Exhibit 99.1
Wintrust Financial Corporation
9700 W. Higgins Road, Suite 800, Rosemont, Illinois 60018
News Release
 
 
 
FOR IMMEDIATE RELEASE
  
July 17, 2018
FOR MORE INFORMATION CONTACT:
Edward J. Wehmer, President & Chief Executive Officer
David A. Dykstra, Senior Executive Vice President & Chief Operating Officer
(847) 939-9000
Web site address: www.wintrust.com

Wintrust Financial Corporation Reports Record Second Quarter 2018 Net Income, an Increase of 38% Over Prior Year, and Year-to-Date Net Income of $171.6 million, an Increase of 39% Over Prior Year

ROSEMONT, ILLINOIS – Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq: WTFC) announced net income of $89.6 million or $1.53 per diluted common share for the second quarter of 2018 compared to net income of $82.0 million or $1.40 per diluted common share for the first quarter of 2018 and $64.9 million or $1.11 per diluted common share for the second quarter of 2017. The Company recorded net income of $171.6 million or $2.93 per diluted common share for the first six months of 2018 compared to net income of $123.3 million or $2.11 per diluted common share for the same period of 2017.

Highlights of the Second Quarter of 2018 *:
    
Total assets increased by $1.0 billion from the prior quarter and now total $29.5 billion.
Total deposits increased $1.1 billion from the prior quarter to $24.4 billion with non-interest bearing deposit accounts comprising 27% of total deposits.
Total loans increased by $548 million from the prior quarter.
Non-performing loans as a percentage of total loans decreased to 0.37% from 0.41% at the end of the prior quarter.
Allowance for loan losses as a percentage of total non-performing loans remained strong, increasing to 172%.
Net charge-offs decreased to $1.1 million, or two basis points of average total loans for the period.
Provision for credit losses totaled $5.0 million in the second quarter compared to $8.3 million in the prior quarter.
Net interest margin increased seven basis points and net interest income increased $13.1 million over the prior quarter.
Return on average assets increased to 1.26% from 1.20% in the first quarter. Return on average common equity increased to 11.94% from 11.29% in the first quarter.
Mortgage banking revenue increased to $39.8 million, up $8.9 million over the first quarter of 2018 due to higher originations during the traditional spring purchase market and a full quarter's impact from the iFreedom Direct Corporation DBA Veterans First Mortgage ("Veterans First") acquisition, offset by lower production margins and smaller positive fair market value adjustment to mortgage servicing rights.
Salaries and employee benefits increased $9.2 million from the most recent quarter due to a full quarter impact from the Veterans First acquisition as well as higher incentive compensation on variable pay based arrangements, commissions on mortgage originations and salaries due to the Company's growth.
Opened five new branches, including three locations in Illinois and two locations in Wisconsin.

* See "Supplemental Financial Measures/Ratios" on pages 11-12 for more information on non-GAAP measures.

Edward J. Wehmer, President and Chief Executive Officer, commented, "Wintrust reported net income of $89.6 million for the second quarter of 2018, the tenth consecutive quarter of record net income, and net income of $171.6 million for the first six months of 2018. These results were driven by strong loan and deposit growth and an increased net interest margin as we continue to benefit from rising interest rates. The second quarter of 2018 was also characterized by good credit quality metrics and increased mortgage banking revenue."
    
Mr. Wehmer continued, "We experienced strong loan growth within the commercial portfolio and premium finance receivables portfolios during the period. The commercial real estate portfolio remained relatively flat during the second quarter as elevated payoffs and paydowns offset new loan growth within the portfolio. We continue to take a measured approach in

1



evaluating new commercial real estate loan opportunities due to supply and demand issues in the market place, pricing competition and easing of underwriting standards by some competitors. Overall, we grew our loan portfolio by $548 million during the second quarter of 2018. Our loan pipelines improved to the highest levels since the second quarter of 2017. The increased loan volume, continued improvement in net interest margin from rising interest rates and an additional day in the second quarter compared to the first quarter helped net interest income increase by $13.1 million in the second quarter of 2018. Deposit growth was strong in the second quarter of 2018 as deposits increased $1.1 billion and exceeded $24 billion as of the end of the quarter. Our deposit growth was primarily the result of growth in money market accounts and retail certificate of deposit accounts as active marketing campaigns began to take effect. Five branches added during the second quarter of 2018 contributed $134 million of retail deposit balances to this growth."

Commenting on credit quality, Mr. Wehmer noted, "During the second quarter of 2018, the Company continued its practice of addressing and resolving non-performing credits in a timely fashion. Net charge-offs totaled $1.1 million in the current quarter, decreasing $5.6 million from the first quarter of 2018. Additionally, net charge-offs as a percentage of average total loans decreased to two basis points from 13 basis points in the first quarter. Total non-performing assets decreased $7.5 million during the second quarter of 2018 resulting in non-performing assets as a percentage of total assets dropping from 0.44% to 0.40% during the period. Total non-performing loans decreased $6.4 million in the second quarter of 2018 and now total $83.3 million, or 0.37% of total loans. As a percentage of non-performing loans, the allowance for loan losses increased to 172% at the end of the second quarter of 2018 from 156% at the end of the first quarter of 2018. We believe that the Company's reserves remain appropriate."

Mr. Wehmer further commented, "Mortgage banking revenue in the second quarter of 2018 totaled $39.8 million, an increase of $8.9 million compared to the first quarter of 2018. Mortgage loan origination volumes in the second quarter of 2018 increased to $1.1 billion from $779 million in the first quarter of 2018 as a result of higher purchase originations during the traditional spring purchase market and a full quarter's impact from the Veterans First acquisition. The increase in mortgage banking revenue from higher originations was tempered by lower production margins and smaller positive fair market value adjustment to mortgage servicing rights as interest rates increased less during the second quarter of 2018 when compared to the first quarter of 2018. Home purchases activity represented 80% of the volume for the second quarter of 2018 compared to 73% in the first quarter of 2018. Our mortgage pipeline remains relatively strong. With respect to production margin, we anticipate that it will decline slightly in the third quarter with stabilization in future periods. We continue to focus on efficiencies in our delivery channels and operating costs in our mortgage banking area."

Turning to the future, Mr. Wehmer stated, "Our growth engine continued its momentum into the second quarter of 2018 and we expect that to continue for the second half of the year. Loan growth at the end of the second quarter of 2018 should add to this momentum as period-end loan balances exceeded the second quarter average balance by $327 million. Wintrust continues to take a steady and measured approach to achieving our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and continuing to increase shareholder value. As our growth engine continues its momentum, we expect continued organic growth while still focusing on expense control. We remain well-positioned for a rising interest rate environment in the future, which, coupled with this loan growth, should continue to grow net interest income. Evaluating strategic acquisitions and organic branch growth will also be a part of our overall growth strategy with the goal of becoming Chicago’s bank and Wisconsin’s bank. To that end, the Company opened five new branches in the second quarter of 2018 and will continue to evaluate future locations in our market area including four expected branch openings in the third quarter of 2018. Our opportunities for both internal growth and external growth remain consistently strong."


2



The graphs below illustrate certain highlights of the second quarter of 2018.

chart-87badb3edd5953098b3a01.jpg
chart-acf08cffaedf13d1743a01.jpg


3



chart-f76bc0a957385d8fbd2a01.jpg

chart-53327de45ac253ab855a01.jpg


4



chart-2bd2a526f6015667937a01.jpg


chart-e28b53d1c4a2506f89ea01.jpg


chart-b1fd58daa9ec5e89b28.jpg

5



chart-72737309cb055301982a01.jpg


6



Wintrust’s key operating measures and growth rates for the second quarter of 2018, as compared to the sequential and linked quarters, are shown in the table below:
 
 
 
 
 
 
 
 
% or(4)
basis point  (bp) change from
1st Quarter
2018
 
% or
basis point  (bp)
change from
2nd Quarter
2017
  
 
Three Months Ended
 
 
(Dollars in thousands)
 
June 30,
2018
 
March 31,
2018
 
June 30,
2017
 
 
Net income
 
$
89,580

 
$
81,981

 
$
64,897

 
9

 
38

Net income per common share – diluted
 
$
1.53

 
$
1.40

 
$
1.11

 
9

 
38

Net revenue (1)
 
$
333,403

 
$
310,761

 
$
294,381

 
7

 
13

Net interest income
 
238,170

 
225,082

 
204,409

 
6

 
17

Net interest margin
 
3.61
%
 
3.54
%
 
3.41
%
 
7

bp 
 
20

bp 
Net interest margin - fully taxable equivalent (non-GAAP) (2)
 
3.63
%
 
3.56
%
 
3.43
%
 
7

bp
 
20

bp
Net overhead ratio (3)
 
1.57
%
 
1.58
%
 
1.44
%
 
(1
)
bp 
 
13

bp 
Return on average assets
 
1.26
%
 
1.20
%
 
1.00
%
 
6

bp 
 
26

bp 
Return on average common equity
 
11.94
%
 
11.29
%
 
9.55
%
 
65

bp 
 
239

bp 
Return on average tangible common equity (non-GAAP) (2)
 
14.72
%
 
14.02
%
 
12.02
%
 
70

bp
 
270

bp
At end of period
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
29,464,588

 
$
28,456,772

 
$
26,929,265

 
14

 
9

Total loans, excluding covered loans
 
22,610,560

 
22,062,134

 
20,743,332

 
10

 
9

Total deposits
 
24,365,479

 
23,279,327

 
22,605,692

 
19

 
8

Total shareholders’ equity
 
3,106,871

 
3,031,250

 
2,839,458

 
10

 
9

 
(1)
Net revenue is net interest income plus non-interest income.
(2)
See "Supplemental Financial Measures/Ratios" for additional information on this performance measure/ratio.
(3)
The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period's average total assets. A lower ratio indicates a higher degree of efficiency.
(4)
Period-end balance sheet percentage changes are annualized.
Certain returns, yields, performance ratios, or quarterly growth rates are “annualized” in this presentation to represent an annual time period. This is done for analytical purposes to better discern for decision-making purposes underlying performance trends when compared to full-year or year-over-year amounts. For example, a 5% growth rate for a quarter would represent an annualized 20% growth rate. Additional supplemental financial information showing quarterly trends can be found on the Company’s website at www.wintrust.com by choosing “Financial Reports” under the “Investor Relations” heading, and then choosing “Financial Highlights.”



7



WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights
 
 
Three Months Ended
 
Six Months Ended
(Dollars in thousands, except per share data)
 
June 30,
2018
 
March 31,
2018
 
June 30,
2017
 
June 30,
2018
 
June 30,
2017
Selected Financial Condition Data (at end of period):
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
29,464,588

 
$
28,456,772

 
$
26,929,265

 
 
 
 
Total loans, excluding covered loans
 
22,610,560

 
22,062,134

 
20,743,332

 
 
 
 
Total deposits
 
24,365,479

 
23,279,327

 
22,605,692

 
 
 
 
Junior subordinated debentures
 
253,566

 
253,566

 
253,566

 
 
 
 
Total shareholders’ equity
 
3,106,871

 
3,031,250

 
2,839,458

 
 
 
 
Selected Statements of Income Data:
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
238,170

 
$
225,082

 
$
204,409

 
$
463,252

 
$
396,989

Net revenue (1)
 
333,403

 
310,761

 
294,381

 
644,164

 
555,726

Net income
 
89,580

 
81,981

 
64,897

 
171,561

 
123,275

Net income per common share – Basic
 
$
1.55

 
$
1.42

 
$
1.15

 
$
2.98

 
$
2.20

Net income per common share – Diluted
 
$
1.53

 
$
1.40

 
$
1.11

 
$
2.93

 
$
2.11

Selected Financial Ratios and Other Data:
 
 
 
 
 
 
 
 
 
 
Performance Ratios:
 
 
 
 
 
 
 
 
 
 
Net interest margin
 
3.61
%
 
3.54
%
 
3.41
%
 
3.58
%
 
3.38
%
Net interest margin - fully taxable equivalent (non-GAAP) (2)
 
3.63
%
 
3.56
%
 
3.43
%
 
3.60
%
 
3.41
%
Non-interest income to average assets
 
1.34
%
 
1.25
%
 
1.39
%
 
1.29
%
 
1.25
%
Non-interest expense to average assets
 
2.90
%
 
2.83
%
 
2.83
%
 
2.87
%
 
2.77
%
Net overhead ratio (3)
 
1.57
%
 
1.58
%
 
1.44
%
 
1.58
%
 
1.52
%
Return on average assets
 
1.26
%
 
1.20
%
 
1.00
%
 
1.23
%
 
0.97
%
Return on average common equity
 
11.94
%
 
11.29
%
 
9.55
%
 
11.62
%
 
9.24
%
Return on average tangible common equity (non-GAAP) (2)
 
14.72
%
 
14.02
%
 
12.02
%
 
14.38
%
 
11.74
%
Average total assets
 
$
28,567,579

 
$
27,809,597

 
$
26,050,949

 
$
28,190,683

 
$
25,632,004

Average total shareholders’ equity
 
3,064,154

 
2,995,592

 
2,800,905

 
3,030,062

 
2,771,768

Average loans to average deposits ratio (excluding covered loans)
 
95.5
%
 
95.2
%
 
94.1
%
 
95.3
%
 
93.3
%
Period-end loans to deposits ratio (excluding covered loans)
 
92.8
%
 
94.8
%
 
91.8
%
 
 
 
 
Common Share Data at end of period:
 
 
 
 
 
 
 
 
 
 
Market price per common share
 
$
87.05

 
$
86.05

 
$
76.44

 
 
 
 
Book value per common share (2)
 
$
52.94

 
$
51.66

 
$
48.73

 
 
 
 
Tangible common book value per share (2)
 
$
43.50

 
$
42.17

 
$
39.40

 
 
 
 
Common shares outstanding
 
56,329,276

 
56,256,498

 
55,699,927

 
 
 
 
Other Data at end of period:(6)
 
 
 
 
 
 
 
 
 
 
Leverage Ratio (4)
 
9.4
%
 
9.3
%
 
9.2
%
 
 
 
 
Tier 1 capital to risk-weighted assets (4)
 
10.0
%
 
10.0
%
 
9.8
%
 
 
 
 
Common equity Tier 1 capital to risk-weighted assets (4)
 
9.5
%
 
9.5
%
 
9.3
%
 
 
 
 
Total capital to risk-weighted assets (4)
 
12.0
%
 
12.0
%
 
12.0
%
 
 
 
 
Allowance for credit losses (5)
 
$
144,645

 
$
140,746

 
$
131,296

 
 
 
 
Non-performing loans
 
83,282

 
89,690

 
69,050

 
 
 
 
Allowance for credit losses to total loans (5)
 
0.64
%
 
0.64
%
 
0.63
%
 
 
 
 
Non-performing loans to total loans
 
0.37
%
 
0.41
%
 
0.33
%
 
 
 
 
Number of:
 
 
 
 
 
 
 
 
 
 
Bank subsidiaries
 
15

 
15

 
15

 
 
 
 
Banking offices
 
162

 
157

 
153

 
 
 
 
 
(1)
Net revenue includes net interest income and non-interest income.
(2)
See “Supplemental Financial Measures/Ratios” for additional information on this performance measure/ratio.
(3)
The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.
(4)
Capital ratios for current quarter-end are estimated.
(5)
The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excludes the allowance for covered loan losses.
(6)
Asset quality ratios exclude covered loans.

8



WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
 
 
 
(Unaudited)
 
 
 
(Unaudited)
(In thousands)
 
June 30,
2018
 
December 31,
2017
 
June 30,
2017
Assets
 
 
 
 
 
 
Cash and due from banks
 
$
304,580

 
$
277,534

 
$
296,105

Federal funds sold and securities purchased under resale agreements
 
62

 
57

 
56

Interest bearing deposits with banks
 
1,221,407

 
1,063,242

 
1,011,635

Available-for-sale securities, at fair value
 
1,940,787

 
1,803,666

 
1,649,636

Held-to-maturity securities, at amortized cost
 
890,834

 
826,449

 
793,376

Trading account securities
 
862

 
995

 
1,987

Equity securities with readily determinable fair value
 
37,839

 

 

Federal Home Loan Bank and Federal Reserve Bank stock
 
96,699

 
89,989

 
80,812

Brokerage customer receivables
 
16,649

 
26,431

 
23,281

Mortgage loans held-for-sale
 
455,712

 
313,592

 
382,837

Loans, net of unearned income, excluding covered loans
 
22,610,560

 
21,640,797

 
20,743,332

Covered loans
 

 

 
50,119

Total loans
 
22,610,560

 
21,640,797

 
20,793,451

Allowance for loan losses
 
(143,402
)
 
(137,905
)
 
(129,591
)
Allowance for covered loan losses
 

 

 
(1,074
)
Net loans
 
22,467,158

 
21,502,892

 
20,662,786

Premises and equipment, net
 
639,345

 
621,895

 
605,211

Lease investments, net
 
194,160

 
212,335

 
191,248

Accrued interest receivable and other assets
 
666,673

 
567,374

 
577,359

Trade date securities receivable
 
450

 
90,014

 
133,130

Goodwill
 
509,957

 
501,884

 
500,260

Other intangible assets
 
21,414

 
17,621

 
19,546

Total assets
 
$
29,464,588

 
$
27,915,970

 
$
26,929,265

Liabilities and Shareholders’ Equity
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
Non-interest bearing
 
$
6,520,724

 
$
6,792,497

 
$
6,294,052

Interest bearing
 
17,844,755

 
16,390,850

 
16,311,640

 Total deposits
 
24,365,479

 
23,183,347

 
22,605,692

Federal Home Loan Bank advances
 
667,000

 
559,663

 
318,270

Other borrowings
 
255,701

 
266,123

 
277,710

Subordinated notes
 
139,148

 
139,088

 
139,029

Junior subordinated debentures
 
253,566

 
253,566

 
253,566

Trade date securities payable
 

 

 
5,151

Accrued interest payable and other liabilities
 
676,823

 
537,244

 
490,389

Total liabilities
 
26,357,717

 
24,939,031

 
24,089,807

Shareholders’ Equity:
 
 
 
 
 
 
Preferred stock
 
125,000

 
125,000

 
125,000

Common stock
 
56,437

 
56,068

 
55,802

Surplus
 
1,547,511

 
1,529,035

 
1,511,080

Treasury stock
 
(5,355
)
 
(4,986
)
 
(4,884
)
Retained earnings
 
1,464,494

 
1,313,657

 
1,198,997

Accumulated other comprehensive loss
 
(81,216
)
 
(41,835
)
 
(46,537
)
Total shareholders’ equity
 
3,106,871

 
2,976,939

 
2,839,458

Total liabilities and shareholders’ equity
 
$
29,464,588

 
$
27,915,970

 
$
26,929,265



9



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

  
Three Months Ended
 
Six Months Ended
(In thousands, except per share data)
June 30,
2018
 
March 31,
2018
 
June 30,
2017
 
June 30,
2018
 
June 30,
2017
Interest income
 
 
 
 
 
 
 
 
 
Interest and fees on loans
255,063

 
234,994

 
209,289

 
490,057

 
406,205

        Mortgage loans held-for-sale
4,226

 
2,818

 
3,420

 
7,044

 
5,818

Interest bearing deposits with banks
3,243

 
2,796

 
1,634

 
6,039

 
3,257

Federal funds sold and securities purchased under resale agreements
1

 

 
1

 
1

 
2

Investment securities
19,888

 
19,128

 
15,524

 
39,016

 
29,097

Trading account securities
4

 
14

 
4

 
18

 
15

Federal Home Loan Bank and Federal Reserve Bank stock
1,455

 
1,298

 
1,153

 
2,753

 
2,223

Brokerage customer receivables
167

 
157

 
156

 
324

 
323

Total interest income
284,047

 
261,205

 
231,181

 
545,252

 
446,940

Interest expense
 
 
 
 
 
 
 
 
 
Interest on deposits
35,293

 
26,549

 
18,471

 
61,842

 
34,741

Interest on Federal Home Loan Bank advances
4,263

 
3,639

 
2,933

 
7,902

 
4,523

Interest on other borrowings
1,698

 
1,699

 
1,149

 
3,397

 
2,288

Interest on subordinated notes
1,787

 
1,773

 
1,786

 
3,560

 
3,558

Interest on junior subordinated debentures
2,836

 
2,463

 
2,433

 
5,299

 
4,841

Total interest expense
45,877

 
36,123

 
26,772

 
82,000

 
49,951

Net interest income
238,170

 
225,082

 
204,409

 
463,252

 
396,989

Provision for credit losses
5,043

 
8,346

 
8,891

 
13,389

 
14,100

Net interest income after provision for credit losses
233,127

 
216,736

 
195,518

 
449,863

 
382,889

Non-interest income
 
 
 
 
 
 
 
 
 
Wealth management
22,617

 
22,986

 
19,905

 
45,603

 
40,053

Mortgage banking
39,834

 
30,960

 
35,939

 
70,794

 
57,877

Service charges on deposit accounts
9,151

 
8,857

 
8,696

 
18,008

 
16,961

Gains (losses) on investment securities, net
12

 
(351
)
 
47

 
(339
)
 
(8
)
Fees from covered call options
669

 
1,597

 
890

 
2,266

 
1,649

Trading gains (losses), net
124

 
103

 
(420
)
 
227

 
(740
)
Operating lease income, net
8,746

 
9,691

 
6,805

 
18,437

 
12,587

Other
14,080

 
11,836

 
18,110

 
25,916

 
30,358

Total non-interest income
95,233

 
85,679

 
89,972

 
180,912

 
158,737

Non-interest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
121,675

 
112,436

 
106,502

 
234,111

 
205,818

Equipment
10,527

 
10,072

 
9,909

 
20,599

 
18,911

Operating lease equipment depreciation
6,940

 
6,533

 
5,662

 
13,473

 
10,298

Occupancy, net
13,663

 
13,767

 
12,586

 
27,430

 
25,687

Data processing
8,752

 
8,493

 
7,804

 
17,245

 
15,729

Advertising and marketing
11,782

 
8,824

 
8,726

 
20,606

 
13,876

Professional fees
6,484

 
6,649

 
7,510

 
13,133

 
12,170

Amortization of other intangible assets
997

 
1,004

 
1,141

 
2,001

 
2,305

FDIC insurance
4,598

 
4,362

 
3,874

 
8,960

 
8,030

OREO expense, net
980

 
2,926

 
739

 
3,906

 
2,404

Other
20,371

 
19,283

 
19,091

 
39,654

 
36,434

Total non-interest expense
206,769

 
194,349

 
183,544

 
401,118

 
351,662

Income before taxes
121,591

 
108,066

 
101,946

 
229,657

 
189,964

Income tax expense
32,011

 
26,085

 
37,049

 
58,096

 
66,689

Net income
$
89,580

 
$
81,981

 
$
64,897

 
$
171,561

 
$
123,275

Preferred stock dividends
2,050

 
2,050

 
2,050

 
4,100

 
5,678

Net income applicable to common shares
$
87,530

 
$
79,931

 
$
62,847

 
$
167,461

 
$
117,597

Net income per common share - Basic
$
1.55

 
$
1.42

 
$
1.15

 
$
2.98

 
$
2.20

Net income per common share - Diluted
$
1.53

 
$
1.40

 
$
1.11

 
$
2.93

 
$
2.11

Cash dividends declared per common share
$
0.19

 
$
0.19

 
$
0.14

 
$
0.38

 
$
0.28

Weighted average common shares outstanding
56,299

 
56,137

 
54,775

 
56,218

 
53,528

Dilutive potential common shares
928

 
888

 
1,812

 
909

 
2,981

Average common shares and dilutive common shares
57,227

 
57,025

 
56,587

 
57,127

 
56,509


10



EARNINGS PER SHARE

The following table shows the computation of basic and diluted earnings per share for the periods indicated:
 
 
 
Three Months Ended
 
Six Months Ended
(In thousands, except per share data)
 
 
June 30,
2018
 
March 31,
2018
 
June 30,
2017
 
June 30,
2018
 
June 30,
2017
Net income
 
 
$
89,580

 
$
81,981

 
$
64,897

 
$
171,561

 
$
123,275

Less: Preferred stock dividends
 
 
2,050

 
2,050

 
2,050

 
4,100

 
5,678

Net income applicable to common shares—Basic
(A)
 
87,530

 
79,931

 
62,847

 
167,461

 
117,597

Add: Dividends on convertible preferred stock, if dilutive
 
 

 

 

 

 
1,578

Net income applicable to common shares—Diluted
(B)
 
87,530

 
79,931

 
62,847

 
167,461

 
119,175

Weighted average common shares outstanding
(C)
 
56,299

 
56,137

 
54,775

 
56,218

 
53,528

Effect of dilutive potential common shares:
 
 
 
 
 
 
 
 
 
 
 
Common stock equivalents
 
 
928

 
888

 
927

 
909

 
994

Convertible preferred stock, if dilutive
 
 

 

 
885

 

 
1,987

Weighted average common shares and effect of dilutive potential common shares
(D)
 
57,227

 
57,025

 
56,587

 
57,127

 
56,509

Net income per common share:
 
 
 
 
 
 
 
 
 
 
 
Basic
(A/C)
 
$
1.55

 
$
1.42

 
$
1.15

 
$
2.98

 
$
2.20

Diluted
(B/D)
 
$
1.53

 
$
1.40

 
$
1.11

 
$
2.93

 
$
2.11


Potentially dilutive common shares can result from stock options, restricted stock unit awards, stock warrants, the Company’s convertible preferred stock and shares to be issued under the Employee Stock Purchase Plan and the Directors Deferred Fee and Stock Plan, being treated as if they had been either exercised or issued, computed by application of the treasury stock method. While potentially dilutive common shares are typically included in the computation of diluted earnings per share, potentially dilutive common shares are excluded from this computation in periods in which the effect would reduce the loss per share or increase the income per share. For diluted earnings per share, net income applicable to common shares can be affected by the conversion of the Company’s convertible preferred stock. Where the effect of this conversion would reduce the loss per share or increase the income per share for a period, net income applicable to common shares is not adjusted by the associated preferred dividends. On April 25, 2017, 2,073 shares of the Series C Preferred Stock were converted at the option of the respective holder into 51,244 shares of the Company's common stock, pursuant to the terms of the Series C Preferred Stock. On April 27, 2017, the Company caused a mandatory conversion of its outstanding 124,184 shares of Series C Preferred Stock into 3,069,828 shares of the Company's common stock at a conversion rate of 24.72 shares of common stock per share of Series C Preferred Stock. Cash was paid in lieu of fractional shares for an amount considered insignificant.

SUPPLEMENTAL FINANCIAL MEASURES/RATIOS

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

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability.

11




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

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
June 30,
 
June 30,
(Dollars and shares in thousands)
2018
 
2018
 
2017
 
2017
 
2017
 
2018
 
2017
Calculation of Net Interest Margin and Efficiency Ratio
 
 
 
 
 
 
 
 
 
 
 
 
 
(A) Interest Income (GAAP)
$
284,047

 
$
261,205

 
$
251,840

 
$
247,688

 
$
231,181

 
$
545,252

 
$
446,940

Taxable-equivalent adjustment:
 
 
 
 
 
 
 
 
 
 

 

 - Loans
812

 
670

 
1,106

 
1,033

 
831

 
1,482

 
1,621

 - Liquidity Management Assets
566

 
531

 
1,019

 
921

 
866

 
1,097

 
1,773

 - Other Earning Assets
1

 
3

 
2

 
5

 
2

 
4

 
7

(B) Interest Income - FTE
$
285,426

 
$
262,409

 
$
253,967

 
$
249,647

 
$
232,880

 
$
547,835

 
$
450,341

(C) Interest Expense (GAAP)
45,877

 
36,123

 
32,741

 
31,700

 
26,772

 
82,000

 
49,951

(D) Net Interest Income - FTE (B minus C)
$
239,549

 
$
226,286

 
$
221,226

 
$
217,947

 
$
206,108

 
$
465,835

 
$
400,390

(E) Net Interest Income (GAAP) (A minus C)
$
238,170

 
$
225,082

 
$
219,099

 
$
215,988

 
$
204,409

 
$
463,252

 
$
396,989

Net interest margin (GAAP-derived)
3.61
%
 
3.54
%
 
3.45
%
 
3.43
%
 
3.41
%
 
3.58
%
 
3.38
%
Net interest margin - FTE
3.63
%
 
3.56
%
 
3.49
%
 
3.46
%
 
3.43
%
 
3.60
%
 
3.41
%
(F) Non-interest income
$
95,233

 
$
85,679

 
$
81,038

 
$
79,731

 
$
89,972

 
$
180,912

 
$
158,737

(G) Gains (losses) on investment securities, net
12

 
(351
)
 
14

 
39

 
47

 
(339
)
 
(8
)
(H) Non-interest expense
206,769

 
194,349

 
196,580

 
183,575

 
183,544

 
401,118

 
351,662

Efficiency ratio (H/(E+F-G))
62.02
%
 
62.47
%
 
65.50
%
 
62.09
%
 
62.36
%
 
62.24
%
 
63.28
%
Efficiency ratio - FTE (H/(D+F-G))
61.76
%
 
62.23
%
 
65.04
%
 
61.68
%
 
62.00
%
 
61.99
%
 
62.89
%
Calculation of Tangible Common Equity ratio (at period end)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
$
3,106,871

 
$
3,031,250

 
$
2,976,939

 
$
2,908,925

 
$
2,839,458

 
 
 
 
Less: Non-convertible preferred stock
(125,000
)
 
(125,000
)
 
(125,000
)
 
(125,000
)
 
(125,000
)
 
 
 
 
Less: Intangible assets
(531,371
)
 
(533,910
)
 
(519,505
)
 
(520,672
)
 
(519,806
)
 
 
 
 
(I) Total tangible common shareholders’ equity
$
2,450,500

 
$
2,372,340

 
$
2,332,434

 
$
2,263,253

 
$
2,194,652

 
 
 
 
Total assets
$
29,464,588

 
$
28,456,772

 
$
27,915,970

 
$
27,358,162

 
$
26,929,265

 
 
 
 
Less: Intangible assets
(531,371
)
 
(533,910
)
 
(519,505
)
 
(520,672
)
 
(519,806
)
 
 
 
 
(J) Total tangible assets
$
28,933,217

 
$
27,922,862

 
$
27,396,465

 
$
26,837,490

 
$
26,409,459

 
 
 
 
Tangible common equity ratio (I/J)
8.5
%
 
8.5
%
 
8.5
%
 
8.4
%
 
8.3
%
 
 
 
 
Calculation of book value per share
 
 
 
 
 
 
 
 
 
 
 
 
 
Total shareholders’ equity
$
3,106,871

 
$
3,031,250

 
$
2,976,939

 
$
2,908,925

 
$
2,839,458

 
 
 
 
Less: Preferred stock
(125,000
)
 
(125,000
)
 
(125,000
)
 
(125,000
)
 
(125,000
)
 
 
 
 
(K) Total common equity
$
2,981,871

 
$
2,906,250

 
$
2,851,939

 
$
2,783,925

 
$
2,714,458

 
 
 
 
(L) Actual common shares outstanding
56,329

 
56,256

 
55,965

 
55,838

 
55,700

 
 
 
 
Book value per common share (K/L)
$
52.94

 
$
51.66

 
$
50.96

 
$
49.86

 
$
48.73

 
 
 
 
Tangible common book value per share (I/L)
$
43.50

 
$
42.17

 
$
41.68

 
$
40.53

 
$
39.40

 
 
 
 
Calculation of return on average common equity
 
 
 
 
 
 
 
 
 
 
 
 
 
(M) Net income applicable to common shares
$
87,530

 
$
79,931

 
$
66,731

 
$
63,576

 
$
62,847

 
$
167,461

 
$
117,597

Add: After-tax intangible asset amortization
734

 
761

 
738

 
672

 
726

 
1,495

 
1,497

(N) Tangible net income applicable to common shares
$
88,264

 
$
80,692

 
$
67,469

 
$
64,248

 
$
63,573

 
$
168,956

 
$
119,094

Total average shareholders' equity
$
3,064,154

 
$
2,995,592

 
$
2,942,999

 
$
2,882,682

 
$
2,800,905

 
$
3,030,062

 
$
2,771,768

Less: Average preferred stock
(125,000
)
 
(125,000
)
 
(125,000
)
 
(125,000
)
 
(161,028
)
 
(125,000
)
 
(205,893
)
(O) Total average common shareholders' equity
$
2,939,154

 
$
2,870,592

 
$
2,817,999

 
$
2,757,682

 
$
2,639,877

 
$
2,905,062

 
$
2,565,875

Less: Average intangible assets
(533,496
)
 
(536,676
)
 
(519,626
)
 
(520,333
)
 
(519,340
)
 
(535,077
)
 
(519,840
)
(P) Total average tangible common shareholders’ equity
$
2,405,658

 
$
2,333,916

 
$
2,298,373

 
$
2,237,349

 
$
2,120,537

 
$
2,369,985

 
$
2,046,035

Return on average common equity, annualized (M/O)
11.94
%
 
11.29
%
 
9.39
%
 
9.15
%
 
9.55
%
 
11.62
%
 
9.24
%
Return on average tangible common equity, annualized (N/P)
14.72
%
 
14.02
%
 
11.65
%
 
11.39
%
 
12.02
%
 
14.38
%
 
11.74
%


12



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 second quarter of 2018, revenue within this unit was primarily driven by increased net interest income due to a higher net interest margin, increased earning assets and one additional day in the second quarter. The net interest margin increased in the second quarter of 2018 compared to the first quarter of 2018 primarily as a result of higher yields on the commercial and commercial real estate loan portfolios (excluding lease loans) and the liquidity management assets portfolio, partially offset by higher rates on interest-bearing liabilities. Mortgage banking revenue increased by $8.9 million from $31.0 million for the first quarter of 2018 to $39.8 million for the second quarter of 2018. The higher revenue was primarily due to originations during the current period increasing to $1.1 billion from $778.9 million in the first quarter of 2018 as a result of typical seasonality in our primary markets and one full quarter's impact of Veterans First. Home purchases represented 80% of loan origination volume for the second quarter of 2018. The increase in revenue from higher originations was tempered by lower production margins and smaller positive fair market value adjustment to mortgage servicing rights as interest rates increased less during the second quarter of 2018 when compared to the first quarter of 2018. The Company's gross commercial and commercial real estate loan pipelines remain strong. Before the impact of scheduled payments and prepayments, at June 30, 2018, gross commercial and commercial real estate loan pipelines totaled $1.3 billion, or $847.4 million when adjusted for the probability of closing, compared to $1.1 billion, or $688.4 million when adjusted for the probability of closing, at March 31, 2018.

Specialty Finance

Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries and accounts receivable financing, value-added, out-sourced administrative services, and other services. In the second quarter of 2018, the specialty finance unit experienced higher revenue as a result of increased volumes and higher yields within its insurance premium financing receivables portfolio. Originations of $2.1 billion during the second quarter of 2018 resulted in a $232.2 million increase in average balances. The increase in average balances along with higher yields on these loans resulted in a $5.3 million increase in interest income attributed to this portfolio. The Company's leasing business remained steady during the second quarter of 2018, with its portfolio of assets, including capital leases, loans and equipment on operating leases, totaling $1.0 billion at the end of the second quarter of 2018. Revenues from the Company's out-sourced administrative services business remained steady, totaling approximately $1.2 million in the second quarter of 2018 and $1.1 million in the first quarter of 2018.

Wealth Management

Through three separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue slightly decreased in the second quarter of 2018 to $22.6 million from $23.0 million in the first quarter of 2018. The decrease in revenue was primarily due to a decrease in brokerage fees due to a reduction in trading activity during the period. At June 30, 2018, the Company’s wealth management subsidiaries had approximately $24.6 billion of assets under administration, which includes $2.9 billion of assets owned by the Company and its subsidiary banks, representing a $299.0 million increase from the $24.3 billion of assets under administration at March 31, 2018. This increase in assets under administration was primarily driven by new customers and market appreciation. Starting in August, our brokerage services subsidiary, Wayne Hummer Investments, LLC, will be renamed to Wintrust Investments, LLC to better align with our Wintrust brand.

13



LOANS

Loan Portfolio Mix and Growth Rates
 
 
 
 
 
 
 
 
 
% Growth
(Dollars in thousands)
 
June 30,
2018
 
December 31,
2017
 
June 30,
2017
 
From (1)
December 31,
2017
 
From
June 30,
2017
Balance:
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
7,289,060

 
$
6,787,677

 
$
6,406,289

 
15
 %
 
14
 %
Commercial real estate
 
6,575,084

 
6,580,618

 
6,402,494

 

 
3

Home equity
 
593,500

 
663,045

 
689,483

 
(21
)
 
(14
)
Residential real estate
 
895,470

 
832,120

 
762,810

 
15

 
17

Premium finance receivables - commercial
 
2,833,452

 
2,634,565

 
2,648,386

 
15

 
7

Premium finance receivables - life insurance
 
4,302,288

 
4,035,059

 
3,719,043

 
13

 
16

Consumer and other
 
121,706

 
107,713

 
114,827

 
26

 
6

Total loans, net of unearned income, excluding covered loans
 
$
22,610,560

 
$
21,640,797

 
$
20,743,332

 
9
 %
 
9
 %
Covered loans
 

 

 
50,119

 

 
(100
)
Total loans, net of unearned income
 
$
22,610,560

 
$
21,640,797

 
$
20,793,451

 
9
 %
 
9
 %
Mix:
 
 
 
 
 
 
 
 
 
 
Commercial
 
32
%
 
31
%
 
31
%
 
 
 
 
Commercial real estate
 
29

 
30

 
31

 
 
 
 
Home equity
 
3

 
3

 
3

 
 
 
 
Residential real estate
 
4

 
4

 
3

 
 
 
 
Premium finance receivables - commercial
 
12

 
12

 
13

 
 
 
 
Premium finance receivables - life insurance
 
19

 
19

 
18

 
 
 
 
Consumer and other
 
1

 
1

 
1

 
 
 
 
Total loans, net of unearned income, excluding covered loans
 
100
%
 
100
%
 
100
%
 
 
 
 
Covered loans
 

 

 

 
 
 
 
Total loans, net of unearned income
 
100
%
 
100
%
 
100
%
 
 
 
 
 
(1)
Annualized
















14



Commercial and Commercial Real Estate Loan Portfolios
 
 
As of June 30, 2018
 
 
 
 
% of
Total
Balance
 
Nonaccrual
 
> 90 Days
Past Due
and Still
Accruing
 
Allowance
For Loan
Losses
Allocation
  
 
 
 
(Dollars in thousands)
 
Balance
 
Commercial:
 
 
 
 
 
 
 
 
 
 
Commercial, industrial and other
 
$
4,621,789

 
33.2
%
 
$
13,543

 
$

 
$
39,704

Franchise
 
957,339

 
6.9

 
2,438

 

 
8,743

Mortgage warehouse lines of credit
 
200,060

 
1.4

 

 

 
1,598

Asset-based lending
 
1,042,755

 
7.5

 
2,158

 

 
8,958

Leases
 
458,614

 
3.3

 
249

 

 
1,237

PCI - commercial loans (1)
 
8,503

 
0.1

 

 
882

 
487

Total commercial
 
$
7,289,060

 
52.4
%
 
$
18,388

 
$
882

 
$
60,727

Commercial Real Estate:
 
 
 
 
 
 
 
 
 
 
Construction
 
$
807,235

 
5.8
%
 
$
1,554

 
$

 
$
9,337

Land
 
115,357

 
0.8

 
228

 

 
3,716

Office
 
894,349

 
6.5

 
1,333

 

 
5,971

Industrial
 
882,525

 
6.4

 
185

 

 
5,902

Retail
 
867,639

 
6.3

 
11,540

 

 
8,085

Multi-family
 
952,048

 
6.9

 
342

 

 
9,688

Mixed use and other
 
1,949,242

 
14.1

 
4,013

 

 
14,859

PCI - commercial real estate (1)
 
106,689

 
0.8