ROSEMONT, Ill., April 21, 2020 (GLOBE NEWSWIRE) — Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq: WTFC) announced net income of $62.8 million or $1.04 per diluted common share for the first quarter of 2020, a decrease in diluted earnings per common share of 27.8% compared to the prior quarter and a decrease of 31.6% compared to the first quarter of 2019.Highlights of the First Quarter of 2020:
Comparative information to the fourth quarter of 2019Total assets increased by $2.2 billion.Total loans increased by $1.0 billion.Total deposits increased by $1.4 billion.Net interest income decreased by $436,000 as the impact of a five basis point decline in net interest margin and one less day was partially offset by a $925 million increase in average earning assets.The allowance for credit losses increased by $95.0 million to $253.5 million as of March 31, 2020 as compared to $158.5 million as of December 31, 2019. The change in allowance for credit losses was due to:
• An increase of $47.4 million related to the cumulative effect adjustment from the adoption of the Current Expected Credit Loss (“CECL”) standard effective as of January 1, 2020.
• Provision for credit losses of $53.0 million in the current quarter. Provision for credit losses increased by $45.2 million from a provision for credit losses of $7.8 million in the fourth quarter of 2019 primarily related to the implementation of CECL and the economic conditions created by the COVID-19 pandemic.
• Net charge-offs of $5.3 million in the first quarter of 2020 as compared to $12.7 million in the fourth quarter of 2019.Other highlights of the first quarter of 2020Recorded $17.4 million of derivative income associated with mandatory commitments to fund mortgage originations for sale in the current quarter as compared to a $1.0 million derivative loss in the fourth quarter of 2019. Mandatory commitments to fund mortgage originations for sale were $1.4 billion at the end of the first quarter of 2020 as compared to $372 million at the end of the fourth quarter of 2019.Recorded a decrease in the value of mortgage servicing rights related to changes in fair value model assumptions, net of derivative contract activity held as an economic hedge, of $10.4 million.Recognized $4.4 million of net losses on investment securities, primarily as a result of unrealized losses on market sensitive securities.Incurred acquisition related costs of $1.7 million in the first quarter of 2020 as compared to $2.4 million in the fourth quarter of 2019.Total period end loans were $871 million higher than average total loans in current quarter.Repurchased 576,469 shares of common stock at a cost of $37.1 million. At this time, we have temporarily suspended our common stock repurchase program, as an additional prudential measure.Edward J. Wehmer, Founder and Chief Executive Officer, commented, “I would like to start by thanking all Wintrust employees for their passion and commitment during this difficult time. As the challenges of COVID-19 affect our customers and our communities, we stand ready to be responsive and supportive. I am extremely proud of our successful efforts earlier this month to timely launch the Paycheck Protection Program (“PPP”) to provide much needed funding to our small business customers so that they can continue to operate and pay their employees. Our teams worked tirelessly to process approximately 8,900 applications with a median loan size of approximately $87,500, totaling loan approvals of nearly $3.3 billion through April 17th. We are honored to be part of the solution to the complex problems faced by our clients during the COVID-19 pandemic. We will continue to answer their call throughout this crisis and into the eventual recovery. Please see our previous releases regarding our PPP activity to date. We expect to further participate in the program if additional government funding is approved.”With respect to the current quarter, Mr Wehmer remarked, “Wintrust reported net income of $62.8 million for the first quarter of 2020, down from $86.0 million in the fourth quarter of 2019. However, pre-tax income, excluding provision for credit losses and MSR valuation adjustments (non-GAAP), increased by $27.8 million over the previous quarter and $12.4 million over the first quarter of 2019. The Company experienced strong balance sheet growth as total assets were $2.2 billion higher than the prior quarter end and $6.4 billion higher than the end of the first quarter of 2019. The first quarter was characterized by significant balance sheet growth, stable net interest income, strong mortgage banking revenue, increased provision for credit losses primarily related to the implementation of CECL and the economic conditions created by the COVID-19 pandemic, and a continued focus to increase franchise value in our market area.”Mr. Wehmer continued, “The Company grew total loans by $1.0 billion in the current quarter with growth diversified primarily across various loan portfolios including the commercial, commercial real estate and life insurance premium finance receivable portfolios. Management estimates that nearly half of the growth in the commercial category during the quarter was a result of customer draws on unfunded commitments primarily occurring toward the end of the quarter. We have seen this activity abate after quarter end. Total deposits increased by $1.4 billion as compared to the fourth quarter of 2019 as strong retail deposit growth, including growth in our MaxSafe product, was supplemented by an increase in brokered deposits. Our loans to deposits ratio ended the quarter at 88.4% and we are confident that we have sufficient liquidity to meet customer loan demand.”Mr. Wehmer commented, “Despite one less day in the quarter and modest net interest margin compression, net interest income stayed relatively flat in the first quarter of 2020 as compared to the fourth quarter of 2019. We believe that our ability to increase market share and grow the balance sheet will continue to help mitigate the pressures presented by a lower interest rate environment. The declining interest rate environment contributed to a reduction in loan yields of 17 basis points; however that impact was partially offset by a 13 basis point improvement in the rate paid on interest bearing deposits. As always, we will strive to grow without a commensurate increase in expenses to enhance our net overhead ratio which was 1.33% in the first quarter of 2020.”Mr. Wehmer noted, “Our mortgage banking business delivered a record quarter in increased pipeline in light of the demand associated with historically low long term interest rates. Loan volumes originated for sale in the current quarter were $1.2 billion, similar to the fourth quarter of 2019. However, due to record mortgage applications and interest rate lock volume near the end of the quarter, mandatory commitments to fund mortgage originations for sale were $1.4 billion at the end of the first quarter of 2020 as compared to $372 million at the end of the fourth quarter of 2019. Additionally, the Company recorded a $10.4 million decrease in the value of mortgage servicing rights related to changes in fair value model assumptions, net of derivative contract activity held as an economic hedge. We are leveraging efficiencies in our delivery channels and staffing strategies to keep pace with unprecedented demand. We believe the second quarter of 2020 will provide another strong quarter for mortgage banking production.”Commenting on credit quality, Mr. Wehmer stated, “The Company recorded net charge-offs of $5.3 million in the first quarter of 2020 as compared to $12.7 million in the fourth quarter of 2019. However, provision for credit losses totaled $53.0 million in the first quarter of 2020 as compared to $7.8 million in the fourth quarter of 2019. The elevated provision expense in the current quarter was primarily related to the implementation of the CECL standard and the economic conditions created by the COVID-19 pandemic. Non-performing assets as of the current quarter end totaled $190.4 million, an increase of $57.6 million from the previous quarter end. Due to the adoption of CECL, $35.4 million of the $57.6 million increase relates to purchased financial assets with credit deterioration that were not previously required to be reported as non-performing assets but are now included in non-performing assets. We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit.”Mindful of the challenges ahead, Mr Wehmer noted, “We leverage robust capital and liquidity management frameworks, which include stress testing processes, to assess and monitor risk and inform decision making. We believe the Company has adequate liquidity and capital to effectively manage through the COVID-19 pandemic. However, we will continue to prudently evaluate and expand liquidity sources, including the possible utilization of the PPP liquidity facility, if necessary.”Mr. Wehmer continued, “Wintrust will continue to practice what we preach in our unwavering commitment to our communities by serving customers via drive up branches, by appointment, telephonically and through digital tools. We believe that we are uniquely positioned by being technologically on par with the big banks, as demonstrated by our PPP efforts, while maintaining the agility and high-touch, personalized service nature of a community bank. We have executed our existing business continuity plan successfully across the Wintrust enterprise and I am proud of our Company’s effectiveness in seamlessly adapting to a remote working environment. In addition to our efforts to support our customers, we are also focused on the wellbeing of our colleagues, modifying certain health care programs to provide additional benefits during the COVID-19 pandemic, as well as offering other pandemic benefits and compensation premiums to eligible employees.”Mr. Wehmer concluded, “We have experienced significant growth in recent quarters and believe that our opportunities for both internal and external growth remain consistently strong, while we continue to carefully monitor the COVID-19 pandemic and evaluate the impact that it could have on the economy, our customers and our business. We remain focused on navigating the current environment by actively monitoring and managing our credit portfolio.”Graphs available at the following link:
http://ml.globenewswire.com/Resource/Download/828bdbfd-a9ad-4684-b6e6-46d21509f781SUMMARY OF RESULTS:BALANCE SHEETTotal asset growth of $2.2 billion in the first quarter of 2020 was primarily comprised of a $1.0 billion increase in loans and a $465 million increase in available for sale securities. The Company believes that the $1.9 billion of interest bearing deposits with banks held as of March 31, 2020 provides sufficient liquidity to operate its business plan.Total liabilities grew by $2.2 billion in the first quarter of 2020 primarily comprised of a $1.4 billion increase in total deposits. The Company successfully grew deposits in the first quarter through organic retail channels, including $282.7 million of growth in our MaxSafe products, that was supplemented by an increase in brokered deposits. Our loans to deposits ratio ended the quarter at 88.4%. Management believes in substantially funding the Company’s balance sheet with core deposits and utilizes brokered or wholesale funding sources as appropriate to manage its liquidity position as well as for interest rate risk management purposes.For more information regarding changes in the Company’s balance sheet, see Consolidated Statements of Condition and Tables 1 through 3 in this report.NET INTEREST INCOMEFor the first quarter of 2020, net interest income totaled $261.4 million, a decrease of $436,000 as compared to the fourth quarter of 2019 and a decrease of $543,000 as compared to the first quarter of 2019. The $436,000 decrease in net interest income in the first quarter of 2020 compared to the fourth quarter of 2019 was attributable to the impact of a five basis point decline in net interest margin and one less day. This impact was partially offset by $924.8 million of growth in average earning assets.Net interest margin was 3.12% (3.14% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2020 compared to 3.17% (3.19% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2019 and 3.70% (3.72% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2019. The five basis point decrease in net interest margin in the first quarter of 2020 as compared to the fourth quarter of 2019 was attributable to a 12 basis point decline in the yield on earnings assets and a four basis point decrease in the net free funds contribution partially offset by an 11 basis point decrease in the rate paid on interest bearing liabilities. The 12 basis point decline in the yield on earning assets in the current quarter as compared to the fourth quarter of 2019 was primarily due to a 17 basis point decline in the yield on loans along with lower yields on interest bearing cash. The 11 basis point decrease in the rate paid on interest bearing liabilities in the current quarter as compared to the prior quarter is primarily due to a 13 basis point decrease in the rate paid on interest bearing deposits as management initiated various deposit rate reductions given the recent decrease in the interest rate environment.For more information regarding net interest income, see Tables 4 through 8 in this report.ASSET QUALITYThe allowance for credit losses totaled $253.5 million as of March 31, 2020 an increase of $95.0 million as compared to $158.5 million as of December 31, 2019. The increase in allowance for credit losses includes a $47.4 million increase related to the cumulative effect adjustment from the adoption of the CECL standard on January 1, 2020.The provision for credit losses totaled $53.0 million for the first quarter of 2020 compared to $7.8 million for the fourth quarter of 2019 and $10.6 million for the first quarter of 2019. The elevated provision expense in the current quarter was primarily related to the implementation of the CECL standard and the economic conditions created by the COVID-19 pandemic. Management believes the allowance for credit losses is appropriate to provide for inherent losses in the portfolio. The CECL standard requires the Company to estimate expected credit losses over the life of the Company’s financial assets at a certain point in time. There can be no assurances, however, that future losses will not significantly exceed the amounts provided for, thereby affecting future results of operations. For more information regarding the provision for credit losses, see Table 10 in this report.Net charge-offs totaled $5.3 million in the first quarter of 2020, a $7.4 million decrease from $12.7 million in the fourth quarter of 2019 and a $146,000 increase from $5.1 million in the first quarter of 2019. Net charge-offs as a percentage of average total loans, in the first quarter of 2020 totaled eight basis points on an annualized basis compared to 19 basis points on an annualized basis in the fourth quarter of 2019 and nine basis points on an annualized basis in the first quarter of 2019. For more information regarding net charge-offs, see Table 9 in this report.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, niche and consumer loans and purchased loans. A summary of the allowance for loan losses calculated for the loan components in the core loan portfolio, the niche and consumer loan portfolio and purchased loan portfolio as of March 31, 2020 and December 31, 2019 is shown on Table 11 of this report.As of March 31, 2020, $33.0 million of all loans, or 0.1%, were 60 to 89 days past due and $262.7 million, or 0.9%, were 30 to 59 days (or one payment) past due. As of December 31, 2019, $50.5 million of all loans, or 0.2%, were 60 to 89 days past due and $248.2 million, or 0.9%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.The Company’s home equity and residential loan portfolios continue to exhibit low delinquency rates as of March 31, 2020. Home equity loans at March 31, 2020 that are current with regard to the contractual terms of the loan agreement represent 98.1% of the total home equity portfolio. Residential real estate loans at March 31, 2020 that are current with regards to the contractual terms of the loan agreements comprised 96.4% of total residential real estate loans outstanding. For more information regarding past due loans, see Table 12 in this report.Prior to January 1, 2020, purchased credit impaired (“PCI”) loans were aggregated into pools by common risk characteristics for accounting purposes, including recognition of interest income on a pool basis. Measurement of any allowance for loan losses on these loans were offset by the remaining discount related to the pool. As a result of the implementation of CECL, beginning in the first quarter of 2020, PCI loans transitioned to a classification of purchased financial assets with credit deterioration (“PCD”), which no longer maintains the prior pools and related accounting concepts. Measurement of any allowance for loan losses on PCD loans is no longer offset by the remaining discount, resulting in additional allowance being recognized at January 1, 2020 through a cumulative effect adjustment to retained earnings. See Table 9 for information on this increase at transition. Additionally, recognition of interest income on PCD loans is considered at the individual asset level following the Company’s accrual policies, instead of based upon the entire pool of loans. Due to the first quarter of 2020 adoption of CECL, the Company included $35.4 million in non-performing PCD loans in total non-performing loans as of March 31, 2020.The ratio of non-performing assets, excluding PCD assets, to total assets was 0.40% as of March 31, 2020, compared to 0.36% at December 31, 2019, and 0.43% at March 31, 2019. Non-performing assets, excluding PCD assets, totaled $155.0 million at March 31, 2020, compared to $132.8 million at December 31, 2019 and $139.4 million at March 31, 2019. Non-performing loans, excluding PCD loans, totaled $143.9 million, or 0.53% of total loans, at March 31, 2020 compared to $117.6 million, or 0.44% of total loans, at December 31, 2019 and $117.6 million, or 0.49% of total loans, at March 31, 2019. This increase includes a $5.0 million increase in premium finance receivable balances that are past due greater than 90 days and still accruing. The level of past due premium finance receivables is impacted by emergency orders issued by states which extend the grace period for nonpayment of insurance premiums to carriers. Other real estate owned (“OREO”) of $11.0 million at March 31, 2020 decreased by $4.2 million compared to $15.2 million at December 31, 2019 and decreased $10.5 million compared to $21.5 million at March 31, 2019. Management is pursuing the resolution of all non-performing assets. At this time, management believes OREO is appropriately valued at the lower of carrying value or fair value less estimated costs to sell. For more information regarding non-performing assets, see Table 13 in this report.NON-INTEREST INCOMEWealth management revenue increased by $942,000 during the first quarter of 2020 as compared to the fourth quarter of 2019 primarily due to increased trust fees and brokerage commissions. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.Mortgage banking revenue increased by $466,000 in the first quarter of 2020 as compared to the fourth quarter of 2019, primarily as a result of increased derivative income associated with mandatory commitments to fund originations for sale, partially offset by a decrease in the fair value of the mortgage servicing rights portfolio. Mandatory commitments to fund originations for sale were $1.4 billion at the end of the first quarter of 2020 as compared to $372.4 million at the end of the fourth quarter of 2019. The percentage of origination volume from refinancing activities was 63% in the first quarter of 2020 as compared to 60% in the fourth quarter of 2019. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market.During the first quarter of 2020, the fair value of the mortgage servicing rights portfolio decreased primarily due to a negative fair value adjustment of $14.6 million as well as a reduction in value of $7.0 million due to payoffs and paydowns of the existing portfolio. The Company entered into interest rate swaps at the beginning of the fourth quarter of 2019 to economically hedge a portion of the potential negative fair value changes recorded in earnings related to its mortgage servicing rights portfolio. The Company recorded a gain of $4.2 million on the interest rate swaps held as economic hedges against the mortgage servicing rights primarily related to the mark to market valuation adjustment at quarter end which was recorded in mortgage banking revenue.The net losses recognized on investment securities in the first quarter of 2020 were $4.4 million as compared to a gain of $587,000 in the fourth quarter of 2019. The losses recorded in the first quarter of 2020 primarily relate to unrealized losses on market sensitive securities held by the Company.Other non-interest income increased by $4.2 million in the first quarter of 2020 as compared to the fourth quarter of 2019 primarily due to increased income from interest rate swap fees and net gains related to the sales of loans and leases. These increases were partially offset by market losses on BOLI investments related to non-qualified deferred compensation accounts recorded in BOLI income.For more information regarding non-interest income, see Tables 14 and 15 in this report.NON-INTEREST EXPENSESalaries and employee benefits expense decreased by $9.2 million in the first quarter of 2020 as compared to the fourth quarter of 2019. The $9.2 million decrease is comprised of a decrease of $8.7 million in commissions and incentive compensation and a decrease of $1.6 million in salaries expense partially offset by $1.1 million increase in employee benefits expense. The decrease in commissions and incentive compensation is primarily due to lower expenses associated with the Company’s long term incentive program.Data processing expenses totaled $8.4 million in the first quarter of 2020, an increase of $804,000 as compared to the fourth quarter of 2019. The increase in the current quarter relates primarily to conversion costs associated with the Countryside Bank acquisition.Advertising and marketing expenses in the first quarter of 2020 decreased by $1.7 million as compared to the fourth quarter of 2019 primarily related to lower media advertising costs. Marketing costs are incurred to promote the Company’s brand, commercial banking capabilities, the Company’s various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company’s non-bank businesses. The level of marketing expenditures depends on the timing of sponsorship programs utilized which are determined based on the market area, targeted audience, competition and various other factors.FDIC insurance expense totaled $4.1 million in the first quarter of 2020, an increase of $2.8 million as compared to the fourth quarter of 2019. In the prior quarter, the Company recorded a $2.8 million reduction to FDIC insurance expense related to assessment credits received from the FDIC.In the first quarter of 2020, the Company recorded a $1.3 million gain on sale of an OREO property resulting in net OREO income of $876,000 in the first quarter of 2020. This compares to OREO expense of $536,000 in the prior quarter.Miscellaneous expense in the first quarter of 2020 decreased $5.3 million as compared to the fourth quarter of 2019. The decrease in the current quarter as compared to the fourth quarter of 2019 is primarily due to charges recognized in the fourth quarter including a litigation settlement, contingent consideration related to previous acquisitions of certain mortgage businesses and overlapping telecommunication charges. 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.For more information regarding non-interest expense, see Table 16 in this report.INCOME TAXESThe Company recorded income tax expense of $24.3 million in the first quarter of 2020 compared to $30.7 million in the fourth quarter of 2019 and $29.5 million in the first quarter of 2019. The effective tax rates were 27.87% in the first quarter of 2020 compared to 26.33% in the fourth quarter of 2019 and 24.86% in the first quarter of 2019.BUSINESS UNIT SUMMARYCommunity BankingThrough its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the first quarter of 2020, this unit expanded its loan and deposit portfolios. However, the banking segment also experienced net interest margin compression in part due to current market conditions.Mortgage banking revenue was $48.3 million for the first quarter of 2020 an increase from $47.9 million for the fourth quarter of 2019. Services charges on deposit accounts totaled $11.3 million in the first quarter of 2020 an increase of $292,000 as compared to the fourth quarter of 2019 primarily due to higher account analysis fees. The Company’s gross commercial and commercial real estate loan pipelines remained strong as of March 31, 2020. Before the impact of scheduled payments and prepayments, gross commercial and commercial real estate loan pipelines were estimated to be approximately $1.0 billion to $1.1 billion at March 31, 2020. When adjusted for the probability of closing, the pipelines were estimated to be approximately $590 million to $650 million at March 31, 2020.Specialty FinanceThrough its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries and accounts receivable financing, value-added, out-sourced administrative services, and other services. Originations within the insurance premium financing receivables portfolio were $2.5 billion during the first quarter of 2020 and average balances increased by $231.4 million as compared to the fourth quarter of 2019. The increase in average balances was more than offset by margin compression in this portfolio resulting in a $3.0 million decrease in interest income attributed to the lower market rates of interest associated with the insurance premium finance receivables portfolio. The Company’s leasing business grew during the first quarter of 2020, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing by $174.4 million to $1.8 billion at the end of the first quarter of 2020. Revenues from the Company’s out-sourced administrative services business were $1.1 million in the first quarter of 2020, unchanged from the fourth quarter of 2019.Wealth ManagementThrough four separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, tax-deferred like-kind exchange services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue increased by $942,000 in the first quarter of 2020 compared to the fourth quarter of 2019, totaling $25.9 million in the current period. At March 31, 2020, the Company’s wealth management subsidiaries had approximately $25.0 billion of assets under administration, which included $4.8 billion of assets owned by the Company and its subsidiary banks, representing a $2.6 billion decrease from the $27.6 billion of assets under administration at December 31, 2019. Increased trust fees contributed to the growth in wealth management revenue, while unfavorable equity market performance in the first quarter of 2020 contributed to the decline of assets under administration.ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTSAcquisitionsOn November 1, 2019, the Company completed its acquisition of SBC, Incorporated (“SBC”). SBC was the parent company of Countryside Bank. Through this business combination, the Company acquired Countryside Bank’s six banking offices located in Countryside, Burbank, Darien, Homer Glen, Oak Brook and Chicago, Illinois. As of the acquisition date, the Company acquired approximately $620 million in assets, including approximately $423 million in loans, and approximately $508 million in deposits. The Company recorded goodwill of approximately $40 million on the acquisition.On October 7, 2019, the Company completed its acquisition of STC Bancshares Corp. (“STC”). STC was the parent company of STC Capital Bank. Through this business combination, the Company acquired STC Capital Bank’s five banking offices located in the communities of St. Charles, Geneva and South Elgin, Illinois. As of the acquisition date, the Company acquired approximately $250 million in assets, including approximately $174 million in loans, and approximately $201 million in deposits. The Company recorded goodwill of approximately $19 million on the acquisition.On May 24, 2019, the Company completed its acquisition of Rush-Oak Corporation (“ROC”). ROC was the parent company of Oak Bank. Through this business combination, the Company acquired Oak Bank’s one banking location in Chicago, Illinois. As of the acquisition date, the Company acquired approximately $223 million in assets, including approximately $125 million in loans, and approximately $161 million in deposits. The Company recorded goodwill of approximately $12 million on the acquisition.Adoption of New Credit Losses Accounting StandardBeginning in 2020, the Company adopted the new current expected credit losses standard, or CECL, which impacted the measurement of the Company’s allowance for credit losses (including the allowance for unfunded lending-related commitments). CECL replaced the previous incurred loss methodology, which delayed recognition until such loss was probable, with a methodology that reflects an estimate of lifetime expected credit losses considering current economic condition and forecasts. Though other assets, including investment securities and other receivables, were considered in-scope of the standard and required a measurement of the allowance for credit loss, the most significant impact of CECL remains within the Company’s loan portfolios and related lending commitments. For more information regarding the adoption of CECL, see the “Asset Quality” section and the asset quality Tables 9-13 in this report.WINTRUST FINANCIAL CORPORATION
Key Operating MeasuresWintrust’s key operating measures and growth rates for the first quarter of 2020, as compared to the fourth quarter of 2019 (sequential quarter) and first quarter of 2019 (linked quarter), are shown in the table below:(1) Net revenue is net interest income plus non-interest income.
(2) See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 17 for additional information on this performance measure/ratio.
(3) The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s average total assets. A lower ratio indicates a higher degree of efficiency.
(4) Period-end balance sheet percentage changes are annualized.
(5) Excludes mortgage loans held-for-sale.Certain returns, yields, performance ratios, or quarterly growth rates are “annualized” in this presentation to represent an annual time period. This is done for analytical purposes to better discern for decision-making purposes underlying performance trends when compared to full-year or year-over-year amounts. For example, a 5% growth rate for a quarter would represent an annualized 20% growth rate. Additional supplemental financial information showing quarterly trends can be found on the Company’s website at www.wintrust.com by choosing “Financial Reports” under the “Investor Relations” heading, and then choosing “Financial Highlights.”WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights(1) Excludes mortgage loans held-for-sale.
(2) Net revenue includes net interest income and non-interest income.
(3) See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 17 for additional information on this performance measure/ratio.
(4) The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.
(5) Capital ratios for current quarter-end are estimated.
(6) The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments.Effective January 1, 2020, the allowance for credit losses also includes the allowance for investment securities as a result of the adoption of Accounting Standard Update (“ASU”) 2016-13, Financial Instruments – Credit Losses.WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) TABLE 1: LOAN PORTFOLIO MIX AND GROWTH RATES AND COMMERCIAL REAL ESTATE BY STATE(1) Annualized.
(2) As a result of the adoption of ASU 2016-13, the Company transitioned all previously classified purchase credit impaired (“PCI”) loans to purchased credit deteriorated (“PCD”) loans effective January 1, 2020. For prior periods presented, the previously classified PCI loans are presented with the PCD loans in their respective class.
TABLE 2: DEPOSIT PORTFOLIO MIX AND GROWTH RATES(1) Annualized.
(2) Represents deposit balances of the Company’s subsidiary banks from brokerage customers of Wintrust Investments, CDEC, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts.TABLE 3: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS
As of March 31, 2020(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.TABLE 4: QUARTERLY AVERAGE BALANCES
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