Exhibit 99.1
Wintrust Financial Corporation
9700 W. Higgins Road, Suite 800, Rosemont, Illinois 60018
News Release
FOR IMMEDIATE RELEASE | April 16, 2018 | |
FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Senior Executive Vice President & Chief Operating Officer
(847) 939-9000
Web site address: www.wintrust.com
Wintrust Financial Corporation Reports Record First Quarter 2018 Net Income, an Increase of 40% Over Prior Year
ROSEMONT, ILLINOIS – Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq: WTFC) announced net income of $82.0 million or $1.40 per diluted common share for the first quarter of 2018 compared to net income of $68.8 million or $1.17 per diluted common share for the fourth quarter of 2017 and $58.4 million or $1.00 per diluted common share for the first quarter of 2017.
Highlights of the First Quarter of 2018 *:
• | Total assets increased by $541 million from the prior quarter and now total $28.5 billion. |
• | Total loans increased by $421 million from the prior quarter. |
• | Net interest margin increased primarily as a result of higher earning asset yields due to rising interest rates in the market. This increase as well as $586 million of growth in average earning assets since the fourth quarter of 2017 drove a $6.0 million increase in net interest income over the prior quarter. |
• | Return on average assets increased to 1.20% from 1.00% in the prior quarter. Return on average common equity increased to 11.29% from 9.39% in the prior quarter. |
• | Decrease in effective tax rate to 24.14% from 28.19% in the fourth quarter of 2017, which was impacted by the enactment of the Tax Cuts and Jobs Act on December 22, 2017 ("Tax Reform") and $2.6 million of excess tax benefits related to income taxes attributed to share-based compensation. |
• | Allowance for loan losses as a percentage of total non-performing loans remained strong at 156%. |
• | Net charge-offs increased to $6.7 million from $3.7 million in the fourth quarter of 2017. Annualized net charge-offs as a percentage of average total loans remained at historically low levels at 12 basis points for the current quarter. |
• | Losses from the sale and negative fair value adjustments realized on other real estate owned increased by $2.7 million during the quarter as a result of our continued monitoring and workout efforts. |
• | Mortgage banking revenue increased to $31.0 million, which was positively impacted by a $4.1 million positive fair value adjustment related to mortgage servicing rights assets compared to a $46,000 positive fair value adjustment in the fourth quarter of 2017. The previously announced acquisition of iFreedom Direct Corporation DBA Veterans First Mortgage ("Veterans First") was completed, which positively impacted mortgage banking revenue by $5.9 million from approximately half a quarter of origination activity during the period after the pipeline was initially established, offset by $5.9 million in expenses from nearly the entire quarter. Additionally, associated with the Veterans First acquisition, $13.8 million of mortgage servicing rights assets were acquired. |
* See "Supplemental Financial Measures/Ratios" on pages 10-11 for more information on non-GAAP measures.
Edward J. Wehmer, President and Chief Executive Officer, commented, "Wintrust reported record net income for the ninth consecutive quarter. These results reflected the steady strength of our internal growth engine at Wintrust as we grew assets by $541 million. The first quarter of 2018 was also characterized by the increased net interest margin as we continued to benefit from rising interest rates, reduced operating costs, steady credit quality metrics and the completion of the acquisition of Veterans First."
Mr. Wehmer continued, "We grew our loan portfolio by $421 million during the first quarter of 2018, which was driven by strong growth in the commercial loan portfolio. The improvement in net interest margin during the period was primarily
1
attributable to rising interest rates in the market. We remain well positioned for expected rising rates in the future. The increased loan volume and continued improvement in net interest margin along with the continued momentum from loan growth at the very end of 2017 resulted in an increase in net interest income of $6.0 million in the first quarter of 2018, despite two less days in the quarter. Our loan pipelines remain consistently strong."
Commenting on credit quality, Mr. Wehmer noted, "Credit quality metrics remained strong during the first quarter of 2018 and the Company continued its practice of addressing and resolving non-performing credits in a timely fashion. Total non-performing assets decreased $4.6 million during the first quarter of 2018 resulting in non-performing assets as a percentage of total assets dropping from 0.47% to 0.44% during the period. Total non-performing loans decreased slightly in the first quarter of 2018 and now total $89.7 million, or 0.41% of total loans. As a percentage of non-performing loans, the allowance for loan losses remained strong at 156%. Other real estate owned decreased $4.0 million to $36.6 million during the first quarter of 2018 as a result of our continued monitoring and workout efforts. Net charge-offs totaled $6.7 million in the current quarter, increasing $3.0 million from the fourth quarter of 2017. This increase was driven primarily by $4.3 million of net charge-offs within the commercial insurance premium finance receivables portfolio. Despite this increase during the current period, annualized net charge-offs as a percentage of total loans ended the first quarter of 2018 at 0.12%, which remains at historically low levels. We believe that the Company's reserves remain appropriate."
Mr. Wehmer further commented, "Mortgage banking revenue in the first quarter of 2018 totaled $31.0 million, an increase of $3.5 million compared to the fourth quarter of 2017 and an increase of $9.0 million compared to the first quarter of 2017. The increase in mortgage banking revenue for the first quarter of 2018 compared to the fourth quarter of 2017 was impacted by the acquisition of Veterans First, which contributed approximately $5.9 million during its first partial quarter of being a part of Wintrust. Veterans First will continue to assist us in growing our mortgage banking business with opportunities to expand in both size and delivery channels. Mortgage loan origination volumes in the first quarter of 2018 declined to $779 million from $879 million in the fourth quarter of 2017 as a result of the recent rise in interest rates and typical seasonality in January and February within our primary markets. Home purchases activity represented 73% of the volume for the first quarter of 2018 compared to 67% in the fourth quarter of 2017. Our mortgage pipeline remains strong. We continue to look for opportunities to further enhance the mortgage banking business both organically and through acquisitions."
Turning to the future, Mr. Wehmer stated, "We expect our growth engine to continue its momentum from the first quarter into the remainder of 2018. Wintrust continues to take a steady and measured approach to achieving our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure to achieve our goal of a net overhead ratio below 1.50% by the end of 2018 and continuing to increase shareholder value. Loan growth at the end of the first quarter of 2018 should add to this momentum as period-end loan balances exceeded the first quarter average balance by $351 million. We remain well-positioned for a rising interest rate environment in the future, which, coupled with this loan growth, should continue to grow net interest income. Additionally, Tax Reform is expected to help fuel our growth and increase profitability as we continue through 2018. As previously noted, we expect our effective income tax rate for the full year of 2018 to be approximately 26%-27%, excluding any impact of excess tax benefits associated with share-based compensation. Evaluating strategic acquisitions and organic branch growth will also be a part of our overall growth strategy with the goal of becoming Chicago’s bank and Wisconsin’s bank. To that end, the Company opened one new branch location in the heart of Wrigleyville in Chicago during April and anticipates opening four or five additional branches in Illinois and Wisconsin during the second and third quarters of 2018. Our opportunities for both internal growth and external growth remain consistently strong."
2
The graphs below illustrate certain highlights of the first quarter of 2018.
3
4
5
Wintrust’s key operating measures and growth rates for the first quarter of 2018, as compared to the sequential and linked quarters, are shown in the table below:
% or(4) basis point (bp) change from 4th Quarter 2017 | % or basis point (bp) change from 1st Quarter 2017 | |||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
(Dollars in thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||||||||||
Net income | $ | 81,981 | $ | 68,781 | $ | 58,378 | 19 | % | 40 | % | ||||||||||
Net income per common share – diluted | $ | 1.40 | $ | 1.17 | $ | 1.00 | 20 | % | 40 | % | ||||||||||
Net revenue (1) | $ | 310,761 | $ | 300,137 | $ | 261,345 | 4 | % | 19 | % | ||||||||||
Net interest income | $ | 225,082 | $ | 219,099 | $ | 192,580 | 3 | % | 17 | % | ||||||||||
Net interest margin | 3.54 | % | 3.45 | % | 3.36 | % | 9 | bp | 18 | bp | ||||||||||
Net interest margin - fully taxable equivalent (non-GAAP) (2) | 3.56 | % | 3.49 | % | 3.39 | % | 7 | bp | 17 | bp | ||||||||||
Net overhead ratio (3) | 1.58 | % | 1.69 | % | 1.60 | % | (11 | ) | bp | (2 | ) | bp | ||||||||
Return on average assets | 1.20 | % | 1.00 | % | 0.94 | % | 20 | bp | 26 | bp | ||||||||||
Return on average common equity | 11.29 | % | 9.39 | % | 8.93 | % | 190 | bp | 236 | bp | ||||||||||
Return on average tangible common equity (non-GAAP) (2) | 14.02 | % | 11.65 | % | 11.44 | % | 237 | bp | 258 | bp | ||||||||||
At end of period | ||||||||||||||||||||
Total assets | $ | 28,456,772 | $ | 27,915,970 | $ | 25,778,893 | 8 | % | 10 | % | ||||||||||
Total loans, excluding covered loans | 22,062,134 | 21,640,797 | 19,931,058 | 8 | % | 11 | % | |||||||||||||
Total deposits | 23,279,327 | 23,183,347 | 21,730,441 | 2 | % | 7 | % | |||||||||||||
Total shareholders’ equity | 3,031,250 | 2,976,939 | 2,764,983 | 7 | % | 10 | % | |||||||||||||
(1) | Net revenue is net interest income plus non-interest income. |
(2) | See "Supplemental Financial Measures/Ratios" for additional information on this performance measure/ratio. |
(3) | The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period's average total assets. A lower ratio indicates a higher degree of efficiency. |
(4) | Period-end balance sheet percentage changes are annualized. |
Certain returns, yields, performance ratios, or quarterly growth rates are “annualized” in this presentation to represent an annual time period. This is done for analytical purposes to better discern for decision-making purposes underlying performance trends when compared to full-year or year-over-year amounts. For example, a 5% growth rate for a quarter would represent an annualized 20% growth rate. Additional supplemental financial information showing quarterly trends can be found on the Company’s website at www.wintrust.com by choosing “Financial Reports” under the “Investor Relations” heading, and then choosing “Financial Highlights.”
6
WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights
Three Months Ended | ||||||||||||
(Dollars in thousands, except per share data) | March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||
Selected Financial Condition Data (at end of period): | ||||||||||||
Total assets | $ | 28,456,772 | $ | 27,915,970 | $ | 25,778,893 | ||||||
Total loans, excluding covered loans | 22,062,134 | 21,640,797 | 19,931,058 | |||||||||
Total deposits | 23,279,327 | 23,183,347 | 21,730,441 | |||||||||
Junior subordinated debentures | 253,566 | 253,566 | 253,566 | |||||||||
Total shareholders’ equity | 3,031,250 | 2,976,939 | 2,764,983 | |||||||||
Selected Statements of Income Data: | ||||||||||||
Net interest income | $ | 225,082 | $ | 219,099 | $ | 192,580 | ||||||
Net revenue (1) | 310,761 | 300,137 | 261,345 | |||||||||
Net income | 81,981 | 68,781 | 58,378 | |||||||||
Net income per common share – Basic | $ | 1.42 | $ | 1.19 | $ | 1.05 | ||||||
Net income per common share – Diluted | $ | 1.40 | $ | 1.17 | $ | 1.00 | ||||||
Selected Financial Ratios and Other Data: | ||||||||||||
Performance Ratios: | ||||||||||||
Net interest margin | 3.54 | % | 3.45 | % | 3.36 | % | ||||||
Net interest margin - fully taxable equivalent (non-GAAP) (2) | 3.56 | % | 3.49 | % | 3.39 | % | ||||||
Non-interest income to average assets | 1.25 | % | 1.18 | % | 1.11 | % | ||||||
Non-interest expense to average assets | 2.83 | % | 2.87 | % | 2.70 | % | ||||||
Net overhead ratio (3) | 1.58 | % | 1.69 | % | 1.60 | % | ||||||
Return on average assets | 1.20 | % | 1.00 | % | 0.94 | % | ||||||
Return on average common equity | 11.29 | % | 9.39 | % | 8.93 | % | ||||||
Return on average tangible common equity (non-GAAP) (2) | 14.02 | % | 11.65 | % | 11.44 | % | ||||||
Average total assets | $ | 27,809,597 | $ | 27,179,484 | $ | 25,207,348 | ||||||
Average total shareholders’ equity | 2,995,592 | 2,942,999 | 2,739,050 | |||||||||
Average loans to average deposits ratio (excluding covered loans) | 95.2 | % | 92.3 | % | 92.5 | % | ||||||
Common Share Data at end of period: | ||||||||||||
Market price per common share | $ | 86.05 | $ | 82.37 | $ | 69.12 | ||||||
Book value per common share (2) | $ | 51.66 | $ | 50.96 | $ | 47.88 | ||||||
Tangible common book value per share (2) | $ | 42.17 | $ | 41.68 | $ | 37.97 | ||||||
Common shares outstanding | 56,256,498 | 55,965,207 | 52,503,663 | |||||||||
Other Data at end of period:(6) | ||||||||||||
Leverage Ratio (4) | 9.4 | % | 9.3 | % | 9.3 | % | ||||||
Tier 1 capital to risk-weighted assets (4) | 10.0 | % | 9.9 | % | 10.0 | % | ||||||
Common equity Tier 1 capital to risk-weighted assets (4) | 9.5 | % | 9.4 | % | 8.9 | % | ||||||
Total capital to risk-weighted assets (4) | 12.1 | % | 12.0 | % | 12.2 | % | ||||||
Allowance for credit losses (5) | $ | 140,746 | $ | 139,174 | $ | 127,630 | ||||||
Non-performing loans | 89,690 | 90,162 | 78,979 | |||||||||
Allowance for credit losses to total loans (5) | 0.64 | % | 0.64 | % | 0.64 | % | ||||||
Non-performing loans to total loans | 0.41 | % | 0.42 | % | 0.40 | % | ||||||
Number of: | ||||||||||||
Bank subsidiaries | 15 | 15 | 15 | |||||||||
Banking offices | 157 | 157 | 155 | |||||||||
(1) | Net revenue includes net interest income and non-interest income. |
(2) | See “Supplemental Financial Measures/Ratios” for additional information on this performance measure/ratio. |
(3) | The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency. |
(4) | Capital ratios for current quarter-end are estimated. |
(5) | The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excludes the allowance for covered loan losses. |
(6) | Asset quality ratios exclude covered loans. |
7
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(Unaudited) | (Unaudited) | |||||||||||
(In thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 231,407 | $ | 277,534 | $ | 214,102 | ||||||
Federal funds sold and securities purchased under resale agreements | 57 | 57 | 3,046 | |||||||||
Interest bearing deposits with banks | 980,380 | 1,063,242 | 1,007,468 | |||||||||
Available-for-sale securities, at fair value | 1,895,688 | 1,803,666 | 1,803,733 | |||||||||
Held-to-maturity securities, at amortized cost | 892,937 | 826,449 | 667,764 | |||||||||
Trading account securities | 1,682 | 995 | 714 | |||||||||
Equity securities with readily determinable fair value | 37,832 | — | — | |||||||||
Federal Home Loan Bank and Federal Reserve Bank stock | 104,956 | 89,989 | 78,904 | |||||||||
Brokerage customer receivables | 24,531 | 26,431 | 23,171 | |||||||||
Mortgage loans held-for-sale | 411,505 | 313,592 | 288,964 | |||||||||
Loans, net of unearned income, excluding covered loans | 22,062,134 | 21,640,797 | 19,931,058 | |||||||||
Covered loans | — | — | 52,359 | |||||||||
Total loans | 22,062,134 | 21,640,797 | 19,983,417 | |||||||||
Allowance for loan losses | (139,503 | ) | (137,905 | ) | (125,819 | ) | ||||||
Allowance for covered loan losses | — | — | (1,319 | ) | ||||||||
Net loans | 21,922,631 | 21,502,892 | 19,856,279 | |||||||||
Premises and equipment, net | 626,687 | 621,895 | 598,746 | |||||||||
Lease investments, net | 190,775 | 212,335 | 155,233 | |||||||||
Accrued interest receivable and other assets | 601,794 | 567,374 | 560,741 | |||||||||
Trade date securities receivable | — | 90,014 | — | |||||||||
Goodwill | 511,497 | 501,884 | 499,341 | |||||||||
Other intangible assets | 22,413 | 17,621 | 20,687 | |||||||||
Total assets | $ | 28,456,772 | $ | 27,915,970 | $ | 25,778,893 | ||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Deposits: | ||||||||||||
Non-interest bearing | $ | 6,612,319 | $ | 6,792,497 | $ | 5,790,579 | ||||||
Interest bearing | 16,667,008 | 16,390,850 | 15,939,862 | |||||||||
Total deposits | 23,279,327 | 23,183,347 | 21,730,441 | |||||||||
Federal Home Loan Bank advances | 915,000 | 559,663 | 227,585 | |||||||||
Other borrowings | 247,092 | 266,123 | 238,787 | |||||||||
Subordinated notes | 139,111 | 139,088 | 138,993 | |||||||||
Junior subordinated debentures | 253,566 | 253,566 | 253,566 | |||||||||
Accrued interest payable and other liabilities | 591,426 | 537,244 | 424,538 | |||||||||
Total liabilities | 25,425,522 | 24,939,031 | 23,013,910 | |||||||||
Shareholders’ Equity: | ||||||||||||
Preferred stock | 125,000 | 125,000 | 251,257 | |||||||||
Common stock | 56,364 | 56,068 | 52,605 | |||||||||
Surplus | 1,540,673 | 1,529,035 | 1,381,886 | |||||||||
Treasury stock | (5,355 | ) | (4,986 | ) | (4,884 | ) | ||||||
Retained earnings | 1,387,663 | 1,313,657 | 1,143,943 | |||||||||
Accumulated other comprehensive loss | (73,095 | ) | (41,835 | ) | (59,824 | ) | ||||||
Total shareholders’ equity | 3,031,250 | 2,976,939 | 2,764,983 | |||||||||
Total liabilities and shareholders’ equity | $ | 28,456,772 | $ | 27,915,970 | $ | 25,778,893 | ||||||
8
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended | |||||||||||
(In thousands, except per share data) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||
Interest income | |||||||||||
Interest and fees on loans | 234,994 | 226,447 | 196,916 | ||||||||
Mortgage loans held-for-sale | 2,818 | 3,291 | 2,398 | ||||||||
Interest bearing deposits with banks | 2,796 | 2,723 | 1,623 | ||||||||
Federal funds sold and securities purchased under resale agreements | — | — | 1 | ||||||||
Investment securities | 19,128 | 18,160 | 13,573 | ||||||||
Trading account securities | 14 | 2 | 11 | ||||||||
Federal Home Loan Bank and Federal Reserve Bank stock | 1,298 | 1,067 | 1,070 | ||||||||
Brokerage customer receivables | 157 | 150 | 167 | ||||||||
Total interest income | 261,205 | 251,840 | 215,759 | ||||||||
Interest expense | |||||||||||
Interest on deposits | 26,549 | 24,930 | 16,270 | ||||||||
Interest on Federal Home Loan Bank advances | 3,639 | 2,124 | 1,590 | ||||||||
Interest on other borrowings | 1,699 | 1,600 | 1,139 | ||||||||
Interest on subordinated notes | 1,773 | 1,786 | 1,772 | ||||||||
Interest on junior subordinated debentures | 2,463 | 2,301 | 2,408 | ||||||||
Total interest expense | 36,123 | 32,741 | 23,179 | ||||||||
Net interest income | 225,082 | 219,099 | 192,580 | ||||||||
Provision for credit losses | 8,346 | 7,772 | 5,209 | ||||||||
Net interest income after provision for credit losses | 216,736 | 211,327 | 187,371 | ||||||||
Non-interest income | |||||||||||
Wealth management | 22,986 | 21,910 | 20,148 | ||||||||
Mortgage banking | 30,960 | 27,411 | 21,938 | ||||||||
Service charges on deposit accounts | 8,857 | 8,907 | 8,265 | ||||||||
(Losses) gains on investment securities, net | (351 | ) | 14 | (55 | ) | ||||||
Fees from covered call options | 1,597 | 1,610 | 759 | ||||||||
Trading gains (losses), net | 103 | 24 | (320 | ) | |||||||
Operating lease income, net | 9,691 | 8,598 | 5,782 | ||||||||
Other | 11,836 | 12,564 | 12,248 | ||||||||
Total non-interest income | 85,679 | 81,038 | 68,765 | ||||||||
Non-interest expense | |||||||||||
Salaries and employee benefits | 112,436 | 118,009 | 99,316 | ||||||||
Equipment | 10,072 | 9,500 | 9,002 | ||||||||
Operating lease equipment depreciation | 6,533 | 7,015 | 4,636 | ||||||||
Occupancy, net | 13,767 | 14,154 | 13,101 | ||||||||
Data processing | 8,493 | 7,915 | 7,925 | ||||||||
Advertising and marketing | 8,824 | 7,382 | 5,150 | ||||||||
Professional fees | 6,649 | 8,879 | 4,660 | ||||||||
Amortization of other intangible assets | 1,004 | 1,028 | 1,164 | ||||||||
FDIC insurance | 4,362 | 4,324 | 4,156 | ||||||||
OREO expense, net | 2,926 | 599 | 1,665 | ||||||||
Other | 19,283 | 17,775 | 17,343 | ||||||||
Total non-interest expense | 194,349 | 196,580 | 168,118 | ||||||||
Income before taxes | 108,066 | 95,785 | 88,018 | ||||||||
Income tax expense | 26,085 | 27,004 | 29,640 | ||||||||
Net income | $ | 81,981 | $ | 68,781 | $ | 58,378 | |||||
Preferred stock dividends | 2,050 | 2,050 | 3,628 | ||||||||
Net income applicable to common shares | $ | 79,931 | $ | 66,731 | $ | 54,750 | |||||
Net income per common share - Basic | $ | 1.42 | $ | 1.19 | $ | 1.05 | |||||
Net income per common share - Diluted | $ | 1.40 | $ | 1.17 | $ | 1.00 | |||||
Cash dividends declared per common share | $ | 0.19 | $ | 0.14 | $ | 0.14 | |||||
Weighted average common shares outstanding | 56,137 | 55,924 | 52,267 | ||||||||
Dilutive potential common shares | 888 | 1,010 | 4,160 | ||||||||
Average common shares and dilutive common shares | 57,025 | 56,934 | 56,427 | ||||||||
9
EARNINGS PER SHARE
The following table shows the computation of basic and diluted earnings per share for the periods indicated:
Three Months Ended | |||||||||||||
(In thousands, except per share data) | March 31, 2018 | December 31, 2017 | March 31, 2017 | ||||||||||
Net income | $ | 81,981 | $ | 68,781 | $ | 58,378 | |||||||
Less: Preferred stock dividends | 2,050 | 2,050 | 3,628 | ||||||||||
Net income applicable to common shares—Basic | (A) | 79,931 | 66,731 | 54,750 | |||||||||
Add: Dividends on convertible preferred stock, if dilutive | — | — | 1,578 | ||||||||||
Net income applicable to common shares—Diluted | (B) | 79,931 | 66,731 | 56,328 | |||||||||
Weighted average common shares outstanding | (C) | 56,137 | 55,924 | 52,267 | |||||||||
Effect of dilutive potential common shares: | |||||||||||||
Common stock equivalents | 888 | 1,010 | 1,060 | ||||||||||
Convertible preferred stock, if dilutive | — | — | 3,100 | ||||||||||
Weighted average common shares and effect of dilutive potential common shares | (D) | 57,025 | 56,934 | 56,427 | |||||||||
Net income per common share: | |||||||||||||
Basic | (A/C) | $ | 1.42 | $ | 1.19 | $ | 1.05 | ||||||
Diluted | (B/D) | $ | 1.40 | $ | 1.17 | $ | 1.00 | ||||||
Potentially dilutive common shares can result from stock options, restricted stock unit awards, stock warrants, the Company’s convertible preferred stock and shares to be issued under the Employee Stock Purchase Plan and the Directors Deferred Fee and Stock Plan, being treated as if they had been either exercised or issued, computed by application of the treasury stock method. While potentially dilutive common shares are typically included in the computation of diluted earnings per share, potentially dilutive common shares are excluded from this computation in periods in which the effect would reduce the loss per share or increase the income per share. For diluted earnings per share, net income applicable to common shares can be affected by the conversion of the Company’s convertible preferred stock. Where the effect of this conversion would reduce the loss per share or increase the income per share for a period, net income applicable to common shares is not adjusted by the associated preferred dividends. On April 25, 2017, 2,073 shares of the Series C Preferred Stock were converted at the option of the respective holder into 51,244 shares of the Company's common stock, pursuant to the terms of the Series C Preferred Stock. On April 27, 2017, the Company caused a mandatory conversion of its outstanding 124,184 shares of Series C Preferred Stock into 3,069,828 shares of the Company's common stock at a conversion rate of 24.72 shares of common stock per share of Series C Preferred Stock. Cash was paid in lieu of fractional shares for an amount considered insignificant.
SUPPLEMENTAL FINANCIAL MEASURES/RATIOS
The accounting and reporting policies of Wintrust conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components), taxable-equivalent net interest margin (including its individual components), the taxable-equivalent efficiency ratio, tangible common equity ratio, tangible common book value per share and return on average tangible common equity. Management believes that these measures and ratios provide users of the Company’s financial information a more meaningful view of the performance of the Company's interest-earning assets and interest-bearing liabilities and of the Company’s operating efficiency. Other financial holding companies may define or calculate these measures and ratios differently.
Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability.
10
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 | |||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
(Dollars and shares in thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | ||||||||||||||
Calculation of Net Interest Margin and Efficiency Ratio | |||||||||||||||||||
(A) Interest Income (GAAP) | $ | 261,205 | $ | 251,840 | $ | 247,688 | $ | 231,181 | $ | 215,759 | |||||||||
Taxable-equivalent adjustment: | |||||||||||||||||||
- Loans | 670 | 1,106 | 1,033 | 831 | 790 | ||||||||||||||
- Liquidity Management Assets | 531 | 1,019 | 921 | 866 | 907 | ||||||||||||||
- Other Earning Assets | 3 | 2 | 5 | 2 | 5 | ||||||||||||||
(B) Interest Income - FTE | $ | 262,409 | $ | 253,967 | $ | 249,647 | $ | 232,880 | $ | 217,461 | |||||||||
(C) Interest Expense (GAAP) | 36,123 | 32,741 | 31,700 | 26,772 | 23,179 | ||||||||||||||
(D) Net Interest Income - FTE (B minus C) | $ | 226,286 | $ | 221,226 | $ | 217,947 | $ | 206,108 | $ | 194,282 | |||||||||
(E) Net Interest Income (GAAP) (A minus C) | $ | 225,082 | $ | 219,099 | $ | 215,988 | $ | 204,409 | $ | 192,580 | |||||||||
Net interest margin (GAAP-derived) | 3.54 | % | 3.45 | % | 3.43 | % | 3.41 | % | 3.36 | % | |||||||||
Net interest margin - FTE | 3.56 | % | 3.49 | % | 3.46 | % | 3.43 | % | 3.39 | % | |||||||||
(F) Non-interest income | $ | 85,679 | $ | 81,038 | $ | 79,731 | $ | 89,972 | $ | 68,765 | |||||||||
(G) Gains (losses) on investment securities, net | (351 | ) | 14 | 39 | 47 | (55 | ) | ||||||||||||
(H) Non-interest expense | 194,349 | 196,580 | 183,575 | 183,544 | 168,118 | ||||||||||||||
Efficiency ratio (H/(E+F-G)) | 62.47 | % | 65.50 | % | 62.09 | % | 62.36 | % | 64.31 | % | |||||||||
Efficiency ratio - FTE (H/(D+F-G)) | 62.23 | % | 65.04 | % | 61.68 | % | 62.00 | % | 63.90 | % | |||||||||
Calculation of Tangible Common Equity ratio (at period end) | |||||||||||||||||||
Total shareholders’ equity | $ | 3,031,250 | $ | 2,976,939 | $ | 2,908,925 | $ | 2,839,458 | $ | 2,764,983 | |||||||||
(I) Less: Convertible preferred stock | — | — | — | — | (126,257 | ) | |||||||||||||
Less: Non-convertible preferred stock | (125,000 | ) | (125,000 | ) | (125,000 | ) | (125,000 | ) | (125,000 | ) | |||||||||
Less: Intangible assets | (533,910 | ) | (519,505 | ) | (520,672 | ) | (519,806 | ) | (520,028 | ) | |||||||||
(J) Total tangible common shareholders’ equity | $ | 2,372,340 | $ | 2,332,434 | $ | 2,263,253 | $ | 2,194,652 | $ | 1,993,698 | |||||||||
Total assets | $ | 28,456,772 | $ | 27,915,970 | $ | 27,358,162 | $ | 26,929,265 | $ | 25,778,893 | |||||||||
Less: Intangible assets | (533,910 | ) | (519,505 | ) | (520,672 | ) | (519,806 | ) | (520,028 | ) | |||||||||
(K) Total tangible assets | $ | 27,922,862 | $ | 27,396,465 | $ | 26,837,490 | $ | 26,409,459 | $ | 25,258,865 | |||||||||
Tangible common equity ratio (J/K) | 8.5 | % | 8.5 | % | 8.4 | % | 8.3 | % | 7.9 | % | |||||||||
Tangible common equity ratio, assuming full conversion of convertible preferred stock ((J-I)/K) | 8.5 | % | 8.5 | % | 8.4 | % | 8.3 | % | 8.4 | % | |||||||||
Calculation of book value per share | |||||||||||||||||||
Total shareholders’ equity | $ | 3,031,250 | $ | 2,976,939 | $ | 2,908,925 | $ | 2,839,458 | $ | 2,764,983 | |||||||||
Less: Preferred stock | (125,000 | ) | (125,000 | ) | (125,000 | ) | (125,000 | ) | (251,257 | ) | |||||||||
(L) Total common equity | $ | 2,906,250 | $ | 2,851,939 | $ | 2,783,925 | $ | 2,714,458 | $ | 2,513,726 | |||||||||
(M) Actual common shares outstanding | 56,256 | 55,965 | 55,838 | 55,700 | 52,504 | ||||||||||||||
Book value per common share (L/M) | $ | 51.66 | $ | 50.96 | $ | 49.86 | $ | 48.73 | $ | 47.88 | |||||||||
Tangible common book value per share (J/M) | $ | 42.17 | $ | 41.68 | $ | 40.53 | $ | 39.40 | $ | 37.97 | |||||||||
Calculation of return on average common equity | |||||||||||||||||||
(N) Net income applicable to common shares | $ | 79,931 | $ | 66,731 | $ | 63,576 | $ | 62,847 | $ | 54,750 | |||||||||
Add: After-tax intangible asset amortization | 761 | 738 | 672 | 726 | 771 | ||||||||||||||
(O) Tangible net income applicable to common shares | $ | 80,692 | $ | 67,469 | $ | 64,248 | $ | 63,573 | $ | 55,521 | |||||||||
Total average shareholders' equity | $ | 2,995,592 | $ | 2,942,999 | $ | 2,882,682 | $ | 2,800,905 | $ | 2,739,050 | |||||||||
Less: Average preferred stock | (125,000 | ) | (125,000 | ) | (125,000 | ) | (161,028 | ) | (251,257 | ) | |||||||||
(P) Total average common shareholders' equity | $ | 2,870,592 | $ | 2,817,999 | $ | 2,757,682 | $ | 2,639,877 | $ | 2,487,793 | |||||||||
Less: Average intangible assets | (536,676 | ) | (519,626 | ) | (520,333 | ) | (519,340 | ) | (520,346 | ) | |||||||||
(Q) Total average tangible common shareholders’ equity | $ | 2,333,916 | $ | 2,298,373 | $ | 2,237,349 | $ | 2,120,537 | $ | 1,967,447 | |||||||||
Return on average common equity, annualized (N/P) | 11.29 | % | 9.39 | % | 9.15 | % | 9.55 | % | 8.93 | % | |||||||||
Return on average tangible common equity, annualized (O/Q) | 14.02 | % | 11.65 | % | 11.39 | % | 12.02 | % | 11.44 | % | |||||||||
11
BUSINESS UNIT SUMMARY
Community Banking
Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the first quarter of 2018, revenue within this unit was primarily driven by increased net interest income due to a higher net interest margin and increased earning assets. The net interest margin increased in the first quarter of 2018 compared to the fourth quarter of 2017 primarily as a result of higher yields on the commercial and commercial real estate loan portfolios (excluding lease loans) and the liquidity management assets portfolio, partially offset by higher rates on interest-bearing liabilities. Mortgage banking revenue increased by $3.5 million from $27.4 million for the fourth quarter of 2017 to $31.0 million for the first quarter of 2018. The higher revenue was primarily due to increased revenue from the Veterans First acquisition of $5.9 million and a $4.1 million positive fair value adjustment related to mortgage servicing rights assets compared to a $46,000 positive fair value adjustment in the fourth quarter of 2017. The increase in revenue was partially offset as origination volume was lower during the current period, decreasing to $778.9 million from $879.4 million in the fourth quarter of 2017, as a result of typical seasonality in our primary markets. Home purchases represented 73% of loan origination volume for the first quarter of 2018. The Company's gross commercial and commercial real estate loan pipelines remain strong. Before the impact of scheduled payments and prepayments, at March 31, 2018, gross commercial and commercial real estate loan pipelines totaled $1.1 billion, or $688.4 million when adjusted for the probability of closing, compared to $974.4 million, or $630.2 million when adjusted for the probability of closing, at December 31, 2017.
Specialty Finance
Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries and accounts receivable financing, value-added, out-sourced administrative services, and other services. In the first quarter of 2018, the specialty finance unit experienced higher revenue as a result of increased volumes and higher yields within its insurance premium financing receivables portfolio. Originations of $1.8 billion during the first quarter of 2018 resulted in a $188.3 million increase in average balances. The increase in average balances along with higher yields on these loans resulted in a $2.7 million increase in interest income attributed to this portfolio. The Company's leasing business remained steady during the first quarter of 2018, with its portfolio of assets, including capital leases, loans and equipment on operating leases, totaling $986.7 million at the end of the first quarter of 2018. Revenues from the Company's out-sourced administrative services business remained steady, totaling approximately $1.1 million in the first quarter of 2018 and fourth quarter of 2017.
Wealth Management
Through its wealth management unit, the Company offers a full range of wealth management services through three separate subsidiaries: trust and investment services, asset management, securities brokerage services and 401(k) and retirement plan services. At March 31, 2018, the Company’s wealth management subsidiaries had approximately $24.3 billion of assets under administration, which includes $2.9 billion of assets owned by the Company and its subsidiary banks, representing a $347.1 million decrease from the $24.6 billion of assets under administration at December 31, 2017. This decrease in assets under administration was primarily driven by market depreciation.
12
LOANS
Loan Portfolio Mix and Growth Rates
% Growth | ||||||||||||||||||
(Dollars in thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | From (1) December 31, 2017 | From March 31, 2017 | |||||||||||||
Balance: | ||||||||||||||||||
Commercial | $ | 7,060,871 | $ | 6,787,677 | $ | 6,081,489 | 16 | % | 16 | % | ||||||||
Commercial real estate | 6,633,520 | 6,580,618 | 6,261,682 | 3 | 6 | |||||||||||||
Home equity | 626,547 | 663,045 | 708,258 | (22 | ) | (12 | ) | |||||||||||
Residential real estate | 869,104 | 832,120 | 720,608 | 18 | 21 | |||||||||||||
Premium finance receivables - commercial | 2,576,150 | 2,634,565 | 2,446,946 | (9 | ) | 5 | ||||||||||||
Premium finance receivables - life insurance | 4,189,961 | 4,035,059 | 3,593,563 | 16 | 17 | |||||||||||||
Consumer and other | 105,981 | 107,713 | 118,512 | (7 | ) | (11 | ) | |||||||||||
Total loans, net of unearned income, excluding covered loans | $ | 22,062,134 | $ | 21,640,797 | $ | 19,931,058 | 8 | % | 11 | % | ||||||||
Covered loans | — | — | 52,359 | — | (100 | ) | ||||||||||||
Total loans, net of unearned income | $ | 22,062,134 | $ | 21,640,797 | $ | 19,983,417 | 8 | % | 10 | % | ||||||||
Mix: | ||||||||||||||||||
Commercial | 32 | % | 31 | % | 30 | % | ||||||||||||
Commercial real estate | 30 | 30 | 31 | |||||||||||||||
Home equity | 3 | 3 | 4 | |||||||||||||||
Residential real estate | 4 | 4 | 4 | |||||||||||||||
Premium finance receivables - commercial | 12 | 12 | 12 | |||||||||||||||
Premium finance receivables - life insurance | 19 | 19 | 18 | |||||||||||||||
Consumer and other | — | 1 | 1 | |||||||||||||||
Total loans, net of unearned income, excluding covered loans | 100 | % | 100 | % | 100 | % | ||||||||||||
Covered loans | — | — | — | |||||||||||||||
Total loans, net of unearned income | 100 | % | 100 | % | 100 | % | ||||||||||||
(1) | Annualized |
13
Commercial and Commercial Real Estate Loan Portfolios
As of March 31, 2018 | |||||||||||||||||||
% of Total Balance | Nonaccrual | > 90 Days Past Due and Still Accruing | Allowance For Loan Losses Allocation | ||||||||||||||||
(Dollars in thousands) | Balance | ||||||||||||||||||
Commercial: | |||||||||||||||||||
Commercial, industrial and other | $ | 4,560,880 | 33.4 | % | $ | 10,051 | $ | — | $ | 39,182 | |||||||||
Franchise | 935,358 | 6.8 | 2,401 | — | 7,116 | ||||||||||||||
Mortgage warehouse lines of credit | 163,470 | 1.2 | — | — | 1,297 | ||||||||||||||
Asset-based lending | 977,735 | 7.1 | 1,194 | — | 8,316 | ||||||||||||||
Leases | 414,198 | 3.0 | 361 | — | 1,222 | ||||||||||||||
PCI - commercial loans (1) | 9,230 | 0.1 | — | 856 | 503 | ||||||||||||||
Total commercial | $ | 7,060,871 | 51.6 | % | $ | 14,007 | $ | 856 | $ | 57,636 | |||||||||
Commercial Real Estate: | |||||||||||||||||||
Construction | $ | 815,636 | 6.0 | % | $ | 3,139 | $ | — | $ | 9,596 | |||||||||
Land | 122,690 | 0.9 | 182 | — | 3,990 | ||||||||||||||
Office | 891,071 | 6.5 | 474 | — | 5,800 | ||||||||||||||
Industrial | 906,144 | 6.6 | 1,427 | — | 5,899 | ||||||||||||||
Retail | 895,622 | 6.5 | 12,274 | — | 8,135 | ||||||||||||||
Multi-family | 931,355 | 6.8 | 19 | — | 9,613 | ||||||||||||||
Mixed use and other | 1,955,456 | 14.3 | 4,310 | — | 14,377 | ||||||||||||||
PCI - commercial real estate (1) | 115,546 | 0.8 | — | 3,107 | 71 | ||||||||||||||
Total commercial real estate | $ | 6,633,520 | 48.4 | % | $ | 21,825 | $ | 3,107 | $ | 57,481 | |||||||||
Total commercial and commercial real estate | $ | 13,694,391 | 100.0 | % | $ | 35,832 | $ | 3,963 | $ | 115,117 | |||||||||
Commercial real estate - collateral location by state: | |||||||||||||||||||
Illinois | $ | 5,199,090 | 78.4 | % | |||||||||||||||
Wisconsin | 706,076 | 10.6 | |||||||||||||||||
Total primary markets | $ | 5,905,166 | 89.0 | % | |||||||||||||||
Indiana | 138,999 | 2.1 | |||||||||||||||||
Florida | 57,260 | 0.9 | |||||||||||||||||
Arizona | 55,914 | 0.8 | |||||||||||||||||
Michigan | 46,230 | 0.7 | |||||||||||||||||
California | 67,922 | 1.0 | |||||||||||||||||
Other (no individual state greater than 0.6%) | 362,029 | 5.5 | |||||||||||||||||
Total | $ | 6,633,520 | 100.0 | % | |||||||||||||||
(1) | Purchased credit impaired ("PCI") loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments. |
14
DEPOSITS
Deposit Portfolio Mix and Growth Rates
% Growth | ||||||||||||||||||
(Dollars in thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | From (1) December 31, 2017 | From March 31, 2017 | |||||||||||||
Balance: | ||||||||||||||||||
Non-interest bearing | $ | 6,612,319 | $ | 6,792,497 | $ | 5,790,579 | (11 | )% | 14 | % | ||||||||
NOW and interest bearing demand deposits | 2,315,122 | 2,315,055 | 2,484,676 | — | (7 | ) | ||||||||||||
Wealth management deposits (2) | 2,495,134 | 2,323,699 | 2,390,464 | 30 | 4 | |||||||||||||
Money market | 4,617,122 | 4,515,353 | 4,555,752 | 9 | 1 | |||||||||||||
Savings | 2,901,504 | 2,829,373 | 2,287,958 | 10 | 27 | |||||||||||||
Time certificates of deposit | 4,338,126 | 4,407,370 | 4,221,012 | (6 | ) | 3 | ||||||||||||
Total deposits | $ | 23,279,327 | $ | 23,183,347 | $ | 21,730,441 | 2 | % | 7 | % | ||||||||
Mix: | ||||||||||||||||||
Non-interest bearing | 28 | % | 29 | % | 27 | % | ||||||||||||
NOW and interest bearing demand deposits | 10 | 10 | 11 | |||||||||||||||
Wealth management deposits (2) | 11 | 10 | 11 | |||||||||||||||
Money market | 20 | 20 | 21 | |||||||||||||||
Savings | 12 | 12 | 11 | |||||||||||||||
Time certificates of deposit | 19 | 19 | 19 | |||||||||||||||
Total deposits | 100 | % | 100 | % | 100 | % | ||||||||||||
(1) | Annualized |
(2) | Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts. |
Time Certificates of Deposit
Maturity/Re-pricing Analysis
As of March 31, 2018
(Dollars in thousands) | CDARs & Brokered Certificates of Deposit (1) | MaxSafe Certificates of Deposit (1) | Variable Rate Certificates of Deposit (2) | Other Fixed Rate Certificates of Deposit (1) | Total Time Certificates of Deposit | Weighted-Average Rate of Maturing Time Certificates of Deposit (3) | |||||||||||||||||
1-3 months | $ | 59,651 | $ | 30,577 | $ | 120,910 | $ | 843,754 | $ | 1,054,892 | 0.98 | % | |||||||||||
4-6 months | — | 26,741 | — | 658,681 | 685,422 | 1.04 | % | ||||||||||||||||
7-9 months | — | 16,099 | — | 600,322 | 616,421 | 1.15 | % | ||||||||||||||||
10-12 months | — | 13,506 | — | 649,139 | 662,645 | 1.31 | % | ||||||||||||||||
13-18 months | 249 | 19,470 | — | 727,824 | 747,543 | 1.41 | % | ||||||||||||||||
19-24 months | — | 15,095 | — | 272,301 | 287,396 | 1.66 | % | ||||||||||||||||
24+ months | 1,000 | 8,663 | — | 274,144 | 283,807 | 1.64 | % | ||||||||||||||||
Total | $ | 60,900 | $ | 130,151 | $ | 120,910 | $ | 4,026,165 | $ | 4,338,126 | 1.23 | % | |||||||||||
(1) | This category of certificates of deposit is shown by contractual maturity date. |
(2) | This category includes variable rate certificates of deposit and savings certificates with the majority repricing on at least a monthly basis. |
(3) | Weighted-average rate excludes the impact of purchase accounting fair value adjustments. |
15
NET INTEREST INCOME
The following table presents a summary of Wintrust’s average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the first quarter of 2018 compared to the fourth quarter of 2017 (sequential quarters) and first quarter of 2017 (linked quarters), respectively:
Average Balance for three months ended, | Interest for three months ended, | Yield/Rate for three months ended, | ||||||||||||||||||||||||||||||
(Dollars in thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | March 31, 2018 | December 31, 2017 | March 31, 2017 | March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||||||||||||||||
Interest-bearing deposits with banks and cash equivalents(1) | $ | 749,973 | $ | 914,319 | $ | 780,752 | $ | 2,796 | $ | 2,723 | $ | 1,624 | 1.51 | % | 1.18 | % | 0.84 | % | ||||||||||||||
Investment securities(2) | 2,892,617 | 2,736,253 | 2,395,625 | 19,659 | 19,179 | 14,480 | 2.76 | 2.78 | 2.45 | |||||||||||||||||||||||
FHLB and FRB stock | 105,414 | 82,092 | 94,090 | 1,298 | 1,067 | 1,070 | 4.99 | % | 5.15 | 4.61 | ||||||||||||||||||||||
Liquidity management assets(3)(8) | $ | 3,748,004 | $ | 3,732,664 | $ | 3,270,467 | $ | 23,753 | $ | 22,969 | $ | 17,174 | 2.57 | % | 2.44 | % | 2.13 | % | ||||||||||||||
Other earning assets(3)(4)(8) | 27,571 | 26,955 | 25,236 | 174 | 154 | 183 | 2.56 | 2.27 | 2.95 | |||||||||||||||||||||||
Mortgage loans held-for-sale | 281,181 | 335,385 | 268,834 | 2,818 | 3,291 | 2,398 | 4.06 | 3.89 | 3.62 | |||||||||||||||||||||||
Loans, net of unearned income(3)(5)(8) | 21,711,342 | 21,080,984 | 19,654,772 | 235,664 | 227,467 | 196,788 | 4.40 | 4.28 | 4.06 | |||||||||||||||||||||||
Covered loans | — | 6,025 | 56,872 | — | 86 | 918 | — | 5.66 | 6.55 | |||||||||||||||||||||||
Total earning assets(8) | $ | 25,768,098 | $ | 25,182,013 | $ | 23,276,181 | $ | 262,409 | $ | 253,967 | $ | 217,461 | 4.13 | % | 4.00 | % | 3.79 | % | ||||||||||||||
Allowance for loan and covered loan losses | (143,108 | ) | (138,584 | ) | (127,425 | ) | ||||||||||||||||||||||||||
Cash and due from banks | 254,489 | 244,097 | 229,588 | |||||||||||||||||||||||||||||
Other assets | 1,930,118 | 1,891,958 | 1,829,004 | |||||||||||||||||||||||||||||
Total assets | $ | 27,809,597 | $ | 27,179,484 | $ | 25,207,348 | ||||||||||||||||||||||||||
NOW and interest bearing demand deposits | $ | 2,255,692 | $ | 2,284,576 | $ | 2,512,598 | $ | 1,386 | $ | 1,407 | $ | 1,093 | 0.25 | % | 0.24 | % | 0.18 | % | ||||||||||||||
Wealth management deposits | 2,250,139 | 2,005,197 | 2,082,285 | 5,441 | 4,059 | 2,313 | 0.98 | 0.80 | 0.45 | |||||||||||||||||||||||
Money market accounts | 4,520,620 | 4,611,515 | 4,407,901 | 4,667 | 4,154 | 2,221 | 0.42 | 0.36 | 0.20 | |||||||||||||||||||||||
Savings accounts | 2,813,772 | 2,741,621 | 2,227,024 | 2,732 | 2,716 | 1,329 | 0.39 | 0.39 | 0.24 | |||||||||||||||||||||||
Time deposits | 4,322,111 | 4,581,464 | 4,236,862 | 12,323 | 12,594 | 9,314 | 1.16 | 1.09 | 0.89 | |||||||||||||||||||||||
Interest-bearing deposits | $ | 16,162,334 | $ | 16,224,373 | $ | 15,466,670 | $ | 26,549 | $ | 24,930 | $ | 16,270 | 0.67 | % | 0.61 | % | 0.43 | % | ||||||||||||||
Federal Home Loan Bank advances | 872,811 | 324,748 | 181,338 | 3,639 | 2,124 | 1,590 | 1.69 | 2.59 | 3.55 | |||||||||||||||||||||||
Other borrowings | 263,125 | 255,972 | 255,012 | 1,699 | 1,600 | 1,139 | 2.62 | 2.48 | 1.81 | |||||||||||||||||||||||
Subordinated notes | 139,094 | 139,065 | 138,980 | 1,773 | 1,786 | 1,772 | 5.10 | 5.14 | 5.10 | |||||||||||||||||||||||
Junior subordinated debentures | 253,566 | 253,566 | 253,566 | 2,463 | 2,301 | 2,408 | 3.89 | 3.55 | 3.80 | |||||||||||||||||||||||
Total interest-bearing liabilities | $ | 17,690,930 | $ | 17,197,724 | $ | 16,295,566 | $ | 36,123 | $ | 32,741 | $ | 23,179 | 0.83 | % | 0.75 | % | 0.58 | % | ||||||||||||||
Non-interest bearing deposits | 6,639,845 | 6,605,553 | 5,787,034 | |||||||||||||||||||||||||||||
Other liabilities | 483,230 | 433,208 | 385,698 | |||||||||||||||||||||||||||||
Equity | 2,995,592 | 2,942,999 | 2,739,050 | |||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 27,809,597 | $ | 27,179,484 | $ | 25,207,348 | ||||||||||||||||||||||||||
Interest rate spread(6)(8) | 3.30 | % | 3.25 | % | 3.21 | % | ||||||||||||||||||||||||||
Less: Fully tax-equivalent adjustment | (1,204 | ) | (2,127 | ) | (1,702 | ) | (0.02 | ) | (0.04 | ) | (0.03 | ) | ||||||||||||||||||||
Net free funds/contribution(7) | $ | 8,077,168 | $ | 7,984,289 | $ | 6,980,615 | 0.26 | 0.24 | 0.18 | |||||||||||||||||||||||
Net interest income/ margin(8) (GAAP) | $ | 225,082 | $ | 219,099 | $ | 192,580 | 3.54 | % | 3.45 | % | 3.36 | % | ||||||||||||||||||||
Fully tax-equivalent adjustment | 1,204 | 2,127 | 1,702 | 0.02 | 0.04 | 0.03 | ||||||||||||||||||||||||||
Net interest income/ margin - FTE (8) | $ | 226,286 | $ | 221,226 | $ | 194,282 | 3.56 | % | 3.49 | % | 3.39 | % | ||||||||||||||||||||
(1) | Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements. |
(2) | Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets. |
(3) | Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the three months ended March 31, 2018, December 31, 2017 and March 31, 2017 were $1.2 million, $2.1 million and $1.7 million, respectively. |
(4) | Other earning assets include brokerage customer receivables and trading account securities. |
(5) | Loans, net of unearned income, include non-accrual loans. |
(6) | Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities. |
(7) | Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities. |
(8) | See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio. |
16
For the first quarter of 2018, net interest income totaled $225.1 million, an increase of $6.0 million as compared to the fourth quarter of 2017 and an increase of $32.5 million as compared to the first quarter of 2017. Net interest margin was 3.54% (3.56% on a fully tax-equivalent basis) during the first quarter of 2018 compared to 3.45% (3.49% on a fully tax-equivalent basis) during the fourth quarter of 2017 and 3.36% (3.39% on a fully tax-equivalent basis) during the first quarter of 2017. The $6.0 million increase in net interest income in the first quarter of 2018 compared to the fourth quarter of 2017 was attributable to a $5.2 million increase from higher levels of earning assets and a $5.7 million increase from rising rates, partially offset by a $4.9 million decrease due to two less days in the quarter.
Interest Rate Sensitivity
As an ongoing part of its financial strategy, the Company attempts to manage the impact of fluctuations in market interest rates on net interest income. Management measures its exposure to changes in interest rates by modeling many different interest rate scenarios.
The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases of 100 and 200 basis points and a decrease of 100 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months. Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenario at March 31, 2018, December 31, 2017 and March 31, 2017 is as follows:
Static Shock Scenario | +200 Basis Points | +100 Basis Points | -100 Basis Points | ||||||
March 31, 2018 | 18.8 | % | 9.7 | % | (11.6 | )% | |||
December 31, 2017 | 17.7 | % | 9.0 | % | (11.8 | )% | |||
March 31, 2017 | 17.7 | % | 9.3 | % | (13.2 | )% | |||
Ramp Scenario | +200 Basis Points | +100 Basis Points | -100 Basis Points | |||||
March 31, 2018 | 9.0 | % | 4.6 | % | (4.8 | )% | ||
December 31, 2017 | 8.9 | % | 4.6 | % | (5.1 | )% | ||
March 31, 2017 | 7.3 | % | 3.9 | % | (4.8 | )% | ||
These results indicate that the Company has positioned its balance sheet to benefit from a rise in interest rates. This analysis also indicates that the Company would benefit to a greater magnitude should a rise in interest rates be significant (i.e., 200 basis points) and immediate (Static Shock Scenario).
17
Maturities and Sensitivities of Loans to Changes in Interest Rates
The following table classifies the loan portfolio at March 31, 2018 by date at which the loans reprice or mature, and the type of rate exposure:
As of March 31, 2018 | One year or less | From one to five years | Over five years | ||||||||||||
(Dollars in thousands) | Total | ||||||||||||||
Commercial | |||||||||||||||
Fixed rate | $ | 155,596 | $ | 927,376 | $ | 562,064 | $ | 1,645,036 | |||||||
Variable rate | 5,409,222 | 6,613 | — | 5,415,835 | |||||||||||
Total commercial | $ | 5,564,818 | $ | 933,989 | $ | 562,064 | $ | 7,060,871 | |||||||
Commercial real estate | |||||||||||||||
Fixed rate | 409,640 | 1,750,632 | 275,186 | 2,435,458 | |||||||||||
Variable rate | 4,170,629 | 27,279 | 154 | 4,198,062 | |||||||||||
Total commercial real estate | $ | 4,580,269 | $ | 1,777,911 | $ | 275,340 | $ | 6,633,520 | |||||||
Home equity | |||||||||||||||
Fixed rate | 11,561 | 4,733 | 43,465 | 59,759 | |||||||||||
Variable rate | 566,788 | — | — | 566,788 | |||||||||||
Total home equity | $ | 578,349 | $ | 4,733 | $ | 43,465 | $ | 626,547 | |||||||
Residential real estate | |||||||||||||||
Fixed rate | 82,686 | 30,356 | 154,028 | 267,070 | |||||||||||
Variable rate | 65,171 | 221,227 | 315,636 | 602,034 | |||||||||||
Total residential real estate | $ | 147,857 | $ | 251,583 | $ | 469,664 | $ | 869,104 | |||||||
Premium finance receivables - commercial | |||||||||||||||
Fixed rate | 2,499,041 | 77,109 | — | 2,576,150 | |||||||||||
Variable rate | — | — | — | — | |||||||||||
Total premium finance receivables - commercial | $ | 2,499,041 | $ | 77,109 | $ | — | $ | 2,576,150 | |||||||
Premium finance receivables - life insurance | |||||||||||||||
Fixed rate | 13,330 | 2,856 | 2,154 | 18,340 | |||||||||||
Variable rate | 4,171,621 | — | — | 4,171,621 | |||||||||||
Total premium finance receivables - life insurance | $ | 4,184,951 | $ | 2,856 | $ | 2,154 | $ | 4,189,961 | |||||||
Consumer and other | |||||||||||||||
Fixed rate | 53,926 | 12,582 | 2,337 | 68,845 | |||||||||||
Variable rate | 37,118 | 18 | — | 37,136 | |||||||||||
Total consumer and other | $ | 91,044 | $ | 12,600 | $ | 2,337 | $ | 105,981 | |||||||
Total per category | |||||||||||||||
Fixed rate | 3,225,780 | 2,805,644 | 1,039,234 | 7,070,658 | |||||||||||
Variable rate | 14,420,549 | 255,137 | 315,790 | 14,991,476 | |||||||||||
Total loans, net of unearned income | $ | 17,646,329 | $ | 3,060,781 | $ | 1,355,024 | $ | 22,062,134 | |||||||
Variable Rate Loan Pricing by Index: | |||||||||||||||
Prime | $ | 2,685,331 | |||||||||||||
One- month LIBOR | 7,433,808 | ||||||||||||||
Three- month LIBOR | 406,365 | ||||||||||||||
Twelve- month LIBOR | 4,225,145 | ||||||||||||||
Other | 240,827 | ||||||||||||||
Total variable rate | $ | 14,991,476 | |||||||||||||
18
Source: Bloomberg
As noted in the table on the previous page, the majority of the Company’s portfolio is tied to LIBOR indices which, as shown in the table above, do not mirror the same increases as the Prime rate when the Federal Reserve raises interest rates. Specifically, the Company has $7.4 billion of variable rate loans tied to one-month LIBOR and $4.2 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:
Changes in | ||||||
Prime | 1-month LIBOR | 12-month LIBOR | ||||
Second Quarter 2017 | +25 bps | +24 bps | -6 bps | |||
Third Quarter 2017 | 0 bps | +1 bps | +4 bps | |||
Fourth Quarter 2017 | +25 bps | +33 bps | +33 bps | |||
First Quarter 2018 | +25 bps | +32 bps | +55 bps | |||
19
NON-INTEREST INCOME
The following table presents non-interest income by category for the periods presented:
Three Months Ended | ||||||||||||||||||||||||||
March 31, | December 31, | March 31, | Q1 2018 compared to Q4 2017 | Q1 2018 compared to Q1 2017 | ||||||||||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | $ Change | % Change | $ Change | % Change | |||||||||||||||||||
Brokerage | $ | 6,031 | $ | 6,067 | $ | 6,220 | $ | (36 | ) | (1 | )% | $ | (189 | ) | (3 | )% | ||||||||||
Trust and asset management | 16,955 | 15,843 | 13,928 | 1,112 | 7 | 3,027 | 22 | |||||||||||||||||||
Total wealth management | 22,986 | 21,910 | 20,148 | 1,076 | 5 | 2,838 | 14 | |||||||||||||||||||
Mortgage banking | 30,960 | 27,411 | 21,938 | 3,549 | 13 | 9,022 | 41 | |||||||||||||||||||
Service charges on deposit accounts | 8,857 | 8,907 | 8,265 | (50 | ) | (1 | ) | 592 | 7 | |||||||||||||||||
(Losses) gains on investment securities, net | (351 | ) | 14 | (55 | ) | (365 | ) | NM | (296 | ) | NM | |||||||||||||||
Fees from covered call options | 1,597 | 1,610 | 759 | (13 | ) | (1 | ) | 838 | NM | |||||||||||||||||
Trading gains (losses), net | 103 | 24 | (320 | ) | 79 | NM | 423 | NM | ||||||||||||||||||
Operating lease income, net | 9,691 | 8,598 | 5,782 | 1,093 | 13 | 3,909 | 68 | |||||||||||||||||||
Other: | ||||||||||||||||||||||||||
Interest rate swap fees | 2,237 | 1,963 | 1,433 | 274 | 14 | 804 | 56 | |||||||||||||||||||
BOLI | 714 | 754 | 985 | (40 | ) | (5 | ) | (271 | ) | (28 | ) | |||||||||||||||
Administrative services | 1,061 | 1,103 | 1,024 | (42 | ) | (4 | ) | 37 | 4 | |||||||||||||||||
Early pay-offs of capital leases | 33 | 7 | 1,211 | 26 | NM | (1,178 | ) | (97 | ) | |||||||||||||||||
Miscellaneous | 7,791 | 8,737 | 7,595 | (946 | ) | (11 | ) | 196 | 3 | |||||||||||||||||
Total Other | 11,836 | 12,564 | 12,248 | (728 | ) | (6 | ) | (412 | ) | (3 | ) | |||||||||||||||
Total Non-Interest Income | $ | 85,679 | $ | 81,038 | $ | 68,765 | $ | 4,641 | 6 | % | $ | 16,914 | 25 | % | ||||||||||||
NM - Not meaningful
Notable contributions to the change in non-interest income are as follows:
The increase in wealth management revenue during the current period as compared to the fourth quarter of 2017 and first quarter of 2017 is primarily attributable to market appreciation at the beginning of the quarter related to managed money accounts with fees based on assets under management at the beginning of the quarterly term. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors and the brokerage commissions, managed money fees and insurance product commissions at Wayne Hummer Investments.
20
The increase in mortgage banking revenue in the current quarter as compared to the fourth quarter of 2017 resulted primarily from increased revenue of $5.9 million from the Veterans First acquisition and a $4.1 million positive fair value adjustment related to mortgage servicing rights assets compared to a $46,000 positive fair value adjustment in the fourth quarter of 2017, partially offset by lower origination volumes in the current quarter. Mortgage loans originated or purchased for sale totaled $778.9 million in the first quarter of 2018 as compared to $879.4 million in the fourth quarter of 2017 and $722.5 million in the first quarter of 2017. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. Mortgage revenue is also impacted by changes in the fair value of mortgage servicing rights as the Company does not hedge this change in fair value. The Company typically originates mortgage loans held-for-sale with associated mortgage servicing rights ("MSRs") retained or released. Additionally, through the acquisition of Veterans First, the Company acquired approximately $13.8 million of MSRs in the first quarter of 2018. The Company records MSRs at fair value on a recurring basis. The table below presents additional selected information regarding mortgage banking revenue for the respective periods.
Three Months Ended | ||||||||||||
(Dollars in thousands) | March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||
Originations: | ||||||||||||
Retail originations | $ | 539,911 | 744,496 | $ | 624,971 | |||||||
Correspondent originations | 126,464 | 134,904 | 97,496 | |||||||||
Veterans First originations | 112,477 | — | — | |||||||||
Total originations (A) | $ | 778,852 | 879,400 | $ | 722,467 | |||||||
Purchases as a percentage of originations | 73 | % | 67 | % | 66 | % | ||||||
Refinances as a percentage of originations | 27 | 33 | 34 | |||||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
Production Margin: | ||||||||||||
Production revenue (B) (1) | $ | 20,526 | $ | 20,603 | $ | 17,677 | ||||||
Production margin (B / A) | 2.64 | % | 2.34 | % | 2.45 | % | ||||||
Mortgage Servicing: | ||||||||||||
Loans serviced for others (C) | $ | 4,795,335 | $ | 2,929,133 | $ | 1,972,592 | ||||||
MSRs, at fair value (D) | 54,572 | 33,676 | 21,596 | |||||||||
Percentage of MSRs to loans serviced for others (D / C) | 1.14 | % | 1.15 | % | 1.09 | % | ||||||
Components of Mortgage Banking Revenue: | ||||||||||||
Production revenue | $ | 20,526 | $ | 20,603 | $ | 17,677 | ||||||
MSR capitalization, net of payoffs and paydowns | 2,957 | 4,216 | 2,337 | |||||||||
MSR fair value adjustments | 4,133 | 46 | 156 | |||||||||
Servicing income | 2,905 | 1,942 | 1,316 | |||||||||
Other | 439 | 604 | 452 | |||||||||
Total mortgage banking revenue | $ | 30,960 | $ | 27,411 | $ | 21,938 | ||||||
(1) | Production revenue represents revenue earned from the origination and subsequent sale of mortgages, including gains on loans sold and fees from originations, processing and other related activities, and excludes servicing fees, changes in the fair value of servicing rights and changes to the mortgage recourse obligation. |
The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio by using fees generated from these options to compensate for net interest margin compression. These option transactions are designed to mitigate overall interest rate risk and do not qualify as hedges pursuant to accounting guidance. Fees from covered call options remained relatively stable in the first quarter of 2018. There were no outstanding call option contracts at March 31, 2018, December 31, 2017 or March 31, 2017.
The increase in operating lease income in the current quarter compared to the fourth quarter of 2017 is primarily related to a $1.1 million gain realized from the sale of certain equipment held on operating leases.
21
NON-INTEREST EXPENSE
The following table presents non-interest expense by category for the periods presented:
Three Months Ended | ||||||||||||||||||||||||||
March 31, | December 31, | March 31, | Q1 2018 compared to Q4 2017 | Q1 2018 compared to Q1 2017 | ||||||||||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | $ Change | % Change | $ Change | % Change | |||||||||||||||||||
Salaries and employee benefits: | ||||||||||||||||||||||||||
Salaries | $ | 61,986 | $ | 58,239 | $ | 55,008 | $ | 3,747 | 6 | % | $ | 6,978 | 13 | % | ||||||||||||
Commissions and incentive compensation | 31,949 | 40,723 | 26,643 | (8,774 | ) | (22 | ) | 5,306 | 20 | |||||||||||||||||
Benefits | 18,501 | 19,047 | 17,665 | (546 | ) | (3 | ) | 836 | 5 | |||||||||||||||||
Total salaries and employee benefits | 112,436 | 118,009 | 99,316 | (5,573 | ) | (5 | ) | 13,120 | 13 | |||||||||||||||||
Equipment | 10,072 | 9,500 | 9,002 | 572 | 6 | 1,070 | 12 | |||||||||||||||||||
Operating lease equipment depreciation | 6,533 | 7,015 | 4,636 | (482 | ) | (7 | ) | 1,897 | 41 | |||||||||||||||||
Occupancy, net | 13,767 | 14,154 | 13,101 | (387 | ) | (3 | ) | 666 | 5 | |||||||||||||||||
Data processing | 8,493 | 7,915 | 7,925 | 578 | 7 | 568 | 7 | |||||||||||||||||||
Advertising and marketing | 8,824 | 7,382 | 5,150 | 1,442 | 20 | 3,674 | 71 | |||||||||||||||||||
Professional fees | 6,649 | 8,879 | 4,660 | (2,230 | ) | (25 | ) | 1,989 | 43 | |||||||||||||||||
Amortization of other intangible assets | 1,004 | 1,028 | 1,164 | (24 | ) | (2 | ) | (160 | ) | (14 | ) | |||||||||||||||
FDIC insurance | 4,362 | 4,324 | 4,156 | 38 | 1 | 206 | 5 | |||||||||||||||||||
OREO expense, net | 2,926 | 599 | 1,665 | 2,327 | NM | 1,261 | 76 | |||||||||||||||||||
Other: | ||||||||||||||||||||||||||
Commissions - 3rd party brokers | 1,252 | 1,057 | 1,098 | 195 | 18 | 154 | 14 | |||||||||||||||||||
Postage | 1,866 | 1,427 | 1,442 | 439 | 31 | 424 | 29 | |||||||||||||||||||
Miscellaneous | 16,165 | 15,291 | 14,803 | 874 | 6 | 1,362 | 9 | |||||||||||||||||||
Total other | 19,283 | 17,775 | 17,343 | 1,508 | 8 | 1,940 | 11 | |||||||||||||||||||
Total Non-Interest Expense | $ | 194,349 | $ | 196,580 | $ | 168,118 | $ | (2,231 | ) | (1 | )% | $ | 26,231 | 16 | % | |||||||||||
NM - Not meaningful
Notable contributions to the change in non-interest expense are as follows:
Salaries and employee benefits expense decreased in the current quarter compared to the fourth quarter of 2017 primarily as a result of lower commissions and incentive compensation, partially offset by higher salaries in the current quarter. The decrease in commissions and incentive compensation was the result of an increase in bonus and long-term performance-based incentive compensation recognized in the fourth quarter of 2017 due to higher current and projected earnings as impacted by the higher rate environment, lower taxes and balance sheet growth at that time as well as an increase in salaries and employee benefits (primarily health plan related). Additionally, salaries and employee benefits expense in the fourth quarter of 2017 included $1.2 million of additional expense related to pension obligations assumed in previous acquisitions. These decreases were partially offset by a $3.7 million increase in salaries primarily due to $2.4 million of additional salaries from the Veterans First acquisition as well as increases from merit-based salary increases for current employees effective in February and an increase of the minimum wage for eligible hourly employees effective in March.
The increase in advertising and marketing expenses during the current quarter compared to the fourth quarter of 2017 and the first quarter of 2017 is primarily related to higher expenses for community advertisements and sponsorships as well as mass media. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities, the Company's various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the timing of sponsorship programs and type of marketing programs utilized which are determined based on the market area, targeted audience, competition and various other factors.
The decrease in professional fees during the current quarter compared to the fourth quarter of 2017 is primarily related to lower consulting fees related to continued investments in various areas of the Company including technology and an enhanced digital customer experience. Professional fees include legal, audit and tax fees, external loan review costs, consulting arrangements and normal regulatory exam assessments.
The increase in OREO expense in the current quarter compared to the fourth quarter of 2017 was primarily the result of negative valuation adjustments and realized losses on the sale of certain OREO properties as a result of our continuing efforts to address
22
and resolve non-performing assets in a timely fashion. OREO expenses include all costs associated with obtaining, maintaining and selling other real estate owned properties as well as valuation adjustments.
INCOME TAXES
The Company recorded income tax expense of $26.1 million in the first quarter of 2018 compared to $27.0 million in the fourth quarter of 2017 and $29.6 million in the first quarter of 2017. The effective tax rates were 24.14% in the first quarter of 2018, 28.19% in the fourth quarter of 2017 and 33.67% in the first quarter of 2017. The lower effective tax rate for the first quarter of 2018 was primarily due to reduction of the federal corporate tax rate as a result of Tax Reform and recording $2.6 million of excess tax benefits related to income taxes attributed to share-based compensation. Excess tax benefits are expected to be higher in the first quarter when the majority of the Company's share-based awards vest, and will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards.
23
ASSET QUALITY
Allowance for Credit Losses, excluding covered loans
Three Months Ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | |||||||||
Allowance for loan losses at beginning of period | $ | 137,905 | $ | 133,119 | $ | 122,291 | ||||||
Provision for credit losses | 8,346 | 7,772 | 5,316 | |||||||||
Other adjustments (1) | (40 | ) | 698 | (56 | ) | |||||||
Reclassification (to) from allowance for unfunded lending-related commitments | 26 | 7 | (138 | ) | ||||||||
Charge-offs: | ||||||||||||
Commercial | 2,687 | 1,340 | 641 | |||||||||
Commercial real estate | 813 | 1,001 | 261 | |||||||||
Home equity | 357 | 728 | 625 | |||||||||
Residential real estate | 571 | 542 | 329 | |||||||||
Premium finance receivables - commercial | 4,721 | 2,314 | 1,427 | |||||||||
Premium finance receivables - life insurance | — | — | — | |||||||||
Consumer and other | 129 | 207 | 134 | |||||||||
Total charge-offs | 9,278 | 6,132 | 3,417 | |||||||||
Recoveries: | ||||||||||||
Commercial | 262 | 235 | 273 | |||||||||
Commercial real estate | 1,687 | 1,037 | 554 | |||||||||
Home equity | 123 | 359 | 65 | |||||||||
Residential real estate | 40 | 165 | 178 | |||||||||
Premium finance receivables - commercial | 385 | 613 | 612 | |||||||||
Premium finance receivables - life insurance | — | — | — | |||||||||
Consumer and other | 47 | 32 | 141 | |||||||||
Total recoveries | 2,544 | 2,441 | 1,823 | |||||||||
Net charge-offs | (6,734 | ) | (3,691 | ) | (1,594 | ) | ||||||
Allowance for loan losses at period end | $ | 139,503 | $ | 137,905 | $ | 125,819 | ||||||
Allowance for unfunded lending-related commitments at period end | 1,243 | 1,269 | 1,811 | |||||||||
Allowance for credit losses at period end | $ | 140,746 | $ | 139,174 | $ | 127,630 | ||||||
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average: | ||||||||||||
Commercial | 0.14 | % | 0.07 | % | 0.03 | % | ||||||
Commercial real estate | (0.05 | ) | 0.00 | (0.02 | ) | |||||||
Home equity | 0.15 | 0.22 | 0.32 | |||||||||
Residential real estate | 0.19 | 0.13 | 0.06 | |||||||||
Premium finance receivables - commercial | 0.68 | 0.26 | 0.13 | |||||||||
Premium finance receivables - life insurance | 0.00 | 0.00 | 0.00 | |||||||||
Consumer and other | 0.26 | 0.52 | (0.02 | ) | ||||||||
Total loans, net of unearned income, excluding covered loans | 0.12 | % | 0.07 | % | 0.03 | % | ||||||
Net charge-offs as a percentage of the provision for credit losses | 80.69 | % | 47.49 | % | 29.98 | % | ||||||
Loans at period-end, excluding covered loans | $ | 22,062,134 | $ | 21,640,797 | $ | 19,931,058 | ||||||
Allowance for loan losses as a percentage of loans at period end | 0.63 | % | 0.64 | % | 0.63 | % | ||||||
Allowance for credit losses as a percentage of loans at period end | 0.64 | % | 0.64 | % | 0.64 | % | ||||||
(1) | Includes $742,000 of allowance for covered loan losses reclassified as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017. |
The allowance for credit losses, excluding the allowance for covered loan losses, is comprised of the allowance for loan losses and the allowance for unfunded lending-related commitments. The allowance for loan losses is a reserve against loan amounts that are actually funded and outstanding while the allowance for unfunded lending-related commitments (separate liability account) relates to certain amounts that Wintrust is committed to lend but for which funds have not yet been disbursed. The provision for credit losses, excluding the provision for covered loan losses, may contain both a component related to funded loans (provision
24
for loan losses) and a component related to lending-related commitments (provision for unfunded loan commitments and letters of credit).
Net charge-offs as a percentage of loans, excluding covered loans, for the first quarter of 2018 totaled 12 basis points on an annualized basis compared to seven basis points on an annualized basis in the fourth quarter of 2017 and three basis points on an annualized basis in the first quarter of 2017. Net charge-offs totaled $6.7 million in the first quarter of 2018, a $3.0 million increase from $3.7 million in the fourth quarter of 2017 and a $5.1 million increase from $1.6 million in the first quarter of 2017. The increase in the first quarter of 2018 compared to both comparative periods is primarily the result of increased net charge-offs within the commercial insurance premium finance receivables portfolio. The provision for credit losses, excluding the provision for covered loan losses, totaled $8.3 million for the first quarter of 2018 compared to $7.8 million for the fourth quarter of 2017 and $5.3 million for the first quarter of 2017.
Management believes the allowance for credit losses is appropriate to provide for inherent losses in the portfolio. There can be no assurances, however, that future losses will not exceed the amounts provided for, thereby affecting future results of operations. The amount of future additions to the allowance for credit losses will be dependent upon management’s assessment of the appropriateness of the allowance based on its evaluation of economic conditions, changes in real estate values, interest rates, the regulatory environment, the level of past-due and non-performing loans and other factors.
The Company also provided a provision for covered loan losses on covered loans when applicable.
The following table presents the provision for credit losses and allowance for credit losses by component for the periods presented, including covered loans:
Three Months Ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | |||||||||
Provision for loan losses | $ | 8,372 | $ | 7,779 | $ | 5,178 | ||||||
Provision for unfunded lending-related commitments | (26 | ) | (7 | ) | 138 | |||||||
Provision for covered loan losses | — | — | (107 | ) | ||||||||
Provision for credit losses | $ | 8,346 | $ | 7,772 | $ | 5,209 | ||||||
Period End | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
2018 | 2017 | 2017 | ||||||||||
Allowance for loan losses | $ | 139,503 | $ | 137,905 | $ | 125,819 | ||||||
Allowance for unfunded lending-related commitments | 1,243 | 1,269 | 1,811 | |||||||||
Allowance for covered loan losses | — | — | 1,319 | |||||||||
Allowance for credit losses | $ | 140,746 | $ | 139,174 | $ | 128,949 | ||||||
25
The tables below summarize the calculation of allowance for loan losses for the Company’s core loan portfolio and consumer, niche and purchased loan portfolio, excluding covered loans, as of March 31, 2018 and December 31, 2017.
As of March 31, 2018 | |||||||||||
Recorded | Calculated | As a percentage of its own respective | |||||||||
(Dollars in thousands) | Investment | Allowance | category’s balance | ||||||||
Commercial:(1) | |||||||||||
Commercial and industrial | $ | 3,989,211 | $ | 36,092 | 0.90 | % | |||||
Asset-based lending | 977,063 | 8,315 | 0.85 | ||||||||
Tax exempt | 380,264 | 2,602 | 0.68 | ||||||||
Leases | 412,786 | 1,222 | 0.30 | ||||||||
Commercial real estate:(1) | |||||||||||
Residential construction | 44,328 | 860 | 1.94 | ||||||||
Commercial construction | 769,330 | 8,723 | 1.13 | ||||||||
Land | 121,005 | 3,988 | 3.30 | ||||||||
Office | 853,839 | 5,795 | 0.68 | ||||||||
Industrial | 872,761 | 5,895 | 0.68 | ||||||||
Retail | 861,249 | 8,101 | 0.94 | ||||||||
Multi-family | 903,778 | 9,599 | 1.06 | ||||||||
Mixed use and other | 1,866,691 | 14,319 | 0.77 | ||||||||
Home equity(1) | 571,925 | 9,719 | 1.70 | ||||||||
Residential real estate(1) | 823,322 | 6,073 | 0.74 | ||||||||
Total core loan portfolio | $ | 13,447,552 | $ | 121,303 | 0.90 | % | |||||
Commercial: | |||||||||||
Franchise | $ | 852,166 | $ | 7,032 | 0.83 | % | |||||
Mortgage warehouse lines of credit | 163,470 | 1,297 | 0.79 | ||||||||
Community Advantage - homeowner associations | 168,656 | 422 | 0.25 | ||||||||
Aircraft | 2,904 | 42 | 1.45 | ||||||||
Purchased non-covered commercial loans (2) | 114,351 | 612 | 0.54 | ||||||||
Commercial real estate: | |||||||||||
Purchased non-covered commercial real estate (2) | 340,539 | 201 | 0.06 | ||||||||
Purchased non-covered home equity (2) | 54,622 | 141 | 0.26 | ||||||||
Purchased non-covered residential real estate (2) | 45,782 | 205 | 0.45 | ||||||||
Premium finance receivables | |||||||||||
U.S. commercial insurance loans | 2,263,019 | 5,415 | 0.24 | ||||||||
Canada commercial insurance loans (2) | 313,131 | 491 | 0.16 | ||||||||
Life insurance loans (1) | 4,002,726 | 1,427 | 0.04 | ||||||||
Purchased life insurance loans (2) | 187,235 | — | — | ||||||||
Consumer and other (1) | 103,312 | 911 | 0.88 | ||||||||
Purchased non-covered consumer and other (2) | 2,669 | 4 | 0.15 | ||||||||
Total consumer, niche and purchased loan portfolio | $ | 8,614,582 | $ | 18,200 | 0.21 | % | |||||
Total loans, net of unearned income, excluding covered loans | $ | 22,062,134 | $ | 139,503 | 0.63 | % | |||||
(1) | Excludes purchased loans reported in accordance with ASC 310-20 and ASC 310-30. |
(2) | Purchased loans represent loans reported in accordance with ASC 310-20 and ASC 310-30. |
26
As of December 31, 2017 | |||||||||||
Recorded | Calculated | As a percentage of its own respective | |||||||||
(Dollars in thousands) | Investment | Allowance | category’s balance | ||||||||
Commercial:(1) | |||||||||||
Commercial and industrial | $ | 3,771,593 | $ | 36,812 | 0.98 | % | |||||
Asset-based lending | 979,526 | 8,236 | 0.84 | ||||||||
Tax exempt | 380,523 | 2,600 | 0.68 | ||||||||
Leases | 411,721 | 1,242 | 0.30 | ||||||||
Commercial real estate:(1) | |||||||||||
Residential construction | 47,241 | 889 | 1.88 | ||||||||
Commercial construction | 697,404 | 7,839 | 1.12 | ||||||||
Land | 124,740 | 3,835 | 3.07 | ||||||||
Office | 854,882 | 5,731 | 0.67 | ||||||||
Industrial | 846,191 | 5,762 | 0.68 | ||||||||
Retail | 915,769 | 7,353 | 0.80 | ||||||||
Multi-family | 885,905 | 9,495 | 1.07 | ||||||||
Mixed use and other | 1,835,612 | 13,814 | 0.75 | ||||||||
Home equity(1) | 602,175 | 10,319 | 1.71 | ||||||||
Residential real estate(1) | 783,842 | 6,447 | 0.82 | ||||||||
Total core loan portfolio | $ | 13,137,124 | $ | 120,374 | 0.92 | % | |||||
Commercial: | |||||||||||
Franchise | $ | 741,965 | $ | 6,367 | 0.86 | % | |||||
Mortgage warehouse lines of credit | 194,524 | 1,454 | 0.75 | ||||||||
Community Advantage - homeowner associations | 164,837 | 412 | 0.25 | ||||||||
Aircraft | 2,984 | 42 | 1.41 | ||||||||
Purchased non-covered commercial loans (2) | 140,004 | 646 | 0.46 | ||||||||
Commercial real estate: | |||||||||||
Purchased non-covered commercial real estate (2) | 372,874 | 509 | 0.14 | ||||||||
Purchased non-covered home equity (2) | 60,870 | 174 | 0.29 | ||||||||
Purchased non-covered residential real estate (2) | 48,278 | 241 | 0.50 | ||||||||
Premium finance receivables | |||||||||||
U.S. commercial insurance loans | 2,315,644 | 4,872 | 0.21 | ||||||||
Canada commercial insurance loans (2) | 318,921 | 484 | 0.15 | ||||||||
Life insurance loans (1) | 3,835,790 | 1,490 | 0.04 | ||||||||
Purchased life insurance loans (2) | 199,269 | — | — | ||||||||
Consumer and other (1) | 104,204 | 836 | 0.80 | ||||||||
Purchased non-covered consumer and other (2) | 3,509 | 4 | 0.11 | ||||||||
Total consumer, niche and purchased loan portfolio | $ | 8,503,673 | $ | 17,531 | 0.21 | % | |||||
Total loans, net of unearned income, excluding covered loans | $ | 21,640,797 | $ | 137,905 | 0.64 | % | |||||
(1) | Excludes purchased loans reported in accordance with ASC 310-20 and ASC 310-30. |
(2) | Purchased loans represent loans reported in accordance with ASC 310-20 and ASC 310-30. |
27
As part of the regular quarterly review performed by management to determine if the Company’s allowance for loan losses is appropriate, an analysis is prepared on the loan portfolio based upon a breakout of core loans and consumer, niche and purchased loans. A summary of the allowance for loan losses calculated for the loan components in both the core loan portfolio and the consumer, niche and purchased loan portfolio was shown on the preceding tables as of March 31, 2018 and December 31, 2017.
Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. In accordance with accounting guidance, credit deterioration on purchased loans is recorded as a credit discount at the time of purchase instead of as an increase to the allowance for loan losses.
In addition to the $139.5 million of allowance for loan losses, there is $4.0 million of non-accretable credit discount on purchased loans reported in accordance with ASC 310-30 that is available to absorb credit losses.
The tables below show the aging of the Company’s loan portfolio at March 31, 2018 and December 31, 2017:
90+ days | 60-89 | 30-59 | ||||||||||||||||||||||
As of March 31, 2018 | and still | days past | days past | |||||||||||||||||||||
(Dollars in thousands) | Nonaccrual | accruing | due | due | Current | Total Loans | ||||||||||||||||||
Loan Balances: | ||||||||||||||||||||||||
Commercial (1) | $ | 14,007 | $ | 856 | $ | 771 | $ | 54,233 | $ | 6,991,004 | $ | 7,060,871 | ||||||||||||
Commercial real estate (1) | 21,825 | 3,107 | 3,563 | 58,469 | 6,546,556 | 6,633,520 | ||||||||||||||||||
Home equity | 9,828 | — | 1,505 | 4,033 | 611,181 | 626,547 | ||||||||||||||||||
Residential real estate (1) | 17,214 | 1,437 | 229 | 8,808 | 841,416 | 869,104 | ||||||||||||||||||
Premium finance receivables - commercial | 17,342 | 8,547 | 6,543 | 17,756 | 2,525,962 | 2,576,150 | ||||||||||||||||||
Premium finance receivables - life insurance (1) | — | — | 5,125 | 11,420 | 4,173,416 | 4,189,961 | ||||||||||||||||||
Consumer and other (1) | 720 | 269 | 216 | 291 | 104,485 | 105,981 | ||||||||||||||||||
Total loans, net of unearned income | $ | 80,936 | $ | 14,216 | $ | 17,952 | $ | 155,010 | $ | 21,794,020 | $ | 22,062,134 | ||||||||||||
As of March 31, 2018 Aging as a % of Loan Balance | Nonaccrual | 90+ days and still accruing | 60-89 days past due | 30-59 days past due | Current | Total Loans | ||||||||||||
Commercial (1) | 0.2 | % | — | % | — | % | 0.8 | % | 99.0 | % | 100.0 | % | ||||||
Commercial real estate (1) | 0.3 | — | 0.1 | 0.9 | 98.7 | 100.0 | ||||||||||||
Home equity | 1.6 | — | 0.2 | 0.6 | 97.6 | 100.0 | ||||||||||||
Residential real estate (1) | 2.0 | 0.2 | — | 1.0 | 96.8 | 100.0 | ||||||||||||
Premium finance receivables - commercial | 0.7 | 0.3 | 0.3 | 0.7 | 98.0 | 100.0 | ||||||||||||
Premium finance receivables - life insurance (1) | — | — | 0.1 | 0.3 | 99.6 | 100.0 | ||||||||||||
Consumer and other (1) | 0.7 | 0.3 | 0.2 | 0.3 | 98.5 | 100.0 | ||||||||||||
Total loans, net of unearned income | 0.4 | % | 0.1 | % | 0.1 | % | 0.7 | % | 98.7 | % | 100.0 | % | ||||||
(1) | Including PCI loans. PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments. |
28
90+ days | 60-89 | 30-59 | ||||||||||||||||||||||
As of December 31, 2017 | and still | days past | days past | |||||||||||||||||||||
(Dollars in thousands) | Nonaccrual | accruing | due | due | Current | Total Loans | ||||||||||||||||||
Loan Balances: | ||||||||||||||||||||||||
Commercial (1) | $ | 15,696 | $ | 877 | $ | 4,218 | $ | 29,407 | $ | 6,737,479 | $ | 6,787,677 | ||||||||||||
Commercial real estate (1) | 22,048 | 7,135 | 4,346 | 29,326 | 6,517,763 | 6,580,618 | ||||||||||||||||||
Home equity | 8,978 | — | 518 | 4,634 | 648,915 | 663,045 | ||||||||||||||||||
Residential real estate (1) | 17,977 | 5,304 | 1,303 | 8,378 | 799,158 | 832,120 | ||||||||||||||||||
Premium finance receivables - commercial | 12,163 | 9,242 | 17,796 | 15,849 | 2,579,515 | 2,634,565 | ||||||||||||||||||
Premium finance receivables - life insurance (1) | — | — | 4,837 | 10,017 | 4,020,205 | 4,035,059 | ||||||||||||||||||
Consumer and other (1) | 740 | 101 | 242 | 727 | 105,903 | 107,713 | ||||||||||||||||||
Total loans, net of unearned income | $ | 77,602 | $ | 22,659 | $ | 33,260 | $ | 98,338 | $ | 21,408,938 | $ | 21,640,797 | ||||||||||||
As of December 31, 2017 Aging as a % of Loan Balance: | Nonaccrual | 90+ days and still accruing | 60-89 days past due | 30-59 days past due | Current | Total Loans | ||||||||||||
Commercial (1) | 0.2 | % | — | % | 0.1 | % | 0.4 | % | 99.3 | % | 100.0 | % | ||||||
Commercial real estate (1) | 0.3 | 0.1 | 0.1 | 0.4 | 99.1 | 100.0 | ||||||||||||
Home equity | 1.4 | — | 0.1 | 0.7 | 97.8 | 100.0 | ||||||||||||
Residential real estate (1) | 2.2 | 0.6 | 0.2 | 1.0 | 96.0 | 100.0 | ||||||||||||
Premium finance receivables - commercial | 0.5 | 0.4 | 0.7 | 0.6 | 97.8 | 100.0 | ||||||||||||
Premium finance receivables - life insurance (1) | — | — | 0.1 | 0.2 | 99.7 | 100.0 | ||||||||||||
Consumer and other (1) | 0.7 | 0.1 | 0.2 | 0.7 | 98.3 | 100.0 | ||||||||||||
Total loans, net of unearned income | 0.4 | % | 0.1 | % | 0.2 | % | 0.5 | % | 98.8 | % | 100.0 | % | ||||||
(1) | Including PCI loans. PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments. |
As of March 31, 2018, $18.0 million of all loans, or 0.1%, were 60 to 89 days past due and $155.0 million, or 0.7%, were 30 to 59 days (or one payment) past due. As of December 31, 2017, $33.3 million of all loans, or 0.2%, were 60 to 89 days past due and $98.3 million, or 0.5%, were 30 to 59 days (or one payment) past due. The majority of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.
The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at March 31, 2018 that are current with regard to the contractual terms of the loan agreement represent 97.6% of the total home equity portfolio. Residential real estate loans at March 31, 2018 that are current with regards to the contractual terms of the loan agreements comprise 96.8% of total residential real estate loans outstanding.
29
Non-performing Assets, excluding covered assets
The following table sets forth Wintrust’s non-performing assets and troubled debt restructurings ("TDRs") performing under the contractual terms of the loan agreement, excluding covered assets and non-covered PCI loans, at the dates indicated.
March 31, | December 31, | March 31, | ||||||||||
(Dollars in thousands) | 2018 | 2017 (3) | 2017 | |||||||||
Loans past due greater than 90 days and still accruing(1): | ||||||||||||
Commercial | $ | — | $ | — | $ | 100 | ||||||
Commercial real estate | — | — | — | |||||||||
Home equity | — | — | — | |||||||||
Residential real estate | — | 3,278 | — | |||||||||
Premium finance receivables - commercial | 8,547 | 9,242 | 4,991 | |||||||||
Premium finance receivables - life insurance | — | — | 2,024 | |||||||||
Consumer and other | 207 | 40 | 104 | |||||||||
Total loans past due greater than 90 days and still accruing | 8,754 | 12,560 | 7,219 | |||||||||
Non-accrual loans(2): | ||||||||||||
Commercial | 14,007 | 15,696 | 14,307 | |||||||||
Commercial real estate | 21,825 | 22,048 | 20,809 | |||||||||
Home equity | 9,828 | 8,978 | 11,722 | |||||||||
Residential real estate | 17,214 | 17,977 | 11,943 | |||||||||
Premium finance receivables - commercial | 17,342 | 12,163 | 12,629 | |||||||||
Premium finance receivables - life insurance | — | — | — | |||||||||
Consumer and other | 720 | 740 | 350 | |||||||||
Total non-accrual loans | 80,936 | 77,602 | 71,760 | |||||||||
Total non-performing loans: | ||||||||||||
Commercial | 14,007 | 15,696 | 14,407 | |||||||||
Commercial real estate | 21,825 | 22,048 | 20,809 | |||||||||
Home equity | 9,828 | 8,978 | 11,722 | |||||||||
Residential real estate | 17,214 | 21,255 | 11,943 | |||||||||
Premium finance receivables - commercial | 25,889 | 21,405 | 17,620 | |||||||||
Premium finance receivables - life insurance | — | — | 2,024 | |||||||||
Consumer and other | 927 | 780 | 454 | |||||||||
Total non-performing loans | $ | 89,690 | $ | 90,162 | $ | 78,979 | ||||||
Other real estate owned | 18,481 | 20,244 | 17,090 | |||||||||
Other real estate owned - from acquisitions | 18,117 | 20,402 | 22,774 | |||||||||
Other repossessed assets | 113 | 153 | 544 | |||||||||
Total non-performing assets | $ | 126,401 | $ | 130,961 | $ | 119,387 | ||||||
TDRs performing under the contractual terms of the loan agreement | $ | 39,562 | $ | 39,683 | $ | 28,392 | ||||||
Total non-performing loans by category as a percent of its own respective category’s period-end balance: | ||||||||||||
Commercial | 0.20 | % | 0.23 | % | 0.24 | % | ||||||
Commercial real estate | 0.33 | 0.34 | 0.33 | |||||||||
Home equity | 1.57 | 1.35 | 1.66 | |||||||||
Residential real estate | 1.98 | 2.55 | 1.66 | |||||||||
Premium finance receivables - commercial | 1.00 | 0.81 | 0.72 | |||||||||
Premium finance receivables - life insurance | — | — | 0.06 | |||||||||
Consumer and other | 0.87 | 0.72 | 0.38 | |||||||||
Total loans, net of unearned income | 0.41 | % | 0.42 | % | 0.40 | % | ||||||
Total non-performing assets as a percentage of total assets | 0.44 | % | 0.47 | % | 0.46 | % | ||||||
Allowance for loan losses as a percentage of total non-performing loans | 155.54 | % | 152.95 | % | 159.31 | % | ||||||
(1) | As of the dates shown, no TDRs were past due greater than 90 days and still accruing interest. |
(2) | Non-accrual loans included TDRs totaling $8.1 million, $10.1 million and $11.3 million as of March 31, 2018, December 31, 2017 and March 31, 2017, respectively. |
(3) | Includes $2.6 million of non-performing loans and $2.9 million of other real estate owned reclassified from covered assets as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017. |
30
The ratio of non-performing assets to total assets was 0.44% as of March 31, 2018, compared to 0.47% at December 31, 2017, and 0.46% at March 31, 2017. Non-performing assets, excluding covered assets and non-covered PCI loans, totaled $126.4 million at March 31, 2018, compared to $131.0 million at December 31, 2017 and $119.4 million at March 31, 2017. Non-performing loans, excluding covered loans and non-covered PCI loans, totaled $89.7 million, or 0.41% of total loans, at March 31, 2018 compared to $90.2 million, or 0.42% of total loans, at December 31, 2017 and $79.0 million, or 0.40% of total loans, at March 31, 2017. OREO, excluding covered OREO, of $36.6 million at March 31, 2018 decreased $4.0 million compared to $40.6 million at December 31, 2017 and decreased $3.3 million compared to $39.9 million at March 31, 2017. The decrease in the first quarter of 2018 was partly due to negative fair value adjustments realized on certain properties as a result of our continued monitoring and workout efforts.
Management is pursuing the resolution of all credits in this category. At this time, management believes reserves are appropriate to absorb inherent losses that are expected upon the ultimate resolution of these credits.
Nonperforming Loans Rollforward
The table below presents a summary of the changes in the balance of non-performing loans, excluding covered loans and non-covered PCI loans, for the periods presented:
Three Months Ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | |||||||||
Balance at beginning of period | $ | 90,162 | $ | 77,983 | $ | 87,454 | ||||||
Additions, net, from non-covered portfolio | 6,608 | 25,619 | 8,609 | |||||||||
Additions, net, from covered non-performing loans subsequent to loss share expiration | — | 2,572 | — | |||||||||
Return to performing status | (3,753 | ) | (426 | ) | (1,592 | ) | ||||||
Payments received | (2,569 | ) | (4,271 | ) | (5,614 | ) | ||||||
Transfer to OREO and other repossessed assets | (1,981 | ) | (3,960 | ) | (1,661 | ) | ||||||
Charge-offs | (3,555 | ) | (2,443 | ) | (1,280 | ) | ||||||
Net change for niche loans (1) | 4,778 | (4,912 | ) | (6,937 | ) | |||||||
Balance at end of period | $ | 89,690 | $ | 90,162 | $ | 78,979 | ||||||
(1) | This includes activity for premium finance receivables and indirect consumer loans. |
31
TDRs
The table below presents a summary of TDRs as of the respective date, presented by loan category and accrual status:
March 31, | December 31, | March 31, | ||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | |||||||||
Accruing TDRs: | ||||||||||||
Commercial | $ | 19,803 | $ | 19,917 | $ | 4,607 | ||||||
Commercial real estate | 16,087 | 16,160 | 18,923 | |||||||||
Residential real estate and other | 3,672 | 3,606 | 4,862 | |||||||||
Total accrual | $ | 39,562 | $ | 39,683 | $ | 28,392 | ||||||
Non-accrual TDRs: (1) | ||||||||||||
Commercial | $ | 1,741 | $ | 4,000 | $ | 1,424 | ||||||
Commercial real estate | 1,304 | 1,340 | 7,338 | |||||||||
Residential real estate and other | 5,069 | 4,763 | 2,515 | |||||||||
Total non-accrual | $ | 8,114 | $ | 10,103 | $ | 11,277 | ||||||
Total TDRs: | ||||||||||||
Commercial | $ | 21,544 | $ | 23,917 | $ | 6,031 | ||||||
Commercial real estate | 17,391 | 17,500 | 26,261 | |||||||||
Residential real estate and other | 8,741 | 8,369 | 7,377 | |||||||||
Total TDRs | $ | 47,676 | $ | 49,786 | $ | 39,669 | ||||||
Weighted-average contractual interest rate of TDRs | 4.84 | % | 4.40 | % | 4.37 | % | ||||||
(1) | Included in total non-performing loans. |
Other Real Estate Owned
The table below presents a summary of other real estate owned, excluding covered other real estate owned, as of March 31, 2018, December 31, 2017 and March 31, 2017, and shows the activity for the respective period and the balance for each property type:
Three Months Ended | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | |||||||||
Balance at beginning of period | $ | 40,646 | $ | 37,378 | $ | 40,282 | ||||||
Disposals/resolved | (3,679 | ) | (6,107 | ) | (2,644 | ) | ||||||
Transfers in at fair value, less costs to sell | 1,789 | 6,733 | 2,268 | |||||||||
Transfers in from covered OREO subsequent to loss share expiration | — | 2,851 | 760 | |||||||||
Fair value adjustments | (2,158 | ) | (209 | ) | (802 | ) | ||||||
Balance at end of period | $ | 36,598 | $ | 40,646 | $ | 39,864 | ||||||
Period End | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||
Balance by Property Type | 2018 | 2017 | 2017 | |||||||||
Residential real estate | $ | 6,407 | $ | 7,515 | $ | 7,597 | ||||||
Residential real estate development | 2,229 | 2,221 | 1,240 | |||||||||
Commercial real estate | 27,962 | 30,910 | 31,027 | |||||||||
Total | $ | 36,598 | $ | 40,646 | $ | 39,864 | ||||||
32
Items Impacting Comparative Financial Results:
Acquisitions
On January 4, 2018, the Company acquired certain assets and assumed certain liabilities of the mortgage banking business of Veterans First, in a business combination. The Company also acquired mortgage servicing rights assets from Veterans First on approximately 10,000 loans, totaling an estimated $1.7 billion in unpaid principal balance. Veterans First is a consumer direct lender with three offices, operating two in Salt Lake City and one in San Diego, and originated in excess of $800 million in loans in 2017.
On February 14, 2017, the Company acquired certain assets and assumed certain liabilities of the mortgage banking business of American Homestead Mortgage, LLC ("AHM"), in a business combination. AHM is located in Montana's Flathead Valley and originated approximately $55 million of residential mortgage loans in 2016.
Termination of Loss Share Agreements
On October 16, 2017, the Company entered in agreements with the FDIC that terminated all existing loss share agreements with the FDIC. The loss share agreements were related to the Company’s acquisition of assets and assumption of liabilities of eight failed banks through FDIC assisted transactions in 2010, 2011 and 2012.
Under terms of the agreements, the Company made a net payment of $15.2 million to the FDIC as consideration for the early termination of the loss share agreements. The Company recorded a pre-tax gain of approximately $0.4 million in the fourth quarter of 2017 to write off the remaining loss share asset, relieve the claw-back liability and recognize the payment to the FDIC.
Approximately $0.2 million of the remaining net indemnification liabilities that were scheduled to be amortized against future earnings did not occur for the remainder of the fourth quarter of 2017. Additionally, $0.8 million, $0.8 million and $0.7 million each year in 2018, 2019 and 2020, respectively, of previously scheduled amortization will not occur.
The termination of the FDIC loss share agreements has no effect on yields of the loans that were previously covered under these agreements. Subsequent to this transaction, the Company is solely responsible for all future charge-offs, recoveries, gains, losses and expenses related to the previously covered assets as the FDIC will no longer share in those amounts.
33
WINTRUST SUBSIDIARIES AND LOCATIONS
Wintrust is a financial holding company whose common stock is traded on the Nasdaq Global Select Market (Nasdaq: WTFC). Its 15 community bank subsidiaries are: Lake Forest Bank & Trust Company, N.A., Hinsdale Bank & Trust Company, Wintrust Bank in Chicago, Libertyville Bank & Trust Company, Barrington Bank & Trust Company, N.A., Crystal Lake Bank & Trust Company, N.A., Northbrook Bank & Trust Company, Schaumburg Bank & Trust Company, N.A., Village Bank & Trust in Arlington Heights, Beverly Bank & Trust Company, N.A. in Chicago, Wheaton Bank & Trust Company, State Bank of The Lakes in Antioch, Old Plank Trail Community Bank, N.A. in New Lenox, St. Charles Bank & Trust Company and Town Bank in Hartland, Wisconsin.
The banks also operate facilities in Illinois in Algonquin, Aurora, Bloomingdale, Buffalo Grove, Cary, Clarendon Hills, Crete, Deerfield, Des Plaines, Downers Grove, Elgin, Elk Grove Village, Elmhurst, Evergreen Park, Frankfort, Geneva, Glen Ellyn, Glencoe, Glenview, Gurnee, Grayslake, Hanover Park, Highland Park, Highwood, Hoffman Estates, Island Lake, Itasca, Joliet, Lake Bluff, Lake Villa, Lansing, Lemont, Lindenhurst, Lynwood, Markham, McHenry, Mokena, Mount Prospect, Mundelein, Naperville, North Chicago, Northfield, Norridge, Oak Lawn, Orland Park, Palatine, Park Ridge, Prospect Heights, Ravinia, Riverside, Rogers Park, Rolling Meadows, Roselle, Round Lake Beach, Shorewood, Skokie, South Holland, Spring Grove, Steger, Stone Park, Vernon Hills, Wauconda, Western Springs, Willowbrook, Wilmette, Winnetka and Wood Dale and in Albany, Burlington, Clinton, Darlington, Delafield, Delavan, Elm Grove, Genoa City, Kenosha, Lake Geneva, Madison, Menomonee Falls, Milwaukee, Monroe, Pewaukee, Sharon, Wales, Walworth and Wind Lake, Wisconsin and Dyer, Indiana.
Additionally, the Company operates various non-bank business units:
• | FIRST Insurance Funding, a division of Lake Forest Bank & Trust Company, N.A., and Wintrust Life Finance, a division of Lake Forest Bank & Trust Company, N.A., serve commercial and life insurance loan customers, respectively, throughout the United States. |
• | First Insurance Funding of Canada serves commercial insurance loan customers throughout Canada. |
• | Tricom, Inc. of Milwaukee provides high-yielding, short-term accounts receivable financing and value-added out-sourced administrative services, such as data processing of payrolls, billing and cash management services, to temporary staffing service clients located throughout the United States. |
• | Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., engages primarily in the origination and purchase of residential mortgages for sale into the secondary market through origination offices located throughout the United States. Loans are also originated nationwide through relationships with wholesale and correspondent offices. |
• | Wayne Hummer Investments, LLC is a broker-dealer providing a full range of private client and brokerage services to clients and correspondent banks located primarily in the Midwest. |
• | Great Lakes Advisors LLC provides money management services and advisory services to individual accounts. |
• | The Chicago Trust Company, a trust subsidiary, allows Wintrust to service customers’ trust and investment needs at each banking location. |
• | Wintrust Asset Finance which offers direct leasing opportunities. |
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “point,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 2017 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:
• | negative economic conditions that adversely affect the economy, housing prices, the job market and other factors that may |
34
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; |
35
• | credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans; |
• | the Company’s ability to comply with covenants under its credit facility; and |
• | fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation. |
Therefore, there can be no assurances that future actual results will correspond to these forward-looking statements. The reader is cautioned not to place undue reliance on any forward-looking statement made by the Company. Any such statement speaks only as of the date the statement was made or as of such date that may be referenced within the statement. The Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events after the date of the press release. Persons are advised, however, to consult further disclosures management makes on related subjects in its reports filed with the Securities and Exchange Commission and in its press releases.
CONFERENCE CALL, WEB CAST AND REPLAY
The Company will hold a conference call at 1:00 p.m. (Central Time) on Tuesday, April 17, 2018 regarding first quarter 2018 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #5398424. A simultaneous audio-only web cast and replay of the conference call may be accessed via the Company’s website at http://www.wintrust.com, Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the first quarter 2018 earnings press release will be available on the home page of the Company’s website at http://www.wintrust.com and at the Investor Relations, Investor News and Events, Press Releases link on its website.
36
WINTRUST FINANCIAL CORPORATION
Supplemental Financial Information
5 Quarter Trends
37
WINTRUST FINANCIAL CORPORATION - Supplemental Financial Information
Selected Financial Highlights - 5 Quarter Trends
(Dollars in thousands, except per share data)
Three Months Ended | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
2018 | 2017 | 2017 | 2017 | 2017 | ||||||||||||||||
Selected Financial Condition Data (at end of period): | ||||||||||||||||||||
Total assets | $ | 28,456,772 | $ | 27,915,970 | $ | 27,358,162 | $ | 26,929,265 | $ | 25,778,893 | ||||||||||
Total loans, excluding covered loans | 22,062,134 | 21,640,797 | 20,912,781 | 20,743,332 | 19,931,058 | |||||||||||||||
Total deposits | 23,279,327 | 23,183,347 | 22,895,063 | 22,605,692 | 21,730,441 | |||||||||||||||
Junior subordinated debentures | 253,566 | 253,566 | 253,566 | 253,566 | 253,566 | |||||||||||||||
Total shareholders’ equity | 3,031,250 | 2,976,939 | 2,908,925 | 2,839,458 | 2,764,983 | |||||||||||||||
Selected Statements of Income Data: | ||||||||||||||||||||
Net interest income | 225,082 | 219,099 | 215,988 | 204,409 | 192,580 | |||||||||||||||
Net revenue (1) | 310,761 | 300,137 | 295,719 | 294,381 | 261,345 | |||||||||||||||
Net income | 81,981 | 68,781 | 65,626 | 64,897 | 58,378 | |||||||||||||||
Net income per common share – Basic | $ | 1.42 | $ | 1.19 | $ | 1.14 | $ | 1.15 | $ | 1.05 | ||||||||||
Net income per common share – Diluted | $ | 1.40 | $ | 1.17 | $ | 1.12 | $ | 1.11 | $ | 1.00 | ||||||||||
Selected Financial Ratios and Other Data: | ||||||||||||||||||||
Performance Ratios: | ||||||||||||||||||||
Net interest margin | 3.54 | % | 3.45 | % | 3.43 | % | 3.41 | % | 3.36 | % | ||||||||||
Net interest margin - fully taxable equivalent (non-GAAP) (2) | 3.56 | % | 3.49 | % | 3.46 | % | 3.43 | % | 3.39 | % | ||||||||||
Non-interest income to average assets | 1.25 | % | 1.18 | % | 1.17 | % | 1.39 | % | 1.11 | % | ||||||||||
Non-interest expense to average assets | 2.83 | % | 2.87 | % | 2.70 | % | 2.83 | % | 2.70 | % | ||||||||||
Net overhead ratio (3) | 1.58 | % | 1.69 | % | 1.53 | % | 1.44 | % | 1.60 | % | ||||||||||
Return on average assets | 1.20 | % | 1.00 | % | 0.96 | % | 1.00 | % | 0.94 | % | ||||||||||
Return on average common equity | 11.29 | % | 9.39 | % | 9.15 | % | 9.55 | % | 8.93 | % | ||||||||||
Return on average tangible common equity (non-GAAP) (2) | 14.02 | % | 11.65 | % | 11.39 | % | 12.02 | % | 11.44 | % | ||||||||||
Average total assets | $ | 27,809,597 | $ | 27,179,484 | $ | 27,012,295 | $ | 26,050,949 | $ | 25,207,348 | ||||||||||
Average total shareholders’ equity | 2,995,592 | 2,942,999 | 2,882,682 | 2,800,905 | 2,739,050 | |||||||||||||||
Average loans to average deposits ratio (excluding covered loans) | 95.2 | % | 92.3 | % | 91.8 | % | 94.1 | % | 92.5 | % | ||||||||||
Common Share Data at end of period: | ||||||||||||||||||||
Market price per common share | $ | 86.05 | $ | 82.37 | $ | 78.31 | $ | 76.44 | $ | 69.12 | ||||||||||
Book value per common share (2) | $ | 51.66 | $ | 50.96 | $ | 49.86 | $ | 48.73 | $ | 47.88 | ||||||||||
Tangible common book value per share (2) | $ | 42.17 | $ | 41.68 | $ | 40.53 | $ | 39.40 | $ | 37.97 | ||||||||||
Common shares outstanding | 56,256,498 | 55,965,207 | 55,838,063 | 55,699,927 | 52,503,663 | |||||||||||||||
Other Data at end of period:(6) | ||||||||||||||||||||
Leverage Ratio(4) | 9.4 | % | 9.3 | % | 9.2 | % | 9.2 | % | 9.3 | % | ||||||||||
Tier 1 Capital to risk-weighted assets (4) | 10.0 | % | 9.9 | % | 10.0 | % | 9.8 | % | 10.0 | % | ||||||||||
Common equity Tier 1 capital to risk-weighted assets (4) | 9.5 | % | 9.4 | % | 9.5 | % | 9.3 | % | 8.9 | % | ||||||||||
Total capital to risk-weighted assets (4) | 12.1 | % | 12.0 | % | 12.2 | % | 12.0 | % | 12.2 | % | ||||||||||
Allowance for credit losses (5) | $ | 140,746 | $ | 139,174 | $ | 134,395 | $ | 131,296 | $ | 127,630 | ||||||||||
Non-performing loans | 89,690 | 90,162 | 77,983 | 69,050 | 78,979 | |||||||||||||||
Allowance for credit losses to total loans (5) | 0.64 | % | 0.64 | % | 0.64 | % | 0.63 | % | 0.64 | % | ||||||||||
Non-performing loans to total loans | 0.41 | % | 0.42 | % | 0.37 | % | 0.33 | % | 0.40 | % | ||||||||||
Number of: | ||||||||||||||||||||
Bank subsidiaries | 15 | 15 | 15 | 15 | 15 | |||||||||||||||
Banking offices | 157 | 157 | 156 | 153 | 155 | |||||||||||||||
(1) | Net revenue includes net interest income and non-interest income. |
(2) | See “Supplemental Financial Measures/Ratios” for additional information on this performance measure/ratio. |
(3) | The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency. |
(4) | Capital ratios for current quarter-end are estimated. |
(5) | The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excluding the allowance for covered loan losses. |
(6) | Asset quality ratios exclude covered loans. |
38
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Consolidated Statements of Condition - 5 Quarter Trends
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(In thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and due from banks | $ | 231,407 | $ | 277,534 | $ | 251,896 | $ | 296,105 | $ | 214,102 | ||||||||||
Federal funds sold and securities purchased under resale agreements | 57 | 57 | 56 | 56 | 3,046 | |||||||||||||||
Interest bearing deposits with banks | 980,380 | 1,063,242 | 1,218,728 | 1,011,635 | 1,007,468 | |||||||||||||||
Available-for-sale securities, at fair value | 1,895,688 | 1,803,666 | 1,665,903 | 1,649,636 | 1,803,733 | |||||||||||||||
Held-to-maturity securities, at amortized cost | 892,937 | 826,449 | 819,340 | 793,376 | 667,764 | |||||||||||||||
Trading account securities | 1,682 | 995 | 643 | 1,987 | 714 | |||||||||||||||
Equity securities with readily determinable fair value | 37,832 | — | — | — | — | |||||||||||||||
Federal Home Loan Bank and Federal Reserve Bank stock | 104,956 | 89,989 | 87,192 | 80,812 | 78,904 | |||||||||||||||
Brokerage customer receivables | 24,531 | 26,431 | 23,631 | 23,281 | 23,171 | |||||||||||||||
Mortgage loans held-for-sale | 411,505 | 313,592 | 370,282 | 382,837 | 288,964 | |||||||||||||||
Loans, net of unearned income, excluding covered loans | 22,062,134 | 21,640,797 | 20,912,781 | 20,743,332 | 19,931,058 | |||||||||||||||
Covered loans | — | — | 46,601 | 50,119 | 52,359 | |||||||||||||||
Total loans | 22,062,134 | 21,640,797 | 20,959,382 | 20,793,451 | 19,983,417 | |||||||||||||||
Allowance for loan losses | (139,503 | ) | (137,905 | ) | (133,119 | ) | (129,591 | ) | (125,819 | ) | ||||||||||
Allowance for covered loan losses | — | — | (758 | ) | (1,074 | ) | (1,319 | ) | ||||||||||||
Net loans | 21,922,631 | 21,502,892 | 20,825,505 | 20,662,786 | 19,856,279 | |||||||||||||||
Premises and equipment, net | 626,687 | 621,895 | 609,978 | 605,211 | 598,746 | |||||||||||||||
Lease investments, net | 190,775 | 212,335 | 193,828 | 191,248 | 155,233 | |||||||||||||||
Accrued interest receivable and other assets | 601,794 | 567,374 | 580,612 | 577,359 | 560,741 | |||||||||||||||
Trade date securities receivable | — | 90,014 | 189,896 | 133,130 | — | |||||||||||||||
Goodwill | 511,497 | 501,884 | 502,021 | 500,260 | 499,341 | |||||||||||||||
Other intangible assets | 22,413 | 17,621 | 18,651 | 19,546 | 20,687 | |||||||||||||||
Total assets | $ | 28,456,772 | $ | 27,915,970 | $ | 27,358,162 | $ | 26,929,265 | $ | 25,778,893 | ||||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Non-interest bearing | $ | 6,612,319 | $ | 6,792,497 | $ | 6,502,409 | $ | 6,294,052 | $ | 5,790,579 | ||||||||||
Interest bearing | 16,667,008 | 16,390,850 | 16,392,654 | 16,311,640 | 15,939,862 | |||||||||||||||
Total deposits | 23,279,327 | 23,183,347 | 22,895,063 | 22,605,692 | 21,730,441 | |||||||||||||||
Federal Home Loan Bank advances | 915,000 | 559,663 | 468,962 | 318,270 | 227,585 | |||||||||||||||
Other borrowings | 247,092 | 266,123 | 251,680 | 277,710 | 238,787 | |||||||||||||||
Subordinated notes | 139,111 | 139,088 | 139,052 | 139,029 | 138,993 | |||||||||||||||
Junior subordinated debentures | 253,566 | 253,566 | 253,566 | 253,566 | 253,566 | |||||||||||||||
Trade date securities payable | — | — | 880 | 5,151 | — | |||||||||||||||
Accrued interest payable and other liabilities | 591,426 | 537,244 | 440,034 | 490,389 | 424,538 | |||||||||||||||
Total liabilities | 25,425,522 | 24,939,031 | 24,449,237 | 24,089,807 | 23,013,910 | |||||||||||||||
Shareholders’ Equity: | ||||||||||||||||||||
Preferred stock | 125,000 | 125,000 | 125,000 | 125,000 | 251,257 | |||||||||||||||
Common stock | 56,364 | 56,068 | 55,940 | 55,802 | 52,605 | |||||||||||||||
Surplus | 1,540,673 | 1,529,035 | 1,519,596 | 1,511,080 | 1,381,886 | |||||||||||||||
Treasury stock | (5,355 | ) | (4,986 | ) | (4,884 | ) | (4,884 | ) | (4,884 | ) | ||||||||||
Retained earnings | 1,387,663 | 1,313,657 | 1,254,759 | 1,198,997 | 1,143,943 | |||||||||||||||
Accumulated other comprehensive loss | (73,095 | ) | (41,835 | ) | (41,486 | ) | (46,537 | ) | (59,824 | ) | ||||||||||
Total shareholders’ equity | 3,031,250 | 2,976,939 | 2,908,925 | 2,839,458 | 2,764,983 | |||||||||||||||
Total liabilities and shareholders’ equity | $ | 28,456,772 | $ | 27,915,970 | $ | 27,358,162 | $ | 26,929,265 | $ | 25,778,893 | ||||||||||
39
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Consolidated Statements of Income (Unaudited) - 5 Quarter Trends
Three Months Ended | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(In thousands, except per share data) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Interest income | ||||||||||||||||||||
Interest and fees on loans | 234,994 | 226,447 | 223,897 | 209,289 | 196,916 | |||||||||||||||
Mortgage loans held-for-sale | 2,818 | 3,291 | 3,223 | 3,420 | 2,398 | |||||||||||||||
Interest bearing deposits with banks | 2,796 | 2,723 | 3,272 | 1,634 | 1,623 | |||||||||||||||
Federal funds sold and securities purchased under resale agreements | — | — | — | 1 | 1 | |||||||||||||||
Investment securities | 19,128 | 18,160 | 16,058 | 15,524 | 13,573 | |||||||||||||||
Trading account securities | 14 | 2 | 8 | 4 | 11 | |||||||||||||||
Federal Home Loan Bank and Federal Reserve Bank stock | 1,298 | 1,067 | 1,080 | 1,153 | 1,070 | |||||||||||||||
Brokerage customer receivables | 157 | 150 | 150 | 156 | 167 | |||||||||||||||
Total interest income | 261,205 | 251,840 | 247,688 | 231,181 | 215,759 | |||||||||||||||
Interest expense | ||||||||||||||||||||
Interest on deposits | 26,549 | 24,930 | 23,655 | 18,471 | 16,270 | |||||||||||||||
Interest on Federal Home Loan Bank advances | 3,639 | 2,124 | 2,151 | 2,933 | 1,590 | |||||||||||||||
Interest on other borrowings | 1,699 | 1,600 | 1,482 | 1,149 | 1,139 | |||||||||||||||
Interest on subordinated notes | 1,773 | 1,786 | 1,772 | 1,786 | 1,772 | |||||||||||||||
Interest on junior subordinated debentures | 2,463 | 2,301 | 2,640 | 2,433 | 2,408 | |||||||||||||||
Total interest expense | 36,123 | 32,741 | 31,700 | 26,772 | 23,179 | |||||||||||||||
Net interest income | 225,082 | 219,099 | 215,988 | 204,409 | 192,580 | |||||||||||||||
Provision for credit losses | 8,346 | 7,772 | 7,896 | 8,891 | 5,209 | |||||||||||||||
Net interest income after provision for credit losses | 216,736 | 211,327 | 208,092 | 195,518 | 187,371 | |||||||||||||||
Non-interest income | ||||||||||||||||||||
Wealth management | 22,986 | 21,910 | 19,803 | 19,905 | 20,148 | |||||||||||||||
Mortgage banking | 30,960 | 27,411 | 28,184 | 35,939 | 21,938 | |||||||||||||||
Service charges on deposit accounts | 8,857 | 8,907 | 8,645 | 8,696 | 8,265 | |||||||||||||||
(Losses) gains on investment securities, net | (351 | ) | 14 | 39 | 47 | (55 | ) | |||||||||||||
Fees from covered call options | 1,597 | 1,610 | 1,143 | 890 | 759 | |||||||||||||||
Trading gains (losses), net | 103 | 24 | (129 | ) | (420 | ) | (320 | ) | ||||||||||||
Operating lease income, net | 9,691 | 8,598 | 8,461 | 6,805 | 5,782 | |||||||||||||||
Other | 11,836 | 12,564 | 13,585 | 18,110 | 12,248 | |||||||||||||||
Total non-interest income | 85,679 | 81,038 | 79,731 | 89,972 | 68,765 | |||||||||||||||
Non-interest expense | ||||||||||||||||||||
Salaries and employee benefits | 112,436 | 118,009 | 106,251 | 106,502 | 99,316 | |||||||||||||||
Equipment | 10,072 | 9,500 | 9,947 | 9,909 | 9,002 | |||||||||||||||
Operating lease equipment depreciation | 6,533 | 7,015 | 6,794 | 5,662 | 4,636 | |||||||||||||||
Occupancy, net | 13,767 | 14,154 | 13,079 | 12,586 | 13,101 | |||||||||||||||
Data processing | 8,493 | 7,915 | 7,851 | 7,804 | 7,925 | |||||||||||||||
Advertising and marketing | 8,824 | 7,382 | 9,572 | 8,726 | 5,150 | |||||||||||||||
Professional fees | 6,649 | 8,879 | 6,786 | 7,510 | 4,660 | |||||||||||||||
Amortization of other intangible assets | 1,004 | 1,028 | 1,068 | 1,141 | 1,164 | |||||||||||||||
FDIC insurance | 4,362 | 4,324 | 3,877 | 3,874 | 4,156 | |||||||||||||||
OREO expense, net | 2,926 | 599 | 590 | 739 | 1,665 | |||||||||||||||
Other | 19,283 | 17,775 | 17,760 | 19,091 | 17,343 | |||||||||||||||
Total non-interest expense | 194,349 | 196,580 | 183,575 | 183,544 | 168,118 | |||||||||||||||
Income before taxes | 108,066 | 95,785 | 104,248 | 101,946 | 88,018 | |||||||||||||||
Income tax expense | 26,085 | 27,004 | 38,622 | 37,049 | 29,640 | |||||||||||||||
Net income | $ | 81,981 | $ | 68,781 | $ | 65,626 | $ | 64,897 | $ | 58,378 | ||||||||||
Preferred stock dividends | 2,050 | 2,050 | 2,050 | 2,050 | 3,628 | |||||||||||||||
Net income applicable to common shares | $ | 79,931 | $ | 66,731 | $ | 63,576 | $ | 62,847 | $ | 54,750 | ||||||||||
Net income per common share - Basic | $ | 1.42 | $ | 1.19 | $ | 1.14 | $ | 1.15 | $ | 1.05 | ||||||||||
Net income per common share - Diluted | $ | 1.40 | $ | 1.17 | $ | 1.12 | $ | 1.11 | $ | 1.00 | ||||||||||
Cash dividends declared per common share | $ | 0.19 | $ | 0.14 | $ | 0.14 | $ | 0.14 | $ | 0.14 | ||||||||||
Weighted average common shares outstanding | 56,137 | 55,924 | 55,796 | 54,775 | 52,267 | |||||||||||||||
Dilutive potential common shares | 888 | 1,010 | 966 | 1,812 | 4,160 | |||||||||||||||
Average common shares and dilutive common shares | 57,025 | 56,934 | 56,762 | 56,587 | 56,427 | |||||||||||||||
40
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Period End Loan Balances - 5 Quarter Trends
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Balance: | ||||||||||||||||||||
Commercial | $ | 7,060,871 | $ | 6,787,677 | $ | 6,456,034 | $ | 6,406,289 | $ | 6,081,489 | ||||||||||
Commercial real estate | 6,633,520 | 6,580,618 | 6,400,781 | 6,402,494 | 6,261,682 | |||||||||||||||
Home equity | 626,547 | 663,045 | 672,969 | 689,483 | 708,258 | |||||||||||||||
Residential real estate | 869,104 | 832,120 | 789,499 | 762,810 | 720,608 | |||||||||||||||
Premium finance receivables - commercial | 2,576,150 | 2,634,565 | 2,664,912 | 2,648,386 | 2,446,946 | |||||||||||||||
Premium finance receivables - life insurance | 4,189,961 | 4,035,059 | 3,795,474 | 3,719,043 | 3,593,563 | |||||||||||||||
Consumer and other | 105,981 | 107,713 | 133,112 | 114,827 | 118,512 | |||||||||||||||
Total loans, net of unearned income, excluding covered loans | $ | 22,062,134 | $ | 21,640,797 | $ | 20,912,781 | $ | 20,743,332 | $ | 19,931,058 | ||||||||||
Covered loans | — | — | 46,601 | 50,119 | 52,359 | |||||||||||||||
Total loans, net of unearned income | $ | 22,062,134 | $ | 21,640,797 | $ | 20,959,382 | $ | 20,793,451 | $ | 19,983,417 | ||||||||||
Mix: | ||||||||||||||||||||
Commercial | 32 | % | 31 | % | 31 | % | 31 | % | 30 | % | ||||||||||
Commercial real estate | 30 | 30 | 31 | 31 | 31 | |||||||||||||||
Home equity | 3 | 3 | 3 | 3 | 4 | |||||||||||||||
Residential real estate | 4 | 4 | 3 | 3 | 4 | |||||||||||||||
Premium finance receivables - commercial | 12 | 12 | 13 | 13 | 12 | |||||||||||||||
Premium finance receivables - life insurance | 19 | 19 | 18 | 18 | 18 | |||||||||||||||
Consumer and other | — | 1 | 1 | 1 | 1 | |||||||||||||||
Total loans, net of unearned income, excluding covered loans | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
Covered loans | — | — | — | — | — | |||||||||||||||
Total loans, net of unearned income | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Period End Deposits Balances - 5 Quarter Trends
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Balance: | ||||||||||||||||||||
Non-interest bearing | $ | 6,612,319 | $ | 6,792,497 | $ | 6,502,409 | $ | 6,294,052 | $ | 5,790,579 | ||||||||||
NOW and interest bearing demand deposits | 2,315,122 | 2,315,055 | 2,273,025 | 2,459,238 | 2,484,676 | |||||||||||||||
Wealth management deposits (1) | 2,495,134 | 2,323,699 | 2,171,758 | 2,464,162 | 2,390,464 | |||||||||||||||
Money market | 4,617,122 | 4,515,353 | 4,607,995 | 4,449,385 | 4,555,752 | |||||||||||||||
Savings | 2,901,504 | 2,829,373 | 2,673,201 | 2,419,463 | 2,287,958 | |||||||||||||||
Time certificates of deposit | 4,338,126 | 4,407,370 | 4,666,675 | 4,519,392 | 4,221,012 | |||||||||||||||
Total deposits | $ | 23,279,327 | $ | 23,183,347 | $ | 22,895,063 | $ | 22,605,692 | $ | 21,730,441 | ||||||||||
Mix: | ||||||||||||||||||||
Non-interest bearing | 28 | % | 29 | % | 28 | % | 28 | % | 27 | % | ||||||||||
NOW and interest bearing demand deposits | 10 | 10 | 10 | 11 | 11 | |||||||||||||||
Wealth management deposits (1) | 11 | 10 | 10 | 11 | 11 | |||||||||||||||
Money market | 20 | 20 | 20 | 19 | 21 | |||||||||||||||
Savings | 12 | 12 | 12 | 11 | 11 | |||||||||||||||
Time certificates of deposit | 19 | 19 | 20 | 20 | 19 | |||||||||||||||
Total deposits | 100 | % | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||||
(1) | Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts of the Banks. |
41
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin (Including Call Option Income) - 5 Quarter Trends
Three Months Ended | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Net interest income - FTE | $ | 226,286 | $ | 221,226 | $ | 217,947 | $ | 206,108 | $ | 194,282 | ||||||||||
Call option income | 1,597 | 1,610 | 1,143 | 890 | 759 | |||||||||||||||
Net interest income including call option income | $ | 227,883 | $ | 222,836 | $ | 219,090 | $ | 206,998 | $ | 195,041 | ||||||||||
Yield on earning assets | 4.13 | % | 4.00 | % | 3.96 | % | 3.88 | % | 3.79 | % | ||||||||||
Rate on interest-bearing liabilities | 0.83 | 0.75 | 0.73 | 0.63 | 0.58 | |||||||||||||||
Rate spread | 3.30 | % | 3.25 | % | 3.23 | % | 3.25 | % | 3.21 | % | ||||||||||
Less: Fully tax-equivalent adjustment | (0.02 | ) | (0.04 | ) | (0.03 | ) | (0.02 | ) | (0.03 | ) | ||||||||||
Net free funds contribution | 0.26 | 0.24 | 0.23 | 0.18 | 0.18 | |||||||||||||||
Net interest margin (GAAP-derived) | 3.54 | % | 3.45 | % | 3.43 | % | 3.41 | % | 3.36 | % | ||||||||||
Fully tax-equivalent adjustment | 0.02 | 0.04 | 0.03 | 0.02 | 0.03 | |||||||||||||||
Net interest margin - FTE | 3.56 | % | 3.49 | % | 3.46 | % | 3.43 | % | 3.39 | % | ||||||||||
Call option income | 0.03 | 0.03 | 0.02 | 0.01 | 0.01 | |||||||||||||||
Net interest margin - FTE, including call option income | 3.59 | % | 3.52 | % | 3.48 | % | 3.44 | % | 3.40 | % | ||||||||||
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin (Including Call Option Income - YTD Trends)
Three Months Ended March 31, | Years Ended December 31, | |||||||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Net interest income - FTE | $ | 226,286 | $ | 839,563 | $ | 728,145 | $ | 646,238 | $ | 601,744 | ||||||||||
Call option income | 1,597 | 4,402 | 11,470 | 15,364 | 7,859 | |||||||||||||||
Net interest income including call option income | $ | 227,883 | $ | 843,965 | $ | 739,615 | $ | 661,602 | $ | 609,603 | ||||||||||
Yield on earning assets | 4.13 | % | 3.91 | % | 3.67 | % | 3.76 | % | 3.96 | % | ||||||||||
Rate on interest-bearing liabilities | 0.83 | 0.67 | 0.57 | 0.54 | 0.55 | |||||||||||||||
Rate spread | 3.30 | % | 3.24 | % | 3.10 | % | 3.22 | % | 3.41 | % | ||||||||||
Less: Fully tax-equivalent adjustment | (0.02 | ) | (0.03 | ) | (0.02 | ) | (0.02 | ) | (0.02 | ) | ||||||||||
Net free funds contribution | 0.26 | 0.20 | 0.16 | 0.14 | 0.12 | |||||||||||||||
Net interest margin (GAAP-derived) | 3.54 | % | 3.41 | % | 3.24 | % | 3.34 | % | 3.51 | % | ||||||||||
Fully tax-equivalent adjustment | 0.02 | 0.03 | 0.02 | 0.02 | 0.02 | |||||||||||||||
Net interest margin - FTE | 3.56 | % | 3.44 | % | 3.26 | % | 3.36 | % | 3.53 | % | ||||||||||
Call option income | 0.03 | 0.02 | 0.05 | 0.08 | 0.05 | |||||||||||||||
Net interest margin - FTE, including call option income | 3.59 | % | 3.46 | % | 3.31 | % | 3.44 | % | 3.58 | % | ||||||||||
42
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Quarterly Average Balances - 5 Quarter Trends
Three Months Ended | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(In thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Interest-bearing deposits with banks and cash equivalents | $ | 749,973 | $ | 914,319 | $ | 1,003,572 | $ | 722,349 | $ | 780,752 | ||||||||||
Investment securities | 2,892,617 | 2,736,253 | 2,652,119 | 2,572,619 | 2,395,625 | |||||||||||||||
FHLB and FRB stock | 105,414 | 82,092 | 81,928 | 99,438 | 94,090 | |||||||||||||||
Liquidity management assets | $ | 3,748,004 | $ | 3,732,664 | $ | 3,737,619 | $ | 3,394,406 | $ | 3,270,467 | ||||||||||
Other earning assets | 27,571 | 26,955 | 25,844 | 25,749 | 25,236 | |||||||||||||||
Mortgage loans held-for-sale | 281,181 | 335,385 | 336,604 | 334,843 | 268,834 | |||||||||||||||
Loans, net of unearned income | 21,711,342 | 21,080,984 | 20,858,618 | 20,264,875 | 19,654,772 | |||||||||||||||
Covered loans | — | 6,025 | 48,415 | 51,823 | 56,872 | |||||||||||||||
Total earning assets | $ | 25,768,098 | $ | 25,182,013 | $ | 25,007,100 | $ | 24,071,696 | $ | 23,276,181 | ||||||||||
Allowance for loan and covered loan losses | (143,108 | ) | (138,584 | ) | (135,519 | ) | (132,053 | ) | (127,425 | ) | ||||||||||
Cash and due from banks | 254,489 | 244,097 | 242,186 | 242,495 | 229,588 | |||||||||||||||
Other assets | 1,930,118 | 1,891,958 | 1,898,528 | 1,868,811 | 1,829,004 | |||||||||||||||
Total assets | $ | 27,809,597 | $ | 27,179,484 | $ | 27,012,295 | $ | 26,050,949 | $ | 25,207,348 | ||||||||||
NOW and interest bearing demand deposits | $ | 2,255,692 | $ | 2,284,576 | $ | 2,344,848 | $ | 2,470,130 | $ | 2,512,598 | ||||||||||
Wealth management deposits | 2,250,139 | 2,005,197 | 2,320,674 | 2,091,251 | 2,082,285 | |||||||||||||||
Money market accounts | 4,520,620 | 4,611,515 | 4,471,342 | 4,435,670 | 4,407,901 | |||||||||||||||
Savings accounts | 2,813,772 | 2,741,621 | 2,581,946 | 2,329,195 | 2,227,024 | |||||||||||||||
Time deposits | 4,322,111 | 4,581,464 | 4,573,081 | 4,295,428 | 4,236,862 | |||||||||||||||
Interest-bearing deposits | $ | 16,162,334 | $ | 16,224,373 | $ | 16,291,891 | $ | 15,621,674 | $ | 15,466,670 | ||||||||||
Federal Home Loan Bank advances | 872,811 | 324,748 | 324,996 | 689,600 | 181,338 | |||||||||||||||
Other borrowings | 263,125 | 255,972 | 268,850 | 240,547 | 255,012 | |||||||||||||||
Subordinated notes | 139,094 | 139,065 | 139,035 | 139,007 | 138,980 | |||||||||||||||
Junior subordinated debentures | 253,566 | 253,566 | 253,566 | 253,566 | 253,566 | |||||||||||||||
Total interest-bearing liabilities | $ | 17,690,930 | $ | 17,197,724 | $ | 17,278,338 | $ | 16,944,394 | $ | 16,295,566 | ||||||||||
Non-interest bearing deposits | 6,639,845 | 6,605,553 | 6,419,326 | 5,904,679 | 5,787,034 | |||||||||||||||
Other liabilities | 483,230 | 433,208 | 431,949 | 400,971 | 385,698 | |||||||||||||||
Equity | 2,995,592 | 2,942,999 | 2,882,682 | 2,800,905 | 2,739,050 | |||||||||||||||
Total liabilities and shareholders’ equity | $ | 27,809,597 | $ | 27,179,484 | $ | 27,012,295 | $ | 26,050,949 | $ | 25,207,348 | ||||||||||
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin - 5 Quarter Trends
Three Months Ended | |||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |||||||||||
Yield earned on: | |||||||||||||||
Interest-bearing deposits with banks and cash equivalents | 1.51 | % | 1.18 | % | 1.29 | % | 0.91 | % | 0.84 | % | |||||
Investment securities | 2.76 | 2.78 | 2.54 | 2.55 | 2.45 | ||||||||||
FHLB and FRB stock | 4.99 | 5.15 | 5.23 | 4.66 | 4.61 | ||||||||||
Liquidity management assets | 2.57 | % | 2.44 | % | 2.26 | % | 2.27 | % | 2.13 | % | |||||
Other earning assets | 2.56 | 2.27 | 2.49 | 2.53 | 2.95 | ||||||||||
Mortgage loans held-for-sale | 4.06 | 3.89 | 3.80 | 4.10 | 3.62 | ||||||||||
Loans, net of unearned income | 4.40 | 4.28 | 4.27 | 4.15 | 4.06 | ||||||||||
Covered loans | — | 5.66 | 4.91 | 5.01 | 6.55 | ||||||||||
Total earning assets | 4.13 | % | 4.00 | % | 3.96 | % | 3.88 | % | 3.79 | % | |||||
Rate paid on: | |||||||||||||||
NOW and interest bearing demand deposits | 0.25 | % | 0.24 | % | 0.22 | % | 0.20 | % | 0.18 | % | |||||
Wealth management deposits | 0.98 | 0.80 | 0.81 | 0.55 | 0.45 | ||||||||||
Money market accounts | 0.42 | 0.36 | 0.31 | 0.24 | 0.20 | ||||||||||
Savings accounts | 0.39 | 0.39 | 0.33 | 0.26 | 0.24 | ||||||||||
Time deposits | 1.16 | 1.09 | 1.04 | 0.95 | 0.89 | ||||||||||
Interest-bearing deposits | 0.67 | % | 0.61 | % | 0.58 | % | 0.47 | % | 0.43 | % | |||||
Federal Home Loan Bank advances | 1.69 | 2.59 | 2.63 | 1.71 | 3.55 | ||||||||||
Other borrowings | 2.62 | 2.48 | 2.19 | 1.92 | 1.81 | ||||||||||
Subordinated notes | 5.10 | 5.14 | 5.10 | 5.14 | 5.10 | ||||||||||
Junior subordinated debentures | 3.89 | 3.55 | 4.07 | 3.80 | 3.80 | ||||||||||
Total interest-bearing liabilities | 0.83 | % | 0.75 | % | 0.73 | % | 0.63 | % | 0.58 | % | |||||
Interest rate spread | 3.30 | % | 3.25 | % | 3.23 | % | 3.25 | % | 3.21 | % | |||||
Less: Fully tax-equivalent adjustment | (0.02 | ) | (0.04 | ) | (0.03 | ) | (0.02 | ) | (0.03 | ) | |||||
Net free funds/contribution | 0.26 | 0.24 | 0.23 | 0.18 | 0.18 | ||||||||||
Net interest margin (GAAP) | 3.54 | % | 3.45 | % | 3.43 | % | 3.41 | % | 3.36 | % | |||||
Fully tax-equivalent adjustment | 0.02 | 0.04 | 0.03 | 0.02 | 0.03 | ||||||||||
Net interest margin - FTE | 3.56 | % | 3.49 | % | 3.46 | % | 3.43 | % | 3.39 | % | |||||
43
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Interest Income - 5 Quarter Trends
Three Months Ended | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(In thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Brokerage | $ | 6,031 | $ | 6,067 | $ | 5,127 | $ | 5,449 | $ | 6,220 | ||||||||||
Trust and asset management | 16,955 | 15,843 | 14,676 | 14,456 | 13,928 | |||||||||||||||
Total wealth management | 22,986 | 21,910 | 19,803 | 19,905 | 20,148 | |||||||||||||||
Mortgage banking | 30,960 | 27,411 | 28,184 | 35,939 | 21,938 | |||||||||||||||
Service charges on deposit accounts | 8,857 | 8,907 | 8,645 | 8,696 | 8,265 | |||||||||||||||
(Losses) gains on investment securities, net | (351 | ) | 14 | 39 | 47 | (55 | ) | |||||||||||||
Fees from covered call options | 1,597 | 1,610 | 1,143 | 890 | 759 | |||||||||||||||
Trading gains (losses), net | 103 | 24 | (129 | ) | (420 | ) | (320 | ) | ||||||||||||
Operating lease income, net | 9,691 | 8,598 | 8,461 | 6,805 | 5,782 | |||||||||||||||
Other: | ||||||||||||||||||||
Interest rate swap fees | 2,237 | 1,963 | 1,762 | 2,221 | 1,433 | |||||||||||||||
BOLI | 714 | 754 | 897 | 888 | 985 | |||||||||||||||
Administrative services | 1,061 | 1,103 | 1,052 | 986 | 1,024 | |||||||||||||||
Early pay-offs of capital leases | 33 | 7 | — | 10 | 1,211 | |||||||||||||||
Miscellaneous | 7,791 | 8,737 | 9,874 | 14,005 | 7,595 | |||||||||||||||
Total other income | 11,836 | 12,564 | 13,585 | 18,110 | 12,248 | |||||||||||||||
Total Non-Interest Income | $ | 85,679 | $ | 81,038 | $ | 79,731 | $ | 89,972 | $ | 68,765 | ||||||||||
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Interest Expense - 5 Quarter Trends
Three Months Ended | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(In thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Salaries and employee benefits: | ||||||||||||||||||||
Salaries | $ | 61,986 | $ | 58,239 | $ | 57,689 | $ | 55,215 | $ | 55,008 | ||||||||||
Commissions and incentive compensation | 31,949 | 40,723 | 32,095 | 34,050 | 26,643 | |||||||||||||||
Benefits | 18,501 | 19,047 | 16,467 | 17,237 | 17,665 | |||||||||||||||
Total salaries and employee benefits | 112,436 | 118,009 | 106,251 | 106,502 | 99,316 | |||||||||||||||
Equipment | 10,072 | 9,500 | 9,947 | 9,909 | 9,002 | |||||||||||||||
Operating lease equipment depreciation | 6,533 | 7,015 | 6,794 | 5,662 | 4,636 | |||||||||||||||
Occupancy, net | 13,767 | 14,154 | 13,079 | 12,586 | 13,101 | |||||||||||||||
Data processing | 8,493 | 7,915 | 7,851 | 7,804 | 7,925 | |||||||||||||||
Advertising and marketing | 8,824 | 7,382 | 9,572 | 8,726 | 5,150 | |||||||||||||||
Professional fees | 6,649 | 8,879 | 6,786 | 7,510 | 4,660 | |||||||||||||||
Amortization of other intangible assets | 1,004 | 1,028 | 1,068 | 1,141 | 1,164 | |||||||||||||||
FDIC insurance | 4,362 | 4,324 | 3,877 | 3,874 | 4,156 | |||||||||||||||
OREO expense, net | 2,926 | 599 | 590 | 739 | 1,665 | |||||||||||||||
Other: | ||||||||||||||||||||
Commissions - 3rd party brokers | 1,252 | 1,057 | 990 | 1,033 | 1,098 | |||||||||||||||
Postage | 1,866 | 1,427 | 1,814 | 2,080 | 1,442 | |||||||||||||||
Miscellaneous | 16,165 | 15,291 | 14,956 | 15,978 | 14,803 | |||||||||||||||
Total other expense | 19,283 | 17,775 | 17,760 | 19,091 | 17,343 | |||||||||||||||
Total Non-Interest Expense | $ | 194,349 | $ | 196,580 | $ | 183,575 | $ | 183,544 | $ | 168,118 | ||||||||||
44
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Allowance for Credit Losses, excluding covered loans - 5 Quarter Trends
Three Months Ended | ||||||||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||||||||||||
Allowance for loan losses at beginning of period | $ | 137,905 | $ | 133,119 | $ | 129,591 | $ | 125,819 | $ | 122,291 | ||||||||||
Provision for credit losses | 8,346 | 7,772 | 7,942 | 8,952 | 5,316 | |||||||||||||||
Other adjustments (1) | (40 | ) | 698 | (39 | ) | (30 | ) | (56 | ) | |||||||||||
Reclassification (to) from allowance for unfunded lending-related commitments | 26 | 7 | 94 | 106 | (138 | ) | ||||||||||||||
Charge-offs: | ||||||||||||||||||||
Commercial | 2,687 | 1,340 | 2,265 | 913 | 641 | |||||||||||||||
Commercial real estate | 813 | 1,001 | 989 | 1,985 | 261 | |||||||||||||||
Home equity | 357 | 728 | 968 | 1,631 | 625 | |||||||||||||||
Residential real estate | 571 | 542 | 267 | 146 | 329 | |||||||||||||||
Premium finance receivables - commercial | 4,721 | 2,314 | 1,716 | 1,878 | 1,427 | |||||||||||||||
Premium finance receivables - life insurance | — | — | — | — | — | |||||||||||||||
Consumer and other | 129 | 207 | 213 | 175 | 134 | |||||||||||||||
Total charge-offs | 9,278 | 6,132 | 6,418 | 6,728 | 3,417 | |||||||||||||||
Recoveries: | ||||||||||||||||||||
Commercial | 262 | 235 | 801 | 561 | 273 | |||||||||||||||
Commercial real estate | 1,687 | 1,037 | 323 | 276 | 554 | |||||||||||||||
Home equity | 123 | 359 | 178 | 144 | 65 | |||||||||||||||
Residential real estate | 40 | 165 | 55 | 54 | 178 | |||||||||||||||
Premium finance receivables - commercial | 385 | 613 | 499 | 404 | 612 | |||||||||||||||
Premium finance receivables - life insurance | — | — | — | — | — | |||||||||||||||
Consumer and other | 47 | 32 | 93 | 33 | 141 | |||||||||||||||
Total recoveries | 2,544 | 2,441 | 1,949 | 1,472 | 1,823 | |||||||||||||||
Net charge-offs | (6,734 | ) | (3,691 | ) | (4,469 | ) | (5,256 | ) | (1,594 | ) | ||||||||||
Allowance for loan losses at period end | $ | 139,503 | $ | 137,905 | $ | 133,119 | $ | 129,591 | $ | 125,819 | ||||||||||
Allowance for unfunded lending-related commitments at period end | 1,243 | 1,269 | 1,276 | 1,705 | 1,811 | |||||||||||||||
Allowance for credit losses at period end | $ | 140,746 | $ | 139,174 | $ | 134,395 | $ | 131,296 | $ | 127,630 | ||||||||||
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average: | ||||||||||||||||||||
Commercial | 0.14 | % | 0.07 | % | 0.09 | % | 0.02 | % | 0.03 | % | ||||||||||
Commercial real estate | (0.05 | ) | 0.00 | 0.04 | 0.11 | (0.02 | ) | |||||||||||||
Home equity | 0.15 | 0.22 | 0.46 | 0.85 | 0.32 | |||||||||||||||
Residential real estate | 0.19 | 0.13 | 0.08 | 0.03 | 0.06 | |||||||||||||||
Premium finance receivables - commercial | 0.68 | 0.26 | 0.18 | 0.23 | 0.13 | |||||||||||||||
Premium finance receivables - life insurance | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
Consumer and other | 0.26 | 0.52 | 0.37 | 0.45 | (0.02 | ) | ||||||||||||||
Total loans, net of unearned income, excluding covered loans | 0.12 | % | 0.07 | % | 0.08 | % | 0.10 | % | 0.03 | % | ||||||||||
Net charge-offs as a percentage of the provision for credit losses | 80.69 | % | 47.49 | % | 56.27 | % | 58.71 | % | 29.98 | % | ||||||||||
Loans at period-end | $ | 22,062,134 | $ | 21,640,797 | $ | 20,912,781 | $ | 20,743,332 | $ | 19,931,058 | ||||||||||
Allowance for loan losses as a percentage of loans at period end | 0.63 | % | 0.64 | % | 0.64 | % | 0.62 | % | 0.63 | % | ||||||||||
Allowance for credit losses as a percentage of loans at period end | 0.64 | % | 0.64 | % | 0.64 | % | 0.63 | % | 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. |
45
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Performing Assets, excluding covered assets - 5 Quarter Trends
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 (3) | 2017 | 2017 | 2017 | ||||||||||||||
Loans past due greater than 90 days and still accruing(1): | |||||||||||||||||||
Commercial | $ | — | $ | — | $ | — | $ | — | $ | 100 | |||||||||
Commercial real estate | — | — | — | — | — | ||||||||||||||
Home equity | — | — | — | — | — | ||||||||||||||
Residential real estate | — | 3,278 | — | 179 | — | ||||||||||||||
Premium finance receivables - commercial | 8,547 | 9,242 | 9,584 | 5,922 | 4,991 | ||||||||||||||
Premium finance receivables - life insurance | — | — | 6,740 | 1,046 | 2,024 | ||||||||||||||
Consumer and other | 207 | 40 | 159 | 63 | 104 | ||||||||||||||
Total loans past due greater than 90 days and still accruing | 8,754 | 12,560 | 16,483 | 7,210 | 7,219 | ||||||||||||||
Non-accrual loans(2): | |||||||||||||||||||
Commercial | 14,007 | 15,696 | 13,931 | 10,191 | 14,307 | ||||||||||||||
Commercial real estate | 21,825 | 22,048 | 14,878 | 16,980 | 20,809 | ||||||||||||||
Home equity | 9,828 | 8,978 | 7,581 | 9,482 | 11,722 | ||||||||||||||
Residential real estate | 17,214 | 17,977 | 14,743 | 14,292 | 11,943 | ||||||||||||||
Premium finance receivables - commercial | 17,342 | 12,163 | 9,827 | 10,456 | 12,629 | ||||||||||||||
Premium finance receivables - life insurance | — | — | — | — | — | ||||||||||||||
Consumer and other | 720 | 740 | 540 | 439 | 350 | ||||||||||||||
Total non-accrual loans | 80,936 | 77,602 | 61,500 | 61,840 | 71,760 | ||||||||||||||
Total non-performing loans: | |||||||||||||||||||
Commercial | 14,007 | 15,696 | 13,931 | 10,191 | 14,407 | ||||||||||||||
Commercial real estate | 21,825 | 22,048 | 14,878 | 16,980 | 20,809 | ||||||||||||||
Home equity | 9,828 | 8,978 | 7,581 | 9,482 | 11,722 | ||||||||||||||
Residential real estate | 17,214 | 21,255 | 14,743 | 14,471 | 11,943 | ||||||||||||||
Premium finance receivables - commercial | 25,889 | 21,405 | 19,411 | 16,378 | 17,620 | ||||||||||||||
Premium finance receivables - life insurance | — | — | 6,740 | 1,046 | 2,024 | ||||||||||||||
Consumer and other | 927 | 780 | 699 | 502 | 454 | ||||||||||||||
Total non-performing loans | $ | 89,690 | $ | 90,162 | $ | 77,983 | $ | 69,050 | $ | 78,979 | |||||||||
Other real estate owned | 18,481 | 20,244 | 17,312 | 16,853 | 17,090 | ||||||||||||||
Other real estate owned - from acquisitions | 18,117 | 20,402 | 20,066 | 22,508 | 22,774 | ||||||||||||||
Other repossessed assets | 113 | 153 | 301 | 532 | 544 | ||||||||||||||
Total non-performing assets | $ | 126,401 | $ | 130,961 | $ | 115,662 | $ | 108,943 | $ | 119,387 | |||||||||
TDRs performing under the contractual terms of the loan agreement | $ | 39,562 | $ | 39,683 | $ | 26,972 | $ | 28,008 | $ | 28,392 | |||||||||
Total non-performing loans by category as a percent of its own respective category’s period-end balance: | |||||||||||||||||||
Commercial | 0.20 | % | 0.23 | % | 0.22 | % | 0.16 | % | 0.24 | % | |||||||||
Commercial real estate | 0.33 | 0.34 | 0.23 | 0.27 | 0.33 | ||||||||||||||
Home equity | 1.57 | 1.35 | 1.13 | 1.38 | 1.66 | ||||||||||||||
Residential real estate | 1.98 | 2.55 | 1.87 | 1.90 | 1.66 | ||||||||||||||
Premium finance receivables - commercial | 1.00 | 0.81 | 0.73 | 0.62 | 0.72 | ||||||||||||||
Premium finance receivables - life insurance | — | — | 0.18 | 0.03 | 0.06 | ||||||||||||||
Consumer and other | 0.87 | 0.72 | 0.53 | 0.44 | 0.38 | ||||||||||||||
Total loans, net of unearned income | 0.41 | % | 0.42 | % | 0.37 | % | 0.33 | % | 0.40 | % | |||||||||
Total non-performing assets as a percentage of total assets | 0.44 | % | 0.47 | % | 0.42 | % | 0.40 | % | 0.46 | % | |||||||||
Allowance for loan losses as a percentage of total non-performing loans | 155.54 | % | 152.95 | % | 170.70 | % | 187.68 | % | 159.31 | % | |||||||||
(1) | As of the dates shown, no TDRs were past due greater than 90 days and still accruing interest. |
(2) | Non-accrual loans included TDRs totaling $8.1 million, $10.1 million, $6.2 million, $5.1 million and $11.3 million as of March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017, respectively. |
(3) | Includes $2.6 million of non-performing loans and $2.9 million of other real estate owned reclassified from covered assets as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017. |
46