Wintrust Financial Corporation Reports Fourth Quarter 2020 Net Income of $101.2 million and Full-Year 2020 Net Income of $293.0 million

ROSEMONT, Ill., Jan. 20, 2021 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust”, “the Company”, "we" or "our") (Nasdaq: WTFC) announced net income of $101.2 million or $1.63 per diluted common share for the fourth quarter of 2020, a decrease in diluted earnings per common share of 2% compared to the third quarter of 2020 and an increase of 13% compared to the fourth quarter of 2019. The Company recorded net income of $293.0 million or $4.68 per diluted common share for the year ended December 31, 2020 compared to net income of $355.7 million or $6.03 per diluted common share for the same period of 2019.

Highlights of the Fourth Quarter of 2020:
Comparative information to the third quarter of 2020

  • Total assets increased by $1.3 billion.
  • Total loans, excluding Paycheck Protection Program ("PPP") loans, increased by $607 million primarily due to growth in commercial loans and life insurance premium finance receivables. This growth also included a $71 million net increase in residential real estate loans for investment as the Company decided to allocate a portion of its current and future mortgage production for investment.
    • In addition, during the fourth quarter of 2020, the Company exercised its early buy-out option on $248 million of eligible loans previously sold to the Government National Mortgage Association ("GNMA") recorded in mortgage loans held-for-sale. See Table 1 for more information.
    • PPP loans originated in 2020 declined by $663 million in the fourth quarter of 2020 primarily as a result of processing forgiveness payments. As of January 15, 2021, approximately 23% of PPP loan balances originated in 2020 have been forgiven, approximately 45% of balances are in the forgiveness review or submission process, and approximately 32% of balances have yet to apply.
  • Total deposits increased by $1.2 billion, notwithstanding the return of approximately $666 million in wholesale deposits during the fourth quarter of 2020.
  • Net interest income increased by $3.5 million primarily due to a reduction in the rate on interest-bearing deposits and loan growth.
    • The rate on interest-bearing deposits declined by 10 basis points in the fourth quarter of 2020 as compared to the third quarter of 2020. This improvement more than offset a two basis point decline in the yield on total loans in the fourth quarter of 2020 as compared to the third quarter of 2020.
    • The Company recognized $16.8 million of PPP loan fee accretion in the fourth quarter of 2020 as compared to $17.4 million in the third quarter of 2020 on PPP loans originated in 2020. As of December 31, 2020, the Company had approximately $32.5 million of PPP loan fees that have yet to be recognized in income.
  • The loans to deposits ratio ended the fourth quarter of 2020 at 86.5% as compared to 89.7% as of September 30, 2020. Excluding PPP loans, the loans to deposits ratio ended the fourth quarter of 2020 at 79.2%.
  • Mortgage banking revenue decreased by $21.7 million to $86.8 million for the fourth quarter of 2020 as compared to $108.5 million in the prior quarter.
  • Outstanding COVID-19 related loan modifications for customers totaled approximately $345 million or 1.2% of total loans, excluding PPP loans, as of December 31, 2020 as compared to $413 million or 1.4% as of September 30, 2020.
  • Provision for credit losses totaled $1.2 million in the fourth quarter of 2020 as compared to $25.0 million in the third quarter of 2020.
  • Recorded net charge-offs of $10.3 million in the fourth quarter of 2020, of which $5.9 million were reserves on individually assessed loans as of the prior quarter end, as compared to net charge-offs of $9.3 million in the third quarter of 2020. Net charge-offs as a percentage of average total loans, totaled 13 basis points in the fourth quarter of 2020 on an annualized basis compared to 12 basis points on an annualized basis in the third quarter of 2020.
  • The allowance for credit losses on our core loan portfolio is approximately 1.82% of the outstanding balance as of December 31, 2020, down from 1.88% as of September 30, 2020. See Table 12 for more information.
  • Non-performing loans declined by $45.6 million, or 26%, and totaled $127.5 million, or 0.40% of total loans, as of December 31, 2020 as compared to $173.1 million, or 0.54% of total loans, as of September 30, 2020.

Other items of note from the fourth quarter of 2020

  • The following items had a $13.2 million unfavorable pre-tax income impact on the fourth quarter of 2020:
    • Recorded a decrease in the value of mortgage servicing rights related to changes in fair value model assumptions of $5.2 million in the fourth quarter of 2020 as compared to a decrease of $3.0 million in the third quarter of 2020.
    • Accrued $6.6 million of contingent consideration expense in the fourth quarter of 2020 related to the previous acquisition of mortgage operations as compared to $6.3 million in the third quarter of 2020, which was recorded in other non-interest expense.
    • Recorded an impairment charge of $1.4 million in occupancy expense related to the planned closure of 10 bank branches.
  • Repurchased 974,150 shares of our common stock at a cost of $54.9 million, or an average price of $56.40 per share.

Edward J. Wehmer, Founder and Chief Executive Officer, commented, "Wintrust reported net income of $101.2 million for the fourth quarter of 2020, down from $107.3 million in the third quarter of 2020. The fourth quarter of 2020 was characterized by significant loan growth, increased net interest income, strong mortgage banking revenue, a significant reduction in non-performing loans and a continued focus to increase franchise value in our market area."

Reflecting on the year, Mr. Wehmer stated, "I am very appreciative of our staff's tireless efforts to make the best of a difficult year. The year offered many challenges and I could not be more proud of our results. Pre-tax income, excluding provision for credit losses (non-GAAP), increased by 13% to $604 million in 2020 as compared to $534 million in 2019. We finished 2020 with a lot of momentum and look forward to serving our communities and being responsive to our customers in the new year."

Mr. Wehmer continued, "The Company experienced significant loan growth, excluding PPP loans, in the fourth quarter of 2020, including growth in its commercial, commercial real estate, residential real estate loans for investment and life insurance premium finance receivable portfolios. In addition, the Company supplemented loan growth by exercising its early buy-out option on eligible GNMA loans. The majority of the loan growth was in the latter part of the quarter as total period end loans, excluding PPP loans, were $678 million higher than average total loans, excluding PPP loans, in the fourth quarter of 2020. Our loan pipelines remain strong and we expect to continue to grow loans in 2021 without compromising our credit standards. Total deposits increased by $1.2 billion as compared to the third quarter of 2020 even with the return of approximately $666 million in wholesale deposits. Additionally, the mix of deposit growth during the quarter was favorable evidenced by $1.3 billion of growth in non-interest bearing deposits. We continue to emphasize growing our franchise, including gathering low cost deposits, which we believe will drive value in the long term. Our loans to deposits ratio ended the quarter at 86.5% and we believe that we have sufficient liquidity to meet customer loan demand."

Mr. Wehmer commented, "Net interest income increased in the fourth quarter of 2020 primarily due to lower interest expense on interest-bearing deposits and loan growth. The rate on interest-bearing deposits declined 10 basis points in the fourth quarter of 2020 as compared to the third quarter of 2020. This improvement more than offset a two basis point decline in the yield on total loans in the fourth quarter of 2020 as compared to the third quarter of 2020. PPP loan fee accretion was relatively flat as the Company recognized $16.8 million of PPP loan fee accretion in the fourth quarter of 2020 as compared to $17.4 million in the third quarter of 2020. The three basis point decline in the net interest margin in the fourth quarter of 2020 as compared to the third quarter of 2020 was primarily due to increased levels of liquidity as average interest-bearing cash increased by $1.0 billion. We have accumulated excess liquidity in recent quarters and believe that, if conditions allow for suitable deployment of such excess liquidity, we could potentially increase our net interest margin by 15 to 30 basis points, depending on the mix of earning assets of such reinvestment."

Mr. Wehmer noted, “Our mortgage banking business delivered another strong quarter of mortgage banking revenue in light of the demand associated with historically low long-term interest rates. Loan volumes originated for sale in the fourth quarter of 2020 were $2.4 billion, up from $2.2 billion in the third quarter of 2020. Production revenue decreased during the quarter as the origination pipeline declined as compared to the end of the third quarter of 2020. This decline was partially due to the Company increasing its allocation of pipeline to originations for investment in order to increase earning assets on the balance sheet. Additionally, the Company recorded a $5.2 million decline in the value of mortgage servicing rights related to changes in fair value model assumptions. We are leveraging efficiencies in our delivery channels and staffing strategies to keep pace with unprecedented demand. The strong quarter of mortgage performance contributed to reporting a 1.12% net overhead ratio for the fourth quarter of 2020. We believe the first quarter of 2021 will provide another strong quarter for mortgage banking production."

Commenting on credit quality, Mr. Wehmer stated, "The Company recorded provision for credit losses of $1.2 million reflecting improvement in credit quality in the fourth quarter of 2020. We expended significant effort in the quarter diligently reviewing and addressing our credit portfolio. The Company's population of loans with a rating below "pass" as of December 31, 2020 declined by $273 million, or 14%, as compared to the prior quarter end primarily due to a note sale, pay-offs and risk rating upgrades. The level of non-performing loans decreased by $45.6 million primarily due to non-performing loan pay-offs. Additionally, net charge-offs remained relatively low totaling $10.3 million in the fourth quarter of 2020 as compared to $9.3 million in the third quarter of 2020. The allowance for credit losses on our core loan portfolio as of December 31, 2020 is approximately 1.82% of the outstanding balance. We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit."

Mr. Wehmer added, "In addition to the previously announced sale of three branches in southwestern Wisconsin, we continue to review our branch footprint and have initiated plans to close an additional 10 branches. These are predominantly smaller locations in close proximity to other Wintrust locations. As such, we do not expect any material attrition or customer disruption. We expect the noted branches to close prior to the end of the second quarter and the branch sale in Wisconsin to close in the second quarter. In the fourth quarter of 2020, we recorded an impairment charge of $1.4 million associated with the closing of the 10 locations. Collectively, the reduction of 13 locations represents approximately 7% of the Wintrust retail banking locations and will result in a reduction in expenses of approximately $5 million annually on an ongoing basis. It is important to note that while we see increased use of electronic services and are investing heavily in digital capabilities to allow clients to choose how they want to be served, Wintrust will continue to selectively open branches in areas where we are not represented."

Mr. Wehmer concluded, "We remain committed to supporting our community, including the well-being and safety of our customers and employees. We are participating in the latest round of PPP having opened our application portal on January 11, 2021. As of January 19, 2021, we have received approximately 5,400 applications aggregating in excess of $1.1 billion of loans with associated fees of approximately $44 million. We are focused on taking advantage of market opportunities to prudently deploy excess liquidity into earning assets. In particular, we expect to grow PPP loans, organic loans, residential real estate loans for investment and investment securities while maintaining an interest rate sensitive asset portfolio. We continue to evaluate our operating expense base to enhance future profitability. We also continue to carefully monitor the COVID-19 pandemic and evaluate the impact that it could have on the economy, our customers and our business. We remain focused on navigating the current environment by actively monitoring and managing our credit portfolio."

Graphs available at the following link: http://ml.globenewswire.com/Resource/Download/0bdf7499-4e66-4b90-bd05-707da79ea7cd

SUMMARY OF RESULTS:

BALANCE SHEET

Total asset growth of $1.3 billion in the fourth quarter of 2020 was primarily comprised of a $977 million increase in interest-bearing deposits with banks, a $312 million increase in mortgage loans held-for-sale, and a $128 million increase in investment securities, partially offset by a $56 million decrease in loans. The Company believes that the $4.8 billion of interest-bearing deposits with banks held as of December 31, 2020 provides more than sufficient liquidity to operate its business plan.

The $56 million decrease in loans was primarily a result of processing forgiveness payments, as PPP loans declined by $663 million in the fourth quarter of 2020. Total loans, excluding PPP loans, increased by $607 million primarily due to growth in commercial loans and life insurance premium finance receivables. This growth also included a $71 million net increase in residential real estate loans for investment as the Company decided to allocate a portion of its current and future mortgage production for investment.

Total liabilities increased $1.3 billion in the fourth quarter of 2020 resulting primarily from a $1.2 billion increase in total deposits, which included the return of approximately $666 million in wholesale deposits. The increase in deposits was primarily due to a $1.3 billion increase in non-interest-bearing deposits. Our loans to deposits ratio ended the quarter at 86.5%. Management believes in substantially funding the Company's balance sheet with core deposits and utilizes brokered or wholesale funding sources as appropriate to manage its liquidity position as well as for interest rate risk management purposes.

For more information regarding changes in the Company’s balance sheet, see Consolidated Statements of Condition and Tables 1 through 3 in this report.

NET INTEREST INCOME

For the fourth quarter of 2020, net interest income totaled $259.4 million, an increase of $3.5 million as compared to the third quarter of 2020 and a decrease of $2.5 million as compared to the fourth quarter of 2019. The $3.5 million increase in net interest income in the fourth quarter of 2020 compared to the third quarter of 2020 was primarily due to a 10 basis point decline in the rate on interest-bearing deposits in the fourth quarter of 2020 and loan growth.

Net interest margin was 2.53% (2.54% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2020 compared to 2.56% (2.57% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2020 and 3.17% (3.19% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2019. The three basis point decrease in net interest margin in the fourth quarter of 2020 as compared to the third quarter of 2020 was attributable to a 10 basis point decline in the yield on earning assets and a two basis point decrease in the net free funds contribution partially offset by a nine basis point decrease in the rate paid on interest-bearing liabilities. The 10 basis point decline in the yield on earning assets in the fourth quarter of 2020 as compared to the third quarter of 2020 was primarily due to a $1.0 billion increase in average interest-bearing deposits with banks and cash equivalents. The decrease in the rate paid on interest-bearing liabilities in the fourth quarter of 2020 as compared to the prior quarter is primarily due to a 10 basis point decrease in the rate paid on interest-bearing deposits as management initiated various deposit rate reductions given the low interest rate environment.

For more information regarding net interest income, see Tables 4 through 8 in this report.

ASSET QUALITY

The allowance for credit losses totaled $380.0 million as of December 31, 2020, a decrease of $9.0 million as compared to $389.0 million as of September 30, 2020. The allowance for credit losses decreased primarily due to portfolio changes and was partially offset by changes in the macroeconomic forecasted conditions. The Commercial, Industrial and Other portfolio realized a decrease in the allowance for credit losses as compared to the prior quarter-end, which was primarily driven by improving portfolio credit characteristics.  There was an increase in the allowance for credit losses in the Commercial Real Estate portfolios driven by deterioration in the Commercial Real Estate Price Index forecast, partially offset by improvement in Baa Corporate Credit Spreads. Other key drivers of allowance for credit losses changes in these portfolios include, but are not limited to, decreases in COVID-19 related loan modifications and loan risk rating migration.

The provision for credit losses totaled $1.2 million for the fourth quarter of 2020 compared to $25.0 million for the third quarter of 2020 and $7.8 million for the fourth quarter of 2019. For more information regarding the provision for credit losses, see Table 11 in this report.

Management believes the allowance for credit losses is appropriate to account for expected credit losses. The Current Expected Credit Losses ("CECL") standard requires the Company to estimate expected credit losses over the life of the Company’s financial assets at a certain point in time. There can be no assurances, however, that future losses will not significantly exceed the amounts provided for, thereby affecting future results of operations. A summary of the allowance for credit losses calculated for the loan components in the core loan portfolio, the niche and consumer loan portfolio and the purchased loan portfolio as of December 31, 2020 and September 30, 2020 is shown on Table 12 of this report.

Net charge-offs totaled $10.3 million in the fourth quarter of 2020, a $1.0 million increase from $9.3 million in the third quarter of 2020 and a $2.4 million decrease from $12.7 million in the fourth quarter of 2019. Net charge-offs as a percentage of average total loans, totaled 13 basis points in the fourth quarter of 2020 on an annualized basis compared to 12 basis points on an annualized basis in the third quarter of 2020 and 19 basis points on an annualized basis in the fourth quarter of 2019. For more information regarding net charge-offs, see Table 10 in this report.

As of December 31, 2020, $41.6 million of all loans, or 0.1%, were 60 to 89 days past due and $139.1 million, or 0.4%, were 30 to 59 days (or one payment) past due. As of September 30, 2020, $49.9 million of all loans, or 0.2%, were 60 to 89 days past due and $186.5 million, or 0.6%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real-estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential real estate loan portfolios continue to exhibit low delinquency rates as of December 31, 2020. Home equity loans at December 31, 2020 that are current with regard to the contractual terms of the loan agreement represent 98.3% of the total home equity portfolio. Residential real estate loans at December 31, 2020 that are current with regards to the contractual terms of the loan agreements comprised 96.8% of total residential real estate loans outstanding. For more information regarding past due loans, see Table 13 in this report.

Outstanding COVID-19 related loan modifications for customers totaled approximately $345 million or 1.2% of total loans, excluding PPP loans as of December 31, 2020 as compared to $413 million or 1.4% as of September 30, 2020 and $1.7 billion or 6.2% as of June 30, 2020. The outstanding modifications primarily changed terms to interest-only payments.

The ratio of non-performing assets to total assets was 0.32% as of December 31, 2020, compared to 0.42% at September 30, 2020, and 0.36% at December 31, 2019. Non-performing assets totaled $144.1 million at December 31, 2020, compared to $182.3 million at September 30, 2020 and $132.8 million at December 31, 2019. Non-performing loans totaled $127.5 million, or 0.40% of total loans, at December 31, 2020 compared to $173.1 million, or 0.54% of total loans, at September 30, 2020 and $117.6 million, or 0.44% of total loans, at December 31, 2019. The decrease in non-performing loans as of December 31, 2020 as compared to September 30, 2020 is primarily due to $30.1 million in payments received throughout the quarter. The payment activity was primarily driven by sales of underlying real property collateral, sales of operating businesses, and refinance activity. Other real estate owned ("OREO") of $16.6 million at December 31, 2020 increased by $7.4 million compared to $9.2 million at September 30, 2020 and increased $1.4 million compared to $15.2 million at December 31, 2019. Management is pursuing the resolution of all non-performing assets. At this time, management believes OREO is appropriately valued at the lower of carrying value or fair value less estimated costs to sell. For more information regarding non-performing assets, see Table 14 in this report.

NON-INTEREST INCOME

Wealth management revenue increased by $1.8 million during the fourth quarter of 2020 as compared to the third quarter of 2020 primarily due to increased trust and asset management fees and brokerage commissions. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

Mortgage banking revenue decreased by $21.7 million in the fourth quarter of 2020 as compared to the third quarter of 2020, primarily due to a $23.3 million decrease in production revenue. Production revenue decreased as origination pipelines designated for sale declined as compared to the prior quarter, due in part to the Company's intention to retain more loans for investment. Loans originated for sale were $2.4 billion in the fourth quarter of 2020, an increase of $124.7 million as compared to the third quarter of 2020. The percentage of origination volume from refinancing activities was 65% in the fourth quarter of 2020 as compared to 59% in the third quarter of 2020. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market.

During the fourth quarter of 2020, the fair value of the mortgage servicing rights portfolio increased primarily due to the capitalization of $20.3 million of servicing rights during the fourth quarter of 2020. This increase was partially offset by a negative fair value adjustment of $5.2 million as well as a reduction in value of $9.0 million due to payoffs and paydowns of the existing portfolio. No economic hedges were outstanding relative to the mortgage servicing rights portfolio during the third or fourth quarter of 2020.

Other non-interest income increased by $6.4 million in the fourth quarter of 2020 as compared to the third quarter of 2020 primarily due to increased bank owned life insurance ("BOLI") revenue and income on partnership investments.

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

NON-INTEREST EXPENSE

Salaries and employee benefits expense increased by $7.1 million in the fourth quarter of 2020 as compared to the third quarter of 2020. The $7.1 million increase is comprised of an increase of $3.9 million in commissions and incentive compensation, an increase of $3.7 million in salaries expense, partially offset by a decrease of $520,000 in employee benefits expense.

The increase in commissions and incentive compensation is primarily due to increased commissions expense from higher levels of mortgage loan originations in the current quarter. The increase in salaries expense is primarily related to increased staffing costs to support mortgage origination and investment in technology related services to satisfy customer demands and create efficiencies in operations.

Occupancy expense totaled $19.7 million in the fourth quarter of 2020, an increase of $3.9 million as compared to the third quarter of 2020. This increase is primarily associated with an impairment charge of $1.4 million related to the planned closure of 10 bank branches, increased real estate tax assessment estimates and a higher level of utility charges.

Equipment expense totaled $20.6 million in the fourth quarter of 2020, an increase of $3.3 million as compared to the third quarter of 2020. This increase is primarily due to increased software licensing expenses.

Advertising and Marketing expense totaled $9.9 million in the fourth quarter of 2020, an increase of $2.0 million as compared to the third quarter of 2020. The increase in the fourth quarter relates primarily to increased digital advertising campaigns and corporate sponsorship costs. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities and various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the timing of sponsorship programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

Miscellaneous expense in the fourth quarter of 2020 increased by $302,000 as compared to the third quarter of 2020. The fourth quarter of 2020 included $6.6 million of contingent consideration expense related to the previous acquisition of mortgage operations as compared to $6.3 million in the prior quarter. The liability for contingent consideration expense related to the previous acquisition of mortgage operations is based upon forward looking mortgage origination volumes and the estimated profitability of that operation. Should those assumptions change going forward, the liability may need to be increased or decreased. The contractual period covering contingent consideration ends in January 2023 and the final two years of the contract contemplate a lower ratio of contingent consideration relative to financial performance. As a result, the Company does not expect to have material adjustments to the contingent consideration liability in future periods. Miscellaneous expense also includes ATM expenses, correspondent bank charges, directors fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses and lending origination costs that are not deferred.

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

INCOME TAXES

The Company recorded income tax expense of $33.5 million in the fourth quarter of 2020 compared to $30.0 million in the third quarter of 2020 and $30.7 million in the fourth quarter of 2019. The effective tax rates were 24.87% in the fourth quarter of 2020 compared to 21.83% in the third quarter of 2020 and 26.33% in the fourth quarter of 2019. The effective tax rate in the third quarter of 2020 reflects the impact of a $9.0 million state income tax benefit related to the settlement of an uncertain tax position.

BUSINESS UNIT SUMMARY

Community Banking

Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the fourth quarter of 2020, this unit expanded its loan portfolio, excluding PPP loans, and its deposit portfolio. However, the banking segment also experienced net interest margin compression primarily due to increased levels of liquidity as average interest bearing cash increased by $1.0 billion in the fourth quarter of 2020 as compared to the third quarter of 2020.

Mortgage banking revenue was $86.8 million for the fourth quarter of 2020, a decrease of $21.7 million as compared to the third quarter of 2020 primarily due to a $23.3 million decrease in production revenue as origination pipelines declined as compared to the prior quarter. Service charges on deposit accounts totaled $11.8 million in the fourth quarter of 2020, an increase of $344,000 as compared to the third quarter of 2020 primarily due to higher account analysis and overdraft fees. The Company's gross commercial and commercial real estate loan pipelines remained strong as of December 31, 2020. Before the impact of scheduled payments and prepayments, gross commercial and commercial real estate loan pipelines were estimated to be approximately $1.1 billion to $1.3 billion at December 31, 2020. When adjusted for the probability of closing, the pipelines were estimated to be approximately $650 million to $750 million at December 31, 2020.

Specialty Finance

Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries, accounts receivable financing and value-added, out-sourced administrative services and other services. Originations within the insurance premium financing receivables portfolio were $2.9 billion during the fourth quarter of 2020 and average balances increased by $49.9 million as compared to the third quarter of 2020. The increase in average balances was more than offset by margin compression in this portfolio resulting in a $3.6 million decrease in interest income attributed to the lower market rates of interest associated with the insurance premium finance receivables portfolio. The Company's leasing business grew during the fourth quarter of 2020, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing by $95.2 million to $2.1 billion at the end of the fourth quarter of 2020. Revenues from the Company's out-sourced administrative services business were $1.3 million in the fourth quarter of 2020, an increase of $186,000 from the third quarter of 2020.

Wealth Management

Through four separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, tax-deferred like-kind exchange services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue totaled $26.8 million in the fourth quarter of 2020, an increase of $1.8 million compared to the third quarter of 2020. Increases in asset management fees were primarily due to favorable equity market performance during the fourth quarter of 2020. At December 31, 2020, the Company’s wealth management subsidiaries had approximately $30.1 billion of assets under administration, which included $3.5 billion of assets owned by the Company and its subsidiary banks, representing a $1.9 billion increase from the $28.2 billion of assets under administration at September 30, 2020.

ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS

Paycheck Protection Program

On March 27, 2020, the President of the United States signed the CARES Act, which authorized the Small Business Administration ("SBA") to guarantee loans under the PPP for small businesses who met the necessary eligibility requirements in order to keep their workers on the payroll. The Company began accepting applications on April 3, 2020. From such date through the end of 2020, the Company secured authorization from the SBA for and funded over 12,000 PPP loans with a carrying balance of approximately $3.4 billion. As of December 31, 2020, the carrying balance of such loans was reduced to approximately $2.7 billion primarily resulting from forgiveness by the SBA.

Acquisitions

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

On October 7, 2019, the Company completed its acquisition of STC Bancshares Corp. (“STC”).  STC was the parent company of STC Capital Bank. Through this business combination, the Company acquired STC Capital Bank's five banking offices located in the communities of St. Charles, Geneva and South Elgin, Illinois. As of the acquisition date, the Company acquired approximately $250 million in assets, including approximately $174 million in loans, and approximately $201 million in deposits. The Company recorded goodwill of approximately $19 million on the acquisition.

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

Adoption of New Credit Losses Accounting Standard

Beginning in 2020, the Company adopted the CECL standard, which impacted the measurement of the Company’s allowance for credit losses (including the allowance for unfunded lending-related commitments). CECL replaced the previous incurred loss methodology, which delayed recognition until such loss was probable, with a methodology that reflects an estimate of lifetime expected credit losses considering current economic condition and forecasts. Though other assets, including investment securities and other receivables, were considered in-scope of the standard and required a measurement of the allowance for credit loss, the most significant impact of CECL remains within the Company’s loan portfolios and related lending commitments. For more information regarding the adoption of CECL, see the "Asset Quality" section and the asset quality Tables 10-14 in this report.

WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights

  Three Months EndedYears Ended
(Dollars in thousands, except per share data) Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019Dec 31, 2020 Dec 31, 2019
Selected Financial Condition Data (at end of period):   
Total assets $45,080,768  $43,731,718  $43,540,017  $38,799,847  $36,620,583    
Total loans (1) 32,079,073  32,135,555  31,402,903  27,807,321  26,800,290    
Total deposits 37,092,651  35,844,422  35,651,874  31,461,660  30,107,138    
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566    
Total shareholders’ equity 4,115,995  4,074,089  3,990,218  3,700,393  3,691,250    
Selected Statements of Income Data:   
Net interest income $259,397  $255,936  $263,131  $261,443  $261,879 $1,039,907  $1,054,919 
Net revenue (2) 417,758  426,529  425,124  374,685  374,099 1,644,096  1,462,091 
Net income 101,204  107,315  21,659  62,812  85,964 292,990  355,697 
Pre-tax income, excluding provision for credit losses (non-GAAP) (3) 135,891  162,310  165,756  140,044  124,508 604,001  533,965 
Net income per common share – Basic 1.64  1.68  0.34  1.05  1.46 4.72  6.11 
Net income per common share – Diluted 1.63  1.67  0.34  1.04  1.44 4.68  6.03 
Selected Financial Ratios and Other Data:   
Performance Ratios:   
Net interest margin 2.53% 2.56% 2.73% 3.12% 3.17%2.72% 3.45%
Net interest margin - fully taxable equivalent (non-GAAP) (3) 2.54  2.57  2.74  3.14  3.19 2.73  3.47 
Non-interest income to average assets 1.44  1.58  1.55  1.24  1.25 1.46  1.23 
Non-interest expense to average assets 2.56  2.45  2.48  2.58  2.78 2.51  2.79 
Net overhead ratio (4) 1.12  0.87  0.93  1.33  1.53 1.05  1.57 
Return on average assets 0.92  0.99  0.21  0.69  0.96 0.71  1.07 
Return on average common equity 10.30  10.66  2.17  6.82  9.52 7.50  10.41 
Return on average tangible common equity (non-GAAP) (3) 12.95  13.43  2.95  8.73  12.17 9.54  13.22 
Average total assets $43,810,005  $42,962,844  $42,042,729  $36,625,490  $35,645,190 $41,371,339  $33,232,083 
Average total shareholders’ equity 4,050,286  4,034,902  3,908,846  3,710,169  3,622,184 3,926,688  3,461,535 
Average loans to average deposits ratio 87.8% 89.6% 87.8% 90.1% 88.8%88.8% 91.4%
Period-end loans to deposits ratio 86.5  89.7  88.1  88.4  89.0    
Common Share Data at end of period:   
Market price per common share $61.09  $40.05  $43.62  $32.86  $70.90    
Book value per common share 65.24  63.57  62.14  62.13  61.68    
Tangible book value per common share (non-GAAP) (3) 53.23  51.70  50.23  50.18  49.70    
Common shares outstanding 56,769,625  57,601,991  57,573,672  57,545,352  57,821,891    
Other Data at end of period:   
Tier 1 leverage ratio (5) 8.1% 8.2% 8.1% 8.5% 8.7%   
Risk-based capital ratios:             
Tier 1 capital ratio (5) 10.0  10.2  10.1  9.3  9.6    
Common equity tier 1 capital ratio(5) 8.8  9.0  8.8  8.9  9.2    
Total capital ratio (5) 12.6  12.9  12.8  11.9  12.2    
Allowance for credit losses (6) $379,969  $388,971  $373,174  $253,482  $158,461    
Allowance for loan and unfunded lending-related commitment losses to total loans 1.18% 1.21% 1.19% 0.91% 0.59%   
Number of:             
Bank subsidiaries 15  15  15  15  15    
Banking offices 181  182  186  187  187    

(1)  Excludes mortgage loans held-for-sale.
(2)  Net revenue includes net interest income and non-interest income.
(3)  See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance measure/ratio.
(4)  The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.
(5)  Capital ratios for current quarter-end are estimated.
(6)  The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments. Effective January 1, 2020, the allowance for credit losses also includes the allowance for investment securities as a result of the adoption of Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses.

WINTRUST FINANCIAL CORPORATION

Key Operating Measures

Wintrust’s key operating measures and growth rates for the fourth quarter of 2020, as compared to the third quarter of 2020 (sequential quarter) and fourth quarter of 2019 (linked quarter), are shown in the table below:

  Three Months Ended% or(1)
basis point (bp)
change from
3rd Quarter
2020

 % or
basis point (bp)
change from
4th Quarter
2019
(Dollars in thousands, except per share data) Dec 31, 2020 Sep 30, 2020 Dec 31, 2019 
Net income $101,204   $107,315  $85,964 (6)% 18 %
Pre-tax income, excluding provision for credit losses (non-GAAP) (2) 135,891   162,310  124,508 (16)  9  
Net income per common share – diluted 1.63   1.67  1.44 (2)  13  
Net revenue (3) 417,758   426,529  374,099 (2)  12  
Net interest income 259,397   255,936  261,879 1   (1) 
Net interest margin 2.53 % 2.56% 3.17%(3)bps (64)bps
Net interest margin - fully taxable equivalent (non-GAAP) (2) 2.54   2.57  3.19 (3)  (65) 
Net overhead ratio (4) 1.12   0.87  1.53 25   (41) 
Return on average assets 0.92   0.99  0.96 (7)  (4) 
Return on average common equity 10.30   10.66  9.52 (36)  78  
Return on average tangible common equity (non-GAAP) (2) 12.95   13.43  12.17 (48)  78  
At end of period           
Total assets $45,080,768   $43,731,718  $36,620,583 12 % 23 %
Total loans (5) 32,079,073   32,135,555  26,800,290 (1)  20  
Total deposits 37,092,651   35,844,422  30,107,138 16   23  
Total shareholders’ equity 4,115,995   4,074,089  3,691,250 13   12  

(1)  Period-end balance sheet percentage changes are annualized.
(2)  See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.
(3)  Net revenue is net interest income plus non-interest income.
(4)  The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period's average total assets. A lower ratio indicates a higher degree of efficiency.
(5)  Excludes mortgage loans held-for-sale.

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

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

  (Unaudited) (Unaudited) (Unaudited) (Unaudited)  
  Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(In thousands) 2020 2020 2020 2020 2019
Assets          
Cash and due from banks $322,415  $308,639  $344,999  $349,118  $286,167 
Federal funds sold and securities purchased under resale agreements 59  56  58  309  309 
Interest-bearing deposits with banks 4,802,527  3,825,823  4,015,072  1,943,743  2,164,560 
Available-for-sale securities, at fair value 3,055,839  2,946,459  3,194,961  3,570,959  3,106,214 
Held-to-maturity securities, at amortized cost 579,138  560,267  728,465  865,376  1,134,400 
Trading account securities 671  1,720  890  2,257  1,068 
Equity securities with readily determinable fair value 90,862  54,398  52,460  47,310  50,840 
Federal Home Loan Bank and Federal Reserve Bank stock 135,588  135,568  135,571  134,546  100,739 
Brokerage customer receivables 17,436  16,818  14,623  16,293  16,573 
Mortgage loans held-for-sale 1,272,090  959,671  833,163  656,934  377,313 
Loans, net of unearned income 32,079,073  32,135,555  31,402,903  27,807,321  26,800,290 
Allowance for loan losses (319,374) (325,959) (313,510) (216,050) (156,828)
Net loans 31,759,699  31,809,596  31,089,393  27,591,271  26,643,462 
Premises and equipment, net 768,808  774,288  769,909  764,583  754,328 
Lease investments, net 242,434  230,373  237,040  207,147  231,192 
Accrued interest receivable and other assets 1,351,455  1,424,728  1,437,832  1,460,168  1,061,141 
Trade date securities receivable       502,207   
Goodwill 645,707  644,644  644,213  643,441  645,220 
Other intangible assets 36,040  38,670  41,368  44,185  47,057 
Total assets $45,080,768  $43,731,718  $43,540,017  $38,799,847  $36,620,583 
Liabilities and Shareholders’ Equity          
Deposits:          
Non-interest bearing $11,748,455  $10,409,747  $10,204,791  $7,556,755  $7,216,758 
Interest bearing 25,344,196  25,434,675  25,447,083  23,904,905  22,890,380 
Total deposits 37,092,651  35,844,422  35,651,874  31,461,660  30,107,138 
Federal Home Loan Bank advances 1,228,429  1,228,422  1,228,416  1,174,894  674,870 
Other borrowings 518,928  507,395  508,535  487,503  418,174 
Subordinated notes 436,506  436,385  436,298  436,179  436,095 
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566 
Trade date securities payable 200,907         
Accrued interest payable and other liabilities 1,233,786  1,387,439  1,471,110  1,285,652  1,039,490 
Total liabilities 40,964,773  39,657,629  39,549,799  35,099,454  32,929,333 
Shareholders’ Equity:          
Preferred stock 412,500  412,500  412,500  125,000  125,000 
Common stock 58,473  58,323  58,294  58,266  57,951 
Surplus 1,649,990  1,647,049  1,643,864  1,652,063  1,650,278 
Treasury stock (100,363) (44,891) (44,891) (44,891) (6,931)
Retained earnings 2,080,013  2,001,949  1,921,048  1,917,558  1,899,630 
Accumulated other comprehensive income (loss) 15,382  (841) (597) (7,603) (34,678)
Total shareholders’ equity 4,115,995  4,074,089  3,990,218  3,700,393  3,691,250 
Total liabilities and shareholders’ equity $45,080,768  $43,731,718  $43,540,017  $38,799,847  $36,620,583 

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

 Three Months EndedYears Ended
(In thousands, except per share data)Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019Dec 31, 2020 Dec 31, 2019
Interest income            
Interest and fees on loans$280,185  $280,479  $294,746  $301,839  $308,055 $1,157,249   $1,228,480 
Mortgage loans held-for-sale6,357  5,791  4,764  3,165  3,201 20,077   11,992 
Interest-bearing deposits with banks1,294  1,181  1,310  4,768  8,971 8,553   29,803 
Federal funds sold and securities purchased under resale agreements    16  86  390 102   700 
Investment securities18,243  21,819  27,105  32,467  27,611 99,634   108,046 
Trading account securities11  6  13  7  6 37   39 
Federal Home Loan Bank and Federal Reserve Bank stock1,775  1,774  1,765  1,577  1,328 6,891   5,416 
Brokerage customer receivables116  106  97  158  169 477   666 
Total interest income307,981  311,156  329,816  344,067  349,731 1,293,020   1,385,142 
Interest expense            
Interest on deposits32,602  39,084  50,057  67,435  74,724 189,178   278,892 
Interest on Federal Home Loan Bank advances4,952  4,947  4,934  3,360  1,461 18,193   9,878 
Interest on other borrowings2,779  3,012  3,436  3,546  3,273 12,773   13,897 
Interest on subordinated notes5,509  5,474  5,506  5,472  5,504 21,961   15,555 
Interest on junior subordinated debentures2,742  2,703  2,752  2,811  2,890 11,008   12,001 
Total interest expense48,584  55,220  66,685  82,624  87,852 253,113   330,223 
Net interest income259,397  255,936  263,131  261,443  261,879 1,039,907   1,054,919 
Provision for credit losses1,180  25,026  135,053  52,961  7,826 214,220   53,864 
Net interest income after provision for credit losses258,217  230,910  128,078  208,482  254,053 825,687   1,001,055 
Non-interest income            
Wealth management26,802  24,957  22,636  25,941  24,999 100,336   97,114 
Mortgage banking86,819  108,544  102,324  48,326  47,860 346,013   154,293 
Service charges on deposit accounts11,841  11,497  10,420  11,265  10,973 45,023   39,070 
Gains (losses) on investment securities, net1,214  411  808  (4,359) 587 (1,926) 3,525 
Fees from covered call options—       2,292  1,243 2,292   3,670 
Trading (losses) gains, net(102) 183  (634) (451) 46 (1,004) (158)
Operating lease income, net12,118  11,717  11,785  11,984  12,487 47,604   47,041 
Other19,669  13,284  14,654  18,244  14,025 65,851   62,617 
Total non-interest income158,361  170,593  161,993  113,242  112,220 604,189   407,172 
Non-interest expense            
Salaries and employee benefits171,116  164,042  154,156  136,762  145,941 626,076  546,420 
Equipment20,565  17,251  15,846  14,834  14,485 68,496  52,328 
Operating lease equipment depreciation9,938  9,425  9,292  9,260  9,766 37,915  35,760 
Occupancy, net19,687  15,830  16,893  17,547  17,132 69,957  64,289 
Data processing5,728  5,689  10,406  8,373  7,569 30,196  27,820 
Advertising and marketing9,850  7,880  7,704  10,862  12,517 36,296  48,595 
Professional fees6,530  6,488  7,687  6,721  7,650 27,426  27,471 
Amortization of other intangible assets2,634  2,701  2,820  2,863  3,017 11,018  11,844 
FDIC insurance7,016  6,772  7,081  4,135  1,348 25,004  9,199 
OREO expense, net(114) (168) 237  (876) 536 (921) 3,628 
Other28,917  28,309  27,246  24,160  29,630 108,632  100,772 
Total non-interest expense281,867  264,219  259,368  234,641  249,591 1,040,095  928,126 
Income before taxes134,711  137,284  30,703  87,083  116,682 389,781  480,101 
Income tax expense33,507  29,969  9,044  24,271  30,718 96,791  124,404 
Net income$101,204  $107,315  $21,659  $62,812  $85,964 $292,990  $355,697 
Preferred stock dividends6,991  10,286  2,050  2,050  2,050 21,377  8,200 
Net income applicable to common shares$94,213  $97,029  $19,609  $60,762  $83,914 $271,613  $347,497 
Net income per common share - Basic$1.64  $1.68  $0.34  $1.05  $1.46 $4.72  $6.11 
Net income per common share - Diluted$1.63  $1.67  $0.34  $1.04  $1.44 $4.68  $6.03 
Cash dividends declared per common share$0.28  $0.28  $0.28  $0.28  $0.25 $1.12  $1.00 
Weighted average common shares outstanding 57,309   57,597   57,567   57,620   57,538  57,523   56,857 
Dilutive potential common shares588  449  414  575  874 496  762 
Average common shares and dilutive common shares57,897  58,046  57,981  58,195  58,412 58,019  57,619 

TABLE 1: LOAN PORTFOLIO MIX AND GROWTH RATES AND COMMERCIAL REAL ESTATE BY STATE

          % Growth From
(Dollars in thousands)Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019Sep 30, 2020 (1) Dec 31, 2019
Balance:            
Mortgage loans held-for-sale, excluding early buy-out exercised loans guaranteed by U.S. Government Agencies$927,307  $862,924  $814,667  $642,386  $361,309 30% 157%
Mortgage loans held-for-sale, early buy-out exercised loans guaranteed by U.S. Government Agencies344,783  96,747  18,496  14,548  16,004 1020  2054 
Total mortgage loans held-for-sale$1,272,090  $959,671  $833,163  $656,934  $377,313 130% 237%
             
Commercial            
Commercial, industrial, and other$9,240,046  $8,897,986  $8,523,864  $9,025,886  $8,285,920 15% 12%
Commercial PPP loans2,715,921  3,379,013  3,335,368     (78) 100 
Commercial real estate            
Construction and development1,371,802  1,333,149  1,285,282  1,237,274  1,200,783 12  14 
Non-construction7,122,330  7,089,993  6,915,463  6,948,257  6,819,493 2  4 
Home equity425,263  446,274  466,596  494,655  513,066 (19) (17)
Residential real estate            
Residential real estate loans for investment1,214,744  1,143,908  1,186,768  1,244,690  1,231,123 25  (1)
Residential mortgage loans, early buy-out eligible loans guaranteed by U.S. Government Agencies44,854  240,902  240,661  132,699  123,098 (324) (64)
Premium Finance receivables            
Commercial insurance4,054,489  4,060,144  3,999,774  3,465,055  3,442,027 (1) 18 
Life insurance5,857,436  5,488,832  5,400,802  5,221,639  5,074,602 27  15 
Consumer and other32,188  55,354  48,325  37,166  110,178 (166) (71)
Total loans, net of unearned income$32,079,073  $32,135,555  $31,402,903  $27,807,321  $26,800,290 (1)% 20%
Mix:            
Mortgage loans held-for-sale, excluding early buy-out exercised loans guaranteed by U.S. Government Agencies73% 90% 98% 98% 96%   
Mortgage loans held-for-sale, early buy-out exercised loans guaranteed by U.S. Government Agencies27  10  2  2  4    
Total mortgage loans held-for-sale100% 100% 100% 100% 100%   
             
Commercial            
Commercial, industrial, and other29 % 28% 28% 32% 31%   
Commercial PPP loans  11  11        
Commercial real estate            
Construction and development  4  4  4  4    
Non-construction22   22  22  25  26    
Home equity  1  1  2  2    
Residential real estate            
Residential real estate loans for investment  3  3  4  5    
Residential mortgage loans, early buy-out eligible loans guaranteed by U.S. Government Agencies  1  1  1  0    
Premium Finance receivables            
Commercial insurance13   13  13  13  13    
Life insurance18   17  17  19  19    
Consumer and other  0  0  0  0    
Total loans, net of unearned income100 % 100% 100% 100% 100%   

(1)  Annualized.

 Dec 31, 2020  Sep 30, 2020   Jun 30, 2020  Mar 31, 2020 Dec 31, 2019
(Dollars in thousands) Balance % of
Total
Balance
   Balance % of
Total
Balance
   Balance % of
Total
Balance
   Balance % of
Total
Balance
   Balance % of
Total
Balance
 
Commercial real estate - collateral location by state:                      
Illinois$6,243,651 73.5% $6,270,584 74.4% $6,198,486 75.6% $6,171,606 75.4% $6,176,353 77.0%
Wisconsin779,390 9.2  783,241 9.3  760,839 9.3  793,145 9.7  744,975 9.3 
Total primary markets$7,023,041 82.7% $7,053,825 83.7% $6,959,325 84.9% $6,964,751 85.1% $6,921,328 86.3%
Indiana301,177 3.5  265,905 3.2  249,423 3.0  249,680 3.1  218,963 2.7 
Florida131,259 1.5  133,602 1.6  133,810 1.6  126,786 1.5  114,629 1.4 
Arizona63,494 0.8  79,086 0.9  78,135 1.0  72,214 0.9  64,022 0.8 
California85,624 1.0  82,852 1.0  81,634 1.0  63,883 0.8  64,345 0.8 
Texas79,406 0.9  55,229 0.7  48,082 0.6  59,647 0.8  29,586 0.5 
Other810,131 9.6  752,643 8.9  650,336 7.9  648,570 7.8  607,403 7.5 
Total commercial real estate$8,494,132 100% $8,423,142 100% $8,200,745 100% $8,185,531 100% $8,020,276 100%

TABLE 2: DEPOSIT PORTFOLIO MIX AND GROWTH RATES

          % Growth From
(Dollars in thousands)Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019Sep 30, 2020 (1) Dec 31, 2019
Balance:            
Non-interest bearing$11,748,455  $10,409,747  $10,204,791  $7,556,755  $7,216,758 51% 63%
NOW and interest-bearing demand deposits3,349,021  3,294,071  3,440,348  3,181,159  3,093,159 7  8 
Wealth management deposits (2)4,138,712  4,235,583  4,433,020  3,936,968  3,123,063 (9) 33 
Money market9,348,806  9,423,653  9,288,976  8,114,659  7,854,189 (3) 19 
Savings3,531,029  3,415,073  3,447,352  3,282,340  3,196,698 14  10 
Time certificates of deposit4,976,628  5,066,295  4,837,387  5,389,779  5,623,271 (7) (11)
Total deposits$37,092,651  $35,844,422  $35,651,874  $31,461,660  $30,107,138 14% 23%
Mix:            
Non-interest bearing32% 29% 29% 24% 24%   
NOW and interest-bearing demand deposits9  9  10  10  10    
Wealth management deposits (2)11  12  12  13  10    
Money market25  26  25  26  26    
Savings10  10  10  10  11    
Time certificates of deposit13  14  14  17  19    
Total deposits100% 100% 100% 100% 100%   

(1)  Annualized.
(2)  Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wintrust Investments, Chicago Deferred Exchange Company, LLC ("CDEC"), trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts.

TABLE 3: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS
As of December 31, 2020

(Dollars in thousands) Total Time
Certificates of
Deposit
 Weighted-Average
Rate of Maturing
Time Certificates
of Deposit (1)
1-3 months $872,282  1.74%
4-6 months 1,327,476  1.82 
7-9 months 948,251  1.57 
10-12 months 760,907  1.19 
13-18 months 628,017  0.85 
19-24 months 224,885  0.98 
24+ months 214,810  1.02 
Total $4,976,628  1.47%

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

TABLE 4: QUARTERLY AVERAGE BALANCES

  Average Balance for three months ended,
  Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(In thousands) 2020 2020 2020 2020 2019
Interest-bearing deposits with banks and cash equivalents (1) $4,381,040  $3,411,164  $3,240,167  $1,418,809  $2,206,251 
Investment securities (2) 3,534,594  3,789,422  4,309,471  4,780,709  3,909,699 
FHLB and FRB stock 135,569  135,567  135,360  114,829  94,843 
Liquidity management assets (3) 8,051,203  7,336,153  7,684,998  6,314,347  6,210,793 
Other earning assets (3)(4) 18,716  16,656  16,917  19,166  18,353 
Mortgage loans held-for-sale 893,395  822,908  705,702  403,262  381,878 
Loans, net of unearned income (3)(5) 31,783,279  31,634,608  30,336,626  26,936,728  26,137,722 
Total earning assets (3) 40,746,593  39,810,325  38,744,243  33,673,503  32,748,746 
Allowance for loan and investment security losses (6) (336,139) (321,732) (222,485) (176,291) (167,759)
Cash and due from banks 344,536  345,438  352,423  321,982  316,631 
Other assets 3,055,015  3,128,813  3,168,548  2,806,296  2,747,572 
Total assets $43,810,005  $42,962,844  $42,042,729  $36,625,490  $35,645,190 
           
NOW and interest-bearing demand deposits $3,320,527  $3,435,089  $3,323,124  $3,113,733  $3,016,991 
Wealth management deposits 4,066,948  4,239,300  4,380,996  2,838,719  2,934,292 
Money market accounts 9,435,344  9,332,668  8,727,966  7,990,775  7,647,635 
Savings accounts 3,413,388  3,419,586  3,394,480  3,189,835  3,028,763 
Time deposits 5,043,558  4,900,839  5,104,701  5,526,407  5,682,449 
Interest-bearing deposits 25,279,765  25,327,482  24,931,267  22,659,469  22,310,130 
Federal Home Loan Bank advances 1,228,425  1,228,421  1,214,375  951,613  596,594 
Other borrowings 510,725  512,787  493,350  469,577  415,092 
Subordinated notes 436,433  436,323  436,226  436,119  436,025 
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566 
Total interest-bearing liabilities 27,708,914  27,758,579  27,328,784  24,770,344  24,011,407 
Non-interest-bearing deposits 10,874,912  9,988,769  9,607,528  7,235,177  7,128,166 
Other liabilities 1,175,893  1,180,594  1,197,571  909,800  883,433 
Equity 4,050,286  4,034,902  3,908,846  3,710,169  3,622,184 
Total liabilities and shareholders’ equity $43,810,005  $42,962,844  $42,042,729  $36,625,490  $35,645,190 
           
Net free funds/contribution (7) $13,037,679  $12,051,746  $11,415,459  $8,903,159  $8,737,339 

(1)  Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.
(2)  Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.
(3)  See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.
(4)  Other earning assets include brokerage customer receivables and trading account securities.
(5)  Loans, net of unearned income, include non-accrual loans.
(6)  Effective January 1, 2020 this includes the allowance for investment security losses as a result of the adoption of ASU 2016-13, Financial Instruments - Credit Losses.
(7)  Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.


TABLE 5: QUARTERLY NET INTEREST INCOME

  Net Interest Income for three months ended,
  Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(In thousands) 2020 2020 2020 2020 2019
Interest income:          
Interest-bearing deposits with banks and cash equivalents $1,294  $1,181  $1,326  $4,854  $9,361 
Investment securities 18,773  22,365  27,643  33,018  28,184 
FHLB and FRB stock 1,775  1,774  1,765  1,577  1,328 
Liquidity management assets (1) 21,842  25,320  30,734  39,449  38,873 
Other earning assets (1) 130  113  113  167  176 
Mortgage loans held-for-sale 6,357  5,791  4,764  3,165  3,201 
Loans, net of unearned income (1) 280,509  280,960  295,322  302,699  308,947 
Total interest income $308,838  $312,184  $330,933  $345,480  $351,197 
           
Interest expense:          
NOW and interest-bearing demand deposits $1,074  $1,342  $1,561  $3,665  $4,622 
Wealth management deposits 7,436  7,662  7,244  6,935  7,867 
Money market accounts 3,740  7,245  13,140  22,363  25,603 
Savings accounts 773  2,104  3,840  5,790  6,145 
Time deposits 19,579  20,731  24,272  28,682  30,487 
Interest-bearing deposits 32,602  39,084  50,057  67,435  74,724 
Federal Home Loan Bank advances 4,952  4,947  4,934  3,360  1,461 
Other borrowings 2,779  3,012  3,436  3,546  3,273 
Subordinated notes 5,509  5,474  5,506  5,472  5,504 
Junior subordinated debentures 2,742  2,703  2,752  2,811  2,890 
Total interest expense $48,584  $55,220  $66,685  $82,624  $87,852 
           
Less: Fully taxable-equivalent adjustment (857) (1,028) (1,117) (1,413) (1,466)
Net interest income (GAAP) (2)  259,397  255,936  263,131  261,443  261,879 
Fully taxable-equivalent adjustment 857  1,028  1,117  1,413  1,466 
Net interest income, fully taxable-equivalent (non-GAAP) (2)  $260,254  $256,964  $264,248  $262,856  $263,345 

(1)  Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period.
(2)  See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.

TABLE 6: QUARTERLY NET INTEREST MARGIN

  Net Interest Margin for three months ended,
  Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019
Yield earned on:          
Interest-bearing deposits with banks and cash equivalents 0.12% 0.14 0.16 1.38% 1.68%
Investment securities 2.11  2.35  2.58  2.78  2.86 
FHLB and FRB stock 5.21  5.21  5.24  5.52  5.55 
Liquidity management assets 1.08  1.37  1.61  2.51  2.48 
Other earning assets 2.79  2.71  2.71  3.50  3.83 
Mortgage loans held-for-sale 2.83  2.80  2.72  3.16  3.33 
Loans, net of unearned income 3.51  3.53  3.92  4.52  4.69 
Total earning assets 3.02% 3.12% 3.44% 4.13% 4.25%
           
Rate paid on:          
NOW and interest-bearing demand deposits 0.13% 0.16% 0.19% 0.47% 0.61%
Wealth management deposits 0.73  0.72  0.67  0.98  1.06 
Money market accounts 0.16  0.31  0.61  1.13  1.33 
Savings accounts 0.09  0.24  0.45  0.73  0.80 
Time deposits 1.54  1.68  1.91  2.09  2.13 
Interest-bearing deposits 0.51  0.61  0.81  1.20  1.33 
Federal Home Loan Bank advances 1.60  1.60  1.63  1.42  0.97 
Other borrowings 2.16  2.34  2.80  3.04  3.13 
Subordinated notes 5.05  5.02  5.05  5.02  5.05 
Junior subordinated debentures 4.23  4.17  4.29  4.39  4.46 
Total interest-bearing liabilities 0.70% 0.79% 0.98% 1.34% 1.45%
           
Interest rate spread (1)(2) 2.32% 2.33 2.46% 2.79% 2.80%
Less: Fully taxable-equivalent adjustment (0.01) (0.01) (0.01) (0.02) (0.02)
Net free funds/contribution (3) 0.22  0.24  0.28  0.35  0.39 
Net interest margin (GAAP) (2) 2.53% 2.56 2.73% 3.12% 3.17%
Fully taxable-equivalent adjustment 0.01  0.01  0.01  0.02  0.02 
Net interest margin, fully taxable-equivalent (non-GAAP) (2) 2.54% 2.57% 2.74% 3.14% 3.19%

(1)  Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(2)  See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information on this performance measure/ratio.
(3)  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.

TABLE 7: YEAR-TO-DATE AVERAGE BALANCES, AND NET INTEREST INCOME AND MARGIN

 Average Balance
for years ended,
Interest
for years ended,
Yield/Rate
for years ended,
(Dollars in thousands)Dec 31, 2020 Dec 31,
2019
Dec 31, 2020 Dec 31, 2019Dec 31, 2020 Dec 31, 2019
Interest-bearing deposits with banks and cash equivalents (1)$3,117,075  $1,494,418  $8,655  $30,503  0.28% 2.04%
Investment securities (2)4,101,136  3,651,091  101,799  110,326  2.48  3.02 
FHLB and FRB stock130,360  96,924  6,891  5,416  5.29  5.59 
Liquidity management assets (3)(4)$7,348,571  $5,242,433  $117,345  $146,245  1.60 2.79%
Other earning assets (3)(4)(5)17,863  16,385  523  714  2.94  4.36 
Mortgage loans held-for-sale707,147  308,645  20,077  11,992  2.84  3.89 
Loans, net of unearned income (3)(4)(6)30,181,204  24,986,736  1,159,490  1,232,415  3.84  4.93 
Total earning assets (4)$38,254,785  $30,554,199  $1,297,435  $1,391,366  3.39% 4.55%
Allowance for loan and investment security losses (7)(264,516) (164,587)       
Cash and due from banks341,116  292,807        
Other assets3,039,954  2,549,664        
Total assets$41,371,339  $33,232,083        
          
NOW and interest-bearing demand deposits$3,298,554  $2,903,441  $7,642  $20,079  0.23% 0.69%
Wealth management deposits3,882,975  2,761,936  29,277  31,121  0.75  1.13 
Money market accounts8,874,488  6,659,376  46,488  91,940  0.52  1.38 
Savings accounts3,354,662  2,834,381  12,507  20,975  0.37  0.74 
Time deposits5,142,938  5,467,192  93,264  114,777  1.81  2.10 
Interest-bearing deposits$24,553,617  $20,626,326  $189,178  $278,892  0.77% 1.35%
Federal Home Loan Bank advances1,156,106  658,669  18,193  9,878  1.57  1.50 
Other borrowings496,693  428,834  12,773  13,897  2.57  3.24 
Subordinated notes436,275  309,178  21,961  15,555  5.03  5.03 
Junior subordinated debentures253,566  253,566  11,008  12,001  4.27  4.67 
Total interest-bearing liabilities$26,896,257  $22,276,573  $253,113  $330,223  0.94% 1.48%
Non-interest-bearing deposits9,432,090  6,711,298        
Other liabilities1,116,304  782,677        
Equity3,926,688  3,461,535        
Total liabilities and shareholders’ equity$41,371,339  $33,232,083        
Interest rate spread (4)(8)      2.45% 3.07%
Less: Fully taxable-equivalent adjustment   (4,415) (6,224) (0.01) (0.02)
Net free funds/contribution (9)$11,358,528  $8,277,626     0.28  0.40 
Net interest income/ margin (GAAP) (4)   $1,039,907  1,054,919  2.72% 3.45%
Fully taxable-equivalent adjustment   4,415  6,224  0.01  0.02 
Net interest income/ margin, fully taxable-equivalent (non-GAAP) (4)    $1,044,322  $1,061,143  2.73% 3.47%

(1)  Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.
(2)  Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.
(3)  Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on a marginal federal corporate tax rate in effect as of the applicable period.
(4)  See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 18 for additional information on this performance ratio.
(5)  Other earning assets include brokerage customer receivables and trading account securities.
(6)  Loans, net of unearned income, include non-accrual loans.
(7)  Effective January 1, 2020 this includes the allowance for investment security losses as a result of the adoption of ASU 2016-13, Financial Instruments - Credit Losses.
(8)  Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(9)  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.

TABLE 8: INTEREST RATE SENSITIVITY

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

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

Static Shock Scenario +200
Basis
Points
 +100
Basis
Points
 -100
Basis
Points
Dec 31, 2020 25.0% 11.6% (7.9)% 
Sep 30, 2020 23.4  10.9  (8.1) 
Jun 30, 2020 25.9  12.6  (8.3) 
Mar 31, 2020 22.5  10.6  (9.4) 
Dec 31, 2019 18.6  9.7  (10.9) 

 

Ramp Scenario+200
Basis
Points
 +100
Basis
Points
 -100
Basis
Points
Dec 31, 202011.4% 5.7% (3.3)% 
Sep 30, 202010.7  5.2  (3.5) 
Jun 30, 202013.0  6.7  (3.2) 
Mar 31, 20207.7  3.7  (3.8) 
Dec 31, 20199.3  4.8  (5.0) 

TABLE 9: MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES

 Loans repricing or maturity period  
As of December 31, 2020One year or less From one to five years Over five years  
(In thousands)   Total
Commercial       
Fixed rate$372,909   $1,878,763   $804,397   $3,056,069  
Fixed Rate - PPP—   2,715,921   —   2,715,921  
Variable rate6,180,119   3,735   123   6,183,977  
Total commercial$6,553,028   $4,598,419   $804,520   $11,955,967  
Commercial real estate       
Fixed rate557,819   2,087,351   377,779   3,022,949  
Variable rate5,435,402   35,781   —   5,471,183  
Total commercial real estate$5,993,221   $2,123,132   $377,779   $8,494,132  
Home equity       
Fixed rate14,710   8,882   25   23,617  
Variable rate401,646   —   —   401,646  
Total home equity$416,356   $8,882   $25   $425,263  
Residential real estate       
Fixed rate31,179   11,061   384,420   426,660  
Variable rate60,121   319,347   453,470   832,938  
Total residential real estate$91,300   $330,408   $837,890   $1,259,598  
Premium finance receivables - commercial       
Fixed rate3,967,351   87,138   —   4,054,489  
Variable rate—   —   —   —  
Total premium finance receivables - commercial$3,967,351   $87,138   $—   $4,054,489  
Premium finance receivables - life insurance       
Fixed rate12,424   299,640   18,931   330,995  
Variable rate5,526,441   —   —   5,526,441  
Total premium finance receivables - life insurance$5,538,865   $299,640   $18,931   $5,857,436  
Consumer and other       
Fixed rate8,696   5,031   1,392   15,119  
Variable rate17,069   —   —   17,069  
Total consumer and other$25,765   $5,031   $1,392   $32,188  
        
Total per category       
Fixed rate4,965,088   4,377,866   1,586,944   10,929,898  
Fixed rate - PPP—   2,715,921   —   2,715,921  
Variable rate17,620,798   358,863   453,593   18,433,254  
Total loans, net of unearned income$22,585,886   $7,452,650   $2,040,537   $32,079,073  
        
Variable Rate Loan Pricing by Index:       
Prime      $2,324,385  
One- month LIBOR      9,338,592  
Three- month LIBOR      394,592  
Twelve- month LIBOR      6,112,979  
Other      262,706  
Total variable rate      $18,433,254  


Graph available at the following link: http://ml.globenewswire.com/Resource/Download/f719da90-6a62-4f5d-a7fb-d34801cb841a

Source: Bloomberg

As noted in the table on the previous page, the majority of the Company’s portfolio is tied to LIBOR indices which, as shown in the table above, do not mirror the same changes as the Prime rate which has historically moved when the Federal Reserve raises or lowers interest rates.  Specifically, the Company has $9.3 billion of variable rate loans tied to one-month LIBOR and $6.1 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:

  Basis Point (bp) Change in
  Prime 1-month
LIBOR
 12-month
LIBOR
 
Fourth Quarter 2020 0bp-1bp-2bps
Third Quarter 2020 0 -1 -19 
Second Quarter 2020 0 -83 -45 
First Quarter 2020 -150 -77 -100 
Fourth Quarter 2019 -25 -26 -3 

TABLE 10: ALLOWANCE FOR CREDIT LOSSES

  Three Months EndedYears Ended
  Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,Dec 31, Dec 31,
(Dollars in thousands) 2020 2020 2020 2020 20192020 2019
Allowance for credit losses at beginning of period $388,971  $373,174  $253,482  $158,461  $163,273 $158,461  $154,164 
Cumulative effect adjustment from the adoption of ASU 2016-13 —       47,418   47,418   
Provision for credit losses 1,180  25,026  135,053  52,961  7,826 214,220  53,864 
Other adjustments 155  55  42  (73) 30 179  (21)
Charge-offs:             
Commercial 5,184  5,270  5,686  2,153  11,222 18,293  35,880 
Commercial real estate 6,637  1,529  7,224  570  533 15,960  5,402 
Home equity 683  138  239  1,001  1,330 2,061  3,702 
Residential real estate 114  83  293  401  483 891  798 
Premium finance receivables 4,214  4,640  3,434  3,184  3,817 15,472  12,902 
Consumer and other 198  103  99  128  167 528  522 
Total charge-offs 17,030  11,763  16,975  7,437  17,552 53,205  59,206 
Recoveries:             
Commercial 4,168  428  112  384  1,871 5,092  2,845 
Commercial real estate 904  175  493  263  1,404 1,835  2,516 
Home equity 77  111  46  294  166 528  479 
Residential real estate 69  25  30  60  50 184  422 
Premium finance receivables 1,445  1,720  833  1,110  1,350 5,108  3,203 
Consumer and other 30  20  58  41  43 149  195 
Total recoveries 6,693  2,479  1,572  2,152  4,884 12,896  9,660 
Net charge-offs (10,337) (9,284) (15,403) (5,285) (12,668)(40,309) (49,546)
Allowance for credit losses at period end $379,969  $388,971  $373,174  $253,482  $158,461 $379,969  $158,461 
              
Annualized net charge-offs by category as a percentage of its own respective category’s average:   
Commercial 0.03% 0.16% 0.20% 0.08% 0.46%0.12% 0.41%
Commercial real estate 0.27  0.06  0.33  0.02  (0.04)0.17  0.04 
Home equity 0.55  0.02  0.16  0.57  0.89 0.33  0.61 
Residential real estate 0.02  0.02  0.09  0.11  0.14 0.06  0.04 
Premium finance receivables 0.11  0.12  0.12  0.10  0.12 0.11  0.12 
Consumer and other 0.78  0.49  0.25  0.56  0.41 0.52  0.29 
Total loans, net of unearned income 0.13% 0.12% 0.20% 0.08% 0.19%0.13% 0.20%
              
Net charge-offs as a percentage of the provision for credit losses 876.02% 37.10% 11.41% 9.98% 161.87%18.82% 91.99%
Loans at period-end $32,079,073  $32,135,555  $31,402,903  $27,807,321  $26,800,290    
Allowance for loan losses as a percentage of loans at period end 1.00% 1.01% 1.00% 0.78% 0.59%   
Allowance for loan and unfunded lending-related commitment losses as a percentage of loans at period end 1.18  1.21  1.19  0.91  0.59    
Allowance for loan and unfunded lending-related commitment losses as a percentage of loans at period end, excluding PPP loans 1.29  1.35  1.33  0.91  0.59    

TABLE 11: ALLOWANCE AND PROVISION FOR CREDIT LOSSES BY COMPONENT

  Three Months EndedYears Ended
  Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,Dec 31, Dec 31,
(In thousands) 2020 2020 2020 2020 20192020 2019
Provision for loan losses $3,597  $21,678  $112,822  $50,396  $7,704 $188,493   $53,626 
Provision for unfunded lending-related commitments losses (2,413) 3,350  22,236  2,569  122 25,742   238 
Provision for held-to-maturity securities losses (4) (2) (5) (4)  (15)  
Provision for credit losses $1,180  $25,026  $135,053  $52,961  $7,826 $214,220   $53,864 
              
Allowance for loan losses $319,374  $325,959  $313,510  $216,050  $156,828    
Allowance for unfunded lending-related commitments losses 60,536  62,949  59,599  37,362  1,633    
Allowance for loan losses and unfunded lending-related commitments losses 379,910  388,908  373,109  253,412  158,461    
Allowance for held-to-maturity securities losses 59  63  65  70      
Allowance for credit losses $379,969  $388,971  $373,174  $253,482  $158,461    


TABLE 12: ALLOWANCE BY LOAN PORTFOLIO

The table below summarizes the calculation of allowance for loan losses and allowance for unfunded lending-related commitments losses for the Company’s core, niche and consumer and purchased loan portfolios, as of December 31, 2020 and September 30, 2020.

 As of Dec 31, 2020As of Sep 30, 2020
(Dollars in thousands)Recorded
Investment
 Calculated
Allowance
 % of its
category’s balance
Recorded
Investment
 Calculated
Allowance
 % of its
category’s balance
Commercial:          
Commercial, industrial and other, excluding PPP loans$9,162,327   $92,777   1.01 %$8,808,467  $110,045  1.25%
Commercial real estate:          
Construction and development1,344,653   77,463   5.76  1,270,235  73,565  5.79 
Non-construction6,775,195   150,637   2.22  6,708,538  141,249  2.11 
Home equity395,248   11,027   2.79  412,162  11,216  2.72 
Residential real estate1,195,271   11,948   1.00  1,309,209  11,165  0.85 
Total core loan portfolio$18,872,694   $343,852   1.82 %$18,508,611  $347,240  1.88%
Commercial PPP loans$2,715,921   $  0.00 %$3,379,013  $3  0.00%
Premium finance receivables          
Commercial insurance loans4,054,489   17,267   0.43  4,060,144  17,378  0.43 
Life insurance loans5,741,639   510   0.01  5,376,403  478  0.01 
Consumer and other30,133   290   0.96  53,191  555  1.04 
Total niche and consumer loan portfolio$12,542,182   $18,069   0.14 %$12,868,751  $18,414  0.14%
Purchased commercial$77,719   $1,433   1.84 %$89,519  $2,846  3.18%
Purchased commercial real estate374,284   15,503   4.14  444,369  19,196  4.32 
Purchased home equity30,015   410   1.37  34,112  461  1.35 
Purchased residential real estate64,327   511   0.79  75,601  625  0.83 
Purchased life insurance loans115,797   —   —  112,429     
Purchased consumer and other2,055   132   6.42  2,163  126  5.83 
Total purchased loan portfolio$664,197   $17,989   2.71 %$758,193  $23,254  3.07%
Total loans, net of unearned income$32,079,073   $379,910   1.18 %$32,135,555  $388,908  1.21%
Total loans, net of unearned income, excluding PPP loans$29,363,152   $379,908   1.29 %$28,756,542  $388,905  1.35%

TABLE 13: LOAN PORTFOLIO AGING

(Dollars in thousands) Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019
Loan Balances:          
Commercial          
Nonaccrual $21,743   $42,036  $42,882  $49,916  $37,224 
90+ days and still accruing 307     1,374  1,241  1,855 
60-89 days past due 6,900   2,168  8,952  8,873  3,275 
30-59 days past due 44,381   48,271  23,720  86,129  77,324 
Current 11,882,636   12,184,524  11,782,304  8,879,727  8,166,242 
Total commercial $11,955,967   $12,276,999  $11,859,232  $9,025,886  $8,285,920 
Commercial real estate          
Nonaccrual $46,107   $68,815  $64,557  $62,830  $26,113 
90+ days and still accruing —       516  14,946 
60-89 days past due 5,178   8,299  26,480  10,212  31,546 
30-59 days past due 32,116   53,462  75,528  75,068  97,567 
Current 8,410,731   8,292,566  8,034,180  8,036,905  7,850,104 
Total commercial real estate $8,494,132   $8,423,142  $8,200,745  8,185,531  $8,020,276 
Home equity          
Nonaccrual $6,529   $6,329  $7,261  $7,243  $7,363 
90+ days and still accruing —          
60-89 days past due 47   70    214  454 
30-59 days past due 637   1,148  1,296  2,096  3,533 
Current 418,050   438,727  458,039  485,102  501,716 
Total home equity $425,263   $446,274  $466,596  $494,655  $513,066 
Residential real estate          
Nonaccrual $26,071   $22,069  $19,529  $18,965  $13,797 
90+ days and still accruing —       605  5,771 
60-89 days past due 1,635   814  1,506  345  3,089 
30-59 days past due 12,584   2,443  4,400  28,983  18,041 
Current 1,219,308   1,359,484  1,401,994  1,328,491  1,313,523 
Total residential real estate $1,259,598   $1,384,810  $1,427,429  $1,377,389  $1,354,221 
Premium finance receivables          
Nonaccrual $13,264   $21,080  $16,460  $21,058  $21,180 
90+ days and still accruing 12,792   12,177  35,638  16,505  11,517 
60-89 days past due 27,801   38,286  42,353  12,730  12,119 
30-59 days past due 49,274   80,732  61,160  70,185  51,342 
Current 9,808,794   9,396,701  9,244,965  8,566,216  8,420,471 
Total premium finance receivables $9,911,925   $9,548,976  $9,400,576  $8,686,694  $8,516,629 
Consumer and other          
Nonaccrual $436   $422  $427  $403  $231 
90+ days and still accruing 264   175  156  78  287 
60-89 days past due 24   273  4  625  40 
30-59 days past due 136   493  281  207  344 
Current 31,328   53,991  47,457  35,853  109,276 
Total consumer and other $32,188   $55,354  $48,325  $37,166  $110,178 
Total loans, net of unearned income          
Nonaccrual $114,150   $160,751  $151,116  $160,415  $105,908 
90+ days and still accruing 13,363   12,352  37,168  18,945  34,376 
60-89 days past due 41,585   49,910  79,295  32,999  50,523 
30-59 days past due 139,128   186,549  166,385  262,668  248,151 
Current 31,770,847   31,725,993  30,968,939  27,332,294  26,361,332 
Total loans, net of unearned income $32,079,073   $32,135,555  $31,402,903  $27,807,321  $26,800,290 

TABLE 14: NON-PERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS ("TDRs")

 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(Dollars in thousands)2020 2020 2020 2020(1) 2019
Loans past due greater than 90 days and still accruing (2):         
Commercial$307  $  $1,374  $1,241  $ 
Commercial real estate      516   
Home equity         
Residential real estate      605   
Premium finance receivables12,792  12,177  35,638  16,505  11,517 
Consumer and other264  175  156  78  163 
Total loans past due greater than 90 days and still accruing13,363  12,352  37,168  18,945  11,680 
Non-accrual loans:         
Commercial21,743  42,036  42,882  49,916  37,224 
Commercial real estate46,107  68,815  64,557  62,830  26,113 
Home equity6,529  6,329  7,261  7,243  7,363 
Residential real estate26,071  22,069  19,529  18,965  13,797 
Premium finance receivables13,264  21,080  16,460  21,058  21,180 
Consumer and other436  422  427  403  231 
Total non-accrual loans114,150   160,751  151,116  160,415  105,908 
Total non-performing loans:         
Commercial22,050  42,036  44,256  51,157  37,224 
Commercial real estate46,107  68,815  64,557  63,346  26,113 
Home equity6,529  6,329  7,261  7,243  7,363 
Residential real estate26,071  22,069  19,529  19,570  13,797 
Premium finance receivables26,056  33,257  52,098  37,563  32,697 
Consumer and other700  597  583  481  394 
Total non-performing loans$127,513  $173,103  $188,284  $179,360  $117,588 
Other real estate owned9,711  2,891  2,409  2,701  5,208 
Other real estate owned - from acquisitions6,847  6,326  7,788  8,325  9,963 
Other repossessed assets        4 
Total non-performing assets$144,071  $182,320  $198,481  $190,386  $132,763 
Accruing TDRs not included within non-performing assets$47,023  $46,410  $48,609  $47,049  $36,725 
Total non-performing loans by category as a percent of its own respective category’s period-end balance:         
Commercial0.18% 0.34% 0.37% 0.57% 0.45%
Commercial real estate0.54  0.82  0.79  0.77  0.33 
Home equity1.54  1.42  1.56  1.46  1.44 
Residential real estate2.07  1.59  1.37  1.42  1.02 
Premium finance receivables0.26  0.35  0.55  0.43  0.39 
Consumer and other2.17  1.08  1.21  1.29  0.36 
Total loans, net of unearned income0.40% 0.54% 0.60% 0.65% 0.44%
Total non-performing assets as a percentage of total assets0.32% 0.42% 0.46% 0.49% 0.36%
Allowance for credit losses as a percentage of non-accrual loans332.82% 241.93% 246.90% 157.97% 149.62%
          

(1)  Prior to the adoption of ASU 2016-13, acquired loans with evidence of credit quality deterioration (purchased credit deteriorated loans, or "PCD loans") were excluded from non-performing loans. PCD loans that meet the definition of non-accrual or are greater than 90 days past-due and still accruing interest are now included in non-performing loans and resulted in a $37.3 million increase in non-accrual loans upon adoption of ASU 2016-13 as of January 1, 2020.
(2)  As of December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020, and December 31, 2019, no TDRs were past due greater than 90 days and still accruing interest.

Non-performing Loans Rollforward

 Three Months EndedYears Ended
 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,Dec 31, Dec 31,
(In thousands)2020 2020 2020 2020 20192020 2019
             
Balance at beginning of period$173,103  $188,284  $179,360  $117,588  $114,284 $117,588  $113,234 
Additions from becoming non-performing in the respective period13,224  19,771  20,803  32,195  30,977 85,993  96,355 
Additions from the adoption of ASU 2016-13      37,285   37,285   
Return to performing status(1,000) (6,202) (2,566) (486) (243)(10,254) (14,774)
Payments received(30,146) (3,733) (11,201) (7,949) (19,380)(53,029) (45,168)
Transfer to OREO and other repossessed assets(12,662) (598)   (1,297)  (14,557) (3,061)
Charge-offs(7,817) (6,583) (12,884) (2,551) (11,798)(29,835) (39,591)
Net change for niche loans (1)(7,189) (17,836) 14,772  4,575  3,748 (5,678) 10,593 
Balance at end of period$127,513  $173,103  $188,284  $179,360  $117,588 $127,513  $117,588 

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


TDRs

 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(In thousands)2020 2020 2020 2020 2019
Accruing TDRs:         
Commercial$7,699  $7,863  $5,338  $6,500  $4,905 
Commercial real estate10,549  10,846  19,106  18,043  9,754 
Residential real estate and other28,775  27,701  24,165  22,506  22,066 
Total accrual$47,023  $46,410  $48,609  $47,049  $36,725 
Non-accrual TDRs: (1)         
Commercial$10,491  $13,132  $20,788  $17,206  $13,834 
Commercial real estate6,177  13,601  8,545  14,420  7,119 
Residential real estate and other4,501  5,392  5,606  4,962  6,158 
Total non-accrual$21,169  $32,125  $34,939  $36,588  $27,111 
Total TDRs:         
Commercial$18,190  $20,995  $26,126  $23,706  $18,739 
Commercial real estate16,726  24,447  27,651  32,463  16,873 
Residential real estate and other33,276  33,093  29,771  27,468  28,224 
Total TDRs$68,192  $78,535  $83,548  $83,637  $63,836 

(1)  Included in total non-performing loans.

Other Real Estate Owned

 Three Months Ended
 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
(In thousands)2020 2020 2020 2020 2019
Balance at beginning of period$9,217  $10,197  $11,026  $15,171  $17,482 
Disposals/resolved(3,839) (1,532) (612) (4,793) (4,860)
Transfers in at fair value, less costs to sell11,508  777    954  936 
Additions from acquisition        2,179 
Fair value adjustments(328) (225) (217) (306) (566)
Balance at end of period$16,558  $9,217  $10,197  $11,026  $15,171 
          
 Period End
 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
Balance by Property Type:2020 2020 2020 2020 2019
Residential real estate$2,324  $1,839  $1,382  $1,684  $1,016 
Residential real estate development1,691        810 
Commercial real estate12,543  7,378  8,815  9,342  13,345 
Total$16,558  $9,217  $10,197  $11,026  $15,171 

TABLE 15: NON-INTEREST INCOME

 Three Months Ended Q4 2020 compared to
Q3 2020
 Q4 2020 compared to
Q4 2019
  Dec 31,  Sep 30, Jun 30, Mar 31, Dec 31,  
(Dollars in thousands)2020 2020 2020 2020 2019 $ Change % Change $ Change % Change
Brokerage$4,740  $4,563  $4,147  $5,281  $4,859  $177  4 % $(119) (2)% 
Trust and asset management22,062  20,394  18,489  20,660  20,140  1,668  8  1,922  10  
Total wealth management26,802  24,957  22,636  25,941  24,999  1,845  7  1,803  7  
Mortgage banking86,819  108,544  102,324  48,326  47,860  (21,725) (20) 38,959  81  
Service charges on deposit accounts11,841  11,497  10,420  11,265  10,973  344  3  868  8  
Gains (losses) on investment securities, net1,214  411  808  (4,359) 587  803  NM 627  NM 
Fees from covered call options      2,292  1,243    NM (1,243) (100) 
Trading (losses) gains, net(102) 183  (634) (451) 46  (285) NM (148) NM 
Operating lease income, net12,118  11,717  11,785  11,984  12,487  401  3  (369) (3) 
Other:                 
Interest rate swap fees4,930  4,029  5,693  6,066  2,206  901  22  2,724  NM 
BOLI2,846  1,218  1,950  (1,284) 1,377  1,628  134  1,469  NM 
Administrative services1,263  1,077  933  1,112  1,072  186  17  191  18  
Foreign currency remeasurement (losses) gains(208) (54) (208) (151) 261  (154) NM (469) NM 
Early pay-offs of capital leases118  165  275  74  24  (47) (28) 94  NM 
Miscellaneous10,720  6,849  6,011  12,427  9,085  3,871  57  1,635  18  
Total Other19,669  13,284  14,654  18,244  14,025  6,385  48  5,644  40  
Total Non-Interest Income$158,361  $170,593  $161,993  $113,242  $112,220  $(12,232) (7)% $46,141  41 % 

NM - Not meaningful.

 Years Ended    
 Dec 31, Dec 31, $ %
(Dollars in thousands)2020 2019 Change Change
Brokerage$18,731  $18,825  $(94) 0%
Trust and asset management81,605  78,289  3,316  4 
Total wealth management100,336  97,114  3,222  3 
Mortgage banking346,013  154,293  191,720  124 
Service charges on deposit accounts45,023  39,070  5,953  15 
(Losses) gains on investment securities, net(1,926) 3,525  (5,451) NM
Fees from covered call options2,292  3,670  (1,378) (38)
Trading losses, net(1,004) (158) (846) NM
Operating lease income, net47,604  47,041  563  1 
Other:       
Interest rate swap fees20,718  13,072  7,646  58 
BOLI4,730  4,947  (217) (4)
Administrative services4,385  4,197  188  4 
Foreign currency remeasurement (loss) gain(621) 783  (1,404) NM
Early pay-offs of leases632  35  597  NM
Miscellaneous36,007  39,583  (3,576) (9)
Total Other65,851  62,617  3,234  5 
Total Non-Interest Income$604,189  $407,172  $197,017  48%

NM - Not meaningful.

TABLE 16: MORTGAGE BANKING

 Three Months EndedYears Ended
(Dollars in thousands)Dec 31,
2020
 Sep 30,
2020
 Jun 30,
2020
 Mar 31,
2020
 Dec 31,
2019
Dec 31,
2020
 Dec 31,
2019
Originations:            
Retail originations$1,757,093  $1,590,699  $1,588,932  $773,144  $782,122 $5,709,868  $2,730,865 
Correspondent originations        4,024   385,729 
Veterans First originations594,151  635,876  621,878  442,957  459,236 2,294,862  1,381,327 
Total originations for sale (A)$2,351,244  $2,226,575  $2,210,810  $1,216,101  $1,245,382 $8,004,730  $4,497,921 
Originations for investment192,107  73,711  56,954  73,727  105,911 396,499  460,734 
Total originations$2,543,351  $2,300,286  $2,267,764  $1,289,828  $1,351,293 $8,401,229  $4,958,655 
             
Purchases as a percentage of originations for sale35% 41% 30% 37% 40%35% 52%
Refinances as a percentage of originations for sale65  59  70  63  60 65  48 
Total100% 100% 100% 100% 100%100% 100%
             
Production Margin:            
Production revenue (B) (1)$70,886  $94,148  $93,433  $49,327  $34,622 $307,794  $122,047 
Production margin (B / A)3.01% 4.23% 4.23% 4.06% 2.78%3.85% 2.71%
             
Mortgage Servicing:            
Loans serviced for others (C)$10,833,135  $10,139,878  $9,188,285  $8,314,634  $8,243,251    
MSRs, at fair value (D)92,081  86,907  77,203  73,504  85,638    
Percentage of MSRs to loans serviced for others (D / C)0.85% 0.86% 0.84% 0.88% 1.04%   
Servicing income$9,829  $8,118  $6,908  $7,031  $6,247 $31,886  $23,156 
             
Components of MSR:            
MSR - current period capitalization$20,343  $20,936  $20,351  $9,447  $14,532 $71,077  $44,943 
MSR - collection of expected cash flows - paydowns(688) (590) (419) (547) (483)(2,244) (1,901)
MSR - collection of expected cash flows - payoffs(8,335) (7,272) (8,252) (6,476) (6,325)(30,335) (18,217)
Valuation:            
MSR - changes in fair value model assumptions(5,223) (3,002) (7,982) (14,557) 2,329 (30,764) (14,778)
Gain (loss) on derivative contract held as an economic hedge, net—     589  4,160  (483)4,749  519 
MSR valuation adjustment, net of gain/(loss) on derivative contract held as an economic hedge$(5,223) $(3,002) $(7,393) $(10,397) $1,846 $(26,015) $(14,259)
             
Summary of Mortgage Banking Revenue:            
Production revenue (1)$70,886  $94,148  $93,433  $49,327  $34,622 $307,794  $122,047 
Servicing income9,829  8,118  6,908  7,031  6,247 31,886  23,156 
MSR activity6,097  10,072  4,287  (7,973) 9,570 12,483  10,566 
Other7  (3,794) (2,304) (59) (2,579)(6,150) (1,476)
Total mortgage banking revenue$86,819  $108,544  $102,324  $48,326  $47,860 $346,013  $154,293 

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

TABLE 17: NON-INTEREST EXPENSE

 Three Months Ended Q4 2020 compared to
Q3 2020
 Q4 2020 compared to
Q4 2019
  Dec 31,   Sep 30,   Jun 30,   Mar 31,   Dec 31,   
(Dollars in thousands) 2020   2020   2020   2020   2019   $ Change  % Change   $ Change  % Change 
Salaries and employee benefits:                                 
Salaries$93,535  $89,849  $87,105  $81,286  $82,888  $3,686  4% $10,647  13%
Commissions and incentive compensation52,383  48,475  46,151  31,575  40,226  3,908  8  12,157  30 
Benefits25,198  25,718  20,900  23,901  22,827  (520) (2) 2,371  10 
Total salaries and employee benefits171,116  164,042  154,156  136,762  145,941  7,074  4  25,175  17 
Equipment20,565  17,251  15,846  14,834  14,485  3,314  19  6,080  42 
Operating lease equipment depreciation9,938  9,425  9,292  9,260  9,766  513  5  172  2 
Occupancy, net19,687  15,830  16,893  17,547  17,132  3,857  24  2,555  15 
Data processing5,728  5,689  10,406  8,373  7,569  39  1  (1,841) (24)
Advertising and marketing9,850  7,880  7,704  10,862  12,517  1,970  25  (2,667) (21)
Professional fees6,530  6,488  7,687  6,721  7,650  42  1  (1,120) (15)
Amortization of other intangible assets2,634  2,701  2,820  2,863  3,017  (67) (2) (383) (13)
FDIC insurance7,016  6,772  7,081  4,135  1,348  244  4  5,668  NM
OREO expense, net(114) (168) 237  (876) 536  54  (32) (650) NM
Other:                 
Commissions - 3rd party brokers764  778  707  865  717  (14) (2) 47  7 
Postage1,849  1,529  1,591  1,949  2,220  320  21  (371) (17)
Miscellaneous26,304  26,002  24,948  21,346  26,693  302  1  (389) (1)
Total other28,917  28,309  27,246  24,160  29,630  608  2  (713) (2)
Total Non-Interest Expense$281,867  $264,219  $259,368  $234,641  $249,591  $17,648  7% $32,276  13%

NM - Not meaningful.

  Years Ended   
  Dec 31, Dec 31,$ %
(Dollars in thousands) 2020 2019Change Change
Salaries and employee benefits:       
Salaries $351,775  $310,352 $41,423  13%
Commissions and incentive compensation 178,584  148,600 29,984  20 
Benefits 95,717  87,468 8,249  9 
Total salaries and employee benefits 626,076  546,420 79,656  15 
Equipment 68,496  52,328 16,168  31 
Operating lease equipment depreciation 37,915  35,760 2,155  6 
Occupancy, net 69,957  64,289 5,668  9 
Data processing 30,196  27,820 2,376  9 
Advertising and marketing 36,296  48,595 (12,299) (25)
Professional fees 27,426  27,471 (45) 0 
Amortization of other intangible assets 11,018  11,844 (826) (7)
FDIC insurance 25,004  9,199 15,805  NM
OREO expense, net (921) 3,628 (4,549) NM
Other:       
Commissions - 3rd party brokers 3,114  2,918 196  7 
Postage 6,918  9,597 (2,679) (28)
Miscellaneous 98,600  88,257 10,343  12 
Total other 108,632  100,772 7,860  8 
Total Non-Interest Expense $1,040,095  $928,126 $111,969  12%

NM - Not meaningful.

TABLE 18: SUPPLEMENTAL NON-GAAP 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 book value per common share, return on average tangible common equity and pre-tax income, excluding provision for credit losses. 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 basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a fully taxable-equivalent 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. Management considers pre-tax income, excluding provision for credit losses, as a useful measurement of the Company's core net income.

 Three Months EndedYears Ended
 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,Dec 31, Dec 31,
(Dollars and shares in thousands)2020 2020 2020 2020 20192020 2019
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:   
(A) Interest Income (GAAP)$307,981  $311,156  $329,816  $344,067  $349,731 $1,293,020  $1,385,142 
Taxable-equivalent adjustment:            
- Loans324  481  576  860  892 2,241  3,935 
- Liquidity Management Assets530  546  538  551  573 2,165  2,280 
- Other Earning Assets3  1  3  2  1 9  9 
(B) Interest Income (non-GAAP)$308,838  $312,184  $330,933  $345,480  $351,197 $1,297,435  $1,391,366 
(C) Interest Expense (GAAP)$48,584  $55,220  $66,685  $82,624  $87,852 $253,113  $330,223 
(D) Net Interest Income (GAAP) (A minus C)$259,397  $255,936  $263,131  $261,443  $261,879 $1,039,907  $1,054,919 
(E) Net Interest Income (non-GAAP) (B minus C)$260,254  $256,964  $264,248  $262,856  $263,345 $1,044,322  $1,061,143 
Net interest margin (GAAP)2.53% 2.56% 2.73% 3.12% 3.17%2.72% 3.45%
Net interest margin, fully taxable-equivalent (non-GAAP)2.54% 2.57% 2.74% 3.14% 3.19%2.73% 3.47%
(F) Non-interest income$158,361  $170,593  $161,993  $113,242  $112,220 $604,189  $407,172 
(G) Gains (losses) on investment securities, net1,214  411  808  (4,359) 587 (1,926) 3,525 
(H) Non-interest expense281,867  264,219  259,368  234,641  249,591 1,040,095  928,126 
Efficiency ratio (H/(D+F-G))67.67% 62.01% 61.13% 61.90% 66.82%63.19% 63.63%
Efficiency ratio (non-GAAP) (H/(E+F-G))67.53% 61.86% 60.97% 61.67% 66.56%63.02% 63.36 %
             
Reconciliation of Non-GAAP Tangible Common Equity Ratio:   
Total shareholders’ equity (GAAP)$4,115,995  $4,074,089  $3,990,218  $3,700,393  $3,691,250    
Less: Non-convertible preferred stock (GAAP)(412,500) (412,500) (412,500) (125,000) (125,000)   
Less: Intangible assets (GAAP)(681,747) (683,314) (685,581) (687,626) (692,277)   
(I) Total tangible common shareholders’ equity (non-GAAP)$3,021,748  $2,978,275  $2,892,137  $2,887,767  $2,873,973    
(J) Total assets (GAAP)$45,080,768  $43,731,718  $43,540,017  $38,799,847  $36,620,583    
Less: Intangible assets (GAAP)(681,747) (683,314) (685,581) (687,626) (692,277)   
(K) Total tangible assets (non-GAAP)$44,399,021  $43,048,404  $42,854,436  $38,112,221  $35,928,306    
Common equity to assets ratio (GAAP) (L/J)8.2% 8.4% 8.2% 9.2% 9.7%   
Tangible common equity ratio (non-GAAP) (I/K)6.8% 6.9% 6.7% 7.6% 8.0%   

 

 Three Months EndedYears Ended
 Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,Dec 31, Dec 31,
(Dollars and shares in thousands)2020 2020 2020 2020 20192020 2019
Reconciliation of Non-GAAP Tangible Book Value per Common Share:   
Total shareholders’ equity$4,115,995  $4,074,089  $3,990,218  $3,700,393  $3,691,250    
Less: Preferred stock(412,500) (412,500) (412,500) (125,000) (125,000)   
(L) Total common equity$3,703,495  $3,661,589  $3,577,718  $3,575,393  $3,566,250    
(M) Actual common shares outstanding56,770  57,602  57,574  57,545  57,822    
Book value per common share (L/M)$65.24  $63.57  $62.14  $62.13  $61.68    
Tangible book value per common share (non-GAAP) (I/M)$53.23  $51.70  $50.23  $50.18  $49.70    
             
Reconciliation of Non-GAAP Return on Average Tangible Common Equity:   
(N) Net income applicable to common shares$94,213  $97,029  $19,609  $60,762  $83,914 $271,613  $347,497 
Add: Intangible asset amortization2,634  2,701  2,820  2,863  3,017 11,018  11,844 
Less: Tax effect of intangible asset amortization(656) (589) (832) (799) (793)(2,732) (3,068)
After-tax intangible asset amortization1,978  2,112  1,988  2,064  2,224 8,286  8,776 
(O) Tangible net income applicable to common shares (non-GAAP)$96,191  $99,141  $21,597  $62,826  $86,138 $279,899  $356,273 
Total average shareholders' equity$4,050,286  $4,034,902  $3,908,846  $3,710,169  $3,622,184 $3,926,688  $3,461,535 
Less: Average preferred stock(412,500) (412,500) (273,489) (125,000) (125,000)(306,455) (125,000)
(P) Total average common shareholders' equity$3,637,786  $3,622,402  $3,635,357  $3,585,169  $3,497,184 $3,620,233  $3,336,535 
Less: Average intangible assets(682,290) (684,717) (686,526) (690,777) (689,286)(686,064) (641,802)
(Q) Total average tangible common shareholders’ equity (non-GAAP)$2,955,496  $2,937,685  $2,948,831  $2,894,392  $2,807,898 $2,934,169  $2,694,733 
Return on average common equity, annualized (N/P)10.30% 10.66% 2.17% 6.82% 9.52%7.50% 10.41%
Return on average tangible common equity, annualized (non-GAAP) (O/Q)12.95% 13.43% 2.95% 8.73% 12.17%9.54% 13.22%
             
Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:     
Income before taxes$134,711  $137,284  $30,703  $87,083  $116,682 $389,781  $480,101 
Add: Provision for credit losses1,180  25,026  135,053  52,961  7,826 214,220  53,864 
Pre-tax income, excluding provision for credit losses (non-GAAP)$135,891  $162,310  $165,756  $140,044  $124,508 $604,001  $533,965 

 

Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:Years Ended
 Dec 31,Dec 31,Dec 31,Dec 31,Dec 31,Dec 31,Dec 31,Dec 31,Dec 31,
 201820172016201520142013201220112010
Income before taxes$460,133 $389,997 $331,854 $251,765 $246,431 $224,440 $180,132 $128,033 $100,807 
Add: Provision for credit losses34,832  29,768  34,084  32,942  20,537  46,033  76,436  102,638  124,664 
Pre-tax income, excluding provision for credit losses (non-GAAP)$494,965 $419,765 $365,938 $284,707 $266,968 $270,473 $256,568 $230,671 $225,471 

WINTRUST SUBSIDIARIES AND LOCATIONS

Wintrust is a financial holding company whose common stock is traded on the Nasdaq Global Select Market (Nasdaq: WTFC). Its 15 community bank subsidiaries are: Lake Forest Bank & Trust Company, N.A., Hinsdale Bank & Trust Company, N.A., Wintrust Bank, N.A., in Chicago, Libertyville Bank & Trust Company, N.A., Barrington Bank & Trust Company, N.A., Crystal Lake Bank & Trust Company, N.A., Northbrook Bank & Trust Company, N.A., Schaumburg Bank & Trust Company, N.A., Village Bank & Trust, N.A., in Arlington Heights, Beverly Bank & Trust Company, N.A. in Chicago, Wheaton Bank & Trust Company, N.A., State Bank of The Lakes, N.A., in Antioch, Old Plank Trail Community Bank, N.A. in New Lenox, St. Charles Bank & Trust Company, N.A. and Town Bank, N.A., in Hartland, Wisconsin.

In addition to the locations noted above, the banks also operate facilities in Illinois in Addison, Algonquin, Aurora, Bloomingdale, Bolingbrook, Buffalo Grove, Burbank, Cary, Clarendon Hills, Crete, Countryside, Darien, Deerfield, Des Plaines, Downers Grove, Elgin, Elk Grove Village, Elmhurst, Evanston, Evergreen Park, Frankfort, Geneva, Glen Ellyn, Glencoe, Glenview, Gurnee, Grayslake, Hanover Park, Highland Park, Highwood, Hoffman Estates, Homer Glen, Itasca, Joliet, Lake Bluff, Lake Villa, Lansing, Lemont, Lindenhurst, Lynwood, Markham, Maywood, McHenry, Mokena, Mount Prospect, Mundelein, Naperville, North Chicago, Northfield, Norridge, Oak Lawn, Oak Brook, Orland Park, Palatine, Park Ridge, Prospect Heights, Ravinia, Riverside, Rolling Meadows, Round Lake Beach, Shorewood, Skokie, South Holland, Spring Grove, Steger, Stone Park, Vernon Hills, Wauconda, Waukegan, Western Springs, Willowbrook, Wilmette, Winnetka and Wood Dale, and in Wisconsin in Albany, Burlington, Clinton, Darlington, Delafield, Delavan, Elm Grove, Genoa City, Kenosha, Lake Geneva, Madison, Menomonee Falls, Milwaukee, Monroe, Pewaukee, Racine, Sharon, Wales, Walworth and Wind Lake, and in Dyer, Indiana and in Naples, Florida.

Additionally, the Company operates various non-bank business units:

  • FIRST Insurance Funding, a division of Lake Forest Bank & Trust Company, N.A., and Wintrust Life Finance, a division of Lake Forest Bank & Trust Company, N.A., serve commercial and life insurance loan customers, respectively, throughout the United States.
  • First Insurance Funding of Canada serves commercial insurance loan customers throughout Canada.
  • Tricom, Inc. of Milwaukee provides high-yielding, short-term accounts receivable financing and value-added out-sourced administrative services, such as data processing of payrolls, billing and cash management services, to temporary staffing service clients located throughout the United States.
  • Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., engages primarily in the origination and purchase of residential mortgages for sale into the secondary market through origination offices located throughout the United States. Loans are also originated nationwide through relationships with wholesale and correspondent offices.
  • Wintrust Investments, LLC is a broker-dealer providing a full range of private client and brokerage services to clients and correspondent banks located primarily in the Midwest.
  • Great Lakes Advisors LLC provides money management services and advisory services to individual accounts.
  • The Chicago Trust Company, N.A., a trust subsidiary, allows Wintrust to service customers’ trust and investment needs at each banking location.
  • Wintrust Asset Finance offers direct leasing opportunities.
  • CDEC provides Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code Section 1031.

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, such as the impacts of the COVID-19 pandemic, and which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 2019 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:

  • the severity, magnitude and duration of the COVID-19 pandemic and the direct and indirect impact of such pandemic, as well as responses to the pandemic by the government, businesses and consumers, on our operations and personnel, commercial activity and demand across our business and our customers’ businesses;
  • the disruption of global, national, state and local economies associated with the COVID-19 pandemic, which could affect the Company’s liquidity and capital positions, impair the ability of our borrowers to repay outstanding loans, impair collateral values and further increase our allowance for credit losses;
  • the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges;
  • economic conditions that affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;
  • negative effects suffered by us or our customers resulting from changes in U.S. trade policies;
  • 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 credit losses;
  • inaccurate assumptions in our analytical and forecasting models used to manage our loan portfolio;
  • changes in the level and volatility of interest rates, the capital markets and other market indices (including developments and volatility arising from or related to the COVID-19 pandemic) that may affect, among other things, the Company’s liquidity and the value of its assets and liabilities;
  • a prolonged period of near zero interest rates or potentially negative interest rates, either broadly or for some types of instruments, which may affect the Company’s net interest income and net interest margin, and which could materially adversely affect the Company’s profitability;
  • competitive pressures in the financial services business which may affect the pricing of the Company’s loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products;
  • failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of the Company’s recent or future acquisitions;
  • unexpected difficulties and losses related to FDIC-assisted acquisitions;
  • harm to the Company’s reputation;
  • any negative perception of the Company’s financial strength;
  • ability of the Company to raise additional capital on acceptable terms when needed;
  • disruption in capital markets, which may lower fair values for the Company’s investment portfolio;
  • ability of the Company to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations and to manage risks associated therewith;
  • failure or breaches of our security systems or infrastructure, or those of third parties;
  • security breaches, including denial of service attacks, hacking, social engineering attacks, malware intrusion or data corruption attempts and identity theft;
  • adverse effects on our information technology systems resulting from failures, human error or cyberattacks;
  • adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors;
  • increased costs as a result of protecting our customers from the impact of stolen debit card information;
  • accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions;
  • ability of the Company to attract and retain senior management experienced in the banking and financial services industries;
  • environmental liability risk associated with lending activities;
  • the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation;
  • losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith;
  • the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank;
  • the soundness of other financial institutions;
  • the expenses and delayed returns inherent in opening new branches and de novo banks;
  • liabilities, potential customer loss or reputational harm related to closings of existing branches;
  • examinations and challenges by tax authorities, and any unanticipated impact of the Tax Act;
  • changes in accounting standards, rules and interpretations such as the new CECL standard and related changes to address the impact of COVID-19, and the impact on the Company’s financial statements;
  • the ability of the Company to receive dividends from its subsidiaries;
  • uncertainty about the discontinued use of LIBOR and transition to an alternative rate;
  • a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;
  • legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies, including those changes that are in response to the COVID-19 pandemic, including without limitation the CARES Act, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, and the rules and regulations that may be promulgated thereunder;
  • a lowering of our credit rating;
  • changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet, including changes in response to the COVID-19 pandemic or otherwise;
  • regulatory restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business;
  • increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory environment;
  • the impact of heightened capital requirements;
  • increases in the Company’s FDIC insurance premiums, or the collection of special assessments by the FDIC;
  • delinquencies or fraud with respect to the Company’s premium finance business;
  • credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans;
  • the Company’s ability to comply with covenants under its credit facility; and
  • fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation.

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

CONFERENCE CALL, WEBCAST AND REPLAY

The Company will hold a conference call on Thursday, January 21, 2021 at 10:00 a.m. (Central Time) regarding fourth quarter and full year 2020 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #9780585. A simultaneous audio-only webcast and replay of the conference call as well as an accompanying slide presentation may be accessed via the Company’s website at https://www.wintrust.com, Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the fourth quarter and full year 2020 earnings press release will be available on the home page of the Company’s website at https://www.wintrust.com and at the Investor Relations, Investor News and Events, Press Releases link on its website.

FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, Founder & Chief Executive Officer
David A. Dykstra, Vice Chairman & Chief Operating Officer
(847) 939-9000
Web site address: www.wintrust.com


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