Attached files
| file | filename |
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| 8-K - 8-K - WINTRUST FINANCIAL CORP | a8-kq42019.htm |
| EX-99.1 - EXHIBIT 99.1 - WINTRUST FINANCIAL CORP | q42019exhibit991.htm |
Wintrust Financial Corporation Earnings Release Presentation Q4 2019
Q4 2019 Highlights Performance Highlights vs. Q3 2019 Expansion Activity (Q4 2019) • Completed the previously announced acquisition of SBC, Incorporated, the $86.0 million -$13.2 million parent company of Countryside Bank. Net Income Net Income • Completed the previously announced acquisition of STC Bancshares $1.44 -$0.25 Corp., the parent company of STC Capital Bank. Diluted EPS1 Diluted EPS1 • Opened two new branches in the Chicago suburbs located in Palatine and Maywood, Illinois. 0.96% -20 bps2 ROA3 ROA3 9.52% -190 bps2 ROE4 ROE4 Key Observations 1.53% +13 bps2 • Recorded quarterly net income of $86.0 million in Q4 2019. Net Overhead Ratio Net Overhead Ratio • Total period end loans were $663 million higher than average total loans in 66.82% +498 bps2 the current quarter. Efficiency Ratio (GAAP) Efficiency Ratio (GAAP) • Net interest income decreased by $3.0 million compared to the third quarter 66.56% +497 bps2 of 2019 as a 20 basis point decline in net interest margin was partially offset Efficiency Ratio (Non-GAAP5) Efficiency Ratio (Non-GAAP5) by the impact of a $1.5 billion increase in average earning assets. As of 12/31/2019 vs. 9/30/2019 • Recognized $7.8 million of provision for credit losses and $12.7 million of net charge-offs. The $12.7 million includes a $5.3 million charge-off of a $36.6 billion +$1.7 billion commercial loan, which was fully reserved for in prior quarters. Total Assets Total Assets • Announced approval of a stock buyback program which authorizes the $26.8 billion +$1.1 billion repurchase of up to $125 million in common shares. Total Loans Total Loans $30.1 billion +$1.4 billion Total Deposits Total Deposits 1 Diluted EPS: Net Income Per Common Share - Diluted 2 Bps: Basis Points 3 ROA: Return on Average Assets 4 ROE: Return on Average Common Equity 5See Non-GAAP reconciliation on pg. 12 2
Earnings Summary Condensed Income Statement Current Q Difference vs. Current Q Net Income & ROA ($ in Millions) Thousands ($) Q4 2019 Q3 2019 Q4 2018 $99.1 Net Interest Income $261,879 $(2,973) $7,791 $89.1 $86.0 $79.7 $81.5 Non-Interest Income $112,220 $(2,917) $36,912 Net Revenue $374,099 $(5,890) $44,703 1.16% 1.16% Non-Interest Expense $249,591 $15,037 $38,258 1.05% 1.02% Pre-Provision Net Revenue $124,508 $(20,927) $6,445 0.96% Provision For Credit Losses $7,826 $(3,008) $(2,575) Income Before Taxes $116,682 $(17,919) $9,020 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Income Tax Expense $30,718 $(4,762) $2,713 Net Income $85,964 $(13,157) $6,307 Net Income ROA Preferred Stock Dividends $2,050 $— $— Net Income Available to Common Shares $83,914 $(13,157) $6,307 Diluted EPS $1.44 $(0.25) $0.09 Diluted EPS Trend ROA 0.96% -20 bps -9 bps ROE 9.52% -190 bps -49 bps $1.69 Other Fourth Quarter Highlights $1.52 • Recorded a $2.8 million reduction to FDIC insurance expense in Q4 2019 $1.44 as compared to $3.9 million in Q3 2019 related to FDIC assessment credits. $1.35 $1.38 • Recorded an increase in value of mortgage servicing rights related to changes in fair value model assumptions, net of derivative contract activity held as an economic hedge, of $1.8 million. • Incurred acquisition related costs of $2.4 million in the fourth quarter of 2019 as compared to $1.3 million in the third quarter of 2019. • Recognized various non-operating charges totaling $5.4 million. This includes expenses related to a litigation settlement, loan remediation, Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 contingent consideration related to previous acquisitions of certain mortgage businesses, pension plan terminations, operating lease impairment Diluted EPS and losses on partnership investments. 3
Year-to-Date ("YTD") 2019 Highlights Difference vs. Prior Performance Highlights Condensed Income Statement Current YTD vs. 12/31/2018 YTD Year YTD (12/31/2019 YTD) Thousands ($) 12/31/2019 12/31/2018 Net Interest Income $1,054,919 $90,016 $355.7 million +$12.5 million Non-Interest Income $407,172 $51,022 Net Income Net Income Net Revenue $1,462,091 $141,038 $6.03 +$0.17 Non-Interest Expense $928,126 $102,038 Diluted EPS Diluted EPS Pre-Provision Net Revenue $533,965 $39,000 Provision For Credit Losses $53,864 $19,032 1.07% -11 bps Income Before Taxes $480,101 $19,968 ROA ROA Income Tax Expense $124,404 $7,437 Net Income $355,697 $12,531 10.41% -85 bps Preferred Stock Dividends $8,200 $— ROE ROE Net Income Available to Common Shares $347,497 $12,531 1.57% -5 bps Diluted EPS $6.03 $0.17 Net Overhead Ratio Net Overhead Ratio ROA 1.07% -11 bps 63.63% +123 bps ROE 10.41% -85 bps Efficiency Ratio (GAAP) Efficiency Ratio (GAAP) Key Observations 63.36% +123 bps 1 1 • Year over year growth as of December 31, 2019 has been as follows: Efficiency Ratio (Non-GAAP ) Efficiency Ratio (Non-GAAP ) ◦ Total assets - $5.4 billion or 17.2% As of 12/31/2019 vs. 12/31/2018 ◦ Total loans - $3.0 billion or 12.5% ◦ Total deposits - $4.0 billion or 15.4% $36.6 billion +$5.4 billion • Net Interest Margin (GAAP) is 3.45% for the twelve months of 2019 as Total Assets Total Assets compared to 3.59% over the same period in 2018. $26.8 billion +$3.0 billion • MSR valuation adjustments, net of gains on derivative contracts held as Total Loans Total Loans economic hedges, resulted in a $14.3 million loss in 2019 as compared to a $331,000 loss in 2018. These valuation adjustments are recorded in non- $30.1 billion +$4.0 billion interest income. Total Deposits Total Deposits 1 See Non-GAAP reconciliation on pg.12 4
Loan Portfolio Key Observations Total Loans ($ in Billions) • Total loans increased $1.1 billion from the prior quarter-end and $3.0 Year-over-Year Change billion as compared to the end of Q4 2018. $3.0B or 13% $26.8 $25.3 $25.7 • Q4 2019 loan growth included $164 million from the acquisition of $24.2 STC Capital Bancshares and $418 million from the acquisition of $23.8 SBC, Incorporated. 5.06% 5.07% 4.87% 4.93% • Before the impact of scheduled payments and prepayments, gross 4.69% commercial and commercial real estate loan pipelines were estimated to be approximately $1.0 billion to $1.1 billion at December 31, 2019. 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 When adjusted for the probability of closing, the pipelines were estimated to be approximately $650 million to $720 million at Total Loans Total Loan Yield December 31, 2019. Loan Composition (as of 12/31/2019) Total Loans as of 12/31/2019 vs. 9/30/2019 ($ in Millions) $20 19% $279 31% $136 $26,800 13% $572 $1 $(8) 5% 30% $90 2% $25,710 l l 19 ia ate ity ate ia nce her 19 /20 erc st qu st erc ra Ot /20 /30 m l E e E l E m su & /31 9 om ea m ea om In er 12 C al R Ho al R - C ife m rci nti les - L nsu me ide ab les Co om es eiv vab C R ec cei e R Re anc ce Fin an m Fin iu um rem mi P Pre 5
Deposit Portfolio Key Observations Total Deposits ($ in Billions) • Total deposits increased by $1.4 billion from the prior quarter-end. The Year-over-Year Change $4.0B or 15% total deposit growth was net of a reduction of $201 million in brokered $30.1 deposits to optimize our funding base. Non-brokered deposits now $28.7 comprise approximately 97% of total deposits. $27.5 $26.8 $26.1 1.43% • Q4 2019 deposit growth included $194 million from the acquisition of 1.29% 1.37% 1.33% STC Capital Bancshares and $496 million from the acquisition of SBC, 1.20% Incorporated. • Rate paid on interest bearing deposits decreased 10 basis points from 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 the prior quarter. • Non-interest bearing deposits increased $149 million from the prior Total Deposits Total Interest Bearing Deposit Rate quarter-end and comprise 24% of total deposits. Deposit Composition (as of 12/31/2019) Total Deposits as of 12/31/2019 vs. 9/30/2019 ($ in Millions) $263 $4 19% 24% $527 $30,107 11% 10% $327 26% 10% $127 $149 $28,710 s t s t 019 ing DA sit ke ng osi 019 /2 ear D po ar avi ep /2 /30 B ing De M S f D /31 9 est ar nt ey s o 12 ter Be me on te -In est ge M fica on ter na rti N In Ma Ce nd th e a eal Tim OW W N 6
Net Interest Margin 4.74% 4.74% 4.58% 4.53% 4.25% Net Interest Margin (Quarterly Trends) Net Interest Margin, Fully Taxable-Equivalent (Non-GAAP1) 3.63% 3.72% 3.64% 4.74% 4.74% 3.39% 4.58% 4.53% 3.19% 4.25% 3.39% 3.63% 3.72% 3.64% 3.70% 3.39% 3.61% 3.62% 3.19% 0.11% 3.37% 3.17% (0.03)% 3.19% 1.51% 1.56% 1.40% 1.45% 1.33% (0.28)% 1.56% 1.51% 9 ld te s 9 1.45% 201 ie Ra nd 201 1.40% 3 t Y ty Fu 4 1.33% Q sse ili ree Q g A iab t F 0.41% 0.42% in g L Ne 0.38% 0.38% 0.39% arn in E ear st B ere Int 0.38% 0.38% 0.41% 0.42% 0.39% Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Key Observations Net Interest Margin Net Free Funds Contribution Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 • Q4 2019 net interest income totaled $261.9 million. Earning Assets Yield Rate on Interest Bearing Liabilities ◦ A decrease of $3.0 million as compared to Q3 2019 and an Net Interest Margin (GAAP) increase of $7.8 million as compared to Q4 2018. Net Interest Margin, Fully Taxable-Equivalent (Non-GAAP)1 • Net interest margin decreased by 20 bps from the prior quarter: 4.74% 4.74% 4.58% Earning Assets Yield ◦ Earning assets yield down 28 bps 4.53% ◦ Interest bearing liability rate decreased 11 bps 4.25% Net Free Funds Contribution ◦ Net free funds decreased 3 bps Rate on Interest Bearing Liabilities 3.63% 3.72% 3.64% 1 See Non-GAAP reconciliation on pg. 12 7 3.39% 3.19% 3.70% 3.61% 3.62% 1.56% 1.51% 3.37% 1.45% 1.33% 1.40% 3.17% 0.38% 0.38% 0.41% 0.42% 0.39% Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Net Interest Margin (GAAP) Net Interest Margin (Non-GAAP) Earning Assets Yield Net Free Funds Contribution Rate on Interest Bearing Liabilities
Credit Quality Non-Performing Loans ("NPLs") ($ in Millions) Net Charge-Offs ("NCOs") ($ in Millions) 0.36% $113.2 $117.6 $113.4 $114.3 $117.6 $22.3 0.19% 0.48% 0.49% 0.15% 0.12% $12.7 0.45% 0.09% 0.44% 0.44% $9.4 $7.2 $5.1 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 NPL $ NPLs as a % of Total Loans Allowance for Loan Losses at Period-End ($ in Millions) Current Expected Credit Losses (CECL) • The Company estimates an increase to the allowance for credit losses $160.4 $161.8 $158.2 $156.8 $152.8 of approximately 30% to 50% at adoption related to its loan portfolios and related lending commitments. Approximately 80% of the 0.65% 0.64% estimated increase is related to: 0.63% 0.63% ◦ Additions to existing reserves for unfunded lending-related commitments due to the consideration under CECL of expected 0.59% utilization by the Company's borrowers over the life of such commitments. ◦ Establishment of reserves for acquired loans which previously 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 considered credit discounts. Total Allowance for Loan Losses The Company estimates an insignificant impact at adoption of measuring an allowance for credit losses for other in-scope assets (e.g. Total Allowance for Loan Losses as a % of Total Loans held-to-maturity debt securities). 8
Non-Interest Income Non-Interest Income ($ in Millions) Operating Lease Income, Net ($ in Millions) $12.5 $115.1 $112.2 $11.7 $12.0 $98.2 $18.2 $15.8 $10.9 $10.8 $81.7 $15.7 $10.0 $11.0 $75.3 $9.3 $12.0 $12.5 $8.4 $19.9 $11.7 $9.1 $8.8 $233.2 $10.9 $50.9 $47.9 $231.2 $10.8 $37.4 $230.1 $24.2 $18.2 $228.6 $22.7 $24.0 $24.1 $24.0 $25.0 $224.2 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Wealth Management Mortgage Banking Operating Lease Income, Net Operating Lease Income, net Service Charges on Deposits Lease Investments, Net (Period-End Balance) Other1 Wealth Management Revenue ($ in Millions) Key Observations • Non-interest income totaled $112.2 million: $24.1 $25.0 $22.7 $24.0 $24.0 ◦ A decrease of $2.9 million as compared to Q3 2019 and an $4.5 $4.8 $4.9 $5.0 $4.7 increase of $36.9 million as compared to Q4 2018. $19.5 $19.3 $19.3 $20.1 $17.7 • Mortgage banking revenue decreased $3.0 million as compared to $27.6 Q3 2019, primarily as a result of lower production revenues, $26.1 partially offset by an increase in the fair value of the mortgage $25.1 $25.9 $24.2 servicing rights portfolio. Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 • Wealth management income increased $1.0 million as compared to Q3 2019 primarily due to increased asset management revenue. Trust and Asset Management Brokerage 1 Other NII - includes Interest Rate Swap Fees, BOLI, Administrative Services, FX Assets Under Administration ($ in Billions) Remeasurement Gains/(Losses), Early Pay-Offs of Capital Leases, Gains/(losses) on investment securities, net, Fees from covered call options, Trading gains/(losses), net 9 and Miscellaneous.
Mortgage Banking Production Revenue ($ in Millions) MSR1 Value and Loans Serviced for Others ($ in Millions) $50.9 $40.9 $0.1 $47.9 $8,243 MSR - Payoffs/ $7,901 LOGIC IN $14.0 Paydowns $34.6 $7,515 $37.4 $14.5 $29.9 $7,014 $7.2 MSR - Change in $0.9 Fair Value Model $6,546 $85.6 MORTGAGE $9.8 $24.2 $3.8 Assumptions 2.88% $18.2 $5.2 $18.7 2.78% BANKING $9.7 Production $16.6 $75.2 $75.6 $6.6 Revenue 2.59% $72.9 2.45% $71.0 $4.9 $5.7 $40.9 $34.6 REVENUE Servicing Income $29.9 & Other Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 $18.6 $16.6 2.01% NEEDS TO BE MSR $2.3 Capitalization MSRs, at fair value Loans Serviced for Others $(4.1) $(7.2) $(6.8) Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 MODIFIED $(7.6) $(8.7) $(4.3) $(4.1) MSR Hedging Gains (Losses) % of MSRs to Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Production Revenue Production Margin Loans Serviced for Others 1.15% 1.01% 0.97% 0.96% 1.04% Originations for Sale (Quarterly $ in Millions) Key Observations • Mortgage banking production revenue decreased by $6.3 $1,420 $1,245 million as mortgage originations for sale totaled $1.2 billion $1,154 $456 in the fourth quarter of 2019 as compared to $1.4 billion in $928 the third quarter of 2019. $301 $51 $459 $175 $678 $183 $4 $289 $165 • Production margin declined from 2.88% in the third quarter $148 $913 of 2019 to 2.78% in the fourth quarter of 2019. $670 $782 $464 $365 • Origination volume mix in Q4 2019: Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 ◦ 40% Purchases / 60% Refinances • As compared to origination volume mix in Q3 2019: Retail Originations Correspondent Originations ◦ 48% Purchases / 52% Refinances Veterans First Originations 1 MSR: Mortgage Servicing Right 10
Non-Interest Expense Trending Non-Interest Expense ($ in Millions) Expense Management Ratios $249.6 1.79% $229.6 $234.6 1.72% $34.5 Salaries and $211.3 $214.4 $28.5 Employee Benefits 1.64% $33.2 $7.6 $6.5 $7.7 $26.1 $29.4 $6.2 $8.0 $9.8 Equipment 1.53% $8.4 $7.5 $6.2 $8.9 $12.5 $5.6 $8.8 $13.4 $9.3 $12.8 $17.1 Occupancy, net $8.5 $8.3 $15.0 1.40% $9.4 $9.9 $15.9 66.56% $16.2 $13.3 $14.5 $16.0 $12.8 Advertising and $11.5 $11.8 Marketing 63.35% 62.89% Operating Lease 62.34% Equipment 61.59% $133.7 $141.0 $145.9 $122.1 $125.7 Professional Fees Data Processing Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Other 1 2 3 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Net Overhead Ratio Efficiency Ratio (Non-GAAP) Non-Interest Expense - Current Quarter vs. Prior Quarter Q4 2019 Key Observations ($ in Millions) • Salary and employee benefits increase $4.6 $249.6 $1.0 $1.2 comprised of: $4.9 $1.2 $2.1 $234.6 ◦ $4.8 million in salaries primarily due to increased staffing as the Company grows and acquisition related costs ◦ $159,000 of benefits expense • Occupancy increased $2.1 million primarily 9 ts t et g e s 9 01 fi en n in nc se 01 2 e m y, ss a en 2 3 en ip c ce ur p 4 due to increased expenses due to acquired Q B u an o s x Q ee q p pr In E y E cu a C er locations, property tax expense and rental lo c at I th p O D FD O Em ll expense. d A an es • Equipment increased $1.2 million primarily ri la Sa due to software depreciation expenses. 3 1 Other NIE - includes amortization of other intangible assets, FDIC insurance, OREO 2 Net Overhead Ratio - The net overhead ratio is calculated by netting total non- See Non-GAAP reconciliation expense, net, Commissions (3rd Party Brokers), Postage and Miscellaneous interest expense and total non-interest income, annualizing this amount, and dividing on pg.12 by that period's average total assets. A lower ratio indicates a higher degree of 11 efficiency.
Non-GAAP Reconciliation Three Months Ended Years Ended Reconciliation of Non-GAAP Net December 31, September 30, June 30, March 31, December 31, December 31, December 31, Interest Margin and Efficiency Ratio: 2019 2019 2019 2019 2018 2019 2018 (A) Interest Income (GAAP) $ 349,731 $ 354,627 $ 346,814 $ 333,970 $ 320,596 $ 1,385,142 $ 1,170,810 Taxable-equivalent adjustment: - Loans 892 978 1,031 1,034 980 3,935 3,403 - Liquidity Management Assets 573 574 568 565 586 2,280 2,258 - Other Earning Assets 1 5 1 2 4 9 11 (B) Interest Income (non-GAAP) $ 351,197 $ 356,184 $ 348,414 $ 335,571 $ 322,166 $ 1,391,366 $ 1,176,482 (C) Interest Expense (GAAP) $ 87,852 $ 89,775 $ 80,612 $ 71,984 $ 66,508 $ 330,223 $ 205,907 (D) Net Interest Income (GAAP) (A minus C) $ 261,879 $ 264,852 $ 266,202 $ 261,986 $ 254,088 $ 1,054,919 $ 964,903 (E) Net Interest Income (non-GAAP) (B minus C) $ 263,345 $ 266,409 $ 267,802 $ 263,587 $ 255,658 $ 1,061,143 $ 970,575 Net interest margin (GAAP) 3.17% 3.37% 3.62% 3.70% 3.61% 3.45% 3.59% Net interest margin, fully taxable-equivalent (non- GAAP) 3.19% 3.39% 3.64% 3.72% 3.63% 3.47% 3.61% (F) Non-interest income $ 112,220 $ 115,137 $ 98,158 $ 81,657 $ 75,308 $ 407,172 $ 356,150 (G) Gains (losses) on investment securities, net 587 710 864 1,364 (2,649) 3,525 (2,898) (H) Non-interest expense 249,591 234,554 229,607 214,374 211,333 928,126 826,088 Efficiency ratio (H/(D+F-G)) 66.82% 61.84% 63.17% 62.63% 63.65% 63.63% 62.40% Efficiency ratio (non-GAAP) (H/(E+F-G)) 66.56% 61.59% 62.89% 62.34% 63.35% 63.36% 62.13% 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. Management believes that these measures and ratios provide users of the Company’s financial information a more meaningful view of the performance of the Company's interest-earning assets and interest-bearing liabilities and of the Company’s operating efficiency. Other financial holding companies may define or calculate these measures and ratios differently. 12
Forward-Looking Statements This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 2018 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following: 1) economic conditions that affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates; 2) negative effects suffered by us or our customers resulting from changes in U.S. trade policies; 3) the extent of defaults and losses on the Company’s loan portfolio, which may require further increases in its allowance for credit losses; 4) estimates of fair value of certain of the Company’s assets and liabilities, which could change in value significantly from period to period; 5) the financial success and economic viability of the borrowers of our commercial loans; 6) commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin; 7) the extent of commercial and consumer delinquencies and declines in real estate values, which may require further increases in the Company’s allowance for loan and lease losses; 8) inaccurate assumptions in our analytical and forecasting models used to manage our loan portfolio; 9) 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; 10) competitive pressures in the financial services business which may affect the pricing of the Company’s loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products; 11) failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of the Company’s recent or future acquisitions; 12) unexpected difficulties and losses related to FDIC-assisted acquisitions; 13) harm to the Company’s reputation; 14) any negative perception of the Company’s financial strength; 15) ability of the Company to raise additional capital on acceptable terms when needed; 16) disruption in capital markets, which may lower fair values for the Company’s investment portfolio; 17) ability of the Company to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations and to manage risks associated therewith; 18) failure or breaches of our security systems or infrastructure, or those of third parties; 19) security breaches, including denial of service attacks, hacking, social engineering attacks, malware intrusion or data corruption attempts and identity theft; 20) adverse effects on our information technology systems resulting from failures, human error or cyberattacks; 21) adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors; 22) increased costs as a result of protecting our customers from the impact of stolen debit card information; 23) accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions; 24) ability of the Company to attract and retain senior management experienced in the banking and financial services industries; 25) environmental liability risk associated with lending activities; 26) the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation; 27) losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith; 28) the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank; 29) the soundness of other financial institutions; 30) the expenses and delayed returns inherent in opening new branches and de novo banks; 31) examinations and challenges by tax authorities, and any unanticipated impact of the Tax Act; 32) changes in accounting standards, rules and interpretations such as the new CECL standard, and the impact on the Company’s financial statements; 33) the ability of the Company to receive dividends from its subsidiaries; 34) uncertainty about the discontinued use of LIBOR and transition to an alternative rate; 35) a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise; 36) legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies; 37) a lowering of our credit rating; 38) changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet as a result of the end of its program of quantitative easing or otherwise; 39) 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; 40) increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory environment; 41) the impact of heightened capital requirements; 42) increases in the Company’s FDIC insurance premiums, or the collection of special assessments by the FDIC; 43) delinquencies or fraud with respect to the Company’s premium finance business; 44) credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans; 45) the Company’s ability to comply with covenants under its credit facility; and 46) fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation. Therefore, there can be no assurances that future actual results will correspond to these forward-looking statements. The reader is cautioned not to place undue reliance on any forward-looking statement made by the Company. Any such statement speaks only as of the date the statement was made or as of such date that may be referenced within the statement. The Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events after the date of this presentation. 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. 13