ROSEMONT, Ill., April 16, 2018 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq:WTFC) announced net income of $82.0 million or $1.40 per diluted common share for the first quarter of 2018 compared to net income of $68.8 million or $1.17 per diluted common share for the fourth quarter of 2017 and $58.4 million or $1.00 per diluted common share for the first quarter of 2017.

Highlights of the First Quarter of 2018 *:               

  • Total assets increased by $541 million from the prior quarter and now total $28.5 billion.
  • Total loans increased by $421 million from the prior quarter.
  • Net interest margin increased primarily as a result of higher earning asset yields due to rising interest rates in the market. This increase as well as $586 million of growth in average earning assets since the fourth quarter of 2017 drove a $6.0 million increase in net interest income over the prior quarter.
  • Return on average assets increased to 1.20% from 1.00% in the prior quarter.  Return on average common equity increased to 11.29% from 9.39% in the prior quarter.
  • Decrease in effective tax rate to 24.14% from 28.19% in the fourth quarter of 2017, which was impacted by the enactment of the Tax Cuts and Jobs Act on December 22, 2017 ("Tax Reform") and $2.6 million of excess tax benefits related to income taxes attributed to share-based compensation.
  • Allowance for loan losses as a percentage of total non-performing loans remained strong at 156%.
  • Net charge-offs increased to $6.7 million from $3.7 million in the fourth quarter of 2017.  Annualized net charge-offs as a percentage of average total loans remained at historically low levels at 12 basis points for the current quarter.
  • Losses from the sale and negative fair value adjustments realized on other real estate owned increased by $2.7 million during the quarter as a result of our continued monitoring and workout efforts.
  • Mortgage banking revenue increased to $31.0 million, which was positively impacted by a $4.1 million positive fair value adjustment related to mortgage servicing rights assets compared to a $46,000 positive fair value adjustment in the fourth quarter of 2017. The previously announced acquisition of iFreedom Direct Corporation DBA Veterans First Mortgage ("Veterans First") was completed, which positively impacted mortgage banking revenue by $5.9 million from approximately half a quarter of origination activity during the period after the pipeline was initially established, offset by $5.9 million in expenses from nearly the entire quarter. Additionally, associated with the Veterans First acquisition, $13.8 million of mortgage servicing rights assets were acquired.

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

Edward J. Wehmer, President and Chief Executive Officer, commented, "Wintrust reported record net income for the ninth consecutive quarter. These results reflected the steady strength of our internal growth engine at Wintrust as we grew assets by $541 million.  The first quarter of 2018 was also characterized by the increased net interest margin as we continued to benefit from rising interest rates, reduced operating costs, steady credit quality metrics and the completion of the acquisition of Veterans First."
               
Mr. Wehmer continued, "We grew our loan portfolio by $421 million during the first quarter of 2018, which was driven by strong growth in the commercial loan portfolio. The improvement in net interest margin during the period was primarily attributable to rising interest rates in the market. We remain well positioned for expected rising rates in the future. The increased loan volume and continued improvement in net interest margin along with the continued momentum from loan growth at the very end of 2017 resulted in an increase in net interest income of $6.0 million in the first quarter of 2018, despite two less days in the quarter. Our loan pipelines remain consistently strong."

Commenting on credit quality, Mr. Wehmer noted, "Credit quality metrics remained strong during the first quarter of 2018 and the Company continued its practice of addressing and resolving non-performing credits in a timely fashion. Total non-performing assets decreased $4.6 million during the first quarter of 2018 resulting in non-performing assets as a percentage of total assets dropping from 0.47% to 0.44% during the period.  Total non-performing loans decreased slightly in the first quarter of 2018 and now total $89.7 million, or 0.41% of total loans. As a percentage of non-performing loans, the allowance for loan losses remained strong at 156%. Other real estate owned decreased $4.0 million to $36.6 million during the first quarter of 2018 as a result of our continued monitoring and workout efforts. Net charge-offs totaled $6.7 million in the current quarter, increasing $3.0 million from the fourth quarter of 2017. This increase was driven primarily by $4.3 million of net charge-offs within the commercial insurance premium finance receivables portfolio. Despite this increase during the current period, annualized net charge-offs as a percentage of total loans ended the first quarter of 2018 at 0.12%, which remains at historically low levels. We believe that the Company's reserves remain appropriate."

Mr. Wehmer further commented, "Mortgage banking revenue in the first quarter of 2018 totaled $31.0 million, an increase of $3.5 million compared to the fourth quarter of 2017 and an increase of $9.0 million compared to the first quarter of 2017. The increase in mortgage banking revenue for the first quarter of 2018 compared to the fourth quarter of 2017 was impacted by the acquisition of Veterans First, which contributed approximately $5.9 million during its first partial quarter of being a part of Wintrust. Veterans First will continue to assist us in growing our mortgage banking business with opportunities to expand in both size and delivery channels. Mortgage loan origination volumes in the first quarter of 2018 declined to $779 million from $879 million in the fourth quarter of 2017 as a result of the recent rise in interest rates and typical seasonality in January and February within our primary markets. Home purchases activity represented 73% of the volume for the first quarter of 2018 compared to 67% in the fourth quarter of 2017. Our mortgage pipeline remains strong. We continue to look for opportunities to further enhance the mortgage banking business both organically and through acquisitions."

Turning to the future, Mr. Wehmer stated, "We expect our growth engine to continue its momentum from the first quarter into the remainder of 2018. Wintrust continues to take a steady and measured approach to achieving our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure to achieve our goal of a net overhead ratio below 1.50% by the end of 2018 and continuing to increase shareholder value. Loan growth at the end of the first quarter of 2018 should add to this momentum as period-end loan balances exceeded the first quarter average balance by $351 million. We remain well-positioned for a rising interest rate environment in the future, which, coupled with this loan growth, should continue to grow net interest income. Additionally, Tax Reform is expected to help fuel our growth and increase profitability as we continue through 2018. As previously noted, we expect our effective income tax rate for the full year of 2018 to be approximately 26%-27%, excluding any impact of excess tax benefits associated with share-based compensation. Evaluating strategic acquisitions and organic branch growth will also be a part of our overall growth strategy with the goal of becoming Chicago’s bank and Wisconsin’s bank. To that end, the Company opened one new branch location in the heart of Wrigleyville in Chicago during April and anticipates opening four or five additional branches in Illinois and Wisconsin during the second and third quarters of 2018. Our opportunities for both internal growth and external growth remain consistently strong."

The graphs below illustrate certain highlights of the first quarter of 2018.

http://resource.globenewswire.com/Resource/Download/f246a5dd-f8ed-4a2d-892f-8640b2d1137c

Wintrust’s key operating measures and growth rates for the first quarter of 2018, as compared to the sequential and linked quarters, are shown in the table below:

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

4th Quarter
2017
 % or
basis point  (bp)
change from
1st Quarter
2017
  Three Months Ended  
(Dollars in thousands) March 31,
 2018
 December 31,
 2017
 March 31,
 2017
  
Net income $81,981  $68,781  $58,378  19 % 40 %
Net income per common share – diluted $1.40  $1.17  $1.00  20 % 40 %
Net revenue (1) $310,761  $300,137  $261,345  4 % 19 %
Net interest income $225,082  $219,099  $192,580  3 % 17 %
Net interest margin 3.54% 3.45% 3.36% 9 bp 18 bp
Net interest margin - fully taxable
equivalent (non-GAAP) (2)
 3.56% 3.49% 3.39% 7 bp 17 bp
Net overhead ratio (3) 1.58% 1.69% 1.60% (11)bp (2)bp
Return on average assets 1.20% 1.00% 0.94% 20 bp 26 bp
Return on average common equity 11.29% 9.39% 8.93% 190 bp 236 bp
Return on average tangible common
equity (non-GAAP) (2)
 14.02% 11.65% 11.44% 237 bp 258 bp
At end of period            
Total assets $28,456,772  $27,915,970  $25,778,893  8 % 10 %
Total loans, excluding covered loans 22,062,134  21,640,797  19,931,058  8 % 11 %
Total deposits 23,279,327  23,183,347  21,730,441  2 % 7 %
Total shareholders’ equity 3,031,250  2,976,939  2,764,983  7 % 10 %
  1. Net revenue is net interest income plus non-interest income.
  2. See "Supplemental Financial Measures/Ratios" for additional information on this performance measure/ratio.
  3. The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period's average total assets. A lower ratio indicates a higher degree of efficiency.
  4. Period-end balance sheet percentage changes are annualized.

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

 
WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights
 
  Three Months Ended
(Dollars in thousands, except per share data)March 31,
 2018
 December 31,
 2017
 March 31,
 2017
Selected Financial Condition Data (at end of period):
Total assets $28,456,772  $27,915,970  $25,778,893 
Total loans, excluding covered loans 22,062,134  21,640,797  19,931,058 
Total deposits 23,279,327  23,183,347  21,730,441 
Junior subordinated debentures 253,566  253,566  253,566 
Total shareholders’ equity 3,031,250  2,976,939  2,764,983 
Selected Statements of Income Data:      
Net interest income $225,082  $219,099  $192,580 
Net revenue (1) 310,761  300,137  261,345 
Net income 81,981  68,781  58,378 
Net income per common share – Basic $1.42  $1.19  $1.05 
Net income per common share – Diluted $1.40  $1.17  $1.00 
Selected Financial Ratios and Other Data:      
Performance Ratios:      
Net interest margin 3.54% 3.45% 3.36%
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.56% 3.49% 3.39%
Non-interest income to average assets 1.25% 1.18% 1.11%
Non-interest expense to average assets 2.83% 2.87% 2.70%
Net overhead ratio (3) 1.58% 1.69% 1.60%
Return on average assets 1.20% 1.00% 0.94%
Return on average common equity 11.29% 9.39% 8.93%
Return on average tangible common equity (non-GAAP) (2) 14.02% 11.65% 11.44%
Average total assets $27,809,597  $27,179,484  $25,207,348 
Average total shareholders’ equity 2,995,592  2,942,999  2,739,050 
Average loans to average deposits ratio (excluding covered loans) 95.2% 92.3% 92.5%
Common Share Data at end of period:      
Market price per common share $86.05  $82.37  $69.12 
Book value per common share (2) $51.66  $50.96  $47.88 
Tangible common book value per share (2) $42.17  $41.68  $37.97 
Common shares outstanding 56,256,498  55,965,207  52,503,663 
Other Data at end of period:(6)      
Leverage Ratio (4) 9.4% 9.3% 9.3%
Tier 1 capital to risk-weighted assets (4) 10.0% 9.9% 10.0%
Common equity Tier 1 capital to risk-weighted assets (4) 9.5% 9.4% 8.9%
Total capital to risk-weighted assets (4) 12.1% 12.0% 12.2%
Allowance for credit losses (5) $140,746  $139,174  $127,630 
Non-performing loans 89,690  90,162  78,979 
Allowance for credit losses to total loans (5) 0.64% 0.64% 0.64%
Non-performing loans to total loans 0.41% 0.42% 0.40%
Number of:      
Bank subsidiaries 15  15  15 
Banking offices 157  157  155 
  1. Net revenue includes net interest income and non-interest income.
  2. See “Supplemental Financial Measures/Ratios” for additional information on this performance measure/ratio.
  3. The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.
  4. Capital ratios for current quarter-end are estimated.
  5. The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excludes the allowance for covered loan losses.
  6. Asset quality ratios exclude covered loans.
 
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
 
(In thousands)(Unaudited)
March 31,
 2018
 December 31,
 2017
 (Unaudited)
March 31,
 2017
Assets
Cash and due from banks $231,407  $277,534  $214,102 
Federal funds sold and securities purchased under resale agreements 57  57  3,046 
Interest bearing deposits with banks 980,380  1,063,242  1,007,468 
Available-for-sale securities, at fair value 1,895,688  1,803,666  1,803,733 
Held-to-maturity securities, at amortized cost 892,937  826,449  667,764 
Trading account securities 1,682  995  714 
Equity securities with readily determinable fair value 37,832     
Federal Home Loan Bank and Federal Reserve Bank stock 104,956  89,989  78,904 
Brokerage customer receivables 24,531  26,431  23,171 
Mortgage loans held-for-sale 411,505  313,592  288,964 
Loans, net of unearned income, excluding covered loans 22,062,134  21,640,797  19,931,058 
Covered loans     52,359 
Total loans 22,062,134  21,640,797  19,983,417 
Allowance for loan losses (139,503) (137,905) (125,819)
Allowance for covered loan losses     (1,319)
Net loans 21,922,631  21,502,892  19,856,279 
Premises and equipment, net 626,687  621,895  598,746 
Lease investments, net 190,775  212,335  155,233 
Accrued interest receivable and other assets 601,794  567,374  560,741 
Trade date securities receivable   90,014   
Goodwill 511,497  501,884  499,341 
Other intangible assets 22,413  17,621  20,687 
Total assets $28,456,772  $27,915,970  $25,778,893 
Liabilities and Shareholders’ Equity      
Deposits:      
Non-interest bearing $6,612,319  $6,792,497  $5,790,579 
Interest bearing 16,667,008  16,390,850  15,939,862 
 Total deposits 23,279,327  23,183,347  21,730,441 
Federal Home Loan Bank advances 915,000  559,663  227,585 
Other borrowings 247,092  266,123  238,787 
Subordinated notes 139,111  139,088  138,993 
Junior subordinated debentures 253,566  253,566  253,566 
Accrued interest payable and other liabilities 591,426  537,244  424,538 
Total liabilities 25,425,522  24,939,031  23,013,910 
Shareholders’ Equity:      
Preferred stock 125,000  125,000  251,257 
Common stock 56,364  56,068  52,605 
Surplus 1,540,673  1,529,035  1,381,886 
Treasury stock (5,355) (4,986) (4,884)
Retained earnings 1,387,663  1,313,657  1,143,943 
Accumulated other comprehensive loss (73,095) (41,835) (59,824)
  Total shareholders’ equity 3,031,250  2,976,939  2,764,983 
  Total liabilities and shareholders’ equity $28,456,772  $27,915,970  $25,778,893 
             

 

 
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 Three Months Ended
(In thousands, except per share data)March 31,
 2018
  December 31,
 2017
  March 31,
 2017
 
Interest income        
Interest and fees on loans234,994  226,447  196,916 
  Mortgage loans held-for-sale2,818  3,291  2,398 
Interest bearing deposits with banks2,796  2,723  1,623 
Federal funds sold and securities purchased under resale agreements    1 
Investment securities19,128  18,160  13,573 
Trading account securities14  2  11 
Federal Home Loan Bank and Federal Reserve Bank stock1,298  1,067  1,070 
Brokerage customer receivables157  150  167 
   Total interest income261,205  251,840  215,759 
Interest expense     
Interest on deposits26,549  24,930  16,270 
Interest on Federal Home Loan Bank advances3,639  2,124  1,590 
Interest on other borrowings1,699  1,600  1,139 
Interest on subordinated notes1,773  1,786  1,772 
Interest on junior subordinated debentures2,463  2,301  2,408 
   Total interest expense36,123  32,741  23,179 
Net interest income225,082  219,099  192,580 
Provision for credit losses8,346  7,772  5,209 
Net interest income after provision for credit losses216,736  211,327  187,371 
Non-interest income     
Wealth management22,986  21,910  20,148 
Mortgage banking30,960  27,411  21,938 
Service charges on deposit accounts8,857  8,907  8,265 
(Losses) gains on investment securities, net(351) 14  (55)
Fees from covered call options1,597  1,610  759 
Trading gains (losses), net103  24  (320)
Operating lease income, net9,691  8,598  5,782 
Other11,836  12,564  12,248 
    Total non-interest income85,679  81,038  68,765 
Non-interest expense     
Salaries and employee benefits112,436  118,009  99,316 
Equipment10,072  9,500  9,002 
Operating lease equipment depreciation6,533  7,015  4,636 
Occupancy, net13,767  14,154  13,101 
Data processing8,493  7,915  7,925 
Advertising and marketing8,824  7,382  5,150 
Professional fees6,649  8,879  4,660 
Amortization of other intangible assets1,004  1,028  1,164 
FDIC insurance4,362  4,324  4,156 
OREO expense, net2,926  599  1,665 
Other19,283  17,775  17,343 
   Total non-interest expense194,349  196,580  168,118 
Income before taxes108,066  95,785  88,018 
Income tax expense26,085  27,004  29,640 
Net income$81,981  $68,781  $58,378 
Preferred stock dividends2,050  2,050  3,628 
Net income applicable to common shares$79,931  $66,731  $54,750 
Net income per common share - Basic$1.42  $1.19  $1.05 
Net income per common share - Diluted$1.40  $1.17  $1.00 
Cash dividends declared per common share$0.19  $0.14  $0.14 
Weighted average common shares outstanding56,137  55,924  52,267 
Dilutive potential common shares888  1,010  4,160 
Average common shares and dilutive common shares57,025  56,934  56,427 
         

 

 
EARNINGS PER SHARE
 
The following table shows the computation of basic and diluted earnings per share for the periods indicated:
 
   Three Months Ended
(In thousands, except per share data) March 31,
 2018
 December 31,
 2017
 March 31,
 2017
Net income $81,981 $68,781 $58,378
Less: Preferred stock dividends  2,050  2,050  3,628 
Net income applicable to common shares—Basic(A) 79,931  66,731  54,750 
Add: Dividends on convertible preferred stock, if dilutive      1,578 
Net income applicable to common shares—Diluted(B) 79,931  66,731  56,328 
Weighted average common shares outstanding(C) 56,137  55,924  52,267 
Effect of dilutive potential common shares:       
Common stock equivalents  888  1,010  1,060 
Convertible preferred stock, if dilutive      3,100 
Weighted average common shares and effect of dilutive potential common shares(D) 57,025  56,934  56,427 
Net income per common share:       
Basic(A/C) $1.42  $1.19  $1.05 
Diluted(B/D) $1.40  $1.17  $1.00 
              

Potentially dilutive common shares can result from stock options, restricted stock unit awards, stock warrants, the Company’s convertible preferred stock and shares to be issued under the Employee Stock Purchase Plan and the Directors Deferred Fee and Stock Plan, being treated as if they had been either exercised or issued, computed by application of the treasury stock method. While potentially dilutive common shares are typically included in the computation of diluted earnings per share, potentially dilutive common shares are excluded from this computation in periods in which the effect would reduce the loss per share or increase the income per share. For diluted earnings per share, net income applicable to common shares can be affected by the conversion of the Company’s convertible preferred stock. Where the effect of this conversion would reduce the loss per share or increase the income per share for a period, net income applicable to common shares is not adjusted by the associated preferred dividends. On April 25, 2017, 2,073 shares of the Series C Preferred Stock were converted at the option of the respective holder into 51,244 shares of the Company's common stock, pursuant to the terms of the Series C Preferred Stock. On April 27, 2017, the Company caused a mandatory conversion of its outstanding 124,184 shares of Series C Preferred Stock into 3,069,828 shares of the Company's common stock at a conversion rate of 24.72 shares of common stock per share of Series C Preferred Stock. Cash was paid in lieu of fractional shares for an amount considered insignificant.

SUPPLEMENTAL FINANCIAL MEASURES/RATIOS

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

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

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

  
 Three Months Ended
(Dollars and shares in thousands) March 31,
2018
   December 31,
2017
   September 30,
2017
   June 30,
2017
   March 31,
2017
 
Calculation of Net Interest Margin and Efficiency Ratio                   
(A) Interest Income (GAAP)$261,205  $251,840  $247,688  $231,181  $215,759 
Taxable-equivalent adjustment:                   
 - Loans 670   1,106   1,033   831   790 
 - Liquidity Management Assets 531   1,019   921   866   907 
 - Other Earning Assets 3   2   5   2   5 
(B) Interest Income - FTE$262,409  $253,967  $249,647  $232,880  $217,461 
(C) Interest Expense (GAAP) 36,123   32,741   31,700   26,772   23,179 
(D) Net Interest Income - FTE (B minus C)$226,286  $221,226  $217,947  $206,108  $194,282 
(E) Net Interest Income (GAAP) (A minus C)$225,082  $219,099  $215,988  $204,409  $192,580 
Net interest margin (GAAP-derived) 3.54%  3.45%  3.43%  3.41%  3.36%
Net interest margin - FTE 3.56%  3.49%  3.46%  3.43%  3.39%
(F) Non-interest income$85,679  $81,038  $79,731  $89,972  $68,765 
(G) Gains (losses) on investment securities, net (351)  14   39   47   (55)
(H) Non-interest expense 194,349   196,580   183,575   183,544   168,118 
Efficiency ratio (H/(E+F-G)) 62.47%  65.50%  62.09%  62.36%  64.31%
Efficiency ratio - FTE (H/(D+F-G)) 62.23%  65.04%  61.68%  62.00%  63.90%
Calculation of Tangible Common Equity ratio (at period end)                   
Total shareholders’ equity$3,031,250  $2,976,939  $2,908,925  $2,839,458  $2,764,983 
(I) Less: Convertible preferred stock __   __   __   __   (126,257)
Less:  Non-convertible preferred stock (125,000)  (125,000)  (125,000)  (125,000)  (125,000)
Less: Intangible assets (533,910)  (519,505)  (520,672)  (519,806)  (520,028)
(J) Total tangible common shareholders’ equity$2,372,340  $2,332,434  $2,263,253  $2,194,652  $1,993,698 
Total assets$ 28,456,772  $ 27,915,970   27,358,162  $ 26,929,265  $ 25,778,893 
Less: Intangible assets (533,910)  (519,505)  (520,672)  (519,806)  (520,028)
(K) Total tangible assets$27,922,862  $27,396,465  $26,837,490  $26,409,459  $25,258,865 
Tangible common equity ratio (J/K) 8.5%  8.5%  8.4%  8.3%  7.9%
Tangible common equity ratio, assuming full conversion of convertible preferred
stock ((J-I)/K)
 8.5%  8.5%  8.4%  8.3%  8.4%
Calculation of book value per share                   
Total shareholders’ equity$ 3,031,250  $ 2,976,939  $ 2,908,925  $ 2,839,458  $ 2,764,983 
Less: Preferred stock (125,000)  (125,000)  (125,000)  (125,000)  (251,257)
(L) Total common equity$2,906,250  $2,851,939   $2,783,925   $2,714,458   $2,513,726  
(M) Actual common shares outstanding 56,256   55,965   55,838   55,700   52,504 
Book value per common share (L/M)$51.66  $50.96  $49.86  $48.73  $47.88 
Tangible common book value per share (J/M)$42.17  $41.68  $40.53  $39.40  $37.97 
                    
                    
Calculation of return on average common equity                   
(N) Net income applicable to common shares$79,931  $66,731  $63,576  $62,847  $54,750 
Add: After-tax intangible asset amortization761  738  672  726  771 
(O) Tangible net income applicable to common shares$80,692  $67,469  $64,248  $63,573  $55,521 
Total average shareholders' equity$2,995,592  $2,942,999  $2,882,682  $2,800,905  $2,739,050 
Less: Average preferred stock(125,000) (125,000) (125,000) (161,028) (251,257)
(P) Total average common shareholders' equity$2,870,592  $2,817,999  $2,757,682  $2,639,877  $2,487,793 
Less: Average intangible assets(536,676) (519,626) (520,333) (519,340) (520,346)
(Q) Total average tangible common shareholders’ equity$2,333,916  $2,298,373  $2,237,349  $2,120,537  $1,967,447 
Return on average common equity, annualized  (N/P)11.29% 9.39% 9.15% 9.55% 8.93%
Return on average tangible common equity, annualized (O/Q)14.02% 11.65% 11.39% 12.02% 11.44%
               


BUSINESS UNIT SUMMARY

Community Banking

Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the first quarter of 2018, revenue within this unit was primarily driven by increased net interest income due to a higher net interest margin and increased earning assets. The net interest margin increased in the first quarter of 2018 compared to the fourth quarter of 2017 primarily as a result of higher yields on the commercial and commercial real estate loan portfolios (excluding lease loans) and the liquidity management assets portfolio, partially offset by higher rates on interest-bearing liabilities. Mortgage banking revenue increased by $3.5 million from $27.4 million for the fourth quarter of 2017 to $31.0 million for the first quarter of 2018. The higher  revenue was primarily due to increased revenue from the Veterans First acquisition of $5.9 million and a $4.1 million positive fair value adjustment related to mortgage servicing rights assets compared to a $46,000 positive fair value adjustment in the fourth quarter of 2017. The increase in revenue was partially offset as origination volume was lower during the current period, decreasing to $778.9 million from $879.4 million in the fourth quarter of 2017, as a result of typical seasonality in our primary markets. Home purchases represented 73% of loan origination volume for the first quarter of 2018. The Company's gross commercial and commercial real estate loan pipelines remain strong. Before the impact of scheduled payments and prepayments, at March 31, 2018, gross commercial and commercial real estate loan pipelines totaled $1.1 billion, or $688.4 million when adjusted for the probability of closing, compared to $974.4 million, or $630.2 million when adjusted for the probability of closing, at December 31, 2017.

Specialty Finance

Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries and accounts receivable financing, value-added, out-sourced administrative services, and other services. In the first quarter of 2018, the specialty finance unit experienced higher revenue as a result of increased volumes and higher yields within its insurance premium financing receivables portfolio. Originations of $1.8 billion during the first quarter of 2018 resulted in a $188.3 million increase in average balances. The increase in average balances along with higher yields on these loans resulted in a $2.7 million increase in interest income attributed to this portfolio. The Company's leasing business remained steady during the first quarter of 2018, with its portfolio of assets, including capital leases, loans and equipment on operating leases, totaling $986.7 million at the end of the first quarter of 2018. Revenues from the Company's out-sourced administrative services business remained steady, totaling approximately $1.1 million in the first quarter of 2018 and fourth quarter of 2017.

Wealth Management

Through its wealth management unit, the Company offers a full range of wealth management services through three separate subsidiaries: trust and investment services, asset management, securities brokerage services and 401(k) and retirement plan services. At March 31, 2018, the Company’s wealth management subsidiaries had approximately $24.3 billion of assets under administration, which includes $2.9 billion of assets owned by the Company and its subsidiary banks, representing a $347.1 million decrease from the $24.6 billion of assets under administration at December 31, 2017. This decrease in assets under administration was primarily driven by market depreciation.

LOANS

Loan Portfolio Mix and Growth Rates

        % Growth
(Dollars in thousands) March 31,
 2018
 December 31,
 2017
 March 31,
 2017
 From (1)
December 31,
2017
 From
March 31,
2017
Balance:          
Commercial $7,060,871  $6,787,677  $6,081,489  16% 16%
Commercial real estate 6,633,520  6,580,618  6,261,682  3  6 
Home equity 626,547  663,045  708,258  (22) (12)
Residential real estate 869,104  832,120  720,608  18  21 
Premium finance receivables - commercial 2,576,150  2,634,565  2,446,946  (9) 5 
Premium finance receivables - life insurance 4,189,961  4,035,059  3,593,563  16  17 
Consumer and other 105,981  107,713  118,512  (7) (11)
     Total loans, net of unearned
     income, excluding covered loans
 $22,062,134  $21,640,797  $19,931,058  8% 11%
Covered loans     52,359    (100)
      Total loans, net of unearned
      income
 $22,062,134  $21,640,797  $19,983,417  8% 10%
Mix:          
Commercial 32% 31% 30%    
Commercial real estate 30  30  31     
Home equity 3  3  4     
Residential real estate 4  4  4     
Premium finance receivables - commercial 12  12  12     
Premium finance receivables - life insurance 19  19  18     
Consumer and other   1  1     
      Total loans, net of unearned
      income, excluding covered loans
 100% 100% 100%    
Covered loans          
      Total loans, net of unearned
       income
 100% 100% 100%    

(1)     Annualized

   
Commercial and Commercial Real Estate Loan Portfolios  
  As of March 31, 2018
   % of
Total
Balance
 Nonaccrual > 90 Days
Past Due
and Still
Accruing
 Allowance
For Loan
Losses
Allocation
 
(Dollars in thousands)Balance 
    
Commercial:          
Commercial, industrial and other $4,560,880  33.4% $10,051  $  $39,182 
Franchise 935,358  6.8  2,401    7,116 
Mortgage warehouse lines of credit 163,470  1.2      1,297 
Asset-based lending 977,735  7.1  1,194    8,316 
Leases 414,198  3.0  361    1,222 
PCI - commercial loans (1) 9,230  0.1    856  503 
      Total commercial $7,060,871  51.6% $14,007  $856  $57,636 
Commercial Real Estate:          
Construction $815,636  6.0% $3,139  $  $9,596 
Land 122,690  0.9  182    3,990 
Office 891,071  6.5  474    5,800 
Industrial 906,144  6.6  1,427    5,899 
Retail 895,622  6.5  12,274    8,135 
Multi-family 931,355  6.8  19    9,613 
Mixed use and other 1,955,456  14.3  4,310    14,377 
PCI - commercial real estate (1) 115,546  0.8    3,107  71 
    Total commercial real estate $6,633,520  48.4% $21,825  $3,107  $57,481 
    Total commercial and commercial real estate $13,694,391  100.0% $35,832  $3,963  $115,117 
           
Commercial real estate - collateral location by state:          
Illinois $5,199,090  78.4%      
Wisconsin 706,076  10.6       
       Total primary markets $5,905,166  89.0%      
Indiana 138,999  2.1       
Florida 57,260  0.9       
Arizona 55,914  0.8       
Michigan 46,230  0.7       
California 67,922  1.0       
Other (no individual state greater than 0.6%) 362,029  5.5       
       Total $6,633,520  100.0%      

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

DEPOSITS

Deposit Portfolio Mix and Growth Rates

        % Growth
(Dollars in thousands) March 31,
 2018
 December 31,
 2017
 March 31,
 2017
 From (1)
December 31,
2017
 From
March 31,
2017
Balance:          
Non-interest bearing $6,612,319  $6,792,497  $5,790,579  (11)% 14%
NOW and interest bearing demand deposits 2,315,122  2,315,055  2,484,676  —  (7)
Wealth management deposits (2) 2,495,134  2,323,699  2,390,464  30  
Money market 4,617,122  4,515,353  4,555,752   
Savings 2,901,504  2,829,373  2,287,958  10  27 
Time certificates of deposit 4,338,126  4,407,370  4,221,012  (6) 
        Total deposits $23,279,327  $23,183,347  $21,730,441  2% 7%
Mix:          
Non-interest bearing 28% 29% 27%    
NOW and interest bearing demand deposits 10  10  11     
Wealth management deposits (2) 11  10  11     
Money market 20  20  21     
Savings 12  12  11     
Time certificates of deposit 19  19  19     
        Total deposits 100% 100% 100%    
  1. Annualized
  2. Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts.
             
Time Certificates of Deposit
Maturity/Re-pricing Analysis
As of March 31, 2018
            
             
(Dollars in thousands) CDARs &
Brokered
Certificates
  of Deposit (1)
 MaxSafe
Certificates
  of Deposit (1)
 Variable Rate
Certificates
  of Deposit (2)
 Other Fixed
Rate 
Certificates
  of Deposit (1)
 Total Time
Certificates of
Deposit
 Weighted-
Average

Rate of
Maturing

Time
Certificates

  of Deposit (3)
1-3 months $59,651  $30,577  $120,910  $843,754  $1,054,892  0.98%
4-6 months   26,741    658,681  685,422  1.04%
7-9 months   16,099    600,322  616,421  1.15%
10-12 months   13,506    649,139  662,645  1.31%
13-18 months 249  19,470    727,824  747,543  1.41%
19-24 months   15,095    272,301  287,396  1.66%
24+ months 1,000  8,663    274,144  283,807  1.64%
Total $60,900  $130,151  $120,910  $4,026,165  $4,338,126  1.23%
  1. This category of certificates of deposit is shown by contractual maturity date.
  2. This category includes variable rate certificates of deposit and savings certificates with the majority repricing on at least a monthly basis.
  3. Weighted-average rate excludes the impact of purchase accounting fair value adjustments.

NET INTEREST INCOME

The following table presents a summary of Wintrust’s average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the first quarter of 2018 compared to the fourth quarter of 2017 (sequential quarters) and first quarter of 2017 (linked quarters), respectively:

  Average Balance
  for three months ended,
   Interest
  for three months ended,
  Yield/Rate 
for three months ended,
 
(Dollars in thousands) March 31,
 2018
   December 31,
 2017
   March 31,
 2017
   March 31,
 2018
   December 31,
 2017
   March 31,
 2017
  March 31,
 2018
 
 December 31,
 2017 
 March 31,
 2017 
Interest-bearing deposits with
banks and cash equivalents(1)
$749,973  $914,319  $780,752  $2,796  $2,723  $1,624  1.51% 1.18% 0.84%
Investment securities(2)2,892,617  2,736,253  2,395,625  19,659  19,179  14,480  2.76  2.78  2.45 
FHLB and FRB stock105,414  82,092  94,090  1,298  1,067  1,070   4.99% 5.15  4.61 
Liquidity management assets(3)(8)$3,748,004  $3,732,664  $3,270,467  $23,753  $22,969  $17,174  2.57% 2.44% 2.13%
Other earning assets(3)(4)(8)27,571  26,955  25,236  174  154  183  2.56  2.27  2.95 
Mortgage loans held-for-sale281,181  335,385  268,834  2,818  3,291  2,398  4.06  3.89  3.62 
Loans, net of unearned
income(3)(5)(8)
21,711,342  21,080,984  19,654,772  235,664  227,467  196,788  4.40  4.28  4.06 
Covered loans  6,025  56,872    86  918    5.66  6.55 
Total earning assets(8)$25,768,098  $25,182,013  $23,276,181  $262,409  $253,967  $217,461  4.13% 4.00% 3.79%
Allowance for loan and covered loan losses(143,108) (138,584) (127,425)            
Cash and due from banks254,489  244,097  229,588             
Other assets1,930,118  1,891,958  1,829,004             
Total assets$27,809,597  $27,179,484  $25,207,348             
                  
NOW and interest bearing demand deposits$2,255,692  $2,284,576  $2,512,598  $1,386  $1,407  $1,093  0.25% 0.24% 0.18%
Wealth management deposits2,250,139  2,005,197  2,082,285  5,441  4,059  2,313  0.98  0.80  0.45 
Money market accounts4,520,620  4,611,515  4,407,901  4,667  4,154  2,221  0.42  0.36  0.20 
Savings accounts2,813,772  2,741,621  2,227,024  2,732  2,716  1,329  0.39  0.39  0.24 
Time deposits4,322,111  4,581,464  4,236,862  12,323  12,594  9,314  1.16  1.09  0.89 
Interest-bearing deposits$16,162,334  $16,224,373  $15,466,670  $26,549  $24,930  $16,270  0.67% 0.61% 0.43%
Federal Home Loan Bank advances872,811  324,748  181,338  3,639  2,124  1,590  1.69  2.59  3.55 
Other borrowings263,125  255,972  255,012  1,699  1,600  1,139  2.62  2.48  1.81 
Subordinated notes139,094  139,065  138,980  1,773  1,786  1,772  5.10  5.14  5.10 
Junior subordinated debentures253,566  253,566  253,566  2,463  2,301  2,408  3.89  3.55  3.80 
Total interest-bearing liabilities$17,690,930  $17,197,724  $16,295,566  $36,123  $32,741  $23,179  0.83% 0.75% 0.58%
Non-interest bearing deposits6,639,845  6,605,553  5,787,034             
Other liabilities483,230  433,208  385,698             
Equity2,995,592  2,942,999  2,739,050             
Total liabilities and
shareholders’ equity
$27,809,597  $27,179,484  $25,207,348             
Interest rate spread(6)(8)            3.30% 3.25% 3.21%
Less:  Fully tax-equivalent adjustment      (1,204) (2,127) (1,702) (0.02) (0.04) (0.03)
Net free funds/contribution(7)$8,077,168  $7,984,289  $6,980,615        0.26  0.24  0.18 
Net interest income/ margin(8)  (GAAP)      $225,082  $219,099  $192,580  3.54% 3.45% 3.36%
Fully tax-equivalent adjustment      1,204  2,127  1,702  0.02  0.04  0.03 
Net interest income/ margin - FTE (8)      $226,286  $221,226  $194,282  3.56% 3.49% 3.39%
  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 tax-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017 were $1.2 million, $2.1 million and $1.7 million, respectively.
  4. Other earning assets include brokerage customer receivables and trading account securities.
  5. Loans, net of unearned income, include non-accrual loans.
  6. Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
  7. Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
  8. See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio.

For the first quarter of 2018, net interest income totaled $225.1 million, an increase of $6.0 million as compared to the fourth quarter of 2017 and an increase of $32.5 million as compared to the first quarter of 2017. Net interest margin was 3.54% (3.56% on a fully tax-equivalent basis) during the first quarter of 2018 compared to 3.45% (3.49% on a fully tax-equivalent basis) during the fourth quarter of 2017 and 3.36% (3.39% on a fully tax-equivalent basis) during the first quarter of 2017. The $6.0 million increase in net interest income in the first quarter of 2018 compared to the fourth quarter of 2017 was attributable to a $5.2 million increase from higher levels of earning assets and a $5.7 million increase from rising rates, partially offset by a $4.9 million decrease due to two less days in the quarter.

Interest Rate Sensitivity

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

The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases of 100 and 200 basis points and a decrease of 100 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months.  Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenario at March 31, 2018, December 31, 2017 and March 31, 2017 is as follows:

      
Static Shock Scenario +200
Basis 
Points
 +100
 Basis
 Points
 -100
Basis
 Points
March 31, 2018 18.8% 9.7% (11.6)%
December 31, 2017 17.7% 9.0% (11.8)%
March 31, 2017 17.7% 9.3% (13.2)%

 

Ramp Scenario+200
Basis
Points
 +100
Basis
Points
 -100
Basis
Points
March 31, 20189.0% 4.6% (4.8)%
December 31, 20178.9% 4.6% (5.1)%
March 31, 20177.3% 3.9% (4.8)%
         

These results indicate that the Company has positioned its balance sheet to benefit from a rise in interest rates.  This analysis also indicates that the Company would benefit to a greater magnitude should a rise in interest rates be significant (i.e., 200 basis points) and immediate (Static Shock Scenario).

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table classifies the loan portfolio at March 31, 2018 by date at which the loans reprice or mature, and the type of rate exposure:

As of March 31, 2018One year or less From one to five
years
 Over five years  
(Dollars in thousands)   Total
Commercial
Fixed rate$155,596  $927,376  $562,064  $1,645,036 
Variable rate5,409,222  6,613    5,415,835 
Total commercial$5,564,818  $933,989  $562,064  $7,060,871 
Commercial real estate       
Fixed rate409,640  1,750,632  275,186  2,435,458 
Variable rate4,170,629  27,279  154  4,198,062 
Total commercial real estate$4,580,269  $1,777,911  $275,340  $6,633,520 
Home equity       
Fixed rate11,561  4,733  43,465  59,759 
Variable rate566,788      566,788 
Total home equity$578,349  $4,733  $43,465  $626,547 
Residential real estate       
Fixed rate82,686  30,356  154,028  267,070 
Variable rate65,171  221,227  315,636  602,034 
Total residential real estate$147,857  $251,583  $469,664  $869,104 
Premium finance receivables - commercial       
Fixed rate2,499,041  77,109    2,576,150 
Variable rate       
Total premium finance receivables - commercial$2,499,041  $77,109  $  $2,576,150 
Premium finance receivables - life insurance       
Fixed rate13,330  2,856  2,154  18,340 
Variable rate4,171,621      4,171,621 
Total premium finance receivables - life insurance$4,184,951  $2,856  $2,154  $4,189,961 
Consumer and other       
Fixed rate53,926  12,582  2,337  68,845 
Variable rate37,118  18    37,136 
Total consumer and other$91,044  $12,600  $2,337  $105,981 
Total per category       
Fixed rate3,225,780  2,805,644  1,039,234  7,070,658 
Variable rate14,420,549  255,137  315,790  14,991,476 
      Total loans, net of unearned income$17,646,329  $3,060,781  $1,355,024  $22,062,134 
Variable Rate Loan Pricing by Index:       
Prime$2,685,331       
One- month LIBOR7,433,808       
Three- month LIBOR406,365       
Twelve- month LIBOR4,225,145       
Other240,827       
       Total variable rate$14,991,476       

http://resource.globenewswire.com/Resource/Download/00a3089c-3e0d-48f3-b094-7019c55c0d5f

Source: Bloomberg

As noted in the table on the previous page, the majority of the Company’s portfolio is tied to LIBOR indices which, as shown in the table above, do not mirror the same increases as the Prime rate when the Federal Reserve raises interest rates.  Specifically, the Company has $7.4 billion of variable rate loans tied to one-month LIBOR and $4.2 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:

  Changes in
  Prime 1-month
LIBOR
 12-month
LIBOR
Second Quarter 2017 +25 bps +24 bps -6 bps
Third Quarter 2017 0 bps +1 bps +4 bps
Fourth Quarter 2017 +25 bps +33 bps +33 bps
First Quarter 2018 +25 bps +32 bps +55 bps
       

NON-INTEREST INCOME

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

   Three Months Ended        
 March 31,
2018 
December 31,
2017 
March 31,
2017 
 Q1 2018 compared to
Q4 2017
 Q1 2018 compared to
Q1 2017
(Dollars in thousands)$ Change % Change $ Change % Change
Brokerage  $6,031  $6,067  $6,220  $(36) (1)% $(189) (3)%
Trust and asset management  16,955  15,843  13,928  1,112   3,027  22 
Total wealth management  22,986  21,910  20,148  1,076   2,838  14 
Mortgage banking  30,960  27,411  21,938  3,549  13  9,022  41 
Service charges on deposit accounts  8,857  8,907  8,265  (50) (1) 592  
(Losses) gains on investment securities, net  (351) 14  (55) (365) NM (296) NM
Fees from covered call options  1,597  1,610  759  (13) (1) 838  NM
Trading gains (losses), net  103  24  (320) 79  NM 423  NM
Operating lease income, net  9,691  8,598  5,782  1,093  13  3,909  68 
Other:               
Interest rate swap fees  2,237  1,963  1,433  274  14  804  56 
BOLI  714  754  985  (40) (5) (271) (28)
Administrative services  1,061  1,103  1,024  (42) (4) 37  
Early pay-offs of capital leases  33  7  1,211  26  NM (1,178) (97)
Miscellaneous  7,791  8,737  7,595  (946) (11) 196  
Total Other  11,836  12,564  12,248  (728) (6) (412) (3)
Total Non-Interest Income  $85,679  $81,038  $68,765  $4,641  6% $16,914  25%

NM - Not meaningful

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

The increase in wealth management revenue during the current period as compared to the fourth quarter of 2017 and first quarter of 2017 is primarily attributable to market appreciation at the beginning of the quarter related to managed money accounts with fees based on assets under management at the beginning of the quarterly term.  Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors and the brokerage commissions, managed money fees and insurance product commissions at Wayne Hummer Investments.

The increase in mortgage banking revenue in the current quarter as compared to the fourth quarter of 2017 resulted primarily from increased revenue of $5.9 million from the Veterans First acquisition and a $4.1 million positive fair value adjustment related to mortgage servicing rights assets compared to a $46,000 positive fair value adjustment in the fourth quarter of 2017, partially offset by lower origination volumes in the current quarter. Mortgage loans originated or purchased for sale totaled $778.9 million in the first quarter of 2018 as compared to $879.4 million in the fourth quarter of 2017 and $722.5 million in the first quarter of 2017. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. Mortgage revenue is also impacted by changes in the fair value of mortgage servicing rights as the Company does not hedge this change in fair value. The Company typically originates mortgage loans held-for-sale with associated mortgage servicing rights ("MSRs") retained or released. Additionally, through the acquisition of Veterans First, the Company acquired approximately $13.8 million of MSRs in the first quarter of 2018. The Company records MSRs at fair value on a recurring basis. The table below presents additional selected information regarding mortgage banking revenue for the respective periods.

   
  Three Months Ended
(Dollars in thousands)
 March 31,
 2018
 December 31,
 2017
 March 31,
 2017
Originations:
      
Retail originations $539,911  744,496  $624,971 
Correspondent originations 126,464  134,904  97,496 
Veterans First originations 112,477     
Total originations (A) $778,852  879,400  $722,467 
       
Purchases as a percentage of originations 73% 67% 66%
Refinances as a percentage of originations 27  33  34 
Total 100% 100% 100%
       
Production Margin:      
Production revenue (B) (1) $20,526  $20,603  $17,677 
Production margin (B / A) 2.64% 2.34% 2.45%
       
Mortgage Servicing:      
Loans serviced for others (C) $4,795,335  $2,929,133  $1,972,592 
MSRs, at fair value (D) 54,572  33,676  21,596 
Percentage of MSRs to loans serviced for others (D / C) 1.14% 1.15% 1.09%
       
Components of Mortgage Banking Revenue:      
Production revenue $20,526  $20,603  $17,677 
MSR capitalization, net of payoffs and paydowns 2,957  4,216  2,337 
MSR fair value adjustments 4,133  46  156 
Servicing income 2,905  1,942  1,316 
Other 439  604  452 
Total mortgage banking revenue $30,960  $27,411  $21,938 
  1. Production revenue represents revenue earned from the origination and subsequent sale of mortgages, including gains on loans sold and fees from originations, processing and other related activities, and excludes servicing fees, changes in the fair value of servicing rights and changes to the mortgage recourse obligation.

The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio by using fees generated from these options to compensate for net interest margin compression. These option transactions are designed to mitigate overall interest rate risk and do not qualify as hedges pursuant to accounting guidance. Fees from covered call options remained relatively stable in the first quarter of 2018. There were no outstanding call option contracts at March 31, 2018, December 31, 2017 or March 31, 2017.

The increase in operating lease income in the current quarter compared to the fourth quarter of 2017 is primarily related to a $1.1 million gain realized from the sale of certain equipment held on operating leases.

NON-INTEREST EXPENSE

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

  Three Months Ended        
  March 31, December 31, March 31, Q1 2018 compared to
Q4 2017
 Q1 2018 compared to
Q1 2017
(Dollars in thousands)2018 2017 2017 $ Change % Change $ Change % Change
Salaries and employee benefits:              
Salaries $61,986  $58,239  $55,008  $3,747  6% $6,978  13%
Commissions and incentive compensation 31,949  40,723  26,643  (8,774) (22) 5,306  20 
Benefits 18,501  19,047  17,665  (546) (3) 836  
Total salaries and employee benefits 112,436  118,009  99,316  (5,573) (5) 13,120  13 
Equipment 10,072  9,500  9,002  572   1,070  12 
Operating lease equipment depreciation 6,533  7,015  4,636  (482) (7) 1,897  41 
Occupancy, net 13,767  14,154  13,101  (387) (3) 666  
Data processing 8,493  7,915  7,925  578   568  
Advertising and marketing 8,824  7,382  5,150  1,442  20  3,674  71 
Professional fees 6,649  8,879  4,660  (2,230) (25) 1,989  43 
Amortization of other intangible assets 1,004  1,028  1,164  (24) (2) (160) (14)
FDIC insurance 4,362  4,324  4,156  38   206  
OREO expense, net 2,926  599  1,665  2,327  NM 1,261  76 
Other:              
Commissions - 3rd party brokers 1,252  1,057  1,098  195  18  154  14 
Postage 1,866  1,427  1,442  439  31  424  29 
Miscellaneous 16,165  15,291  14,803  874   1,362  
Total other 19,283  17,775  17,343  1,508   1,940  11 
Total Non-Interest Expense $194,349  $196,580  $168,118  $(2,231) (1)% $26,231  16%

NM - Not meaningful

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

Salaries and employee benefits expense decreased in the current quarter compared to the fourth quarter of 2017 primarily as a result of lower commissions and incentive compensation, partially offset by higher salaries in the current quarter. The decrease in commissions and incentive compensation was the result of an increase in bonus and long-term performance-based incentive compensation recognized in the fourth quarter of 2017 due to higher current and projected earnings as impacted by the higher rate environment, lower taxes and balance sheet growth at that time as well as an increase in salaries and employee benefits (primarily health plan related). Additionally, salaries and employee benefits expense in the fourth quarter of 2017 included $1.2 million of additional expense related to pension obligations assumed in previous acquisitions. These decreases were partially offset by a $3.7 million increase in salaries primarily due to $2.4 million of additional salaries from the Veterans First acquisition as well as increases from merit-based salary increases for current employees effective in February and an increase of the minimum wage for eligible hourly employees effective in March.

The increase in advertising and marketing expenses during the current quarter compared to the fourth quarter of 2017 and the first quarter of 2017 is primarily related to higher expenses for community advertisements and sponsorships as well as mass media. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities, the Company's various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the timing of sponsorship programs and type of marketing programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

The decrease in professional fees during the current quarter compared to the fourth quarter of 2017 is primarily related to lower consulting fees related to continued investments in various areas of the Company including technology and an enhanced digital customer experience. Professional fees include legal, audit and tax fees, external loan review costs, consulting arrangements and normal regulatory exam assessments.

The increase in OREO expense in the current quarter compared to the fourth quarter of 2017 was primarily the result of negative valuation adjustments and realized losses on the sale of certain OREO properties as a result of our continuing efforts to address and resolve non-performing assets in a timely fashion. OREO expenses include all costs associated with obtaining, maintaining and selling other real estate owned properties as well as valuation adjustments.

INCOME TAXES

The Company recorded income tax expense of $26.1 million in the first quarter of 2018 compared to $27.0 million in the fourth quarter of 2017 and $29.6 million in the first quarter of 2017. The effective tax rates were 24.14% in the first quarter of 2018, 28.19% in the fourth quarter of 2017 and 33.67% in the first quarter of 2017. The lower effective tax rate for the first quarter of 2018 was primarily due to reduction of the federal corporate tax rate as a result of Tax Reform and recording $2.6 million of excess tax benefits related to income taxes attributed to share-based compensation. Excess tax benefits are expected to be higher in the first quarter when the majority of the Company's share-based awards vest, and will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards.

ASSET QUALITY

Allowance for Credit Losses, excluding covered loans

  Three Months Ended
 
 March 31, December 31, March 31,
(Dollars in thousands) 2018 2017 2017
Allowance for loan losses at beginning of period$137,905 $133,119 $122,291
Provision for credit losses 8,346  7,772  5,316 
Other adjustments (1) (40) 698  (56)
Reclassification (to) from allowance for unfunded lending-related commitments 26  7  (138)
Charge-offs:      
Commercial 2,687  1,340  641 
Commercial real estate 813  1,001  261 
Home equity 357  728  625 
Residential real estate 571  542  329 
Premium finance receivables - commercial 4,721  2,314  1,427 
Premium finance receivables - life insurance      
Consumer and other 129  207  134 
Total charge-offs 9,278  6,132  3,417 
Recoveries:      
Commercial 262  235  273 
Commercial real estate 1,687  1,037  554 
Home equity 123  359  65 
Residential real estate 40  165  178 
Premium finance receivables - commercial 385  613  612 
Premium finance receivables - life insurance      
Consumer and other 47  32  141 
       Total recoveries 2,544  2,441  1,823 
Net charge-offs (6,734) (3,691) (1,594)
Allowance for loan losses at period end $139,503  $137,905  $125,819 
Allowance for unfunded lending-related commitments at period end 1,243  1,269  1,811 
Allowance for credit losses at period end $140,746  $139,174  $127,630 
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average:      
      Commercial 0.14% 0.07% 0.03%
      Commercial real estate (0.05) 0.00  (0.02)
      Home equity 0.15  0.22  0.32 
      Residential real estate 0.19  0.13  0.06 
      Premium finance receivables - commercial 0.68  0.26  0.13 
      Premium finance receivables - life insurance 0.00  0.00  0.00 
      Consumer and other 0.26  0.52  (0.02)
      Total loans, net of unearned income, excluding covered loans 0.12% 0.07% 0.03%
Net charge-offs as a percentage of the provision for credit losses 80.69% 47.49% 29.98%
Loans at period-end, excluding covered loans $22,062,134  $21,640,797  $19,931,058 
Allowance for loan losses as a percentage of loans at period end 0.63% 0.64% 0.63%
Allowance for credit losses as a percentage of loans at period end 0.64% 0.64% 0.64%

(1)     Includes $742,000 of allowance for covered loan losses reclassified as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017.

The allowance for credit losses, excluding the allowance for covered loan losses, is comprised of the allowance for loan losses and the allowance for unfunded lending-related commitments. The allowance for loan losses is a reserve against loan amounts that are actually funded and outstanding while the allowance for unfunded lending-related commitments (separate liability account) relates to certain amounts that Wintrust is committed to lend but for which funds have not yet been disbursed. The provision for credit losses, excluding the provision for covered loan losses, may contain both a component related to funded loans (provision for loan losses) and a component related to lending-related commitments (provision for unfunded loan commitments and letters of credit).

Net charge-offs as a percentage of loans, excluding covered loans, for the first quarter of 2018 totaled 12 basis points on an annualized basis compared to seven basis points on an annualized basis in the fourth quarter of 2017 and three basis points on an annualized basis in the first quarter of 2017.  Net charge-offs totaled $6.7 million in the first quarter of 2018, a $3.0 million increase from $3.7 million in the fourth quarter of 2017 and a $5.1 million increase from $1.6 million in the first quarter of 2017. The increase in the first quarter of 2018 compared to both comparative periods is primarily the result of increased net charge-offs within the commercial insurance premium finance receivables portfolio. The provision for credit losses, excluding the provision for covered loan losses, totaled $8.3 million for the first quarter of 2018 compared to $7.8 million for the fourth quarter of 2017 and $5.3 million for the first quarter of 2017.

Management believes the allowance for credit losses is appropriate to provide for inherent losses in the portfolio. There can be no assurances, however, that future losses will not exceed the amounts provided for, thereby affecting future results of operations. The amount of future additions to the allowance for credit losses will be dependent upon management’s assessment of the appropriateness of the allowance based on its evaluation of economic conditions, changes in real estate values, interest rates, the regulatory environment, the level of past-due and non-performing loans and other factors.

The Company also provided a provision for covered loan losses on covered loans when applicable.

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

  Three Months Ended
 March 31, December 31, March 31,
(Dollars in thousands) 2018 2017 2017
Provision for loan losses
 $8,372 $7,779 $5,178
Provision for unfunded lending-related commitments (26) (7) 138 
Provision for covered loan losses     (107)
Provision for credit losses $8,346  $7,772  $5,209 
       
  Period End
 March 31, December 31, March 31,
 2018 2017 2017
Allowance for loan losses
 $139,503  $137,905 $125,819
Allowance for unfunded lending-related commitments 1,243  1,269  1,811 
Allowance for covered loan losses     1,319 
Allowance for credit losses $140,746  $139,174  $128,949 
             

The tables below summarize the calculation of allowance for loan losses for the Company’s core loan portfolio and consumer, niche and purchased loan portfolio, excluding covered loans, as of March 31, 2018 and December 31, 2017.

  As of March 31, 2018
(Dollars in thousands) Recorded
Investment
 Calculated
Allowance
 As a percentage
of its own respective 
category’s balance
Commercial:(1)      
Commercial and industrial $3,989,211  $36,092  0.90%
Asset-based lending 977,063  8,315  0.85 
Tax exempt 380,264  2,602  0.68 
Leases 412,786  1,222  0.30 
Commercial real estate:(1)      
Residential construction 44,328  860  1.94 
Commercial construction 769,330  8,723  1.13 
Land 121,005  3,988  3.30 
Office 853,839  5,795  0.68 
Industrial 872,761  5,895  0.68 
Retail 861,249  8,101  0.94 
Multi-family 903,778  9,599  1.06 
Mixed use and other 1,866,691  14,319  0.77 
Home equity(1) 571,925  9,719  1.70 
Residential real estate(1) 823,322  6,073  0.74 
Total core loan portfolio $13,447,552  $121,303  0.90%
Commercial:      
Franchise $852,166  $7,032  0.83%
Mortgage warehouse lines of credit 163,470  1,297  0.79 
Community Advantage - homeowner associations 168,656  422  0.25 
Aircraft 2,904  42  1.45 
Purchased non-covered commercial loans (2) 114,351  612  0.54 
Commercial real estate:      
Purchased non-covered commercial real estate (2) 340,539  201  0.06 
Purchased non-covered home equity (2) 54,622  141  0.26 
Purchased non-covered residential real estate (2) 45,782  205  0.45 
Premium finance receivables      
U.S. commercial insurance loans 2,263,019  5,415  0.24 
Canada commercial insurance loans (2) 313,131  491  0.16 
Life insurance loans (1) 4,002,726  1,427  0.04 
Purchased life insurance loans (2) 187,235    — 
Consumer and other (1) 103,312  911  0.88 
Purchased non-covered consumer and other (2) 2,669  4  0.15 
Total consumer, niche and purchased loan portfolio $8,614,582  $18,200  0.21%
Total loans, net of unearned income, excluding covered loans $22,062,134  $139,503  0.63%

(1)     Excludes purchased loans reported in accordance with ASC 310-20 and ASC 310-30.
(2)     Purchased loans represent loans reported in accordance with ASC 310-20 and ASC 310-30.

   
  As of December 31, 2017
(Dollars in thousands) Recorded
Investment
 Calculated
Allowance
 As a percentage
of its own respective
category’s balance
Commercial:(1)      
Commercial and industrial $3,771,593  $36,812  0.98%
Asset-based lending 979,526  8,236  0.84 
Tax exempt 380,523  2,600  0.68 
Leases 411,721  1,242  0.30 
Commercial real estate:(1)      
Residential construction 47,241  889  1.88 
Commercial construction 697,404  7,839  1.12 
Land 124,740  3,835  3.07 
Office 854,882  5,731  0.67 
Industrial 846,191  5,762  0.68 
Retail 915,769  7,353  0.80 
Multi-family 885,905  9,495  1.07 
Mixed use and other 1,835,612  13,814  0.75 
Home equity(1) 602,175  10,319  1.71 
Residential real estate(1) 783,842  6,447  0.82 
Total core loan portfolio $13,137,124  $120,374  0.92%
Commercial:      
Franchise $741,965  $6,367  0.86%
Mortgage warehouse lines of credit 194,524  1,454  0.75 
Community Advantage - homeowner associations 164,837  412  0.25 
Aircraft 2,984  42  1.41 
Purchased non-covered commercial loans (2) 140,004  646  0.46 
Commercial real estate:      
Purchased non-covered commercial real estate (2) 372,874  509  0.14 
Purchased non-covered home equity (2) 60,870  174  0.29 
Purchased non-covered residential real estate (2) 48,278  241  0.50 
Premium finance receivables      
U.S. commercial insurance loans 2,315,644  4,872  0.21 
Canada commercial insurance loans (2) 318,921  484  0.15 
Life insurance loans (1) 3,835,790  1,490  0.04 
Purchased life insurance loans (2) 199,269    — 
Consumer and other (1) 104,204  836  0.80 
Purchased non-covered consumer and other (2) 3,509  4  0.11 
Total consumer, niche and purchased loan portfolio $8,503,673  $17,531  0.21%
Total loans, net of unearned income, excluding covered loans $21,640,797  $137,905  0.64%

(1)     Excludes purchased loans reported in accordance with ASC 310-20 and ASC 310-30.
(2)     Purchased loans represent loans reported in accordance with ASC 310-20 and ASC 310-30.

As part of the regular quarterly review performed by management to determine if the Company’s allowance for loan losses is appropriate, an analysis is prepared on the loan portfolio based upon a breakout of core loans and consumer, niche and purchased loans. A summary of the allowance for loan losses calculated for the loan components in both the core loan portfolio and the consumer, niche and purchased loan portfolio was shown on the preceding tables as of March 31, 2018 and December 31, 2017.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. In accordance with accounting guidance, credit deterioration on purchased loans is recorded as a credit discount at the time of purchase instead of as an increase to the allowance for loan losses.

In addition to the $139.5 million of allowance for loan losses, there is $4.0 million of non-accretable credit discount on purchased loans reported in accordance with ASC 310-30 that is available to absorb credit losses.

The tables below show the aging of the Company’s loan portfolio at March 31, 2018 and December 31, 2017:

             
    90+ days 60-89 30-59    
As of March 31, 2018   and still days past days past    
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:
Commercial (1) $14,007  $856  $771  $54,233  $6,991,004  $7,060,871 
Commercial real estate (1) 21,825  3,107  3,563  58,469  6,546,556  6,633,520 
Home equity 9,828    1,505  4,033  611,181  626,547 
Residential real estate (1) 17,214  1,437  229  8,808  841,416  869,104 
Premium finance receivables - commercial 17,342  8,547  6,543  17,756  2,525,962  2,576,150 
Premium finance receivables - life insurance (1)     5,125  11,420  4,173,416  4,189,961 
Consumer and other (1) 720  269  216  291  104,485  105,981 
Total loans, net of unearned income $80,936  $14,216  $17,952  $155,010  $21,794,020  $22,062,134 
                         

 

As of March 31, 2018
Aging as a % of Loan Balance
 Nonaccrual 90+ days
and still
accruing
 60-89
days past
due
 30-59
days past
due
 Current Total Loans
Commercial (1) 0.2% % % 0.8% 99.0% 100.0%
Commercial real estate (1) 0.3    0.1  0.9  98.7  100.0 
Home equity 1.6    0.2  0.6  97.6  100.0 
Residential real estate (1) 2.0  0.2    1.0  96.8  100.0 
Premium finance receivables - commercial 0.7  0.3  0.3  0.7  98.0  100.0 
Premium finance receivables - life insurance (1)     0.1  0.3  99.6  100.0 
Consumer and other (1) 0.7  0.3  0.2  0.3  98.5  100.0 
Total loans, net of unearned income 0.4% 0.1% 0.1% 0.7% 98.7% 100.0%
  1. Including PCI loans. PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30.  Loan agings are based upon contractually required payments.
             
    90+ days 60-89 30-59    
As of December 31, 2017   and still days past days past    
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:
Commercial (1) $15,696  $877  $4,218  $29,407  $6,737,479  $6,787,677 
Commercial real estate (1) 22,048  7,135  4,346  29,326  6,517,763  6,580,618 
Home equity 8,978    518  4,634  648,915  663,045 
Residential real estate (1) 17,977  5,304  1,303  8,378  799,158  832,120 
Premium finance receivables - commercial 12,163  9,242  17,796  15,849  2,579,515  2,634,565 
Premium finance receivables - life insurance (1)     4,837  10,017  4,020,205  4,035,059 
Consumer and other (1) 740  101  242  727  105,903  107,713 
Total loans, net of unearned income $77,602  $22,659  $33,260  $98,338  $21,408,938  $21,640,797 
                         

 

As of December 31, 2017
Aging as a % of Loan Balance:
 Nonaccrual 90+ days
and still
accruing
 60-89
days past
due
 30-59
days past
due
 Current Total Loans
Commercial (1) 0.2% % 0.1% 0.4% 99.3% 100.0%
Commercial real estate (1) 0.3  0.1  0.1  0.4  99.1  100.0 
Home equity 1.4    0.1  0.7  97.8  100.0 
Residential real estate (1) 2.2  0.6  0.2  1.0  96.0  100.0 
Premium finance receivables - commercial 0.5  0.4  0.7  0.6  97.8  100.0 
Premium finance receivables - life insurance (1)     0.1  0.2  99.7  100.0 
Consumer and other (1) 0.7  0.1  0.2  0.7  98.3  100.0 
Total loans, net of unearned income 0.4% 0.1% 0.2% 0.5% 98.8% 100.0%
  1. Including PCI loans. PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30.  Loan agings are based upon contractually required payments.

As of March 31, 2018, $18.0 million of all loans, or 0.1%, were 60 to 89 days past due and $155.0 million, or 0.7%, were 30 to 59 days (or one payment) past due. As of December 31, 2017, $33.3 million of all loans, or 0.2%, were 60 to 89 days past due and $98.3 million, or 0.5%, were 30 to 59 days (or one payment) past due. The majority of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at March 31, 2018 that are current with regard to the contractual terms of the loan agreement represent 97.6% of the total home equity portfolio. Residential real estate loans at March 31, 2018 that are current with regards to the contractual terms of the loan agreements comprise 96.8% of total residential real estate loans outstanding.

Non-performing Assets, excluding covered assets

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

       
(Dollars in thousands)  March 31,
2018
 December 31,
2017 (3
 March 31,
2017
Loans past due greater than 90 days and still accruing(1):
Commercial $  $  $100 
Commercial real estate      
Home equity      
Residential real estate   3,278   
Premium finance receivables - commercial 8,547  9,242  4,991 
Premium finance receivables - life insurance     2,024 
Consumer and other 207  40  104 
        Total loans past due greater than 90 days and still accruing 8,754  12,560  7,219 
Non-accrual loans(2):      
Commercial 14,007  15,696  14,307 
Commercial real estate 21,825  22,048  20,809 
Home equity 9,828  8,978  11,722 
Residential real estate 17,214  17,977  11,943 
Premium finance receivables - commercial 17,342  12,163  12,629 
Premium finance receivables - life insurance      
Consumer and other 720  740  350 
        Total non-accrual loans 80,936  77,602  71,760 
Total non-performing loans:      
Commercial 14,007  15,696  14,407 
Commercial real estate 21,825  22,048  20,809 
Home equity 9,828  8,978  11,722 
Residential real estate 17,214  21,255  11,943 
Premium finance receivables - commercial 25,889  21,405  17,620 
Premium finance receivables - life insurance     2,024 
Consumer and other 927  780  454 
        Total non-performing loans $89,690  $90,162  $78,979 
Other real estate owned 18,481  20,244  17,090 
Other real estate owned - from acquisitions 18,117  20,402  22,774 
Other repossessed assets 113  153  544 
Total non-performing assets $126,401  $130,961  $119,387 
TDRs performing under the contractual terms of the loan agreement $39,562  $39,683  $28,392 
Total non-performing loans by category as a percent of its own respective category’s period-end balance:      
Commercial 0.20% 0.23% 0.24%
Commercial real estate 0.33  0.34  0.33 
Home equity 1.57  1.35  1.66 
Residential real estate 1.98  2.55  1.66 
Premium finance receivables - commercial 1.00  0.81  0.72 
Premium finance receivables - life insurance     0.06 
Consumer and other 0.87  0.72  0.38 
        Total loans, net of unearned income 0.41% 0.42% 0.40%
Total non-performing assets as a percentage of total assets 0.44% 0.47% 0.46%
Allowance for loan losses as a percentage of total non-performing loans 155.54% 152.95% 159.31%

(1)    As of the dates shown, no TDRs were past due greater than 90 days and still accruing interest.

(2)    Non-accrual loans included TDRs totaling $8.1 million, $10.1 million and $11.3 million as of March 31, 2018, December 31, 2017 and March 31, 2017, respectively.
(3)    Includes $2.6 million of non-performing loans and $2.9 million of other real estate owned reclassified from covered assets as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017.

The ratio of non-performing assets to total assets was 0.44% as of March 31, 2018, compared to 0.47% at December 31, 2017, and 0.46% at March 31, 2017. Non-performing assets, excluding covered assets and non-covered PCI loans, totaled $126.4 million at March 31, 2018, compared to $131.0 million at December 31, 2017 and $119.4 million at March 31, 2017. Non-performing loans, excluding covered loans and non-covered PCI loans, totaled $89.7 million, or 0.41% of total loans, at March 31, 2018 compared to $90.2 million, or 0.42% of total loans, at December 31, 2017 and $79.0 million, or 0.40% of total loans, at March 31, 2017. OREO, excluding covered OREO, of $36.6 million at March 31, 2018 decreased $4.0 million compared to $40.6 million at December 31, 2017 and decreased $3.3 million compared to $39.9 million at March 31, 2017. The decrease in the first quarter of 2018 was partly due to negative fair value adjustments realized on certain properties as a result of our continued monitoring and workout efforts.

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

Nonperforming Loans Rollforward

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

  Three Months Ended
 March 31, December 31, March 31,
(Dollars in thousands) 2018 2017 2017
Balance at beginning of period$90,162 $77,983 $87,454
Additions, net, from non-covered portfolio 6,608  25,619  8,609 
Additions, net, from covered non-performing loans subsequent to loss share expiration   2,572   
Return to performing status (3,753) (426) (1,592)
Payments received (2,569) (4,271) (5,614)
Transfer to OREO and other repossessed assets (1,981) (3,960) (1,661)
Charge-offs (3,555) (2,443) (1,280)
Net change for niche loans (1) 4,778  (4,912) (6,937)
Balance at end of period $89,690  $90,162  $78,979 

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

TDRs

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

(Dollars in thousands)  March 31,
2018
 December 31,
2017
 March 31,
2017
Accruing TDRs:
Commercial $19,803  $19,917  $4,607 
Commercial real estate 16,087  16,160  18,923 
Residential real estate and other 3,672  3,606  4,862 
       Total accrual $39,562  $39,683  $28,392 
Non-accrual TDRs: (1)      
Commercial $1,741  $4,000  $1,424 
Commercial real estate 1,304  1,340  7,338 
Residential real estate and other 5,069  4,763  2,515 
       Total non-accrual $8,114  $10,103  $11,277 
Total TDRs:      
Commercial $21,544  $23,917  $6,031 
Commercial real estate 17,391  17,500  26,261 
Residential real estate and other 8,741  8,369  7,377 
       Total TDRs $47,676  $49,786  $39,669 
Weighted-average contractual interest rate of TDRs 4.84% 4.40% 4.37%

(1)     Included in total non-performing loans.

Other Real Estate Owned

The table below presents a summary of other real estate owned, excluding covered other real estate owned, as of March 31, 2018, December 31, 2017 and March 31, 2017, and shows the activity for the respective period and the balance for each property type:

  Three Months Ended
 March 31, December 31, March 31,
(Dollars in thousands) 2018 2017 2017
Balance at beginning of period$40,646 $37,378 $40,282
Disposals/resolved (3,679) (6,107) (2,644)
Transfers in at fair value, less costs to sell 1,789  6,733  2,268 
Transfers in from covered OREO subsequent to loss share expiration   2,851  760 
Fair value adjustments (2,158) (209) (802)
Balance at end of period $36,598  $40,646  $39,864 
       
  Period End
 March 31, December 31, March 31,
Balance by Property Type 2018 2017 2017
Residential real estate $6,407 $7,515 $7,597
Residential real estate development 2,229  2,221  1,240 
Commercial real estate 27,962  30,910  31,027 
Total $36,598  $40,646  $39,864 
             

Items Impacting Comparative Financial Results:

Acquisitions

On January 4, 2018, the Company acquired certain assets and assumed certain liabilities of the mortgage banking business of Veterans First, in a business combination. The Company also acquired mortgage servicing rights assets from Veterans First on approximately 10,000 loans, totaling an estimated $1.7 billion in unpaid principal balance. Veterans First is a consumer direct lender with three offices, operating two in Salt Lake City and one in San Diego, and originated in excess of $800 million in loans in 2017.

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

Termination of Loss Share Agreements

On October 16, 2017, the Company entered in agreements with the FDIC that terminated all existing loss share agreements with the FDIC.  The loss share agreements were related to the Company’s acquisition of assets and assumption of liabilities of eight failed banks through FDIC assisted transactions in 2010, 2011 and 2012.

Under terms of the agreements, the Company made a net payment of $15.2 million to the FDIC as consideration for the early termination of the loss share agreements.  The Company recorded a pre-tax gain of approximately $0.4 million in the fourth quarter of 2017 to write off the remaining loss share asset, relieve the claw-back liability and recognize the payment to the FDIC.

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

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

WINTRUST SUBSIDIARIES AND LOCATIONS

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

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

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

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

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “point,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 2017 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

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

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

CONFERENCE CALL, WEB CAST AND REPLAY

The Company will hold a conference call at 1:00 p.m. (Central Time) on Tuesday, April 17, 2018 regarding first quarter 2018 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #5398424. A simultaneous audio-only web cast and replay of the conference call may be accessed via the Company’s website at http://www.wintrust.com, Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the first quarter 2018 earnings press release will be available on the home page of the Company’s website at http://www.wintrust.com and at the Investor Relations, Investor News and Events, Press Releases link on its website.

WINTRUST FINANCIAL CORPORATION

Supplemental Financial Information

5 Quarter Trends

   
WINTRUST FINANCIAL CORPORATION - Supplemental Financial Information  
Selected Financial Highlights - 5 Quarter Trends  
(Dollars in thousands, except per share data)  
   
  Three Months Ended
 March 31, December 31, September 30, June 30, March 31,
 2018 2017 2017 2017 2017
Selected Financial Condition Data (at end of period):
Total assets $28,456,772  $27,915,970  $27,358,162  $26,929,265  $25,778,893 
Total loans, excluding covered loans 22,062,134  21,640,797  20,912,781  20,743,332  19,931,058 
Total deposits 23,279,327  23,183,347  22,895,063  22,605,692  21,730,441 
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566 
Total shareholders’ equity 3,031,250  2,976,939  2,908,925  2,839,458  2,764,983 
Selected Statements of Income Data:          
Net interest income 225,082  219,099  215,988  204,409  192,580 
Net revenue (1) 310,761  300,137  295,719  294,381  261,345 
Net income 81,981  68,781  65,626  64,897  58,378 
Net income per common share – Basic $1.42  $1.19  $1.14  $1.15  $1.05 
Net income per common share – Diluted $1.40  $1.17  $1.12  $1.11  $1.00 
Selected Financial Ratios and Other Data:          
Performance Ratios:          
Net interest margin 3.54% 3.45% 3.43% 3.41% 3.36%
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.56% 3.49% 3.46% 3.43% 3.39%
Non-interest income to average assets 1.25% 1.18% 1.17% 1.39% 1.11%
Non-interest expense to average assets 2.83% 2.87% 2.70% 2.83% 2.70%
Net overhead ratio (3) 1.58% 1.69% 1.53% 1.44% 1.60%
Return on average assets 1.20% 1.00% 0.96% 1.00% 0.94%
Return on average common equity 11.29% 9.39% 9.15% 9.55% 8.93%
Return on average tangible common equity (non-GAAP) (2) 14.02% 11.65% 11.39% 12.02% 11.44%
Average total assets $27,809,597  $27,179,484  $27,012,295  $26,050,949  $25,207,348 
Average total shareholders’ equity 2,995,592  2,942,999  2,882,682  2,800,905  2,739,050 
Average loans to average deposits ratio (excluding covered loans) 95.2% 92.3% 91.8% 94.1% 92.5%
Common Share Data at end of period:          
Market price per common share $86.05  $82.37  $78.31  $76.44  $69.12 
Book value per common share (2) $51.66  $50.96  $49.86  $48.73  $47.88 
Tangible common book value per share (2) $42.17  $41.68  $40.53  $39.40  $37.97 
Common shares outstanding 56,256,498  55,965,207  55,838,063  55,699,927  52,503,663 
Other Data at end of period:(6)          
Leverage Ratio(4) 9.4% 9.3% 9.2% 9.2% 9.3%
Tier 1 Capital to risk-weighted assets (4) 10.0% 9.9% 10.0% 9.8% 10.0%
Common equity Tier 1 capital to risk-weighted assets (4) 9.5% 9.4% 9.5% 9.3% 8.9%
Total capital to risk-weighted assets (4) 12.1% 12.0% 12.2% 12.0% 12.2%
Allowance for credit losses (5) $140,746  $139,174  $134,395  $131,296  $127,630 
Non-performing loans 89,690  90,162  77,983  69,050  78,979 
Allowance for credit losses to total loans (5) 0.64% 0.64% 0.64% 0.63% 0.64%
Non-performing loans to total loans 0.41% 0.42% 0.37% 0.33% 0.40%
Number of:          
Bank subsidiaries 15  15  15  15  15 
Banking offices 157  157  156  153  155 
  1. Net revenue includes net interest income and non-interest income.
  2. See “Supplemental Financial Measures/Ratios” for additional information on this performance measure/ratio.
  3. The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.
  4. Capital ratios for current quarter-end are estimated.
  5. The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excluding the allowance for covered loan losses.
  6. Asset quality ratios exclude covered loans.
           
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION          
Consolidated Statements of Condition - 5 Quarter Trends          
 (Unaudited)
March 31,
 December 31, (Unaudited)
September 30,
 (Unaudited)
June 30,
 (Unaudited)
March 31,
(In thousands)2018 2017 2017 2017 2017
Assets
Cash and due from banks $231,407  $277,534  $251,896  $296,105  $214,102 
Federal funds sold and securities purchased under resale agreements 57  57  56  56  3,046 
Interest bearing deposits with banks 980,380  1,063,242  1,218,728  1,011,635  1,007,468 
Available-for-sale securities, at fair value 1,895,688  1,803,666  1,665,903  1,649,636  1,803,733 
Held-to-maturity securities, at amortized cost 892,937  826,449  819,340  793,376  667,764 
Trading account securities 1,682  995  643  1,987  714 
Equity securities with readily determinable fair value 37,832         
Federal Home Loan Bank and Federal Reserve Bank stock 104,956  89,989  87,192  80,812  78,904 
Brokerage customer receivables 24,531  26,431  23,631  23,281  23,171 
Mortgage loans held-for-sale 411,505  313,592  370,282  382,837  288,964 
Loans, net of unearned income, excluding covered loans 22,062,134  21,640,797  20,912,781  20,743,332  19,931,058 
Covered loans     46,601  50,119  52,359 
Total loans 22,062,134  21,640,797  20,959,382  20,793,451  19,983,417 
Allowance for loan losses (139,503) (137,905) (133,119) (129,591) (125,819)
Allowance for covered loan losses     (758) (1,074) (1,319)
Net loans 21,922,631  21,502,892  20,825,505  20,662,786  19,856,279 
Premises and equipment, net 626,687  621,895  609,978  605,211  598,746 
Lease investments, net 190,775  212,335  193,828  191,248  155,233 
Accrued interest receivable and other assets 601,794  567,374  580,612  577,359  560,741 
Trade date securities receivable   90,014  189,896  133,130   
Goodwill 511,497  501,884  502,021  500,260  499,341 
Other intangible assets 22,413  17,621  18,651  19,546  20,687 
Total assets $28,456,772  $27,915,970  $27,358,162  $26,929,265  $25,778,893 
Liabilities and Shareholders’ Equity          
Deposits:          
Non-interest bearing $6,612,319  $6,792,497  $6,502,409  $6,294,052  $5,790,579 
Interest bearing 16,667,008  16,390,850  16,392,654  16,311,640  15,939,862 
Total deposits 23,279,327  23,183,347  22,895,063  22,605,692  21,730,441 
Federal Home Loan Bank advances 915,000  559,663  468,962  318,270  227,585 
Other borrowings 247,092  266,123  251,680  277,710  238,787 
Subordinated notes 139,111  139,088  139,052  139,029  138,993 
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566 
Trade date securities payable     880  5,151   
Accrued interest payable and other liabilities 591,426  537,244  440,034  490,389  424,538 
Total liabilities 25,425,522  24,939,031  24,449,237  24,089,807  23,013,910 
Shareholders’ Equity:          
Preferred stock 125,000  125,000  125,000  125,000  251,257 
Common stock 56,364  56,068  55,940  55,802  52,605 
Surplus 1,540,673  1,529,035  1,519,596  1,511,080  1,381,886 
Treasury stock (5,355) (4,986) (4,884) (4,884) (4,884)
Retained earnings 1,387,663  1,313,657  1,254,759  1,198,997  1,143,943 
Accumulated other comprehensive loss (73,095) (41,835) (41,486) (46,537) (59,824)
     Total shareholders’ equity 3,031,250  2,976,939  2,908,925  2,839,458  2,764,983 
     Total liabilities and shareholders’ equity $28,456,772  $27,915,970  $27,358,162  $26,929,265  $25,778,893 
                     

 

   
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION  
Consolidated Statements of Income (Unaudited) - 5 Quarter Trends  
   
  Three Months Ended
 March 31, December 31, September 30, June 30, March 31,
(In thousands, except per share data) 2018 2017 2017 2017 2017
Interest income
Interest and fees on loans 234,994  226,447  223,897  209,289  196,916 
        Mortgage loans held-for-sale 2,818  3,291  3,223  3,420  2,398 
Interest bearing deposits with banks 2,796  2,723  3,272  1,634  1,623 
Federal funds sold and securities purchased under resale agreements       1  1 
Investment securities 19,128  18,160  16,058  15,524  13,573 
Trading account securities 14  2  8  4  11 
Federal Home Loan Bank and Federal Reserve Bank stock 1,298  1,067  1,080  1,153  1,070 
Brokerage customer receivables 157  150  150  156  167 
        Total interest income 261,205  251,840  247,688  231,181  215,759 
Interest expense          
Interest on deposits 26,549  24,930  23,655  18,471  16,270 
Interest on Federal Home Loan Bank advances 3,639  2,124  2,151  2,933  1,590 
Interest on other borrowings 1,699  1,600  1,482  1,149  1,139 
Interest on subordinated notes 1,773  1,786  1,772  1,786  1,772 
Interest on junior subordinated debentures 2,463  2,301  2,640  2,433  2,408 
       Total interest expense 36,123  32,741  31,700  26,772  23,179 
Net interest income 225,082  219,099  215,988  204,409  192,580 
Provision for credit losses 8,346  7,772  7,896  8,891  5,209 
Net interest income after provision for credit losses 216,736  211,327  208,092  195,518  187,371 
Non-interest income          
Wealth management 22,986  21,910  19,803  19,905  20,148 
Mortgage banking 30,960  27,411  28,184  35,939  21,938 
Service charges on deposit accounts 8,857  8,907  8,645  8,696  8,265 
(Losses) gains on investment securities, net (351) 14  39  47  (55)
Fees from covered call options 1,597  1,610  1,143  890  759 
Trading gains (losses), net 103  24  (129) (420) (320)
Operating lease income, net 9,691  8,598  8,461  6,805  5,782 
Other 11,836  12,564  13,585  18,110  12,248 
        Total non-interest income 85,679  81,038  79,731  89,972  68,765 
Non-interest expense          
Salaries and employee benefits 112,436  118,009  106,251  106,502  99,316 
Equipment 10,072  9,500  9,947  9,909  9,002 
Operating lease equipment depreciation 6,533  7,015  6,794  5,662  4,636 
Occupancy, net 13,767  14,154  13,079  12,586  13,101 
Data processing 8,493  7,915  7,851  7,804  7,925 
Advertising and marketing 8,824  7,382  9,572  8,726  5,150 
Professional fees 6,649  8,879  6,786  7,510  4,660 
Amortization of other intangible assets 1,004  1,028  1,068  1,141  1,164 
FDIC insurance 4,362  4,324  3,877  3,874  4,156 
OREO expense, net 2,926  599  590  739  1,665 
Other 19,283  17,775  17,760  19,091  17,343 
       Total non-interest expense 194,349  196,580  183,575  183,544  168,118 
Income before taxes 108,066  95,785  104,248  101,946  88,018 
Income tax expense 26,085  27,004  38,622  37,049  29,640 
Net income $81,981  $68,781  $65,626  $64,897  $58,378 
Preferred stock dividends 2,050  2,050  2,050  2,050  3,628 
Net income applicable to common shares $79,931  $66,731  $63,576  $62,847  $54,750 
Net income per common share - Basic $1.42  $1.19  $1.14  $1.15  $1.05 
Net income per common share - Diluted $1.40  $1.17  $1.12  $1.11  $1.00 
Cash dividends declared per common share $0.19  $0.14  $0.14  $0.14  $0.14 
Weighted average common shares outstanding 56,137  55,924  55,796  54,775  52,267 
Dilutive potential common shares 888  1,010  966  1,812  4,160 
Average common shares and dilutive common shares 57,025  56,934  56,762  56,587  56,427 
                

 

           
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION          
Period End Loan Balances - 5 Quarter Trends          
           
(Dollars in thousands)  March 31,
2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
 March 31,
2017
Balance:
Commercial $7,060,871  $6,787,677  $6,456,034  $6,406,289  $6,081,489 
Commercial real estate 6,633,520  6,580,618  6,400,781  6,402,494  6,261,682 
Home equity 626,547  663,045  672,969  689,483  708,258 
Residential real estate 869,104  832,120  789,499  762,810  720,608 
Premium finance receivables - commercial 2,576,150  2,634,565  2,664,912  2,648,386  2,446,946 
Premium finance receivables - life insurance 4,189,961  4,035,059  3,795,474  3,719,043  3,593,563 
Consumer and other 105,981  107,713  133,112  114,827  118,512 
       Total loans, net of unearned income, excluding covered loans $22,062,134  $21,640,797  $20,912,781  $20,743,332  $19,931,058 
Covered loans     46,601  50,119  52,359 
        Total loans, net of unearned income $22,062,134  $21,640,797  $20,959,382  $20,793,451  $19,983,417 
Mix:          
Commercial 32% 31% 31% 31% 30%
Commercial real estate 30  30  31  31  31 
Home equity 3  3  3  3  4 
Residential real estate 4  4  3  3  4 
Premium finance receivables - commercial 12  12  13  13  12 
Premium finance receivables - life insurance 19  19  18  18  18 
Consumer and other   1  1  1  1 
       Total loans, net of unearned income, excluding covered loans 100% 100% 100% 100% 100%
Covered loans          
      Total loans, net of unearned income 100% 100% 100% 100% 100%
                

 

           
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION          
Period End Deposits Balances - 5 Quarter Trends          
           
(Dollars in thousands)  March 31,
2018
 December 31,
2017
 September 30,
2017
 June 30,
2017
 March 31,
2017
Balance:
Non-interest bearing $6,612,319  $6,792,497  $6,502,409  $6,294,052  $5,790,579 
NOW and interest bearing demand deposits 2,315,122  2,315,055  2,273,025  2,459,238  2,484,676 
Wealth management deposits (1) 2,495,134  2,323,699  2,171,758  2,464,162  2,390,464 
Money market 4,617,122  4,515,353  4,607,995  4,449,385  4,555,752 
Savings 2,901,504  2,829,373  2,673,201  2,419,463  2,287,958 
Time certificates of deposit 4,338,126  4,407,370  4,666,675  4,519,392  4,221,012 
        Total deposits $23,279,327  $23,183,347  $22,895,063  $22,605,692  $21,730,441 
Mix:          
Non-interest bearing 28% 29% 28% 28% 27%
NOW and interest bearing demand deposits 10  10  10  11  11 
Wealth management deposits (1) 11  10  10  11  11 
Money market 20  20  20  19  21 
Savings 12  12  12  11  11 
Time certificates of deposit 19  19  20  20  19 
        Total deposits 100% 100% 100% 100% 100%
  1. Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts of the Banks.
   
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION  
Net Interest Margin (Including Call Option Income) - 5 Quarter Trends  
   
  Three Months Ended
 March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2018 2017 2017 2017 2017
Net interest income - FTE$226,286 $221,226 $217,947 $206,108 $194,282
Call option income 1,597  1,610  1,143  890  759 
Net interest income including call option income $227,883  $222,836  $219,090  $206,998  $195,041 
Yield on earning assets 4.13% 4.00% 3.96% 3.88% 3.79%
Rate on interest-bearing liabilities 0.83  0.75  0.73  0.63  0.58 
Rate spread 3.30% 3.25% 3.23% 3.25% 3.21%
Less:  Fully tax-equivalent adjustment (0.02) (0.04) (0.03) (0.02) (0.03)
Net free funds contribution 0.26  0.24  0.23  0.18  0.18 
Net interest margin (GAAP-derived) 3.54% 3.45% 3.43% 3.41% 3.36%
Fully tax-equivalent adjustment 0.02  0.04  0.03  0.02  0.03 
Net interest margin - FTE 3.56% 3.49% 3.46% 3.43% 3.39%
Call option income 0.03  0.03  0.02  0.01  0.01 
Net interest margin - FTE, including call option income 3.59% 3.52% 3.48% 3.44% 3.40%
                

 

     
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION    
Net Interest Margin (Including Call Option Income - YTD Trends)    
     
  Three Months Ended
March 31,
 Years Ended
December 31,
(Dollars in thousands)2018 2017 2016 2015 2014
Net interest income - FTE$226,286 $839,563 $728,145 $646,238 $601,744
Call option income 1,597  4,402  11,470  15,364  7,859 
Net interest income including call option income $227,883  $843,965  $739,615  $661,602  $609,603 
Yield on earning assets 4.13% 3.91% 3.67% 3.76% 3.96%
Rate on interest-bearing liabilities 0.83  0.67  0.57  0.54  0.55 
Rate spread 3.30% 3.24% 3.10% 3.22% 3.41%
Less:  Fully tax-equivalent adjustment (0.02) (0.03) (0.02) (0.02) (0.02)
Net free funds contribution 0.26  0.20  0.16  0.14  0.12 
Net interest margin (GAAP-derived) 3.54% 3.41% 3.24% 3.34% 3.51%
Fully tax-equivalent adjustment 0.02  0.03  0.02  0.02  0.02 
Net interest margin - FTE 3.56% 3.44% 3.26% 3.36% 3.53%
Call option income 0.03  0.02  0.05  0.08  0.05 
Net interest margin - FTE, including call option income 3.59% 3.46% 3.31% 3.44% 3.58%
                

 

   
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION  
Quarterly Average Balances - 5 Quarter Trends  
   
  Three Months Ended
 March 31, December 31, September 30, June 30, March 31,
(In thousands) 2018 2017 2017 2017 2017
Interest-bearing deposits with banks and cash equivalents $749,973 $914,319 $1,003,572 $722,349 $780,752
Investment securities 2,892,617  2,736,253  2,652,119  2,572,619  2,395,625 
FHLB and FRB stock 105,414  82,092  81,928  99,438  94,090 
Liquidity management assets $3,748,004  $3,732,664  $3,737,619  $3,394,406  $3,270,467 
Other earning assets 27,571  26,955  25,844  25,749  25,236 
Mortgage loans held-for-sale 281,181  335,385  336,604  334,843  268,834 
Loans, net of unearned income 21,711,342  21,080,984  20,858,618  20,264,875  19,654,772 
Covered loans   6,025  48,415  51,823  56,872 
Total earning assets $25,768,098  $25,182,013  $25,007,100  $24,071,696  $23,276,181 
Allowance for loan and covered loan losses (143,108) (138,584) (135,519) (132,053) (127,425)
Cash and due from banks 254,489  244,097  242,186  242,495  229,588 
Other assets 1,930,118  1,891,958  1,898,528  1,868,811  1,829,004 
Total assets $27,809,597  $27,179,484  $27,012,295  $26,050,949  $25,207,348 
NOW and interest bearing demand deposits $2,255,692  $2,284,576  $2,344,848  $2,470,130  $2,512,598 
Wealth management deposits 2,250,139  2,005,197  2,320,674  2,091,251  2,082,285 
Money market accounts 4,520,620  4,611,515