Intangible asset amortization	2,957				2,942				1,407				1,163				997			5,899				2,001
Less: Tax effect of intangible asset amortization	(771		)		(731		)		(366		)		(292		)		(263		)	(1,502		)		(506		)
After-tax intangible asset amortization	2,186				2,211				1,041				871				734			4,397				1,495
(O) Tangible net income applicable to common shares (non-GAAP)	$	81,602			$	89,307			$	78,648			$	90,769			$	88,264		$	170,909			$	168,956
Total average shareholders' equity	$	3,414,340			$	3,309,078			$	3,200,654			$	3,131,943			$	3,064,154		$	3,362,000			$	3,030,062
Less: Average preferred stock	(125,000		)		(125,000		)		(125,000		)		(125,000		)		(125,000		)	(125,000		)		(125,000		)
(P) Total average common shareholders' equity	$	3,289,340			$	3,184,078			$	3,075,654			$	3,006,943			$	2,939,154		$	3,237,000			$	2,905,062
Less: Average intangible assets	(624,794		)		(622,240		)		(574,757		)		(547,552		)		(533,496		)	(623,524		)		(535,077		)
(Q) Total average tangible common shareholders’ equity (non-GAAP)	$	2,664,546			$	2,561,838			$	2,500,897			$	2,459,391			$	2,405,658		$	2,613,476			$	2,369,985
Return on average common equity, annualized  (N/P)	9.68		%		11.09		%		10.01		%		11.86		%		11.94		%	10.37		%		11.62		%
Return on average tangible common equity, annualized (non-GAAP) (O/Q)	12.28		%		14.14		%		12.48		%		14.64		%		14.72		%	13.19		%		14.38		%

 

WINTRUST SUBSIDIARIES AND LOCATIONS

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

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

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

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

FORWARD-LOOKING STATEMENTS

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

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

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

CONFERENCE CALL, WEBCAST AND REPLAY

The Company will hold a conference call at 1:00 p.m. (Central Time) on Tuesday, July 16, 2019 regarding second quarter 2019 results. Individuals interested in listening should call [phone] and enter Conference ID #2183197. A simultaneous audio-only webcast and replay of the conference call as well as an accompanying slide presentation may be accessed via the Company’s website at https://www.wintrust.com, Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the second quarter 2019 earnings press release will be available on the home page of the Company’s website at https://www.wintrust.com and at the Investor Relations, Investor News and Events, Press Releases link on its website.

FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Senior Executive Vice President & Chief Operating Officer
[phone]
Web site address: www.wintrust.com