Wintrust Financial Corporation Reports Record Full-Year 2019 Net Income of $355.7 million and Fourth Quarter 2019 Net Income of $86.0 million, up 8% from the Fourth Quarter 2018

ROSEMONT, Ill., Jan. 21, 2020 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust” or “the Company”) (WTFC) announced record net income of $355.7 million or $6.03 per diluted common share for the year ended December 31, 2019 compared to net income of $343.2 million or $5.86 per diluted common share for the same period of 2018. The Company recorded net income of $86.0 million or $1.44 per diluted common share for the fourth quarter of 2019, a decrease in diluted earnings per common share of 14.8% compared to the prior quarter and an increase of 6.7% compared to the fourth quarter of 2018.

Highlights of the Fourth Quarter of 2019:
Comparative information to the third quarter of 2019

  • Total assets increased by $1.7 billion, including $240 million from the acquisition of STC Capital Bancshares and $607 million from the acquisition of SBC, Incorporated, or 19% on an annualized basis.

  • Total loans increased by $1.1 billion, including $164 million from the acquisition of STC Capital Bancshares and $418 million from the acquisition of SBC, Incorporated, or 17% on an annualized basis.

  • Total deposits increased by $1.4 billion, including $194 million from the acquisition of STC Capital Bancshares and $496 million from the acquisition of SBC, Incorporated, or 19% on an annualized basis. The increase was net of a $201 million reduction in brokered deposits.

  • Mortgage banking production revenue decreased by $6.3 million as mortgage loans originated for sale totaled $1.2 billion in the fourth quarter of 2019 as compared to $1.4 billion in the third quarter of 2019.

  • Net interest income decreased by $3.0 million as a 20 basis point decline in net interest margin was partially offset by a $1.5 billion increase in average earning assets.

  • Recorded net charge-offs of $12.7 million in the fourth quarter of 2019 as compared to $9.4 million in the third quarter of 2019. The $12.7 million includes a $5.3 million charge-off of a commercial loan, which was fully reserved for in prior quarters.

  • The ratio of non-performing assets to total assets declined by two basis points to 0.36%.

Other highlights of the fourth quarter of 2019

  • Recorded a $2.8 million reduction to FDIC insurance expense related to assessment credits received from the FDIC. The Company received $3.9 million of assessment credits from the FDIC in the third quarter of 2019.

  • Recorded an increase in the value of mortgage servicing rights related to changes in fair value model assumptions, net of derivative contract activity held as an economic hedge, of $1.8 million.

  • Incurred acquisition related costs of $2.4 million in the fourth quarter of 2019 as compared to $1.3 million in the third quarter of 2019.

  • Recognized various non-operating charges totaling $5.4 million. This includes expenses related to a litigation settlement, loan remediation, contingent consideration related to previous acquisitions of certain mortgage businesses, pension plan terminations, operating lease impairment and losses on partnership investments.

  • Announced approval of a stock buyback program which authorizes the repurchase of up to $125 million in common shares.

Expansion activity

  • Opened two new branches in the Chicago suburbs located in Palatine and Maywood, Illinois.

  • Completed the previously announced acquisition of STC Bancshares Corp., the parent company of STC Capital Bank.

  • Completed the previously announced acquisition of SBC, Incorporated, the parent company of Countryside Bank.

Edward J. Wehmer, President and Chief Executive Officer, commented, "As the decade closes, I reflect back on the recent history of Wintrust and I am proud of the franchise that we have built. In the last 10 years, Wintrust has experienced significant growth and has become a household name in the Chicago and Milwaukee areas. Wintrust now boasts the largest deposit base in the Chicago market area among locally headquartered banks which is a product of our consistent growth strategy that has yielded 12% compound annual growth in assets, loans and deposits over the past 10 years. Additionally, the last nine years of the decade reported record annual net income. Admittedly, 2019 was not what we expected with respect to our profitability goals. However, 2019 was a success with respect to our efforts to increase market share and household penetration in our market areas and continue to establish Wintrust as a reliable partner with excellent customer service. We believe that our core operating tenants that have produced the success that we have experienced over the past 10 years will continue to serve us favorably as we seek to grow strategically in 2020 and beyond."

Transitioning to the current quarter, Mr. Wehmer proceeded, "Wintrust reported net income of $86.0 million for the fourth quarter of 2019, down from $99.1 million in the third quarter of 2019 and record annual net income of $355.7 million in 2019 as compared to $343.2 million in 2018. The Company experienced strong balance sheet growth as total assets were $1.7 billion higher than the prior quarter end and $5.4 billion higher than at the fourth quarter of 2018. The fourth quarter was characterized by strong balance sheet growth, decreased net interest margin, decreased mortgage banking revenue, stable credit quality, and a continued focus to increase franchise value in our market area."

Mr. Wehmer continued, "The Company experienced deposit growth of $1.4 billion in the fourth quarter of 2019 which was net of a reduction of $201 million in brokered deposits to optimize our funding base. Non-brokered deposits now comprise approximately 97% of total deposits. Additionally, the Company grew total loans by $1.1 billion with growth diversified across various loan portfolios including the commercial, commercial real estate, life insurance premium finance receivables and residential real estate portfolios. We remain aggressive in growing quality assets that meet our standards and will seek to fund that by expanding deposit market share and household penetration."

Mr. Wehmer commented, "Net interest margin declined by 20 basis points in the fourth quarter of 2019 as compared to the third quarter of 2019 primarily due to downward repricing of variable rate loans partially offset by improvement in deposit pricing. Given the relatively stable short-term outlook on interest rates, we expect to hold loan yields steady while continuing to reduce our interest bearing deposit costs. Additionally, we expect to deploy the excess liquidity gathered in the third and fourth quarters of 2019 to enhance net interest income. As always, we will strive to grow without a commensurate increase in expenses to enhance our net overhead ratio which was 1.53% in the fourth quarter of 2019."

Mr. Wehmer noted, “Our mortgage banking business production decreased in the current quarter as loan volumes originated for sale decreased to $1.2 billion from $1.4 billion in the third quarter of 2019. The decrease in origination volumes was primarily attributed to the seasonal purchase market decline which was partially mitigated by elevated refinancing activity. Our mortgage servicing rights portfolio increased by $10.1 million primarily due to the capitalization of retained servicing rights of $14.5 million partially offset by a $6.8 million reduction related to payoffs and paydowns. We recorded a $1.8 million increase due to changes in fair value assumptions, net of derivative contract activity held as an economic hedge. We continue to focus on efficiencies in our delivery channels and our operating costs in our mortgage banking area. We believe that the mortgage rate outlook in the first quarter of 2020 will continue to result in elevated refinancing activity, which will supplement the seasonally challenging purchase market."

Commenting on credit quality, Mr. Wehmer stated, "Overall credit quality metrics were positive in the fourth quarter of 2019. The Company recorded net charge-offs of $12.7 million in the fourth quarter of 2019 as compared to $9.4 million in the third quarter of 2019. The $12.7 million of net charge-offs in the current quarter includes a $5.3 million charge-off of a commercial loan, which was fully reserved for in prior quarters. Although we experienced elevated charge-offs in the second quarter of 2019, net charge-offs for the year of 2019 were 20 basis points. The ratio of non-performing assets as a percent of total assets declined by two basis points to a historically low level of 0.36%. We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit."

Turning to the future, Mr. Wehmer stated, “We have experienced significant franchise growth in 2019 and believe that our opportunities for both internal and external growth remain consistently strong. Total period end loans were $663 million higher than average total loans in the current quarter which provides momentum into the first quarter of 2020. We plan to continue our steady and measured approach to achieve our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and continuing to increase shareholder value. Evaluating strategic acquisitions, like the completed acquisitions of STC Bancshares Corp. and SBC, Incorporated, as well as focusing on organic branch growth will continue to be a part of our overall growth strategy with the goal of becoming Chicago’s bank and Wisconsin’s bank."

The graphs below illustrate the annual trend of certain financial highlights, including the 10 year compound annual growth rate ("CAGR").

Graphs available at the following link:
http://ml.globenewswire.com/Resource/Download/ee80b169-0adb-4a48-bc91-93f46e6dc982

SUMMARY OF RESULTS:

BALANCE SHEET

Total assets grew by $1.7 billion in the fourth quarter of 2019 primarily due to a $1.1 billion increase in loans and an $836 million increase in available for sale securities, partially offset by a reduction in liquidity. The increase in assets and loans include acquired balances of $847 million and $582 million, respectively. The Company believes that the $2.2 billion of interest bearing deposits with banks held as of December 31, 2019 is more than sufficient liquidity to operate its business plan. Excess liquidity is expected to be deployed in future quarters to enhance net interest income.

Total liabilities grew by $1.6 billion in the fourth quarter of 2019 primarily comprised of a $1.4 billion increase in total deposits of which $690 million related to acquisitions. The Company successfully grew deposits in the fourth quarter through organic retail channels, acquisitions and its wealth management segment. In addition, the total deposit growth was net of a $201 million reduction in brokered deposits. Management believes in substantially funding the Company's balance sheet with core deposits and utilizes brokered or wholesale funding sources as appropriate to manage its liquidity position as well as for interest rate risk management purposes. Non-brokered deposits now comprise approximately 97% of total deposits.

For more information regarding changes in the Company’s balance sheet, see Consolidated Statements of Condition and Tables 1 through 4 in this report.

NET INTEREST INCOME

For the fourth quarter of 2019, net interest income totaled $261.9 million, a decrease of $3.0 million as compared to the third quarter of 2019 and an increase of $7.8 million as compared to the fourth quarter of 2018. The $3.0 million decrease in net interest income in the fourth quarter of 2019 compared to the third quarter of 2019 was attributable to the impact of a 20 basis point decline in net interest margin. This impact was partially offset by $1.5 billion of growth in average earning assets.

Net interest margin was 3.17% (3.19% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2019 compared to 3.37% (3.39% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2019 and 3.61% (3.63% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2018. The 20 basis point decrease in net interest margin in the fourth quarter of 2019 as compared to the third quarter of 2019 was attributable to a 28 basis point decline in the yield on earnings assets and three basis point decrease in the net free funds contribution partially offset by an 11 basis point decrease in the rate paid on interest bearing liabilities. The 28 basis point decline in the yield on earning assets in the current quarter as compared to the third quarter of 2019 was primarily due to a 24 basis point decline in the yield on loans along with lower yields on interest bearing cash. The 11 basis point decrease in the rate paid on interest bearing liabilities in the current quarter as compared to the prior quarter is primarily due to a 10 basis point decrease in the rate paid on interest bearing deposits as management initiated various deposit rate reductions given the recent decrease in the interest rate environment.

For the full twelve months of 2019, net interest income totaled $1.1 billion, an increase of $90.0 million as compared to the full twelve months of 2018. Net interest margin was 3.45% (3.47% on a fully taxable-equivalent basis, non-GAAP) for the full twelve months of 2019 compared to 3.59% (3.61% on a fully taxable-equivalent basis, non-GAAP) for the full twelve months of 2018.

For more information regarding net interest income, see Tables 5 through 10 in this report.

ASSET QUALITY

The allowance for credit 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 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 average total loans, in the fourth quarter of 2019 totaled 19 basis points on an annualized basis compared to 15 basis points on an annualized basis in the third quarter of 2019 and 12 basis points on an annualized basis in the fourth quarter of 2018. Net charge-offs totaled $12.7 million in the fourth quarter of 2019, a $3.3 million increase from $9.4 million in the third quarter of 2019 and a $5.5 million increase from $7.2 million in the fourth quarter of 2018. The $12.7 million of net charge-offs in the current quarter includes a $5.3 million charge-off of a commercial loan, which was fully reserved for in prior quarters. The provision for credit losses totaled $7.8 million for the fourth quarter of 2019 compared to $10.8 million for the third quarter of 2019 and $10.4 million for the fourth quarter of 2018. For more information regarding net charge-offs, see Table 11 in this report.

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.

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 as of December 31, 2019 and September 30, 2019 is shown on Table 12 of this report.

As of December 31, 2019, $50.5 million of all loans, or 0.2%, were 60 to 89 days past due and $248.2 million, or 0.9%, were 30 to 59 days (or one payment) past due. As of September 30, 2019, $51.1 million of all loans, or 0.2%, were 60 to 89 days past due and $134.2 million, or 0.5%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at December 31, 2019 that are current with regard to the contractual terms of the loan agreement represent 97.8% of the total home equity portfolio. Residential real estate loans at December 31, 2019 that are current with regards to the contractual terms of the loan agreements comprise 97.1% of total residential real estate loans outstanding. For more information regarding past due loans, see Table 13 in this report.

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 $156.8 million of allowance for loan losses, there was $11.6 million of non-accretable credit discount on purchased loans reported in accordance with ASC 310-30 that is available to absorb credit losses as of December 31, 2019.

The ratio of non-performing assets to total assets was 0.36% as of December 31, 2019, compared to 0.38% at September 30, 2019, and 0.44% at December 31, 2018. Non-performing assets, excluding PCI loans, totaled $132.8 million at December 31, 2019, compared to $132.0 million at September 30, 2019 and $138.3 million at December 31, 2018. Non-performing loans, excluding PCI loans, totaled $117.6 million, or 0.44% of total loans, at December 31, 2019 compared to $114.3 million, or 0.44% of total loans, at September 30, 2019 and $113.2 million, or 0.48% of total loans, at December 31, 2018. Other real estate owned ("OREO") of $15.2 million at December 31, 2019 decreased $2.3 million compared to $17.5 million at September 30, 2019 and decreased $9.6 million compared to $24.8 million at December 31, 2018. Management is pursuing the resolution of all non-performing assets. 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. For more information regarding non-performing assets, see Table 14 in this report.

NON-INTEREST INCOME

Wealth management revenue increased by $1.0 million during the fourth quarter of 2019 as compared to the third quarter of 2019 primarily due to increased asset management revenue. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

Mortgage banking revenue decreased by $3.0 million in the fourth quarter of 2019 as compared to the third quarter of 2019, primarily as a result of lower production revenues, partially offset by an increase in the fair value of the mortgage servicing rights portfolio in the fourth quarter of 2019. Production revenue decreased by $6.3 million in the fourth quarter of 2019 as compared to the third quarter of 2019 primarily due to a decrease in origination volumes. The decrease in origination volumes was primarily attributed to the seasonal purchase market decline which was partially mitigated by elevated refinancing activity. The percentage of origination volume from refinancing activities was 60% in the fourth quarter of 2019 as compared to 52% in the third quarter of 2019. Production margin declined from 2.88% in the third quarter of 2019 to 2.78% in the fourth quarter of 2019. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market.

During the fourth quarter of 2019, the fair value of the mortgage servicing rights portfolio increased as retained servicing rights led to the capitalization of $14.5 million along with a positive fair value adjustment of $2.3 million partially offset by a reduction in value of $6.8 million due to payoffs and paydowns of the existing portfolio. The Company entered into interest rate swaps at the beginning of the fourth quarter of 2019 to economically hedge a portion of the potential negative fair value changes recorded in earnings related to its mortgage servicing rights portfolio. The Company recorded a loss of $483,000 on the interest rate swaps held as economic hedges against the mortgage servicing rights primarily related to the mark to market at year end which was recorded in mortgage banking revenue.

The net gains recognized on investment securities in the fourth quarter of 2019 were $587,000 as compared to $710,000 in third quarter of 2019. The gains recorded in the fourth quarter of 2019 relate to unrealized gains recognized on equity securities held by the Company.

Other non-interest income decreased by $3.5 million in the fourth quarter of 2019 as compared to the third quarter of 2019 primarily due to decreased income from investments in partnerships and interest rate swap fees.

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

NON-INTEREST EXPENSE

Salaries and employee benefits expense increased by $4.9 million in the fourth quarter of 2019 as compared to the third quarter of 2019. The $4.9 million increase is comprised of an increase of $4.8 million in salaries expense and $159,000 in benefits expense, partially offset by a decrease of $63,000 in commissions and incentive compensation. The increase in salaries and employee benefits expense is primarily due to increased staffing as the Company grows, $1.0 million of higher acquisition related costs and $487,000 of costs to terminate two pension plans.

Equipment expense totaled $14.5 million in the fourth quarter of 2019, an increase of $1.2 million as compared to the third quarter of 2019. The increase in the current quarter relates primarily to increased software depreciation expenses.

Advertising and marketing expenses in the fourth quarter of 2019 decreased by $858,000 as compared to the third quarter of 2019 primarily related to lower corporate sponsorship costs. 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 utilized which are determined based on the market area, targeted audience, competition and various other factors.

FDIC insurance expense totaled $1.3 million in the fourth quarter of 2019, an increase of $1.2 million as compared to the third quarter of 2019. In the current quarter, the Company recorded a $2.8 million reduction to FDIC insurance expense related to assessment credits received from the FDIC. The Company received $3.9 million of assessment credits from the FDIC in the third quarter of 2019.

Occupancy expense totaled $17.1 million in the fourth quarter of 2019, an increase of $2.1 million as compared to the third quarter of 2019. The increase in the current quarter relates primarily to increased expenses due to acquired locations, property tax expense and rental expense.

Miscellaneous expense in the fourth quarter of 2019 increased $5.6 million as compared to the third quarter of 2019. The increase in the current quarter as compared to the third quarter of 2019 is primarily due to a litigation settlement, contingent consideration related to previous acquisitions of certain mortgage businesses and overlapping telecommunication charges. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors' fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses and lending origination costs that are not deferred.

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

INCOME TAXES

The Company recorded income tax expense of $30.7 million in the fourth quarter of 2019 compared to $35.5 million in the third quarter of 2019 and $28.0 million in the fourth quarter of 2018. The effective tax rates were 26.33% in the fourth quarter of 2019 compared to 26.36% in the third quarter of 2019 and 26.01% in the fourth quarter of 2018. During the twelve months of 2019, the Company recorded income tax expense of $124.4 million compared to $117.0 million for the twelve months of 2018. The effective tax rates were 25.91% for the twelve months of 2019 and 25.42% for the twelve months of 2018.

The year-to-date effective tax rates were impacted by excess tax benefits related to share-based compensation. These excess tax benefits were $1.8 million in the twelve months of 2019 and $3.9 million in the twelve months of 2018. Excess tax benefits 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.

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 2019, this unit expanded its loan and deposit portfolios. However, the banking segment also experienced net interest margin compression in part due to current market conditions.

Mortgage banking revenue was $47.9 million for the fourth quarter of 2019 a decrease from $50.9 million for the third quarter of 2019. Services charges on deposit accounts totaled $11.0 million in the fourth quarter of 2019 an increase of $1.0 million as compared to the third quarter of 2019 primarily due to higher account analysis fees. The Company's gross commercial and commercial real estate loan pipelines remain strong. Before the impact of scheduled payments and prepayments, gross commercial and commercial real estate loan pipelines were estimated to be approximately $1.0 billion to $1.1 billion at December 31, 2019. When adjusted for the probability of closing, the pipelines were estimated to be approximately $650 million to $720 million at December 31, 2019.

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. Originations within the insurance premium financing receivables portfolio were $2.5 billion during the fourth quarter of 2019 and average balances increased by $217.4 million as compared to the third quarter of 2019. The increase in average balances was more than offset by margin compression in this portfolio resulting in a $2.4 million decrease in interest income attributed to the insurance premium finance receivables portfolio. The Company's leasing business grew during the fourth quarter of 2019, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing $123.8 million to $1.6 billion at the end of the fourth quarter of 2019. Revenues from the Company's out-sourced administrative services business remained flat at $1.1 million in the third quarter of 2019 and fourth quarter of 2019.

Wealth Management

Through four separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, tax-deferred like-kind exchange services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue increased by $1.0 million in the fourth quarter of 2019 compared to the third quarter of 2019, totaling $25.0 million in the current period. At December 31, 2019, the Company’s wealth management subsidiaries had approximately $27.6 billion of assets under administration, which included $4.2 billion of assets owned by the Company and its subsidiary banks, representing a $1.5 billion increase from the $26.1 billion of assets under administration at September 30, 2019. Successful new business development efforts and favorable equity markets have contributed to growth in revenue and assets under management.

ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS

Acquisitions

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

On October 7, 2019, the Company completed its acquisition of STC Bancshares Corp. (“STC”). STC was the parent company of STC Capital Bank. Through this business combination, the Company acquired STC Capital Bank's five banking offices located in the communities of St. Charles, Geneva and South Elgin, Illinois. As of the acquisition date, the Company acquired approximately $250 million in assets, including approximately $174 million in loans, and approximately $202 million in deposits. The Company recorded goodwill of approximately $19 million on the acquisition.

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

On December 14, 2018, the Company acquired Elektra Holding Company, LLC, the parent company of Chicago Deferred Exchange Company, LLC ("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. The Company recorded goodwill of approximately $37 million on the acquisition.

On December 7, 2018, the Company completed its acquisition of certain assets and the assumption of certain liabilities of American Enterprise Bank. Through this asset acquisition, the Company acquired approximately $164 million in assets, including approximately $119 million in loans, and approximately $151 million in deposits, as of the acquisition date.

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. As of the acquisition date, the Company acquired approximately $283 million in assets, including approximately $153 million in loans, and approximately $213 million in deposits. The Company recorded goodwill of approximately $27 million on the acquisition.

On January 4, 2018, the Company acquired iFreedom Direct Corporation DBA Veterans First Mortgage ("Veterans First") with assets including mortgage-servicing-rights on approximately 10,000 loans, totaling an estimated $2 billion in unpaid principal balance, as of the acquisition date. The Company recorded goodwill of approximately $9 million on the acquisition.

ITEMS IMPACTING FINANCIAL RESULTS IN FUTURE PERIODS

Adoption of New Credit Losses Accounting Standard

Beginning in 2020, the Company is adopting the new current expected credit losses standard, or CECL, which impacts the measurement of the Company’s allowance for credit losses (including the allowance for unfunded lending-related commitments). CECL replaces the previous incurred loss methodology, which delays recognition until such loss is probable, with a methodology that reflects an estimate of lifetime expected credit losses considering current economic condition and forecasts. Though other assets, including investment securities and other receivables, are considered in-scope of the standard and will require a measurement of the allowance for credit loss, the most significant impact of CECL remains within the Company’s loan portfolios and related lending commitments.

Based upon the Company’s current composition of assets as well as current considerations of existing and expected future economic conditions, the Company estimates an increase to the allowance for credit losses of approximately 30% to 50% at adoption related to its loan portfolios and related lending commitments. Approximately 80% of the estimated increase is related to additions to existing reserves for unfunded lending-related commitments due to the consideration under CECL of expected utilization by the Company's borrowers over the life of such commitments, as well as for acquired loans, which previously considered credit discounts. The Company estimates an insignificant impact at adoption of measuring an allowance for credit losses for the other in-scope assets noted above. The adjustment at adoption on January 1, 2020 is recognized as an adjustment to the balance sheet (retained earnings or the related asset basis dependent upon whether the asset is purchased credit deteriorated from a prior acquisition). After adoption, adjustments to the allowance for credit losses will primarily be recorded as provision for credit losses on the Company’s income statement. The estimate of the allowance for credit losses is highly dependent upon considerations of current and expected economic conditions, which may result in earnings volatility across economic cycles.

WINTRUST FINANCIAL CORPORATION
Key Operating Measures

Wintrust’s key operating measures and growth rates for the fourth quarter of 2019, as compared to the third quarter of 2019 (sequential quarter) and fourth quarter of 2018 (linked quarter), are shown in the table below:

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

3nd Quarter
2019

% or
basis point (bp)
change from
4rd Quarter
2018

Three Months Ended

(Dollars in thousands, except per share data)

Dec 31, 2019

Sep 30, 2019

Dec 31, 2018

Net income

$

85,964

$

99,121

$

79,657

(13

)%

8

%

Net income per common share – diluted

1.44

1.69

1.35

(15

)

7

Net revenue (1)

374,099

379,989

329,396

(2

)

14

Net interest income

261,879

264,852

254,088

(1

)

3

Net interest margin

3.17

%

3.37

%

3.61

%

(20

)bp

(44

)bp

Net interest margin - fully taxable equivalent (non-GAAP) (2)

3.19

3.39

3.63

(20

)

(44

)

Net overhead ratio (3)

1.53

1.40

1.79

13

(26

)

Return on average assets

0.96

1.16

1.05

(20

)

(9

)

Return on average common equity

9.52

11.42

10.01

(190

)

(49

)

Return on average tangible common equity (non-GAAP) (2)

12.17

14.36

12.48

(219

)

(31

)

At end of period

Total assets

$

36,620,583

$

34,911,902

$

31,244,849

19

%

17

%

Total loans (5)

26,800,290

25,710,171

23,820,691

17

13

Total deposits

30,107,138

28,710,379

26,094,678

19

15

Total shareholders’ equity

3,691,250

3,540,325

3,267,570

17

13


(1)

Net revenue is net interest income plus non-interest income.

(2)

See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 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)

Dec 31, 2019

Sep 30, 2019

Jun 30, 2019

Mar 31, 2019

Dec 31, 2018

Dec 31, 2019

Dec 31, 2018

Selected Financial Condition Data (at end of period):

Total assets

$

36,620,583

$

34,911,902

$

33,641,769

$

32,358,621

$

31,244,849

Total loans (1)

26,800,290

25,710,171

25,304,659

24,214,629

23,820,691

Total deposits

30,107,138

28,710,379

27,518,815

26,804,742

26,094,678

Junior subordinated debentures

253,566

253,566

253,566

253,566

253,566

Total shareholders’ equity

3,691,250

3,540,325

3,446,950

3,371,972

3,267,570

Selected Statements of Income Data:

Net interest income

$

261,879

$

264,852

$

266,202

$

261,986

$

254,088

$

1,054,919

$

964,903

Net revenue (2)

374,099

379,989

364,360

343,643

329,396

1,462,091

1,321,053

Net income

85,964

99,121

81,466

89,146

79,657

355,697

343,166

Net income per common share – Basic

1.46

1.71

1.40

1.54

1.38

6.11

5.95

Net income per common share – Diluted

1.44

1.69

1.38

1.52

1.35

6.03

5.86

Selected Financial Ratios and Other Data:

Performance Ratios:

Net interest margin

3.17

%

3.37

%

3.62

%

3.70

%

3.61

%

3.45

%

3.59

%

Net interest margin - fully taxable equivalent (non-GAAP) (3)

3.19

3.39

3.64

3.72

3.63

3.47

3.61

Non-interest income to average assets

1.25

1.35

1.23

1.06

0.99

1.23

1.23

Non-interest expense to average assets

2.78

2.74

2.87

2.79

2.78

2.79

2.85

Net overhead ratio (4)

1.53

1.40

1.64

1.72

1.79

1.57

1.62

Return on average assets

0.96

1.16

1.02

1.16

1.05

1.07

1.18

Return on average common equity

9.52

11.42

9.68

11.09

10.01

10.41

11.26

Return on average tangible common equity (non-GAAP) (3)

12.17

14.36

12.28

14.14

12.48

13.22

13.95

Average total assets

$

35,645,190

$

33,954,592

$

32,055,769

$

31,216,171

$

30,179,887

$

33,232,083

$

29,028,420

Average total shareholders’ equity

3,622,184

3,496,714

3,414,340

3,309,078

3,200,654

3,461,535

3,098,740

Average loans to average deposits ratio

88.8

%

90.6

%

93.9

%

92.7

%

92.4

%

91.4

%

93.7

%

Period-end loans to deposits ratio

89.0

89.6

92.0

90.3

91.3

Common Share Data at end of period:

Market price per common share

$

70.90

$

64.63

$

73.16

$

67.33

$

66.49

Book value per common share

61.68

60.24

58.62

57.33

55.71

Tangible book value per common share (non-GAAP) (3)

49.70

49.16

47.48

46.38

44.67

Common shares outstanding

57,821,891

56,698,429

56,667,846

56,638,968

56,407,558

Other Data at end of period:

Tier 1 leverage ratio (5)

8.6

%

8.8

%

9.1

%

9.1

%

9.1

%

Risk-based capital ratios:

Tier 1 capital ratio (5)

9.5

9.7

9.6

9.8

9.7

Common equity tier 1 capital ratio(5)

9.2

9.3

9.2

9.3

9.3

Total capital ratio (5)

12.1

12.4

12.4

11.7

11.6

Allowance for credit losses (6)

$

158,461

$

163,273

$

161,901

$

159,622

$

154,164

Non-performing loans

117,588

114,284

113,447

117,586

113,234

Allowance for credit losses to total loans (6)

0.59

%

0.64

%

0.64

%

0.66

%

0.65

%

Non-performing loans to total loans

0.44

0.44

0.45

0.49

0.48

Number of:

Bank subsidiaries

15

15

15

15

15

Banking offices

187

174

172

170

167


(1)

Excludes mortgage loans held-for-sale.

(2)

Net revenue includes net interest income and non-interest income.

(3)

See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance measure/ratio.

(4)

The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.

(5)

Capital ratios for current quarter-end are estimated.

(6)

The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments.


WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

(In thousands)

2019

2019

2019

2019

2018

Assets

Cash and due from banks

$

286,167

$

448,755

$

300,934

$

270,765

$

392,142

Federal funds sold and securities purchased under resale agreements

309

59

58

58

58

Interest bearing deposits with banks

2,164,560

2,260,806

1,437,105

1,609,852

1,099,594

Available-for-sale securities, at fair value

3,106,214

2,270,059

2,186,154

2,185,782

2,126,081

Held-to-maturity securities, at amortized cost

1,134,400

1,095,802

1,191,634

1,051,542

1,067,439

Trading account securities

1,068

3,204

2,430

559

1,692

Equity securities with readily determinable fair value

50,840

46,086

44,319

47,653

34,717

Federal Home Loan Bank and Federal Reserve Bank stock

100,739

92,714

92,026

89,013

91,354

Brokerage customer receivables

16,573

14,943

13,569

14,219

12,609

Mortgage loans held-for-sale

377,313

464,727

394,975

248,557

264,070

Loans, net of unearned income

26,800,290

25,710,171

25,304,659

24,214,629

23,820,691

Allowance for loan losses

(156,828

)

(161,763

)

(160,421

)

(158,212

)

(152,770

)

Net loans

26,643,462

25,548,408

25,144,238

24,056,417

23,667,921

Premises and equipment, net

754,328

721,856

711,214

676,037

671,169

Lease investments, net

231,192

228,647

230,111

224,240

233,208

Accrued interest receivable and other assets

1,061,141

1,087,864

1,023,896

888,492

696,707

Trade date securities receivable

237,607

375,211

263,523

Goodwill

645,220

584,315

584,911

573,658

573,141

Other intangible assets

47,057

43,657

46,588

46,566

49,424

Total assets

$

36,620,583

$

34,911,902

$

33,641,769

$

32,358,621

$

31,244,849

Liabilities and Shareholders’ Equity

Deposits:

Non-interest bearing

$

7,216,758

$

7,067,960

$

6,719,958

$

6,353,456

$

6,569,880

Interest bearing

22,890,380

21,642,419

20,798,857

20,451,286

19,524,798

Total deposits

30,107,138

28,710,379

27,518,815

26,804,742

26,094,678

Federal Home Loan Bank advances

674,870

574,847

574,823

576,353

426,326

Other borrowings

418,174

410,488

418,057

372,194

393,855

Subordinated notes

436,095

435,979

436,021

139,235

139,210

Junior subordinated debentures

253,566

253,566

253,566

253,566

253,566

Trade date securities payable

226

Accrued interest payable and other liabilities

1,039,490

986,092

993,537

840,559

669,644

Total liabilities

32,929,333

31,371,577

30,194,819

28,986,649

27,977,279

Shareholders’ Equity:

Preferred stock

125,000

125,000

125,000

125,000

125,000

Common stock

57,951

56,825

56,794

56,765

56,518

Surplus

1,650,278

1,574,011

1,569,969

1,565,185

1,557,984

Treasury stock

(6,931

)

(6,799

)

(6,650

)

(6,650

)

(5,634

)

Retained earnings

1,899,630

1,830,165

1,747,266

1,682,016

1,610,574

Accumulated other comprehensive loss

(34,678

)

(38,877

)

(45,429

)

(50,344

)

(76,872

)

Total shareholders’ equity

3,691,250

3,540,325

3,446,950

3,371,972

3,267,570

Total liabilities and shareholders’ equity

$

36,620,583

$

34,911,902

$

33,641,769

$

32,358,621

$

31,244,849


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

Three Months Ended

Years Ended

(In thousands, except per share data)

Dec 31, 2019

Sep 30, 2019

Jun 30, 2019

Mar 31, 2019

Dec 31, 2018

Dec 31, 2019

Dec 31, 2018

Interest income

Interest and fees on loans

$

308,055

$

314,277

$

309,161

$

296,987

$

283,311

$

1,228,480

$

1,044,502

Mortgage loans held-for-sale

3,201

3,478

3,104

2,209

3,409

11,992

15,738

Interest bearing deposits with banks

8,971

10,326

5,206

5,300

5,628

29,803

17,090

Federal funds sold and securities purchased under resale agreements

390

310

700

1

Investment securities

27,611

24,758

27,721

27,956

26,656

108,046

87,382

Trading account securities

6

20

5

8

14

39

43

Federal Home Loan Bank and Federal Reserve Bank stock

1,328

1,294

1,439

1,355

1,343

5,416

5,331

Brokerage customer receivables

169

164

178

155

235

666

723

Total interest income

349,731

354,627

346,814

333,970

320,596

1,385,142

1,170,810

Interest expense

Interest on deposits

74,724

76,168

67,024

60,976

55,975

278,892

166,553

Interest on Federal Home Loan Bank advances

1,461

1,774

4,193

2,450

2,563

9,878

12,412

Interest on other borrowings

3,273

3,466

3,525

3,633

3,199

13,897

8,599

Interest on subordinated notes

5,504

5,470

2,806

1,775

1,788

15,555

7,121

Interest on junior subordinated debentures

2,890

2,897

3,064

3,150

2,983

12,001

11,222

Total interest expense

87,852

89,775

80,612

71,984

66,508

330,223

205,907

Net interest income

261,879

264,852

266,202

261,986

254,088

1,054,919

964,903

Provision for credit losses

7,826

10,834

24,580

10,624

10,401

53,864

34,832

Net interest income after provision for credit losses

254,053

254,018

241,622

251,362

243,687

1,001,055

930,071

Non-interest income

Wealth management

24,999

23,999

24,139

23,977

22,726

97,114

90,963

Mortgage banking

47,860

50,864

37,411

18,158

24,182

154,293

136,990

Service charges on deposit accounts

10,973

9,972

9,277

8,848

9,065

39,070

36,404

Gains (losses) on investment securities, net

587

710

864

1,364

(2,649

)

3,525

(2,898

)

Fees from covered call options

1,243

643

1,784

626

3,670

3,519

Trading gains (losses), net

46

11

(44

)

(171

)

(155

)

(158

)

11

Operating lease income, net

12,487

12,025

11,733

10,796

10,882

47,041

38,451

Other

14,025

17,556

14,135

16,901

10,631

62,617

52,710

Total non-interest income

112,220

115,137

98,158

81,657

75,308

407,172

356,150

Non-interest expense

Salaries and employee benefits

145,941

141,024

133,732

125,723

122,111

546,420

480,077

Equipment

14,485

13,314

12,759

11,770

11,523

52,328

42,949

Operating lease equipment

9,766

8,907

8,768

8,319

8,462

35,760

29,305

Occupancy, net

17,132

14,991

15,921

16,245

15,980

64,289

57,814

Data processing

7,569

6,522

6,204

7,525

8,447

27,820

35,027

Advertising and marketing

12,517

13,375

12,845

9,858

9,414

48,595

41,140

Professional fees

7,650

8,037

6,228

5,556

9,259

27,471

32,306

Amortization of other intangible assets

3,017

2,928

2,957

2,942

1,407

11,844

4,571

FDIC insurance

1,348

148

4,127

3,576

4,044

9,199

17,209

OREO expense, net

536

1,170

1,290

632

1,618

3,628

6,120

Other

29,630

24,138

24,776

22,228

19,068

100,772

79,570

Total non-interest expense

249,591

234,554

229,607

214,374

211,333

928,126

826,088

Income before taxes

116,682

134,601

110,173

118,645

107,662

480,101

460,133

Income tax expense

30,718

35,480

28,707

29,499

28,005

124,404

116,967

Net income

$

85,964

$

99,121

$

81,466

$

89,146

$

79,657

$

355,697

$

343,166

Preferred stock dividends

2,050

2,050

2,050

2,050

2,050

8,200

8,200

Net income applicable to common shares

$

83,914

$

97,071

$

79,416

$

87,096

$

77,607

$

347,497

$

334,966

Net income per common share - Basic

$

1.46

$

1.71

$

1.40

$

1.54

$

1.38

$

6.11

$

5.95

Net income per common share - Diluted

$

1.44

$

1.69

$

1.38

$

1.52

$

1.35

$

6.03

$

5.86

Cash dividends declared per common share

$

0.25

$

0.25

$

0.25

$

0.25

$

0.19

$

1.00

$

0.76

Weighted average common shares outstanding

57,538

56,690

56,662

56,529

56,395

56,857

56,300

Dilutive potential common shares

874

773

699

699

892

762

908

Average common shares and dilutive common shares

58,412

57,463

57,361

57,228

57,287

57,619

57,208


TABLE 1: LOAN PORTFOLIO MIX AND GROWTH RATES

% Growth From

(Dollars in thousands)

Dec 31, 2019

Sep 30, 2019

Jun 30, 2019

Mar 31, 2019

Dec 31, 2018

Sep 30, 2019(1)

Dec 31, 2018

Balance:

Commercial

$

8,285,920

$

8,195,602

$

8,270,774

$

7,994,191

$

7,828,538

4

%

6

%

Commercial real estate

8,020,276

7,448,667

7,276,244

6,973,505

6,933,252

30

16

Home equity

513,066

512,303

527,370

528,448

552,343

1

(7

)

Residential real estate

1,354,221

1,218,666

1,118,178

1,053,524

1,002,464

44

35

Premium finance receivables - commercial

3,442,027

3,449,950

3,368,423

2,988,788

2,841,659

(1

)

21

Premium finance receivables - life insurance

5,074,602

4,795,496

4,634,478

4,555,369

4,541,794

23

12

Consumer and other

110,178

89,487

109,192

120,804

120,641

92

(9

)

Total loans, net of unearned income

$

26,800,290

$

25,710,171

$

25,304,659

$

24,214,629

$

23,820,691

17

%

13

%

Mix:

Commercial

31

%

32

%

33

%

33

%

33

%

Commercial real estate

30

29

29

29

29

Home equity

2

2

2

2

2

Residential real estate

5

5

4

4

4

Premium finance receivables - commercial

13

13

13

12

12

Premium finance receivables - life insurance

19

19

18

19

19

Consumer and other

1

1

1

Total loans, net of unearned income

100

%

100

%

100

%

100

%

100

%

(1) Annualized.


TABLE 2: COMMERCIAL AND COMMERCIAL REAL ESTATE LOAN PORTFOLIOS

As of December 31, 2019

% 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

$

5,159,805

31.7

%

$

33,983

$

$

44,230

Franchise

937,482

5.7

2,391

7,976

Mortgage warehouse lines of credit

292,781

1.8

2,166

Asset-based lending

989,018

6.1

128

7,871

Leases

878,528

5.4

722

2,647

PCI - commercial loans (1)

28,306

0.2

1,855

30

Total commercial

$

8,285,920

50.9

%

$

37,224

$

1,855

$

64,920

Commercial Real Estate:

Construction

$

1,023,300

6.3

%

$

1,030

$

$

10,006

Land

177,483

1.1

1,082

4,779

Office

1,044,769

6.4

8,034

9,903

Industrial

1,032,866

6.3

99

6,724

Retail

1,097,930

6.7

6,789

6,738

Multi-family

1,311,542

8.0

913

12,528

Mixed use and other

2,094,946

12.8

8,166

16,086

PCI - commercial real estate (1)

237,440

1.5

14,946

114

Total commercial real estate

$

8,020,276

49.1

%

$

26,113

$

14,946

$

66,878

Total commercial and commercial real estate

$

16,306,196

100.0

%

$

63,337

$

16,801

$

131,798

Commercial real estate - collateral location by state:

Illinois

$

6,176,353

77.0

%

Wisconsin

744,975

9.3

Total primary markets

$

6,921,328

86.3

%

Indiana

218,963

2.7

Florida

114,629

1.4

Arizona

64,022

0.8

California

64,345

0.8

Other

636,989

8.0

Total commercial real estate

$

8,020,276

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.


TABLE 3: DEPOSIT PORTFOLIO MIX AND GROWTH RATES

% Growth From

(Dollars in thousands)

Dec 31, 2019

Sep 30, 2019

Jun 30, 2019

Mar 31, 2019

Dec 31, 2018

Sep 30, 2019 (1)

Dec 31, 2018

Balance:

Non-interest bearing

$

7,216,758

$

7,067,960

$

6,719,958

$

6,353,456

$

6,569,880

8

%

10

%

NOW and interest bearing demand deposits

3,093,159

2,966,098

2,788,976

2,948,576

2,897,133

17

7

Wealth management deposits (2)

3,123,063

2,795,838

3,220,256

3,328,781

2,996,764

46

4

Money market

7,854,189

7,326,899

6,460,098

6,093,596

5,704,866

29

38

Savings

3,196,698

2,934,348

2,823,904

2,729,626

2,665,194

35

20

Time certificates of deposit

5,623,271

5,619,236

5,505,623

5,350,707

5,260,841

7

Total deposits

$

30,107,138

$

28,710,379

$

27,518,815

$

26,804,742

$

26,094,678

19

%

15

%

Mix:

Non-interest bearing

24

%

25

%

24

%

24

%

25

%

NOW and interest bearing demand deposits

10

10

10

11

11

Wealth management deposits (2)

10

10

12

12

12

Money market

26

25

24

23

22

Savings

11

10

10

10

10

Time certificates of deposit

19

20

20

20

20

Total deposits

100

%

100

%

100

%

100

%

100

%


(1)

Annualized.

(2)

Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wintrust Investments, CDEC, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts.


TABLE 4: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS

As of December 31, 2019

(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

$

3,923

$

31,610

$

102,043

$

936,474

$

1,074,050

1.84

%

4-6 months

1,420

16,774

1,235,449

1,253,643

2.13

7-9 months

1,685

18,954

570,523

591,162

1.96

10-12 months

609

20,033

482,719

503,361

1.71

13-18 months

11,242

1,378,718

1,389,960

2.42

19-24 months

1,401

5,403

625,445

632,249

2.56

24+ months

88

4,538

174,220

178,846

1.84

Total

$

9,126

$

108,554

$

102,043

$

5,403,548

$

5,623,271

2.13

%


(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.

TABLE 5: QUARTERLY AVERAGE BALANCES

Average Balance for three months ended,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

(In thousands)

2019

2019

2019

2019

2018

Interest-bearing deposits with banks and cash equivalents (1)

$

2,206,251

$

1,960,898

$

893,332

$

897,629

$

1,042,860

Investment securities (2)

3,909,699

3,410,090

3,653,580

3,630,577

3,347,496

FHLB and FRB stock

94,843

92,583

105,491

94,882

98,084

Liquidity management assets (6)

6,210,793

5,463,571

4,652,403

4,623,088

4,488,440

Other earning assets (3)(6)

18,353

17,809

15,719

13,591

16,204

Mortgage loans held-for-sale

381,878

379,870

281,732

188,190

265,717

Loans, net of unearned income (4)(6)

26,137,722

25,346,290

24,553,263

23,880,916

23,164,154

Total earning assets (6)

32,748,746

31,207,540

29,503,117

28,705,785

27,934,515

Allowance for loan losses

(167,759

)

(168,423

)

(164,231

)

(157,782

)

(154,438

)

Cash and due from banks

316,631

297,475

273,679

283,019

271,403

Other assets

2,747,572

2,618,000

2,443,204

2,385,149

2,128,407

Total assets

$

35,645,190

$

33,954,592

$

32,055,769

$

31,216,171

$

30,179,887

NOW and interest bearing demand deposits

$

3,016,991

$

2,912,961

$

2,878,021

$

2,803,338

$

2,671,283

Wealth management deposits

2,934,292

2,888,817

2,605,690

2,614,035

2,289,904

Money market accounts

7,647,635

6,956,755

6,095,285

5,915,525

5,632,268

Savings accounts

3,028,763

2,837,039

2,752,828

2,715,422

2,553,133

Time deposits

5,682,449

5,590,228

5,322,384

5,267,796

5,381,029

Interest-bearing deposits

22,310,130

21,185,800

19,654,208

19,316,116

18,527,617

Federal Home Loan Bank advances

596,594

574,833

869,812

594,335

551,846

Other borrowings

415,092

416,300

419,064

465,571

385,878

Subordinated notes

436,025

436,041

220,771

139,217

139,186

Junior subordinated debentures

253,566

253,566

253,566

253,566

253,566

Total interest-bearing liabilities

24,011,407

22,866,540

21,417,421

20,768,805

19,858,093

Non-interest bearing deposits

7,128,166

6,776,786

6,487,627

6,444,378

6,542,228

Other liabilities

883,433

814,552

736,381

693,910

578,912

Equity

3,622,184

3,496,714

3,414,340

3,309,078

3,200,654

Total liabilities and shareholders’ equity

$

35,645,190

$

33,954,592

$

32,055,769

$

31,216,171

$

30,179,887

Net free funds/contribution (5)

$

8,737,339

$

8,341,000

$

8,085,696

$

7,936,980

$

8,076,422


(1)

Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.

(2)

Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.

(3)

Other earning assets include brokerage customer receivables and trading account securities.

(4)

Loans, net of unearned income, include non-accrual loans.

(5)

Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.

(6)

See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.


TABLE 6: QUARTERLY NET INTEREST INCOME

Net Interest Income for three months ended,

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

(In thousands)

2019

2019

2019

2019

2018

Interest income:

Interest-bearing deposits with banks and cash equivalents

$

9,361

$

10,636

$

5,206

$

5,300

$

5,628

Investment securities

28,184

25,332

28,290

28,521

27,242

FHLB and FRB stock

1,328

1,294

1,439

1,355

1,343

Liquidity management assets (2)

38,873

37,262

34,935

35,176

34,213

Other earning assets (2)

176

189

184

165

253

Mortgage loans held-for-sale

3,201

3,478

3,104

2,209

3,409

Loans, net of unearned income (2)

308,947

315,255

310,191

298,021

284,291

Total interest income

$

351,197

$

356,184

$

348,414

$

335,571

$

322,166

Interest expense:

NOW and interest bearing demand deposits

$

4,622

$

5,291

$

5,553

$

4,613

$

4,007

Wealth management deposits

7,867

9,163

7,091

7,000

7,119

Money market accounts

25,603

25,426

21,451

19,460

16,936

Savings accounts

6,145

5,622

4,959

4,249

3,096

Time deposits

30,487

30,666

27,970

25,654

24,817

Interest-bearing deposits

74,724

76,168

67,024

60,976

55,975

Federal Home Loan Bank advances

1,461

1,774

4,193

2,450

2,563

Other borrowings

3,273

3,466

3,525

3,633

3,199

Subordinated notes

5,504

5,470

2,806

1,775

1,788

Junior subordinated debentures

2,890

2,897

3,064

3,150

2,983

Total interest expense

$

87,852

$

89,775

$

80,612

$

71,984

$

66,508

Less: Fully taxable-equivalent adjustment

(1,466

)

(1,557

)

(1,600

)

(1,601

)

(1,570

)

Net interest income (GAAP) (1)

261,879

264,852

266,202

261,986

254,088

Fully taxable-equivalent adjustment

1,466

1,557

1,600

1,601

1,570

Net interest income, fully taxable-equivalent (non-GAAP) (1)

$

263,345

$

266,409

$

267,802

$

263,587

$

255,658


(1)

See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.

(2)

Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period.


TABLE 7: QUARTERLY NET INTEREST MARGIN

Net Interest Margin for three months ended,

Dec 31, 2019

Sep 30, 2019

Jun 30, 2019

Mar 31, 2019

Dec 31, 2018

Yield earned on:

Interest-bearing deposits with banks and cash equivalents

1.68

%

2.15

%

2.34

%

2.39

%

2.14

%

Investment securities

2.86

2.95

3.11

3.19

3.23

FHLB and FRB stock

5.55

5.55

5.47

5.79

5.43

Liquidity management assets

2.48

2.71

3.01

3.09

3.02

Other earning assets

3.83

4.20

4.68

4.91

6.19

Mortgage loans held-for-sale

3.33

3.63

4.42

4.76

5.09

Loans, net of unearned income

4.69

4.93

5.07

5.06

4.87

Total earning assets

4.25

%

4.53

%

4.74

%

4.74

%

4.58

%

Rate paid on:

NOW and interest bearing demand deposits

0.61

%

0.72

%

0.77

%

0.67

%

0.60

%

Wealth management deposits

1.06

1.26

1.09

1.09

1.23

Money market accounts

1.33

1.45

1.41

1.33

1.19

Savings accounts

0.80

0.79

0.72

0.63

0.48

Time deposits

2.13

2.18

2.11

1.98

1.83

Interest-bearing deposits

1.33

1.43

1.37

1.29

1.20

Federal Home Loan Bank advances

0.97

1.22

1.93

1.67

1.84

Other borrowings

3.13

3.30

3.37

3.16

3.29

Subordinated notes

5.05

5.02

5.08

5.10

5.14

Junior subordinated debentures

4.46

4.47

4.78

4.97

4.60

Total interest-bearing liabilities

1.45

%

1.56

%

1.51

%

1.40

%

1.33

%

Interest rate spread (1)(3)

2.80

%

2.97

%

3.23

%

3.34

%

3.25

%

Less: Fully taxable-equivalent adjustment

(0.02

)

(0.02

)

(0.02

)

(0.02

)

(0.02

)

Net free funds/contribution (2)

0.39

0.42

0.41

0.38

0.38

Net interest margin (GAAP) (3)

3.17

%

3.37

%

3.62

%

3.70

%

3.61

%

Fully taxable-equivalent adjustment

0.02

0.02

0.02

0.02

0.02

Net interest margin, fully taxable-equivalent (non-GAAP) (3)

3.19

%

3.39

%

3.64

%

3.72

%

3.63

%


(1)

Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.

(2)

Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.

(3)

See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.


TABLE 8: YEAR-TO-DATE AVERAGE BALANCES, AND NET INTEREST INCOME AND MARGIN

Average Balance for years ended,

Interest for years ended,

Yield/Rate for years ended,

(Dollars in thousands)

Dec 31, 2019

Dec 31, 2018

Dec 31, 2019

Dec 31, 2018

Dec 31, 2019

Dec 31, 2018

Interest-bearing deposits with banks and cash equivalents (1)

$

1,494,418

$

888,671

$

30,503

$

17,091

2.04

%

1.92

%

Investment securities (2)

3,651,091

3,045,555

110,326

89,640

3.02

2.94

FHLB and FRB stock

96,924

101,681

5,416

5,331

5.59

5.24

Liquidity management assets (3)(8)

$

5,242,433

$

4,035,907

$

146,245

$

112,062

2.79

%

2.78

%

Other earning assets (3)(4)(8)

16,385

20,681

714

777

4.36

3.75

Mortgage loans held-for-sale

308,645

332,863

11,992

15,738

3.89

4.73

Loans, net of unearned income (3)(5)(8)

24,986,736

22,500,482

1,232,415

1,047,905

4.93

4.66

Total earning assets (8)

$

30,554,199

$

26,889,933

$

1,391,366

$

1,176,482

4.55

%

4.38

%

Allowance for loan losses

(164,587

)

(148,342

)

Cash and due from banks

292,807

266,086

Other assets

2,549,664

2,020,743

Total assets

$

33,232,083

$

29,028,420

NOW and interest bearing demand deposits

$

2,903,441

$

2,436,791

$

20,079

$

9,773

0.69

%

0.40

%

Wealth management deposits

2,761,936

2,356,145

31,121

27,839

1.13

1.18

Money market accounts

6,659,376

5,105,244

91,940

42,973

1.38

0.84

Savings accounts

2,834,381

2,684,661

20,975

11,444

0.74

0.43

Time deposits

5,467,192

4,872,590

114,777

74,524

2.10

1.53

Interest-bearing deposits

$

20,626,326

$

17,455,431

$

278,892

$

166,553

1.35

%

0.95

%

Federal Home Loan Bank advances

658,669

713,539

9,878

12,412

1.50

1.74

Other borrowings

428,834

289,615

13,897

8,599

3.24

2.97

Subordinated notes

309,178

139,140

15,555

7,121

5.03

5.12

Junior subordinated debentures

253,566

253,566

12,001

11,222

4.67

4.37

Total interest-bearing liabilities

$

22,276,573

$

18,851,291

$

330,223

$

205,907

1.48

%

1.09

%

Non-interest bearing deposits

6,711,298

6,545,251

Other liabilities

782,677

533,138

Equity

3,461,535

3,098,740

Total liabilities and shareholders’ equity

$

33,232,083

$

29,028,420

Interest rate spread (6)(8)

3.07

%

3.29

%

Less: Fully taxable-equivalent adjustment

(6,224

)

(5,672

)

(0.02

)

(0.02

)

Net free funds/contribution (7)

$

8,277,626

$

8,038,642

0.40

0.32

Net interest income/ margin (GAAP) (8)

$

1,054,919

$

964,903

3.45

%

3.59

%

Fully taxable-equivalent adjustment

6,224

5,672

0.02

0.02

Net interest income/ margin, fully taxable-equivalent (non-GAAP) (8)

$

1,061,143

$

970,575

3.47

%

3.61

%


(1)

Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.

(2)

Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.

(3)

Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on a marginal federal corporate tax rate in effect as of the applicable period.

(4)

Other earning assets include brokerage customer receivables and trading account securities.

(5)

Loans, net of unearned income, include non-accrual loans.

(6)

Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.

(7)

Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.

(8)

See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance ratio.


TABLE 9: INTEREST RATE SENSITIVITY

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

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

Static Shock Scenario

+200
Basis
Points

+100
Basis
Points

-100
Basis
Points

Dec 31, 2019

18.6

%

9.7

%

(10.9

)%

Sep 30, 2019

20.7

10.5

(11.9

)

Jun 30, 2019

17.3

8.9

(10.2

)

Mar 31, 2019

14.9

7.8

(8.5

)

Dec 31, 2018

15.6

7.9

(8.6

)


Ramp Scenario

+200
Basis
Points

+100
Basis
Points

-100
Basis
Points

Dec 31, 2019

9.3

%

4.8

%

(5.0

)%

Sep 30, 2019

10.1

5.2

(5.6

)

Jun 30, 2019

8.3

4.3

(4.6

)

Mar 31, 2019

6.7

3.5

(3.3

)

Dec 31, 2018

7.4

3.8

(3.6

)

TABLE 10: MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES

Loans repricing or maturity period

As of December 31, 2019

One year or less

From one to five years

Over five years

(In thousands)

Total

Commercial

Fixed rate

$

180,519

$

1,454,680

$

796,323

$

2,431,522

Variable rate

5,832,290

21,972

136

5,854,398

Total commercial

$

6,012,809

$

1,476,652

$

796,459

$

8,285,920

Commercial real estate

Fixed rate

480,094

2,112,534

370,604

2,963,232

Variable rate

5,019,250

37,787

7

5,057,044

Total commercial real estate

$

5,499,344

$

2,150,321

$

370,611

$

8,020,276

Home equity

Fixed rate

25,854

3,741

9,348

38,943

Variable rate

473,879

244

474,123

Total home equity

$

499,733

$

3,741

$

9,592

$

513,066

Residential real estate

Fixed rate

40,630

22,015

390,926

453,571

Variable rate

85,597

347,368

467,685

900,650

Total residential real estate

$

126,227

$

369,383

$

858,611

$

1,354,221

Premium finance receivables - commercial

Fixed rate

3,362,547

79,480

3,442,027

Variable rate

Total premium finance receivables - commercial

$

3,362,547

$

79,480

$

$

3,442,027

Premium finance receivables - life insurance

Fixed rate

14,171

132,629

25,247

172,047

Variable rate

4,902,555

4,902,555

Total premium finance receivables - life insurance

$

4,916,726

$

132,629

$

25,247

$

5,074,602

Consumer and other

Fixed rate

77,621

10,470

1,927

90,018

Variable rate

20,160

20,160

Total consumer and other

$

97,781

$

10,470

$

1,927

$

110,178

Total per category

Fixed rate

4,181,436

3,815,549

1,594,375

9,591,360

Variable rate

16,333,731

407,127

468,072

17,208,930

Total loans, net of unearned income

$

20,515,167

$

4,222,676

$

2,062,447

$

26,800,290

Variable Rate Loan Pricing by Index:

Prime

$

2,162,148

One-month LIBOR

8,552,261

Three-month LIBOR

334,925

Twelve-month LIBOR

5,521,391

Other

638,205

Total variable rate

$

17,208,930


Graph available at the following link:
http://ml.globenewswire.com/Resource/Download/50728f70-26b9-4437-95a1-dd7c03f0b3c3

Source: Bloomberg

As noted in the table on the previous page, the majority of the Company’s portfolio is tied to LIBOR indices which, as shown in the table above, do not mirror the same changes as the Prime rate when the Federal Reserve raises or lowers interest rates. Specifically, the Company has $8.6 billion of variable rate loans tied to one-month LIBOR and $5.5 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:

Basis Points (bps) Change in

Prime

1-month
LIBOR

12-month
LIBOR

Fourth Quarter 2019

-25

bps

-26

bps

-3

bps

Third Quarter 2019

-50

-38

-15

Second Quarter 2019

0

-9

-53

First Quarter 2019

0

-1

-30

Fourth Quarter 2018

+25

+24

+9


TABLE 11: ALLOWANCE FOR CREDIT LOSSES

Three Months Ended

Years Ended

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Dec 31,

Dec 31,

(Dollars in thousands)

2019

2019

2019

2019

2018

2019

2018

Allowance for loan losses at beginning of period

$

161,763

$

160,421

$

158,212

$

152,770

$

149,756

$

152,770

$

137,905

Provision for credit losses

7,826

10,834

24,580

10,624

10,401

53,864

34,832

Other adjustments

30

(13

)

(11

)

(27

)

(79

)

(21

)

(181

)

Reclassification (to) from allowance for unfunded lending-related commitments

(122

)

(30

)

(70

)

(16

)

(150

)

(238

)

(126

)

Charge-offs:

Commercial

11,222

6,775

17,380

503

6,416

35,880

14,532

Commercial real estate

533

809

326

3,734

219

5,402

1,395

Home equity

1,330

1,594

690

88

715

3,702

2,245

Residential real estate

483

25

287

3

267

798

1,355

Premium finance receivables - commercial

3,817

1,866

5,009

2,210

1,741

12,902

12,228

Premium finance receivables - life insurance

Consumer and other

167

117

136

102

148

522

880

Total charge-offs

17,552

11,186

23,828

6,640

9,506

59,206

32,635

Recoveries:

Commercial

1,871

367

289

318

225

2,845

1,457

Commercial real estate

1,404

385

247

480

1,364

2,516

5,631

Home equity

166

183

68

62

105

479

541

Residential real estate

50

203

140

29

47

422

2,075

Premium finance receivables - commercial

1,350

563

734

556

567

3,203

3,069

Premium finance receivables - life insurance

Consumer and other

42

36

60

56

40

194

202

Total recoveries

4,883

1,737

1,538

1,501

2,348

9,659

12,975

Net charge-offs

(12,669

)

(9,449

)

(22,290

)

(5,139

)

(7,158

)

(49,547

)

(19,660

)

Allowance for loan losses at period end

$

156,828

$

161,763

$

160,421

$

158,212

$

152,770

$

156,828

$

152,770

Allowance for unfunded lending-related commitments at period end

1,633

1,510

1,480

1,410

1,394

1,633

1,394

Allowance for credit losses at period end

$

158,461

$

163,273

$

161,901

$

159,622

$

154,164

$

158,461

$

154,164

Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average:

Commercial

0.46

%

0.31

%

0.85

%

0.01

%

0.33

%

0.41

%

0.18

%

Commercial real estate

(0.04

)

0.02

0.00

0.19

(0.07

)

0.04

(0.06

)

Home equity

0.89

1.08

0.47

0.02

0.43

0.61

0.28

Residential real estate

0.14

(0.07

)

0.06

(0.01

)

0.10

0.04

(0.08

)

Premium finance receivables - commercial

0.28

0.15

0.55

0.23

0.16

0.30

0.33

Premium finance receivables - life insurance

Consumer and other

0.41

0.27

0.30

0.16

0.30

0.29

0.50

Total loans, net of unearned income

0.19

%

0.15

%

0.36

%

0.09

%

0.12

%

0.20

%

0.09

%

Net charge-offs as a percentage of the provision for credit losses

161.88

%

87.22

%

90.68

%

48.37

%

68.82

%

91.99

%

56.44

%

Loans at period-end

$

26,800,290

$

25,710,171

$

25,304,659

$

24,214,629

$

23,820,691

Allowance for loan losses as a percentage of loans at period end

0.59

%

0.63

%

0.63

%

0.65

%

0.64

%

Allowance for credit losses as a percentage of loans at period end

0.59

0.64

0.64

0.66

0.65

Provision for credit losses by component for the periods presented:

Three Months Ended

Years Ended

Dec 31,

Sep 30,

Jun 30,

Mar 31,

Dec 31,

Dec 31,

Dec 31,

(In thousands)

2019

2019

2019

2019

2018

2019

2018

Provision for loan losses

$

7,704

$

10,804

$

24,510

$

10,608

$

10,251

$

53,626

$

34,706

Provision for unfunded lending-related commitments

122

30

70

16

150

238

126

Provision for credit losses

$

7,826

$

10,834

$

24,580

$

10,624