×

Wintrust Financial Corporation Reports Record Third Quarter 2016 Net Income, an Increase of 38% Over Prior Year, and Year-to-Date 2016 Net Income of $152.3 million, an Increase of 26% Over Prior Year

ROSEMONT, Ill., Oct. 17, 2016 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq:WTFC) announced net income of $53.1 million or $0.92 per diluted common share for the third quarter of 2016 compared to net income of $50.0 million or $0.90 per diluted common share for the second quarter of 2016 and $38.4 million or $0.69 per diluted common share for the third quarter of 2015. The Company recorded net income of $152.3 million or $2.72 per diluted common share for the first nine months of 2016 compared to net income of $121.2 million or $2.29 per diluted common share for the same period of 2015.

Highlights of the Third Quarter of 2016 *:

  • Total assets increased by 15% on an annualized basis and now exceed $25 billion.
  • Total loans, excluding covered loans and mortgage loans held-for-sale, increased by $927 million, or 20% on an annualized basis, to $19.1 billion. Loan growth included $555 million of select performing loans acquired from an affiliate of GE Capital Franchise Finance, which was completed in mid-August.
  • Total deposits increased by $1.1 billion, or 22% on an annualized basis, to $21.1 billion. Non-interest bearing deposit accounts comprise 27% of total deposits.
  • Mortgage banking revenue remained strong, totaling $34.7 million during the third quarter as origination volumes increased to $1.3 billion in the third quarter compared to $1.2 billion in the second quarter.
  • Net overhead ratio improved to 1.44% from 1.46% remaining below our stated goal of 1.50%.
  • Non-performing loans as a percentage of total loans, excluding covered loans, decreased to 0.44% from 0.48% and the allowance for loan losses as a percentage of total non-performing loans, excluding covered loans, increased to 142% from 130%.
  • Net interest income increased $9.4 million primarily as a result of earning assets growth. Although loan yields increased, net interest margin dropped 3 basis points primarily due to a decrease in yields on liquidity management assets brought about by market conditions.
  • Gains on investment securities totaled $3.3 million.
  • Recorded a $2.5 million negative fair value adjustment related to mortgage servicing rights assets.
  • Recorded a $1.8 million charge related to outstanding legal disputes, including a $1.5 million adverse arbitration award relating to a previously disclosed claim.

* 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, “The growth engine at Wintrust continued its momentum into the third quarter as we recorded nearly $1 billion of asset growth while controlling operating expenses as evidenced by the improvement of our net overhead ratio to 1.44% for the quarter. All aspects of our business performed solidly in the third quarter as evidenced by our record level of net income. Continued strong loan growth and mortgage banking operations, improved credit quality metrics and an improved net overhead ratio fueled the record results this quarter."

Mr. Wehmer continued, “Excluding covered loans and mortgage loans held-for-sale, our loan portfolio grew by $927 million during the third quarter, which included $555 million of select performing loans and related relationships acquired from an affiliate of GE Capital Franchise Finance. The increased loan volumes offset compression in the net interest margin during the quarter due to a reduction in yield on liquidity management assets, resulting in an increase in net interest income of $9.4 million. Our loan pipelines remain consistently strong and we are well positioned for rising interest rates in the future. Deposit growth continued to be strong in the third quarter of 2016 as deposits increased $1.1 billion and exceeded $21 billion as of the end of the third quarter. Total deposit growth included $343 million of growth from demand deposits, which now totals $5.7 billion and comprises 27% of our overall deposit base."

Commenting on credit quality, Mr. Wehmer noted, “During the third quarter of 2016, the Company has continued its practice of timely addressing and resolving non-performing credits. Total non-performing assets, excluding covered assets, decreased by $8.0 million during the third quarter of 2016 resulting in non-performing assets as a percentage of total assets dropping from 0.52% to 0.47% during the period. Additionally, the allowance for loan losses as a percentage of non-performing loans, excluding covered loans, increased to 142% during the third quarter, exhibiting greater coverage for those non-performing credits. We believe that the Company's reserves remain appropriate."

Mr. Wehmer further commented, “Mortgage banking revenue in the third quarter totaled $34.7 million, a decrease of $2.1 million compared to the second quarter of 2016. Revenue for the third quarter of 2016 was negatively impacted by a $2.5 million valuation adjustment on mortgage servicing rights assets. Our mortgage operations experienced record origination volumes in the third quarter totaling $1.3 billion for the period compared to $1.2 billion during the second quarter of 2016. We expect normal seasonality in the fourth quarter, although our mortgage loan pipelines remain strong."

Turning to the future, Mr. Wehmer stated, “Wintrust is continuing to take a steady and measured approach to achieve our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and increasing shareholder value. We expect continued growth and momentum in all areas of our business. The acquisition of select performing loans from an affiliate of GE Capital Franchise Finance is expected to help expand our franchise lending business. Also, the previously announced acquisition of First Community Financial Corporation located in Elgin, Illinois is expected to be completed in the fourth quarter of 2016. Evaluating strategic acquisitions and organic branch growth will continue to be a part of our overall growth strategy with the goal of becoming Chicago’s bank and Wisconsin’s bank. Our opportunities for both internal growth and external growth remain consistently strong."

The graphs below illustrate certain highlights of the third quarter of 2016.

http://www.globenewswire.com/NewsRoom/AttachmentNg/bb0f7074-45ca-4514-885d-01698412ae61

Wintrust’s key operating measures and growth rates for the third quarter of 2016, as compared to the sequential and linked quarters, are shown in the table below:

% or(4)
basis point (bp)change from
2nd Quarter
2016
% or
basis point (bp)
change from
3rd Quarter
2015
Three Months Ended
(Dollars in thousands) September 30,
2016
June 30,
2016
September 30,
2015
Net income $53,115 $50,041 $38,355 6 % 38 %
Net income per common share – diluted $0.92 $0.90 $0.69 2 % 33 %
Net revenue (1) $271,240 $260,069 $230,493 4 % 18 %
Net interest income $184,636 $175,270 $165,540 5 % 12 %
Net interest margin 3.21% 3.24% 3.31% (3)bp (10)bp
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.24% 3.27% 3.33% (3)bp (9)bp
Net overhead ratio (3) 1.44% 1.46% 1.74% (2)bp (30)bp
Return on average assets 0.85% 0.85% 0.70% bp 15 bp
Return on average common equity 8.20% 8.43% 6.60% (23)bp 160 bp
Return on average tangible common equity (non-GAAP) (2) 10.55% 11.12% 8.88% (57)bp 167 bp
At end of period
Total assets $25,321,759 $24,420,616 $22,035,216 15 % 15 %
Total loans, excluding loans held-for-sale, excluding covered loans 19,101,261 18,174,655 16,316,211 20 % 17 %
Total loans, including loans held-for-sale, excluding covered loans 19,660,895 18,728,911 16,663,216 20 % 18 %
Total deposits 21,147,655 20,041,750 18,228,469 22 % 16 %
Total shareholders’ equity 2,674,474 2,623,595 2,335,736 8 % 15 %


(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 web site at www.wintrust.com by choosing “Financial Reports” under the “Investor Relations” heading, and then choosing “Financial Highlights.”


WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights

Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) September 30,
2016
June 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
Selected Financial Condition Data (at end of period):
Total assets $25,321,759 $24,420,616 $22,035,216
Total loans, excluding loans held-for-sale and covered loans 19,101,261 18,174,655 16,316,211
Total deposits 21,147,655 20,041,750 18,228,469
Junior subordinated debentures 253,566 253,566 268,566
Total shareholders’ equity 2,674,474 2,623,595 2,335,736
Selected Statements of Income Data:
Net interest income $184,636 $175,270 $165,540 $531,415 $474,323
Net revenue (1) 271,240 260,069 230,493 771,570 680,830
Net income 53,115 50,041 38,355 152,267 121,238
Net income per common share – Basic $0.96 $0.94 $0.71 $2.84 $2.39
Net income per common share – Diluted $0.92 $0.90 $0.69 $2.72 $2.29
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin 3.21% 3.24% 3.31% 3.25% 3.36%
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.24% 3.27% 3.33% 3.27% 3.39%
Non-interest income to average assets 1.38% 1.44% 1.19% 1.35% 1.34%
Non-interest expense to average assets 2.82% 2.89% 2.93% 2.81% 3.00%
Net overhead ratio (3) 1.44% 1.46% 1.74% 1.46% 1.66%
Return on average assets 0.85% 0.85% 0.70% 0.85% 0.79%
Return on average common equity 8.20% 8.43% 6.60% 8.39% 7.53%
Return on average tangible common equity (non-GAAP) (2) 10.55% 11.12% 8.88% 10.98% 9.90%
Average total assets $24,879,252 $23,754,755 $21,679,062 $23,849,412 $20,586,924
Average total shareholders’ equity 2,651,684 2,465,732 2,310,511 2,502,940 2,194,384
Average loans to average deposits ratio (excluding loans held-for-sale, excluding covered loans) 89.8% 92.4% 89.7% 91.4% 89.8%
Average loans to average deposits ratio (excluding loans held-for-sale, including covered loans) 90.3% 92.9% 90.6% 92.0% 91.0%
Common Share Data at end of period:
Market price per common share $55.57 $51.00 $53.43
Book value per common share (2) $46.86 $45.96 $43.12
Tangible common book value per share (2) $37.06 $36.12 $32.83
Common shares outstanding 51,714,683 51,619,155 48,336,870
Other Data at end of period:(6)
Leverage Ratio (4) 9.0% 9.2% 9.2%
Tier 1 capital to risk-weighted assets (4) 9.8% 10.1% 10.3%
Common equity Tier 1 capital to risk-weighted assets (4) 8.7% 8.9% 8.6%
Total capital to risk-weighted assets (4) 12.1% 12.4% 12.6%
Allowance for credit losses (5) $119,341 $115,426 $103,922
Non-performing loans $83,128 $88,119 $85,976
Allowance for credit losses to total loans (5) 0.62% 0.64% 0.64%
Non-performing loans to total loans 0.44% 0.48% 0.53%
Number of:
Bank subsidiaries 15 15 15
Banking offices 152 153 160


(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. As of January 1, 2015 capital ratios are calculated under the requirements of Basel III.
(5)The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excludes the allowance for covered loan losses.
(6)Asset quality ratios exclude covered loans.


WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

(Unaudited) (Unaudited)
(In thousands) September 30,
2016
December 31,
2015
September 30,
2015
Assets
Cash and due from banks $242,825 $271,454 $247,341
Federal funds sold and securities purchased under resale agreements 4,122 4,341 3,314
Interest bearing deposits with banks 816,104 607,782 701,106
Available-for-sale securities, at fair value 1,650,096 1,716,388 2,214,281
Held-to-maturity securities, at amortized cost 932,767 884,826
Trading account securities 1,092 448 3,312
Federal Home Loan Bank and Federal Reserve Bank stock 129,630 101,581 90,308
Brokerage customer receivables 25,511 27,631 28,293
Mortgage loans held-for-sale 559,634 388,038 347,005
Loans, net of unearned income, excluding covered loans 19,101,261 17,118,117 16,316,211
Covered loans 95,940 148,673 168,609
Total loans 19,197,201 17,266,790 16,484,820
Allowance for loan losses (117,693) (105,400) (102,996)
Allowance for covered loan losses (1,422) (3,026) (2,918)
Net loans 19,078,086 17,158,364 16,378,906
Premises and equipment, net 597,263 592,256 587,348
Lease investments, net 116,355 63,170 29,111
Accrued interest receivable and other assets 660,923 597,099 629,211
Trade date securities receivable 677 277,981
Goodwill 485,938 471,761 472,166
Other intangible assets 20,736 24,209 25,533
Total assets $25,321,759 $22,909,348 $22,035,216
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing $5,711,042 $4,836,420 $4,705,994
Interest bearing 15,436,613 13,803,214 13,522,475
Total deposits 21,147,655 18,639,634 18,228,469
Federal Home Loan Bank advances 419,632 853,431 443,955
Other borrowings 241,366 265,785 259,805
Subordinated notes 138,943 138,861 138,834
Junior subordinated debentures 253,566 268,566 268,566
Trade date securities payable 538 617
Accrued interest payable and other liabilities 446,123 390,259 359,234
Total liabilities 22,647,285 20,557,074 19,699,480
Shareholders’ Equity:
Preferred stock 251,257 251,287 251,312
Common stock 51,811 48,469 48,422
Surplus 1,356,759 1,190,988 1,187,407
Treasury stock (4,522) (3,973) (3,964)
Retained earnings 1,051,748 928,211 901,652
Accumulated other comprehensive loss (32,579) (62,708) (49,093)
Total shareholders’ equity 2,674,474 2,352,274 2,335,736
Total liabilities and shareholders’ equity $25,321,759 $22,909,348 $22,035,216


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

Three Months Ended Nine Months Ended
(In thousands, except per share data)September 30,
2016
June 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
Interest income
Interest and fees on loans$190,189 $178,530 $167,831 $541,846 $482,330
Interest bearing deposits with banks1,156 793 372 2,695 993
Federal funds sold and securities purchased under resale agreements1 1 1 3 4
Investment securities15,496 16,398 16,130 49,084 44,601
Trading account securities18 14 19 43 83
Federal Home Loan Bank and Federal Reserve Bank stock1,094 1,112 821 3,143 2,375
Brokerage customer receivables195 216 205 630 591
Total interest income208,149 197,064 185,379 597,444 530,977
Interest expense
Interest on deposits15,621 13,594 12,436 41,996 36,246
Interest on Federal Home Loan Bank advances2,577 2,984 2,458 8,447 6,426
Interest on other borrowings1,137 1,086 1,045 3,281 2,620
Interest on subordinated notes1,778 1,777 1,776 5,332 5,328
Interest on junior subordinated debentures2,400 2,353 2,124 6,973 6,034
Total interest expense23,513 21,794 19,839 66,029 56,654
Net interest income184,636 175,270 165,540 531,415 474,323
Provision for credit losses9,571 9,129 8,322 26,734 23,883
Net interest income after provision for credit losses175,065 166,141 157,218 504,681 450,440
Non-interest income
Wealth management19,334 18,852 18,243 56,506 54,819
Mortgage banking34,712 36,807 27,887 93,254 91,694
Service charges on deposit accounts8,024 7,726 7,403 23,156 20,174
Gains (losses) on investment securities, net3,305 1,440 (98) 6,070 402
Fees from covered call options3,633 4,649 2,810 9,994 11,735
Trading losses, net(432) (316) (135) (916) (452)
Operating lease income, net4,459 4,005 613 11,270 755
Other13,569 11,636 8,230 40,821 27,380
Total non-interest income86,604 84,799 64,953 240,155 206,507
Non-interest expense
Salaries and employee benefits103,718 100,894 97,749 300,423 282,300
Equipment9,449 9,307 8,456 27,523 24,090
Operating lease equipment depreciation3,605 3,385 431 9,040 547
Occupancy, net12,767 11,943 12,066 36,658 35,818
Data processing7,432 7,138 8,127 21,089 19,656
Advertising and marketing7,365 6,941 6,237 18,085 16,550
Professional fees5,508 5,419 4,100 14,986 13,838
Amortization of other intangible assets1,085 1,248 1,350 3,631 3,297
FDIC insurance3,686 4,040 3,035 11,339 9,069
OREO expense, net1,436 1,348 (367) 3,344 1,885
Other20,564 19,306 18,790 55,196 54,539
Total non-interest expense176,615 170,969 159,974 501,314 461,589
Income before taxes85,054 79,971 62,197 243,522 195,358
Income tax expense31,939 29,930 23,842 91,255 74,120
Net income$53,115 $50,041 $38,355 $152,267 $121,238
Preferred stock dividends and discount accretion3,628 3,628 4,079 10,884 7,240
Net income applicable to common shares$49,487 $46,413 $34,276 $141,383 $113,998
Net income per common share - Basic$0.96 $0.94 $0.71 $2.84 $2.39
Net income per common share - Diluted$0.92 $0.90 $0.69 $2.72 $2.29
Cash dividends declared per common share$0.12 $0.12 $0.11 $0.36 $0.33
Weighted average common shares outstanding51,679 49,140 48,158 49,763 47,658
Dilutive potential common shares4,047 3,965 4,049 3,931 4,141
Average common shares and dilutive common shares55,726 53,105 52,207 53,694 51,799


EARNINGS PER SHARE

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

Three Months Ended Nine Months Ended
(In thousands, except per share data) September 30,
2016
June 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
Net income $53,115 $50,041 $38,355 $152,267 $121,238
Less: Preferred stock dividends and discount accretion 3,628 3,628 4,079 10,884 7,240
Net income applicable to common shares—Basic(A) 49,487 46,413 34,276 141,383 113,998
Add: Dividends on convertible preferred stock, if dilutive 1,578 1,578 1,579 4,735 4,740
Net income applicable to common shares—Diluted(B) 51,065 47,991 35,855 146,118 118,738
Weighted average common shares outstanding(C) 51,679 49,140 48,158 49,763 47,658
Effect of dilutive potential common shares:
Common stock equivalents 938 856 978 822 1,070
Convertible preferred stock, if dilutive 3,109 3,109 3,071 3,109 3,071
Weighted average common shares and effect of dilutive potential common shares(D) 55,726 53,105 52,207 53,694 51,799
Net income per common share:
Basic(A/C) $0.96 $0.94 $0.71 $2.84 $2.39
Diluted(B/D) $0.92 $0.90 $0.69 $2.72 $2.29

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, net income applicable to common shares is not adjusted by the associated preferred dividends.

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), net interest margin (including its individual components), the 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 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. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability.

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

Three Months Ended Nine Months Ended
(Dollars and shares in thousands)September 30,
2016
June 30,
2016
March 31,
2016
December 31,
2015
September 30,
2015
September 30,
2016
September 30,
2015
Calculation of Net Interest Margin and Efficiency Ratio
(A) Interest Income (GAAP)$208,149 $197,064 $192,231 $187,487 $185,379 $597,444 $530,977
Taxable-equivalent adjustment:
- Loans584 523 509 430 346 1,616 1,001
- Liquidity Management Assets963 932 920 866 841 2,815 2,355
- Other Earning Assets9 8 6 13 10 23 44
(B) Interest Income - FTE$209,705 $198,527 $193,666 $188,796 $186,576 $601,898 $534,377
(C) Interest Expense (GAAP)23,513 21,794 20,722 20,281 19,839 66,029 56,654
(D) Net Interest Income - FTE (B minus C)$186,192 $176,733 $172,944 $168,515 $166,737 $535,869 $477,723
(E) Net Interest Income (GAAP) (A minus C)$184,636 $175,270 $171,509 $167,206 $165,540 $531,415 $474,323
Net interest margin (GAAP-derived)3.21% 3.24% 3.29% 3.26% 3.31% 3.25% 3.36%
Net interest margin - FTE3.24% 3.27% 3.32% 3.29% 3.33% 3.27% 3.39%
(F) Non-interest income$86,604 $84,799 $68,752 $65,090 $64,953 $240,155 $206,507
(G) Gains (losses) on investment securities, net3,305 1,440 1,325 (79) (98) 6,070 402
(H) Non-interest expense176,615 170,969 153,730 166,829 159,974 501,314 461,589
Efficiency ratio (H/(E+F-G))65.92% 66.11% 64.34% 71.79% 69.38% 65.49% 67.84%
Efficiency ratio - FTE (H/(D+F-G))65.54% 65.73% 63.96% 71.39% 69.02% 65.11% 67.50%
Calculation of Tangible Common Equity ratio (at period end)
Total shareholders’ equity$2,674,474 $2,623,595 $2,418,442 $2,352,274 $2,335,736
(I) Less: Convertible preferred stock(126,257) (126,257) (126,257) (126,287) (126,312)
Less: Non-convertible preferred stock(125,000) (125,000) (125,000) (125,000) (125,000)
Less: Intangible assets(506,674) (507,916) (508,005) (495,970) (497,699)
(J) Total tangible common shareholders’ equity$1,916,543 $1,864,422 $1,659,180 $1,605,017 $1,586,725
Total assets$25,321,759 $24,420,616 $23,488,168 $22,909,348 $22,035,216
Less: Intangible assets(506,674) (507,916) (508,005) (495,970) (497,699)
(K) Total tangible assets$24,815,085 $23,912,700 $22,980,163 $22,413,378 $21,537,517
Tangible common equity ratio (J/K)7.7% 7.8% 7.2% 7.2% 7.4%
Tangible common equity ratio, assuming full conversion of convertible preferred stock ((J-I)/K)8.2% 8.3% 7.8% 7.7% 8.0%
Calculation of book value per share
Total shareholders’ equity$2,674,474 $2,623,595 $2,418,442 $2,352,274 $2,335,736
Less: Preferred stock(251,257) (251,257) (251,257) (251,287) (251,312)
(L) Total common equity$2,423,217 $2,372,338 $2,167,185 $2,100,987 $2,084,424
(M) Actual common shares outstanding51,715 51,619 48,519 48,383 48,337
Book value per common share (L/M)$46.86 $45.96 $44.67 $43.42 $43.12
Tangible common book value per share (J/M)$37.06 $36.12 $34.20 $33.17 $32.83
Calculation of return on average common equity
(N) Net income applicable to common shares49,487 46,413 45,483 31,883 34,276 141,383 113,998
Add: After-tax intangible asset amortization677 781 812 834 833 2,270 2,046
(O) Tangible net income applicable to common shares50,164 47,194 46,295 32,717 35,109 143,653 116,044
Total average shareholders' equity2,651,684 2,465,732 2,389,770 2,347,545 2,310,511 2,502,940 2,194,384
Less: Average preferred stock(251,257) (251,257) (251,262) (251,293) (251,312) (251,259) (171,238)
(P) Total average common shareholders' equity2,400,427 2,214,475 2,138,508 2,096,252 2,059,199 2,251,681 2,023,146
Less: Average intangible assets(508,812) (507,439) (495,594) (497,199) (490,583) (503,966) (455,787)
(Q) Total average tangible common shareholders’ equity1,891,615 1,707,036 1,642,914 1,599,053 1,568,616 1,747,715 1,567,359
Return on average common equity, annualized (N/P)8.20% 8.43% 8.55% 6.03% 6.60% 8.39% 7.53%
Return on average tangible common equity, annualized (O/Q)10.55% 11.12% 11.33% 8.12% 8.88% 10.98% 9.90%

LOANS

Loan Portfolio Mix and Growth Rates

% Growth
(Dollars in thousands) September 30,
2016
December 31,
2015
September 30,
2015
From (1)
December 31,
2015
From
September 30,
2015
Balance:
Commercial $5,951,544 $4,713,909 $4,400,185 35% 35%
Commercial real estate 5,908,684 5,529,289 5,307,566 9 11
Home equity 742,868 784,675 797,465 (7) (7)
Residential real estate 663,598 607,451 571,743 12 16
Premium finance receivables - commercial 2,430,233 2,374,921 2,407,075 3 1
Premium finance receivables - life insurance 3,283,359 2,961,496 2,700,275 15 22
Consumer and other 120,975 146,376 131,902 (23) (8)
Total loans, net of unearned income, excluding covered loans $19,101,261 $17,118,117 $16,316,211 15% 17%
Covered loans 95,940 148,673 168,609 (47) (43)
Total loans, net of unearned income $19,197,201 $17,266,790 $16,484,820 15% 16%
Mix:
Commercial 31% 27% 27%
Commercial real estate 31 32 32
Home equity 4 5 5
Residential real estate 3 3 3
Premium finance receivables - commercial 13 14 15
Premium finance receivables - life insurance 17 17 16
Consumer and other 1 1 1
Total loans, net of unearned income, excluding covered loans 100% 99% 99%
Covered loans 1 1
Total loans, net of unearned income 100% 100% 100%


(1)Annualized


Commercial and Commercial Real Estate Loan Portfolios

As of September 30, 2016 % 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 $3,605,516 30.4% $15,809 $ $29,087
Franchise 874,745 7.4 3,357
Mortgage warehouse lines of credit 309,632 2.6 2,241
Asset-based lending 845,719 7.2 234 6,728
Leases 299,953 2.5 375 893
PCI - commercial loans (1) 15,979 0.1 1,783 732
Total commercial $5,951,544 50.2% $16,418 $1,783 $43,038
Commercial Real Estate:
Construction $451,477 3.8% $400 $ $4,778
Land 107,701 0.9 1,208 3,577
Office 884,082 7.5 3,609 6,003
Industrial 767,504 6.5 9,967 6,353
Retail 895,341 7.5 909 6,063
Multi-family 794,955 6.7 90 7,966
Mixed use and other 1,851,507 15.6 6,442 13,586
PCI - commercial real estate (1) 156,117 1.3 21,433 22
Total commercial real estate $5,908,684 49.8% $22,625 $21,433 $48,348
Total commercial and commercial real estate $11,860,228 100.0% $39,043 $23,216 $91,386
Commercial real estate - collateral location by state:
Illinois $4,652,758 78.8%
Wisconsin 646,116 10.9
Total primary markets $5,298,874 89.7%
Indiana 111,206 1.9
Florida 77,836 1.3
Arizona 45,620 0.8
California 38,195 0.6
Other (no individual state greater than 0.7%) 336,953 5.7
Total $5,908,684 100.0%


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


DEPOSITS

Deposit Portfolio Mix and Growth Rates

% Growth
(Dollars in thousands) September 30,
2016
December 31,
2015
September 30,
2015
From (1)
December 31,
2015
From
September 30,
2015
Balance:
Non-interest bearing $5,711,042 $4,836,420 $4,705,994 24% 21%
NOW and interest bearing demand deposits 2,552,611 2,390,217 2,231,258 9 14
Wealth management deposits (2) 2,283,233 1,643,653 1,469,920 52 55
Money market 4,421,631 4,041,300 4,001,518 13 10
Savings 1,977,661 1,723,367 1,684,007 20 17
Time certificates of deposit 4,201,477 4,004,677 4,135,772 7 2
Total deposits $21,147,655 $18,639,634 $18,228,469 18% 16%
Mix:
Non-interest bearing 27% 26% 26%
NOW and interest bearing demand deposits 12 13 12
Wealth management deposits (2) 11 9 8
Money market 21 22 22
Savings 9 9 9
Time certificates of deposit 20 21 23
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 September 30, 2016

(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 $ $53,575 $138,228 $697,340 $889,143 0.62%
4-6 months 33,497 655,169 688,666 0.72%
7-9 months 43,570 24,529 503,267 571,366 0.75%
10-12 months 531 21,464 530,905 552,900 0.81%
13-18 months 2,744 16,479 1,016,558 1,035,781 1.10%
19-24 months 3,021 8,259 162,251 173,531 0.91%
24+ months 1,249 13,232 275,609 290,090 1.29%
Total $51,115 $171,035 $138,228 $3,841,099 $4,201,477 0.86%


(1)This category of certificates of deposit is shown by contractual maturity date.
(2)This category includes variable rate certificates of deposit and savings certificates with the majority repricing on at least a monthly basis.
(3)Weighted-average rate excludes the impact of purchase accounting fair value adjustments.


NET INTEREST INCOME

The following table presents a summary of Wintrust’s average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the third quarter of 2016 compared to the second quarter of 2016 (sequential quarters) and third quarter of 2015 (linked quarters), respectively:

Average Balance for three months ended, Interest for three months ended, Yield/Rate for three months ended,
(Dollars in thousands)September 30,
2016
June 30,
2016
September 30,
2015
September 30,
2016
June 30,
2016
September 30,
2015
September 30,
2016
June 30,
2016
September 30,
2015
Liquidity management assets(1)(2)(7)$3,671,577 $3,413,113 $3,140,782 $18,710 $19,236 $18,165 2.03% 2.27% 2.29%
Other earning assets(2)(3)(7)29,875 29,759 30,990 222 238 234 2.96 3.21 3.00
Loans, net of unearned income(2)(4)(7)19,071,621 18,204,552 16,509,001 189,637 177,571 165,572 3.96 3.92 3.98
Covered loans101,570 109,533 174,768 1,136 1,482 2,605 4.45 5.44 5.91
Total earning assets(7)$22,874,643 $21,756,957 $19,855,541 $209,705 $198,527 $186,576 3.65% 3.67% 3.73%
Allowance for loan and covered loan losses(121,156) (116,984) (106,091)
Cash and due from banks240,239 272,935 251,289
Other assets1,885,526 1,841,847 1,678,323
Total assets$24,879,252 $23,754,755 $21,679,062
Interest-bearing deposits$15,117,102 $14,065,995 $13,489,651 $15,621 $13,594 $12,436 0.41% 0.39% 0.37%
Federal Home Loan Bank advances459,198 946,081 394,666 2,577 2,984 2,458 2.23 1.27 2.47
Other borrowings249,307 248,233 272,549 1,137 1,086 1,045 1.81 1.76 1.52
Subordinated notes138,925 138,898 138,825 1,778 1,777 1,776 5.12 5.12 5.12
Junior subordinated debentures253,566 253,566 264,974 2,400 2,353 2,124 3.70 3.67 3.14
Total interest-bearing liabilities$16,218,098 $15,652,773 $14,560,665 $23,513 $21,794 $19,839 0.58% 0.56% 0.54%
Non-interest bearing deposits5,566,983 5,223,384 4,473,632
Other liabilities442,487 412,866 334,254
Equity2,651,684 2,465,732 2,310,511
Total liabilities and shareholders’ equity$24,879,252 $23,754,755 $21,679,062
Interest rate spread(5)(7) 3.07% 3.11% 3.19%
Less: Fully tax-equivalent adjustment (1,556) (1,463) (1,197) (0.03) (0.03) (0.02)
Net free funds/contribution(6)$6,656,545 $6,104,184 $5,294,876 0.17 0.16 0.14
Net interest income/ margin(7) (GAAP) $184,636 $175,270 $165,540 3.21% 3.24% 3.31%
Fully tax-equivalent adjustment 1,556 1,463 1,197 0.03 0.03 0.02
Net interest income/ margin - FTE (7) $186,192 $176,733 $166,737 3.24% 3.27% 3.33%


(1)Liquidity management assets include available-for-sale and held-to-maturity securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(2)Interest income on tax-advantaged loans, trading securities and available-for-sale securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015 were $1.6 million, $1.5 million and $1.2 million, respectively.
(3)Other earning assets include brokerage customer receivables and trading account securities.
(4)Loans, net of unearned income, include loans held-for-sale and non-accrual loans.
(5)Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(6)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.
(7)See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio.

For the third quarter of 2016, net interest income totaled $184.6 million, an increase of $9.4 million as compared to the second quarter of 2016 and an increase of $19.1 million as compared to the third quarter of 2015. Net interest margin was 3.21% (3.24% on a fully tax-equivalent basis) during the third quarter of 2016 compared to 3.24% (3.27% on a fully tax-equivalent basis) during the second quarter of 2016 and 3.31% (3.33% on a fully tax-equivalent basis) during the third quarter of 2015. The reduction in net interest margin compared to the second quarter of 2016 is primarily the result of a decline in yields on mortgage-backed securities.

The following table presents a summary of Wintrust's average balances, net interest income and related interest margins, calculated on a fully tax-equivalent basis, for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015:

Average Balance for nine months ended, Interest for nine months ended, Yield/Rate for nine months ended,
(Dollars in thousands)September 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
Liquidity management assets(1)(2)(7)$3,462,375 $2,907,284 $57,740 $50,328 2.23% 2.31%
Other earning assets(2)(3)(7)29,457 30,286 696 718 3.16 3.17
Loans, net of unearned income(2)(4)(7)18,264,545 15,730,009 538,833 473,857 3.94 4.03
Covered loans117,427 197,069 4,629 9,474 5.27 6.43
Total earning assets(7)$21,873,804 $18,864,648 $601,898 $534,377 3.68% 3.79%
Allowance for loan and covered loan losses(116,739) (101,440)
Cash and due from banks257,443 245,745
Other assets1,834,904 1,577,971
Total assets$23,849,412 $20,586,924
Interest-bearing deposits$14,303,125 $13,158,498 $41,996 $36,246 0.39% 0.37%
Federal Home Loan Bank advances742,423 360,470 8,447 6,426 1.52 2.38
Other borrowings251,633 220,478 3,281 2,620 1.74 1.59
Subordinated notes138,898 138,799 5,332 5,328 5.12 5.12
Junior subordinated debentures254,935 254,710 6,973 6,034 3.59 3.12
Total interest-bearing liabilities$15,691,014 $14,132,955 $66,029 $56,654 0.56% 0.54%
Non-interest bearing deposits5,244,552 3,931,194
Other liabilities410,906 328,391
Equity2,502,940 2,194,384
Total liabilities and shareholders’ equity$23,849,412 $20,586,924
Interest rate spread(5)(7) 3.12% 3.25%
Less: Fully tax-equivalent adjustment (4,454) (3,400) (0.02) (0.03)
Net free funds/contribution(6)$6,182,790 $4,731,693 0.15 0.14
Net interest income/ margin(7) (GAAP) $531,415 $474,323 3.25% 3.36%
Fully tax-equivalent adjustment 4,454 3,400 0.02 0.03
Net interest income/ margin - FTE (7) $535,869 $477,723 3.27% 3.39%


(1)Liquidity management assets include available-for-sale and held-to-maturity securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(2)Interest income on tax-advantaged loans, trading securities and available-for-sale securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the nine months ended September 30, 2016 and September 30, 2015 were $4.5 million and $3.4 million respectively.
(3)Other earning assets include brokerage customer receivables and trading account securities.
(4)Loans, net of unearned income, include loans held-for-sale and non-accrual loans.
(5)Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(6)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.
(7)See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio.

For the first nine months of 2016, net interest income totaled $531.4 million, an increase of $57.1 million as compared to the first nine months of 2015. Net interest margin was 3.25% (3.27% on a fully tax-equivalent basis) for the first nine months of 2016 compared to 3.36% (3.39% on a fully tax-equivalent basis) for the same period of 2015. The reduction in net interest margin compared to the first nine months of 2015 is primarily the result of a decline in loan yields, including less accretion recognized on purchased loans, and an increase on the rate of interest bearing liabilities.

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 September 30, 2016, June 30, 2016 and September 30, 2015 is as follows:

Static Shock Scenario +200
Basis
Points
+100
Basis
Points
-100
Basis
Points
September 30, 2016 19.6% 10.1% (10.4)%
June 30, 2016 16.9% 8.9% (8.9)%
September 30, 2015 15.6% 8.0% (11.1)%


Ramp Scenario+200
Basis
Points
+100
Basis
Points
-100
Basis
Points
September 30, 20167.8% 3.9% (4.1)%
June 30, 20167.0% 3.5% (3.7)%
September 30, 20156.7% 3.6% (4.0)%

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).

NON-INTEREST INCOME

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

Three Months Ended
(Dollars in thousands) September 30, June 30, September 30, Q3 2016 compared to
Q2 2016
Q3 2016 compared to
Q3 2015
2016 2016 2015 $ Change % Change $ Change % Change
Brokerage $6,752 $6,302 $6,579 $450 7% $173 3%
Trust and asset management 12,582 12,550 11,664 32 918 8
Total wealth management 19,334 18,852 18,243 482 3 1,091 6
Mortgage banking 34,712 36,807 27,887 (2,095) (6) 6,825 24
Service charges on deposit accounts 8,024 7,726 7,403 298 4 621 8
Gains (losses) on investment securities, net 3,305 1,440 (98) 1,865 NM 3,403 NM
Fees from covered call options 3,633 4,649 2,810 (1,016) (22) 823 29
Trading losses, net (432) (316) (135) (116) 37 (297) NM
Operating lease income, net 4,459 4,005 613 454 11 3,846 NM
Other:
Interest rate swap fees 2,881 1,835 2,606 1,046 57 275 11
BOLI 884 1,257 212 (373) (30) 672 NM
Administrative services 1,151 1,074 1,072 77 7 79 7
Gain on extinguishment of debt NM NM
Miscellaneous 8,653 7,470 4,340 1,183 16 4,313 99
Total Other 13,569 11,636 8,230 1,933 17 5,339 65
Total Non-Interest Income $86,604 $84,799 $64,953 $1,805 2% $21,651 33%

NM - Not Meaningful

Nine Months Ended
September 30, September 30, $ %
(Dollars in thousands) 2016 2015 Change Change
Brokerage $19,111 $20,181 $(1,070) (5)%
Trust and asset management 37,395 34,638 2,757 8
Total wealth management 56,506 54,819 1,687 3
Mortgage banking 93,254 91,694 1,560 2
Service charges on deposit accounts 23,156 20,174 2,982 15
Gains on investment securities, net 6,070 402 5,668 NM
Fees from covered call options 9,994 11,735 (1,741) (15)
Trading losses, net (916) (452) (464) NM
Operating lease income, net 11,270 755 10,515 NM
Other:
Interest rate swap fees 9,154 7,144 2,010 28
BOLI 2,613 3,158 (545) (17)
Administrative services 3,294 3,151 143 5
Gain on extinguishment of debt 4,305 4,305 NM
Miscellaneous 21,455 13,927 7,528 54
Total Other 40,821 27,380 13,441 49
Total Non-Interest Income $240,155 $206,507 $33,648 16%

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 second quarter of 2016 and third quarter of 2015 is primarily attributable to growth in assets under management due to new customers. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors and the brokerage commissions, managed money fees and insurance product commissions at Wayne Hummer Investments.

The decrease in mortgage banking revenue in the current quarter as compared to the most recent quarter resulted primarily from a $2.5 million negative fair value adjustment on mortgage servicing rights assets ("MSRs") during the period as a result of actual prepayments in the third quarter of 2016 and higher projected prepayment speeds. Mortgage loans originated or purchased for sale remained steady during the period totaling $1.3 billion in the current quarter as compared to $1.2 billion in the second quarter of 2016 and $973.7 million in the third quarter of 2015. 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 MSRs as the Company does not hedge this change in fair value. The Company typically originates mortgage loans held-for-sale with associated MSRs either retained or released. 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 Nine Months Ended
(Dollars in thousands) September 30,
2016
June 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
Retail originations $1,138,571 1,135,082 $900,302 $2,978,643 $2,906,508
Correspondent originations 121,007 77,160 73,362 229,825 188,393
(A) Total originations $1,259,578 1,212,242 $973,664 $3,208,468 $3,094,901
Purchases as a percentage of originations 57% 65% 72% 60% 60%
Refinances as a percentage of originations 43 35 28 40 40
Total 100% 100% 100% 100% 100%
(B) Production revenue (1) $32,889 $32,221 $27,211 $85,040 $90,640
Production margin (B / A) 2.61% 2.66% 2.79% 2.65% 2.93%
Loans serviced for others (C) $1,508,469 $1,250,062 $853,286
MSRs, at fair value (D) 13,901 13,382 7,875
Percentage of mortgage servicing rights to loans serviced for others (D/C) 0.92% 1.07% 0.92%


(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 increase in service charges on deposit accounts in the current quarter is mostly a result of higher account analysis fees on deposit accounts which have increased as a result of the Company's commercial banking initiative as well as additional service charges on deposit accounts from acquired institutions.

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 effectively 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 decreased in the current quarter compared to the second quarter of 2016 primarily as a result of selling call options against a smaller value of underlying securities resulting in lower premiums received by the Company. There were no outstanding call option contracts at September 30, 2016, June 30, 2016 and September 30, 2015.

The increase in operating lease income in the current quarter compared to the prior period quarters is primarily related to growth in business from the Company's leasing divisions.

The increase in other non-interest income in the current quarter as compared to the second quarter of 2016 is primarily due to higher swap fee revenues resulting from interest rate hedging transactions related to both customer-based trades and the related matched trades with inter-bank dealer counterparties and gains recognized on the purchase and sale of certain assets, partially offset by lower income on bank-owned life insurance.

NON-INTEREST EXPENSE

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

Three Months Ended
(Dollars in thousands) September 30, June 30, September 30, Q3 2016 compared to
Q2 2016
Q3 2016 compared to
Q3 2015
2016 2016 2015 $ Change % Change $ Change % Change
Salaries and employee benefits:
Salaries $54,309 $52,924 $53,028 $1,385 3% $1,281 2%
Commissions and incentive compensation 33,740 32,531 30,035 1,209 4 3,705 12
Benefits 15,669 15,439 14,686 230 1 983 7
Total salaries and employee benefits 103,718 100,894 97,749 2,824 3 5,969 6
Equipment 9,449 9,307 8,456 142 2 993 12
Operating lease equipment depreciation 3,605 3,385 431 220 6 3,174 NM
Occupancy, net 12,767 11,943 12,066 824 7 701 6
Data processing 7,432 7,138 8,127 294 4 (695) (9)
Advertising and marketing 7,365 6,941 6,237 424 6 1,128 18
Professional fees 5,508 5,419 4,100 89 2 1,408 34
Amortization of other intangible assets 1,085 1,248 1,350 (163) (13) (265) (20)
FDIC insurance 3,686 4,040 3,035 (354) (9) 651 21
OREO expense, net 1,436 1,348 (367) 88 7 1,803 NM
Other:
Commissions - 3rd party brokers 1,362 1,324 1,364 38 3 (2)
Postage 1,889 2,038 1,927 (149) (7) (38) (2)
Miscellaneous 17,313 15,944 15,499 1,369 9 1,814 12
Total other 20,564 19,306 18,790 1,258 7 1,774 9
Total Non-Interest Expense $176,615 $170,969 $159,974 $5,646 3% $16,641 10%

NM - Not Meaningful

Nine Months Ended
September 30, September 30, $ %
(Dollars in thousands) 2016 2015 Change Change
Salaries and employee benefits:
Salaries $157,515 $146,493 $11,022 8%
Commissions and incentive compensation 92,646 88,916 3,730 4
Benefits 50,262 46,891 3,371 7
Total salaries and employee benefits 300,423 282,300 18,123 6
Equipment 27,523 24,090 3,433 14
Operating lease equipment depreciation 9,040 547 8,493 NM
Occupancy, net 36,658 35,818 840 2
Data processing 21,089 19,656 1,433 7
Advertising and marketing 18,085 16,550 1,535 9
Professional fees 14,986 13,838 1,148 8
Amortization of other intangible assets 3,631 3,297 334 10
FDIC insurance 11,339 9,069 2,270 25
OREO expense, net 3,344 1,885 1,459 77
Other:
Commissions - 3rd party brokers 3,996 4,153 (157) (4)
Postage 5,229 5,138 91 2
Miscellaneous 45,971 45,248 723 2
Total other 55,196 54,539 657 1
Total Non-Interest Expense $501,314 $461,589 $39,725 9%

NM - Not Meaningful

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

Salaries and employee benefits expense increased in the current quarter compared to the second quarter of 2016 primarily as a result of increased staffing as the Company grows and higher commissions and incentive compensation on variable pay based arrangements. Salaries and employee benefits expense increased in the current quarter compared to the third quarter of 2015 primarily as a result of the addition of employees from acquisitions, increased staffing as the Company grows, higher commissions and incentive compensation on variable pay based arrangements and an increase in employee benefits (primarily payroll tax related).

The increase in advertising and marketing expenses during the current quarter compared to the second quarter of 2016 is primarily related to higher expenses from mass market media promotions. 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 type of marketing programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

The increase in miscellaneous expenses in the current quarter as compared to the second quarter of 2016 is primarily a result of a $1.8 million charge related to outstanding legal disputes recognized during the period, including a $1.5 million adverse arbitration award relating to a previously disclosed claim arising out of the hiring of a wealth management financial advisor by Wayne Hummer Investments LLC. Miscellaneous expense includes such items as ATM expenses, correspondent bank charges, directors' fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses, operating losses and lending origination costs that are not deferred.

ASSET QUALITY

Allowance for Credit Losses, excluding covered loans

Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
(Dollars in thousands) 2016 2016 2015 2016 2015
Allowance for loan losses at beginning of period $114,356 $110,171 $100,204 $105,400 $91,705
Provision for credit losses 9,741 9,269 8,665 27,433 24,551
Other adjustments (112) (134) (153) (324) (494)
Reclassification (to) from allowance for unfunded lending-related commitments (579) (40) (42) (700) (151)
Charge-offs:
Commercial 3,469 721 964 4,861 2,884
Commercial real estate 382 502 1,948 1,555 3,809
Home equity 574 2,046 1,116 3,672 3,547
Residential real estate 134 693 1,138 1,320 2,692
Premium finance receivables - commercial 1,959 1,911 1,595 6,350 4,384
Premium finance receivables - life insurance
Consumer and other 389 224 116 720 342
Total charge-offs 6,907 6,097 6,877 18,478 17,658
Recoveries:
Commercial 176 121 462 926 1,117
Commercial real estate 364 296 213 1,029 2,349
Home equity 65 71 42 184 129
Residential real estate 61 31 136 204 228
Premium finance receivables - commercial 456 633 278 1,876 1,065
Premium finance receivables - life insurance 16 16
Consumer and other 72 35 52 143 139
Total recoveries 1,194 1,187 1,199 4,362 5,043
Net charge-offs (5,713) (4,910) (5,678) (14,116) (12,615)
Allowance for loan losses at period end $117,693 $114,356 $102,996 $117,693 $102,996
Allowance for unfunded lending-related commitments at period end 1,648 1,070 926 1,648 926
Allowance for credit losses at period end $119,341 $115,426 $103,922 $119,341 $103,922
Annualized net charge-offs by category as a percentage of its own respective category’s average:
Commercial 0.24% 0.05% 0.05% 0.10% 0.06%
Commercial real estate 0.00 0.01 0.13 0.01 0.04
Home equity 0.27 1.03 0.55 0.61 0.62
Residential real estate 0.03 0.26 0.42 0.14 0.37
Premium finance receivables - commercial 0.24 0.21 0.21 0.25 0.18
Premium finance receivables - life insurance 0.00 0.00 0.00 0.00 0.00
Consumer and other 0.92 0.57 0.17 0.56 0.17
Total loans, net of unearned income, excluding covered loans 0.12% 0.11% 0.14% 0.10% 0.11%
Net charge-offs as a percentage of the provision for credit losses 58.65% 52.97% 65.53% 51.46% 51.39%
Loans at period-end, excluding covered loans $19,101,261 $18,174,655 $16,316,211
Allowance for loan losses as a percentage of loans at period end 0.62% 0.63% 0.63%
Allowance for credit losses as a percentage of loans at period end 0.62% 0.64% 0.64%

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

Net charge-offs as a percentage of loans, excluding covered loans, for the third quarter of 2016 totaled 12 basis points on an annualized basis compared to 11 basis points on an annualized basis in the second quarter of 2016 and 14 basis points on an annualized basis in the third quarter of 2015. Net charge-offs totaled $5.7 million in the third quarter of 2016, an $803,000 increase from $4.9 million in the second quarter of 2016 and remained steady when compared to the third quarter of 2015.

The provision for credit losses, excluding the provision for covered loan losses, totaled $9.7 million for the third quarter of 2016 compared to $9.3 million for the second quarter of 2016 and $8.7 million for the third quarter of 2015. The higher provision for credit losses in the third quarter of 2016 compared to the second quarter of 2016 was partly due to loan growth, excluding covered loans and mortgage loans held-for-sale, during the third quarter of 2016.

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 provides a provision for covered loan losses on covered loans and maintains an allowance for covered loan losses on covered loans. Please see “Covered Assets” later in this document for more detail.

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

Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
(Dollars in thousands) 2016 2016 2015 2016 2015
Provision for loan losses $9,162 $9,229 $8,623 $26,733 $24,400
Provision for unfunded lending-related commitments 579 40 42 700 151
Provision for covered loan losses (170) (140) (343) (699) (668)
Provision for credit losses $9,571 $9,129 $8,322 $26,734 $23,883
Period End
September 30, June 30, September 30,
2016 2016 2015
Allowance for loan losses $117,693 $114,356 $102,996
Allowance for unfunded lending-related commitments 1,648 1,070 926
Allowance for covered loan losses 1,422 2,412 2,918
Allowance for credit losses $120,763 $117,838 $106,840

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 as of September 30, 2016 and June 30, 2016.

As of September 30, 2016
Recorded Calculated As a percentage
of its own respective
(Dollars in thousands) Investment Allowance category’s balance
Commercial:(1)
Commercial and industrial $3,111,891 $26,440 0.85%
Asset-based lending 844,357 6,728 0.80
Tax exempt 316,343 2,229 0.70
Leases 299,534 893 0.30
Commercial real estate:(1)
Residential construction 64,986 736 1.13
Commercial construction 386,275 4,042 1.05
Land 103,109 3,577 3.47
Office 834,123 6,002 0.72
Industrial 719,470 6,349 0.88
Retail 834,507 6,045 0.72
Multi-family 752,106 7,956 1.06
Mixed use and other 1,731,583 13,545 0.78
Home equity(1) 664,811 11,678 1.76
Residential real estate(1) 615,312 6,027 0.98
Total core loan portfolio $11,278,407 $102,247 0.91%
Commercial:
Franchise $334,910 $3,357 1.00%
Mortgage warehouse lines of credit 309,632 2,241 0.72
Community Advantage - homeowner associations 141,351 353 0.25
Aircraft 4,498 53 1.18
Purchased non-covered commercial loans (2) 589,028 744 0.13
Commercial real estate:
Purchased non-covered commercial real estate (2) 482,525 96 0.02
Purchased non-covered home equity (2) 78,057 6 0.01
Purchased non-covered residential real estate (2) 48,286 76 0.16
Premium finance receivables
U.S. commercial insurance loans 2,139,966 5,416 0.25
Canada commercial insurance loans (2) 290,267 554 0.19
Life insurance loans (1) 3,020,472 1,305 0.04
Purchased life insurance loans (2) 262,887
Consumer and other (1) 117,897 1,244 1.06
Purchased non-covered consumer and other (2) 3,078 1 0.03
Total consumer, niche and purchased loan portfolio $7,822,854 $15,446 0.20%
Total loans, net of unearned income, excluding covered loans $19,101,261 $117,693 0.62%
Non-accretable credit discounts on purchased loans reported in accordance with ASC 310-30, excluding covered loans $20,940
Total allowance for loan losses and non-accretable credit discounts on purchased loans, excluding covered loans $138,633 0.72%


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


As of June 30, 2016
Recorded Calculated As a percentage
of its own respective
(Dollars in thousands) Investment Allowance category’s balance
Commercial:(1)
Commercial and industrial $2,986,178 $26,037 0.87%
Asset-based lending 841,028 6,735 0.80
Tax exempt 288,091 2,027 0.70
Leases 267,686 807 0.30
Commercial real estate:(1)
Residential construction 67,006 768 1.15
Commercial construction 336,486 3,551 1.06
Land 100,187 3,455 3.45
Office 856,193 6,099 0.71
Industrial 717,313 6,439 0.90
Retail 830,284 6,040 0.73
Multi-family 732,449 7,736 1.06
Mixed use and other 1,678,829 12,622 0.75
Home equity(1) 673,741 11,367 1.69
Residential real estate(1) 599,262 5,333 0.89
Total core loan portfolio $10,974,733 $99,016 0.90%
Commercial:
Franchise $289,905 $3,337 1.15%
Mortgage warehouse lines of credit 270,586 1,976 0.73
Community Advantage - homeowner associations 134,273 3 0.00
Aircraft 4,597 54 1.17
Purchased non-covered commercial loans (2) 62,189 678 1.09
Commercial real estate:
Purchased non-covered commercial real estate (2) 529,587 114 0.02
Purchased non-covered home equity (2) 87,163 16 0.02
Purchased non-covered residential real estate (2) 54,402 72 0.13
Premium finance receivables
U.S. commercial insurance loans 2,181,222 5,776 0.26
Canada commercial insurance loans (2) 297,058 598 0.20
Life insurance loans (1) 2,869,960 1,440 0.05
Purchased life insurance loans (2) 291,602
Consumer and other (1) 123,944 1,275 1.03
Purchased non-covered consumer and other (2) 3,434 1 0.03
Total consumer, niche and purchased loan portfolio $7,199,922 $15,340 0.21%
Total loans, net of unearned income, excluding covered loans $18,174,655 $114,356 0.63%
Non-accretable credit discounts on purchased loans reported in accordance with ASC 310-30, excluding covered loans $27,039
Total allowance for loan losses and non-accretable credit discounts on purchased loans, excluding covered loans $141,395 0.78%


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

As part of the regular quarterly review performed by management to determine if the Company’s allowance for loan losses is appropriate, an analysis is prepared on the loan portfolio based upon a breakout of core loans and consumer, niche and purchased loans. A summary of the allowance for loan losses calculated for the loan components in both the core loan portfolio and the consumer, niche and purchased loan portfolio was shown on the previous pages as of September 30, 2016 and June 30, 2016.

The increase in the allowance for loan losses to core loans in the third quarter of 2016 compared to the second quarter of 2016 was attributable to $303.7 million core loan portfolio growth.

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. For analysis purposes, the Company has combined the non-accretable credit discounts recorded on purchased loans with the total allowance for loan losses in the previous tables to present the total credit reserves available on its loan portfolio. The total allowance for loan losses and non-accretable credit discounts on purchased loans was 0.72% of the total loan portfolio as of September 30, 2016 and 0.78% of the total loan portfolio as of June 30, 2016.

The tables below show the aging of the Company’s loan portfolio at September 30, 2016 and June 30, 2016:

90+ days 60-89 30-59
As of September 30, 2016 and still days past days past
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:
Commercial
Commercial, industrial and other $15,809 $ $7,324 $8,987 $3,573,396 $3,605,516
Franchise 458 1,626 872,661 874,745
Mortgage warehouse lines of credit 309,632 309,632
Asset-based lending 234 3,772 3,741 837,972 845,719
Leases 375 239 299,339 299,953
PCI - commercial (1) 1,783 1,036 13,160 15,979
Total commercial 16,418 1,783 11,793 15,390 5,906,160 5,951,544
Commercial real estate
Construction 400 3,775 447,302 451,477
Land 1,208 787 300 105,406 107,701
Office 3,609 6,457 8,062 865,954 884,082
Industrial 9,967 940 2,961 753,636 767,504
Retail 909 1,340 8,723 884,369 895,341
Multi-family 90 3,051 2,169 789,645 794,955
Mixed use and other 6,442 2,157 5,184 1,837,724 1,851,507
PCI - commercial real estate (1) 21,433 1,509 4,066 129,109 156,117
Total commercial real estate 22,625 21,433 16,241 35,240 5,813,145 5,908,684
Home equity 9,309 1,728 3,842 727,989 742,868
Residential real estate, including PCI 12,205 1,496 2,232 1,088 646,577 663,598
Premium finance receivables
Commercial insurance loans 14,214 7,754 6,968 10,291 2,391,006 2,430,233
Life insurance loans 9,960 3,717 3,006,795 3,020,472
PCI - life insurance loans (1) 262,887 262,887
Consumer and other, including PCI 543 124 204 871 119,233 120,975
Total loans, net of unearned income, excluding covered loans $75,314 $32,590 $49,126 $70,439 $18,873,792 $19,101,261
Covered loans 2,331 4,806 1,545 2,456 84,802 95,940
Total loans, net of unearned income $77,645 $37,396 $50,671 $72,895 $18,958,594 $19,197,201


As of September 30, 2016
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
Commercial, industrial and other 0.4% % 0.2% 0.2% 99.2% 100.0%
Franchise 0.1 0.2 99.7 100.0
Mortgage warehouse lines of credit 100.0 100.0
Asset-based lending 0.4 0.4 99.2 100.0
Leases 0.1 0.1 99.8 100.0
PCI - commercial(1) 11.2 6.5 82.3 100.0
Total commercial 0.3 0.2 0.3 99.2 100.0
Commercial real estate
Construction 0.1 0.8 99.1 100.0
Land 1.1 0.7 0.3 97.9 100.0
Office 0.4 0.7 0.9 98.0 100.0
Industrial 1.3 0.1 0.4 98.2 100.0
Retail 0.1 0.1 1.0 98.8 100.0
Multi-family 0.4 0.3 99.3 100.0
Mixed use and other 0.3 0.1 0.3 99.3 100.0
PCI - commercial real estate (1) 13.7 1.0 2.6 82.7 100.0
Total commercial real estate 0.4 0.4 0.3 0.6 98.3 100.0
Home equity 1.3 0.2 0.5 98.0 100.0
Residential real estate, including PCI 1.8 0.2 0.3 0.2 97.5 100.0
Premium finance receivables
Commercial insurance loans 0.6 0.3 0.3 0.4 98.4 100.0
Life insurance loans 0.3 0.1 99.6 100.0
PCI - life insurance loans (1) 100.0 100.0
Consumer and other, including PCI 0.4 0.1 0.2 0.7 98.6 100.0
Total loans, net of unearned income, excluding covered loans 0.4% 0.2% 0.3% 0.4% 98.7% 100.0%
Covered loans 2.4 5.0 1.6 2.6 88.4 100.0
Total loans, net of unearned income 0.4% 0.2% 0.3% 0.4% 98.7% 100.0%


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


90+ days 60-89 30-59
As of June 30, 2016 and still days past days past
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:
Commercial
Commercial, industrial and other $16,414 $ $1,412 $22,317 $3,416,432 $3,456,575
Franchise 560 87 289,258 289,905
Mortgage warehouse lines of credit 270,586 270,586
Asset-based lending 235 1,899 6,421 834,112 842,667
Leases 387 48 267,639 268,074
PCI - commercial(1) 1,956 630 1,426 12,714 16,726
Total commercial 16,801 2,191 4,549 30,251 5,090,741 5,144,533
Commercial real estate
Construction 673 46 7,922 396,264 404,905
Land 1,725 340 103,816 105,881
Office 6,274 5,452 4,936 892,791 909,453
Industrial 10,295 1,108 719 754,647 766,769
Retail 916 535 6,450 889,945 897,846
Multi-family 90 2,077 1,275 775,075 778,517
Mixed use and other 4,442 4,285 8,007 1,795,931 1,812,665
PCI - commercial real estate (1) 27,228 1,663 2,608 140,799 172,298
Total commercial real estate 24,415 27,228 15,166 32,257 5,749,268 5,848,334
Home equity 8,562 380 4,709 747,253 760,904
Residential real estate, including PCI 12,413 1,479 1,367 299 638,106 653,664
Premium finance receivables
Commercial insurance loans 14,497 10,558 6,966 9,456 2,436,803 2,478,280
Life insurance loans 46,651 11,953 2,811,356 2,869,960
PCI - life insurance loans (1) 291,602 291,602
Consumer and other, including PCI 475 226 610 1,451 124,616 127,378
Total loans, net of unearned income, excluding covered loans $77,163 $41,682 $75,689 $90,376 $17,889,745 $18,174,655
Covered loans 2,651 6,810 697 1,610 93,480 105,248
Total loans, net of unearned income $79,814 $48,492 $76,386 $91,986 $17,983,225 $18,279,903


As of June 30, 2016
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
Commercial, industrial and other 0.5% % % 0.6% 98.9% 100.0%
Franchise 0.2 99.8 100.0
Mortgage warehouse lines of credit 100.0 100.0
Asset-based lending 0.2 0.8 99.0 100.0
Leases 0.1 99.9 100.0
PCI - commercial(1) 11.7 3.8 8.5 76.0 100.0
Total commercial 0.3 0.1 0.6 99.0 100.0
Commercial real estate
Construction 0.2 2.0 97.8 100.0
Land 1.6 0.3 98.1 100.0
Office 0.7 0.6 0.5 98.2 100.0
Industrial 1.3 0.1 0.1 98.5 100.0
Retail 0.1 0.1 0.7 99.1 100.0
Multi-family 0.3 0.2 99.5 100.0
Mixed use and other 0.2 0.2 0.4 99.2 100.0
PCI - commercial real estate (1) 15.8 1.0 1.5 81.7 100.0
Total commercial real estate 0.4 0.5 0.3 0.6 98.2 100.0
Home equity 1.1 0.6 98.3 100.0
Residential real estate, including PCI 1.9 0.2 0.2 97.7 100.0
Premium finance receivables
Commercial insurance loans 0.6 0.4 0.3 0.4 98.3 100.0
Life insurance loans 1.6 0.4 98.0 100.0
PCI - life insurance loans (1) 100.0 100.0
Consumer and other, including PCI 0.4 0.2 0.5 1.1 97.8 100.0
Total loans, net of unearned income, excluding covered loans 0.4% 0.2% 0.4% 0.5% 98.5% 100.0%
Covered loans 2.5 6.5 0.7 1.5 88.8 100.0
Total loans, net of unearned income 0.4% 0.3% 0.4% 0.5% 98.4% 100.0%


(1)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 September 30, 2016, $49.1 million of all loans, excluding covered loans, or 0.3%, were 60 to 89 days past due and $70.4 million, or 0.4%, were 30 to 59 days (or one payment) past due. As of June 30, 2016, $75.7 million of all loans, excluding covered loans, or 0.4%, were 60 to 89 days past due and $90.4 million, or 0.5%, were 30 to 59 days (or one payment) past due. The majority of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at September 30, 2016 that are current with regard to the contractual terms of the loan agreement represent 98.0% of the total home equity portfolio. Residential real estate loans at September 30, 2016 that are current with regards to the contractual terms of the loan agreements comprise 97.5% of total residential real estate loans outstanding.

Non-performing Assets, 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.

September 30, June 30, September 30,
(Dollars in thousands) 2016 2016 2015
Loans past due greater than 90 days and still accruing(1):
Commercial $ $235 $
Commercial real estate
Home equity
Residential real estate
Premium finance receivables - commercial 7,754 10,558 8,231
Premium finance receivables - life insurance
Consumer and other 60 163 140
Total loans past due greater than 90 days and still accruing 7,814 10,956 8,371
Non-accrual loans(2):
Commercial 16,418 16,801 12,018
Commercial real estate 22,625 24,415 28,617
Home equity 9,309 8,562 8,365
Residential real estate 12,205 12,413 14,557
Premium finance receivables - commercial 14,214 14,497 13,751
Premium finance receivables - life insurance
Consumer and other 543 475 297
Total non-accrual loans 75,314 77,163 77,605
Total non-performing loans:
Commercial 16,418 17,036 12,018
Commercial real estate 22,625 24,415 28,617
Home equity 9,309 8,562 8,365
Residential real estate 12,205 12,413 14,557
Premium finance receivables - commercial 21,968 25,055 21,982
Premium finance receivables - life insurance
Consumer and other 603 638 437
Total non-performing loans $83,128 $88,119 $85,976
Other real estate owned 19,933 22,154 29,053
Other real estate owned - from acquisitions 15,117 15,909 22,827
Other repossessed assets 428 420 193
Total non-performing assets $118,606 $126,602 $138,049
TDRs performing under the contractual terms of the loan agreement $29,440 $33,310 $49,173
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial 0.28% 0.33% 0.27%
Commercial real estate 0.38 0.42 0.54
Home equity 1.25 1.13 1.05
Residential real estate 1.84 1.90 2.55
Premium finance receivables - commercial 0.90 1.01 0.91
Premium finance receivables - life insurance
Consumer and other 0.50 0.50 0.33
Total loans, net of unearned income 0.44% 0.48% 0.53%
Total non-performing assets as a percentage of total assets 0.47% 0.52% 0.63%
Allowance for loan losses as a percentage of total non-performing loans 141.58% 129.78% 119.79%


(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 $14.8 million, $16.3 million, and $10.1 million as of September 30, 2016, June 30, 2016, and September 30, 2015, respectively.

The ratio of non-performing assets to total assets was 0.47% as of September 30, 2016, compared to 0.52% at June 30, 2016, and 0.63% at September 30, 2015. Non-performing assets, excluding covered assets, totaled $118.6 million at September 30, 2016, compared to $126.6 million at June 30, 2016 and $138.0 million at September 30, 2015. Non-performing loans, excluding covered loans, totaled $83.1 million, or 0.44% of total loans, at September 30, 2016 compared to $88.1 million, or 0.48% of total loans, at June 30, 2016 and $86.0 million, or 0.53% of total loans, at September 30, 2015. The decrease in non-performing loans, excluding covered loans, compared to June 30, 2016 is primarily the result of a $3.1 million decrease in the commercial premium finance receivables portfolio and a $1.8 million decrease in the commercial real estate loan portfolio. OREO, excluding covered OREO, of $35.1 million at September 30, 2016 decreased $3.0 million compared to $38.1 million at June 30, 2016 and decreased $16.8 million compared to $51.9 million at September 30, 2015.

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, for the periods presented:

Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
(Dollars in thousands) 2016 2016 2015 2016 2015
Balance at beginning of period $88,119 $89,499 $76,554 $84,057 $78,677
Additions, net 9,522 10,351 24,333 32,039 42,141
Return to performing status (231) (873) (1,028) (3,110) (2,591)
Payments received (5,235) (4,810) (5,468) (13,353) (16,417)
Transfer to OREO and other repossessed assets (2,270) (1,818) (1,773) (6,168) (8,678)
Charge-offs (3,353) (2,943) (4,081) (6,829) (8,637)
Net change for niche loans (1) (3,424) (1,287) (2,561) (3,508) 1,481
Balance at end of period $83,128 $88,119 $85,976 $83,128 $85,976


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

TDRs

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

September 30, June 30, September 30,
(Dollars in thousands) 2016 2016 2015
Accruing TDRs:
Commercial $2,285 $3,931 $5,717
Commercial real estate 22,261 24,450 39,867
Residential real estate and other 4,894 4,929 3,589
Total accrual $29,440 $33,310 $49,173
Non-accrual TDRs: (1)
Commercial $2,134 $1,477 $147
Commercial real estate 10,610 12,240 5,778
Residential real estate and other 2,092 2,608 4,222
Total non-accrual $14,836 $16,325 $10,147
Total TDRs:
Commercial $4,419 $5,408 $5,864
Commercial real estate 32,871 36,690 45,645
Residential real estate and other 6,986 7,537 7,811
Total TDRs $44,276 $49,635 $59,320
Weighted-average contractual interest rate of TDRs 4.33% 4.31% 4.04%


(1)Included in total non-performing loans.

At September 30, 2016, the Company had $44.3 million in loans modified in TDRs. The $44.3 million in TDRs represents 89 credits in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay. The balance decreased from $49.6 million representing 97 credits at June 30, 2016 and decreased from $59.3 million representing 114 credits at September 30, 2015.

The table below presents a summary of TDRs as of September 30, 2016 and September 30, 2015, and shows the changes in the balance during the periods presented:

Three Months Ended September 30, 2016

(Dollars in thousands) Commercial Commercial
Real Estate
Residential
Real Estate
and Other
Total
Balance at beginning of period $5,408 $36,690 $7,537 $49,635
Additions during the period 28 43 71
Reductions:
Charge-offs (761) (204) (965)
Transferred to OREO and other repossessed assets (681) (535) (1,216)
Removal of TDR loan status (1) (1,323) (1,323)
Payments received, net (256) (1,611) (59) (1,926)
Balance at period end $4,419 $32,871 $6,986 $44,276


(1)Loan was previously classified as a troubled debt restructuring and subsequently performed in compliance with the loan’s modified terms for a period of six months (including over a calendar year-end) at a modified interest rate which represented a market rate at the time of restructuring. Per our TDR policy, the TDR classification is removed.

Three Months Ended September 30, 2015

(Dollars in thousands) Commercial Commercial
Real Estate
Residential
Real Estate
and Other
Total
Balance at beginning of period $6,204 $48,450 $8,122 $62,776
Additions during the period 222 222
Reductions:
Charge-offs (267) (52) (319)
Transferred to OREO and other repossessed assets (175) (175)
Removal of TDR loan status (1) (234) (1,581) - (1,815)
Payments received, net (106) (957) (306) (1,369)
Balance at period end $5,864 $45,645 $7,811 $59,320

Nine Months Ended September 30, 2016

(Dollars in thousands) Commercial Commercial
Real Estate
Residential
Real Estate
and Other
Total
Balance at beginning of period $5,747 $38,707 $7,399 $51,853
Additions during the period 345 8,521 583 9,449
Reductions:
Charge-offs (781) (1,038) (212) (2,031)
Transferred to OREO and other repossessed assets (1,365) (535) (1,900)
Removal of TDR loan status (1) (6,479) (6,479)
Payments received, net (892) (5,475) (249) (6,616)
Balance at period end $4,419 $32,871 $6,986 $44,276

Nine Months Ended September 30, 2015

(Dollars in thousands) Commercial Commercial
Real Estate
Residential
Real Estate
and Other
Total
Balance at beginning of period $7,576 $67,623 $7,076 $82,275
Additions during the period 169 1,664 1,833
Reductions:
Charge-offs (397) (268) (92) (757)
Transferred to OREO and other repossessed assets (562) (2,290) (279) (3,131)
Removal of TDR loan status (1) (471) (10,151) (10,622)
Payments received, net (282) (9,438) (558) (10,278)
Balance at period end $5,864 $45,645 $7,811 $59,320


(1)Loan was previously classified as a troubled debt restructuring and subsequently performed in compliance with the loan’s modified terms for a period of six months (including over a calendar year-end) at a modified interest rate which represented a market rate at the time of restructuring. Per our TDR policy, the TDR classification is removed.

Each TDR was reviewed for impairment at September 30, 2016 and approximately $2.8 million of impairment was present and appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for loan losses. For TDRs in which impairment is calculated by the present value of future cash flows, the Company records interest income representing the decrease in impairment resulting from the passage of time during the respective period, which differs from interest income from contractually required interest on these specific loans. For both the three months ending September 30, 2016 and 2015, the Company recorded $98,000 in interest income representing this decrease in impairment. For the nine months ended September 30, 2016 and 2015, the Company recorded $323,000 and $385,000, respectively, in interest income.

Other Real Estate Owned

The table below presents a summary of other real estate owned, excluding covered other real estate owned, as of September 30, 2016, June 30, 2016 and September 30, 2015, and shows the activity for the respective period and the balance for each property type:

Three Months Ended
September 30, June 30, September 30,
(Dollars in thousands) 2016 2016 2015
Balance at beginning of period $38,063 $41,002 $42,080
Disposals/resolved (5,967) (6,591) (7,611)
Transfers in at fair value, less costs to sell 3,958 1,309 6,159
Transfers in from covered OREO subsequent to loss share expiration 3,300 7,316
Additions from acquisition 4,617
Fair value adjustments (1,004) (957) (681)
Balance at end of period $35,050 $38,063 $51,880
Period End
September 30, June 30, September 30,
Balance by Property Type 2016 2016 2015
Residential real estate $9,602 $9,153 $12,577
Residential real estate development 2,114 2,133 3,147
Commercial real estate 23,334 26,777 36,156
Total $35,050 $38,063 $51,880

Covered Assets

In conjunction with FDIC-assisted transactions, the Company entered into loss share agreements with the FDIC. These agreements cover realized losses on loans, foreclosed real estate and certain other assets and require the Company to record loss share assets and liabilities that are measured separately from the loan portfolios because they are not contractually embedded in the loans and are not transferable with the loans should the Company choose to dispose of them. Fair values at the acquisition dates were estimated based on projected cash flows available for loss-share based on the credit adjustments estimated for each loan pool and the loss share percentages. The loss share assets and liabilities are also separately measured from the related loans and foreclosed real estate and recorded on the Consolidated Statements of Condition. Subsequent to the acquisition date, reimbursements received from the FDIC for actual incurred losses will reduce any loss share assets. Reductions to expected losses, to the extent such reductions to expected losses are the result of an improvement to the actual or expected cash flows from the covered assets, will also reduce any loss share asset and, if necessary, increase any loss share liability when necessary reductions exceed the current value of the loss share asset. The increases in cash flows for the purchased loans are recognized as interest income prospectively. In accordance with clawback provisions included in loss share agreements with the FDIC, the Company may be required to reimburse the FDIC when actual losses are less than certain thresholds established for each loss share agreement. The balance of these estimated reimbursements in accordance with clawback provisions and any related amortization are adjusted periodically for changes in the expected losses on covered assets. Estimated reimbursements from clawback provisions are recorded as a reduction to the loss share asset or, if necessary, an increase to the loss share liability on the Consolidated Statements of Condition. The allowance for loan losses for loans acquired in FDIC-assisted transactions is determined without giving consideration to the amounts recoverable through loss share agreements (since the loss share agreements are separately accounted for and thus presented “gross” on the balance sheet). On the Consolidated Statements of Income, the provision for credit losses is reported net of changes in the amount recoverable under the loss share agreements.

The following table provides a comparative analysis for the period end balances of covered assets and any changes in the allowance for covered loan losses. The Company expects covered assets and the allowance for covered loan losses to continue to decrease in periods without FDIC-assisted acquisitions.

September 30, June 30, September 30,
(Dollars in thousands) 2016 2016 2015
Period End Balances:
Loans $95,940 $105,248 $168,609
Other real estate owned 10,399 12,983 28,644
Other assets 216 238 686
FDIC indemnification (liability) asset (17,945) (11,729) (3,033)
Total net covered assets $88,610 $106,740 $194,906
Allowance for Covered Loan Losses Rollforward:
Balance at beginning of quarter: $2,412 $2,507 $2,215
Provision for covered loan losses before benefit attributable to FDIC loss share agreements (847) (702) (1,716)
Benefit attributable to FDIC loss share agreements 677 562 1,373
Net provision for covered loan losses (170) (140) (343)
Decrease in FDIC indemnification liability/asset (677) (562) (1,373)
Loans charged-off (918) (143) (287)
Recoveries of loans charged-off 775 750 2,706
Net (charge-offs) recoveries (143) 607 2,419
Balance at end of quarter $1,422 $2,412 $2,918

Changes in Accretable Yield

The excess of cash flows expected to be collected over the carrying value of loans accounted for under ASC 310-30 is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the pool of loans. The accretable yield is affected by:

  • Changes in interest rate indices for variable rate loans accounted for under ASC 310-30 – Expected future cash flows are based on the variable rates in effect at the time of the regular evaluations of cash flows expected to be collected;
  • Changes in prepayment assumptions – Prepayments affect the estimated life of loans accounted for under ASC 310-30 which may change the amount of interest income, and possibly principal, expected to be collected; and
  • Changes in the expected principal and interest payments over the estimated life – Updates to expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.

The following table provides activity for the accretable yield of loans accounted for under ASC 310-30.

Three Months Ended
September 30, September 30,
(Dollars in thousands) 2016 2015
Accretable yield, beginning balance $55,630 $63,643
Acquisitions 10,407
Accretable yield amortized to interest income (6,449) (5,939)
Accretable yield amortized to indemnification asset/liability (1) (1,744) (3,280)
Reclassification from non-accretable difference(2) 5,370 2,298
Increases (decreases) in interest cash flows due to payments and changes in interest rates 170 (610)
Accretable yield, ending balance (3) $52,977 $66,519


Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2016 2015
Accretable yield, beginning balance $63,902 $79,102
Acquisitions 1,266 11,305
Accretable yield amortized to interest income (17,105) (18,359)
Accretable yield amortized to indemnification asset/liability (1) (5,539) (10,945)
Reclassification from non-accretable difference(2) 12,099 5,154
(Decreases) increases in interest cash flows due to payments and changes in interest rates (1,646) 262
Accretable yield, ending balance (3) $52,977 $66,519


(1)Represents the portion of the current period accreted yield, resulting from lower expected losses, applied to reduce the loss share indemnification asset.
(2)Reclassification is the result of subsequent increases in expected principal cash flows.
(3)As of September 30, 2016, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $1.5 million. The remainder of the accretable yield related to bank acquisitions is expected to be amortized to interest income.

Accretion to interest income accounted for under ASC 310-30 totaled $6.4 million and $5.9 million in the third quarter of 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, the Company recorded accretion to interest income of $17.1 million and $18.4 million, respectively. These amounts include accretion from both covered and non-covered loans, and are included together within interest and fees on loans in the Consolidated Statements of Income.

Items Impacting Comparative Financial Results:

Acquisitions

On August 19, 2016, the Company, through its wholly-owned subsidiary Lake Forest Bank & Trust Company, completed its acquisition of approximately $555 million in select performing loans and related relationships from an affiliate of GE Capital Franchise Finance. The loans are to franchise operators (primarily quick service restaurant concepts) in the Midwest and in the Western portion of the United States.

On March 31, 2016, the Company completed its acquisition of Generations Bancorp. Inc. ("Generations"). Generations was the parent company of Foundations Bank ("Foundations"). Through this transaction, the Company acquired Foundations' banking location in Pewaukee, Wisconsin, approximately $131 million in assets and approximately $100 million in deposits.

On July 24, 2015, the Company completed its acquisition of Community Financial Shares, Inc ("CFIS"). CFIS was the parent company of Community Bank - Wheaton/Glen Ellyn ("CBWGE"). Through this transaction, the Company acquired CBWGE's four banking locations in Wheaton and Glen Ellyn, Illinois, approximately $351 million in assets and approximately $290 million in deposits.

On July 17, 2015, the Company completed its acquisition of Suburban Illinois Bancorp, Inc. ("Suburban"). Suburban was the parent company of Suburban Bank & Trust Company ("SBT"). Through this transaction, the Company acquired SBT's ten banking locations in Chicago and its suburbs, approximately $495 million in assets and approximately $417 million in deposits.

On July 1, 2015, the Company, through its wholly-owned subsidiary Wintrust Bank, completed its acquisition of North Bank. Through this transaction, Wintrust Bank acquired two banking locations, $118 million in assets and approximately $101 million in deposits.

On January 16, 2015, the Company completed its acquisition of Delavan Bancshares, Inc. ("Delavan"). Delavan was the parent company of Community Bank CBD. Through this transaction, Town Bank acquired four banking locations, approximately $224 million in assets and approximately $170 million in deposits.

Previously Announced Acquisitions

On July 6, 2016, the Company announced the signing of a definitive agreement to acquire First Community Financial Corporation ("FCFC"). FCFC is the parent company of First Community Bank, an Illinois state-chartered bank, which operates two banking locations in Elgin, Illinois. As of June 30, 2016, First Community Bank had approximately $177 million in assets, approximately $79 million in loans and approximately $154 million in deposits.

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, 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, Chicago, 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, 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, Menomenee 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 Corporation, one of the largest insurance premium finance companies operating in the United States, serves commercial and life insurance loan customers throughout the country.
  • 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, 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 2015 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:

  • difficult economic conditions have adversely affected our company and the financial services industry in general and further deterioration in economic conditions may materially adversely affect our business, financial condition, results of operations and cash flows;
  • since our business is concentrated in the Chicago metropolitan and southern Wisconsin market areas, further declines in the economy of this region could adversely affect our business;
  • if our allowance for loan losses is not sufficient to absorb losses that may occur in our loan portfolio, our financial condition and liquidity could suffer;
  • a significant portion of our loan portfolio is comprised of commercial loans, the repayment of which is largely dependent upon the financial success and economic viability of the borrower;
  • a substantial portion of our loan portfolio is secured by real estate, in particular commercial real estate. Deterioration in the real estate markets could lead to additional losses, which could have a material adverse effect on our financial condition and results of operations;
  • any inaccurate assumptions in our analytical and forecasting models could cause us to miscalculate our projected revenue or losses, which could adversely affect our financial condition;
  • unanticipated changes in prevailing interest rates and the effects of changing regulation could adversely affect our net interest income, which is our largest source of income;
  • our liquidity position may be negatively impacted if economic conditions continue to suffer;
  • the financial services industry is very competitive, and if we are not able to compete effectively, we may lose market share and our business could suffer;
  • if we are unable to compete effectively, we will lose market share and income from deposits, loans and other products may be reduced. This could adversely affect our profitability and have a material adverse effect on our business, financial condition and results of operations;
  • if we are unable to continue to identify favorable acquisitions or successfully integrate our acquisitions, our growth may be limited and our results of operations could suffer;
  • our participation in FDIC-assisted acquisitions may present additional risks to our financial condition and results of operations;
  • an actual or perceived reduction in our financial strength may cause others to reduce or cease doing business with us, which could result in a decrease in our net interest income and fee revenues;
  • if our growth requires us to raise additional capital, that capital may not be available when it is needed or the cost of that capital may be very high;
  • disruption in the financial markets could result in lower fair values for our investment securities portfolio;
  • our controls and procedures may fail or be circumvented;
  • new lines of business and new products and services are essential to our ability to compete but may subject us to additional risks;
  • failures of our information technology systems may adversely affect our operations;
  • failures by or of our vendors may adversely affect our operations;
  • we issue debit cards, and debit card transactions pose a particular cybersecurity risk that is outside of our control;
  • we depend on the accuracy and completeness of information we receive about our customers and counterparties to make credit decisions;
  • if we are unable to attract and retain experienced and qualified personnel, our ability to provide high quality service will be diminished, we may lose key customer relationships, and our results of operations may suffer;
  • we are subject to environmental liability risk associated with lending activities;
  • we are subject to claims and legal actions which could negatively affect our results of operations or financial condition;
  • losses incurred in connection with actual or projected repurchases and indemnification payments related to mortgages that we have sold into the secondary market may exceed our financial statement reserves and we may be required to increase such reserves in the future. Increases to our reserves and losses incurred in connection with actual loan repurchases and indemnification payments could have a material adverse effect on our business, financial condition, results of operations or cash flows;
  • consumers may decide not to use banks to complete their financial transactions, which could adversely affect our business and results of operations;
  • we may be adversely impacted by the soundness of other financial institutions;
  • de novo operations often involve significant expenses and delayed returns and may negatively impact Wintrust's profitability;
  • we are subject to examinations and challenges by tax authorities, and changes in federal and state tax laws and changes in interpretation of existing laws can impact our financial results;
  • changes in accounting policies or accounting standards could materially adversely affect how we report our financial results and financial condition;
  • we are a bank holding company, and our sources of funds, including to pay dividends, are limited;
  • anti-takeover provisions could negatively impact our shareholders;
  • if we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets;
  • if our credit rating is lowered, our financing costs could increase;
  • changes in the United States’ monetary policy may restrict our ability to conduct our business in a profitable manner;
  • legislative and regulatory actions taken now or in the future regarding the financial services industry may significantly increase our costs or limit our ability to conduct our business in a profitable manner;
  • financial reform legislation and increased regulatory rigor around mortgage-related issues may reduce our ability to market our products to consumers and may limit our ability to profitably operate our mortgage business;
  • federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business;
  • regulatory initiatives regarding bank capital requirements may require heightened capital;
  • our FDIC insurance premiums may increase, which could negatively impact our results of operations;
  • non-compliance with the USA PATRIOT Act, Bank Secrecy Act or other laws and regulations could result in fines or sanctions;
  • our premium finance business may involve a higher risk of delinquency or collection than our other lending operations, and could expose us to losses;
  • widespread financial difficulties or credit downgrades among commercial and life insurance providers could lessen the value of the collateral securing our premium finance loans and impair the financial condition and liquidity of FIFC and FIFC Canada;
  • regulatory changes could significantly reduce loan volume and impair the financial condition of FIFC; and
  • our wealth management business in general, and WHI's brokerage operation, in particular, exposes us to certain risks associated with the securities industry.

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 2:00 p.m. (CT) Tuesday, October 18, 2016 regarding third quarter and year-to-date 2016 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #91910010. A simultaneous audio-only web cast and replay of the conference call may be accessed via the Company’s web site at (http://www.wintrust.com), Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the third quarter and year-to-date 2016 earnings press release will be available on the home page of the Company’s website at (http://www.wintrust.com) and at the Investor Relations, Investor News and Events, Press Releases link on its website.


WINTRUST FINANCIAL CORPORATION

Supplemental Financial Information

5 Quarter Trends



WINTRUST FINANCIAL CORPORATION - Supplemental Financial Information
Selected Financial Highlights - 5 Quarter Trends
(Dollars in thousands, except per share data)

Three Months Ended
September 30, June 30, March 31, December 31, September 30,
2016 2016 2016 2015 2015
Selected Financial Condition Data (at end of period):
Total assets $25,321,759 $24,420,616 $23,488,168 $22,909,348 $22,035,216
Total loans, excluding loans held-for-sale and covered loans 19,101,261 18,174,655 17,446,413 17,118,117 16,316,211
Total deposits 21,147,655 20,041,750 19,217,071 18,639,634 18,228,469
Junior subordinated debentures 253,566 253,566 253,566 268,566 268,566
Total shareholders’ equity 2,674,474 2,623,595 2,418,442 2,352,274 2,335,736
Selected Statements of Income Data:
Net interest income 184,636 175,270 171,509 167,206 165,540
Net revenue (1) 271,240 260,069 240,261 232,296 230,493
Net income 53,115 50,041 49,111 35,512 38,355
Net income per common share – Basic $0.96 $0.94 $0.94 $0.66 $0.71
Net income per common share – Diluted $0.92 $0.90 $0.90 $0.64 $0.69
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin 3.21% 3.24% 3.29% 3.26% 3.31%
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.24% 3.27% 3.32% 3.29% 3.33%
Non-interest income to average assets 1.38% 1.44% 1.21% 1.16% 1.19%
Non-interest expense to average assets 2.82% 2.89% 2.70% 2.98% 2.93%
Net overhead ratio (3) 1.44% 1.46% 1.49% 1.82% 1.74%
Return on average assets 0.85% 0.85% 0.86% 0.63% 0.70%
Return on average common equity 8.20% 8.43% 8.55% 6.03% 6.60%
Return on average tangible common equity (non-GAAP) (2) 10.55% 11.12% 11.33% 8.12% 8.88%
Average total assets $24,879,252 $23,754,755 $22,902,913 $22,225,112 $21,679,062
Average total shareholders’ equity 2,651,684 2,465,732 2,389,770 2,347,545 2,310,511
Average loans to average deposits ratio (excluding loans held-for-sale, excluding covered loans) 89.8% 92.4% 92.2% 90.2% 89.7%
Average loans to average deposits ratio (excluding loans held-for-sale, including covered loans) 90.3 92.9 93.0 91.0 90.6
Common Share Data at end of period:
Market price per common share $55.57 $51.00 $44.34 $48.52 $53.43
Book value per common share (2) $46.86 $45.96 $44.67 $43.42 $43.12
Tangible common book value per share (2) $37.06 $36.12 $34.20 $33.17 $32.83
Common shares outstanding 51,714,683 51,619,155 48,518,998 48,383,279 48,336,870
Other Data at end of period:(6)
Leverage Ratio(4) 9.0% 9.2% 8.7% 9.1% 9.2%
Tier 1 Capital to risk-weighted assets (4) 9.8% 10.1% 9.6% 10.0% 10.3%
Common equity Tier 1 capital to risk-weighted assets (4) 8.7% 8.9% 8.4% 8.4% 8.6%
Total capital to risk-weighted assets (4) 12.1% 12.4% 12.1% 12.2% 12.6%
Allowance for credit losses (5) $119,341 $115,426 $111,201 $106,349 $103,922
Non-performing loans 83,128 88,119 89,499 84,057 85,976
Allowance for credit losses to total loans (5) 0.62% 0.64% 0.64% 0.62% 0.64%
Non-performing loans to total loans 0.44% 0.48% 0.51% 0.49% 0.53%
Number of:
Bank subsidiaries 15 15 15 15 15
Banking offices 152 153 153 152 160


(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. As of January 1, 2015 capital ratios are calculated under the requirements of Basel III.
(5)The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excluding the allowance for covered loan losses.
(6)Asset quality ratios exclude covered loans.


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

(Unaudited) (Unaudited) (Unaudited) (Unaudited)
September 30, June 30, March 31, December 31, September 30,
(In thousands) 2016 2016 2016 2015 2015
Assets
Cash and due from banks $242,825 $267,551 $208,480 $271,454 $247,341
Federal funds sold and securities purchased under resale agreements 4,122 4,024 3,820 4,341 3,314
Interest bearing deposits with banks 816,104 693,269 817,013 607,782 701,106
Available-for-sale securities, at fair value 1,650,096 637,663 770,983 1,716,388 2,214,281
Held-to-maturity securities, at amortized cost 932,767 992,211 911,715 884,826
Trading account securities 1,092 3,613 2,116 448 3,312
Federal Home Loan Bank and Federal Reserve Bank stock 129,630 121,319 113,222 101,581 90,308
Brokerage customer receivables 25,511 26,866 28,266 27,631 28,293
Mortgage loans held-for-sale 559,634 554,256 314,554 388,038 347,005
Loans, net of unearned income, excluding covered loans 19,101,261 18,174,655 17,446,413 17,118,117 16,316,211
Covered loans 95,940 105,248 138,848 148,673 168,609
Total loans 19,197,201 18,279,903 17,585,261 17,266,790 16,484,820
Allowance for loan losses (117,693) (114,356) (110,171) (105,400) (102,996)
Allowance for covered loan losses (1,422) (2,412) (2,507) (3,026) (2,918)
Net loans 19,078,086 18,163,135 17,472,583 17,158,364 16,378,906
Premises and equipment, net 597,263 595,792 591,608 592,256 587,348
Lease investments, net 116,355 103,749 89,337 63,170 29,111
Accrued interest receivable and other assets 660,923 670,014 647,853 597,099 629,211
Trade date securities receivable 677 1,079,238 1,008,613 277,981
Goodwill 485,938 486,095 484,280 471,761 472,166
Other intangible assets 20,736 21,821 23,725 24,209 25,533
Total assets $25,321,759 $24,420,616 $23,488,168 $22,909,348 $22,035,216
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing $5,711,042 $5,367,672 $5,205,410 $4,836,420 $4,705,994
Interest bearing 15,436,613 14,674,078 14,011,661 13,803,214 13,522,475
Total deposits 21,147,655 20,041,750 19,217,071 18,639,634 18,228,469
Federal Home Loan Bank advances 419,632 588,055 799,482 853,431 443,955
Other borrowings 241,366 252,611 253,126 265,785 259,805
Subordinated notes 138,943 138,915 138,888 138,861 138,834
Junior subordinated debentures 253,566 253,566 253,566 268,566 268,566
Trade date securities payable 40,000 538 617
Accrued interest payable and other liabilities 446,123 482,124 407,593 390,259 359,234
Total liabilities 22,647,285 21,797,021 21,069,726 20,557,074 19,699,480
Shareholders’ Equity:
Preferred stock 251,257 251,257 251,257 251,287 251,312
Common stock 51,811 51,708 48,608 48,469 48,422
Surplus 1,356,759 1,350,751 1,194,750 1,190,988 1,187,407
Treasury stock (4,522) (4,145) (4,145) (3,973) (3,964)
Retained earnings 1,051,748 1,008,464 967,882 928,211 901,652
Accumulated other comprehensive loss (32,579) (34,440) (39,910) (62,708) (49,093)
Total shareholders’ equity 2,674,474 2,623,595 2,418,442 2,352,274 2,335,736
Total liabilities and shareholders’ equity $25,321,759 $24,420,616 $23,488,168 $22,909,348 $22,035,216


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

Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(In thousands, except per share data) 2016 2016 2016 2015 2015
Interest income
Interest and fees on loans $190,189 $178,530 $173,127 $169,501 $167,831
Interest bearing deposits with banks 1,156 793 746 493 372
Federal funds sold and securities purchased under resale agreements 1 1 1 1
Investment securities 15,496 16,398 17,190 16,405 16,130
Trading account securities 18 14 11 25 19
Federal Home Loan Bank and Federal Reserve Bank stock 1,094 1,112 937 857 821
Brokerage customer receivables 195 216 219 206 205
Total interest income 208,149 197,064 192,231 187,487 185,379
Interest expense
Interest on deposits 15,621 13,594 12,781 12,617 12,436
Interest on Federal Home Loan Bank advances 2,577 2,984 2,886 2,684 2,458
Interest on other borrowings 1,137 1,086 1,058 1,007 1,045
Interest on subordinated notes 1,778 1,777 1,777 1,777 1,776
Interest on junior subordinated debentures 2,400 2,353 2,220 2,196 2,124
Total interest expense 23,513 21,794 20,722 20,281 19,839
Net interest income 184,636 175,270 171,509 167,206 165,540
Provision for credit losses 9,571 9,129 8,034 9,059 8,322
Net interest income after provision for credit losses 175,065 166,141 163,475 158,147 157,218
Non-interest income
Wealth management 19,334 18,852 18,320 18,634 18,243
Mortgage banking 34,712 36,807 21,735 23,317 27,887
Service charges on deposit accounts 8,024 7,726 7,406 7,210 7,403
Gains (losses) on investment securities, net 3,305 1,440 1,325 (79) (98)
Fees from covered call options 3,633 4,649 1,712 3,629 2,810
Trading (losses) gains, net (432) (316) (168) 205 (135)
Operating lease income, net 4,459 4,005 2,806 1,973 613
Other 13,569 11,636 15,616 10,201 8,230
Total non-interest income 86,604 84,799 68,752 65,090 64,953
Non-interest expense
Salaries and employee benefits 103,718 100,894 95,811 99,780 97,749
Equipment 9,449 9,307 8,767 8,799 8,456
Operating lease equipment depreciation 3,605 3,385 2,050 1,202 431
Occupancy, net 12,767 11,943 11,948 13,062 12,066
Data processing 7,432 7,138 6,519 7,284 8,127
Advertising and marketing 7,365 6,941 3,779 5,373 6,237
Professional fees 5,508 5,419 4,059 4,387 4,100
Amortization of other intangible assets 1,085 1,248 1,298 1,324 1,350
FDIC insurance 3,686 4,040 3,613 3,317 3,035
OREO expense, net 1,436 1,348 560 2,598 (367)
Other 20,564 19,306 15,326 19,703 18,790
Total non-interest expense 176,615 170,969 153,730 166,829 159,974
Income before taxes 85,054 79,971 78,497 56,408 62,197
Income tax expense 31,939 29,930 29,386 20,896 23,842
Net income $53,115 $50,041 $49,111 $35,512 $38,355
Preferred stock dividends and discount accretion 3,628 3,628 3,628 3,629 4,079
Net income applicable to common shares $49,487 $46,413 $45,483 $31,883 $34,276
Net income per common share - Basic $0.96 $0.94 $0.94 $0.66 $0.71
Net income per common share - Diluted $0.92 $0.90 $0.90 $0.64 $0.69
Cash dividends declared per common share $0.12 $0.12 $0.12 $0.11 $0.11
Weighted average common shares outstanding 51,679 49,140 48,448 48,371 48,158
Dilutive potential common shares 4,047 3,965 3,820 4,005 4,049
Average common shares and dilutive common shares 55,726 53,105 52,268 52,376 52,207


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

September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2016 2016 2016 2015 2015
Balance:
Commercial $5,951,544 $5,144,533 $4,890,246 $4,713,909 $4,400,185
Commercial real estate 5,908,684 5,848,334 5,737,959 5,529,289 5,307,566
Home equity 742,868 760,904 774,342 784,675 797,465
Residential real estate 663,598 653,664 626,043 607,451 571,743
Premium finance receivables - commercial 2,430,233 2,478,280 2,320,987 2,374,921 2,407,075
Premium finance receivables - life insurance 3,283,359 3,161,562 2,976,934 2,961,496 2,700,275
Consumer and other 120,975 127,378 119,902 146,376 131,902
Total loans, net of unearned income, excluding covered loans $19,101,261 $18,174,655 $17,446,413 $17,118,117 $16,316,211
Covered loans 95,940 105,248 138,848 148,673 168,609
Total loans, net of unearned income $19,197,201 $18,279,903 $17,585,261 $17,266,790 $16,484,820
Mix:
Commercial 31% 28% 28% 27% 27%
Commercial real estate 31 31 32 32 32
Home equity 4 4 4 5 5
Residential real estate 3 4 4 3 3
Premium finance receivables - commercial 13 14 13 14 15
Premium finance receivables - life insurance 17 17 17 17 16
Consumer and other 1 1 1 1 1
Total loans, net of unearned income, excluding covered loans 100% 99% 99% 99% 99%
Covered loans 1 1 1 1
Total loans, net of unearned income 100% 100% 100% 100% 100%


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

September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2016 2016 2016 2015 2015
Balance:
Non-interest bearing $5,711,042 $5,367,672 $5,205,410 $4,836,420 $4,705,994
NOW and interest bearing demand deposits 2,552,611 2,450,710 2,369,474 2,390,217 2,231,258
Wealth management deposits (1) 2,283,233 1,904,121 1,761,710 1,643,653 1,469,920
Money market 4,421,631 4,384,134 4,157,083 4,041,300 4,001,518
Savings 1,977,661 1,851,863 1,766,552 1,723,367 1,684,007
Time certificates of deposit 4,201,477 4,083,250 3,956,842 4,004,677 4,135,772
Total deposits $21,147,655 $20,041,750 $19,217,071 $18,639,634 $18,228,469
Mix:
Non-interest bearing 27% 27% 27% 26% 26%
NOW and interest bearing demand deposits 12 12 12 13 12
Wealth management deposits (1) 11 10 9 9 8
Money market 21 22 22 22 22
Savings 9 9 9 9 9
Time certificates of deposit 20 20 21 21 23
Total deposits 100% 100% 100% 100% 100%


(1)Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts of the Banks.


WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin (Including Call Option Income) - 5 Quarter Trends

Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2016 2016 2016 2015 2015
Net interest income - FTE $186,192 $176,733 $172,944 $168,515 $166,737
Call option income 3,633 4,649 1,712 3,629 2,810
Net interest income including call option income $189,825 $181,382 $174,656 $172,144 $169,547
Yield on earning assets 3.65% 3.67% 3.71% 3.69% 3.73%
Rate on interest-bearing liabilities 0.58% 0.56% 0.55 0.55% 0.54
Rate spread 3.07% 3.11% 3.16% 3.14% 3.19%
Less: Fully tax-equivalent adjustment (0.03) (0.03) (0.03) (0.03) (0.02)
Net free funds contribution 0.17% 0.16 0.16 0.15% 0.14
Net interest margin (GAAP-derived) 3.21% 3.24% 3.29% 3.26% 3.31%
Fully tax-equivalent adjustment 0.03 0.03 0.03 0.03 0.02
Net interest margin - FTE 3.24% 3.27% 3.32% 3.29% 3.33%
Call option income 0.06% 0.09% 0.03 0.07% 0.06
Net interest margin - FTE, including call option income 3.30% 3.36% 3.35% 3.36% 3.39%


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

Nine months ended
September 30,
Years Ended
December 31,
(Dollars in thousands) 2016 2015 2014 2013 2012
Net interest income - FTE $535,869 $646,238 $601,744 $552,887 $521,463
Call option income 9,994 15,364 7,859 4,773 10,476
Net interest income including call option income $545,863 $661,602 $609,603 $557,660 $531,939
Yield on earning assets 3.68% 3.76% 3.96% 4.01% 4.21%
Rate on interest-bearing liabilities 0.56% 0.54 0.55 0.63 0.86
Rate spread 3.12% 3.22% 3.41% 3.38% 3.35%
Less: Fully tax-equivalent adjustment (0.02) (0.02) (0.02) (0.01) (0.02)
Net free funds contribution 0.15 0.14 0.12 0.12 0.14
Net interest margin (GAAP-derived) 3.25% 3.34% 3.51% 3.49% 3.47%
Fully tax-equivalent adjustment 0.02 0.02 0.02 0.01 0.02
Net interest margin - FTE 3.27% 3.36% 3.53% 3.50% 3.49%
Call option income 0.06% 0.08 0.05 0.03 0.07
Net interest margin - FTE, including call option income 3.33% 3.44% 3.58% 3.53% 3.56%


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

Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(In thousands) 2016 2016 2016 2015 2015
Liquidity management assets $3,671,577 $3,413,113 $3,300,138 $3,245,393 $3,140,782
Other earning assets 29,875 29,759 28,731 29,792 30,990
Loans, net of unearned income 19,071,621 18,204,552 17,508,593 16,889,922 16,509,001
Covered loans 101,570 109,533 141,351 154,846 174,768
Total earning assets $22,874,643 $21,756,957 $20,978,813 $20,319,953 $19,855,541
Allowance for loan and covered loan losses (121,156) (116,984) (112,028) (109,448) (106,091)
Cash and due from banks 240,239 272,935 259,343 260,593 251,289
Other assets 1,885,526 1,841,847 1,776,785 1,754,014 1,678,323
Total assets $24,879,252 $23,754,755 $22,902,913 $22,225,112 $21,679,062
Interest-bearing deposits $15,117,102 $14,065,995 $13,717,333 $13,606,046 $13,489,651
Federal Home Loan Bank advances 459,198 946,081 825,104 441,669 394,666
Other borrowings 249,307 248,233 257,384 269,738 272,549
Subordinated notes 138,925 138,898 138,870 138,852 138,825
Junior subordinated debentures 253,566 253,566 257,687 268,566 264,974
Total interest-bearing liabilities $16,218,098 $15,652,773 $15,196,378 $14,724,871 $14,560,665
Non-interest bearing deposits 5,566,983 5,223,384 4,939,746 4,776,977 4,473,632
Other liabilities 442,487 412,866 377,019 375,719 334,254
Equity 2,651,684 2,465,732 2,389,770 2,347,545 2,310,511
Total liabilities and shareholders’ equity $24,879,252 $23,754,755 $22,902,913 $22,225,112 $21,679,062


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

Three Months Ended
September 30,
2016
June 30,
2016
March 31,
2016
December 31,
2015
September 30,
2015
Yield earned on:
Liquidity management assets 2.03% 2.27% 2.41% 2.28% 2.29%
Other earning assets 2.96% 3.21% 3.31% 3.26% 3.00%
Loans, net of unearned income 3.96% 3.92% 3.94% 3.95% 3.98%
Covered loans 4.45% 5.44% 5.72% 4.79% 5.91%
Total earning assets 3.65% 3.67% 3.71% 3.69% 3.73%
Rate paid on:
Interest-bearing deposits 0.41% 0.39% 0.37% 0.37% 0.37%
Federal Home Loan Bank advances 2.23% 1.27% 1.41% 2.41% 2.47%
Other borrowings 1.81% 1.76% 1.65% 1.48% 1.52%
Subordinated notes 5.12% 5.12% 5.12% 5.12% 5.12%
Junior subordinated debentures 3.70% 3.67% 3.41% 3.20% 3.14%
Total interest-bearing liabilities 0.58% 0.56% 0.55% 0.55% 0.54%
Interest rate spread 3.07% 3.11% 3.16% 3.14% 3.19%
Less: Fully tax-equivalent adjustment (0.03) (0.03) (0.03) (0.03) (0.02)
Net free funds/contribution 0.17 0.16 0.16 0.15 0.14
Net interest margin (GAAP) 3.21% 3.24% 3.29% 3.26% 3.31%
Fully tax-equivalent adjustment 0.03 0.03 0.03 0.03 0.02
Net interest margin - FTE 3.24% 3.27% 3.32% 3.29% 3.33%


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

Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(In thousands) 2016 2016 2016 2015 2015
Brokerage $6,752 $6,302 $6,057 $6,850 $6,579
Trust and asset management 12,582 12,550 12,263 11,784 11,664
Total wealth management 19,334 18,852 18,320 18,634 18,243
Mortgage banking 34,712 36,807 21,735 23,317 27,887
Service charges on deposit accounts 8,024 7,726 7,406 7,210 7,403
Gains (losses) on investment securities, net 3,305 1,440 1,325 (79) (98)
Fees from covered call options 3,633 4,649 1,712 3,629 2,810
Trading (losses) gains, net (432) (316) (168) 205 (135)
Operating lease income, net 4,459 4,005 2,806 1,973 613
Other:
Interest rate swap fees 2,881 1,835 4,438 2,343 2,606
BOLI 884 1,257 472 1,463 212
Administrative services 1,151 1,074 1,069 1,101 1,072
Gain on extinguishment of debt 4,305
Miscellaneous 8,653 7,470 5,332 5,294 4,340
Total other income 13,569 11,636 15,616 10,201 8,230
Total Non-Interest Income $86,604 $84,799 $68,752 $65,090 $64,953


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

Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(In thousands) 2016 2016 2016 2015 2015
Salaries and employee benefits:
Salaries $54,309 $52,924 $50,282 $50,982 $53,028
Commissions and incentive compensation 33,740 32,531 26,375 31,222 30,035
Benefits 15,669 15,439 19,154 17,576 14,686
Total salaries and employee benefits 103,718 100,894 95,811 99,780 97,749
Equipment 9,449 9,307 8,767 8,799 8,456
Operating lease equipment depreciation 3,605 3,385 2,050 1,202 431
Occupancy, net 12,767 11,943 11,948 13,062 12,066
Data processing 7,432 7,138 6,519 7,284 8,127
Advertising and marketing 7,365 6,941 3,779 5,373 6,237
Professional fees 5,508 5,419 4,059 4,387 4,100
Amortization of other intangible assets 1,085 1,248 1,298 1,324 1,350
FDIC insurance 3,686 4,040 3,613 3,317 3,035
OREO expense, net 1,436 1,348 560 2,598 (367)
Other:
Commissions - 3rd party brokers 1,362 1,324 1,310 1,321 1,364
Postage 1,889 2,038 1,302 1,892 1,927
Miscellaneous 17,313 15,944 12,714 16,490 15,499
Total other expense 20,564 19,306 15,326 19,703 18,790
Total Non-Interest Expense $176,615 $170,969 $153,730 $166,829 $159,974


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

Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands) 2016 2016 2016 2015 2015
Allowance for loan losses at beginning of period $114,356 $110,171 $105,400 $102,996 $100,204
Provision for credit losses 9,741 9,269 8,423 9,196 8,665
Other adjustments (112) (134) (78) (243) (153)
Reclassification (to) from allowance for unfunded lending-related commitments (579) (40) (81) 13 (42)
Charge-offs:
Commercial 3,469 721 671 1,369 964
Commercial real estate 382 502 671 2,734 1,948
Home equity 574 2,046 1,052 680 1,116
Residential real estate 134 693 493 211 1,138
Premium finance receivables - commercial 1,959 1,911 2,480 2,676 1,595
Premium finance receivables - life insurance
Consumer and other 389 224 107 179 116
Total charge-offs 6,907 6,097 5,474 7,849 6,877
Recoveries:
Commercial 176 121 629 315 462
Commercial real estate 364 296 369 491 213
Home equity 65 71 48 183 42
Residential real estate 61 31 112 55 136
Premium finance receivables - commercial 456 633 787 223 278
Premium finance receivables - life insurance 16
Consumer and other 72 35 36 20 52
Total recoveries 1,194 1,187 1,981 1,287 1,199
Net charge-offs (5,713) (4,910) (3,493) (6,562) (5,678)
Allowance for loan losses at period end $117,693 $114,356 $110,171 $105,400 $102,996
Allowance for unfunded lending-related commitments at period end 1,648 1,070 1,030 949 926
Allowance for credit losses at period end $119,341 $115,426 $111,201 $106,349 $103,922
Annualized net charge-offs by category as a percentage of its own respective category’s average:
Commercial 0.24% 0.05% 0.00% 0.09% 0.05%
Commercial real estate 0.00 0.01 0.02 0.16 0.13
Home equity 0.27 1.03 0.52 0.25 0.55
Residential real estate 0.03 0.26 0.17 0.07 0.42
Premium finance receivables - commercial 0.24 0.21 0.29 0.41 0.21
Premium finance receivables - life insurance 0.00 0.00 0.00 0.00 0.00
Consumer and other 0.92 0.57 0.20 0.37 0.17
Total loans, net of unearned income, excluding covered loans 0.12% 0.11% 0.08% 0.15% 0.14%
Net charge-offs as a percentage of the provision for credit losses 58.65% 52.97% 41.47% 71.35% 65.53%
Loans at period-end $19,101,261 $18,174,655 $17,446,413 $17,118,117 $16,316,211
Allowance for loan losses as a percentage of loans at period end 0.62% 0.63% 0.63% 0.62% 0.63%
Allowance for credit losses as a percentage of loans at period end 0.62% 0.64% 0.64% 0.62% 0.64%


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

September 30, June 30, March 31, December 31, September 30,
(Dollars in thousands)2016 2016 2016 2015 2015
Loans past due greater than 90 days and still accruing(1):
Commercial$ $235 $338 $541 $
Commercial real estate 1,260
Home equity
Residential real estate
Premium finance receivables - commercial7,754 10,558 9,548 10,294 8,231
Premium finance receivables - life insurance 1,641
Consumer and other60 163 180 150 140
Total loans past due greater than 90 days and still accruing7,814 10,956 12,967 10,985 8,371
Non-accrual loans(2):
Commercial16,418 16,801 12,373 12,712 12,018
Commercial real estate22,625 24,415 26,996 26,645 28,617
Home equity9,309 8,562 9,365 6,848 8,365
Residential real estate12,205 12,413 11,964 12,043 14,557
Premium finance receivables - commercial14,214 14,497 15,350 14,561 13,751
Premium finance receivables - life insurance
Consumer and other543 475 484 263 297
Total non-accrual loans75,314 77,163 76,532 73,072 77,605
Total non-performing loans:
Commercial16,418 17,036 12,711 13,253 12,018
Commercial real estate22,625 24,415 28,256 26,645 28,617
Home equity9,309 8,562 9,365 6,848 8,365
Residential real estate12,205 12,413 11,964 12,043 14,557
Premium finance receivables - commercial21,968 25,055 24,898 24,855 21,982
Premium finance receivables - life insurance 1,641
Consumer and other603 638 664 413 437
Total non-performing loans$83,128 $88,119 $89,499 $84,057 $85,976
Other real estate owned19,933 22,154 24,022 26,849 29,053
Other real estate owned - from acquisitions15,117 15,909 16,980 17,096 22,827
Other repossessed assets428 420 171 174 193
Total non-performing assets$118,606 $126,602 $130,672 $128,176 $138,049
TDRs performing under the contractual terms of the loan agreement29,440 33,310 34,949 42,744 49,173
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial0.28% 0.33% 0.26% 0.28% 0.27%
Commercial real estate0.38 0.42 0.49 0.48 0.54
Home equity1.25 1.13 1.21 0.87 1.05
Residential real estate1.84 1.90 1.91 1.98 2.55
Premium finance receivables - commercial0.90 1.01 1.07 1.05 0.91
Premium finance receivables - life insurance 0.06
Consumer and other0.50 0.50 0.55 0.28 0.33
Total loans, net of unearned income0.44% 0.48% 0.51% 0.49% 0.53%
Total non-performing assets as a percentage of total assets0.47% 0.52% 0.56% 0.56% 0.63%
Allowance for loan losses as a percentage of total non-performing loans141.58% 129.78% 123.10% 125.39% 119.79%


(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 $14.8 million, $16.3 million, $17.6 million, $9.1 million and $10.1 million as of September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015 and September 30, 2015, respectively.

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

Source:Wintrust Financial Corporation