WTFC
$57.55
Wintrust Finl
($1.15)
(1.96%)
Earnings Details
3rd Quarter September 2020
Wednesday, October 21, 2020 6:35:00 PM
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Summary

Wintrust Finl (WTFC) Recent Earnings

Wintrust Finl (WTFC) reported 3rd Quarter September 2020 earnings of $1.67 per share on revenue of $481.7 million. The consensus earnings estimate was $1.08 per share on revenue of $408.2 million. Revenue grew 2.6% on a year-over-year basis.

Wintrust Financial Corp is a financial holding company. The Company provides community banking, specialty finance and wealth management services.

Results
Reported Earnings
$1.67
Earnings Whisper
-
Consensus Estimate
$1.08
Reported Revenue
$481.7 Mil
Revenue Estimate
$408.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Wintrust Financial Corporation Reports Record Third Quarter 2020 Net Income of $107.3 million and Year-to-Date Net Income of $191.8 million

ROSEMONT, Ill., Oct. 21, 2020 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust”, “the Company” or "we") (Nasdaq: WTFC) announced record net income of $107.3 million or $1.67 per diluted common share for the third quarter of 2020, an increase in diluted earnings per common share of 391% compared to the second quarter of 2020 and a decrease of 1% compared to the third quarter of 2019. The Company recorded net income of $191.8 million or $3.06 per diluted common share for the first nine months of 2020 compared to net income of $269.7 million or $4.60 per diluted common share for the same period of 2019.

Highlights of the Third Quarter of 2020:
Comparative information to the second quarter of 2020

  • Total assets increased by $192 million.
  • Total loans increased by $733 million.
  • Total deposits increased by $193 million.
  • Net interest income decreased by $7.2 million primarily due to lower Paycheck Protection Program ("PPP") loan fee accretion as a result of changes to the estimated timing of loan forgiveness. The Company recognized $17.4 million of PPP loan fee accretion in the third quarter of 2020 as compared to $25.1 million in the prior quarter. As of September 30, 2020, the Company had approximately $49.3 million of PPP loan fees that have yet to be recognized in income.
  • The loans to deposits ratio ended the third quarter of 2020 at 89.7% as compared to 88.1% as of the prior quarter end. Excluding PPP loans, the loans to deposits ratio ended the third quarter of 2020 at 80.2%.
  • Mortgage banking revenue increased by $6.2 million to $108.5 million for the third quarter of 2020 as compared to $102.3 million in the prior quarter.
    • Loans originated for sale in the third quarter of 2020 totaled $2.2 billion, essentially unchanged from the prior quarter.
  • Outstanding COVID-19 related loan modifications for customers totaled approximately $413 million or 1.4% of total loans, excluding PPP loans, as of September 30, 2020 as compared to $1.7 billion or 6.2% as of June 30, 2020.
  • Provision for credit losses totaled $25.0 million in the third quarter of 2020 as compared to $135.1 million in the second quarter of 2020.
  • Recorded net charge-offs of $9.3 million in the third quarter of 2020, of which $6.4 million were reserves on individually assessed loans as of the prior quarter end, as compared to net charge-offs of $15.4 million in the second quarter of 2020. Net charge-offs as a percentage of average total loans, totaled 12 basis points in the third quarter of 2020 on an annualized basis compared to 20 basis points on an annualized basis in the second quarter of 2020.
  • The allowance for credit losses on our core loan portfolio is approximately 1.88% of the outstanding balance as of September 30, 2020, up from 1.85% as of the prior quarter end. See Table 12 for more information.
  • Non-performing assets totaled $182.3 million, or 0.42% of total assets, as of September 30, 2020 as compared to $198.5 million, or 0.46% of total assets, as of the prior quarter end.

Other items of note from the third quarter of 2020

  • 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 $3.0 million in the third quarter of 2020 as compared to a decline of $7.4 million in the prior quarter.
  • Agreed to settle long standing recourse obligation disputes which resulted in an additional accrual of $3.1 million in the third quarter of 2020, recorded as a reduction to other mortgage banking revenue.
  • Accrued $6.3 million of contingent consideration expense related to the previous acquisition of mortgage operations in the third quarter of 2020 as compared to $7.2 million in the prior quarter, which was recorded in other non-interest expense.
  • Recorded acquisition related costs of $132,000 in the third quarter of 2020 as compared to $4.9 million in the prior quarter.
  • Recorded a $9.0 million state income tax benefit in the third quarter of 2020 related to the settlement of an uncertain tax position. Net of the federal tax impact, the reduction to income tax expense was $7.1 million.

Edward J. Wehmer, Founder and Chief Executive Officer, commented, "I remain very proud of the extraordinary effort put forth by our employees to support our customers and our communities amid the challenges of COVID-19. Wintrust reported record net income of $107.3 million for the third quarter of 2020, up from $21.7 million in the second quarter of 2020. The third quarter of 2020 was characterized by strong loan growth, declining net interest income primarily due to lower PPP loan fee accretion, strong mortgage banking revenue, increased allowance for credit losses coverage and a continued focus to increase franchise value in our market area."

Mr. Wehmer continued, "The Company grew total loans by $733 million or 9%, on an annualized basis, in the third quarter of 2020 as compared to the second quarter of 2020. The Company experienced growth in its commercial, commercial real estate and premium finance receivable portfolios. In addition, the Company originated approximately $27 million of PPP loans in the third quarter of 2020. Our loan pipelines remain strong and we expect to continue to grow loans in the fourth quarter of 2020 without compromising our credit standards. Total deposits increased by $193 million as compared to the second quarter of 2020 including $205 million of non-interest bearing deposit growth. We continue to emphasize growing our franchise including gathering low cost deposits which we believe will drive value in the long term. We have accumulated excess liquidity in recent quarters and believe that, if conditions allow for suitable deployment of such excess liquidity, we could potentially increase our net interest margin by 10-25 basis points, depending on the mix of earning assets of such reinvestment. Our loans to deposits ratio ended the quarter at 89.7% and we believe that we have sufficient liquidity to meet customer loan demand."

Mr. Wehmer commented, "Net interest income decreased in the third quarter of 2020 primarily due to lower PPP loan fee accretion as a result of changes to the estimated timing of loan forgiveness. The Company recognized $17.4 million of PPP loan fee accretion in third quarter of 2020 as compared to $25.1 million in the prior quarter. Excluding the impact of PPP fees, the Company effectively offset the net interest margin impact of declining earning asset yields through downward repricing of interest-bearing deposits. We expect that, absent changes to the level of PPP loan fee accretion, we can continue to mitigate loan yield compression with deposit repricing in the fourth quarter of 2020. Further, to the extent we identify prudent opportunities to deploy excess liquidity, we may be able to improve net interest margin."

Mr. Wehmer noted, “Our mortgage banking business delivered another record quarter of mortgage banking revenue in light of the demand associated with historically low long-term interest rates. Loan volumes originated for sale in the third quarter of 2020 were $2.2 billion, essentially unchanged from the second quarter of 2020. As a result of increases in both current and forecasted revenues given the favorable mortgage banking environment, the Company recorded increased contingent consideration expense related to the previous acquisition of mortgage operations. Additionally, the Company recorded a $3.0 million decrease in the value of mortgage servicing rights related to changes in fair value model assumptions. We are leveraging efficiencies in our delivery channels and staffing strategies to keep pace with unprecedented demand. The strong quarter of mortgage performance contributed to reporting a 0.87% net overhead ratio for the third quarter of 2020. We believe the fourth quarter of 2020 will provide another strong quarter for mortgage banking production."

Commenting on credit quality, Mr. Wehmer stated, "The Company recorded provision for credit losses of $25.0 million in the third quarter increasing our allowance for credit losses. The allowance for credit losses on our core loan portfolio as of September 30, 2020 is approximately 1.88% of the outstanding balance. Net charge-offs totaled $9.3 million in the third quarter of 2020, of which $6.4 million were reserves on individually assessed loans as of the prior quarter end, as compared to $15.4 million in the second quarter of 2020. Additionally, the level of non-performing assets decreased by $16.2 million to $182.3 million. 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. The Company's capital ratios were stable in the third quarter of 2020 as net income supported asset growth. We believe the Company's capital levels remain adequate and will evaluate if it is prudent to resume repurchasing common stock."

Mr. Wehmer concluded, "We remain committed to supporting our community, including the well-being and safety of our customers and employees. We believe that our opportunities for both internal and external growth remain consistently strong and were particularly enhanced as a result of our successful participation in PPP lending. However, 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."

The graphs below illustrate certain financial highlights of the third quarter of 2020. See "Supplemental Non-GAAP Financial Measures/Ratios" at Table 18 for additional information with respect to non-GAAP financial measures/ratios, including the reconciliations to the corresponding GAAP financial measures/ratios.

Graphs available at the following link: http://ml.globenewswire.com/Resource/Download/6ccf49fe-326a-4af9-87b2-479bbf0543ee

SUMMARY OF RESULTS:

BALANCE SHEET

Total asset growth of $192 million in the third quarter of 2020 was primarily comprised of a $733 million increase in loans, partially offset by a $417 million decrease in investment securities and a $189 million decrease in interest-bearing deposits with banks. The $733 million increase in loans is comprised of a $418 million increase in commercial loans, a $222 million increase in commercial real estate loans and a $148 million increase in premium finance receivables. The $417 million decrease in investment securities was primarily due to accelerated prepayments and exercised embedded call options. The Company believes that the $3.8 billion of interest-bearing deposits with banks held as of September 30, 2020 provides more than sufficient liquidity to operate its business plan.

Total liabilities increased $108 million in the third quarter of 2020 resulting primarily from a $193 million increase in total deposits. The increase in deposits includes a $272 million increase in MaxSafe money market deposits and a $205 million increase in non-interest-bearing deposits, partially offset by a $197 million decrease in wealth management deposits. Our loans to deposits ratio ended the quarter at 89.7%. Management believes in substantially funding the Company's balance sheet with core deposits and utilizes brokered or wholesale funding sources as appropriate to manage its liquidity position as well as for interest rate risk management purposes.

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

NET INTEREST INCOME

For the third quarter of 2020, net interest income totaled $255.9 million, a decrease of $7.2 million as compared to the second quarter of 2020 and a decrease of $8.9 million as compared to the third quarter of 2019. The $7.2 million decrease in net interest income in the third quarter of 2020 compared to the second quarter of 2020 was primarily due to $7.7 million less PPP loan fee accretion in the third quarter of 2020.

Net interest margin was 2.56% (2.57% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2020 compared to 2.73% (2.74% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2020 and 3.37% (3.39% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2019. The 17 basis point decrease in net interest margin in the third quarter of 2020 as compared to the second quarter of 2020 was attributable to a 32 basis point decline in the yield on earning assets and a four basis point decrease in the net free funds contribution partially offset by a 19 basis point decrease in the rate paid on interest-bearing liabilities. The 32 basis point decline in the yield on earning assets in the third quarter of 2020 as compared to the second quarter of 2020 was in part due to a 14 basis point impact attributed to the declining yield on PPP loans. The remaining 18 basis point decrease in earning asset yields, primarily due to declining loan yields, excluding PPP, was more than offset by a 19 basis point decrease in the rate paid on interest-bearing liabilities. The decrease in the rate paid on interest-bearing liabilities in the third quarter of 2020 as compared to the prior quarter is primarily due to a 20 basis point decrease in the rate paid on interest-bearing deposits as management initiated various deposit rate reductions given the low interest rate environment.

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

ASSET QUALITY

The allowance for credit losses totaled $389.0 million as of September 30, 2020 an increase of $15.8 million as compared to $373.2 million as of June 30, 2020. The allowance for credit losses increased primarily due to portfolio changes partially offset by changes in the macroeconomic forecasted conditions which contributed to decrease reserves. Consistent with the recovery in economic activity since the end of the second quarter of 2020, the Company's third quarter of 2020 macroeconomic forecasts of key model inputs (Gross Domestic Product, Baa Corporate Credit spreads, Dow Jones Total Stock Market Index and Commercial Real Estate Price Index) assume an improvement in the economic outlook compared to the macroeconomic forecasts used in the second quarter of 2020. While the uncertainties around the path of the recovery are still present, the third quarter of 2020 macroeconomic forecasts assume that the impact of those uncertainties on economic growth is relatively less severe compared to that assumed in the prior quarter. The Commercial, Industrial and Other portfolio realized a decrease in the allowance for credit losses as compared to the prior quarter-end, which was primarily driven by improving Dow Jones Total Stock Market Index and Baa Corporate Credit spread macroeconomic scenario variables. A deterioration in the CRE Price Index for the first portion of the Reasonable & Supportable period was a primary driver of increases in the allowance for credit losses of the Commercial Real Estate portfolios. Other key drivers of allowance for credit losses changes in these portfolios include, but are not limited to, net new loan growth and loan risk rating migration.

The provision for credit losses totaled $25.0 million for the third quarter of 2020 compared to $135.1 million for the second quarter of 2020 and $10.8 million for the third quarter of 2019. For more information regarding the provision for credit losses, see Table 11 in this report.

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

Net charge-offs totaled $9.3 million in the third quarter of 2020, a $6.1 million decrease from $15.4 million in the second quarter of 2020 and a $165,000 decrease from $9.4 million in the third quarter of 2019. Net charge-offs as a percentage of average total loans, totaled 12 basis points in the third quarter of 2020 on an annualized basis compared to 20 basis points on an annualized basis in the second quarter of 2020 and 15 basis points on an annualized basis in the third quarter of 2019. For more information regarding net charge-offs, see Table 10 in this report.

As of September 30, 2020, $49.9 million of all loans, or 0.2%, were 60 to 89 days past due and $186.5 million, or 0.6%, were 30 to 59 days (or one payment) past due. As of June 30, 2020, $79.3 million of all loans, or 0.3%, were 60 to 89 days past due and $166.4 million, or 0.5%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real-estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential real estate loan portfolios continue to exhibit low delinquency rates as of September 30, 2020. Home equity loans at September 30, 2020 that are current with regard to the contractual terms of the loan agreement represent 98.3% of the total home equity portfolio. Residential real estate loans at September 30, 2020 that are current with regards to the contractual terms of the loan agreements comprised 98.2% of total residential real estate loans outstanding. For more information regarding past due loans, see Table 13 in this report.

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

The ratio of non-performing assets to total assets was 0.42% as of September 30, 2020, compared to 0.46% at June 30, 2020, and 0.38% at September 30, 2019. Non-performing assets totaled $182.3 million at September 30, 2020, compared to $198.5 million at June 30, 2020 and $132.0 million at September 30, 2019. Non-performing loans totaled $173.1 million, or 0.54% of total loans, at September 30, 2020 compared to $188.3 million, or 0.60% of total loans, at June 30, 2020 and $114.3 million, or 0.44% of total loans, at September 30, 2019. The decrease in non-performing loans as of September 30, 2020 as compared to June 30, 2020 is primarily due to an $18.8 million decrease in total non-performing premium finance receivable balances. State emergency orders and pandemic delays on processing of return premiums, which serve as our collateral, contributed to the increase in 90 day past due premium finance receivables in the second quarter of 2020. As state emergency orders expired in the third quarter of 2020, many of the non-performing premium finance receivables were modified and returned to current as of September 30, 2020. Other real estate owned ("OREO") of $9.2 million at September 30, 2020 decreased by $1.0 million compared to $10.2 million at June 30, 2020 and decreased $8.3 million compared to $17.5 million at September 30, 2019. Management is pursuing the resolution of all non-performing assets. At this time, management believes OREO is appropriately valued at the lower of carrying value or fair value less estimated costs to sell. For more information regarding non-performing assets, see Table 14 in this report.

NON-INTEREST INCOME

Wealth management revenue increased by $2.3 million during the third quarter of 2020 as compared to the second quarter of 2020 primarily due to increased asset management fees and brokerage commissions. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

Mortgage banking revenue increased by $6.2 million in the third quarter of 2020 as compared to the second quarter of 2020, primarily due to a $5.8 million increase in revenue related to mortgage servicing rights activity. Loans originated for sale were $2.2 billion in the third quarter of 2020, essentially unchanged from the second quarter of 2020. The percentage of origination volume from refinancing activities was 59% in the third quarter of 2020 as compared to 70% in the second quarter of 2020. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market.

During the third quarter of 2020, the fair value of the mortgage servicing rights portfolio increased primarily due to increased capitalization of $20.9 million during the third quarter. This increase was partially offset by a negative fair value adjustment of $3.0 million as well as a reduction in value of $7.9 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. During the second quarter of 2020, the Company terminated the interest rate swaps. No economic hedges were outstanding relative to the mortgage servicing rights portfolio as of September 30, 2020 or June 30, 2020.

Other non-interest income decreased by $1.4 million in the third quarter of 2020 as compared to the second quarter of 2020 primarily due to lower swap fees with commercial clients.

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

NON-INTEREST EXPENSE

Salaries and employee benefits expense increased by $9.9 million in the third quarter of 2020 as compared to the second quarter of 2020. The $9.9 million increase is comprised of an increase of $4.8 million in employee benefits expense, an increase of $2.8 million in salaries expense, and an increase of $2.3 million in commissions and incentive compensation. The increase in employee benefits expense is primarily due to increases in employee insurance expense related to higher medical claims in the third quarter of 2020. The increase in salaries expense is primarily related to increased staffing costs to support mortgage origination. The increase in commissions and incentive compensation is primarily due to a reversal of expense associated with the Company's long term incentive program recorded in the second quarter of 2020.

Equipment expense totaled $17.3 million in the third quarter of 2020, an increase of $1.4 million as compared to the second quarter of 2020. This increase is primarily due to increased software licensing expenses.

Professional fees totaled $6.5 million in the third quarter of 2020, a decrease of $1.2 million as compared to the second quarter of 2020. The decrease in the third quarter relates primarily to lower legal and consulting fees during the period. Professional fees include legal, audit and tax fees, external loan review costs, consulting arrangements and normal regulatory exam assessments.

Data processing expenses totaled $5.7 million in the third quarter of 2020, a decrease of $4.7 million as compared to the second quarter of 2020. The decrease in the third quarter relates primarily to conversion costs of $4.5 million associated with the Countryside Bank acquisition recognized in the second quarter of 2020.

Miscellaneous expense in the third quarter of 2020 increased $1.1 million as compared to the second quarter of 2020. The increase in the third quarter is primarily due to higher loan expenses. The third quarter of 2020 included $6.3 million of contingent consideration expense related to the previous acquisition of mortgage operations as compared to $7.2 million in the prior quarter. The liability for contingent consideration expense related to the previous acquisition of mortgage operations is based upon forward looking mortgage origination volumes and the estimated profitability of that operation. Should those assumptions change going forward, the liability may need to be increased or decreased. The contractual period covering contingent consideration ends in January 2023. Miscellaneous expense also includes ATM expenses, correspondent bank charges, directors fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses and lending origination costs that are not deferred.

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

INCOME TAXES

The Company recorded income tax expense of $30.0 million in the third quarter of 2020 compared to $9.0 million in the second quarter of 2020 and $35.5 million in the third quarter of 2019. The effective tax rates were 21.83% in the third quarter of 2020 compared to 29.46% in the second quarter of 2020 and 26.36% in the third quarter of 2019. The effective tax rate in the third quarter of 2020 reflects a $9.0 million state income tax benefit related to the settlement of an uncertain tax position. Net of the federal tax impact, the reduction to income tax expense was $7.1 million.

BUSINESS UNIT SUMMARY

Community Banking

Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the third quarter of 2020, this unit expanded its loan and deposit portfolios. However, the banking segment also experienced net interest margin compression primarily due to lower PPP loan fee accretion in the third quarter of 2020 as compared to the second quarter of 2020.

Mortgage banking revenue was $108.5 million for the third quarter of 2020 an increase of $6.2 million as compared to the second quarter of 2020 primarily due to a $5.8 million increase in revenue related to mortgage servicing rights activity. Services charges on deposit accounts totaled $11.5 million in the third quarter of 2020 an increase of $1.1 million as compared to the second quarter of 2020 primarily due to higher account analysis and overdraft fees. The Company's gross commercial and commercial real estate loan pipelines remained strong as of September 30, 2020. Before the impact of scheduled payments and prepayments, gross commercial and commercial real estate loan pipelines were estimated to be approximately $1.3 billion to $1.5 billion at September 30, 2020. When adjusted for the probability of closing, the pipelines were estimated to be approximately $850 million to $950 million at September 30, 2020.

Specialty Finance

Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries, accounts receivable financing and value-added, out-sourced administrative services and other services. Originations within the insurance premium financing receivables portfolio were $2.8 billion during the third quarter of 2020 and average balances increased by $582.1 million as compared to the second quarter of 2020. The increase in average balances was more than offset by margin compression in this portfolio resulting in a $1.3 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 third quarter of 2020, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing by $20.3 million to $2.0 billion at the end of the third quarter of 2020. Revenues from the Company's out-sourced administrative services business were $1.1 million in the third quarter of 2020, an increase of $144,000 from the second quarter of 2020.

Wealth Management

Through four separate subsidiaries within its wealth management unit, the Company offers a full range of wealth management services, including trust and investment services, tax-deferred like-kind exchange services, asset management, securities brokerage services and 401(k) and retirement plan services. Wealth management revenue increased by $2.3 million in the third quarter of 2020 compared to the second quarter of 2020, totaling $25.0 million in the third quarter of 2020. Increases in asset management fees were primarily due to favorable equity market performance during the third quarter of 2020. At September 30, 2020, the Company’s wealth management subsidiaries had approximately $28.2 billion of assets under administration, which included $3.5 billion of assets owned by the Company and its subsidiary banks, representing a $1.2 billion increase from the $27.0 billion of assets under administration at June 30, 2020.

ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS

Paycheck Protection Program

On March 27, 2020, the President of the United States signed the CARES Act which authorized the Small Business Administration ("SBA") to guarantee loans under the PPP for small businesses who meet the necessary eligibility requirements in order to keep their workers on the payroll. The Company began accepting applications on April 3, 2020. As of September 30, 2020, the Company secured authorization from the SBA and funded over 12,000 PPP loans with a carrying balance of approximately $3.4 billion.

Acquisitions

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

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

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

Adoption of New Credit Losses Accounting Standard

Beginning in 2020, the Company adopted 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 10-14 in this report.

WINTRUST FINANCIAL CORPORATION
Key Operating Measures

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

  Three Months Ended  % or(1)
basis point  (bp)
change from
 % or
basis point  (bp)
change from
(Dollars in thousands, except per share data) 
Sep 30, 2020
 Jun 30, 2020 Sep 30, 20192nd Quarter
2020   
 3rd Quarter
2019   
Net income $107,315  $21,659  $99,121 395 % 8 %
Pre-tax income, excluding provision for credit losses (non-GAAP) (2) 162,310  165,756  145,435 (2)  12  
Net income per common share – diluted 1.67  0.34  1.69 391   (1) 
Net revenue (3) 426,529  425,124  379,989    12  
Net interest income 255,936  263,131  264,852 (3)  (3) 
Net interest margin 2.56% 2.73% 3.37%(17)bp (81)bp
Net interest margin - fully taxable equivalent (non-GAAP) (2) 2.57  2.74  3.39 (17)  (82) 
Net overhead ratio (4) 0.87  0.93  1.40 (6)  (53) 
Return on average assets 0.99  0.21  1.16 78   (17) 
Return on average common equity 10.66  2.17  11.42 849   (76) 
Return on average tangible common equity (non-GAAP) (2) 13.43  2.95  14.36 1,048   (93) 
At end of period           
Total assets $43,731,718  $43,540,017  $34,911,902 2 % 25 %
Total loans (5) 32,135,555  31,402,903  25,710,171 9   25  
Total deposits 35,844,422  35,651,874  28,710,379 2   25  
Total shareholders’ equity 4,074,089  3,990,218  3,540,325 8   15  

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

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

 

WINTRUST FINANCIAL CORPORATION
Selected Financial Highlights

  Three Months EndedNine Months Ended
(Dollars in thousands, except per share data) Sep 30,
2020
 Jun 30,
2020
 Mar 31,
2020
 Dec 31,
2019
 Sep 30,
2019
Sep 30,
2020
 Sep 30,
2019
Selected Financial Condition Data (at end of period):   
Total assets $43,731,718  $43,540,017  $38,799,847  $36,620,583  $34,911,902    
Total loans (1) 32,135,555  31,402,903  27,807,321  26,800,290  25,710,171    
Total deposits 35,844,422  35,651,874  31,461,660  30,107,138  28,710,379    
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566    
Total shareholders’ equity 4,074,089  3,990,218  3,700,393  3,691,250  3,540,325    
Selected Statements of Income Data:   
Net interest income $255,936  $263,131  $261,443  $261,879  $264,852 $780,510  $793,040 
Net revenue (2) 426,529  425,124  374,685  374,099  379,989 1,226,338  1,087,992 
Net income 107,315  21,659  62,812  85,964  99,121 191,786  269,733 
Pre-tax income, excluding provision for credit losses (non-GAAP) (3) 162,310  165,756  140,044  124,508  145,435 468,110  409,457 
Net income per common share – Basic 1.68  0.34  1.05  1.46  1.71 3.08  4.65 
Net income per common share – Diluted 1.67  0.34  1.04  1.44  1.69 3.06  4.60 
Selected Financial Ratios and Other Data:   
Performance Ratios:   
Net interest margin 2.56% 2.73% 3.12% 3.17% 3.37%2.79% 3.56%
Net interest margin - fully taxable equivalent (non-GAAP) (3) 2.57  2.74  3.14  3.19  3.39 2.80  3.58 
Non-interest income to average assets 1.58  1.55  1.24  1.25  1.35 1.47  1.22 
Non-interest expense to average assets 2.45  2.48  2.58  2.78  2.74 2.50  2.80 
Net overhead ratio (4) 0.87  0.93  1.33  1.53  1.40 1.03  1.58 
Return on average assets 0.99  0.21  0.69  0.96  1.16 0.63  1.11 
Return on average common equity 10.66  2.17  6.82  9.52  11.42 6.56  10.74 
Return on average tangible common equity (non-GAAP) (3) 13.43  2.95  8.73  12.17  14.36 8.38  13.60 
Average total assets $42,962,844  $42,042,729  $36,625,490  $35,645,190  $33,954,592 $40,552,517  $32,418,875 
Average total shareholders’ equity 4,034,902  3,908,846  3,710,169  3,622,184  3,496,714 3,885,187  3,407,398 
Average loans to average deposits ratio 89.6% 87.8% 90.1% 88.8% 90.6%89.1% 92.4%
Period-end loans to deposits ratio 89.7  88.1  88.4  89.0  89.6    
Common Share Data at end of period:   
Market price per common share $40.05  $43.62  $32.86  $70.90  $64.63    
Book value per common share 63.57  62.14  62.13  61.68  60.24    
Tangible book value per common share (non-GAAP) (3) 51.70  50.23  50.18  49.70  49.16    
Common shares outstanding 57,601,991  57,573,672  57,545,352  57,821,891  56,698,429    
Other Data at end of period:   
Tier 1 leverage ratio (5) 8.2% 8.1% 8.5% 8.7% 8.8%   
Risk-based capital ratios:             
Tier 1 capital ratio (5) 10.1  10.1  9.3  9.6  9.7    
Common equity tier 1 capital ratio(5) 8.9  8.8  8.9  9.2  9.3    
Total capital ratio (5) 12.8  12.8  11.9  12.2  12.4    
Allowance for credit losses (6) $388,971  $373,174  $253,482  $158,461  $163,273    
Allowance for loan and unfunded lending-related commitment losses to total loans 1.21% 1.19% 0.91% 0.59% 0.64%   
Number of:             
Bank subsidiaries 15  15  15  15  15    
Banking offices 182  186  187  187  174    

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

 

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

  (Unaudited) (Unaudited) (Unaudited)   (Unaudited)
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(In thousands) 2020 2020 2020 2019 2019
Assets          
Cash and due from banks $308,639  $344,999  $349,118  $286,167  $448,755 
Federal funds sold and securities purchased under resale agreements 56  58  309  309  59 
Interest-bearing deposits with banks 3,825,823  4,015,072  1,943,743  2,164,560  2,260,806 
Available-for-sale securities, at fair value 2,946,459  3,194,961  3,570,959  3,106,214  2,270,059 
Held-to-maturity securities, at amortized cost 560,267  728,465  865,376  1,134,400  1,095,802 
Trading account securities 1,720  890  2,257  1,068  3,204 
Equity securities with readily determinable fair value 54,398  52,460  47,310  50,840  46,086 
Federal Home Loan Bank and Federal Reserve Bank stock 135,568  135,571  134,546  100,739  92,714 
Brokerage customer receivables 16,818  14,623  16,293  16,573  14,943 
Mortgage loans held-for-sale 959,671  833,163  656,934  377,313  464,727 
Loans, net of unearned income 32,135,555  31,402,903  27,807,321  26,800,290  25,710,171 
Allowance for loan losses (325,959) (313,510) (216,050) (156,828) (161,763)
Net loans 31,809,596  31,089,393  27,591,271  26,643,462  25,548,408 
Premises and equipment, net 774,288  769,909  764,583  754,328  721,856 
Lease investments, net 230,373  237,040  207,147  231,192  228,647 
Accrued interest receivable and other assets 1,424,728  1,437,832  1,460,168  1,061,141  1,087,864 
Trade date securities receivable     502,207     
Goodwill 644,644  644,213  643,441  645,220  584,315 
Other intangible assets 38,670  41,368  44,185  47,057  43,657 
Total assets $43,731,718  $43,540,017  $38,799,847  $36,620,583  $34,911,902 
Liabilities and Shareholders’ Equity          
Deposits:          
Non-interest bearing $10,409,747  $10,204,791  $7,556,755  $7,216,758  $7,067,960 
Interest bearing 25,434,675  25,447,083  23,904,905  22,890,380  21,642,419 
Total deposits 35,844,422  35,651,874  31,461,660  30,107,138  28,710,379 
Federal Home Loan Bank advances 1,228,422  1,228,416  1,174,894  674,870  574,847 
Other borrowings 507,395  508,535  487,503  418,174  410,488 
Subordinated notes 436,385  436,298  436,179  436,095  435,979 
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566 
Trade date securities payable         226 
Accrued interest payable and other liabilities 1,387,439  1,471,110  1,285,652  1,039,490  986,092 
Total liabilities 39,657,629  39,549,799  35,099,454  32,929,333  31,371,577 
Shareholders’ Equity:          
Preferred stock 412,500  412,500  125,000  125,000  125,000 
Common stock 58,323  58,294  58,266  57,951  56,825 
Surplus 1,647,049  1,643,864  1,652,063  1,650,278  1,574,011 
Treasury stock (44,891) (44,891) (44,891) (6,931) (6,799)
Retained earnings 2,001,949  1,921,048  1,917,558  1,899,630  1,830,165 
Accumulated other comprehensive loss (841) (597) (7,603) (34,678) (38,877)
Total shareholders’ equity 4,074,089  3,990,218  3,700,393  3,691,250  3,540,325 
Total liabilities and shareholders’ equity $43,731,718  $43,540,017  $38,799,847  $36,620,583  $34,911,902 

 

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

 Three Months EndedNine Months Ended
(In thousands, except per share data)Sep 30,
2020
 Jun 30,
2020
 Mar 31,
2020
 Dec 31,
2019
 Sep 30,
2019
Sep 30,
2020
 Sep 30,
2019
Interest income            
Interest and fees on loans$280,479  $294,746  $301,839  $308,055  $314,277 $877,064  $920,425 
Mortgage loans held-for-sale5,791  4,764  3,165  3,201  3,478 13,720  8,791 
Interest-bearing deposits with banks1,181  1,310  4,768  8,971  10,326 7,259  20,832 
Federal funds sold and securities purchased under resale agreements  16  86  390  310 102  310 
Investment securities21,819  27,105  32,467  27,611  24,758 81,391  80,435 
Trading account securities6  13  7  6  20 26  33 
Federal Home Loan Bank and Federal Reserve Bank stock1,774  1,765  1,577  1,328  1,294 5,116  4,088 
Brokerage customer receivables106  97  158  169  164 361  497 
Total interest income311,156  329,816  344,067  349,731  354,627 985,039  1,035,411 
Interest expense            
Interest on deposits39,084  50,057  67,435  74,724  76,168 156,576  204,168 
Interest on Federal Home Loan Bank advances4,947  4,934  3,360  1,461  1,774 13,241  8,417 
Interest on other borrowings3,012  3,436  3,546  3,273  3,466 9,994  10,624 
Interest on subordinated notes5,474  5,506  5,472  5,504  5,470 16,452  10,051 
Interest on junior subordinated debentures2,703  2,752  2,811  2,890  2,897 8,266  9,111 
Total interest expense55,220  66,685  82,624  87,852  89,775 204,529  242,371 
Net interest income255,936  263,131  261,443  261,879  264,852 780,510  793,040 
Provision for credit losses25,026  135,053  52,961  7,826  10,834 213,040  46,038 
Net interest income after provision for credit losses230,910  128,078  208,482  254,053  254,018 567,470  747,002 
Non-interest income            
Wealth management24,957  22,636  25,941  24,999  23,999 73,534  72,115 
Mortgage banking108,544  102,324  48,326  47,860  50,864 259,194  106,433 
Service charges on deposit accounts11,497  10,420  11,265  10,973  9,972 33,182  28,097 
Gains (losses) on investment securities, net411  808  (4,359) 587  710 (3,140) 2,938 
Fees from covered call options    2,292  1,243   2,292  2,427 
Trading gains (losses), net183  (634) (451) 46  11 (902) (204)
Operating lease income, net11,717  11,785  11,984  12,487  12,025 35,486  34,554 
Other13,284  14,654  18,244  14,025  17,556 46,182  48,592 
Total non-interest income170,593  161,993  113,242  112,220  115,137 445,828  294,952 
Non-interest expense            
Salaries and employee benefits164,042  154,156  136,762  145,941  141,024 454,960  400,479 
Equipment17,251  15,846  14,834  14,485  13,314 47,931  37,843 
Operating lease equipment9,425  9,292  9,260  9,766  8,907 27,977  25,994 
Occupancy, net15,830  16,893  17,547  17,132  14,991 50,270  47,157 
Data processing5,689  10,406  8,373  7,569  6,522 24,468  20,251 
Advertising and marketing7,880  7,704  10,862  12,517  13,375 26,446  36,078 
Professional fees6,488  7,687  6,721  7,650  8,037 20,896  19,821 
Amortization of other intangible assets2,701  2,820  2,863  3,017  2,928 8,384  8,827 
FDIC insurance6,772  7,081  4,135  1,348  148 17,988  7,851 
OREO expense, net(168) 237  (876) 536  1,170 (807) 3,092 
Other28,309  27,246  24,160  29,630  24,138 79,715  71,142 
Total non-interest expense264,219  259,368  234,641  249,591  234,554 758,228  678,535 
Income before taxes137,284  30,703  87,083  116,682  134,601 255,070  363,419 
Income tax expense29,969  9,044  24,271  30,718  35,480 63,284  93,686 
Net income$107,315  $21,659  $62,812  $85,964  $99,121 $191,786  $269,733 
Preferred stock dividends10,286  2,050  2,050  2,050  2,050 14,386  6,150 
Net income applicable to common shares$97,029  $19,609  $60,762  $83,914  $97,071 $177,400  $263,583 
Net income per common share - Basic$1.68  $0.34  $1.05  $1.46  $1.71 $3.08  $4.65 
Net income per common share - Diluted$1.67  $0.34  $1.04  $1.44  $1.69 $3.06  $4.60 
Cash dividends declared per common share$0.28  $0.28  $0.28  $0.25  $0.25 $0.84  $0.75 
Weighted average common shares outstanding 57,597   57,567   57,620   57,538   56,690  57,595   56,627 
Dilutive potential common shares449  414  575  874  773 469  724 
Average common shares and dilutive common shares58,046  57,981  58,195  58,412  57,463 58,064  57,351 

 

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

          % Growth From
(Dollars in thousands)Sep 30,
2020
 Jun 30,
2020
 Mar 31,
2020
 Dec 31,
2019
 Sep 30,
2019
Dec 31,
2019 (1)
 Sep 30,
2019
Balance:            
Commercial            
Commercial, industrial, and other$8,897,986  $8,523,864  $9,025,886  $8,285,920  $8,195,602 10% 9%
Commercial PPP loans3,379,013  3,335,368       100  100 
Commercial real estate            
Construction and development1,333,149  1,285,282  1,237,274  1,200,783  1,025,961 15  30 
Non-construction7,089,993  6,915,463  6,948,257  6,819,493  6,422,706 5  10 
Home equity446,274  466,596  494,655  513,066  512,303 (17) (13)
Residential real estate1,384,810  1,427,429  1,377,389  1,354,221  1,218,666 3  14 
Premium Finance receivables            
Commercial insurance4,060,144  3,999,774  3,465,055  3,442,027  3,449,950 24  18 
Life insurance5,488,832  5,400,802  5,221,639  5,074,602  4,795,496 11  14 
Consumer and other55,354  48,325  37,166  110,178  89,487 (66) (38)
Total loans, net of unearned income$32,135,555  $31,402,903  $27,807,321  $26,800,290  $25,710,171 27% 25%
Mix:            
Commercial            
Commercial, industrial, and other28% 28% 32% 31% 32%   
Commercial PPP loans11  11          
Commercial real estate            
Construction and development4  4  4  4  4    
Non-construction22  22  25  26  25    
Home equity1  1  2  2  2    
Residential real estate4  4  5  5  5    
Premium Finance receivables            
Commercial insurance13  13  13  13  13    
Life insurance17  17  19  19  19    
Consumer and other0  0  0  0  0    
Total loans, net of unearned income100% 100% 100% 100% 100%   

(1)   Annualized.

 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019
(Dollars in thousands) Balance % of
Total
Balance
    Balance % of
Total
Balance
 Balance% of
Total
Balance
 Balance% of
Total
Balance
 Balance% of
Total
Balance
Commercial real estate - collateral location by state:          
Illinois$6,270,584 74.4% $6,198,486 75.6% $6,171,606 75.4% $6,176,353 77.0% $5,654,827 75.9%
Wisconsin783,241 9.3  760,839 9.3  793,145 9.7  744,975 9.3  744,577 10.0 
Total primary markets$7,053,825 83.7% $6,959,325 84.9% $6,964,751 85.1% $6,921,328 86.3% $6,399,404 85.9%
Indiana265,905 3.2  249,423 3.0  249,680 3.1  218,963 2.7  193,350 2.6 
Florida133,602 1.6  133,810 1.6  126,786 1.5  114,629 1.4  80,120 1.1 
Arizona79,086 0.9  78,135 1.0  72,214 0.9  64,022 0.8  62,657 0.8 
California82,852 1.0  81,634 1.0  63,883 0.8  64,345 0.8  67,999 0.9 
Other807,872 9.6  698,418 8.5  708,217 8.6  636,989 8.0  645,137 8.7 
Total commercial real estate$8,423,142 100% $8,200,745 100% $8,185,531 100% $8,020,276 100% $7,448,667 100%

 

TABLE 2: DEPOSIT PORTFOLIO MIX AND GROWTH RATES

          % Growth From
(Dollars in thousands)Sep 30,
2020
 Jun 30,
2020
 Mar 31,
2020
 Dec 31,
2019
 Sep 30,
2019
Dec 31,
2019 (1)
 Sep 30,
2019
Balance:            
Non-interest bearing$10,409,747  $10,204,791  $7,556,755  $7,216,758  $7,067,960 59% 47%
NOW and interest-bearing demand deposits3,294,071  3,440,348  3,181,159  3,093,159  2,966,098 9  11 
Wealth management deposits (2)4,235,583  4,433,020  3,936,968  3,123,063  2,795,838 48  51 
Money market9,423,653  9,288,976  8,114,659  7,854,189  7,326,899 27  29 
Savings3,415,073  3,447,352  3,282,340  3,196,698  2,934,348 9  16 
Time certificates of deposit5,066,295  4,837,387  5,389,779  5,623,271  5,619,236 (13) (10)
Total deposits$35,844,422  $35,651,874  $31,461,660  $30,107,138  $28,710,379 25% 25%
Mix:            
Non-interest bearing29% 29% 24% 24% 25%   
NOW and interest-bearing demand deposits9  10  10  10  10    
Wealth management deposits (2)12  12  13  10  10    
Money market26  25  26  26  25    
Savings10  10  10  11  10    
Time certificates of deposit14  14  17  19  20    
Total deposits100% 100% 100% 100% 100%   

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

 

TABLE 3: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS
As of September 30, 2020

(Dollars in thousands) Total Time
Certificates of
Deposit
 Weighted-Average
Rate of Maturing
Time Certificates
of Deposit (1)
1-3 months $671,229  1.37%
4-6 months 859,769  1.82 
7-9 months 1,282,241  1.88 
10-12 months 908,894  1.62 
13-18 months 888,169  1.30 
19-24 months 224,400  1.06 
24+ months 231,593  1.24 
Total $5,066,295  1.59%

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

TABLE 4: QUARTERLY AVERAGE BALANCES

  Average Balance for three months ended,
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(In thousands) 2020 2020 2020 2019 2019
Interest-bearing deposits with banks and cash equivalents (1) $3,411,164  $3,240,167  $1,418,809  $2,206,251  $1,960,898 
Investment securities (2) 3,789,422  4,309,471  4,780,709  3,909,699  3,410,090 
FHLB and FRB stock 135,567  135,360  114,829  94,843  92,583 
Liquidity management assets (6) 7,336,153  7,684,998  6,314,347  6,210,793  5,463,571 
Other earning assets (3)(6) 16,656  16,917  19,166  18,353  17,809 
Mortgage loans held-for-sale 822,908  705,702  403,262  381,878  379,870 
Loans, net of unearned income (4)(6) 31,634,608  30,336,626  26,936,728  26,137,722  25,346,290 
Total earning assets (6) 39,810,325  38,744,243  33,673,503  32,748,746  31,207,540 
Allowance for loan and investment security losses (7) (321,732) (222,485) (176,291) (167,759) (168,423)
Cash and due from banks 345,438  352,423  321,982  316,631  297,475 
Other assets 3,128,813  3,168,548  2,806,296  2,747,572  2,618,000 
Total assets $42,962,844  $42,042,729  $36,625,490  $35,645,190  $33,954,592 
                     
NOW and interest-bearing demand deposits $3,435,089  $3,323,124  $3,113,733  $3,016,991  $2,912,961 
Wealth management deposits 4,239,300  4,380,996  2,838,719  2,934,292  2,888,817 
Money market accounts 9,332,668  8,727,966  7,990,775  7,647,635  6,956,755 
Savings accounts 3,419,586  3,394,480  3,189,835  3,028,763  2,837,039 
Time deposits 4,900,839  5,104,701  5,526,407  5,682,449  5,590,228 
Interest-bearing deposits 25,327,482  24,931,267  22,659,469  22,310,130  21,185,800 
Federal Home Loan Bank advances 1,228,421  1,214,375  951,613  596,594  574,833 
Other borrowings 512,787  493,350  469,577  415,092  416,300 
Subordinated notes 436,323  436,226  436,119  436,025  436,041 
Junior subordinated debentures 253,566  253,566  253,566  253,566  253,566 
Total interest-bearing liabilities 27,758,579  27,328,784  24,770,344  24,011,407  22,866,540 
Non-interest-bearing deposits 9,988,769  9,607,528  7,235,177  7,128,166  6,776,786 
Other liabilities 1,180,594  1,197,571  909,800  883,433  814,552 
Equity 4,034,902  3,908,846  3,710,169  3,622,184  3,496,714 
Total liabilities and shareholders’ equity $42,962,844  $42,042,729  $36,625,490  $35,645,190  $33,954,592 
           
Net free funds/contribution (5) $12,051,746  $11,415,459  $8,903,159  $8,737,339  $8,341,000 

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


TABLE 5: QUARTERLY NET INTEREST INCOME

  Net Interest Income for three months ended,
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(In thousands) 2020 2020 2020 2019 2019
Interest income:          
Interest-bearing deposits with banks and cash equivalents $1,181  $1,326  $4,854  $9,361  $10,636 
Investment securities 22,365  27,643  33,018  28,184  25,332 
FHLB and FRB stock 1,774  1,765  1,577  1,328  1,294 
Liquidity management assets (2) 25,320  30,734  39,449  38,873  37,262 
Other earning assets (2) 113  113  167  176  189 
Mortgage loans held-for-sale 5,791  4,764  3,165  3,201  3,478 
Loans, net of unearned income (2) 280,960  295,322  302,699  308,947  315,255 
Total interest income $312,184  $330,933  $345,480  $351,197  $356,184 
           
Interest expense:          
NOW and interest-bearing demand deposits $1,342  $1,561  $3,665  $4,622  $5,291 
Wealth management deposits 7,662  7,244  6,935  7,867  9,163 
Money market accounts 7,245  13,140  22,363  25,603  25,426 
Savings accounts 2,104  3,840  5,790  6,145  5,622 
Time deposits 20,731  24,272  28,682  30,487  30,666 
Interest-bearing deposits 39,084  50,057  67,435  74,724  76,168 
Federal Home Loan Bank advances 4,947  4,934  3,360  1,461  1,774 
Other borrowings 3,012  3,436  3,546  3,273  3,466 
Subordinated notes 5,474  5,506  5,472  5,504  5,470 
Junior subordinated debentures 2,703  2,752  2,811  2,890  2,897 
Total interest expense $55,220  $66,685  $82,624  $87,852  $89,775 
           
Less: Fully taxable-equivalent adjustment (1,028) (1,117) (1,413) (1,466) (1,557)
Net interest income (GAAP) (1) 255,936  263,131  261,443  261,879  264,852 
Fully taxable-equivalent adjustment 1,028  1,117  1,413  1,466  1,557 
Net interest income, fully taxable-equivalent (non-GAAP) (1) $256,964  $264,248  $262,856  $263,345  $266,409 

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

 

TABLE 6: QUARTERLY NET INTEREST MARGIN

  Net Interest Margin for three months ended,
  Sep 30,
2020
 Jun 30,
2020
 Mar 31,
2020
 Dec 31,
2019
 Sep 30,
2019
Yield earned on:          
Interest-bearing deposits with banks and cash equivalents 0.14% 0.16% 1.38% 1.68% 2.15%
Investment securities 2.35  2.58  2.78  2.86  2.95 
FHLB and FRB stock 5.21  5.24  5.52  5.55  5.55 
Liquidity management assets 1.37  1.61  2.51  2.48  2.71 
Other earning assets 2.71  2.71  3.50  3.83  4.20 
Mortgage loans held-for-sale 2.80  2.72  3.16  3.33  3.63 
Loans, net of unearned income 3.53  3.92  4.52  4.69  4.93 
Total earning assets 3.12% 3.44% 4.13% 4.25% 4.53%
           
Rate paid on:          
NOW and interest-bearing demand deposits 0.16% 0.19% 0.47% 0.61% 0.72%
Wealth management deposits 0.72  0.67  0.98  1.06  1.26 
Money market accounts 0.31  0.61  1.13  1.33  1.45 
Savings accounts 0.24  0.45  0.73  0.80  0.79 
Time deposits 1.68  1.91  2.09  2.13  2.18 
Interest-bearing deposits 0.61  0.81  1.20  1.33  1.43 
Federal Home Loan Bank advances 1.60  1.63  1.42  0.97  1.22 
Other borrowings 2.34  2.80  3.04  3.13  3.30 
Subordinated notes 5.02  5.05  5.02  5.05  5.02 
Junior subordinated debentures 4.17  4.29  4.39  4.46  4.47 
Total interest-bearing liabilities 0.79% 0.98% 1.34% 1.45% 1.56%
           
Interest rate spread (1)(3) 2.33% 2.46% 2.79% 2.80% 2.97%
Less: Fully taxable-equivalent adjustment (0.01) (0.01) (0.02) (0.02) (0.02)
Net free funds/contribution (2) 0.24  0.28  0.35  0.39  0.42 
Net interest margin (GAAP) (3) 2.56% 2.73% 3.12% 3.17% 3.37%
Fully taxable-equivalent adjustment 0.01  0.01  0.02  0.02  0.02 
Net interest margin, fully taxable-equivalent (non-GAAP) (3) 2.57% 2.74% 3.14% 3.19% 3.39%

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

 

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

 Average Balance
for nine months ended,
Interest
for nine months ended,
Yield/Rate
for nine months ended,
(Dollars in thousands)Sep 30,
2020
 Sep 30,
2019
Sep 30,
2020
 Sep 30,
2019
Sep 30,
2020
 Sep 30,
2019
Interest-bearing deposits with banks and cash equivalents (1)$2,692,678  $1,254,534 $7,361  $21,142 0.37% 2.26%
Investment securities (2)4,291,362  3,563,941 83,026  82,142 2.58  3.08 
FHLB and FRB stock128,611  97,624 5,116  4,088 5.31  5.60 
Liquidity management assets (3)(8)$7,112,651  $4,916,099 $95,503  $107,372 1.79% 2.92%
Other earning assets (3)(4)(8)17,576  15,722 393  538 2.99  4.56 
Mortgage loans held-for-sale644,611  283,966 13,720  8,791 2.84  4.14 
Loans, net of unearned income (3)(5)(8)29,643,281  24,598,857 878,981  923,468 3.96  5.02 
Total earning assets (8)$37,418,119  $29,814,644 $988,597  $1,040,169 3.53% 4.66%
Allowance for loan and investment security losses (9)(240,467) (163,518)      
Cash and due from banks339,968  284,779       
Other assets3,034,897  2,482,970       
Total assets$40,552,517  $32,418,875       
          
NOW and interest-bearing demand deposits$3,291,176  $2,865,175 $6,569  $15,457 0.27% 0.72%
Wealth management deposits3,821,203  2,703,853 21,840  23,254 0.76  1.15 
Money market accounts8,686,171  6,326,336 42,748  66,337 0.66  1.40 
Savings accounts3,334,944  2,768,875 11,736  14,830 0.47  0.72 
Time deposits5,176,307  5,394,651 73,683  84,290 1.90  2.09 
Interest-bearing deposits$24,309,801  $20,058,890 $156,576  $204,168 0.86% 1.36%
Federal Home Loan Bank advances1,131,823  679,589 13,241  8,417 1.56  1.66 
Other borrowings491,981  433,465 9,994  10,624 2.71  3.28 
Subordinated notes436,223  266,430 16,452  10,051 5.03  5.03 
Junior subordinated debentures253,566  253,566 8,266  9,111 4.28  4.74 
Total interest-bearing liabilities$26,623,394  $21,691,940 $204,529  $242,371 1.03% 1.49%
Non-interest-bearing deposits8,947,639  6,570,815       
Other liabilities1,096,297  748,722       
Equity3,885,187  3,407,398       
Total liabilities and shareholders’ equity$40,552,517  $32,418,875       
Interest rate spread (6)(8)      2.50% 3.17%
Less: Fully taxable-equivalent adjustment   (3,558) (4,758)(0.01) (0.02)
Net free funds/contribution (7)$10,794,725  $8,122,704    0.30  0.41 
Net interest income/ margin (GAAP) (8)   $780,510  793,040 2.79% 3.56%
Fully taxable-equivalent adjustment   3,558  4,758 0.01  0.02 
Net interest income/ margin, fully taxable-equivalent (non-GAAP) (8)   $784,068  $797,798 2.80% 3.58%

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


TABLE 8: INTEREST RATE SENSITIVITY

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

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

Static Shock Scenario +200
Basis
Points
 +100
Basis
Points
 -100
Basis
Points
Sep 30, 2020 23.4% 10.9% (8.1)%
Jun 30, 2020 25.9  12.6  (8.3)
Mar 31, 2020 22.5  10.6  (9.4)
Dec 31, 2019 18.6  9.7  (10.9)
Sep 30, 2019 20.7  10.5  (11.9)

 

Ramp Scenario+200
Basis
Points
 +100
Basis
Points
 -100
Basis
Points
Sep 30, 202010.7% 5.2% (3.5)%
Jun 30, 202013.0  6.7  (3.2)
Mar 31, 20207.7  3.7  (3.8)
Dec 31, 20199.3  4.8  (5.0)
Sep 30, 201910.1  5.2  (5.6)

 

TABLE 9: MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES

 Loans repricing or maturity period  
As of September 30, 2020One year or less From one to five
years
 Over five years  Total
(In thousands)       
        
Commercial       
Fixed rate$329,230  $1,831,547  $794,089  $2,954,866 
Fixed Rate - PPP  3,379,013    3,379,013 
Variable rate5,923,248  19,747  125  5,943,120 
Total commercial$6,252,478  $5,230,307  $794,214  $12,276,999 
Commercial real estate       
Fixed rate601,275  2,093,741  399,264  3,094,280 
Variable rate5,291,887  36,975    5,328,862 
Total commercial real estate$5,893,162  $2,130,716  $399,264  $8,423,142 
Home equity       
Fixed rate18,022  7,551  25  25,598 
Variable rate420,676      420,676 
Total home equity$438,698  $7,551  $25  $446,274 
Residential real estate       
Fixed rate29,068  12,611  463,604  505,283 
Variable rate66,816  328,865  483,846  879,527 
Total residential real estate$95,884  $341,476  $947,450  $1,384,810 
Premium finance receivables - commercial       
Fixed rate3,965,026  95,118    4,060,144 
Variable rate       
Total premium finance receivables - commercial$3,965,026  $95,118  $  $4,060,144 
Premium finance receivables - life insurance       
Fixed rate15,284  240,467  19,591  275,342 
Variable rate5,213,490      5,213,490 
Total premium finance receivables - life insurance$5,228,774  $240,467  $19,591  $5,488,832 
Consumer and other       
Fixed rate28,297  5,831  1,501  35,629 
Variable rate19,725      19,725 
Total consumer and other$48,022  $5,831  $1,501  $55,354 
        
Total per category       
Fixed rate4,986,202  7,665,879  1,678,074  14,330,155 
Variable rate16,935,842  385,587  483,971  17,805,400 
Total loans, net of unearned income$21,922,044  $8,051,466  $2,162,045  $32,135,555 
        
Variable Rate Loan Pricing by Index:       
Prime      $2,254,870 
One- month LIBOR      8,977,288 
Three- month LIBOR      412,969 
Twelve- month LIBOR      5,870,663 
Other      289,610 
Total variable rate      $17,805,400 


Graph available at the following link: 
http://ml.globenewswire.com/Resource/Download/ef1ce1bb-9104-4a8b-93ff-34a8785c198e

Source: Bloomberg

As noted in the table on the previous page, the majority of the Company’s portfolio is tied to LIBOR indices which, as shown in the table above, do not mirror the same changes as the Prime rate which has historically moved when the Federal Reserve raises or lowers interest rates.  Specifically, the Company has $9.0 billion of variable rate loans tied to one-month LIBOR and $5.9 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:

  Basis Points (bps) Change in
  Prime 1-month
LIBOR
 12-month
LIBOR
 
Third Quarter 2020 0bps-1bps-19bps
Second Quarter 2020 0 -83 -45 
First Quarter 2020 -150 -77 -100 
Fourth Quarter 2019 -25 -26 -3 
Third Quarter 2019 -50 -38 -15 

 

TABLE 10: ALLOWANCE FOR CREDIT LOSSES

  Three Months EndedNine Months Ended
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,Sep 30, Sep 30,
(Dollars in thousands) 2020 2020 2020 2019 20192020 2019
Allowance for credit losses at beginning of period $373,174  $253,482  $158,461  $163,273  $161,901 $158,461  $154,164 
Cumulative effect adjustment from the adoption of ASU 2016-13     47,418     47,418   
Provision for credit losses 25,026  135,053  52,961  7,826  10,834 213,040  46,038 
Other adjustments 55  42  (73) 30  (13)24  (51)
Charge-offs:             
Commercial 5,270  5,686  2,153  11,222  6,775 13,109  24,658 
Commercial real estate 1,529  7,224  570  533  809 9,323  4,869 
Home equity 138  239  1,001  1,330  1,594 1,378  2,372 
Residential real estate 83  293  401  483  25 777  315 
Premium finance receivables 4,640  3,434  3,184  3,817  1,866 11,258  9,085 
Consumer and other 103  99  128  167  117 330  355 
Total charge-offs 11,763  16,975  7,437  17,552  11,186 36,175  41,654 
Recoveries:             
Commercial 428  112  384  1,871  367 924  974 
Commercial real estate 175  493  263  1,404  385 931  1,112 
Home equity 111  46  294  166  183 451  313 
Residential real estate 25  30  60  50  203 115  372 
Premium finance receivables 1,720  833  1,110  1,350  563 3,663  1,853 
Consumer and other 20  58  41  43  36 119  152 
Total recoveries 2,479  1,572  2,152  4,884  1,737 6,203  4,776 
Net charge-offs (9,284) (15,403) (5,285) (12,668) (9,449)(29,972) (36,878)
Allowance for credit losses at period end $388,971  $373,174  $253,482  $158,461  $163,273 $388,971  $163,273 
              
Annualized net charge-offs by category as a percentage of its own respective category’s average:   
Commercial 0.16% 0.20% 0.08% 0.46% 0.31%0.15% 0.39%
Commercial real estate 0.06  0.33  0.02  (0.04) 0.02 0.14  0.07 
Home equity 0.02  0.16  0.57  0.89  1.08 0.26  0.52 
Residential real estate 0.02  0.09  0.11  0.14  (0.07)0.07  (0.01)
Premium finance receivables 0.12  0.12  0.10  0.28  0.15 0.11  0.12 
Consumer and other 0.49  0.25  0.56  0.41  0.27 0.41  0.24 
Total loans, net of unearned income 0.12% 0.20% 0.08% 0.19% 0.15%0.14% 0.20%
              
Net charge-offs as a percentage of the provision for credit losses 37.10% 11.41% 9.98% 161.87% 87.22%14.07% 80.10%
Loans at period-end $32,135,555  $31,402,903  $27,807,321  $26,800,290  $25,710,171    
Allowance for loan losses as a percentage of loans at period end 1.01% 1.00% 0.78% 0.59% 0.63%   
Allowance for loan and unfunded lending-related commitment losses as a percentage of loans at period end 1.21  1.19  0.91  0.59  0.64    
Allowance for loan and unfunded lending-related commitment losses as a percentage of loans at period end, excluding PPP loans 1.35  1.33  0.91  0.59  0.64    

 

TABLE 11: ALLOWANCE AND PROVISON FOR CREDIT LOSSES BY COMPONENT

  Three Months EndedNine Months Ended
  Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,Sep 30, Sep 30,
(In thousands) 2020 2020 2020 2019 20192020 2019
Provision for loan losses $21,678  $112,822  $50,396  $7,704  $10,804 $184,896  $45,922 
Provision for unfunded lending-related commitments losses 3,350  22,236  2,569  122  30 28,155  116 
Provision for held-to-maturity securities losses (2) (5) (4)    (11)  
Provision for credit losses $25,026  $135,053  $52,961  $7,826  $10,834 $213,040  $46,038 
              
Allowance for loan losses $325,959  $313,510  $216,050  $156,828  $161,763    
Allowance for unfunded lending-related commitments losses 62,949  59,599  37,362  1,633  1,510    
Allowance for loan losses and unfunded lending-related commitments losses 388,908  373,109  253,412  158,461  163,273    
Allowance for held-to-maturity securities losses 63  65  70        
Allowance for credit losses $388,971  $373,174  $253,482  $158,461  $163,273    

 

TABLE 12: ALLOWANCE BY LOAN PORTFOLIO

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

 As of Sep 30, 2020As of Jun 30, 2020As of Mar 31, 2020
(Dollars in thousands)Recorded
Investment
 Calculated
Allowance
 % of its
category’s balance
Recorded
Investment
 Calculated
Allowance
 % of its
category’s balance
Recorded
Investment
 Calculated
Allowance
 % of its
category’s balance
Commercial:               
Commercial, industrial and other, excluding PPP loans$8,808,467  $110,045  1.25%$8,396,485  $130,585  1.56%$8,888,342  $104,754  1.18%
Commercial real estate:               
Construction and development1,270,235  73,565  5.79 1,193,735  67,333  5.64 1,113,863  31,687  2.84 
Non-construction6,708,538  141,249  2.11 6,397,847  108,613  1.70 6,388,142  68,914  1.08 
Home equity412,162  11,216  2.72 427,668  11,596  2.71 451,804  11,844  2.62 
Residential real estate1,309,209  11,165  0.85 1,338,801  11,200  0.84 1,274,351  11,621  0.91 
Total core loan portfolio$18,508,611  $347,240  1.88%$17,754,536  $329,327  1.85%$18,116,502  $228,820  1.26%
Commercial PPP loans$3,379,013  $3  0.00%$3,335,368  $4  0.00%$  $  %
Premium finance receivables               
Commercial insurance loans4,060,144  17,378  0.43 3,999,774  17,122  0.43 3,465,055  7,426  0.21 
Life insurance loans5,376,403  478  0.01 5,277,126  470  0.01 5,084,695  454  0.01 
Consumer and other53,191  555  1.04 45,474  556  1.22 34,111  331  0.97 
Total niche and consumer loan portfolio$12,868,751  $18,414  0.14%$12,657,742  $18,152  0.14%$8,583,861  $8,211  0.10%
Purchased commercial$89,519  $2,846  3.18%$127,379  $3,008  2.36%$137,544  $2,592  1.88%
Purchased commercial real estate444,369  19,196  4.32 609,163  21,180  3.48 683,526  12,195  1.78 
Purchased home equity34,112  461  1.35 38,928  593  1.52 42,851  550  1.28 
Purchased residential real estate75,601  625  0.83 88,628  715  0.81 103,038  929  0.90 
Purchased life insurance loans112,429     123,676     136,944     
Purchased consumer and other2,163  126  5.83 2,851  134  4.70 3,055  115  3.76 
Total purchased loan portfolio$758,193  $23,254  3.07%$990,625  $25,630  2.59%$1,106,958  $16,381  1.48%
Total loans, net of unearned income$32,135,555  $388,908  1.21%$31,402,903  $373,109  1.19%$27,807,321  $253,412  0.91%
Total loans, net of unearned income, excluding PPP loans$28,756,542  $388,905  1.35%$28,067,535  $373,105  1.33%$27,807,321  $253,412  0.91%

 

TABLE 13: LOAN PORTFOLIO AGING

(Dollars in thousands) Sep 30, 2020 Jun 30, 2020 Mar 31, 2020 Dec 31, 2019 Sep 30, 2019
Loan Balances:          
Commercial          
Nonaccrual $42,036  $42,882  $49,916  $37,224  $43,931 
90+ days and still accruing   1,374  1,241  1,855  382 
60-89 days past due 2,168  8,952  8,873  3,275  12,860 
30-59 days past due 48,271  23,720  86,129  77,324  51,487 
Current 12,184,524  11,782,304  8,879,727  8,166,242  8,086,942 
Total commercial $12,276,999  $11,859,232  $9,025,886  $8,285,920  $8,195,602 
Commercial real estate          
Nonaccrual $68,815  $64,557  $62,830  $26,113  $21,557 
90+ days and still accruing     516  14,946  4,992 
60-89 days past due 8,299  26,480  10,212  31,546  9,629 
30-59 days past due 53,462  75,528  75,068  97,567  33,098 
Current 8,292,566  8,034,180  8,036,905  7,850,104  7,379,391 
Total commercial real estate $8,423,142  $8,200,745  $8,185,531  $8,020,276  $7,448,667 
Home equity          
Nonaccrual $6,329  $7,261  $7,243  $7,363  $7,920 
90+ days and still accruing          
60-89 days past due 70    214  454  95 
30-59 days past due 1,148  1,296  2,096  3,533  3,100 
Current 438,727  458,039  485,102  501,716  501,188 
Total home equity $446,274  $466,596  $494,655  $513,066  $512,303 
Residential real estate          
Nonaccrual $22,069  $19,529  $18,965  $13,797  $13,447 
90+ days and still accruing     605  5,771  3,244 
60-89 days past due 814  1,506  345  3,089  1,868 
30-59 days past due 2,443  4,400  28,983  18,041  1,433 
Current 1,359,484  1,401,994  1,328,491  1,313,523  1,198,674 
Total residential real estate $1,384,810  $1,427,429  $1,377,389  $1,354,221  $1,218,666 
Premium finance receivables          
Nonaccrual $21,080  $16,460  $21,058  $21,180  $16,540 
90+ days and still accruing 12,177  35,638  16,505  11,517  10,612 
60-89 days past due 38,286  42,353  12,730  12,119  26,606 
30-59 days past due 80,732  61,160  70,185  51,342  44,767 
Current 9,396,701  9,244,965  8,566,216  8,420,471  8,146,921 
Total premium finance receivables $9,548,976  $9,400,576  $8,686,694  $8,516,629  $8,245,446 
Consumer and other          
Nonaccrual $422  $427  $403  $231  $224 
90+ days and still accruing 175  156  78  287  117 
60-89 days past due 273  4  625  40  55 
30-59 days past due 493  281  207  344  272 
Current 53,991  47,457  35,853  109,276  88,819 
Total consumer and other $55,354  $48,325  $37,166  $110,178  $89,487 
Total loans, net of unearned income          
Nonaccrual $160,751  $151,116  $160,415  $105,908  $103,619 
90+ days and still accruing 12,352  37,168  18,945  34,376  19,347 
60-89 days past due 49,910  79,295  32,999  50,523  51,113 
30-59 days past due 186,549  166,385  262,668  248,151  134,157 
Current 31,725,993  30,968,939  27,332,294  26,361,332  25,401,935 
Total loans, net of unearned income $32,135,555  $31,402,903  $27,807,321  $26,800,290  $25,710,171 

 

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

 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(Dollars in thousands)2020 2020 2020(1) 2019 2019
Loans past due greater than 90 days and still accruing (2):         
Commercial$  $1,374  $1,241  $  $ 
Commercial real estate    516     
Home equity         
Residential real estate    605     
Premium finance receivables12,177  35,638  16,505  11,517  10,612 
Consumer and other175  156  78  163  53 
Total loans past due greater than 90 days and still accruing12,352  37,168  18,945  11,680  10,665 
Non-accrual loans:         
Commercial42,036  42,882  49,916  37,224  43,931 
Commercial real estate68,815  64,557  62,830  26,113  21,557 
Home equity6,329  7,261  7,243  7,363  7,920 
Residential real estate22,069  19,529  18,965  13,797  13,447 
Premium finance receivables21,080  16,460  21,058  21,180  16,540 
Consumer and other422  427  403  231  224 
Total non-accrual loans160,751  151,116  160,415  105,908  103,619 
Total non-performing loans:         
Commercial42,036  44,256  51,157  37,224  43,931 
Commercial real estate68,815  64,557  63,346  26,113  21,557 
Home equity6,329  7,261  7,243  7,363  7,920 
Residential real estate22,069  19,529  19,570  13,797  13,447 
Premium finance receivables33,257  52,098  37,563  32,697  27,152 
Consumer and other597  583  481  394  277 
Total non-performing loans$173,103  $188,284  $179,360  $117,588  $114,284 
Other real estate owned2,891  2,409  2,701  5,208  8,584 
Other real estate owned - from acquisitions6,326  7,788  8,325  9,963  8,898 
Other repossessed assets      4  257 
Total non-performing assets$182,320  $198,481  $190,386  $132,763  $132,023 
Accruing TDRs not included within non-performing assets$46,410  $48,609  $47,049  $36,725  $45,178 
Total non-performing loans by category as a percent of its own respective category’s period-end balance:         
Commercial0.34% 0.37% 0.57% 0.45% 0.54%
Commercial real estate0.82  0.79  0.77  0.33  0.29 
Home equity1.42  1.56  1.46  1.44  1.55 
Residential real estate1.59  1.37  1.42  1.02  1.10 
Premium finance receivables0.35  0.55  0.43  0.39  0.34 
Consumer and other1.08  1.21  1.29  0.36  0.31 
Total loans, net of unearned income0.54% 0.60% 0.65% 0.44% 0.44%
Total non-performing assets as a percentage of total assets0.42% 0.46% 0.49% 0.36% 0.38%
Allowance for loan losses as a percentage of total non-performing loans188.30% 166.51% 120.46% 133.37% 141.54%

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

 

Non-performing Loans Rollforward

 Three Months EndedNine Months Ended
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,Sep 30, Sep 30,
(In thousands)2020 2020 2020 2019 20192020 2019
             
Balance at beginning of period$188,284  $179,360  $117,588  $114,284  $113,447 $117,588  $113,234 
Additions from becoming non-performing in the respective period19,771  20,803  32,195  30,977  20,781 72,769  65,378 
Additions from the adoption of ASU 2016-13    37,285     37,285   
Return to performing status(6,202) (2,566) (486) (243) (407)(9,254) (14,531)
Payments received(3,733) (11,201) (7,949) (19,380) (16,326)(22,883) (25,788)
Transfer to OREO and other repossessed assets(598)   (1,297)   (1,493)(1,895) (3,061)
Charge-offs(6,583) (12,884) (2,551) (11,798) (6,984)(22,018) (27,793)
Net change for niche loans (1)(17,836) 14,772  4,575  3,748  5,266 1,511  6,845 
Balance at end of period$173,103  $188,284  $179,360  $117,588  $114,284 $173,103  $114,284 

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


TDRs

 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(In thousands)2020 2020 2020 2019 2019
Accruing TDRs:         
Commercial$7,863  $5,338  $6,500  $4,905  $14,099 
Commercial real estate10,846  19,106  18,043  9,754  10,370 
Residential real estate and other27,701  24,165  22,506  22,066  20,709 
Total accrual$46,410  $48,609  $47,049  $36,725  $45,178 
Non-accrual TDRs: (1)         
Commercial$13,132  $20,788  $17,206  $13,834  $7,451 
Commercial real estate13,601  8,545  14,420  7,119  7,673 
Residential real estate and other5,392  5,606  4,962  6,158  6,006 
Total non-accrual$32,125  $34,939  $36,588  $27,111  $21,130 
Total TDRs:         
Commercial$20,995  $26,126  $23,706  $18,739  $21,550 
Commercial real estate24,447  27,651  32,463  16,873  18,043 
Residential real estate and other33,093  29,771  27,468  28,224  26,715 
Total TDRs$78,535  $83,548  $83,637  $63,836  $66,308 

(1)   Included in total non-performing loans.

Other Real Estate Owned

 Three Months Ended
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
(In thousands)2020 2020 2020 2019 2019
Balance at beginning of period$10,197  $11,026  $15,171  $17,482  $19,837 
Disposals/resolved(1,532) (612) (4,793) (4,860) (4,501)
Transfers in at fair value, less costs to sell777    954  936  3,008 
Additions from acquisition      2,179   
Fair value adjustments(225) (217) (306) (566) (862)
Balance at end of period$9,217  $10,197  $11,026  $15,171  $17,482 
          
 Period End
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30,
Balance by Property Type:2020 2020 2020 2019 2019
Residential real estate$1,839  $1,382  $1,684  $1,016  $1,250 
Residential real estate development      810  1,282 
Commercial real estate7,378  8,815  9,342  13,345  14,950 
Total$9,217  $10,197  $11,026  $15,171  $17,482 

 

TABLE 15: NON-INTEREST INCOME

 Three Months Ended Q3 2020 compared to Q3 2020 compared to
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q2 2020 Q3 2019
(Dollars in thousands)2020 2020 2020 2019 2019 $ Change % Change $ Change % Change
Brokerage$4,563  $4,147  $5,281  $4,859  $4,686  $416  10% $(123) (3)%
Trust and asset management20,394  18,489  20,660  20,140  19,313  1,905  10  1,081  6 
Total wealth management24,957  22,636  25,941  24,999  23,999  2,321  10  958  4 
Mortgage banking108,544  102,324  48,326  47,860  50,864  6,220  6  57,680  113 
Service charges on deposit accounts11,497  10,420  11,265  10,973  9,972  1,077  10  1,525  15 
Gains (losses) on investment securities, net411  808  (4,359) 587  710  (397) (49) (299) (42)
Fees from covered call options    2,292  1,243      NM    NM 
Trading gains (losses), net183  (634) (451) 46  11  817  NM  172  NM 
Operating lease income, net11,717  11,785  11,984  12,487  12,025  (68) (1) (308) (3)
Other:                 
Interest rate swap fees4,029  5,693  6,066  2,206  4,811  (1,664) (29) (782) (16)
BOLI1,218  1,950  (1,284) 1,377  830  (732) (38) 388  47 
Administrative services1,077  933  1,112  1,072  1,086  144  15  (9) (1)
Foreign currency remeasurement (losses) gains(54) (208) (151) 261  (55) 154  74  1  (2)
Early pay-offs of capital leases165  275  74  24  6  (110) (40) 159  NM 
Miscellaneous6,849  6,011  12,427  9,085  10,878  838  14  (4,029) (37)
Total Other13,284  14,654  18,244  14,025  17,556  (1,370) (9) (4,272) (24)
Total Non-Interest Income$170,593  $161,993  $113,242  $112,220  $115,137  $8,600  5% $55,456  48%

NM - Not meaningful.

 

 Nine Months Ended    
 Sep 30, Sep 30, $ %
(Dollars in thousands)2020 2019 Change Change
Brokerage$13,991  $13,966  $25  %
Trust and asset management59,543  58,149  1,394  2 
Total wealth management73,534  72,115  1,419  2 
Mortgage banking259,194  106,433  152,761  144 
Service charges on deposit accounts33,182  28,097  5,085  18 
(Losses) gains on investment securities, net(3,140) 2,938  (6,078) NM 
Fees from covered call options2,292  2,427  (135) (6)
Trading losses, net(902) (204) (698) NM 
Operating lease income, net35,486  34,554  932  3 
Other:       
Interest rate swap fees15,788  10,866  4,922  45 
BOLI1,884  3,570  (1,686) (47)
Administrative services3,122  3,125  (3)  
Foreign currency remeasurement (loss) gain(413) 522  (935) NM 
Early pay-offs of leases514  11  503  NM 
Miscellaneous25,287  30,498  (5,211) (17)
Total Other46,182  48,592  (2,410) (5)
Total Non-Interest Income$445,828  $294,952  $150,876  51%

NM - Not meaningful.

 

TABLE 16: MORTGAGE BANKING

 Three Months EndedNine Months Ended
(Dollars in thousands)Sep 30,
2020
 Jun 30,
2020
 Mar 31,
2020
 Dec 31,
2019
 Sep 30,
2019
Sep 30,
2020
 Sep 30,
2019
Originations and Commitments:            
Retail originations$1,590,699  $1,588,932  $773,144  $782,122  $913,631 $3,952,775  $1,948,743 
Correspondent originations      4,024  50,639   381,705 
Veterans First originations635,876  621,878  442,957  459,236  456,005 1,700,711  922,091 
Total originations for sale (A)$2,226,575  $2,210,810  $1,216,101  $1,245,382  $1,420,275 $5,653,486  $3,252,539 
Originations for investment73,711  56,954  73,727  105,911  154,897 204,392  354,823 
Total originations$2,300,286  $2,267,764  $1,289,828  $1,351,293  $1,575,172 $5,857,878  $3,607,362 
             
Purchases as a percentage of originations for sale41% 30% 37% 40% 48%36% 57%
Refinances as a percentage of originations for sale59  70  63  60  52 64  43 
Total100% 100% 100% 100% 100%100% 100%
             
Mandatory commitments to fund originations for sale (1)$1,962,817  $1,275,648  $1,375,162  $372,357  $433,009    
             
Production Margin:            
Production revenue (B) (2)$94,148  $93,433  $49,327  $34,622  $40,924 $236,908  $87,425 
Production margin (B / A)4.23% 4.23% 4.06% 2.78% 2.88%4.19% 2.69%
             
Mortgage Servicing:            
Loans serviced for others (C)$10,139,878  $9,188,285  $8,314,634  $8,243,251  $7,901,045    
MSRs, at fair value (D)86,907  77,203  73,504  85,638  75,585    
Percentage of MSRs to loans serviced for others (D / C)0.86% 0.84% 0.88% 1.04% 0.96%   
Servicing income$8,118  $6,908  $7,031  $6,247  $5,989 $22,057  $16,909 
             
Components of MSR:            
MSR - current period capitalization$20,936  $20,351  $9,447  $14,532  $14,029 $50,734  $30,411 
MSR - collection of expected cash flows - paydowns(590) (419) (547) (483) (456)(1,556) (1,418)
MSR - collection of expected cash flows - payoffs(7,272) (8,252) (6,476) (6,325) (6,781)(22,000) (11,892)
Valuation:            
MSR - changes in fair value model assumptions(3,002) (7,982) (14,557) 2,329  (4,058)(25,541) (17,107)
Gain (loss) on derivative contract held as an economic hedge, net  589  4,160  (483) 82 4,749  1,002 
MSR valuation adjustment, net of gain/(loss) on derivative contract held as an economic hedge$(3,002) $(7,393) $(10,397) $1,846  $(3,976)$(20,792) $(16,105)
             
Summary of Mortgage Banking Revenue:            
Production revenue (2)$94,148  $93,433  $49,327  $34,622  $40,924 $236,908  $87,425 
Servicing income8,118  6,908  7,031  6,247  5,989 22,057  16,909 
MSR activity10,072  4,287  (7,973) 9,570  2,816 6,386  996 
Other(3,794) (2,304) (59) (2,579) 1,135 (6,157) 1,103 
Total mortgage banking revenue$108,544  $102,324  $48,326  $47,860  $50,864 $259,194  $106,433 

(1)   Certain volume adjusted for the estimated pull-through rate of the loan, which represents the Company’s best estimate of the likelihood that a committed loan will ultimately fund.
(2)   Production revenue represents revenue earned from the origination and subsequent sale of mortgages, including gains on loans sold and fees from originations, processing and other related activities, and excludes servicing fees, changes in the fair value of servicing rights and changes to the mortgage recourse obligation and other non-production revenue.

 

TABLE 17: NON-INTEREST EXPENSE

 Three Months Ended Q3 2020 compared to Q3 2020 compared to
 Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, Q2 2020 Q3 2019
(Dollars in thousands)2020 2020 2020 2019 2019 $ Change % Change $ Change % Change
Salaries and employee benefits:                 
Salaries$89,849  $87,105  $81,286  $82,888  $78,067  $2,744  3% $11,782  15%
Commissions and incentive compensation48,475  46,151  31,575  40,226  40,289  2,324  5  8,186  20 
Benefits25,718  20,900  23,901  22,827  22,668  4,818  23  3,050  13 
Total salaries and employee benefits164,042  154,156  136,762  145,941  141,024  9,886  6  23,018  16 
Equipment17,251  15,846  14,834  14,485  13,314  1,405  9  3,937  30 
Operating lease equipment depreciation9,425  9,292  9,260  9,766  8,907  133  1  518  6 
Occupancy, net15,830  16,893  17,547  17,132  14,991  (1,063) (6) 839  6 
Data processing5,689  10,406  8,373  7,569  6,522  (4,717) (45) (833) (13)
Advertising and marketing7,880  7,704  10,862  12,517  13,375  176  2  (5,495) (41)
Professional fees6,488  7,687  6,721  7,650  8,037  (1,199) (16) (1,549) (19)
Amortization of other intangible assets2,701  2,820  2,863  3,017  2,928  (119) (4) (227) (8)
FDIC insurance6,772  7,081  4,135  1,348  148  (309) (4) 6,624  NM 
OREO expense, net(168) 237  (876) 536  1,170  (405) NM  (1,338) NM 
Other:                 
Commissions - 3rd party brokers778  707  865  717  734  71  10  44  6 
Postage1,529  1,591  1,949  2,220  2,321  (62) (4) (792) (34)
Miscellaneous26,002  24,948  21,346  26,693  21,083  1,054  4  4,919  23 
Total other28,309  27,246  24,160  29,630  24,138  1,063  4  4,171  17 
Total Non-Interest Expense$264,219  $259,368  $234,641  $249,591