Market Overview

Wintrust Financial Corporation Reports Record Third Quarter 2017 Net Income, an Increase of 24% Over Prior Year, and Year-to-Date 2017 Net Income of $188.9 million, an Increase of 24% Over Prior Year

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ROSEMONT, Ill., Oct. 18, 2017 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation ("Wintrust" or "the Company") (NASDAQ:WTFC) announced net income of $65.6 million or $1.12 per diluted common share for the third quarter of 2017 compared to net income of $64.9 million or $1.11 per diluted common share for the second quarter of 2017 and $53.1 million or $0.92 per diluted common share for the third quarter of 2016. The Company recorded net income of $188.9 million or $3.23 per diluted common share for the first nine months of 2017 compared to net income of $152.3 million or $2.72 per diluted common share for the same period of 2016.

Highlights of the Third Quarter of 2017 *: 

  • Total assets increased by $429 million from the prior quarter and now total $27.4 billion.
  • Total deposits increased $289 million to $22.9 billion with non-interest bearing deposit accounts comprising 28% of total deposits.
  • Total loans, excluding covered loans, mortgage loans held-for-sale and mortgage warehouse lines of credit, increased by $210 million from the prior quarter. 
  • Net interest margin increased primarily as a result of higher yields, which were positively impacted by the Federal Reserve's rate increase in June of 2017. This increase as well as $935 million of growth in average earning assets since the second quarter of 2017 drove the $11.6 million increase in net interest income over the prior quarter.
  • Return on average assets was 0.96%.
  • Net charge-offs, excluding covered loans, decreased to $4.5 million. Net charge-offs as a percentage of average total loans, excluding covered loans, decreased to eight basis points for the third quarter of 2017 and remained under ten basis points for the year-to-date period.
  • Non-performing loans as a percentage of total loans, excluding covered loans, remained low at 0.37% with the allowance for loan losses as a percentage of total non-performing loans, excluding covered loans, remaining strong at 171%.
  • Mortgage banking revenue decreased $7.8 million compared to the previous quarter due to lower origination volumes and a $2.2 million negative fair value adjustment related to mortgage servicing rights assets compared to an $825,000 positive fair value adjustment in the second quarter of 2017.
  • Reduction in other non-interest income of $4.5 million as the prior quarter benefited from a $4.9 million reduction to the estimated FDIC indemnification liability primarily as a result of an adjustment related to clawback provisions within certain loss-sharing agreements.
  • Opened two new branches on the DePaul University campus in Chicago as well as one new branch in Uptown Milwaukee.

* See "Supplemental Financial Measures/Ratios" on pages 10-11 for more information on non-GAAP measures.

Edward J. Wehmer, President and Chief Executive Officer, commented, "Wintrust reported record net income for the seventh consecutive quarter. We are pleased with the third quarter results despite elevated payoffs and paydowns in our commercial and commercial real estate portfolios, lower revenues from our mortgage banking division and a reduction of our estimated FDIC indemnification liability by $4.9 million that was recorded in our second quarter of 2017. Our ability to generate new retail and commercial deposits was evidenced by a $562 million increase in such deposit balances in the third quarter, which allowed us to reduce our wholesale deposit balances by $272 million. Continued growth of non-interest bearing balances is a positive contribution to our net interest margin as well as a driver to our organic growth, helping offset the rise in our deposit costs during the quarter."

Mr. Wehmer continued, "Excluding covered loans, mortgage loans held-for-sale and mortgage warehouse lines of credit, we grew our loan portfolio by $210 million during the third quarter, which was driven by steady growth in the commercial portfolio as well as the insurance premium finance receivables portfolios. Our loan pipelines remain consistently strong. New loan volumes were consistent with our expectations, but overall portfolio growth was muted by the elevated levels of payoffs and paydowns. The increased loan volume and continued improvement in net interest margin from recent interest rate increases during the period helped net interest income increase by $11.6 million. We remain well positioned for expected rising rates in the future. Strong deposit growth continued in the third quarter of 2017 as deposits increased $289 million and ended at nearly $23 billion as of the end of the third quarter. Total deposit growth included $208 million of growth from demand deposits, which now total $6.5 billion and comprise 28.4% of our overall deposit base."

Commenting on credit quality, Mr. Wehmer noted, "Credit quality metrics remained strong during the third quarter of 2017 and the Company continued its practice of addressing and resolving non-performing credits in a timely fashion. Excluding covered loans, net charge-offs totaled $4.5 million in the current quarter, decreasing $787,000 from the second quarter of 2017. Additionally, net charge-offs as a percentage of average total loans decreased to 0.08% from 0.10% in the second quarter. Total non-performing loans as a percentage of total loans, excluding covered loans, remained at historically low levels at 0.37% at the end of the third quarter of 2017.  Total non-performing loans, excluding covered loans, increased $8.9 million. This increase was primarily the result of delayed payment on one $6.7 million credit within the life insurance premium finance receivables portfolio, which is fully secured and not expected to result in any loss, as well as a $3.0 million increase within the commercial insurance premium finance receivables portfolio due to the delayed payment of certain credits, most of which are no longer 90 days past due in October, and the impact of the recent hurricanes in the United States. The remaining loan portfolios were not significantly impacted by these hurricanes and non-performing loans, excluding covered loans, within such portfolios remained stable during the third quarter of 2017. Additionally, the allowance for loan losses as a percentage of non-performing loans, excluding covered loans, remained strong at 171%. We believe that the Company's reserves remain appropriate."

Mr. Wehmer further commented, "Mortgage banking revenue in the third quarter of 2017 totaled $28.2 million, a decrease of $7.8 million compared to the second quarter of 2017. The decreased revenue compared to the the second quarter  resulted from origination volumes declining to $956.0 million from $1.1 billion as a result of a decrease in originations related to purchases due to typical seasonality in our market area. Purchases represented 80% of the volume for the third quarter of 2017 compared to 84% in the second quarter of 2017. Revenue for the third quarter of 2017 was also negatively impacted by a $2.2 million negative fair value adjustment on mortgage servicing rights assets compared to an $825,000 positive fair value adjustment in the prior quarter. We expect slightly lower origination volumes in the fourth quarter due to normal seasonality, although our mortgage pipeline remains good. We continue to look for opportunities to further enhance the mortgage banking business both organically and through acquisitions."

Commenting on events subsequent to the end of the third quarter, Mr. Wehmer noted, "On October 16th, Wintrust entered into agreements with the FDIC that terminate all existing loss share agreements related to the acquisitions of eight failed banks in 2010, 2011 and 2012. Under terms of the agreements, we made a net payment of $15.2 million to the FDIC as consideration for the early termination of the loss share agreements resulting in a pre-tax gain of approximately $0.4 million in the fourth quarter. This termination has no effect on yields of the loans that were previously covered under these agreements and will result in the remaining net indemnification liabilities scheduled amortization against earnings not occurring for the remainder of the fourth quarter of 2017 and future periods thereafter. We will be solely responsible for all future charge-offs, recoveries, gains, losses and expenses related to the previously covered assets as the FDIC will no longer share in those amounts."

Turning to the future, Mr. Wehmer stated, "Wintrust continues to take a steady and measured approach to achieving our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and increasing shareholder value. As our growth engine continues its momentum, we expect continued organic growth in all areas of our business while still focusing on expense control. We remain well-positioned for a rising rate environment in the future, which, along with growth, will continue to grow net interest income. We have invested significantly in technology throughout Wintrust and will continue to do so as we grow in order to provide the services needed to our customers. Evaluating strategic acquisitions and organic branch growth will also 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."

The graphs below illustrate certain highlights of the third quarter of 2017.

http://www.globenewswire.com/NewsRoom/AttachmentNg/17ee742f-6115-4e53-be9f-95a8557f50f7

Wintrust's key operating measures and growth rates for the third quarter of 2017, as compared to the sequential and linked quarters, are shown in the table below:

                     
                % or(4)
 basis point  (bp) 
change from

2nd Quarter
2017
  % or
 basis point  (bp) 
change from
3rd Quarter
2016
    Three Months Ended    
(Dollars in thousands)   September 30, 
2017
  June 30,
 2017
  September 30,
 2016
   
Net income   $ 65,626     $ 64,897     $ 53,115     1   %   24   %
Net income per common share – diluted   $ 1.12     $ 1.11     $ 0.92     1   %   22   %
Net revenue (1)   $ 295,719     $ 294,381     $ 271,240       %   9   %
Net interest income   $ 215,988     $ 204,409     $ 184,636     6   %   17   %
Net interest margin   3.43 %   3.41 %   3.21 %   2   bp   22   bp
Net interest margin - fully taxable equivalent (non-GAAP) (2)   3.46 %   3.43 %   3.24 %   3   bp   22   bp
Net overhead ratio (3)   1.53 %   1.44 %   1.44 %   9   bp   9   bp
Return on average assets   0.96 %   1.00 %   0.85 %   (4 ) bp   11   bp
Return on average common equity   9.15 %   9.55 %   8.20 %   (40 ) bp   95   bp
Return on average tangible common equity (non-GAAP) (2)   11.39 %   12.02 %   10.55 %   (63 ) bp   84   bp
At end of period                        
Total assets   $  27,358,162     $  26,929,265     $  25,321,759     6   %   8   %
Total loans, excluding loans held-for-sale, excluding covered loans   20,912,781     20,743,332     19,101,261     3   %   9   %
Total loans, including loans held-for-sale, excluding covered loans   21,283,063     21,126,169     19,660,895     3   %   8   %
Total deposits   22,895,063     22,605,692     21,147,655     5   %   8   %
Total shareholders' equity   2,908,925     2,839,458     2,674,474     10   %   9   %
                                   

(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) 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 website at www.wintrust.com by choosing "Financial Reports" under the "Investor Relations" heading, and then choosing "Financial Highlights."

         
WINTRUST FINANCIAL CORPORATION        
Selected Financial Highlights        
         
    Three Months Ended   Nine Months Ended
(Dollars in thousands, except per share data)   September 30,
2017
  June 30,
 2017
  September 30,
 2016
  September 30,
 2017
  September 30,
 2016
Selected Financial Condition Data (at end of period):                    
Total assets   $  27,358,162     $  26,929,265     $  25,321,759          
Total loans, excluding loans held-for-sale and covered loans   20,912,781     20,743,332     19,101,261          
Total deposits   22,895,063     22,605,692     21,147,655          
Junior subordinated debentures   253,566     253,566     253,566          
Total shareholders' equity   2,908,925     2,839,458     2,674,474          
Selected Statements of Income Data:                    
Net interest income   $ 215,988     $ 204,409     $ 184,636     $ 612,977     $ 531,415  
Net revenue (1)   295,719     294,381     271,240     851,445     771,570  
Net income   65,626     64,897     53,115     188,901     152,267  
Net income per common share – Basic   $ 1.14     $ 1.15     $ 0.96     $ 3.34     $ 2.84  
Net income per common share – Diluted   $ 1.12     $ 1.11     $ 0.92     $ 3.23     $ 2.72  
Selected Financial Ratios and Other Data:                    
Performance Ratios:                    
Net interest margin   3.43 %   3.41 %   3.21 %   3.40 %   3.25 %
Net interest margin - fully taxable equivalent (non-GAAP) (2)   3.46 %   3.43 %   3.24 %   3.43 %   3.27 %
Non-interest income to average assets   1.17 %   1.39 %   1.38 %   1.22 %   1.35 %
Non-interest expense to average assets   2.70 %   2.83 %   2.82 %   2.74 %   2.81 %
Net overhead ratio (3)   1.53 %   1.44 %   1.44 %   1.52 %   1.46 %
Return on average assets   0.96 %   1.00 %   0.85 %   0.97 %   0.85 %
Return on average common equity   9.15 %   9.55 %   8.20 %   9.21 %   8.39 %
Return on average tangible common equity (non-GAAP) (2)   11.39 %   12.02 %   10.55 %   11.62 %   10.98 %
Average total assets   $ 27,012,295     $ 26,050,949     $ 24,879,252     $  26,096,809     $  23,849,412  
Average total shareholders' equity   2,882,682     2,800,905     2,651,684     2,808,072     2,502,940  
Average loans to average deposits ratio (excluding loans held-for-sale, excluding covered loans)    91.8 %   94.1 %   89.8 %   92.8 %   91.4 %
Average loans to average deposits ratio (excluding loans held-for-sale, including covered loans)   92.1 %   94.4 %   90.3 %   93.0 %   92.0 %
Common Share Data at end of period:                    
Market price per common share   $ 78.31     $ 76.44     $ 55.57          
Book value per common share (2)   $ 49.86     $ 48.73     $ 46.86          
Tangible common book value per share (2)   $ 40.53     $ 39.40     $ 37.06          
Common shares outstanding   55,838,063     55,699,927     51,714,683          
Other Data at end of period:(6)                    
Leverage Ratio (4)   9.2 %   9.2 %   9.0 %        
Tier 1 capital to risk-weighted assets (4)   10.0 %   9.8 %   9.8 %        
Common equity Tier 1 capital to risk-weighted assets (4)   9.5 %   9.3 %   8.7 %        
Total capital to risk-weighted assets (4)   12.1 %   12.0 %   12.1 %        
Allowance for credit losses (5)   $ 134,395     $ 131,296     $ 119,341          
Non-performing loans   77,983     69,050     83,128          
Allowance for credit losses to total loans (5)   0.64 %   0.63 %   0.62 %        
Non-performing loans to total loans   0.37 %   0.33 %   0.44 %        
Number of:                    
Bank subsidiaries   15     15     15          
Banking offices   156     153     152          
                           

(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) Capital ratios for current quarter-end are estimated.
(5) 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.
(6) Asset quality ratios exclude covered loans. 

             
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES            
CONSOLIDATED STATEMENTS OF CONDITION            
             
    (Unaudited)       (Unaudited)
(In thousands)   September 30,
 2017
  December 31,
 2016
  September 30,
 2016
Assets            
Cash and due from banks   $ 251,896     $ 267,194     $ 242,825  
Federal funds sold and securities purchased under resale agreements    56     2,851     4,122  
Interest bearing deposits with banks   1,218,728     980,457     816,104  
Available-for-sale securities, at fair value   1,665,903     1,724,667     1,650,096  
Held-to-maturity securities, at amortized cost   819,340     635,705     932,767  
Trading account securities   643     1,989     1,092  
Federal Home Loan Bank and Federal Reserve Bank stock   87,192     133,494     129,630  
Brokerage customer receivables   23,631     25,181     25,511  
Mortgage loans held-for-sale   370,282     418,374     559,634  
Loans, net of unearned income, excluding covered loans   20,912,781     19,703,172     19,101,261  
Covered loans   46,601     58,145     95,940  
Total loans   20,959,382     19,761,317     19,197,201  
Allowance for loan losses   (133,119 )   (122,291 )   (117,693 )
Allowance for covered loan losses   (758 )   (1,322 )   (1,422 )
Net loans   20,825,505     19,637,704     19,078,086  
Premises and equipment, net   609,978     597,301     597,263  
Lease investments, net   193,828     129,402     116,355  
Accrued interest receivable and other assets   580,612     593,796     660,923  
Trade date securities receivable   189,896         677  
Goodwill   502,021     498,587     485,938  
Other intangible assets   18,651     21,851     20,736  
Total assets   $ 27,358,162     $ 25,668,553     $ 25,321,759  
Liabilities and Shareholders' Equity            
Deposits:            
Non-interest bearing   $ 6,502,409     $ 5,927,377     $ 5,711,042  
Interest bearing   16,392,654     15,731,255     15,436,613  
 Total deposits   22,895,063     21,658,632     21,147,655  
Federal Home Loan Bank advances   468,962     153,831     419,632  
Other borrowings   251,680     262,486     241,366  
Subordinated notes   139,052     138,971     138,943  
Junior subordinated debentures   253,566     253,566     253,566  
Trade date securities payable   880          
Accrued interest payable and other liabilities   440,034     505,450     446,123  
Total liabilities   24,449,237     22,972,936     22,647,285  
Shareholders' Equity:            
Preferred stock   125,000     251,257     251,257  
Common stock   55,940     51,978     51,811  
Surplus   1,519,596     1,365,781     1,356,759  
Treasury stock   (4,884 )   (4,589 )   (4,522 )
Retained earnings   1,254,759     1,096,518     1,051,748  
Accumulated other comprehensive loss   (41,486 )   (65,328 )   (32,579 )
Total shareholders' equity   2,908,925     2,695,617     2,674,474  
Total liabilities and shareholders' equity   $ 27,358,162     $  25,668,553     $  25,321,759  
                         


       
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES      
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)      
       
  Three Months Ended   Nine Months Ended
(In thousands, except per share data) September 30,
 2017
  June 30,
 2017
   September 30, 
 2016
   September 30, 
 2017
   September 30, 
 2016
Interest income                  
Interest and fees on loans $ 227,120     $  212,709     $ 190,189     $ 639,143     $ 541,846  
Interest bearing deposits with banks 3,272     1,634     1,156     6,529     2,695  
Federal funds sold and securities purchased under resale agreements     1     1     2     3  
Investment securities 16,058     15,524     15,496     45,155     49,084  
Trading account securities 8     4     18     23     43  
Federal Home Loan Bank and Federal Reserve Bank stock 1,080     1,153     1,094     3,303     3,143  
Brokerage customer receivables 150     156     195     473     630  
Total interest income 247,688     231,181     208,149     694,628     597,444  
Interest expense                  
Interest on deposits 23,655     18,471     15,621     58,396     41,996  
Interest on Federal Home Loan Bank advances 2,151     2,933     2,577     6,674     8,447  
Interest on other borrowings 1,482     1,149     1,137     3,770     3,281  
Interest on subordinated notes 1,772     1,786     1,778     5,330     5,332  
Interest on junior subordinated debentures 2,640     2,433     2,400     7,481     6,973  
Total interest expense 31,700     26,772     23,513     81,651     66,029  
Net interest income 215,988     204,409     184,636     612,977     531,415  
Provision for credit losses 7,896     8,891     9,571     21,996     26,734  
Net interest income after provision for credit losses 208,092     195,518     175,065     590,981     504,681  
Non-interest income                  
Wealth management 19,803     19,905     19,334     59,856     56,506  
Mortgage banking 28,184     35,939     34,712     86,061     93,254  
Service charges on deposit accounts 8,645     8,696     8,024     25,606     23,156  
Gain on investment securities, net 39     47     3,305     31     6,070  
Fees from covered call options 1,143     890     3,633     2,792     9,994  
Trading losses, net (129 )   (420 )   (432 )   (869 )   (916 )
Operating lease income, net 8,461     6,805     4,459     21,048     11,270  
Other 13,585     18,110     13,569     43,943     40,821  
Total non-interest income 79,731     89,972     86,604     238,468     240,155  
Non-interest expense                  
Salaries and employee benefits 106,251     106,502     103,718     312,069     300,423  
Equipment 9,947     9,909     9,449     28,858     27,523  
Operating lease equipment depreciation 6,794     5,662     3,605     17,092     9,040  
Occupancy, net 13,079     12,586     12,767     38,766     36,658  
Data processing 7,851     7,804     7,432     23,580     21,089  
Advertising and marketing 9,572     8,726     7,365     23,448     18,085  
Professional fees 6,786     7,510     5,508     18,956     14,986  
Amortization of other intangible assets 1,068     1,141     1,085     3,373     3,631  
FDIC insurance 3,877     3,874     3,686     11,907     11,339  
OREO expense, net 590     739     1,436     2,994     3,344  
Other 17,760     19,091     20,564     54,194     55,196  
Total non-interest expense 183,575     183,544     176,615     535,237     501,314  
Income before taxes 104,248     101,946     85,054     294,212     243,522  
Income tax expense 38,622     37,049     31,939     105,311     91,255  
Net income $ 65,626     $ 64,897     $ 53,115     $ 188,901     $ 152,267  
Preferred stock dividends 2,050     2,050     3,628     7,728     10,884  
Net income applicable to common shares $ 63,576     $ 62,847     $ 49,487     $ 181,173     $ 141,383  
Net income per common share - Basic $ 1.14     $ 1.15     $ 0.96     $ 3.34     $ 2.84  
Net income per common share - Diluted $ 1.12     $ 1.11     $ 0.92     $ 3.23     $ 2.72  
Cash dividends declared per common share $ 0.14     $ 0.14     $ 0.12     $ 0.42     $ 0.36  
Weighted average common shares outstanding 55,796     54,775     51,679     54,292     49,763  
Dilutive potential common shares 966     1,812     4,047     2,305     3,931  
Average common shares and dilutive common shares 56,762     56,587     55,726     56,597     53,694  
                             

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, 
 2017
  June 30,
 2017
   September 30, 
 2016
   September 30, 
 2017
   September 30, 
 2016
Net income     $ 65,626     $  64,897     $ 53,115     $ 188,901     $ 152,267  
Less: Preferred stock dividends     2,050     2,050     3,628     7,728     10,884  
Net income applicable to common shares—Basic (A)   63,576     62,847     49,487     181,173     141,383  
Add: Dividends on convertible preferred stock, if dilutive             1,578     1,578     4,735  
Net income applicable to common shares—Diluted (B)   63,576     62,847     51,065     182,751     146,118  
Weighted average common shares outstanding (C)   55,796     54,775     51,679     54,292     49,763  
Effect of dilutive potential common shares:                      
Common stock equivalents     966     927     938     988     822  
Convertible preferred stock, if dilutive         885     3,109     1,317     3,109  
Weighted average common shares and effect of dilutive potential common shares (D)   56,762     56,587     55,726     56,597     53,694  
Net income per common share:                      
Basic  (A/C)    $ 1.14     $ 1.15     $ 0.96     $ 3.34     $ 2.84  
Diluted (B/D)   $ 1.12     $ 1.11     $ 0.92     $ 3.23     $ 2.72  
                                           

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 for a period, net income applicable to common shares is not adjusted by the associated preferred dividends. On April 25, 2017, 2,073 shares of the Series C Preferred Stock were converted at the option of the respective holder into 51,244 shares of the Company's common stock, pursuant to the terms of the Series C Preferred Stock. On April 27, 2017, the Company caused a mandatory conversion of its outstanding 124,184 shares of Series C Preferred Stock into 3,069,828 shares of the Company's common stock at a conversion rate of 24.72 shares of common stock per share of Series C Preferred Stock. Cash was paid in lieu of fractional shares for an amount considered insignificant.

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), taxable-equivalent net interest margin (including its individual components), the taxable-equivalent efficiency ratio, tangible common equity ratio, tangible common book value per share and return on average tangible common equity. Management believes that these measures and ratios provide users of the Company's financial information a more meaningful view of the performance of the Company's interest-earning assets and interest-bearing liabilities and of the Company's operating efficiency. Other financial holding companies may define or calculate these measures and ratios differently.

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent ("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.

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) 2017   2017   2017   2016   2016   2017   2016
Calculation of Net Interest Margin and Efficiency Ratio                          
(A) Interest Income (GAAP) $ 247,688     $ 231,181     $ 215,759     $ 215,013     $ 208,149     $ 694,628     $ 597,444  
Taxable-equivalent adjustment:                          
 - Loans 1,033     831     790     666     584     2,654     1,616  
 - Liquidity Management Assets 921     866     907     815     963     2,694     2,815  
 - Other Earning Assets 5     2     5     17     9     12     23  
(B) Interest Income - FTE $ 249,647     $ 232,880     $ 217,461     $ 216,511     $ 209,705     $ 699,988     $ 601,898  
(C) Interest Expense (GAAP) 31,700     26,772     23,179     24,235     23,513     81,651     66,029  
(D) Net Interest Income - FTE (B minus C) $ 217,947     $ 206,108     $ 194,282     $ 192,276     $ 186,192     $ 618,337     $ 535,869  
(E) Net Interest Income (GAAP) (A minus C) $ 215,988     $ 204,409     $ 192,580     $ 190,778     $ 184,636     $ 612,977     $ 531,415  
Net interest margin (GAAP-derived) 3.43 %   3.41 %   3.36 %   3.21 %   3.21 %   3.40 %   3.25 %
Net interest margin - FTE 3.46 %   3.43 %   3.39 %   3.23 %   3.24 %   3.43 %   3.27 %
(F) Non-interest income $ 79,731     $ 89,972     $ 68,765     $ 85,275     $ 86,604     $ 238,468     $ 240,155  
(G) Gains (losses) on investment securities, net 39     47     (55 )   1,575     3,305     31     6,070  
(H) Non-interest expense 183,575     183,544     168,118     180,371     176,615     535,237     501,314  
Efficiency ratio (H/(E+F-G)) 62.09 %   62.36 %   64.31 %   65.71 %   65.92 %   62.86 %   65.49 %
Efficiency ratio - FTE (H/(D+F-G)) 61.68 %   62.00 %   63.90 %   65.36 %   65.54 %   62.47 %   65.11 %
Calculation of Tangible Common Equity ratio (at period end)                          
Total shareholders' equity $ 2,908,925     $ 2,839,458     $ 2,764,983     $ 2,695,617     $ 2,674,474          
(I) Less: Convertible preferred stock         (126,257 )   (126,257 )   (126,257 )        
Less:  Non-convertible preferred stock (125,000 )   (125,000 )   (125,000 )   (125,000 )   (125,000 )        
Less: Intangible assets (520,672 )   (519,806 )   (520,028 )   (520,438 )   (506,674 )        
(J) Total tangible common shareholders' equity $ 2,263,253     $ 2,194,652     $ 1,993,698     $ 1,923,922     $ 1,916,543          
Total assets $ 27,358,162     $  26,929,265     $  25,778,893     $  25,668,553     $  25,321,759          
Less: Intangible assets (520,672 )   (519,806 )   (520,028 )   (520,438 )   (506,674 )        
(K) Total tangible assets $ 26,837,490     $ 26,409,459     $ 25,258,865     $ 25,148,115     $ 24,815,085          
Tangible common equity ratio (J/K) 8.4 %   8.3 %   7.9 %   7.7 %   7.7 %        
Tangible common equity ratio, assuming full conversion of convertible preferred stock ((J-I)/K)  8.4 %   8.3 %   8.4 %   8.2 %   8.2 %        
Calculation of book value per share                          
Total shareholders' equity $ 2,908,925     $ 2,839,458     $ 2,764,983     $ 2,695,617     $ 2,674,474          
Less: Preferred stock (125,000 )   (125,000 )   (251,257 )   (251,257 )   (251,257 )        
(L) Total common equity $ 2,783,925     $ 2,714,458     $ 2,513,726     $ 2,444,360     $ 2,423,217          
(M) Actual common shares outstanding 55,838     55,700     52,504     51,881     51,715          
Book value per common share (L/M) $ 49.86     $ 48.73     $ 47.88     $ 47.12     $ 46.86          
Tangible common book value per share (J/M) $ 40.53     $ 39.40     $ 37.97     $ 37.08     $ 37.06          
Calculation of return on average common equity                          
(N) Net income applicable to common shares 63,576     62,847     54,750     50,979     49,487     181,173     141,383  
Add: After-tax intangible asset amortization 672     726     771     716     677     2,169     2,270  
(O) Tangible net income applicable to common shares 64,248     63,573     55,521     51,695     50,164     183,342     143,653  
Total average shareholders' equity 2,882,682     2,800,905     2,739,050     2,689,876     2,651,684     2,808,072     2,502,940  
Less: Average preferred stock (125,000 )   (161,028 )   (251,257 )   (251,257 )   (251,257 )   (178,632 )   (251,259 )
(P) Total average common shareholders' equity 2,757,682     2,639,877     2,487,793     2,438,619     2,400,427     2,629,440     2,251,681  
Less: Average intangible assets (520,333 )   (519,340 )   (520,346 )   (513,017 )   (508,812 )   (520,006 )   (503,966 )
(Q) Total average tangible common shareholders' equity 2,237,349     2,120,537     1,967,447     1,925,602     1,891,615     2,109,434     1,747,715  
Return on average common equity, annualized  (N/P) 9.15 %   9.55 %   8.93 %   8.32 %   8.20 %   9.21 %   8.39 %
Return on average tangible common equity, annualized (O/Q) 11.39 %   12.02 %   11.44 %   10.68 %   10.55 %   11.62 %   10.98 %
                                         

BUSINESS UNIT SUMMARY

Community Banking

Through its community banking segment, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the third quarter of 2017, profitability within this franchise was primarily driven by increased net interest income due to a higher net interest margin, partially offset by lower revenue from the mortgage banking business. The net interest margin increased in the third quarter of 2017 compared to the second quarter of 2017 primarily as a result of higher yields on the commercial loan portfolio (excluding lease loans) and the commercial real estate loan portfolio, partially offset by higher rates on interest-bearing deposits. Mortgage banking revenue decreased by $7.8 million from $35.9 million for the second quarter of 2017 to $28.2 million for the third quarter of 2017. The lower  revenue was primarily due to originations during the current period decreasing to $956.0 million from $1.1 billion in the second quarter of 2017 as a result of typical seasonality in our market area and a $2.2 million negative fair value adjustment related to mortgage servicing rights assets compared to an $825,000 positive fair value adjustment in the second quarter of 2017. Purchases represented 80% of loan origination volume for the third quarter of 2017. The Company's gross commercial and commercial real estate loan pipelines remain strong. Before the impact of scheduled payments and prepayments, at September 30, 2017, gross commercial and commercial real estate loan pipelines totaled $1.1 billion, or $714.7 million when adjusted for the probability of closing, compared to $1.2 billion, or $796.8 million when adjusted for the probability of closing, at June 30, 2017.

Specialty Finance

Through its specialty finance segment, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries and accounts receivable financing, value-added, out-sourced administrative services, and other services. In the third quarter of 2017, the specialty finance unit experienced higher revenue as a result of increased volumes and higher yields within its insurance premium financing receivables portfolio. Originations of $1.8 billion during the third quarter of 2017 resulted in a $284.0 million increase in average balances. The increase in average balances along with higher yields on these loans resulted in a $5.0 million increase in interest income attributed to this portfolio. The Company's leasing business continued to grow during the third quarter of 2017, increasing its portfolio of assets, including capital leases, loans and equipment on operating leases, to $916.1 million at the end of the third quarter of 2017. Revenues from the Company's out-sourced administrative services business remained steady, totaling approximately $1.1 million  and $1.0 million in the third quarter of 2017 and second quarter of 2017, respectively.

Wealth Management

Through its wealth management segment, the Company offers a full range of wealth management services through three separate subsidiaries: trust and investment services, asset management, securities brokerage services and 401(k) and retirement plan services. At September 30, 2017, the Company's wealth management subsidiaries had approximately $24.5 billion of assets under administration, which includes $2.7 billion of assets owned by the Company and its subsidiary banks, representing a $1.2 billion increase from the $23.3 billion of assets under administration at June 30, 2017. This growth in assets under administration was positive across the various services offered.

LOANS

Loan Portfolio Mix and Growth Rates                
                % Growth
(Dollars in thousands)   September 30,
 2017
  December 31,
 2016
  September 30,
 2016
  From (1)
December 31,
2016
  From
September 30,
2016
Balance:                    
Commercial   $ 6,456,034     $ 6,005,422     $ 5,951,544     10 %   8 %
Commercial real estate   6,400,781     6,196,087     5,908,684     4     8  
Home equity   672,969     725,793     742,868     (10 )   (9 )
Residential real estate   789,499     705,221     663,598     16     19  
Premium finance receivables - commercial   2,664,912     2,478,581     2,430,233     10     10  
Premium finance receivables - life insurance   3,795,474     3,470,027     3,283,359     13     16  
Consumer and other   133,112     122,041     120,975     12     10  
Total loans, net of unearned income, excluding covered loans    $  20,912,781     $  19,703,172     $  19,101,261     8 %   9 %
Covered loans   46,601     58,145     95,940     (27 )   (51 )
Total loans, net of unearned income   $ 20,959,382     $ 19,761,317     $ 19,197,201     8 %   9 %
Mix:                    
Commercial   31   30   31        
Commercial real estate   31     31     31          
Home equity   3     4     4          
Residential real estate   3     4     3          
Premium finance receivables - commercial   13     12     13          
Premium finance receivables - life insurance   18     18     17          
Consumer and other   1     1     1          
Total loans, net of unearned income, excluding covered loans   100 %   100 %   100 %        
Covered loans                    
Total loans, net of unearned income   100 %   100 %   100 %        
                           

(1)     Annualized

 
Commercial and Commercial Real Estate Loan Portfolios
     
    As of September 30, 2017
        % of
Total
Balance
  Nonaccrual    > 90 Days 
Past Due
and Still
Accruing
   Allowance 
For Loan
Losses
Allocation
       
(Dollars in thousands)   Balance  
Commercial:                    
Commercial, industrial and other   $ 4,120,533     32.0 %   $ 12,281     $     $ 38,708  
Franchise   853,716     6.6             6,154  
Mortgage warehouse lines of credit   194,370     1.5             1,438  
Asset-based lending   896,336     7.0     1,141         7,683  
Leases   381,394     3.0     509         1,208  
PCI - commercial loans (1)   9,685     0.1         1,489     544  
Total commercial   $ 6,456,034     50.2 %   $ 13,931     $ 1,489     $ 55,735  
Commercial Real Estate:                    
Construction   $ 673,977     5.2 %   $ 1,607     $     $ 7,565  
Land   102,753     0.8     196         3,354  
Office   880,951     6.9     5,148         6,249  
Industrial   836,485     6.5     1,848         5,538  
Retail   934,239     7.3     2,200         6,107  
Multi-family   864,985     6.7     569         8,873  
Mixed use and other   1,974,315     15.4     3,310         14,270  
PCI - commercial real estate (1)   133,076     1.0         8,443     84  
Total commercial real estate   $ 6,400,781     49.8 %   $ 14,878     $ 8,443     $ 52,040  
Total commercial and commercial real estate    $  12,856,815      100.0 %   $ 28,809     $ 9,932     $ 107,775  
                     
Commercial real estate - collateral location by state:                    
Illinois   $ 4,981,379     77.8            
Wisconsin   683,229     10.7              
Total primary markets   $ 5,664,608     88.5            
Indiana   140,749     2.2              
Florida   114,599     1.8              
Arizona   58,192     0.9              
Michigan   44,664     0.7              
California   36,366     0.6              
Other (no individual state greater than 0.6%)   341,603     5.3              
Total   $ 6,400,781     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,
 2017
  December 31,
 2016
  September 30,
 2016
  From (1)
 December 31, 
2016
  From
 September 30, 
2016
Balance:                    
Non-interest bearing   $ 6,502,409     $ 5,927,377     $ 5,711,042     13 %   14 %
NOW and interest bearing demand deposits    2,273,025     2,624,442     2,552,611     (18 )   (11 )
Wealth management deposits (2)   2,171,758     2,209,617     2,283,233     (2 )   (5 )
Money market   4,607,995     4,441,811     4,421,631     5     4  
Savings   2,673,201     2,180,482     1,977,661     30     35  
Time certificates of deposit   4,666,675     4,274,903     4,201,477     12     11  
Total deposits   $  22,895,063     $  21,658,632     $  21,147,655     8 %   8 %
Mix:                    
Non-interest bearing   28 %   27 %   27 %        
NOW and interest bearing demand deposits   10     12     12          
Wealth management deposits (2)   10     10     11          
Money market   20     21     21          
Savings   12     10     9          
Time certificates of deposit   20     20     20          
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 Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts.

Time Certificates of Deposit
Maturity/Re-pricing Analysis
As of September 30, 2017

                         
(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   $ 1,253     $ 40,644     $ 128,579     $ 851,813     $ 1,022,289     0.84 %
4-6 months   1,493     28,487         892,779     922,759     0.97 %
7-9 months   59,737     16,700         736,366     812,803     1.05 %
10-12 months       20,191         592,693     612,884     1.02 %
13-18 months       13,716         765,773     779,489     1.28 %
19-24 months   249     11,431         208,626     220,306     1.43 %
24+ months   1,000     15,892         279,253     296,145     1.50 %
Total   $ 63,732     $ 147,061     $ 128,579     $ 4,327,303     $ 4,666,675     1.07 %
                                               

(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 2017 compared to the second quarter of 2017 (sequential quarters) and third quarter of 2016 (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,
 2017
  June 30,
 2017
  September 30,
 2016
  September 30,
 2017
  June 30,
 2017
  September 30,
 2016
  September 30,
 2017
  June 30,
 2017
  September 30,
 2016
Interest-bearing deposits with banks and cash equivalents(1)  $ 1,003,572     $ 722,349     $ 851,385     $ 3,272     $ 1,635     $ 1,157     1.29 %   0.91 %   0.54 %
Investment securities 2,652,119     2,572,619     2,692,691     16,979     16,390     16,459     2.54     2.55     2.43  
FHLB and FRB stock 81,928     99,438     127,501     1,080     1,153     1,094     5.23     4.66     3.41  
Liquidity management assets(2)(7) $ 3,737,619     $ 3,394,406     $ 3,671,577     $ 21,331     $ 19,178     $ 18,710     2.26 %   2.27 %   2.03 %
Other earning assets(2)(3)(7) 25,844     25,749     29,875     163     162     222     2.49     2.53     2.96  
Loans, net of unearned
income(2)(4)(7)
21,195,222     20,599,718     19,071,621     227,553     212,892     189,637     4.26     4.15     3.96  
Covered loans 48,415     51,823     101,570     600     648     1,136     4.91     5.01     4.45  
Total earning assets(7) $ 25,007,100     $ 24,071,696     $ 22,874,643     $ 249,647     $ 232,880     $ 209,705     3.96 %   3.88 %   3.65 %
Allowance for loan and covered loan losses (135,519 )   (132,053 )   (121,156 )                        
Cash and due from banks 242,186     242,495     240,239                          
Other assets 1,898,528     1,868,811     1,885,526                          
Total assets $ 27,012,295     $ 26,050,949     $ 24,879,252                          
                                   
Interest-bearing deposits $ 16,291,891     $ 15,621,674     $ 15,117,102     $ 23,655     $ 18,471     $ 15,621     0.58 %   0.47 %   0.41 %
Federal Home Loan Bank advances 324,996     689,600     459,198     2,151     2,933     2,577     2.63     1.71     2.23  
Other borrowings 268,850     240,547     249,307     1,482     1,149     1,137     2.19     1.92     1.81  
Subordinated notes 139,035     139,007     138,925     1,772     1,786     1,778     5.10     5.14     5.12  
Junior subordinated debentures 253,566     253,566     253,566     2,640     2,433     2,400     4.07     3.80     3.70  
Total interest-bearing liabilities $ 17,278,338     $ 16,944,394     $ 16,218,098     $ 31,700     $ 26,772     $ 23,513     0.73 %   0.63 %   0.58 %
Non-interest bearing deposits 6,419,326     5,904,679     5,566,983                          
Other liabilities 431,949     400,971     442,487                          
Equity 2,882,682     2,800,905     2,651,684                          
Total liabilities and shareholders' equity $ 27,012,295     $  26,050,949     $  24,879,252                          
Interest rate spread(5)(7)                         3.23 %   3.25 %   3.07 %
Less:  Fully tax-equivalent adjustment             (1,959 )   (1,699 )   (1,556 )   (0.03 )   (0.02 )   (0.03 )
Net free funds/contribution(6) $ 7,728,762     $ 7,127,302     $ 6,656,545                 0.23     0.18     0.17  
Net interest income/ margin(7)  (GAAP)             $ 215,988     $ 204,409     $ 184,636     3.43 %   3.41 %   3.21 %
Fully tax-equivalent adjustment             1,959     1,699     1,556     0.03     0.02     0.03  
Net interest income/ margin - FTE (7)             $ 217,947     $  206,108     $ 186,192     3.46 %   3.43 %   3.24 %
                                                     

(1) Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading securities and investment 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, 2017, June 30, 2017 and September 30, 2016 were $2.0 million, $1.7 million and $1.6 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.

For the third quarter of 2017, net interest income totaled $216.0 million, an increase of $11.6 million as compared to the second quarter of 2017 and an increase of $31.4 million as compared to the third quarter of 2016. Net interest margin was 3.43% (3.46% on a fully tax-equivalent basis) during the third quarter of 2017 compared to 3.41% (3.43% on a fully tax-equivalent basis) during the second quarter of 2017 and 3.21% (3.24% on a fully tax-equivalent basis) during the third quarter of 2016.

The following table presents a summary of Wintrust's average balances, net interest income and related interest margins, calculated on a fully tax-equivalent basis, for nine months ended September 30, 2017 compared to nine months ended September 30, 2016:

           
  Average Balance
for nine months ended,
  Interest
for nine months ended,
  Yield/Rate
for nine months ended,
(Dollars in thousands)  September 30, 
 2017
   September 30, 
 2016
   September 30, 
 2017
   September 30, 
 2016
   September 30, 
 2017
   September 30, 
 2016
Interest-bearing deposits with banks and cash equivalents (1)  $ 836,373     $ 688,208     $ 6,531     $ 2,699     1.04 %   0.52 %
Investment securities 2,541,061     2,656,969     47,849     51,898     2.52     2.61  
FHLB and FRB stock 91,774     117,198     3,303     3,143     4.81     3.58  
Liquidity management assets(2)(7) $ 3,469,208     $ 3,462,375     $ 57,683     $ 57,740     2.22 %   2.23 %
Other earning assets(2)(3)(7) 25,612     29,457     508     696     2.65     3.16  
Loans, net of unearned income(2)(4)(7) 20,577,507     18,264,545     639,632     538,833     4.16     3.94  
Covered loans 52,339     117,427     2,165     4,629     5.53     5.27  
Total earning assets(7) $ 24,124,666     $ 21,873,804     $ 699,988     $ 601,898     3.88 %   3.68 %
Allowance for loan and covered loan losses (131,695 )   (116,739 )                
Cash and due from banks 238,136     257,443                  
Other assets 1,865,702     1,834,904                  
Total assets $ 26,096,809     $ 23,849,412                  
                       
Interest-bearing deposits $ 15,796,434     $ 14,303,125     $ 58,396     $ 41,996     0.49 %   0.39 %
Federal Home Loan Bank advances 399,171     742,423     6,674     8,447     2.24     1.52  
Other borrowings 254,854     251,633     3,770     3,281     1.98     1.74  
Subordinated notes 139,008     138,898     5,330     5,332     5.11     5.12  
Junior subordinated debentures 253,566     254,935     7,481     6,973     3.89     3.59  
Total interest-bearing liabilities $ 16,843,033     $ 15,691,014     $ 81,651     $ 66,029     0.65 %   0.56 %
Non-interest bearing deposits 6,039,329     5,244,552                  
Other liabilities 406,375     410,906                  
Equity 2,808,072     2,502,940                  
Total liabilities and shareholders' equity $  26,096,809     $  23,849,412                  
Interest rate spread(5)(7)                 3.23 %   3.12 %
Less:  Fully tax-equivalent adjustment         (5,360 )   (4,454 )   (0.03 )   (0.02 )
Net free funds/contribution(6) $ 7,281,633     $ 6,182,790             0.20     0.15  
Net interest income/ margin(7)  (GAAP)         $ 612,977     $ 531,415     3.40 %   3.25 %
Fully tax-equivalent adjustment         5,360     4,454     0.03     0.02  
Net interest income/ margin - FTE (7)         $ 618,337     $ 535,869     3.43 %   3.27 %
                                   

(1) Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for nine months ended September 30, 2017 and 2016 were $5.4 million and $4.5 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.

For the first nine months of 2017 net interest income totaled $613.0 million, an increase of $81.6 million as compared to the first nine months of 2016. Net interest margin was 3.40% (3.43% on a fully tax-equivalent basis) for the first nine months of 2017 compared to 3.25% (3.27% on a fully tax-equivalent basis) for the first nine months of 2016.

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, 2017, June 30, 2017 and September 30, 2016 is as follows: 

           
Static Shock Scenario    +200
Basis
 Points 
  +100
Basis
 Points 
  -100
Basis
 Points 
September 30, 2017   19.5 %   9.8 %   (12.9 )%
June 30, 2017   19.3 %   10.4 %   (13.5 )%
September 30, 2016   19.6 %   10.1 %   (10.4 )%
                   


             
Ramp Scenario   +200
Basis
 Points 
  +100
Basis
 Points 
  -100
Basis
 Points 
September 30, 2017    9.0 %   4.6 %   (5.3 )%
June 30, 2017   7.8 %   4.0 %   (4.6 )%
September 30, 2016   7.8 %   3.9 %   (4.1 )%
                   

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).

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table classifies the loan portfolio, excluding covered loans, at September 30, 2017 by date at which the loans reprice or mature, and the type of rate exposure:

               
As of September 30, 2017  One year or less     From one to five
years
   Over five years     
(Dollars in thousands)       Total
Commercial              
Fixed rate $ 173,603     $ 668,211     $ 442,587     $ 1,284,401  
Variable rate 5,163,750     6,042     1,841     5,171,633  
Total commercial $ 5,337,353     $ 674,253     $ 444,428     $ 6,456,034  
Commercial real estate              
Fixed rate 405,258     1,769,399     263,307     2,437,964  
Variable rate 3,932,069     30,085     663     3,962,817  
Total commercial real estate $ 4,337,327     $ 1,799,484     $ 263,970     $ 6,400,781  
Home equity              
Fixed rate 8,126     4,047     62,070     74,243  
Variable rate 598,726             598,726  
Total home equity $ 606,852     $ 4,047     $ 62,070     $ 672,969  
Residential real estate              
Fixed rate 45,854     30,097     143,789     219,740  
Variable rate 54,908     197,720     317,131     569,759  
Total residential real estate $ 100,762     $ 227,817     $ 460,920     $ 789,499  
Premium finance receivables - commercial              
Fixed rate 2,575,106     89,806         2,664,912  
Variable rate              
Total premium finance receivables - commercial $ 2,575,106     $ 89,806     $     $ 2,664,912  
Premium finance receivables - life insurance              
Fixed rate 11,659     33,294     7,082     52,035  
Variable rate 3,743,439             3,743,439  
Total premium finance receivables - life insurance $ 3,755,098     $ 33,294     $ 7,082     $ 3,795,474  
Consumer and other              
Fixed rate 71,223     14,930     3,178     89,331  
Variable rate 43,781             43,781  
Total consumer and other $ 115,004     $ 14,930     $ 3,178     $ 133,112  
Total per category              
Fixed rate 3,290,829     2,609,784     922,013     6,822,626  
Variable rate 13,536,673     233,847     319,635     14,090,155  
Total loans, net of unearned income, excluding covered loans  $ 16,827,502     $ 2,843,631     $ 1,241,648     $ 20,912,781  
Variable Rate Loan Pricing by Index:              
Prime $ 2,891,012              
One- month LIBOR 6,631,241              
Three- month LIBOR 473,085              
Twelve- month LIBOR 3,663,204              
Other 431,613              
Total variable rate $ 14,090,155              
                   

A table accompanying this announcement can be found at:

http://www.globenewswire.com/NewsRoom/AttachmentNg/d4ac8ff1-0c35-4c80-a418-c20978f9deb6

Source: Bloomberg

As noted in the table on the previous page, the majority of the Company's portfolio is tied to LIBOR indices which, as shown in the table above, do not mirror the same increases as the prime rate or the federal funds rate when the Federal Reserve raises interest rates.  Specifically, the Company has $6.6 billion of variable rate loans tied to one-month LIBOR and $3.7 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows that the Federal Reserve raised interest rates by 25 bps in the fourth quarter of 2016, and the first and second quarters of 2017, and during those periods one-month LIBOR increased by 24 bps, 21 bps and 24 bps respectively, while twelve-month LIBOR increased by 14 bps and 11 bps and then decreased by 6 bps in the second quarter of 2017. The Federal Reserve did not raise interest rates during the third quarter of 2017.  During that period, one-month LIBOR increased by 1bp and twelve-month LIBOR increased by 4 bps.

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 2017 compared to 
Q2 2017
   Q3 2017 compared to 
Q3 2016
(Dollars in thousands)   2017   2017   2016   $ Change   % Change   $ Change   % Change
Brokerage   $ 5,127     $ 5,449     $ 6,752     $ (322 )   (6 )%   $ (1,625 )   (24 )%
Trust and asset management   14,676     14,456     12,582     220     2     2,094     17  
Total wealth management   19,803     19,905     19,334     (102 )   (1 )   469     2  
Mortgage banking   28,184     35,939     34,712     (7,755 )   (22 )   (6,528 )   (19 )
Service charges on deposit accounts    8,645     8,696     8,024     (51 )   (1 )   621     8  
Gains on investment securities, net   39     47     3,305     (8 )   (17 )   (3,266 )   (99 )
Fees from covered call options   1,143     890     3,633     253     28     (2,490 )   (69 )
Trading losses, net   (129 )   (420 )   (432 )   291     (69 )   303     (70 )
Operating lease income, net   8,461     6,805     4,459     1,656     24     4,002     90  
Other:                            
Interest rate swap fees   1,762     2,221     2,881     (459 )   (21 )   (1,119 )   (39 )
BOLI   897     888     884     9     1     13     1  
Administrative services   1,052     986     1,151     66     7     (99 )   (9 )
Early pay-offs of leases       10         (10 )   (100 )       NM  
Miscellaneous   9,874     14,005     8,653     (4,131 )   (29 )   1,221     14  
Total Other   13,585     18,110     13,569     (4,525 )   (25 )   16      
Total Non-Interest Income   $ 79,731     $ 89,972     $ 86,604     $ (10,241 )   (11 )%   $ (6,873 )   (8 )%
                                                     

NM - Not Meaningful

             
    Nine Months Ended        
     September 30,     September 30,    $   %
(Dollars in thousands)   2017   2016   Change   Change
Brokerage   $ 16,796     $ 19,111     $ (2,315   (12 )%
Trust and asset management   43,060     37,395     5,665     15  
Total wealth management   59,856     56,506     3,350     6  
Mortgage banking   86,061     93,254     (7,193 )   (8 )
Service charges on deposit accounts   25,606     23,156     2,450     11  
Gains on investment securities, net   31     6,070     (6,039 )   (99 )
Fees from covered call options   2,792     9,994     (7,202 )   (72 )
Trading losses, net   (869 )   (916 )   47     (5 )
Operating lease income, net   21,048     11,270     9,778     87  
Other:                
Interest rate swap fees   5,416     9,154     (3,738 )   (41 )
BOLI   2,770     2,613     157     6  
Administrative services   3,062     3,294     (232 )   (7 )
Gain on extinguishment of debt        4,305     (4,305 )   NM  
Early pay-offs of leases   1,221         1,221     NM  
Miscellaneous   31,474     21,455     10,019     47  
Total Other   43,943     40,821     3,122     8  
Total Non-Interest Income   $ 238,468     $ 240,155     $ (1,687 )   (1 )%
                               

NM - Not Meaningful
Notable contributions to the change in non-interest income are as follows:

The decrease in wealth management revenue during the current period as compared to the second quarter of 2017 resulted from lower customer trading activity in the current quarter. The increase in wealth management revenue during the current period as compared to the third quarter of 2016 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.

The decrease in mortgage banking revenue in the current quarter as compared to the second quarter of 2017 resulted primarily from lower origination volumes and a $2.2 million negative fair value adjustment related to mortgage servicing rights assets (compared to an $825,000 positive fair value adjustment in the second quarter of 2017). Mortgage loans originated or purchased for sale decreased during the current quarter, totaling $956.0 million in the third quarter of 2017 as compared to $1.1 billion in the second quarter of 2017 and $1.3 billion in the third quarter of 2016. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. Mortgage revenue is also impacted by changes in the fair value of mortgage servicing rights as the Company does not hedge this change in fair value. The Company typically originates mortgage loans held-for-sale with associated mortgage servicing rights retained or released. The Company records mortgage servicing rights at fair value on a recurring basis. The table below presents additional selected information regarding mortgage banking revenue for the respective periods.

         
    Three Months Ended   Nine Months Ended
(Dollars in thousands)    September 30, 
 2017
  June 30,
 2017
   September 30,
 2016
  September 30,
 2017
  September 30,
 2016
Retail originations   $ 809,961     963,396     $  1,138,571     $  2,398,328     $  2,978,643  
Correspondent originations   145,999     170,862     121,007     414,357     229,825  
Total originations (A)   $ 955,960     1,134,258     $ 1,259,578     $ 2,812,685     $ 3,208,468  
                     
Purchases as a percentage of originations   80 %   84 %   57   78   60
Refinances as a percentage of originations   20     16     43     22     40  
Total   100 %   100 %   100   100 %   100
                                         
Production revenue (B) (1)   $ 24,038     $ 28,140     $ 32,889     $ 69,855     $ 85,040  
Production margin (B / A)   2.51 %   2.48 %   2.61   2.48   2.65
                                 
Loans serviced for others (C)   $ 2,622,411     $  2,303,435     $ 1,508,469          
Mortgage servicing rights, at fair value (D)   29,414     27,307     13,901          
Percentage of mortgage servicing rights to loans serviced for others (D / C)    1.12 %   1.19 %   0.92        
                           

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

The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio by using fees generated from these options to compensate for net interest margin compression. These option transactions are designed to mitigate overall interest rate risk and do not qualify as hedges pursuant to accounting guidance. Fees from covered call options decreased in the current quarter compared to the third quarter of 2016, 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, 2017, June 30, 2017 or September 30, 2016.

The increase in operating lease income in the current quarter compared to the prior periods is primarily related to growth in business from the Company's leasing divisions during the third quarter of 2017.

The decrease in other non-interest income in the current quarter as compared to the second quarter of 2017 is primarily due to a reduction in the estimated FDIC indemnification liability of $4.9 million recognized in the previous quarter and lower interest rate swap fees, partially offset by higher income from investments in partnerships.

NON-INTEREST EXPENSE

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

                     
    Three Months Ended                
     September 30,    June 30,    September 30,     Q3 2017 compared to 
Q2 2017
   Q3 2017 compared to 
Q3 2016
(Dollars in thousands)   2017   2017   2016   $ Change   % Change   $ Change   % Change
Salaries and employee benefits:                            
Salaries   $ 57,689     $ 55,215     $ 54,309     $ 2,474     4 %   $ 3,380     6 %
Commissions and incentive compensation    32,095     34,050     33,740     (1,955 )   (6 )   (1,645 )   (5 )
Benefits   16,467     17,237     15,669     (770 )   (4 )   798     5  
Total salaries and employee benefits   106,251     106,502     103,718     (251 )       2,533     2  
Equipment   9,947     9,909     9,449     38         498     5  
Operating lease equipment depreciation   6,794     5,662     3,605     1,132     20     3,189     88  
Occupancy, net   13,079     12,586     12,767     493     4     312     2  
Data processing   7,851     7,804     7,432     47     1     419     6  
Advertising and marketing   9,572     8,726     7,365     846     10     2,207     30  
Professional fees   6,786     7,510     5,508     (724 )   (10 )   1,278     23  
Amortization of other intangible assets   1,068     1,141     1,085     (73 )   (6 )   (17 )   (2 )
FDIC insurance   3,877     3,874     3,686     3         191     5  
OREO expense, net   590     739     1,436     (149 )   (20 )   (846 )   (59 )
Other:                            
Commissions - 3rd party brokers   990     1,033     1,362     (43 )   (4 )   (372 )   (27 )
Postage   1,814     2,080     1,889     (266 )   (13 )   (75 )   (4 )
Miscellaneous   14,956     15,978     17,313     (1,022 )   (6 )   (2,357 )   (14 )
Total other   17,760     19,091     20,564     (1,331 )   (7 )   (2,804 )   (14 )
Total Non-Interest Expense   $ 183,575     $  183,544     $ 176,615     $ 31     %   $ 6,960     4 %


             
    Nine Months Ended        
     September 30,     September 30,    $   %
(Dollars in thousands)   2017   2016   Change    Change 
Salaries and employee benefits:                
Salaries   $ 167,912     $ 157,515     $ 10,397     7 %
Commissions and incentive compensation    92,788     92,646     142      
Benefits   51,369     50,262     1,107     2  
Total salaries and employee benefits   312,069     300,423     11,646     4  
Equipment   28,858     27,523     1,335     5  
Operating lease equipment depreciation   17,092     9,040     8,052     89  
Occupancy, net   38,766     36,658     2,108     6  
Data processing   23,580     21,089     2,491     12  
Advertising and marketing   23,448     18,085     5,363     30  
Professional fees   18,956     14,986     3,970     26  
Amortization of other intangible assets   3,373     3,631     (258 )   (7 )
FDIC insurance   11,907     11,339     568     5  
OREO expense, net   2,994     3,344     (350 )   (10 )
Other:                
Commissions - 3rd party brokers   3,121     3,996     (875 )   (22 )
Postage   5,336     5,229     107     2  
Miscellaneous   45,737     45,971     (234 )   (1 )
Total other   54,194     55,196     (1,002 )   (2 )
Total Non-Interest Expense   $ 535,237     $ 501,314     $  33,923     7 %
                               

Notable contributions to the change in non-interest expense are as follows:

Salaries and employee benefits expense decreased in the current quarter compared to the second quarter of 2017 primarily as a result of lower incentive compensation on variable pay based arrangements (including mortgage banking commissions) and benefits, partially offset by higher salaries.

The increase in operating lease equipment depreciation in the current quarter compared to the prior periods is primarily related to growth in business from the Company's leasing divisions during the third quarter of 2017.

The increase in advertising and marketing expenses during the current quarter compared to the second quarter of 2017 is primarily related to higher expenses from mass market media promotions. 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 timing of sponsorship programs and type of marketing programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

The decrease in professional fees during the current quarter compared to the second quarter of 2017 is primarily related to lower legal and consulting fees. Professional fees include legal, audit and tax fees, external loan review costs, consulting arrangements and normal regulatory exam assessments.

The decrease in miscellaneous expenses during the current quarter compared to the second quarter of 2017 is primarily a result of lower fees from various purchased services. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors' fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses, operating losses and lending origination costs that are not deferred.

INCOME TAXES

The Company recorded income tax expense of $38.6 million in the third quarter of 2017 compared to $37.0 million in the second quarter of 2017 and $31.9 million in the third quarter of 2016. The effective tax rates were 37.05% in the third quarter of 2017, 36.34% in the second quarter of 2017 and 37.55% in the third quarter of 2016. During the nine months ended September 30, 2017, the Company recorded income tax expense of $105.3 million (35.79% effective tax rate) compared to $91.3 million (37.47% effective tax rate) for the same period of 2016. The lower effective tax rate in the first nine months of 2017 was primarily a result of recording $5.0 million of excess tax benefits related to the adoption of new accounting rules over income taxes attributed to share-based compensation that became effective on January 1, 2017. Approximately $3.4 million of these excess tax benefits were recorded in the first quarter of 2017. Excess tax benefits are expected to be higher in the first quarter when the majority of the Company's share-based awards vest, and will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards.

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)   2017   2017   2016   2017   2016
Allowance for loan losses at beginning of period   $ 129,591     $ 125,819     $ 114,356     $ 122,291     $ 105,400  
Provision for credit losses   7,942     8,952     9,741     22,210     27,433  
Other adjustments   (39 )   (30 )   (112 )   (125 )   (324 )
Reclassification (to) from allowance for unfunded lending-related commitments    94     106     (579 )   62     (700 )
Charge-offs:                    
Commercial   2,265     913     3,469     3,819     4,861  
Commercial real estate   989     1,985     382     3,235     1,555  
Home equity   968     1,631     574     3,224     3,672  
Residential real estate   267     146     134     742     1,320  
Premium finance receivables - commercial   1,716     1,878     1,959     5,021     6,350  
Premium finance receivables - life insurance                    
Consumer and other   213     175     389     522     720  
Total charge-offs   6,418     6,728     6,907     16,563     18,478  
Recoveries:                    
Commercial   801     561     176     1,635     926  
Commercial real estate   323     276     364     1,153     1,029  
Home equity   178     144     65     387     184  
Residential real estate   55     54     61     287     204  
Premium finance receivables - commercial   499     404     456     1,515     1,876  
Premium finance receivables - life insurance                    
Consumer and other   93     33     72     267     143  
Total recoveries   1,949     1,472     1,194     5,244     4,362  
Net charge-offs   (4,469 )   (5,256 )   (5,713 )   (11,319 )   (14,116 )
Allowance for loan losses at period end   $ 133,119     $ 129,591     $ 117,693     $ 133,119     $ 117,693  
Allowance for unfunded lending-related commitments at period end   1,276     1,705     1,648     1,276     1,648  
Allowance for credit losses at period end   $ 134,395     $ 131,296     $ 119,341     $ 134,395     $ 119,341  
Annualized net charge-offs (recoveries) by category as a
percentage of its own respective category's average:
                   
Commercial   0.09 %   0.02 %   0.24 %   0.05 %   0.10 %
Commercial real estate   0.04     0.11     0.00     0.04     0.01  
Home equity   0.46     0.85     0.27     0.54     0.61  
Residential real estate   0.08     0.03     0.03     0.06     0.14  
Premium finance receivables - commercial   0.18     0.23     0.24     0.18     0.25  
Premium finance receivables - life insurance   0.00     0.00     0.00     0.00     0.00  
Consumer and other   0.37     0.45     0.92     0.27     0.56  
Total loans, net of unearned income, excluding covered loans   0.08 %   0.10 %   0.12 %   0.07 %   0.10 %
Net charge-offs as a percentage of the provision for credit losses   56.27 %   58.71 %   58.65 %   50.96 %   51.46 %
Loans at period-end, excluding covered loans   $  20,912,781     $  20,743,332     $  19,101,261          
Allowance for loan losses as a percentage of loans at period end   0.64 %   0.62 %   0.62 %        
Allowance for credit losses as a percentage of loans at period end   0.64 %   0.63 %   0.62 %        
                           

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).

Net charge-offs as a percentage of loans, excluding covered loans, for the third quarter of 2017 totaled eight basis points on an annualized basis compared to ten basis points on an annualized basis in the second quarter of 2017 and twelve basis points on an annualized basis in the third quarter of 2016.  Net charge-offs totaled $4.5 million in the third quarter of 2017, a $787,000 decrease from $5.3 million in the second quarter of 2017 and a $1.2 million decrease from $5.7 million in the third quarter of 2016. The provision for credit losses, excluding the provision for covered loan losses, totaled $7.9 million for the third quarter of 2017 compared to $9.0 million for the second quarter of 2017 and $9.7 million for the third quarter of 2016.

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.

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

         
    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,   September 30,
(Dollars in thousands)   2017   2017   2016   2017   2016
Provision for loan losses   $ 8,036     $ 9,058     $ 9,162     $ 22,272     $ 26,733  
Provision for unfunded lending-related commitments   (94 )   (106 )   579     (62 )   700  
Provision for covered loan losses   (46 )   (61 )   (170 )   (214 )   (699 )
Provision for credit losses   $ 7,896     $ 8,891     $ 9,571     $ 21,996     $ 26,734  
                     
            Period End
            September 30,   June 30,   September 30,
            2017   2017   2016
Allowance for loan losses           $ 133,119     $ 129,591     $ 117,693  
Allowance for unfunded lending-related commitments            1,276     1,705     1,648  
Allowance for covered loan losses           758     1,074     1,422  
Allowance for credit losses           $ 135,153     $ 132,370     $ 120,763  
                                 

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, excluding covered loans, as of September 30, 2017 and June 30, 2017.

     
    As of September 30, 2017
    Recorded   Calculated   As a percentage
of its own respective
(Dollars in thousands)   Investment   Allowance   category's balance
Commercial:(1)            
Commercial and industrial   $ 3,587,207     $ 35,803     1.00 %
Asset-based lending   895,283     7,682     0.86  
Tax exempt   350,470     2,454     0.70  
Leases   380,056     1,208     0.32  
Commercial real estate:(1)            
Residential construction   37,501     722     1.93  
Commercial construction   635,763     6,843     1.08  
Land   99,360     3,352     3.37  
Office   836,978     6,245     0.75  
Industrial   798,459     5,532     0.69  
Retail   900,005     6,094     0.68  
Multi-family   833,330     8,856     1.06  
Mixed use and other   1,870,439     14,199     0.76  
Home equity(1)   615,690     10,556     1.71  
Residential real estate(1)   753,407     6,565     0.87  
Total core loan portfolio   $ 12,593,948     $ 116,111     0.92 %
Commercial:            
Franchise   $ 690,867     $ 5,950     0.86 %
Mortgage warehouse lines of credit   194,370     1,438     0.74  
Community Advantage - homeowner associations   156,457     392     0.25  
Aircraft   3,084     43     1.39  
Purchased non-covered commercial loans (2)   198,240     765     0.39  
Commercial real estate:            
Purchased non-covered commercial real estate (2)   388,946     197     0.05  
Purchased non-covered home equity (2)   57,279          
Purchased non-covered residential real estate (2)   36,092     92     0.25  
Premium finance receivables            
U.S. commercial insurance loans   2,353,705     4,760     0.20  
Canada commercial insurance loans (2)   311,207     469     0.15  
Life insurance loans (1)   3,586,011     1,324     0.04  
Purchased life insurance loans (2)   209,463          
Consumer and other (1)   130,852     1,577     1.21  
Purchased non-covered consumer and other (2)   2,260     1     0.04  
Total consumer, niche and purchased loan portfolio   $ 8,318,833     $ 17,008     0.20 %
Total loans, net of unearned income, excluding covered loans    $  20,912,781     $  133,119     0.64 %
                       

(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, 2017
    Recorded   Calculated   As a percentage
of its own respective
(Dollars in thousands)   Investment   Allowance   category's balance
Commercial:(1)            
Commercial and industrial   $ 3,562,482     $ 32,496     0.91 %
Asset-based lending   869,031     8,004     0.92  
Tax exempt   357,872     2,638     0.74  
Leases   355,383     1,150     0.32  
Commercial real estate:(1)            
Residential construction   41,640     892     2.14  
Commercial construction   667,269     8,295     1.24  
Land   107,506     3,594     3.34  
Office   838,897     5,729     0.68  
Industrial   748,142     5,188     0.69  
Retail   878,908     5,952     0.68  
Multi-family   780,360     8,207     1.05  
Mixed use and other   1,904,331     14,225     0.75  
Home equity(1)   627,178     11,134     1.78  
Residential real estate(1)   724,161     6,063     0.84  
Total core loan portfolio   $ 12,463,160     $ 113,567     0.91 %
Commercial:            
Franchise   $ 622,301     $ 5,222     0.84 %
Mortgage warehouse lines of credit   234,643     1,719     0.73  
Community Advantage - homeowner associations   145,494     364     0.25  
Aircraft   3,156     17     0.54  
Purchased non-covered commercial loans (2)   255,927     748     0.29  
Commercial real estate:            
Purchased non-covered commercial real estate (2)   435,441     257     0.06  
Purchased non-covered home equity (2)   62,305          
Purchased non-covered residential real estate (2)   38,649     80     0.21  
Premium finance receivables            
U.S. commercial insurance loans   2,342,428     4,526     0.19  
Canada commercial insurance loans (2)   305,958     483     0.16  
Life insurance loans (1)   3,492,709     1,343     0.04  
Purchased life insurance loans (2)   226,334          
Consumer and other (1)   112,337     1,264     1.13  
Purchased non-covered consumer and other (2)   2,490     1     0.04  
Total consumer, niche and purchased loan portfolio   $ 8,280,172     $ 16,024     0.19 %
Total loans, net of unearned income, excluding covered loans   $  20,743,332     $  129,591     0.62 %
                       

(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.

In addition to the $133.1 million of allowance for loan losses, there is $5.2 million of non-accretable credit discount on purchased loans reported in accordance with ASC 310-30, excluding covered loans, that is available to absorb credit losses.

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 preceding tables as of September 30, 2017 and June 30, 2017.

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.

The tables below show the aging of the Company's loan portfolio at September 30, 2017 and June 30, 2017:

                         
        90+ days   60-89   30-59        
As of September 30, 2017       and still   days past   days past        
(Dollars in thousands)   Nonaccrual   accruing   due   due   Current   Total Loans
Loan Balances:                        
Commercial (1)   $ 13,931     $ 1,489     $ 5,036     $ 36,450     $ 6,399,128     $ 6,456,034  
Commercial real estate (1)   14,878     8,443     5,838     16,955     6,354,667     6,400,781  
Home equity   7,581         446     2,590     662,352     672,969  
Residential real estate (1)   14,743     1,120     2,055     165     771,416     789,499  
Premium finance receivables - commercial   9,827     9,584     7,421     9,966     2,628,114     2,664,912  
Premium finance receivables - life insurance (1)       6,740     946     6,937     3,780,851     3,795,474  
Consumer and other (1)   540     221     242     685     131,424     133,112  
Total loans, net of unearned income, excluding covered loans   $ 61,500     $ 27,597     $ 21,984     $ 73,748     $ 20,727,952     $ 20,912,781  
Covered loans   1,936     2,233     1,074     45     41,313     46,601  
Total loans, net of unearned income   $ 63,436     $ 29,830     $ 23,058     $ 73,793     $ 20,769,265     $ 20,959,382  


As of September 30, 2017
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 (1)   0.2 %   %   0.1 %   0.6 %   99.1 %   100.0 %
Commercial real estate (1)   0.2     0.1     0.1     0.3     99.3     100.0  
Home equity   1.1         0.1     0.4     98.4     100.0  
Residential real estate (1)   1.9     0.1     0.3         97.7     100.0  
Premium finance receivables - commercial   0.4     0.4     0.3     0.4     98.5     100.0  
Premium finance receivables - life insurance (1)       0.2         0.2     99.6     100.0  
Consumer and other (1)   0.4     0.2     0.2     0.5     98.7     100.0  
Total loans, net of unearned income, excluding covered loans   0.3 %   0.1 %   0.1 %   0.4 %   99.1 %   100.0 %
Covered loans   4.2     4.8     2.3     0.1     88.6     100.0  
Total loans, net of unearned income   0.3 %   0.1 %   0.1 %   0.4 %   99.1 %   100.0 %
                                     

(1) Including PCI loans. PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30.  Loan agings are based upon contractually required payments.

                         
        90+ days   60-89   30-59        
As of June 30, 2017       and still   days past   days past        
(Dollars in thousands)   Nonaccrual   accruing   due   due   Current   Total Loans
Loan Balances:                        
Commercial (1)   $ 10,191     $ 1,572     $ 7,062     $ 22,372     $ 6,365,092     $ 6,406,289  
Commercial real estate (1)   16,980     8,768     1,642     42,049     6,333,055     6,402,494  
Home equity   9,482         855     2,858     676,288     689,483  
Residential real estate (1)   14,292     775     1,273     300     746,170     762,810  
Premium finance receivables - commercial   10,456     5,922     4,951     11,713     2,615,344     2,648,386  
Premium finance receivables - life insurance (1)       1,046         16,977     3,701,020     3,719,043  
Consumer and other (1)   439     125     331     515     113,417     114,827  
Total loans, net of unearned income, excluding covered loans   $ 61,840     $ 18,208     $ 16,114     $ 96,784     $ 20,550,386     $ 20,743,332  
Covered loans   1,961     2,504     113     598     44,943     50,119  
Total loans, net of unearned income   $ 63,801     $ 20,712     $ 16,227     $ 97,382     $ 20,595,329     $ 20,793,451  
                                                 


                         
As of June 30, 2017
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 (1)   0.2 %   %   0.1 %   0.3 %   99.4 %   100.0 %
Commercial real estate (1)   0.3     0.1         0.7     98.9     100.0  
Home equity   1.4         0.1     0.4     98.1     100.0  
Residential real estate (1)   1.9     0.1     0.2         97.8     100.0  
Premium finance receivables - commercial   0.4     0.2     0.2     0.4     98.8     100.0  
Premium finance receivables - life insurance (1)               0.5     99.5     100.0  
Consumer and other (1)   0.4     0.1     0.3     0.4     98.8     100.0  
Total loans, net of unearned income, excluding covered loans   0.3 %   0.1 %   0.1 %   0.5 %   99.0 %   100.0 %
Covered loans   3.9     5.0     0.2     1.2     89.7     100.0  
Total loans, net of unearned income   0.3 %   0.1 %   0.1 %   0.5 %   99.0 %   100.0 %
                                     

(1) Including PCI loans. PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30.  Loan agings are based upon contractually required payments.

As of September 30, 2017, $22.0 million of all loans, excluding covered loans, or 0.1%, were 60 to 89 days past due and $73.7 million, or 0.4%, were 30 to 59 days (or one payment) past due. As of June 30, 2017, $16.1 million of all loans, excluding covered loans, or 0.1%, were 60 to 89 days past due and $96.8 million, or 0.5%, 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, 2017 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, 2017 that are current with regards to the contractual terms of the loan agreements comprise 97.7% of total residential real estate loans outstanding.

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)   2017   2017   2016
Loans past due greater than 90 days and still accruing(1):            
Commercial   $     $     $  
Commercial real estate            
Home equity            
Residential real estate       179      
Premium finance receivables - commercial   9,584     5,922     7,754  
Premium finance receivables - life insurance   6,740     1,046      
Consumer and other   159     63     60  
Total loans past due greater than 90 days and still accruing   16,483     7,210     7,814  
Non-accrual loans (2):            
Commercial   13,931     10,191     16,418  
Commercial real estate   14,878     16,980     22,625  
Home equity   7,581     9,482     9,309  
Residential real estate   14,743     14,292     12,205  
Premium finance receivables - commercial   9,827     10,456     14,214  
Premium finance receivables - life insurance            
Consumer and other   540     439     543  
Total non-accrual loans   61,500     61,840     75,314  
Total non-performing loans:            
Commercial   13,931     10,191     16,418  
Commercial real estate   14,878     16,980     22,625  
Home equity   7,581     9,482     9,309  
Residential real estate   14,743     14,471     12,205  
Premium finance receivables - commercial   19,411     16,378     21,968  
Premium finance receivables - life insurance   6,740     1,046      
Consumer and other   699     502     603  
Total non-performing loans   $ 77,983     $ 69,050     $ 83,128  
Other real estate owned   17,312     16,853     19,933  
Other real estate owned - from acquisitions   20,066     22,508     15,117  
Other repossessed assets   301     532     428  
Total non-performing assets   $ 115,662     $ 108,943     $ 118,606  
TDRs performing under the contractual terms of the loan agreement   $ 26,972     $ 28,008     $ 29,440  
Total non-performing loans by category as a percent of its own respective
category's period-end balance:
           
Commercial   0.22 %   0.16 %   0.28 %
Commercial real estate   0.23     0.27     0.38  
Home equity   1.13     1.38     1.25  
Residential real estate   1.87     1.90     1.84  
Premium finance receivables - commercial   0.73     0.62     0.90  
Premium finance receivables - life insurance   0.18     0.03      
Consumer and other   0.53     0.44     0.50  
Total loans, net of unearned income   0.37 %   0.33 %   0.44 %
Total non-performing assets as a percentage of total assets   0.42 %   0.40 %   0.47 %
Allowance for loan losses as a percentage of total non-performing loans   170.70 %   187.68 %   141.58 %
                   

(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 $6.2 million, $5.1 million and $14.8 million as of September 30, 2017, June 30, 2017 and September 30, 2016, respectively.

The ratio of non-performing assets to total assets was 0.42% as of September 30, 2017, compared to 0.40% at June 30, 2017, and 0.47% at September 30, 2016. Non-performing assets, excluding covered assets and non-covered PCI loans, totaled $115.7 million at September 30, 2017, compared to $108.9 million at June 30, 2017 and $118.6 million at September 30, 2016. Non-performing loans, excluding covered loans and non-covered PCI loans, totaled $78.0 million, or 0.37% of total loans, at September 30, 2017 compared to $69.1 million, or 0.33% of total loans, at June 30, 2017 and $83.1 million, or 0.44% of total loans, at September 30, 2016. The increase in non-performing loans, excluding covered loans and non-covered PCI loans, compared to June 30, 2017 was primarily the result of a $5.7 million increase in the life insurance premium finance receivables portfolio, a $3.7 million increase in the commercial portfolio and a $3.0 million  increase in the commercial premium finance receivables portfolio. OREO, excluding covered OREO, of $37.4 million at September 30, 2017 decreased $2.0 million compared to $39.4 million at June 30, 2017 and increased $2.3 million compared to $35.1 million at September 30, 2016.

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.

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)   2017   2017   2016   2017   2016
Balance at beginning of period   $ 69,050     $ 78,979     $ 88,119     $ 87,454     $ 84,057  
Additions, net   10,622     10,888     9,522     30,119     32,039  
Return to performing status   (603 )   (975 )   (231 )   (3,170 )   (3,110 )
Payments received   (6,633 )   (10,684 )   (5,235 )   (22,931 )   (13,353 )
Transfer to OREO and other repossessed assets   (1,072 )   (2,543 )   (2,270 )   (5,276 )   (6,168 )
Charge-offs   (2,295 )   (4,344 )   (3,353 )   (7,919 )   (6,829 )
Net change for niche loans (1)   8,914     (2,271 )   (3,424 )   (294 )   (3,508 )
Balance at end of period   $ 77,983     $ 69,050     $ 83,128     $ 77,983     $ 83,128  
                                         

(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)   2017   2017   2016
Accruing TDRs:            
Commercial   $ 3,774     $ 3,886     $ 2,285  
Commercial real estate   16,475     17,349     22,261  
Residential real estate and other   6,723     6,773     4,894  
Total accrual   $ 26,972     $ 28,008     $ 29,440  
Non-accrual TDRs: (1)            
Commercial   $ 2,493     $ 1,110     $ 2,134  
Commercial real estate   1,492     1,839     10,610  
Residential real estate and other   2,226     2,134     2,092  
Total non-accrual   $ 6,211     $ 5,083     $ 14,836  
Total TDRs:            
Commercial   $ 6,267     $ 4,996     $ 4,419  
Commercial real estate   17,967     19,188     32,871  
Residential real estate and other   8,949     8,907     6,986  
Total TDRs   $ 33,183     $ 33,091     $ 44,276  
Weighted-average contractual interest rate of TDRs    4.39 %   4.28 %   4.33 %
                   

(1) Included in total non-performing loans.

Other Real Estate Owned

The table below presents a summary of other real estate owned, excluding covered other real estate owned, as of September 30, 2017, June 30, 2017 and September 30, 2016, and shows the activity for the respective period and the balance for each property type:

     
    Three Months Ended
    September 30,   June 30,   September 30,
(Dollars in thousands)   2017   2017   2016
Balance at beginning of period   $ 39,361     $ 39,864     $ 38,063  
Disposals/resolved   (2,391 )   (4,270 )   (5,967 )
Transfers in at fair value, less costs to sell   898     3,965     3,958  
Transfers in from covered OREO subsequent to loss share expiration            
Additions from acquisition            
Fair value adjustments   (490 )   (198 )   (1,004 )
Balance at end of period   $ 37,378     $ 39,361     $ 35,050  
             
    Period End
    September 30,   June 30,   September 30,
Balance by Property Type   2017   2017   2016
Residential real estate   $ 7,236     $ 7,684     $ 9,602  
Residential real estate development   676     755     2,114  
Commercial real estate   29,466     30,922     23,334  
Total   $ 37,378     $ 39,361     $ 35,050  
                         

Items Impacting Comparative Financial Results:

Acquisitions

On February 14, 2017, the Company acquired certain assets and assumed certain liabilities of the mortgage banking business of American Homestead Mortgage, LLC ("AHM"), in a business combination. AHM is located in Montana's Flathead Valley and originated approximately $55 million of residential mortgage loans in 2016.

On November 18, 2016, the Company completed its acquisition of First Community Financial Corporation ("FCFC"). FCFC was the parent company of First Community Bank.  Through this transaction, the Company acquired First Community Bank's two banking locations in Elgin, Illinois, approximately $187 million in assets and approximately $150 million in deposits.         
                
On August 19, 2016, the Company, through its wholly-owned subsidiary Lake Forest Bank & Trust Company, completed its acquisition of approximately $561 million in select performing loans and related relationships from an affiliate of GE Capital Franchise Finance. The loans are to franchise operators (primarily quick service restaurant concepts) in the Midwest and in the Western portion of the United States.

On March 31, 2016, the Company completed its acquisition of Generations Bancorp. Inc. ("Generations"). Generations was the parent company of Foundations Bank ("Foundations").  Through this transaction, the Company acquired Foundations' banking location in Pewaukee, Wisconsin, approximately $134 million in assets and approximately $100 million in deposits.  

Items Occurring Subsequent to September 30, 2017:

Termination of Loss Share Agreements

On October 16, 2017, the Company entered in agreements with the Federal Deposit Insurance Corporation ("FDIC") that terminate all existing loss share agreements with the FDIC.  The loss share agreements were related to the Company's acquisition of assets and assumption of liabilities of eight failed banks through FDIC assisted transactions in 2010, 2011 and 2012.

Under terms of the agreements, the Company made a net payment of $15.2 million to the FDIC as consideration for the early termination of the loss share agreements.  The Company will record a pre-tax gain of approximately $0.4 million in the fourth quarter to write off the remaining loss share asset, relieve the claw-back liability and recognize the payment to the FDIC.

Approximately $0.2 million of the remaining net indemnification liabilities that were scheduled to be amortized against future earnings will not occur for the remainder of the fourth quarter of 2017. Additionally, $0.8 million, $0.8 million and $0.7 million each year in 2018, 2019 and 2020, respectively, of scheduled amortization will not occur.

The termination of FDIC loss share agreements has no effect on yields of the loans that were previously covered under these agreements.  The Company will be solely responsible for all future charge-offs, recoveries, gains, losses and expenses related to the previously covered assets as the FDIC will no longer share in those amounts.

WINTRUST SUBSIDIARIES AND LOCATIONS

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

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

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

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

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as "intend," "plan," "project," "expect," "anticipate," "believe," "estimate," "contemplate," "possible," "point," "will," "may," "should," "would" and "could." Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management's expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company's 2016 Annual Report on Form 10-K and in any of the Company's subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company's future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management's long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company's business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

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

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

CONFERENCE CALL, WEB CAST AND REPLAY

The Company will hold a conference call at 1:00 p.m. (CT) Thursday, October 19, 2017 regarding third quarter and year-to-date 2017 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #94462324. A simultaneous audio-only web cast and replay of the conference call may be accessed via the Company's website at (http://www.wintrust.com), Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the third quarter and year-to-date 2017 earnings press release will be available on the home page of the Company's website at (http://www.wintrust.com) and at the Investor Relations, Investor News and Events, Press Releases link on its website.

WINTRUST FINANCIAL CORPORATION

Supplemental Financial Information

5 Quarter Trends

     
WINTRUST FINANCIAL CORPORATION - Supplemental Financial Information
Selected Financial Highlights - 5 Quarter Trends
(Dollars in thousands, except per share data)
     
    Three Months Ended
    September 30,   June 30,   March 31,   December 31,   September 30,
    2017   2017   2017   2016   2016
Selected Financial Condition Data (at end of period):                    
Total assets   $ 27,358,162     $ 26,929,265     $ 25,778,893     $ 25,668,553     $ 25,321,759  
Total loans, excluding loans held-for-sale and covered loans   20,912,781     20,743,332     19,931,058     19,703,172     19,101,261  
Total deposits   22,895,063     22,605,692     21,730,441     21,658,632     21,147,655  
Junior subordinated debentures   253,566     253,566     253,566     253,566     253,566  
Total shareholders' equity   2,908,925     2,839,458     2,764,983     2,695,617     2,674,474  
Selected Statements of Income Data:                    
Net interest income   215,988     204,409     192,580     190,778     184,636  
Net revenue (1)   295,719     294,381     261,345     276,053     271,240  
Net income   65,626     64,897     58,378     54,608     53,115  
Net income per common share – Basic   $ 1.14     $ 1.15     $ 1.05     $ 0.98     $ 0.96  
Net income per common share – Diluted   $ 1.12     $ 1.11     $ 1.00     $ 0.94     $ 0.92  
Selected Financial Ratios and Other Data:                    
Performance Ratios:                    
Net interest margin   3.43 %   3.41 %   3.36 %   3.21 %   3.21 %
Net interest margin - fully taxable equivalent (non-GAAP) (2)   3.46 %   3.43 %   3.39 %   3.23 %   3.24 %
Non-interest income to average assets   1.17 %   1.39 %   1.11 %   1.32 %   1.38 %
Non-interest expense to average assets   2.70 %   2.83 %   2.70 %   2.80 %   2.82 %
Net overhead ratio (3)   1.53 %   1.44 %   1.60 %   1.48 %   1.44 %
Return on average assets   0.96 %   1.00 %   0.94 %   0.85 %   0.85 %
Return on average common equity   9.15 %   9.55 %   8.93 %   8.32 %   8.20 %
Return on average tangible common equity (non-GAAP) (2)   11.39 %   12.02 %   11.44 %   10.68 %   10.55 %
Average total assets   $ 27,012,295     $ 26,050,949     $ 25,207,348     $ 25,611,060     $ 24,879,252  
Average total shareholders' equity   2,882,682     2,800,905     2,739,050     2,689,876     2,651,684  
Average loans to average deposits ratio (excluding loans
held-for-sale, excluding covered loans)
  91.8 %   94.1 %   92.5 %   89.6 %   89.8 %
Average loans to average deposits ratio (excluding loans
held-for-sale, including covered loans)
  92.1     94.4     92.7     89.9     90.3  
Common Share Data at end of period:                    
Market price per common share   $ 78.31     $ 76.44     $ 69.12     $ 72.57     $ 55.57  
Book value per common share (2)   $ 49.86     $ 48.73     $ 47.88     $ 47.12     $ 46.86  
Tangible common book value per share (2)   $ 40.53     $ 39.40     $ 37.97     $ 37.08     $ 37.06  
Common shares outstanding   55,838,063     55,699,927     52,503,663     51,880,540     51,714,683  
Other Data at end of period:(6)                    
Leverage Ratio(4)   9.2 %   9.2 %   9.3 %   8.9 %   9.0 %
Tier 1 Capital to risk-weighted assets (4)   10.0 %   9.8 %   10.0 %   9.7 %   9.8 %
Common equity Tier 1 capital to risk-weighted assets (4)   9.5 %   9.3 %   8.9 %   8.6 %   8.7 %
Total capital to risk-weighted assets (4)   12.1 %   12.0 %   12.2 %   11.9 %   12.1 %
Allowance for credit losses (5)   $ 134,395     $ 131,296     $ 127,630     $ 123,964     $ 119,341  
Non-performing loans   77,983     69,050     78,979     87,454     83,128  
Allowance for credit losses to total loans (5)   0.64 %   0.63 %   0.64 %   0.63 %   0.62 %
Non-performing loans to total loans   0.37 %   0.33 %   0.40 %   0.44 %   0.44 %
Number of:                    
Bank subsidiaries   15     15     15     15     15  
Banking offices   156     153     155     155     152  
                               

(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) Capital ratios for current quarter-end are estimated.
(5) The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excluding the allowance for covered loan losses.
(6) Asset quality ratios exclude covered loans.