Wintrust Financial Corporation Reports Third Quarter and Year-to-Date 2015 Net Income

ROSEMONT, Ill., Oct. 14, 2015 (GLOBE NEWSWIRE) — Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq:WTFC) announced net income of $38.4 million or $0.69 per diluted common share for the third quarter of 2015 compared to net income of $43.8 million or $0.85 per diluted common share for the second quarter of 2015 and $40.2 million or $0.79 per diluted common share for the third quarter of 2014. The Company recorded net income of $121.2 million or $2.29 per diluted common share for the first nine months of 2015 compared to net income of $113.3 million or $2.23 per diluted common share for the same period of 2014. Operating net income was $41.8 million or $0.75 per diluted common share for the third quarter of 2015 compared to $44.5 million or $0.86 per diluted common share in the second quarter of 2015. Operating net income excludes acquisition related charges totaling $5.7 million and $1.1 million in the third quarter of 2015 and second quarter of 2015, respectively. A table reconciling net income as reported to operating net income is set forth below and additional detail is shown in the “Supplemental Financial Measures/Ratios” section.

Highlights compared with the Second Quarter of 2015*:                

  • Total loans, excluding covered loans and mortgage loans held-for-sale, increased by $803 million, or 21% on annualized basis, to $16.3 billion, which included $455 million of loans acquired in relation to the bank acquisitions during the period
  • Total assets increased by 24% on an annualized basis to $22.0 billion
  • Total deposits increased by $1.1 billion, or 27% on an annualized basis, to $18.2 billion, which included $802 million assumed from the bank acquisitions during the period
  • Demand deposits comprise 26% of total deposits, increasing from 23% in the second quarter of 2015
  • Net interest margin decreased 8 basis points primarily as a result of lower yields on earning assets due to pricing pressure and the low rate environment
  • Maintained strong capital ratios with a tangible common equity ratio, assuming full conversion of convertible preferred stock, of 8.0%
  • Dividend on Series D preferred stock, issued in June 2015, reduced earnings per diluted common share by $0.04 per share
  • Completed the acquisitions of North Bank, Suburban Illinois Bancorp, Inc. and Community Financial Shares, Inc.
  • Acquisition-related charges totaled $5.7 million, reducing earnings per diluted common share by $0.06 per share
  • Opened new banking location in Aurora, Illinois along with the locations acquired, increasing our total banking locations to 160 locations
    Three Months Ended,     Nine Months
Ended,
    September 30,   June 30,   March 31,     September 30,
(Dollars in thousands, except per share data)   2015   2015   2015     2015
Key Operating Measures, Adjusted for Acquisition Related Charges                  
Net income per common share – diluted   $ 0.75     $ 0.86     $ 0.77       $ 2.38  
Net overhead ratio   1.63 %   1.51 %   1.68 %     1.61 %
Efficiency ratio   66.67 %   65.16 %   67.56 %     66.43 %
Return on average assets   0.76 %   0.88 %   0.81 %     0.82 %
Return on average common equity   7.26 %   8.52 %   7.73 %     7.82 %
Return on average tangible common equity   9.73 %   11.03 %   10.07 %     10.26 %
                                   
Net income, as reported   $ 38,355     $ 43,831     $ 39,052       $ 121,238  
Acquisition Related Charges                  
Salaries and employee benefits:                  
Salaries   $ 1,355     $     $ 12       $ 1,367  
Commissions and incentive compensation   264         3       267  
Benefits   107               107  
Total salaries and employee benefits   1,726         15       1,741  
Equipment   36     32           68  
Occupancy, net   201         16       217  
Data processing   2,692     653     130       3,475  
Advertising and marketing   1         5       6  
Professional fees   335     417     568       1,320  
Other expense   5     21     4       30  
Other income   (674 )             (674 )
Total Acquisition Related Charges   $ 5,670     $ 1,123     $ 738       $ 7,531  
Income tax expense on acquisition related charges   $ 2,225     $ 441     $ 290       $ 2,956  
Acquisition related charges, net of tax   $ 3,445     $ 682     $ 448       $ 4,575  
Operating net income   $ 41,800     $ 44,513     $ 39,500       $ 125,813  

* See “Supplemental Financial Measures/Ratios” on pages 16-18 for more information on non-GAAP measures.

Edward J. Wehmer, President and Chief Executive Officer, commented, “Wintrust reported operating net income of $41.8 million for the third quarter of 2015 and operating net income of $125.8 million on a year-to-date basis. The third quarter of 2015 was characterized by continued strong loan and deposit growth coupled with compression in our net interest margin, stable credit quality metrics, decreased mortgage banking revenue, the acquisitions of North Bank, Suburban Illinois Bancorp, Inc. and Community Financial Shares, Inc. and the costs related to these acquisitions.”

Mr. Wehmer continued, “Excluding covered loans and mortgage loans held-for-sale, we grew our loan portfolio by $803 million in the third quarter, which included $455 million of loans acquired in relation to the three bank acquisitions. This increase in loan volume helped offset the impact on net interest income from net interest margin compression experienced during the quarter from competitive pricing pressures and the continued low rate environment. Our average loan to deposit ratio declined to 91.9% in the third quarter of 2015 compared to 92.8% in the second quarter of 2015 as the three acquisitions combined had a loan to deposit ratio of only 56.7%. Our loan pipelines remain consistently strong. Deposits in the third quarter of 2015 increased $1.1 billion, which included $802 million assumed from the bank acquisitions during the period. Demand deposits increased $796 million and now comprise 26% of our overall deposit base compared to 23% at the end of the second quarter of 2015.”

Commenting on credit quality, Mr. Wehmer noted, “Total non-performing assets increased by $19.2 million. This increase was comprised of $4.6 million of OREO related to the three acquisitions completed in July, $7.3 million transferring from covered OREO as the loss sharing period expired, a single customer relationship totaling $9.3 million being placed in nonaccrual status at quarter-end, and other activities.  Excluding covered loans, non-performing loans as a percentage of total loans was 0.53% at the end of the third quarter. The allowance for loan losses as a percentage of non-performing loans, excluding covered loans, remained strong at 120%, exhibiting sufficient coverage for non-performing credits. We believe that the Company’s reserves remain appropriate.”

Mr. Wehmer further commented, “Mortgage banking revenue in the third quarter totaled $27.9 million, a decrease of $8.1 million compared to the second quarter of 2015 and an increase of $1.2 million compared to the third quarter of 2014. The decrease from the second quarter to the third quarter of 2015 resulted from origination volumes declining to $973.7 million from $1.2 billion and unfavorable changes in product and channel mix, both combined with more competitive pricing.  Our mortgage banking business remains well positioned for growth both organically and through acquisitions.”

Turning to the future, Mr. Wehmer stated, “We anticipate approximately $4 million in additional charges related to the three previously announced acquisitions in July over the next two quarters as the conversions and integrations are completed. This is in addition to the $5.7 million of various charges incurred in the third quarter related to these acquisitions. The cost savings from these transactions have exceeded our initial expectations.  We believe we have achieved approximately two-thirds of our expected annual cost savings to date and expect to realize additional annual cost savings of approximately $5 million by the end of the first quarter of 2016. We remain on track to realize cost savings opportunities in the future from our existing infrastructure as additional acquisition opportunities exist in all areas of our business lines. Evaluating strategic acquisitions and organic branch growth will continue to be a part of our overall growth strategy with the goal of becoming Chicago’s bank and Wisconsin’s bank. Our opportunities for both internal growth and external growth remain consistently strong. We continue to take a steady and measured approach to achieve our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and increasing shareholder value.”

Graphs accompanying this release are available at http://www.globenewswire.com/NewsRoom/AttachmentNg/673e6825-ff7f-48d9-9801-a6bf5134cb26

Wintrust’s key operating measures and growth rates for the third quarter of 2015, as compared to the sequential and linked quarters, are shown in the table below:

                % or(5)
basis point  (bp)
change from

2nd Quarter
2015
  % or
basis point  (bp)
change from
3rd Quarter
2014
    Three Months Ended    
(Dollars in thousands)   September 30,
2015
  June 30,
 2015
  September 30,
 2014
   
Net income   $ 38,355     $ 43,831     $ 40,224     (12 ) %   (5 ) %
Net income per common share – diluted   $ 0.69     $ 0.85     $ 0.79     (19 ) %   (13 ) %
Net revenue (1)   $ 230,493     $ 233,905     $ 209,622     (1 ) %   10   %
Net interest income   $ 165,540     $ 156,892     $ 151,670     6   %   9   %
Net interest margin (2)   3.33 %   3.41 %   3.46 %   (8 ) bp   (13 ) bp
Net overhead ratio (2) (3)   1.74 %   1.53 %   1.67 %   21   bp   7   bp
Efficiency ratio (2) (4)   69.02 %   65.64 %   65.76 %   338   bp   326   bp
Return on average assets   0.70 %   0.87 %   0.83 %   (17 ) bp   (13 ) bp
Return on average common equity   6.60 %   8.38 %   8.09 %   (178 ) bp   (149 ) bp
Return on average tangible common equity   8.88 %   10.86 %   10.59 %   (198 ) bp   (171 ) bp
At end of period                        
Total assets   $ 22,043,930     $ 20,799,924     $ 19,169,345     24   %   15   %
Total loans, excluding loans held-for-sale, excluding covered loans   $ 16,316,211     $ 15,513,650     $ 14,052,059     21   %   16   %
Total loans, including loans held-for-sale, excluding covered loans   $ 16,663,216     $ 16,010,933     $ 14,415,362     16   %   16   %
Total deposits   $ 18,228,469     $ 17,082,418     $ 16,065,246     27   %   13   %
Total shareholders’ equity   $ 2,335,736     $ 2,264,982     $ 2,028,508     12   %   15   %

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

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

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

(4) The efficiency ratio is calculated by dividing total non-interest expense by tax-equivalent net revenue (less securities gains or losses).  A lower ratio indicates more efficient revenue generation.

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

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

Financial Performance Overview – Third Quarter 2015

For the third quarter of 2015, net interest income totaled $165.5 million, an increase of $8.6 million as compared to the second quarter of 2015 and an increase of $13.9 million as compared to the third quarter of 2014.  The changes in net interest income on both a sequential and linked quarter basis are the result of the following:

  • Net interest income increased $8.6 million in the third quarter of 2015 compared to the second quarter of 2015, due to: 
    • An increase in total interest income of $10.1 million resulting primarily from loan growth during the period and one additional day of interest, partially offset by a reduction in yield on earning assets.  
                 
    • Interest expense increased $1.5 million primarily as a result of an increase in the average balance of interest-bearing liabilities, a two basis point increase in the rate on average interest bearing liabilities and one additional day in the quarter.
    • Combined, the increase in interest income of $10.1 million and the increase in interest expense of $1.5 million created the $8.6 million increase in net interest income.
  • Net interest income increased $13.9 million in the third quarter of 2015 compared to the third quarter of 2014, due to:
    • Average loans, excluding covered loans, increased by $2.1 billion.  The growth in average loans, excluding covered loans, was partially offset by a 17 basis point decline in the yield on earning assets, resulting in an increase in total interest income of $14.7 million.
    • An increase in interest bearing deposits, an increase in borrowings under the Company’s term credit facility at the end of the second quarter of 2015 and the completion of the Canadian secured borrowing transaction at the end of the fourth quarter of 2014 resulted in a $834,000 increase in interest expense.
    • Combined, the increase in interest income of $14.7 million and the increase in interest expense of $834,000 created the $13.9 million increase in net interest income.

The net interest margin, on a fully taxable equivalent basis, for the third quarter of 2015 was 3.33% compared to 3.41% for the second quarter of 2015 and 3.46% for the third quarter of 2014.  The reduction in net interest margin, on a fully taxable equivalent basis, compared to the second quarter of 2015 and third quarter of 2014 is primarily the result of a decline in yields on loans and other earning assets (see “Net Interest Income” section later in this release for further detail).

Non-interest income totaled $65.0 million in the third quarter of 2015, decreasing $12.1 million, or 16%, compared to the second quarter of 2015 and increasing $7.0 million, or 12%, compared to the third quarter of 2014. The decrease in non-interest income in the third quarter of 2015 compared to the second quarter of 2015 is primarily attributable to lower mortgage banking revenue, the recognition of a $1.5 million bank owned life insurance (“BOLI”) death benefit in the second quarter of 2015 and lower fees from covered call option contracts, partially offset by increased service charges on deposits.  The increase in non-interest income in the third quarter of 2015 compared to the third quarter of 2014 was primarily attributable to an increase in mortgage banking revenues, fees from covered call options, higher customer interest rate swap fees and an increase in service charges on deposits (see “Non-Interest Income” section later in this release for further detail). 

Non-interest expense totaled $160.0 million in the third quarter of 2015, increasing $5.7 million, or 4%, compared to the second quarter of 2015 and increasing $21.5 million, or 16%, compared to the third quarter of 2014.  The increase in the current quarter compared to the second quarter of 2015 can be primarily attributed to an increase in acquisition related charges, higher salary and employee benefit costs caused by the addition of employees from the various acquisitions and higher staffing levels as the Company grows, increased data processing expenses, partially offset by a decrease in OREO expenses.  The increase in the third quarter of 2015 compared to the third quarter of 2014 was primarily attributable to acquisition related charges in the current quarter, higher salary and employee benefit costs caused by the addition of employees from the various acquisitions and higher staffing levels as the Company grows as well as higher commissions and incentive compensation, increased equipment and occupancy, data processing and professional fees, and higher marketing expenses, partially offset by a decrease in OREO expenses (see “Non-Interest Expense” section later in this release for further detail). 

Financial Performance Overview – First Nine Months of 2015

For the first nine months of 2015, net interest income totaled $474.3 million, an increase of $29.5 million as compared to the first nine months of 2014 as a result of the following: 

  • Average earning assets increased by $2.1 billion, primarily comprised of average loan growth, excluding covered loans, of $1.9 billion and an increase of $216.9 million in the average balance of liquidity management assets, partially offset by a decrease of $96.3 million in the average balance of covered loans. The growth in average total loans, excluding covered loans, included an increase of $691.0 million in commercial loans, $523.3 million in commercial real estate loans, $463.2 million in life insurance premium finance receivables, $99.3 million in mortgage loans held-for-sale, $88.6 million in commercial premium finance receivables and $78.1 million in home equity and other loans.
  • The average earning asset growth of $2.1 billion, partially offset by a 20 basis point decrease in yield on earning assets, resulted in an increase in total interest income of $32.4 million.
  • Funding mix remained relatively consistent as average demand deposits increased $982.2 million, average interest bearing deposits increased $789.3 million and average wholesale borrowings increased $125.2 million. The increase in average interest bearing liabilities, partially offset by a one basis point decline in rate during the current period, resulted in a $2.9 million increase in interest expense.
  • Combined, the increase in interest income of $32.4 million and the increase in interest expense of $2.9 million created the $29.5 million increase in net interest income.

The net interest margin, on a fully taxable equivalent basis, for the first nine months of 2015 was 3.39% compared to 3.56% for the first nine months of 2014 (see “Net Interest Income” section later in this release for further detail).

Non-interest income totaled $206.5 million in the first nine months of 2015, increasing $48.9 million, or 31%, compared to the first nine months of 2014. The increase in non-interest income in the first nine months of 2015 compared to the first nine months of 2014 is primarily attributable to an increase in mortgage banking and wealth management revenues, fees from covered call options, the recognition of a $1.5 million BOLI death benefit, increased service charges and higher fees on customer interest rate swap transactions (see “Non-Interest Income” section later in this release for further detail). 

Non-interest expense totaled $461.6 million in the first nine months of 2015, increasing $58.2 million, or 14%, compared to the first nine months of 2014.  The increase in the first nine months of 2015 compared to the first nine months of 2014 was primarily attributable to acquisition related charges during the current year, higher salary and employee benefit costs caused by the addition of employees from the various acquisitions and larger staffing as the Company grows as well as higher commissions and incentive compensation, and increased equipment, occupancy, data processing and professional fees, and increased marketing expenses, partially offset by a decrease in OREO expenses (see “Non-Interest Expense” section later in this release for further detail). 

Financial Performance Overview – Credit Quality

The ratio of non-performing assets to total assets was 0.63% as of September 30, 2015, compared to 0.57% at June 30, 2015, and 0.69% at September 30, 2014.  Non-performing assets, excluding covered assets, totaled $138.0 million at September 30, 2015, compared to $118.9 million at June 30, 2015 and $131.7 million at September 30, 2014.

Non-performing loans, excluding covered loans, totaled $86.0 million, or 0.53% of total loans, at September 30, 2015, compared to $76.6 million, or 0.49% of total loans, at June 30, 2015 and $81.1 million, or 0.58% of total loans, at September 30, 2014.  The increase in non-performing loans, excluding covered loans, compared to June 30, 2015 is primarily the result of a single customer relationship totaling $9.3 million being placed in nonaccrual status at quarter-end. Compared to September 30, 2014, the increase is primarily the result of a $2.7 million increase in the home equity loan portfolio, a $1.6 million increase in the commercial loan portfolio and a $1.3 million increase in the commercial real-estate portfolio. OREO, excluding covered OREO, of $51.9 million at September 30, 2015 increased $9.8 million compared to $42.1 million at June 30, 2015 and decreased $1.5 million compared to $50.4 million at September 30, 2014. The increase in OREO, excluding covered OREO, compared to June 30, 2015 is primarily the result of the addition of properties from acquisitions and properties transferring from covered OREO as the loss sharing period expired during the period.

The provision for credit losses, excluding the provision for covered loan losses, totaled $8.7 million for the third quarter of 2015 compared to $9.7 million for the second quarter of 2015 and $6.0 million for the third quarter of 2014. The higher provision for credit losses in the third quarter of 2015 compared to the same period of 2014 was partly due to loan growth since the prior period.

Net charge-offs as a percentage of loans, excluding covered loans, for the third quarter of 2015 totaled 14 basis points on an annualized basis compared to ten basis points on an annualized basis in the second quarter of 2015 and 19 basis points on an annualized basis in the third quarter of 2014.  Net charge-offs totaled $5.7 million in the third quarter of 2015, a $1.8 million increase from $3.9 million in the second quarter of 2015 and a $1.3 million decrease from $7.0 million in the third quarter of 2014.

Excluding the allowance for covered loan losses, the allowance for credit losses at September 30, 2015 totaled $103.9 million, or 0.64% of total loans, compared to $101.1 million, or 0.65% of total loans, at June 30, 2015 and $91.8 million, or 0.65% of total loans, at September 30, 2014.  The allowance for unfunded lending-related commitments totaled $926,000 as of September 30, 2015 compared to $884,000 as of June 30, 2015 and $822,000 as of September 30, 2014. 

Financial Performance Overview – Earnings Per Share

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

      Three Months Ended   Nine Months Ended
(In thousands, except per share data)     September 30,
2015
  June 30,
2015
  September 30,
2014
  September 30,
2015
  September 30,
2014
Net income     $ 38,355     $ 43,831     $ 40,224     $ 121,238     $ 113,265  
Less: Preferred stock dividends and discount accretion     4,079     1,580     1,581     7,240     4,743  
Net income applicable to common shares—Basic (A)   34,276     42,251     38,643     113,998     108,522  
Add: Dividends on convertible preferred stock, if dilutive     1,579     1,580     1,581     4,740     4,743  
Net income applicable to common shares—Diluted (B)   35,855     43,831     40,224     118,738     113,265  
Weighted average common shares outstanding (C)   48,158     47,567     46,639     47,658     46,453  
Effect of dilutive potential common shares:                      
Common stock equivalents     978     1,085     1,166     1,070     1,274  
Convertible preferred stock, if dilutive     3,071     3,071     3,075     3,071     3,075  
Weighted average common shares and effect of dilutive potential common shares (D)   52,207     51,723     50,880     51,799     50,802  
Net income per common share:                      
Basic (A/C)   $ 0.71     $ 0.89     $ 0.83     $ 2.39     $ 2.34  
Diluted (B/D)   $ 0.69     $ 0.85     $ 0.79     $ 2.29     $ 2.23  

Potentially dilutive common shares can result from stock options, restricted stock unit awards, stock warrants, the Company’s convertible preferred stock and shares to be issued under the Employee Stock Purchase Plan and the Directors Deferred Fee and Stock Plan, being treated as if they had been either exercised or issued, computed by application of the treasury stock method. While potentially dilutive common shares are typically included in the computation of diluted earnings per share, potentially dilutive common shares are excluded from this computation in periods in which the effect would reduce the loss per share or increase the income per share. For diluted earnings per share, net income applicable to common shares can be affected by the conversion of the Company’s convertible preferred stock. Where the effect of this conversion would reduce the loss per share or increase the income per share, net income applicable to common shares is not adjusted by the associated preferred dividends. Due to weighted average share differences, when stated on a quarter and year-to-date basis, the earnings per share for the year ended September 30, 2015 does not equal the sum of the respective earnings per share for the three quarters then ended. 

WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights
 
    Three Months Ended   Nine Months Ended
(Dollars in thousands, except per share data)   September 30,
2015
  June 30,
2015
  September 30,
2014
  September 30,
2015
  September 30,
2014
Selected Financial Condition Data (at end of period):                    
Total assets   $ 22,043,930     $ 20,799,924     $ 19,169,345          
Total loans, excluding loans held-for-sale and covered loans   16,316,211     15,513,650     14,052,059          
Total deposits   18,228,469     17,082,418     16,065,246          
Junior subordinated debentures   268,566     249,493     249,493          
Total shareholders’ equity   2,335,736     2,264,982     2,028,508          
Selected Statements of Income Data:                    
Net interest income   $ 165,540     $ 156,892     $ 151,670     $ 474,323     444,856  
Net revenue (1)   230,493     233,905     209,622     680,830     602,439  
Net income   38,355     43,831     40,224     121,238     113,265  
Net income per common share – Basic   $ 0.71     $ 0.89     $ 0.83     $ 2.39     $ 2.34  
Net income per common share – Diluted   $ 0.69     $ 0.85     $ 0.79     $ 2.29     $ 2.23  
Selected Financial Ratios and Other Data:                    
Performance Ratios:                    
Net interest margin (2)   3.33 %   3.41 %   3.46 %   3.39 %   3.56 %
Non-interest income to average assets   1.19 %   1.52 %   1.20 %   1.34 %   1.14 %
Non-interest expense to average assets   2.93 %   3.06 %   2.87 %   3.00 %   2.92 %
Net overhead ratio (2) (3)   1.74 %   1.53 %   1.67 %   1.66 %   1.78 %
Efficiency ratio (2) (4)   69.02 %   65.64 %   65.76 %   67.50 %   66.65 %
Return on average assets   0.70 %   0.87 %   0.83 %   0.79 %   0.82 %
Return on average common equity   6.60 %   8.38 %   8.09 %   7.53 %   7.86 %
Return on average tangible common equity (2)   8.88 %   10.86 %   10.59 %   9.90 %   10.25 %
Average total assets   $ 21,688,450     $ 20,256,996     $ 19,127,346     $ 20,597,383     $ 18,474,609  
Average total shareholders’ equity   2,310,511     2,156,128     2,020,903     2,194,384     1,972,425  
Average loans to average deposits ratio (excluding covered loans)   91.9 %   92.8 %   90.1 %   92.0 %   90.0 %
Average loans to average deposits ratio (including covered loans)   92.9 %   94.0 %   91.8 %   93.2 %   91.9 %
Common Share Data at end of period:                    
Market price per common share   $ 53.43     $ 53.38     $ 44.67          
Book value per common share (2)   $ 43.12     $ 42.24     $ 40.74          
Tangible common book value per share (2)   $ 32.83     $ 33.02     $ 31.60          
Common shares outstanding   48,336,870     47,677,257     46,691,047          
Other Data at end of period:(8)                    
Leverage Ratio (5)   9.4 %   9.8 %   10.0 %        
Tier 1 capital to risk-weighted assets (5)   10.4 %   10.7 %   11.7 %        
Common equity Tier 1 capital to risk-weighted assets (5)   8.8 %   9.0 %   N/A        
Total capital to risk-weighted assets (5)   12.7 %   13.1 %   13.1 %        
Tangible common equity ratio (TCE) (2)(7)   7.4 %   7.7 %   7.9 %        
Tangible common equity ratio, assuming full conversion of convertible preferred stock (2) (7)   8.0 %   8.4 %   8.6 %        
Allowance for credit losses (6)   $ 103,922     $ 101,088     $ 91,841          
Non-performing loans   $ 85,976     $ 76,554     $ 81,070          
Allowance for credit losses to total loans (6)   0.64 %   0.65 %   0.65 %        
Non-performing loans to total loans   0.53 %   0.49 %   0.58 %        
Number of:                    
Bank subsidiaries   15     15     15          
Banking offices   160     147     139          

(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) The efficiency ratio is calculated by dividing total non-interest expense by tax-equivalent net revenue (less securities gains or losses). A lower ratio indicates more efficient revenue generation.

(5) Capital ratios for current quarter-end are estimated.  As of January 1, 2015 capital ratios are calculated under the requirements of Basel III.

(6) 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.

(7) Total shareholders’ equity minus preferred stock and total intangible assets divided by total assets minus total intangible assets.

(8) Asset quality ratios exclude covered loans.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
 
(In thousands)   (Unaudited)
September 30,
2015
  December 31,
2014
  (Unaudited)
September 30,
2014
             
Assets            
Cash and due from banks   $ 247,341     $ 225,136     $ 260,694  
Federal funds sold and securities purchased under resale agreements   3,314     5,571     26,722  
Interest bearing deposits with banks   701,106     998,437     620,370  
Available-for-sale securities, at fair value   2,214,281     1,792,078     1,782,648  
Trading account securities   3,312     1,206     6,015  
Federal Home Loan Bank and Federal Reserve Bank stock   90,308     91,582     80,951  
Brokerage customer receivables   28,293     24,221     26,624  
Mortgage loans held-for-sale   347,005     351,290     363,303  
Loans, net of unearned income, excluding covered loans   16,316,211     14,409,398     14,052,059  
Covered loans   168,609     226,709     254,605  
Total loans   16,484,820     14,636,107     14,306,664  
Less: Allowance for loan losses   102,996     91,705     91,019  
Less: Allowance for covered loan losses   2,918     2,131     2,655  
Net loans   16,378,906     14,542,271     14,212,990  
Premises and equipment, net   587,348     555,228     555,241  
FDIC indemnification asset       11,846     27,359  
Accrued interest receivable and other assets   667,036     501,882     494,213  
Trade date securities receivable   277,981     485,534     285,627  
Goodwill   472,166     405,634     406,604  
Other intangible assets   25,533     18,811     19,984  
Total assets   $ 22,043,930     $ 20,010,727     $ 19,169,345  
Liabilities and Shareholders’ Equity            
Deposits:            
Non-interest bearing   $ 4,705,994     $ 3,518,685     $ 3,253,477  
Interest bearing   13,522,475     12,763,159     12,811,769  
 Total deposits   18,228,469     16,281,844     16,065,246  
Federal Home Loan Bank advances   451,330     733,050     347,500  
Other borrowings   259,978     196,465     51,483  
Subordinated notes   140,000     140,000     140,000  
Junior subordinated debentures   268,566     249,493     249,493  
Trade date securities payable   617     3,828      
Accrued interest payable and other liabilities   359,234     336,225     287,115  
Total liabilities   19,708,194     17,940,905     17,140,837  
Shareholders’ Equity:            
Preferred stock   251,312     126,467     126,467  
Common stock   48,422     46,881     46,766  
Surplus   1,187,407     1,133,955     1,129,975  
Treasury stock   (3,964 )   (3,549 )   (3,519 )
Retained earnings   901,652     803,400     771,519  
Accumulated other comprehensive loss   (49,093 )   (37,332 )   (42,700 )
Total shareholders’ equity   2,335,736     2,069,822     2,028,508  
Total liabilities and shareholders’ equity   $ 22,043,930     $ 20,010,727     $ 19,169,345  

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
  Three Months Ended   Nine Months Ended
(In thousands, except per share data) September 30,
2015
  June 30,
2015
  September 30,
2014
  September 30,
2015
  September 30,
2014
Interest income                  
Interest and fees on loans $ 167,831     $ 159,823     $ 156,534     $ 482,330     $ 455,548  
Interest bearing deposits with banks 372     305     409     993     977  
Federal funds sold and securities purchased under resale agreements 1     1     12     4     22  
Available-for-sale securities 16,130     14,071     12,767     44,601     39,190  
Trading account securities 19     51     20     83     34  
Federal Home Loan Bank and Federal Reserve Bank stock 821     785     733     2,375     2,171  
Brokerage customer receivables 205     205     201     591     610  
Total interest income 185,379     175,241     170,676     530,977     498,552  
Interest expense                  
Interest on deposits 12,436     11,996     12,298     36,246     35,980  
Interest on Federal Home Loan Bank advances 2,458     1,812     2,641     6,426     7,989  
Interest on other borrowings 1,045     787     200     2,620     1,460  
Interest on subordinated notes 1,776     1,777     1,776     5,328     2,130  
Interest on junior subordinated debentures 2,124     1,977     2,091     6,034     6,137  
Total interest expense 19,839     18,349     19,006     56,654     53,696  
Net interest income 165,540     156,892     151,670     474,323     444,856  
Provision for credit losses 8,322     9,482     5,864     23,883     14,404  
Net interest income after provision for credit losses 157,218     147,410     145,806     450,440     430,452  
Non-interest income                  
Wealth management 18,243     18,476     17,659     54,819     52,694  
Mortgage banking 27,887     36,007     26,691     91,694     66,923  
Service charges on deposit accounts 7,403     6,474     6,084     20,174     17,118  
(Losses) gains on available-for-sale securities, net (98 )   (24 )   (153 )   402     (522 )
Fees from covered call options 2,810     4,565     2,107     11,735     4,893  
Trading (losses) gains, net (135 )   160     293     (452 )   (1,102 )
Other 8,843     11,355     5,271     28,135     17,579  
Total non-interest income 64,953     77,013     57,952     206,507     157,583  
Non-interest expense                  
Salaries and employee benefits 97,749     94,421     85,976     282,300     247,873  
Equipment 8,887     7,914     7,570     24,637     22,196  
Occupancy, net 12,066     11,401     10,446     35,818     31,289  
Data processing 8,127     6,081     4,765     19,656     14,023  
Advertising and marketing 6,237     6,406     3,528     16,550     9,902  
Professional fees 4,100     5,074     4,035     13,838     11,535  
Amortization of other intangible assets 1,350     934     1,202     3,297     3,521  
FDIC insurance 3,035     3,047     3,211     9,069     9,358  
OREO expense, net (367 )   841     581     1,885     7,047  
Other 18,790     18,178     17,186     54,539     46,662  
Total non-interest expense 159,974     154,297     138,500     461,589     403,406  
Income before taxes 62,197     70,126     65,258     195,358     184,629  
Income tax expense 23,842     26,295     25,034     74,120     71,364  
Net income $ 38,355     $ 43,831     $ 40,224     $ 121,238     $ 113,265  
Preferred stock dividends and discount accretion 4,079     1,580     1,581     7,240     4,743  
Net income applicable to common shares $ 34,276     $ 42,251     $ 38,643     $ 113,998     $ 108,522  
Net income per common share – Basic $ 0.71     $ 0.89     $ 0.83     $ 2.39     $ 2.34  
Net income per common share – Diluted $ 0.69     $ 0.85     $ 0.79     $ 2.29     $ 2.23  
Cash dividends declared per common share $ 0.11     $ 0.11     $ 0.10     $ 0.33     $ 0.30  
Weighted average common shares outstanding 48,158     47,567     46,639     47,658     46,453  
Dilutive potential common shares 4,049     4,156     4,241     4,141     4,349  
Average common shares and dilutive common shares 52,207     51,723     50,880     51,799     50,802  

SUPPLEMENTAL FINANCIAL MEASURES/RATIOS

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

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity.  The Company references the return on average tangible common equity as a measurement of profitability. Management considers operating net income, which is reported net income excluding acquisition related charges, as a useful measure of operating performance.  Acquisition related charges are specific costs incurred by the Company as a result of an acquisition that are not expected to continue in subsequent periods. The Company excludes acquisition related charges from reported net income as well as certain operating measures and ratios noted above to provide better comparability between periods. 

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

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,   September 30,   September 30,
(Dollars and shares in thousands) 2015   2015   2015   2014   2014   2015   2014
Calculation of Net Interest Margin and Efficiency Ratio                          
(A) Interest Income (GAAP) $ 185,379     $ 175,241     $ 170,357     $ 172,715     $ 170,676     $ 530,977     $ 498,552  
Taxable-equivalent adjustment:                          
 – Loans 346     328     327     301     315     1,001     827  
 – Liquidity Management Assets 841     787     727     555     502     2,355     1,445  
 – Other Earning Assets 10     27     7     24     11     44     17  
Interest Income – FTE $ 186,576     $ 176,383     $ 171,418     $ 173,595     $ 171,504     $ 534,377     $ 500,841  
(B) Interest Expense (GAAP) 19,839     18,349     18,466     18,996     19,006     56,654     53,696  
Net interest income – FTE $ 166,737     $ 158,034     $ 152,952     $ 154,599     $ 152,498     $ 477,723     $ 447,145  
(C) Net Interest Income (GAAP) (A minus B) $ 165,540     $ 156,892     $ 151,891     $ 153,719     $ 151,670     $ 474,323     $ 444,856  
(D) Net interest margin (GAAP) 3.31 %   3.39 %   3.40 %   3.44 %   3.45 %   3.36 %   3.54 %
Net interest margin – FTE 3.33 %   3.41 %   3.42 %   3.46 %   3.46 %   3.39 %   3.56 %
(E) Efficiency ratio (GAAP) 69.38 %   65.96 %   68.23 %   67.87 %   66.02 %   67.84 %   66.90 %
Efficiency ratio – FTE 69.02 %   65.64 %   67.90 %   67.59 %   65.76 %   67.50 %   66.65 %
Efficiency ratio – Adjusted for acquisition related charges 66.67 %   65.16 %   67.56 %   67.59 %   65.76 %   66.43 %   66.65 %
(F) Net Overhead Ratio (GAAP) 1.74 %   1.53 %   1.69 %   1.76 %   1.67 %   1.66 %   1.78 %
Net Overhead Ratio – Adjusted for acquisition related charges 1.63 %   1.51 %   1.68 %   1.76 %   1.67 %   1.61 %   1.78 %
Calculation of Tangible Common Equity ratio (at period end)                          
Total shareholders’ equity $ 2,335,736     $ 2,264,982     $ 2,131,074     $ 2,069,822     $ 2,028,508          
(G) Less: Convertible preferred stock (126,312 )   (126,312 )   (126,427 )   (126,467 )   (126,467 )        
Less:  Non-convertible preferred stock (125,000 )   (125,000 )                    
Less: Intangible assets (497,699 )   (439,570 )   (439,055 )   (424,445 )   (426,588 )        
(H) Total tangible common shareholders’ equity $ 1,586,725     $ 1,574,100     $ 1,565,592     $ 1,518,910     $ 1,475,453          
Total assets $ 22,043,930     $ 20,799,924     $ 20,382,271     $ 20,010,727     $ 19,169,345          
Less: Intangible assets (497,699 )   (439,570 )   (439,055 )   (424,445 )   (426,588 )        
(I) Total tangible assets $ 21,546,231     $ 20,360,354     $ 19,943,216     $ 19,586,282     $ 18,742,757          
Tangible common equity ratio (H/I) 7.4 %   7.7 %   7.9 %   7.8 %   7.9 %        
Tangible common equity ratio, assuming full conversion of convertible preferred stock ((H-G)/I) 8.0 %   8.4 %   8.5 %   8.4 %   8.6 %        
Calculation of book value per share                          
Total shareholders’ equity $ 2,335,736     $ 2,264,982     $ 2,131,074     $ 2,069,822     $ 2,028,508          
Less: Preferred stock (251,312 )   (251,312 )   (126,427 )   (126,467 )   (126,467 )        
(J) Total common equity $ 2,084,424     $ 2,013,670     $ 2,004,647     $ 1,943,355     $ 1,902,041          
(K) Actual common shares outstanding 48,337     47,677     47,390     46,805     46,691          
Book value per common share (J/K) $ 43.12     $ 42.24     $ 42.30     $ 41.52     $ 40.74          
Tangible common book value per share (H/K) $ 32.83     $ 33.02     $ 33.04     $ 32.45     $ 31.60          

 

  Three Months Ended   Nine Months Ended
  September 30,   June 30,   March 31,   December 31,   September 30,   September 30,   September 30,
(Dollars and shares in thousands) 2015   2015   2015   2014   2014   2015   2014
Calculation of return on average assets                          
(L) Net income $ 38,355     $ 43,831     $ 39,052     $ 38,133     $ 40,224     $ 121,238     $ 113,265  
Add: Acquisition related charges, net of tax 3,445     682     448             4,575      
(M) Operating net income 41,800     44,513     39,500     38,133     40,224     125,813     113,265  
(N) Total average assets 21,688,450     20,256,996     19,826,240     19,366,670     19,127,346     20,597,383     18,474,609  
Return on average assets, annualized (L/N) 0.70 %   0.87 %   0.80 %   0.78 %   0.83 %   0.79 %   0.82 %
Return on average assets, adjusted for acquisition related charges, annualized (M/N) 0.76 %   0.88 %   0.81 %   0.78 %   0.83 %   0.82 %   0.82 %
Calculation of return on average common equity                          
(O) Net income applicable to common shares 34,276     42,251     37,471     36,553     38,643     113,998     108,522  
(P) Add: Acquisition related charges, net of tax 3,445     682     448             4,575      
(Q) Add: After-tax intangible asset amortization 833     597     615     722     739     2,046     2,159  
(R) Tangible operating net income applicable to common shares 38,554     43,530     38,534     37,275     39,382     120,619     110,681  
Total average shareholders’ equity 2,310,511     2,156,128     2,114,356     2,057,855     2,020,903     2,194,384     1,972,425  
Less: Average preferred stock (251,312 )   (134,586 )   (126,445 )   (126,467 )   (126,467 )   (171,238 )   (126,472 )
(S) Total average common shareholders’ equity 2,059,199     2,021,542     1,987,911     1,931,388     1,894,436     2,023,146     1,845,953  
Less: Average intangible assets (490,583 )   (439,455 )   (436,456 )   (425,834 )   (419,125 )   (455,787 )   (402,848 )
(T) Total average tangible common shareholders’ equity 1,568,616     1,582,087     1,551,455     1,505,554     1,475,311     1,567,359     1,443,105  
Return on average common equity, annualized  (O/S) 6.60 %   8.38 %   7.64 %   7.51 %   8.09 %   7.53 %   7.86 %
Return on average common equity, adjusted for acquisition related charges, annualized  ((O+P)/S) 7.26 %   8.52 %   7.73 %   7.51 %   8.09 %   7.82 %   7.86 %
Return on average tangible common equity, annualized ((O+Q)/T) 8.88 %   10.86 %   9.96 %   9.82 %   10.59 %   9.90 %   10.25 %
Return on average tangible common equity, adjusted for acquisition related charges, annualized  (R/T) 9.73 %   11.03 %   10.07 %   9.82 %   10.59 %   10.26 %   10.25 %
Calculation of net income per common share – diluted                          
(U) Net income applicable to common shares – Diluted 35,855     43,831     39,052     38,133     40,224     118,738     113,265  
Add: Acquisition related charges, net of tax 3,445     682     448             4,575      
(V) Net income applicable to common shares – Diluted, adjusted for acquisition related charges 39,300     44,513     39,500     38,133     40,224     123,313     113,265  
Weighted average common shares and effect of dilutive potential common shares (W) 52,207     51,723     51,472     50,977     50,880     51,799     50,802  
Net income per common share – Diluted (U/W) 0.69     0.85     0.76     0.75     0.79     2.29     2.23  
Net income per common share – Diluted, adjusted for acquisition related charges (V/W) 0.75     0.86     0.77     0.75     0.79     2.38     2.23  

 

LOANS
Loan Portfolio Mix and Growth Rates
                % Growth
(Dollars in thousands)   September 30,
2015
  December 31,
2014
  September 30,
2014
  From (1)
December 31,
2014
  From
September 30,
2014
Balance:                    
Commercial   $ 4,400,185     $ 3,924,394     $ 3,689,671     16 %   19 %
Commercial real-estate   5,307,566     4,505,753     4,510,375     24     18  
Home equity   797,465     716,293     720,058     15     11  
Residential real-estate   571,743     483,542     470,319     24     22  
Premium finance receivables – commercial   2,407,075     2,350,833     2,377,892     3     1  
Premium finance receivables – life insurance   2,700,275     2,277,571     2,134,405     25     27  
Consumer and other(2)   131,902     151,012     149,339     (17 )   (12 )
Total loans, net of unearned income, excluding covered loans   $ 16,316,211     $ 14,409,398     $ 14,052,059     18 %   16 %
Covered loans   168,609     226,709     254,605     (34 )   (34 )
Total loans, net of unearned income   $ 16,484,820     $ 14,636,107     $ 14,306,664     17 %   15 %
Mix:                    
Commercial   27 %   26 %   26 %        
Commercial real-estate   32     31     31          
Home equity   5     5     5          
Residential real-estate   3     3     3          
Premium finance receivables – commercial   15     16     17          
Premium finance receivables – life insurance   16     16     15          
Consumer and other(2)   1     1     1          
Total loans, net of unearned income, excluding covered loans   99 %   98 %   98 %        
Covered loans   1     2     2          
Total loans, net of unearned income   100 %   100 %   100 %        

(1) Annualized
(2) Includes autos, boats, snowmobiles and other indirect consumer loans as well as short-term accounts receivable financing.

                     
As of September 30, 2015       % of
Total
Balance
  Nonaccrual   > 90 Days
Past Due
and Still
Accruing
  Allowance
For Loan
Losses
Allocation
       
(Dollars in thousands)   Balance  
Commercial:                    
Commercial and industrial   $ 2,646,275     27.3 %   $ 12,006     $     $ 21,880  
Franchise   222,001     2.3             3,145  
Mortgage warehouse lines of credit   136,614     1.4             1,022  
Community Advantage – homeowner associations   123,209     1.3             3  
Aircraft   6,371     0.1             8  
Asset-based lending   802,370     8.3     12         6,282  
Tax exempt   232,667     2.4             1,303  
Leases   205,786     2.1             169  
Other   1,953                 12  
PCI – commercial loans (1)   22,939     0.2         217     166  
Total commercial   $ 4,400,185     45.4 %   $ 12,018     $ 217     $ 33,990  
Commercial Real-Estate:                    
Residential construction   $ 61,271     0.6 %   $     $     $ 753  
Commercial construction   285,963     2.9     31         2,995  
Land   79,076     0.8     1,756         2,550  
Office   790,311     8.1     4,045         7,156  
Industrial   636,124     6.6     11,637         5,521  
Retail   785,842     8.1     2,022         5,254  
Multi-family   687,659     7.1     1,525         6,959  
Mixed use and other   1,820,328     18.7     7,601         12,079  
PCI – commercial real-estate (1)   160,992     1.7         13,547     794  
Total commercial real-estate   $ 5,307,566     54.6 %   $ 28,617     $ 13,547     $ 44,061  
Total commercial and commercial real-estate   $ 9,707,751     100.0 %   $ 40,635     $ 13,764     $ 78,051  
                     
Commercial real-estate – collateral location by state:                    
Illinois   $ 4,053,531     76.4 %            
Wisconsin   577,231     10.9              
Total primary markets   $ 4,630,762     87.3 %            
Florida   56,020     1.1              
Arizona   9,677     0.2              
Indiana   106,591     2.0              
Other (no individual state greater than 0.6%)   504,516     9.4              
Total   $ 5,307,566     100.0 %            

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

DEPOSITS
Deposit Portfolio Mix and Growth Rates
                % Growth
(Dollars in thousands)   September 30,
2015
  December 31,
2014
  September 30,
2014
  From (1)
December 31,
2014
  From
September 30,
2014
Balance:                    
Non-interest bearing   $ 4,705,994     $ 3,518,685     $ 3,253,477     45 %   45 %
NOW and interest bearing demand deposits   2,231,258     2,236,089     2,086,099         7  
Wealth management deposits (2)   1,469,920     1,226,916     1,212,317     26     21  
Money market   4,001,518     3,651,467     3,744,682     13     7  
Savings   1,684,007     1,508,877     1,465,250     16     15  
Time certificates of deposit   4,135,772     4,139,810     4,303,421         (4 )
Total deposits   $ 18,228,469     $ 16,281,844     $ 16,065,246     16 %   13 %
Mix:                    
Non-interest bearing   26 %   22 %   20 %        
NOW and interest bearing demand deposits   12     14     13          
Wealth management deposits (2)   8     8     8          
Money market   22     22     23          
Savings   9     9     9          
Time certificates of deposit   23     25     27          
Total deposits   100 %   100 %   100 %        

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

Time Certificates of Deposit
Maturity/Re-pricing Analysis
As of September 30, 2015
 
(Dollars in thousands)   CDARs &
Brokered
Certificates
  of Deposit (1)
  MaxSafe
Certificates
  of Deposit (1)
  Variable Rate
Certificates
  of Deposit (2)
  Other Fixed
Rate   Certificates
  of Deposit (1)
  Total Time
Certificates of
Deposit
  Weighted-Average
Rate of Maturing
Time Certificates
  of Deposit (3)
1-3 months   $ 2,177     $ 79,330     $ 144,798     $ 631,780     $ 858,085     0.53 %
4-6 months       40,240         671,299     711,539     0.69 %
7-9 months   36,504     27,980         511,261     575,745     0.63 %
10-12 months   165,615     28,909         524,389     718,913     0.79 %
13-18 months       23,819         613,561     637,380     0.96 %
19-24 months   44,063     5,877         263,783     313,723     1.02 %
24+ months   3,432     14,395         302,560     320,387     1.23 %
Total   $ 251,791     $ 220,550     $ 144,798     $ 3,518,633     $ 4,135,772     0.77 %

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

NET INTEREST INCOME

The following table presents a summary of Wintrust’s average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the third quarter of 2015 compared to the second quarter of 2015 (sequential quarters) and third quarter of 2014 (linked quarters), respectively: 

  Average Balance 
for three months ended,
  Interest 
for three months ended,
  Yield/Rate
for three months ended,
(Dollars in thousands) September 30,
 2015
  June 30,
2015
  September 30,
 2014
  September 30,
2015
  June 30,
2015
  September 30,
2014
    September 30,
2015

  June 30,
2015
  September 30,
2014
Liquidity management  assets(1)(2)(7) $ 3,140,782     $ 2,709,176     $ 2,814,720     $ 18,165     $ 15,949     $ 14,423     2.29 %   2.36 %   2.03 %
Other earning assets(2)(3)(7) 30,990     32,115     28,702     234     283     232     3.00     3.54     3.21  
Loans, net of unearned income(2)(4)(7) 16,509,001     15,632,875     14,359,467     165,572     156,970     151,540     3.98     4.03     4.19  
Covered loans 174,768     202,663     262,310     2,605     3,181     5,309     5.91     6.30     8.03  
Total earning assets(7) $ 19,855,541     $ 18,576,829     $ 17,465,199     $ 186,576     $ 176,383     $ 171,504     3.73 %   3.81 %   3.90 %
Allowance for loan and covered loan losses (106,091 )   (101,211 )   (96,463 )                        
Cash and due from banks 251,289     236,242     237,402                          
Other assets 1,687,711     1,545,136     1,521,208                          
Total assets $ 21,688,450     $ 20,256,996     $ 19,127,346                          
                                   
Interest-bearing deposits $ 13,489,651     $ 13,115,453     $ 12,695,780     $ 12,436     $ 11,996     $ 12,298     0.37 %   0.37 %   0.38 %
Federal Home Loan Bank advances 402,646     347,656     380,083     2,458     1,812     2,641     2.42     2.09     2.76  
Other borrowings 272,782     193,660     54,653     1,045     787     200     1.52     1.63     1.45  
Subordinated notes 140,000     140,000     140,000     1,776     1,777     1,776     5.08     5.07     5.07  
Junior subordinated debentures 264,974     249,493     249,493     2,124     1,977     2,091     3.14     3.13     3.28  
Total interest-bearing liabilities $ 14,570,053     $ 14,046,262     $ 13,520,009     $ 19,839     $ 18,349     $ 19,006     0.54 %   0.52 %   0.56 %
Non-interest bearing deposits 4,473,632     3,725,728     3,233,937                          
Other liabilities 334,254     328,878     352,497                          
Equity 2,310,511     2,156,128     2,020,903                          
Total liabilities and shareholders’ equity $ 21,688,450     $ 20,256,996     $ 19,127,346                          
Interest rate spread(5)(7)                         3.19 %   3.29 %   3.34 %
Net free funds/contribution(6) $ 5,285,488     $ 4,530,567     $ 3,945,190                 0.14 %   0.12 %   0.12 %
Net interest income/ margin(7)             $ 166,737     $ 158,034     $ 152,498     3.33 %   3.41 %   3.46 %

(1) Liquidity management assets include available-for-sale securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading securities and available-for-sale securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014 were $1.2 million, $1.1 million and $828,000, respectively.
(3) Other earning assets include brokerage customer receivables and trading account securities.
(4) Loans, net of unearned income, include loans held-for-sale and non-accrual loans.
(5) Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(6) Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
(7) See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio.

The following table presents a summary of Wintrust’s average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014:

  Average Balance
for nine months ended,
  Interest 
for nine months ended,
  Yield/Rate 
for nine months ended,
(Dollars in thousands) September 30,
 2015
  September 30,
2014
  September 30,
 2015
  September 30,
2014
  September 30,
 2015
  September 30,
2014
Liquidity management assets(1)(2)(7) $ 2,907,284     $ 2,690,422     $ 50,328     $ 43,805     2.31 %   2.18 %
Other earning assets(2)(3)(7) 30,286     28,363     718     661     3.17     3.12  
Loans, net of unearned income(2)(4)(7) 15,730,009     13,786,669     473,857     437,030     4.03     4.24  
Covered loans 197,069     293,349     9,474     19,345     6.43     8.82  
Total earning assets(7) $ 18,864,648     $ 16,798,803     $ 534,377     $ 500,841     3.79 %   3.99 %
Allowance for loan and covered loan losses (101,440 )   (101,624 )                
Cash and due from banks 245,745     231,199                  
Other assets 1,588,430     1,546,231                  
Total assets $ 20,597,383     $ 18,474,609                  
                       
Interest-bearing deposits $ 13,158,498     $ 12,369,241     $ 36,246     $ 35,980     0.37 %   0.39 %
Federal Home Loan Bank advances 369,443     405,246     6,426     7,989     2.33     2.64  
Other borrowings 220,763     148,549     2,620     1,460     1.59     1.31  
Subordinated notes 140,000     56,410     5,328     2,130     5.07     5.03  
Junior subordinated debentures 254,710     249,493     6,034     6,137     3.12     3.24  
Total interest-bearing liabilities $ 14,143,414     $ 13,228,939     $ 56,654     $ 53,696     0.53 %   0.54 %
Non-interest bearing deposits 3,931,194     2,948,961                  
Other liabilities 328,391     324,284                  
Equity 2,194,384     1,972,425                  
Total liabilities and shareholders’ equity $ 20,597,383     $ 18,474,609                  
Interest rate spread(5)(7)                 3.26 %   3.45 %
Net free funds/contribution(6) $ 4,721,234     $ 3,569,864             0.13 %   0.11 %
Net interest income/ margin(7)         $ 477,723     $ 447,145     3.39 %   3.56 %

(1) Liquidity management assets include available-for-sale securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading securities and available-for-sale securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the nine months ended September 30, 2015, and September 30, 2014 were $3.4 million and $2.3 million, respectively.
(3) Other earning assets include brokerage customer receivables and trading account securities.
(4) Loans, net of unearned income, include loans held-for-sale and non-accrual loans.
(5) Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(6) Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
(7) See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio

Interest Rate Sensitivity

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

The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases of 100 and 200 basis points and a decrease of 100 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet.  Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months.  Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenario at September 30, 2015, June 30, 2015 and September 30, 2014 is as follows:

           
Static Shock Scenario   +200
Basis 
Points
  +100
 Basis
 Points
  -100
Basis
 Points
September 30, 2015   15.6 %   8.0 %   (11.1 )%
June 30, 2015   14.8 %   7.3 %   (10.5 )%
September 30, 2014   13.7 %   6.2 %   (11.1 )%

 

Ramp Scenario +200
Basis
Points
  +100
Basis
Points
  -100
Basis
Points
September 30, 2015 6.7 %   3.6 %   (4.0 )%
June 30, 2015 6.4 %   3.3 %   (4.0 )%
September 30, 2014 5.0 %   2.6 %   (5.0 )%

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

NON-INTEREST INCOME

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

    Three Months Ended                
    September 30,   June 30,   September 30,   Q3 2015 compared to
Q2 2015
  Q3 2015 compared to
Q3 2014
(Dollars in thousands)    2015      2015      2014     $ Change    % Change     $ Change    % Change 
Brokerage   $ 6,579     $ 6,750     $ 7,185     $ (171 )   (3 )%   $ (606 )   (8 )%
Trust and asset management   11,664     11,726     10,474     (62 )   (1 )   1,190     11  
Total wealth management   18,243     18,476     17,659     (233 )   (1 )   584     3  
Mortgage banking   27,887     36,007     26,691     (8,120 )   (23 )   1,196     4  
Service charges on deposit accounts   7,403     6,474     6,084     929     14     1,319     22  
(Losses) gains on available-for-sale securities, net   (98 )   (24 )   (153 )   (74 )   NM   55     (36 )
Fees from covered call options   2,810     4,565     2,107     (1,755 )   (38 )   703     33  
Trading (losses) gains, net   (135 )   160     293     (295 )   NM   (428 )   NM
Other:                            
Interest rate swap fees   2,606     2,347     1,207     259     11     1,399     NM
BOLI   212     2,180     652     (1,968 )   (90 )   (440 )   (67 )
Administrative services   1,072     1,053     990     19     2     82     8  
Miscellaneous   4,953     5,775     2,422     (822 )   (14 )   2,531     NM
Total Other   8,843     11,355     5,271     (2,512 )   (22 )   3,572     68  
Total Non-Interest Income   $ 64,953     $ 77,013     $ 57,952     $ (12,060 )   (16 )%   $ 7,001     12 %

NM – Not Meaningful

    Nine Months Ended        
    September 30,   September 30,   Q3 2015 compared to
Q3 2014
(Dollars in thousands)    2015     2014     $ Change    % Change 
Brokerage   $ 20,181     $ 22,546     $ (2,365 )   (10 )%
Trust and asset management   34,638     30,148     4,490     15  
Total wealth management   54,819     52,694     2,125     4  
Mortgage banking   91,694     66,923     24,771     37  
Service charges on deposit accounts   20,174     17,118     3,056     18  
Gains (losses) on available-for-sale securities, net   402     (522 )   924     NM
Fees from covered call options   11,735     4,893     6,842     NM
Trading losses, net   (452 )   (1,102 )   650     (59 )
Other:                
Interest rate swap fees   7,144     3,350     3,794     NM
BOLI   3,158     2,039     1,119     55  
Administrative services   3,151     2,786     365     13  
Miscellaneous   14,682     9,404     5,278     56  
Total Other   28,135     17,579     10,556     60  
Total Non-Interest Income   $ 206,507     $ 157,583     $ 48,924     31 %

The significant changes in non-interest income for the quarter ended September 30, 2015 compared to the quarters ended June 30, 2015 and September 30, 2014 are discussed below.

Wealth management revenue totaled $18.2 million in the third quarter of 2015 compared to $18.5 million in the second quarter of 2015, a decrease of 1%, and $17.7 million in the third quarter of 2014, an increase of 3%.  The decrease during the current period as compared to the second quarter of 2015 is primarily attributable to volatile market conditions and lower customer trading activity in the current quarter.  The increase during the current period as compared to the third quarter of 2014 is primarily attributable to growth in assets under management due to new customers.  Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors and the brokerage commissions, managed money fees and insurance product commissions at Wayne Hummer Investments.

For the quarter ended September 30, 2015, mortgage banking revenue totaled $27.9 million, a decrease of $8.1 million, or 23%, when compared to the second quarter of 2015, and an increase of $1.2 million, or 4%, when compared to the third quarter of 2014.  The decrease in mortgage banking revenue in the third quarter of 2015 as compared to the second quarter of 2015  resulted primarily from lower origination volumes in the current quarter. Mortgage loans originated or purchased for sale were $973.7 million in the current quarter as compared to $1.2 billion in the second quarter of 2015 and $904.8 million in the third quarter of 2014. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. 

Service charges on deposit accounts totaled $7.4 million in the third quarter of 2015, an increase of $929,000 and $1.3 million compared to the quarters ended June 30, 2015 and September 30, 2014, respectively.  The increase in the current quarter is mostly a result of higher account analysis fees on deposit accounts which have increased as a result of the Company’s commercial banking initiative and recent acquisitions.

Fees from covered call option transactions totaled $2.8 million for the third quarter of 2015, compared to $4.6 million for the second quarter of 2015 and $2.1 million for the third quarter of 2014. The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has effectively entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio by using fees generated from these options to compensate for net interest margin compression. These option transactions are designed to mitigate overall interest rate risk and do not qualify as hedges pursuant to accounting guidance. Fees from covered call options decreased in the current quarter compared to the second quarter of 2015 primarily as a result of selling call options against a smaller value of underlying securities resulting in lower premiums received by the Company. There were no outstanding call option contracts at September 30, 2015, June 30, 2015 and September 30, 2014.

The Company recognized $135,000 of trading losses in the third quarter of 2015 compared to trading gains of $160,000 in the second quarter of 2015 and trading gains of $293,000 in the third quarter of 2014. Trading gains and losses recorded by the Company primarily result from fair value adjustments related to interest rate derivatives not designated as accounting hedges, primarily interest rate cap instruments that the Company uses to manage interest rate risk, specifically in the event of future increases in short-term interest rates.  The change in value of the cap derivatives reflects the present value of expected cash flows over the remaining life of the caps.  These expected cash flows are derived from the expected path for and a measure of volatility for short-term interest rates.

Other non-interest income totaled $8.8 million in the third quarter of 2015 compared to $11.4 million in the second quarter of 2015 and $5.3 million in the third quarter of 2014.  Other non-interest income decreased in the third quarter of 2015 as compared to the second quarter of 2015, primarily due to lower net gains on partnership investments in the current quarter and from the Company recognizing a $1.5 million BOLI death benefit in the second quarter of 2015.  Other non-interest income increased in the third quarter of 2015 as compared to the third quarter of 2014, primarily due to an increase in swap fee revenues resulting from interest rate hedging transactions related to both customer-based trades and the related matched trades with inter-bank dealer counterparties as well as higher net gains on partnership investments.  

NON-INTEREST EXPENSE

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

    Three Months Ended                
    September 30,   June 30,   September 30,   Q3 2015 compared to
Q2 2015
  Q3 2015 compared to
Q3 2014
(Dollars in thousands)   2015   2015   2014   $ Change   % Change   $ Change   % Change
Salaries and employee benefits:                            
Salaries   $ 53,028     $ 46,617     $ 45,471     $ 6,411     14 %   $ 7,557     17 %
Commissions and incentive compensation   30,035     33,387     27,885     (3,352 )   (10 )   2,150     8  
Benefits   14,686     14,417     12,620     269     2     2,066     16  
Total salaries and employee benefits   97,749     94,421     85,976     3,328     4     11,773     14  
Equipment   8,887     7,914     7,570     973     12     1,317     17  
Occupancy, net   12,066     11,401     10,446     665     6     1,620     16  
Data processing   8,127     6,081     4,765     2,046     34     3,362     71  
Advertising and marketing   6,237     6,406     3,528     (169 )   (3 )   2,709     77  
Professional fees   4,100     5,074     4,035     (974 )   (19 )   65     2  
Amortization of other intangible assets   1,350     934     1,202     416     45     148     12  
FDIC insurance   3,035     3,047     3,211     (12 )       (176 )   (5 )
OREO expense, net   (367 )   841     581     (1,208 )   NM   (948 )   NM
Other:                            
Commissions – 3rd party brokers   1,364     1,403     1,621     (39 )   (3 )   (257 )   (16 )
Postage   1,927     1,578     1,427     349     22     500     35  
Miscellaneous   15,499     15,197     14,138     302     2     1,361     10  
Total other   18,790     18,178     17,186     612     3     1,604     9  
Total Non-Interest Expense   $ 159,974     $ 154,297     $ 138,500     $ 5,677     4 %   $ 21,474     16 %

 

    Nine months ended        
    September 30,   September 30,   $   %
(Dollars in thousands)   2015   2014   Change   Change
Salaries and employee benefits:                
Salaries   $ 146,493     $ 132,556     $ 13,937     11 %
Commissions and incentive compensation   88,916     74,816     14,100     19  
Benefits   46,891     40,501     6,390     16  
Total salaries and employee benefits   282,300     247,873     34,427     14  
Equipment   24,637     22,196     2,441     11  
Occupancy, net   35,818     31,289     4,529     14  
Data processing   19,656     14,023     5,633     40  
Advertising and marketing   16,550     9,902     6,648     67  
Professional fees   13,838     11,535     2,303     20  
Amortization of other intangible assets   3,297     3,521     (224 )   (6 )
FDIC insurance   9,069     9,358     (289 )   (3 )
OREO expense, net   1,885     7,047     (5,162 )   (73 )
Other:                
Commissions – 3rd party brokers   4,153     4,911     (758 )   (15 )
Postage   5,138     4,321     817     19  
Miscellaneous   45,248     37,430     7,818     21  
Total other   54,539     46,662     7,877     17  
Total Non-Interest Expense   $ 461,589     $ 403,406     $ 58,183     14 %

The significant changes in non-interest expense for the quarter ended September 30, 2015 compared to the quarters ended June 30, 2015 and September 30, 2014 are discussed below.

Salaries and employee benefits expense increased $3.3 million, or 4%, in the third quarter of 2015 compared to the second quarter of 2015. In addition to acquisition related charges of $1.7 million, the increase was primarily a result of a $5.1 million increase in salaries as a result of various acquisitions and additional staffing as the Company grows, partially offset by a $3.6 million decrease in commissions and incentive compensation primarily attributable to lower commissions as a result of decreased mortgage loan origination volume. Salaries and employee benefits expense increased $11.8 million, or 14%, compared to the third quarter of 2014 primarily as a result of the $1.7 million in acquisition related charges during the period as well as an additional $6.2 million increase in salaries as a result of various acquisitions and additional staffing as the Company grows, a $1.9 million increase in commissions and incentive compensation primarily attributable to higher commissions as a result of increased mortgage loan origination volume, and a $2.0 million increase in employee benefits resulting from higher insurance costs. 

Equipment expense totaled $8.9 million for the third quarter of 2015, an increase of $973,000 compared to the second quarter of 2015 and an increase of $1.3 million compared to the third quarter of 2014. The increase in the current quarter compared to the prior year quarter is primarily related to the impact of the recent acquisitions and increased software license fees and higher depreciation as a result of equipment purchases.  Equipment expense includes depreciation on equipment, maintenance and repairs, equipment rental and software license fees. 

Occupancy expense for the third quarter of 2015 was $12.1 million, an increase of $665,000, or 6%, compared to the second quarter of 2015 and an increase of $1.6 million, or 16%, compared to the same period in 2014.  Occupancy expense increased in the current quarter compared to the prior quarter due to property taxes and additional depreciation expenses on owned locations, including those obtained in the Company’s acquisitions. The increase in the current quarter as compared to the prior year quarter is primarily the result of increased rent expense on leased properties as well as additional depreciation expenses on owned locations including those obtained in the Company’s acquisitions. Occupancy expense includes depreciation on premises, real estate taxes, utilities and maintenance of premises, as well as net rent expense for leased premises.

Data processing expenses totaled $8.1 million in the third quarter of 2015 compared to $6.1 million recorded in the second quarter of 2015 and $4.8 million recorded in the third quarter of 2014. The amount of data processing expenses incurred increased due to $2.7 million and $653,000 of additional expenses recorded in the third quarter of 2015 and the second quarter of 2015, respectively, related to bank acquisition transactions as well as overall growth of loan and deposit accounts. 

Advertising and marketing expenses totaled $6.2 million in the third quarter of 2015, a decrease of $169,000 compared to the second quarter of 2015 and an increase of $2.7 million compared to the third quarter of 2014.  The increase in the current quarter compared to the prior year quarter relates primarily to expenses for community-related advertisements and sponsorships. Marketing costs are incurred to promote the Company’s brand, commercial banking capabilities, the Company’s various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company’s non-bank businesses. The level of marketing expenditures depends on the type of marketing programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

Professional fees for the third quarter of 2015 were $4.1 million, compared to $5.1 million for the second quarter of 2015 and $4.0 million in the third quarter of 2014. The decrease in professional fees in the current quarter as compared to the second quarter of 2015 is due to a decrease in legal expenses, including legal fees incurred in connection with  acquisitions as well as lower professional tax preparation fees. The majority of legal work for the acquisitions completed early in the third quarter of 2015 was performed in prior quarters of 2015.  These acquisition related professional fees totaled $335,000 in the third quarter of 2015 compared to $417,000 in the second quarter of 2015. Professional fees include legal, audit and tax fees, external loan review costs and normal regulatory exam assessments.

OREO expense totaled $(367,000) in the third quarter of 2015 compared to OREO expense of $841,000 recorded in the second quarter of 2015 and $581,000 recorded in the third quarter of 2014.  OREO expense was lower in the current quarter compared to the quarter ended June 30, 2015 and September 30, 2014 primarily due to higher gains recorded on  non-covered OREO sales in the current quarter and lower expenses to maintain OREO properties.  OREO costs include all costs related to obtaining, maintaining and selling other real estate owned properties.    

Miscellaneous expense in the third quarter of 2015 increased $302,000, or 2%, compared to the quarter ended June 30, 2015 and increased $1.4 million, or 10%, compared to the quarter ended September 30, 2014.  The increase in the current quarter as compared to the prior year quarter is primarily a result of higher travel and entertainment expenses and increased costs related to insurance and donations. Miscellaneous expense 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. 

ASSET QUALITY

Allowance for Credit Losses, excluding covered loans

    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,   September 30,
(Dollars in thousands)   2015   2015   2014   2015   2014
Allowance for loan losses at beginning of period   $ 100,204     $ 94,446     $ 92,253     $ 91,705     $ 96,922  
Provision for credit losses   8,665     9,701     6,028     24,551     16,145  
Other adjustments   (153 )   (93 )   (335 )   (494 )   (588 )
Reclassification from (to) allowance for unfunded lending-related commitments   (42 )   4     62     (151 )   (102 )
Charge-offs:                    
Commercial   964     1,243     832     2,884     3,864  
Commercial real estate   1,948     856     4,510     3,809     11,354  
Home equity   1,116     1,847     748     3,547     3,745  
Residential real estate   1,138     923     205     2,692     1,120  
Premium finance receivables – commercial   1,595     1,526     1,557     4,384     4,259  
Premium finance receivables – life insurance                    
Consumer and other   116     115     250     342     636  
Total charge-offs   6,877     6,510     8,102     17,658     24,978  
Recoveries:                    
Commercial   462     285     296     1,117     883  
Commercial real estate   213     1,824     275     2,349     762  
Home equity   42     39     99     129     478  
Residential real estate   136     16     111     228     316  
Premium finance receivables – commercial   278     458     289     1,065     920  
Premium finance receivables – life insurance   16         1     16     5  
Consumer and other   52     34     42     139     256  
Total recoveries   1,199     2,656     1,113     5,043     3,620  
Net charge-offs   (5,678 )   (3,854 )   (6,989 )   (12,615 )   (21,358 )
Allowance for loan losses at period end   $ 102,996     $ 100,204     $ 91,019     $ 102,996     $ 91,019  
Allowance for unfunded lending-related commitments at period end   926     884     822     926     822  
Allowance for credit losses at period end   $ 103,922     $ 101,088     $ 91,841     $ 103,922     $ 91,841  
Annualized net charge-offs by category as a percentage of its own respective category’s average:                    
Commercial   0.05 %   0.09 %   0.06 %   0.06 %   0.11 %
Commercial real estate   0.13     (0.08 )   0.38     0.04     0.33  
Home equity   0.55     1.01     0.36     0.62     0.61  
Residential real estate   0.42     0.39     0.05     0.37     0.15  
Premium finance receivables – commercial   0.21     0.18     0.20     0.18     0.19  
Premium finance receivables – life insurance                    
Consumer and other   0.17     0.23     0.49     0.17     0.30  
Total loans, net of unearned income, excluding covered loans   0.14 %   0.10 %   0.19 %   0.11 %   0.21 %
Net charge-offs as a percentage of the provision for credit losses   65.53 %   39.73 %   115.95 %   51.39 %   132.29 %
Loans at period-end, excluding covered loans   $ 16,316,211     $ 15,513,650     $ 14,052,059          
Allowance for loan losses as a percentage of loans at period end   0.63 %   0.65 %   0.65 %        
Allowance for credit losses as a percentage of loans at period end   0.64 %   0.65 %   0.65 %        
                           

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

The provision for credit losses, excluding the provision for covered loan losses, totaled $8.7 million for the third quarter of 2015 compared to $9.7 million for the second quarter of 2015 and $6.0 million for the third quarter of 2014. The higher provision for credit losses in the third quarter of 2015 compared to the same period of 2014 was primarily due to loan growth since the prior period.

Net charge-offs as a percentage of loans, excluding covered loans, for the third quarter of 2015 totaled 14 basis points on an annualized basis compared to ten basis points on an annualized basis in the second quarter of 2015 and 19 basis points on an annualized basis in the third quarter of 2014.  Net charge-offs totaled $5.7 million in the third quarter of 2015, a $1.8 million increase from $3.9 million in the second quarter of 2015 and a $1.3 million decrease from $7.0 million in the third quarter of 2014.

Management believes the allowance for credit losses is appropriate to provide for inherent losses in the portfolio. There can be no assurances however, that future losses will not exceed the amounts provided for, thereby affecting future results of operations. The amount of future additions to the allowance for credit losses will be dependent upon management’s assessment of the appropriateness of the allowance based on its evaluation of economic conditions, changes in real estate values, interest rates, the regulatory environment, the level of past-due and non-performing loans, and other factors.

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

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

    Three months ended   Nine months ended
    September 30,   June 30,   September 30,   September 30,   September 30,
(Dollars in thousands)   2015   2015   2014   2015   2014
Provision for loan losses   $ 8,623     $ 9,705     $ 6,090     $ 24,400     $ 16,043  
Provision for unfunded lending-related commitments   42     (4 )   (62 )   151     102  
Provision for covered loan losses   (343 )   (219 )   (164 )   (668 )   (1,741 )
Provision for credit losses   $ 8,322     $ 9,482     $ 5,864     $ 23,883     $ 14,404  
                     
            Period End
            September 30,   June 30,   September 30,
            2015   2015   2014
Allowance for loan losses   $ 102,996     $ 100,204     $ 91,019  
Allowance for unfunded lending-related commitments   926     884     822  
Allowance for covered loan losses   2,918     2,215     2,655  
Allowance for credit losses   $ 106,840     $ 103,303     $ 94,496  
                         

The tables below summarize the calculation of allowance for loan losses for the Company’s core loan portfolio and consumer, niche and purchased loan portfolio as of September 30, 2015 and June 30, 2015.

    As of September 30, 2015
    Recorded   Calculated   As a percentage
of its own respective
(Dollars in thousands)   Investment   Allowance   category’s balance
Commercial:(1)            
Commercial and industrial   $ 2,579,208     $ 21,875     0.85 %
Asset-based lending   797,301     6,282     0.79  
Tax exempt   230,878     1,303     0.56  
Leases   205,612     169     0.08  
Other   1,953     12     0.61  
Commercial real-estate:(1)            
Residential construction   60,072     753     1.25  
Commercial construction   283,689     2,995     1.06  
Land   73,923     2,550     3.45  
Office   762,734     7,154     0.94  
Industrial   614,619     5,515     0.90  
Retail   753,009     5,254     0.70  
Multi-family   650,287     6,951     1.07  
Mixed use and other   1,517,265     12,077     0.80  
Home equity(1)   694,203     12,205     1.76  
Residential real-estate(1)   518,756     4,580     0.88  
Total core loan portfolio   $ 9,743,509     $ 89,675     0.92 %
Commercial:            
Franchise   $ 222,001     $ 3,145     1.42 %
Mortgage warehouse lines of credit   136,614     1,022     0.75  
Community Advantage – homeowner associations   123,209     3      
Aircraft   6,371     8     0.13  
Purchased non-covered commercial loans (2)   97,038     171     0.18  
Commercial real-estate:            
Purchased non-covered commercial real-estate (2)   591,968     812     0.14  
Purchased non-covered home equity (2)   103,262     18     0.02  
Purchased non-covered residential real-estate (2)   52,987     6     0.01  
Premium finance receivables            
U.S. commercial insurance loans   2,127,969     5,458     0.26  
Canada commercial insurance loans (2)   279,106     583     0.21  
Life insurance loans (1)   2,326,689     1,040     0.04  
Purchased life insurance loans (2)   373,586          
Consumer and other (1)   127,011     1,054     0.83  
Purchased non-covered consumer and other (2)   4,891     1     0.02  
Total consumer, niche and purchased loan portfolio   $ 6,572,702     $ 13,321     0.20 %
Total loans, net of unearned income, excluding covered loans   $ 16,316,211     $ 102,996     0.63 %
Non-accretable credit discounts on purchased loans reported in accordance with ASC 310-30, excluding covered loans       $ 30,405      
Total allowance for loan losses and non-accretable credit discounts on purchased loans, excluding covered loans       $ 133,401     0.82 %

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

    As of June 30, 2015
    Recorded   Calculated   As a percentage
of its own respective
(Dollars in thousands)   Investment   Allowance   category’s balance
Commercial:(1)            
Commercial and industrial   $ 2,486,860     $ 21,691     0.87 %
Asset-based lending   830,378     6,382     0.77  
Tax exempt   198,520     1,186     0.60  
Leases   187,630     166     0.09  
Other   2,772     20     0.72  
Commercial real-estate:(1)            
Residential construction   56,500     687     1.22  
Commercial construction   247,982     2,656     1.07  
Land   81,630     2,513     3.08  
Office   726,155     7,127     0.98  
Industrial   608,566     4,524     0.74  
Retail   718,990     5,002     0.70  
Multi-family   634,144     7,172     1.13  
Mixed use and other   1,466,366     12,164     0.83  
Home equity(1)   692,692     12,270     1.77  
Residential real-estate(1)   469,265     4,966     1.06  
Total core loan portfolio   $ 9,408,450     $ 88,526     0.94 %
Commercial:            
Franchise   $ 228,599     $ 1,852     0.81 %
Mortgage warehouse lines of credit   213,797     1,571     0.73  
Community Advantage – homeowner associations   114,883     3      
Aircraft   6,831     9     0.13  
Purchased non-covered commercial loans (2)   60,074     20     0.03  
Commercial real-estate:            
Purchased non-covered commercial real-estate (2)   310,257     353     0.11  
Purchased non-covered home equity (2)   19,658     18     0.09  
Purchased non-covered residential real-estate (2)   33,750     53     0.16  
Premium finance receivables            
U.S. commercial insurance loans   2,163,089     5,502     0.25  
Canada commercial insurance loans (2)   297,319     620     0.21  
Life insurance loans (1)   2,153,155     799     0.04  
Purchased life insurance loans (2)   384,320          
Consumer and other (1)   115,675     877     0.76  
Purchased non-covered consumer and other (2)     3,793       1     0.03  
Total consumer, niche and purchased loan portfolio   $ 6,105,200     $ 11,678     0.19 %
Total loans, net of unearned income, excluding covered loans   $ 15,513,650     $ 100,204     0.65 %
Non-accretable credit discounts on purchased loans reported in accordance with ASC 310-30, excluding covered loans       $ 14,474      
Total allowance for loan losses and non-accretable credit discounts on purchased loans, excluding covered loans       $ 114,678     0.74 %

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

As part of the regular quarterly review performed by management to determine if the Company’s allowance for loan losses is appropriate, an analysis is prepared on the loan portfolio based upon a breakout of core loans and consumer, niche and purchased loans. A summary of the allowance for loan losses calculated for the loan components in both the core loan portfolio and the consumer, niche and purchased loan portfolio was shown on the previous pages as of September 30, 2015 and June 30, 2015.

The decrease in the allowance for loan losses to core loans in the third quarter of 2015 compared to the second quarter of 2015 was attributable to a decrease in required ASC 310 reserves (specific reserves) within the core portfolio.

Current credit quality metrics are comparable to the pre-credit crisis levels reported between 2005 and 2008.  However, we are able to carry a slightly lower ratio of allowance for loan losses to total loans than during the pre-credit crisis period as the result of the fact that the mix of the Company’s loan portfolio is now more heavily weighted toward niche and purchased loans which historically require lower reserves.  The niche and purchased components of our total loan portfolio now comprise 40% as compared to 23% of the total loan portfolio at December 31, 2005.  Our current loan portfolio is comprised of a core portion totaling $9.7 billion with a 0.92% of allowance for loan losses and a niche and purchased component totaling $6.6 billion that requires 0.20% of allowance for loan losses.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. In accordance with accounting guidance, credit deterioration on purchased loans is recorded as a credit discount at the time of purchase instead of as an increase to the allowance for loan losses. For analysis purposes, the Company has combined the non-accretable credit discounts recorded on purchased loans with the total allowance for loan losses in the previous tables to present the total credit reserves available on its loan portfolio. The total allowance for loan losses and non-accretable credit discounts on purchased loans was 0.82% of the total loan portfolio as of September 30, 2015 as compared to 0.74% as of June 30, 2015. The Company expects the total allowance for loan losses and non-accretable credit discounts on purchased loans to total loans ratio to increase in periods that have acquisitions and decrease in periods without acquisitions, based on the performance of the purchased loan portfolios.

The table below shows the aging of the Company’s loan portfolio at September 30, 2015:

        90+ days   60-89   30-59        
As of September 30, 2015       and still   days past   days past        
(Dollars in thousands)   Nonaccrual   accruing   due   due   Current   Total Loans
Loan Balances:                        
Commercial                        
Commercial and industrial   $ 12,006     $     $ 2,731     $ 9,331     $ 2,622,207     $ 2,646,275  
Franchise           80     376     221,545     222,001  
Mortgage warehouse lines of credit                   136,614     136,614  
Community Advantage – homeowners association           44         123,165     123,209  
Aircraft               378     5,993     6,371  
Asset-based lending   12         1,313     247     800,798     802,370  
Tax exempt                   232,667     232,667  
Leases               89     205,697     205,786  
Other                   1,953     1,953  
PCI – commercial (1)       217         39     22,683     22,939  
Total commercial   12,018     217     4,168     10,460     4,373,322     4,400,185  
Commercial real-estate                        
Residential construction               1,141     60,130     61,271  
Commercial construction   31             2,394     283,538     285,963  
Land   1,756             2,207     75,113     79,076  
Office   4,045         10,861     2,362     773,043     790,311  
Industrial   11,637         786     897     622,804     636,124  
Retail   2,022         1,536     821     781,463     785,842  
Multi-family   1,525         512     744     684,878     687,659  
Mixed use and other   7,601         2,340     12,871     1,797,516     1,820,328  
PCI – commercial real-estate (1)       13,547     299     583     146,563     160,992  
Total commercial real-estate   28,617     13,547     16,334     24,020     5,225,048     5,307,566  
Home equity   8,365         811     4,124     784,165     797,465  
Residential real estate   14,557         1,017     1,195     551,292     568,061  
PCI – residential real estate (1)       424     323     411     2,524     3,682  
Premium finance receivables                        
Commercial insurance loans   13,751     8,231     6,664     13,659     2,364,770     2,407,075  
Life insurance loans           9,656     2,627     2,314,406     2,326,689  
PCI – life insurance loans (1)                   373,586     373,586  
Consumer and other   297     140     56     935     130,474     131,902  
Total loans, net of unearned income, excluding covered loans   $ 77,605     $ 22,559     $ 39,029     $ 57,431     $ 16,119,587     $ 16,316,211  
Covered loans   6,540     7,626     1,392     802     152,249     168,609  
Total loans, net of unearned income   $ 84,145     $ 30,185     $ 40,421     $ 58,233     $ 16,271,836     $ 16,484,820  
                         

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

As of September 30, 2015
Aging as a % of Loan Balance
  Nonaccrual   90+ days
and still
accruing
  60-89
days past
due
  30-59
days past
due
  Current   Total Loans
Commercial                        
Commercial and industrial   0.5 %   %   0.1 %   0.4 %   99.0 %   100.0 %
Franchise               0.2     99.8     100.0  
Mortgage warehouse lines of credit                   100.0     100.0  
Community Advantage – homeowners association                   100.0     100.0  
Aircraft               5.9     94.1     100.0  
Asset-based lending           0.2         99.8     100.0  
Tax exempt                   100.0     100.0  
Leases                   100.0     100.0  
Other                   100.0     100.0  
PCI – commercial(1)       0.9         0.2     98.9     100.0  
Total commercial   0.3         0.1     0.2     99.4     100.0  
Commercial real-estate                        
Residential construction               1.9     98.1     100.0  
Commercial construction               0.8     99.2     100.0  
Land   2.2             2.8     95.0     100.0  
Office   0.5         1.4     0.3     97.8     100.0  
Industrial   1.8         0.1     0.1     98.0     100.0  
Retail   0.3         0.2     0.1     99.4     100.0  
Multi-family   0.2         0.1     0.1     99.6     100.0  
Mixed use and other   0.4         0.1     0.7     98.8     100.0  
PCI – commercial real-estate (1)       8.4     0.2     0.4     91.0     100.0  
Total commercial real-estate   0.5     0.3     0.3     0.5     98.4     100.0  
Home equity   1.0         0.1     0.5     98.4     100.0  
Residential real estate   2.6         0.2     0.2     97.0     100.0  
PCI – residential real estate(1)       11.5     8.8     11.2     68.5     100.0  
Premium finance receivables                        
Commercial insurance loans   0.6     0.4     0.3     0.6     98.1     100.0  
Life insurance loans           0.4     0.1     99.5     100.0  
PCI – life insurance loans (1)                   100.0     100.0  
Consumer and other   0.2     0.1         0.7     99.0     100.0  
Total loans, net of unearned income, excluding covered loans   0.5 %   0.1 %   0.2 %   0.4 %   98.8 %   100.0 %
Covered loans   3.9     4.5     0.8     0.5     90.3     100.0  
Total loans, net of unearned income   0.5 %   0.2 %   0.2 %   0.4 %   98.7 %   100.0 %

As of September 30, 2015, $39.0 million of all loans, excluding covered loans, or 0.2%, were 60 to 89 days past due and $57.4 million, or 0.4%, were 30 to 59 days (or one payment) past due. As of June 30, 2015, $21.0 million of all loans, excluding covered loans, or 0.1%, were 60 to 89 days past due and $52.2 million, or 0.3%, were 30 to 59 days (or one payment) past due. The majority of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at September 30, 2015 that are current with regard to the contractual terms of the loan agreement represent 98.4% of the total home equity portfolio. Residential real estate loans at September 30, 2015 that are current with regards to the contractual terms of the loan agreements comprise 96.9% of total residential real estate loans outstanding, which includes purchased non-covered residential real-estate.

The table below shows the aging of the Company’s loan portfolio at June 30, 2015:

        90+ days   60-89   30-59        
As of June 30, 2015       and still   days past   days past        
(Dollars in thousands)   Nonaccrual   accruing   due   due   Current   Total Loans
Loan Balances:                        
Commercial                        
Commercial and industrial   $ 4,424     $     $ 1,846     $ 6,027     $ 2,522,162     $ 2,534,459  
Franchise   905         113     396     227,185     228,599  
Mortgage warehouse lines of credit                   213,797     213,797  
Community Advantage – homeowners association                   114,883     114,883  
Aircraft                   6,831     6,831  
Asset-based lending           1,767     7,423     823,265     832,455  
Tax exempt                   199,185     199,185  
Leases   65                 187,565     187,630  
Other                   2,772     2,772  
PCI – commercial(1)       474         233     9,026     9,733  
Total commercial   5,394     474     3,726     14,079     4,306,671     4,330,344  
Commercial real-estate                        
Residential construction               4     57,598     57,602  
Commercial construction   19                 249,524     249,543  
Land   2,035         1,123     2,399     82,280     87,837  
Office   6,360     701     163     2,601     744,992     754,817  
Industrial   2,568         18     484     624,337     627,407  
Retail   2,352         896     2,458     744,285     749,991  
Multi-family   1,730         933     223     665,562     668,448  
Mixed use and other   8,119         2,405     3,752     1,577,846     1,592,122  
PCI – commercial real-estate (1)       15,646     3,490     2,798     40,889     62,823  
Total commercial real-estate   23,183     16,347     9,028     14,719     4,787,313     4,850,590  
Home equity   5,695         511     3,365     702,779     712,350  
Residential real estate   16,631         2,410     1,205     480,427     500,673  
PCI – residential real estate (1)       264     84         1,994     2,342  
Premium finance receivables                        
Commercial insurance loans   15,156     9,053     5,048     11,071     2,420,080     2,460,408  
Life insurance loans       351         6,823     2,145,981     2,153,155  
PCI – life insurance loans (1)                   384,320     384,320  
Consumer and other   280     110     196     919     117,963     119,468  
Total loans, net of unearned income, excluding covered loans   $ 66,339     $ 26,599     $ 21,003     $ 52,181     $ 15,347,528     $ 15,513,650  
Covered loans   6,353     10,030     1,333     1,720     173,974     193,410  
Total loans, net of unearned income   $ 72,692     $ 36,629     $ 22,336     $ 53,901     $ 15,521,502     $ 15,707,060  

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

As of June 30, 2015
Aging as a % of Loan Balance:
  Nonaccrual   90+ days
and still
accruing
  60-89
days past
due
  30-59
days past
due
  Current   Total Loans
Commercial                        
Commercial and industrial   0.2 %   %   0.1 %   0.2 %   99.5 %   100.0 %
Franchise   0.4             0.2     99.4     100.0  
Mortgage warehouse lines of credit                   100.0     100.0  
Community Advantage – homeowners association                   100.0     100.0  
Aircraft                   100.0     100.0  
Asset-based lending           0.2     0.9     98.9     100.0  
Tax exempt                   100.0     100.0  
Leases                   100.0     100.0  
Other                   100.0     100.0  
PCI – commercial(1)       4.9         2.4     92.7     100.0  
Total commercial   0.1         0.1     0.3     99.5     100.0  
Commercial real-estate                        
Residential construction                   100.0     100.0  
Commercial construction                   100.0     100.0  
Land   2.3         1.3     2.7     93.7     100.0  
Office   0.8     0.1         0.3     98.8     100.0  
Industrial   0.4             0.1     99.5     100.0  
Retail   0.3         0.1     0.3     99.3     100.0  
Multi-family   0.3         0.1         99.6     100.0  
Mixed use and other   0.5         0.2     0.2     99.1     100.0  
PCI – commercial real-estate (1)       24.9     5.6     4.5     65.0     100.0  
Total commercial real-estate   0.5     0.3     0.2     0.3     98.7     100.0  
Home equity   0.8         0.1     0.5     98.6     100.0  
Residential real estate   3.3         0.5     0.2     96.0     100.0  
PCI – residential real estate (1)       11.3     3.6         85.1     100.0  
Premium finance receivables                        
Commercial insurance loans   0.6     0.5     0.2     0.4     98.3     100.0  
Life insurance loans               0.3     99.7     100.0  
PCI – life insurance loans (1)                   100.0     100.0  
Consumer and other   0.2     0.1     0.2     0.8     98.7     100.0  
Total loans, net of unearned income, excluding covered loans   0.4 %   0.2 %   0.1 %   0.3 %   99.0 %   100.0 %
Covered loans   3.3     5.2     0.7     0.9     89.9     100.0  
Total loans, net of unearned income   0.5 %   0.2 %   0.1 %   0.3 %   98.9 %   100.0 %

Non-performing Assets, excluding covered assets

The following table sets forth Wintrust’s non-performing assets and troubled debt restructurings  (“TDRs”) performing under the contractual terms of the loan agreement, excluding covered assets and non-covered PCI loans, at the dates indicated.

    September 30,   June 30,   September 30,
(Dollars in thousands)   2015   2015   2014
Loans past due greater than 90 days and still accruing(1):            
Commercial   $     $     $  
Commercial real-estate       701      
Home equity            
Residential real-estate            
Premium finance receivables – commercial   8,231     9,053     7,115  
Premium finance receivables – life insurance       351      
Consumer and other   140     110     175  
Total loans past due greater than 90 days and still accruing   8,371     10,215     7,290  
Non-accrual loans(2):            
Commercial   12,018     5,394     10,455  
Commercial real-estate   28,617     23,183     27,363  
Home equity   8,365     5,695     5,696  
Residential real-estate   14,557     16,631     15,730  
Premium finance receivables – commercial   13,751     15,156     14,110  
Premium finance receivables – life insurance            
Consumer and other   297     280     426  
Total non-accrual loans   77,605     66,339     73,780  
Total non-performing loans:            
Commercial   12,018     5,394     10,455  
Commercial real-estate   28,617     23,884     27,363  
Home equity   8,365     5,695     5,696  
Residential real-estate   14,557     16,631     15,730  
Premium finance receivables – commercial   21,982     24,209     21,225  
Premium finance receivables – life insurance       351      
Consumer and other   437     390     601  
Total non-performing loans   $ 85,976     $ 76,554     $ 81,070  
Other real estate owned   29,053     33,044     41,506  
Other real estate owned – from acquisitions   22,827     9,036     8,871  
Other repossessed assets   193     231     292  
Total non-performing assets   $ 138,049     $ 118,865     $ 131,739  
TDRs performing under the contractual terms of the loan agreement   $ 49,173     $ 52,174     $ 69,868  
Total non-performing loans by category as a percent of its own respective category’s period-end balance:            
Commercial   0.27 %   0.12 %   0.28 %
Commercial real-estate   0.54     0.49     0.61  
Home equity   1.05     0.80     0.79  
Residential real-estate   2.55     3.31     3.34  
Premium finance receivables – commercial   0.91     0.98     0.89  
Premium finance receivables – life insurance       0.01      
Consumer and other   0.33     0.33     0.40  
Total loans, net of unearned income   0.53 %   0.49 %   0.58 %
Total non-performing assets as a percentage of total assets   0.63 %   0.57 %   0.69 %
Allowance for loan losses as a percentage of total non-performing loans   119.79 %   130.89 %   112.27 %

(1) As of the dates shown, no TDRs were past due greater than 90 days and still accruing interest.
(2) Non-accrual loans included TDRs totaling $10.1 million, $10.6 million, and $13.5 million as of September 30, 2015,  June 30, 2015, and September 30, 2014, respectively.

Non-performing Commercial and Commercial Real Estate

Non-performing commercial and commercial real estate loans totaled $40.6 million as of September 30, 2015 compared to $29.3 million at June 30, 2015 and $37.8 million at September 30, 2014. The increase compared to June 30, 2015 is primarily the result of a single customer relationship totaling $9.3 million being placed in nonaccrual status at quarter-end.

Management is pursuing the resolution of all credits in this category. At this time, management believes reserves are appropriate to absorb inherent losses that are expected upon the ultimate resolution of these credits.

Non-performing Residential Real Estate and Home Equity

Non-performing home equity and residential real estate loans totaled $22.9 million as of September 30, 2015. The balance remained relatively unchanged compared to $22.3 million and $21.4 million at June 30, 2015 and September 30, 2014, respectively. The September 30, 2015 non-performing balance is comprised of $14.6 million of residential real estate (71 individual credits) and $8.4 million of home equity loans (50 individual credits). On average, this is approximately 8 non-performing residential real estate loans and home equity loans per chartered bank within the Company. The Company believes control and collection of these loans is very manageable. At this time, management believes reserves are adequate to absorb inherent losses that are expected upon the ultimate resolution of these credits.

Non-performing Commercial Insurance Premium Finance Receivables

The table below presents the level of non-performing property and casualty premium finance receivables as of September 30, 2015, June 30, 2015 and September 30, 2014 and the amount of net charge-offs for the quarters then ended.

    September 30,   June 30,   September 30,
(Dollars in thousands)   2015   2015   2014
Non-performing premium finance receivables – commercial   $ 21,982     $ 24,209     $ 21,225  
– as a percent of premium finance receivables – commercial outstanding   0.91 %   0.98 %   0.89 %
Net charge-offs of premium finance receivables – commercial   $ 1,317     $ 1,068     $ 1,268  
– annualized as a percent of average premium finance receivables – commercial   0.21 %   0.18 %   0.20 %

Fluctuations in this category may occur due to timing and nature of account collections from insurance carriers. The Company’s underwriting standards, regardless of the condition of the economy, have remained consistent. We anticipate that net charge-offs and non-performing asset levels in the near term will continue to be at levels that are within acceptable operating ranges for this category of loans. Management is comfortable with administering the collections at this level of non-performing property and casualty premium finance receivables and believes reserves are adequate to absorb inherent losses that are expected upon the ultimate resolution of these credits.

Due to the nature of collateral for commercial premium finance receivables, it customarily takes 60-150 days to convert the collateral into cash. Accordingly, the level of non-performing commercial premium finance receivables is not necessarily indicative of the loss inherent in the portfolio. In the event of default, Wintrust has the right to cancel the insurance policy and collect the unearned portion of the premium from the insurance carrier. In the event of cancellation, the cash returned in payment of the unearned premium by the insurer should generally be sufficient to cover the receivable balance, the interest and other charges due. Due to notification requirements and processing time by most insurance carriers, many receivables will become delinquent beyond 90 days while the insurer is processing the return of the unearned premium. Management continues to accrue interest until maturity as the unearned premium is ordinarily sufficient to pay-off the outstanding balance and contractual interest due.

Nonperforming Loans Rollforward

The table below presents a summary of the changes in the balance of non-performing loans, excluding covered loans, for the periods presented:

    Three Months Ended   Nine Months Ended
    September 30,   June 30,   September 30,   September 30,   September 30,
(Dollars in thousands)   2015   2015   2014   2015   2014
Balance at beginning of period   $ 76,554     $ 81,772     $ 88,650     $ 78,677     $ 103,334  
Additions, net   24,333     8,828     10,389     42,141     31,187  
Return to performing status   (1,028 )   (847 )   (3,745 )   (2,591 )   (6,812 )
Payments received   (5,468 )