updated 4/20/2011 8:16:56 AM ET 2011-04-20T12:16:56

LAKE FOREST, Ill., April 20, 2011 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation ("Wintrust" or "the Company") (Nasdaq:WTFC) announced net income of $16.4 million or $0.36 per diluted common share for the quarter ended March 31, 2011 compared to net income of $16.0 million or $0.41 per diluted common share for the quarter ended March 31, 2010 and $14.2 million or $(0.06) per diluted common share for the fourth quarter of 2010.

The Company's total assets of $14.1 billion at March 31, 2011 increased $1.2 billion from March 31, 2010. Total deposits as of March 31, 2011 were $10.9 billion, an increase of $1.2 billion from March 31, 2010. Noninterest bearing deposits increased by $407.4 million or 46.7% since March 31, 2010, while NOW, money market and savings deposits increased $526.6 million or 14.7% during the same time period. Total loans, including loans held for sale and excluding covered loans, were $9.7 billion as of March 31, 2011, an increase of $429.7 million over March 31, 2010.

Edward J. Wehmer, President and Chief Executive Officer, commented, "We are pleased to report net income of $16.4 million for the first quarter of 2011 compared to $16.0 million in the first quarter of 2010 and $14.2 million in the fourth quarter of 2010. The results for the first quarter of 2011 show continued core operating strengths as our net interest margin improved, credit related costs remain at levels similar to recent quarters, core loans outstanding increased, demand deposits related to this core loan growth increased and the beneficial shift in our deposit mix away from single-product CD customers continues. Specifically, our commercial lending initiatives continue to benefit non-interest bearing deposit growth where this component of total deposits has increased over the past 12 months to 11.7%, up from 9.0%.

Our renewed franchise expansion efforts that began in the second quarter of 2010, picked up as we acquired two banks in FDIC-assisted transactions, acquired the assets of another residential mortgage origination company and acquired, or contracted to acquire, three closed branch banking facilities from the FDIC in Crystal Lake, Schaumburg and Des Plaines. These transactions will open up new markets to us."

Mr. Wehmer noted, "Our results for the first quarter of 2011 included $9.8 million of bargain purchase gains on the two FDIC-assisted transactions. These gains were negated somewhat by an industry-wide fall-off in residential real-estate loan originations, as we experienced a 55% decline in origination volumes compared to the first quarter of 2010. Over the past three months, our period end balances of mortgages held-for-sale and our niche mortgage warehouse lending have declined by $375 million. This not only impacted the composition of our balance sheet, but negatively impacted non-interest income as mortgage banking income declined by $11.1 million in the first quarter of 2011 compared to the fourth quarter of 2010."

Commenting further on credit quality, Mr. Wehmer said, "Non-performing loans and other real-estate owned both increased slightly since year-end as severe weather conditions and a shorter first quarter business calendar hampered the outflow of non-performing credits. During the first quarter, the Company recorded a provision for credit losses of $25.3 million, net charge-offs of $25.3 million and other real-estate owned operating expenses and charges of $5.8 million. Our allowance for credit losses, excluding covered loans, increased to $117.1 million or 1.22% of total loans."

In closing, Mr. Wehmer added, "This year will mark the 20th anniversary of the start of the Wintrust organization. What began as a single temporary store-front location in Lake Forest in 1991 now has 88 banking locations, as well as wealth management, mortgage banking and specialty finance operations. We believe we are successfully managing through the current credit cycle of elevated credit costs, higher levels of liquidity with little or no yield and increased capital scrutiny, and we believe our opportunities to expand the franchise have also increased. Our core commercial loan pipeline is strong which should result in shifting our low yielding liquidity assets into higher yield loans and resulting higher margins on those assets.  Marketing efforts are only just beginning in our newer markets and present us with good opportunities to further expand and strengthen our core deposit franchise to support the funding of potential future loan originations. Our capital levels remain well above regulatory requirements, we are free from the restraints of TARP and are excited about the opportunities that lie ahead."

Wintrust's key operating measures and growth rates for the first quarter of 2011, as compared to the sequential and linked quarters are shown in the table below:

 
        % or (4) % or 
        basis point (bp) basis point (bp)
        change change
  Three Months Ended from from
  March 31, December 31, March 31, 4th Quarter 1st Quarter
  2011 2010 2010 2010 2010
           
Net income  $ 16,402  $ 14,205  $ 16,017 15% 2%
Net income (loss) per common share – diluted   $ 0.36  $ (0.06)  $ 0.41 700% (12)%
           
Core pre-tax earnings (2)  $ 48,799  $ 58,666  $ 42,076 (17)% 16%
Net revenue (1)  $ 150,501  $ 157,138  $ 138,472 (4)% 9%
Net interest income  $ 109,614  $ 112,677  $ 95,865 (3)% 14%
           
Net interest margin (2) 3.48% 3.46% 3.38% 2 bp 10 bp
Net overhead ratio (3) 1.66% 1.73% 1.33% (7) bp 33 bp
Return on average assets 0.47% 0.40% 0.52% 7 bp (5) bp
Return on average common equity 4.49% (0.66)% 4.93% 515 bp (44) bp
 
           
At end of period          
Total assets  $ 14,080,180  $ 13,980,156  $ 12,839,978 3% 10%
Total loans, excluding covered loans  $ 9,561,802  $ 9,599,886  $ 9,070,562 (2)% 5%
Total loans, including loans held-for-sale, excluding covered loans  $ 9,656,288  $ 9,971,333  $ 9,226,611 (13)% 5%
Total deposits  $ 10,915,169  $ 10,803,673  $ 9,724,870 4% 12%
Total shareholders' equity  $ 1,453,253  $ 1,436,549  $ 1,364,832 5% 6%
 
(1)  Net revenue is net interest income plus non-interest income.
(2) See "Supplemental Financial Measures/Ratios" for additional information on this performance measure/ratio.
(3) The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period's average total assets. A lower ratio indicates a higher degree of efficiency.
(4) Period-end balance sheet percentage changes are annualized.

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

Items Impacting Comparative Financial Results: Acquisitions and Capital

Acquisitions   

On March 25, 2011, the Company announced that its wholly-owned subsidiary bank, Advantage National Bank Group ("Advantage"), acquired certain assets and liabilities and the banking operations of The Bank of Commerce ("TBOC") in an FDIC-assisted transaction. TBOC operated one location in Wood Dale, Illlinois and had approximately $163 million in total assets and $161 million in total deposits as of December 31, 2010. Advantage acquired substantially all of TBOC's assets at a discount of approximately 14% and assumed all of the non-brokered deposits at a premium of approximately 0.1%. 

On February 4, 2011, the Company announced that its wholly-owned subsidiary bank, Northbrook Bank & Trust Company ("Northbrook"), acquired certain assets and liabilities and the banking operations of Community First Bank-Chicago ("CFBC") in an FDIC-assisted transaction. CFBC operated one location in Chicago and had approximately $51.1 million in total assets and $49.5 million in total deposits as of December 31, 2010. Northbrook Bank acquired substantially all of CFBC's assets at a discount of approximately 8% and assumed all of the non-brokered deposits at a premium of approximately 0.5%. 

On February 3, 2011, the Company announced the acquisition of certain assets and the assumption of certain liabilities of the mortgage banking business of Woodfield Planning Corporation ("Woodfield") of Rolling Meadows, Illinois. With offices in Rolling Meadows, Illinois and Crystal Lake, Illinois, Woodfield originated approximately $180 million in mortgage loans in 2010.

On August 17, 2010, the Company announced that its wholly-owned subsidiary bank, Wheaton Bank & Trust Company ("Wheaton") signed a Branch Purchase and Assumption Agreement whereby it agreed to acquire a branch of First National Bank of Brookfield located in Naperville, Illinois. The transaction closed on October 22, 2010 and the acquired operations are operating as Naperville Bank & Trust. Through this transaction, Wheaton acquired approximately $23 million of deposits, approximately $11 million of performing loans, the property, bank facility and various other assets.  

On August 6, 2010, the Company announced that its wholly-owned subsidiary bank, Northbrook, in an FDIC-assisted transaction, had acquired certain assets and liabilities and the banking operations of Ravenswood Bank ("Ravenswood"). Ravenswood operated one location in Chicago, Illinois and one in Mount Prospect, Illinois. 

On April 23, 2010, the Company announced that Northbrook and Wheaton, in two FDIC-assisted transactions, had acquired certain assets and liabilities and the banking operations of Lincoln Park Savings Bank ("Lincoln Park") and Wheatland Bank ("Wheatland"), respectively. Lincoln Park operated four locations in Chicago, Illinois. Wheatland had one location in Naperville, Illinois. 

In summary, in the FDIC-assisted transactions:

  • Advantage assumed approximately $161 million of the outstanding deposits and approximately $163 million of assets of TBOC, prior to purchase accounting adjustments. A bargain purchase gain of $7.9 million was recognized on this transaction. 
     
  • Northbrook assumed approximately $50 million of the outstanding deposits and approximately $51 million of assets of CFBC, prior to purchase accounting adjustments. A bargain purchase gain of $1.9 million was recognized on this transaction. 
     
  • Northbrook assumed approximately $120 million of the outstanding deposits and approximately $188 million of assets of Ravenswood, prior to purchase accounting adjustments. A bargain purchase gain of $6.8 million was recognized on this transaction. 
     
  • Northbrook assumed approximately $160 million of the outstanding deposits and approximately $170 million of assets of Lincoln Park, prior to purchase accounting adjustments. A bargain purchase gain of $4.2 million was recognized on this transaction. 
     
  • Wheaton assumed approximately $400 million of the outstanding deposits and approximately $370 million of assets of Wheatland, prior to purchase accounting adjustments. A bargain purchase gain of $22.3 million was recognized on this transaction.

Loans comprise the majority of the assets acquired in the five FDIC-assisted transactions and are subject to loss sharing agreements with the FDIC where the FDIC has agreed to reimburse the Company for 80% of losses incurred on the purchased loans. We refer to the loans subject to these loss-sharing agreements as "covered loans." Covered assets include covered loans, covered OREO and certain other covered assets. The agreements with the FDIC require that the Company follow certain servicing procedures or risk losing FDIC reimbursement of losses related to covered assets. 

Capital

On February 14, 2011, the U.S. Department of Treasury ("the Treasury") sold all 1.6 million warrants to purchase the Company's common stock it received in connection with its purchase of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series B in December 2008. The Treasury sold the warrants to third parties, in a public modified Dutch auction for $15.80 per warrant. The Company received no proceeds in connection with the offering. Holders of the warrants have the right to buy the Company's common stock at a price of $22.82 per share. The warrants are traded on the NASDAQ Global Select Market under the ticker symbol "WTFCW" and expire on December 19, 2018.

On December 22, 2010, the Company repurchased all 250,000 shares of its Fixed Rate Cumulative Perpetual Preferred Stock, Series B (the "Preferred Stock"), which it issued to the Treasury under the TARP Capital Purchase Program. The Preferred Stock was repurchased at a price of $251.3 million, which included accrued and unpaid dividends of $1.3 million. The repurchase of the Preferred Stock resulted in a non-cash deemed preferred stock dividend that reduced net income applicable to common shares in the fourth quarter of 2010 by approximately $11.4 million. This amount represented the difference between the repurchase price and the carrying amount of the Preferred Stock, or the accelerated accretion of the applicable discount on the preferred shares.

In December 2010, the Company sold 3.69 million shares of common stock at $30.00 per share in a public offering. The Company received net proceeds of $104.8 million after deducting underwriting discounts and commissions and estimated offering expenses. At the same time the Company sold 4.6 million 7.50% tangible equity units ("TEU") at a public offering price of $50.00 per unit. The Company received net proceeds of $222.7 million after deducting underwriting discounts and commissions and estimated offering expenses. In total, the Company received net proceeds of $327.5 million from the December offerings.

In March 2010, the Company sold 6.67 million shares of common stock at $33.25 per share in a public offering. The Company received net proceeds of $210.3 million after deducting underwriting discounts and commissions and estimated offering expenses.

As of March 31, 2011, the Company's estimated capital ratios were 14.1% for total risk-based capital, 12.8% for tier 1 risk-based capital and 10.3% for leverage, well above the well capitalized guidelines.   Additionally, the Company's tangible common equity ratio was 8.0% at March 31, 2011.

Financial Performance Overview – First quarter of 2011

For the first quarter of 2011, net interest income totaled $109.6 million, an increase of $13.7 million as compared to the first quarter of 2010 and a decrease of $3.1 million as compared to the fourth quarter of 2010. Average earning assets for the first quarter of 2011 increased by $1.3 billion compared to the first quarter of 2010. Average earning asset growth over the past 12 months was primarily a result of the $699.2 million increase in average loans, $326.6 million of average covered loan growth from the five FDIC-assisted bank acquisitions and $247.9 million increase in average liquidity management assets. Growth in the life insurance premium finance portfolio of $327.1 million and growth in the commercial and industrial portfolio of $256.9 million accounted for the bulk of the total average loan growth over the past 12 months. The average earning asset growth of $1.3 billion over the past 12 months was funded by a $440.3 million increase in the average balances of savings, NOW, MMA and Wealth Management deposits, an increase in the average balance of net free funds of $533.2 million and increase in the average balance of retail certificates of deposit of $313.5 million.

The net interest margin for the first quarter of 2011 was 3.48% compared to 3.46% in the fourth quarter of 2010. The two basis point increase in net interest margin in the first quarter of 2011 compared to the fourth quarter of 2010 resulted as reduced costs of interest-bearing deposits continued to improve the net interest margin as the rate on these deposits decreased ten basis points in the first quarter of 2011 compared to the fourth quarter of 2010. Including the costs of wholesale funding, the rate on total interest-bearing liabilities declined four basis points between these comparable periods. Offsetting this positive impact to the net interest margin was the yield on total average earning assets, which declined by four basis points as the yield on loans declined by 37 basis points and the yield on liquidity management assets improved by 43 basis points. The increased effective yield recognized on the FDIC covered loan portfolio helped to counteract some of the impact of the loan portfolio yield decreases. The lower yield on the loan portfolio in the first quarter of 2011 was primarily attributable to a $5.6 million decline in accretion recognized on the purchased life insurance premium finance loan portfolio as prepayments declined and lower yields on the commercial premium finance receivable portfolio. Average net free funds increased by $123 million, improving the contribution to net interest margin by two basis points in the first quarter of 2011 compared to the fourth quarter of 2010. The Company continues to see a beneficial shift in its deposit mix as average non-interest bearing deposits comprised 11.7% of total average deposits in the first quarter of 2011 compared to 10.5% in the fourth quarter of 2010.

The lower level of net interest income recorded in the first quarter of 2011 compared to the fourth quarter of 2010 was primarily attributable to the first quarter of 2011 consisting of two less days than the fourth quarter of 2010, reducing net interest income by approximately $2.5 million. The remainder of the decrease in net interest income was caused by slightly lower levels of total average earning assets as the average balance of mortgages held for sale and mortgage warehouse lines declined by $240 million in the first quarter of 2011 compared to the fourth quarter of 2010.

The net interest margin increased ten basis points in the first quarter of 2011 compared to the first quarter of 2010. The driver for this increase was the reduced costs of interest-bearing deposits as the rate on these deposits decreased 51 basis points in the first quarter of 2011 compared to the first quarter of 2010. Including the costs of wholesale funding, the rate on total interest-bearing liabilities declined 43 basis points between these comparable periods. Partially offsetting this positive impact to the net interest margin was the yield on total average earning assets, which declined by 33 basis points as the yield on loans declined by 41 basis points and the yield on liquidity management assets declined by 49 basis points. The yield recognized on the FDIC covered loan portfolio helped to counteract some of the impact of these yield decreases.

The higher level of net interest income recorded in the first quarter of 2011 compared to the first quarter of 2010 was primarily attributable to a $699 million increase in the average balance of loans and a $327 million increase in FDIC covered loans. The bulk of this growth was funded by an increase of $725 million in interest-bearing deposits and a $533 million increase in net free funds (of which $402 million was non-interest bearing deposits). The Company continues to see a beneficial shift in its deposit mix as non-interest bearing deposits comprised 11.7% of total average deposits in the first quarter of 2011 compared to 8.9% in the first quarter of 2010.

Non-interest income totaled $40.9 million in the first quarter of 2011, decreasing $1.7 million, or 4.0%, compared to the first quarter of 2010 and decreasing $3.6 million, or 8.0%, compared to the fourth quarter of 2010. Mortgage banking revenue increased $1.9 million when compared to the first quarter of 2010 and decreased $11.1 million when compared to the fourth quarter of 2010 as loans originated and sold to the secondary market were $562 million in the first quarter of 2011 compared to $687 million in the first quarter of 2010 and $1.3 billion in the fourth quarter of 2010 (see "Non-Interest Income" section later in this document for further detail). Trading income decreased by $6.4 million in the first quarter of 2011 when compared to the first quarter of 2010 primarily due to the realization in the prior year of market value increases on certain collateralized mortgage obligations held in trading during 2010.  

Non-interest expense totaled $98.1 million in the first quarter of 2011, increasing $14.2 million, or 17%, compared to the first quarter of 2010 and decreasing $8.1 million compared to the fourth quarter of 2010. The increase compared to the first quarter of 2010 was primarily attributable to a $7.0 million increase in salaries and employee benefits. The increase in salaries and employee benefits was attributable to a $1.0 million increase in bonus and commissions as variable pay based revenue increased (primarily in our mortgage banking and wealth management businesses), a $4.0 million increase in salaries caused by the addition of employees from the five FDIC-assisted transactions and larger staffing related to organic Company growth, and a $2.0 million increase from employee benefits (primarily related to health plans and payroll taxes). Additionally, OREO related expenses increased $4.5 million and professional fees increased $439,000, primarily related to increased legal costs related to non-performing assets and recent bank acquisitions. 

The Company's effective tax rate increased to 39.4% in the first quarter of 2011, up from 37.2% in the first quarter of 2010. This increase is primarily attributable to two items. The increased Illinois corporate tax rate on 2011 earnings increased our tax expense by approximately $200,000. Additionally, the Company recorded approximately $300,000 of additional tax expense due to a one-time adjustment to change the recorded value of its deferred tax liabilities as of the beginning of 2011 as a result of the Illinois corporate tax rate change that was effective on January 1, 2011.

Financial Performance Overview – Credit Quality

Non-performing loans, excluding covered loans, totaled $155.4 million, or 1.63% of total loans, at March 31, 2011, compared to $142.1 million, or 1.48% of total loans, at December 31, 2010 and $141.0 million, or 1.55% of total loans, at March 31, 2010. OREO, excluding covered OREO, of $85.3 million at March 31, 2011 increased $14.1 million compared to $71.2 million at December 31, 2010 and decreased $3.7 million compared to $89.0 million at March 31, 2010. Throughout the quarter, management worked with certain borrowers to restructure performing loans. These actions help these borrowers maintain their homes or businesses and keep these loans in an accruing status for the Company. As of March 31, 2011, a total of $96.6 million of outstanding loan balances qualified as restructured loans, with $69.4 million of these modified loans in an accruing status.

The provision for credit losses totaled $25.3 million for the first quarter of 2011 compared to $28.8 million for the fourth quarter of 2010 and $29.0 million in the first quarter of 2010. Net charge-offs as a percentage of loans, excluding covered loans, for the first quarter of 2011 totaled 104 basis points on an annualized basis compared to 119 basis points on an annualized basis in the first quarter of 2010 and 96 basis points on an annualized basis in the fourth quarter of 2010. 

Excluding the allowance for covered loan losses and covered loans, the allowance for credit losses at March 31, 2011 totaled $117.1 million, or 1.22% of total loans, compared to $118.0 million, or 1.23% of total loans, at December 31, 2010 and $106.1 million, or 1.17% of total loans, at March 31, 2010. 

     
WINTRUST FINANCIAL CORPORATION Three Months Ended
Selected Financial Highlights March 31,
  2011 2010
Selected Financial Condition Data (at end of period):    
Total assets  $ 14,080,180  $ 12,839,978
Total loans, excluding covered loans  9,561,802  9,070,562
Total deposits  10,915,169  9,724,870
Junior subordinated debentures  249,493  249,493
Total shareholders' equity  1,453,253  1,364,832
Selected Statements of Income Data:    
Net interest income  $ 109,614  $ 95,865
Net revenue (1)  150,501  138,472
Core pre-tax earnings (2)  48,799  42,076
Net income  16,402  16,017
Net income (loss) per common share – Basic  $ 0.44  $ 0.43
Net income (loss) per common share – Diluted   $ 0.36  $ 0.41
Selected Financial Ratios and Other Data:    
Performance Ratios:    
Net interest margin (2) 3.48% 3.38%
Non-interest income to average assets 1.18% 1.37%
Non-interest expense to average assets  2.84% 2.70%
Net overhead ratio (3) 1.66% 1.33%
Efficiency ratio (2) (4) 65.05% 60.59%
Return on average assets 0.47% 0.52%
Return on average common equity 4.49% 4.93%
     
Average total assets  $ 14,018,525  $ 12,590,817
Average total shareholders' equity  1,437,869  1,196,191
Average loans to average deposits ratio (excluding covered loans) 91.2% 94.6%
Average loans to average deposits ratio (including covered loans) 94.2% 94.6%
Common Share Data at end of period:    
Market price per common share  $ 36.75  $ 37.21
Book value per common share (2)  $ 33.70  $ 34.76
Tangible common book value per share (2)  $ 26.65  $ 25.39
Common shares outstanding 34,947,251 31,044,449
     
Other Data at end of period:(9)    
Leverage Ratio (5) 10.3% 10.8%
Tier 1 capital to risk-weighted assets (5) 12.8% 13.4%
Total capital to risk-weighted assets (5) 14.1% 14.9%
Tangible common equity ratio (TCE) (2)(8) 8.0% 6.3%
Allowance for credit losses (6)  $ 117,067  $ 106,050
Credit discounts on purchased premium finance receivables - life insurance (7)  $ 22,147  $ 33,990
Non-performing loans  $ 155,387  $ 140,960
Allowance for credit losses to total loans (6) 1.22% 1.17%
Non-performing loans to total loans 1.63% 1.55%
Number of:    
 Bank subsidiaries 15 15
 Non-bank subsidiaries 8 8
 Banking offices 88 78
(1) Net revenue includes net interest income and non-interest income
(2) See "Supplemental Financial Measures/Ratios" for additional information on this performance measure/ratio.
(3) The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period's total average assets. A lower ratio indicates a higher degree of efficiency.
(4) The efficiency ratio is calculated by dividing total non-interest expense by tax-equivalent net revenue (less securities gains or losses). A lower ratio indicates more efficient revenue generation.
(5) Capital ratios for current quarter-end are estimated.
(6) The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excludes the allowance for covered loan losses.
(7) Represents the credit discounts on purchased life insurance premium finance loans.
(8) Total shareholders' equity minus preferred stock and total intangible assets divided by total assets minus total intangible assets.
(9) Asset quality ratios exclude covered loans.
       
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
       
  (Unaudited)   (Unaudited)
  March 31, December 31, March 31,
(In thousands) 2011 2010 2010
Assets      
Cash and due from banks  $ 140,919  $ 153,690  $ 106,501
Federal funds sold and securities purchased under resale agreements 33,575 18,890 15,393
Interest-bearing deposits with other banks 946,193 865,575 1,222,323
Available-for-sale securities, at fair value 1,710,321 1,496,302 1,205,919
Trading account securities 2,229 4,879 39,938
Federal Home Loan Bank and Federal Reserve Bank stock, at cost 85,144 82,407 74,001
Brokerage customer receivables 25,361 24,549 20,978
Mortgage loans held-for-sale, at fair value 92,151 356,662 149,897
Mortgage loans held-for-sale, at lower of cost or market 2,335 14,785 6,152
Loans, net of unearned income, excluding covered loans 9,561,802 9,599,886 9,070,562
Covered loans 430,452 334,353  -- 
Total loans 9,992,254 9,934,239 9,070,562
Less: Allowance for loan losses 115,049 113,903 102,397
Less: Allowance for covered loan losses 4,844  --   -- 
Net loans 9,872,361 9,820,336 8,968,165
Premises and equipment, net 369,785  363,696  348,182
FDIC indemnification asset 124,785  118,182  -- 
Accrued interest receivable and other assets 381,025  366,438  363,676
Trade date securities receivable  --   --   27,850
Goodwill 281,940  281,190 278,025
Other intangible assets 12,056  12,575 12,978
Total assets  $ 14,080,180  $ 13,980,156  $ 12,839,978
       
Liabilities and Shareholders' Equity      
Deposits:      
Non-interest bearing  $ 1,279,256  $ 1,201,194  $ 871,830
Interest bearing 9,635,913 9,602,479 8,853,040
Total deposits 10,915,169 10,803,673 9,724,870
Notes payable 1,000 1,000 1,000
Federal Home Loan Bank advances 409,386 423,500 421,775
Other borrowings 250,032 260,620 218,079
Secured borrowings - owed to securitization investors 600,000 600,000  600,000
Subordinated notes 50,000 50,000 60,000
Junior subordinated debentures  249,493 249,493  249,493
Trade date securities payable  10,000  --   62,017
Accrued interest payable and other liabilities  141,847 155,321  137,912
Total liabilities  12,626,927  12,543,607  11,475,146
       
Shareholders' Equity:      
Preferred stock  49,672 49,640  285,642
Common stock  34,947 34,864  31,044
Surplus 967,587 965,203 677,090
Treasury stock  (74)  --   -- 
Retained earnings 404,580 392,354  373,903
Accumulated other comprehensive loss  (3,459)  (5,512)  (2,847)
Total shareholders' equity 1,453,253 1,436,549 1,364,832
Total liabilities and shareholders' equity  $ 14,080,180  $ 13,980,156  $ 12,839,978
     
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
     
  Three Months Ended
  March 31,
(In thousands, except per share data) 2011 2010
Interest income    
Interest and fees on loans  $ 136,543  $ 129,542
Interest bearing deposits with banks  936  1,274
Federal funds sold and securities purchased under resale agreements  32  49
Securities  9,540  11,012
Trading account securities  13  21
Federal Home Loan Bank and Federal Reserve Bank stock  550  459
Brokerage customer receivables  166  139
Total interest income  147,780  142,496
Interest expense    
Interest on deposits  23,956  33,212
Interest on Federal Home Loan Bank advances  3,958  4,346
Interest on notes payable and other borrowings  2,630  1,462
Interest on secured borrowings - owed to securitization investors  3,040  2,995
Interest on subordinated notes  212  241
Interest on junior subordinated debentures  4,370  4,375
Total interest expense  38,166  46,631
Net interest income  109,614  95,865
Provision for credit losses  25,344  29,044
Net interest income after provision for credit losses  84,270  66,821
Non-interest income    
Wealth management  10,236  8,667
Mortgage banking  11,631  9,727
Service charges on deposit accounts  3,311  3,332
Gains on available-for-sale securities, net  106  392
Gain on bargain purchases  9,838  10,894
Trading (losses) gains   (440)  5,961
Other  6,205  3,634
Total non-interest income  40,887  42,607
Non-interest expense    
Salaries and employee benefits  56,099  49,072
Equipment  4,264  3,896
Occupancy, net  6,505  6,230
Data processing  3,523  3,407
Advertising and marketing  1,614  1,314
Professional fees  3,546  3,107
Amortization of other intangible assets  689  645
FDIC insurance  4,518  3,809
OREO expenses, net  5,808  1,337
Other  11,543  11,121
Total non-interest expense  98,109  83,938
Income before taxes  27,048  25,490
Income tax expense  10,646  9,473
Net income  $ 16,402  $ 16,017
Preferred stock dividends and discount accretion  $ 1,031  $ 4,943
Net income applicable to common shares  $ 15,371  $ 11,074
Net income per common share - Basic  $ 0.44  $ 0.43
Net income per common share - Diluted  $ 0.36  $ 0.41
Cash dividends declared per common share  $ 0.09  $ 0.09
Weighted average common shares outstanding  34,928  25,942
Dilutive potential common shares  7,794  1,139
Average common shares and dilutive common shares  42,722  27,081

SUPPLEMENTAL FINANCIAL MEASURES/RATIOS

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

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent ("FTE") basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company's efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company's equity. Core pre-tax earnings is a significant metric in assessing the Company's core operating performance. Core pre-tax earnings is adjusted to exclude the provision for credit losses and certain significant items.

The following table presents a reconciliation of certain non-GAAP performance measures and ratios used by the Company to evaluate and measure the Company's performance to the most directly comparable GAAP financial measures for the last 5 quarters:

           
 
  Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
(Dollars and shares in thousands) 2011 2010 2010 2010 2010
Calculation of Net Interest Margin and Efficiency Ratio        
(A) Interest Income (GAAP)  $ 147,780  $ 153,962  $ 147,401  $ 149,248  $ 142,496
 Taxable-equivalent adjustment:          
 - Loans  116  79  85  90  80
 - Liquidity management assets  295  326  324  366  361
 - Other earning assets  3  --   7  5  5
 Interest Income - FTE  $ 148,194  $ 154,367  $ 147,817  $ 149,709  $ 142,942
(B) Interest Expense (GAAP)  $ 38,166  $ 41,285  $ 44,421  $ 44,934  $ 46,631
 Net interest income - FTE  110,028  113,082  103,396  104,775  96,311
(C) Net Interest Income (GAAP) (A minus B)  $ 109,614  $ 112,677  $ 102,980  $ 104,314  $ 95,865
(D) Net interest margin (GAAP) 3.46% 3.44% 3.20% 3.42% 3.36%
 Net interest margin - FTE 3.48% 3.46% 3.22% 3.43% 3.38%
(E) Efficiency ratio (GAAP) 65.23% 67.65% 67.20% 59.90% 60.79%
 Efficiency ratio - FTE 65.05% 67.48% 67.01% 59.72% 60.59%
           
Calculation of Tangible Common Equity ratio (at period end)        
Total shareholders' equity  $ 1,453,253  $ 1,436,549  $ 1,398,912  $ 1,384,736  $ 1,364,832
Less: Preferred stock  (49,672)  (49,640)  (287,234)  (286,460)  (285,642)
Less: Intangible assets  (293,996)  (293,765)  (291,219)  (291,300)  (291,003)
(F) Total tangible common shareholders' equity  $ 1,109,585  $ 1,093,144  $ 820,459  $ 806,976  $ 788,187
           
Total assets  $ 14,080,180  $ 13,980,156  $ 14,100,368  $ 13,708,560  $ 12,839,978
Less: Intangible assets  (293,996)  (293,765)  (291,219)  (291,300)  (291,003)
(G) Total tangible assets  $ 13,786,184  $ 13,686,391  $ 13,809,149  $ 13,417,260  $ 12,548,975
           
Tangible common equity ratio (F/G) 8.0% 8.0% 5.9% 6.0% 6.3%
           
Calculation of Core Pre-Tax Earnings          
Income before taxes  $ 27,048  $ 22,142  $ 32,385  $ 20,790  $ 25,490
Add: Provision for credit losses  25,344  28,795  25,528  41,297  29,044
Add: OREO expenses, net  5,808  7,384  4,767  5,843  1,337
Add: Recourse obligation on loans previously sold  103  1,365  1,432  4,721  3,452
Less: Gain on bargain purchases  (9,838)  (250)  (6,593)  (26,494)  (10,894)
Less: Trading losses (gains)  440  (611)  (210)  1,617  (5,961)
Less: (Gains) losses on available-for-sale securities, net  (106)  (159)  (9,235)  (46)  (392)
Core pre-tax earnings  $ 48,799  $ 58,666  $ 48,074  $ 47,728  $ 42,076
           
Calculation of book value per share          
Total shareholders' equity  $ 1,453,253  $ 1,436,549  $ 1,398,912  $ 1,384,736  $ 1,364,832
Less: Preferred stock  (49,672)  (49,640)  (287,234)  (286,460)  (285,642)
(H) Total common equity  $ 1,403,581  $ 1,386,909  $ 1,111,678  $ 1,098,276  $ 1,079,190
           
Actual common shares outstanding  34,947  34,864  31,144  31,084  31,044
Add: TEU conversion shares  6,696  7,512  --  --  --
(I) Common shares used for book value calculation  41,643  42,376  31,144  31,084  31,044
           
Book value per share (H/I)  $ 33.70  $ 32.73  $ 35.70  $ 35.33  $ 34.76
Tangible common book value per share (F/I)  $ 26.65  $ 25.80  $ 26.34  $ 25.96  $ 25.39
 
           
LOANS
           
Loan Portfolio Mix and Growth Rates       % Growth
        From (1) From
  March 31, December 31, March 31, December 31, March 31,
(Dollars in thousands) 2011 2010 2010 2010 2010
Balance:          
Commercial   $ 1,937,561  $ 2,049,326  $ 1,749,895 (22)% 11%
Commercial real-estate  3,356,562  3,338,007  3,333,157  2  1
Home equity  891,332  914,412  924,993  (10)  (4)
Residential real-estate  344,909  353,336  322,984  (10)  7
Premium finance receivables - commercial  1,337,851  1,265,500  1,317,822  23  2
Premium finance receivables - life insurance  1,539,521  1,521,886  1,233,573  5  25
Indirect consumer (2)  52,379  51,147  83,136  10  (37)
Consumer and other  101,687  106,272  105,002  (17)  (3)
Total loans, net of unearned income, excluding covered loans  $ 9,561,802  $ 9,599,886  $ 9,070,562 (2)% 5%
Covered loans  430,452  334,353  --   117  100
Total loans, net of unearned income  $ 9,992,254  $ 9,934,239  $ 9,070,562 2% 10%
           
Mix:          
Commercial 19% 21% 19%    
Commercial real-estate  34  34  37    
Home equity  9  9  10    
Residential real-estate  4  3  4    
Premium finance receivables - commercial  13  13  14    
Premium finance receivables - life insurance  15  15  14    
Indirect consumer (2)  1  1  1    
Consumer and other  1  1  1    
Total loans, net of unearned income, excluding covered loans 96% 97% 100%    
Covered loans  4  3  --     
Total loans, net of unearned income 100% 100% 100%    
           
(1) Annualized
(2) Includes autos, boats, snowmobiles and other indirect consumer loans.
 
 
Commercial and Commercial Real-Estate Loans, excluding covered loans       > 90 Days Allowance
 As of March 31, 2011   % of   Past Due For Loan
    Total   and Still Losses
(Dollars in thousands) Balance Balance Nonaccrual Accruing Allocation
Commercial:          
Commercial and industrial  $ 1,277,657 24.2%  $ 24,277  $ 150  $ 20,208
Franchise  114,376  2.2  1,792  --   974
Mortgage warehouse lines of credit  33,482  0.6  --   --   290
Community Advantage - homeowner associations  75,948  1.4  --   --   190
Aircraft  22,317  0.4  74  --   130
Asset-based lending  301,899  5.7  --   --   4,828
Municipal  60,376  1.1  --   --   1,037
Leases  51,506  1.0  14  --   449
Total commercial  $ 1,937,561 36.6%  $ 26,157  $ 150  $ 28,106
           
Commercial Real-Estate:          
Residential construction  $ 91,367 1.7%  $ 7,891  $ --   $ 2,987
Commercial construction  121,548  2.3  1,396  692  3,914
Land  230,214  4.3  26,974  --   13,971
Office  557,267  10.5  17,945  --   9,001
Industrial  495,636  9.4  1,251  524  4,744
Retail  523,114  9.9  12,824  --   7,424
Multi-family  293,863  5.6  5,968  --   9,945
Mixed use and other  1,043,553  19.7  19,752  781  13,660
Total commercial real-estate  $ 3,356,562 63.4%  $ 94,001  $ 1,997  $ 65,646
Total commercial and commercial real-estate  $ 5,294,123 100.0%  $ 120,158  $ 2,147  $ 93,752
 
Commercial real-estate - collateral location by state:          
Illinois  $ 2,725,135 81.2%      
Wisconsin  352,975  10.5      
Total primary markets  $ 3,078,110 91.7%      
Florida  48,071  1.4      
Arizona  41,875  1.2      
Indiana  47,659  1.4      
Other (no individual state greater than 0.5%)  140,847  4.3      
Total  $ 3,356,562 100.0%      
 
           
DEPOSITS
           
Deposit Portfolio Mix and Growth Rates       % Growth
        From (1) From
  March 31, December 31, March 31, December 31, March 31,
(Dollars in thousands) 2011 2010 2010 2010 2010
Balance:          
Non-interest bearing  $ 1,279,256  $ 1,201,194  $ 871,830 26% 47%
NOW  1,526,955  1,561,507  1,448,857  (9)  5
Wealth Management deposits (2)  659,194  658,660  690,919  0  (5)
Money Market  1,844,416  1,759,866  1,586,830  19  16
Savings  749,681  744,534  558,770  3  34
Time certificates of deposit  4,855,667  4,877,912  4,567,664  (2)  6
Total deposits  $ 10,915,169  $ 10,803,673  $ 9,724,870 4% 12%
           
Mix:          
Non-interest bearing 12% 11% 9%    
NOW  14  15  15    
Wealth Management deposits (2)  6  6  7    
Money Market  17  16  16    
Savings  7  7  6    
Time certificates of deposit  44  45  47    
Total deposits 100% 100% 100%    
           
(1) Annualized
(2) Represents deposit balances of the Company's subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customers of The Chicago Trust Company which have been placed into deposit accounts of the Banks.
 
 
             
Deposit Maturity Analysis           Weighted-
 As of March 31, 2011 Non--         Average
  Interest Savings       Rate of
  Bearing and   Time   Maturing Time
  and Money Wealth Certificates Total Certificates
(Dollars in thousands) NOW (1) Market (1) Mgt (1)  of Deposit Deposits of Deposit
1-3 months  $ 2,806,211  $ 2,594,097  $ 659,194  $ 1,102,908  $ 7,162,410 1.38%
4-6 months       723,965  723,965  1.90
7-9 months       700,530  700,530  1.32
10-12 months       581,775  581,775  1.26
13-18 months       724,299  724,299  1.68
19-24 months       313,539  313,539  1.82
24+ months       708,651  708,651  2.33
Total deposits  $ 2,806,211  $ 2,594,097  $ 659,194  $ 4,855,667  $ 10,915,169 1.57%
 
             
(1) Balances of non-contractual maturity deposits are shown as maturing in the earliest time frame. These deposits do not have contractual maturities and re-price in varying degrees to changes in interest rates.
 

NET INTEREST INCOME

The following table presents a summary of Wintrust's average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the first quarter of 2011 compared to the first quarter of 2010 (linked quarters):

 
  For the Three Months Ended For the Three Months Ended
  March 31, 2011 March 31, 2010
(Dollars in thousands) Average Interest Rate Average Interest Rate
             
Liquidity management assets (1) (2) (7)  $ 2,632,012  $ 11,354 1.75%  $ 2,384,122  $ 13,155 2.24%
Other earning assets (2) (3) (7)  27,718  181  2.65  26,269  164  2.53
Loans, net of unearned income (2) (4) (7)  9,849,309  129,587  5.34  9,150,078  129,623  5.75
Covered loans  326,571  7,072  8.78  --   --   -- 
Total earning assets (7)  $ 12,835,610  $ 148,194 4.68%  $ 11,560,469  $ 142,942 5.01%
Allowance for loan losses  (118,610)      (107,257)    
Cash and due from banks  152,264      113,514    
Other assets  1,149,261      1,024,091    
Total assets  $ 14,018,525      $ 12,590,817    
             
Interest-bearing deposits  9,542,637  $ 23,956 1.02%  $ 8,818,012  $ 33,212 1.53%
Federal Home Loan Bank advances  416,021  3,958  3.86  429,195  4,346  4.11
Notes payable and other borrowings  266,379  2,630  4.00  225,919  1,462  2.63
Secured borrowings - owed to securitization investors  600,000  3,040  2.05  600,000  2,995  2.02
Subordinated notes  50,000  212  1.69  60,000  241  1.60
Junior subordinated notes  249,493  4,370  7.01  249,493  4,375  7.01
Total interest-bearing liabilities  $ 11,124,530  $ 38,166 1.39%  $ 10,382,619  $ 46,631 1.82%
Non-interest bearing deposits  1,261,374      858,875    
Other liabilities  194,752      153,132    
Equity  1,437,869      1,196,191    
Total liabilities and shareholders' equity  $ 14,018,525      $ 12,590,817    
             
Interest rate spread (5) (7)     3.29%     3.19%
Net free funds/contribution (6)  $ 1,711,080   0.19%  $ 1,177,850   0.19%
Net interest income/Net interest margin (7)    $ 110,028 3.48%    $ 96,311 3.38%
 
(1) Liquidity management assets include available-for-sale securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading securities and securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the three months ended March 31, 2011 and 2010 were $414,000 and $446,000, respectively.
(3) Other earning assets include brokerage customer receivables and trading account securities.
(4) Loans, net of unearned income, include loans held-for-sale and non-accrual loans.
(5) Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(6) Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
(7) See "Supplemental Financial Measures/Ratios" for additional information on this performance ratio.

The higher level of net interest income recorded in the first quarter of 2011 compared to the first quarter of 2010 was primarily attributable to a $699 million increase in the average balance of loans and a $327 million increase in FDIC covered loans. The bulk of this growth was funded by an increase of $725 million in interest-bearing deposits and a $533 million increase in net free funds (of which $402 million was non-interest bearing deposits). The Company continues to see a beneficial shift in its deposit mix as non-interest bearing deposits comprised 11.7% of total average deposits in the first quarter of 2011 compared to 8.9% in the first quarter of 2010.

The net interest margin increased ten basis points in the first quarter of 2011 compared to the first quarter of 2010. The driver for this increase was the reduced costs of interest-bearing deposits as the rate on these decreased 51 basis points in the first quarter of 2011 compared to the first quarter of 2010. Including the costs of wholesale funding, the rate on total interest-bearing liabilities declined 43 basis points between these comparable periods. Partially offsetting this positive impact to the net interest margin was the yield on total average earning assets, which declined by 33 basis points as the yield on loans declined by 41 basis points and the yield on liquidity management assets declined by 49 basis points. The yield recognized on the FDIC covered loan portfolio helped to counteract some of the impact of these yield decreases. Although average net free funds increased by $533 million, the contribution to net interest margin remained at 19 basis points for both periods as the replacement value (rate on total interest-bearing liabilities) was 43 basis points lower.

The following table presents a summary of Wintrust's average balances, net interest income and related net interest margins, calculated on a fully tax-equivalent basis, for the first quarter of 2011 compared to the fourth quarter of 2010 (sequential quarters):

 
  For the Three Months Ended For the Three Months Ended
  March 31, 2011 December 31, 2010
(Dollars in thousands) Average Interest Rate Average Interest Rate
             
Liquidity management assets (1) (2) (7)  $ 2,632,012  $ 11,354 1.75%  $ 2,844,351  $ 9,455 1.32%
Other earning assets (2) (3) (7)  27,718  181  2.65  29,676  183  2.45
Loans, net of unearned income (2) (4) (7)  9,849,309  129,587  5.34  9,777,435  140,689  5.71
Covered loans  326,571  7,072  8.78  337,690  4,042  4.75
Total earning assets (7)  $ 12,835,610  $ 148,194 4.68%  $ 12,989,152  $ 154,369 4.72%
Allowance for loan losses  (118,610)      (116,447)    
Cash and due from banks  152,264      151,562    
Other assets  1,149,261      1,175,084    
Total assets  $ 14,018,525      $ 14,199,351    
             
Interest-bearing deposits  9,542,637  $ 23,956 1.02%  $ 9,839,223  $ 27,853 1.12%
Federal Home Loan Bank advances  416,021  3,958  3.86  415,260  4,038  3.86
Notes payable and other borrowings  266,379  2,630  4.00  244,044  1,631  2.65
Secured borrowings - owed to securitization investors  600,000  3,040  2.05  600,000  3,089  2.04
Subordinated notes  50,000  212  1.69  53,369  233  1.71
Junior subordinated notes  249,493  4,370  7.01  249,493  4,441  6.97
Total interest-bearing liabilities  $ 11,124,530  $ 38,166 1.39%  $ 11,401,389  $ 41,285 1.43%
Non-interest bearing deposits  1,261,374      1,148,208    
Other liabilities  194,752      207,000    
Equity  1,437,869      1,442,754    
Total liabilities and shareholders' equity  $ 14,018,525      $ 14,199,351    
             
Interest rate spread (5) (7)     3.29%     3.29%
Net free funds/contribution (6)  $ 1,711,080   0.19%  $ 1,587,763   0.17%
Net interest income/Net interest margin (7)    $ 110,028 3.48%    $ 113,084 3.46%
 
(1) Liquidity management assets include available-for-sale securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements.
(2) Interest income on tax-advantaged loans, trading securities and securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the three months ended March 31, 2011 was $414,000 and for the three months ended December 31, 2010 was $405,000.
(3) Other earning assets include brokerage customer receivables and trading account securities.
(4) Loans, net of unearned income, include loans held-for-sale and non-accrual loans.
(5) Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(6) Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.
(7) See "Supplemental Financial Measures/Ratios" for additional information on this performance ratio.

The lower level of net interest income recorded in the first quarter of 2011 compared to the fourth quarter of 2010 was primarily attributable to the first quarter of 2011 consisting of two less days than the fourth quarter of 2010, reducing net interest income by approximately $2.5 million. The remainder of the decrease in net interest income was caused by slightly lower levels of total average earning assets as the average balance of mortgages held for sale and mortgage warehouse lines declined by $240 million in the first quarter of 2011 compared to the fourth quarter of 2010.

The net interest margin increased two basis points in the first quarter of 2011 compared to the fourth quarter of 2010. Reduced costs of interest-bearing deposits continued to improve the net interest margin as the rate on these decreased ten basis points in the first quarter of 2011 compared to the fourth quarter of 2010. Including the costs of wholesale funding, the rate on total interest-bearing liabilities declined four basis points between these comparable periods. Offsetting this positive impact to the net interest margin was the yield on total average earning assets, which declined by four basis points as the yield on loans declined by 37 basis points and the yield on liquidity management assets improved by 43 basis points. The increased effective yield recognized on the FDIC covered loan portfolio, as higher levels of forecasted cashflows on the covered loan portfolios drive higher effective yields on these assets, helped to counteract some of the impact of the loan portfolio yield decreases. The lower yield on the loan portfolio in the first quarter of 2011 was primarily attributable to a $5.6 million decline in accretion recognized on the purchased life insurance premium finance loan portfolio as prepayments declined and lower yields on the commercial premium finance receivable portfolio. Average net free funds increased by $123 million improving the contribution to net interest margin by two basis points in the first quarter of 2011 compared to the fourth quarter of 2010. The Company continues to see a beneficial shift in its deposit mix as non-interest bearing deposits comprised 11.7% of total average deposits in the first quarter of 2011 compared to 10.5% in the fourth quarter of 2010.

NON-INTEREST INCOME

For the first quarter of 2011, non-interest income totaled $40.9 million, a decrease of $1.7 million, or 4.0%, compared to the first quarter of 2010. The decrease was primarily attributable to lower trading gains and bargain purchase gains, partially offset by increases in fees from covered call options, mortgage banking revenue and wealth management revenue.

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

 
  Three Months Ended    
  March 31, $ %
(Dollars in thousands) 2011 2010 Change Change
Brokerage  $ 6,325  $ 5,554  $ 771  14
Trust and asset management  3,911  3,113  798  26
Total wealth management  10,236  8,667  1,569  18
Mortgage banking  11,631  9,727  1,904  20
Service charges on deposit accounts  3,311  3,332  (21)  (1)
Gains on available-for-sale securities  106  392  (286)  (73)
Gain on bargain purchases  9,838  10,894  (1,056)  (10)
Trading (losses) gains   (440)  5,961  (6,401)  (107)
Other:        
Fees from covered call options  2,470  289  2,181  755
Bank Owned Life Insurance  876  623  253  41
Administrative services  717  582  135  23
Miscellaneous  2,142  2,140  2  0
Total Other  6,205  3,634  2,571  71
         
Total Non-Interest Income  $ 40,887  $ 42,607  $ (1,720)  (4)
 

Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and the asset management fees, brokerage commissions, trading commissions and insurance product commissions at Wayne Hummer Investments and Wintrust Capital Management. Wealth management revenue totaled $10.2 million in the first quarter of 2011 and $8.7 million in the first quarter of 2010, an increase of 18%. Increased asset valuations due to equity market improvements have helped revenue growth from trust and asset management activities. Additionally, the improvement in the equity markets overall have led to the increase of the brokerage component of wealth management revenue as customer trading activity has increased. 

Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. For the quarter ended March 31, 2011, this revenue source totaled $11.6 million, an increase of $1.9 million when compared to the first quarter of 2010. Mortgages originated and sold totaled $562 million in the first quarter of 2011 compared to $687 million in the first quarter of 2010. The increase in mortgage banking revenue in the first quarter of 2011 as compared to the first quarter of 2010 resulted primarily from estimations of fewer loss indemnification requests from investors. The Company enters into residential mortgage loan sale agreements with investors in the normal course of business.  These agreements provide recourse to investors through certain representations concerning credit information, loan documentation, collateral and insurability.  Investors request the Company to indemnify them against losses on certain loans or to repurchase loans which the investors believe do not comply with applicable representations.  An increase in requests for loss indemnification can negatively impact mortgage banking revenue as additional recourse expense. The Company recognized $103,000 of expense on loans previously sold in the first quarter of 2011, a decrease of $3.3 million compared to the first quarter of 2010. The loss reserves established for loans expected to be repurchased is based on trends in repurchase and indemnification requests, actual loss experience, known and inherent risks in the loans that have been sold, and current economic conditions.

A summary of the mortgage banking revenue components is shown below:

 
Mortgage banking revenue      
  Three Months Ended
(Dollars in thousands) March 31,

2011
December 31,

2010
March 31,

2010
       
Mortgage loans originated and sold  $ 562,088  $ 1,250,193  $ 686,679
       
Mortgage loans serviced for others  $ 943,074  $ 942,224  $ 750,413
Fair value of mortgage servicing rights (MSRs)  $ 9,448  $ 8,762  $ 6,602
MSRs as a percentage of loans serviced 1.00% 0.93% 0.88%
       
Gain on sales of loans and other fees  $ 11,593  $ 23,216  $ 13,717
Mortgage servicing rights fair value adjustments  141  835  (538)
Recourse obligation on loans previously sold  (103)  (1,365)  (3,452)
Total mortgage banking revenue  $ 11,631  $ 22,686  $ 9,727
       
Gain on sales of loans and other fees as a percentage of loans sold  2.06% 1.86% 2.00%
       

The gain on bargain purchases of $9.8 million recognized in the first quarter of 2011 relates to the FDIC-assisted acquisitions of TBOC by Advantage and CFBC by Northbrook (see "Items Impacting Comparative Financial Results: Acquisitions"). The gain on bargain purchases of $10.9 million in the first quarter of 2010 related to loans acquired in the Company's acquisition of a life insurance premium finance loan portfolio in 2009.

Trading losses of $440,000 were recognized by the Company in the first quarter of 2011 compared to gains of $6.0 million in the first quarter of 2010. Lower trading gains in the current period compared to the first quarter of 2010 resulted primarily from realizing market value increases in the prior year on certain collateralized mortgage obligations held in trading which were sold in July 2010.

Other non-interest income for the first quarter of 2011 totaled $6.2 million, compared to $3.6 million in the first quarter of 2010. Fees from certain covered call option transactions increased by $2.2 million in the first quarter of 2011 as compared to the same period in the prior year. Historically, compression in the net interest margin was effectively offset, as has consistently been the case, by the Company's covered call strategy. An illustration of the past effectiveness of this strategy is shown in the Supplemental Financial Information section (see page titled "Net Interest Margin (Including Call Option Income)").

NON-INTEREST EXPENSE

Non-interest expense for the first quarter of 2011 totaled $98.1 million and increased approximately $14.2 million, or 17%, compared to the first quarter of 2010.   

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

 
  Three Months Ended    
  March 31, $ %
(Dollars in thousands) 2011 2010 Change Change
Salaries and employee benefits:        
Salaries  $ 33,135  $ 29,083  4,052  14
Commissions and bonus  10,714  9,731  983  10
Benefits  12,250  10,258  1,992  19
Total salaries and employee benefits  56,099  49,072  7,027  14
Equipment  4,264  3,896  368  9
Occupancy, net  6,505  6,230  275  4
Data processing  3,523  3,407  116  3
Advertising and marketing  1,614  1,314  300  23
Professional fees  3,546  3,107  439  14
Amortization of other intangible assets  689  645  44  7
FDIC insurance  4,518  3,809  709  19
OREO expenses, net  5,808  1,337  4,471  334
Other:        
Commissions - 3rd party brokers  1,030  962  68  7
Postage  1,078  1,110  (32)  (3)
Stationery and supplies  840  732  108  15
Miscellaneous  8,595  8,317  278  3
Total other  11,543  11,121  422  4
         
Total Non-Interest Expense  $ 98,109  $ 83,938  $ 14,171  17
 

Salaries and employee benefits comprised 57% of total non-interest expense in the first quarter of 2011 and 58% in the first quarter of 2010. Salaries and employee benefits expense increased $7.0 million, or 14%, in the first quarter of 2011 compared to the first quarter of 2010 primarily as a result of a $1.0 million increase in bonus and commissions as variable pay based revenue increased (primarily our mortgage banking and wealth management businesses), a $4.0 million increase in salaries caused by the addition of employees from the five FDIC-assisted transactions and larger staffing as the Company grows and a $2.0 million increase from employee benefits (primarily health plan and payroll taxes related).       

Professional fees include legal, audit and tax fees, external loan review costs and normal regulatory exam assessments. Professional fees for the first quarter of 2011 were $3.5 million, an increase of $439,000, or 14%, compared to the same period in 2010. These increases are primarily a result of increased legal costs related to non-performing assets and recent bank acquisitions. 

OREO expenses include all costs related to obtaining, maintaining and selling of other real estate owned properties. This expense totaled $5.8 million in the first quarter of 2011, an increase of $4.5 million compared to $1.3 million in the first quarter of 2010. The increase in OREO expenses primarily related to higher valuation adjustments of properties held in OREO in the first quarter of 2011 as compared to first quarter of 2010.

     
ASSET QUALITY
Allowance for Credit Losses, excluding covered loans
     
  Three Months Ended
  March 31,
(Dollars in thousands) 2011 2010
     
Allowance for loan losses at beginning of period  $ 113,903  $ 98,277
Provision for credit losses  24,376  29,044
Other adjustments  --   1,943
Reclassification (to)/from allowance for unfunded lending-related commitments  2,116  (99)
     
Charge-offs:    
Commercial  9,140  4,675
Commercial real estate  13,342  20,244
Home equity  773  281
Residential real estate  1,275  406
Premium finance receivables - commercial  1,507  1,933
Premium finance receivables - life insurance  30  -- 
Indirect consumer  120  274
Consumer and other  160  179
Total charge-offs  26,347  27,992
     
Recoveries:    
Commercial  266  443
Commercial real estate  338  442
Home equity  8  8
Residential real estate  2  5
Premium finance receivables - commercial  268  229
Premium finance receivables - life insurance  --   -- 
Indirect consumer  66  50
Consumer and other  53  47
Total recoveries  1,001  1,224
Net charge-offs  (25,346)  (26,768)
     
Allowance for loan losses at period end  $ 115,049  $ 102,397
     
Allowance for unfunded lending-related commitments at period end  2,018  3,653
     
Allowance for credit losses at period end  $ 117,067  $ 106,050
     
Annualized net charge-offs by category as a percentage of its own respective category's average:    
Commercial 1.85% 1.02%
Commercial real estate  1.57  2.42
Home equity  0.34  0.12
Residential real estate  0.91  0.32
Premium finance receivables - commercial  0.37  0.54
Premium finance receivables - life insurance  0.01  -- 
Indirect consumer  0.41  1.00
Consumer and other  0.42  0.48
Total loans, net of unearned income, excluding covered loans 1.04% 1.19%
     
Net charge-offs as a percentage of the provision for credit losses 103.98% 92.16%
     
Loans at period-end  $ 9,561,802  $ 9,070,562
Allowance for loan losses as a percentage of loans at period end 1.20% 1.13%
Allowance for credit losses as a percentage of loans at period end 1.22% 1.17%
 

The allowance for credit losses, excluding the allowance for covered loan losses, is comprised of the allowance for loan losses and the allowance for unfunded lending-related commitments. The allowance for loan losses is a reserve against loan amounts that are actually funded and outstanding while the allowance for unfunded lending-related commitments relates to certain amounts that Wintrust is committed to lend but for which funds have not yet been disbursed. The allowance for unfunded lending-related commitments (separate liability account) represents the portion of the allowance for credit losses that was associated with unfunded lending-related commitments. The provision for credit losses, excluding the provision for covered loan losses, may contain both a component related to funded loans (provision for loan losses) and a component related to lending-related commitments (provision for unfunded loan commitments and letters of credit). Total credit-related reserves also include the credit discounts on the purchased life insurance premium finance receivables which are netted with the loan balance. Additionally, on January 1, 2010, in conjunction with recording the securitization facility on its balance sheet, the Company established an allowance for loan losses totaling $1.9 million. This addition to the allowance for loan losses is shown as an "other adjustment to the allowance for loan losses". 

The provision for credit losses, excluding the provision for covered loan losses, totaled $24.4 million for the first quarter of 2011, $28.8 million in the fourth quarter of 2010 and $29.0 million for the first quarter of 2010. For the quarter ended March 31, 2011, net charge-offs, excluding covered loans, totaled $25.3 million compared to $23.5 million in the fourth quarter of 2010 and $26.8 million recorded in the first quarter of 2010. On a ratio basis, annualized net charge-offs as a percentage of average loans, excluding covered loans, were 1.04% in the first quarter of 2011, 0.96% in the fourth quarter of 2010, and 1.19% in the first quarter of 2010.  Beginning in the third quarter of 2009, the Company committed to resolving problem credits as quickly as possible. Actions taken during this time increased OREO, net charge-offs and the provision for loan losses expenses required to maintain an appropriate level of reserves. The first quarter of 2011 amounts recorded for both net charge-offs and provision for credit losses reflect a continuation of the Company's commitment to maintain a low level of non-performing assets.

Management believes the allowance for credit losses is appropriate to provide for inherent losses in the portfolio. There can be no assurances however, that future losses will not exceed the amounts provided for, thereby affecting future results of operations. The amount of future additions to the allowance for credit losses will be dependent upon management's assessment of the appropriateness of the allowance based on its evaluation of economic conditions, changes in real estate values, interest rates, the regulatory environment, the level of past-due and non-performing loans, and other factors. The increase in the allowance for credit losses from the end of the prior quarter reflects the continued changes in real estate values on certain types of credits, specifically credits with residential development collateral valuation exposure.

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

The table below shows the aging of the Company's loan portfolio, excluding covered loans, at March 31, 2011:

 
             
As of March 31, 2011   90+ days 60-89 30-59    
    and still days past days past    
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:            
Commercial  $ 26,157  $ 150  $ 3,450  $ 11,645  $ 1,896,159  $ 1,937,561
Commercial real-estate:            
Residential construction  7,891  --   1,057  3,587  78,832  91,367
Commercial construction  1,396  692  2,469  680  116,311  121,548
Land  26,974  --   7,366  12,455  183,419  230,214
Office  17,945  --   1,705  3,059  534,558  557,267
Industrial  1,251  524  1,672  8,499  483,690  495,636
Retail  12,824  --   4,994  5,810  499,486  523,114
Multi-family  5,968  --   1,107  5,059  281,729  293,863
Mixed use and other  19,752  781  7,187  19,835  995,998  1,043,553
Total commercial real-estate  94,001  1,997  27,557  58,984  3,174,023  3,356,562
Total commercial and commercial real-estate  120,158  2,147  31,007  70,629  5,070,182  5,294,123
Home equity  11,184  --   3,366  6,603  870,179  891,332
Residential real estate  4,909  --   918  5,174  333,908  344,909
Premium finance receivables - commercial  9,550  6,319  4,433  14,428  1,303,121  1,337,851
Premium finance receivables - life insurance  342  --   1,130  5,580  1,532,469  1,539,521
Indirect consumer  320  310  182  657  50,910  52,379
Consumer and other  147  1  185  394  100,960  101,687
Total loans, net of unearned income, excluding covered loans  $ 146,610  $ 8,777  $ 41,221  $ 103,465  $ 9,261,729  $ 9,561,802
             
Aging as a % of Loan Balance:            
Commercial 1.3%  --%  0.2% 0.6% 97.9% 100.0%
Commercial real-estate:            
Residential construction  8.6  --   1.2  3.9  86.3  100.0
Commercial construction  1.1  0.6  2.0  0.6  95.7  100.0
Land  11.7  --   3.2  5.4  79.7  100.0
Office  3.2  --   0.3  0.5  96.0  100.0
Industrial  0.3  0.1  0.3  1.7  97.6  100.0
Retail  2.5  --   1.0  1.1  95.4  100.0
Multi-family  2.0  --   0.4  1.7  95.9  100.0
Mixed use and other  1.9  0.1  0.7  1.9  95.4  100.0
Total commercial real-estate  2.8  0.1  0.8  1.8  94.5  100.0
Total commercial and commercial real-estate  2.3  --   0.6  1.3  95.8  100.0
Home equity  1.3  --   0.4  0.7  97.6  100.0
Residential real estate  1.4  --   0.3  1.5  96.8  100.0
Premium finance receivables - commercial  0.7  0.5  0.3  1.1  97.4  100.0
Premium finance receivables - life insurance  0.0  --   0.1  0.4  99.5  100.0
Indirect consumer  0.6  0.6  0.3  1.3  97.2  100.0
Consumer and other  0.1  0.0  0.2  0.4  99.3  100.0
Total loans, net of unearned income, excluding covered loans 1.5% 0.1% 0.4% 1.1% 96.9% 100.0%
 

As of March 31, 2011, $41.2 million of all loans, excluding covered loans, or 0.4%, were 60 to 89 days past due and $103.5 million, or 1.1%, were 30 to 59 days (or one payment) past due.  As of December 31, 2010, $46.1 million of all loans, excluding covered loans, or 0.5%, were 60 to 89 days past due and $91.9 million, or 1.0%, were 30 to 59 days (or one payment) past due. The majority of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company's internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis. 

The Company's home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at March 31, 2011 that are current with regard to the contractual terms of the loan agreement represent 97.6% of the total home equity portfolio. Residential real estate loans at March 31, 2011 that are current with regards to the contractual terms of the loan agreements comprise 96.8% of total residential real estate loans outstanding.

The table below shows the aging of the Company's loan portfolio, excluding covered loans, at December 31, 2010:

 
As of December 31, 2010   90+ days 60-89 30-59    
    and still days past days past    
(Dollars in thousands) Nonaccrual accruing due due Current Total Loans
Loan Balances:            
Commercial  $ 16,382  $ 478  $ 4,755  $ 16,024  $ 2,011,687  $ 2,049,326
Commercial real-estate:            
Residential construction  10,010  --   96  1,801  84,040  95,947
Commercial construction  1,820  --   --  1,481  128,371  131,672
Land  37,602  --   6,815  11,915  203,857  260,189
Office  12,718  --   9,121  3,202  510,290  535,331
Industrial  3,480  --   686  2,276  493,859  500,301
Retail  3,265  --   4,088  3,839  499,335  510,527
Multi-family  4,794  --   1,573  3,062  281,525  290,954
Mixed use and other  20,274  --   8,481  15,059  969,272  1,013,086
Total commercial real-estate  93,963  --   30,860  42,635  3,170,549  3,338,007
Total commercial and commercial real-estate  110,345  478  35,615  58,659  5,182,236  5,387,333
Home equity  7,425  --   2,181  7,098  897,708  914,412
Residential real estate  6,085  --   1,836  8,224  337,191  353,336
Premium finance receivables - commercial  8,587  8,096  6,076  16,584  1,226,157  1,265,500
Premium finance receivables - life insurance  354  --   --   --   1,521,532  1,521,886
Indirect consumer  191  318  301  918  49,419  51,147
Consumer and other  252  1  109  379  105,531  106,272
Total loans, net of unearned income, excluding covered loans  $ 133,239  $ 8,893  $ 46,118  $ 91,862  $ 9,319,774  $ 9,599,886
             
Aging as a % of Loan Balance:            
Commercial 0.8%  --%  0.2% 0.8% 98.2% 100.0%
Commercial real-estate:            
Residential construction  10.4  --   0.1  1.9  87.6  100.0
Commercial construction  1.4  --   --   1.1  97.5  100.0
Land  14.5  --   2.6  4.6  78.3  100.0
Office  2.4  --   1.7  0.6  95.3  100.0
Industrial  0.7  --   0.1  0.5  98.7  100.0
Retail  0.6  --   0.8  0.8  97.8  100.0
Multi-family  1.6  --   0.5  1.1  96.8  100.0
Mixed use and other  2.0  --   0.8  1.5  95.7  100.0
Total commercial real-estate  2.8  --   0.9  1.3  95.0  100.0
Total commercial and commercial real-estate  2.0  --   0.7  1.1  96.2  100.0
Home equity  0.8  --   0.2  0.8  98.2  100.0
Residential real estate  1.7  --   0.5  2.3  95.5  100.0
Premium finance receivables - commercial  0.7 0.6  0.5  1.3  96.9  100.0
Premium finance receivables - life insurance  0.0  --  0.0 0.0  100.0  100.0
Indirect consumer  0.4 0.6  0.6  1.8  96.6  100.0
Consumer and other  0.2  --   0.1  0.4  99.3  100.0
Total loans, net of unearned income, excluding covered loans 1.4% 0.1% 0.5% 1.0% 97.0% 100.0%
 

Non-performing Assets, excluding covered assets

The following table sets forth Wintrust's non-performing assets, excluding covered assets, at the dates indicated. 

 
       
  March 31, December 31, March 31,
(Dollars in thousands) 2011 2010 2010
       
Loans past due greater than 90 days and still accruing:      
Commercial  $ 150  $ 478  $ -- 
Commercial real-estate  1,997  --   1,195
Home equity  --   --   21
Residential real-estate  --   --   -- 
Premium finance receivables - commercial  6,319  8,096  7,479
Premium finance receivables - life insurance  --   --   5,450
Indirect consumer  310  318  665
Consumer and other  1  1  20
Total loans past due greater than 90 days and still accruing   8,777  8,893  14,830
       
Non-accrual loans:      
Commercial   26,157  16,382  15,331
Commercial real-estate  94,001  93,963  82,389
Home equity  11,184  7,425  7,730
Residential real-estate  4,909  6,085  5,460
Premium finance receivables - commercial  9,550  8,587  14,106
Premium finance receivables - life insurance  342  354  73
Indirect consumer  320  191  615
Consumer and other  147  252  426
Total non-accrual loans  146,610  133,239  126,130
       
Total non-performing loans:      
Commercial  26,307  16,860  15,331
Commercial real-estate  95,998  93,963  83,584
Home equity  11,184  7,425  7,751
Residential real-estate  4,909  6,085  5,460
Premium finance receivables - commercial  15,869  16,683  21,585
Premium finance receivables - life insurance  342  354  5,523
Indirect consumer  630  509  1,280
Consumer and other  148  253  446
Total non-performing loans  $ 155,387  $ 142,132  $ 140,960
Other real estate owned  85,290  71,214  89,009
Total non-performing assets  $ 240,677  $ 213,346  $ 229,969
       
Total non-performing loans by category as a percent of its own respective category's period-end balance:      
Commercial 1.36% 0.82% 0.88%
Commercial real-estate  2.86  2.81  2.51
Home equity  1.25  0.81  0.84
Residential real-estate  1.42  1.72  1.69
Premium finance receivables - commercial  1.19  1.32  1.64
Premium finance receivables - life insurance  0.02  0.02  0.45
Indirect consumer  1.20  0.99  1.54
Consumer and other  0.15  0.24  0.42
Total loans, net of unearned income  1.63% 1.48% 1.55%
       
Total non-performing assets as a percentage of total assets 1.71% 1.53% 1.79%
       
Allowance for loan losses as a percentage total non-performing loans 74.04% 80.14% 72.64%
 

Non-performing Commercial and Commercial Real Estate

The commercial non-performing loan category totaled $26.3 million as of March 31, 2011 compared to $16.9 million as of December 31, 2010 and $15.3 million as of March 31, 2010. The commercial real estate non-performing loan category totaled $96.0 million as of March 31, 2011 compared to $94.0 million as of December 31, 2010 and $83.6 million as of March 31, 2010. 

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

Non-performing Residential Real Estate and Home Equity

Non-performing home equity and residential real estate loans totaled $16.1 million as of March 31, 2011. The balance increased $2.9 million from March 31, 2010 and $2.6 million from December 31, 2010. The March 31, 2011 non-performing balance is comprised of $4.9 million of residential real estate (22 individual credits) and $11.2 million of home equity loans (35 individual credits). On average, this is approximately four non-performing residential real estate loans and home equity loans per chartered bank within the Company. The Company believes control and collection of these loans is very manageable. At this time, management believes reserves are adequate to absorb inherent losses that may occur upon the ultimate resolution of these credits.

Non-performing Commercial Premium Finance Receivables

The table below presents the level of non-performing property and casualty premium finance receivables as of March 31, 2011 and 2010, and the amount of net charge-offs for the quarters then ended. 

 
  March 31, March 31,
(Dollars in thousands) 2011 2010
Non-performing premium finance receivables - commercial  $ 15,869  $ 21,585
- as a percent of premium finance receivables - commercial outstanding 1.19% 1.64%
     
Net charge-offs of premium finance receivables - commercial  $ 1,239  $ 1,704
- annualized as a percent of average premium finance receivables - commercial 0.37% 0.54%
 

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

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

Nonperforming Loans Rollforward

The table below presents a summary of non-performing loans, excluding covered loans, as of March 31, 2011 and 2010 as well as the change in balance during each respective period:

 
     
  Three Months Ended
  March 31, March 31,
(Dollars in thousands) 2011 2010
Balance at beginning of period  $ 142,132  $ 131,804
Additions, net  56,168  45,803
Return to performing status  (1,175)  (3,087)
Payments received  (1,589)  (1,300)
Transfer to OREO  (22,425)  (27,246)
Charge-offs  (14,100)  (12,199)
Net change for niche loans (1)  (3,624)  7,185
Balance at end of period  $ 155,387  $ 140,960
     
(1) This includes activity for premium finance receivables, mortgages held for investment by Wintrust Mortgage and indirect consumer loans.
 

Restructured Loans

The table below presents a summary of restructured loans for the respective period, presented by loan category and accrual status:

 
   
  March 31, December 31, March 31,
(Dollars in thousands) 2011 2010 2010
Accruing:      
Commercial  $ 12,620  $ 14,163  $ 12,593
Commercial real estate  55,202  65,419  50,523
Residential real estate  1,560  1,562  2,169
Total accrual  $ 69,382  $ 81,144  $ 65,285
       
Non-accrual: (1)      
Commercial  $ 5,582  $ 3,865  $ --
Commercial real estate  21,174  15,947  4,096
Residential real estate  431  234  --
Total non-accrual  $ 27,187  $ 20,046  $ 4,096
       
Total restructured loans:      
Commercial  $ 18,202  $ 18,028  $ 12,593
Commercial real estate  76,376  81,366  54,619
Residential real estate  1,991  1,796  2,169
Total restructured loans  $ 96,569  $ 101,190  $ 69,381
       
(1) Included in total non-performing loans.      
 

At March 31, 2011, the Company had $96.6 million in loans with modified terms. The $96.6 million in modified loans represents 121 credit relationships in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay. These actions were taken on a case-by-case basis working with these borrowers to find a concession that would assist them in retaining their businesses or their homes and attempt to keep these loans in an accruing status for the Company.  

Subsequent to its restructuring, any restructured loan with a below market rate concession will remain classified by the Company as a restructured loan for its duration. All restructured loans were reviewed for collateral impairment at March 31, 2011 and approximately $8.3 million of collateral impairment was present on restructured loans classified as non-accrual and appropriately reserved for through the Company's normal reserving methodology in the Company's allowance for loan losses.

Other Real Estate Owned

The table below presents a summary of other real estate owned, excluding covered other real estate owned, as of March 31, 2011 and shows the activity for the respective period and the balance for each property type:

 
       
  Three Months Ended
  March 31, December 31, March 31,
(Dollars in thousands) 2011 2010 2010
Balance at beginning of period  $ 71,214  $ 76,654  $ 80,163
Disposals/resolved  (11,515)  (21,904)  (10,994)
Transfers in at fair value, less costs to sell  28,865  18,812  20,152
Fair value adjustments  (3,274)  (2,348)  (312)
Balance at end of period  $ 85,290  $ 71,214  $ 89,009
       
   Period End 
  March 31, December 31, March 31,
Balance by Property Type 2011 2010 2010
Residential real estate  $ 10,570  $ 5,694  $ 9,476
Residential real estate development  17,808  17,781  34,392
Commercial real estate  56,912  47,739  45,141
Total  $ 85,290  $ 71,214  $ 89,009
 

The following table provides a comparative analysis for the period end balances of the covered asset components, any changes in the allowance for covered loan losses and the contractual aging of the loans in the covered loan portfolio.

       
Covered Assets 
       
  March 31, December 31, March 31,
(Dollars in thousands) 2011 2010 2010
       
Period End Balances:      
Loans   $ 430,452  $ 334,353  $ -- 
Other real estate owned   37,143  19,583  -- 
FDIC Indemnification asset  124,785  118,182  -- 
Total covered assets  $ 592,380  $ 472,118  $ -- 
       
Allowance for Covered Loan Losses Rollforward:      
Balance at beginning of period  $ --   $ --   $ -- 
Provision for covered loan losses  968  --   -- 
Loans charged-off  --   --   -- 
Recoveries of loans charged-off  --   --   -- 
 Net charge-offs  --   --   -- 
Other adjustments - increase to indemnification asset  3,876    
Balance at end of period  $ 4,844  $ --   $ -- 
       
Accretable Yield Activity:      
Accretable yield, beginning balance  $ 39,809  $ 38,866  $ -- 
Acquisitions  7,107   --   -- 
Accretable yield amortized to interest income (1)  (14,159)   (4,042)  -- 
Increase in expected cash flows (2)  58,575   4,985  -- 
Accretable yield, ending balance  $ 91,332   $ 39,809  $ -- 
 
       
(1) Does not reflect offsetting amounts of $7.1 million recorded against interest income in the first quarter of 2011 as a result of reductions to the indemnification assets.
(2) Represents reclassifications to/from non-accretable discount, increases/decreases in interest cash flows due to prepayments and/or changes in interest rates.

The following table presents a summary of the discount components for the life insurance premium finance portfolio purchase as of March 31, 2011 and shows the changes in the balances from March 31, 2010.

 
Purchased Loan Portfolio    
Summary of Acquisition   Credit
    discounts --
    non--
  Accretable accretable
(Dollars in thousands) discounts discounts
     
Balances at March 31, 2010  $ 58,037  $ 33,990
- Accretion (effective yield method)  (4,810)  -- 
- Accretion recognized as accounts prepay  (3,434)  (3,418)
- Reclassification from nonaccretable to accretable  1,986  (1,986)
- Discount used for loans written off  --   (369)
Balances at June 30, 2010  $ 51,779  $ 28,217
- Accretion (effective yield method)  (5,139)  -- 
- Accretion recognized as accounts prepay  (1,672)  (1,680)
- Reclassification from accretable to nonaccretable  (52)  52
- Discount used for loans written off  --   (190)
 Balances at September 30, 2010  $ 44,916  $ 26,399
- Accretion (effective yield method)  (6,873)  -- 
- Accretion recognized as accounts prepay  (4,591)  (3,181)
- Reclassification from accretable to nonaccretable  (137)  137
- Discount used for loans written off  --   (128)
 Balances at December 31, 2010  $ 33,315  $ 23,227
- Accretion (effective yield method)  (6,418)  -- 
- Accretion recognized as accounts prepay  (1,538)  (1,096)
- Reclassification from nonaccretable to accretable  184  (184)
- Recovery of discount used for loans written off  --   200
Balances at March 31, 2011  $ 25,543  $ 22,147
 

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, Hinsdale Bank & Trust Company, North Shore Community Bank & Trust Company in Wilmette, Libertyville Bank & Trust Company, Barrington Bank & Trust Company, Crystal Lake Bank & Trust Company, Northbrook Bank & Trust Company, Advantage National Bank in Elk Grove Village, Village Bank & Trust in Arlington Heights, Beverly Bank & Trust Company in Chicago, Wheaton Bank & Trust Company, State Bank of The Lakes in Antioch, Old Plank Trail Community Bank, N.A. in New Lenox, St. Charles Bank & Trust Company and Town Bank in Hartland, Wisconsin. The banks also operate facilities in Illinois in Algonquin, Bloomingdale, Buffalo Grove, Cary, Chicago, Clarendon Hills, Deerfield, Downers Grove, Frankfort, Geneva, Glencoe, Glen Ellyn, Gurnee, Grayslake, Highland Park, Highwood, Hoffman Estates, Island Lake, Lake Bluff, Lake Villa, Lincoln Park, Lindenhurst, McHenry, Mokena, Mount Prospect, Mundelein, Naperville, North Chicago, Northfield, Palatine, Prospect Heights, Ravenswood, Ravinia, Riverside, Rogers Park, Roselle, Sauganash, Skokie, Spring Grove, Vernon Hills, Wauconda, Western Springs, Willowbrook, Winnetka and Wood Dale and in Delafield, Elm Grove, Madison, Wales, Wisconsin.

Additionally, the Company operates various non-bank subsidiaries. First Insurance Funding Corporation, one of the largest insurance premium finance companies operating in the United States, serves commercial and life insurance loan customers throughout the country. 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 Corporation 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. Wayne Hummer 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. Wintrust Capital Management provides money management services and advisory services to individual accounts. Advanced Investment Partners, LLC is an investment management firm specializing in the active management of domestic equity investment strategies. The Chicago Trust Company, a trust subsidiary, allows Wintrust to service customers' trust and investment needs at each banking location. Wintrust Information Technology Services Company provides information technology support, item capture and statement preparation services to the Wintrust subsidiaries.

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," "point," "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 2010 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:

  • negative economic conditions that adversely affect the economy, housing prices, the job market and other factors that may affect the Company's liquidity and the performance of its loan portfolios, particularly in the markets in which it operates; 
  • 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; 
  • 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; 
  • a decrease in the Company's regulatory capital ratios, including as a result of further 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, including those resulting from the Dodd-Frank Act; 
  • 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 current regulatory environment, including the Dodd-Frank Act; 
  • changes in capital requirements resulting from Basel II and III initiatives;
  • increases in the Company's FDIC insurance premiums, or the collection of special assessments by the FDIC; 
  • losses incurred in connection with repurchases and indemnification payments related to mortgages; 
  • 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); 
  • delinquencies or fraud with respect to the Company's premium finance business; 
  • failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of recent or future acquisitions; 
  • unexpected difficulties and losses related to FDIC-assisted acquisitions, including those resulting from our loss-sharing arrangements with the FDIC; 
  • credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company's premium finance loans; 
  • any negative perception of the Company's reputation or financial strength; 
  • the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank; 
  • the ability of the Company to attract and retain senior management experienced in the banking and financial services industries; 
  • the Company's ability to comply with covenants under its securitization facility and credit facility; 
  • unexpected difficulties or unanticipated developments related to the Company's strategy of de novo bank formations and openings, which typically require over 13 months of operations before becoming profitable due to the impact of organizational and overhead expenses, the startup phase of generating deposits and the time lag typically involved in redeploying deposits into attractively priced loans and other higher yielding earning assets; 
  • changes in accounting standards, rules and interpretations and the impact on the Company's financial statements; 
  • adverse effects on our operational systems resulting from failures, human error or tampering; 
  • significant litigation involving the Company; and 
  • the ability of the Company to receive dividends from its subsidiaries.

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 or on behalf of Wintrust. 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 release revisions to these forward-looking statements or reflect events or circumstances after the date of this 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, WEB CAST AND REPLAY

The Company will hold a conference call at 1:00 p.m. (CT) Wednesday, April 20, 2011 regarding first quarter 2011 results. Individuals interested in listening should call (877) 363-5049 and enter Conference ID #59204020. A simultaneous audio-only web cast and replay of the conference call may be accessed via the Company's web site at ( http://www.wintrust.com ), Investor News and Events, Presentations & Conference Calls. The text of the first quarter 2011 earnings press release will be available on the home page of the Company's website at ( http://www.wintrust.com ) and at the Investor News and Events, Press Releases link on its website.

WINTRUST FINANCIAL CORPORATION

Supplemental Financial Information

5 Quarter Trends

WINTRUST FINANCIAL CORPORATION - Supplemental Financial Information
Selected Financial Highlights - 5 Quarter Trends  
(Dollars in thousands, except per share data) Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
  2011 2010 2010 2010 2010
Selected Financial Condition Data (at end of period):          
Total assets  $ 14,080,180  $ 13,980,156  $ 14,100,368  $ 13,708,560  $ 12,839,978
Total loans, excluding covered loans  9,561,802  9,599,886  9,461,155  9,324,163  9,070,562
Total deposits  10,915,169  10,803,673  10,962,239  10,624,742  9,724,870
Junior subordinated debentures  249,493  249,493  249,493  249,493  249,493
Total shareholders' equity  1,453,253  1,436,549  1,398,912  1,384,736  1,364,832
Selected Statements of Income Data:          
Net interest income  109,614  112,677  102,980  104,314  95,865
Net revenue (1)  150,501  157,138  157,636  154,750  138,472
Core pre-tax earnings (2)  48,799  58,666  48,074  47,728  42,076
Net income  16,402  14,205  20,098  13,009  16,017
Net income (loss) per common share – Basic  $ 0.44  $ (0.06)  $ 0.49  $ 0.26  $ 0.43
Net income (loss) per common share – Diluted   $ 0.36  $ (0.06)  $ 0.47  $ 0.25  $ 0.41
Selected Financial Ratios and Other Data:          
Performance Ratios:          
Net interest margin (2)  3.48%  3.46%  3.22%  3.43%  3.38%
Non-interest income to average assets  1.18%  1.24%  1.56%  1.51%  1.37%
Non-interest expense to average assets   2.84%  2.97%  2.85%  2.78%  2.70%
Net overhead ratio (3)  1.66%  1.73%  1.28%  1.26%  1.33%
Efficiency ratio (2) (4)  65.05%  67.48%  67.01%  59.72%  60.59%
Return on average assets  0.47%  0.40%  0.57%  0.39%  0.52%
Return on average common equity  4.49%  (0.66)%  5.44%  2.98%  4.93%
Average total assets  $ 14,018,525  $ 14,199,351  $ 14,015,757  $ 13,390,537  $ 12,590,817
Average total shareholders' equity  1,437,869  1,442,754  1,391,507  1,371,689  1,196,191
Average loans to average deposits ratio  91.2%  89.0%  88.7%  91.0%  94.6%
Average loans to average deposits ratio (including covered loans)  94.2  92.1  91.7  93.0  94.6
Common Share Data at end of period:          
Market price per common share  $ 36.75  $ 33.03  $ 32.41  $ 33.34  $ 37.21
Book value per common share (2)  $ 33.70  $ 32.73  $ 35.70  $ 35.33  $ 34.76
Tangible common book value per share (2)  $ 26.65  $ 25.80  $ 26.34  $ 25.96  $ 25.39
Common shares outstanding 34,947,251 34,864,068 31,143,740 31,084,298 31,044,449
Other Data at end of period:(9)          
Leverage Ratio (5)  10.3%  10.1%  10.0%  10.2%  10.8%
Tier 1 Capital to risk-weighted assets (5)  12.8%  12.5%  12.7%  13.0%  13.4%
Total capital to risk-weighted assets (5)  14.1%  13.8%  14.1%  14.3%  14.9%
Tangible Common Equity ratio (TCE) (2) (8)  8.0%  8.0%  5.9%  6.0%  6.3%
Allowance for credit losses (6)  $ 117,067  $ 118,037  $ 112,807  $ 108,716  $ 106,050
Credit discounts on purchased premium finance receivables - life insurance (7)  22,147  23,227  26,399  28,216  33,990
Non-performing loans  155,387  142,132  134,323  135,401  140,960
Allowance for credit losses to total loans (6)  1.22%  1.23%  1.19%  1.17%  1.17%
Non-performing loans to total loans  1.63%  1.48%  1.42%  1.45%  1.55%
Number of:          
 Bank subsidiaries 15 15 15 15 15
 Non-bank subsidiaries 8 8 8 8 8
 Banking offices 88 86 85 85 78
(1) Net revenue includes net interest income and non-interest income
(2) See "Supplemental Financial Measures/Ratios" for additional information on this performance measure/ratio.
(3) The net overhead ratio is calculated by netting total non-interest expense and total non-interest income, annualizing this amount, and dividing by that period's total average assets. A lower ratio indicates a higher degree of efficiency.
(4) The efficiency ratio is calculated by dividing total non-interest expense by tax-equivalent net revenue (less securities gains or losses). A lower ratio indicates more efficient revenue generation.
(5) Capital ratios for current quarter-end are estimated.
(6) The allowance for credit losses includes both the allowance for loan losses and the allowance for unfunded lending-related commitments, but excluding the allowance for covered loan losses.
(7) Represents the credit discounts on purchased life insurance premium finance loans.
(8) Total shareholders' equity minus preferred stock and total intangible assets divided by total assets minus total intangible assets
(9) Asset quality ratios exclude covered loans.
 
 
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Consolidated Statements of Condition - 5 Quarter Trends
           
  (Unaudited)   (Unaudited) (Unaudited) (Unaudited)
  March 31, December 31, September 30, June 30, March 31,
(In thousands) 2011 2010 2010 2010 2010
Assets          
Cash and due from banks  $ 140,919  $ 153,690  $ 155,067  $ 123,712  $ 106,501
Federal funds sold and securities purchased under resale agreements 33,575 18,890 88,913 28,664 15,393
Interest-bearing deposits with other banks 946,193 865,575 1,224,584 1,110,123 1,222,323
Available-for-sale securities, at fair value 1,710,321 1,496,302 1,324,179 1,418,035 1,205,919
Trading account securities 2,229 4,879 4,935 38,261 39,938
Federal Home Loan Bank and Federal Reserve Bank stock, at cost 85,144 82,407 80,445 79,300 74,001
Brokerage customer receivables 25,361 24,549 25,442 24,291 20,978
Mortgage loans held-for-sale, at fair value 92,151 356,662 307,231 222,703 149,897
Mortgage loans held-for-sale, at lower of cost or market 2,335 14,785 13,209 15,278 6,152
Loans, net of unearned income, excluding covered loans 9,561,802 9,599,886 9,461,155 9,324,163 9,070,562
Covered loans 430,452 334,353 353,840 275,563  -- 
Total loans 9,992,254 9,934,239 9,814,995 9,599,726 9,070,562
Less: Allowance for loan losses 115,049 113,903 110,432 106,547 102,397
Less: Allowance for covered loan losses 4,844  --   --   --   -- 
Net loans 9,872,361 9,820,336 9,704,563 9,493,179 8,968,165
Premises and equipment, net 369,785 363,696 353,445 346,806 348,182
FDIC indemnification asset 124,785 118,182 161,640 114,102  -- 
Accrued interest receivable and other assets 381,025 366,438 365,496 374,172 363,676
Trade date securities receivable  --   --   --   28,634  27,850
Goodwill 281,940 281,190 278,025 278,025 278,025
Other intangible assets 12,056 12,575 13,194 13,275 12,978
Total assets  $ 14,080,180  $ 13,980,156  $ 14,100,368  $ 13,708,560  $ 12,839,978
           
Liabilities and Shareholders' Equity          
Deposits:          
Non-interest bearing  $ 1,279,256  $ 1,201,194  $ 1,042,730  $ 953,814  $ 871,830
Interest bearing 9,635,913 9,602,479 9,919,509 9,670,928 8,853,040
Total deposits 10,915,169 10,803,673 10,962,239 10,624,742 9,724,870
Notes payable 1,000 1,000 1,000 1,000 1,000
Federal Home Loan Bank advances 409,386 423,500 414,832 415,571 421,775
Other borrowings 250,032 260,620 241,522 218,424 218,079
Secured borrowings - owed to securitization investors 600,000 600,000 600,000 600,000 600,000
Subordinated notes 50,000 50,000 55,000 55,000 60,000
Junior subordinated debentures  249,493  249,493  249,493  249,493  249,493
Trade date securities payable  10,000  --   2,045  200  62,017
Accrued interest payable and other liabilities  141,847  155,321  175,325  159,394  137,912
Total liabilities  12,626,927  12,543,607  12,701,456  12,323,824  11,475,146
           
Shareholders' Equity:          
Preferred stock  49,672  49,640  287,234  286,460  285,642
Common stock  34,947  34,864  31,145  31,084  31,044
Surplus 967,587 965,203 682,318 680,261 677,090
Treasury stock  (74)  --   (51)  (4)  -- 
Retained earnings 404,580 392,354 394,323 381,969 373,903
Accumulated other comprehensive (loss) income  (3,459)  (5,512) 3,943 4,966  (2,847)
Total shareholders' equity 1,453,253 1,436,549 1,398,912 1,384,736 1,364,832
Total liabilities and shareholders' equity  $ 14,080,180  $ 13,980,156  $ 14,100,368  $ 13,708,560  $ 12,839,978
 
 
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Consolidated Statements of Income (Unaudited) - 5 Quarter Trends
           
  Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
(In thousands, except per share data) 2011 2010 2010 2010 2010
Interest income          
Interest and fees on loans  $ 136,543  $ 144,652  $ 137,902  $ 135,800  $ 129,542
Interest bearing deposits with banks  936  1,342  1,339  1,215  1,274
Federal funds sold and securities purchased under resale agreements  32  39  35  34  49
Securities  9,540  7,236  7,438  11,218  11,012
Trading account securities  13  11  19  343  21
Federal Home Loan Bank and Federal Reserve Bank stock  550  512  488  472  459
Brokerage customer receivables  166  170  180  166  139
Total interest income  147,780  153,962  147,401  149,248  142,496
Interest expense          
Interest on deposits  23,956  27,853  31,088  31,626  33,212
Interest on Federal Home Loan Bank advances  3,958  4,038  4,042  4,094  4,346
Interest on notes payable and other borrowings  2,630  1,631  1,411  1,439  1,462
Interest on secured borrowings - owed to securitization investors  3,040  3,089  3,167  3,115  2,995
Interest on subordinated notes  212  233  265  256  241
Interest on junior subordinated debentures  4,370  4,441  4,448  4,404  4,375
Total interest expense  38,166  41,285  44,421  44,934  46,631
Net interest income  109,614  112,677  102,980  104,314  95,865
Provision for credit losses  25,344  28,795  25,528  41,297  29,044
Net interest income after provision for credit losses  84,270  83,882  77,452  63,017  66,821
Non-interest income          
Wealth management  10,236  10,108  8,973  9,193  8,667
Mortgage banking  11,631  22,686  20,980  7,985  9,727
Service charges on deposit accounts  3,311  3,346  3,384  3,371  3,332
Gains on available-for-sale securities, net  106  159  9,235  46  392
Gain on bargain purchases  9,838  250  6,593  26,494  10,894
Trading (losses) gains  (440)  611  210  (1,617)  5,961
Other  6,205  7,301  5,281  4,964  3,634
Total non-interest income  40,887  44,461  54,656  50,436  42,607
Non-interest expense          
Salaries and employee benefits  56,099  59,031  57,014  50,649  49,072
Equipment  4,264  4,384  4,203  4,046  3,896
Occupancy, net  6,505  5,927  6,254  6,033  6,230
Data processing  3,523  4,388  3,891  3,669  3,407
Advertising and marketing  1,614  1,881  1,650  1,470  1,314
Professional fees  3,546  4,775  4,555  3,957  3,107
Amortization of other intangible assets  689  719  701  674  645
FDIC insurance  4,518  4,572  4,642  5,005  3,809
OREO expenses, net  5,808  7,384  4,767  5,843  1,337
Other  11,543  13,140  12,046  11,317  11,121
Total non-interest expense  98,109  106,201  99,723  92,663  83,938
Income before taxes  27,048  22,142  32,385  20,790  25,490
Income tax expense  10,646  7,937  12,287  7,781  9,473
Net income  $ 16,402  $ 14,205  $ 20,098  $ 13,009  $ 16,017
Preferred stock dividends and discount accretion  $ 1,031  $ 16,175  $ 4,943  $ 4,943  $ 4,943
Net income (loss) applicable to common shares  $ 15,371  $ (1,970)  $ 15,155  $ 8,066  $ 11,074
Net income (loss) per common share - Basic  $ 0.44  $ (0.06)  $ 0.49  $ 0.26  $ 0.43
Net income (loss) per common share - Diluted  $ 0.36  $ (0.06)  $ 0.47  $ 0.25  $ 0.41
Cash dividends declared per common share  $ 0.09  $ --   $ 0.09  $ --   $ 0.09
Weighted average common shares outstanding  34,928  32,015  31,117  31,074  25,942
Dilutive potential common shares  7,794  --   988  1,267  1,139
Average common shares and dilutive common shares  42,722  32,015  32,105  32,341  27,081
 
 
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Period End Loan Balances - 5 Quarter Trends
           
  March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2011 2010 2010 2010 2010
Balance:          
Commercial  $ 1,937,561  $ 2,049,326  $ 1,952,791  $ 1,827,618  $ 1,749,895
Commercial real estate  3,356,562  3,338,007  3,331,498  3,347,823  3,333,157
Home equity  891,332  914,412  919,824  922,305  924,993
Residential real-estate  344,909  353,336  342,009  332,673  322,984
Premium finance receivables - commercial  1,337,851  1,265,500  1,323,934  1,346,985  1,317,822
Premium finance receivables - life insurance  1,539,521  1,521,886  1,434,994  1,378,657  1,233,573
Indirect consumer (1)  52,379  51,147  56,575  69,011  83,136
Consumer and other  101,687  106,272  99,530  99,091  105,002
Total loans, net of unearned income, excluding covered loans  $ 9,561,802  $ 9,599,886  $ 9,461,155  $ 9,324,163  $ 9,070,562
Covered loans  430,452  334,353  353,840  275,563  -- 
Total loans, net of unearned income  $ 9,992,254  $ 9,934,239  $ 9,814,995  $ 9,599,726  $ 9,070,562
           
Mix:          
Commercial   19%  21%  20%  19%  19%
Commercial real estate  34  34  34  35  37
Home equity  9  9  9  10  10
Residential real-estate  4  3  3  3  4
Premium finance receivables - commercial  13  13  13  14  14
Premium finance receivables - life insurance  15  15  15  14  14
Indirect consumer (1)  1  1  1  1  1
Consumer and other  1  1  1  1  1
Total loans, net of unearned income, excluding covered loans  96%  97%  96%  97%  100%
Covered loans  4  3  4  3  -- 
Total loans, net of unearned income  100%  100%  100%  100%  100%
           
(1) Includes autos, boats, snowmobiles and other indirect consumer loans.
 
           
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Period End Deposits Balances - 5 Quarter Trends
           
  March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2011 2010 2010 2010 2010
Balance:          
Non-interest bearing  $ 1,279,256  $ 1,201,194  $ 1,042,730  $ 953,814  $ 871,830
NOW  1,526,955  1,561,507  1,551,749  1,560,733  1,448,857
Wealth Management deposits (1)  659,194  658,660  710,435  694,830  690,919
Money Market  1,844,416  1,759,866  1,746,168  1,722,729  1,586,830
Savings  749,681  744,534  713,823  594,753  558,770
Time certificates of deposit  4,855,667  4,877,912  5,197,334  5,097,883  4,567,664
Total deposits  $ 10,915,169  $ 10,803,673  $ 10,962,239  $ 10,624,742  $ 9,724,870
           
Mix:          
Non-interest bearing  12%  11%  10%  9%  9%
NOW  14  15  14  15  15
Wealth Management deposits (1)  6  6  6  6  7
Money Market  17  16  16  16  16
Savings  7  7  7  6  6
Time certificates of deposit  44  45  47  48  47
Total deposits  100%  100%  100%  100%  100%
(1) Represents deposit balances of the Company's subsidiary banks from brokerage customers of Wayne Hummer Investments, trust and asset management customes of The Chicago Trust Company which have been placed into deposit accounts of the Banks.
 
 
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin (Including Call Option Income) - 5 Quarter Trends
 
  Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2011 2010 2010 2010 2010
           
Net interest income  $ 110,028  $ 113,083  $ 103,396  $ 104,775  $ 96,311
Call option income  2,470  1,075  703  169  289
Net interest income including call option income  $ 112,498  $ 114,158  $ 104,099  $ 104,944  $ 96,600
           
Yield on earning assets  4.68%  4.72%  4.59%  4.91%  5.01%
Rate on interest-bearing liabilities  1.39  1.43  1.55  1.65  1.82
Rate spread  3.29%  3.29%  3.04%  3.26%  3.19%
Net free funds contribution  0.19  0.17  0.18  0.17  0.19
Net interest margin  3.48  3.46  3.22  3.43  3.38
Call option income  0.08  0.03  0.02  0.01  0.01
Net interest margin including call option income  3.56%  3.49%  3.24%  3.44%  3.39%
 
           
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin (Including Call Option Income - YTD Trends)
     
   Three Months Ended Years Ended
  March 31, December 31,
(Dollars in thousands) 2011 2010 2009 2008 2007
           
Net interest income  $ 110,028  $ 417,565  $ 314,096  $ 247,054  $ 264,777
Call option income  2,470  2,236  1,998  29,024  2,628
Net interest income including call option income  $ 112,498  $ 419,801  $ 316,094  $ 276,078  $ 267,405
           
Yield on earning assets  4.68%  4.80%  5.07%  5.88%  7.21%
Rate on interest-bearing liabilities  1.39  1.61  2.29  3.31  4.39
Rate spread  3.29%  3.19%  2.78%  2.57%  2.82%
Net free funds contribution  0.19  0.18  0.23  0.24  0.29
Net interest margin  3.48  3.37  3.01  2.81  3.11
Call option income  0.08  0.02  0.02  0.33  0.03
Net interest margin including call option income  3.56%  3.39%  3.03%  3.14%  3.14%
 
 
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Quarterly Average Balances - 5 Quarter Trends
 
  Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
(In thousands) 2011 2010 2010 2010 2010
Liquidity management assets  $ 2,632,012  $ 2,844,351  $ 2,802,964  $ 2,613,179  $ 2,384,122
Other earning assets  27,718  29,676  34,263  62,874  26,269
Loans, net of unearned income  9,849,309  9,777,435  9,603,561  9,356,033  9,150,078
Covered loans  326,571  337,690  325,751  210,030  -- 
Total earning assets  $ 12,835,610  $ 12,989,152  $ 12,766,539  $ 12,242,116  $ 11,560,469
Allowance for loan losses  (118,610)  (116,447)  (113,631)  (108,764)  (107,257)
Cash and due from banks  152,264  151,562  154,078  137,531  113,514
Other assets  1,149,261  1,175,084  1,208,771  1,119,654  1,024,091
Total assets  $ 14,018,525  $ 14,199,351  $ 14,015,757  $ 13,390,537  $ 12,590,817
           
Interest-bearing deposits  $ 9,542,637  $ 9,839,223  $ 9,823,525  $ 9,348,541  $ 8,818,012
Federal Home Loan Bank advances  416,021  415,260  414,789  417,835  429,195
Notes payable and other borrowings  266,379  244,044  232,991  217,751  225,919
Secured borrowings - owed to securitization investors  600,000  600,000  600,000  600,000  600,000
Subordinated notes  50,000  53,369  55,000  57,198  60,000
Junior subordinated notes  249,493  249,493  249,493  249,493  249,493
Total interest-bearing liabilities  $ 11,124,530  $ 11,401,389  $ 11,375,798  $ 10,890,818  $ 10,382,619
Non-interest bearing deposits  1,261,374  1,148,208  1,005,170  932,046  858,875
Other liabilities  194,752  207,000  243,282  195,984  153,132
Equity  1,437,869  1,442,754  1,391,507  1,371,689  1,196,191
Total liabilities and shareholders' equity  $ 14,018,525  $ 14,199,351  $ 14,015,757  $ 13,390,537  $ 12,590,817
 
           
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Net Interest Margin - 5 Quarter Trends
 
  Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
  2011 2010 2010 2010 2010
Yield earned on:          
Liquidity management assets  1.75%  1.32%  1.36%  2.04%  2.24%
Other earning assets  2.65  2.45  2.37  3.28  2.53
Loans, net of unearned income  5.34  5.71  5.54  5.71  5.75
Covered loans  8.78  4.75  4.84  5.12  -- 
   4.68%  4.72%  4.59%  4.91%  5.01%
Rate paid on:          
Interest-bearing deposits  1.02%  1.12%  1.26%  1.36%  1.53%
Federal Home Loan Bank advances  3.86  3.86  3.87  3.93  4.11
Notes payable and other borrowings  4.00  2.65  2.40  2.65  2.63
Secured borrowings - owed to securitization investors  2.05  2.04  2.09  2.08  2.02
Subordinated notes  1.69  1.71  1.89  1.77  1.60
Junior subordinated notes  7.01  6.97  6.98  6.98  7.01
   1.39%  1.43%  1.55%  1.65%  1.82%
           
Interest rate spread  3.29%  3.29%  3.04%  3.26%  3.19%
Net free funds/contribution  0.19  0.17  0.18  0.17  0.19
Net interest income/Net interest margin  3.48%  3.46%  3.22%  3.43%  3.38%
 
 
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Interest Income - 5 Quarter Trends
           
  Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
(In thousands) 2011 2010 2010 2010 2010
Brokerage  $ 6,325  $ 6,641  $ 5,806  $ 5,712  $ 5,554
Trust and asset management  3,911  3,467  3,167  3,481  3,113
Total wealth management  10,236  10,108  8,973  9,193  8,667
Mortgage banking  11,631  22,686  20,980  7,985  9,727
Service charges on deposit accounts  3,311  3,346  3,384  3,371  3,332
Gains on available-for-sale securities  106  159  9,235  46  392
Gain on bargain purchases  9,838  250  6,593  26,494  10,894
Trading (losses) gains  (440)  611  210  (1,617)  5,961
Other:          
Fees from covered call options  2,470  1,074  703  169  289
Bank Owned Life Insurance  876  811  552  418  623
Administrative services  717  715  744  708  582
Miscellaneous  2,142  4,701  3,282  3,669  2,140
Total other income  6,205  7,301  5,281  4,964  3,634
           
Total Non-Interest Income  $ 40,887  $ 44,461  $ 54,656  $ 50,436  $ 42,607
 
           
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Interest Expense - 5 Quarter Trends
           
  Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
(In thousands) 2011 2010 2010 2010 2010
Salaries and employee benefits:          
Salaries  $ 33,135  $ 31,876  $ 30,537  $ 28,714  $ 29,083
Commissions and bonus  10,714  18,043  17,366  12,967  9,731
Benefits  12,250  9,112  9,111  8,968  10,258
Total salaries and employee benefits  56,099  59,031  57,014  50,649  49,072
Equipment  4,264  4,384  4,203  4,046  3,896
Occupancy, net  6,505  5,927  6,254  6,033  6,230
Data processing  3,523  4,388  3,891  3,669  3,407
Advertising and marketing  1,614  1,881  1,650  1,470  1,314
Professional fees  3,546  4,775  4,555  3,957  3,107
Amortization of other intangibles  689  719  701  674  645
FDIC insurance  4,518  4,572  4,642  5,005  3,809
OREO expenses, net  5,808  7,384  4,767  5,843  1,337
Other:          
Commissions - 3rd party brokers  1,030  965  979  1,097  962
Postage  1,078  1,220  1,254  1,229  1,110
Stationery and supplies  840  1,069  812  761  732
Miscellaneous  8,595  9,886  9,001  8,230  8,317
Total other expense  11,543  13,140  12,046  11,317  11,121
           
Total Non-Interest Expense  $ 98,109  $ 106,201  $ 99,723  $ 92,663  $ 83,938
 
 
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Allowance for Credit Losses, excluding covered loans - 5 Quarter Trends
           
  Three Months Ended
  March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2011 2010 2010 2010 2010
           
Allowance for loan losses at beginning of period  $ 113,903  $ 110,432  $ 106,547  $ 102,397  $ 98,277
Provision for credit losses  24,376  28,795  25,528  41,297  29,044
Other adjustments  --   --   --   --   1,943
Reclassification (to)/from allowance for unfunded lending-related commitments  2,116  (1,781)  (206)  785  (99)
           
Charge-offs:          
Commercial  9,140  6,060  3,076  4,781  4,675
Commercial real estate  13,342  13,591  15,727  12,311  20,244
Home equity  773  1,322  1,234  3,089  281
Residential real estate  1,275  311  116  310  406
Premium finance receivables - commercial  1,507  1,820  1,505  17,747  1,933
Premium finance receivables - life insurance  30  154  79  --   -- 
Indirect consumer  120  239  198  256  274
Consumer and other  160  565  288  109  179
Total charge-offs  26,347  24,062  22,223  38,603  27,992
Recoveries:          
Commercial  266  268  286  143  443
Commercial real estate  338  57  197  218  442
Home equity  8  2  8  6  8
Residential real estate  2  2  3  2  5
Premium finance receivables - commercial  268  144  220  188  229
Premium finance receivables - life insurance  --   --   --   --   -- 
Indirect consumer  66  38  29  81  50
Consumer and other  53  8  43  33  47
Total recoveries  1,001  519  786  671  1,224
Net charge-offs  (25,346)  (23,543)  (21,437)  (37,932)  (26,768)
           
Allowance for loan losses at period end  $ 115,049  $ 113,903  $ 110,432  $ 106,547  $ 102,397
           
Allowance for unfunded lending-related commitments at period end  2,018  4,134  2,375  2,169  3,653
Allowance for credit losses at period end  $ 117,067  $ 118,037  $ 112,807  $ 108,716  $ 106,050
           
Annualized net charge-offs by category as a percentage of its own respective category's average:          
Commercial  1.85%  1.11%  0.60%  1.04%  1.02%
Commercial real estate  1.57  1.66  1.84  1.45  2.42
Home equity  0.34  0.57  0.53  1.34  0.12
Residential real estate  0.91  0.17  0.07  0.23  0.32
Premium finance receivables - commercial  0.37  0.54  0.39  5.46  0.54
Premium finance receivables - life insurance  0.01  0.04  0.02  --   -- 
Indirect consumer  0.41  1.51  1.08  0.92  1.00
Consumer and other  0.42  1.98  1.01  0.27  0.48
Total loans, net of unearned income  1.04%  0.96%  0.89%  1.63%  1.19%
           
Net charge-offs as a percentage of the provision for credit losses 103.98% 81.76% 83.97% 91.85% 92.16%
           
Loans at period-end  $ 9,561,802  $ 9,599,886  $ 9,461,155  $ 9,324,163  $ 9,070,562
Allowance for loan losses as a percentage of loans at period end 1.20% 1.19% 1.17% 1.14% 1.13%
Allowance for credit losses as a percentage of loans at period end 1.22% 1.23% 1.19% 1.17% 1.17%
 
 
WINTRUST FINANCIAL CORPORATION - SUPPLEMENTAL FINANCIAL INFORMATION
Non-Performing Assets, excluding covered assets - 5 Quarter Trends
           
  March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2011 2010 2010 2010 2010
           
Loans past due greater than 90 days and still accruing:          
Commercial  $ 150  $ 478  $ --   $ 99  $ -- 
Commercial real-estate  1,997  --   --   2,248  1,195
Home equity  --   --   --   --   21
Residential real-estate  --   --   --   --   -- 
Premium finance receivables - commercial  6,319  8,096  6,853  6,350  7,479
Premium finance receivables - life insurance  --   --   1,222  1,923  5,450
Indirect consumer  310  318  355  579  665
Consumer and other  1  1  2  3  20
Total loans past due greater than 90 days and still accruing  8,777  8,893  8,432  11,202  14,830
           
Non-accrual loans:          
Commercial  26,157  16,382  19,444  17,741  15,331
Commercial real-estate  94,001  93,963  83,340  82,984  82,389
Home equity  11,184  7,425  6,144  7,149  7,730
Residential real-estate  4,909  6,085  6,644  4,436  5,460
Premium finance receivables - commercial  9,550  8,587  9,082  11,389  14,106
Premium finance receivables - life insurance  342  354  222  --   73
Indirect consumer  320  191  446  438  615
Consumer and other  147  252  569  62  426
Total non-accrual loans  146,610  133,239  125,891  124,199  126,130
           
Total non-performing loans:          
Commercial  26,307  16,860  19,444  17,840  15,331
Commercial real-estate  95,998  93,963  83,340  85,232  83,584
Home equity  11,184  7,425  6,144  7,149  7,751
Residential real-estate  4,909  6,085  6,644  4,436  5,460
Premium finance receivables - commercial  15,869  16,683  15,935  17,739  21,585
Premium finance receivables - life insurance  342  354  1,444  1,923  5,523
Indirect consumer  630  509  801  1,017  1,280
Consumer and other  148  253  571  65  446
Total non-performing loans  $ 155,387  $ 142,132  $ 134,323  $ 135,401  $ 140,960
Other real estate owned  85,290  71,214  76,654  86,420  89,009
Total non-performing assets  $ 240,677  $ 213,346  $ 210,977  $ 221,821  $ 229,969
           
Total non-performing loans by category as a percent of its own respective category's period-end balance:          
Commercial  1.36%  0.82%  1.00%  0.98%  0.88%
Commercial real-estate  2.86  2.81  2.50  2.55  2.51
Home equity  1.25  0.81  0.67  0.78  0.84
Residential real-estate  1.42  1.72  1.94  1.33  1.69
Premium finance receivables - commercial  1.19  1.32  1.20  1.32  1.64
Premium finance receivables - life insurance  0.02  0.02  0.10  0.14  0.45
Indirect consumer  1.20  0.99  1.42  1.47  1.54
Consumer and other  0.15  0.24  0.57  0.07  0.42
Total loans  1.63%  1.48%  1.42%  1.45%  1.55%
           
Total non-performing assets as a percentage of total assets 1.71% 1.53% 1.50% 1.62% 1.79%
           
Allowance for loan losses as a percentage total non-performing loans 74.04% 80.14% 82.21% 78.69% 72.64%
 
CONTACT: Edward J. Wehmer, President & Chief Executive Officer
         David A. Dykstra, Senior Executive Vice President
         & Chief Operating Officer
         (847) 615-4096
         Web site address: www.wintrust.com

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