Market Overview

Wintrust Financial Corporation Reports Third Quarter and Year-to-Date 2015 Net Income

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ROSEMONT, Ill., Oct. 14, 2015 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation ("Wintrust" or "the Company") (Nasdaq: WTFC) announced net income of $38.4 million or $0.69 per diluted common share for the third quarter of 2015 compared to net income of $43.8 million or $0.85 per diluted common share for the second quarter of 2015 and $40.2 million or $0.79 per diluted common share for the third quarter of 2014. The Company recorded net income of $121.2 million or $2.29 per diluted common share for the first nine months of 2015 compared to net income of $113.3 million or $2.23 per diluted common share for the same period of 2014. Operating net income was $41.8 million or $0.75 per diluted common share for the third quarter of 2015 compared to $44.5 million or $0.86 per diluted common share in the second quarter of 2015. Operating net income excludes acquisition related charges totaling $5.7 million and $1.1 million in the third quarter of 2015 and second quarter of 2015, respectively. A table reconciling net income as reported to operating net income is set forth below and additional detail is shown in the "Supplemental Financial Measures/Ratios" section.

Highlights compared with the Second Quarter of 2015*:                

  • Total loans, excluding covered loans and mortgage loans held-for-sale, increased by $803 million, or 21% on annualized basis, to $16.3 billion, which included $455 million of loans acquired in relation to the bank acquisitions during the period
  • Total assets increased by 24% on an annualized basis to $22.0 billion
  • Total deposits increased by $1.1 billion, or 27% on an annualized basis, to $18.2 billion, which included $802 million assumed from the bank acquisitions during the period
  • Demand deposits comprise 26% of total deposits, increasing from 23% in the second quarter of 2015
  • Net interest margin decreased 8 basis points primarily as a result of lower yields on earning assets due to pricing pressure and the low rate environment
  • Maintained strong capital ratios with a tangible common equity ratio, assuming full conversion of convertible preferred stock, of 8.0%
  • Dividend on Series D preferred stock, issued in June 2015, reduced earnings per diluted common share by $0.04 per share
  • Completed the acquisitions of North Bank, Suburban Illinois Bancorp, Inc. and Community Financial Shares, Inc.
  • Acquisition-related charges totaled $5.7 million, reducing earnings per diluted common share by $0.06 per share
  • Opened new banking location in Aurora, Illinois along with the locations acquired, increasing our total banking locations to 160 locations

  Three Months Ended,  Nine Months
Ended,
  September 30, June 30, March 31,  September 30,
(Dollars in thousands, except per share data) 2015 2015 2015  2015
Key Operating Measures, Adjusted for Acquisition Related Charges         
Net income per common share – diluted $0.75  $0.86  $0.77   $2.38 
Net overhead ratio 1.63% 1.51% 1.68%  1.61%
Efficiency ratio 66.67% 65.16% 67.56%  66.43%
Return on average assets 0.76% 0.88% 0.81%  0.82%
Return on average common equity 7.26% 8.52% 7.73%  7.82%
Return on average tangible common equity 9.73% 11.03% 10.07%  10.26%
                  
Net income, as reported $38,355  $43,831  $39,052   $121,238 
Acquisition Related Charges         
Salaries and employee benefits:         
Salaries $1,355  $  $12   $1,367 
Commissions and incentive compensation 264    3   267 
Benefits 107       107 
Total salaries and employee benefits 1,726    15   1,741 
Equipment 36  32     68 
Occupancy, net 201    16   217 
Data processing 2,692  653  130   3,475 
Advertising and marketing 1    5   6 
Professional fees 335  417  568   1,320 
Other expense 5  21  4   30 
Other income (674)      (674)
Total Acquisition Related Charges $5,670  $1,123  $738   $7,531 
Income tax expense on acquisition related charges $2,225  $441  $290   $2,956 
Acquisition related charges, net of tax $3,445  $682  $448   $4,575 
Operating net income $41,800  $44,513  $39,500   $125,813 

* See "Supplemental Financial Measures/Ratios" on pages 16-18 for more information on non-GAAP measures.

Edward J. Wehmer, President and Chief Executive Officer, commented, "Wintrust reported operating net income of $41.8 million for the third quarter of 2015 and operating net income of $125.8 million on a year-to-date basis. The third quarter of 2015 was characterized by continued strong loan and deposit growth coupled with compression in our net interest margin, stable credit quality metrics, decreased mortgage banking revenue, the acquisitions of North Bank, Suburban Illinois Bancorp, Inc. and Community Financial Shares, Inc. and the costs related to these acquisitions."

Mr. Wehmer continued, "Excluding covered loans and mortgage loans held-for-sale, we grew our loan portfolio by $803 million in the third quarter, which included $455 million of loans acquired in relation to the three bank acquisitions. This increase in loan volume helped offset the impact on net interest income from net interest margin compression experienced during the quarter from competitive pricing pressures and the continued low rate environment. Our average loan to deposit ratio declined to 91.9% in the third quarter of 2015 compared to 92.8% in the second quarter of 2015 as the three acquisitions combined had a loan to deposit ratio of only 56.7%. Our loan pipelines remain consistently strong. Deposits in the third quarter of 2015 increased $1.1 billion, which included $802 million assumed from the bank acquisitions during the period. Demand deposits increased $796 million and now comprise 26% of our overall deposit base compared to 23% at the end of the second quarter of 2015."

Commenting on credit quality, Mr. Wehmer noted, "Total non-performing assets increased by $19.2 million. This increase was comprised of $4.6 million of OREO related to the three acquisitions completed in July, $7.3 million transferring from covered OREO as the loss sharing period expired, a single customer relationship totaling $9.3 million being placed in nonaccrual status at quarter-end, and other activities.  Excluding covered loans, non-performing loans as a percentage of total loans was 0.53% at the end of the third quarter. The allowance for loan losses as a percentage of non-performing loans, excluding covered loans, remained strong at 120%, exhibiting sufficient coverage for non-performing credits. We believe that the Company's reserves remain appropriate."

Mr. Wehmer further commented, "Mortgage banking revenue in the third quarter totaled $27.9 million, a decrease of $8.1 million compared to the second quarter of 2015 and an increase of $1.2 million compared to the third quarter of 2014. The decrease from the second quarter to the third quarter of 2015 resulted from origination volumes declining to $973.7 million from $1.2 billion and unfavorable changes in product and channel mix, both combined with more competitive pricing.  Our mortgage banking business remains well positioned for growth both organically and through acquisitions."

Turning to the future, Mr. Wehmer stated, "We anticipate approximately $4 million in additional charges related to the three previously announced acquisitions in July over the next two quarters as the conversions and integrations are completed. This is in addition to the $5.7 million of various charges incurred in the third quarter related to these acquisitions. The cost savings from these transactions have exceeded our initial expectations.  We believe we have achieved approximately two-thirds of our expected annual cost savings to date and expect to realize additional annual cost savings of approximately $5 million by the end of the first quarter of 2016. We remain on track to realize cost savings opportunities in the future from our existing infrastructure as additional acquisition opportunities exist in all areas of our business lines. Evaluating strategic acquisitions 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. Our opportunities for both internal growth and external growth remain consistently strong. We continue to take a steady and measured approach to achieve our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and increasing shareholder value."

Graphs accompanying this release are available at http://www.globenewswire.com/NewsRoom/AttachmentNg/673e6825-ff7f-48d9-9801-a6bf5134cb26

Wintrust's key operating measures and growth rates for the third quarter of 2015, as compared to the sequential and linked quarters, are shown in the table below:

        % or(5)
basis point  (bp)
change from

2nd Quarter
2015
 % or
basis point  (bp)
change from
3rd Quarter
2014
  Three Months Ended  
(Dollars in thousands) September 30,
2015
 June 30,
 2015
 September 30,
 2014
  
Net income $38,355  $43,831  $40,224  (12)% (5)%
Net income per common share – diluted $0.69  $0.85  $0.79  (19)% (13)%
Net revenue (1) $230,493  $233,905  $209,622  (1)% 10 %
Net interest income $165,540  $156,892  $151,670  6 % 9 %
Net interest margin (2) 3.33% 3.41% 3.46% (8)bp (13)bp
Net overhead ratio (2) (3) 1.74% 1.53% 1.67% 21 bp 7 bp
Efficiency ratio (2) (4) 69.02% 65.64% 65.76% 338 bp 326 bp
Return on average assets 0.70% 0.87% 0.83% (17)bp (13)bp
Return on average common equity 6.60% 8.38% 8.09% (178)bp (149)bp
Return on average tangible common equity 8.88% 10.86% 10.59% (198)bp (171)bp
At end of period            
Total assets $22,043,930  $20,799,924  $19,169,345  24 % 15 %
Total loans, excluding loans held-for-sale, excluding covered loans $16,316,211  $15,513,650  $14,052,059  21 % 16 %
Total loans, including loans held-for-sale, excluding covered loans $16,663,216  $16,010,933  $14,415,362  16 % 16 %
Total deposits $18,228,469  $17,082,418  $16,065,246  27 % 13 %
Total shareholders' equity $2,335,736  $2,264,982  $2,028,508  12 % 15 %

(1) Net revenue is net interest income plus non-interest income.

(2) See "Supplemental Financial Measures/Ratios" 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) The efficiency ratio is calculated by dividing total non-interest expense by tax-equivalent net revenue (less securities gains or losses).  A lower ratio indicates more efficient revenue generation.

(5) Period-end balance sheet percentage changes are annualized.

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 web site at www.wintrust.com by choosing "Financial Reports" under the "Investor Relations" heading, and then choosing "Financial Highlights."

Financial Performance Overview – Third Quarter 2015

For the third quarter of 2015, net interest income totaled $165.5 million, an increase of $8.6 million as compared to the second quarter of 2015 and an increase of $13.9 million as compared to the third quarter of 2014.  The changes in net interest income on both a sequential and linked quarter basis are the result of the following:

  • Net interest income increased $8.6 million in the third quarter of 2015 compared to the second quarter of 2015, due to: 

    • An increase in total interest income of $10.1 million resulting primarily from loan growth during the period and one additional day of interest, partially offset by a reduction in yield on earning assets.  
                 
    • Interest expense increased $1.5 million primarily as a result of an increase in the average balance of interest-bearing liabilities, a two basis point increase in the rate on average interest bearing liabilities and one additional day in the quarter.

    • Combined, the increase in interest income of $10.1 million and the increase in interest expense of $1.5 million created the $8.6 million increase in net interest income.

  • Net interest income increased $13.9 million in the third quarter of 2015 compared to the third quarter of 2014, due to:

    • Average loans, excluding covered loans, increased by $2.1 billion.  The growth in average loans, excluding covered loans, was partially offset by a 17 basis point decline in the yield on earning assets, resulting in an increase in total interest income of $14.7 million.

    • An increase in interest bearing deposits, an increase in borrowings under the Company's term credit facility at the end of the second quarter of 2015 and the completion of the Canadian secured borrowing transaction at the end of the fourth quarter of 2014 resulted in a $834,000 increase in interest expense.

    • Combined, the increase in interest income of $14.7 million and the increase in interest expense of $834,000 created the $13.9 million increase in net interest income.

The net interest margin, on a fully taxable equivalent basis, for the third quarter of 2015 was 3.33% compared to 3.41% for the second quarter of 2015 and 3.46% for the third quarter of 2014.  The reduction in net interest margin, on a fully taxable equivalent basis, compared to the second quarter of 2015 and third quarter of 2014 is primarily the result of a decline in yields on loans and other earning assets (see "Net Interest Income" section later in this release for further detail).

Non-interest income totaled $65.0 million in the third quarter of 2015, decreasing $12.1 million, or 16%, compared to the second quarter of 2015 and increasing $7.0 million, or 12%, compared to the third quarter of 2014. The decrease in non-interest income in the third quarter of 2015 compared to the second quarter of 2015 is primarily attributable to lower mortgage banking revenue, the recognition of a $1.5 million bank owned life insurance ("BOLI") death benefit in the second quarter of 2015 and lower fees from covered call option contracts, partially offset by increased service charges on deposits.  The increase in non-interest income in the third quarter of 2015 compared to the third quarter of 2014 was primarily attributable to an increase in mortgage banking revenues, fees from covered call options, higher customer interest rate swap fees and an increase in service charges on deposits (see "Non-Interest Income" section later in this release for further detail). 

Non-interest expense totaled $160.0 million in the third quarter of 2015, increasing $5.7 million, or 4%, compared to the second quarter of 2015 and increasing $21.5 million, or 16%, compared to the third quarter of 2014.  The increase in the current quarter compared to the second quarter of 2015 can be primarily attributed to an increase in acquisition related charges, higher salary and employee benefit costs caused by the addition of employees from the various acquisitions and higher staffing levels as the Company grows, increased data processing expenses, partially offset by a decrease in OREO expenses.  The increase in the third quarter of 2015 compared to the third quarter of 2014 was primarily attributable to acquisition related charges in the current quarter, higher salary and employee benefit costs caused by the addition of employees from the various acquisitions and higher staffing levels as the Company grows as well as higher commissions and incentive compensation, increased equipment and occupancy, data processing and professional fees, and higher marketing expenses, partially offset by a decrease in OREO expenses (see "Non-Interest Expense" section later in this release for further detail). 

Financial Performance Overview – First Nine Months of 2015

For the first nine months of 2015, net interest income totaled $474.3 million, an increase of $29.5 million as compared to the first nine months of 2014 as a result of the following: 

  • Average earning assets increased by $2.1 billion, primarily comprised of average loan growth, excluding covered loans, of $1.9 billion and an increase of $216.9 million in the average balance of liquidity management assets, partially offset by a decrease of $96.3 million in the average balance of covered loans. The growth in average total loans, excluding covered loans, included an increase of $691.0 million in commercial loans, $523.3 million in commercial real estate loans, $463.2 million in life insurance premium finance receivables, $99.3 million in mortgage loans held-for-sale, $88.6 million in commercial premium finance receivables and $78.1 million in home equity and other loans.

  • The average earning asset growth of $2.1 billion, partially offset by a 20 basis point decrease in yield on earning assets, resulted in an increase in total interest income of $32.4 million.

  • Funding mix remained relatively consistent as average demand deposits increased $982.2 million, average interest bearing deposits increased $789.3 million and average wholesale borrowings increased $125.2 million. The increase in average interest bearing liabilities, partially offset by a one basis point decline in rate during the current period, resulted in a $2.9 million increase in interest expense.

  • Combined, the increase in interest income of $32.4 million and the increase in interest expense of $2.9 million created the $29.5 million increase in net interest income.

The net interest margin, on a fully taxable equivalent basis, for the first nine months of 2015 was 3.39% compared to 3.56% for the first nine months of 2014 (see "Net Interest Income" section later in this release for further detail).

Non-interest income totaled $206.5 million in the first nine months of 2015, increasing $48.9 million, or 31%, compared to the first nine months of 2014. The increase in non-interest income in the first nine months of 2015 compared to the first nine months of 2014 is primarily attributable to an increase in mortgage banking and wealth management revenues, fees from covered call options, the recognition of a $1.5 million BOLI death benefit, increased service charges and higher fees on customer interest rate swap transactions (see "Non-Interest Income" section later in this release for further detail). 

Non-interest expense totaled $461.6 million in the first nine months of 2015, increasing $58.2 million, or 14%, compared to the first nine months of 2014.  The increase in the first nine months of 2015 compared to the first nine months of 2014 was primarily attributable to acquisition related charges during the current year, higher salary and employee benefit costs caused by the addition of employees from the various acquisitions and larger staffing as the Company grows as well as higher commissions and incentive compensation, and increased equipment, occupancy, data processing and professional fees, and increased marketing expenses, partially offset by a decrease in OREO expenses (see "Non-Interest Expense" section later in this release for further detail). 

Financial Performance Overview – Credit Quality

The ratio of non-performing assets to total assets was 0.63% as of September 30, 2015, compared to 0.57% at June 30, 2015, and 0.69% at September 30, 2014.  Non-performing assets, excluding covered assets, totaled $138.0 million at September 30, 2015, compared to $118.9 million at June 30, 2015 and $131.7 million at September 30, 2014.

Non-performing loans, excluding covered loans, totaled $86.0 million, or 0.53% of total loans, at September 30, 2015, compared to $76.6 million, or 0.49% of total loans, at June 30, 2015 and $81.1 million, or 0.58% of total loans, at September 30, 2014.  The increase in non-performing loans, excluding covered loans, compared to June 30, 2015 is primarily the result of a single customer relationship totaling $9.3 million being placed in nonaccrual status at quarter-end. Compared to September 30, 2014, the increase is primarily the result of a $2.7 million increase in the home equity loan portfolio, a $1.6 million increase in the commercial loan portfolio and a $1.3 million increase in the commercial real-estate portfolio. OREO, excluding covered OREO, of $51.9 million at September 30, 2015 increased $9.8 million compared to $42.1 million at June 30, 2015 and decreased $1.5 million compared to $50.4 million at September 30, 2014. The increase in OREO, excluding covered OREO, compared to June 30, 2015 is primarily the result of the addition of properties from acquisitions and properties transferring from covered OREO as the loss sharing period expired during the period.

The provision for credit losses, excluding the provision for covered loan losses, totaled $8.7 million for the third quarter of 2015 compared to $9.7 million for the second quarter of 2015 and $6.0 million for the third quarter of 2014. The higher provision for credit losses in the third quarter of 2015 compared to the same period of 2014 was partly due to loan growth since the prior period.

Net charge-offs as a percentage of loans, excluding covered loans, for the third quarter of 2015 totaled 14 basis points on an annualized basis compared to ten basis points on an annualized basis in the second quarter of 2015 and 19 basis points on an annualized basis in the third quarter of 2014.  Net charge-offs totaled $5.7 million in the third quarter of 2015, a $1.8 million increase from $3.9 million in the second quarter of 2015 and a $1.3 million decrease from $7.0 million in the third quarter of 2014.

Excluding the allowance for covered loan losses, the allowance for credit losses at September 30, 2015 totaled $103.9 million, or 0.64% of total loans, compared to $101.1 million, or 0.65% of total loans, at June 30, 2015 and $91.8 million, or 0.65% of total loans, at September 30, 2014.  The allowance for unfunded lending-related commitments totaled $926,000 as of September 30, 2015 compared to $884,000 as of June 30, 2015 and $822,000 as of September 30, 2014. 

Financial Performance Overview – Earnings Per Share

The following table shows the computation of basic and diluted earnings per share for the periods indicated:

   Three Months Ended Nine Months Ended
(In thousands, except per share data)  September 30,
2015
 June 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
Net income  $38,355  $43,831  $40,224  $121,238  $113,265 
Less: Preferred stock dividends and discount accretion  4,079  1,580  1,581  7,240  4,743 
Net income applicable to common shares—Basic(A) 34,276  42,251  38,643  113,998  108,522 
Add: Dividends on convertible preferred stock, if dilutive  1,579  1,580  1,581  4,740  4,743 
Net income applicable to common shares—Diluted(B) 35,855  43,831  40,224  118,738  113,265 
Weighted average common shares outstanding(C) 48,158  47,567  46,639  47,658  46,453 
Effect of dilutive potential common shares:           
Common stock equivalents  978  1,085  1,166  1,070  1,274 
Convertible preferred stock, if dilutive  3,071  3,071  3,075  3,071  3,075 
Weighted average common shares and effect of dilutive potential common shares(D) 52,207  51,723  50,880  51,799  50,802 
Net income per common share:           
Basic(A/C) $0.71  $0.89  $0.83  $2.39  $2.34 
Diluted(B/D) $0.69  $0.85  $0.79  $2.29  $2.23 


Potentially dilutive common shares can result from stock options, restricted stock unit awards, stock warrants, the Company's convertible preferred stock and shares to be issued under the Employee Stock Purchase Plan and the Directors Deferred Fee and Stock Plan, being treated as if they had been either exercised or issued, computed by application of the treasury stock method. While potentially dilutive common shares are typically included in the computation of diluted earnings per share, potentially dilutive common shares are excluded from this computation in periods in which the effect would reduce the loss per share or increase the income per share. For diluted earnings per share, net income applicable to common shares can be affected by the conversion of the Company's convertible preferred stock. Where the effect of this conversion would reduce the loss per share or increase the income per share, net income applicable to common shares is not adjusted by the associated preferred dividends. Due to weighted average share differences, when stated on a quarter and year-to-date basis, the earnings per share for the year ended September 30, 2015 does not equal the sum of the respective earnings per share for the three quarters then ended. 

WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights
 
  Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) September 30,
2015
 June 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
Selected Financial Condition Data (at end of period):          
Total assets $22,043,930  $20,799,924  $19,169,345     
Total loans, excluding loans held-for-sale and covered loans 16,316,211  15,513,650  14,052,059     
Total deposits 18,228,469  17,082,418  16,065,246     
Junior subordinated debentures 268,566  249,493  249,493     
Total shareholders' equity 2,335,736  2,264,982  2,028,508     
Selected Statements of Income Data:          
Net interest income $165,540  $156,892  $151,670  $474,323  444,856 
Net revenue (1) 230,493  233,905  209,622  680,830  602,439 
Net income 38,355  43,831  40,224  121,238  113,265 
Net income per common share – Basic $0.71  $0.89  $0.83  $2.39  $2.34 
Net income per common share – Diluted $0.69  $0.85  $0.79  $2.29  $2.23 
Selected Financial Ratios and Other Data:          
Performance Ratios:          
Net interest margin (2) 3.33% 3.41% 3.46% 3.39% 3.56%
Non-interest income to average assets 1.19% 1.52% 1.20% 1.34% 1.14%
Non-interest expense to average assets 2.93% 3.06% 2.87% 3.00% 2.92%
Net overhead ratio (2) (3) 1.74% 1.53% 1.67% 1.66% 1.78%
Efficiency ratio (2) (4) 69.02% 65.64% 65.76% 67.50% 66.65%
Return on average assets 0.70% 0.87% 0.83% 0.79% 0.82%
Return on average common equity 6.60% 8.38% 8.09% 7.53% 7.86%
Return on average tangible common equity (2) 8.88% 10.86% 10.59% 9.90% 10.25%
Average total assets $21,688,450  $20,256,996  $19,127,346  $20,597,383  $18,474,609 
Average total shareholders' equity 2,310,511  2,156,128  2,020,903  2,194,384  1,972,425 
Average loans to average deposits ratio (excluding covered loans) 91.9% 92.8% 90.1% 92.0% 90.0%
Average loans to average deposits ratio (including covered loans) 92.9% 94.0% 91.8% 93.2% 91.9%
Common Share Data at end of period:          
Market price per common share $53.43  $53.38  $44.67     
Book value per common share (2) $43.12  $42.24  $40.74     
Tangible common book value per share (2) $32.83  $33.02  $31.60     
Common shares outstanding 48,336,870  47,677,257  46,691,047     
Other Data at end of period:(8)          
Leverage Ratio (5) 9.4% 9.8% 10.0%    
Tier 1 capital to risk-weighted assets (5) 10.4% 10.7% 11.7%    
Common equity Tier 1 capital to risk-weighted assets (5) 8.8% 9.0% N/A    
Total capital to risk-weighted assets (5) 12.7% 13.1% 13.1%    
Tangible common equity ratio (TCE) (2)(7) 7.4% 7.7% 7.9%    
Tangible common equity ratio, assuming full conversion of convertible preferred stock (2) (7) 8.0% 8.4% 8.6%    
Allowance for credit losses (6) $103,922  $101,088  $91,841     
Non-performing loans $85,976  $76,554  $81,070     
Allowance for credit losses to total loans (6) 0.64% 0.65% 0.65%    
Non-performing loans to total loans 0.53% 0.49% 0.58%    
Number of:          
Bank subsidiaries 15  15  15     
Banking offices 160  147  139     

(1) Net revenue includes net interest income and non-interest income

(2) See "Supplemental Financial Measures/Ratios" 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 total average assets. A lower ratio indicates a higher degree of efficiency.

(4) The efficiency ratio is calculated by dividing total non-interest expense by tax-equivalent net revenue (less securities gains or losses). A lower ratio indicates more efficient revenue generation.

(5) Capital ratios for current quarter-end are estimated.  As of January 1, 2015 capital ratios are calculated under the requirements of Basel III.

(6) The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excludes the allowance for covered loan losses.

(7) Total shareholders' equity minus preferred stock and total intangible assets divided by total assets minus total intangible assets.

(8) Asset quality ratios exclude covered loans.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
 
(In thousands) (Unaudited)
September 30,
2015
 December 31,
2014
 (Unaudited)
September 30,
2014
       
Assets      
Cash and due from banks $247,341  $225,136  $260,694 
Federal funds sold and securities purchased under resale agreements 3,314  5,571  26,722 
Interest bearing deposits with banks 701,106  998,437  620,370 
Available-for-sale securities, at fair value 2,214,281  1,792,078  1,782,648 
Trading account securities 3,312  1,206  6,015 
Federal Home Loan Bank and Federal Reserve Bank stock 90,308  91,582  80,951 
Brokerage customer receivables 28,293  24,221  26,624 
Mortgage loans held-for-sale 347,005  351,290  363,303 
Loans, net of unearned income, excluding covered loans 16,316,211  14,409,398  14,052,059 
Covered loans 168,609  226,709  254,605 
Total loans 16,484,820  14,636,107  14,306,664 
Less: Allowance for loan losses 102,996  91,705  91,019 
Less: Allowance for covered loan losses 2,918  2,131  2,655 
Net loans 16,378,906  14,542,271  14,212,990 
Premises and equipment, net 587,348  555,228  555,241 
FDIC indemnification asset   11,846  27,359 
Accrued interest receivable and other assets 667,036  501,882  494,213 
Trade date securities receivable 277,981  485,534  285,627 
Goodwill 472,166  405,634  406,604 
Other intangible assets 25,533  18,811  19,984 
Total assets $22,043,930  $20,010,727  $19,169,345 
Liabilities and Shareholders' Equity      
Deposits:      
Non-interest bearing $4,705,994  $3,518,685  $3,253,477 
Interest bearing 13,522,475  12,763,159  12,811,769 
 Total deposits 18,228,469  16,281,844  16,065,246 
Federal Home Loan Bank advances 451,330  733,050  347,500 
Other borrowings 259,978  196,465  51,483 
Subordinated notes 140,000  140,000  140,000 
Junior subordinated debentures 268,566  249,493  249,493 
Trade date securities payable 617  3,828   
Accrued interest payable and other liabilities 359,234  336,225  287,115 
Total liabilities 19,708,194  17,940,905  17,140,837 
Shareholders' Equity:      
Preferred stock 251,312  126,467  126,467 
Common stock 48,422  46,881  46,766 
Surplus 1,187,407  1,133,955  1,129,975 
Treasury stock (3,964) (3,549) (3,519)
Retained earnings 901,652  803,400  771,519 
Accumulated other comprehensive loss (49,093) (37,332) (42,700)
Total shareholders' equity 2,335,736  2,069,822  2,028,508 
Total liabilities and shareholders' equity $22,043,930  $20,010,727  $19,169,345 


WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 Three Months Ended Nine Months Ended
(In thousands, except per share data)September 30,
2015
 June 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
Interest income         
Interest and fees on loans$167,831  $159,823  $156,534  $482,330  $455,548 
Interest bearing deposits with banks372  305  409  993  977 
Federal funds sold and securities purchased under resale agreements1  1  12  4  22 
Available-for-sale securities16,130  14,071  12,767  44,601  39,190 
Trading account securities19  51  20  83  34 
Federal Home Loan Bank and Federal Reserve Bank stock821  785  733  2,375  2,171 
Brokerage customer receivables205  205  201  591  610 
Total interest income185,379  175,241  170,676  530,977  498,552 
Interest expense         
Interest on deposits12,436  11,996  12,298  36,246  35,980 
Interest on Federal Home Loan Bank advances2,458  1,812  2,641  6,426  7,989 
Interest on other borrowings1,045  787  200  2,620  1,460 
Interest on subordinated notes1,776  1,777  1,776  5,328  2,130 
Interest on junior subordinated debentures2,124  1,977  2,091  6,034  6,137 
Total interest expense19,839  18,349  19,006  56,654  53,696 
Net interest income165,540  156,892  151,670  474,323  444,856 
Provision for credit losses8,322  9,482  5,864  23,883  14,404 
Net interest income after provision for credit losses157,218  147,410  145,806  450,440  430,452 
Non-interest income         
Wealth management18,243  18,476  17,659  54,819  52,694 
Mortgage banking27,887  36,007  26,691  91,694  66,923 
Service charges on deposit accounts7,403  6,474  6,084  20,174  17,118 
(Losses) gains on available-for-sale securities, net(98) (24) (153) 402  (522)
Fees from covered call options2,810  4,565  2,107  11,735  4,893 
Trading (losses) gains, net(135) 160  293  (452) (1,102)
Other8,843  11,355  5,271  28,135  17,579 
Total non-interest income64,953  77,013  57,952  206,507  157,583 
Non-interest expense         
Salaries and employee benefits97,749  94,421  85,976  282,300  247,873 
Equipment8,887  7,914  7,570  24,637  22,196 
Occupancy, net12,066  11,401  10,446  35,818  31,289 
Data processing8,127  6,081  4,765  19,656  14,023 
Advertising and marketing6,237  6,406  3,528  16,550  9,902 
Professional fees4,100  5,074  4,035  13,838  11,535 
Amortization of other intangible assets1,350  934  1,202  3,297  3,521 
FDIC insurance3,035  3,047  3,211  9,069  9,358 
OREO expense, net(367) 841  581  1,885  7,047 
Other18,790  18,178  17,186  54,539  46,662 
Total non-interest expense159,974  154,297  138,500  461,589  403,406 
Income before taxes62,197  70,126  65,258  195,358  184,629 
Income tax expense23,842  26,295  25,034  74,120  71,364 
Net income$38,355  $43,831  $40,224  $121,238  $113,265 
Preferred stock dividends and discount accretion4,079  1,580  1,581  7,240  4,743 
Net income applicable to common shares$34,276  $42,251  $38,643  $113,998  $108,522 
Net income per common share - Basic$0.71  $0.89  $0.83  $2.39  $2.34 
Net income per common share - Diluted$0.69  $0.85  $0.79  $2.29  $2.23 
Cash dividends declared per common share$0.11  $0.11  $0.10  $0.33  $0.30 
Weighted average common shares outstanding48,158  47,567  46,639  47,658  46,453 
Dilutive potential common shares4,049  4,156  4,241  4,141  4,349 
Average common shares and dilutive common shares52,207  51,723  50,880  51,799  50,802 

SUPPLEMENTAL 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), net interest margin (including its individual components), the efficiency ratio, tangible common equity ratio, tangible common book value per share and return on average tangible common equity. In addition, certain operating measures and ratios are adjusted for acquisition related charges. These operating measures and ratios include operating net income, the efficiency ratio, the net overhead ratio, return on average assets, return on average common equity, return on average tangible common equity and net income per diluted common share. Management believes that these measures and ratios provide users of the Company's financial information a more meaningful view of the performance of the 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 ("FTE") basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE 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. Management considers operating net income, which is reported net income excluding acquisition related charges, as a useful measure of operating performance.  Acquisition related charges are specific costs incurred by the Company as a result of an acquisition that are not expected to continue in subsequent periods. The Company excludes acquisition related charges from reported net income as well as certain operating measures and ratios noted above to provide better comparability between periods. 

The following table presents a reconciliation of certain non-GAAP performance measures and ratios used by the Company to evaluate and measure the Company's performance to the most directly comparable GAAP financial measures for the last five quarters.

 Three Months Ended Nine Months Ended
 September 30, June 30, March 31, December 31, September 30, September 30, September 30,
(Dollars and shares in thousands)2015 2015 2015 2014 2014 2015 2014
Calculation of Net Interest Margin and Efficiency Ratio             
(A) Interest Income (GAAP)$185,379  $175,241  $170,357  $172,715  $170,676  $530,977  $498,552 
Taxable-equivalent adjustment:             
 - Loans346  328  327  301  315  1,001  827 
 - Liquidity Management Assets841  787  727  555  502  2,355  1,445 
 - Other Earning Assets10  27  7  24  11  44  17 
Interest Income - FTE$186,576  $176,383  $171,418  $173,595  $171,504  $534,377  $500,841 
(B) Interest Expense (GAAP)19,839  18,349  18,466  18,996  19,006  56,654  53,696 
Net interest income - FTE$166,737  $158,034  $152,952  $154,599  $152,498  $477,723  $447,145 
(C) Net Interest Income (GAAP) (A minus B)$165,540  $156,892  $151,891  $153,719  $151,670  $474,323  $444,856 
(D) Net interest margin (GAAP)3.31% 3.39% 3.40% 3.44% 3.45% 3.36% 3.54%
Net interest margin - FTE3.33% 3.41% 3.42% 3.46% 3.46% 3.39% 3.56%
(E) Efficiency ratio (GAAP)69.38% 65.96% 68.23% 67.87% 66.02% 67.84% 66.90%
Efficiency ratio - FTE69.02% 65.64% 67.90% 67.59% 65.76% 67.50% 66.65%
Efficiency ratio - Adjusted for acquisition related charges66.67% 65.16% 67.56% 67.59% 65.76% 66.43% 66.65%
(F) Net Overhead Ratio (GAAP)1.74% 1.53% 1.69% 1.76% 1.67% 1.66% 1.78%
Net Overhead Ratio - Adjusted for acquisition related charges1.63% 1.51% 1.68% 1.76% 1.67% 1.61% 1.78%
Calculation of Tangible Common Equity ratio (at period end)             
Total shareholders' equity$2,335,736  $2,264,982  $2,131,074  $2,069,822  $2,028,508     
(G) Less: Convertible preferred stock(126,312) (126,312) (126,427) (126,467) (126,467)    
Less:  Non-convertible preferred stock(125,000) (125,000)          
Less: Intangible assets(497,699) (439,570) (439,055) (424,445) (426,588)    
(H) Total tangible common shareholders' equity$1,586,725  $1,574,100  $1,565,592  $1,518,910  $1,475,453     
Total assets$22,043,930  $20,799,924  $20,382,271  $20,010,727  $19,169,345     
Less: Intangible assets(497,699) (439,570) (439,055) (424,445) (426,588)    
(I) Total tangible assets$21,546,231  $20,360,354  $19,943,216  $19,586,282  $18,742,757     
Tangible common equity ratio (H/I)7.4% 7.7% 7.9% 7.8% 7.9%    
Tangible common equity ratio, assuming full conversion of convertible preferred stock ((H-G)/I)8.0% 8.4% 8.5% 8.4% 8.6%    
Calculation of book value per share             
Total shareholders' equity$2,335,736  $2,264,982  $2,131,074  $2,069,822  $2,028,508     
Less: Preferred stock(251,312) (251,312) (126,427) (126,467) (126,467)    
(J) Total common equity$2,084,424  $2,013,670  $2,004,647  $1,943,355  $1,902,041     
(K) Actual common shares outstanding48,337  47,677  47,390  46,805  46,691     
Book value per common share (J/K)$43.12  $42.24  $42.30  $41.52  $40.74     
Tangible common book value per share (H/K)$32.83  $33.02  $33.04  $32.45  $31.60     

 

 Three Months Ended Nine Months Ended
 September 30, June 30, March 31, December 31, September 30, September 30, September 30,
(Dollars and shares in thousands)2015 2015 2015 2014 2014 2015 2014
Calculation of return on average assets             
(L) Net income$38,355  $43,831  $39,052  $38,133  $40,224  $121,238  $113,265 
Add: Acquisition related charges, net of tax3,445  682  448      4,575   
(M) Operating net income41,800  44,513  39,500  38,133  40,224  125,813  113,265 
(N) Total average assets21,688,450  20,256,996  19,826,240  19,366,670  19,127,346  20,597,383  18,474,609 
Return on average assets, annualized (L/N)0.70% 0.87% 0.80% 0.78% 0.83% 0.79% 0.82%
Return on average assets, adjusted for acquisition related charges, annualized (M/N)0.76% 0.88% 0.81% 0.78% 0.83% 0.82% 0.82%
Calculation of return on average common equity             
(O) Net income applicable to common shares34,276  42,251  37,471  36,553  38,643  113,998  108,522 
(P) Add: Acquisition related charges, net of tax3,445  682  448      4,575   
(Q) Add: After-tax intangible asset amortization833  597  615  722  739  2,046  2,159 
(R) Tangible operating net income applicable to common shares38,554  43,530  38,534  37,275  39,382  120,619  110,681 
Total average shareholders' equity2,310,511  2,156,128  2,114,356  2,057,855  2,020,903  2,194,384  1,972,425 
Less: Average preferred stock(251,312) (134,586) (126,445) (126,467) (126,467) (171,238) (126,472)
(S) Total average common shareholders' equity2,059,199  2,021,542  1,987,911  1,931,388  1,894,436  2,023,146  1,845,953 
Less: Average intangible assets(490,583) (439,455) (436,456) (425,834) (419,125) (455,787) (402,848)
(T) Total average tangible common shareholders' equity1,568,616  1,582,087  1,551,455  1,505,554  1,475,311  1,567,359  1,443,105 
Return on average common equity, annualized  (O/S)6.60% 8.38% 7.64% 7.51% 8.09% 7.53% 7.86%
Return on average common equity, adjusted for acquisition related charges, annualized  ((O+P)/S)7.26% 8.52% 7.73% 7.51% 8.09% 7.82% 7.86%
Return on average tangible common equity, annualized ((O+Q)/T)8.88% 10.86% 9.96% 9.82% 10.59% 9.90% 10.25%
Return on average tangible common equity, adjusted for acquisition related charges, annualized  (R/T)9.73% 11.03% 10.07% 9.82% 10.59% 10.26% 10.25%
Calculation of net income per common share - diluted             
(U) Net income applicable to common shares - Diluted35,855  43,831  39,052  38,133  40,224  118,738  113,265 
Add: Acquisition related charges, net of tax3,445  682  448      4,575   
(V) Net income applicable to common shares - Diluted, adjusted for acquisition related charges39,300  44,513  39,500  38,133  40,224  123,313  113,265 
Weighted average common shares and effect of dilutive potential common shares (W)52,207  51,723  51,472  50,977  50,880  51,799  50,802 
Net income per common share - Diluted (U/W)0.69  0.85  0.76  0.75  0.79  2.29  2.23 
Net income per common share - Diluted, adjusted for acquisition related charges (V/W)0.75  0.86  0.77  0.75  0.79  2.38  2.23 

 

LOANS
Loan Portfolio Mix and Growth Rates
        % Growth
(Dollars in thousands) September 30,
2015
 December 31,
2014
 September 30,
2014
 From (1)
December 31,
2014
 From
September 30,
2014
Balance:          
Commercial $4,400,185  $3,924,394  $3,689,671  16% 19%
Commercial real-estate 5,307,566  4,505,753  4,510,375  24  18 
Home equity 797,465  716,293  720,058  15  11 
Residential real-estate 571,743  483,542  470,319  24  22 
Premium finance receivables - commercial 2,407,075  2,350,833  2,377,892  3  1 
Premium finance receivables - life insurance 2,700,275  2,277,571  2,134,405  25  27 
Consumer and other(2) 131,902  151,012  149,339  (17) (12)
Total loans, net of unearned income, excluding covered loans $16,316,211  $14,409,398  $14,052,059  18% 16%
Covered loans 168,609  226,709  254,605  (34) (34)
Total loans, net of unearned income $16,484,820  $14,636,107  $14,306,664  17% 15%
Mix:          
Commercial 27% 26% 26%    
Commercial real-estate 32  31  31     
Home equity 5  5  5     
Residential real-estate 3  3  3     
Premium finance receivables - commercial 15  16  17     
Premium finance receivables - life insurance 16  16  15     
Consumer and other(2) 1  1  1     
Total loans, net of unearned income, excluding covered loans 99% 98% 98%    
Covered loans 1  2  2     
Total loans, net of unearned income 100% 100% 100%    

(1) Annualized
(2) Includes autos, boats, snowmobiles and other indirect consumer loans as well as short-term accounts receivable financing.

           
As of September 30, 2015   % of
Total
Balance
 Nonaccrual > 90 Days
Past Due
and Still
Accruing
 Allowance
For Loan
Losses
Allocation
    
(Dollars in thousands) Balance 
Commercial:          
Commercial and industrial $2,646,275  27.3% $12,006  $  $21,880 
Franchise 222,001  2.3      3,145 
Mortgage warehouse lines of credit 136,614  1.4      1,022 
Community Advantage - homeowner associations 123,209  1.3      3 
Aircraft 6,371  0.1      8 
Asset-based lending 802,370  8.3  12    6,282 
Tax exempt 232,667  2.4      1,303 
Leases 205,786  2.1      169 
Other 1,953        12 
PCI - commercial loans (1) 22,939  0.2    217  166 
Total commercial $4,400,185  45.4% $12,018  $217  $33,990 
Commercial Real-Estate:          
Residential construction $61,271  0.6% $  $  $753 
Commercial construction 285,963  2.9  31    2,995 
Land 79,076  0.8  1,756    2,550 
Office 790,311  8.1  4,045    7,156 
Industrial 636,124  6.6  11,637    5,521 
Retail 785,842  8.1  2,022    5,254 
Multi-family 687,659  7.1  1,525    6,959 
Mixed use and other 1,820,328  18.7  7,601    12,079 
PCI - commercial real-estate (1) 160,992  1.7    13,547  794 
Total commercial real-estate $5,307,566  54.6% $28,617  $13,547  $44,061 
Total commercial and commercial real-estate $9,707,751  100.0% $40,635  $13,764  $78,051 
           
Commercial real-estate - collateral location by state:          
Illinois $4,053,531  76.4%      
Wisconsin 577,231  10.9       
Total primary markets $4,630,762  87.3%      
Florida 56,020  1.1       
Arizona 9,677  0.2       
Indiana 106,591  2.0       
Other (no individual state greater than 0.6%) 504,516  9.4       
Total $5,307,566  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. 

DEPOSITS
Deposit Portfolio Mix and Growth Rates
        % Growth
(Dollars in thousands) September 30,
2015
 December 31,
2014
 September 30,
2014
 From (1)
December 31,
2014
 From
September 30,
2014
Balance:          
Non-interest bearing $4,705,994  $3,518,685  $3,253,477  45% 45%
NOW and interest bearing demand deposits 2,231,258  2,236,089  2,086,099    7 
Wealth management deposits (2) 1,469,920  1,226,916  1,212,317  26  21 
Money market 4,001,518  3,651,467  3,744,682  13  7 
Savings 1,684,007  1,508,877  1,465,250  16  15 
Time certificates of deposit 4,135,772  4,139,810  4,303,421    (4)
Total deposits $18,228,469  $16,281,844  $16,065,246  16% 13%
Mix:          
Non-interest bearing 26% 22% 20%    
NOW and interest bearing demand deposits 12  14  13     
Wealth management deposits (2) 8  8  8     
Money market 22  22  23     
Savings 9  9  9     
Time certificates of deposit 23  25  27     
Total deposits 100% 100% 100%    

(1) Annualized
(2) Represents deposit balances of the Company's subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customers of The Chicago Trust Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts of the Banks.

Time Certificates of Deposit
Maturity/Re-pricing Analysis
As of September 30, 2015
 
(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 $2,177  $79,330  $144,798  $631,780  $858,085  0.53%
4-6 months   40,240    671,299  711,539  0.69%
7-9 months 36,504  27,980    511,261  575,745  0.63%
10-12 months 165,615  28,909    524,389  718,913  0.79%
13-18 months   23,819    613,561  637,380  0.96%
19-24 months 44,063  5,877    263,783  313,723  1.02%
24+ months 3,432  14,395    302,560  320,387  1.23%
Total $251,791  $220,550  $144,798  $3,518,633  $4,135,772  0.77%

(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. 

NET INTEREST INCOME

The following table presents a summary of Wintrust's average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the third quarter of 2015 compared to the second quarter of 2015 (sequential quarters) and third quarter of 2014 (linked quarters), respectively: 

 Average Balance 
for three months ended,
 Interest 
for three months ended,
 Yield/Rate
for three months ended,
(Dollars in thousands)September 30,
 2015
 June 30,
2015
 September 30,
 2014
 September 30,
2015
 June 30,
2015
 September 30,
2014
  September 30,
2015

 June 30,
2015
 September 30,
2014
Liquidity management  assets(1)(2)(7)$3,140,782  $2,709,176  $2,814,720  $18,165  $15,949  $14,423  2.29% 2.36% 2.03%
Other earning assets(2)(3)(7)30,990  32,115  28,702  234  283  232  3.00  3.54  3.21 
Loans, net of unearned income(2)(4)(7)16,509,001  15,632,875  14,359,467  165,572  156,970  151,540  3.98  4.03  4.19 
Covered loans174,768  202,663  262,310  2,605  3,181  5,309  5.91  6.30  8.03 
Total earning assets(7)$19,855,541  $18,576,829  $17,465,199  $186,576  $176,383  $171,504  3.73% 3.81% 3.90%
Allowance for loan and covered loan losses(106,091) (101,211) (96,463)            
Cash and due from banks251,289  236,242  237,402             
Other assets1,687,711  1,545,136  1,521,208             
Total assets$21,688,450  $20,256,996  $19,127,346             
                  
Interest-bearing deposits$13,489,651  $13,115,453  $12,695,780  $12,436  $11,996  $12,298  0.37% 0.37% 0.38%
Federal Home Loan Bank advances402,646  347,656  380,083  2,458  1,812  2,641  2.42  2.09  2.76 
Other borrowings272,782  193,660  54,653  1,045  787  200  1.52  1.63  1.45 
Subordinated notes140,000  140,000  140,000  1,776  1,777  1,776  5.08  5.07  5.07 
Junior subordinated debentures264,974  249,493  249,493  2,124  1,977  2,091  3.14  3.13  3.28 
Total interest-bearing liabilities$14,570,053  $14,046,262  $13,520,009  $19,839  $18,349  $19,006  0.54% 0.52% 0.56%
Non-interest bearing deposits4,473,632  3,725,728  3,233,937             
Other liabilities334,254  328,878  352,497             
Equity2,310,511  2,156,128  2,020,903             
Total liabilities and shareholders' equity$21,688,450  $20,256,996  $19,127,346             
Interest rate spread(5)(7)            3.19% 3.29% 3.34%
Net free funds/contribution(6)$5,285,488  $4,530,567  $3,945,190        0.14% 0.12% 0.12%
Net interest income/ margin(7)      $166,737  $158,034  $152,498  3.33% 3.41% 3.46%

(1) Liquidity management assets include available-for-sale securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading securities and available-for-sale securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014 were $1.2 million, $1.1 million and $828,000, respectively.
(3) Other earning assets include brokerage customer receivables and trading account securities.
(4) Loans, net of unearned income, include loans held-for-sale and non-accrual loans.
(5) Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(6) 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.
(7) See "Supplemental Financial Measures/Ratios" for additional information on this performance ratio.

The following table presents a summary of Wintrust's average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014:

 Average Balance
for nine months ended,
 Interest 
for nine months ended,
 Yield/Rate 
for nine months ended,
(Dollars in thousands)September 30,
 2015
 September 30,
2014
 September 30,
 2015
 September 30,
2014
 September 30,
 2015
 September 30,
2014
Liquidity management assets(1)(2)(7)$2,907,284  $2,690,422  $50,328  $43,805  2.31% 2.18%
Other earning assets(2)(3)(7)30,286  28,363  718  661  3.17  3.12 
Loans, net of unearned income(2)(4)(7)15,730,009  13,786,669  473,857  437,030  4.03  4.24 
Covered loans197,069  293,349  9,474  19,345  6.43  8.82 
Total earning assets(7)$18,864,648  $16,798,803  $534,377  $500,841  3.79% 3.99%
Allowance for loan and covered loan losses(101,440) (101,624)        
Cash and due from banks245,745  231,199         
Other assets1,588,430  1,546,231         
Total assets$20,597,383  $18,474,609         
            
Interest-bearing deposits$13,158,498  $12,369,241  $36,246  $35,980  0.37% 0.39%
Federal Home Loan Bank advances369,443  405,246  6,426  7,989  2.33  2.64 
Other borrowings220,763  148,549  2,620  1,460  1.59  1.31 
Subordinated notes140,000  56,410  5,328  2,130  5.07  5.03 
Junior subordinated debentures254,710  249,493  6,034  6,137  3.12  3.24 
Total interest-bearing liabilities$14,143,414  $13,228,939  $56,654  $53,696  0.53% 0.54%
Non-interest bearing deposits3,931,194  2,948,961         
Other liabilities328,391  324,284         
Equity2,194,384  1,972,425         
Total liabilities and shareholders' equity$20,597,383  $18,474,609         
Interest rate spread(5)(7)        3.26% 3.45%
Net free funds/contribution(6)$4,721,234  $3,569,864      0.13% 0.11%
Net interest income/ margin(7)    $477,723  $447,145  3.39% 3.56%

(1) Liquidity management assets include available-for-sale securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading securities and available-for-sale securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the nine months ended September 30, 2015, and September 30, 2014 were $3.4 million and $2.3 million, respectively.
(3) Other earning assets include brokerage customer receivables and trading account securities.
(4) Loans, net of unearned income, include loans held-for-sale and non-accrual loans.
(5) Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(6) 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.
(7) See "Supplemental Financial Measures/Ratios" for additional information on this performance ratio

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 at September 30, 2015, June 30, 2015 and September 30, 2014 is as follows:

      
Static Shock Scenario +200
Basis 
Points
 +100
 Basis
 Points
 -100
Basis
 Points
September 30, 2015 15.6% 8.0% (11.1)%
June 30, 2015 14.8% 7.3% (10.5)%
September 30, 2014 13.7% 6.2% (11.1)%

 

Ramp Scenario+200
Basis
Points
 +100
Basis
Points
 -100
Basis
Points
September 30, 20156.7% 3.6% (4.0)%
June 30, 20156.4% 3.3% (4.0)%
September 30, 20145.0% 2.6% (5.0)%


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). 

NON-INTEREST INCOME

The following table presents non-interest income by category for the periods presented:

  Three Months Ended        
  September 30, June 30, September 30, Q3 2015 compared to
Q2 2015
 Q3 2015 compared to
Q3 2014
(Dollars in thousands)  2015   2015   2014   $ Change  % Change   $ Change  % Change 
Brokerage $6,579  $6,750  $7,185  $(171) (3)% $(606) (8)%
Trust and asset management 11,664  11,726  10,474  (62) (1) 1,190  11 
Total wealth management 18,243  18,476  17,659  (233) (1) 584  3 
Mortgage banking 27,887  36,007  26,691  (8,120) (23) 1,196  4 
Service charges on deposit accounts 7,403  6,474  6,084  929  14  1,319  22 
(Losses) gains on available-for-sale securities, net (98) (24) (153) (74) NM 55  (36)
Fees from covered call options 2,810  4,565  2,107  (1,755) (38) 703  33 
Trading (losses) gains, net (135) 160  293  (295) NM (428) NM
Other:              
Interest rate swap fees 2,606  2,347  1,207  259  11  1,399  NM
BOLI 212  2,180  652  (1,968) (90) (440) (67)
Administrative services 1,072  1,053  990  19  2  82  8 
Miscellaneous 4,953  5,775  2,422  (822) (14) 2,531  NM
Total Other 8,843  11,355  5,271  (2,512) (22) 3,572  68 
Total Non-Interest Income $64,953  $77,013  $57,952  $(12,060) (16)% $7,001  12%

NM - Not Meaningful

  Nine Months Ended    
  September 30, September 30, Q3 2015 compared to
Q3 2014
(Dollars in thousands)  2015   2014   $ Change  % Change 
Brokerage $20,181  $22,546  $(2,365) (10)%
Trust and asset management 34,638  30,148  4,490  15 
Total wealth management 54,819  52,694  2,125  4 
Mortgage banking 91,694  66,923  24,771  37 
Service charges on deposit accounts 20,174  17,118  3,056  18 
Gains (losses) on available-for-sale securities, net 402  (522) 924  NM
Fees from covered call options 11,735  4,893  6,842  NM
Trading losses, net (452) (1,102) 650  (59)
Other:        
Interest rate swap fees 7,144  3,350  3,794  NM
BOLI 3,158  2,039  1,119  55 
Administrative services 3,151  2,786  365  13 
Miscellaneous 14,682  9,404  5,278  56 
Total Other 28,135  17,579  10,556  60 
Total Non-Interest Income $206,507  $157,583  $48,924  31%

The significant changes in non-interest income for the quarter ended September 30, 2015 compared to the quarters ended June 30, 2015 and September 30, 2014 are discussed below.

Wealth management revenue totaled $18.2 million in the third quarter of 2015 compared to $18.5 million in the second quarter of 2015, a decrease of 1%, and $17.7 million in the third quarter of 2014, an increase of 3%.  The decrease during the current period as compared to the second quarter of 2015 is primarily attributable to volatile market conditions and lower customer trading activity in the current quarter.  The increase during the current period as compared to the third quarter of 2014 is primarily attributable to growth in assets under management due to new customers.  Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors and the brokerage commissions, managed money fees and insurance product commissions at Wayne Hummer Investments.

For the quarter ended September 30, 2015, mortgage banking revenue totaled $27.9 million, a decrease of $8.1 million, or 23%, when compared to the second quarter of 2015, and an increase of $1.2 million, or 4%, when compared to the third quarter of 2014.  The decrease in mortgage banking revenue in the third quarter of 2015 as compared to the second quarter of 2015  resulted primarily from lower origination volumes in the current quarter. Mortgage loans originated or purchased for sale were $973.7 million in the current quarter as compared to $1.2 billion in the second quarter of 2015 and $904.8 million in the third quarter of 2014. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. 

Service charges on deposit accounts totaled $7.4 million in the third quarter of 2015, an increase of $929,000 and $1.3 million compared to the quarters ended June 30, 2015 and September 30, 2014, respectively.  The increase in the current quarter is mostly a result of higher account analysis fees on deposit accounts which have increased as a result of the Company's commercial banking initiative and recent acquisitions.

Fees from covered call option transactions totaled $2.8 million for the third quarter of 2015, compared to $4.6 million for the second quarter of 2015 and $2.1 million for the third quarter of 2014. 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 effectively 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. Fees from covered call options decreased in the current quarter compared to the second quarter of 2015 primarily as a result of selling call options against a smaller value of underlying securities resulting in lower premiums received by the Company. There were no outstanding call option contracts at September 30, 2015, June 30, 2015 and September 30, 2014.

The Company recognized $135,000 of trading losses in the third quarter of 2015 compared to trading gains of $160,000 in the second quarter of 2015 and trading gains of $293,000 in the third quarter of 2014. Trading gains and losses recorded by the Company primarily result from fair value adjustments related to interest rate derivatives not designated as accounting hedges, primarily interest rate cap instruments that the Company uses to manage interest rate risk, specifically in the event of future increases in short-term interest rates.  The change in value of the cap derivatives reflects the present value of expected cash flows over the remaining life of the caps.  These expected cash flows are derived from the expected path for and a measure of volatility for short-term interest rates.

Other non-interest income totaled $8.8 million in the third quarter of 2015 compared to $11.4 million in the second quarter of 2015 and $5.3 million in the third quarter of 2014.  Other non-interest income decreased in the third quarter of 2015 as compared to the second quarter of 2015, primarily due to lower net gains on partnership investments in the current quarter and from the Company recognizing a $1.5 million BOLI death benefit in the second quarter of 2015.  Other non-interest income increased in the third quarter of 2015 as compared to the third quarter of 2014, primarily due to an increase in swap fee revenues resulting from interest rate hedging transactions related to both customer-based trades and the related matched trades with inter-bank dealer counterparties as well as higher net gains on partnership investments.  

NON-INTEREST EXPENSE

The following table presents non-interest expense by category for the periods present:

  Three Months Ended        
  September 30, June 30, September 30, Q3 2015 compared to
Q2 2015
 Q3 2015 compared to
Q3 2014
(Dollars in thousands) 2015 2015 2014 $ Change % Change $ Change % Change
Salaries and employee benefits:              
Salaries $53,028  $46,617  $45,471  $6,411  14% $7,557  17%
Commissions and incentive compensation 30,035  33,387  27,885  (3,352) (10) 2,150  8 
Benefits 14,686  14,417  12,620  269  2  2,066  16 
Total salaries and employee benefits 97,749  94,421  85,976  3,328  4  11,773  14 
Equipment 8,887  7,914  7,570  973  12  1,317  17 
Occupancy, net 12,066  11,401  10,446  665  6  1,620  16 
Data processing 8,127  6,081  4,765  2,046  34  3,362  71 
Advertising and marketing 6,237  6,406  3,528  (169) (3) 2,709  77 
Professional fees 4,100  5,074  4,035  (974) (19) 65  2 
Amortization of other intangible assets 1,350  934  1,202  416  45  148  12 
FDIC insurance 3,035  3,047  3,211  (12)   (176) (5)
OREO expense, net (367) 841  581  (1,208) NM (948) NM
Other:              
Commissions - 3rd party brokers 1,364  1,403  1,621  (39) (3) (257) (16)
Postage 1,927  1,578  1,427  349  22  500  35 
Miscellaneous 15,499  15,197  14,138  302  2  1,361  10 
Total other 18,790  18,178  17,186  612  3  1,604  9 
Total Non-Interest Expense $159,974  $154,297  $138,500  $5,677  4% $21,474  16%

 

  Nine months ended    
  September 30, September 30, $ %
(Dollars in thousands) 2015 2014 Change Change
Salaries and employee benefits:        
Salaries $146,493  $132,556  $13,937  11%
Commissions and incentive compensation 88,916  74,816  14,100  19 
Benefits 46,891  40,501  6,390  16 
Total salaries and employee benefits 282,300  247,873  34,427  14 
Equipment 24,637  22,196  2,441  11 
Occupancy, net 35,818  31,289  4,529  14 
Data processing 19,656  14,023  5,633  40 
Advertising and marketing 16,550  9,902  6,648  67 
Professional fees 13,838  11,535  2,303  20 
Amortization of other intangible assets 3,297  3,521  (224) (6)
FDIC insurance 9,069  9,358  (289) (3)
OREO expense, net 1,885  7,047  (5,162) (73)
Other:        
Commissions - 3rd party brokers 4,153  4,911  (758) (15)
Postage 5,138  4,321  817  19 
Miscellaneous 45,248  37,430  7,818  21 
Total other 54,539  46,662  7,877  17 
Total Non-Interest Expense $461,589  $403,406  $58,183  14%

The significant changes in non-interest expense for the quarter ended September 30, 2015 compared to the quarters ended June 30, 2015 and September 30, 2014 are discussed below.

Salaries and employee benefits expense increased $3.3 million, or 4%, in the third quarter of 2015 compared to the second quarter of 2015. In addition to acquisition related charges of $1.7 million, the increase was primarily a result of a $5.1 million increase in salaries as a result of various acquisitions and additional staffing as the Company grows, partially offset by a $3.6 million decrease in commissions and incentive compensation primarily attributable to lower commissions as a result of decreased mortgage loan origination volume. Salaries and employee benefits expense increased $11.8 million, or 14%, compared to the third quarter of 2014 primarily as a result of the $1.7 million in acquisition related charges during the period as well as an additional $6.2 million increase in salaries as a result of various acquisitions and additional staffing as the Company grows, a $1.9 million increase in commissions and incentive compensation primarily attributable to higher commissions as a result of increased mortgage loan origination volume, and a $2.0 million increase in employee benefits resulting from higher insurance costs. 

Equipment expense totaled $8.9 million for the third quarter of 2015, an increase of $973,000 compared to the second quarter of 2015 and an increase of $1.3 million compared to the third quarter of 2014. The increase in the current quarter compared to the prior year quarter is primarily related to the impact of the recent acquisitions and increased software license fees and higher depreciation as a result of equipment purchases.  Equipment expense includes depreciation on equipment, maintenance and repairs, equipment rental and software license fees. 

Occupancy expense for the third quarter of 2015 was $12.1 million, an increase of $665,000, or 6%, compared to the second quarter of 2015 and an increase of $1.6 million, or 16%, compared to the same period in 2014.  Occupancy expense increased in the current quarter compared to the prior quarter due to property taxes and additional depreciation expenses on owned locations, including those obtained in the Company's acquisitions. The increase in the current quarter as compared to the prior year quarter is primarily the result of increased rent expense on leased properties as well as additional depreciation expenses on owned locations including those obtained in the Company's acquisitions. Occupancy expense includes depreciation on premises, real estate taxes, utilities and maintenance of premises, as well as net rent expense for leased premises.

Data processing expenses totaled $8.1 million in the third quarter of 2015 compared to $6.1 million recorded in the second quarter of 2015 and $4.8 million recorded in the third quarter of 2014. The amount of data processing expenses incurred increased due to $2.7 million and $653,000 of additional expenses recorded in the third quarter of 2015 and the second quarter of 2015, respectively, related to bank acquisition transactions as well as overall growth of loan and deposit accounts. 

Advertising and marketing expenses totaled $6.2 million in the third quarter of 2015, a decrease of $169,000 compared to the second quarter of 2015 and an increase of $2.7 million compared to the third quarter of 2014.  The increase in the current quarter compared to the prior year quarter relates primarily to expenses for community-related advertisements and sponsorships. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities, the Company's various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the type of marketing programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

Professional fees for the third quarter of 2015 were $4.1 million, compared to $5.1 million for the second quarter of 2015 and $4.0 million in the third quarter of 2014. The decrease in professional fees in the current quarter as compared to the second quarter of 2015 is due to a decrease in legal expenses, including legal fees incurred in connection with  acquisitions as well as lower professional tax preparation fees. The majority of legal work for the acquisitions completed early in the third quarter of 2015 was performed in prior quarters of 2015.  These acquisition related professional fees totaled $335,000 in the third quarter of 2015 compared to $417,000 in the second quarter of 2015. Professional fees include legal, audit and tax fees, external loan review costs and normal regulatory exam assessments.

OREO expense totaled $(367,000) in the third quarter of 2015 compared to OREO expense of $841,000 recorded in the second quarter of 2015 and $581,000 recorded in the third quarter of 2014.  OREO expense was lower in the current quarter compared to the quarter ended June 30, 2015 and September 30, 2014 primarily due to higher gains recorded on  non-covered OREO sales in the current quarter and lower expenses to maintain OREO properties.  OREO costs include all costs related to obtaining, maintaining and selling other real estate owned properties.    

Miscellaneous expense in the third quarter of 2015 increased $302,000, or 2%, compared to the quarter ended June 30, 2015 and increased $1.4 million, or 10%, compared to the quarter ended September 30, 2014.  The increase in the current quarter as compared to the prior year quarter is primarily a result of higher travel and entertainment expenses and increased costs related to insurance and donations. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors' fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses and lending origination costs that are not deferred. 

ASSET QUALITY

Allowance for Credit Losses, excluding covered loans

  Three Months Ended Nine Months Ended
  September 30, June 30, September 30, September 30, September 30,
(Dollars in thousands) 2015 2015 2014 2015 2014
Allowance for loan losses at beginning of period $100,204  $94,446  $92,253  $91,705  $96,922 
Provision for credit losses 8,665  9,701  6,028  24,551  16,145 
Other adjustments (153) (93) (335) (494) (588)
Reclassification from (to) allowance for unfunded lending-related commitments (42) 4  62  (151) (102)
Charge-offs:          
Commercial 964  1,243  832  2,884  3,864 
Commercial real estate 1,948  856  4,510  3,809  11,354 
Home equity 1,116  1,847  748  3,547  3,745 
Residential real estate 1,138  923  205  2,692  1,120 
Premium finance receivables - commercial 1,595  1,526  1,557  4,384  4,259 
Premium finance receivables - life insurance          
Consumer and other 116  115  250  342  636 
Total charge-offs 6,877  6,510  8,102  17,658  24,978 
Recoveries:          
Commercial 462  285  296  1,117  883 
Commercial real estate 213  1,824  275  2,349  762 
Home equity 42  39  99  129  478 
Residential real estate 136  16  111  228  316 
Premium finance receivables - commercial 278  458  289  1,065  920 
Premium finance receivables - life insurance 16    1  16  5 
Consumer and other 52  34  42  139  256 
Total recoveries 1,199  2,656  1,113  5,043  3,620 
Net charge-offs (5,678) (3,854) (6,989) (12,615) (21,358)
Allowance for loan losses at period end $102,996  $100,204  $91,019  $102,996  $91,019 
Allowance for unfunded lending-related commitments at period end 926  884  822  926  822 
Allowance for credit losses at period end $103,922  $101,088  $91,841  $103,922  $91,841 
Annualized net charge-offs by category as a percentage of its own respective category's average:          
Commercial 0.05% 0.09% 0.06% 0.06% 0.11%
Commercial real estate 0.13  (0.08) 0.38  0.04  0.33 
Home equity 0.55  1.01  0.36  0.62  0.61 
Residential real estate 0.42  0.39  0.05  0.37  0.15 
Premium finance receivables - commercial 0.21  0.18  0.20  0.18  0.19 
Premium finance receivables - life insurance          
Consumer and other 0.17  0.23  0.49  0.17  0.30 
Total loans, net of unearned income, excluding covered loans 0.14% 0.10% 0.19% 0.11% 0.21%
Net charge-offs as a percentage of the provision for credit losses 65.53% 39.73% 115.95% 51.39% 132.29%
Loans at period-end, excluding covered loans $16,316,211  $15,513,650  $14,052,059     
Allowance for loan losses as a percentage of loans at period end 0.63% 0.65% 0.65%    
Allowance for credit losses as a percentage of loans at period end 0.64% 0.65% 0.65%    
              

The allowance for credit losses, excluding the allowance for covered loan 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, excluding the provision for covered loan 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).

The provision for credit losses, excluding the provision for covered loan losses, totaled $8.7 million for the third quarter of 2015 compared to $9.7 million for the second quarter of 2015 and $6.0 million for the third quarter of 2014. The higher provision for credit losses in the third quarter of 2015 compared to the same period of 2014 was primarily due to loan growth since the prior period.

Net charge-offs as a percentage of loans, excluding covered loans, for the third quarter of 2015 totaled 14 basis points on an annualized basis compared to ten basis points on an annualized basis in the second quarter of 2015 and 19 basis points on an annualized basis in the third quarter of 2014.  Net charge-offs totaled $5.7 million in the third quarter of 2015, a $1.8 million increase from $3.9 million in the second quarter of 2015 and a $1.3 million decrease from $7.0 million in the third quarter of 2014.

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.

The Company also provides a provision for covered loan losses on covered loans and maintains an allowance for covered loan losses on covered loans. Please see "Covered Assets" later in this document for more detail.

The following table presents the provision for credit losses and allowance for credit losses by component for the periods presented:

  Three months ended Nine months ended
  September 30, June 30, September 30, September 30, September 30,
(Dollars in thousands) 2015 2015 2014 2015 2014
Provision for loan losses $8,623  $9,705  $6,090  $24,400  $16,043 
Provision for unfunded lending-related commitments 42  (4) (62) 151  102 
Provision for covered loan losses (343) (219) (164) (668) (1,741)
Provision for credit losses $8,322  $9,482  $5,864  $23,883  $14,404 
           
      Period End
      September 30, June 30, September 30,
      2015 2015 2014
Allowance for loan losses $102,996  $100,204  $91,019 
Allowance for unfunded lending-related commitments 926  884  822 
Allowance for covered loan losses 2,918  2,215  2,655 
Allowance for credit losses $106,840  $103,303  $94,496 
             

The tables below summarize the calculation of allowance for loan losses for the Company's core loan portfolio and consumer, niche and purchased loan portfolio as of September 30, 2015 and June 30, 2015.

  As of September 30, 2015
  Recorded Calculated As a percentage
of its own respective
(Dollars in thousands) Investment Allowance category's balance
Commercial:(1)      
Commercial and industrial $2,579,208  $21,875  0.85%
Asset-based lending 797,301  6,282  0.79 
Tax exempt 230,878  1,303  0.56 
Leases 205,612  169  0.08 
Other 1,953  12  0.61 
Commercial real-estate:(1)      
Residential construction 60,072  753  1.25 
Commercial construction 283,689  2,995  1.06 
Land 73,923  2,550  3.45 
Office 762,734  7,154  0.94 
Industrial 614,619  5,515  0.90 
Retail 753,009  5,254  0.70 
Multi-family 650,287  6,951  1.07 
Mixed use and other 1,517,265  12,077  0.80 
Home equity(1) 694,203  12,205  1.76 
Residential real-estate(1) 518,756  4,580  0.88 
Total core loan portfolio $9,743,509  $89,675  0.92%
Commercial:      
Franchise $222,001  $3,145  1.42%
Mortgage warehouse lines of credit 136,614  1,022  0.75 
Community Advantage - homeowner associations 123,209  3   
Aircraft 6,371  8  0.13 
Purchased non-covered commercial loans (2) 97,038  171  0.18 
Commercial real-estate:      
Purchased non-covered commercial real-estate (2) 591,968  812  0.14 
Purchased non-covered home equity (2) 103,262  18  0.02 
Purchased non-covered residential real-estate (2) 52,987  6  0.01 
Premium finance receivables      
U.S. commercial insurance loans 2,127,969  5,458  0.26 
Canada commercial insurance loans (2) 279,106  583  0.21 
Life insurance loans (1) 2,326,689  1,040  0.04 
Purchased life insurance loans (2) 373,586     
Consumer and other (1) 127,011  1,054  0.83 
Purchased non-covered consumer and other (2) 4,891  1  0.02 
Total consumer, niche and purchased loan portfolio $6,572,702  $13,321  0.20%
Total loans, net of unearned income, excluding covered loans $16,316,211  $102,996  0.63%
Non-accretable credit discounts on purchased loans reported in accordance with ASC 310-30, excluding covered loans   $30,405   
Total allowance for loan losses and non-accretable credit discounts on purchased loans, excluding covered loans   $133,401  0.82%

(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.

  As of June 30, 2015
  Recorded Calculated As a percentage
of its own respective
(Dollars in thousands) Investment Allowance category's balance
Commercial:(1)      
Commercial and industrial $2,486,860  $21,691  0.87%
Asset-based lending 830,378  6,382  0.77 
Tax exempt 198,520  1,186  0.60 
Leases 187,630  166  0.09 
Other 2,772  20  0.72 
Commercial real-estate:(1)      
Residential construction 56,500  687  1.22 
Commercial construction 247,982  2,656  1.07 
Land 81,630  2,513  3.08 
Office 726,155  7,127  0.98 
Industrial 608,566  4,524  0.74 
Retail 718,990  5,002  0.70 
Multi-family 634,144  7,172  1.13 
Mixed use and other 1,466,366  12,164  0.83 
Home equity(1) 692,692  12,270  1.77 
Residential real-estate(1) 469,265  4,966  1.06 
Total core loan portfolio $9,408,450  $88,526  0.94%
Commercial:      
Franchise $228,599  $1,852  0.81%
Mortgage warehouse lines of credit 213,797  1,571  0.73 
Community Advantage - homeowner associations 114,883  3   
Aircraft 6,831  9  0.13 
Purchased non-covered commercial loans (2) 60,074  20  0.03 
Commercial real-estate:      
Purchased non-covered commercial real-estate (2) 310,257  353  0.11 
Purchased non-covered home equity (2) 19,658  18  0.09 
Purchased non-covered residential real-estate (2) 33,750  53  0.16 
Premium finance receivables      
U.S. commercial insurance loans 2,163,089  5,502  0.25 
Canada commercial insurance loans (2) 297,319  620  0.21 
Life insurance loans (1) 2,153,155  799  0.04 
Purchased life insurance loans (2) 384,320     
Consumer and other (1) 115,675  877  0.76 
Purchased non-covered consumer and other (2)  3,793   1  0.03 
Total consumer, niche and purchased loan portfolio $6,105,200  $11,678  0.19%
Total loans, net of unearned income, excluding covered loans $15,513,650  $100,204  0.65%
Non-accretable credit discounts on purchased loans reported in accordance with ASC 310-30, excluding covered loans   $14,474   
Total allowance for loan losses and non-accretable credit discounts on purchased loans, excluding covered loans   $114,678  0.74%

(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.

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 was shown on the previous pages as of September 30, 2015 and June 30, 2015.

The decrease in the allowance for loan losses to core loans in the third quarter of 2015 compared to the second quarter of 2015 was attributable to a decrease in required ASC 310 reserves (specific reserves) within the core portfolio.

Current credit quality metrics are comparable to the pre-credit crisis levels reported between 2005 and 2008.  However, we are able to carry a slightly lower ratio of allowance for loan losses to total loans than during the pre-credit crisis period as the result of the fact that the mix of the Company's loan portfolio is now more heavily weighted toward niche and purchased loans which historically require lower reserves.  The niche and purchased components of our total loan portfolio now comprise 40% as compared to 23% of the total loan portfolio at December 31, 2005.  Our current loan portfolio is comprised of a core portion totaling $9.7 billion with a 0.92% of allowance for loan losses and a niche and purchased component totaling $6.6 billion that requires 0.20% of allowance for loan losses.

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 instead of as an increase to the allowance for loan losses. For analysis purposes, the Company has combined the non-accretable credit discounts recorded on purchased loans with the total allowance for loan losses in the previous tables to present the total credit reserves available on its loan portfolio. The total allowance for loan losses and non-accretable credit discounts on purchased loans was 0.82% of the total loan portfolio as of September 30, 2015 as compared to 0.74% as of June 30, 2015. The Company expects the total allowance for loan losses and non-accretable credit discounts on purchased loans to total loans ratio to increase in periods that have acquisitions and decrease in periods without acquisitions, based on the performance of the purchased loan portfolios.

The table below shows the aging of the Company's loan portfolio at September 30, 2015:

    90+ days 60-89 30-59    
As of September 30, 2015   and still days past days past    
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:            
Commercial            
Commercial and industrial $12,006  $  $2,731  $9,331  $2,622,207  $2,646,275 
Franchise     80  376  221,545  222,001 
Mortgage warehouse lines of credit         136,614  136,614 
Community Advantage - homeowners association     44    123,165  123,209 
Aircraft       378  5,993  6,371 
Asset-based lending 12    1,313  247  800,798  802,370 
Tax exempt         232,667  232,667 
Leases       89  205,697  205,786 
Other         1,953  1,953 
PCI - commercial (1)   217    39  22,683  22,939 
Total commercial 12,018  217  4,168  10,460  4,373,322  4,400,185 
Commercial real-estate            
Residential construction       1,141  60,130  61,271 
Commercial construction 31      2,394  283,538  285,963 
Land 1,756      2,207  75,113  79,076 
Office 4,045    10,861  2,362  773,043  790,311 
Industrial 11,637    786  897  622,804  636,124 
Retail 2,022    1,536  821  781,463  785,842 
Multi-family 1,525    512  744  684,878  687,659 
Mixed use and other 7,601    2,340  12,871  1,797,516  1,820,328 
PCI - commercial real-estate (1)   13,547  299  583  146,563  160,992 
Total commercial real-estate 28,617  13,547  16,334  24,020  5,225,048  5,307,566 
Home equity 8,365    811  4,124  784,165  797,465 
Residential real estate 14,557    1,017  1,195  551,292  568,061 
PCI - residential real estate (1)   424  323  411  2,524  3,682 
Premium finance receivables            
Commercial insurance loans 13,751  8,231  6,664  13,659  2,364,770  2,407,075 
Life insurance loans     9,656  2,627  2,314,406  2,326,689 
PCI - life insurance loans (1)         373,586  373,586 
Consumer and other 297  140  56  935  130,474  131,902 
Total loans, net of unearned income, excluding covered loans $77,605  $22,559  $39,029  $57,431  $16,119,587  $16,316,211 
Covered loans 6,540  7,626  1,392  802  152,249  168,609 
Total loans, net of unearned income $84,145  $30,185  $40,421  $58,233  $16,271,836  $16,484,820 
             

(1) 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.

As of September 30, 2015
Aging as a % of Loan Balance
 Nonaccrual 90+ days
and still
accruing
 60-89
days past
due
 30-59
days past
due
 Current Total Loans
Commercial            
Commercial and industrial 0.5% % 0.1% 0.4% 99.0% 100.0%
Franchise       0.2  99.8  100.0 
Mortgage warehouse lines of credit         100.0  100.0 
Community Advantage - homeowners association         100.0  100.0 
Aircraft       5.9  94.1  100.0 
Asset-based lending     0.2    99.8  100.0 
Tax exempt         100.0  100.0 
Leases         100.0  100.0 
Other         100.0  100.0 
PCI - commercial(1)   0.9    0.2  98.9  100.0 
Total commercial 0.3    0.1  0.2  99.4  100.0 
Commercial real-estate            
Residential construction       1.9  98.1  100.0 
Commercial construction       0.8  99.2  100.0 
Land 2.2      2.8  95.0  100.0 
Office 0.5    1.4  0.3  97.8  100.0 
Industrial 1.8    0.1  0.1  98.0  100.0 
Retail 0.3    0.2  0.1  99.4  100.0 
Multi-family 0.2    0.1  0.1  99.6  100.0 
Mixed use and other 0.4    0.1  0.7  98.8  100.0 
PCI - commercial real-estate (1)   8.4  0.2  0.4  91.0  100.0 
Total commercial real-estate 0.5  0.3  0.3  0.5  98.4  100.0 
Home equity 1.0    0.1  0.5  98.4  100.0 
Residential real estate 2.6    0.2  0.2  97.0  100.0 
PCI - residential real estate(1)   11.5  8.8  11.2  68.5  100.0 
Premium finance receivables            
Commercial insurance loans 0.6  0.4  0.3  0.6  98.1  100.0 
Life insurance loans     0.4  0.1  99.5  100.0 
PCI - life insurance loans (1)         100.0  100.0 
Consumer and other 0.2  0.1    0.7  99.0  100.0 
Total loans, net of unearned income, excluding covered loans 0.5% 0.1% 0.2% 0.4% 98.8% 100.0%
Covered loans 3.9  4.5  0.8  0.5  90.3  100.0 
Total loans, net of unearned income 0.5% 0.2% 0.2% 0.4% 98.7% 100.0%

As of September 30, 2015, $39.0 million of all loans, excluding covered loans, or 0.2%, were 60 to 89 days past due and $57.4 million, or 0.4%, were 30 to 59 days (or one payment) past due. As of June 30, 2015, $21.0 million of all loans, excluding covered loans, or 0.1%, were 60 to 89 days past due and $52.2 million, or 0.3%, were 30 to 59 days (or one payment) past due. The majority of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company's internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company's home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at September 30, 2015 that are current with regard to the contractual terms of the loan agreement represent 98.4% of the total home equity portfolio. Residential real estate loans at September 30, 2015 that are current with regards to the contractual terms of the loan agreements comprise 96.9% of total residential real estate loans outstanding, which includes purchased non-covered residential real-estate.

The table below shows the aging of the Company's loan portfolio at June 30, 2015:

    90+ days 60-89 30-59    
As of June 30, 2015   and still days past days past    
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:            
Commercial            
Commercial and industrial $4,424  $  $1,846  $6,027  $2,522,162  $2,534,459 
Franchise 905    113  396  227,185  228,599 
Mortgage warehouse lines of credit         213,797  213,797 
Community Advantage - homeowners association         114,883  114,883 
Aircraft         6,831  6,831 
Asset-based lending     1,767  7,423  823,265  832,455 
Tax exempt         199,185  199,185 
Leases 65        187,565  187,630 
Other         2,772  2,772 
PCI - commercial(1)   474    233  9,026  9,733 
Total commercial 5,394  474  3,726  14,079  4,306,671  4,330,344 
Commercial real-estate            
Residential construction       4  57,598  57,602 
Commercial construction 19        249,524  249,543 
Land 2,035    1,123  2,399  82,280  87,837 
Office 6,360  701  163  2,601  744,992  754,817 
Industrial 2,568    18  484  624,337  627,407 
Retail 2,352    896  2,458  744,285  749,991 
Multi-family 1,730    933  223  665,562  668,448 
Mixed use and other 8,119    2,405  3,752  1,577,846  1,592,122 
PCI - commercial real-estate (1)   15,646  3,490  2,798  40,889  62,823 
Total commercial real-estate 23,183  16,347  9,028  14,719  4,787,313  4,850,590 
Home equity 5,695    511  3,365  702,779  712,350 
Residential real estate 16,631    2,410  1,205  480,427  500,673 
PCI - residential real estate (1)   264  84    1,994  2,342 
Premium finance receivables            
Commercial insurance loans 15,156  9,053  5,048  11,071  2,420,080  2,460,408 
Life insurance loans   351    6,823  2,145,981  2,153,155 
PCI - life insurance loans (1)         384,320  384,320 
Consumer and other 280  110  196  919  117,963  119,468 
Total loans, net of unearned income, excluding covered loans $66,339  $26,599  $21,003  $52,181  $15,347,528  $15,513,650 
Covered loans 6,353  10,030  1,333  1,720  173,974  193,410 
Total loans, net of unearned income $72,692  $36,629  $22,336  $53,901  $15,521,502  $15,707,060 

(1) 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.

As of June 30, 2015
Aging as a % of Loan Balance:
 Nonaccrual 90+ days
and still
accruing
 60-89
days past
due
 30-59
days past
due
 Current Total Loans
Commercial            
Commercial and industrial 0.2% % 0.1% 0.2% 99.5% 100.0%
Franchise 0.4      0.2  99.4  100.0 
Mortgage warehouse lines of credit         100.0  100.0 
Community Advantage - homeowners association         100.0  100.0 
Aircraft         100.0  100.0 
Asset-based lending     0.2  0.9  98.9  100.0 
Tax exempt         100.0  100.0 
Leases         100.0  100.0 
Other         100.0  100.0 
PCI - commercial(1)   4.9    2.4  92.7  100.0 
Total commercial 0.1    0.1  0.3  99.5  100.0 
Commercial real-estate            
Residential construction         100.0  100.0 
Commercial construction         100.0  100.0 
Land 2.3    1.3  2.7  93.7  100.0 
Office 0.8  0.1    0.3  98.8  100.0 
Industrial 0.4      0.1  99.5  100.0 
Retail 0.3    0.1  0.3  99.3  100.0 
Multi-family 0.3    0.1    99.6  100.0 
Mixed use and other 0.5    0.2  0.2  99.1  100.0 
PCI - commercial real-estate (1)   24.9  5.6  4.5  65.0  100.0 
Total commercial real-estate 0.5  0.3  0.2  0.3  98.7  100.0 
Home equity 0.8    0.1  0.5  98.6  100.0 
Residential real estate 3.3    0.5  0.2  96.0  100.0 
PCI - residential real estate (1)   11.3  3.6    85.1  100.0 
Premium finance receivables            
Commercial insurance loans 0.6  0.5  0.2  0.4  98.3  100.0 
Life insurance loans       0.3  99.7  100.0 
PCI - life insurance loans (1)         100.0  100.0 
Consumer and other 0.2  0.1  0.2  0.8  98.7  100.0 
Total loans, net of unearned income, excluding covered loans 0.4% 0.2% 0.1% 0.3% 99.0% 100.0%
Covered loans 3.3  5.2  0.7  0.9  89.9  100.0 
Total loans, net of unearned income 0.5% 0.2% 0.1% 0.3% 98.9% 100.0%

Non-performing Assets, excluding covered assets

The following table sets forth Wintrust's non-performing assets and troubled debt restructurings  ("TDRs") performing under the contractual terms of the loan agreement, excluding covered assets and non-covered PCI loans, at the dates indicated.

  September 30, June 30, September 30,
(Dollars in thousands) 2015 2015 2014
Loans past due greater than 90 days and still accruing(1):      
Commercial $  $  $ 
Commercial real-estate   701   
Home equity      
Residential real-estate      
Premium finance receivables - commercial 8,231  9,053  7,115 
Premium finance receivables - life insurance   351   
Consumer and other 140  110  175 
Total loans past due greater than 90 days and still accruing 8,371  10,215  7,290 
Non-accrual loans(2):      
Commercial 12,018  5,394  10,455 
Commercial real-estate 28,617  23,183  27,363 
Home equity 8,365  5,695  5,696 
Residential real-estate 14,557  16,631  15,730 
Premium finance receivables - commercial 13,751  15,156  14,110 
Premium finance receivables - life insurance      
Consumer and other 297  280  426 
Total non-accrual loans 77,605  66,339  73,780 
Total non-performing loans:      
Commercial 12,018  5,394  10,455 
Commercial real-estate 28,617  23,884  27,363 
Home equity 8,365  5,695  5,696 
Residential real-estate 14,557  16,631  15,730 
Premium finance receivables - commercial 21,982  24,209  21,225 
Premium finance receivables - life insurance   351   
Consumer and other 437  390  601 
Total non-performing loans $85,976  $76,554  $81,070 
Other real estate owned 29,053  33,044  41,506 
Other real estate owned - from acquisitions 22,827  9,036  8,871 
Other repossessed assets 193  231  292 
Total non-performing assets $138,049  $118,865  $131,739 
TDRs performing under the contractual terms of the loan agreement $49,173  $52,174  $69,868 
Total non-performing loans by category as a percent of its own respective category's period-end balance:      
Commercial 0.27% 0.12% 0.28%
Commercial real-estate 0.54  0.49  0.61 
Home equity 1.05  0.80  0.79 
Residential real-estate 2.55  3.31  3.34 
Premium finance receivables - commercial 0.91  0.98  0.89 
Premium finance receivables - life insurance   0.01   
Consumer and other 0.33  0.33  0.40 
Total loans, net of unearned income 0.53% 0.49% 0.58%
Total non-performing assets as a percentage of total assets 0.63% 0.57% 0.69%
Allowance for loan losses as a percentage of total non-performing loans 119.79% 130.89% 112.27%

(1) As of the dates shown, no TDRs were past due greater than 90 days and still accruing interest.
(2) Non-accrual loans included TDRs totaling $10.1 million, $10.6 million, and $13.5 million as of September 30, 2015,  June 30, 2015, and September 30, 2014, respectively.

Non-performing Commercial and Commercial Real Estate

Non-performing commercial and commercial real estate loans totaled $40.6 million as of September 30, 2015 compared to $29.3 million at June 30, 2015 and $37.8 million at September 30, 2014. The increase compared to June 30, 2015 is primarily the result of a single customer relationship totaling $9.3 million being placed in nonaccrual status at quarter-end.

Management is pursuing the resolution of all credits in this category. At this time, management believes reserves are appropriate to absorb inherent losses that are expected upon the ultimate resolution of these credits.

Non-performing Residential Real Estate and Home Equity

Non-performing home equity and residential real estate loans totaled $22.9 million as of September 30, 2015. The balance remained relatively unchanged compared to $22.3 million and $21.4 million at June 30, 2015 and September 30, 2014, respectively. The September 30, 2015 non-performing balance is comprised of $14.6 million of residential real estate (71 individual credits) and $8.4 million of home equity loans (50 individual credits). On average, this is approximately 8 non-performing residential real estate loans and home equity loans per chartered bank within the Company. The Company believes control and collection of these loans is very manageable. At this time, management believes reserves are adequate to absorb inherent losses that are expected upon the ultimate resolution of these credits.

Non-performing Commercial Insurance Premium Finance Receivables

The table below presents the level of non-performing property and casualty premium finance receivables as of September 30, 2015, June 30, 2015 and September 30, 2014 and the amount of net charge-offs for the quarters then ended.

  September 30, June 30, September 30,
(Dollars in thousands) 2015 2015 2014
Non-performing premium finance receivables - commercial $21,982  $24,209  $21,225 
- as a percent of premium finance receivables - commercial outstanding 0.91% 0.98% 0.89%
Net charge-offs of premium finance receivables - commercial $1,317  $1,068  $1,268 
- annualized as a percent of average premium finance receivables - commercial 0.21% 0.18% 0.20%

Fluctuations in this category may occur due to timing and nature of account collections from insurance carriers. The Company's underwriting standards, regardless of the condition of the economy, have remained consistent. We anticipate that net charge-offs and non-performing asset levels in the near term will continue to be at levels that are within acceptable operating ranges for this category of loans. Management is comfortable with administering the collections at this level of non-performing property and casualty premium finance receivables and believes reserves are adequate to absorb inherent losses that are expected upon the ultimate resolution of these credits.

Due to the nature of collateral for commercial premium finance receivables, it customarily takes 60-150 days to convert the collateral into cash. Accordingly, the level of non-performing commercial premium finance receivables is not necessarily indicative of the loss inherent in the portfolio. In the event of default, Wintrust has the right to cancel the insurance policy and collect the unearned portion of the premium from the insurance carrier. In the event of cancellation, the cash returned in payment of the unearned premium by the insurer should generally be sufficient to cover the receivable balance, the interest and other charges due. Due to notification requirements and processing time by most insurance carriers, many receivables will become delinquent beyond 90 days while the insurer is processing the return of the unearned premium. Management continues to accrue interest until maturity as the unearned premium is ordinarily sufficient to pay-off the outstanding balance and contractual interest due.

Nonperforming Loans Rollforward

The table below presents a summary of the changes in the balance of non-performing loans, excluding covered loans, for the periods presented:

  Three Months Ended Nine Months Ended
  September 30, June 30, September 30, September 30, September 30,
(Dollars in thousands) 2015 2015 2014 2015 2014
Balance at beginning of period $76,554  $81,772  $88,650  $78,677  $103,334 
Additions, net 24,333  8,828  10,389  42,141  31,187 
Return to performing status (1,028) (847) (3,745) (2,591) (6,812)
Payments received (5,468) (6,580) (4,792) (16,417) (11,605)
Transfer to OREO and other repossessed assets (1,773) (4,365) (2,782) (8,678) (22,536)
Charge-offs (4,081) (2,755) (4,751) (8,637) (14,127)
Net change for niche loans (1) (2,561) 501  (1,899) 1,481  1,629 
Balance at end of period $85,976  $76,554  $81,070  $85,976  $81,070 

(1) This includes activity for premium finance receivables and indirect consumer loans.

TDRs

The table below presents a summary of TDRs as of the respective date, presented by loan category and accrual status:

  September 30, June 30, September 30,
(Dollars in thousands) 2015 2015 2014
Accruing TDRs:      
Commercial $5,717  $6,039  $5,517 
Commercial real estate 39,867  42,210  61,288 
Residential real estate and other 3,589  3,925  3,063 
Total accrual $49,173  $52,174  $69,868 
Non-accrual TDRs: (1)      
Commercial $147  $165  $927 
Commercial real estate 5,778  6,240  9,153 
Residential real estate and other 4,222  4,197  3,437 
Total non-accrual $10,147  $10,602  $13,517 
Total TDRs:      
Commercial $5,864  $6,204  $6,444 
Commercial real estate 45,645  48,450  70,441 
Residential real estate and other 7,811  8,122  6,500 
Total TDRs $59,320  $62,776  $83,385 
Weighted-average contractual interest rate of TDRs 4.04% 4.05% 4.05%

(1) Included in total non-performing loans.

At September 30, 2015, the Company had $59.3 million in loans modified in TDRs.  The $59.3 million in TDRs represents 114 credits in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay.  The balance decreased from $62.8 million representing 122 credits at June 30, 2015 and decreased from $83.4 million representing 145 credits at September 30, 2014.

The table below presents a summary of TDRs as of September 30, 2015 and September 30, 2014, and shows the changes in the balance during the periods presented:

Three Months Ended September 30, 2015
 
(Dollars in thousands) Commercial Commercial
Real Estate
 Residential
Real Estate
and Other
 Total
Balance at beginning of period $6,204  $48,450  $8,122  $62,776 
Additions during the period     222  222 
Reductions:        
Charge-offs   (267) (52) (319)
Transferred to OREO and other repossessed assets     (175) (175)
Removal of TDR loan status (1) (234) (1,581)   (1,815)
Payments received, net (106) (957) (306) (1,369)
Balance at period end $5,864  $45,645  $7,811  $59,320 


Three Months Ended September 30, 2014
 
(Dollars in thousands) Commercial Commercial
Real Estate
 Residential
Real Estate
and Other
 Total
Balance at beginning of period $6,417  $75,834  $5,856  $88,107 
Additions during the period     667  667 
Reductions:        
Charge-offs (28) (2,584)   (2,612)
Transferred to OREO and other repossessed assets        
Removal of TDR loan status (1)