News Details

ROSEMONT, Ill., July 15, 2015 (GLOBE NEWSWIRE) -- Wintrust Financial Corporation ("Wintrust" or "the Company") (Nasdaq:WTFC) announced net income of $43.8 million or $0.85 per diluted common share for the second quarter of 2015 compared to net income of $39.1 million or $0.76 per diluted common share for the first quarter of 2015 and $38.5 million or $0.76 per diluted common share for the second quarter of 2014. The Company recorded net income of $82.9 million or $1.61 per diluted common share for the first six months of 2015 compared to net income of $73.0 million or $1.44 per diluted common share for the same period of 2014.

Highlights compared with the First Quarter of 2015*:

• Total loans, excluding covered loans and mortgage loans held-for-sale, increased by $561 million, or 15% on annualized basis, to $15.5 billion
• Total deposits increased by $144 million, or 3% on an annualized basis, to $17.1 billion
• Net interest income increased $5.0 million primarily due to strong loan growth in the quarter
• Mortgage banking revenue increased by $8.2 million to $36.0 million
• Non-performing loans as a percentage of total loans, excluding covered loans, decreased to 0.49% from 0.55% and the allowance for loan losses as a percentage of total non-performing loans, excluding covered loans, increased to 131% from 116%
• Maintained strong capital ratios with a tangible common equity ratio, assuming full conversion of convertible preferred stock, of 8.4%
• Acquisition-related expenses increased by $385,000 to $1.1 million
• Completed issuance of perpetual preferred stock resulting in estimated net proceeds of $120.8 million
• Opened new banking location in Kenosha, Wisconsin

* See "Supplemental Financial Measures/Ratios" on page 14/15 for more information on non-GAAP measures.

Edward J. Wehmer, President and Chief Executive Officer, commented, "All aspects of our business performed solidly in the second quarter as evidenced by the quarter-over-quarter and year-to-date double digit earnings growth. We reported record net income of $43.8 million for the second quarter of 2015, a 12% increase over the first quarter of 2015 and a 14% increase over the second quarter of 2014. On a year-to-date basis, we reported net income of $82.9 million, a 13% increase over the $73.0 million recorded for the first half of 2014. Continued strong loan growth and mortgage banking operations, a stable net interest margin, improved credit quality metrics and improved net overhead ratio fueled the record results in this quarter."

Mr. Wehmer continued, "We experienced balanced loan growth among all of our loan categories. Excluding covered loans and mortgage loans held-for-sale, loans grew $561 million, or 15% on an annualized basis, over the first quarter of 2015. Our loan pipelines remain consistently strong. Our loan-to-deposit ratio of 92.8% exceeded our stated goal of 85% to 90% during the quarter in order to accommodate the additional liquidity we receive when we close on the three previously announced bank acquisitions. The first of these, North Bank, closed on July 1, 2015 and the remainder are expected to close in the next thirty days. Deposits in the second quarter of 2015 increased $144 million with demand deposits now comprising 23% of our overall deposit base."

Commenting on credit quality, Mr. Wehmer noted, "The Company has continued its practice of timely addressing and resolving non-performing credits during the current quarter, resulting in non-performing loans decreasing to $76.6 million. The allowance for loan losses as a percentage of non-performing loans, excluding covered loans, increased to 131% during the quarter, exhibiting greater coverage for non-performing credits. Additionally, low net charge-offs continued in the current quarter with net charge-offs totaling $3.9 million, while our provision for credit losses increased compared to recent quarters as a result of the strong loan growth during the current quarter. Overall, credit quality metrics improved during the period, continuing to rival the pre-credit crisis levels experienced between 2005 and 2008. We believe that the Company's reserves remain appropriate."

Mr. Wehmer further commented, "Our mortgage banking business continued its positive momentum in the second quarter resulting in an increase in mortgage banking revenue of $8.2 million as compared to the first quarter of 2015. The increase in mortgage banking revenue was primarily a result of higher origination volumes in the current quarter as purchase originations increased due to activity during the traditional spring purchase market. We believe that our mortgage banking business remains well positioned to grow both organically and through acquisitions."

Turning to the future, Mr. Wehmer stated, "Wintrust is continuing on its stated approach of consistent and steady growth in all pertinent financial metrics and the franchise itself. In the third quarter we expect to add nearly a billion dollars of assets to the balance sheet through the closing of our previously announced acquisitions. These acquisitions will result in material cost savings opportunities which will allow us to leverage our existing infrastructure. During the second quarter we raised additional capital to support our continued growth. Acquisition opportunities exist in all areas of our business. We also expect to continue organic growth at historical levels. During the second quarter we opened one branch and have several more under development. Loan pipelines remain strong and we are very well positioned from an interest rate sensitivity standpoint. In short, we believe we are advantageously situated to achieve our financial goals and our goal of becoming Chicago's bank and Wisconsin's bank."

The graphs below illustrate certain highlights of the second quarter of 2015.

Graphs accompanying this release are available at http://media.globenewswire.com/cache/11955/file/35635.pdf

Wintrust's key operating measures and growth rates for the second quarter of 2015, as compared to the sequential and linked quarters, are shown in the table below:

(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)     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)     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 "Financial Highlights."

Financial Performance Overview – Second Quarter 2015

For the second quarter of 2015, net interest income totaled $156.9 million, an increase of $5.0 million as compared to the first quarter of 2015 and an increase of $7.7 million as compared to the second quarter of 2014. The changes in net interest income on both a sequential and linked quarter basis are the result of the following:

• Net interest income increased $5.0 million in the second quarter of 2015 compared to the first quarter of 2015, due to: 
  
  
  • An increase in total interest income of $4.9 million resulting primarily from loan growth during the period and one additional day of interest, partially offset by a reduction in yield on the non-covered loan portfolios.
     
  • Interest expense decreased $117,000 primarily as a result of a reduction in wholesale borrowings and a two basis point decline in the rate on average interest bearing liabilities, partially offset by an increase in interest bearing deposits and one additional day in the quarter.
     
  • Combined, the increase in interest income of $4.9 million and the decrease in interest expense of $117,000 created the $5.0 million increase in net interest income.
     
• Net interest income increased $7.7 million in the second quarter of 2015 compared to the second quarter of 2014, due to:
  
  
  • Average loans, excluding covered loans, increased by $1.9 billion. The growth in average loans, excluding covered loans, was partially offset by a 22 basis point decline in the yield on earning assets, resulting in an increase in total interest income of $8.7 million.
     
  • An increase in interest bearing deposits, the issuance of subordinated notes at the end of the second quarter of 2014 and the completion of the Canadian secured borrowing transaction at the end of the fourth quarter of 2014 was partially offset by a more favorable funding mix, resulting in a $979,000 increase in interest expense.
     
  • Combined, the increase in interest income of $8.7 million and the increase in interest expense of $979,000 created the $7.7 million increase in net interest income.

The net interest margin, on a fully taxable equivalent basis, for the second quarter of 2015 was 3.41% compared to 3.42% for the first quarter of 2015 and 3.62% for the second quarter of 2014. The reduction in net interest margin, on a fully taxable equivalent basis, compared to the second quarter of 2014 is primarily the result of a decline in loan yields (see "Net Interest Income" section later in this release for further detail).

Non-interest income totaled $77.0 million in the second quarter of 2015, increasing $12.5 million, or 19%, compared to the first quarter of 2015 and increasing $22.9 million, or 42%, compared to the second quarter of 2014. The increase in non-interest income in the second quarter of 2015 compared to the first quarter of 2015 is primarily attributable to higher mortgage banking revenue, the recognition of a $1.5 million bank owned life insurance ("BOLI") death benefit and lower FDIC indemnification asset amortization, partially offset by losses on the sale of available-for-sale securities. The increase in non-interest income in the second quarter of 2015 compared to the second quarter of 2014 was primarily attributable to an increase in mortgage banking revenues, fees from covered call options, the recognition of a $1.5 million BOLI death benefit and higher interest rate swap fees (see "Non-Interest Income" section later in this release for further detail). 

Non-interest expense totaled $154.3 million in the second quarter of 2015, increasing $7.0 million, or 5%, compared to the first quarter of 2015 and increasing $20.7 million, or 15%, compared to the second quarter of 2014. The increase in the current quarter compared to the first quarter of 2015 can be primarily attributed to higher commissions and incentive compensation, increased marketing expenses and higher professional fees, partially offset by a decrease in OREO expenses. The increase in the second quarter of 2015 compared to the second quarter of 2014 was primarily attributable to higher salary and employee benefit costs from increased salaries caused by the addition of employees from the various acquisitions and higher staffing levels as the Company grows as well as higher commissions and incentive compensation, increased occupancy, data processing and professional fees, and higher marketing expenses, partially offset by a decrease in OREO expenses (see "Non-Interest Expense" section later in this release for further detail).

Financial Performance Overview – First Six Months of 2015

For the first six months of 2015, net interest income totaled $308.8 million, an increase of $15.6 million as compared to the first six months of 2014 as a result of the following:

• Average earning assets increased by $1.9 billion, primarily comprised of average loan growth, excluding covered loans, of $1.8 billion and an increase of $161.4 million in the average balance of liquidity management assets, partially offset by a decrease of $100.7 million in the average balance of covered loans. The growth in average total loans, excluding covered loans, included an increase of $698.1 million in commercial loans, $436.0 million in life insurance premium finance receivables, $405.4 million in commercial real estate loans, $124.1 million in mortgage loans held-for-sale, $120.8 million in commercial premium finance receivables and $54.1 million in home equity and other loans.
   
• The average earning asset growth of $1.9 billion, partially offset by a 21 basis point decrease in yield on earning assets, resulted in an increase in total interest income of $17.7 million.
   
• Funding mix remained relatively consistent as average demand deposits increased $851.4 million, average interest bearing deposits increased $786.9 million and average wholesale borrowings increased $58.7 million. The increase in average interest bearing liabilities with no change in rate during the current period resulted in a $2.1 million increase in interest expense.
   
• Combined, the increase in interest income of $17.7 million and the increase in interest expense of $2.1 million created the $15.6 million increase in net interest income.

The net interest margin, on a fully taxable equivalent basis, for the first six months of 2015 was 3.42% compared to 3.61% for the first six months of 2014 (see "Net Interest Income" section later in this release for further detail).

Non-interest income totaled $141.6 million in the first six months of 2015, increasing $41.9 million, or 42%, compared to the first six months of 2014. The increase in non-interest income in the first six months of 2015 compared to the first six months of 2014 is primarily attributable to an increase in mortgage banking revenues, fees from covered call options, the recognition of a $1.5 million BOLI death benefit , increased service charges and higher fees on interest rate swap transactions (see "Non-Interest Income" section later in this release for further detail). 

Non-interest expense totaled $301.6 million in the first six months of 2015, increasing $36.7 million, or 14%, compared to the first six months of 2014. The increase in the first six months of 2015 compared to the first six months of 2014 was primarily attributable to higher salary and employee benefit costs from increased salaries caused by the addition of employees from the various acquisitions and larger staffing as the Company grows as well as higher commissions and incentive compensation, and increased equipment, occupancy, data processing and professional fees, and increased marketing expenses, partially offset by a decrease in OREO expenses (see "Non-Interest Expense" section later in this release for further detail).

Financial Performance Overview – Credit Quality

The ratio of non-performing assets to total assets was 0.57% as of June 30, 2015, compared to 0.61% at March 31, 2015, and 0.79% at June 30, 2014. Non-performing assets, excluding covered assets, totaled $118.9 million at June 30, 2015, compared to $124.3 million at March 31, 2015 and $148.5 million at June 30, 2014.

Non-performing loans, excluding covered loans, totaled $76.6 million, or 0.49% of total loans, at June 30, 2015, compared to $81.8 million, or 0.55% of total loans, at March 31, 2015 and $88.7 million, or 0.64% of total loans, at June 30, 2014. The decrease in non-performing loans, excluding covered loans, compared to March 31, 2015 is primarily the result of a $6.1 million decrease in the commercial real-estate portfolio. Compared to June 30, 2014, the decrease is primarily the result of a $12.7 million decrease in the commercial real-estate loan portfolio and a $1.1 million decrease in the commercial loan portfolio. OREO, excluding covered OREO, of $42.1 million at June 30, 2015 decreased $177,000 compared to $42.3 million at March 31, 2015 and decreased $17.5 million compared to $59.6 million at June 30, 2014.

The provision for credit losses, excluding the provision for covered loan losses, totaled $9.7 million for the second quarter of 2015 compared to $6.2 million for the first quarter of 2015 and $6.8 million for the second quarter of 2014. The higher provision for credit losses in the second quarter of 2015 compared to both periods was partly due to the $560.6 million in loan growth, excluding covered loans and mortgage loans held-for-sale, during the current period.

Net charge-offs as a percentage of loans, excluding covered loans, for the second quarter of 2015 totaled ten basis points on an annualized basis compared to eight basis points on an annualized basis in the first quarter of 2015 and 19 basis points on an annualized basis in the second quarter of 2014. Net charge-offs totaled $3.9 million in the second quarter of 2015, a $771,000 increase from $3.1 million in the first quarter of 2015 and a $2.7 million decrease from $6.6 million in the second quarter of 2014. Compared to the second quarter of 2014, net charge-offs decreased primarily as a result of a $3.0 million and $1.2 million decrease in net charge-offs within the commercial real-estate and commercial loan portfolios, respectively, partially offset by a $1.2 million increase in net charge-offs within the home equity loan portfolio.

Excluding the allowance for covered loan losses, the allowance for credit losses at June 30, 2015 totaled $101.1 million, or 0.65% of total loans, compared to $95.3 million, or 0.64% of total loans, at March 31, 2015 and $93.1 million, or 0.68% of total loans, at June 30, 2014. The allowance for unfunded lending-related commitments totaled $884,000 as of June 30, 2015 compared to $888,000 as of March 31, 2015 and $884,000 as of June 30, 2014.

Financial Performance Overview – Earnings Per Share

The following table shows the computation of basic and diluted earnings per share for the periods indicated:

Potentially dilutive common shares can result from stock options, restricted stock unit awards, stock warrants, the Company's convertible preferred stock and shares to be issued under the Employee Stock Purchase Plan and the Directors Deferred Fee and Stock Plan, being treated as if they had been either exercised or issued, computed by application of the treasury stock method. While potentially dilutive common shares are typically included in the computation of diluted earnings per share, potentially dilutive common shares are excluded from this computation in periods in which the effect would reduce the loss per share or increase the income per share. For diluted earnings per share, net income applicable to common shares can be affected by the conversion of the Company's convertible preferred stock. Where the effect of this conversion would reduce the loss per share or increase the income per share, net income applicable to common shares is not adjusted by the associated preferred dividends.

(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. As of January 1, 2015 capital ratios are calculated under the requirements of Basel III.
(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) Total shareholders' equity minus preferred stock and total intangible assets divided by total assets minus total intangible assets.
(8) Asset quality ratios exclude covered loans.

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 return on average tangible common equity. Management believes that these measures and ratios provide users of the Company's financial information a more meaningful view of the performance of the 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. The Company references the return on average tangible common equity as a measurement of profitability.

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 five quarters.

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 second quarter of 2015 compared to the first quarter of 2015 (sequential quarters) and second quarter of 2014 (linked quarters), respectively:

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 six months ended June 30, 2015 compared to the six months ended June 30, 2014:

Interest Rate Sensitivity

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

The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases of 100 and 200 basis points and a decrease of 100 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management's projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months. Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenario at June 30, 2015, March 31, 2015 and June 30, 2014 is as follows:

These results indicate that the Company has positioned its balance sheet to benefit from a rise in interest rates. This analysis also indicates that the Company would benefit to a greater magnitude should a rise in interest rates be significant (i.e., 200 basis points) and immediate (Static Shock Scenario).

NON-INTEREST INCOME

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

The significant changes in non-interest income for the quarter ended June 30, 2015 compared to the quarters ended March 31, 2015 and June 30, 2014 are discussed below.

Wealth management revenue totaled $18.5 million in the second quarter of 2015 compared to $18.1 million in the first quarter of 2015, an increase of 2%, and $18.2 million in the second quarter of 2014, an increase of 1%. The increase during the current period as compared to prior quarters is primarily attributable to growth in assets under management due to new customers, as well as market appreciation. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors and the brokerage commissions, managed money fees and insurance product commissions at Wayne Hummer Investments.

For the quarter ended June 30, 2015, mortgage banking revenue totaled $36.0 million, an increase of $8.2 million, or 30%, when compared to the first quarter of 2015, and an increase of $12.2 million, or 51%, when compared to the second quarter of 2014. The increase in mortgage banking revenue in the second quarter of 2015 as compared to the first quarter of 2015 and prior year period resulted primarily from higher origination volumes as a result of a favorable mortgage banking environment in the current quarter. Mortgage loans originated or purchased for sale were $1.2 billion in the current quarter as compared to $941.7 million in the first quarter of 2015 and $912.4 million in the second quarter of 2014. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. 

Service charges on deposit accounts totaled $6.5 million in the second quarter of 2015, an increase of $177,000 and $786,000 compared to the quarters ended March 31, 2015 and June 30, 2014, respectively. The increase in the current quarter is mostly a result of higher account analysis fees on deposit accounts which have increased as a result of the Company's commercial banking initiative.

Fees from covered call option transactions totaled $4.6 million for the second quarter 2015, compared to $4.4 million for the first quarter of 2015 and $1.2 million for the second quarter of 2014. The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has effectively entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio by using fees generated from these options to compensate for net interest margin compression. These option transactions are designed to mitigate overall interest rate risk and to increase the total return associated with holding certain investment securities and do not qualify as hedges pursuant to accounting guidance. Fees from covered call options increased in the current quarter primarily as a result of selling call options against a larger value of underlying securities resulting in higher premiums received by the Company. There were no outstanding call option contracts at June 30, 2015, March 31, 2015 and June 30, 2014.

The Company recognized $160,000 of trading gains in the second quarter of 2015 compared to trading losses of $477,000 in the first quarter of 2015 and trading losses of $743,000 in the second quarter of 2014. Trading gains and losses recorded by the Company primarily result from fair value adjustments related to interest rate derivatives not designated as accounting hedges, primarily interest rate cap instruments that the Company uses to manage interest rate risk, specifically in the event of future increases in short-term interest rates. The change in value of the cap derivatives reflects the present value of expected cash flows over the remaining life of the caps. These expected cash flows are derived from the expected path for and a measure of volatility for short-term interest rates.

Other non-interest income totaled $11.4 million in the second quarter of 2015 compared to $7.9 million in the first quarter of 2015 and $6.2 million in the second quarter of 2014. Other non-interest income increased in the second quarter of 2015 as compared to the first quarter of 2015 and prior year period, primarily due to an increase in swap fee revenues resulting from interest rate hedging transactions related to both customer-based trades and the related matched trades with inter-bank dealer counterparties as well as the recognition of a $1.5 million BOLI death benefit.

NON-INTEREST EXPENSE

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

The significant changes in non-interest expense for the quarter ended June 30, 2015 compared to the quarters ended March 31, 2015 and June 30, 2014 are discussed below.

Salaries and employee benefits expense increased $4.3 million, or 5%, in the second quarter of 2015 compared to the first quarter of 2015 primarily as a result of a $7.9 million increase in commissions and incentive compensation related to higher expenses on variable pay based arrangements, partially offset by a $3.4 million decrease in employee benefits resulting from lower payroll taxes. Salaries and employee benefits expense increased $12.5 million, or 15%, compared to the second quarter of 2014 primarily as a result of a $8.0 million increase in commissions and incentive compensation primarily attributable to higher expenses on variable pay based arrangements, a $3.3 million increase in salaries as a result of various acquisitions and additional staffing as the Company grows and a $1.2 million increase in employee benefits resulting from higher insurance costs.

Equipment expense totaled $7.9 million for the second quarter of 2015, an increase of $78,000 compared to the first quarter of 2015 and an increase of $691,000 compared to the second quarter of 2014. The increase in the current quarter compared to the prior year quarter is primarily related to increased software license fees. Equipment expense includes depreciation on equipment, maintenance and repairs, equipment rental and software license fees. 

Occupancy expense for the second quarter of 2015 was $11.4 million, a decrease of $950,000, or 8%, compared to the first quarter of 2015 and an increase of $1.6 million, or 16%, compared to the same period in 2014. Occupancy expense decreased in the current quarter compared to the prior quarter due to a reduction in utilities, maintenance and repair costs. The increase in the current quarter as compared to the prior year quarter is primarily the result of increased rent expense on leased properties as well as additional depreciation expenses on owned locations including those obtained in the Company's acquisitions. Occupancy expense includes depreciation on premises, real estate taxes, utilities and maintenance of premises, as well as net rent expense for leased premises.

Data processing expenses totaled $6.1 million in the second quarter of 2015 compared to $5.4 million recorded in the first quarter of 2015 and $4.5 million recorded in the second quarter of 2014. The amount of data processing expenses incurred increased when compared to prior periods due to overall growth of loan and deposit accounts as well as additional expenses recorded related to bank acquisition transactions.

Advertising and marketing expenses totaled $6.4 million in the second quarter of 2015, an increase of $2.5 million compared to the first quarter of 2015 and an increase of $2.8 million compared to the second quarter of 2014. The increase in the current quarter compared to the prior year quarter relates primarily to expenses for community-related advertisements and sponsorships. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities, the Company's various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the type of marketing programs utilized which are determined based on the market area, targeted audience, competition and various other factors.

Professional fees for the second quarter of 2015 were $5.1 million, compared to $4.7 million for the first quarter of 2015 and $4.0 million in the second quarter of 2014. The increase in professional fees in the current quarter as compared to the first quarter of 2015 and second quarter of 2014 is due to an increase in legal expenses, including legal fees incurred in connection with recent acquisitions. Professional fees include legal, audit and tax fees, external loan review costs and normal regulatory exam assessments.

OREO expense totaled $841,000 in the second quarter of 2015 compared to OREO expense of $1.4 million recorded in the first quarter of 2015 and $2.5 million recorded in the second quarter of 2014. OREO expense was lower in the current quarter compared to the quarter ended March 31, 2015 and June 30, 2014 primarily due to fewer negative valuation adjustments of OREO properties as well as higher gains recorded on non-covered OREO sales in the current quarter. OREO costs include all costs related to obtaining, maintaining and selling other real estate owned properties.    

Miscellaneous expense in the second quarter of 2015 increased $645,000, or 4%, compared to the quarter ended March 31, 2015 and increased $2.7 million, or 22%, compared to the quarter ended June 30, 2014. The increase in the current quarter as compared to the first quarter of 2015 is primarily due to increased donations as well as higher travel and entertainment expenses. Compared to the prior year quarter, miscellaneous expenses increased primarily as a result of higher travel and entertainment expenses and increased costs related to postage, insurance and operating losses. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors' fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses and lending origination costs that are not deferred. 

The non-interest expense categories previously discussed include expenses related to acquisitions. The following table presents the detail of these acquisition related expenses:

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 (separate liability account) relates to certain amounts that Wintrust is committed to lend but for which funds have not yet been disbursed. The provision for credit losses, 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).

The provision for credit losses, excluding the provision for covered loan losses, totaled $9.7 million for the second quarter of 2015 compared to $6.2 million for the first quarter of 2015 and $6.8 million for the second quarter of 2014. The higher provision for credit losses in the second quarter of 2015 compared to both periods was partly due to the $560.6 million in loan growth, excluding covered loans and mortgage loans held-for-sale, during the current period.

Net charge-offs as a percentage of loans, excluding covered loans, for the second quarter of 2015 totaled ten basis points on an annualized basis compared to eight basis points on an annualized basis in the first quarter of 2015 and 19 basis points on an annualized basis in the second quarter of 2014. Net charge-offs totaled $3.9 million in the second quarter of 2015, a $771,000 increase from $3.1 million in the first quarter of 2015 and a $2.7 million decrease from $6.6 million in the second quarter of 2014. Compared to the second quarter of 2014, net charge-offs decreased primarily as a result of a $3.0 million and $1.2 million decrease in net charge-offs within the commercial real-estate and commercial loan portfolios, respectively, partially offset by a $1.2 million increase in net charge-offs within the home equity loan portfolio.

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

The following table presents the provision for credit losses and allowance for credit losses by component for the periods presented:

The tables below summarize the calculation of allowance for loan losses for the Company's core loan portfolio and consumer, niche and purchased loan portfolio as of June 30, 2015 and March 31, 2015.

As part of a quarterly review performed by Management to determine if the Company's allowance for loan losses is appropriate, an analysis is prepared on the loan portfolio based upon a breakout of core loans and consumer, niche and purchased loans. A summary of the allowance for loan losses calculated for the loan components in both the core loan portfolio and the consumer, niche and purchased loan portfolio was shown on the previous pages as of June 30, 2015 and March 31, 2015.

The increase in the allowance for loan losses to core loans in the second quarter of 2015 compared to the first quarter of 2015 was attributable to an increase in required ASC 310 reserves (specific reserves) within the core portfolio.

As discussed within this section, credit quality metrics improved in the current quarter compared to the same quarter of last year including a reduction in the level of non-performing assets, increased allowance for loan losses coverage of non-performing loans and decreased net charge-offs. These current credit quality metrics are comparable to the pre-credit crisis levels reported between 2005 and 2008. However, we are able to carry a slightly lower ratio of allowance for loan losses to total loans than during the pre-credit crisis period as the result of the fact that the mix of the Company's loan portfolio is now more heavily weighted toward niche and purchased loans which historically require lower reserves. The niche and purchased components of our total loan portfolio now comprise 39% as compared to 23% of the total loan portfolio at December 31, 2005. Our current loan portfolio is comprised of a core portion totaling $9.4 billion with a 0.94% of allowance for loan losses and a niche and purchased component totaling $6.1 billion that only requires 0.19% of allowance for loan losses.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. In accordance with accounting guidance, credit deterioration on purchased loans is recorded as a credit discount at the time of purchase instead of as an increase to the allowance for loan losses. For analysis purposes, the Company has combined the non-accretable credit discounts recorded on purchased loans with the total allowance for loan losses in the previous tables to present the total credit reserves available on its loan portfolio. The total allowance for loan losses and non-accretable credit discounts on purchased loans was 0.74% of the total loan portfolio as of June 30, 2015 as compared to 0.74% as of March 31, 2015. The Company expects the total allowance for loan losses and non-accretable credit discounts on purchased loans to total loans ratio to increase in periods that have acquisitions and decrease in periods without acquisitions, based on the performance of the purchased loan portfolios.

The table below shows the aging of the Company's loan portfolio at June 30, 2015:

As of June 30, 2015, $21.0 million of all loans, excluding covered loans, or 0.1%, were 60 to 89 days past due and $52.2 million, or 0.3%, were 30 to 59 days (or one payment) past due. As of March 31, 2015, $26.2 million of all loans, excluding covered loans, or 0.2%, were 60 to 89 days past due and $88.3 million, or 0.6%, 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 June 30, 2015 that are current with regard to the contractual terms of the loan agreement represent 98.6% of the total home equity portfolio. Residential real estate loans at June 30, 2015 that are current with regards to the contractual terms of the loan agreements comprise 95.9% of total residential real estate loans outstanding, which includes purchased non-covered residential real-estate.

The table below shows the aging of the Company's loan portfolio at March 31, 2015:

Non-performing Assets, excluding covered assets

The following table sets forth Wintrust's non-performing assets and troubled debt restructurings ("TDRs") performing under the contractual terms of the loan agreement, excluding covered assets and non-covered PCI loans, at the dates indicated.