Wintrust Financial Corporation Reports Record Full-Year 2018 Net Income of $343.2 million, an Increase of 33% Over Prior Year and Fourth Quarter 2018 Net Income of $79.7 million, an Increase of 16% Over Prior Year

ROSEMONT, Ill., Jan. 22, 2019 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq: WTFC) announced record net income of $343.2 million or $5.86 per diluted common share for the year ended December 31, 2018 compared to net income of $257.7 million or $4.40 per diluted common share for the same period of 2017. The Company recorded net income of $79.7 million or $1.35 per diluted common share for the fourth quarter of 2018 compared to net income of $91.9 million or $1.57 per diluted common share for the third quarter of 2018 and $68.8 million or $1.17 per diluted common share for the fourth quarter of 2017.

Highlights of the Fourth Quarter of 2018 *:                

• Total period-end loans increased by $697 million from the prior quarter. The increase included $119 million of loans acquired in relation to the previously-announced acquisition of certain assets and assumption of certain liabilities of American Enterprise Bank ("AEB") completed in early December.
• Total deposits increased by $1.2 billion from the prior quarter. This increase included $151 million of deposits assumed in relation to AEB as well as additional incremental deposits generated subsequent to the previously-announced acquisition of Elektra Holding Company, LLC ("Elektra"), the parent company of Chicago Deferred Exchange Company, LLC ("CDEC"), offset by a reduction in brokered funds.
• Period-end total loans outstanding ended the year $657 million higher than total average loans outstanding during the fourth quarter of 2018, providing positive momentum for net interest income in the first quarter of 2019.
• Net interest margin increased by two basis points from the prior quarter which combined with $580 million of average earning asset growth created an increase in net interest income of $6.5 million from the prior quarter.
• Market volatility and recent acquisitions resulted in the following items negatively impacting fourth quarter 2018 pre-tax earnings:
  
  • An $8.5 million negative fair value adjustment recognized on mortgage servicing rights related to changes in valuation assumptions and pay-offs contributed to mortgage banking revenue decreasing by $17.8 million compared to the third quarter of 2018.  Production revenue decreased due to lower origination volumes and lower revenue margins.
  • Recognized unrealized losses on equity securities of $2.6 million.
  • Recognized a $1.1 million foreign currency remeasurement loss, primarily related to weakness in Canadian currency.
  • Incurred $1.6 million of acquisition-related expenses.
• Non-performing assets decreased by $17.5 million, now representing 0.44% of total assets. Non-performing loans decreased by $14.0 million while other real-estate owned decreased $3.5 million compared to the end of the third quarter of 2018.
• Opened one new branch in the Brighton Park neighborhood of Chicago, Illinois, increasing our total branches to 167 locations.

* 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 of $343.2 million for the year ended December 31, 2018, the eighth consecutive year of record net income.  Net income was $79.7 million for the fourth quarter of 2018, down from the third quarter of 2018 primarily due to market related adjustments resulting from quickly declining interest rates and lower equity markets late in the year.   These market related adjustments and acquisition-related expenses incurred in the fourth quarter negatively impacted our net overhead ratio by 18 basis points.   During the fourth quarter, total assets and deposits grew by over $1 billion while we leveraged acquisitions to enhance our deposit mix.  A substantial amount of the balance sheet growth occurred near the end of the quarter, which positions us well for the first quarter of 2019.  Additionally, we improved our net interest margin by two basis points and have seen deposit costs stabilizing.  The improvement in our funding mix should allow for further net interest margin expansion in the first quarter of 2019."

Mr. Wehmer continued, "We experienced strong loan growth in our commercial, commercial real-estate and premium finance receivables portfolios during the fourth quarter, increasing our total loans outstanding by $697 million.  Our loan pipelines remain consistently strong, and reflect opportunities to continue to grow loan balances during 2019.  Deposit growth outpaced loan growth during the fourth quarter, lowering our loan to deposit ratio to 91.3% at year-end.  Organic deposit growth in the fourth quarter occurred across all deposit categories, except time certificates of deposit.  The previously mentioned CDEC acquisition allowed the Company to bring $1.1 billion of low cost funding into our banks.  The new deposit source was utilized to optimize the balance sheet by reducing outstanding wholesale funding positions, including $696 million of wholesale wealth management deposits, $75 million of maturing brokered CDs and $200 million of short-term Federal Home Loan Bank advances.  We believe that we can continue to grow the CDEC deposit base which will further drive down the Company’s loan to deposit ratio to our desired operating range and enable us to expand our investment portfolio if opportunities and market conditions that meet our standards arise."

Commenting on credit quality, Mr. Wehmer noted, "During the fourth quarter of 2018, the Company continued its practice of addressing and resolving non-performing credits in a timely fashion.  Total non-performing assets declined $17.5 million during the fourth quarter, dropping to 0.44% of total assets.  Both non-performing loans and other real-estate owned declined during the quarter.  Additionally, near-term 60 to 89 day delinquent loans declined to $34.2 million or only 0.1% of total loans in the fourth quarter of 2018.  The allowance for loan losses as a percentage of non-performing loans ended the year at 135%.  Net charge-offs for the fourth quarter were 12 basis points of total average loan balances with full year net charge-offs at a historically low level of nine basis points of total average loan balances.  We believe that the Company’s reserves remain appropriate.  The Company begins 2019 with credit quality in a very strong position but will continue to be diligent in its review of credit."

Mr. Wehmer further commented, “Our mortgage banking and wealth management businesses were both impacted by volatile markets in the fourth quarter.  Mortgage banking revenue decreased $17.8 million.  The mortgage origination environment in the fourth quarter was challenging as normal seasonality was further pressured by declining demand leading to lower origination volumes and production margins.  Origination volumes decreased to $927.8 million, down from $1.2 billion in the third quarter.  Home purchase activity continues to make up the bulk of our originations accounting for 71% of origination volumes in the fourth quarter. For much of the fourth quarter, mortgage rates increased, however, during the closing weeks of 2018, a sudden shift downward in rates contributed to the negative fair value adjustment on our mortgage servicing rights portfolio of $8.5 million related to changes in valuation assumptions and pay-offs.  We continue to focus on efficiencies in our delivery channels and our operating costs in our mortgage banking area.  Our wealth management businesses experienced headwinds in the fourth quarter due to declining equity prices.  Despite these headwinds, wealth management revenue was essentially flat to the third quarter of 2018."

Turning to the future, Mr. Wehmer stated, “As 2019 begins, we expect our growth engines to continue their momentum.  We expect continued organic growth in all areas of our businesses.  Total period-end loans outstanding exceeded fourth quarter total average loans by $657 million, providing momentum for net interest income into the first quarter of 2019.  Net interest margin is expected to improve in first quarter of 2019 fueled by the CDEC acquisition and stabilizing retail deposit costs.  We will continue to take a steady and measured approach to achieving our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and continuing to increase shareholder value.  Evaluating strategic acquisitions and organic branch growth will also be a part of our overall growth strategy with the continued goal of becoming Chicago’s bank and Wisconsin’s bank.  We believe our opportunities for both internal growth and external growth remain consistently strong."

The graphs below illustrate certain highlights of the fourth quarter of 2018 and the year ended December 31, 2018.

http://resource.globenewswire.com/Resource/Download/34219f8f-0c04-4502-9e45-6f5f0582ff85

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

														% or(4) basis point  (bp) change from 3rd Quarter 2018				% or basis point  (bp) change from 4th Quarter 2017
		Three Months Ended
(Dollars in thousands)		December 31,  2018				September 30,  2018				December 31,  2017
Net income		$	79,657			$	91,948			$	68,781			(13	)	%		16		%
Net income per common share – diluted		$	1.35			$	1.57			$	1.17			(14	)	%		15		%
Net revenue (1)		$	329,396			$	347,493			$	300,137			(5	)	%		10		%
Net interest income		254,088				247,563				219,099				3		%		16		%
Net interest margin		3.61		%		3.59		%		3.45		%		2		bp		16		bp
Net interest margin - fully taxable equivalent (non-GAAP) (2)		3.63		%		3.61		%		3.49		%		2		bp		14		bp
Net overhead ratio (3)		1.79		%		1.53		%		1.69		%		26		bp		10		bp
Return on average assets		1.05		%		1.24		%		1.00		%		(19	)	bp		5		bp
Return on average common equity		10.01		%		11.86		%		9.39		%		(185	)	bp		62		bp
Return on average tangible common equity (non-GAAP) (2)		12.48		%		14.64		%		11.65		%		(216	)	bp		83		bp
At end of period
Total assets		$	31,241,521			$	30,142,731			$	27,915,970			14		%		12		%
Total loans (5)		23,820,691				23,123,951				21,640,797				12		%		10		%
Total deposits		26,094,678				24,916,715				23,183,347				19		%		13		%
Total shareholders’ equity		3,267,570				3,179,822				2,976,939				11		%		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. 
(5) Excludes mortgage loans held-for-sale.

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

 

WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights

		Three Months Ended												Years Ended
(Dollars in thousands, except per share data)		December 31,  2018				September 30,  2018				December 31,  2017				December 31,  2018				December 31,  2017
Selected Financial Condition Data (at end of period):
Total assets		$	31,241,521			$	30,142,731			$	27,915,970
Total loans (7)		23,820,691				23,123,951				21,640,797
Total deposits		26,094,678				24,916,715				23,183,347
Junior subordinated debentures		253,566				253,566				253,566
Total shareholders’ equity		3,267,570				3,179,822				2,976,939
Selected Statements of Income Data:
Net interest income		$	254,088			$	247,563			$	219,099			$	964,903			$	832,076
Net revenue (1)		329,396				347,493				300,137				1,321,053				1,151,582
Net income		79,657				91,948				68,781				343,166				257,682
Net income per common share – Basic		$	1.38			$	1.59			$	1.19			$	5.95			$	4.53
Net income per common share – Diluted		$	1.35			$	1.57			$	1.17			$	5.86			$	4.40
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin		3.61		%		3.59		%		3.45		%		3.59		%		3.41		%
Net interest margin - fully taxable equivalent (non-GAAP) (2)		3.63		%		3.61		%		3.49		%		3.61		%		3.44		%
Non-interest income to average assets		0.99		%		1.34		%		1.18		%		1.23		%		1.21		%
Non-interest expense to average assets		2.78		%		2.87		%		2.87		%		2.85		%		2.78		%
Net overhead ratio (3)		1.79		%		1.53		%		1.69		%		1.62		%		1.56		%
Return on average assets		1.05		%		1.24		%		1.00		%		1.18		%		0.98		%
Return on average common equity		10.01		%		11.86		%		9.39		%		11.26		%		9.26		%
Return on average tangible common equity (non-GAAP) (2)		12.48		%		14.64		%		11.65		%		13.95		%		11.63		%
Average total assets		$	30,179,887			$	29,525,109			$	27,179,484			$	29,028,420			$	26,369,702
Average total shareholders’ equity		3,200,654				3,131,943				2,942,999				3,098,740				2,842,081
Average loans to average deposits ratio (excluding covered loans)		92.4		%		92.2		%		92.3		%		93.7		%		92.7		%
Period-end loans to deposits ratio (excluding covered loans)		91.3		%		92.8		%		93.3		%
Common Share Data at end of period:
Market price per common share		$	66.49			$	84.94			$	82.37
Book value per common share (2)		$	55.71			$	54.19			$	50.96
Tangible common book value per share (2)		$	44.73			$	44.16			$	41.68
Common shares outstanding		56,407,558				56,377,169				55,965,207
Other Data at end of period:(6)
Leverage Ratio (4)		9.1		%		9.3		%		9.3		%
Tier 1 capital to risk-weighted assets (4)		9.6		%		10.0		%		9.9		%
Common equity Tier 1 capital to risk-weighted assets (4)		9.2		%		9.5		%		9.4		%
Total capital to risk-weighted assets (4)		11.6		%		12.0		%		12.0		%
Allowance for credit losses (5)		$	154,164			$	151,001			$	139,174
Non-performing loans		113,234				127,227				90,162
Allowance for credit losses to total loans (5)		0.65		%		0.65		%		0.64		%
Non-performing loans to total loans		0.48		%		0.55		%		0.42		%
Number of:
Bank subsidiaries		15				15				15
Banking offices		167				166				157

(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. 
(7) Excludes mortgage loans held-for-sale.

 

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

		(Unaudited)				(Unaudited)
(In thousands)		December 31,  2018				September 30,  2018				December 31,  2017
Assets
Cash and due from banks		$	392,142			$	279,936			$	277,534
Federal funds sold and securities purchased under resale agreements		58				57				57
Interest bearing deposits with banks		1,099,594				1,137,044				1,063,242
Available-for-sale securities, at fair value		2,126,081				2,164,985				1,803,666
Held-to-maturity securities, at amortized cost		1,067,439				966,438				826,449
Trading account securities		1,692				688				995
Equity securities with readily determinable fair value		34,717				36,414				—
Federal Home Loan Bank and Federal Reserve Bank stock		91,354				99,998				89,989
Brokerage customer receivables		12,609				15,649				26,431
Mortgage loans held-for-sale		264,070				338,111				313,592
Loans, net of unearned income		23,820,691				23,123,951				21,640,797
Allowance for loan losses		(152,770		)		(149,756		)		(137,905		)
Net loans		23,667,921				22,974,195				21,502,892
Premises and equipment, net		671,169				664,469				621,895
Lease investments, net		233,208				199,241				212,335
Accrued interest receivable and other assets		696,707				700,568				567,374
Trade date securities receivable		263,523				—				90,014
Goodwill and other intangible assets		619,237				564,938				519,505
Total assets		$	31,241,521			$	30,142,731			$	27,915,970
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing		$	6,569,880			$	6,399,213			$	6,792,497
Interest bearing		19,524,798				18,517,502				16,390,850
Total deposits		26,094,678				24,916,715				23,183,347
Federal Home Loan Bank advances		426,326				615,000				559,663
Other borrowings		393,855				373,571				266,123
Subordinated notes		139,210				139,172				139,088
Junior subordinated debentures		253,566				253,566				253,566
Accrued interest payable and other liabilities		666,316				664,885				537,244
Total liabilities		27,973,951				26,962,909				24,939,031
Shareholders’ Equity:
Preferred stock		125,000				125,000				125,000
Common stock		56,518				56,486				56,068
Surplus		1,557,984				1,553,353				1,529,035
Treasury stock		(5,634		)		(5,547		)		(4,986		)
Retained earnings		1,610,574				1,543,680				1,313,657
Accumulated other comprehensive loss		(76,872		)		(93,150		)		(41,835		)
Total shareholders’ equity		3,267,570				3,179,822				2,976,939
Total liabilities and shareholders’ equity		$	31,241,521			$	30,142,731			$	27,915,970

 

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

	Three Months Ended												Years Ended
(In thousands, except per share data)	December 31,  2018				September 30,  2018				December 31,  2017				December 31,  2018				December 31,  2017
Interest income
Interest and fees on loans	$	283,311			$	271,134			$	226,447			$	1,044,502			$	856,549
Mortgage loans held-for-sale	3,409				5,285				3,291				15,738				12,332
Interest bearing deposits with banks	5,628				5,423				2,723				17,090				9,252
Federal funds sold and securities purchased under resale agreements	—				—				—				1				2
Investment securities	26,656				21,710				18,160				87,382				63,315
Trading account securities	14				11				2				43				25
Federal Home Loan Bank and Federal Reserve Bank stock	1,343				1,235				1,067				5,331				4,370
Brokerage customer receivables	235				164				150				723				623
Total interest income	320,596				304,962				251,840				1,170,810				946,468
Interest expense
Interest on deposits	55,975				48,736				24,930				166,553				83,326
Interest on Federal Home Loan Bank advances	2,563				1,947				2,124				12,412				8,798
Interest on other borrowings	3,199				2,003				1,600				8,599				5,370
Interest on subordinated notes	1,788				1,773				1,786				7,121				7,116
Interest on junior subordinated debentures	2,983				2,940				2,301				11,222				9,782
Total interest expense	66,508				57,399				32,741				205,907				114,392
Net interest income	254,088				247,563				219,099				964,903				832,076
Provision for credit losses	10,401				11,042				7,772				34,832				29,768
Net interest income after provision for credit losses	243,687				236,521				211,327				930,071				802,308
Non-interest income
Wealth management	22,726				22,634				21,910				90,963				81,766
Mortgage banking	24,182				42,014				27,411				136,990				113,472
Service charges on deposit accounts	9,065				9,331				8,907				36,404				34,513
(Losses) gains on investment securities, net	(2,649		)		90				14				(2,898		)		45
Fees from covered call options	626				627				1,610				3,519				4,402
Trading (losses) gains, net	(155		)		(61		)		24				11				(845		)
Operating lease income, net	10,882				9,132				8,598				38,451				29,646
Other	10,631				16,163				12,564				52,710				56,507
Total non-interest income	75,308				99,930				81,038				356,150				319,506
Non-interest expense
Salaries and employee benefits	122,111				123,855				118,009				480,077				430,078
Equipment	11,523				10,827				9,500				42,949				38,358
Operating lease equipment depreciation	8,462				7,370				7,015				29,305				24,107
Occupancy, net	15,980				14,404				14,154				57,814				52,920
Data processing	8,447				9,335				7,915				35,027				31,495
Advertising and marketing	9,414				11,120				7,382				41,140				30,830
Professional fees	9,259				9,914				8,879				32,306				27,835
Amortization of other intangible assets	1,407				1,163				1,028				4,571				4,401
FDIC insurance	4,044				4,205				4,324				17,209				16,231
OREO expense, net	1,618				596				599				6,120				3,593
Other	19,068				20,848				17,775				79,570				71,969
Total non-interest expense	211,333				213,637				196,580				826,088				731,817
Income before taxes	107,662				122,814				95,785				460,133				389,997
Income tax expense	28,005				30,866				27,004				116,967				132,315
Net income	$	79,657			$	91,948			$	68,781			$	343,166			$	257,682
Preferred stock dividends	2,050				2,050				2,050				8,200				9,778
Net income applicable to common shares	$	77,607			$	89,898			$	66,731			$	334,966			$	247,904
Net income per common share - Basic	$	1.38			$	1.59			$	1.19			$	5.95			$	4.53
Net income per common share - Diluted	$	1.35			$	1.57			$	1.17			$	5.86			$	4.40
Cash dividends declared per common share	$	0.19			$	0.19			$	0.14			$	0.76			$	0.56
Weighted average common shares outstanding	56,395				56,366				55,924				56,300				54,703
Dilutive potential common shares	892				918				1,010				908				1,983
Average common shares and dilutive common shares	57,287				57,284				56,934				57,208				56,686

 

EARNINGS PER SHARE

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

			Three Months Ended												Years Ended
(In thousands, except per share data)			December 31,  2018				September 30,  2018				December 31,  2017				December 31,  2018				December 31,  2017
Net income			$	79,657			$	91,948			$	68,781			$	343,166			$	257,682
Less: Preferred stock dividends			2,050				2,050				2,050				8,200				9,778
Net income applicable to common shares—Basic	(A)		77,607				89,898				66,731				334,966				247,904
Add: Dividends on convertible preferred stock, if dilutive			—				—				—				—				1,578
Net income applicable to common shares—Diluted	(B)		77,607				89,898				66,731				334,966				249,482
Weighted average common shares outstanding	(C)		56,395				56,366				55,924				56,300				54,703
Effect of dilutive potential common shares:
Common stock equivalents			892				918				1,010				908				998
Convertible preferred stock, if dilutive			—				—				—				—				985
Weighted average common shares and effect of dilutive potential common shares	(D)		57,287				57,284				56,934				57,208				56,686
Net income per common share:
Basic	(A/C)		$	1.38			$	1.59			$	1.19			$	5.95			$	4.53
Diluted	(B/D)		$	1.35			$	1.57			$	1.17			$	5.86			$	4.40

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																				Years Ended
	December 31,				September 30,				June 30,				March 31,				December 31,				December 31,				December 31,
(Dollars and shares in thousands)	2018				2018				2018				2018				2017				2018				2017
Calculation of Net Interest Margin and Efficiency Ratio
(A) Interest Income (GAAP)	$	320,596			$	304,962			$	284,047			$	261,205			$	251,840			$	1,170,810			$	946,468
Taxable-equivalent adjustment:
- Loans	980				941				812				670				1,106				3,403				3,760
- Liquidity Management Assets	586				575				566				531				1,019				2,258				3,713
- Other Earning Assets	4				3				1				3				2				11				14
(B) Interest Income - FTE	$	322,166			$	306,481			$	285,426			$	262,409			$	253,967			$	1,176,482			$	953,955
(C) Interest Expense (GAAP)	66,508				57,399				45,877				36,123				32,741				205,907				114,392
(D) Net Interest Income - FTE (B minus C)	$	255,658			$	249,082			$	239,549			$	226,286			$	221,226			$	970,575			$	839,563
(E) Net Interest Income (GAAP) (A minus C)	$	254,088			$	247,563			$	238,170			$	225,082			$	219,099			$	964,903			$	832,076
Net interest margin (GAAP-derived)	3.61		%		3.59		%		3.61		%		3.54		%		3.45		%		3.59		%		3.41		%
Net interest margin - FTE	3.63		%		3.61		%		3.63		%		3.56		%		3.49		%		3.61		%		3.44		%
(F) Non-interest income	$	75,308			$	99,930			$	95,233			$	85,679			$	81,038			$	356,150			$	319,506
(G) (Losses) gains on investment securities, net	(2,649		)		90				12				(351		)		14				(2,898		)		45
(H) Non-interest expense	211,333				213,637				206,769				194,349				196,580				826,088				731,817
Efficiency ratio (H/(E+F-G))	63.65		%		61.50		%		62.02		%		62.47		%		65.50		%		62.40		%		63.55		%
Efficiency ratio - FTE (H/(D+F-G))	63.35		%		61.23		%		61.76		%		62.23		%		65.04		%		62.13		%		63.14		%
Calculation of Tangible Common Equity ratio (at period end)
Total shareholders’ equity	$	3,267,570			$	3,179,822			$	3,106,871			$	3,031,250			$	2,976,939
Less: Non-convertible preferred stock	(125,000		)		(125,000		)		(125,000		)		(125,000		)		(125,000		)
Less: Intangible assets	(619,237		)		(564,938		)		(531,371		)		(533,910		)		(519,505		)
(I) Total tangible common shareholders’ equity	$	2,523,333			$	2,489,884			$	2,450,500			$	2,372,340			$	2,332,434
Total assets	$	31,241,521			$	30,142,731			$	29,464,588			$	28,456,772			$	27,915,970
Less: Intangible assets	(619,237		)		(564,938		)		(531,371		)		(533,910		)		(519,505		)
(J) Total tangible assets	$	30,622,284			$	29,577,793			$	28,933,217			$	27,922,862			$	27,396,465
Tangible common equity ratio (I/J)	8.2		%		8.4		%		8.5		%		8.5		%		8.5		%
Calculation of book value per share
Total shareholders’ equity	$	3,267,570			$	3,179,822			$	3,106,871			$	3,031,250			$	2,976,939
Less: Preferred stock	(125,000		)		(125,000		)		(125,000		)		(125,000		)		(125,000		)
(K) Total common equity	$	3,142,570			$	3,054,822			$	2,981,871			$	2,906,250			$	2,851,939
(L) Actual common shares outstanding	56,408				56,377				56,329				56,256				55,965
Book value per common share (K/L)	$	55.71			$	54.19			$	52.94			$	51.66			$	50.96
Tangible common book value per share (I/L)	$	44.73			$	44.16			$	43.50			$	42.17			$	41.68

 

Calculation of return on average common equity
(M) Net income applicable to common shares	$	77,607			$	89,898			$	87,530			$	79,931			$	66,731			$	334,966			$	247,904
Add: After-tax intangible asset amortization	1,041				871				734				761				738				3,407				2,907
(N) Tangible net income applicable to common shares	$	78,648			$	90,769			$	88,264			$	80,692			$	67,469			$	338,373			$	250,811
Total average shareholders' equity	$	3,200,654			$	3,131,943			$	3,064,154			$	2,995,592			$	2,942,999			$	3,098,740			$	2,842,081
Less: Average preferred stock	(125,000		)		(125,000		)		(125,000		)		(125,000		)		(125,000		)		(125,000		)		(165,114		)
(O) Total average common shareholders' equity	$	3,075,654			$	3,006,943			$	2,939,154			$	2,870,592			$	2,817,999			$	2,973,740			$	2,676,967
Less: Average intangible assets	(574,757		)		(547,552		)		(533,496		)		(536,676		)		(519,626		)		(548,223		)		(519,910		)
(P) Total average tangible common shareholders’ equity	$	2,500,897			$	2,459,391			$	2,405,658			$	2,333,916			$	2,298,373			$	2,425,517			$	2,157,057
Return on average common equity, annualized  (M/O)	10.01		%		11.86		%		11.94		%		11.29		%		9.39		%		11.26		%		9.26		%
Return on average tangible common equity, annualized (N/P)	12.48		%		14.64		%		14.72		%		14.02		%		11.65		%		13.95		%		11.63		%

 

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 fourth quarter of 2018, revenue within this unit was primarily driven by increased net interest income due to increased earning assets and a higher net interest margin. The net interest margin increased in the fourth quarter of 2018 compared to the third quarter of 2018 primarily as a result of higher yields within the loan portfolio. Mortgage banking revenue decreased by $17.8 million from $42.0 million for the third quarter of 2018 to $24.2 million for the fourth quarter of 2018. The lower revenue was primarily due to to lower origination volumes, lower revenue margins and a $8.5 million negative fair value adjustment recognized on mortgage servicing rights related to changes in valuation assumptions and pay-offs. Originations during the current period decreased to $927.8 million from $1.2 billion in the third quarter of 2018. Home purchases represented 71% of loan origination volume for the fourth 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 December 31, 2018, gross commercial and commercial real estate loan pipelines totaled $1.1 billion, or $671.1 million when adjusted for the probability of closing, compared to $1.1 billion, or $693.5 million when adjusted for the probability of closing, at September 30, 2018.

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 fourth 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 $2.1 billion during the fourth quarter of 2018 resulted in a $25.1 million increase in average balances. The increase in average balances along with higher yields on these loans resulted in a $2.8 million increase in interest income attributed to this portfolio. The Company's leasing business showed steady growth during the fourth quarter of 2018, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing $132.7 million to $1.2 billion at the end of the fourth quarter of 2018. Revenues from the Company's out-sourced administrative services business remained steady, totaling approximately $1.3 million in the fourth quarter of 2018 and $1.1 million in the third quarter of 2018.

Wealth Management

Through four separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, tax-deferred like-kind exchange services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue remained flat in the fourth quarter of 2018 compared to the third quarter of 2018, totaling $22.7 million in the current period. At December 31, 2018, the Company’s wealth management subsidiaries had approximately $24.2 billion of assets under administration, which includes $3.6 billion of assets owned by the Company and its subsidiary banks, representing a $1.8 billion decrease from the $26.0 billion of assets under administration at September 30, 2018. The decrease in the fourth quarter of 2018 was primarily due to the impact of market conditions on the value of assets under administration. In December, the Company acquired CDEC, which provides Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code Section 1031.

 

LOANS

Loan Portfolio Mix and Growth Rates

														% Growth
(Dollars in thousands)		December 31,  2018				September 30,  2018				December 31,  2017				From (1) September 30, 2018			From December 31, 2017
Balance:
Commercial		$	7,828,538			$	7,473,958			$	6,787,677			19	%		15	%
Commercial real estate		6,933,252				6,746,774				6,580,618				11			5
Home equity		552,343				578,844				663,045				(18	)		(17	)
Residential real estate		1,002,464				924,250				832,120				34			20
Premium finance receivables - commercial		2,841,659				2,885,327				2,634,565				(6	)		8
Premium finance receivables - life insurance		4,541,794				4,398,971				4,035,059				13			13
Consumer and other		120,641				115,827				107,713				16			12
Total loans, net of unearned income		$	23,820,691			$	23,123,951			$	21,640,797			12	%		10	%
Mix:
Commercial		33		%		32		%		31		%
Commercial real estate		29				29				30
Home equity		2				3				3
Residential real estate		4				4				4
Premium finance receivables - commercial		12				12				12
Premium finance receivables - life insurance		19				19				19
Consumer and other		1				1				1
Total loans, net of unearned income		100		%		100		%		100		%

(1) Annualized

 

Commercial and Commercial Real Estate Loan Portfolios

		As of December 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		$	5,120,096			34.6	%		$	34,298			$	—			$	46,586
Franchise		948,979				6.4			16,051				—				8,919
Mortgage warehouse lines of credit		144,199				1.0			—				—				1,162
Asset-based lending		1,026,056				7.0			635				—				9,138
Leases		565,680				3.8			—				—				1,502
PCI - commercial loans (1)		23,528				0.2			—				3,313				519
Total commercial		$	7,828,538			53.0	%		$	50,984			$	3,313			$	67,826
Commercial Real Estate:
Construction		$	760,824			5.2	%		$	1,554			$	—			$	8,999
Land		141,481				1.0			107				—				3,953
Office		939,322				6.4			3,629				—				6,239
Industrial		902,248				6.1			285				—				6,088
Retail		892,478				6.0			10,753				—				9,338
Multi-family		976,560				6.6			311				—				9,395
Mixed use and other		2,205,195				14.9			2,490				—				16,210
PCI - commercial real estate (1)		115,144				0.8			—				6,241				45
Total commercial real estate		$	6,933,252			47.0	%		$	19,129			$	6,241			$	60,267
Total commercial and commercial real estate		$	14,761,790			100.0	%		$	70,113			$	9,554			$	128,093
Commercial real estate - collateral location by state:
Illinois		$	5,336,454			77.0	%
Wisconsin		684,425				9.9
Total primary markets		$	6,020,879			86.9	%
Indiana		169,817				2.4
Florida		52,237				0.8
Michigan		40,110				0.6
Other (no individual state greater than 0.6%)		650,209				9.3
Total		$	6,933,252			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)		December 31,  2018				September 30,  2018				December 31,  2017				From (1) September 30, 2018			From December 31, 2017
Balance:
Non-interest bearing		$	6,569,880			$	6,399,213			$	6,792,497			11	%		(3	)%
NOW and interest bearing demand deposits		2,897,133				2,512,259				2,315,055				61			25
Wealth management deposits (2)		2,996,764				2,520,120				2,323,699				75			29
Money market		5,704,866				5,429,921				4,515,353				20			26
Savings		2,665,194				2,595,164				2,829,373				11			(6	)
Time certificates of deposit		5,260,841				5,460,038				4,407,370				(14	)		19
Total deposits		$	26,094,678			$	24,916,715			$	23,183,347			19	%		13	%
Mix:
Non-interest bearing		25		%		26		%		29		%
NOW and interest bearing demand deposits		11				10				10
Wealth management deposits (2)		12				10				10
Money market		22				22				20
Savings		10				10				12
Time certificates of deposit		20				22				19
Total deposits		100		%		100		%		100		%

(1) Annualized 
(2) Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wintrust Investments, CDEC, 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 December 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			$	31,471			$	102,531			$	847,039			$	981,100			1.39	%
4-6 months		249				30,229				—				862,207				892,685				1.59	%
7-9 months		75,077				24,145				—				666,487				765,709				1.76	%
10-12 months		—				12,813				—				563,031				575,844				1.75	%
13-18 months		—				19,315				—				941,117				960,432				2.10	%
19-24 months		—				14,684				—				274,076				288,760				2.42	%
24+ months		1,000				10,228				—				785,083				796,311				2.60	%
Total		$	76,385			$	142,885			$	102,531			$	4,939,040			$	5,260,841			1.88	%

(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 fourth quarter of 2018 compared to the third quarter of 2018 (sequential quarters) and fourth 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)	December 31,  2018				September 30,  2018				December 31,  2017				December 31,  2018				September 30,  2018				December 31,  2017				December 31,  2018			September 30,  2018			December 31,  2017
Interest-bearing deposits with banks and cash equivalents(1)	$	1,042,860			$	998,004			$	914,319			$	5,628			$	5,423			$	2,723			2.14	%		2.16	%		1.18	%
Investment securities(2)	3,347,496				3,046,272				2,736,253				27,242				22,285				19,179				3.23			2.90			2.78
FHLB and FRB stock	98,084				88,335				82,092				1,343				1,235				1,067				5.43			5.54			5.15
Liquidity management assets(3)(8)	$	4,488,440			$	4,132,611			$	3,732,664			$	34,213			$	28,943			$	22,969			3.02	%		2.78	%		2.44	%
Other earning assets(3)(4)(8)	16,204				17,862				26,955				253				178				154				6.19			3.95			2.27
Mortgage loans held-for-sale	265,717				380,235				335,385				3,409				5,285				3,291				5.09			5.51			3.89
Loans, net of unearned income(3)(5)(8)	23,164,154				22,823,378				21,080,984				284,291				272,075				227,467				4.87			4.73			4.28
Covered loans	—				—				6,025				—				—				86				—			—			5.66
Total earning assets(8)	$	27,934,515			$	27,354,086			$	25,182,013			$	322,166			$	306,481			$	253,967			4.58	%		4.45	%		4.00	%
Allowance for loan and covered loan losses	(154,438		)		(148,503		)		(138,584		)
Cash and due from banks	271,403				268,006				244,097
Other assets	2,128,407				2,051,520				1,891,958
Total assets	$	30,179,887			$	29,525,109			$	27,179,484
NOW and interest bearing demand deposits	$	2,671,283			$	2,519,445			$	2,284,576			$	4,007			$	2,479			$	1,407			0.60	%		0.39	%		0.24	%
Wealth management deposits	2,289,904				2,517,141				2,005,197				7,119				8,287				4,059				1.23			1.31			0.80
Money market accounts	5,632,268				5,369,324				4,611,515				16,936				13,260				4,154				1.19			0.98			0.36
Savings accounts	2,553,133				2,672,077				2,741,621				3,096				2,907				2,716				0.48			0.43			0.39
Time deposits	5,381,029				5,214,637				4,581,464				24,817				21,803				12,594				1.83			1.66			1.09
Interest-bearing deposits	$	18,527,617			$	18,292,624			$	16,224,373			$	55,975			$	48,736			$	24,930			1.20	%		1.06	%		0.61	%
Federal Home Loan Bank advances	551,846				429,739				324,748				2,563				1,947				2,124				1.84			1.80			2.59
Other borrowings	385,878				268,278				255,972				3,199				2,003				1,600				3.29			2.96			2.48
Subordinated notes	139,186				139,155				139,065				1,788				1,773				1,786				5.14			5.10			5.14
Junior subordinated debentures	253,566				253,566				253,566				2,983				2,940				2,301				4.60			4.54			3.55
Total interest-bearing liabilities	$	19,858,093			$	19,383,362			$	17,197,724			$	66,508			$	57,399			$	32,741			1.33	%		1.17	%		0.75	%
Non-interest bearing deposits	6,542,228				6,461,195				6,605,553
Other liabilities	578,912				548,609				433,208
Equity	3,200,654				3,131,943				2,942,999
Total liabilities and shareholders’ equity	$	30,179,887			$	29,525,109			$	27,179,484
Interest rate spread(6)(8)																									3.25	%		3.28	%		3.25	%
Less:  Fully tax-equivalent adjustment													(1,570		)		(1,519		)		(2,127		)		(0.02	)		(0.02	)		(0.04	)
Net free funds/contribution(7)	$	8,076,422			$	7,970,724			$	7,984,289															0.38			0.33			0.24
Net interest income/ margin(8)  (GAAP)													$	254,088			$	247,563			$	219,099			3.61	%		3.59	%		3.45	%
Fully tax-equivalent adjustment													1,570				1,519				2,127				0.02			0.02			0.04
Net interest income/ margin - FTE (8)													$	255,658			$	249,082			$	221,226			3.63	%		3.61	%		3.49	%

(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 December 31, 2018, September 30, 2018 and December 31, 2017 were $1.6 million, $1.5 million and $2.1 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 fourth quarter of 2018, net interest income totaled $254.1 million, an increase of $6.5 million as compared to the third quarter of 2018 and an increase of $35.0 million as compared to the fourth quarter of 2017. Net interest margin was 3.61% (3.63% on a fully tax-equivalent basis) during the fourth quarter of 2018 compared to 3.59% (3.61% on a fully tax-equivalent basis) during the third quarter of 2018 and 3.45% (3.49% on a fully tax-equivalent basis) during the fourth quarter of 2017. The $6.5 million increase in net interest income in the fourth quarter of 2018 compared to the third quarter of 2018 was attributable to a $2.6 million increase from higher levels of earning assets and a $3.9 million increase due to a higher net interest margin during the period.

The following table presents a summary of Wintrust's average balances, net interest income and related interest margins, calculated on a fully tax-equivalent basis, for year ended December 31, 2018 compared to year ended December 31, 2017:

	Average Balance for year ended,								Interest for year ended,								Yield/Rate for year ended,
(Dollars in thousands)	December 31,  2018				December 31,  2017				December 31,  2018				December 31,  2017				December 31,  2018			December 31,  2017
Interest-bearing deposits with banks and cash equivalents (1)	$	888,671			$	856,020			$	17,091			$	9,254			1.92	%		1.08	%
Investment securities (2)	3,045,555				2,590,260				89,640				67,028				2.94			2.59
FHLB and FRB stock	101,681				89,333				5,331				4,370				5.24			4.89
Liquidity management assets(3)(8)	$	4,035,907			$	3,535,613			$	112,062			$	80,652			2.78	%		2.28	%
Other earning assets(3)(4)(8)	20,681				25,951				777				662				3.75			2.55
Mortgage loans held-for-sale	332,863				319,147				15,738				12,332				4.73			3.86
Loans, net of unearned income(3)(5)(8)	22,500,482				20,469,799				1,047,905				858,058				4.66			4.19
Covered loans	—				40,665				—				2,251				—			5.54
Total earning assets(8)	$	26,889,933			$	24,391,175			$	1,176,482			$	953,955			4.38	%		3.91	%
Allowance for loan and covered loan losses	(148,342		)		(133,432		)
Cash and due from banks	266,086				239,638
Other assets	2,020,743				1,872,321
Total assets	$	29,028,420			$	26,369,702
NOW and interest bearing demand deposits	$	2,436,791			$	2,402,254			$	9,773			$	5,027			0.40	%		0.21	%
Wealth management deposits	2,356,145				2,125,177				27,839				13,952				1.18			0.66
Money market accounts	5,105,244				4,482,137				42,973				12,588				0.84			0.28
Savings accounts	2,684,661				2,471,663				11,444				7,715				0.43			0.31
Time deposits	4,872,590				4,423,067				74,524				44,044				1.53			1.00
Interest-bearing deposits	$	17,455,431			$	15,904,298			$	166,553			$	83,326			0.95	%		0.52	%
Federal Home Loan Bank advances	713,539				380,412				12,412				8,798				1.74			2.31
Other borrowings	289,615				255,136				8,599				5,370				2.97			2.10
Subordinated notes	139,140				139,022				7,121				7,116				5.12			5.12
Junior subordinated debentures	253,566				253,566				11,222				9,782				4.37			3.81
Total interest-bearing liabilities	$	18,851,291			$	16,932,434			$	205,907			$	114,392			1.09	%		0.67	%
Non-interest bearing deposits	6,545,251				6,182,048
Other liabilities	533,138				413,139
Equity	3,098,740				2,842,081
Total liabilities and shareholders’ equity	$	29,028,420			$	26,369,702
Interest rate spread(6)(8)																	3.29	%		3.24	%
Less:  Fully tax-equivalent adjustment									(5,672		)		(7,487		)		(0.02	)		(0.03	)
Net free funds/contribution(7)	$	8,038,642			$	7,458,741											0.32			0.20
Net interest income/ margin(8)  (GAAP)									$	964,903			$	832,076			3.59	%		3.41	%
Fully tax-equivalent adjustment									5,672				7,487				0.02			0.03
Net interest income/ margin - FTE (8)									$	970,575			$	839,563			3.61	%		3.44	%

(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 a marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the twelve months ended December 31, 2018 and 2017 were $5.7 million and $7.5 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 year ended December 31, 2018, net interest income totaled $964.9 million, an increase of $132.8 million as compared to the year ended December 31, 2017. Net interest margin was 3.59% (3.61% on a fully tax-equivalent basis) for the year ended December 31, 2018 compared to 3.41% (3.44% on a fully tax-equivalent basis) for the year ended December 31, 2017. The $132.8 million increase in net interest income in the year ended 2018 compared to the same period of 2017 was attributable to a $81.5 million increase from higher levels of earning assets and a $51.3 million increase from rising rates.

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 December 31, 2018, September 30, 2018 and December 31, 2017 is as follows:

Static Shock Scenario		+200 Basis  Points			+100  Basis  Points			-100 Basis  Points
December 31, 2018		15.6	%		7.9	%		(8.6	)%
September 30, 2018		18.1	%		9.1	%		(10.0	)%
December 31, 2017		17.7	%		9.0	%		(11.8	)%

 

Ramp Scenario	+200 Basis Points			+100 Basis Points			-100 Basis Points
December 31, 2018	7.4	%		3.8	%		(3.6	)%
September 30, 2018	8.5	%		4.3	%		(4.2	)%
December 31, 2017	8.9	%		4.6	%		(5.1	)%

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

Maturities and Sensitivities of Loans to Changes in Interest Rates

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

As of December 31, 2018	One year or less				From one to five years				Over five years
(Dollars in thousands)													Total
Commercial
Fixed rate	$	154,368			$	1,105,414			$	665,595			$	1,925,377
Variable rate	5,896,481				6,531				149				5,903,161
Total commercial	$	6,050,849			$	1,111,945			$	665,744			$	7,828,538
Commercial real estate
Fixed rate	369,120				1,930,892				315,343				2,615,355
Variable rate	4,288,293				29,455				149				4,317,897
Total commercial real estate	$	4,657,413			$	1,960,347			$	315,492			$	6,933,252
Home equity
Fixed rate	11,712				15,125				18,543				45,380
Variable rate	506,963				—				—				506,963
Total home equity	$	518,675			$	15,125			$	18,543			$	552,343
Residential real estate
Fixed rate	30,724				22,568				229,433				282,725
Variable rate	55,329				303,383				361,027				719,739
Total residential real estate	$	86,053			$	325,951			$	590,460			$	1,002,464
Premium finance receivables - commercial
Fixed rate	2,762,211				79,448				—				2,841,659
Variable rate	—				—				—				—
Total premium finance receivables - commercial	$	2,762,211			$	79,448			$	—			$	2,841,659
Premium finance receivables - life insurance
Fixed rate	15,303				10,977				3,690				29,970
Variable rate	4,511,824				—				—				4,511,824
Total premium finance receivables - life insurance	$	4,527,127			$	10,977			$	3,690			$	4,541,794
Consumer and other
Fixed rate	75,263				10,312				2,176				87,751
Variable rate	32,848				42				—				32,890
Total consumer and other	$	108,111			$	10,354			$	2,176			$	120,641
Total per category
Fixed rate	3,418,701				3,174,736				1,234,780				7,828,217
Variable rate	15,291,738				339,411				361,325				15,992,474
Total loans, net of unearned income	$	18,710,439			$	3,514,147			$	1,596,105			$	23,820,691
Variable Rate Loan Pricing by Index:
Prime	$	2,480,764
One- month LIBOR	8,076,230
Three- month LIBOR	458,994
Twelve- month LIBOR	4,741,121
Other	235,365
Total variable rate	$	15,992,474

http://resource.globenewswire.com/Resource/Download/23ff1660-84db-4ebe-8d4a-50f6b99bed74

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 $8.1 billion of variable rate loans tied to one-month LIBOR and $4.7 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:

		Changes in
		Prime		1-month LIBOR		12-month LIBOR
First Quarter 2018		+25 bps		+32 bps		+55 bps
Second Quarter 2018		+25 bps		+21 bps		+10 bps
Third Quarter 2018		+25 bps		+17 bps		+16 bps
Fourth Quarter 2018		+25 bps		+24 bps		+9 bps

 

NON-INTEREST INCOME

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

		Three Months Ended
		December 31,				September 30,				December 31,				Q4 2018 compared to Q3 2018							Q4 2018 compared to Q4 2017
(Dollars in thousands)		2018				2018				2017				$ Change				% Change			$ Change				% Change
Brokerage		$	4,997			$	5,579			$	6,067			$	(582	)		(10	)%		$	(1,070	)		(18	)%
Trust and asset management		17,729				17,055				15,843				674				4			1,886				12
Total wealth management		$	22,726			$	22,634			$	21,910			$	92			—	%		$	816			4	%
Mortgage banking		24,182				42,014				27,411				(17,832		)		(42	)		(3,229		)		(12	)
Service charges on deposit accounts		9,065				9,331				8,907				(266		)		(3	)		158				2
(Losses) gains on investment securities, net		(2,649		)		90				14				(2,739		)		NM			(2,663		)		NM
Fees from covered call options		626				627				1,610				(1		)		—			(984		)		(61	)
Trading (losses) gains, net		(155		)		(61		)		24				(94		)		NM			(179		)		NM
Operating lease income, net		10,882				9,132				8,598				1,750				19			2,284				27
Other:
Interest rate swap fees		2,602				2,359				1,963				243				10			639				33
BOLI		(466		)		3,190				754				(3,656		)		NM			(1,220		)		NM
Administrative services		1,260				1,099				1,103				161				15			157				14
Early pay-offs of capital leases		3				11				7				(8		)		(73	)		(4		)		(57	)
Miscellaneous		7,232				9,504				8,737				(2,272		)		(24	)		(1,505		)		(17	)
Total Other		$	10,631			$	16,163			$	12,564			$	(5,532	)		(34	)%		$	(1,933	)		(15	)%
Total Non-Interest Income		$	75,308			$	99,930			$	81,038			$	(24,622	)		(25	)%		$	(5,730	)		(7	)%

 

		Years Ended
		December 31,				December 31,				$				%
(Dollars in thousands)		2018				2017				Change				Change
Brokerage		$	22,391			$	22,863			$	(472	)		(2	)%
Trust and asset management		68,572				58,903				9,669				16
Total wealth management		$	90,963			$	81,766			$	9,197			11	%
Mortgage banking		136,990				113,472				23,518				21
Service charges on deposit accounts		36,404				34,513				1,891				5
(Losses) gains on investment securities, net		(2,898		)		45				(2,943		)		NM
Fees from covered call options		3,519				4,402				(883		)		(20	)
Trading gains (losses), net		11				(845		)		856				NM
Operating lease income, net		38,451				29,646				8,805				30
Other:
Interest rate swap fees		11,027				7,379				3,648				49
BOLI		4,982				3,524				1,458				41
Administrative services		4,625				4,165				460				11
Early pay-offs of capital leases		601				1,228				(627		)		(51	)
Miscellaneous		31,475				40,211				(8,736		)		(22	)
Total Other		$	52,710			$	56,507			$	(3,797	)		(7	)%
Total Non-Interest Income		$	356,150			$	319,506			$	36,644			11	%

NM - Not meaningful

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

The decrease in mortgage banking revenue in the fourth quarter of 2018 as compared to the third quarter of 2018 resulted primarily from lower origination volumes, lower revenue margins and a $8.5 million negative fair value adjustment recognized on mortgage servicing rights related to changes in valuation assumptions and pay-offs. Mortgage loans originated or purchased for sale totaled $927.8 million in the fourth quarter of 2018 as compared to $1.2 billion in the third quarter of 2018 and $879.4 million in the fourth 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 ("MSRs") as the Company does not hedge this change in fair value. 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												Years Ended
(Dollars in thousands)		December 31,  2018				September 30,  2018				December 31,  2017				December 31,  2018				December 31,  2017
Originations:
Retail originations		$	463,196			$	642,213			$	744,496			$	2,412,232			$	3,142,824
Correspondent originations		289,101				310,446				134,904				848,997				549,261
Veterans First originations		175,483				199,774				—				694,209				—
Total originations (A)		$	927,780			$	1,152,433			$	879,400			$	3,955,438			$	3,692,085
Purchases as a percentage of originations		71		%		76		%		67		%		75		%		75		%
Refinances as a percentage of originations		29				24				33				25				25
Total		100		%		100		%		100		%		100		%		100		%
Production Margin:
Production revenue (B) (1)		$	18,657			$	25,253			$	20,603			$	92,250			$	90,458
Production margin (B / A)		2.01		%		2.19		%		2.34		%		2.33		%		2.45		%
Mortgage Servicing:
Loans serviced for others (C)		$	6,545,870			$	5,904,300			$	2,929,133
MSRs, at fair value (D)		75,183				74,530				33,676
Percentage of MSRs to loans serviced for others (D / C)		1.15		%		1.26		%		1.15		%
Components of Mortgage Banking Revenue:
Production revenue		$	18,657			$	25,253			$	20,603			$	92,250			$	90,458
MSR - current period capitalization		9,683				11,340				5,179				33,071				18,341
MSR - collection of expected cash flows - paydowns (2)		(496		)		(282		)		—				(1,910		)		—
MSR - collection of expected cash flows - payoffs		(896		)		(799		)		(963		)		(3,129		)		(2,595		)
MSR - changes in fair value model assumptions		(7,638		)		1,077				46				(331		)		(1,173		)
Servicing income		4,917				3,942				1,942				15,268				6,417
Other		(45		)		1,483				604				1,771				2,024
Total mortgage banking revenue		$	24,182			$	42,014			$	27,411			$	136,990			$	113,472

(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. 
(2) Change in MSR value due to collection of expected cash flows from paydowns and payoffs in 2017 is combined and shown in total in the payoff line.  The component detail is not available for 2017.

The net losses recognized in the fourth quarter of 2018 on investment securities are primarily due to $2.6 million of unrealized losses on equity securities held by the Company, including a large cap value mutual fund.

The increase in operating lease income in the fourth quarter of 2018 compared to the third quarter of 2018 is primarily related to growth in business from the Company's leasing divisions during the period.

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. There were no outstanding call option contracts at December 31, 2018, September 30, 2018 or December 31, 2017.

The decrease in BOLI income was primarily the result of higher income in the third quarter of 2018 due to death benefits received during that period on certain insurance policies and lower market returns during the fourth quarter of 2018 on certain investments supporting deferred compensation plan benefits.

The decrease in miscellaneous non-interest income in the fourth quarter of 2018 as compared to the third quarter of 2018 is primarily due to negative adjustments from foreign currency remeasurement and losses from investments in partnerships.

NON-INTEREST EXPENSE

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

		Three Months Ended
		December 31,				September 30,				December 31,				Q4 2018 compared to Q3 2018							Q4 2018 compared to Q4 2017
(Dollars in thousands)		2018				2018				2017				$ Change				% Change			$ Change				% Change
Salaries and employee benefits:
Salaries		$	67,708			$	69,893			$	58,239			$	(2,185	)		(3	)%		$	9,469			16	%
Commissions and incentive compensation		33,656				34,046				40,723				(390		)		(1	)		(7,067		)		(17	)
Benefits		20,747				19,916				19,047				831				4			1,700				9
Total salaries and employee benefits		122,111				123,855				118,009				(1,744		)		(1	)		4,102				3
Equipment		11,523				10,827				9,500				696				6			2,023				21
Operating lease equipment depreciation		8,462				7,370				7,015				1,092				15			1,447				21
Occupancy, net		15,980				14,404				14,154				1,576				11			1,826				13
Data processing		8,447				9,335				7,915				(888		)		(10	)		532				7
Advertising and marketing		9,414				11,120				7,382				(1,706		)		(15	)		2,032				28
Professional fees		9,259				9,914				8,879				(655		)		(7	)		380				4
Amortization of other intangible assets		1,407				1,163				1,028				244				21			379				37
FDIC insurance		4,044				4,205				4,324				(161		)		(4	)		(280		)		(6	)
OREO expense, net		1,618				596				599				1,022				NM			1,019				NM
Other:
Commissions - 3rd party brokers		779				1,059				1,057				(280		)		(26	)		(278		)		(26	)
Postage		2,047				2,205				1,427				(158		)		(7	)		620				43
Miscellaneous		16,242				17,584				15,291				(1,342		)		(8	)		951				6
Total other		19,068				20,848				17,775				(1,780		)		(9	)		1,293				7
Total Non-Interest Expense		$	211,333			$	213,637			$	196,580			$	(2,304	)		(1	)%		$	14,753			8	%

 

		Years Ended
		December 31,				December 31,				$				%
(Dollars in thousands)		2018				2017				Change				Change
Salaries and employee benefits:
Salaries		$	266,563			$	226,151			$	40,412			18	%
Commissions and incentive compensation		135,558				133,511				2,047				2
Benefits		77,956				70,416				7,540				11
Total salaries and employee benefits		480,077				430,078				49,999				12
Equipment		42,949				38,358				4,591				12
Operating lease equipment depreciation		29,305				24,107				5,198				22
Occupancy, net		57,814				52,920				4,894				9
Data processing		35,027				31,495				3,532				11
Advertising and marketing		41,140				30,830				10,310				33
Professional fees		32,306				27,835				4,471				16
Amortization of other intangible assets		4,571				4,401				170				4
FDIC insurance		17,209				16,231				978				6
OREO expense, net		6,120				3,593				2,527				70
Other:
Commissions - 3rd party brokers		4,264				4,178				86				2
Postage		8,685				6,763				1,922				28
Miscellaneous		66,621				61,028				5,593				9
Total other		79,570				71,969				7,601				11
Total Non-Interest Expense		$	826,088			$	731,817			$	94,271			13	%

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

Salaries and employee benefits expense decreased in the fourth quarter of 2018 compared to the third quarter of 2018 primarily as a result of lower commissions related to mortgage loan originations, higher salary deferrals related to loan origination costs and a reduction in costs related to deferred compensation plans impacted by market returns of related BOLI investments.

The increase in operating lease equipment depreciation in the fourth quarter of 2018 compared to the third quarter of 2018 is primarily related to growth in business from the Company's leasing divisions during the period.

The decrease in advertising and marketing expenses during the fourth quarter of 2018 compared to the third quarter of 2018 is primarily related to lower expenses for community advertisements and sponsorships. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities, the Company's various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the 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.

INCOME TAXES

The Company recorded income tax expense of $28.0 million in the fourth quarter of 2018 compared to $30.9 million in the third quarter of 2018 and $27.0 million in the fourth quarter of 2017. The effective tax rates were 26.01% in the fourth quarter of 2018, 25.13% in the third quarter of 2018 and 28.19% in the fourth quarter of 2017. For the year ended December 31, 2018, the Company recorded income tax expense of $117.0 million (25.42% effective tax rate) compared to $132.3 million (33.93% effective tax rate) for the same period of 2017. The lower effective tax rate for the 2018 year-to-date period as compared to the same period of 2017 was primarily due to the reduction of the federal corporate income tax rate effective in 2018 as a result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017. During the fourth quarter of 2017, the Company recorded a provisional tax benefit of $7.6 million related to the enactment of the Tax Cuts and Jobs Act, and during the third quarter of 2018, the Company finalized the provisional amounts and recorded an additional net tax benefit of $1.2 million. The effective tax rates were also impacted by excess tax benefits related to share-based compensation. These excess tax benefits were $160,000 in the fourth quarter of 2018 and $370,000 in the third quarter of 2018, compared to $1.2 million in the fourth quarter of 2017. Excess tax benefits were $3.9 million and $6.2 million for the years ended 2018 and 2017, respectively. 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												Years Ended
		December 31,				September 30,				December 31,				December 31,				December 31,
(Dollars in thousands)		2018				2018				2017				2018				2017
Allowance for loan losses at beginning of period		$	149,756			$	143,402			$	133,119			$	137,905			$	122,291
Provision for credit losses		10,401				11,042				7,772				34,832				29,982
Other adjustments (1)		(79		)		(18		)		698				(181		)		573
Reclassification (to) from allowance for unfunded lending-related commitments		(150		)		(2		)		7				(126		)		69
Charge-offs:
Commercial		6,416				3,219				1,340				14,532				5,159
Commercial real estate		219				208				1,001				1,395				4,236
Home equity		715				561				728				2,245				3,952
Residential real estate		267				337				542				1,355				1,284
Premium finance receivables - commercial		1,741				2,512				2,314				12,228				7,335
Premium finance receivables - life insurance		—				—				—				—				—
Consumer and other		148				144				207				880				729
Total charge-offs		9,506				6,981				6,132				32,635				22,695
Recoveries:
Commercial		225				304				235				1,457				1,870
Commercial real estate		1,364				193				1,037				5,631				2,190
Home equity		105				142				359				541				746
Residential real estate		47				466				165				2,075				452
Premium finance receivables - commercial		567				1,142				613				3,069				2,128
Premium finance receivables - life insurance		—				—				—				—				—
Consumer and other		40				66				32				202				299
Total recoveries		2,348				2,313				2,441				12,975				7,685
Net charge-offs		(7,158		)		(4,668		)		(3,691		)		(19,660		)		(15,010		)
Allowance for loan losses at period end		$	152,770			$	149,756			$	137,905			$	152,770			$	137,905
Allowance for unfunded lending-related commitments at period end		1,394				1,245				1,269				1,394				1,269
Allowance for credit losses at period end		$	154,164			$	151,001			$	139,174			$	154,164			$	139,174
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average:
Commercial		0.33		%		0.16		%		0.07		%		0.18		%		0.05		%
Commercial real estate		(0.07		)		0.00				0.00				(0.06		)		0.03
Home equity		0.43				0.28				0.22				0.28				0.46
Residential real estate		0.10				(0.06		)		0.18				(0.08		)		0.11
Premium finance receivables - commercial		0.16				0.19				0.26				0.33				0.20
Premium finance receivables - life insurance		0.00				0.00				0.00				0.00				0.00
Consumer and other		0.30				0.23				0.52				0.50				0.34
Total loans, net of unearned income, excluding covered loans		0.12		%		0.08		%		0.07		%		0.09		%		0.07		%
Net charge-offs as a percentage of the provision for credit losses		68.82		%		42.27		%		47.49		%		56.44		%		50.06		%
Loans at period-end, excluding covered loans		$	23,820,691			$	23,123,951			$	21,640,797
Allowance for loan losses as a percentage of loans at period end		0.64		%		0.65		%		0.64		%
Allowance for credit losses as a percentage of loans at period end		0.65		%		0.65		%		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 fourth quarter of 2018 totaled 12 basis points on an annualized basis compared to eight basis points on an annualized basis in the third quarter of 2018 and seven basis points on an annualized basis in the fourth quarter of 2017.  Net charge-offs totaled $7.2 million in the fourth quarter of 2018, a $2.5 million increase from $4.7 million in the third quarter of 2018 and a $3.5 million increase from $3.7 million in the fourth quarter of 2017. The increase in net charge-offs in the fourth quarter of 2018 compared to third quarter of 2018 is primarily the result of higher charge-offs within the commercial portfolio during the current period. The provision for credit losses, excluding the provision for covered loan losses, totaled $10.4 million for the fourth quarter of 2018 compared to $11.0 million for the third quarter of 2018 and $7.8 million for the fourth 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 by component for the periods presented, including covered loans:

		Three Months Ended												Years Ended
		December 31,				September 30,				December 31,				December 31,				December 31,
(Dollars in thousands)		2018				2018				2017				2018				2017
Provision for loan losses		$	10,251			$	11,040			$	7,779			$	34,706			$	30,051
Provision for unfunded lending-related commitments		150				2				(7		)		126				(69		)
Provision for covered loan losses		—				—				—				—				(214		)
Provision for credit losses		$	10,401			$	11,042			$	7,772			$	34,832			$	29,768

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 December 31, 2018 and September 30, 2018.

		As of December 31, 2018
		Recorded				Calculated				As a percentage of its own respective
(Dollars in thousands)		Investment				Allowance				category’s balance
Commercial:(1)
Commercial and industrial		$	4,339,618			$	42,948			0.99	%
Asset-based lending		1,025,805				9,138				0.89
Tax exempt		495,896				3,150				0.64
Leases		556,808				1,502				0.27
Commercial real estate:(1)
Residential construction		39,569				773				1.95
Commercial construction		715,260				8,203				1.15
Land		140,409				3,953				2.82
Office		903,559				6,235				0.69
Industrial		867,676				6,083				0.70
Retail		856,114				9,312				1.09
Multi-family		933,362				9,386				1.01
Mixed use and other		2,120,361				16,183				0.76
Home equity(1)		518,814				8,428				1.62
Residential real estate(1)		975,750				7,001				0.72
Total core loan portfolio		$	14,489,001			$	132,295			0.91	%
Commercial:
Franchise		$	885,882			$	8,772			0.99	%
Mortgage warehouse lines of credit		144,199				1,162				0.81
Community Advantage - homeowner associations		180,757				453				0.25
Aircraft		12,218				17				0.14
Purchased non-covered commercial loans (2)		187,355				684				0.37
Commercial real estate:
Purchased non-covered commercial real estate (2)		356,942				139				0.04
Purchased non-covered home equity (2)		33,529				79				0.24
Purchased non-covered residential real estate (2)		26,714				193				0.72
Premium finance receivables
U.S. commercial insurance loans		2,504,515				5,629				0.22
Canada commercial insurance loans (2)		337,144				515				0.15
Life insurance loans (1)		4,373,891				1,571				0.04
Purchased life insurance loans (2)		167,903				—				—
Consumer and other (1)		117,251				1,258				1.07
Purchased non-covered consumer and other (2)		3,390				3				0.09
Total consumer, niche and purchased loan portfolio		$	9,331,690			$	20,475			0.22	%
Total loans, net of unearned income, excluding covered loans		$	23,820,691			$	152,770			0.64	%

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

		As of September 30, 2018
		Recorded				Calculated				As a percentage of its own respective
(Dollars in thousands)		Investment				Allowance				category’s balance
Commercial:(1)
Commercial and industrial		$	4,073,911			$	41,543			1.02	%
Asset-based lending		1,032,850				9,389				0.91
Tax exempt		478,547				3,098				0.65
Leases		500,052				1,338				0.27
Commercial real estate:(1)
Residential construction		39,289				784				2.00
Commercial construction		754,842				8,452				1.12
Land		117,616				3,814				3.24
Office		909,517				6,332				0.70
Industrial		853,351				5,995				0.70
Retail		852,351				8,152				0.96
Multi-family		891,654				8,891				1.00
Mixed use and other		2,009,861				15,671				0.78
Home equity(1)		538,209				9,051				1.68
Residential real estate(1)		887,336				6,121				0.69
Total core loan portfolio		$	13,939,386			$	128,631			0.92	%
Commercial:
Franchise		$	866,885			$	8,879			1.02	%
Mortgage warehouse lines of credit		171,860				1,350				0.79
Community Advantage - homeowner associations		166,941				442				0.26
Aircraft		2,498				4				0.16
Purchased non-covered commercial loans (2)		180,414				702				0.39
Commercial real estate:
Purchased non-covered commercial real estate (2)		318,293				156				0.05
Purchased non-covered home equity (2)		40,635				92				0.23
Purchased non-covered residential real estate (2)		36,914				170				0.46
Premium finance receivables
U.S. commercial insurance loans		2,532,584				6,027				0.24
Canada commercial insurance loans (2)		352,743				541				0.15
Life insurance loans (1)		4,225,481				1,606				0.04
Purchased life insurance loans (2)		173,490				—				—
Consumer and other (1)		113,320				1,153				1.02
Purchased non-covered consumer and other (2)		2,507				3				0.10
Total consumer, niche and purchased loan portfolio		$	9,184,565			$	21,125			0.23	%
Total loans, net of unearned income, excluding covered loans		$	23,123,951			$	149,756			0.65	%

(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 December 31, 2018 and September 30, 2018.

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.

In addition to the $152.8 million of allowance for loan losses, there is $6.7 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 December 31, 2018 and September 30, 2018:

						90+ days				60-89				30-59
As of December 31, 2018						and still				days past				days past
(Dollars in thousands)		Nonaccrual				accruing				due				due				Current				Total Loans
Loan Balances:
Commercial (1)		$	50,984			$	3,313			$	1,651			$	34,861			$	7,737,729			$	7,828,538
Commercial real estate (1)		19,129				6,241				10,826				51,566				6,845,490				6,933,252
Home equity		7,147				—				131				3,105				541,960				552,343
Residential real estate (1)		16,383				1,292				1,692				6,171				976,926				1,002,464
Premium finance receivables - commercial		11,335				7,799				11,382				15,085				2,796,058				2,841,659
Premium finance receivables - life insurance (1)		—				—				8,407				24,628				4,508,759				4,541,794
Consumer and other (1)		348				227				87				733				119,246				120,641
Total loans, net of unearned income		$	105,326			$	18,872			$	34,176			$	136,149			$	23,526,168			$	23,820,691

 

As of December 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)		0.7	%		—	%		—	%		0.4	%		98.9	%		100.0	%
Commercial real estate (1)		0.3			0.1			0.2			0.7			98.7			100.0
Home equity		1.3			—			—			0.6			98.1			100.0
Residential real estate (1)		1.6			0.1			0.2			0.6			97.5			100.0
Premium finance receivables - commercial		0.4			0.3			0.4			0.5			98.4			100.0
Premium finance receivables - life insurance (1)		—			—			0.2			0.5			99.3			100.0
Consumer and other (1)		0.3			0.2			0.1			0.6			98.8			100.0
Total loans, net of unearned income		0.4	%		0.1	%		0.1	%		0.6	%		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.

						90+ days				60-89				30-59
As of September 30, 2018						and still				days past				days past
(Dollars in thousands)		Nonaccrual				accruing				due				due				Current				Total Loans
Loan Balances:
Commercial (1)		$	58,587			$	8,494			$	6,140			$	25,614			$	7,375,123			$	7,473,958
Commercial real estate (1)		17,515				5,578				27,040				44,084				6,652,557				6,746,774
Home equity		8,523					—			1,075				3,478				565,768				578,844
Residential real estate (1)		16,062				1,865				1,714				603				904,006				924,250
Premium finance receivables - commercial		13,802				7,028				5,945				13,239				2,845,313				2,885,327
Premium finance receivables - life insurance (1)		—				—				—				22,016				4,376,955				4,398,971
Consumer and other (1)		355				295				430				329				114,418				115,827
Total loans, net of unearned income		$	114,844			$	23,260			$	42,344			$	109,363			$	22,834,140			$	23,123,951

 

As of September 30, 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)		0.8	%		0.1	%		0.1	%		0.3	%		98.7	%		100.0	%
Commercial real estate (1)		0.3			0.1			0.4			0.7			98.5			100.0
Home equity		1.5			—			0.2			0.6			97.7			100.0
Residential real estate (1)		1.7			0.2			0.2			0.1			97.8			100.0
Premium finance receivables - commercial		0.5			0.2			0.2			0.5			98.6			100.0
Premium finance receivables - life insurance (1)		—			—			—			0.5			99.5			100.0
Consumer and other (1)		0.3			0.3			0.4			0.3			98.7			100.0
Total loans, net of unearned income		0.5	%		0.1	%		0.2	%		0.5	%		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.

As of December 31, 2018, $34.2 million of all loans, or 0.1%, were 60 to 89 days past due and $136.1 million, or 0.6%, were 30 to 59 days (or one payment) past due. As of September 30, 2018, $42.3 million of all loans, or 0.2%, were 60 to 89 days past due and $109.4 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. All loans within the life insurance premium financing portfolio shown as 60 to 89 days and 30 to 59 days past due (four and nine credits, respectively) remain fully secured.

The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at December 31, 2018 that are current with regard to the contractual terms of the loan agreement represent 98.1% of the total home equity portfolio. Residential real estate loans at December 31, 2018 that are current with regards to the contractual terms of the loan agreements comprise 97.5% of total residential real estate loans outstanding.

Non-performing 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 PCI loans, at the dates indicated.

		December 31,				September 30,				December 31,
(Dollars in thousands)		2018				2018				2017(3)
Loans past due greater than 90 days and still accruing(1):
Commercial		$	—			$	5,122			$	—
Commercial real estate		—				—				—
Home equity		—				—				—
Residential real estate		—				—				3,278
Premium finance receivables - commercial		7,799				7,028				9,242
Premium finance receivables - life insurance		—				—				—
Consumer and other		109				233				40
Total loans past due greater than 90 days and still accruing		7,908				12,383				12,560
Non-accrual loans(2):
Commercial		50,984				58,587				15,696
Commercial real estate		19,129				17,515				22,048
Home equity		7,147				8,523				8,978
Residential real estate		16,383				16,062				17,977
Premium finance receivables - commercial		11,335				13,802				12,163
Premium finance receivables - life insurance		—				—				—
Consumer and other		348				355				740
Total non-accrual loans		105,326				114,844				77,602
Total non-performing loans:
Commercial		50,984				63,709				15,696
Commercial real estate		19,129				17,515				22,048
Home equity		7,147				8,523				8,978
Residential real estate		16,383				16,062				21,255
Premium finance receivables - commercial		19,134				20,830				21,405
Premium finance receivables - life insurance		—				—				—
Consumer and other		457				588				780
Total non-performing loans		$	113,234			$	127,227			$	90,162
Other real estate owned		11,968				14,924				20,244
Other real estate owned - from acquisitions		12,852				13,379				20,402
Other repossessed assets		280				294				153
Total non-performing assets		$	138,334			$	155,824			$	130,961
TDRs performing under the contractual terms of the loan agreement		$	33,281			$	31,487			$	39,683
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial		0.65		%		0.85		%		0.23		%
Commercial real estate		0.28				0.26				0.34
Home equity		1.29				1.47				1.35
Residential real estate		1.63				1.74				2.55
Premium finance receivables - commercial		0.67				0.72				0.81
Premium finance receivables - life insurance		—				—				—
Consumer and other		0.38				0.51				0.72
Total loans, net of unearned income		0.48		%		0.55		%		0.42		%
Total non-performing assets as a percentage of total assets		0.44		%		0.52		%		0.47		%
Allowance for loan losses as a percentage of total non-performing loans		134.92		%		117.71		%		152.95		%

(1) Loans past due greater than 90 days and still accruing interest included TDRs totaling $5.1 million as of September 30, 2018. As of December 31, 2018 and December 31, 2017, no TDRs were past due greater than 90 days and still accruing interest. 
(2) Non-accrual loans included TDRs totaling $32.8 million, $34.7 million and $10.1 million as of December 31, 2018, September 30, 2018 and December 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 December 31, 2018, compared to 0.52% at September 30, 2018, and 0.47% at December 31, 2017. Non-performing assets, excluding PCI loans, totaled $138.3 million at December 31, 2018, compared to $155.8 million at September 30, 2018 and $131.0 million at December 31, 2017. Non-performing loans, excluding PCI loans, totaled $113.2 million, or 0.48% of total loans, at December 31, 2018 compared to $127.2 million, or 0.55% of total loans, at September 30, 2018 and $90.2 million, or 0.42% of total loans, at December 31, 2017. OREO of $24.8 million at December 31, 2018 decreased $3.5 million compared to $28.3 million at September 30, 2018 and decreased $15.8 million compared to $40.6 million at December 31, 2017.

Management is pursuing the resolution of all credits in this category. At this time, management believes reserves are appropriate to absorb inherent losses and OREO is appropriately valued at the lower of carrying value or fair value less estimated costs to sell.

Nonperforming Loans Rollforward

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

		Three Months Ended												Years Ended
		December 31,				September 30,				December 31,				December 31,				December 31,
(Dollars in thousands)		2018				2018				2017				2018				2017
Balance at beginning of period		$	127,227			$	83,282			$	77,983			$	90,162			$	87,454
Additions, net, from non-covered portfolio		18,553				56,864				25,619				92,428				55,738
Additions, net, from covered non-performing loans subsequent to loss share expiration		—				—				2,572				—				2,572
Return to performing status		(6,155		)		(3,782		)		(426		)		(14,449		)		(3,596		)
Payments received		(16,437		)		(6,212		)		(4,271		)		(29,807		)		(27,202		)
Transfer to OREO and other repossessed assets		(970		)		(659		)		(3,960		)		(7,138		)		(9,236		)
Charge-offs		(7,161		)		(3,108		)		(2,443		)		(15,792		)		(10,362		)
Net change for niche loans (1)		(1,823		)		842				(4,912		)		(2,170		)		(5,206		)
Balance at end of period		$	113,234			$	127,227			$	90,162			$	113,234			$	90,162

(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:

		December 31,				September 30,				December 31,
(Dollars in thousands)		2018				2018				2017
Accruing TDRs:
Commercial		$	8,545			$	8,794			$	19,917
Commercial real estate		13,895				14,160				16,160
Residential real estate and other		10,841				8,533				3,606
Total accrual		$	33,281			$	31,487			$	39,683
Non-accrual TDRs: (1)
Commercial		$	27,774			$	30,452			$	4,000
Commercial real estate		1,552				1,326				1,340
Residential real estate and other		3,495				2,954				4,763
Total non-accrual		$	32,821			$	34,732			$	10,103
Total TDRs:
Commercial		$	36,319			$	39,246			$	23,917
Commercial real estate		15,447				15,486				17,500
Residential real estate and other		14,336				11,487				8,369
Total TDRs		$	66,102			$	66,219			$	49,786
Weighted-average contractual interest rate of TDRs		5.54		%		5.48		%		4.40		%

(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 December 31, 2018, September 30, 2018 and December 31, 2017, and shows the activity for the respective period and the balance for each property type:

		Three Months Ended
		December 31,				September 30,				December 31,
(Dollars in thousands)		2018				2018				2017
Balance at beginning of period		$	28,303			$	35,331			$	37,378
Disposals/resolved		(3,848		)		(7,291		)		(6,107		)
Transfers in at fair value, less costs to sell		997				349				6,733
Transfers in from covered OREO subsequent to loss share expiration		—				—				2,851
Additions from acquisition		160				1,418				—
Fair value adjustments		(792		)		(1,504		)		(209		)
Balance at end of period		$	24,820			$	28,303			$	40,646
		Period End
		December 31,				September 30,				December 31,
Balance by Property Type		2018				2018				2017
Residential real estate		$	3,446			$	3,735			$	7,515
Residential real estate development		1,426				1,952				2,221
Commercial real estate		19,948				22,616				30,910
Total		$	24,820			$	28,303			$	40,646

Items Impacting Comparative Financial Results:

Acquisitions

On December 14, 2018, the Company acquired Elektra, the parent company of CDEC. CDEC is a provider of Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code Section 1031.  CDEC has successfully facilitated more than 8,000 like-kind exchanges in the past decade for taxpayers nationwide.  These transactions typically generate customer deposits during the period following the sale of the property until such proceeds are used to purchase a replacement property.  During 2018, deposits from CDEC customers averaged over $1 billion.
               
On December 7, 2018, the Company completed its acquisition of certain assets and the assumption of certain liabilities of AEB. Through this asset acquisition, the Company acquired approximately $164 million in assets, including approximately $119 million in loans, and approximately $151 million in deposits.

On August 1, 2018, the Company completed its acquisition of Chicago Shore Corporation ("CSC"). CSC was the parent company of Delaware Place Bank. Through this business combination, the Company acquired Delaware Place Bank's one banking location in Chicago, Illinois, approximately $283 million in assets, including approximately $152 million in loans, and approximately $213 million in deposits.

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 $1.6 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 Addison, Algonquin, Aurora, Bloomingdale, Buffalo Grove, Cary, Clarendon Hills, Crete, Deerfield, Des Plaines, Downers Grove, Elgin, Elk Grove Village, Elmhurst, Evanston, Evergreen Park, Frankfort, Geneva, Glen Ellyn, Glencoe, Glenview, Gurnee, Grayslake, Hanover Park, Highland Park, Highwood, Hoffman Estates, 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, Racine, 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.
• Wintrust Investments, LLC is a broker-dealer providing a full range of private client and brokerage services to clients and correspondent banks located primarily in the Midwest.
• Great Lakes Advisors LLC provides money management services and advisory services to individual accounts.
• The Chicago Trust Company, a trust subsidiary, allows Wintrust to service customers’ trust and investment needs at each banking location.
• Wintrust Asset Finance offers direct leasing opportunities.
• CDEC provides Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code Section 1031.

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, 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:

• economic conditions that affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;
• 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 9:00 a.m. (Central Time) on Wednesday, January 23, 2019 regarding fourth quarter and full year 2018 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #3897075. 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 fourth quarter and full year 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
		December 31,				September 30,				June 30,				March 31,				December 31,
		2018				2018				2018				2018				2017
Selected Financial Condition Data (at end of period):
Total assets		$	31,241,521			$	30,142,731			$	29,464,588			$	28,456,772			$	27,915,970
Total loans (7)		23,820,691				23,123,951				22,610,560				22,062,134				21,640,797
Total deposits		26,094,678				24,916,715				24,365,479				23,279,327				23,183,347
Junior subordinated debentures		253,566				253,566				253,566				253,566				253,566
Total shareholders’ equity		3,267,570				3,179,822				3,106,871				3,031,250				2,976,939
Selected Statements of Income Data:
Net interest income		254,088				247,563				238,170				225,082				219,099
Net revenue (1)		329,396				347,493				333,403				310,761				300,137
Net income		79,657				91,948				89,580				81,981				68,781
Net income per common share – Basic		$	1.38			$	1.59			$	1.55			$	1.42			$	1.19
Net income per common share – Diluted		$	1.35			$	1.57			$	1.53			$	1.40			$	1.17
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin		3.61		%		3.59		%		3.61		%		3.54		%		3.45		%
Net interest margin - fully taxable equivalent (non-GAAP) (2)		3.63		%		3.61		%		3.63		%		3.56		%		3.49		%
Non-interest income to average assets		0.99		%		1.34		%		1.34		%		1.25		%		1.18		%
Non-interest expense to average assets		2.78		%		2.87		%		2.90		%		2.83		%		2.87		%
Net overhead ratio (3)		1.79		%		1.53		%		1.57		%		1.58		%		1.69		%
Return on average assets		1.05		%		1.24		%		1.26		%		1.20		%		1.00		%
Return on average common equity		10.01		%		11.86		%		11.94		%		11.29		%		9.39		%
Return on average tangible common equity (non-GAAP) (2)		12.48		%		14.64		%		14.72		%		14.02		%		11.65		%
Average total assets		$	30,179,887			$	29,525,109			$	28,567,579			$	27,809,597			$	27,179,484
Average total shareholders’ equity		3,200,654				3,131,943				3,064,154				2,995,592				2,942,999
Average loans to average deposits ratio (excluding covered loans)		92.4		%		92.2		%		95.5		%		95.2		%		92.3		%
Period-end loans to deposits ratio (excluding covered loans)		91.3				92.8				92.8				94.8				93.3
Common Share Data at end of period:
Market price per common share		$	66.49			$	84.94			$	87.05			$	86.05			$	82.37
Book value per common share (2)		$	55.71			$	54.19			$	52.94			$	51.66			$	50.96
Tangible common book value per share (2)		$	44.73			$	44.16			$	43.50			$	42.17			$	41.68
Common shares outstanding		56,407,558				56,377,169				56,329,276				56,256,498				55,965,207
Other Data at end of period:(6)
Leverage Ratio(4)		9.1		%		9.3		%		9.4		%		9.3		%		9.3		%
Tier 1 Capital to risk-weighted assets (4)		9.6		%		10.0		%		10.0		%		10.0		%		9.9		%
Common equity Tier 1 capital to risk-weighted assets (4)		9.2		%		9.5		%		9.6		%		9.5		%		9.4		%
Total capital to risk-weighted assets (4)		11.6		%		12.0		%		12.1		%		12.0		%		12.0		%
Allowance for credit losses (5)		$	154,164			$	151,001			$	144,645			$	140,746			$	139,174
Non-performing loans		113,234				127,227				83,282				89,690				90,162
Allowance for credit losses to total loans (5)		0.65		%		0.65		%		0.64		%		0.64		%		0.64		%
Non-performing loans to total loans		0.48		%		0.55		%		0.37		%		0.41		%		0.42		%
Number of:
Bank subsidiaries		15				15				15				15				15
Banking offices		167				166				162				157				157

(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. 
(7) Excludes mortgage loans held-for-sale.

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Consolidated Statements of Condition - 5 Quarter Trends

		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
		December 31,				September 30,				June 30,				March 31,				December 31,
(In thousands)		2018				2018				2018				2018				2017
Assets
Cash and due from banks		$	392,142			$	279,936			$	304,580			$	231,407			$	277,534
Federal funds sold and securities purchased under resale agreements		58				57				62				57				57
Interest bearing deposits with banks		1,099,594				1,137,044				1,221,407				980,380				1,063,242
Available-for-sale securities, at fair value		2,126,081				2,164,985				1,940,787				1,895,688				1,803,666
Held-to-maturity securities, at amortized cost		1,067,439				966,438				890,834				892,937				826,449
Trading account securities		1,692				688				862				1,682				995
Equity securities with readily determinable fair value		34,717				36,414				37,839				37,832				—
Federal Home Loan Bank and Federal Reserve Bank stock		91,354				99,998				96,699				104,956				89,989
Brokerage customer receivables		12,609				15,649				16,649				24,531				26,431
Mortgage loans held-for-sale		264,070				338,111				455,712				411,505				313,592
Loans, net of unearned income		23,820,691				23,123,951				22,610,560				22,062,134				21,640,797
Allowance for loan losses		(152,770		)		(149,756		)		(143,402		)		(139,503		)		(137,905		)
Net loans		23,667,921				22,974,195				22,467,158				21,922,631				21,502,892
Premises and equipment, net		671,169				664,469				639,345				626,687				621,895
Lease investments, net		233,208				199,241				194,160				190,775				212,335
Accrued interest receivable and other assets		696,707				700,568				666,673				601,794				567,374
Trade date securities receivable		263,523				—				450				—				90,014
Goodwill and other intangible assets		619,237				564,938				531,371				533,910				519,505
Total assets		$	31,241,521			$	30,142,731			$	29,464,588			$	28,456,772			$	27,915,970
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing		$	6,569,880			$	6,399,213			$	6,520,724			$	6,612,319			$	6,792,497
Interest bearing		19,524,798				18,517,502				17,844,755				16,667,008				16,390,850
Total deposits		26,094,678				24,916,715				24,365,479				23,279,327				23,183,347
Federal Home Loan Bank advances		426,326				615,000				667,000				915,000				559,663
Other borrowings		393,855				373,571				255,701				247,092				266,123
Subordinated notes		139,210				139,172				139,148				139,111				139,088
Junior subordinated debentures		253,566				253,566				253,566				253,566				253,566
Accrued interest payable and other liabilities		666,316				664,885				676,823				591,426				537,244
Total liabilities		27,973,951				26,962,909				26,357,717				25,425,522				24,939,031
Shareholders’ Equity:
Preferred stock		125,000				125,000				125,000				125,000				125,000
Common stock		56,518				56,486				56,437				56,364				56,068
Surplus		1,557,984				1,553,353				1,547,511				1,540,673				1,529,035
Treasury stock		(5,634		)		(5,547		)		(5,355		)		(5,355		)		(4,986		)
Retained earnings		1,610,574				1,543,680				1,464,494				1,387,663				1,313,657
Accumulated other comprehensive loss		(76,872		)		(93,150		)		(81,216		)		(73,095		)		(41,835		)
Total shareholders’ equity		3,267,570				3,179,822				3,106,871				3,031,250				2,976,939
Total liabilities and shareholders’ equity		$	31,241,521			$	30,142,731			$	29,464,588			$	28,456,772			$	27,915,970

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Consolidated Statements of Income (Unaudited) - 5 Quarter Trends

		Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
(In thousands, except per share data)		2018				2018				2018				2018				2017
Interest income
Interest and fees on loans		283,311				271,134				255,063				234,994				226,447
Mortgage loans held-for-sale		3,409				5,285				4,226				2,818				3,291
Interest bearing deposits with banks		5,628				5,423				3,243				2,796				2,723
Federal funds sold and securities purchased under resale agreements		—				—				1				—				—
Investment securities		26,656				21,710				19,888				19,128				18,160
Trading account securities		14				11				4				14				2
Federal Home Loan Bank and Federal Reserve Bank stock		1,343				1,235				1,455				1,298				1,067
Brokerage customer receivables		235				164				167				157				150
Total interest income		320,596				304,962				284,047				261,205				251,840
Interest expense
Interest on deposits		55,975				48,736				35,293				26,549				24,930
Interest on Federal Home Loan Bank advances		2,563				1,947				4,263				3,639				2,124
Interest on other borrowings		3,199				2,003				1,698				1,699				1,600
Interest on subordinated notes		1,788				1,773				1,787				1,773				1,786
Interest on junior subordinated debentures		2,983				2,940				2,836				2,463				2,301
Total interest expense		66,508				57,399				45,877				36,123				32,741
Net interest income		254,088				247,563				238,170				225,082				219,099
Provision for credit losses		10,401				11,042				5,043				8,346				7,772
Net interest income after provision for credit losses		243,687				236,521				233,127				216,736				211,327
Non-interest income
Wealth management		22,726				22,634				22,617				22,986				21,910
Mortgage banking		24,182				42,014				39,834				30,960				27,411
Service charges on deposit accounts		9,065				9,331				9,151				8,857				8,907
(Losses) gains on investment securities, net		(2,649		)		90				12				(351		)		14
Fees from covered call options		626				627				669				1,597				1,610
Trading (losses) gains, net		(155		)		(61		)		124				103				24
Operating lease income, net		10,882				9,132				8,746				9,691				8,598
Other		10,631				16,163				14,080				11,836				12,564
Total non-interest income		75,308				99,930				95,233				85,679				81,038
Non-interest expense
Salaries and employee benefits		122,111				123,855				121,675				112,436				118,009
Equipment		11,523				10,827				10,527				10,072				9,500
Operating lease equipment depreciation		8,462				7,370				6,940				6,533				7,015
Occupancy, net		15,980				14,404				13,663				13,767				14,154
Data processing		8,447				9,335				8,752				8,493				7,915
Advertising and marketing		9,414				11,120				11,782				8,824				7,382
Professional fees		9,259				9,914				6,484				6,649				8,879
Amortization of other intangible assets		1,407				1,163				997				1,004				1,028
FDIC insurance		4,044				4,205				4,598				4,362				4,324
OREO expense, net		1,618				596				980				2,926				599
Other		19,068				20,848				20,371				19,283				17,775
Total non-interest expense		211,333				213,637				206,769				194,349				196,580
Income before taxes		107,662				122,814				121,591				108,066				95,785
Income tax expense		28,005				30,866				32,011				26,085				27,004
Net income		$	79,657			$	91,948			$	89,580			$	81,981			$	68,781
Preferred stock dividends		2,050				2,050				2,050				2,050				2,050
Net income applicable to common shares		$	77,607			$	89,898			$	87,530			$	79,931			$	66,731
Net income per common share - Basic		$	1.38			$	1.59			$	1.55			$	1.42			$	1.19
Net income per common share - Diluted		$	1.35			$	1.57			$	1.53			$	1.40			$	1.17
Cash dividends declared per common share		$	0.19			$	0.19			$	0.19			$	0.19			$	0.14
Weighted average common shares outstanding		56,395				56,366				56,299				56,137				55,924
Dilutive potential common shares		892				918				928				888				1,010
Average common shares and dilutive common shares		57,287				57,284				57,227				57,025				56,934

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Period End Loan Balances - 5 Quarter Trends

		December 31,				September 30,				June 30,				March 31,				December 31,
(Dollars in thousands)		2018				2018				2018				2018				2017
Balance:
Commercial		$	7,828,538			$	7,473,958			$	7,289,060			$	7,060,871			$	6,787,677
Commercial real estate		6,933,252				6,746,774				6,575,084				6,633,520				6,580,618
Home equity		552,343				578,844				593,500				626,547				663,045
Residential real estate		1,002,464				924,250				895,470				869,104				832,120
Premium finance receivables - commercial		2,841,659				2,885,327				2,833,452				2,576,150				2,634,565
Premium finance receivables - life insurance		4,541,794				4,398,971				4,302,288				4,189,961				4,035,059
Consumer and other		120,641				115,827				121,706				105,981				107,713
Total loans, net of unearned income		$	23,820,691			$	23,123,951			$	22,610,560			$	22,062,134			$	21,640,797
Mix:
Commercial		33		%		32		%		32		%		32		%		31		%
Commercial real estate		29				29				29				30				30
Home equity		2				3				3				3				3
Residential real estate		4				4				4				4				4
Premium finance receivables - commercial		12				12				12				12				12
Premium finance receivables - life insurance		19				19				19				19				19
Consumer and other		1				1				1				—				1
Total loans, net of unearned income		100		%		100		%		100		%		100		%		100		%

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Period End Deposits Balances - 5 Quarter Trends

		December 31,				September 30,				June 30,				March 31,				December 31,
(Dollars in thousands)		2018				2018				2018				2018				2017
Balance:
Non-interest bearing		$	6,569,880			$	6,399,213			$	6,520,724			$	6,612,319			$	6,792,497
NOW and interest bearing demand deposits		2,897,133				2,512,259				2,452,474				2,315,122				2,315,055
Wealth management deposits (1)		2,996,764				2,520,120				2,523,572				2,495,134				2,323,699
Money market		5,704,866				5,429,921				5,205,678				4,617,122				4,515,353
Savings		2,665,194				2,595,164				2,763,062				2,901,504				2,829,373
Time certificates of deposit		5,260,841				5,460,038				4,899,969				4,338,126				4,407,370
Total deposits		$	26,094,678			$	24,916,715			$	24,365,479			$	23,279,327			$	23,183,347
Mix:
Non-interest bearing		25		%		26		%		27		%		28		%		29		%
NOW and interest bearing demand deposits		11				10				10				10				10
Wealth management deposits (1)		12				10				11				11				10
Money market		22				22				21				20				20
Savings		10				10				11				12				12
Time certificates of deposit		20				22				20				19				19
Total deposits		100		%		100		%		100		%		100		%		100		%

(1) Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wintrust Investments, CDEC, 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
		December 31,				September 30,				June 30,				March 31,				December 31,
(Dollars in thousands)		2018				2018				2018				2018				2017
Net interest income - FTE		$	255,658			$	249,082			$	239,549			$	226,286			$	221,226
Call option income		626				627				669				1,597				1,610
Net interest income including call option income		$	256,284			$	249,709			$	240,218			$	227,883			$	222,836
Yield on earning assets		4.58		%		4.45		%		4.32		%		4.13		%		4.00		%
Rate on interest-bearing liabilities		1.33				1.17				1.00				0.83				0.75
Rate spread		3.25		%		3.28		%		3.32		%		3.30		%		3.25		%
Less:  Fully tax-equivalent adjustment		(0.02		)		(0.02		)		(0.02		)		(0.02		)		(0.04		)
Net free funds contribution		0.38				0.33				0.31				0.26				0.24
Net interest margin (GAAP-derived)		3.61		%		3.59		%		3.61		%		3.54		%		3.45		%
Fully tax-equivalent adjustment		0.02				0.02				0.02				0.02				0.04
Net interest margin - FTE		3.63		%		3.61		%		3.63		%		3.56		%		3.49		%
Call option income		0.01				0.01				0.01				0.03				0.03
Net interest margin - FTE, including call option income		3.64		%		3.62		%		3.64		%		3.59		%		3.52		%

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin (Including Call Option Income - YTD Trends)

		Years Ended December 31,
(Dollars in thousands)		2018				2017				2016				2015				2014
Net interest income - FTE		$	970,575			$	839,563			$	728,145			$	646,238			$	601,744
Call option income		3,519				4,402				11,470				15,364				7,859
Net interest income including call option income		$	974,094			$	843,965			$	739,615			$	661,602			$	609,603
Yield on earning assets		4.38		%		3.91		%		3.67		%		3.76		%		3.96		%
Rate on interest-bearing liabilities		1.09				0.67				0.57				0.54				0.55
Rate spread		3.29		%		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		0.32				0.20				0.16				0.14				0.12
Net interest margin (GAAP-derived)		3.59		%		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		3.61		%		3.44		%		3.26		%		3.36		%		3.53		%
Call option income		0.01				0.02				0.05				0.08				0.05
Net interest margin - FTE, including call option income		3.62		%		3.46		%		3.31		%		3.44		%		3.58		%

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Quarterly Average Balances - 5 Quarter Trends

		Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
(In thousands)		2018				2018				2018				2018				2017
Interest-bearing deposits with banks and cash equivalents		$	1,042,860			$	998,004			$	759,425			$	749,973			$	914,319
Investment securities		3,347,496				3,046,272				2,890,828				2,892,617				2,736,253
FHLB and FRB stock		98,084				88,335				115,119				105,414				82,092
Liquidity management assets		$	4,488,440			$	4,132,611			$	3,765,372			$	3,748,004			$	3,732,664
Other earning assets		16,204				17,862				21,244				27,571				26,955
Mortgage loans held-for-sale		265,717				380,235				403,967				281,181				335,385
Loans, net of unearned income		23,164,154				22,823,378				22,283,541				21,711,342				21,080,984
Covered loans		—				—				—				—				6,025
Total earning assets		$	27,934,515			$	27,354,086			$	26,474,124			$	25,768,098			$	25,182,013
Allowance for loan and covered loan losses		(154,438		)		(148,503		)		(147,192		)		(143,108		)		(138,584		)
Cash and due from banks		271,403				268,006				270,240				254,489				244,097
Other assets		2,128,407				2,051,520				1,970,407				1,930,118				1,891,958
Total assets		$	30,179,887			$	29,525,109			$	28,567,579			$	27,809,597			$	27,179,484
NOW and interest bearing demand deposits		$	2,671,283			$	2,519,445			$	2,295,268			$	2,255,692			$	2,284,576
Wealth management deposits		2,289,904				2,517,141				2,365,191				2,250,139				2,005,197
Money market accounts		5,632,268				5,369,324				4,883,645				4,520,620				4,611,515
Savings accounts		2,553,133				2,672,077				2,702,665				2,813,772				2,741,621
Time deposits		5,381,029				5,214,637				4,557,187				4,322,111				4,581,464
Interest-bearing deposits		$	18,527,617			$	18,292,624			$	16,803,956			$	16,162,334			$	16,224,373
Federal Home Loan Bank advances		551,846				429,739				1,006,407				872,811				324,748
Other borrowings		385,878				268,278				240,066				263,125				255,972
Subordinated notes		139,186				139,155				139,125				139,094				139,065
Junior subordinated debentures		253,566				253,566				253,566				253,566				253,566
Total interest-bearing liabilities		$	19,858,093			$	19,383,362			$	18,443,120			$	17,690,930			$	17,197,724
Non-interest bearing deposits		6,542,228				6,461,195				6,539,731				6,639,845				6,605,553
Other liabilities		578,912				548,609				520,574				483,230				433,208
Equity		3,200,654				3,131,943				3,064,154				2,995,592				2,942,999
Total liabilities and shareholders’ equity		$	30,179,887			$	29,525,109			$	28,567,579			$	27,809,597			$	27,179,484

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin - 5 Quarter Trends

		Three Months Ended
		December 31,  2018			September 30,  2018			June 30,  2018			March 31,  2018			December 31,  2017
Yield earned on:
Interest-bearing deposits with banks and cash equivalents		2.14	%		2.16	%		1.71	%		1.51	%		1.18	%
Investment securities		3.23			2.90			2.84			2.76			2.78
FHLB and FRB stock		5.43			5.54			5.07			4.99			5.15
Liquidity management assets		3.02	%		2.78	%		2.68	%		2.57	%		2.44	%
Other earning assets		6.19			3.95			3.24			2.56			2.27
Mortgage loans held-for-sale		5.09			5.51			4.20			4.06			3.89
Loans, net of unearned income		4.87			4.73			4.61			4.40			4.28
Covered loans		—			—			—			—			5.66
Total earning assets		4.58	%		4.45	%		4.32	%		4.13	%		4.00	%
Rate paid on:
NOW and interest bearing demand deposits		0.60	%		0.39	%		0.33	%		0.25	%		0.24	%
Wealth management deposits		1.23			1.31			1.19			0.98			0.80
Money market accounts		1.19			0.98			0.67			0.42			0.36
Savings accounts		0.48			0.43			0.40			0.39			0.39
Time deposits		1.83			1.66			1.37			1.16			1.09
Interest-bearing deposits		1.20	%		1.06	%		0.84	%		0.67	%		0.61	%
Federal Home Loan Bank advances		1.84			1.80			1.70			1.69			2.59
Other borrowings		3.29			2.96			2.84			2.62			2.48
Subordinated notes		5.14			5.10			5.14			5.10			5.14
Junior subordinated debentures		4.60			4.54			4.42			3.89			3.55
Total interest-bearing liabilities		1.33	%		1.17	%		1.00	%		0.83	%		0.75	%
Interest rate spread		3.25	%		3.28	%		3.32	%		3.30	%		3.25	%
Less:  Fully tax-equivalent adjustment		(0.02	)		(0.02	)		(0.02	)		(0.02	)		(0.04	)
Net free funds/contribution		0.38			0.33			0.31			0.26			0.24
Net interest margin (GAAP)		3.61	%		3.59	%		3.61	%		3.54	%		3.45	%
Fully tax-equivalent adjustment		0.02			0.02			0.02			0.02			0.04
Net interest margin - FTE		3.63	%		3.61	%		3.63	%		3.56	%		3.49	%

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Interest Income - 5 Quarter Trends

		Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
(In thousands)		2018				2018				2018				2018				2017
Brokerage		$	4,997			$	5,579			$	5,784			$	6,031			$	6,067
Trust and asset management		17,729				17,055				16,833				16,955				15,843
Total wealth management		22,726				22,634				22,617				22,986				21,910
Mortgage banking		24,182				42,014				39,834				30,960				27,411
Service charges on deposit accounts		9,065				9,331				9,151				8,857				8,907
Gains (losses) on investment securities, net		(2,649		)		90				12				(351		)		14
Fees from covered call options		626				627				669				1,597				1,610
Trading gains (losses), net		(155		)		(61		)		124				103				24
Operating lease income, net		10,882				9,132				8,746				9,691				8,598
Other:
Interest rate swap fees		2,602				2,359				3,829				2,237				1,963
BOLI		(466		)		3,190				1,544				714				754
Administrative services		1,260				1,099				1,205				1,061				1,103
Early pay-offs of capital leases		3				11				554				33				7
Miscellaneous		7,232				9,504				6,948				7,791				8,737
Total other income		10,631				16,163				14,080				11,836				12,564
Total Non-Interest Income		$	75,308			$	99,930			$	95,233			$	85,679			$	81,038

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Interest Expense - 5 Quarter Trends

		Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
(In thousands)		2018				2018				2018				2018				2017
Salaries and employee benefits:
Salaries		$	67,708			$	69,893			$	66,976			$	61,986			$	58,239
Commissions and incentive compensation		33,656				34,046				35,907				31,949				40,723
Benefits		20,747				19,916				18,792				18,501				19,047
Total salaries and employee benefits		122,111				123,855				121,675				112,436				118,009
Equipment		11,523				10,827				10,527				10,072				9,500
Operating lease equipment depreciation		8,462				7,370				6,940				6,533				7,015
Occupancy, net		15,980				14,404				13,663				13,767				14,154
Data processing		8,447				9,335				8,752				8,493				7,915
Advertising and marketing		9,414				11,120				11,782				8,824				7,382
Professional fees		9,259				9,914				6,484				6,649				8,879
Amortization of other intangible assets		1,407				1,163				997				1,004				1,028
FDIC insurance		4,044				4,205				4,598				4,362				4,324
OREO expense, net		1,618				596				980				2,926				599
Other:
Commissions - 3rd party brokers		779				1,059				1,174				1,252				1,057
Postage		2,047				2,205				2,567				1,866				1,427
Miscellaneous		16,242				17,584				16,630				16,165				15,291
Total other expense		19,068				20,848				20,371				19,283				17,775
Total Non-Interest Expense		$	211,333			$	213,637			$	206,769			$	194,349			$	196,580

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Allowance for Credit Losses, excluding covered loans - 5 Quarter Trends

		Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
(Dollars in thousands)		2018				2018				2018				2018				2017
Allowance for loan losses at beginning of period		$	149,756			$	143,402			$	139,503			$	137,905			$	133,119
Provision for credit losses		10,401				11,042				5,043				8,346				7,772
Other adjustments (1)		(79		)		(18		)		(44		)		(40		)		698
Reclassification (to) from allowance for unfunded lending-related commitments		(150		)		(2		)		—				26				7
Charge-offs:
Commercial		6,416				3,219				2,210				2,687				1,340
Commercial real estate		219				208				155				813				1,001
Home equity		715				561				612				357				728
Residential real estate		267				337				180				571				542
Premium finance receivables - commercial		1,741				2,512				3,254				4,721				2,314
Premium finance receivables - life insurance		—				—				—				—				—
Consumer and other		148				144				459				129				207
Total charge-offs		9,506				6,981				6,870				9,278				6,132
Recoveries:
Commercial		225				304				666				262				235
Commercial real estate		1,364				193				2,387				1,687				1,037
Home equity		105				142				171				123				359
Residential real estate		47				466				1,522				40				165
Premium finance receivables - commercial		567				1,142				975				385				613
Premium finance receivables - life insurance		—				—				—				—				—
Consumer and other		40				66				49				47				32
Total recoveries		2,348				2,313				5,770				2,544				2,441
Net charge-offs		(7,158		)		(4,668		)		(1,100		)		(6,734		)		(3,691		)
Allowance for loan losses at period end		$	152,770			$	149,756			$	143,402			$	139,503			$	137,905
Allowance for unfunded lending-related commitments at period end		1,394				1,245				1,243				1,243				1,269
Allowance for credit losses at period end		$	154,164			$	151,001			$	144,645			$	140,746			$	139,174
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average:
Commercial		0.33		%		0.16		%		0.09		%		0.14		%		0.07		%
Commercial real estate		(0.07		)		0.00				(0.14		)		(0.05		)		0.00
Home equity		0.43				0.28				0.29				0.15				0.22
Residential real estate		0.10				(0.06		)		(0.64		)		0.26				0.18
Premium finance receivables - commercial		0.16				0.19				0.34				0.68				0.26
Premium finance receivables - life insurance		0.00				0.00				0.00				0.00				0.00
Consumer and other		0.30				0.23				1.21				0.26				0.52
Total loans, net of unearned income, excluding covered loans		0.12		%		0.08		%		0.02		%		0.13		%		0.07		%
Net charge-offs as a percentage of the provision for credit losses		68.82		%		42.27		%		21.81		%		80.69		%		47.49		%
Loans at period-end		$	23,820,691			$	23,123,951			$	22,610,560			$	22,062,134			$	21,640,797
Allowance for loan losses as a percentage of loans at period end		0.64		%		0.65		%		0.63		%		0.63		%		0.64		%
Allowance for credit losses as a percentage of loans at period end		0.65		%		0.65		%		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.

 

WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Performing Assets, excluding covered assets - 5 Quarter Trends

	December 31,				September 30,				June 30,				March 31,				December 31,(3)
(Dollars in thousands)	2018				2018				2018				2018				2017
Loans past due greater than 90 days and still accruing(1):
Commercial	$	—			$	5,122			$	—			$	—			$	—
Commercial real estate	—				—				—				—				—
Home equity	—				—				—				—				—
Residential real estate	—				—				—				—				3,278
Premium finance receivables - commercial	7,799				7,028				5,159				8,547				9,242
Premium finance receivables - life insurance	—				—				—				—				—
Consumer and other	109				233				224				207				40
Total loans past due greater than 90 days and still accruing	7,908				12,383				5,383				8,754				12,560
Non-accrual loans(2):
Commercial	50,984				58,587				18,388				14,007				15,696
Commercial real estate	19,129				17,515				19,195				21,825				22,048
Home equity	7,147				8,523				9,096				9,828				8,978
Residential real estate	16,383				16,062				15,825				17,214				17,977
Premium finance receivables - commercial	11,335				13,802				14,832				17,342				12,163
Premium finance receivables - life insurance	—				—				—				—				—
Consumer and other	348				355				563				720				740
Total non-accrual loans	105,326				114,844				77,899				80,936				77,602
Total non-performing loans:
Commercial	50,984				63,709				18,388				14,007				15,696
Commercial real estate	19,129				17,515				19,195				21,825				22,048
Home equity	7,147				8,523				9,096				9,828				8,978
Residential real estate	16,383				16,062				15,825				17,214				21,255
Premium finance receivables - commercial	19,134				20,830				19,991				25,889				21,405
Premium finance receivables - life insurance	—				—				—				—				—
Consumer and other	457				588				787				927				780
Total non-performing loans	$	113,234			$	127,227			$	83,282			$	89,690			$	90,162
Other real estate owned	11,968				14,924				18,925				18,481				20,244
Other real estate owned - from acquisitions	12,852				13,379				16,406				18,117				20,402
Other repossessed assets	280				294				305				113				153
Total non-performing assets	$	138,334			$	155,824			$	118,918			$	126,401			$	130,961
TDRs performing under the contractual terms of the loan agreement	$	33,281			$	31,487			$	57,249			$	39,562			$	39,683
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial	0.65		%		0.85		%		0.25		%		0.20		%		0.23		%
Commercial real estate	0.28				0.26				0.29				0.33				0.34
Home equity	1.29				1.47				1.53				1.57				1.35
Residential real estate	1.63				1.74				1.77				1.98				2.55
Premium finance receivables - commercial	0.67				0.72				0.71				1.00				0.81
Premium finance receivables - life insurance	—				—				—				—				—
Consumer and other	0.38				0.51				0.65				0.87				0.72
Total loans, net of unearned income	0.48		%		0.55		%		0.37		%		0.41		%		0.42		%
Total non-performing assets as a percentage of total assets	0.44		%		0.52		%		0.40		%		0.44		%		0.47		%
Allowance for loan losses as a percentage of total non-performing loans	134.92		%		117.71		%		172.19		%		155.54		%		152.95		%

(1) Loans past due greater than 90 days and still accruing interest included TDRs totaling $5.1 million as of September 30, 2018. As of December 31, 2018, June 30, 2018, March 31, 2018 and December 31, 2017, no TDRs were past due greater than 90 days and still accruing interest. 
(2) Non-accrual loans included TDRs totaling $32.8 million, $34.7 million, $8.1 million, $8.1 million and $10.1 million as of December 31, 2018, September 30, 2018, June 30, 2018, March 31, 2018 and December 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.