WTFC - Wintrust Financial Corporation Reports Record Full-Year 2019 Net Income of $355.7 million and Fourth Quarter 2019 Net Income of $86.0 million up 8% from the Fourth Quarter 2018

ROSEMONT, Ill., Jan. 21, 2020 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust” or “the Company”) (Nasdaq: WTFC) announced record net income of $355.7 million or $6.03 per diluted common share for the year ended December 31, 2019 compared to net income of $343.2 million or $5.86 per diluted common share for the same period of 2018.  The Company recorded net income of $86.0 million or $1.44 per diluted common share for the fourth quarter of 2019, a decrease in diluted earnings per common share of 14.8% compared to the prior quarter and an increase of 6.7% compared to the fourth quarter of 2018.

Highlights of the Fourth Quarter of 2019:
Comparative information to the third quarter of 2019

• Total assets increased by $1.7 billion, including $240 million from the acquisition of STC Capital Bancshares and $607 million from the acquisition of SBC, Incorporated, or 19% on an annualized basis.
• Total loans increased by $1.1 billion, including $164 million from the acquisition of STC Capital Bancshares and $418 million from the acquisition of SBC, Incorporated, or 17% on an annualized basis.
• Total deposits increased by $1.4 billion, including $194 million from the acquisition of STC Capital Bancshares and $496 million from the acquisition of SBC, Incorporated, or 19% on an annualized basis. The increase was net of a $201 million reduction in brokered deposits.
• Mortgage banking production revenue decreased by $6.3 million as mortgage loans originated for sale totaled $1.2 billion in the fourth quarter of 2019 as compared to $1.4 billion in the third quarter of 2019.
• Net interest income decreased by $3.0 million as a 20 basis point decline in net interest margin was partially offset by a $1.5 billion increase in average earning assets.
• Recorded net charge-offs of $12.7 million in the fourth quarter of 2019 as compared to $9.4 million in the third quarter of 2019. The $12.7 million includes a $5.3 million charge-off of a commercial loan, which was fully reserved for in prior quarters.
• The ratio of non-performing assets to total assets declined by two basis points to 0.36%.

Other highlights of the fourth quarter of 2019

• Recorded a $2.8 million reduction to FDIC insurance expense related to assessment credits received from the FDIC. The Company received $3.9 million of assessment credits from the FDIC in the third quarter of 2019. 
• Recorded an increase 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 $1.8 million.
• Incurred acquisition related costs of $2.4 million in the fourth quarter of 2019 as compared to $1.3 million in the third quarter of 2019.
• Recognized various non-operating charges totaling $5.4 million. This includes expenses related to a litigation settlement, loan remediation, contingent consideration related to previous acquisitions of certain mortgage businesses, pension plan terminations, operating lease impairment and losses on partnership investments.
• Announced approval of a stock buyback program which authorizes the repurchase of up to $125 million in common shares.

Expansion activity

• Opened two new branches in the Chicago suburbs located in Palatine and Maywood, Illinois.
• Completed the previously announced acquisition of STC Bancshares Corp., the parent company of STC Capital Bank.
• Completed the previously announced acquisition of SBC, Incorporated, the parent company of Countryside Bank.

Edward J. Wehmer, President and Chief Executive Officer, commented, "As the decade closes, I reflect back on the recent history of Wintrust and I am proud of the franchise that we have built. In the last 10 years, Wintrust has experienced significant growth and has become a household name in the Chicago and Milwaukee areas. Wintrust now boasts the largest deposit base in the Chicago market area among locally headquartered banks which is a product of our consistent growth strategy that has yielded 12% compound annual growth in assets, loans and deposits over the past 10 years. Additionally, the last nine years of the decade reported record annual net income. Admittedly, 2019 was not what we expected with respect to our profitability goals. However, 2019 was a success with respect to our efforts to increase market share and household penetration in our market areas and continue to establish Wintrust as a reliable partner with excellent customer service. We believe that our core operating tenants that have produced the success that we have experienced over the past 10 years will continue to serve us favorably as we seek to grow strategically in 2020 and beyond."

Transitioning to the current quarter, Mr. Wehmer proceeded, "Wintrust reported net income of $86.0 million for the fourth quarter of 2019, down from $99.1 million in the third quarter of 2019 and record annual net income of $355.7 million in 2019 as compared to $343.2 million in 2018. The Company experienced strong balance sheet growth as total assets were $1.7 billion higher than the prior quarter end and $5.4 billion higher than at the fourth quarter of 2018. The fourth quarter was characterized by strong balance sheet growth, decreased net interest margin, decreased mortgage banking revenue, stable credit quality, and a continued focus to increase franchise value in our market area."

Mr. Wehmer continued, "The Company experienced deposit growth of $1.4 billion in the fourth quarter of 2019 which was net of a reduction of $201 million in brokered deposits to optimize our funding base. Non-brokered deposits now comprise approximately 97% of total deposits. Additionally, the Company grew total loans by $1.1 billion with growth diversified across various loan portfolios including the commercial, commercial real estate, life insurance premium finance receivables and residential real estate portfolios. We remain aggressive in growing quality assets that meet our standards and will seek to fund that by expanding deposit market share and household penetration."

Mr. Wehmer commented, "Net interest margin declined by 20 basis points in the fourth quarter of 2019 as compared to the third quarter of 2019 primarily due to downward repricing of variable rate loans partially offset by improvement in deposit pricing. Given the relatively stable short-term outlook on interest rates, we expect to hold loan yields steady while continuing to reduce our interest bearing deposit costs. Additionally, we expect to deploy the excess liquidity gathered in the third and fourth quarters of 2019 to enhance net interest income. As always, we will strive to grow without a commensurate increase in expenses to enhance our net overhead ratio which was 1.53% in the fourth quarter of 2019."

Mr. Wehmer noted, “Our mortgage banking business production decreased in the current quarter as loan volumes originated for sale decreased to $1.2 billion from $1.4 billion in the third quarter of 2019. The decrease in origination volumes was primarily attributed to the seasonal purchase market decline which was partially mitigated by elevated refinancing activity. Our mortgage servicing rights portfolio increased by $10.1 million primarily due to the capitalization of retained servicing rights of $14.5 million partially offset by a $6.8 million reduction related to payoffs and paydowns. We recorded a $1.8 million increase due to changes in fair value assumptions, net of derivative contract activity held as an economic hedge. We continue to focus on efficiencies in our delivery channels and our operating costs in our mortgage banking area. We believe that the mortgage rate outlook in the first quarter of 2020 will continue to result in elevated refinancing activity, which will supplement the seasonally challenging purchase market."

Commenting on credit quality, Mr. Wehmer stated, "Overall credit quality metrics were positive in the fourth quarter of 2019. The Company recorded net charge-offs of $12.7 million in the fourth quarter of 2019 as compared to $9.4 million in the third quarter of 2019. The $12.7 million of net charge-offs in the current quarter includes a $5.3 million charge-off of a commercial loan, which was fully reserved for in prior quarters. Although we experienced elevated charge-offs in the second quarter of 2019, net charge-offs for the year of 2019 were 20 basis points. The ratio of non-performing assets as a percent of total assets declined by two basis points to a historically low level of 0.36%.  We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit."

Turning to the future, Mr. Wehmer stated, “We have experienced significant franchise growth in 2019 and believe that our opportunities for both internal and external growth remain consistently strong. Total period end loans were $663 million higher than average total loans in the current quarter which provides momentum into the first quarter of 2020. We plan to continue our steady and measured approach to achieve our main objectives of growing franchise value, increasing profitability, leveraging our expense infrastructure and continuing to increase shareholder value. Evaluating strategic acquisitions, like the completed acquisitions of STC Bancshares Corp. and SBC, Incorporated, as well as focusing on organic branch growth will continue to be a part of our overall growth strategy with the goal of becoming Chicago’s bank and Wisconsin’s bank."

The graphs below illustrate the annual trend of certain financial highlights, including the 10 year compound annual growth rate ("CAGR").

Graphs available at the following link:
http://ml.globenewswire.com/Resource/Download/ee80b169-0adb-4a48-bc91-93f46e6dc982

SUMMARY OF RESULTS:

BALANCE SHEET

Total assets grew by $1.7 billion in the fourth quarter of 2019 primarily due to a $1.1 billion increase in loans and an $836 million increase in available for sale securities, partially offset by a reduction in liquidity. The increase in assets and loans include acquired balances of $847 million and $582 million, respectively. The Company believes that the $2.2 billion of interest bearing deposits with banks held as of December 31, 2019 is more than sufficient liquidity to operate its business plan. Excess liquidity is expected to be deployed in future quarters to enhance net interest income.

Total liabilities grew by $1.6 billion in the fourth quarter of 2019 primarily comprised of a $1.4 billion increase in total deposits of which $690 million related to acquisitions. The Company successfully grew deposits in the fourth quarter through organic retail channels, acquisitions and its wealth management segment. In addition, the total deposit growth was net of a $201 million reduction in brokered deposits. 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. Non-brokered deposits now comprise approximately 97% of total deposits.

For more information regarding changes in the Company’s balance sheet, see Consolidated Statements of Condition and Tables 1 through 4 in this report.

NET INTEREST INCOME

For the fourth quarter of 2019, net interest income totaled $261.9 million, a decrease of $3.0 million as compared to the third quarter of 2019 and an increase of $7.8 million as compared to the fourth quarter of 2018. The $3.0 million decrease in net interest income in the fourth quarter of 2019 compared to the third quarter of 2019 was attributable to the impact of a 20 basis point decline in net interest margin. This impact was partially offset by $1.5 billion of growth in average earning assets.

Net interest margin was 3.17% (3.19% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2019 compared to 3.37% (3.39% on a fully taxable-equivalent basis, non-GAAP) during the third quarter of 2019 and 3.61% (3.63% on a fully taxable-equivalent basis, non-GAAP) during the fourth quarter of 2018. The 20 basis point decrease in net interest margin in the fourth quarter of 2019 as compared to the third quarter of 2019 was attributable to a 28 basis point decline in the yield on earnings assets and three basis point decrease in the net free funds contribution partially offset by an 11 basis point decrease in the rate paid on interest bearing liabilities. The 28 basis point decline in the yield on earning assets in the current quarter as compared to the third quarter of 2019 was primarily due to a 24 basis point decline in the yield on loans along with lower yields on interest bearing cash. The 11 basis point decrease in the rate paid on interest bearing liabilities in the current quarter as compared to the prior quarter is primarily due to a 10 basis point decrease in the rate paid on interest bearing deposits as management initiated various deposit rate reductions given the recent decrease in the interest rate environment.

For the full twelve months of 2019, net interest income totaled $1.1 billion, an increase of $90.0 million as compared to the full twelve months of 2018. Net interest margin was 3.45% (3.47% on a fully taxable-equivalent basis, non-GAAP) for the full twelve months of 2019 compared to 3.59% (3.61% on a fully taxable-equivalent basis, non-GAAP) for the full twelve months of 2018.

For more information regarding net interest income, see Tables 5 through 10 in this report.

ASSET QUALITY

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

Net charge-offs as a percentage of average total loans, in the fourth quarter of 2019 totaled 19 basis points on an annualized basis compared to 15 basis points on an annualized basis in the third quarter of 2019 and 12 basis points on an annualized basis in the fourth quarter of 2018. Net charge-offs totaled $12.7 million in the fourth quarter of 2019, a $3.3 million increase from $9.4 million in the third quarter of 2019 and a $5.5 million increase from $7.2 million in the fourth quarter of 2018. The $12.7 million of net charge-offs in the current quarter includes a $5.3 million charge-off of a commercial loan, which was fully reserved for in prior quarters. The provision for credit losses totaled $7.8 million for the fourth quarter of 2019 compared to $10.8 million for the third quarter of 2019 and $10.4 million for the fourth quarter of 2018. For more information regarding net charge-offs, see Table 11 in this report.

Management believes the allowance for credit losses is appropriate to provide for inherent losses in the portfolio. There can be no assurances, however, that future losses will not exceed the amounts provided for, thereby affecting future results of operations.

As part of the regular quarterly review performed by management to determine if the Company’s allowance for loan losses is appropriate, an analysis is prepared on the loan portfolio based upon a breakout of core loans and consumer, niche and purchased loans. A summary of the allowance for loan losses calculated for the loan components in both the core loan portfolio and the consumer, niche and purchased loan portfolio as of December 31, 2019 and September 30, 2019 is shown on Table 12 of this report.

As of December 31, 2019, $50.5 million of all loans, or 0.2%, were 60 to 89 days past due and $248.2 million, or 0.9%, were 30 to 59 days (or one payment) past due. As of September 30, 2019, $51.1 million of all loans, or 0.2%, were 60 to 89 days past due and $134.2 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 loan portfolios continue to exhibit low delinquency ratios. Home equity loans at December 31, 2019 that are current with regard to the contractual terms of the loan agreement represent 97.8% of the total home equity portfolio. Residential real estate loans at December 31, 2019 that are current with regards to the contractual terms of the loan agreements comprise 97.1% of total residential real estate loans outstanding. For more information regarding past due loans, see Table 13 in this report.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. In accordance with accounting guidance, credit deterioration on purchased loans is recorded as a credit discount at the time of purchase. In addition to the $156.8 million of allowance for loan losses, there was $11.6 million of non-accretable credit discount on purchased loans reported in accordance with ASC 310-30 that is available to absorb credit losses as of December 31, 2019.

The ratio of non-performing assets to total assets was 0.36% as of December 31, 2019, compared to 0.38% at September 30, 2019, and 0.44% at December 31, 2018. Non-performing assets, excluding PCI loans, totaled $132.8 million at December 31, 2019, compared to $132.0 million at September 30, 2019 and $138.3 million at December 31, 2018. Non-performing loans, excluding PCI loans, totaled $117.6 million, or 0.44% of total loans, at December 31, 2019 compared to $114.3 million, or 0.44% of total loans, at September 30, 2019 and $113.2 million, or 0.48% of total loans, at December 31, 2018. Other real estate owned ("OREO") of $15.2 million at December 31, 2019 decreased $2.3 million compared to $17.5 million at September 30, 2019 and decreased $9.6 million compared to $24.8 million at December 31, 2018. Management is pursuing the resolution of all non-performing assets. At this time, management believes reserves are appropriate to absorb inherent losses and OREO is appropriately valued at the lower of carrying value or fair value less estimated costs to sell. For more information regarding non-performing assets, see Table 14 in this report.

NON-INTEREST INCOME

Wealth management revenue increased by $1.0 million during the fourth quarter of 2019 as compared to the third quarter of 2019 primarily due to increased asset management revenue. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

Mortgage banking revenue decreased by $3.0 million in the fourth quarter of 2019 as compared to the third quarter of 2019, primarily as a result of lower production revenues, partially offset by an increase in the fair value of the mortgage servicing rights portfolio in the fourth quarter of 2019. Production revenue decreased by $6.3 million in the fourth quarter of 2019 as compared to the third quarter of 2019 primarily due to a decrease in origination volumes. The decrease in origination volumes was primarily attributed to the seasonal purchase market decline which was partially mitigated by elevated refinancing activity. The percentage of origination volume from refinancing activities was 60% in the fourth quarter of 2019 as compared to 52% in the third quarter of 2019. Production margin declined from 2.88% in the third quarter of 2019 to 2.78% in the fourth quarter of 2019. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market.

During the fourth quarter of 2019, the fair value of the mortgage servicing rights portfolio increased as retained servicing rights led to the capitalization of $14.5 million along with a positive fair value adjustment of $2.3 million partially offset by a reduction in value of $6.8 million due to payoffs and paydowns of the existing portfolio. The Company entered into interest rate swaps at the beginning of the fourth quarter of 2019 to economically hedge a portion of the potential negative fair value changes recorded in earnings related to its mortgage servicing rights portfolio. The Company recorded a loss of $483,000 on the interest rate swaps held as economic hedges against the mortgage servicing rights primarily related to the mark to market at year end which was recorded in mortgage banking revenue.

The net gains recognized on investment securities in the fourth quarter of 2019 were $587,000 as compared to $710,000 in third quarter of 2019. The gains recorded in the fourth quarter of 2019 relate to unrealized gains recognized on equity securities held by the Company.

Other non-interest income decreased by $3.5 million in the fourth quarter of 2019 as compared to the third quarter of 2019 primarily due to decreased income from investments in partnerships and interest rate swap fees.

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 $4.9 million in the fourth quarter of 2019 as compared to the third quarter of 2019. The $4.9 million increase is comprised of an increase of $4.8 million in salaries expense and $159,000 in benefits expense, partially offset by a decrease of $63,000 in commissions and incentive compensation. The increase in salaries and employee benefits expense is primarily due to increased staffing as the Company grows, $1.0 million of higher acquisition related costs and $487,000 of costs to terminate two pension plans.

Equipment expense totaled $14.5 million in the fourth quarter of 2019, an increase of $1.2 million as compared to the third quarter of 2019. The increase in the current quarter relates primarily to increased software depreciation expenses.

Advertising and marketing expenses in the fourth quarter of 2019 decreased by $858,000 as compared to the third quarter of 2019 primarily related to lower corporate sponsorship costs. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities, the Company's various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the timing of sponsorship programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

FDIC insurance expense totaled $1.3 million in the fourth quarter of 2019, an increase of $1.2 million as compared to the third quarter of 2019. In the current quarter, the Company recorded a $2.8 million reduction to FDIC insurance expense related to assessment credits received from the FDIC. The Company received $3.9 million of assessment credits from the FDIC in the third quarter of 2019.

Occupancy expense totaled $17.1 million in the fourth quarter of 2019, an increase of $2.1 million as compared to the third quarter of 2019. The increase in the current quarter relates primarily to increased expenses due to acquired locations, property tax expense and rental expense.

Miscellaneous expense in the fourth quarter of 2019 increased $5.6 million as compared to the third quarter of 2019. The increase in the current quarter as compared to the third quarter of 2019 is primarily due to a litigation settlement, contingent consideration related to previous acquisitions of certain mortgage businesses and overlapping telecommunication charges. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors' fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses and lending origination costs that are not deferred.

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

INCOME TAXES

The Company recorded income tax expense of $30.7 million in the fourth quarter of 2019 compared to $35.5 million in the third quarter of 2019 and $28.0 million in the fourth quarter of 2018. The effective tax rates were 26.33% in the fourth quarter of 2019 compared to 26.36% in the third quarter of 2019 and 26.01% in the fourth quarter of 2018. During the twelve months of 2019, the Company recorded income tax expense of $124.4 million compared to $117.0 million for the twelve months of 2018. The effective tax rates were 25.91% for the twelve months of 2019 and 25.42% for the twelve months of 2018.

The year-to-date effective tax rates were impacted by excess tax benefits related to share-based compensation. These excess tax benefits were $1.8 million in the twelve months of 2019 and $3.9 million in the twelve months of 2018. Excess tax benefits will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards.

BUSINESS UNIT SUMMARY

Community Banking

Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the fourth quarter of 2019, this unit expanded its loan and deposit portfolios. However, the banking segment also experienced net interest margin compression in part due to current market conditions.

Mortgage banking revenue was $47.9 million for the fourth quarter of 2019 a decrease from $50.9 million for the third quarter of 2019. Services charges on deposit accounts totaled $11.0 million in the fourth quarter of 2019 an increase of $1.0 million as compared to the third quarter of 2019 primarily due to higher account analysis fees. The Company's gross commercial and commercial real estate loan pipelines remain strong. Before the impact of scheduled payments and prepayments, gross commercial and commercial real estate loan pipelines were estimated to be approximately $1.0 billion to $1.1 billion at December 31, 2019. When adjusted for the probability of closing, the pipelines were estimated to be approximately $650 million to $720 million at December 31, 2019.

Specialty Finance

Through its specialty finance unit, the Company offers financing of insurance premiums for businesses and individuals, equipment financing through structured loans and lease products to customers in a variety of industries and accounts receivable financing, value-added, out-sourced administrative services, and other services. Originations within the insurance premium financing receivables portfolio were $2.5 billion during the fourth quarter of 2019 and average balances increased by $217.4 million as compared to the third quarter of 2019. The increase in average balances was more than offset by margin compression in this portfolio resulting in a $2.4 million decrease in interest income attributed to the insurance premium finance receivables portfolio. The Company's leasing business grew during the fourth quarter of 2019, with its portfolio of assets, including capital leases, loans and equipment on operating leases, increasing $123.8 million to $1.6 billion at the end of the fourth quarter of 2019. Revenues from the Company's out-sourced administrative services business remained flat at $1.1 million in the third quarter of 2019 and fourth quarter of 2019.

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 $1.0 million in the fourth quarter of 2019 compared to the third quarter of 2019, totaling $25.0 million in the current period. At December 31, 2019, the Company’s wealth management subsidiaries had approximately $27.6 billion of assets under administration, which included $4.2 billion of assets owned by the Company and its subsidiary banks, representing a $1.5 billion increase from the $26.1 billion of assets under administration at September 30, 2019. Successful new business development efforts and favorable equity markets have contributed to growth in revenue and assets under management.

ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS

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 $202 million in deposits. The Company recorded goodwill of approximately $19 million on the acquisition.

On May 24, 2019, the Company completed its acquisition 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.

On December 14, 2018, the Company acquired Elektra Holding Company, LLC, the parent company of Chicago Deferred Exchange Company, LLC ("CDEC"). CDEC is a provider of Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code Section 1031. CDEC has successfully facilitated more than 8,000 like-kind exchanges in the past decade for taxpayers nationwide. These transactions typically generate customer deposits during the period following the sale of the property until such proceeds are used to purchase a replacement property. The Company recorded goodwill of approximately $37 million on the acquisition.

On December 7, 2018, the Company completed its acquisition of certain assets and the assumption of certain liabilities of American Enterprise Bank. Through this asset acquisition, the Company acquired approximately $164 million in assets, including approximately $119 million in loans, and approximately $151 million in deposits, as of the acquisition date.

On August 1, 2018, the Company completed its acquisition of Chicago Shore Corporation ("CSC"). CSC was the parent company of Delaware Place Bank. Through this business combination, the Company acquired Delaware Place Bank's one banking location in Chicago, Illinois. As of the acquisition date, the Company acquired approximately $283 million in assets, including approximately $153 million in loans, and approximately $213 million in deposits. The Company recorded goodwill of approximately $27 million on the acquisition.

On January 4, 2018, the Company acquired iFreedom Direct Corporation DBA Veterans First Mortgage ("Veterans First") with assets including mortgage-servicing-rights on approximately 10,000 loans, totaling an estimated $2 billion in unpaid principal balance, as of the acquisition date. The Company recorded goodwill of approximately $9 million on the acquisition.

ITEMS IMPACTING FINANCIAL RESULTS IN FUTURE PERIODS

Adoption of New Credit Losses Accounting Standard

Beginning in 2020, the Company is adopting the new current expected credit losses standard, or CECL, which impacts the measurement of the Company’s allowance for credit losses (including the allowance for unfunded lending-related commitments). CECL replaces the previous incurred loss methodology, which delays recognition until such loss is 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, are considered in-scope of the standard and will require 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.

Based upon the Company’s current composition of assets as well as current considerations of existing and expected future economic conditions, the Company estimates an increase to the allowance for credit losses of approximately 30% to 50% at adoption related to its loan portfolios and related lending commitments. Approximately 80% of the estimated increase is related to additions to existing reserves for unfunded lending-related commitments due to the consideration under CECL of expected utilization by the Company's borrowers over the life of such commitments, as well as for acquired loans, which previously considered credit discounts. The Company estimates an insignificant impact at adoption of measuring an allowance for credit losses for the other in-scope assets noted above. The adjustment at adoption on January 1, 2020 is recognized as an adjustment to the balance sheet (retained earnings or the related asset basis dependent upon whether the asset is purchased credit deteriorated from a prior acquisition). After adoption, adjustments to the allowance for credit losses will primarily be recorded as provision for credit losses on the Company’s income statement. The estimate of the allowance for credit losses is highly dependent upon considerations of current and expected economic conditions, which may result in earnings volatility across economic cycles.

WINTRUST FINANCIAL CORPORATION
Key Operating Measures

Wintrust’s key operating measures and growth rates for the fourth quarter of 2019, as compared to the third quarter of 2019 (sequential quarter) and fourth quarter of 2018 (linked quarter), are shown in the table below:

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

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

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

TABLE 1: LOAN PORTFOLIO MIX AND GROWTH RATES

TABLE 2: COMMERCIAL AND COMMERCIAL REAL ESTATE LOAN PORTFOLIOS

TABLE 3: DEPOSIT PORTFOLIO MIX AND GROWTH RATES

TABLE 4: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS
As of December 31, 2019

TABLE 5: QUARTERLY AVERAGE BALANCES

TABLE 6: QUARTERLY NET INTEREST INCOME

TABLE 7: QUARTERLY NET INTEREST MARGIN

TABLE 8: YEAR-TO-DATE AVERAGE BALANCES, AND NET INTEREST INCOME AND MARGIN

TABLE 9: 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:

TABLE 10: MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES

Graph available at the following link:
http://ml.globenewswire.com/Resource/Download/50728f70-26b9-4437-95a1-dd7c03f0b3c3 

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 when the Federal Reserve raises or lowers interest rates.  Specifically, the Company has $8.6 billion of variable rate loans tied to one-month LIBOR and $5.5 billion of variable rate loans tied to twelve-month LIBOR. The above chart shows:

TABLE 11: ALLOWANCE FOR CREDIT LOSSES

Provision for credit losses by component for the periods presented:

TABLE 12: ALLOWANCE BY LOAN PORTFOLIO

The table below summarizes the calculation of allowance for loan losses for the Company’s core loan portfolio and consumer, niche and purchased loan portfolio, as of December 31, 2019 and September 30, 2019.

TABLE 13: LOAN PORTFOLIO AGING

TABLE 14: NON-PERFORMING ASSETS, EXCLUDING PCI LOANS, AND TROUBLED DEBT RESTRUCTURINGS ("TDRs")

Non-performing Loans Rollforward, excluding PCI loans:

TDRs

Other Real Estate Owned

TABLE 15: NON-INTEREST INCOME

_{NM - Not meaningful.}

_{NM - Not meaningful.}

TABLE 16: MORTGAGE BANKING

TABLE 17: NON-INTEREST EXPENSE

_{NM - Not meaningful.}

_{NM - Not meaningful.}

TABLE 18: SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES/RATIOS

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

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

WINTRUST SUBSIDIARIES AND LOCATIONS

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

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

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

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

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 2018 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

• economic conditions that affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;
• negative effects suffered by us or our customers resulting from changes in U.S. trade policies;
• the extent of defaults and losses on the Company’s loan portfolio, which may require further increases in its allowance for credit losses;
• estimates of fair value of certain of the Company’s assets and liabilities, which could change in value significantly from period to period;
• the financial success and economic viability of the borrowers of our commercial loans;
• commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;
• the extent of commercial and consumer delinquencies and declines in real estate values, which may require further increases in the Company’s allowance for loan and lease losses;
• inaccurate assumptions in our analytical and forecasting models used to manage our loan portfolio;
• changes in the level and volatility of interest rates, the capital markets and other market indices that may affect, among other things, the Company’s liquidity and the value of its assets and liabilities;
• competitive pressures in the financial services business which may affect the pricing of the Company’s loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products;
• failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of the Company’s recent or future acquisitions;
• unexpected difficulties and losses related to FDIC-assisted acquisitions;
• harm to the Company’s reputation;
• any negative perception of the Company’s financial strength;
• ability of the Company to raise additional capital on acceptable terms when needed;
• disruption in capital markets, which may lower fair values for the Company’s investment portfolio;
• ability of the Company to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations and to manage risks associated therewith;
• failure or breaches of our security systems or infrastructure, or those of third parties;
• security breaches, including denial of service attacks, hacking, social engineering attacks, malware intrusion or data corruption attempts and identity theft;
• adverse effects on our information technology systems resulting from failures, human error or cyberattacks;
• adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors;
• increased costs as a result of protecting our customers from the impact of stolen debit card information;
• accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions;
• ability of the Company to attract and retain senior management experienced in the banking and financial services industries;
• environmental liability risk associated with lending activities;
• the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation;
• losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith;
• the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank;
• the soundness of other financial institutions;
• the expenses and delayed returns inherent in opening new branches and de novo banks;
• examinations and challenges by tax authorities, and any unanticipated impact of the Tax Act;
• changes in accounting standards, rules and interpretations such as the new CECL standard, and the impact on the Company’s financial statements;
• the ability of the Company to receive dividends from its subsidiaries;
• uncertainty about the discontinued use of LIBOR and transition to an alternative rate;
• a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;
• legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies;
• a lowering of our credit rating;
• changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet as a result of the end of its program of quantitative easing or otherwise;
• restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business resulting from the Dodd-Frank Act;
• increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory environment;
• the impact of heightened capital requirements;
• increases in the Company’s FDIC insurance premiums, or the collection of special assessments by the FDIC;
• delinquencies or fraud with respect to the Company’s premium finance business;
• credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans;
• the Company’s ability to comply with covenants under its credit facility; and
• fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation.

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

CONFERENCE CALL, WEBCAST AND REPLAY

The Company will hold a conference call on Wednesday, January 22, 2020 at 10:00 a.m. (Central Time) regarding fourth quarter 2019 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #5079486. A simultaneous audio-only webcast and replay of the conference call as well as an accompanying slide presentation may be accessed via the Company’s website at https://www.wintrust.com, Investor Relations, Investor News and Events, Presentations & Conference Calls. The text of the fourth quarter 2019 earnings press release will be available on the home page of the Company’s website at https://www.wintrust.com and at the Investor Relations, Investor News and Events, Press Releases link on its website.

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