Wintrust Financial Corporation Reports Record Third Quarter 2020 Net Income of $107.3 million and Year-to-Date Net Income of $191.8 million

Rhea-AI Summary

Wintrust Financial Corporation (Nasdaq: WTFC) reported record net income of $107.3 million or $1.67 per diluted share for Q3 2020, a 391% increase from Q2 2020, but a 1% decrease compared to Q3 2019. Year-to-date net income was $191.8 million, down from $269.7 million in the same period in 2019. Total assets rose by $192 million, with loans up by $733 million. However, net interest income decreased by $7.2 million primarily due to lower PPP loan fee accretion. Mortgage banking revenue reached $108.5 million, while non-performing assets fell to 0.42%.

Positive

• Record net income of $107.3 million, up 391% from Q2 2020.
• Total assets increased by $192 million.
• Loans increased by $733 million, reflecting strong loan growth.
• Mortgage banking revenue rose to $108.5 million, indicating robust performance in a low-interest rate environment.
• Non-performing assets decreased to 0.42% of total assets.

Negative

• Net interest income decreased by $7.2 million due to lower PPP loan fee accretion.
• Year-to-date net income decreased to $191.8 million, down from $269.7 million in 2019.

ROSEMONT, Ill., Oct. 21, 2020 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust”, “the Company” or "we") (Nasdaq: WTFC) announced record net income of $107.3 million or $1.67 per diluted common share for the third quarter of 2020, an increase in diluted earnings per common share of 391% compared to the second quarter of 2020 and a decrease of 1% compared to the third quarter of 2019. The Company recorded net income of $191.8 million or $3.06 per diluted common share for the first nine months of 2020 compared to net income of $269.7 million or $4.60 per diluted common share for the same period of 2019.

Highlights of the Third Quarter of 2020:
Comparative information to the second quarter of 2020

• Total assets increased by $192 million.
• Total loans increased by $733 million.
• Total deposits increased by $193 million.
• Net interest income decreased by $7.2 million primarily due to lower Paycheck Protection Program ("PPP") loan fee accretion as a result of changes to the estimated timing of loan forgiveness. The Company recognized $17.4 million of PPP loan fee accretion in the third quarter of 2020 as compared to $25.1 million in the prior quarter. As of September 30, 2020, the Company had approximately $49.3 million of PPP loan fees that have yet to be recognized in income.
• The loans to deposits ratio ended the third quarter of 2020 at 89.7% as compared to 88.1% as of the prior quarter end. Excluding PPP loans, the loans to deposits ratio ended the third quarter of 2020 at 80.2%.
• Mortgage banking revenue increased by $6.2 million to $108.5 million for the third quarter of 2020 as compared to $102.3 million in the prior quarter.
  • Loans originated for sale in the third quarter of 2020 totaled $2.2 billion, essentially unchanged from the prior quarter.
• Outstanding COVID-19 related loan modifications for customers totaled approximately $413 million or 1.4% of total loans, excluding PPP loans, as of September 30, 2020 as compared to $1.7 billion or 6.2% as of June 30, 2020.
• Provision for credit losses totaled $25.0 million in the third quarter of 2020 as compared to $135.1 million in the second quarter of 2020.
• Recorded net charge-offs of $9.3 million in the third quarter of 2020, of which $6.4 million were reserves on individually assessed loans as of the prior quarter end, as compared to net charge-offs of $15.4 million in the second quarter of 2020. Net charge-offs as a percentage of average total loans, totaled 12 basis points in the third quarter of 2020 on an annualized basis compared to 20 basis points on an annualized basis in the second quarter of 2020.
• The allowance for credit losses on our core loan portfolio is approximately 1.88% of the outstanding balance as of September 30, 2020, up from 1.85% as of the prior quarter end. See Table 12 for more information.
• Non-performing assets totaled $182.3 million, or 0.42% of total assets, as of September 30, 2020 as compared to $198.5 million, or 0.46% of total assets, as of the prior quarter end.

Other items of note from the third quarter of 2020

• Recorded a decrease in the value of mortgage servicing rights related to changes in fair value model assumptions, net of derivative contract activity held as an economic hedge, of $3.0 million in the third quarter of 2020 as compared to a decline of $7.4 million in the prior quarter.
• Agreed to settle long standing recourse obligation disputes which resulted in an additional accrual of $3.1 million in the third quarter of 2020, recorded as a reduction to other mortgage banking revenue.
• Accrued $6.3 million of contingent consideration expense related to the previous acquisition of mortgage operations in the third quarter of 2020 as compared to $7.2 million in the prior quarter, which was recorded in other non-interest expense.
• Recorded acquisition related costs of $132,000 in the third quarter of 2020 as compared to $4.9 million in the prior quarter.
• Recorded a $9.0 million state income tax benefit in the third quarter of 2020 related to the settlement of an uncertain tax position. Net of the federal tax impact, the reduction to income tax expense was $7.1 million.

Edward J. Wehmer, Founder and Chief Executive Officer, commented, "I remain very proud of the extraordinary effort put forth by our employees to support our customers and our communities amid the challenges of COVID-19. Wintrust reported record net income of $107.3 million for the third quarter of 2020, up from $21.7 million in the second quarter of 2020. The third quarter of 2020 was characterized by strong loan growth, declining net interest income primarily due to lower PPP loan fee accretion, strong mortgage banking revenue, increased allowance for credit losses coverage and a continued focus to increase franchise value in our market area."

Mr. Wehmer continued, "The Company grew total loans by $733 million or 9%, on an annualized basis, in the third quarter of 2020 as compared to the second quarter of 2020. The Company experienced growth in its commercial, commercial real estate and premium finance receivable portfolios. In addition, the Company originated approximately $27 million of PPP loans in the third quarter of 2020. Our loan pipelines remain strong and we expect to continue to grow loans in the fourth quarter of 2020 without compromising our credit standards. Total deposits increased by $193 million as compared to the second quarter of 2020 including $205 million of non-interest bearing deposit growth. We continue to emphasize growing our franchise including gathering low cost deposits which we believe will drive value in the long term. We have accumulated excess liquidity in recent quarters and believe that, if conditions allow for suitable deployment of such excess liquidity, we could potentially increase our net interest margin by 10-25 basis points, depending on the mix of earning assets of such reinvestment. Our loans to deposits ratio ended the quarter at 89.7% and we believe that we have sufficient liquidity to meet customer loan demand."

Mr. Wehmer commented, "Net interest income decreased in the third quarter of 2020 primarily due to lower PPP loan fee accretion as a result of changes to the estimated timing of loan forgiveness. The Company recognized $17.4 million of PPP loan fee accretion in third quarter of 2020 as compared to $25.1 million in the prior quarter. Excluding the impact of PPP fees, the Company effectively offset the net interest margin impact of declining earning asset yields through downward repricing of interest-bearing deposits. We expect that, absent changes to the level of PPP loan fee accretion, we can continue to mitigate loan yield compression with deposit repricing in the fourth quarter of 2020. Further, to the extent we identify prudent opportunities to deploy excess liquidity, we may be able to improve net interest margin."

Mr. Wehmer noted, “Our mortgage banking business delivered another record quarter of mortgage banking revenue in light of the demand associated with historically low long-term interest rates. Loan volumes originated for sale in the third quarter of 2020 were $2.2 billion, essentially unchanged from the second quarter of 2020. As a result of increases in both current and forecasted revenues given the favorable mortgage banking environment, the Company recorded increased contingent consideration expense related to the previous acquisition of mortgage operations. Additionally, the Company recorded a $3.0 million decrease in the value of mortgage servicing rights related to changes in fair value model assumptions. We are leveraging efficiencies in our delivery channels and staffing strategies to keep pace with unprecedented demand. The strong quarter of mortgage performance contributed to reporting a 0.87% net overhead ratio for the third quarter of 2020. We believe the fourth quarter of 2020 will provide another strong quarter for mortgage banking production."

Commenting on credit quality, Mr. Wehmer stated, "The Company recorded provision for credit losses of $25.0 million in the third quarter increasing our allowance for credit losses. The allowance for credit losses on our core loan portfolio as of September 30, 2020 is approximately 1.88% of the outstanding balance. Net charge-offs totaled $9.3 million in the third quarter of 2020, of which $6.4 million were reserves on individually assessed loans as of the prior quarter end, as compared to $15.4 million in the second quarter of 2020. Additionally, the level of non-performing assets decreased by $16.2 million to $182.3 million. We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit."

Mindful of the challenges ahead, Mr. Wehmer noted, "We leverage robust capital and liquidity management frameworks, which include stress testing processes, to assess and monitor risk and inform decision making. The Company's capital ratios were stable in the third quarter of 2020 as net income supported asset growth. We believe the Company's capital levels remain adequate and will evaluate if it is prudent to resume repurchasing common stock."

Mr. Wehmer concluded, "We remain committed to supporting our community, including the well-being and safety of our customers and employees. We believe that our opportunities for both internal and external growth remain consistently strong and were particularly enhanced as a result of our successful participation in PPP lending. However, we continue to carefully monitor the COVID-19 pandemic and evaluate the impact that it could have on the economy, our customers and our business. We remain focused on navigating the current environment by actively monitoring and managing our credit portfolio."

The graphs below illustrate certain financial highlights of the third quarter of 2020. See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information with respect to non-GAAP financial measures/ratios, including the reconciliations to the corresponding GAAP financial measures/ratios.

Graphs available at the following link: http://ml.globenewswire.com/Resource/Download/6ccf49fe-326a-4af9-87b2-479bbf0543ee

SUMMARY OF RESULTS:

BALANCE SHEET

Total asset growth of $192 million in the third quarter of 2020 was primarily comprised of a $733 million increase in loans, partially offset by a $417 million decrease in investment securities and a $189 million decrease in interest-bearing deposits with banks. The $733 million increase in loans is comprised of a $418 million increase in commercial loans, a $222 million increase in commercial real estate loans and a $148 million increase in premium finance receivables. The $417 million decrease in investment securities was primarily due to accelerated prepayments and exercised embedded call options. The Company believes that the $3.8 billion of interest-bearing deposits with banks held as of September 30, 2020 provides more than sufficient liquidity to operate its business plan.

Total liabilities increased $108 million in the third quarter of 2020 resulting primarily from a $193 million increase in total deposits. The increase in deposits includes a $272 million increase in MaxSafe money market deposits and a $205 million increase in non-interest-bearing deposits, partially offset by a $197 million decrease in wealth management deposits. Our loans to deposits ratio ended the quarter at 89.7%. Management believes in substantially funding the Company's balance sheet with core deposits and utilizes brokered or wholesale funding sources as appropriate to manage its liquidity position as well as for interest rate risk management purposes.

For more information regarding changes in the Company’s balance sheet, see Consolidated Statements of Condition and Tables 1 through 3 in this report.

NET INTEREST INCOME

For the third quarter of 2020, net interest income totaled $255.9 million, a decrease of $7.2 million as compared to the second quarter of 2020 and a decrease of $8.9 million as compared to the third quarter of 2019. The $7.2 million decrease in net interest income in the third quarter of 2020 compared to the second quarter of 2020 was primarily due to $7.7 million less PPP loan fee accretion in the third quarter of 2020.

Net interest margin was 2.56% (2.57% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2020 compared to 2.73% (2.74% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2020 and 3.37% (3.39% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2019. The 17 basis point decrease in net interest margin in the third quarter of 2020 as compared to the second quarter of 2020 was attributable to a 32 basis point decline in the yield on earning assets and a four basis point decrease in the net free funds contribution partially offset by a 19 basis point decrease in the rate paid on interest-bearing liabilities. The 32 basis point decline in the yield on earning assets in the third quarter of 2020 as compared to the second quarter of 2020 was in part due to a 14 basis point impact attributed to the declining yield on PPP loans. The remaining 18 basis point decrease in earning asset yields, primarily due to declining loan yields, excluding PPP, was more than offset by a 19 basis point decrease in the rate paid on interest-bearing liabilities. The decrease in the rate paid on interest-bearing liabilities in the third quarter of 2020 as compared to the prior quarter is primarily due to a 20 basis point decrease in the rate paid on interest-bearing deposits as management initiated various deposit rate reductions given the low interest rate environment.

For more information regarding net interest income, see Tables 4 through 8 in this report.

ASSET QUALITY

The allowance for credit losses totaled $389.0 million as of September 30, 2020 an increase of $15.8 million as compared to $373.2 million as of June 30, 2020. The allowance for credit losses increased primarily due to portfolio changes partially offset by changes in the macroeconomic forecasted conditions which contributed to decrease reserves. Consistent with the recovery in economic activity since the end of the second quarter of 2020, the Company's third quarter of 2020 macroeconomic forecasts of key model inputs (Gross Domestic Product, Baa Corporate Credit spreads, Dow Jones Total Stock Market Index and Commercial Real Estate Price Index) assume an improvement in the economic outlook compared to the macroeconomic forecasts used in the second quarter of 2020. While the uncertainties around the path of the recovery are still present, the third quarter of 2020 macroeconomic forecasts assume that the impact of those uncertainties on economic growth is relatively less severe compared to that assumed in the prior quarter. The Commercial, Industrial and Other portfolio realized a decrease in the allowance for credit losses as compared to the prior quarter-end, which was primarily driven by improving Dow Jones Total Stock Market Index and Baa Corporate Credit spread macroeconomic scenario variables. A deterioration in the CRE Price Index for the first portion of the Reasonable & Supportable period was a primary driver of increases in the allowance for credit losses of the Commercial Real Estate portfolios. Other key drivers of allowance for credit losses changes in these portfolios include, but are not limited to, net new loan growth and loan risk rating migration.

The provision for credit losses totaled $25.0 million for the third quarter of 2020 compared to $135.1 million for the second quarter of 2020 and $10.8 million for the third quarter of 2019. For more information regarding the provision for credit losses, see Table 11 in this report.

Management believes the allowance for credit losses is appropriate to account for expected credit losses. The Current Expected Credit Losses ("CECL") standard requires the Company to estimate expected credit losses over the life of the Company’s financial assets at a certain point in time. There can be no assurances, however, that future losses will not significantly exceed the amounts provided for, thereby affecting future results of operations. A summary of the allowance for credit losses calculated for the loan components in the core loan portfolio, the niche and consumer loan portfolio and the purchased loan portfolio as of September 30, 2020, June 30, 2020 and March 31, 2020 is shown on Table 12 of this report.

Net charge-offs totaled $9.3 million in the third quarter of 2020, a $6.1 million decrease from $15.4 million in the second quarter of 2020 and a $165,000 decrease from $9.4 million in the third quarter of 2019. Net charge-offs as a percentage of average total loans, totaled 12 basis points in the third quarter of 2020 on an annualized basis compared to 20 basis points on an annualized basis in the second quarter of 2020 and 15 basis points on an annualized basis in the third quarter of 2019. For more information regarding net charge-offs, see Table 10 in this report.

As of September 30, 2020, $49.9 million of all loans, or 0.2%, were 60 to 89 days past due and $186.5 million, or 0.6%, were 30 to 59 days (or one payment) past due. As of June 30, 2020, $79.3 million of all loans, or 0.3%, were 60 to 89 days past due and $166.4 million, or 0.5%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real-estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential real estate loan portfolios continue to exhibit low delinquency rates as of September 30, 2020. Home equity loans at September 30, 2020 that are current with regard to the contractual terms of the loan agreement represent 98.3% of the total home equity portfolio. Residential real estate loans at September 30, 2020 that are current with regards to the contractual terms of the loan agreements comprised 98.2% of total residential real estate loans outstanding. For more information regarding past due loans, see Table 13 in this report.

Outstanding COVID-19 related loan modifications for customers totaled approximately $413 million or 1.4% of total loans, excluding PPP loans as of September 30, 2020 as compared to $1.7 billion or 6.2% as of June 30, 2020. The outstanding modifications primarily changed terms to interest-only payments.

The ratio of non-performing assets to total assets was 0.42% as of September 30, 2020, compared to 0.46% at June 30, 2020, and 0.38% at September 30, 2019. Non-performing assets totaled $182.3 million at September 30, 2020, compared to $198.5 million at June 30, 2020 and $132.0 million at September 30, 2019. Non-performing loans totaled $173.1 million, or 0.54% of total loans, at September 30, 2020 compared to $188.3 million, or 0.60% of total loans, at June 30, 2020 and $114.3 million, or 0.44% of total loans, at September 30, 2019. The decrease in non-performing loans as of September 30, 2020 as compared to June 30, 2020 is primarily due to an $18.8 million decrease in total non-performing premium finance receivable balances. State emergency orders and pandemic delays on processing of return premiums, which serve as our collateral, contributed to the increase in 90 day past due premium finance receivables in the second quarter of 2020. As state emergency orders expired in the third quarter of 2020, many of the non-performing premium finance receivables were modified and returned to current as of September 30, 2020. Other real estate owned ("OREO") of $9.2 million at September 30, 2020 decreased by $1.0 million compared to $10.2 million at June 30, 2020 and decreased $8.3 million compared to $17.5 million at September 30, 2019. Management is pursuing the resolution of all non-performing assets. At this time, management believes OREO is appropriately valued at the lower of carrying value or fair value less estimated costs to sell. For more information regarding non-performing assets, see Table 14 in this report.

NON-INTEREST INCOME

Wealth management revenue increased by $2.3 million during the third quarter of 2020 as compared to the second quarter of 2020 primarily due to increased asset management fees and brokerage commissions. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

Mortgage banking revenue increased by $6.2 million in the third quarter of 2020 as compared to the second quarter of 2020, primarily due to a $5.8 million increase in revenue related to mortgage servicing rights activity. Loans originated for sale were $2.2 billion in the third quarter of 2020, essentially unchanged from the second quarter of 2020. The percentage of origination volume from refinancing activities was 59% in the third quarter of 2020 as compared to 70% in the second quarter of 2020. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market.

During the third quarter of 2020, the fair value of the mortgage servicing rights portfolio increased primarily due to increased capitalization of $20.9 million during the third quarter. This increase was partially offset by a negative fair value adjustment of $3.0 million as well as a reduction in value of $7.9 million due to payoffs and paydowns of the existing portfolio. The Company entered into interest rate swaps at the beginning of the fourth quarter of 2019 to economically hedge a portion of the potential negative fair value changes recorded in earnings related to its mortgage servicing rights portfolio. During the second quarter of 2020, the Company terminated the interest rate swaps. No economic hedges were outstanding relative to the mortgage servicing rights portfolio as of September 30, 2020 or June 30, 2020.

Other non-interest income decreased by $1.4 million in the third quarter of 2020 as compared to the second quarter of 2020 primarily due to lower swap fees with commercial clients.

For more information regarding non-interest income, see Tables 15 and 16 in this report.

NON-INTEREST EXPENSE

Salaries and employee benefits expense increased by $9.9 million in the third quarter of 2020 as compared to the second quarter of 2020. The $9.9 million increase is comprised of an increase of $4.8 million in employee benefits expense, an increase of $2.8 million in salaries expense, and an increase of $2.3 million in commissions and incentive compensation. The increase in employee benefits expense is primarily due to increases in employee insurance expense related to higher medical claims in the third quarter of 2020. The increase in salaries expense is primarily related to increased staffing costs to support mortgage origination. The increase in commissions and incentive compensation is primarily due to a reversal of expense associated with the Company's long term incentive program recorded in the second quarter of 2020.

Equipment expense totaled $17.3 million in the third quarter of 2020, an increase of $1.4 million as compared to the second quarter of 2020. This increase is primarily due to increased software licensing expenses.

Professional fees totaled $6.5 million in the third quarter of 2020, a decrease of $1.2 million as compared to the second quarter of 2020. The decrease in the third quarter relates primarily to lower legal and consulting fees during the period. Professional fees include legal, audit and tax fees, external loan review costs, consulting arrangements and normal regulatory exam assessments.

Data processing expenses totaled $5.7 million in the third quarter of 2020, a decrease of $4.7 million as compared to the second quarter of 2020. The decrease in the third quarter relates primarily to conversion costs of $4.5 million associated with the Countryside Bank acquisition recognized in the second quarter of 2020.

Miscellaneous expense in the third quarter of 2020 increased $1.1 million as compared to the second quarter of 2020. The increase in the third quarter is primarily due to higher loan expenses. The third quarter of 2020 included $6.3 million of contingent consideration expense related to the previous acquisition of mortgage operations as compared to $7.2 million in the prior quarter. The liability for contingent consideration expense related to the previous acquisition of mortgage operations is based upon forward looking mortgage origination volumes and the estimated profitability of that operation. Should those assumptions change going forward, the liability may need to be increased or decreased. The contractual period covering contingent consideration ends in January 2023. Miscellaneous expense also includes ATM expenses, correspondent bank charges, directors fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses and lending origination costs that are not deferred.

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

INCOME TAXES

The Company recorded income tax expense of $30.0 million in the third quarter of 2020 compared to $9.0 million in the second quarter of 2020 and $35.5 million in the third quarter of 2019. The effective tax rates were 21.83% in the third quarter of 2020 compared to 29.46% in the second quarter of 2020 and 26.36% in the third quarter of 2019. The effective tax rate in the third quarter of 2020 reflects a $9.0 million state income tax benefit related to the settlement of an uncertain tax position. Net of the federal tax impact, the reduction to income tax expense was $7.1 million.

BUSINESS UNIT SUMMARY

Community Banking

Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the third quarter of 2020, this unit expanded its loan and deposit portfolios. However, the banking segment also experienced net interest margin compression primarily due to lower PPP loan fee accretion in the third quarter of 2020 as compared to the second quarter of 2020.

Mortgage banking revenue was $108.5 million for the third quarter of 2020 an increase of $6.2 million as compared to the second quarter of 2020 primarily due to a $5.8 million increase in revenue related to mortgage servicing rights activity. Services charges on deposit accounts totaled $11.5 million in the third quarter of 2020 an increase of $1.1 million as compared to the second quarter of 2020 primarily due to higher account analysis and overdraft fees. The Company's gross commercial and commercial real estate loan pipelines remained strong as of September 30, 2020. Before the impact of scheduled payments and prepayments, gross commercial and commercial real estate loan pipelines were estimated to be approximately $1.3 billion to $1.5 billion at September 30, 2020. When adjusted for the probability of closing, the pipelines were estimated to be approximately $850 million to $950 million at September 30, 2020.

Specialty Finance

Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries, accounts receivable financing and value-added, out-sourced administrative services and other services. Originations within the insurance premium financing receivables portfolio were $2.8 billion during the third quarter of 2020 and average balances increased by $582.1 million as compared to the second quarter of 2020. The increase in average balances was more than offset by margin compression in this portfolio resulting in a $1.3 million decrease in interest income attributed to the lower market rates of interest associated with the insurance premium finance receivables portfolio. The Company's leasing business grew during the third quarter of 2020, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing by $20.3 million to $2.0 billion at the end of the third quarter of 2020. Revenues from the Company's out-sourced administrative services business were $1.1 million in the third quarter of 2020, an increase of $144,000 from the second quarter of 2020.

Wealth Management

Through four separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, tax-deferred like-kind exchange services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue increased by $2.3 million in the third quarter of 2020 compared to the second quarter of 2020, totaling $25.0 million in the third quarter of 2020. Increases in asset management fees were primarily due to favorable equity market performance during the third quarter of 2020. At September 30, 2020, the Company’s wealth management subsidiaries had approximately $28.2 billion of assets under administration, which included $3.5 billion of assets owned by the Company and its subsidiary banks, representing a $1.2 billion increase from the $27.0 billion of assets under administration at June 30, 2020.

ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS

Paycheck Protection Program

On March 27, 2020, the President of the United States signed the CARES Act which authorized the Small Business Administration ("SBA") to guarantee loans under the PPP for small businesses who meet the necessary eligibility requirements in order to keep their workers on the payroll. The Company began accepting applications on April 3, 2020. As of September 30, 2020, the Company secured authorization from the SBA and funded over 12,000 PPP loans with a carrying balance of approximately $3.4 billion.

Acquisitions

On November 1, 2019, the Company completed its acquisition of SBC, Incorporated (“SBC”).  SBC was the parent company of Countryside Bank. Through this business combination, the Company acquired Countryside Bank's six banking offices located in Countryside, Burbank, Darien, Homer Glen, Oak Brook and Chicago, Illinois. As of the acquisition date, the Company acquired approximately $620 million in assets, including approximately $423 million in loans, and approximately $508 million in deposits. The Company recorded goodwill of approximately $40 million on the acquisition.

On October 7, 2019, the Company completed its acquisition of STC Bancshares Corp. (“STC”).  STC was the parent company of STC Capital Bank. Through this business combination, the Company acquired STC Capital Bank's five banking offices located in the communities of St. Charles, Geneva and South Elgin, Illinois. As of the acquisition date, the Company acquired approximately $250 million in assets, including approximately $174 million in loans, and approximately $201 million in deposits. The Company recorded goodwill of approximately $19 million on the acquisition.

On May 24, 2019, the Company completed its acquisition of Rush-Oak Corporation ("ROC"). ROC was the parent company of Oak Bank. Through this business combination, the Company acquired Oak Bank's one banking location in Chicago, Illinois. As of the acquisition date, the Company acquired approximately $223 million in assets, including approximately $125 million in loans, and approximately $161 million in deposits. The Company recorded goodwill of approximately $12 million on the acquisition.

Adoption of New Credit Losses Accounting Standard

Beginning in 2020, the Company adopted CECL, which impacted the measurement of the Company’s allowance for credit losses (including the allowance for unfunded lending-related commitments). CECL replaced the previous incurred loss methodology, which delayed recognition until such loss was probable, with a methodology that reflects an estimate of lifetime expected credit losses considering current economic condition and forecasts. Though other assets, including investment securities and other receivables, were considered in-scope of the standard and required a measurement of the allowance for credit loss, the most significant impact of CECL remains within the Company’s loan portfolios and related lending commitments. For more information regarding the adoption of CECL, see the "Asset Quality" section and the asset quality Tables 10-14 in this report.

WINTRUST FINANCIAL CORPORATION
Key Operating Measures

Wintrust’s key operating measures and growth rates for the third quarter of 2020, as compared to the second quarter of 2020 (sequential quarter) and third quarter of 2019 (linked quarter), are shown in the table below:

		Three Months Ended											% or(1) basis point  (bp) change from				% or basis point  (bp) change from
(Dollars in thousands, except per share data)		Sep 30, 2020				Jun 30, 2020				Sep 30, 2019			2nd Quarter 2020				3rd Quarter 2019
Net income		$	107,315			$	21,659			$	99,121		395		%		8		%
Pre-tax income, excluding provision for credit losses (non-GAAP) (2)		162,310				165,756				145,435			(2	)			12
Net income per common share – diluted		1.67				0.34				1.69			391				(1	)
Net revenue (3)		426,529				425,124				379,989			—				12
Net interest income		255,936				263,131				264,852			(3	)			(3	)
Net interest margin		2.56		%		2.73		%		3.37		%	(17	)	bp		(81	)	bp
Net interest margin - fully taxable equivalent (non-GAAP) (2)		2.57				2.74				3.39			(17	)			(82	)
Net overhead ratio (4)		0.87				0.93				1.40			(6	)			(53	)
Return on average assets		0.99				0.21				1.16			78				(17	)
Return on average common equity		10.66				2.17				11.42			849				(76	)
Return on average tangible common equity (non-GAAP) (2)		13.43				2.95				14.36			1,048				(93	)
At end of period
Total assets		$	43,731,718			$	43,540,017			$	34,911,902		2		%		25		%
Total loans (5)		32,135,555				31,402,903				25,710,171			9				25
Total deposits		35,844,422				35,651,874				28,710,379			2				25
Total shareholders’ equity		4,074,089				3,990,218				3,540,325			8				15

(1)   Period-end balance sheet percentage changes are annualized.
(2)   See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.
(3)   Net revenue is net interest income plus non-interest income.
(4)   The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period's average total assets. A lower ratio indicates a higher degree of efficiency.
(5)   Excludes mortgage loans held-for-sale.

Certain returns, yields, performance ratios, or quarterly growth rates are “annualized” in this presentation to represent an annual time period. This is done for analytical purposes to better discern, for decision-making purposes, underlying performance trends when compared to full-year or year-over-year amounts. For example, a 5% growth rate for a quarter would represent an annualized 20% growth rate. Additional supplemental financial information showing quarterly trends can be found on the Company’s website at www.wintrust.com by choosing “Financial Reports” under the “Investor Relations” heading, and then choosing “Financial Highlights.”

 

WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights

		Three Months Ended																			Nine Months Ended
(Dollars in thousands, except per share data)		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019			Sep 30, 2020				Sep 30, 2019
Selected Financial Condition Data (at end of period):
Total assets		$	43,731,718			$	43,540,017			$	38,799,847			$	36,620,583			$	34,911,902
Total loans (1)		32,135,555				31,402,903				27,807,321				26,800,290				25,710,171
Total deposits		35,844,422				35,651,874				31,461,660				30,107,138				28,710,379
Junior subordinated debentures		253,566				253,566				253,566				253,566				253,566
Total shareholders’ equity		4,074,089				3,990,218				3,700,393				3,691,250				3,540,325
Selected Statements of Income Data:
Net interest income		$	255,936			$	263,131			$	261,443			$	261,879			$	264,852		$	780,510			$	793,040
Net revenue (2)		426,529				425,124				374,685				374,099				379,989			1,226,338				1,087,992
Net income		107,315				21,659				62,812				85,964				99,121			191,786				269,733
Pre-tax income, excluding provision for credit losses (non-GAAP) (3)		162,310				165,756				140,044				124,508				145,435			468,110				409,457
Net income per common share – Basic		1.68				0.34				1.05				1.46				1.71			3.08				4.65
Net income per common share – Diluted		1.67				0.34				1.04				1.44				1.69			3.06				4.60
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin		2.56		%		2.73		%		3.12		%		3.17		%		3.37		%	2.79		%		3.56		%
Net interest margin - fully taxable equivalent (non-GAAP) (3)		2.57				2.74				3.14				3.19				3.39			2.80				3.58
Non-interest income to average assets		1.58				1.55				1.24				1.25				1.35			1.47				1.22
Non-interest expense to average assets		2.45				2.48				2.58				2.78				2.74			2.50				2.80
Net overhead ratio (4)		0.87				0.93				1.33				1.53				1.40			1.03				1.58
Return on average assets		0.99				0.21				0.69				0.96				1.16			0.63				1.11
Return on average common equity		10.66				2.17				6.82				9.52				11.42			6.56				10.74
Return on average tangible common equity (non-GAAP) (3)		13.43				2.95				8.73				12.17				14.36			8.38				13.60
Average total assets		$	42,962,844			$	42,042,729			$	36,625,490			$	35,645,190			$	33,954,592		$	40,552,517			$	32,418,875
Average total shareholders’ equity		4,034,902				3,908,846				3,710,169				3,622,184				3,496,714			3,885,187				3,407,398
Average loans to average deposits ratio		89.6		%		87.8		%		90.1		%		88.8		%		90.6		%	89.1		%		92.4		%
Period-end loans to deposits ratio		89.7				88.1				88.4				89.0				89.6
Common Share Data at end of period:
Market price per common share		$	40.05			$	43.62			$	32.86			$	70.90			$	64.63
Book value per common share		63.57				62.14				62.13				61.68				60.24
Tangible book value per common share (non-GAAP) (3)		51.70				50.23				50.18				49.70				49.16
Common shares outstanding		57,601,991				57,573,672				57,545,352				57,821,891				56,698,429
Other Data at end of period:
Tier 1 leverage ratio (5)		8.2		%		8.1		%		8.5		%		8.7		%		8.8		%
Risk-based capital ratios:
Tier 1 capital ratio (5)		10.1				10.1				9.3				9.6				9.7
Common equity tier 1 capital ratio(5)		8.9				8.8				8.9				9.2				9.3
Total capital ratio (5)		12.8				12.8				11.9				12.2				12.4
Allowance for credit losses (6)		$	388,971			$	373,174			$	253,482			$	158,461			$	163,273
Allowance for loan and unfunded lending-related commitment losses to total loans		1.21		%		1.19		%		0.91		%		0.59		%		0.64		%
Number of:
Bank subsidiaries		15				15				15				15				15
Banking offices		182				186				187				187				174

(1)   Excludes mortgage loans held-for-sale.
(2)   Net revenue includes net interest income and non-interest income.
(3)   See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance measure/ratio.
(4)   The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.
(5)   Capital ratios for current quarter-end are estimated.
(6)   The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments. Effective January 1, 2020, the allowance for credit losses also includes the allowance for investment securities as a result of the adoption of Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses.

 

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

		(Unaudited)				(Unaudited)				(Unaudited)								(Unaudited)
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(In thousands)		2020				2020				2020				2019				2019
Assets
Cash and due from banks		$	308,639			$	344,999			$	349,118			$	286,167			$	448,755
Federal funds sold and securities purchased under resale agreements		56				58				309				309				59
Interest-bearing deposits with banks		3,825,823				4,015,072				1,943,743				2,164,560				2,260,806
Available-for-sale securities, at fair value		2,946,459				3,194,961				3,570,959				3,106,214				2,270,059
Held-to-maturity securities, at amortized cost		560,267				728,465				865,376				1,134,400				1,095,802
Trading account securities		1,720				890				2,257				1,068				3,204
Equity securities with readily determinable fair value		54,398				52,460				47,310				50,840				46,086
Federal Home Loan Bank and Federal Reserve Bank stock		135,568				135,571				134,546				100,739				92,714
Brokerage customer receivables		16,818				14,623				16,293				16,573				14,943
Mortgage loans held-for-sale		959,671				833,163				656,934				377,313				464,727
Loans, net of unearned income		32,135,555				31,402,903				27,807,321				26,800,290				25,710,171
Allowance for loan losses		(325,959		)		(313,510		)		(216,050		)		(156,828		)		(161,763		)
Net loans		31,809,596				31,089,393				27,591,271				26,643,462				25,548,408
Premises and equipment, net		774,288				769,909				764,583				754,328				721,856
Lease investments, net		230,373				237,040				207,147				231,192				228,647
Accrued interest receivable and other assets		1,424,728				1,437,832				1,460,168				1,061,141				1,087,864
Trade date securities receivable		—				—				502,207				—				—
Goodwill		644,644				644,213				643,441				645,220				584,315
Other intangible assets		38,670				41,368				44,185				47,057				43,657
Total assets		$	43,731,718			$	43,540,017			$	38,799,847			$	36,620,583			$	34,911,902
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing		$	10,409,747			$	10,204,791			$	7,556,755			$	7,216,758			$	7,067,960
Interest bearing		25,434,675				25,447,083				23,904,905				22,890,380				21,642,419
Total deposits		35,844,422				35,651,874				31,461,660				30,107,138				28,710,379
Federal Home Loan Bank advances		1,228,422				1,228,416				1,174,894				674,870				574,847
Other borrowings		507,395				508,535				487,503				418,174				410,488
Subordinated notes		436,385				436,298				436,179				436,095				435,979
Junior subordinated debentures		253,566				253,566				253,566				253,566				253,566
Trade date securities payable		—				—				—				—				226
Accrued interest payable and other liabilities		1,387,439				1,471,110				1,285,652				1,039,490				986,092
Total liabilities		39,657,629				39,549,799				35,099,454				32,929,333				31,371,577
Shareholders’ Equity:
Preferred stock		412,500				412,500				125,000				125,000				125,000
Common stock		58,323				58,294				58,266				57,951				56,825
Surplus		1,647,049				1,643,864				1,652,063				1,650,278				1,574,011
Treasury stock		(44,891		)		(44,891		)		(44,891		)		(6,931		)		(6,799		)
Retained earnings		2,001,949				1,921,048				1,917,558				1,899,630				1,830,165
Accumulated other comprehensive loss		(841		)		(597		)		(7,603		)		(34,678		)		(38,877		)
Total shareholders’ equity		4,074,089				3,990,218				3,700,393				3,691,250				3,540,325
Total liabilities and shareholders’ equity		$	43,731,718			$	43,540,017			$	38,799,847			$	36,620,583			$	34,911,902

 

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

	Three Months Ended																			Nine Months Ended
(In thousands, except per share data)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019			Sep 30, 2020				Sep 30, 2019
Interest income
Interest and fees on loans	$	280,479			$	294,746			$	301,839			$	308,055			$	314,277		$	877,064			$	920,425
Mortgage loans held-for-sale	5,791				4,764				3,165				3,201				3,478			13,720				8,791
Interest-bearing deposits with banks	1,181				1,310				4,768				8,971				10,326			7,259				20,832
Federal funds sold and securities purchased under resale agreements	—				16				86				390				310			102				310
Investment securities	21,819				27,105				32,467				27,611				24,758			81,391				80,435
Trading account securities	6				13				7				6				20			26				33
Federal Home Loan Bank and Federal Reserve Bank stock	1,774				1,765				1,577				1,328				1,294			5,116				4,088
Brokerage customer receivables	106				97				158				169				164			361				497
Total interest income	311,156				329,816				344,067				349,731				354,627			985,039				1,035,411
Interest expense
Interest on deposits	39,084				50,057				67,435				74,724				76,168			156,576				204,168
Interest on Federal Home Loan Bank advances	4,947				4,934				3,360				1,461				1,774			13,241				8,417
Interest on other borrowings	3,012				3,436				3,546				3,273				3,466			9,994				10,624
Interest on subordinated notes	5,474				5,506				5,472				5,504				5,470			16,452				10,051
Interest on junior subordinated debentures	2,703				2,752				2,811				2,890				2,897			8,266				9,111
Total interest expense	55,220				66,685				82,624				87,852				89,775			204,529				242,371
Net interest income	255,936				263,131				261,443				261,879				264,852			780,510				793,040
Provision for credit losses	25,026				135,053				52,961				7,826				10,834			213,040				46,038
Net interest income after provision for credit losses	230,910				128,078				208,482				254,053				254,018			567,470				747,002
Non-interest income
Wealth management	24,957				22,636				25,941				24,999				23,999			73,534				72,115
Mortgage banking	108,544				102,324				48,326				47,860				50,864			259,194				106,433
Service charges on deposit accounts	11,497				10,420				11,265				10,973				9,972			33,182				28,097
Gains (losses) on investment securities, net	411				808				(4,359		)		587				710			(3,140		)		2,938
Fees from covered call options	—				—				2,292				1,243				—			2,292				2,427
Trading gains (losses), net	183				(634		)		(451		)		46				11			(902		)		(204		)
Operating lease income, net	11,717				11,785				11,984				12,487				12,025			35,486				34,554
Other	13,284				14,654				18,244				14,025				17,556			46,182				48,592
Total non-interest income	170,593				161,993				113,242				112,220				115,137			445,828				294,952
Non-interest expense
Salaries and employee benefits	164,042				154,156				136,762				145,941				141,024			454,960				400,479
Equipment	17,251				15,846				14,834				14,485				13,314			47,931				37,843
Operating lease equipment	9,425				9,292				9,260				9,766				8,907			27,977				25,994
Occupancy, net	15,830				16,893				17,547				17,132				14,991			50,270				47,157
Data processing	5,689				10,406				8,373				7,569				6,522			24,468				20,251
Advertising and marketing	7,880				7,704				10,862				12,517				13,375			26,446				36,078
Professional fees	6,488				7,687				6,721				7,650				8,037			20,896				19,821
Amortization of other intangible assets	2,701				2,820				2,863				3,017				2,928			8,384				8,827
FDIC insurance	6,772				7,081				4,135				1,348				148			17,988				7,851
OREO expense, net	(168		)		237				(876		)		536				1,170			(807		)		3,092
Other	28,309				27,246				24,160				29,630				24,138			79,715				71,142
Total non-interest expense	264,219				259,368				234,641				249,591				234,554			758,228				678,535
Income before taxes	137,284				30,703				87,083				116,682				134,601			255,070				363,419
Income tax expense	29,969				9,044				24,271				30,718				35,480			63,284				93,686
Net income	$	107,315			$	21,659			$	62,812			$	85,964			$	99,121		$	191,786			$	269,733
Preferred stock dividends	10,286				2,050				2,050				2,050				2,050			14,386				6,150
Net income applicable to common shares	$	97,029			$	19,609			$	60,762			$	83,914			$	97,071		$	177,400			$	263,583
Net income per common share - Basic	$	1.68			$	0.34			$	1.05			$	1.46			$	1.71		$	3.08			$	4.65
Net income per common share - Diluted	$	1.67			$	0.34			$	1.04			$	1.44			$	1.69		$	3.06			$	4.60
Cash dividends declared per common share	$	0.28			$	0.28			$	0.28			$	0.25			$	0.25		$	0.84			$	0.75
Weighted average common shares outstanding		57,597				57,567				57,620				57,538				56,690			57,595				56,627
Dilutive potential common shares	449				414				575				874				773			469				724
Average common shares and dilutive common shares	58,046				57,981				58,195				58,412				57,463			58,064				57,351

 

TABLE 1: LOAN PORTFOLIO MIX AND GROWTH RATES AND COMMERCIAL REAL ESTATE BY STATE

																				% Growth From
(Dollars in thousands)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019			Dec 31, 2019 (1)			Sep 30, 2019
Balance:
Commercial
Commercial, industrial, and other	$	8,897,986			$	8,523,864			$	9,025,886			$	8,285,920			$	8,195,602		10	%		9	%
Commercial PPP loans	3,379,013				3,335,368				—				—				—			100			100
Commercial real estate
Construction and development	1,333,149				1,285,282				1,237,274				1,200,783				1,025,961			15			30
Non-construction	7,089,993				6,915,463				6,948,257				6,819,493				6,422,706			5			10
Home equity	446,274				466,596				494,655				513,066				512,303			(17	)		(13	)
Residential real estate	1,384,810				1,427,429				1,377,389				1,354,221				1,218,666			3			14
Premium Finance receivables
Commercial insurance	4,060,144				3,999,774				3,465,055				3,442,027				3,449,950			24			18
Life insurance	5,488,832				5,400,802				5,221,639				5,074,602				4,795,496			11			14
Consumer and other	55,354				48,325				37,166				110,178				89,487			(66	)		(38	)
Total loans, net of unearned income	$	32,135,555			$	31,402,903			$	27,807,321			$	26,800,290			$	25,710,171		27	%		25	%
Mix:
Commercial
Commercial, industrial, and other	28		%		28		%		32		%		31		%		32		%
Commercial PPP loans	11				11				—				—				—
Commercial real estate
Construction and development	4				4				4				4				4
Non-construction	22				22				25				26				25
Home equity	1				1				2				2				2
Residential real estate	4				4				5				5				5
Premium Finance receivables
Commercial insurance	13				13				13				13				13
Life insurance	17				17				19				19				19
Consumer and other	0				0				0				0				0
Total loans, net of unearned income	100		%		100		%		100		%		100		%		100		%

(1)   Annualized.

	Sep 30, 2020						Jun 30, 2020						Mar 31, 2020						Dec 31, 2019						Sep 30, 2019
(Dollars in thousands)		Balance		% of Total Balance				Balance		% of Total Balance			Balance			% of Total Balance			Balance			% of Total Balance			Balance			% of Total Balance
Commercial real estate - collateral location by state:
Illinois	$	6,270,584		74.4	%		$	6,198,486		75.6	%		$	6,171,606		75.4	%		$	6,176,353		77.0	%		$	5,654,827		75.9	%
Wisconsin	783,241			9.3			760,839			9.3			793,145			9.7			744,975			9.3			744,577			10.0
Total primary markets	$	7,053,825		83.7	%		$	6,959,325		84.9	%		$	6,964,751		85.1	%		$	6,921,328		86.3	%		$	6,399,404		85.9	%
Indiana	265,905			3.2			249,423			3.0			249,680			3.1			218,963			2.7			193,350			2.6
Florida	133,602			1.6			133,810			1.6			126,786			1.5			114,629			1.4			80,120			1.1
Arizona	79,086			0.9			78,135			1.0			72,214			0.9			64,022			0.8			62,657			0.8
California	82,852			1.0			81,634			1.0			63,883			0.8			64,345			0.8			67,999			0.9
Other	807,872			9.6			698,418			8.5			708,217			8.6			636,989			8.0			645,137			8.7
Total commercial real estate	$	8,423,142		100	%		$	8,200,745		100	%		$	8,185,531		100	%		$	8,020,276		100	%		$	7,448,667		100	%

 

TABLE 2: DEPOSIT PORTFOLIO MIX AND GROWTH RATES

																				% Growth From
(Dollars in thousands)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019			Dec 31, 2019 (1)			Sep 30, 2019
Balance:
Non-interest bearing	$	10,409,747			$	10,204,791			$	7,556,755			$	7,216,758			$	7,067,960		59	%		47	%
NOW and interest-bearing demand deposits	3,294,071				3,440,348				3,181,159				3,093,159				2,966,098			9			11
Wealth management deposits (2)	4,235,583				4,433,020				3,936,968				3,123,063				2,795,838			48			51
Money market	9,423,653				9,288,976				8,114,659				7,854,189				7,326,899			27			29
Savings	3,415,073				3,447,352				3,282,340				3,196,698				2,934,348			9			16
Time certificates of deposit	5,066,295				4,837,387				5,389,779				5,623,271				5,619,236			(13	)		(10	)
Total deposits	$	35,844,422			$	35,651,874			$	31,461,660			$	30,107,138			$	28,710,379		25	%		25	%
Mix:
Non-interest bearing	29		%		29		%		24		%		24		%		25		%
NOW and interest-bearing demand deposits	9				10				10				10				10
Wealth management deposits (2)	12				12				13				10				10
Money market	26				25				26				26				25
Savings	10				10				10				11				10
Time certificates of deposit	14				14				17				19				20
Total deposits	100		%		100		%		100		%		100		%		100		%

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

 

TABLE 3: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS
As of September 30, 2020

(Dollars in thousands)		Total Time Certificates of Deposit				Weighted-Average Rate of Maturing Time Certificates of Deposit (1)
1-3 months		$	671,229			1.37	%
4-6 months		859,769				1.82
7-9 months		1,282,241				1.88
10-12 months		908,894				1.62
13-18 months		888,169				1.30
19-24 months		224,400				1.06
24+ months		231,593				1.24
Total		$	5,066,295			1.59	%

(1)   Weighted-average rate excludes the impact of purchase accounting fair value adjustments.

TABLE 4: QUARTERLY AVERAGE BALANCES

		Average Balance for three months ended,
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(In thousands)		2020				2020				2020				2019				2019
Interest-bearing deposits with banks and cash equivalents (1)		$	3,411,164			$	3,240,167			$	1,418,809			$	2,206,251			$	1,960,898
Investment securities (2)		3,789,422				4,309,471				4,780,709				3,909,699				3,410,090
FHLB and FRB stock		135,567				135,360				114,829				94,843				92,583
Liquidity management assets (6)		7,336,153				7,684,998				6,314,347				6,210,793				5,463,571
Other earning assets (3)(6)		16,656				16,917				19,166				18,353				17,809
Mortgage loans held-for-sale		822,908				705,702				403,262				381,878				379,870
Loans, net of unearned income (4)(6)		31,634,608				30,336,626				26,936,728				26,137,722				25,346,290
Total earning assets (6)		39,810,325				38,744,243				33,673,503				32,748,746				31,207,540
Allowance for loan and investment security losses (7)		(321,732		)		(222,485		)		(176,291		)		(167,759		)		(168,423		)
Cash and due from banks		345,438				352,423				321,982				316,631				297,475
Other assets		3,128,813				3,168,548				2,806,296				2,747,572				2,618,000
Total assets		$	42,962,844			$	42,042,729			$	36,625,490			$	35,645,190			$	33,954,592
NOW and interest-bearing demand deposits		$	3,435,089			$	3,323,124			$	3,113,733			$	3,016,991			$	2,912,961
Wealth management deposits		4,239,300				4,380,996				2,838,719				2,934,292				2,888,817
Money market accounts		9,332,668				8,727,966				7,990,775				7,647,635				6,956,755
Savings accounts		3,419,586				3,394,480				3,189,835				3,028,763				2,837,039
Time deposits		4,900,839				5,104,701				5,526,407				5,682,449				5,590,228
Interest-bearing deposits		25,327,482				24,931,267				22,659,469				22,310,130				21,185,800
Federal Home Loan Bank advances		1,228,421				1,214,375				951,613				596,594				574,833
Other borrowings		512,787				493,350				469,577				415,092				416,300
Subordinated notes		436,323				436,226				436,119				436,025				436,041
Junior subordinated debentures		253,566				253,566				253,566				253,566				253,566
Total interest-bearing liabilities		27,758,579				27,328,784				24,770,344				24,011,407				22,866,540
Non-interest-bearing deposits		9,988,769				9,607,528				7,235,177				7,128,166				6,776,786
Other liabilities		1,180,594				1,197,571				909,800				883,433				814,552
Equity		4,034,902				3,908,846				3,710,169				3,622,184				3,496,714
Total liabilities and shareholders’ equity		$	42,962,844			$	42,042,729			$	36,625,490			$	35,645,190			$	33,954,592
Net free funds/contribution (5)		$	12,051,746			$	11,415,459			$	8,903,159			$	8,737,339			$	8,341,000

(1)   Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.
(2)   Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.
(3)   Other earning assets include brokerage customer receivables and trading account securities.
(4)   Loans, net of unearned income, include non-accrual loans.
(5)   Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
(6)   See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.
(7)   Effective January 1, 2020 this includes the allowance for investment security losses as a result of the adoption of ASU 2016-13, Financial Instruments - Credit Losses.

TABLE 5: QUARTERLY NET INTEREST INCOME

		Net Interest Income for three months ended,
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(In thousands)		2020				2020				2020				2019				2019
Interest income:
Interest-bearing deposits with banks and cash equivalents		$	1,181			$	1,326			$	4,854			$	9,361			$	10,636
Investment securities		22,365				27,643				33,018				28,184				25,332
FHLB and FRB stock		1,774				1,765				1,577				1,328				1,294
Liquidity management assets (2)		25,320				30,734				39,449				38,873				37,262
Other earning assets (2)		113				113				167				176				189
Mortgage loans held-for-sale		5,791				4,764				3,165				3,201				3,478
Loans, net of unearned income (2)		280,960				295,322				302,699				308,947				315,255
Total interest income		$	312,184			$	330,933			$	345,480			$	351,197			$	356,184
Interest expense:
NOW and interest-bearing demand deposits		$	1,342			$	1,561			$	3,665			$	4,622			$	5,291
Wealth management deposits		7,662				7,244				6,935				7,867				9,163
Money market accounts		7,245				13,140				22,363				25,603				25,426
Savings accounts		2,104				3,840				5,790				6,145				5,622
Time deposits		20,731				24,272				28,682				30,487				30,666
Interest-bearing deposits		39,084				50,057				67,435				74,724				76,168
Federal Home Loan Bank advances		4,947				4,934				3,360				1,461				1,774
Other borrowings		3,012				3,436				3,546				3,273				3,466
Subordinated notes		5,474				5,506				5,472				5,504				5,470
Junior subordinated debentures		2,703				2,752				2,811				2,890				2,897
Total interest expense		$	55,220			$	66,685			$	82,624			$	87,852			$	89,775
Less: Fully taxable-equivalent adjustment		(1,028		)		(1,117		)		(1,413		)		(1,466		)		(1,557		)
Net interest income (GAAP) (1)		255,936				263,131				261,443				261,879				264,852
Fully taxable-equivalent adjustment		1,028				1,117				1,413				1,466				1,557
Net interest income, fully taxable-equivalent (non-GAAP) (1)		$	256,964			$	264,248			$	262,856			$	263,345			$	266,409

(1)   See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.
(2)   Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period.

 

TABLE 6: QUARTERLY NET INTEREST MARGIN

		Net Interest Margin for three months ended,
		Sep 30, 2020			Jun 30, 2020			Mar 31, 2020			Dec 31, 2019			Sep 30, 2019
Yield earned on:
Interest-bearing deposits with banks and cash equivalents		0.14	%		0.16	%		1.38	%		1.68	%		2.15	%
Investment securities		2.35			2.58			2.78			2.86			2.95
FHLB and FRB stock		5.21			5.24			5.52			5.55			5.55
Liquidity management assets		1.37			1.61			2.51			2.48			2.71
Other earning assets		2.71			2.71			3.50			3.83			4.20
Mortgage loans held-for-sale		2.80			2.72			3.16			3.33			3.63
Loans, net of unearned income		3.53			3.92			4.52			4.69			4.93
Total earning assets		3.12	%		3.44	%		4.13	%		4.25	%		4.53	%
Rate paid on:
NOW and interest-bearing demand deposits		0.16	%		0.19	%		0.47	%		0.61	%		0.72	%
Wealth management deposits		0.72			0.67			0.98			1.06			1.26
Money market accounts		0.31			0.61			1.13			1.33			1.45
Savings accounts		0.24			0.45			0.73			0.80			0.79
Time deposits		1.68			1.91			2.09			2.13			2.18
Interest-bearing deposits		0.61			0.81			1.20			1.33			1.43
Federal Home Loan Bank advances		1.60			1.63			1.42			0.97			1.22
Other borrowings		2.34			2.80			3.04			3.13			3.30
Subordinated notes		5.02			5.05			5.02			5.05			5.02
Junior subordinated debentures		4.17			4.29			4.39			4.46			4.47
Total interest-bearing liabilities		0.79	%		0.98	%		1.34	%		1.45	%		1.56	%
Interest rate spread (1)(3)		2.33	%		2.46	%		2.79	%		2.80	%		2.97	%
Less: Fully taxable-equivalent adjustment		(0.01	)		(0.01	)		(0.02	)		(0.02	)		(0.02	)
Net free funds/contribution (2)		0.24			0.28			0.35			0.39			0.42
Net interest margin (GAAP) (3)		2.56	%		2.73	%		3.12	%		3.17	%		3.37	%
Fully taxable-equivalent adjustment		0.01			0.01			0.02			0.02			0.02
Net interest margin, fully taxable-equivalent (non-GAAP) (3)		2.57	%		2.74	%		3.14	%		3.19	%		3.39	%

(1)   Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(2)   Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
(3)   See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.

 

TABLE 7: YEAR-TO-DATE AVERAGE BALANCES, AND NET INTEREST INCOME AND MARGIN

	Average Balance for nine months ended,							Interest for nine months ended,							Yield/Rate for nine months ended,
(Dollars in thousands)	Sep 30, 2020				Sep 30, 2019			Sep 30, 2020				Sep 30, 2019			Sep 30, 2020			Sep 30, 2019
Interest-bearing deposits with banks and cash equivalents (1)	$	2,692,678			$	1,254,534		$	7,361			$	21,142		0.37	%		2.26	%
Investment securities (2)	4,291,362				3,563,941			83,026				82,142			2.58			3.08
FHLB and FRB stock	128,611				97,624			5,116				4,088			5.31			5.60
Liquidity management assets (3)(8)	$	7,112,651			$	4,916,099		$	95,503			$	107,372		1.79	%		2.92	%
Other earning assets (3)(4)(8)	17,576				15,722			393				538			2.99			4.56
Mortgage loans held-for-sale	644,611				283,966			13,720				8,791			2.84			4.14
Loans, net of unearned income (3)(5)(8)	29,643,281				24,598,857			878,981				923,468			3.96			5.02
Total earning assets (8)	$	37,418,119			$	29,814,644		$	988,597			$	1,040,169		3.53	%		4.66	%
Allowance for loan and investment security losses (9)	(240,467		)		(163,518		)
Cash and due from banks	339,968				284,779
Other assets	3,034,897				2,482,970
Total assets	$	40,552,517			$	32,418,875
NOW and interest-bearing demand deposits	$	3,291,176			$	2,865,175		$	6,569			$	15,457		0.27	%		0.72	%
Wealth management deposits	3,821,203				2,703,853			21,840				23,254			0.76			1.15
Money market accounts	8,686,171				6,326,336			42,748				66,337			0.66			1.40
Savings accounts	3,334,944				2,768,875			11,736				14,830			0.47			0.72
Time deposits	5,176,307				5,394,651			73,683				84,290			1.90			2.09
Interest-bearing deposits	$	24,309,801			$	20,058,890		$	156,576			$	204,168		0.86	%		1.36	%
Federal Home Loan Bank advances	1,131,823				679,589			13,241				8,417			1.56			1.66
Other borrowings	491,981				433,465			9,994				10,624			2.71			3.28
Subordinated notes	436,223				266,430			16,452				10,051			5.03			5.03
Junior subordinated debentures	253,566				253,566			8,266				9,111			4.28			4.74
Total interest-bearing liabilities	$	26,623,394			$	21,691,940		$	204,529			$	242,371		1.03	%		1.49	%
Non-interest-bearing deposits	8,947,639				6,570,815
Other liabilities	1,096,297				748,722
Equity	3,885,187				3,407,398
Total liabilities and shareholders’ equity	$	40,552,517			$	32,418,875
Interest rate spread (6)(8)															2.50	%		3.17	%
Less: Fully taxable-equivalent adjustment								(3,558		)		(4,758		)	(0.01	)		(0.02	)
Net free funds/contribution (7)	$	10,794,725			$	8,122,704									0.30			0.41
Net interest income/ margin (GAAP) (8)								$	780,510			793,040			2.79	%		3.56	%
Fully taxable-equivalent adjustment								3,558				4,758			0.01			0.02
Net interest income/ margin, fully taxable-equivalent (non-GAAP) (8)								$	784,068			$	797,798		2.80	%		3.58	%

(1)   Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.
(2)   Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.
(3)   Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on a marginal federal corporate tax rate in effect as of the applicable period. 
(4)   Other earning assets include brokerage customer receivables and trading account securities.
(5)   Loans, net of unearned income, include non-accrual loans.
(6)   Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(7)   Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
(8)   See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance ratio.
(9)   Effective January 1, 2020 this includes the allowance for investment security losses as a result of the adoption of ASU 2016-13, Financial Instruments - Credit Losses.

TABLE 8: INTEREST RATE SENSITIVITY

As an ongoing part of its financial strategy, the Company attempts to manage the impact of fluctuations in market interest rates on net interest income. Management measures its exposure to changes in interest rates by modeling many different interest rate scenarios.

The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases of 100 and 200 basis points and a decrease of 100 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months. Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenario is as follows:

Static Shock Scenario		+200 Basis Points			+100 Basis Points			-100 Basis Points
Sep 30, 2020		23.4	%		10.9	%		(8.1	)%
Jun 30, 2020		25.9			12.6			(8.3	)
Mar 31, 2020		22.5			10.6			(9.4	)
Dec 31, 2019		18.6			9.7			(10.9	)
Sep 30, 2019		20.7			10.5			(11.9	)

 

Ramp Scenario	+200 Basis Points			+100 Basis Points			-100 Basis Points
Sep 30, 2020	10.7	%		5.2	%		(3.5	)%
Jun 30, 2020	13.0			6.7			(3.2	)
Mar 31, 2020	7.7			3.7			(3.8	)
Dec 31, 2019	9.3			4.8			(5.0	)
Sep 30, 2019	10.1			5.2			(5.6	)

 

TABLE 9: MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES

	Loans repricing or maturity period
As of September 30, 2020	One year or less				From one to five years				Over five years				Total
(In thousands)
Commercial
Fixed rate	$	329,230			$	1,831,547			$	794,089			$	2,954,866
Fixed Rate - PPP	—				3,379,013				—				3,379,013
Variable rate	5,923,248				19,747				125				5,943,120
Total commercial	$	6,252,478			$	5,230,307			$	794,214			$	12,276,999
Commercial real estate
Fixed rate	601,275				2,093,741				399,264				3,094,280
Variable rate	5,291,887				36,975				—				5,328,862
Total commercial real estate	$	5,893,162			$	2,130,716			$	399,264			$	8,423,142
Home equity
Fixed rate	18,022				7,551				25				25,598
Variable rate	420,676				—				—				420,676
Total home equity	$	438,698			$	7,551			$	25			$	446,274
Residential real estate
Fixed rate	29,068				12,611				463,604				505,283
Variable rate	66,816				328,865				483,846				879,527
Total residential real estate	$	95,884			$	341,476			$	947,450			$	1,384,810
Premium finance receivables - commercial
Fixed rate	3,965,026				95,118				—				4,060,144
Variable rate	—				—				—				—
Total premium finance receivables - commercial	$	3,965,026			$	95,118			$	—			$	4,060,144
Premium finance receivables - life insurance
Fixed rate	15,284				240,467				19,591				275,342
Variable rate	5,213,490				—				—				5,213,490
Total premium finance receivables - life insurance	$	5,228,774			$	240,467			$	19,591			$	5,488,832
Consumer and other
Fixed rate	28,297				5,831				1,501				35,629
Variable rate	19,725				—				—				19,725
Total consumer and other	$	48,022			$	5,831			$	1,501			$	55,354
Total per category
Fixed rate	4,986,202				7,665,879				1,678,074				14,330,155
Variable rate	16,935,842				385,587				483,971				17,805,400
Total loans, net of unearned income	$	21,922,044			$	8,051,466			$	2,162,045			$	32,135,555
Variable Rate Loan Pricing by Index:
Prime													$	2,254,870
One- month LIBOR													8,977,288
Three- month LIBOR													412,969
Twelve- month LIBOR													5,870,663
Other													289,610
Total variable rate													$	17,805,400

Graph available at the following link: 
http://ml.globenewswire.com/Resource/Download/ef1ce1bb-9104-4a8b-93ff-34a8785c198e

Source: Bloomberg

As noted in the table on the previous page, the majority of the Company’s portfolio is tied to LIBOR indices which, as shown in the table above, do not mirror the same changes as the Prime rate which has historically moved when the Federal Reserve raises or lowers interest rates.  Specifically, the Company has $9.0 billion of variable rate loans tied to one-month LIBOR and $5.9 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:

		Basis Points (bps) Change in
		Prime		1-month LIBOR		12-month LIBOR
Third Quarter 2020		0	bps	-1	bps	-19	bps
Second Quarter 2020		0		-83		-45
First Quarter 2020		-150		-77		-100
Fourth Quarter 2019		-25		-26		-3
Third Quarter 2019		-50		-38		-15

 

TABLE 10: ALLOWANCE FOR CREDIT LOSSES

		Three Months Ended																			Nine Months Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,			Sep 30,				Sep 30,
(Dollars in thousands)		2020				2020				2020				2019				2019			2020				2019
Allowance for credit losses at beginning of period		$	373,174			$	253,482			$	158,461			$	163,273			$	161,901		$	158,461			$	154,164
Cumulative effect adjustment from the adoption of ASU 2016-13		—				—				47,418				—				—			47,418				—
Provision for credit losses		25,026				135,053				52,961				7,826				10,834			213,040				46,038
Other adjustments		55				42				(73		)		30				(13		)	24				(51		)
Charge-offs:
Commercial		5,270				5,686				2,153				11,222				6,775			13,109				24,658
Commercial real estate		1,529				7,224				570				533				809			9,323				4,869
Home equity		138				239				1,001				1,330				1,594			1,378				2,372
Residential real estate		83				293				401				483				25			777				315
Premium finance receivables		4,640				3,434				3,184				3,817				1,866			11,258				9,085
Consumer and other		103				99				128				167				117			330				355
Total charge-offs		11,763				16,975				7,437				17,552				11,186			36,175				41,654
Recoveries:
Commercial		428				112				384				1,871				367			924				974
Commercial real estate		175				493				263				1,404				385			931				1,112
Home equity		111				46				294				166				183			451				313
Residential real estate		25				30				60				50				203			115				372
Premium finance receivables		1,720				833				1,110				1,350				563			3,663				1,853
Consumer and other		20				58				41				43				36			119				152
Total recoveries		2,479				1,572				2,152				4,884				1,737			6,203				4,776
Net charge-offs		(9,284		)		(15,403		)		(5,285		)		(12,668		)		(9,449		)	(29,972		)		(36,878		)
Allowance for credit losses at period end		$	388,971			$	373,174			$	253,482			$	158,461			$	163,273		$	388,971			$	163,273
Annualized net charge-offs by category as a percentage of its own respective category’s average:
Commercial		0.16		%		0.20		%		0.08		%		0.46		%		0.31		%	0.15		%		0.39		%
Commercial real estate		0.06				0.33				0.02				(0.04		)		0.02			0.14				0.07
Home equity		0.02				0.16				0.57				0.89				1.08			0.26				0.52
Residential real estate		0.02				0.09				0.11				0.14				(0.07		)	0.07				(0.01		)
Premium finance receivables		0.12				0.12				0.10				0.28				0.15			0.11				0.12
Consumer and other		0.49				0.25				0.56				0.41				0.27			0.41				0.24
Total loans, net of unearned income		0.12		%		0.20		%		0.08		%		0.19		%		0.15		%	0.14		%		0.20		%
Net charge-offs as a percentage of the provision for credit losses		37.10		%		11.41		%		9.98		%		161.87		%		87.22		%	14.07		%		80.10		%
Loans at period-end		$	32,135,555			$	31,402,903			$	27,807,321			$	26,800,290			$	25,710,171
Allowance for loan losses as a percentage of loans at period end		1.01		%		1.00		%		0.78		%		0.59		%		0.63		%
Allowance for loan and unfunded lending-related commitment losses as a percentage of loans at period end		1.21				1.19				0.91				0.59				0.64
Allowance for loan and unfunded lending-related commitment losses as a percentage of loans at period end, excluding PPP loans		1.35				1.33				0.91				0.59				0.64

 

TABLE 11: ALLOWANCE AND PROVISON FOR CREDIT LOSSES BY COMPONENT

		Three Months Ended																			Nine Months Ended
		Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,			Sep 30,				Sep 30,
(In thousands)		2020				2020				2020				2019				2019			2020				2019
Provision for loan losses		$	21,678			$	112,822			$	50,396			$	7,704			$	10,804		$	184,896			$	45,922
Provision for unfunded lending-related commitments losses		3,350				22,236				2,569				122				30			28,155				116
Provision for held-to-maturity securities losses		(2		)		(5		)		(4		)		—				—			(11		)		—
Provision for credit losses		$	25,026			$	135,053			$	52,961			$	7,826			$	10,834		$	213,040			$	46,038
Allowance for loan losses		$	325,959			$	313,510			$	216,050			$	156,828			$	161,763
Allowance for unfunded lending-related commitments losses		62,949				59,599				37,362				1,633				1,510
Allowance for loan losses and unfunded lending-related commitments losses		388,908				373,109				253,412				158,461				163,273
Allowance for held-to-maturity securities losses		63				65				70				—				—
Allowance for credit losses		$	388,971			$	373,174			$	253,482			$	158,461			$	163,273

 

TABLE 12: ALLOWANCE BY LOAN PORTFOLIO

The table below summarizes the calculation of allowance for loan losses and allowance for unfunded lending-related commitments losses for the Company’s core, niche and consumer and purchased loan portfolios, as of September 30, 2020, June 30, 2020, and March 31, 2020.

	As of Sep 30, 2020										As of Jun 30, 2020										As of Mar 31, 2020
(Dollars in thousands)	Recorded Investment				Calculated Allowance				% of its category’s balance		Recorded Investment				Calculated Allowance				% of its category’s balance		Recorded Investment				Calculated Allowance				% of its category’s balance
Commercial:
Commercial, industrial and other, excluding PPP loans	$	8,808,467			$	110,045			1.25	%	$	8,396,485			$	130,585			1.56	%	$	8,888,342			$	104,754			1.18	%
Commercial real estate:
Construction and development	1,270,235				73,565				5.79		1,193,735				67,333				5.64		1,113,863				31,687				2.84
Non-construction	6,708,538				141,249				2.11		6,397,847				108,613				1.70		6,388,142				68,914				1.08
Home equity	412,162				11,216				2.72		427,668				11,596				2.71		451,804				11,844				2.62
Residential real estate	1,309,209				11,165				0.85		1,338,801				11,200				0.84		1,274,351				11,621				0.91
Total core loan portfolio	$	18,508,611			$	347,240			1.88	%	$	17,754,536			$	329,327			1.85	%	$	18,116,502			$	228,820			1.26	%
Commercial PPP loans	$	3,379,013			$	3			0.00	%	$	3,335,368			$	4			0.00	%	$	—			$	—			—	%
Premium finance receivables
Commercial insurance loans	4,060,144				17,378				0.43		3,999,774				17,122				0.43		3,465,055				7,426				0.21
Life insurance loans	5,376,403				478				0.01		5,277,126				470				0.01		5,084,695				454				0.01
Consumer and other	53,191				555				1.04		45,474				556				1.22		34,111				331				0.97
Total niche and consumer loan portfolio	$	12,868,751			$	18,414			0.14	%	$	12,657,742			$	18,152			0.14	%	$	8,583,861			$	8,211			0.10	%
Purchased commercial	$	89,519			$	2,846			3.18	%	$	127,379			$	3,008			2.36	%	$	137,544			$	2,592			1.88	%
Purchased commercial real estate	444,369				19,196				4.32		609,163				21,180				3.48		683,526				12,195				1.78
Purchased home equity	34,112				461				1.35		38,928				593				1.52		42,851				550				1.28
Purchased residential real estate	75,601				625				0.83		88,628				715				0.81		103,038				929				0.90
Purchased life insurance loans	112,429				—				—		123,676				—				—		136,944				—				—
Purchased consumer and other	2,163				126				5.83		2,851				134				4.70		3,055				115				3.76
Total purchased loan portfolio	$	758,193			$	23,254			3.07	%	$	990,625			$	25,630			2.59	%	$	1,106,958			$	16,381			1.48	%
Total loans, net of unearned income	$	32,135,555			$	388,908			1.21	%	$	31,402,903			$	373,109			1.19	%	$	27,807,321			$	253,412			0.91	%
Total loans, net of unearned income, excluding PPP loans	$	28,756,542			$	388,905			1.35	%	$	28,067,535			$	373,105			1.33	%	$	27,807,321			$	253,412			0.91	%

 

TABLE 13: LOAN PORTFOLIO AGING

(Dollars in thousands)		Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019
Loan Balances:
Commercial
Nonaccrual		$	42,036			$	42,882			$	49,916			$	37,224			$	43,931
90+ days and still accruing		—				1,374				1,241				1,855				382
60-89 days past due		2,168				8,952				8,873				3,275				12,860
30-59 days past due		48,271				23,720				86,129				77,324				51,487
Current		12,184,524				11,782,304				8,879,727				8,166,242				8,086,942
Total commercial		$	12,276,999			$	11,859,232			$	9,025,886			$	8,285,920			$	8,195,602
Commercial real estate
Nonaccrual		$	68,815			$	64,557			$	62,830			$	26,113			$	21,557
90+ days and still accruing		—				—				516				14,946				4,992
60-89 days past due		8,299				26,480				10,212				31,546				9,629
30-59 days past due		53,462				75,528				75,068				97,567				33,098
Current		8,292,566				8,034,180				8,036,905				7,850,104				7,379,391
Total commercial real estate		$	8,423,142			$	8,200,745			$	8,185,531			$	8,020,276			$	7,448,667
Home equity
Nonaccrual		$	6,329			$	7,261			$	7,243			$	7,363			$	7,920
90+ days and still accruing		—				—				—				—				—
60-89 days past due		70				—				214				454				95
30-59 days past due		1,148				1,296				2,096				3,533				3,100
Current		438,727				458,039				485,102				501,716				501,188
Total home equity		$	446,274			$	466,596			$	494,655			$	513,066			$	512,303
Residential real estate
Nonaccrual		$	22,069			$	19,529			$	18,965			$	13,797			$	13,447
90+ days and still accruing		—				—				605				5,771				3,244
60-89 days past due		814				1,506				345				3,089				1,868
30-59 days past due		2,443				4,400				28,983				18,041				1,433
Current		1,359,484				1,401,994				1,328,491				1,313,523				1,198,674
Total residential real estate		$	1,384,810			$	1,427,429			$	1,377,389			$	1,354,221			$	1,218,666
Premium finance receivables
Nonaccrual		$	21,080			$	16,460			$	21,058			$	21,180			$	16,540
90+ days and still accruing		12,177				35,638				16,505				11,517				10,612
60-89 days past due		38,286				42,353				12,730				12,119				26,606
30-59 days past due		80,732				61,160				70,185				51,342				44,767
Current		9,396,701				9,244,965				8,566,216				8,420,471				8,146,921
Total premium finance receivables		$	9,548,976			$	9,400,576			$	8,686,694			$	8,516,629			$	8,245,446
Consumer and other
Nonaccrual		$	422			$	427			$	403			$	231			$	224
90+ days and still accruing		175				156				78				287				117
60-89 days past due		273				4				625				40				55
30-59 days past due		493				281				207				344				272
Current		53,991				47,457				35,853				109,276				88,819
Total consumer and other		$	55,354			$	48,325			$	37,166			$	110,178			$	89,487
Total loans, net of unearned income
Nonaccrual		$	160,751			$	151,116			$	160,415			$	105,908			$	103,619
90+ days and still accruing		12,352				37,168				18,945				34,376				19,347
60-89 days past due		49,910				79,295				32,999				50,523				51,113
30-59 days past due		186,549				166,385				262,668				248,151				134,157
Current		31,725,993				30,968,939				27,332,294				26,361,332				25,401,935
Total loans, net of unearned income		$	32,135,555			$	31,402,903			$	27,807,321			$	26,800,290			$	25,710,171

 

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

	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(Dollars in thousands)	2020				2020				2020(1)				2019				2019
Loans past due greater than 90 days and still accruing (2):
Commercial	$	—			$	1,374			$	1,241			$	—			$	—
Commercial real estate	—				—				516				—				—
Home equity	—				—				—				—				—
Residential real estate	—				—				605				—				—
Premium finance receivables	12,177				35,638				16,505				11,517				10,612
Consumer and other	175				156				78				163				53
Total loans past due greater than 90 days and still accruing	12,352				37,168				18,945				11,680				10,665
Non-accrual loans:
Commercial	42,036				42,882				49,916				37,224				43,931
Commercial real estate	68,815				64,557				62,830				26,113				21,557
Home equity	6,329				7,261				7,243				7,363				7,920
Residential real estate	22,069				19,529				18,965				13,797				13,447
Premium finance receivables	21,080				16,460				21,058				21,180				16,540
Consumer and other	422				427				403				231				224
Total non-accrual loans	160,751				151,116				160,415				105,908				103,619
Total non-performing loans:
Commercial	42,036				44,256				51,157				37,224				43,931
Commercial real estate	68,815				64,557				63,346				26,113				21,557
Home equity	6,329				7,261				7,243				7,363				7,920
Residential real estate	22,069				19,529				19,570				13,797				13,447
Premium finance receivables	33,257				52,098				37,563				32,697				27,152
Consumer and other	597				583				481				394				277
Total non-performing loans	$	173,103			$	188,284			$	179,360			$	117,588			$	114,284
Other real estate owned	2,891				2,409				2,701				5,208				8,584
Other real estate owned - from acquisitions	6,326				7,788				8,325				9,963				8,898
Other repossessed assets	—				—				—				4				257
Total non-performing assets	$	182,320			$	198,481			$	190,386			$	132,763			$	132,023
Accruing TDRs not included within non-performing assets	$	46,410			$	48,609			$	47,049			$	36,725			$	45,178
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial	0.34		%		0.37		%		0.57		%		0.45		%		0.54		%
Commercial real estate	0.82				0.79				0.77				0.33				0.29
Home equity	1.42				1.56				1.46				1.44				1.55
Residential real estate	1.59				1.37				1.42				1.02				1.10
Premium finance receivables	0.35				0.55				0.43				0.39				0.34
Consumer and other	1.08				1.21				1.29				0.36				0.31
Total loans, net of unearned income	0.54		%		0.60		%		0.65		%		0.44		%		0.44		%
Total non-performing assets as a percentage of total assets	0.42		%		0.46		%		0.49		%		0.36		%		0.38		%
Allowance for loan losses as a percentage of total non-performing loans	188.30		%		166.51		%		120.46		%		133.37		%		141.54		%

(1)   Prior to the adoption of ASU 2016-13, acquired loans with evidence of credit quality deterioration (purchased credit deteriorated loans, or "PCD loans") were excluded from non-performing loans. PCD loans that meet the definition of non-accrual or are greater than 90 days past-due and still accruing interest are now included in non-performing loans and resulted in a $37.3 million increase in non-accrual loans upon adoption of ASU 2016-13 as of January 1, 2020.
(2)   As of September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019, and September 30, 2019, no TDRs were past due greater than 90 days and still accruing interest.

 

Non-performing Loans Rollforward

	Three Months Ended																			Nine Months Ended
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,			Sep 30,				Sep 30,
(In thousands)	2020				2020				2020				2019				2019			2020				2019
Balance at beginning of period	$	188,284			$	179,360			$	117,588			$	114,284			$	113,447		$	117,588			$	113,234
Additions from becoming non-performing in the respective period	19,771				20,803				32,195				30,977				20,781			72,769				65,378
Additions from the adoption of ASU 2016-13	—				—				37,285				—				—			37,285				—
Return to performing status	(6,202		)		(2,566		)		(486		)		(243		)		(407		)	(9,254		)		(14,531		)
Payments received	(3,733		)		(11,201		)		(7,949		)		(19,380		)		(16,326		)	(22,883		)		(25,788		)
Transfer to OREO and other repossessed assets	(598		)		—				(1,297		)		—				(1,493		)	(1,895		)		(3,061		)
Charge-offs	(6,583		)		(12,884		)		(2,551		)		(11,798		)		(6,984		)	(22,018		)		(27,793		)
Net change for niche loans (1)	(17,836		)		14,772				4,575				3,748				5,266			1,511				6,845
Balance at end of period	$	173,103			$	188,284			$	179,360			$	117,588			$	114,284		$	173,103			$	114,284

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


TDRs

	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(In thousands)	2020				2020				2020				2019				2019
Accruing TDRs:
Commercial	$	7,863			$	5,338			$	6,500			$	4,905			$	14,099
Commercial real estate	10,846				19,106				18,043				9,754				10,370
Residential real estate and other	27,701				24,165				22,506				22,066				20,709
Total accrual	$	46,410			$	48,609			$	47,049			$	36,725			$	45,178
Non-accrual TDRs: (1)
Commercial	$	13,132			$	20,788			$	17,206			$	13,834			$	7,451
Commercial real estate	13,601				8,545				14,420				7,119				7,673
Residential real estate and other	5,392				5,606				4,962				6,158				6,006
Total non-accrual	$	32,125			$	34,939			$	36,588			$	27,111			$	21,130
Total TDRs:
Commercial	$	20,995			$	26,126			$	23,706			$	18,739			$	21,550
Commercial real estate	24,447				27,651				32,463				16,873				18,043
Residential real estate and other	33,093				29,771				27,468				28,224				26,715
Total TDRs	$	78,535			$	83,548			$	83,637			$	63,836			$	66,308

(1)   Included in total non-performing loans.

Other Real Estate Owned

	Three Months Ended
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
(In thousands)	2020				2020				2020				2019				2019
Balance at beginning of period	$	10,197			$	11,026			$	15,171			$	17,482			$	19,837
Disposals/resolved	(1,532		)		(612		)		(4,793		)		(4,860		)		(4,501		)
Transfers in at fair value, less costs to sell	777				—				954				936				3,008
Additions from acquisition	—				—				—				2,179				—
Fair value adjustments	(225		)		(217		)		(306		)		(566		)		(862		)
Balance at end of period	$	9,217			$	10,197			$	11,026			$	15,171			$	17,482
	Period End
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,
Balance by Property Type:	2020				2020				2020				2019				2019
Residential real estate	$	1,839			$	1,382			$	1,684			$	1,016			$	1,250
Residential real estate development	—				—				—				810				1,282
Commercial real estate	7,378				8,815				9,342				13,345				14,950
Total	$	9,217			$	10,197			$	11,026			$	15,171			$	17,482

 

TABLE 15: NON-INTEREST INCOME

	Three Months Ended																				Q3 2020 compared to							Q3 2020 compared to
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Q2 2020							Q3 2019
(Dollars in thousands)	2020				2020				2020				2019				2019				$ Change				% Change			$ Change				% Change
Brokerage	$	4,563			$	4,147			$	5,281			$	4,859			$	4,686			$	416			10	%		$	(123	)		(3	)%
Trust and asset management	20,394				18,489				20,660				20,140				19,313				1,905				10			1,081				6
Total wealth management	24,957				22,636				25,941				24,999				23,999				2,321				10			958				4
Mortgage banking	108,544				102,324				48,326				47,860				50,864				6,220				6			57,680				113
Service charges on deposit accounts	11,497				10,420				11,265				10,973				9,972				1,077				10			1,525				15
Gains (losses) on investment securities, net	411				808				(4,359		)		587				710				(397		)		(49	)		(299		)		(42	)
Fees from covered call options	—				—				2,292				1,243				—				—				NM			—				NM
Trading gains (losses), net	183				(634		)		(451		)		46				11				817				NM			172				NM
Operating lease income, net	11,717				11,785				11,984				12,487				12,025				(68		)		(1	)		(308		)		(3	)
Other:
Interest rate swap fees	4,029				5,693				6,066				2,206				4,811				(1,664		)		(29	)		(782		)		(16	)
BOLI	1,218				1,950				(1,284		)		1,377				830				(732		)		(38	)		388				47
Administrative services	1,077				933				1,112				1,072				1,086				144				15			(9		)		(1	)
Foreign currency remeasurement (losses) gains	(54		)		(208		)		(151		)		261				(55		)		154				74			1				(2	)
Early pay-offs of capital leases	165				275				74				24				6				(110		)		(40	)		159				NM
Miscellaneous	6,849				6,011				12,427				9,085				10,878				838				14			(4,029		)		(37	)
Total Other	13,284				14,654				18,244				14,025				17,556				(1,370		)		(9	)		(4,272		)		(24	)
Total Non-Interest Income	$	170,593			$	161,993			$	113,242			$	112,220			$	115,137			$	8,600			5	%		$	55,456			48	%

NM - Not meaningful.

 

	Nine Months Ended
	Sep 30,				Sep 30,				$				%
(Dollars in thousands)	2020				2019				Change				Change
Brokerage	$	13,991			$	13,966			$	25			—	%
Trust and asset management	59,543				58,149				1,394				2
Total wealth management	73,534				72,115				1,419				2
Mortgage banking	259,194				106,433				152,761				144
Service charges on deposit accounts	33,182				28,097				5,085				18
(Losses) gains on investment securities, net	(3,140		)		2,938				(6,078		)		NM
Fees from covered call options	2,292				2,427				(135		)		(6	)
Trading losses, net	(902		)		(204		)		(698		)		NM
Operating lease income, net	35,486				34,554				932				3
Other:
Interest rate swap fees	15,788				10,866				4,922				45
BOLI	1,884				3,570				(1,686		)		(47	)
Administrative services	3,122				3,125				(3		)		—
Foreign currency remeasurement (loss) gain	(413		)		522				(935		)		NM
Early pay-offs of leases	514				11				503				NM
Miscellaneous	25,287				30,498				(5,211		)		(17	)
Total Other	46,182				48,592				(2,410		)		(5	)
Total Non-Interest Income	$	445,828			$	294,952			$	150,876			51	%

NM - Not meaningful.

 

TABLE 16: MORTGAGE BANKING

	Three Months Ended																			Nine Months Ended
(Dollars in thousands)	Sep 30, 2020				Jun 30, 2020				Mar 31, 2020				Dec 31, 2019				Sep 30, 2019			Sep 30, 2020				Sep 30, 2019
Originations and Commitments:
Retail originations	$	1,590,699			$	1,588,932			$	773,144			$	782,122			$	913,631		$	3,952,775			$	1,948,743
Correspondent originations	—				—				—				4,024				50,639			—				381,705
Veterans First originations	635,876				621,878				442,957				459,236				456,005			1,700,711				922,091
Total originations for sale (A)	$	2,226,575			$	2,210,810			$	1,216,101			$	1,245,382			$	1,420,275		$	5,653,486			$	3,252,539
Originations for investment	73,711				56,954				73,727				105,911				154,897			204,392				354,823
Total originations	$	2,300,286			$	2,267,764			$	1,289,828			$	1,351,293			$	1,575,172		$	5,857,878			$	3,607,362
Purchases as a percentage of originations for sale	41		%		30		%		37		%		40		%		48		%	36		%		57		%
Refinances as a percentage of originations for sale	59				70				63				60				52			64				43
Total	100		%		100		%		100		%		100		%		100		%	100		%		100		%
Mandatory commitments to fund originations for sale (1)	$	1,962,817			$	1,275,648			$	1,375,162			$	372,357			$	433,009
Production Margin:
Production revenue (B) (2)	$	94,148			$	93,433			$	49,327			$	34,622			$	40,924		$	236,908			$	87,425
Production margin (B / A)	4.23		%		4.23		%		4.06		%		2.78		%		2.88		%	4.19		%		2.69		%
Mortgage Servicing:
Loans serviced for others (C)	$	10,139,878			$	9,188,285			$	8,314,634			$	8,243,251			$	7,901,045
MSRs, at fair value (D)	86,907				77,203				73,504				85,638				75,585
Percentage of MSRs to loans serviced for others (D / C)	0.86		%		0.84		%		0.88		%		1.04		%		0.96		%
Servicing income	$	8,118			$	6,908			$	7,031			$	6,247			$	5,989		$	22,057			$	16,909
Components of MSR:
MSR - current period capitalization	$	20,936			$	20,351			$	9,447			$	14,532			$	14,029		$	50,734			$	30,411
MSR - collection of expected cash flows - paydowns	(590		)		(419		)		(547		)		(483		)		(456		)	(1,556		)		(1,418		)
MSR - collection of expected cash flows - payoffs	(7,272		)		(8,252		)		(6,476		)		(6,325		)		(6,781		)	(22,000		)		(11,892		)
Valuation:
MSR - changes in fair value model assumptions	(3,002		)		(7,982		)		(14,557		)		2,329				(4,058		)	(25,541		)		(17,107		)
Gain (loss) on derivative contract held as an economic hedge, net	—				589				4,160				(483		)		82			4,749				1,002
MSR valuation adjustment, net of gain/(loss) on derivative contract held as an economic hedge	$	(3,002	)		$	(7,393	)		$	(10,397	)		$	1,846			$	(3,976	)	$	(20,792	)		$	(16,105	)
Summary of Mortgage Banking Revenue:
Production revenue (2)	$	94,148			$	93,433			$	49,327			$	34,622			$	40,924		$	236,908			$	87,425
Servicing income	8,118				6,908				7,031				6,247				5,989			22,057				16,909
MSR activity	10,072				4,287				(7,973		)		9,570				2,816			6,386				996
Other	(3,794		)		(2,304		)		(59		)		(2,579		)		1,135			(6,157		)		1,103
Total mortgage banking revenue	$	108,544			$	102,324			$	48,326			$	47,860			$	50,864		$	259,194			$	106,433

(1)   Certain volume adjusted for the estimated pull-through rate of the loan, which represents the Company’s best estimate of the likelihood that a committed loan will ultimately fund.
(2)   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 and other non-production revenue.

 

TABLE 17: NON-INTEREST EXPENSE

	Three Months Ended																				Q3 2020 compared to							Q3 2020 compared to
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,				Q2 2020							Q3 2019
(Dollars in thousands)	2020				2020				2020				2019				2019				$ Change				% Change			$ Change				% Change
Salaries and employee benefits:
Salaries	$	89,849			$	87,105			$	81,286			$	82,888			$	78,067			$	2,744			3	%		$	11,782			15	%
Commissions and incentive compensation	48,475				46,151				31,575				40,226				40,289				2,324				5			8,186				20
Benefits	25,718				20,900				23,901				22,827				22,668				4,818				23			3,050				13
Total salaries and employee benefits	164,042				154,156				136,762				145,941				141,024				9,886				6			23,018				16
Equipment	17,251				15,846				14,834				14,485				13,314				1,405				9			3,937				30
Operating lease equipment depreciation	9,425				9,292				9,260				9,766				8,907				133				1			518				6
Occupancy, net	15,830				16,893				17,547				17,132				14,991				(1,063		)		(6	)		839				6
Data processing	5,689				10,406				8,373				7,569				6,522				(4,717		)		(45	)		(833		)		(13	)
Advertising and marketing	7,880				7,704				10,862				12,517				13,375				176				2			(5,495		)		(41	)
Professional fees	6,488				7,687				6,721				7,650				8,037				(1,199		)		(16	)		(1,549		)		(19	)
Amortization of other intangible assets	2,701				2,820				2,863				3,017				2,928				(119		)		(4	)		(227		)		(8	)
FDIC insurance	6,772				7,081				4,135				1,348				148				(309		)		(4	)		6,624				NM
OREO expense, net	(168		)		237				(876		)		536				1,170				(405		)		NM			(1,338		)		NM
Other:
Commissions - 3rd party brokers	778				707				865				717				734				71				10			44				6
Postage	1,529				1,591				1,949				2,220				2,321				(62		)		(4	)		(792		)		(34	)
Miscellaneous	26,002				24,948				21,346				26,693				21,083				1,054				4			4,919				23
Total other	28,309				27,246				24,160				29,630				24,138				1,063				4			4,171				17
Total Non-Interest Expense	$	264,219			$	259,368			$	234,641			$	249,591			$	234,554			$	4,851			2	%		$	29,665			13	%

NM - Not meaningful.

		Nine Months Ended
		Sep 30,				Sep 30,			$				%
(Dollars in thousands)		2020				2019			Change				Change
Salaries and employee benefits:
Salaries		$	258,240			$	227,464		$	30,776			14	%
Commissions and incentive compensation		126,201				108,374			17,827				16
Benefits		70,519				64,641			5,878				9
Total salaries and employee benefits		454,960				400,479			54,481				14
Equipment		47,931				37,843			10,088				27
Operating lease equipment depreciation		27,977				25,994			1,983				8
Occupancy, net		50,270				47,157			3,113				7
Data processing		24,468				20,251			4,217				21
Advertising and marketing		26,446				36,078			(9,632		)		(27	)
Professional fees		20,896				19,821			1,075				5
Amortization of other intangible assets		8,384				8,827			(443		)		(5	)
FDIC insurance		17,988				7,851			10,137				NM
OREO expense, net		(807		)		3,092			(3,899		)		NM
Other:
Commissions - 3rd party brokers		2,350				2,201			149				7
Postage		5,069				7,377			(2,308		)		(31	)
Miscellaneous		72,296				61,564			10,732				17
Total other		79,715				71,142			8,573				12
Total Non-Interest Expense		$	758,228			$	678,535		$	79,693			12	%

NM - Not meaningful.

TABLE 18: SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES/RATIOS

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

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

	Three Months Ended																			Nine Months Ended
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,			Sep 30,				Sep 30,
(Dollars and shares in thousands)	2020				2020				2020				2019				2019			2020				2019
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:
(A) Interest Income (GAAP)	$	311,156			$	329,816			$	344,067			$	349,731			$	354,627		$	985,039			$	1,035,411
Taxable-equivalent adjustment:
- Loans	481				576				860				892				978			1,917				3,043
- Liquidity Management Assets	546				538				551				573				574			1,635				1,707
- Other Earning Assets	1				3				2				1				5			6				8
(B) Interest Income (non-GAAP)	$	312,184			$	330,933			$	345,480			$	351,197			$	356,184		$	988,597			$	1,040,169
(C) Interest Expense (GAAP)	$	55,220			$	66,685			$	82,624			$	87,852			$	89,775		$	204,529			$	242,371
(D) Net Interest Income (GAAP) (A minus C)	$	255,936			$	263,131			$	261,443			$	261,879			$	264,852		$	780,510			$	793,040
(E) Net Interest Income (non-GAAP) (B minus C)	$	256,964			$	264,248			$	262,856			$	263,345			$	266,409		$	784,068			$	797,798
Net interest margin (GAAP)	2.56		%		2.73		%		3.12		%		3.17		%		3.37		%	2.79		%		3.56		%
Net interest margin, fully taxable-equivalent (non-GAAP)	2.57		%		2.74		%		3.14		%		3.19		%		3.39		%	2.80		%		3.58		%
(F) Non-interest income	$	170,593			$	161,993			$	113,242			$	112,220			$	115,137		$	445,828			$	294,952
(G) Gains (losses) on investment securities, net	411				808				(4,359		)		587				710			(3,140		)		2,938
(H) Non-interest expense	264,219				259,368				234,641				249,591				234,554			758,228				678,535
Efficiency ratio (H/(D+F-G))	62.01		%		61.13		%		61.90		%		66.82		%		61.84		%	61.67		%		62.53		%
Efficiency ratio (non-GAAP) (H/(E+F-G))	61.86		%		60.97		%		61.67		%		66.56		%		61.59		%	61.49		%		62.26		%
Reconciliation of Non-GAAP Tangible Common Equity Ratio:
Total shareholders’ equity (GAAP)	$	4,074,089			$	3,990,218			$	3,700,393			$	3,691,250			$	3,540,325
Less: Non-convertible preferred stock (GAAP)	(412,500		)		(412,500		)		(125,000		)		(125,000		)		(125,000		)
Less: Intangible assets (GAAP)	(683,314		)		(685,581		)		(687,626		)		(692,277		)		(627,972		)
(I) Total tangible common shareholders’ equity (non-GAAP)	$	2,978,275			$	2,892,137			$	2,887,767			$	2,873,973			$	2,787,353
(J) Total assets (GAAP)	$	43,731,718			$	43,540,017			$	38,799,847			$	36,620,583			$	34,911,902
Less: Intangible assets (GAAP)	(683,314		)		(685,581		)		(687,626		)		(692,277		)		(627,972		)
(K) Total tangible assets (non-GAAP)	$	43,048,404			$	42,854,436			$	38,112,221			$	35,928,306			$	34,283,930
Common equity to assets ratio (GAAP) (L/J)	8.4		%		8.2		%		9.2		%		9.7		%		9.8		%
Tangible common equity ratio (non-GAAP) (I/K)	6.9		%		6.7		%		7.6		%		8.0		%		8.1		%

 

	Three Months Ended																			Nine Months Ended
	Sep 30,				Jun 30,				Mar 31,				Dec 31,				Sep 30,			Sep 30,				Sep 30,
(Dollars and shares in thousands)	2020				2020				2020				2019				2019			2020				2019
Reconciliation of Non-GAAP Tangible Book Value per Common Share:
Total shareholders’ equity	$	4,074,089			$	3,990,218			$	3,700,393			$	3,691,250			$	3,540,325
Less: Preferred stock	(412,500		)		(412,500		)		(125,000		)		(125,000		)		(125,000		)
(L) Total common equity	$	3,661,589			$	3,577,718			$	3,575,393			$	3,566,250			$	3,415,325
(M) Actual common shares outstanding	57,602				57,574				57,545				57,822				56,698
Book value per common share (L/M)	$	63.57			$	62.14			$	62.13			$	61.68			$	60.24
Tangible book value per common share (non-GAAP) (I/M)	$	51.70			$	50.23			$	50.18			$	49.70			$	49.16
Reconciliation of Non-GAAP Return on Average Tangible Common Equity:
(N) Net income applicable to common shares	$	97,029			$	19,609			$	60,762			$	83,914			$	97,071		$	177,400			$	263,583
Add: Intangible asset amortization	2,701				2,820				2,863				3,017				2,928			8,384				8,827
Less: Tax effect of intangible asset amortization	(589		)		(832		)		(799		)		(793		)		(773		)	(2,079		)		(2,277		)
After-tax intangible asset amortization	2,112				1,988				2,064				2,224				2,155			6,305				6,550
(O) Tangible net income applicable to common shares (non-GAAP)	$	99,141			$	21,597			$	62,826			$	86,138			$	99,226		$	183,705			$	270,133
Total average shareholders' equity	$	4,034,902			$	3,908,846			$	3,710,169			$	3,622,184			$	3,496,714		$	3,885,187			$	3,407,398
Less: Average preferred stock	(412,500		)		(273,489		)		(125,000		)		(125,000		)		(125,000		)	(270,849		)		(125,000		)
(P) Total average common shareholders' equity	$	3,622,402			$	3,635,357			$	3,585,169			$	3,497,184			$	3,371,714		$	3,614,338			$	3,282,398
Less: Average intangible assets	(684,717		)		(686,526		)		(690,777		)		(689,286		)		(630,279		)	(687,331		)		(625,800		)
(Q) Total average tangible common shareholders’ equity (non-GAAP)	$	2,937,685			$	2,948,831			$	2,894,392			$	2,807,898			$	2,741,435		$	2,927,007			$	2,656,598
Return on average common equity, annualized (N/P)	10.66		%		2.17		%		6.82		%		9.52		%		11.42		%	6.56		%		10.74		%
Return on average tangible common equity, annualized (non-GAAP) (O/Q)	13.43		%		2.95		%		8.73		%		12.17		%		14.36		%	8.38		%		13.60		%
Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:
Income before taxes	$	137,284			$	30,703			$	87,083			$	116,682			$	134,601		$	255,070			$	363,419
Add: Provision for credit losses	25,026				135,053				52,961				7,826				10,834			213,040				46,038
Pre-tax income, excluding provision for credit losses (non-GAAP)	$	162,310			$	165,756			$	140,044			$	124,508			$	145,435		$	468,110			$	409,457

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, N.A., Wintrust Bank, N.A., in Chicago, Libertyville Bank & Trust Company, N.A., Barrington Bank & Trust Company, N.A., Crystal Lake Bank & Trust Company, N.A., Northbrook Bank & Trust Company, N.A., Schaumburg Bank & Trust Company, N.A., Village Bank & Trust, N.A., in Arlington Heights, Beverly Bank & Trust Company, N.A. in Chicago, Wheaton Bank & Trust Company, N.A., State Bank of The Lakes, N.A., in Antioch, Old Plank Trail Community Bank, N.A. in New Lenox, St. Charles Bank & Trust Company, N.A. and Town Bank, N.A., in Hartland, Wisconsin.

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

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

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

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, such as the impacts of the COVID-19 pandemic, and which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 2019 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:

• the severity, magnitude and duration of the COVID-19 pandemic and the direct and indirect impact of such pandemic, as well as responses to the pandemic by the government, businesses and consumers, on our operations and personnel, commercial activity and demand across our business and our customers’ businesses;
• the disruption of global, national, state and local economies associated with the COVID-19 pandemic, which could affect the Company’s liquidity and capital positions, impair the ability of our borrowers to repay outstanding loans, impair collateral values and further increase our allowance for credit losses;
• the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges;
• economic conditions that affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;
• negative effects suffered by us or our customers resulting from changes in U.S. trade policies;
• the extent of defaults and losses on the Company’s loan portfolio, which may require further increases in its allowance for credit losses;
• estimates of fair value of certain of the Company’s assets and liabilities, which could change in value significantly from period to period;
• the financial success and economic viability of the borrowers of our commercial loans;
• commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;
• the extent of commercial and consumer delinquencies and declines in real estate values, which may require further increases in the Company’s allowance for credit 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 (including developments and volatility arising from or related to the COVID-19 pandemic) that may affect, among other things, the Company’s liquidity and the value of its assets and liabilities;
• a prolonged period of near zero interest rates and potentially negative interest rates, either broadly or for some types of instruments, which may affect the Company’s net interest income and net interest margin, and which could materially adversely affect the Company’s profitability;
• competitive pressures in the financial services business which may affect the pricing of the Company’s loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products;
• failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of the Company’s recent or future acquisitions;
• unexpected difficulties and losses related to FDIC-assisted acquisitions;
• harm to the Company’s reputation;
• any negative perception of the Company’s financial strength;
• ability of the Company to raise additional capital on acceptable terms when needed;
• disruption in capital markets, which may lower fair values for the Company’s investment portfolio;
• ability of the Company to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations and to manage risks associated therewith;
• failure or breaches of our security systems or infrastructure, or those of third parties;
• security breaches, including denial of service attacks, hacking, social engineering attacks, malware intrusion or data corruption attempts and identity theft;
• adverse effects on our information technology systems resulting from failures, human error or cyberattacks;
• adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors;
• increased costs as a result of protecting our customers from the impact of stolen debit card information;
• accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions;
• ability of the Company to attract and retain senior management experienced in the banking and financial services industries;
• environmental liability risk associated with lending activities;
• the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation;
• losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith;
• the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank;
• the soundness of other financial institutions;
• the expenses and delayed returns inherent in opening new branches and de novo banks;
• examinations and challenges by tax authorities, and any unanticipated impact of the Tax Act;
• changes in accounting standards, rules and interpretations such as the new CECL standard and related changes to address the impact of COVID-19, and the impact on the Company’s financial statements;
• the ability of the Company to receive dividends from its subsidiaries;
• uncertainty about the discontinued use of LIBOR and transition to an alternative rate;
• a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;
• legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies, including those changes that are in response to the COVID-19 pandemic, including without limitation the CARES Act and the rules and regulations that may be promulgated thereunder;
• a lowering of our credit rating;
• changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet, including changes in response to the COVID-19 pandemic or otherwise;
• regulatory restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business;
• increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory environment;
• the impact of heightened capital requirements;
• increases in the Company’s FDIC insurance premiums, or the collection of special assessments by the FDIC;
• delinquencies or fraud with respect to the Company’s premium finance business;
• credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans;
• the Company’s ability to comply with covenants under its credit facility; and
• fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation.

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

CONFERENCE CALL, WEBCAST AND REPLAY

The Company will hold a conference call on Thursday, October 22, 2020 at 1:00 p.m. (Central Time) regarding third quarter and year-to-date 2020 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #5903949. A simultaneous audio-only webcast and replay of the conference call as well as an accompanying slide presentation may be accessed via the Company’s website at https://www.wintrust.com, Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the third quarter and year-to-date 2020 earnings press release will be available on the home page of the Company’s website at https://www.wintrust.com and at the Investor Relations, Investor News and Events, Press Releases link on its website. 

FAQ

What was Wintrust Financial's net income for Q3 2020?

Wintrust Financial reported a record net income of $107.3 million for the third quarter of 2020.

How much did total loans increase for Wintrust Financial in Q3 2020?

Total loans increased by $733 million in the third quarter of 2020.

What was the change in net interest income for Wintrust Financial in Q3 2020?

Net interest income decreased by $7.2 million primarily due to lower PPP loan fee accretion.

What percentage of non-performing assets did Wintrust Financial have at the end of Q3 2020?

Non-performing assets totaled 0.42% of total assets as of September 30, 2020.

How did Wintrust Financial's year-to-date net income compare to 2019?

Year-to-date net income for Wintrust Financial decreased to $191.8 million compared to $269.7 million in the same period in 2019.