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Wintrust Financial Corporation Reports Record First Quarter 2017 Net Income, an Increase of 19% Over Prior Year

ROSEMONT, Ill., April 18, 2017 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq:WTFC) announced net income of $58.4 million or $1.00 per diluted common share for the first quarter of 2017 compared to net income of $54.6 million or $0.94 per diluted common share for the fourth quarter of 2016 and $49.1 million or $0.90 per diluted common share for the first quarter of 2016.

Highlights of the First Quarter of 2017*:

  • Net interest margin increased substantially as a result of the recent rate increase in December 2016 and better utilization of excess liquidity in the first quarter of 2017. Net interest income increased $1.8 million from the prior quarter as the improvement in net interest margin more than offset two less days in the quarter.
  • Return on average assets increased to 0.94% from 0.85% in the fourth quarter of 2016. Return on average common equity increased to 8.93% from 8.32% in the fourth quarter of 2016.
  • Net charge-offs, excluding covered loans, decreased to $1.6 million. Net charge-offs as a percentage of average total loans, excluding covered loans, decreased to three basis points, the lowest ratio since the second quarter of 2004.
  • Non-performing loans as a percentage of total loans, excluding covered loans, decreased to 0.40% from 0.44% in the fourth quarter of 2016 and the allowance for loan losses as a percentage of total non-performing loans, excluding covered loans, increased to 159% from 140% in the prior quarter.
  • Total loans, excluding covered loans, mortgage loans held-for-sale and mortgage warehouse lines of credit, increased by $278 million from the prior quarter.
  • Total assets increased by $110 million from the prior quarter and now total $25.8 billion.
  • Reduced operating expenses by $12.3 million from the prior quarter to $168.1 million.
  • Acquired American Homestead Mortgage, LLC ("AHM") located in Montana's Flathead Valley, which will supplement our existing mortgage banking operations in the Rocky Mountain region and continue to diversify our current product mix.

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

Edward J. Wehmer, President and Chief Executive Officer, commented, “Wintrust reported record net income of $58.4 million for the first quarter of 2017. These results were driven by our momentum from 2016 carrying into 2017 with continued steady loan growth in the first quarter. The first quarter of 2017 was also characterized by our increased net interest margin, improved credit quality metrics and reduced operating costs, while offsetting an expected decrease in mortgage banking revenue. As we saw in the first quarter, the structure of our balance sheet is well positioned to take advantage of higher interest rates, and is designed to provide an internal hedge to offset lower earnings from our mortgage banking operations and from reduced revenue from our covered call option program."

Mr. Wehmer continued, “Excluding covered loans, mortgage loans held-for-sale and mortgage warehouse lines of credit, we grew our loan portfolio by $278 million during the first quarter, which was driven by steady growth in the commercial portfolio and life insurance premium finance receivables portfolio. The substantial improvement in net interest margin during the period was primarily attributable to the increase in interest rates by the Federal Reserve Bank in December, which added eight basis points. We remain well positioned for the March interest rate increase and expected rising rates in the future. The net interest margin was also positively impacted by six basis points in the first quarter of 2017 from investing excess liquidity held at year-end. The increased loan volumes and improved net interest margin along with the continued momentum from loan growth at the very end of 2016 resulted in an increase in net interest income of $1.8 million despite two less days in the quarter. Our loan pipelines remain consistently strong."

Commenting on credit quality, Mr. Wehmer noted, “During the first quarter of 2017, the Company continued its practice of timely addressing and resolving non-performing credits. Excluding covered loans, low net charge-offs continued in the current quarter with net charge-offs totaling $1.6 million in the first quarter of 2017 compared to $2.8 million in the prior quarter. Additionally, net charge-offs as a percentage of average total loans decreased to 0.03% from 0.06% in the fourth quarter. Total non-performing assets, excluding covered assets, as a percentage of total assets decreased to 0.46% compared to 0.50% as of the prior quarter-end. Excluding covered loans, non-performing loans as a percentage of total loans decreased to 0.40% at the end of first quarter of 2017 compared to 0.44% at the end of the fourth quarter of 2016. As a percentage of non-performing loans, the allowance for loan losses, excluding covered loans, remained strong at 159%. We believe that the Company's reserves remain appropriate."

Mr. Wehmer further commented, “Mortgage banking revenue in the first quarter of 2017 totaled $21.9 million, a decrease of $13.6 million compared to the fourth quarter of 2016 and a slight increase of $203,000 compared to the first quarter of 2016. The decreased revenue from the fourth quarter of 2016 resulted from origination volumes declining to $722 million from $1.2 billion as a result of the recent rise in interest rates and typical seasonality in January and February. Our mortgage pipeline strengthened in March and is expected to continue to strengthen in the second quarter. We continue to look for opportunities to further enhance the mortgage banking business both organically and through acquisitions. To that end, in the first quarter, we added to our mortgage banking business with the acquisition of AHM."

Turning to the future, Mr. Wehmer stated, “Our growth engine continued its momentum into 2017 and we anticipate the positive momentum realized in the first quarter to continue in all areas of our business for the remainder of 2017. Loan growth at the end of the current quarter should add to this momentum as period-end loan balances, excluding covered loans, mortgage loans held-for-sale and mortgage warehouse lines of credit, exceeded the first quarter average balances by approximately $240 million. Wintrust continues 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. 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 first quarter of 2017.

http://www.globenewswire.com/NewsRoom/AttachmentNg/32dff03e-6e37-407b-aee8-ba4cd9878c75

Wintrust’s key operating measures and growth rates for the first quarter of 2017, as compared to the sequential and linked quarters, are shown in the table below:

% or(4)
basis point (bp)change from
4th Quarter
2016
% or
basis point (bp)
change from
1st Quarter
2016
Three Months Ended
(Dollars in thousands) March 31,
2017
December 31,
2016
March 31,
2016
Net income $58,378 $54,608 $49,111 7 % 19 %
Net income per common share – diluted $1.00 $0.94 $0.90 6 % 11 %
Net revenue (1) $261,345 $276,053 $240,261 (5)% 9 %
Net interest income $192,580 $190,778 $171,509 1 % 12 %
Net interest margin 3.36% 3.21% 3.29% 15 bp 7 bp
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.39% 3.23% 3.32% 16 bp 7 bp
Net overhead ratio (3) 1.60% 1.48% 1.49% 12 bp 11 bp
Return on average assets 0.94% 0.85% 0.86% 9 bp 8 bp
Return on average common equity 8.93% 8.32% 8.55% 61 bp 38 bp
Return on average tangible common equity (non-GAAP) (2) 11.44% 10.68% 11.33% 76 bp 11 bp
At end of period
Total assets $25,778,893 $25,668,553 $23,488,168 2 % 10 %
Total loans, excluding loans held-for-sale, excluding covered loans 19,931,058 19,703,172 17,446,413 5 % 14 %
Total loans, including loans held-for-sale, excluding covered loans 20,220,022 20,121,546 17,760,967 2 % 14 %
Total deposits 21,730,441 21,658,632 19,217,071 1 % 13 %
Total shareholders’ equity 2,764,983 2,695,617 2,418,442 10 % 14 %

(1) Net revenue is net interest income plus non-interest income.

(2) See "Supplemental Financial Measures/Ratios" for additional information on this performance measure/ratio.

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

(4) Period-end balance sheet percentage changes are annualized.

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

WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights

Three Months Ended
(Dollars in thousands, except per share data) March 31,
2017
December 31,
2016
March 31,
2016
Selected Financial Condition Data (at end of period):
Total assets $25,778,893 $25,668,553 $23,488,168
Total loans, excluding loans held-for-sale and covered loans 19,931,058 19,703,172 17,446,413
Total deposits 21,730,441 21,658,632 19,217,071
Junior subordinated debentures 253,566 253,566 253,566
Total shareholders’ equity 2,764,983 2,695,617 2,418,442
Selected Statements of Income Data:
Net interest income $192,580 $190,778 $171,509
Net revenue (1) 261,345 276,053 240,261
Net income 58,378 54,608 49,111
Net income per common share – Basic $1.05 $0.98 $0.94
Net income per common share – Diluted $1.00 $0.94 $0.90
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin 3.36% 3.21% 3.29%
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.39% 3.23% 3.32%
Non-interest income to average assets 1.11% 1.32% 1.21%
Non-interest expense to average assets 2.70% 2.80% 2.70%
Net overhead ratio (3) 1.60% 1.48% 1.49%
Return on average assets 0.94% 0.85% 0.86%
Return on average common equity 8.93% 8.32% 8.55%
Return on average tangible common equity (non-GAAP) (2) 11.44% 10.68% 11.33%
Average total assets $25,207,348 $25,611,060 $22,902,913
Average total shareholders’ equity 2,739,050 2,689,876 2,389,770
Average loans to average deposits ratio (excluding loans held-for-sale, excluding covered loans) 92.5% 89.6% 92.2%
Average loans to average deposits ratio (excluding loans held-for-sale, including covered loans) 92.7% 89.9% 93.0%
Common Share Data at end of period:
Market price per common share $69.12 $72.57 $44.34
Book value per common share (2) $47.88 $47.12 $44.67
Tangible common book value per share (2) $37.97 $37.08 $34.20
Common shares outstanding 52,503,663 51,880,540 48,518,998
Other Data at end of period:(6)
Leverage Ratio (4) 9.3% 8.9% 8.7%
Tier 1 capital to risk-weighted assets (4) 9.9% 9.7% 9.6%
Common equity Tier 1 capital to risk-weighted assets (4) 8.9% 8.6% 8.4%
Total capital to risk-weighted assets (4) 12.1% 11.9% 12.1%
Allowance for credit losses (5) $127,630 $123,964 $111,201
Non-performing loans 78,979 87,454 89,499
Allowance for credit losses to total loans (5) 0.64% 0.63% 0.64%
Non-performing loans to total loans 0.40% 0.44% 0.51%
Number of:
Bank subsidiaries 15 15 15
Banking offices 155 155 153

(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) March 31,
2017
December 31,
2016
March 31,
2016
Assets
Cash and due from banks $214,102 $267,194 $208,480
Federal funds sold and securities purchased under resale agreements 3,046 2,851 3,820
Interest bearing deposits with banks 1,007,468 980,457 817,013
Available-for-sale securities, at fair value 1,803,733 1,724,667 770,983
Held-to-maturity securities, at amortized cost 667,764 635,705 911,715
Trading account securities 714 1,989 2,116
Federal Home Loan Bank and Federal Reserve Bank stock 78,904 133,494 113,222
Brokerage customer receivables 23,171 25,181 28,266
Mortgage loans held-for-sale 288,964 418,374 314,554
Loans, net of unearned income, excluding covered loans 19,931,058 19,703,172 17,446,413
Covered loans 52,359 58,145 138,848
Total loans 19,983,417 19,761,317 17,585,261
Allowance for loan losses (125,819) (122,291) (110,171)
Allowance for covered loan losses (1,319) (1,322) (2,507)
Net loans 19,856,279 19,637,704 17,472,583
Premises and equipment, net 598,746 597,301 591,608
Lease investments, net 155,233 129,402 89,337
Accrued interest receivable and other assets 560,741 593,796 647,853
Trade date securities receivable 1,008,613
Goodwill 499,341 498,587 484,280
Other intangible assets 20,687 21,851 23,725
Total assets $25,778,893 $25,668,553 $23,488,168
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing $5,790,579 $5,927,377 $5,205,410
Interest bearing 15,939,862 15,731,255 14,011,661
Total deposits 21,730,441 21,658,632 19,217,071
Federal Home Loan Bank advances 227,585 153,831 799,482
Other borrowings 238,787 262,486 253,126
Subordinated notes 138,993 138,971 138,888
Junior subordinated debentures 253,566 253,566 253,566
Accrued interest payable and other liabilities 424,538 505,450 407,593
Total liabilities 23,013,910 22,972,936 21,069,726
Shareholders’ Equity:
Preferred stock 251,257 251,257 251,257
Common stock 52,605 51,978 48,608
Surplus 1,381,886 1,365,781 1,194,750
Treasury stock (4,884) (4,589) (4,145)
Retained earnings 1,143,943 1,096,518 967,882
Accumulated other comprehensive loss (59,824) (65,328) (39,910)
Total shareholders’ equity 2,764,983 2,695,617 2,418,442
Total liabilities and shareholders’ equity $25,778,893 $25,668,553 $23,488,168


WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended
(In thousands, except per share data)March 31,
2017
December 31,
2016
March 31,
2016
Interest income
Interest and fees on loans$199,314 $199,155 $173,127
Interest bearing deposits with banks1,623 1,541 746
Federal funds sold and securities purchased under resale agreements1 1 1
Investment securities13,573 12,954 17,190
Trading account securities11 32 11
Federal Home Loan Bank and Federal Reserve Bank stock1,070 1,144 937
Brokerage customer receivables167 186 219
Total interest income215,759 215,013 192,231
Interest expense
Interest on deposits16,270 16,413 12,781
Interest on Federal Home Loan Bank advances1,590 2,439 2,886
Interest on other borrowings1,139 1,074 1,058
Interest on subordinated notes1,772 1,779 1,777
Interest on junior subordinated debentures2,408 2,530 2,220
Total interest expense23,179 24,235 20,722
Net interest income192,580 190,778 171,509
Provision for credit losses5,209 7,350 8,034
Net interest income after provision for credit losses187,371 183,428 163,475
Non-interest income
Wealth management20,148 19,512 18,320
Mortgage banking21,938 35,489 21,735
Service charges on deposit accounts8,265 8,054 7,406
(Losses) gains on investment securities, net(55) 1,575 1,325
Fees from covered call options759 1,476 1,712
Trading (losses) gains, net(320) 1,007 (168)
Operating lease income, net5,782 5,171 2,806
Other12,248 12,991 15,616
Total non-interest income68,765 85,275 68,752
Non-interest expense
Salaries and employee benefits99,316 104,735 95,811
Equipment9,002 9,532 8,767
Operating lease equipment depreciation4,636 4,219 2,050
Occupancy, net13,101 14,254 11,948
Data processing7,925 7,687 6,519
Advertising and marketing5,150 6,691 3,779
Professional fees4,660 5,425 4,059
Amortization of other intangible assets1,164 1,158 1,298
FDIC insurance4,156 4,726 3,613
OREO expense, net1,665 1,843 560
Other17,343 20,101 15,326
Total non-interest expense168,118 180,371 153,730
Income before taxes88,018 88,332 78,497
Income tax expense29,640 33,724 29,386
Net income$58,378 $54,608 $49,111
Preferred stock dividends3,628 3,629 3,628
Net income applicable to common shares$54,750 $50,979 $45,483
Net income per common share - Basic$1.05 $0.98 $0.94
Net income per common share - Diluted$1.00 $0.94 $0.90
Cash dividends declared per common share$0.14 $0.12 $0.12
Weighted average common shares outstanding52,267 51,812 48,448
Dilutive potential common shares4,160 4,152 3,820
Average common shares and dilutive common shares56,427 55,964 52,268


EARNINGS PER SHARE

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

Three Months Ended
(In thousands, except per share data) March 31,
2017
December 31,
2016
March 31,
2016
Net income $58,378 $54,608 $49,111
Less: Preferred stock dividends 3,628 3,629 3,628
Net income applicable to common shares—Basic(A) 54,750 50,979 45,483
Add: Dividends on convertible preferred stock, if dilutive 1,578 1,578 1,578
Net income applicable to common shares—Diluted(B) 56,328 52,557 47,061
Weighted average common shares outstanding(C) 52,267 51,812 48,448
Effect of dilutive potential common shares:
Common stock equivalents 1,060 1,052 750
Convertible preferred stock, if dilutive 3,100 3,100 3,070
Weighted average common shares and effect of dilutive potential common shares(D) 56,427 55,964 52,268
Net income per common share:
Basic(A/C) $1.05 $0.98 $0.94
Diluted(B/D) $1.00 $0.94 $0.90

Potentially dilutive common shares can result from stock options, restricted stock unit awards, stock warrants, the Company’s convertible preferred stock and shares to be issued under the Employee Stock Purchase Plan and the Directors Deferred Fee and Stock Plan, being treated as if they had been either exercised or issued, computed by application of the treasury stock method. While potentially dilutive common shares are typically included in the computation of diluted earnings per share, potentially dilutive common shares are excluded from this computation in periods in which the effect would reduce the loss per share or increase the income per share. For diluted earnings per share, net income applicable to common shares can be affected by the conversion of the Company’s convertible preferred stock. Where the effect of this conversion would reduce the loss per share or increase the income per share for a period, net income applicable to common shares is not adjusted by the associated preferred dividends. On April 17, 2017, the Company delivered notice to the holders of the outstanding 5.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series C (“Series C Preferred Stock”) that the Series C Preferred Stock will mandatorily convert on April 27, 2017 (the “Mandatory Conversion Date”). On the Mandatory Conversion Date, 126,257 shares of Series C Preferred Stock will be converted to shares of the Company’s common stock, no par value (“Common Stock”). Holders of the Series C Preferred Stock will receive 24.72 shares of Common Stock for each share of Series C Preferred Stock converted. Cash (computed to the nearest cent) will be paid in lieu of fractional shares of Common Stock. The last dividend with respect to the Series C Preferred Stock was paid on April 17, 2017 to holders of record on April 1, 2017.

SUPPLEMENTAL FINANCIAL MEASURES/RATIOS

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

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. 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
March 31, December 31, September 30, June 30, March 31,
(Dollars and shares in thousands)2017 2016 2016 2016 2016
Calculation of Net Interest Margin and Efficiency Ratio
(A) Interest Income (GAAP)$215,759 $215,013 $208,149 $197,064 $192,231
Taxable-equivalent adjustment:
- Loans790 666 584 523 509
- Liquidity Management Assets907 815 963 932 920
- Other Earning Assets5 17 9 8 6
(B) Interest Income - FTE$217,461 $216,511 $209,705 $198,527 $193,666
(C) Interest Expense (GAAP)23,179 24,235 23,513 21,794 20,722
(D) Net Interest Income - FTE (B minus C)$194,282 $192,276 $186,192 $176,733 $172,944
(E) Net Interest Income (GAAP) (A minus C)$192,580 $190,778 $184,636 $175,270 $171,509
Net interest margin (GAAP-derived)3.36% 3.21% 3.21% 3.24% 3.29%
Net interest margin - FTE3.39% 3.23% 3.24% 3.27% 3.32%
(F) Non-interest income$68,765 $85,275 $86,604 $84,799 $68,752
(G) Gains (losses) on investment securities, net(55) 1,575 3,305 1,440 1,325
(H) Non-interest expense168,118 180,371 176,615 170,969 153,730
Efficiency ratio (H/(E+F-G))64.31% 65.71% 65.92% 66.11% 64.34%
Efficiency ratio - FTE (H/(D+F-G))63.90% 65.36% 65.54% 65.73% 63.96%
Calculation of Tangible Common Equity ratio (at period end)
Total shareholders’ equity$2,764,983 $2,695,617 $2,674,474 $2,623,595 $2,418,442
(I) Less: Convertible preferred stock(126,257) (126,257) (126,257) (126,257) (126,257)
Less: Non-convertible preferred stock(125,000) (125,000) (125,000) (125,000) (125,000)
Less: Intangible assets(520,028) (520,438) (506,674) (507,916) (508,005)
(J) Total tangible common shareholders’ equity$1,993,698 $1,923,922 $1,916,543 $1,864,422 $1,659,180
Total assets$25,778,893 $25,668,553 $25,321,759 $24,420,616 $23,488,168
Less: Intangible assets(520,028) (520,438) (506,674) (507,916) (508,005)
(K) Total tangible assets$25,258,865 $25,148,115 $24,815,085 $23,912,700 $22,980,163
Tangible common equity ratio (J/K)7.9% 7.7% 7.7% 7.8% 7.2%
Tangible common equity ratio, assuming full conversion of convertible preferred stock ((J-I)/K)8.4% 8.2% 8.2% 8.3% 7.8%
Calculation of book value per share
Total shareholders’ equity$2,764,983 $2,695,617 $2,674,474 $2,623,595 $2,418,442
Less: Preferred stock(251,257) (251,257) (251,257) (251,257) (251,257)
(L) Total common equity$2,513,726 $2,444,360 $2,423,217 $2,372,338 $2,167,185
(M) Actual common shares outstanding52,504 51,881 51,715 51,619 48,519
Book value per common share (L/M)$47.88 $47.12 $46.86 $45.96 $44.67
Tangible common book value per share (J/M)$37.97 $37.08 $37.06 $36.12 $34.20
Calculation of return on average common equity
(N) Net income applicable to common shares54,750 50,979 49,487 46,413 45,483
Add: After-tax intangible asset amortization771 716 677 781 812
(O) Tangible net income applicable to common shares55,521 51,695 50,164 47,194 46,295
Total average shareholders' equity2,739,050 2,689,876 2,651,684 2,465,732 2,389,770
Less: Average preferred stock(251,257) (251,257) (251,257) (251,257) (251,262)
(P) Total average common shareholders' equity2,487,793 2,438,619 2,400,427 2,214,475 2,138,508
Less: Average intangible assets(520,346) (513,017) (508,812) (507,439) (495,594)
(Q) Total average tangible common shareholders’ equity1,967,447 1,925,602 1,891,615 1,707,036 1,642,914
Return on average common equity, annualized (N/P)8.93% 8.32% 8.20% 8.43% 8.55%
Return on average tangible common equity, annualized (O/Q)11.44% 10.68% 10.55% 11.12% 11.33%

BUSINESS UNIT SUMMARY

Community Banking

Through its community banking franchise, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the first quarter of 2017, profitability within this franchise was primarily driven by increased net interest income due to a higher net interest margin, partially offset by lower revenue from the mortgage banking business. The net interest margin increased in the first quarter of 2017 compared to the fourth quarter of 2016 primarily as a result of higher yields on the commercial (excluding lease loans) and commercial real-estate loan portfolios as well as liquidity management assets, and an improved funding mix related to the Company's interest-bearing liabilities. The increased net interest margin was offset by a $13.6 million decrease in mortgage banking revenue in the first quarter of 2017 compared to the fourth quarter of 2016. The lower revenue was due to originations during the current period decreasing to $722.5 million from $1.2 billion in the fourth quarter of 2016 due to typical seasonality in the first quarter, as well as rising interest rates in the market. The Company's gross commercial and commercial real estate loan pipelines remain strong. Before the impact of scheduled payments and prepayments, at March 31, 2017, gross commercial and commercial real estate loan pipelines totaled $1.5 billion, or $934 million when adjusted for the probability of closing, compared to $1.4 billion, or $895 million when adjusted for the probability of closing, at December 31, 2016.

Specialty Finance

Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, accounts receivable financing, value-added, out-sourced administrative services, and other specialty finance businesses. In the first quarter of 2017, the specialty finance unit experienced higher revenue as a result of increased volumes and higher yields within its insurance premium financing receivables portfolio. Originations of $1.6 billion during the first quarter of 2017 resulted in a $214 million increase in average balance and $1.4 million increase in interest income attributed to this portfolio. The Company's leasing business continued to grow during the first quarter of 2017, increasing its portfolio of assets, including capital leases, loans and equipment on operating leases, by $64 million since the end of the fourth quarter of 2016. Revenues from the Company's out-sourced administrative services business remained steady, totaling $1.0 million and $1.1 million in the first quarter of 2017 and fourth quarter of 2016, respectively.

Wealth Management

Through its wealth management unit, the Company offers a full range of wealth management services through three separate subsidiaries: trust and investment services, asset management, securities brokerage services and 401(k) and retirement plan services. At March 31, 2017, the Company’s wealth management subsidiaries had approximately $22.9 billion of assets under administration, which includes $2.5 billion of assets owned by the Company and its subsidiary banks, representing a $978 million increase from the $21.9 billion of assets under administration at December 31, 2016.

LOANS

Loan Portfolio Mix and Growth Rates

% Growth
(Dollars in thousands) March 31,
2017
December 31,
2016
March 31,
2016
From (1)
December 31,
2016
From
March 31,
2016
Balance:
Commercial $6,081,489 $6,005,422 $4,890,246 5% 24%
Commercial real estate 6,261,682 6,196,087 5,737,959 4 9
Home equity 708,258 725,793 774,342 (10) (9)
Residential real estate 720,608 705,221 626,043 9 15
Premium finance receivables - commercial 2,446,946 2,478,581 2,320,987 (5) 5
Premium finance receivables - life insurance 3,593,563 3,470,027 2,976,934 14 21
Consumer and other 118,512 122,041 119,902 (12) (1)
Total loans, net of unearned income, excluding covered loans $19,931,058 $19,703,172 $17,446,413 5% 14%
Covered loans 52,359 58,145 138,848 (40) (62)
Total loans, net of unearned income $19,983,417 $19,761,317 $17,585,261 5% 14%
Mix:
Commercial 30% 30% 28%
Commercial real estate 31 31 32
Home equity 4 4 4
Residential real estate 4 4 4
Premium finance receivables - commercial 12 12 13
Premium finance receivables - life insurance 18 18 17
Consumer and other 1 1 1
Total loans, net of unearned income, excluding covered loans 100% 100% 99%
Covered loans 1
Total loans, net of unearned income 100% 100% 100%

(1) Annualized

Commercial and Commercial Real Estate Loan Portfolios

As of March 31, 2017
% 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 $3,891,075 31.5% $12,036 $100 $31,693
Franchise 823,734 6.7 323 4,675
Mortgage warehouse lines of credit 154,180 1.3 1,178
Asset-based lending 881,004 7.1 1,378 7,262
Leases 320,010 2.6 570 1,132
PCI - commercial loans (1) 11,486 0.1 1,368 642
Total commercial $6,081,489 49.3% $14,307 $1,468 $46,582
Commercial Real Estate:
Construction $655,333 5.3% $2,408 $ $7,908
Land 105,079 0.8 350 3,658
Office 870,666 7.1 3,513 5,822
Industrial 792,962 6.4 7,004 6,728
Retail 911,786 7.4 589 5,981
Multi-family 804,776 6.5 668 8,101
Mixed use and other 1,963,744 15.9 6,277 14,375
PCI - commercial real estate (1) 157,336 1.3 12,559 60
Total commercial real estate $6,261,682 50.7% $20,809 $12,559 $52,633
Total commercial and commercial real estate $12,343,171 100.0% $35,116 $14,027 $99,215
Commercial real estate - collateral location by state:
Illinois $4,943,266 79.0%
Wisconsin 670,936 10.7
Total primary markets $5,614,202 89.7%
Indiana 125,233 2.0
Florida 79,554 1.2
Arizona 55,069 0.9
California 41,989 0.7
Other (no individual state greater than 0.7%) 345,635 5.5
Total $6,261,682 100.0%

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

DEPOSITS

Deposit Portfolio Mix and Growth Rates

% Growth
(Dollars in thousands) March 31,
2017
December 31,
2016
March 31,
2016
From (1)
December 31,
2016
From
March 31,
2016
Balance:
Non-interest bearing $5,790,579 $5,927,377 $5,205,410 (9)% 11%
NOW and interest bearing demand deposits 2,484,676 2,624,442 2,369,474 (22) 5
Wealth management deposits (2) 2,390,464 2,209,617 1,761,710 33 36
Money market 4,555,752 4,441,811 4,157,083 10 10
Savings 2,287,958 2,180,482 1,766,552 20 30
Time certificates of deposit 4,221,012 4,274,903 3,956,842 (5) 7
Total deposits $21,730,441 $21,658,632 $19,217,071 1% 13%
Mix:
Non-interest bearing 27% 27% 27%
NOW and interest bearing demand deposits 11 12 12
Wealth management deposits (2) 11 10 9
Money market 21 21 22
Savings 11 10 9
Time certificates of deposit 19 20 21
Total deposits 100% 100% 100%

(1) Annualized

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

Time Certificates of Deposit
Maturity/Re-pricing Analysis
As of March 31, 2017

(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 $43,578 $47,371 $132,858 $673,994 $897,801 0.62%
4-6 months 535 30,294 597,665 628,494 0.76%
7-9 months 1,252 19,845 701,548 722,645 0.94%
10-12 months 1,494 19,652 709,879 731,025 0.97%
13-18 months 3,034 14,025 797,334 814,393 1.08%
19-24 months 8,905 126,543 135,448 0.99%
24+ months 1,249 20,362 269,595 291,206 1.36%
Total $51,142 $160,454 $132,858 $3,876,558 $4,221,012 0.91%

(1) This category of certificates of deposit is shown by contractual maturity date.

(2) This category includes variable rate certificates of deposit and savings certificates with the majority repricing on at least a monthly basis.

(3) Weighted-average rate excludes the impact of purchase accounting fair value adjustments.

NET INTEREST INCOME

The following table presents a summary of Wintrust’s average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the first quarter of 2017 compared to the fourth quarter of 2016 (sequential quarters) and first quarter of 2016 (linked quarters), respectively:

Average Balance
for three months ended,
Interest
for three months ended,
Yield/Rate
for three months ended,
(Dollars in thousands)March 31,
2017
December 31,
2016
March 31,
2016
March 31,
2017
December 31,
2016
March 31,
2016
March 31,
2017
December 31,
2016
March 31,
2016
Liquidity management assets(1)(2)(7)$3,270,467 $3,860,616 $3,300,138 $17,174 $16,455 $19,794 2.13% 1.70% 2.41%
Other earning assets(2)(3)(7)25,236 27,608 28,731 183 235 236 2.95 3.37 3.31
Loans, net of unearned income(2)(4)(7)19,923,606 19,711,504 17,508,593 199,186 198,861 171,625 4.05 4.01 3.94
Covered loans56,872 59,827 141,351 918 960 2,011 6.55 6.38 5.72
Total earning assets(7)$23,276,181 $23,659,555 $20,978,813 $217,461 $216,511 $193,666 3.79% 3.64% 3.71%
Allowance for loan and covered loan losses(127,425) (122,665) (112,028)
Cash and due from banks229,588 221,892 259,343
Other assets1,829,004 1,852,278 1,776,785
Total assets$25,207,348 $25,611,060 $22,902,913
Interest-bearing deposits$15,466,670 $15,567,263 $13,717,333 $16,270 $16,413 $12,781 0.43% 0.42% 0.37%
Federal Home Loan Bank advances181,338 388,780 825,104 1,590 2,439 2,886 3.55 2.50 1.41
Other borrowings255,012 240,174 257,384 1,139 1,074 1,058 1.81 1.78 1.65
Subordinated notes138,980 138,953 138,870 1,772 1,779 1,777 5.10 5.12 5.12
Junior subordinated debentures253,566 253,566 257,687 2,408 2,530 2,220 3.80 3.90 3.41
Total interest-bearing liabilities$16,295,566 $16,588,736 $15,196,378 $23,179 $24,235 $20,722 0.58% 0.58% 0.55%
Non-interest bearing deposits5,787,034 5,902,439 4,939,746
Other liabilities385,698 430,009 377,019
Equity2,739,050 2,689,876 2,389,770
Total liabilities and shareholders’ equity$25,207,348 $25,611,060 $22,902,913
Interest rate spread(5)(7) 3.21% 3.06% 3.16%
Less: Fully tax-equivalent adjustment (1,702) (1,498) (1,435) (0.03) (0.02) (0.03)
Net free funds/
contribution(6)
$6,980,615 $7,070,819 $5,782,435 0.18 0.17 0.16
Net interest income/ margin(7) (GAAP) $192,580 $190,778 $171,509 3.36% 3.21% 3.29%
Fully tax-equivalent adjustment 1,702 1,498 1,435 0.03 0.02 0.03
Net interest income/ margin - FTE (7) $194,282 $192,276 $172,944 3.39% 3.23% 3.32%

(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 investment securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the three months ended March 31, 2017, December 31, 2016 and March 31, 2016 were $1.7 million, $1.5 million and $1.4 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 quarter of 2017, net interest income totaled $192.6 million, an increase of $1.8 million as compared to the fourth quarter of 2016 and an increase of $21.1 million as compared to the first quarter of 2016. Net interest margin was 3.36% (3.39% on a fully tax-equivalent basis) during the first quarter of 2017 compared to 3.21% (3.23% on a fully tax-equivalent basis) during the fourth quarter of 2016 and 3.29% (3.32% on a fully tax-equivalent basis) during the first quarter of 2016.

Interest Rate Sensitivity

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

The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases of 100 and 200 basis points and a decrease of 100 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months. Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenario at March 31, 2017, December 31, 2016 and March 31, 2016 is as follows:

Static Shock Scenario +200
Basis
Points
+100
Basis
Points
-100
Basis
Points
March 31, 2017 17.7% 9.3% (13.2)%
December 31, 2016 18.5% 9.6% (13.2)%
March 31, 2016 16.4% 8.9% (8.7)%


Ramp Scenario+200
Basis
Points
+100
Basis
Points
-100
Basis
Points
March 31, 20177.3% 3.9% (4.8)%
December 31, 20167.6% 4.0% (5.0)%
March 31, 20167.5% 3.7% (3.7)%

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

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table classifies the loan portfolio, excluding covered loans, at March 31, 2017 by date at which the loans reprice or mature, and the type of rate exposure:

As of March 31, 2017One year or less From one to five years Over five years
(Dollars in thousands) Total
Commercial
Fixed rate$103,508 $700,701 $477,141 $1,281,350
Variable rate4,788,750 9,426 1,963 4,800,139
Total commercial$4,892,258 $710,127 $479,104 $6,081,489
Commercial real estate
Fixed rate386,082 1,706,877 272,040 2,364,999
Variable rate3,862,571 32,513 1,599 3,896,683
Total commercial real estate$4,248,653 $1,739,390 $273,639 $6,261,682
Home Equity
Fixed rate4,803 3,284 66,264 74,351
Variable rate633,439 75 393 633,907
Total home equity$638,242 $3,359 $66,657 $708,258
Residential real estate
Fixed rate47,885 41,106 140,076 229,067
Variable rate60,869 177,311 253,361 491,541
Total residential real estate$108,754 $218,417 $393,437 $720,608
Premium finance receivables - commercial
Fixed rate2,364,859 82,087 2,446,946
Variable rate
Total premium finance receivables - commercial$2,364,859 $82,087 $ $2,446,946
Premium finance receivables - life insurance
Fixed rate14,387 36,404 1,377 52,168
Variable rate3,541,395 3,541,395
Total premium finance receivables - life insurance$3,555,782 $36,404 $1,377 $3,593,563
Consumer and other
Fixed rate59,400 12,480 3,321 75,201
Variable rate43,311 43,311
Total consumer and other$102,711 $12,480 $3,321 $118,512
Total per category
Fixed rate2,980,924 2,582,939 960,219 6,524,082
Variable rate12,930,335 219,325 257,316 13,406,976
Total loans, net of unearned income, excluding covered loans$15,911,259 $2,802,264 $1,217,535 $19,931,058
Variable Rate Loan Pricing by Index:
Prime$2,999,998
One- month LIBOR6,104,386
Three- month LIBOR522,109
Twelve- month LIBOR3,341,513
Other438,970
Total variable rate$13,406,976

NON-INTEREST INCOME

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

Three Months Ended
March 31, December 31, March 31, Q1 2017 compared to
Q4 2016
Q1 2017 compared to
Q1 2016
(Dollars in thousands) 2017 2016 2016 $ Change % Change $ Change % Change
Brokerage $6,220 $6,408 $6,057 $(188) (3)% $163 3%
Trust and asset management 13,928 13,104 12,263 824 6 1,665 14
Total wealth management 20,148 19,512 18,320 636 3 1,828 10
Mortgage banking 21,938 35,489 21,735 (13,551) (38) 203 1
Service charges on deposit accounts 8,265 8,054 7,406 211 3 859 12
(Losses) gains on investment securities, net (55) 1,575 1,325 (1,630) NM (1,380) NM
Fees from covered call options 759 1,476 1,712 (717) (49) (953) (56)
Trading (losses) gains, net (320) 1,007 (168) (1,327) NM (152) 90
Operating lease income, net 5,782 5,171 2,806 611 12 2,976 NM
Other:
Interest rate swap fees 1,433 2,870 4,438 (1,437) (50) (3,005) (68)
BOLI 985 981 472 4 513 NM
Administrative services 1,024 1,115 1,069 (91) (8) (45) (4)
(Loss) gain on extinguishment of debt (717) 4,305 717 NM (4,305) NM
Early pay-offs of leases 1,211 728 483 66 1,211 NM
Miscellaneous 7,595 8,014 5,332 (419) (5) 2,263 42
Total Other 12,248 12,991 15,616 (743) (6) (3,368) (22)
Total Non-Interest Income $68,765 $85,275 $68,752 $(16,510) (19)% $13 %

NM - Not Meaningful

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

The increase in wealth management revenue during the current period as compared to the fourth quarter of 2016 and first quarter of 2016 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 lower origination volumes in the current quarter. The lower origination volume was a result of typical seasonality in the first quarter and a higher interest rate environment. Mortgage loans originated or purchased for sale decreased during the current quarter, totaling $722.5 million in the first quarter of 2017 as compared to $1.2 billion in the fourth quarter of 2016 and $736.6 million in the first quarter of 2016. 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
(Dollars in thousands) March 31,
2017
December 31,
2016
March 31,
2016
Retail originations $624,971 1,042,145 $704,990
Correspondent originations 97,496 135,726 31,658
(A) Total originations $722,467 1,177,871 $736,648
Purchases as a percentage of originations 66% 52% 56%
Refinances as a percentage of originations 34 48 44
Total 100% 100% 100%
(B) Production revenue (1) $17,677 $28,320 $19,930
Production margin (B / A) 2.45% 2.40% 2.71%
Loans serviced for others (C) $1,972,592 $1,784,760 $1,044,745
MSRs, at fair value (D) 21,596 19,103 10,128
Percentage of mortgage servicing rights to loans serviced for others (D/C) 1.09% 1.07% 0.97%

(1) Production revenue represents revenue earned from the origination and subsequent sale of mortgages, including gains on loans sold and fees from originations, processing and other related activities, and excludes servicing fees, changes in the fair value of servicing rights and changes to the mortgage recourse obligation.

The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has 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 fourth 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 March 31, 2017, December 31, 2016 and March 31, 2016.

The Company recognized $320,000 of trading losses in the first quarter of 2017 compared to trading gains of $1.0 million in the fourth quarter of 2016 and trading losses of $168,000 in the first quarter of 2016. Trading gains and losses recorded by the Company primarily result from fair value adjustments related to interest rate derivatives not designated as hedges.

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 during the first quarter of 2017.

The decrease in other non-interest income in the current quarter as compared to the fourth quarter of 2016 is primarily due to lower 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, partially offset by the loss on extinguishment of debt recognized in previous quarter.

NON-INTEREST EXPENSE

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

Three Months Ended
March 31, December 31, March 31, Q1 2017 compared to
Q4 2016
Q1 2017 compared to
Q1 2016
(Dollars in thousands) 2017 2016 2016 $ Change % Change $ Change % Change
Salaries and employee benefits:
Salaries $55,008 $53,108 $50,282 $1,900 4% $4,726 9%
Commissions and incentive compensation 26,643 35,744 26,375 (9,101) (25) 268 1
Benefits 17,665 15,883 19,154 1,782 11 (1,489) (8)
Total salaries and employee benefits 99,316 104,735 95,811 (5,419) (5) 3,505 4
Equipment 9,002 9,532 8,767 (530) (6) 235 3
Operating lease equipment depreciation 4,636 4,219 2,050 417 10 2,586 NM
Occupancy, net 13,101 14,254 11,948 (1,153) (8) 1,153 10
Data processing 7,925 7,687 6,519 238 3 1,406 22
Advertising and marketing 5,150 6,691 3,779 (1,541) (23) 1,371 36
Professional fees 4,660 5,425 4,059 (765) (14) 601 15
Amortization of other intangible assets 1,164 1,158 1,298 6 1 (134) (10)
FDIC insurance 4,156 4,726 3,613 (570) (12) 543 15
OREO expense, net 1,665 1,843 560 (178) (10) 1,105 NM
Other:
Commissions - 3rd party brokers 1,098 1,165 1,310 (67) (6) (212) (16)
Postage 1,442 1,955 1,302 (513) (26) 140 11
Miscellaneous 14,803 16,981 12,714 (2,178) (13) 2,089 16
Total other 17,343 20,101 15,326 (2,758) (14) 2,017 13
Total Non-Interest Expense $168,118 $180,371 $153,730 $(12,253) (7)% $14,388 9%

NM - Not Meaningful

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

Salaries and employee benefits expense decreased in the current quarter compared to the fourth quarter of 2016 primarily as a result of lower incentive compensation on variable pay based arrangements (including mortgage banking commissions), partially offset by higher salaries and benefits.

Occupancy expense decreased in the current quarter compared to the fourth quarter of 2016 due to lower net rent expense on leased properties as well as lower maintenance and repair costs. Occupancy expense includes depreciation on premises, real estate taxes, utilities and maintenance of premises, as well as net rent expense for lease premises.

The decrease in advertising and marketing expenses during the current quarter compared to the fourth quarter of 2016 is primarily related to the lower expenses for mass market media promotions and printing costs. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities, the Company's various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the company's non-bank businesses. The level of marketing expenditures depends on the type of marketing programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

The decrease in miscellaneous expenses during the current quarter compared to the fourth quarter of 2016 is primarily a result of lower travel and entertainment expenses. Miscellaneous expense includes 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.

INCOME TAXES

The Company recorded income tax expense of $29.6 million in the first quarter of 2017 compared to $33.7 million in the fourth quarter of 2016. The effective tax rates were 33.67% in first quarter of 2017 and 38.18% in the fourth quarter of 2016. The lower effective tax rate in the first quarter of 2017 was primarily a result of recording $3.4 million of excess tax benefits related to the adoption of new accounting rules over income taxes attributed to share-based compensation that became effective on January 1, 2017. These excess tax benefits are expected to be higher in the first quarter when the majority of the Company's share-based awards vest, and will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards.

ASSET QUALITY

Allowance for Credit Losses, excluding covered loans

Three Months Ended
March 31, December 31, March 31,
(Dollars in thousands) 2017 2016 2016
Allowance for loan losses at beginning of period $122,291 $117,693 $105,400
Provision for credit losses 5,316 7,357 8,423
Other adjustments (56) 33 (78)
Reclassification (to) from allowance for unfunded lending-related commitments (138) (25) (81)
Charge-offs:
Commercial 641 3,054 671
Commercial real estate 261 375 671
Home equity 625 326 1,052
Residential real estate 329 410 493
Premium finance receivables - commercial 1,427 1,843 2,480
Premium finance receivables - life insurance
Consumer and other 134 205 107
Total charge-offs 3,417 6,213 5,474
Recoveries:
Commercial 273 668 629
Commercial real estate 554 1,916 369
Home equity 65 300 48
Residential real estate 178 21 112
Premium finance receivables - commercial 612 498 787
Premium finance receivables - life insurance
Consumer and other 141 43 36
Total recoveries 1,823 3,446 1,981
Net charge-offs (1,594) (2,767) (3,493)
Allowance for loan losses at period end $125,819 $122,291 $110,171
Allowance for unfunded lending-related commitments at period end 1,811 1,673 1,030
Allowance for credit losses at period end $127,630 $123,964 $111,201
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average:
Commercial 0.03% 0.16% 0.00%
Commercial real estate (0.02) (0.10) 0.02
Home equity 0.32 0.01 0.52
Residential real estate 0.06 0.13 0.17
Premium finance receivables - commercial 0.13 0.22 0.29
Premium finance receivables - life insurance 0.00 0.00 0.00
Consumer and other (0.02) 0.47 0.20
Total loans, net of unearned income, excluding covered loans 0.03% 0.06% 0.08%
Net charge-offs as a percentage of the provision for credit losses 29.98% 37.61% 41.47%
Loans at period-end, excluding covered loans $19,931,058 $19,703,172 $17,446,413
Allowance for loan losses as a percentage of loans at period end 0.63% 0.62% 0.63%
Allowance for credit losses as a percentage of loans at period end 0.64% 0.63% 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 first quarter of 2017 totaled three basis points on an annualized basis compared to six basis points on an annualized basis in the fourth quarter of 2016 and eight basis points on an annualized basis in the first quarter of 2016. Net charge-offs totaled $1.6 million in the first quarter of 2017, a $1.2 million decrease from $2.8 million in the fourth quarter of 2016 and a $1.9 million decrease from $3.5 million in the first quarter of 2016. The provision for credit losses, excluding the provision for covered loan losses, totaled $5.3 million for the first quarter of 2017 compared to $7.4 million for the fourth quarter of 2016 and $8.4 million for the first 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
March 31, December 31, March 31,
(Dollars in thousands) 2017 2016 2016
Provision for loan losses $5,178 $7,332 $8,342
Provision for unfunded lending-related commitments 138 25 81
Provision for covered loan losses (107) (7) (389)
Provision for credit losses $5,209 $7,350 $8,034
Period End
March 31, December 31, March 31,
2017 2016 2016
Allowance for loan losses $125,819 $122,291 $110,171
Allowance for unfunded lending-related commitments 1,811 1,673 1,030
Allowance for covered loan losses 1,319 1,322 2,507
Allowance for credit losses $128,949 $125,286 $113,708

The tables below summarize the calculation of allowance for loan losses for the Company’s core loan portfolio and consumer, niche and purchased loan portfolio, excluding covered loans, as of March 31, 2017 and December 31, 2016.

As of March 31, 2017
Recorded Calculated As a percentage
of its own respective
(Dollars in thousands) Investment Allowance category’s balance
Commercial:(1)
Commercial and industrial $3,396,191 $29,088 0.86%
Asset-based lending 875,403 7,262 0.83
Tax exempt 315,487 2,206 0.70
Leases 318,943 1,132 0.35
Commercial real estate:(1)
Residential construction 46,956 1,091 2.32
Commercial construction 607,507 6,817 1.12
Land 100,056 3,655 3.65
Office 817,239 5,810 0.71
Industrial 742,844 6,711 0.90
Retail 863,804 5,963 0.69
Multi-family 765,933 8,082 1.06
Mixed use and other 1,835,745 14,302 0.78
Home equity(1) 639,399 12,194 1.91
Residential real estate(1) 678,978 5,461 0.80
Total core loan portfolio $12,004,485 $109,774 0.91%
Commercial:
Franchise $560,532 $4,595 0.82%
Mortgage warehouse lines of credit 154,180 1,178 0.76
Community Advantage - homeowner associations 145,233 363 0.25
Aircraft 3,250 17 0.52
Purchased non-covered commercial loans (2) 312,270 741 0.24
Commercial real estate:
Purchased non-covered commercial real estate (2) 481,598 202 0.04
Purchased non-covered home equity (2) 68,859 9 0.01
Purchased non-covered residential real estate (2) 41,630 69 0.17
Premium finance receivables
U.S. commercial insurance loans 2,167,524 5,389 0.25
Canada commercial insurance loans (2) 279,422 572 0.20
Life insurance loans (1) 3,352,857 1,598 0.05
Purchased life insurance loans (2) 240,706
Consumer and other (1) 115,710 1,310 1.13
Purchased non-covered consumer and other (2) 2,802 2 0.07
Total consumer, niche and purchased loan portfolio $7,926,573 $16,045 0.20%
Total loans, net of unearned income, excluding covered loans $19,931,058 $125,819 0.63%
Non-accretable credit discounts on purchased loans reported in accordance with ASC 310-30, excluding covered loans $8,315
Total allowance for loan losses and non-accretable credit discounts on purchased loans, excluding covered loans $134,134 0.67%

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

As of December 31, 2016
Recorded Calculated As a percentage
of its own respective
(Dollars in thousands) Investment Allowance category’s balance
Commercial:(1)
Commercial and industrial $3,234,629 $27,112 0.84%
Asset-based lending 867,697 6,859 0.79
Tax exempt 327,694 2,299 0.70
Leases 294,124 858 0.29
Commercial real estate:(1)
Residential construction 46,235 1,045 2.26
Commercial construction 563,001 6,259 1.11
Land 99,194 3,677 3.71
Office 808,322 5,757 0.71
Industrial 716,480 6,643 0.93
Retail 855,787 5,928 0.69
Multi-family 766,146 8,052 1.05
Mixed use and other 1,815,573 13,867 0.76
Home equity(1) 649,129 11,767 1.81
Residential real estate(1) 658,487 5,634 0.86
Total core loan portfolio $11,702,498 $105,757 0.90%
Commercial:
Franchise $565,588 $4,744 0.84%
Mortgage warehouse lines of credit 204,225 1,548 0.76
Community Advantage - homeowner associations 145,717 365 0.25
Aircraft 3,356 42 1.25
Purchased non-covered commercial loans (2) 362,392 666 0.18
Commercial real estate:
Purchased non-covered commercial real estate (2) 525,349 194 0.04
Purchased non-covered home equity (2) 76,664 7 0.01
Purchased non-covered residential real estate (2) 46,734 80 0.17
Premium finance receivables
U.S. commercial insurance loans 2,170,844 5,521 0.25
Canada commercial insurance loans (2) 307,737 604 0.20
Life insurance loans (1) 3,220,370 1,500 0.05
Purchased life insurance loans (2) 249,657
Consumer and other (1) 119,073 1,261 1.06
Purchased non-covered consumer and other (2) 2,968 2 0.07
Total consumer, niche and purchased loan portfolio $8,000,674 $16,534 0.21%
Total loans, net of unearned income, excluding covered loans $19,703,172 $122,291 0.62%
Non-accretable credit discounts on purchased loans reported in accordance with ASC 310-30, excluding covered loans $12,324
Total allowance for loan losses and non-accretable credit discounts on purchased loans, excluding covered loans $134,615 0.68%

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

As part of the regular quarterly review performed by management to determine if the Company’s allowance for loan losses is appropriate, an analysis is prepared on the loan portfolio based upon a breakout of core loans and consumer, niche and purchased loans. A summary of the allowance for loan losses calculated for the loan components in both the core loan portfolio and the consumer, niche and purchased loan portfolio was shown on the preceding tables as of March 31, 2017 and December 31, 2016.

The increase in the allowance for loan losses to core loans in the first quarter of 2017 compared to the fourth quarter of 2016 was primarily attributable to higher ASC 310 reserves (specific reserves) on the core portfolio as of March 31, 2017.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. In accordance with accounting guidance, credit deterioration on purchased loans is recorded as a credit discount at the time of purchase instead of as an increase to the allowance for loan losses. 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 0.67% of the total loan portfolio as of March 31, 2017 and 0.68% of the total loan portfolio as of December 31, 2016.

The tables below show the aging of the Company’s loan portfolio at March 31, 2017 and December 31, 2016:

90+ days 60-89 30-59
As of March 31, 2017 and still days past days past
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:
Commercial (1) $14,307 $1,468 $19 $39,440 $6,026,255 $6,081,489
Commercial real estate (1) 20,809 12,559 5,426 56,712 6,166,176 6,261,682
Home equity 11,722 430 4,884 691,222 708,258
Residential real estate (1) 11,943 900 3,410 5,262 699,093 720,608
Premium finance receivables - commercial 12,629 4,991 6,383 23,775 2,399,168 2,446,946
Premium finance receivables - life insurance (1) 2,024 2,535 32,208 3,556,796 3,593,563
Consumer and other (1) 350 167 323 543 117,129 118,512
Total loans, net of unearned income, excluding covered loans $71,760 $22,109 $18,526 $162,824 $19,655,839 $19,931,058
Covered loans 1,592 2,808 268 1,570 46,121 52,359
Total loans, net of unearned income $73,352 $24,917 $18,794 $164,394 $19,701,960 $19,983,417


As of March 31, 2017
Nonaccrual 90+ days
and still
accruing
60-89
days past
due
30-59
days past
due
Current Total Loans
Aging as a % of Loan Balance
Commercial (1) 0.2% % % 0.6% 99.2% 100.0%
Commercial real estate (1) 0.3 0.2 0.1 0.9 98.5 100.0
Home equity 1.7 0.1 0.7 97.5 100.0
Residential real estate (1) 1.7 0.1 0.5 0.7 97.0 100.0
Premium finance receivables - commercial 0.5 0.2 0.3 1.0 98.0 100.0
Premium finance receivables - life insurance (1) 0.1 0.1 0.9 98.9 100.0
Consumer and other (1) 0.3 0.1 0.3 0.5 98.8 100.0
Total loans, net of unearned income, excluding covered loans 0.4% 0.1% 0.1% 0.8% 98.6% 100.0%
Covered loans 3.0 5.4 0.5 3.0 88.1 100.0
Total loans, net of unearned income 0.4% 0.1% 0.1% 0.8% 98.6% 100.0%

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

90+ days 60-89 30-59
As of December 31, 2016 and still days past days past
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:
Commercial (1) $15,875 $1,863 $2,576 $17,640 $5,967,468 $6,005,422
Commercial real estate (1) 21,924 16,188 15,253 31,723 6,110,999 6,196,087
Home equity 9,761 1,630 6,515 707,887 725,793
Residential real estate (1) 12,749 1,309 936 8,271 681,956 705,221
Premium finance receivables - commercial 14,709 7,962 5,646 14,580 2,435,684 2,478,581
Premium finance receivables - life insurance (1) 3,717 17,514 16,204 3,432,592 3,470,027
Consumer and other (1) 439 207 100 887 120,408 122,041
Total loans, net of unearned income, excluding covered loans $75,457 $31,246 $43,655 $95,820 $19,456,994 $19,703,172
Covered loans 2,121 2,492 225 1,553 51,754 58,145
Total loans, net of unearned income $77,578 $33,738 $43,880 $97,373 $19,508,748 $19,761,317


As of December 31, 2016
Nonaccrual 90+ days
and still
accruing
60-89
days past
due
30-59
days past
due
Current Total Loans
Aging as a % of Loan Balance:
Commercial (1) 0.3% % % 0.3% 99.4% 100.0%
Commercial real estate (1) 0.4 0.3 0.2 0.5 98.6 100.0
Home equity 1.3 0.2 0.9 97.6 100.0
Residential real estate (1) 1.8 0.2 0.1 1.2 96.7 100.0
Premium finance receivables - commercial 0.6 0.3 0.2 0.6 98.3 100.0
Premium finance receivables - life insurance (1) 0.1 0.5 0.5 98.9 100.0
Consumer and other (1) 0.4 0.2 0.1 0.7 98.6 100.0
Total loans, net of unearned income, excluding covered loans 0.4% 0.2% 0.2% 0.5% 98.7% 100.0%
Covered loans 3.6 4.3 0.4 2.7 89.0 100.0
Total loans, net of unearned income 0.4% 0.2% 0.2% 0.5% 98.7% 100.0%

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

As of March 31, 2017, $18.5 million of all loans, excluding covered loans, or 0.1%, were 60 to 89 days past due and $162.8 million, or 0.8%, were 30 to 59 days (or one payment) past due. As of December 31, 2016, $43.7 million of all loans, excluding covered loans, or 0.2%, were 60 to 89 days past due and $95.8 million, or 0.5%, were 30 to 59 days (or one payment) past due. The majority of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at March 31, 2017 that are current with regard to the contractual terms of the loan agreement represent 97.5% of the total home equity portfolio. Residential real estate loans at March 31, 2017 that are current with regards to the contractual terms of the loan agreements comprise 97.0% 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.

March 31, December 31, March 31,
(Dollars in thousands) 2017 2016 2016
Loans past due greater than 90 days and still accruing(1):
Commercial $100 $174 $338
Commercial real estate 1,260
Home equity
Residential real estate
Premium finance receivables - commercial 4,991 7,962 9,548
Premium finance receivables - life insurance 2,024 3,717 1,641
Consumer and other 104 144 180
Total loans past due greater than 90 days and still accruing 7,219 11,997 12,967
Non-accrual loans (2):
Commercial 14,307 15,875 12,373
Commercial real estate 20,809 21,924 26,996
Home equity 11,722 9,761 9,365
Residential real estate 11,943 12,749 11,964
Premium finance receivables - commercial 12,629 14,709 15,350
Premium finance receivables - life insurance
Consumer and other 350 439 484
Total non-accrual loans 71,760 75,457 76,532
Total non-performing loans:
Commercial 14,407 16,049 12,711
Commercial real estate 20,809 21,924 28,256
Home equity 11,722 9,761 9,365
Residential real estate 11,943 12,749 11,964
Premium finance receivables - commercial 17,620 22,671 24,898
Premium finance receivables - life insurance 2,024 3,717 1,641
Consumer and other 454 583 664
Total non-performing loans $78,979 $87,454 $89,499
Other real estate owned 17,090 17,699 24,022
Other real estate owned - from acquisitions 22,774 22,583 16,980
Other repossessed assets 544 581 171
Total non-performing assets $119,387 $128,317 $130,672
TDRs performing under the contractual terms of the loan agreement $28,392 $29,911 $34,949
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial 0.24% 0.27% 0.26%
Commercial real estate 0.33 0.35 0.49
Home equity 1.66 1.34 1.21
Residential real estate 1.66 1.81 1.91
Premium finance receivables - commercial 0.72 0.91 1.07
Premium finance receivables - life insurance 0.06 0.11 0.06
Consumer and other 0.38 0.48 0.55
Total loans, net of unearned income 0.40% 0.44% 0.51%
Total non-performing assets as a percentage of total assets 0.46% 0.50% 0.56%
Allowance for loan losses as a percentage of total non-performing loans 159.31% 139.83% 123.10%

(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 $11.3 million, $11.8 million and $17.6 million as of March 31, 2017, December 31, 2016 and March 31, 2016, respectively.

The ratio of non-performing assets to total assets was 0.46% as of March 31, 2017, compared to 0.50% at December 31, 2016, and 0.56% at March 31, 2016. Non-performing assets, excluding covered assets and non-covered PCI loans, totaled $119.4 million at March 31, 2017, compared to $128.3 million at December 31, 2016 and $130.7 million at March 31, 2016. Non-performing loans, excluding covered loans and non-covered PCI loans, totaled $79.0 million, or 0.40% of total loans, at March 31, 2017 compared to $87.5 million, or 0.44% of total loans, at December 31, 2016 and $89.5 million, or 0.51% of total loans, at March 31, 2016. The decrease in non-performing loans, excluding covered loans and non-covered PCI loans, compared to December 31, 2016 is primarily the result of a $5.1 million decrease in the commercial premium finance receivable portfolio, a $1.7 million decrease in the life premium finance receivable portfolio and a $1.6 million decrease in the commercial portfolio, partially offset by a $2.0 million increase in the home equity portfolio. OREO, excluding covered OREO, of $39.9 million at March 31, 2017 decreased $418,000 compared to $40.3 million at December 31, 2016 and decreased $1.1 million compared to $41.0 million at March 31, 2016.

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
March 31, December 31, March 31,
(Dollars in thousands) 2017 2016 2016
Balance at beginning of period $87,454 $83,128 $84,057
Additions, net 8,609 10,969 12,166
Return to performing status (1,592) (150) (2,006)
Payments received (5,614) (6,623) (3,308)
Transfer to OREO and other repossessed assets (1,661) (878) (2,080)
Charge-offs (1,280) (3,494) (533)
Net change for niche loans (1) (6,937) 4,502 1,203
Balance at end of period $78,979 $87,454 $89,499

(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:

March 31, December 31, March 31,
(Dollars in thousands) 2017 2016 2016
Accruing TDRs:
Commercial $4,607 $4,643 $5,143
Commercial real estate 18,923 19,993 25,548
Residential real estate and other 4,862 5,275 4,258
Total accrual $28,392 $29,911 $34,949
Non-accrual TDRs: (1)
Commercial $1,424 $1,487 $82
Commercial real estate 7,338 8,153 14,340
Residential real estate and other 2,515 2,157 3,184
Total non-accrual $11,277 $11,797 $17,606
Total TDRs:
Commercial $6,031 $6,130 $5,225
Commercial real estate 26,261 28,146 39,888
Residential real estate and other 7,377 7,432 7,442
Total TDRs $39,669 $41,708 $52,555
Weighted-average contractual interest rate of TDRs 4.37% 4.33% 4.35%

(1) Included in total non-performing loans.

Other Real Estate Owned

The table below presents a summary of other real estate owned, excluding covered other real estate owned, as of March 31, 2017, December 31, 2016 and March 31, 2016, and shows the activity for the respective period and the balance for each property type:

Three Months Ended
March 31, December 31, March 31,
(Dollars in thousands) 2017 2016 2016
Balance at beginning of period $40,282 $35,050 $43,945
Disposals/resolved (2,644) (5,850) (6,766)
Transfers in at fair value, less costs to sell 2,268 667 3,291
Transfers in from covered OREO subsequent to loss share expiration 760 4,213
Additions from acquisition 7,230 1,064
Fair value adjustments (802) (1,028) (532)
Balance at end of period $39,864 $40,282 $41,002
Period End
March 31, December 31, March 31,
Balance by Property Type 2017 2016 2016
Residential real estate $7,597 $8,063 $11,006
Residential real estate development 1,240 1,349 2,320
Commercial real estate 31,027 30,870 27,676
Total $39,864 $40,282 $41,002

Items Impacting Comparative Financial Results:

Acquisitions

On February 14, 2017, the Company acquired certain assets and assumed certain liabilities of the mortgage banking business of AHM. AHM is located in Montana's Flathead Valley and originated approximately $55 million of residential mortgage loans in 2016.

On November 18, 2016, the Company completed its acquisition of First Community Financial Corporation ("FCFC"). FCFC was the parent company of First Community Bank. Through this transaction, the Company acquired First Community Bank's two banking locations in Elgin, Illinois, approximately $187 million in assets and approximately $150 million in deposits.

On August 19, 2016, the Company, through its wholly-owned subsidiary Lake Forest Bank & Trust Company, completed its acquisition of approximately $561 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 $134 million in assets and approximately $100 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, 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 2016 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

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

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

CONFERENCE CALL, WEB CAST AND REPLAY

The Company will hold a conference call at 2:30 p.m. (CT) Wednesday, April 19, 2017 regarding first quarter 2017 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #99783626. A simultaneous audio-only web cast and replay of the conference call may be accessed via the Company’s website at (http://www.wintrust.com), Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the first quarter 2017 earnings press release will be available on the home page of the Company’s website at (http://www.wintrust.com) and at the Investor Relations, Investor News and Events, Press Releases link on its website.

WINTRUST FINANCIAL CORPORATION

Supplemental Financial Information

5 Quarter Trends


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

Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2017 2016 2016 2016 2016
Selected Financial Condition Data (at end of period):
Total assets $25,778,893 $25,668,553 $25,321,759 $24,420,616 $23,488,168
Total loans, excluding loans held-for-sale and covered loans 19,931,058 19,703,172 19,101,261 18,174,655 17,446,413
Total deposits 21,730,441 21,658,632 21,147,655 20,041,750 19,217,071
Junior subordinated debentures 253,566 253,566 253,566 253,566 253,566
Total shareholders’ equity 2,764,983 2,695,617 2,674,474 2,623,595 2,418,442
Selected Statements of Income Data:
Net interest income 192,580 190,778 184,636 175,270 171,509
Net revenue (1) 261,345 276,053 271,240 260,069 240,261
Net income 58,378 54,608 53,115 50,041 49,111
Net income per common share – Basic $1.05 $0.98 $0.96 $0.94 $0.94
Net income per common share – Diluted $1.00 $0.94 $0.92 $0.90 $0.90
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin 3.36% 3.21% 3.21% 3.24% 3.29%
Net interest margin - fully taxable equivalent (non-GAAP) (2) 3.39% 3.23% 3.24% 3.27% 3.32%
Non-interest income to average assets 1.11% 1.32% 1.38% 1.44% 1.21%
Non-interest expense to average assets 2.70% 2.80% 2.82% 2.89% 2.70%
Net overhead ratio (3) 1.60% 1.48% 1.44% 1.46% 1.49%
Return on average assets 0.94% 0.85% 0.85% 0.85% 0.86%
Return on average common equity 8.93% 8.32% 8.20% 8.43% 8.55%
Return on average tangible common equity (non-GAAP) (2) 11.44% 10.68% 10.55% 11.12% 11.33%
Average total assets $25,207,348 $25,611,060 $24,879,252 $23,754,755 $22,902,913
Average total shareholders’ equity 2,739,050 2,689,876 2,651,684 2,465,732 2,389,770
Average loans to average deposits ratio (excluding loans held-for-sale, excluding covered loans) 92.5% 89.6% 89.8% 92.4% 92.2%
Average loans to average deposits ratio (excluding loans held-for-sale, including covered loans) 92.7 89.9 90.3 92.9 93.0
Common Share Data at end of period:
Market price per common share $69.12 $72.57 $55.57 $51.00 $44.34
Book value per common share (2) $47.88 $47.12 $46.86 $45.96 $44.67
Tangible common book value per share (2) $37.97 $37.08 $37.06 $36.12 $34.20
Common shares outstanding 52,503,663 51,880,540 51,714,683 51,619,155 48,518,998
Other Data at end of period:(6)
Leverage Ratio(4) 9.3% 8.9% 9.0% 9.2% 8.7%
Tier 1 Capital to risk-weighted assets (4) 9.9% 9.7% 9.8% 10.1% 9.6%
Common equity Tier 1 capital to risk-weighted assets (4) 8.9% 8.6% 8.7% 8.9% 8.4%
Total capital to risk-weighted assets (4) 12.1% 11.9% 12.1% 12.4% 12.1%
Allowance for credit losses (5) $127,630 $123,964 $119,341 $115,426 $111,201
Non-performing loans 78,979 87,454 83,128 88,119 89,499
Allowance for credit losses to total loans (5) 0.64% 0.63% 0.62% 0.64% 0.64%
Non-performing loans to total loans 0.40% 0.44% 0.44% 0.48% 0.51%
Number of:
Bank subsidiaries 15 15 15 15 15
Banking offices 155 155 152 153 153

(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)
March 31, December 31, September 30, June 30, March 31,
(In thousands) 2017 2016 2016 2016 2016
Assets
Cash and due from banks $214,102 $267,194 $242,825 $267,551 $208,480
Federal funds sold and securities purchased under resale agreements 3,046 2,851 4,122 4,024 3,820
Interest bearing deposits with banks 1,007,468 980,457 816,104 693,269 817,013
Available-for-sale securities, at fair value 1,803,733 1,724,667 1,650,096 637,663 770,983
Held-to-maturity securities, at amortized cost 667,764 635,705 932,767 992,211 911,715
Trading account securities 714 1,989 1,092 3,613 2,116
Federal Home Loan Bank and Federal Reserve Bank stock 78,904 133,494 129,630 121,319 113,222
Brokerage customer receivables 23,171 25,181 25,511 26,866 28,266
Mortgage loans held-for-sale 288,964 418,374 559,634 554,256 314,554
Loans, net of unearned income, excluding covered loans 19,931,058 19,703,172 19,101,261 18,174,655 17,446,413
Covered loans 52,359 58,145 95,940 105,248 138,848
Total loans 19,983,417 19,761,317 19,197,201 18,279,903 17,585,261
Allowance for loan losses (125,819) (122,291) (117,693) (114,356) (110,171)
Allowance for covered loan losses (1,319) (1,322) (1,422) (2,412) (2,507)
Net loans 19,856,279 19,637,704 19,078,086 18,163,135 17,472,583
Premises and equipment, net 598,746 597,301 597,263 595,792 591,608
Lease investments, net 155,233 129,402 116,355 103,749 89,337
Accrued interest receivable and other assets 560,741 593,796 660,923 670,014 647,853
Trade date securities receivable 677 1,079,238 1,008,613
Goodwill 499,341 498,587 485,938 486,095 484,280
Other intangible assets 20,687 21,851 20,736 21,821 23,725
Total assets $25,778,893 $25,668,553 $25,321,759 $24,420,616 $23,488,168
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing $5,790,579 $5,927,377 $5,711,042 $5,367,672 $5,205,410
Interest bearing 15,939,862 15,731,255 15,436,613 14,674,078 14,011,661
Total deposits 21,730,441 21,658,632 21,147,655 20,041,750 19,217,071
Federal Home Loan Bank advances 227,585 153,831 419,632 588,055 799,482
Other borrowings 238,787 262,486 241,366 252,611 253,126
Subordinated notes 138,993 138,971 138,943 138,915 138,888
Junior subordinated debentures 253,566 253,566 253,566 253,566 253,566
Trade date securities payable 40,000
Accrued interest payable and other liabilities 424,538 505,450 446,123 482,124 407,593
Total liabilities 23,013,910 22,972,936 22,647,285 21,797,021 21,069,726
Shareholders’ Equity:
Preferred stock 251,257 251,257 251,257 251,257 251,257
Common stock 52,605 51,978 51,811 51,708 48,608
Surplus 1,381,886 1,365,781 1,356,759 1,350,751 1,194,750
Treasury stock (4,884) (4,589) (4,522) (4,145) (4,145)
Retained earnings 1,143,943 1,096,518 1,051,748 1,008,464 967,882
Accumulated other comprehensive loss (59,824) (65,328) (32,579) (34,440) (39,910)
Total shareholders’ equity 2,764,983 2,695,617 2,674,474 2,623,595 2,418,442
Total liabilities and shareholders’ equity $25,778,893 $25,668,553 $25,321,759 $24,420,616 $23,488,168


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

Three Months Ended
March 31, December 31, September 30, June 30, March 31,
(In thousands, except per share data) 2017 2016 2016 2016 2016
Interest income
Interest and fees on loans $199,314 $199,155 $190,189 $178,530 $173,127
Interest bearing deposits with banks 1,623 1,541 1,156 793 746
Federal funds sold and securities purchased under resale agreements 1 1 1 1 1
Investment securities 13,573 12,954 15,496 16,398 17,190
Trading account securities 11 32 18 14 11
Federal Home Loan Bank and Federal Reserve Bank stock 1,070 1,144 1,094 1,112 937
Brokerage customer receivables 167 186 195 216 219
Total interest income 215,759 215,013 208,149 197,064 192,231
Interest expense
Interest on deposits 16,270 16,413 15,621 13,594 12,781
Interest on Federal Home Loan Bank advances 1,590 2,439 2,577 2,984 2,886
Interest on other borrowings 1,139 1,074 1,137 1,086 1,058
Interest on subordinated notes 1,772 1,779 1,778 1,777 1,777
Interest on junior subordinated debentures 2,408 2,530 2,400 2,353 2,220
Total interest expense 23,179 24,235 23,513 21,794 20,722
Net interest income 192,580 190,778 184,636 175,270 171,509
Provision for credit losses 5,209 7,350 9,571 9,129 8,034
Net interest income after provision for credit losses 187,371 183,428 175,065 166,141 163,475
Non-interest income
Wealth management 20,148 19,512 19,334 18,852 18,320
Mortgage banking 21,938 35,489 34,712 36,807 21,735
Service charges on deposit accounts 8,265 8,054 8,024 7,726 7,406
(Losses) gains on investment securities, net (55) 1,575 3,305 1,440 1,325
Fees from covered call options 759 1,476 3,633 4,649 1,712
Trading (losses) gains, net (320) 1,007 (432) (316) (168)
Operating lease income, net 5,782 5,171 4,459 4,005 2,806
Other 12,248 12,991 13,569 11,636 15,616
Total non-interest income 68,765 85,275 86,604 84,799 68,752
Non-interest expense
Salaries and employee benefits 99,316 104,735 103,718 100,894 95,811
Equipment 9,002 9,532 9,449 9,307 8,767
Operating lease equipment depreciation 4,636 4,219 3,605 3,385 2,050
Occupancy, net 13,101 14,254 12,767 11,943 11,948
Data processing 7,925 7,687 7,432 7,138 6,519
Advertising and marketing 5,150 6,691 7,365 6,941 3,779
Professional fees 4,660 5,425 5,508 5,419 4,059
Amortization of other intangible assets 1,164 1,158 1,085 1,248 1,298
FDIC insurance 4,156 4,726 3,686 4,040 3,613
OREO expense, net 1,665 1,843 1,436 1,348 560
Other 17,343 20,101 20,564 19,306 15,326
Total non-interest expense 168,118 180,371 176,615 170,969 153,730
Income before taxes 88,018 88,332 85,054 79,971 78,497
Income tax expense 29,640 33,724 31,939 29,930 29,386
Net income $58,378 $54,608 $53,115 $50,041 $49,111
Preferred stock dividends 3,628 3,629 3,628 3,628 3,628
Net income applicable to common shares $54,750 $50,979 $49,487 $46,413 $45,483
Net income per common share - Basic $1.05 $0.98 $0.96 $0.94 $0.94
Net income per common share - Diluted $1.00 $0.94 $0.92 $0.90 $0.90
Cash dividends declared per common share $0.14 $0.12 $0.12 $0.12 $0.12
Weighted average common shares outstanding 52,267 51,812 51,679 49,140 48,448
Dilutive potential common shares 4,160 4,152 4,047 3,965 3,820
Average common shares and dilutive common shares 56,427 55,964 55,726 53,105 52,268


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

March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Balance:
Commercial $6,081,489 $6,005,422 $5,951,544 $5,144,533 $4,890,246
Commercial real estate 6,261,682 6,196,087 5,908,684 5,848,334 5,737,959
Home equity 708,258 725,793 742,868 760,904 774,342
Residential real estate 720,608 705,221 663,598 653,664 626,043
Premium finance receivables - commercial 2,446,946 2,478,581 2,430,233 2,478,280 2,320,987
Premium finance receivables - life insurance 3,593,563 3,470,027 3,283,359 3,161,562 2,976,934
Consumer and other 118,512 122,041 120,975 127,378 119,902
Total loans, net of unearned income, excluding covered loans $19,931,058 $19,703,172 $19,101,261 $18,174,655 $17,446,413
Covered loans 52,359 58,145 95,940 105,248 138,848
Total loans, net of unearned income $19,983,417 $19,761,317 $19,197,201 $18,279,903 $17,585,261
Mix:
Commercial 30% 30% 31% 28% 28%
Commercial real estate 31 31 31 31 32
Home equity 4 4 4 4 4
Residential real estate 4 4 3 4 4
Premium finance receivables - commercial 12 12 13 14 13
Premium finance receivables - life insurance 18 18 17 17 17
Consumer and other 1 1 1 1 1
Total loans, net of unearned income, excluding covered loans 100% 100% 100% 99% 99%
Covered loans 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

March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Balance:
Non-interest bearing $5,790,579 $5,927,377 $5,711,042 $5,367,672 $5,205,410
NOW and interest bearing demand deposits 2,484,676 2,624,442 2,552,611 2,450,710 2,369,474
Wealth management deposits (1) 2,390,464 2,209,617 2,283,233 1,904,121 1,761,710
Money market 4,555,752 4,441,811 4,421,631 4,384,134 4,157,083
Savings 2,287,958 2,180,482 1,977,661 1,851,863 1,766,552
Time certificates of deposit 4,221,012 4,274,903 4,201,477 4,083,250 3,956,842
Total deposits $21,730,441 $21,658,632 $21,147,655 $20,041,750 $19,217,071
Mix:
Non-interest bearing 27% 27% 27% 27% 27%
NOW and interest bearing demand deposits 11 12 12 12 12
Wealth management deposits (1) 11 10 11 10 9
Money market 21 21 21 22 22
Savings 11 10 9 9 9
Time certificates of deposit 19 20 20 20 21
Total deposits 100% 100% 100% 100% 100%

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


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

Three Months Ended
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Net interest income - FTE $194,282 $192,276 $186,192 $176,733 $172,944
Call option income 759 1,476 3,633 4,649 1,712
Net interest income including call option income $195,041 $193,752 $189,825 $181,382 $174,656
Yield on earning assets 3.79% 3.64% 3.65% 3.67% 3.71%
Rate on interest-bearing liabilities 0.58 0.58 0.58 0.56 0.55
Rate spread 3.21% 3.06% 3.07% 3.11% 3.16%
Less: Fully tax-equivalent adjustment (0.03) (0.02) (0.03) (0.03) (0.03)
Net free funds contribution 0.18 0.17 0.17 0.16 0.16
Net interest margin (GAAP-derived) 3.36% 3.21% 3.21% 3.24% 3.29%
Fully tax-equivalent adjustment 0.03 0.02 0.03 0.03 0.03
Net interest margin - FTE 3.39% 3.23% 3.24% 3.27% 3.32%
Call option income 0.01 0.02 0.06 0.09 0.03
Net interest margin - FTE, including call option income 3.40% 3.25% 3.30% 3.36% 3.35%


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

Three Months Ended March 31, Years Ended
December 31,
(Dollars in thousands) 2017 2016 2015 2014 2013
Net interest income - FTE $194,282 $728,145 $646,238 $601,744 $552,887
Call option income 759 11,470 15,364 7,859 4,773
Net interest income including call option income $195,041 $739,615 $661,602 $609,603 $557,660
Yield on earning assets 3.79% 3.67% 3.76% 3.96% 4.01%
Rate on interest-bearing liabilities 0.58 0.57 0.54 0.55 0.63
Rate spread 3.21% 3.10% 3.22% 3.41% 3.38%
Less: Fully tax-equivalent adjustment (0.03) (0.02) (0.02) (0.02) (0.01)
Net free funds contribution 0.18 0.16 0.14 0.12 0.12
Net interest margin (GAAP-derived) 3.36% 3.24% 3.34% 3.51% 3.49%
Fully tax-equivalent adjustment 0.03 0.02 0.02 0.02 0.01
Net interest margin - FTE 3.39% 3.26% 3.36% 3.53% 3.50%
Call option income 0.01 0.05 0.08 0.05 0.03
Net interest margin - FTE, including call option income 3.40% 3.31% 3.44% 3.58% 3.53%


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

Three Months Ended
March 31, December 31, September 30, June 30, March 31,
(In thousands) 2017 2016 2016 2016 2016
Liquidity management assets $3,270,467 $3,860,616 $3,671,577 $3,413,113 $3,300,138
Other earning assets 25,236 27,608 29,875 29,759 28,731
Loans, net of unearned income 19,923,606 19,711,504 19,071,621 18,204,552 17,508,593
Covered loans 56,872 59,827 101,570 109,533 141,351
Total earning assets $23,276,181 $23,659,555 $22,874,643 $21,756,957 $20,978,813
Allowance for loan and covered loan losses (127,425) (122,665) (121,156) (116,984) (112,028)
Cash and due from banks 229,588 221,892 240,239 272,935 259,343
Other assets 1,829,004 1,852,278 1,885,526 1,841,847 1,776,785
Total assets $25,207,348 $25,611,060 $24,879,252 $23,754,755 $22,902,913
Interest-bearing deposits $15,466,670 $15,567,263 $15,117,102 $14,065,995 $13,717,333
Federal Home Loan Bank advances 181,338 388,780 459,198 946,081 825,104
Other borrowings 255,012 240,174 249,307 248,233 257,384
Subordinated notes 138,980 138,953 138,925 138,898 138,870
Junior subordinated debentures 253,566 253,566 253,566 253,566 257,687
Total interest-bearing liabilities $16,295,566 $16,588,736 $16,218,098 $15,652,773 $15,196,378
Non-interest bearing deposits 5,787,034 5,902,439 5,566,983 5,223,384 4,939,746
Other liabilities 385,698 430,009 442,487 412,866 377,019
Equity 2,739,050 2,689,876 2,651,684 2,465,732 2,389,770
Total liabilities and shareholders’ equity $25,207,348 $25,611,060 $24,879,252 $23,754,755 $22,902,913


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

Three Months Ended
March 31,
2017
December 31,
2016
September 30,
2016
June 30,
2016
March 31,
2016
Yield earned on:
Liquidity management assets 2.13% 1.70% 2.03% 2.27% 2.41%
Other earning assets 2.95% 3.37% 2.96% 3.21% 3.31%
Loans, net of unearned income 4.05% 4.01% 3.96% 3.92% 3.94%
Covered loans 6.55% 6.38% 4.45% 5.44% 5.72%
Total earning assets 3.79% 3.64% 3.65% 3.67% 3.71%
Rate paid on:
Interest-bearing deposits 0.43% 0.42% 0.41% 0.39% 0.37%
Federal Home Loan Bank advances 3.55% 2.50% 2.23% 1.27% 1.41%
Other borrowings 1.81% 1.78% 1.81% 1.76% 1.65%
Subordinated notes 5.10% 5.12% 5.12% 5.12% 5.12%
Junior subordinated debentures 3.80% 3.90% 3.70% 3.67% 3.41%
Total interest-bearing liabilities 0.58% 0.58% 0.58% 0.56% 0.55%
Interest rate spread 3.21% 3.06% 3.07% 3.11% 3.16%
Less: Fully tax-equivalent adjustment (0.03) (0.02) (0.03) (0.03) (0.03)
Net free funds/contribution 0.18 0.17 0.17 0.16 0.16
Net interest margin (GAAP) 3.36% 3.21% 3.21% 3.24% 3.29%
Fully tax-equivalent adjustment 0.03 0.02 0.03 0.03 0.03
Net interest margin - FTE 3.39% 3.23% 3.24% 3.27% 3.32%


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

Three Months Ended
March 31, December 31, September 30, June 30, March 31,
(In thousands) 2017 2016 2016 2016 2016
Brokerage $6,220 $6,408 $6,752 $6,302 $6,057
Trust and asset management 13,928 13,104 12,582 12,550 12,263
Total wealth management 20,148 19,512 19,334 18,852 18,320
Mortgage banking 21,938 35,489 34,712 36,807 21,735
Service charges on deposit accounts 8,265 8,054 8,024 7,726 7,406
(Losses) gains on investment securities, net (55) 1,575 3,305 1,440 1,325
Fees from covered call options 759 1,476 3,633 4,649 1,712
Trading (losses) gains, net (320) 1,007 (432) (316) (168)
Operating lease income, net 5,782 5,171 4,459 4,005 2,806
Other:
Interest rate swap fees 1,433 2,870 2,881 1,835 4,438
BOLI 985 981 884 1,257 472
Administrative services 1,024 1,115 1,151 1,074 1,069
(Loss) gain on extinguishment of debt (717) 4,305
Early pay-offs of leases 1,211 728
Miscellaneous 7,595 8,014 8,653 7,470 5,332
Total other income 12,248 12,991 13,569 11,636 15,616
Total Non-Interest Income $68,765 $85,275 $86,604 $84,799 $68,752


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

Three Months Ended
March 31, December 31, September 30, June 30, March 31,
(In thousands) 2017 2016 2016 2016 2016
Salaries and employee benefits:
Salaries $55,008 $53,108 $54,309 $52,924 $50,282
Commissions and incentive compensation 26,643 35,744 33,740 32,531 26,375
Benefits 17,665 15,883 15,669 15,439 19,154
Total salaries and employee benefits 99,316 104,735 103,718 100,894 95,811
Equipment 9,002 9,532 9,449 9,307 8,767
Operating lease equipment depreciation 4,636 4,219 3,605 3,385 2,050
Occupancy, net 13,101 14,254 12,767 11,943 11,948
Data processing 7,925 7,687 7,432 7,138 6,519
Advertising and marketing 5,150 6,691 7,365 6,941 3,779
Professional fees 4,660 5,425 5,508 5,419 4,059
Amortization of other intangible assets 1,164 1,158 1,085 1,248 1,298
FDIC insurance 4,156 4,726 3,686 4,040 3,613
OREO expense, net 1,665 1,843 1,436 1,348 560
Other:
Commissions - 3rd party brokers 1,098 1,165 1,362 1,324 1,310
Postage 1,442 1,955 1,889 2,038 1,302
Miscellaneous 14,803 16,981 17,313 15,944 12,714
Total other expense 17,343 20,101 20,564 19,306 15,326
Total Non-Interest Expense $168,118 $180,371 $176,615 $170,969 $153,730


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

Three Months Ended
March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2016 2016 2016 2016
Allowance for loan losses at beginning of period $122,291 $117,693 $114,356 $110,171 $105,400
Provision for credit losses 5,316 7,357 9,741 9,269 8,423
Other adjustments (56) 33 (112) (134) (78)
Reclassification (to) from allowance for unfunded lending-related commitments (138) (25) (579) (40) (81)
Charge-offs:
Commercial 641 3,054 3,469 721 671
Commercial real estate 261 375 382 502 671
Home equity 625 326 574 2,046 1,052
Residential real estate 329 410 134 693 493
Premium finance receivables - commercial 1,427 1,843 1,959 1,911 2,480
Premium finance receivables - life insurance
Consumer and other 134 205 389 224 107
Total charge-offs 3,417 6,213 6,907 6,097 5,474
Recoveries:
Commercial 273 668 176 121 629
Commercial real estate 554 1,916 364 296 369
Home equity 65 300 65 71 48
Residential real estate 178 21 61 31 112
Premium finance receivables - commercial 612 498 456 633 787
Premium finance receivables - life insurance
Consumer and other 141 43 72 35 36
Total recoveries 1,823 3,446 1,194 1,187 1,981
Net charge-offs (1,594) (2,767) (5,713) (4,910) (3,493)
Allowance for loan losses at period end $125,819 $122,291 $117,693 $114,356 $110,171
Allowance for unfunded lending-related commitments at period end 1,811 1,673 1,648 1,070 1,030
Allowance for credit losses at period end $127,630 $123,964 $119,341 $115,426 $111,201
Annualized net charge-offs (recoveries) by category as a percentage of its own respective category’s average:
Commercial 0.03% 0.16% 0.24% 0.05% 0.00%
Commercial real estate (0.02) (0.10) 0.00 0.01 0.02
Home equity 0.32 0.01 0.27 1.03 0.52
Residential real estate 0.06 0.13 0.03 0.26 0.17
Premium finance receivables - commercial 0.13 0.22 0.24 0.21 0.29
Premium finance receivables - life insurance 0.00 0.00 0.00 0.00 0.00
Consumer and other (0.02) 0.47 0.92 0.57 0.20
Total loans, net of unearned income, excluding covered loans 0.03% 0.06% 0.12% 0.11% 0.08%
Net charge-offs as a percentage of the provision for credit losses 29.98% 37.61% 58.65% 52.97% 41.47%
Loans at period-end $19,931,058 $19,703,172 $19,101,261 $18,174,655 $17,446,413
Allowance for loan losses as a percentage of loans at period end 0.63% 0.62% 0.62% 0.63% 0.63%
Allowance for credit losses as a percentage of loans at period end 0.64% 0.63% 0.62% 0.64% 0.64%


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

March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands)2017 2016 2016 2016 2016
Loans past due greater than 90 days and still accruing(1):
Commercial$100 $174 $ $235 $338
Commercial real estate 1,260
Home equity
Residential real estate
Premium finance receivables - commercial4,991 7,962 7,754 10,558 9,548
Premium finance receivables - life insurance2,024 3,717 1,641
Consumer and other104 144 60 163 180
Total loans past due greater than 90 days and still accruing7,219 11,997 7,814 10,956 12,967
Non-accrual loans:
Commercial14,307 15,875 16,418 16,801 12,373
Commercial real estate20,809 21,924 22,625 24,415 26,996
Home equity11,722 9,761 9,309 8,562 9,365
Residential real estate11,943 12,749 12,205 12,413 11,964
Premium finance receivables - commercial12,629 14,709 14,214 14,497 15,350
Premium finance receivables - life insurance
Consumer and other350 439 543 475 484
Total non-accrual loans71,760 75,457 75,314 77,163 76,532
Total non-performing loans:
Commercial14,407 16,049 16,418 17,036 12,711
Commercial real estate20,809 21,924 22,625 24,415 28,256
Home equity11,722 9,761 9,309 8,562 9,365
Residential real estate11,943 12,749 12,205 12,413 11,964
Premium finance receivables - commercial17,620 22,671 21,968 25,055 24,898
Premium finance receivables - life insurance2,024 3,717 1,641
Consumer and other454 583 603 638 664
Total non-performing loans$78,979 $87,454 $83,128 $88,119 $89,499
Other real estate owned17,090 17,699 19,933 22,154 24,022
Other real estate owned - from acquisitions22,774 22,583 15,117 15,909 16,980
Other repossessed assets544 581 428 420 171
Total non-performing assets$119,387 $128,317 $118,606 $126,602 $130,672
TDRs performing under the contractual terms of the loan agreement$28,392 $29,911 $29,440 $33,310 $34,949
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial0.24% 0.27% 0.28% 0.33% 0.26%
Commercial real estate0.33 0.35 0.38 0.42 0.49
Home equity1.66 1.34 1.25 1.13 1.21
Residential real estate1.66 1.81 1.84 1.90 1.91
Premium finance receivables - commercial0.72 0.91 0.90 1.01 1.07
Premium finance receivables - life insurance0.06 0.11 0.06
Consumer and other0.38 0.48 0.50 0.50 0.55
Total loans, net of unearned income0.40% 0.44% 0.44% 0.48% 0.51%
Total non-performing assets as a percentage of total assets0.46% 0.50% 0.47% 0.52% 0.56%
Allowance for loan losses as a percentage of total non-performing loans159.31% 139.83% 141.58% 129.78% 123.10%

(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 $11.3 million, $11.8 million, $14.8 million, $16.3 million and $17.6 million as of March 31, 2017, December 31, 2016, September 30, 2016, June 30, 2016 and March 31, 2016, 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