Advertisement
Singapore markets closed
  • Straits Times Index

    3,224.01
    -27.70 (-0.85%)
     
  • Nikkei

    40,168.07
    -594.66 (-1.46%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Bitcoin USD

    70,735.05
    +2,100.84 (+3.06%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,261.09
    +12.60 (+0.24%)
     
  • Dow

    39,837.39
    +77.31 (+0.19%)
     
  • Nasdaq

    16,400.86
    +1.34 (+0.01%)
     
  • Gold

    2,241.70
    +29.00 (+1.31%)
     
  • Crude Oil

    83.06
    +1.71 (+2.10%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • FTSE Bursa Malaysia

    1,530.60
    -7.82 (-0.51%)
     
  • Jakarta Composite Index

    7,288.81
    -21.28 (-0.29%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

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

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

ADVERTISEMENT
  • 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 Companys 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 Companys 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 Companys 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 Companys internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Companys 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.

B USINESS 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 Companys 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 Companys 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 Companys 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

Wintrusts 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 Companys website at www.wintrust.com  by choosing Financial Reports under the Investor Relations heading, and then choosing Financial Highlights.

 

WINTRUST FINANCIA L 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 periods 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.

CONTACT: FOR MORE INFORMATION CONTACT: Edward J. Wehmer, Founder & Chief Executive Officer David A. Dykstra, Vice Chairman & Chief Operating Officer (847) 939-9000 Web site address: www.wintrust.com