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Wintrust Financial Corporation Reports Record Year-to-Date Net Income

ROSEMONT, Ill., July 19, 2023 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation (“Wintrust”, “the Company”, “we” or “our”) (Nasdaq: WTFC) announced record net income of $334.9 million or $5.18 per diluted common share for the first six months of 2023 compared to net income of $221.9 million or $3.56 per diluted common share for the same period of 2022, an increase in diluted earnings per common share of 46%. Pre-tax, pre-provision income (non-GAAP) for the first six months of 2023 totaled $506.5 million as compared to $329.9 million in the first six months of 2022, an increase in pre-tax, pre-provision income of 54%.

The Company recorded quarterly net income of $154.8 million or $2.38 per diluted common share for the second quarter of 2023, a decrease in diluted earnings per common share of 15% compared to the first quarter of 2023. Pre-tax, pre-provision income (non-GAAP) totaled $239.9 million as compared to $266.6 million for the first quarter of 2023.

Timothy S. Crane, President and Chief Executive Officer, commented, “We are very pleased with our record net income for the first half of 2023. Our margin stabilized in the second quarter of 2023 and we continue to believe that maintaining such level will allow for strong financial performance in the coming quarters. Specifically, the repricing of our premium finance receivables portfolios in the second quarter helped offset increases in deposit pricing. Strong and balanced deposit growth as well as prudent liquidity management provided stability in our balance sheet through this period of volatility. Credit performance within the portfolio remained strong.”

Highlights of the second quarter of 2023:
Comparative information to the first quarter of 2023, unless otherwise noted

  • Total deposits grew by $1.3 billion, or 12.4% annualized.
  • Non-deposit borrowings decreased by $208.2 million.
  • Total loans increased by $1.5 billion, or 14.8% annualized.
  • Net interest margin decreased to 3.64% (3.66% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2023 due to higher deposit costs. Importantly, however, net interest margin remained relatively stable throughout the second quarter of 2023.
  • Provision for credit losses totaled $28.5 million in the second quarter of 2023 as compared to a provision for credit losses of $23.0 million in the first quarter of 2023.
  • Net charge-offs totaled $17.0 million or 17 basis points of average total loans on an annualized basis in the second quarter of 2023 as compared to $5.5 million or six basis points of average total loans on an annualized basis in the first quarter of 2023.
  • Non-performing assets remained at a low level and represent 0.22% of total assets.

Mr. Crane noted, “By effectively leveraging our strong customer relationships, unique market position, diversified products and competitive rates, Wintrust experienced significant deposit growth, with increased deposits of approximately $1.3 billion, or 12% on an annualized basis. This included outstanding balances of our MaxSafe® products increasing approximately $1.7 billion since the end of the first quarter of 2023. Deposit growth provided enhanced liquidity and reduced our reliance on other borrowings such as FHLB advances. Non-deposit borrowings decreased approximately $208.2 million during the quarter. Growth in deposits helped fund approximately $1.5 billion of loan growth during the quarter. This growth came primarily from approximately $1.0 billion in the commercial premium finance receivables portfolio and approximately $370 million largely from draws on existing commercial real estate loan facilities. We remain prudent in our review of credit prospects ensuring our loan growth stays within our conservative credit standards.”

Mr. Crane commented, “As noted in our first quarter earnings release, our net interest margin was approximately 3.70% at the end of March of 2023. Despite continued acceleration in deposit pricing and the impact of hedging activity, our net interest margin remained relatively stable throughout the second quarter of 2023. Due to our relatively short-term and asset sensitive balance sheet, we believe that we can maintain the net interest margin between 3.60% and 3.70% for the remainder of the year as we expect further upward repricing primarily in our premium finance receivable portfolios to mitigate higher deposit costs as deposit pricing stabilizes. Net interest income decreased by $10.5 million in the second quarter of 2023, however, we expect net interest income to increase in the third quarter given the aforementioned strong balance sheet growth paired with a stable net interest margin.”

Commenting on credit quality, Mr. Crane stated, “Credit metrics remained strong. The Company has a well-diversified commercial real estate portfolio with exposures primarily consisting of stabilized, income-producing properties. Additionally, the commercial real estate office portfolio represents a small portion of our loan portfolio. In the second quarter of 2023, we took a proactive approach to exit certain credits we considered to be vulnerable to existing market conditions. The resolution of these credits through a sale to external parties resulted in approximately $8.0 million in charge-offs. Net charge-offs totaled $17.0 million or 17 basis points of average total loans on an annualized basis in the second quarter of 2023 as compared to $5.5 million or six basis points of average total loans on an annualized basis in the first quarter of 2023. The allowance for credit losses on our core loan portfolio as of June 30, 2023 was approximately 1.50% of the outstanding balance (see Table 12 for additional information). We believe that the Company’s reserves remain appropriate and we remain diligent in our review of credit.”

Mr. Crane concluded, “Our second quarter of 2023 results continued to demonstrate the benefits of the diversified, multi-faceted nature of our business model. Net income for the quarter was the second highest in our history, behind only net income from the first quarter of 2023. We remain focused on continuing to grow deposits to enhance liquidity and support future asset growth while remaining well positioned for higher interest rates. Total loans as of June 30, 2023 were $917 million higher than average total loans in the second quarter of 2023, which is expected to benefit the third quarter. We are pleased by our position in the markets we serve to continue to grow deposit and loan relationships and believe we are situated well to expand our net revenues and earnings in the coming quarters.”

The graphs below illustrate certain financial highlights of the second quarter of 2023 as well as historical financial performance. See “Supplemental Non-GAAP Financial Measures/Ratios” at Table 17 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/92e4bba1-fb72-4c4a-8da7-f33effeda53f

SUMMARY OF RESULTS:

BALANCE SHEET

Total assets increased $1.4 billion in the second quarter of 2023 as compared to the first quarter of 2023. Total loans increased by $1.5 billion as compared to the first quarter of 2023 primarily due to growth in the property and casualty insurance premium finance receivables and commercial real estate loan portfolios. The growth in the commercial real estate portfolio was largely driven by draws on previously-established credit facilities. Additionally, in the second quarter of 2023, the Company received settlement proceeds related to securities called and previously recognized as a trade date receivable of $940 million as of March 31, 2023. Proceeds received increased interest bearing cash on the balance sheet in the second quarter of 2023.

Total liabilities increased by $1.4 billion in the second quarter of 2023 as compared to the first quarter of 2023 primarily due to a $1.3 billion increase in total deposits. In the second quarter of 2023, the deposit mix shift continued as non-interest bearing deposits made up 24% of total deposits at June 30, 2023 compared to 26% at March 31, 2023. This included growth of $1.7 billion in the Company’s unique MaxSafe® product balances. The majority of the Company’s deposits are insured as approximately 74% of the total deposit balance is either fully FDIC-insured or fully collateralized as of June 30, 2023.

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

NET INTEREST INCOME

For the second quarter of 2023, net interest income totaled $447.5 million, a decrease of $10.5 million as compared to the first quarter of 2023. The $10.5 million decrease in net interest income in the second quarter of 2023 compared to the first quarter of 2023 was primarily due to net interest margin compression driven by an increase in deposit costs and the impact from hedges of our loan portfolio established to protect against the impact of lower rates.

Net interest margin was 3.64% (3.66% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2023 compared to 3.81% (3.83% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2023. The net interest margin decrease as compared to the first quarter of 2023 was due to a 66 basis point increase in the rate paid on interest-bearing liabilities. This decrease was partially offset by a 34 basis point increase in yield on earning assets and a 15 basis point increase in the net free funds contribution. The 66 basis point increase on the rate paid on interest-bearing liabilities in the second quarter of 2023 as compared to the first quarter of 2023 was primarily due to a 74 basis point increase in the rate paid on interest-bearing deposits primarily related to the increasing rate environment. The 34 basis point increase in the yield on earning assets in the second quarter of 2023 as compared to the first quarter of 2023 was primarily due to a 42 basis point expansion on loan yields, which included an unfavorable eight basis point impact from the Company’s existing hedging positions.

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

ASSET QUALITY

The allowance for credit losses totaled $387.8 million as of June 30, 2023, an increase of $11.5 million as compared to $376.3 million as of March 31, 2023. A provision for credit losses totaling $28.5 million was recorded for the second quarter of 2023 as compared to $23.0 million recorded in the first quarter of 2023. 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”) accounting standard requires the Company to estimate expected credit losses over the life of the Company’s financial assets as of the reporting date. 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 each portfolio as of June 30, 2023, March 31, 2023, and December 31, 2022 is shown on Table 12 of this report.

Net charge-offs totaled $17.0 million in the second quarter of 2023, as compared to $5.5 million of net charge-offs in the first quarter of 2023. The increase in net charge-offs during the second quarter of 2023 was partially the result of the sale to external parties of certain credits within the commercial real estate portfolio, which resulted in approximately $8.0 million in charge-offs. Net charge-offs as a percentage of average total loans were reported as 17 basis points in the second quarter of 2023 on an annualized basis compared to six basis points on an annualized basis in the first quarter of 2023. For more information regarding net charge-offs, see Table 10 in this report.

The Company’s delinquency rates remain low and manageable. For more information regarding past due loans, see Table 13 in this report.

Non-performing assets totaled $120 million and comprised only 0.22% of total assets as of June 30, 2023, as compared to $110 million as of March 31, 2023. Non-performing loans were slightly higher totaling $109 million, or 0.26% of total loans, at June 30, 2023. For more information regarding non-performing assets, see Table 14 in this report.

NON-INTEREST INCOME

Wealth management revenue increased by $3.9 million in the second quarter of 2023 as compared to the first quarter of 2023 primarily due to increased asset management fees from the acquisition of two asset management businesses at the beginning of the second quarter, offset by lower fees associated with our tax-deferred like-kind exchange business. 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 $11.7 million in the second quarter of 2023 as compared to the first quarter of 2023 primarily due to increased loan volume and favorable adjustments to the fair value of certain mortgage assets. The Company recorded net positive fair value adjustments of $1.2 million in the second quarter of 2023 related to fair value changes in certain mortgage assets. This included a $2.0 million favorable adjustment in the value of mortgage servicing rights related to changes in fair value model assumptions, net of economic hedges, offset by a $739,000 unfavorable adjustment on the Company’s held-for-sale portfolio of early buy-out exercised loans guaranteed by U.S. government agencies which are held at fair value. The Company intends to monitor the relationship of these assets and will seek to minimize the earnings impact of fair value changes in future quarters.

The Company recognized nominal net gains on investment securities in the second quarter of 2023 as compared to net gains of $1.4 million in the first quarter of 2023 related to changes in the value of equity securities.

Fees from covered call options decreased by $7.8 million in the second quarter of 2023 as compared to the first quarter of 2023. The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio. These option transactions are designed to mitigate overall interest rate risk and do not qualify as hedges pursuant to accounting guidance.

For more information regarding non-interest income, see Table 15 in this report.

NON-INTEREST EXPENSE

Salaries and employee benefits expense increased by $8.1 million in the second quarter of 2023 as compared to the first quarter of 2023. The $8.1 million increase is primarily related to higher incentive compensation expense due to elevated commissions and bonus accruals in the second quarter of 2023 and increased employee insurance costs.

Advertising and marketing expenses in the second quarter of 2023 totaled $17.8 million, which is a $5.8 million increase as compared to the first quarter of 2023 primarily due to an increase in seasonal media advertising and sponsorship costs. Marketing costs are incurred to promote the Company’s brand, commercial banking capabilities and 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. Generally, these expenses are elevated in the second and third quarters of each year.

Lending expenses, net of deferred origination costs, increased by $4.8 million as compared to the first quarter of 2023 primarily due to increased loan originations in the second quarter of 2023.

Miscellaneous expense in the second quarter of 2023 decreased by $2.3 million as compared to the first quarter of 2023. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors’ fees, telephone, postage, corporate insurance, dues and subscriptions, problem loan expenses and other miscellaneous operational losses and costs.

For more information regarding non-interest expense, see Table 16 in this report.

INCOME TAXES

The Company recorded income tax expense of $56.7 million in the second quarter of 2023 compared to $63.4 million in the first quarter of 2023. The effective tax rates were 26.81% in the second quarter of 2023 compared to 26.01% in the first quarter of 2023. The effective tax rates were partially impacted by the tax effects related to share-based compensation which fluctuate based on the Company’s stock price and timing of employee stock option exercises and vesting of other share-based awards. The Company recorded net excess tax benefits of $12,000 in the second quarter of 2023, compared to net excess tax benefits of $2.8 million in the first quarter of 2023 related to share-based compensation.

BUSINESS UNIT SUMMARY

Community Banking

Through its community banking unit, the Company provides banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas the Company services. In the second quarter of 2023, this unit expanded its commercial real estate and residential real estate loan portfolios and grew consumer deposits.

Mortgage banking revenue was $30.0 million for the second quarter of 2023, an increase of $11.7 million as compared to the first quarter of 2023, primarily due to higher production volume. Service charges on deposit accounts totaled $13.6 million in the second quarter of 2023, an increase of $705,000 as compared to the first quarter of 2023, primarily due to higher fees associated with commercial account activity. The Company’s gross commercial and commercial real estate loan pipelines remained solid as of June 30, 2023 indicating momentum for expected continued loan growth in the third quarter of 2023.

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 $5.0 billion during the second quarter of 2023 and average balances increased by $370.0 million as compared to the first quarter of 2023. The Company’s leasing portfolio balance remained steady in the second quarter of 2023, with its portfolio of assets, including capital leases, loans and equipment on operating leases, totaling $3.1 billion as of June 30, 2023 as compared to $3.1 billion as of March 31, 2023. Revenues from the Company’s out-sourced administrative services business were $1.3 million in the second quarter of 2023, a decrease of $296,000 from the first quarter of 2023.

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 totaled $33.9 million in the second quarter of 2023, an increase of $3.9 million compared to the first quarter of 2023. The increase in wealth management revenue in the second quarter of 2023 was primarily related to higher asset management fees from the acquisition of two asset management businesses at the beginning of the second quarter, offset by lower fees associated with our tax-deferred like-kind exchange business. At June 30, 2023, the Company’s wealth management subsidiaries had approximately $44.5 billion of assets under administration, which included $7.6 billion of assets owned by the Company and its subsidiary banks, representing an increase from the $35.2 billion of assets under administration at March 31, 2023. The increase in assets under administration was primarily the result of the acquisition of two asset management businesses in the second quarter of 2023.

ITEMS IMPACTING COMPARATIVE FINANCIAL RESULTS

Business Combination

On April 3, 2023, the Company completed its acquisition of Rothschild & Co Asset Management US Inc. and Rothschild & Co Risk Based Investments LLC from Rothschild & Co North America Inc. As of the acquisition date, the Company acquired approximately $12.6 million in assets. As the transaction was determined to be a business combination, the Company recorded goodwill of approximately $2.6 million on the purchase.

Common Stock Offering

In June 2022, the Company sold through a public offering a total of 3,450,000 shares of its common stock. Net proceeds to the Company totaled approximately $285.7 million, net of estimated issuance costs.

WINTRUST FINANCIAL CORPORATION 
Key Operating Measures

Wintrust’s key operating measures and growth rates for the second quarter of 2023, as compared to the first quarter of 2023 (sequential quarter) and second quarter of 2022 (linked quarter), are shown in the table below:

              % or(1)
basis point 
(bp) change
from

1st Quarter
2023
  % or
basis point 
(bp) change
from

2nd Quarter
2022
    Three Months Ended  
(Dollars in thousands, except per share data)   Jun 30, 2023   Mar 31, 2023   Jun 30, 2022  
Net income   $ 154,750     $ 180,198     $ 94,513   (14 ) %     64  %
Pre-tax income, excluding provision for credit losses (non-GAAP)(2)     239,944       266,595       152,078   (10 )     58  
Net income per common share – diluted     2.38       2.80       1.49   (15 )     60  
Cash dividends declared per common share     0.40       0.40       0.34   0       18  
Net revenue(3)     560,567       565,764       440,746   (1 )     27  
Net interest income     447,537       457,995       337,804   (2 )     32  
Net interest margin     3.64 %     3.81 %     2.92 % (17 ) bps     72  bps
Net interest margin – fully taxable-equivalent (non-GAAP)(2)     3.66       3.83       2.93   (17 )     73  
Net overhead ratio(4)     1.58       1.49       1.51   9       7  
Return on average assets     1.18       1.40       0.77   (22 )     41  
Return on average common equity     12.79       15.67       8.53   (288 )     426  
Return on average tangible common equity (non-GAAP)(2)     15.12       18.55       10.36   (343 )     476  
At end of period                      
Total assets   $ 54,286,176     $ 52,873,511     $ 50,969,332   11  %      7  %
Total loans(5)     41,023,408       39,565,471       37,053,103   15       11  
Total deposits     44,038,707       42,718,211       42,593,326   12       3  
Total shareholders’ equity     5,041,912       5,015,506       4,727,623   2       7  

(1)   Period-end balance sheet percentage changes are annualized.
(2)   
See Table 17: Supplemental Non-GAAP Financial Measures/Ratios 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 Ended Six Months Ended
(Dollars in thousands, except per share data)   Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
Jun 30,
2023
  Jun 30,
2022
Selected Financial Condition Data (at end of period):      
Total assets   $ 54,286,176     $ 52,873,511     $ 52,949,649     $ 52,382,939     $ 50,969,332        
Total loans(1)     41,023,408       39,565,471       39,196,485       38,167,613       37,053,103        
Total deposits     44,038,707       42,718,211       42,902,544       42,797,191       42,593,326        
Total shareholders’ equity     5,041,912       5,015,506       4,796,838       4,637,980       4,727,623        
Selected Statements of Income Data:      
Net interest income   $ 447,537     $ 457,995     $ 456,816     $ 401,448     $ 337,804   $ 905,532     $ 637,098  
Net revenue(2)     560,567       565,764       550,655       502,930       440,746     1,126,331       902,830  
Net income     154,750       180,198       144,817       142,961       94,513     334,948       221,904  
Pre-tax income, excluding provision for credit losses (non-GAAP)(3)     239,944       266,595       242,819       206,461       152,078     506,539       329,864  
Net income per common share – Basic     2.41       2.84       2.27       2.24       1.51     5.26       3.61  
Net income per common share – Diluted     2.38       2.80       2.23       2.21       1.49     5.18       3.56  
Cash dividends declared per common share     0.40       0.40       0.34       0.34       0.34     0.80       0.68  
Selected Financial Ratios and Other Data:      
Performance Ratios:      
Net interest margin     3.64 %     3.81 %     3.71 %     3.34 %     2.92 %   3.72 %     2.76 %
Net interest margin – fully taxable-equivalent (non-GAAP)(3)     3.66       3.83       3.73       3.35       2.93     3.74       2.77  
Non-interest income to average assets     0.86       0.84       0.71       0.79       0.84     0.85       1.08  
Non-interest expense to average assets     2.44       2.33       2.34       2.32       2.35     2.39       2.34  
Net overhead ratio(4)     1.58       1.49       1.63       1.53       1.51     1.54       1.25  
Return on average assets     1.18       1.40       1.10       1.12       0.77     1.29       0.91  
Return on average common equity     12.79       15.67       12.72       12.31       8.53     14.20       10.22  
Return on average tangible common equity (non-GAAP)(3)     15.12       18.55       15.21       14.68       10.36     16.79       12.40  
Average total assets   $ 52,601,953     $ 52,075,318     $ 52,087,618     $ 50,722,694     $ 49,353,426   $ 52,340,090     $ 49,427,225  
Average total shareholders’ equity     5,044,718       4,895,271       4,710,856       4,795,387       4,526,110     4,970,407       4,513,356  
Average loans to average deposits ratio     94.3 %     93.0 %     90.5 %     88.8 %     86.8 %   93.7 %     85.3 %
Period-end loans to deposits ratio     93.2       92.6       91.4       89.2       87.0        
Common Share Data at end of period:      
Market price per common share   $ 72.62     $ 72.95     $ 84.52     $ 81.55     $ 80.15        
Book value per common share     75.65       75.24       72.12       69.56       71.06        
Tangible book value per common share (non-GAAP)(3)     64.50       64.22       61.00       58.42       59.87        
Common shares outstanding     61,197,676       61,176,415       60,794,008       60,743,335       60,721,889        
Other Data at end of period:      
Tier 1 leverage ratio(5)     9.3 %     9.1 %     8.8 %     8.8 %     8.8 %      
Risk-based capital ratios:                          
Tier 1 capital ratio(5)     10.1       10.1       10.0       9.9       9.9        
Common equity tier 1 capital ratio(5)     9.2       9.2       9.1       9.0       9.0        
Total capital ratio(5)     11.9       12.1       11.9       11.8       11.9        
Allowance for credit losses(6)   $ 387,786     $ 376,261     $ 357,936     $ 315,338     $ 312,192        
Allowance for loan and unfunded lending-related commitment losses to total loans     0.94 %     0.95 %     0.91 %     0.83 %     0.84 %      
Number of:                          
Bank subsidiaries     15       15       15       15       15        
Banking offices     175       174       174       174       173        

(1)   Excludes mortgage loans held-for-sale.
(2)   Net revenue is net interest income and non-interest income.
(3)   See Table 17: Supplemental Non-GAAP Financial Measures/Ratios 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 average total 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 the allowance for loan losses, the allowance for unfunded lending-related commitments and the allowance for held-to-maturity securities losses.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION

    (Unaudited)   (Unaudited)       (Unaudited)   (Unaudited)
    Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
(In thousands)     2023       2023       2022       2022       2022  
Assets                    
Cash and due from banks   $ 513,858     $ 445,928     $ 490,908     $ 489,590     $ 498,891  
Federal funds sold and securities purchased under resale agreements     59       58       58       57       475,056  
Interest-bearing deposits with banks     2,163,708       1,563,578       1,988,719       3,968,605       3,266,541  
Available-for-sale securities, at fair value     3,492,481       3,259,845       3,243,017       2,923,653       2,970,121  
Held-to-maturity securities, at amortized cost     3,564,473       3,606,391       3,640,567       3,389,842       3,413,469  
Trading account securities     3,027       102       1,127       179       1,010  
Equity securities with readily determinable fair value     116,275       111,943       110,365       114,012       93,295  
Federal Home Loan Bank and Federal Reserve Bank stock     195,117       244,957       224,759       178,156       136,138  
Brokerage customer receivables     15,722       16,042       16,387       20,327       21,527  
Mortgage loans held-for-sale, at fair value     338,728       302,493       299,935       376,160       513,232  
Loans, net of unearned income     41,023,408       39,565,471       39,196,485       38,167,613       37,053,103  
Allowance for loan losses     (302,499 )     (287,972 )     (270,173 )     (246,110 )     (251,769 )
Net loans     40,720,909       39,277,499       38,926,312       37,921,503       36,801,334  
Premises, software and equipment, net     749,393       760,283       764,798       763,029       762,381  
Lease investments, net     274,351       256,301       253,928       244,822       223,813  
Accrued interest receivable and other assets     1,455,748       1,413,795       1,391,342       1,316,305       1,112,697  
Trade date securities receivable           939,758       921,717              
Goodwill     656,674       653,587       653,524       653,079       654,709  
Other acquisition-related intangible assets     25,653       20,951       22,186       23,620       25,118  
Total assets   $ 54,286,176     $ 52,873,511     $ 52,949,649     $ 52,382,939     $ 50,969,332  
Liabilities and Shareholders’ Equity                    
Deposits:                    
Non-interest-bearing   $ 10,604,915     $ 11,236,083     $ 12,668,160     $ 13,529,277     $ 13,855,844  
Interest-bearing     33,433,792       31,482,128       30,234,384       29,267,914       28,737,482  
Total deposits     44,038,707       42,718,211       42,902,544       42,797,191       42,593,326  
Federal Home Loan Bank advances     2,026,071       2,316,071       2,316,071       2,316,071       1,166,071  
Other borrowings     665,219       583,548       596,614       447,215       482,787  
Subordinated notes     437,628       437,493       437,392       437,260       437,162  
Junior subordinated debentures     253,566       253,566       253,566       253,566       253,566  
Accrued interest payable and other liabilities     1,823,073       1,549,116       1,646,624       1,493,656       1,308,797  
Total liabilities     49,244,264       47,858,005       48,152,811       47,744,959       46,241,709  
Shareholders’ Equity:                    
Preferred stock     412,500       412,500       412,500       412,500       412,500  
Common stock     61,219       61,198       60,797       60,743       60,722  
Surplus     1,923,623       1,913,947       1,902,474       1,891,621       1,880,913  
Treasury stock     (1,966 )     (1,966 )     (304 )            
Retained earnings     3,120,626       2,997,263       2,849,007       2,731,844       2,616,525  
Accumulated other comprehensive loss     (474,090 )     (367,436 )     (427,636 )     (458,728 )     (243,037 )
Total shareholders’ equity     5,041,912       5,015,506       4,796,838       4,637,980       4,727,623  
Total liabilities and shareholders’ equity   $ 54,286,176     $ 52,873,511     $ 52,949,649     $ 52,382,939     $ 50,969,332  


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

  Three Months Ended Six Months Ended
(In thousands, except per share data) Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
Jun 30,
2023
  Jun 30,
2022
Interest income                        
Interest and fees on loans $ 621,057   $ 558,692     $ 498,838     $ 402,689     $ 320,501   $ 1,179,749     $ 606,199  
Mortgage loans held-for-sale   4,178     3,528       3,997       5,371       5,740     7,706       11,827  
Interest-bearing deposits with banks   16,882     13,468       20,349       15,621       5,790     30,350       7,477  
Federal funds sold and securities purchased under resale agreements   1     70       1,263       1,845       1,364     71       1,795  
Investment securities   51,243     59,943       53,092       38,569       36,541     111,186       68,939  
Trading account securities   6     14       6       7       4     20       9  
Federal Home Loan Bank and Federal Reserve Bank stock   3,544     3,680       2,918       2,109       1,823     7,224       3,595  
Brokerage customer receivables   265     295       282       267       205     560       379  
Total interest income   697,176     639,690       580,745       466,478       371,968     1,336,866       700,220  
Interest expense                        
Interest on deposits   213,495     144,802       95,447       45,916       18,985     358,297       33,839  
Interest on Federal Home Loan Bank advances   17,399     19,135       13,823       6,812       4,878     36,534       9,694  
Interest on other borrowings   8,485     7,854       5,313       4,008       2,734     16,339       4,973  
Interest on subordinated notes   5,523     5,488       5,520       5,485       5,517     11,011       10,999  
Interest on junior subordinated debentures   4,737     4,416       3,826       2,809       2,050     9,153       3,617  
Total interest expense   249,639     181,695       123,929       65,030       34,164     431,334       63,122  
Net interest income   447,537     457,995       456,816       401,448       337,804     905,532       637,098  
Provision for credit losses   28,514     23,045       47,646       6,420       20,417     51,559       24,523  
Net interest income after provision for credit losses   419,023     434,950       409,170       395,028       317,387     853,973       612,575  
Non-interest income                        
Wealth management   33,858     29,945       30,727       33,124       31,369     63,803       62,763  
Mortgage banking   29,981     18,264       17,407       27,221       33,314     48,245       110,545  
Service charges on deposit accounts   13,608     12,903       13,054       14,349       15,888     26,511       31,171  
Gains (losses) on investment securities, net   0     1,398       (6,745 )     (3,103 )     (7,797 )   1,398       (10,579 )
Fees from covered call options   2,578     10,391       7,956       1,366       1,069     12,969       4,811  
Trading gains (losses), net   106     813       (306 )     (7 )     176     919       4,065  
Operating lease income, net   12,227     13,046       12,384       12,644       15,007     25,273       30,482  
Other   20,672     21,009       19,362       15,888       13,916     41,681       32,474  
Total non-interest income   113,030     107,769       93,839       101,482       102,942     220,799       265,732  
Non-interest expense                        
Salaries and employee benefits   184,923     176,781       180,331       176,095       167,326     361,704       339,681  
Software and equipment   26,205     24,697       24,699       24,126       24,250     50,902       47,060  
Operating lease equipment   9,816     9,833       10,078       9,448       8,774     19,649       18,482  
Occupancy, net   19,176     18,486       17,763       17,727       17,651     37,662       35,475  
Data processing   9,726     9,409       7,927       7,767       8,010     19,135       15,515  
Advertising and marketing   17,794     11,946       14,279       16,600       16,615     29,740       28,539  
Professional fees   8,940     8,163       9,267       7,544       7,876     17,103       16,277  
Amortization of other acquisition-related intangible assets   1,499     1,235       1,436       1,492       1,579     2,734       3,188  
FDIC insurance   9,008     8,669       6,775       7,186       6,949     17,677       14,678  
OREO expenses, net   118     (207 )     369       229       294     (89 )     (738 )
Other   33,418     30,157       34,912       28,255       29,344     63,575       54,809  
Total non-interest expense   320,623     299,169       307,836       296,469       288,668     619,792       572,966  
Income before taxes   211,430     243,550       195,173       200,041       131,661     454,980       305,341  
Income tax expense   56,680     63,352       50,356       57,080       37,148     120,032       83,437  
Net income $ 154,750   $ 180,198     $ 144,817     $ 142,961     $ 94,513   $ 334,948     $ 221,904  
Preferred stock dividends   6,991     6,991       6,991       6,991       6,991     13,982       13,982  
Net income applicable to common shares $ 147,759   $ 173,207     $ 137,826     $ 135,970     $ 87,522   $ 320,966     $ 207,922  
Net income per common share - Basic $ 2.41   $ 2.84     $ 2.27     $ 2.24     $ 1.51   $ 5.26     $ 3.61  
Net income per common share - Diluted $ 2.38   $ 2.80     $ 2.23     $ 2.21     $ 1.49   $ 5.18     $ 3.56  
Cash dividends declared per common share $ 0.40   $ 0.40     $ 0.34     $ 0.34     $ 0.34   $ 0.80     $ 0.68  
Weighted average common shares outstanding   61,192     60,950       60,769       60,738       58,063     61,072       57,632  
Dilutive potential common shares   902     873       1,096       837       775     933       823  
Average common shares and dilutive common shares   62,094     61,823       61,865       61,575       58,838     62,005       58,455  


TABLE 1
: LOAN PORTFOLIO MIX AND GROWTH RATES

                    % Growth From(1)
(Dollars in thousands) Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
Dec 31,
2022(2)
  Jun 30,
2022
Balance:                        
Mortgage loans held-for-sale, excluding early buy-out exercised loans guaranteed by U.S. government agencies $ 235,570   $ 155,687   $ 156,297   $ 216,062   $ 294,688 NM     (20 )%
Mortgage loans held-for-sale, early buy-out exercised loans guaranteed by U.S. government agencies   103,158     146,806     143,638     160,098     218,544 (57 )   (53 )
Total mortgage loans held-for-sale $ 338,728   $ 302,493   $ 299,935   $ 376,160   $ 513,232 26 %   (34 )%
                         
Core loans:                        
Commercial                        
Commercial and industrial $ 5,737,633   $ 5,855,035   $ 5,852,166   $ 5,818,959   $ 5,502,584 (4 )%   4 %
Asset-based lending   1,465,848     1,482,071     1,473,344     1,545,038     1,552,033 (1 )   (6 )
Municipal   653,117     655,301     668,235     608,234     535,586 (5 )   22  
Leases   1,925,767     1,904,137     1,840,928     1,582,359     1,592,329 9     21  
PPP loans   15,337     17,195     28,923     43,658     82,089 (95 )   (81 )
Commercial real estate                        
Residential construction   51,689     69,998     76,877     66,957     55,941 (66 )   (8 )
Commercial construction   1,409,751     1,234,762     1,102,098     1,176,407     1,145,602 56     23  
Land   298,996     292,293     307,955     282,147     304,775 (6 )   (2 )
Office   1,404,422     1,392,040     1,337,176     1,269,729     1,321,745 10     6  
Industrial   2,002,740     1,858,088     1,836,276     1,777,658     1,746,280 18     15  
Retail   1,304,083     1,309,680     1,304,444     1,331,316     1,331,059 0     (2 )
Multi-family   2,696,478     2,635,411     2,560,709     2,305,433     2,171,583 11     24  
Mixed use and other   1,440,652     1,446,806     1,425,412     1,368,537     1,330,220 2     8  
Home equity   336,974     337,016     332,698     328,822     325,826 3     3  
Residential real estate                        
Residential real estate loans for investment   2,455,392     2,309,393     2,207,595     2,086,795     1,965,051 23     25  
Residential mortgage loans, early buy-out eligible loans guaranteed by U.S. government agencies   117,024     119,301     80,701     57,161     34,764 91     NM  
Residential mortgage loans, early buy-out exercised loans guaranteed by U.S. government agencies   70,824     76,851     84,087     91,503     79,092 (32 )   (10 )
Total core loans $ 23,386,727   $ 22,995,378   $ 22,519,624   $ 21,740,713   $ 21,076,559 8 %   11 %
                         
Niche loans:                        
Commercial                        
Franchise $ 1,091,164   $ 1,131,913   $ 1,169,623   $ 1,118,478   $ 1,136,929 (14 )%   (4 )%
Mortgage warehouse lines of credit   381,043     235,684     237,392     297,374     398,085 NM     (4 )
Community Advantage - homeowners association   405,042     389,922     380,875     365,967     341,095 13     19  
Insurance agency lending   925,520     905,727     897,678     879,183     906,375 6     2  
Premium Finance receivables                        
U.S. property & casualty insurance   5,900,228     5,043,486     5,103,820     4,983,795     4,781,042 31     23  
Canada property & casualty insurance   862,470     695,394     745,639     729,545     760,405 32     13  
Life insurance   8,039,273     8,125,802     8,090,998     8,004,856     7,608,433 (1 )   6  
Consumer and other   31,941     42,165     50,836     47,702     44,180 (75 )   (28 )
Total niche loans $ 17,636,681   $ 16,570,093   $ 16,676,861   $ 16,426,900   $ 15,976,544 12 %   10 %
                         
Total loans, net of unearned income $ 41,023,408   $ 39,565,471   $ 39,196,485   $ 38,167,613   $ 37,053,103 9 %   11 %

(1)   NM - Not meaningful.
(2)   Annualized.

TABLE 2: DEPOSIT PORTFOLIO MIX AND GROWTH RATES

                    % Growth From
(Dollars in thousands) Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
Mar 31,
2023(1)
  Jun 30,
2022
Balance:                        
Non-interest-bearing $ 10,604,915     $ 11,236,083     $ 12,668,160     $ 13,529,277     $ 13,855,844   (23 )%   (23 )%
NOW and interest-bearing demand deposits   5,814,836       5,576,558       5,591,986       5,676,122       5,918,908   17     (2 )
Wealth management deposits(2)   1,417,984       1,809,933       2,463,833       2,988,195       3,182,407   (87 )   (55 )
Money market   14,523,124       13,552,277       12,886,795       12,538,489       12,273,350   29     18  
Savings   5,321,578       5,192,108       4,556,635       3,988,790       3,686,596   10     44  
Time certificates of deposit   6,356,270       5,351,252       4,735,135       4,076,318       3,676,221   75     73  
Total deposits $ 44,038,707     $ 42,718,211     $ 42,902,544     $ 42,797,191     $ 42,593,326   12 %   3 %
Mix:                        
Non-interest-bearing   24 %     26 %     30 %     32 %     33 %      
NOW and interest-bearing demand deposits   13       13       13       13       13        
Wealth management deposits(2)   3       4       5       7       7        
Money market   33       32       30       29       29        
Savings   12       12       11       9       9        
Time certificates of deposit   15       13       11       10       9        
Total deposits   100 %     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.

TABLE 3: TIME CERTIFICATES OF DEPOSIT MATURITY/RE-PRICING ANALYSIS
As of June 30, 2023

(Dollars in thousands)   Total Time
Certificates of
Deposit
  Weighted-Average
Rate of Maturing
Time Certificates
of Deposit(1)
1-3 months   $ 1,407,470   3.15 %
4-6 months     1,323,183   2.93  
7-9 months     1,148,928   3.53  
10-12 months     1,543,622   4.39  
13-18 months     595,056   3.25  
19-24 months     250,020   2.87  
24+ months     87,991   1.99  
Total   $ 6,356,270   3.46 %

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

TABLE 4: QUARTERLY AVERAGE BALANCES

    Average Balance for three months ended,
    Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
(In thousands)     2023       2023       2022       2022       2022  
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1)   $ 1,454,057     $ 1,235,748     $ 2,449,889     $ 3,039,907     $ 3,265,607  
Investment securities(2)     7,252,582       7,956,722       7,310,383       6,655,215       6,589,947  
FHLB and FRB stock     223,813       233,615       185,290       142,304       136,930  
Liquidity management assets(3)     8,930,452       9,426,085       9,945,562       9,837,426       9,992,484  
Other earning assets(3)(4)     17,401       18,445       18,585       21,805       24,059  
Mortgage loans held-for-sale     307,683       270,966       308,639       455,342       560,707  
Loans, net of unearned income(3)(5)     40,106,393       39,093,368       38,566,871       37,431,126       35,860,329  
Total earning assets(3)     49,361,929       48,808,864       48,839,657       47,745,699       46,437,579  
Allowance for loan and investment security losses     (302,627 )     (282,704 )     (252,827 )     (260,270 )     (260,547 )
Cash and due from banks     481,510       488,457       475,691       458,263       476,741  
Other assets     3,061,141       3,060,701       3,025,097       2,779,002       2,699,653  
Total assets   $ 52,601,953     $ 52,075,318     $ 52,087,618     $ 50,722,694     $ 49,353,426  
                     
NOW and interest-bearing demand deposits   $ 5,540,597     $ 5,271,740     $ 5,598,291     $ 5,789,368     $ 5,230,702  
Wealth management deposits     1,545,626       2,167,081       2,883,247       3,078,764       2,835,267  
Money market accounts     13,735,924       12,533,468       12,319,842       12,037,412       11,892,948  
Savings accounts     5,206,609       4,830,322       4,403,113       3,862,579       3,882,856  
Time deposits     5,603,024       5,041,638       4,023,232       3,675,930       3,687,778  
Interest-bearing deposits     31,631,780       29,844,249       29,227,725       28,444,053       27,529,551  
Federal Home Loan Bank advances     2,227,106       2,474,882       2,088,201       1,403,573       1,197,390  
Other borrowings     625,757       602,937       480,553       478,909       489,779  
Subordinated notes     437,545       437,422       437,312       437,191       437,084  
Junior subordinated debentures     253,566       253,566       253,566       253,566       253,566  
Total interest-bearing liabilities     35,175,754       33,613,056       32,487,357       31,017,292       29,907,370  
Non-interest-bearing deposits     10,908,022       12,171,631       13,404,036       13,731,219       13,805,128  
Other liabilities     1,473,459       1,395,360       1,485,369       1,178,796       1,114,818  
Equity     5,044,718       4,895,271       4,710,856       4,795,387       4,526,110  
Total liabilities and shareholders’ equity   $ 52,601,953     $ 52,075,318     $ 52,087,618     $ 50,722,694     $ 49,353,426  
                     
Net free funds/contribution (6)   $ 14,186,175     $ 15,195,808     $ 16,352,300     $ 16,728,407     $ 16,530,209  

(1)   Includes interest-bearing deposits from banks and securities purchased under resale agreements with original maturities of greater than three months. Cash equivalents include federal funds sold and securities purchased under resale agreements with original maturities of three months or less.
(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)   See Table 17: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.
(4)   Other earning assets include brokerage customer receivables and trading account securities.
(5)   Loans, net of unearned income, include non-accrual loans.
(6)   Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.

TABLE 5: QUARTERLY NET INTEREST INCOME

    Net Interest Income for three months ended,
    Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30,
(In thousands)     2023       2023       2022       2022       2022  
Interest income:                    
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents   $ 16,882     $ 13,538     $ 21,612     $ 17,466     $ 7,154  
Investment securities     51,795       60,494       53,630       39,071       37,013  
FHLB and FRB stock     3,544       3,680       2,918       2,109       1,823  
Liquidity management assets(1)     72,221       77,712       78,160       58,646       45,990  
Other earning assets(1)     272       313       289       275       210  
Mortgage loans held-for-sale     4,178       3,528       3,997       5,371       5,740  
Loans, net of unearned income(1)     622,939       560,564       500,432       403,719       321,069  
Total interest income   $ 699,610     $ 642,117     $ 582,878     $ 468,011     $ 373,009  
                     
Interest expense:                    
NOW and interest-bearing demand deposits   $ 29,178     $ 18,772     $ 14,982     $ 8,041     $ 2,553  
Wealth management deposits     9,097       12,258       14,079       11,068       3,685  
Money market accounts     106,630       68,276       45,468       18,916       8,559  
Savings accounts     25,603       15,816       8,421       2,130       347  
Time deposits     42,987       29,680       12,497       5,761       3,841  
Interest-bearing deposits     213,495       144,802       95,447       45,916       18,985  
Federal Home Loan Bank advances     17,399       19,135       13,823       6,812       4,878  
Other borrowings     8,485       7,854       5,313       4,008       2,734  
Subordinated notes     5,523       5,488       5,520       5,485       5,517  
Junior subordinated debentures     4,737       4,416       3,826       2,809       2,050  
Total interest expense   $ 249,639     $ 181,695     $ 123,929     $ 65,030     $ 34,164  
                     
Less: Fully taxable-equivalent adjustment     (2,434 )     (2,427 )     (2,133 )     (1,533 )     (1,041 )
Net interest income (GAAP)(2)     447,537       457,995       456,816       401,448       337,804  
Fully taxable-equivalent adjustment     2,434       2,427       2,133       1,533       1,041  
Net interest income, fully taxable-equivalent (non-GAAP)(2)   $ 449,971     $ 460,422     $ 458,949     $ 402,981     $ 338,845  

(1)   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.
(2)   See Table 17: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.

TABLE 6: QUARTERLY NET INTEREST MARGIN

    Net Interest Margin for three months ended,
    Jun 30,
2023
  Mar 31,
2023
  Dec 31,
2022
  Sep 30,
2022
  Jun 30,
2022
Yield earned on:                    
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents   4.66 %   4.44 %   3.50 %   2.28 %   0.88 %
Investment securities   2.86     3.08     2.91     2.33     2.25  
FHLB and FRB stock   6.35     6.39     6.25     5.88     5.34  
Liquidity management assets   3.24     3.34     3.12     2.37     1.85  
Other earning assets   6.27     6.87     6.17     5.01     3.49  
Mortgage loans held-for-sale   5.45     5.28     5.14     4.68     4.11  
Loans, net of unearned income   6.23     5.82     5.15     4.28     3.59  
Total earning assets   5.68 %   5.34 %   4.73 %   3.89 %   3.22 %
                     
Rate paid on:                    
NOW and interest-bearing demand deposits   2.11 %   1.44 %   1.06 %   0.55 %   0.20 %
Wealth management deposits   2.36     2.29     1.94     1.43     0.52  
Money market accounts   3.11     2.21     1.46     0.62     0.29  
Savings accounts   1.97     1.33     0.76     0.22     0.04  
Time deposits   3.08     2.39     1.23     0.62     0.42  
Interest-bearing deposits   2.71     1.97     1.30     0.64     0.28  
Federal Home Loan Bank advances   3.13     3.14     2.63     1.93     1.63  
Other borrowings   5.44     5.28     4.39     3.32     2.24  
Subordinated notes   5.06     5.02     5.05     5.02     5.05  
Junior subordinated debentures   7.49     6.97     5.90     4.33     3.20  
Total interest-bearing liabilities   2.85 %   2.19 %   1.51 %   0.83 %   0.46 %
                     
Interest rate spread(1)(2)   2.83 %   3.15 %   3.22 %   3.06 %   2.76 %
Less: Fully taxable-equivalent adjustment   (0.02 )   (0.02 )   (0.02 )   (0.01 )   (0.01 )
Net free funds/contribution(3)   0.83     0.68     0.51     0.29     0.17  
Net interest margin (GAAP)(2)   3.64 %   3.81 %   3.71 %   3.34 %   2.92 %
Fully taxable-equivalent adjustment   0.02     0.02     0.02     0.01     0.01  
Net interest margin, fully taxable-equivalent (non-GAAP)(2)   3.66 %   3.83 %   3.73 %   3.35 %   2.93 %

(1)   Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(2)   See Table 17: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.
(3)   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.

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

  Average Balance
for six months ended,
Interest
for six months ended,
Yield/Rate
for six months ended,
(Dollars in thousands) Jun 30,
2023
  Jun 30,
2022
Jun 30,
2023
  Jun 30,
2022
Jun 30,
2023
  Jun 30,
2022
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1) $ 1,345,506     $ 3,911,080   $ 30,421     $ 9,272   4.56 %   0.48 %
Investment securities(2)   7,602,707       6,484,570     112,288       69,876   2.98     2.17  
FHLB and FRB stock   228,687       136,424     7,224       3,595   6.37     5.31  
Liquidity management assets(3)(4) $ 9,176,900     $ 10,532,074   $ 149,933     $ 82,743   3.29 %   1.58 %
Other earning assets(3)(4)(5)   17,920       24,622     585       391   6.58     3.20  
Mortgage loans held-for-sale   289,426       612,078     7,706       11,827   5.37     3.90  
Loans, net of unearned income(3)(4)(6)   39,602,672       35,348,269     1,183,503       607,194   6.03     3.46  
Total earning assets(4) $ 49,086,918     $ 46,517,043   $ 1,341,727     $ 702,155   5.51 %   3.04 %
Allowance for loan and investment security losses   (292,721 )     (256,834 )            
Cash and due from banks   484,964       479,174              
Other assets   3,060,929       2,687,842              
Total assets $ 52,340,090     $ 49,427,225              
                   
NOW and interest-bearing demand deposits $ 5,406,911     $ 5,010,709   $ 47,949     $ 4,543   1.79 %   0.18 %
Wealth management deposits   1,854,637       2,671,444     21,355       4,603   2.32     0.35  
Money market accounts   13,138,018       12,330,943     174,907       16,207   2.68     0.27  
Savings accounts   5,019,505       3,893,519     41,419       683   1.66     0.04  
Time deposits   5,323,882       3,774,095     72,667       7,803   2.75     0.42  
Interest-bearing deposits $ 30,742,953     $ 27,680,710   $ 358,297     $ 33,839   2.35 %   0.25 %
Federal Home Loan Bank advances   2,350,309       1,219,110     36,534       9,694   3.13     1.60  
Other borrowings   614,410       492,011     16,338       4,973   5.36     2.04  
Subordinated notes   437,484       437,025     11,011       10,999   5.08     5.03  
Junior subordinated debentures   253,566       253,566     9,154       3,617   7.28     2.84  
Total interest-bearing liabilities $ 34,398,722     $ 30,082,422   $ 431,334     $ 63,122   2.53 %   0.42 %
Non-interest-bearing deposits   11,536,336       13,769,792              
Other liabilities   1,434,625       1,061,655              
Equity   4,970,407       4,513,356              
Total liabilities and shareholders’ equity $ 52,340,090     $ 49,427,225              
Interest rate spread(4)(7)             2.98 %   2.62 %
Less: Fully taxable-equivalent adjustment         (4,861 )     (1,935 ) (0.02 )   (0.01 )
Net free funds/contribution(8) $ 14,688,196     $ 16,434,621         0.76     0.15  
Net interest income/margin (GAAP)(4)       $ 905,532     $ 637,098   3.72 %   2.76 %
Fully taxable-equivalent adjustment         4,861       1,935   0.02     0.01  
Net interest income/margin, fully taxable-equivalent (non-GAAP)(4)       $ 910,393     $ 639,033   3.74 %   2.77 %

(1)   Includes interest-bearing deposits from banks and securities purchased under resale agreements with original maturities of greater than three months. Cash equivalents include federal funds sold and securities purchased under resale agreements with original maturities of three months or less.
(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 the marginal federal corporate tax rate in effect as of the applicable period.
(4)   See Table 17: Supplemental Non-GAAP Financial Measures/Ratios for additional information on this performance measure/ratio.
(5)   Other earning assets include brokerage customer receivables and trading account securities.
(6)   Loans, net of unearned income, include non-accrual loans.
(7)   Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(8)   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.

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 and decreases of 100 and 200 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
  -200 Basis
Points
Jun 30, 2023   5.7 %   2.9 %   (2.9 )%   (7.9 )%
Mar 31, 2023   4.2     2.4     (2.4 )   (7.3 )
Dec 31, 2022   7.2     3.8     (5.0 )   (12.1 )
Sep 30, 2022   12.9     7.1     (8.7 )   (18.9 )
Jun 30, 2022   17.0     9.0     (12.6 )   (23.8 )

 

Ramp Scenario +200 Basis
Points
  +100 Basis
Points
  -100 Basis
Points
  -200 Basis
Points
Jun 30, 2023 2.9 %   1.8 %   (0.9 )%   (3.4 )%
Mar 31, 2023 3.0     1.7     (1.3 )   (3.4 )
Dec 31, 2022 5.6     3.0     (2.9 )   (6.8 )
Sep 30, 2022 6.5     3.6     (3.9 )   (8.6 )
Jun 30, 2022 10.2     5.3     (6.9 )   (14.3 )

As shown above, the magnitude of potential changes in net interest income in various interest rate scenarios has continued to diminish. Given the recent unprecedented rise in interest rates, the Company has made a conscious effort to reposition its exposure to changing interest rates given the uncertainty of the future interest rate environment. To this end, management has executed various derivative instruments including collars and receive fixed swaps to hedge variable rate loan exposures and originated a higher percentage of its loan originations in longer term fixed rate loans. The Company will continue to monitor current and projected interest rates and expects to execute additional derivatives to mitigate potential fluctuations in the net interest margin in future years.

TABLE 9: MATURITIES AND SENSITIVITIES TO CHANGES IN INTEREST RATES

  Loans repricing or maturity period
As of June 30, 2023 One year or
less
  From one to
five years
  From five to
fifteen years
  After fifteen
years
  Total
(In thousands)        
Commercial                  
Fixed rate $ 491,950   $ 2,588,577   $ 1,707,423   $ 11,360   $ 4,799,310
Variable rate   7,799,656     1,505             7,801,161
Total commercial $ 8,291,606   $ 2,590,082   $ 1,707,423   $ 11,360   $ 12,600,471
Commercial real estate                  
Fixed rate   580,938     2,884,383     573,579     51,683     4,090,583
Variable rate   6,509,558     8,631     39         6,518,228
Total commercial real estate $ 7,090,496   $ 2,893,014   $ 573,618   $ 51,683   $ 10,608,811
Home equity                  
Fixed rate   11,132     2,682         31     13,845
Variable rate   323,129                 323,129
Total home equity $ 334,261   $ 2,682   $   $ 31   $ 336,974
Residential real estate                  
Fixed rate   16,724     3,824     30,511     1,072,690     1,123,749
Variable rate   73,672     263,888     1,181,931         1,519,491
Total residential real estate $ 90,396   $ 267,712   $ 1,212,442   $ 1,072,690   $ 2,643,240
Premium finance receivables - property & casualty                  
Fixed rate   6,657,042     105,656             6,762,698
Variable rate                  
Total premium finance receivables - property & casualty $ 6,657,042   $ 105,656   $   $   $ 6,762,698
Premium finance receivables - life insurance                  
Fixed rate   121,092     547,337     22,242         690,671
Variable rate   7,348,602                 7,348,602
Total premium finance receivables - life insurance $ 7,469,694   $ 547,337   $ 22,242   $   $ 8,039,273
Consumer and other                  
Fixed rate   4,420     3,912     60     301     8,693
Variable rate   23,248                 23,248
Total consumer and other $ 27,668   $ 3,912   $ 60   $ 301   $ 31,941
                   
Total per category                  
Fixed rate   7,883,298     6,136,371     2,333,815     1,136,065     17,489,549
Variable rate   22,077,865     274,024     1,181,970         23,533,859
Total loans, net of unearned income $ 29,961,163   $ 6,410,395   $ 3,515,785   $ 1,136,065   $ 41,023,408
                   
Variable Rate Loan Pricing by Index:                  
SOFR tenors                 $ 10,407,621
One- year CMT                   5,819,451
One- month LIBOR                   1,707,349
Three- month LIBOR                   10,276
Twelve- month LIBOR                   1,028,904
Prime                   3,932,654
Ameribor tenors                   356,300
Other U.S. Treasury tenors                   46,387
BSBY tenors                   49,436
Other                   175,481
Total variable rate                 $ 23,533,859

SOFR - Secured Overnight Financing Rate.
CMT - Constant Maturity Treasury Rate.
LIBOR - London Interbank Offered Rate.
Ameribor - American Interbank Offered Rate.
BSBY - Bloomberg Short Term Bank Yield Index.

Graph available at the following link: 
http://ml.globenewswire.com/Resource/Download/b5ad0e3b-b9cd-4f50-9166-ef49f007ca12

Source: Bloomberg

As noted in the table on the previous page, the majority of the Company’s portfolio is tied to SOFR, CMT and 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 variable rate loans of $7.8 billion tied to one-month SOFR, $5.8 billion tied to one-year CMT and $1.7 billion tied to one-month LIBOR. The above chart shows:

    Basis Point (bp) Change in
    1-month
SOFR
  1-year
CMT
  1-month
LIBOR
  Prime  
Second Quarter 2023   34 bps 76 bps 36 bps 25 bps
First Quarter 2023   44   -9   47   50  
Fourth Quarter 2022   132   68   125   125  
Third Quarter 2022   135   125   135   150  
Second Quarter 2022   139   117   134   125  


TABLE 10
: ALLOWANCE FOR CREDIT LOSSES

    Three Months Ended Six Months Ended
    Jun 30,   Mar 31,   Dec 31,   Sep 30,   Jun 30, Jun 30,   Jun 30,
(Dollars in thousands)     2023       2023       2022       2022       2022     2023       2022  
Allowance for credit losses at beginning of period   $ 376,261     $ 357,936     $ 315,338     $ 312,192     $ 301,327   $ 357,936     $ 299,731  
Cumulative effect adjustment from the adoption of ASU 2022-02           741                       741        
Provision for credit losses     28,514       23,045       47,646       6,420       20,417     51,559       24,523