0001015328 srt:WeightedAverageMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MeasurementInputDiscountRateMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q



þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2020



¨☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35077

_____________________________________

WINTRUST FINANCIAL ~~CORPORATION~~CORPORATION

(Exact name of registrant as specified in its charter)



Illinois	36-3873352
(State of incorporation or organization)	(I.R.S. Employer Identification No.)

9700 W. Higgins Road, Suite 800

Rosemont, Illinois60018

(Address of principal executive offices)

~~(847)~~ (847) 939-9000

(Registrant’s telephone number, including area code)

~~______________________________________~~



Title of Each Class	Ticker Symbol	Name of Each Exchange on Which Registered
Common Stock, no par value	WTFC	The NASDAQ Global Select Market
Series D Preferred Stock, no par value	WTFCM	The NASDAQ Global Select Market
Depositary Shares, Each Representing a 1/1,000^thInterest in a Share of	WTFCP	The NASDAQ Global Select Market
6.875% Fixed-Rate Reset Non-Cumulative Perpetual Series E Preferred Stock, no par value

____________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ☑ No ¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesþ☑ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	þ☑		Accelerated filer	¨☐
Non-accelerated filer	¨☐	(Do not check if a smaller reporting company)	Smaller reporting company	¨☐
Emerging growth company	¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No þ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock — no par value, ~~55,923,249~~57,600,765 shares, as of ~~October~~July 31, ~~2017~~2020

TABLE OF CONTENTS



		Page
	PART I. — FINANCIAL INFORMATION
ITEM 1.	Financial Statements	1
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5654
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risks	9593
ITEM 4.	Controls and Procedures	9795
	PART II. — OTHER INFORMATION
ITEM 1.	Legal Proceedings	9896
ITEM 1A.	Risk Factors	98
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	99100
ITEM 3.	Defaults Upon Senior Securities	NA
ITEM 4.	Mine Safety Disclosures	NA
ITEM 5.	Other Information	NA
ITEM 6.	Exhibits	99101
	Signatures	~~100~~
	~~Index of Exhibits~~	~~101~~102

PART I

ITEM 1. FINANCIAL STATEMENTS

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION	WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION									WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION

	(Unaudited)						(Unaudited)			(Unaudited)						(Unaudited)
(In thousands, except share data)	September 30, 2017			December 31, 2016			September 30, 2016			June 30, 2020			December 31, 2019			June 30, 2019
Assets
Cash and due from banks	$	251,896		$	267,194		$	242,825		$	344,999		$	286,167		$	300,934
Federal funds sold and securities purchased under resale agreements	56			2,851			4,122			58			309			58
Interest bearing deposits with banks	1,218,728			980,457			816,104			4,015,072			2,164,560			1,437,105
Available-for-sale securities, at fair value	1,665,903			1,724,667			1,650,096			3,194,961			3,106,214			2,186,154
Held-to-maturity securities, at amortized cost ($807.0 million, $607.6 million and $942.7 million fair value at September 30, 2017, December 31, 2016 and September 30, 2016 respectively)	819,340			635,705			932,767
Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $65 at June 30, 2020 ($744.3 million, $1.1 billion and $1.2 billion fair value at June 30, 2020, December 31, 2019 and June 30, 2019 respectively)										728,465			1,134,400			1,191,634
Trading account securities	643			1,989			1,092			890			1,068			2,430
Equity securities with readily determinable fair value										52,460			50,840			44,319
Federal Home Loan Bank and Federal Reserve Bank stock	87,192			133,494			129,630			135,571			100,739			92,026
Brokerage customer receivables	23,631			25,181			25,511			14,623			16,573			13,569
Mortgage loans held-for-sale	370,282			418,374			559,634
Loans, net of unearned income, excluding covered loans	20,912,781			19,703,172			19,101,261
Covered loans	46,601			58,145			95,940
Total loans	20,959,382			19,761,317			19,197,201
Mortgage loans held-for-sale, at fair value										833,163			377,313			394,975
Loans, net of unearned income										31,402,903			26,800,290			25,304,659
Allowance for loan losses	(133,119		)	(122,291		)	(117,693		)	(313,510		)	(156,828		)	(160,421		)
Allowance for covered loan losses	(758		)	(1,322		)	(1,422		)
Net loans	20,825,505			19,637,704			19,078,086			31,089,393			26,643,462			25,144,238
Premises and equipment, net	609,978			597,301			597,263			769,909			754,328			711,214
Lease investments, net	193,828			129,402			116,355			237,040			231,192			230,111
Accrued interest receivable and other assets	580,612			593,796			660,923			1,437,832			1,061,141			1,023,896
Trade date securities receivable	189,896			—			677			—			—			237,607
Goodwill	502,021			498,587			485,938			644,213			645,220			584,911
Other intangible assets	18,651			21,851			20,736			41,368			47,057			46,588
Total assets	$	27,358,162		$	25,668,553		$	25,321,759		$	43,540,017		$	36,620,583		$	33,641,769
Liabilities and Shareholders’ Equity
Deposits:
Non-interest bearing	$	6,502,409		$	5,927,377		$	5,711,042		$	10,204,791		$	7,216,758		$	6,719,958
Interest bearing	16,392,654			15,731,255			15,436,613			25,447,083			22,890,380			20,798,857
Total deposits	22,895,063			21,658,632			21,147,655			35,651,874			30,107,138			27,518,815
Federal Home Loan Bank advances	468,962			153,831			419,632			1,228,416			674,870			574,823
Other borrowings	251,680			262,486			241,366			508,535			418,174			418,057
Subordinated notes	139,052			138,971			138,943			436,298			436,095			436,021
Junior subordinated debentures	253,566			253,566			253,566			253,566			253,566			253,566
Trade date securities payable	880			—			—
Accrued interest payable and other liabilities	440,034			505,450			446,123			1,471,110			1,039,490			993,537
Total liabilities	24,449,237			22,972,936			22,647,285			39,549,799			32,929,333			30,194,819
Shareholders’ Equity:
Preferred stock, no par value; 20,000,000 shares authorized:
Series C - $1,000 liquidation value; no shares issued and outstanding at September 30, 2017, and 126,257 shares issued and outstanding at December 31, 2016 and September 30, 2016, respectively	—			126,257			126,257
Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at September 30, 2017, December 31, 2016 and September 30, 2016, respectively	125,000			125,000			125,000
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at September 30, 2017, December 31, 2016 and September 30, 2016; 55,939,801 shares issued at September 30, 2017, 51,978,289 shares issued at December 31, 2016 and 51,811,204 shares issued at September 30, 2016	55,940			51,978			51,811
Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at June 30, 2020, December 31, 2019 and June 30, 2019										125,000			125,000			125,000
Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at June 30, 2020 and no shares issued and outstanding at December 31, 2019 and June 30, 2019										287,500			—			—
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at June 30, 2020, December 31, 2019 and June 30, 2019; 58,294,456 shares issued at June 30, 2020, 57,950,803 shares issued at December 31, 2019 and 56,794,328 shares issued at June 30, 2019										58,294			57,951			56,794
Surplus	1,519,596			1,365,781			1,356,759			1,643,864			1,650,278			1,569,969
Treasury stock, at cost, 101,738 shares at September 30, 2017, 97,749 shares at December 31, 2016, and 96,521 shares at September 30, 2016	(4,884		)	(4,589		)	(4,522		)
Treasury stock, at cost, 720,784 shares at June 30, 2020, 128,912 shares at December 31, 2019, and 126,482 shares at June 30, 2019										(44,891		)	(6,931		)	(6,650		)
Retained earnings	1,254,759			1,096,518			1,051,748			1,921,048			1,899,630			1,747,266
Accumulated other comprehensive loss	(41,486		)	(65,328		)	(32,579		)	(597		)	(34,678		)	(45,429		)
Total shareholders’ equity	2,908,925			2,695,617			2,674,474			3,990,218			3,691,250			3,446,950
Total liabilities and shareholders’ equity	$	27,358,162		$	25,668,553		$	25,321,759		$	43,540,017		$	36,620,583		$	33,641,769

See accompanying notes to unaudited consolidated financial statements.

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

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands, except per share data)	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Interest income
Interest and fees on loans	$	227,120		$	190,189		$	639,143		$	541,846		$	294,746		$	309,161		$	596,585		$	606,148
Mortgage loans held-for-sale													4,764			3,104			7,929			5,313
Interest bearing deposits with banks	3,272			1,156			6,529			2,695			1,310			5,206			6,078			10,506
Federal funds sold and securities purchased under resale agreements	—			1			2			3			16			—			102			—
Investment securities	16,058			15,496			45,155			49,084			27,105			27,721			59,572			55,677
Trading account securities	8			18			23			43			13			5			20			13
Federal Home Loan Bank and Federal Reserve Bank stock	1,080			1,094			3,303			3,143			1,765			1,439			3,342			2,794
Brokerage customer receivables	150			195			473			630			97			178			255			333
Total interest income	247,688			208,149			694,628			597,444			329,816			346,814			673,883			680,784
Interest expense
Interest on deposits	23,655			15,621			58,396			41,996			50,057			67,024			117,492			128,000
Interest on Federal Home Loan Bank advances	2,151			2,577			6,674			8,447			4,934			4,193			8,294			6,643
Interest on other borrowings	1,482			1,137			3,770			3,281			3,436			3,525			6,982			7,158
Interest on subordinated notes	1,772			1,778			5,330			5,332			5,506			2,806			10,978			4,581
Interest on junior subordinated debentures	2,640			2,400			7,481			6,973			2,752			3,064			5,563			6,214
Total interest expense	31,700			23,513			81,651			66,029			66,685			80,612			149,309			152,596
Net interest income	215,988			184,636			612,977			531,415			263,131			266,202			524,574			528,188
Provision for credit losses	7,896			9,571			21,996			26,734			135,053			24,580			188,014			35,204
Net interest income after provision for credit losses	208,092			175,065			590,981			504,681			128,078			241,622			336,560			492,984
Non-interest income
Wealth management	19,803			19,334			59,856			56,506			22,636			24,139			48,577			48,116
Mortgage banking	28,184			34,712			86,061			93,254			102,324			37,411			150,650			55,569
Service charges on deposit accounts	8,645			8,024			25,606			23,156			10,420			9,277			21,685			18,125
Gains on investment securities, net	39			3,305			31			6,070
Gains (losses) on investment securities, net													808			864			(3,551		)	2,228
Fees from covered call options	1,143			3,633			2,792			9,994			—			643			2,292			2,427
Trading losses, net	(129		)	(432		)	(869		)	(916		)	(634		)	(44		)	(1,085		)	(215		)
Operating lease income, net	8,461			4,459			21,048			11,270			11,785			11,733			23,769			22,529
Other	13,585			13,569			43,943			40,821			14,654			14,135			32,898			31,036
Total non-interest income	79,731			86,604			238,468			240,155			161,993			98,158			275,235			179,815
Non-interest expense
Salaries and employee benefits	106,251			103,718			312,069			300,423			154,156			133,732			290,918			259,455
Equipment	9,947			9,449			28,858			27,523			15,846			12,759			30,680			24,529
Operating lease equipment depreciation	6,794			3,605			17,092			9,040			9,292			8,768			18,552			17,087
Occupancy, net	13,079			12,767			38,766			36,658			16,893			15,921			34,440			32,166
Data processing	7,851			7,432			23,580			21,089			10,406			6,204			18,779			13,729
Advertising and marketing	9,572			7,365			23,448			18,085			7,704			12,845			18,566			22,703
Professional fees	6,786			5,508			18,956			14,986			7,687			6,228			14,408			11,784
Amortization of other intangible assets	1,068			1,085			3,373			3,631			2,820			2,957			5,683			5,899
FDIC insurance	3,877			3,686			11,907			11,339			7,081			4,127			11,216			7,703
OREO expense, net	590			1,436			2,994			3,344			237			1,290			(639		)	1,922
Other	17,760			20,564			54,194			55,196			27,246			24,776			51,406			47,004
Total non-interest expense	183,575			176,615			535,237			501,314			259,368			229,607			494,009			443,981
Income before taxes	104,248			85,054			294,212			243,522			30,703			110,173			117,786			228,818
Income tax expense	38,622			31,939			105,311			91,255			9,044			28,707			33,315			58,206
Net income	$	65,626		$	53,115		$	188,901		$	152,267		$	21,659		$	81,466		$	84,471		$	170,612
Preferred stock dividends	2,050			3,628			7,728			10,884			2,050			2,050			4,100			4,100
Net income applicable to common shares	$	63,576		$	49,487		$	181,173		$	141,383		$	19,609		$	79,416		$	80,371		$	166,512
Net income per common share—Basic	$	1.14		$	0.96		$	3.34		$	2.84		$	0.34		$	1.40		$	1.40		$	2.94
Net income per common share—Diluted	$	1.12		$	0.92		$	3.23		$	2.72		$	0.34		$	1.38		$	1.38		$	2.91
Cash dividends declared per common share	$	0.14		$	0.12		$	0.42		$	0.36		$	0.28		$	0.25		$	0.56		$	0.50
Weighted average common shares outstanding	55,796			51,679			54,292			49,763			57,567			56,662			57,593			56,596
Dilutive potential common shares	966			4,047			2,305			3,931			414			699			481			700
Average common shares and dilutive common shares	56,762			55,726			56,597			53,694			57,981			57,361			58,074			57,296

See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(In thousands)	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Net income	$	65,626		$	53,115		$	188,901		$	152,267		$	21,659		$	81,466		$	84,471		$	170,612
Unrealized gains on securities
Unrealized gains on available-for-sale securities
Before tax	811			2,525			25,783			33,669			5,068			26,177			96,422			64,452
Tax effect	(158		)	(993		)	(9,968		)	(13,225		)	(1,350		)	(6,977		)	(25,697		)	(17,296		)
Net of tax	653			1,532			15,815			20,444			3,718			19,200			70,725			47,156
Reclassification of net gains included in net income
Reclassification of net (losses) gains on available-for-sale securities included in net income
Before tax	39			3,305			31			6,070			(341		)	523			150			456
Tax effect	(15		)	(1,300		)	(12		)	(2,386		)	92			(140		)	(40		)	(122		)
Net of tax	24			2,005			19			3,684			(249		)	383			110			334
Reclassification of amortization of unrealized gains and losses on investment securities transferred to held-to-maturity from available-for-sale
Reclassification of amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale
Before tax	33			(3,781		)	1,483			(11,038		)	46			214			124			358
Tax effect	(13		)	1,486			(583		)	4,331			(12		)	(57		)	(33		)	(98		)
Net of tax	20			(2,295		)	900			(6,707		)	34			157			91			260
Net unrealized gains on securities	609			1,822			14,896			23,467
Unrealized gains on derivative instruments
Net unrealized gains on available-for-sale securities													3,933			18,660			70,524			46,562
Unrealized losses on derivative instruments
Before tax	394			2,773			1,699			2,728			(2,867		)	(22,168		)	(41,560		)	(27,164		)
Tax effect	(158		)	(1,090		)	(669		)	(1,072		)	773			5,918			11,095			7,263
Net unrealized gains on derivative instruments	236			1,683			1,030			1,656
Net unrealized losses on derivative instruments													(2,094		)	(16,250		)	(30,465		)	(19,901		)
Foreign currency adjustment
Before tax	5,643			(2,237		)	10,678			6,966			6,677			3,232			(7,655		)	6,123
Tax effect	(1,437		)	593			(2,762		)	(1,960		)	(1,510		)	(727		)	1,677			(1,341		)
Net foreign currency adjustment	4,206			(1,644		)	7,916			5,006			5,167			2,505			(5,978		)	4,782
Total other comprehensive income	5,051			1,861			23,842			30,129			7,006			4,915			34,081			31,443
Comprehensive income	$	70,677		$	54,976		$	212,743		$	182,396		$	28,665		$	86,381		$	118,552		$	202,055

See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

(In thousands)	Preferred stock		Common stock		Surplus			Treasury stock			Retained earnings				Accumulated other comprehensive loss			Total shareholders’ equity
Balance at March 31, 2019	$	125,000	$	56,765	$	1,565,185		$	(6,650	)	$	1,682,016			$	(50,344	)	$	3,371,972
Net income	—		—		—			—			81,466				—			81,466
Other comprehensive income, net of tax	—		—		—			—			—				4,915			4,915
Cash dividends declared on common stock, $0.25 per share	—		—		—			—			(14,166		)	��	—			(14,166		)
Dividends on preferred stock, $0.41 per share	—		—		—			—			(2,050		)		—			(2,050		)
Stock-based compensation	—		—		2,965			—			—				—			2,965
Common stock issued for:
Exercise of stock options and warrants	—		16		643			—			—				—			659
Restricted stock awards	—		3		(3		)	—			—				—			—
Employee stock purchase plan	—		10		656			—			—				—			666
Director compensation plan	—		—		523			—			—				—			523
Balance at June 30, 2019	$	125,000	$	56,794	$	1,569,969		$	(6,650	)	$	1,747,266			$	(45,429	)	$	3,446,950

Balance at January 1, 2019	$	125,000	$	56,518	$	1,557,984		$	(5,634	)	$	1,610,574			$	(76,872	)	$	3,267,570
Cumulative effect adjustment from the adoption of ASU 2017-08	—		—		—			—			(1,531		)		—			(1,531		)
Net income	—		—		—			—			170,612				—			170,612
Other comprehensive income, net of tax	—		—		—			—			—				31,443			31,443
Cash dividends declared on common stock, $0.50 per share	—		—		—			—			(28,289		)		—			(28,289		)
Dividends on preferred stock, $0.82 per share	—		—		—			—			(4,100		)		—			(4,100		)
Stock-based compensation	—		—		6,283			—			—				—			6,283
Common stock issued for:
Exercise of stock options and warrants	—		95		3,507			(575		)	—				—			3,027
Restricted stock awards	—		142		(142		)	(441		)	—				—			(441		)
Employee stock purchase plan	—		21		1,328			—			—				—			1,349
Director compensation plan	—		18		1,009			—			—				—			1,027
Balance at June 30, 2019	$	125,000	$	56,794	$	1,569,969		$	(6,650	)	$	1,747,266			$	(45,429	)	$	3,446,950

Balance at March 31, 2020	$	125,000	$	58,266	$	1,652,063		$	(44,891	)	$	1,917,558			$	(7,603	)	$	3,700,393
Net income	—		—		—			—			21,659				—			21,659
Other comprehensive income, net of tax	—		—		—			—			—				7,006			7,006
Cash dividends declared on common stock, $0.28 per share	—		—		—			—			(16,119		)		—			(16,119		)
Dividends on preferred stock, $0.41 per share	—		—		—			—			(2,050		)		—			(2,050		)
Common stock repurchases	—		—		—			—			—				—			—
Stock-based compensation	—		—		541			—			—				—			541
Issuance of Series E preferred stock	287,500		—		(10,125		)	—			—				—			277,375
Common stock issued for:
Exercise of stock options and warrants	—		3		158			—			—				—			161
Restricted stock awards	—		3		(3		)	—			—				—			—
Employee stock purchase plan	—		22		654			—			—				—			676
Director compensation plan	—		—		576			—			—				—			576
Balance at June 30, 2020	$	412,500	$	58,294	$	1,643,864		$	(44,891	)	$	1,921,048			$	(597	)	$	3,990,218

Balance at January 1, 2020	$	125,000	$	57,951	$	1,650,278		$	(6,931	)	$	1,899,630			$	(34,678	)	$	3,691,250
Cumulative effect adjustment from the adoption of ASU 2016-13, net of tax	—		—		—			—			(26,717		)		—			(26,717		)
Net income	—		—		—			—			84,471				—			84,471
Other comprehensive income, net of tax	—		—		—			—			—				34,081			34,081
Cash dividends declared on common stock, $0.56 per share	—		—		—			—			(32,236		)		—			(32,236		)
Dividends on preferred stock, $0.82 per share	—		—		—			—			(4,100		)		—			(4,100		)
Common stock repurchases	—		—		—			(37,116		)	—				—			(37,116		)
Stock-based compensation	—		—		(2,278		)	—			—				—			(2,278		)
Issuance of Series E preferred stock	287,500		—		(10,125		)	—			—				—			277,375
Common stock issued for:
Exercise of stock options and warrants	—		98		3,701			(92		)	—				—			3,707
Restricted stock awards	—		193		(193		)	(752		)	—				—			(752		)
Employee stock purchase plan	—		32		1,353			—			—				—			1,385
Director compensation plan	—		20		1,128			—			—				—			1,148
Balance at June 30, 2020	$	412,500	$	58,294	$	1,643,864		$	(44,891	)	$	1,921,048			$	(597	)	$	3,990,218

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(In thousands)
Preferred
stock

Common
stock
Surplus
Treasury
stock

Retained
earnings

Accumulated
other
comprehensive
loss

Total
shareholders’
equity
Balance at January 1, 2016 $ 251,287
$ 48,469
$ 1,190,988
$ (3,973 ) $ 928,211
$ (62,708 ) $ 2,352,274
Net income —
—
—
—
152,267
—
152,267
Other comprehensive income, net of tax —
—
—
—
—
30,129
30,129
Cash dividends declared on common stock —
—
—
—
(17,846 ) —
(17,846 )
Dividends on preferred stock —
—
—
—
(10,884 ) —
(10,884 )
Stock-based compensation —
—
6,778
—
—
—
6,778
Conversion of Series C preferred stock to common stock (30 ) 1
29
—
—
—
—
Common stock issued for:
New issuance, net of costs —
3,000
149,823
—
—
—
152,823
Exercise of stock options and warrants —
185
5,965
(377 ) —
—
5,773
Restricted stock awards —
88
121
(172 ) —
—
37
Employee stock purchase plan —
43
1,890
—
—
—
1,933
Director compensation plan —
25
1,165
—
—
—
1,190
Balance at September 30, 2016 $ 251,257
$ 51,811
$ 1,356,759
$ (4,522 ) $ 1,051,748
$ (32,579 ) $ 2,674,474
Balance at January 1, 2017 $ 251,257
$ 51,978
$ 1,365,781
$ (4,589 ) $ 1,096,518
$ (65,328 ) $ 2,695,617
Net income —
—
—
—
188,901
—
188,901
Other comprehensive income, net of tax —
—
—
—
—
23,842
23,842
Cash dividends declared on common stock —
—
—
—
(22,932 ) —
(22,932 )
Dividends on preferred stock —
—
—
—
(7,728 ) —
(7,728 )
Stock-based compensation —
—
8,160
—
—
—
8,160
Conversion of Series C preferred stock to common stock (126,257 ) 3,121
123,136
—
—
—
—
Common stock issued for:
Exercise of stock options and warrants —
702
19,544
—
—
—
20,246
Restricted stock awards —
79
(79 ) (295 ) —
—
(295 )
Employee stock purchase plan —
28
1,893
—
—
—
1,921
Director compensation plan —
32
1,161
—
—
—
1,193
Balance at September 30, 2017 $ 125,000
$ 55,940
$ 1,519,596
$ (4,884 ) $ 1,254,759
$ (41,486 ) $ 2,908,925

See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine Months Ended						Six Months Ended
(In thousands)	September 30, 2017			September 30, 2016			June 30, 2020			June 30, 2019
Operating Activities:
Net income	$	188,901		$	152,267		$	84,471		$	170,612
Adjustments to reconcile net income to net cash provided by (used for) operating activities
Adjustments to reconcile net income to net cash (used for) provided by operating activities
Provision for credit losses	21,996			26,734			188,014			35,204
Depreciation, amortization and accretion, net	46,514			38,798			47,138			43,322
Stock-based compensation expense	8,160			6,778			(2,278		)	6,283
Net amortization of premium on securities	4,694			3,728			4,694			2,971
Accretion of discount on loans	(16,885		)	(23,416		)
Accretion of discount and deferred fees on loans, net							(41,304		)	(11,746		)
Mortgage servicing rights fair value change, net	1,338			(4,810		)	35,509			19,122
Originations and purchases of mortgage loans held-for-sale	(2,812,685		)	(3,208,468		)	(3,426,911		)	(1,832,264		)
Proceeds from sales of mortgage loans held-for-sale	2,916,368			3,111,318			3,035,641			1,736,063
Bank owned life insurance ("BOLI") income	(2,770		)	(2,613		)	(666		)	(2,740		)
Decrease (increase) in trading securities, net	1,346			(644		)	178			(738		)
Net decrease in brokerage customer receivables	1,550			2,120
Net decrease (increase) in brokerage customer receivables							1,950			(960		)
Gains on mortgage loans sold	(67,239		)	(74,446		)	(155,108		)	(51,086		)
Gains on investment securities, net	(31		)	(6,070		)
Gains on early extinguishment of debt	—			(4,305		)
Gains on sales of premises and equipment, net	(88		)	(89		)
Net losses on sales and fair value adjustments of other real estate owned	969			935
Losses (gains) on investment securities, net							3,551			(2,228		)
Losses on sales of premises and equipment, net							3			37
Net (gains) losses on sales and fair value adjustments of other real estate owned							(694		)	1,115
Increase in accrued interest receivable and other assets, net	(62,599		)	(131,504		)	(171,099		)	(139,971		)
(Decrease) increase in accrued interest payable and other liabilities, net	(81,157		)	31,082
Net Cash Provided by (Used for) Operating Activities	148,382			(82,605		)
Increase in accrued interest payable and other liabilities, net							27,244			49,233
Net Cash (Used for) Provided by Operating Activities							(369,667		)	22,229
Investing Activities:
Proceeds from maturities of available-for-sale securities	190,799			1,128,428
Proceeds from maturities of held-to-maturity securities	51,282			502
Proceeds from sales and calls of available-for-sale securities	146,518			2,186,662
Proceeds from calls of held-to-maturity securities	51,079			423,866
Proceeds from maturities and calls of available-for-sale securities							549,981			231,198
Proceeds from maturities and calls of held-to-maturity securities							529,974			51,393
Proceeds from sales of available-for-sale securities							502,676			667,918
Proceeds from sales of equity securities with readily determinable fair value							4,030			11,000
Proceeds from sales and capital distributions of equity securities without readily determinable fair value							444			609
Purchases of available-for-sale securities	(446,278		)	(3,169,020		)	(1,048,539		)	(871,269		)
Purchases of held-to-maturity securities	(287,976		)	(472,803		)	(124,802		)	(178,331		)
Redemption (purchase) of Federal Home Loan Bank and Federal Reserve Bank stock, net	46,302			(28,049		)
Net cash paid in business combinations	(284		)	(578,315		)
Purchases of equity securities with readily determinable fair value							(7,659		)	(18,677		)
Purchases of equity securities without readily determinable fair value							(3,166		)	(1,072		)
Purchases of Federal Home Loan Bank and Federal Reserve Bank stock, net							(34,832		)	(672		)
(Purchases of) distributions from investments in partnerships, net							(355		)	772
Net cash received (paid) in business combinations							—			748
Proceeds from sales of other real estate owned	12,892			29,223			5,405			5,155
Proceeds (paid to) received from the FDIC related to reimbursements on covered assets	(258		)	2,124
Net increase in interest bearing deposits with banks	(236,531		)	(204,085		)	(1,852,194		)	(337,581		)
Net increase in loans	(1,176,279		)	(1,303,218		)	(4,460,325		)	(1,340,204		)
Redemption of BOLI	—			659
Purchases of premises and equipment, net	(39,583		)	(28,276		)	(38,132		)	(31,297		)
Net Cash Used for Investing Activities	(1,688,317		)	(2,012,302		)	(5,977,494		)	(1,810,310		)
Financing Activities:
Increase in deposit accounts	1,236,548			2,408,216
Decrease in subordinated notes and other borrowings, net	(20,111		)	(24,545		)
Increase (decrease) in Federal Home Loan Bank advances, net	313,000			(440,257		)
Proceeds from the issuance of common stock, net	—			152,823
Redemption of junior subordinated debentures, net	—			(10,695		)
Increase in deposit accounts, net							5,545,133			1,262,941
Increase in other borrowings, net							98,974			16,243
Increase in Federal Home Loan Bank advances, net							553,500			148,441
Proceeds from the issuance of subordinated notes, net							—			296,741
Proceeds from the issuance of preferred stock, net							277,375			—
Cash payments to settle contingent consideration liabilities recognized in business combinations							(1,276		)	(66		)
Issuance of common shares resulting from the exercise of stock options, employee stock purchase plan and conversion of common stock warrants	23,360			9,796			6,332			5,978
Common stock repurchases authorized							(37,116		)	—
Common stock repurchases for tax withholdings related to stock-based compensation	(295		)	(549		)	(844		)	(1,016		)
Dividends paid	(30,660		)	(28,730		)	(36,336		)	(32,389		)
Net Cash Provided by Financing Activities	1,521,842			2,066,059			6,405,742			1,696,873
Net Increase (Decrease) in Cash and Cash Equivalents	(18,093		)	(28,848		)	58,581			(91,208		)
Cash and Cash Equivalents at Beginning of Period	270,045			275,795			286,476			392,200
Cash and Cash Equivalents at End of Period	$	251,952		$	246,947		$	345,057		$	300,992

See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

The interim consolidated financial statements of Wintrust Financial Corporation and Subsidiaries (“Wintrust” or ~~“the Company”~~the “Company”) presented herein are unaudited, but in the opinion of management reflect all necessary adjustments of a normal or recurring nature for a fair presentation of results as of the dates and for the periods covered by the interim consolidated financial statements.

The accompanying interim consolidated financial statements are unaudited and do not include information or footnotes necessary for a complete presentation of financial condition, results of operations or cash flows in accordance with U.S. generally accepted accounting principles ("GAAP"). The interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 (“~~2016~~2019 Form 10-K”). Operating results reported for the period are not necessarily indicative of the results which may be expected for the entire year. Reclassifications of certain prior period amounts have been made to conform to the current period presentation.

The preparation of the financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities. Management believes that the estimates made are ~~reasonable,~~reasonable; however, changes in estimates may be required if economic or other conditions develop differently from management’s expectations. Certain policies and accounting principles inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported. Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management currently views the determination of the allowance for credit losses, including the allowance for loan losses, the allowance for ~~covered loan~~unfunded commitment losses and the allowance for held-to-maturity securities losses, ~~on lending-related commitments,~~ loans acquired with evidence of credit quality deterioration since origination, estimations of fair value, the valuations required for impairment testing of goodwill, the valuation and accounting for derivative instruments and income taxes as the accounting areas that require the most subjective and complex judgments, and as such could be the most subject to revision as new information becomes available. Descriptions of the Company's significant accounting policies are included in Note 1 - “Summary of Significant Accounting Policies” of the ~~2016~~2019 Form ~~10-K.~~10-K, some of which were superseded by the Company's adoption of certain accounting standards as of January 1, 2020. For further discussion of the Company's adoption of such accounting standards as of January 1, 2020, see Note 2 - Recent Accounting Developments.

(2) Recent Accounting Developments

~~Revenue Recognition~~

In May 2014, the FASB issued ASU No. 2014-09, which created “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue and develop a common revenue standard for customer contracts. This ASU provides guidance regarding how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also added a new subtopic to the codification, ASC 340-40, “Other Assets and Deferred Costs: Contracts with Customers” to provide guidance on costs related to obtaining and fulfilling a customer contract. Furthermore, the new standard requires disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. At the time ASU No. 2014-09 was issued, the guidance was effective for fiscal years beginning after December 15, 2016. In July 2015, the FASB approved a deferral of the effective date by one year, which would result in the guidance becoming effective for fiscal years beginning after December 15, 2017.

The FASB has continued to issue various Updates to clarify and improve specific areas of ASU No. 2014-09. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net),” to clarify the implementation guidance within ASU No. 2014-09 surrounding principal versus agent considerations and its impact on revenue recognition. In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,” to also clarify the implementation guidance within ASU No. 2014-09 related to these two topics. In May 2016, the FASB issued ASU No. 2016-11, “Revenue Recognition (Topic 605) and Derivative and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting,” to remove certain areas of SEC Staff Guidance from those specific Topics. In May 2016 and December 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” and ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” to clarify specific aspects of implementation, including the collectability criterion, exclusion of sales taxes collected from a transaction price, noncash consideration, contract modifications, completed contracts at transition, the applicability of loan guarantee fees, impairment of

capitalized contract costs and certain disclosure requirements. In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,” to clarify the implementation guidance within ASU No. 2014-09 surrounding transfers of nonfinancial assets, including partial sales of such assets, and its impact on revenue recognition. Like ASU No. 2014-09, this guidance is effective for fiscal years beginning after December 15, 2017.

The Company continues to evaluate the impact on the consolidated financial statements of adopting this new guidance. As certain significant revenue sources related to financial instruments such as interest income are considered not in-scope, the Company does not believe the new guidance will have a significant impact on its consolidated financial statements. The Company is currently completing reviews of specific contracts with customers across its various sources of revenue, primarily related to revenue from its wealth management segment. Contract reviews assist in identifying any characteristics of such contracts that could result in a change in the Company's current practices for recognition of revenue and recognition of costs incurred to obtain or fulfill such contracts. Additionally, during these contract reviews, the Company is considering any disclosure impact that may arise from characteristics identified. The Company expects to adopt the new guidance using the modified retrospective approach.

~~Financial Instruments~~

~~In January 2016, the FASB issued ASU No. 2016-01,~~ “~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,~~” to improve the accounting for financial instruments. This ASU requires equity investments with readily determinable fair values to be measured at fair value with changes recognized in net income regardless of classification. For equity investments without a readily determinable fair value, the value of the investment would be measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer instead of fair value, unless a qualitative assessment indicates impairment. Additionally, this ASU requires the separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2017 and is to be applied prospectively with a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company does not expect this guidance to have a material impact on the Company's consolidated financial statements.

~~Leases~~

~~In February 2016, the FASB issued ASU No. 2016-02,~~ “~~Leases (Topic 842),~~” to improve transparency and comparability across entities regarding leasing arrangements. This ASU requires the recognition of a separate lease liability representing the required discounted lease payments over the lease term and a separate lease asset representing the right to use the underlying asset during the same lease term. Additionally, this ASU provides clarification regarding the identification of certain components of contracts that would represent a lease as well as requires additional disclosures to the notes of the financial statements. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is to be applied under a modified retrospective approach, including the option to apply certain practical expedients.

The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements. Excluding any impact from the clarification of contracts representing a lease, the Company expects to recognize separate lease liabilities and right to use assets for the amounts related to ~~certain facilities under operating lease agreements~~ ~~disclosed in Note 15 - Minimum Lease Commitments in the~~ ~~2016 Form 10-K. Additionally, the Company does not expect to significantly change operating lease agreements prior to adoption.~~

~~Derivatives~~

~~In March 2016, the FASB issued ASU No. 2016-05,~~ “~~Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships,~~” to clarify guidance surrounding the effect on an existing hedging relationship of a change in the counterparty to a derivative instrument that has been designated as a hedging instrument. This ASU states that a change in counterparty to such derivative instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. This guidance was effective for fiscal years beginning after December 15, 2016 and did not have a material impact on the Company's consolidated financial statements.

~~In August 2017, the FASB issued ASU No. 2017-12,~~ “~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,~~” to improve the financial reporting of hedging relationships to better align the economic results of an entity’s risk management activities and disclosures within its financial statements. In addition, this ASU makes certain targeted improvements to simplify the application of the hedge accounting to derivative instruments. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Guidance related to existing cash

flow hedges is to be applied under a modified retrospective approach and guidance related to amended presentation and disclosures is to be applied under a prospective approach. Early adoption is permitted as of the beginning of an annual period that has not been issued or made available for issuance. The Company has not early adopted this guidance. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.

~~Equity Method Investments~~

~~In March 2016, the FASB issued ASU No. 2016-07,~~ “~~Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting,~~” to simplify the accounting for investments qualifying for the use of the equity method of accounting. This ASU eliminates the requirement to retroactively adopt the equity method of accounting when an investment qualifies for such method as a result of an increase in the level of ownership interest or degree of influence. The ASU requires the equity method investor add the cost of acquiring the additional interest to the current basis and adopt the equity method of accounting as of that date going forward. Additionally, for available-for-sale equity securities that become qualified for equity method accounting, the ASU requires the related unrealized holding gains or losses included in accumulated other comprehensive income be recognized in earnings at the date the investment qualifies for such accounting. This guidance was effective for fiscal years beginning after December 15, 2016 and did not have a material impact on the Company's consolidated financial statements.

~~Employee Share-Based Compensation~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ “~~Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,~~” to simplify the accounting for several areas of share-based payment transactions. This included the recognition of all excess tax benefits and tax deficiencies as income tax expense instead of surplus, the classification on the statement of cash flows of excess tax benefits and taxes paid when the employer withholds shares for tax-withholding purposes. Additionally, related to forfeitures, the ASU provides the option to estimate the number of awards that are expected to vest or account for forfeitures as they occur. This guidance was effective for fiscal years beginning after December 15, 2016. In the first nine months of 2017, the Company recorded $5.0 million ~~of excess tax benefits within income tax expense on the Consolidated Statements of Income as a result of adoption.~~

Allowance for Credit Losses

In June 2016, the FASB issued ~~ASU~~Accounting Standards Update ("ASU") No. 2016-13, “~~Financial~~“Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” to replace the ~~current~~ incurred loss methodology for recognizing credit losses, which delays recognition until it is probable a loss has been incurred, with a methodology that reflects an estimate of all expected credit losses and considers additional reasonable and supportable forecasted information when determining lifetime credit loss estimates. This impacts the calculation of ~~the~~an allowance for credit losses for all financial assets measured under the amortized cost basis, including ~~PCI loans~~held-to-maturity debt securities and purchased credit deteriorated ("PCD") assets at the time of and subsequent to acquisition. Additionally, credit losses related to available-for-sale debt securities would be recorded through the allowance for credit losses and not as a direct adjustment to the amortized cost of the securities.

The FASB has continued to issue various updates to clarify and improve specific areas of ASU No. 2016-13. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses,” to clarify the implementation guidance within ASU No. 2016-13 surrounding narrow aspects of Topic 326, including the impact of the guidance on operating lease receivables. In May 2019, FASB issued ASU No. 2019-05, “Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief," allowing for the irrevocable election of the fair value option for certain financial assets, on an instrument-by-instrument basis, within the scope previously measured at amortized cost basis. In February 2020, the FASB issued ASU No. 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842),” which adds and amends SEC Staff Guidance paragraphs within these Topics in the Codification to reflect the issuance of SEC Staff Accounting Bulletin (SAB) No. 119, which includes the SEC's general statement on measuring current expected credit losses, and information on developing, reporting, and validating a systematic methodology. ASU No. 2020-02 was effective upon issuance.

In May 2020, federal and state banking regulators issued the final “Interagency Policy Statement on Allowance for Credit Losses." The policy statement was issued to maintain conformance with GAAP and FASB ASC Topic 326 and does not prescribe how estimation methods are used, nor how key assumptions are determined. The final guidance describes the measurement of expected credit losses, including the design, documentation, and validation of expected credit loss estimation processes, internal controls over these processes, and the responsibilities of boards of directors and management, in addition to examiner reviews of the allowance for credit losses. The final Policy Statement replaces the existing policy statements related to the allowance for loan and lease losses under the prior incurred loss methodology and was effective upon adoption of ASC Topic 326.

The Company adopted ASU No. 2016-13 and all subsequent updates issued to clarify and improve specific areas of this ASU as of January 1, 2020. Guidance was adopted under a modified retrospective approach and the Company recognized a cumulative-effect adjustment to the allowance for credit losses of $47.4 million representing current expected credit losses on financial instruments. Of this amount, $33.2 million was recorded to the allowance for unfunded commitment losses within accrued interest and other liabilities and $74,000 was recorded to the allowance for held-to-maturity securities losses presented as a reduction to the carrying balance of held-to-maturity debt securities, both on the Company's Consolidated Statements of Condition, with an offsetting amount recorded directly to retained earnings, net of taxes. The remaining $14.2 million cumulative effect adjustment was recorded to the allowance for loan losses, presented separately on the Company's Consolidated Statements of Condition. Of the amount recorded to the allowance for loan losses, $11.0 million related to PCD loans with such offsetting amount added directly to the carrying balance of the loans and the remaining $3.2 million not related to PCD loans recorded directly to retained earnings, net of taxes, on the Company's Consolidated Statements of Condition.

Further, as noted above, certain accounting policy elections are available under the new rules. The Company utilized the following approach to such elections:

The Company elected to not measure an allowance for credit losses on accrued interest as such accrued interest is written off in a timely manner when deemed uncollectible. Any such write-off of accrued interest will reverse previously recognized interest income.

The Company elected to not include accrued interest within presentation and disclosures of the carrying amount of financial assets held at amortized cost. This election is applicable to the various disclosures included within the Company's financial statements. Accrued interest related to financial assets held at amortized cost is included within accrued interest receivable and other assets within the Company's Consolidated Statements of Condition and totaled $109.1 million at June 30, 2020.

The Company elected to estimate expected credit losses by measuring the face amount or unpaid principal balance component of the amortized cost basis of a financial asset separately from other components such as premiums, discount and deferred fees and costs.

The Company elected to not maintain current accounting policies for existing purchase credit impaired ("PCI") financial assets. Upon adoption, such assets were considered PCD assets and measured accordingly under the new rules.

See Note 7 - Allowance for Credit Losses for further information on the Company’s current expected credit losses methodology.

CARES Act

On March 27, 2020, the President of the United States signed the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act" or the "Act"), which provides entities with optional temporary relief from certain accounting and financial reporting requirements under U.S. GAAP.

Section 4013 of the CARES Act allows financial institutions to suspend application of certain current troubled debt restructuring ("TDR") accounting guidance under Accounting Standards Codification ("ASC") 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that defer or delay the payment of principal or interest, or change the interest rate on the loan. The Company chose to apply this relief to eligible loan modifications. Further, in April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (e.g., six months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Company continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing appropriate allowance for credit losses on its loan portfolio.

The Act also provided financial institutions with the option to defer adoption of ASU No. 2016-13 until the earlier of the date the COVID-19 national emergency comes to an end or December 31, 2020. The Company did not elect to defer adoption and elected to adopt ASU No. 2016-13 and all subsequent updates issued to clarify and improve specific areas of this ASU as of January 1, 2020.

The business tax provisions of the Act include temporary changes to income and non-income based tax laws, including immediate recovery of qualified improvement property costs and acceleration of Alternative Minimum Tax ("AMT") credits. These provisions are not expected to have a material impact on the Company's deferred taxes.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," to simplify the accounting for income taxes by removing certain exceptions to the general principles of ASC 740. The guidance also improves consistent application by clarifying and amending existing guidance from ASC 740. This guidance is effective for fiscal years beginning after December 15, ~~2019,~~2020, including interim periods ~~within those fiscal years,~~therein and is to be applied ~~under~~on a retrospective, modified retrospective ~~approach.~~

~~The Company is currently evaluating the impact of adopting this new guidance~~or prospective approach, depending on the consolidated financial statements as well as the impact on current systems and processes. Specifically, the Company has established a group consisting of individuals from the various areas of the Company tasked with transitioning to the new requirements. At this time, the Companyspecific amendment. Early adoption is ~~reviewing potential methodologies for estimating expected credit losses using reasonable and supportable forecast information and has identified certain historical data and system requirements.~~

~~Statement of Cash Flows~~

~~In August 2016, the FASB issued ASU No. 2016-15,~~ “~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force),~~”to clarify the presentation of specific types of cash flow receipts and payments, including the payment of debt prepayment or debt extinguishment costs, contingent consideration cash payments paid subsequent to the acquisition date and proceeds from settlement of BOLI policies. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and is to be applied under a retrospective approach, if practicable.permitted. The Company does not expect this guidance to have a material impact on the ~~Company's~~Company’s consolidated financial statements.

Investment Securities

In ~~November 2016,~~January 2020, the FASB issued ASU No. ~~2016-18~~ “~~Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of~~2020-01, “Clarifying the ~~FASB Emerging Issues Task Force)~~Interactions Between Investments-Equity Securities (ASC Topic 321), Investments-Equity Method and Joint Ventures (ASC Topic 323), and Derivatives and Hedging (ASC Topic 815),” to which amends ASC 323, Investments-Equity Method & Joint Ventures to clarify that an entity should consider observable transactions that require it to either apply or discontinue using the ~~classification~~equity method of accounting for purposes of applying the measurement alternative in accordance with ASC 321, Investments-Equity Securities, immediately before applying or discontinuing the equity method under ASC 323.

The guidance also amends ASC 815, Derivatives & Hedging, to clarify that, when determining the accounting for certain non-derivative forward contracts and ~~presentation of changes~~purchased options, an entity should not consider how to account for the resulting investments upon eventual settlement or exercise, and that an entity should evaluate the remaining characteristics in ~~restricted cash on~~accordance with ASC 815 to determine the ~~statement of cash flows~~. accounting for those forward contracts and purchased options.

This guidance is effective for fiscal years beginning after December 15, ~~2017,~~2020, including interim periods ~~within~~

~~those fiscal years,~~therein, and is to be applied under a ~~retrospective~~prospective approach. Early adoption is permitted. The Company does not expect this guidance to have a material impact on the ~~Company's~~Company’s consolidated financial statements.

~~Income Taxes~~Codification Improvements to Financial Instruments

In ~~October 2016,~~March 2020, the FASB issued ASU No. ~~2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory,~~2020-03, “Codification Improvements to Financial Instruments,” to clarify and improve various aspects of financial instruments guidance, including amending ASC 326, Financial Instruments-Credit Losses, to align the contractual term used to measure expected credit losses for a lease to be consistent with the lease term determined under ASC 842, Leases, and amending ASC 860, Transfers and Servicing, to clarify that, when an entity regains control of financial assets previously sold, an allowance for credit losses should be recognized in accordance with ASC 326.

The guidance also amends ASC 820, Fair Value Measurement, to clarify the applicability of the portfolio exception to non-financial items accounted for as derivatives, and amends ASC 942, Financial Services, to clarify the applicability of certain disclosure requirements in ASC 320, Investments-Debt Securities, to depository and lending institutions. Amendments to clarify Codification sections relevant to the accounting for ~~intra-entity transfers~~certain fees and costs related to exchanges or modifications of ~~assets other than inventory. This~~debt instruments within ASC 470, Debt, is also provided.

As the Company has already adopted the standards amended by this ASU, allows the recognition of current and deferred income taxes for such transfers prior to the subsequent sale of the transferred assets to an outside party. Initial recognition of current and deferred income taxes is currently prohibited for intra-entity transfers of assets other than inventory. Thisthis guidance is effective ~~for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and is~~upon issuance. Amendments to beASC 326 were applied under a modified retrospective approach through a cumulative-effect adjustment recognized by the Company directly to retained earnings on the Company's Consolidated Statements of Condition. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides temporary optional relief for contracts modified as a result of reference rate reform meeting certain modification criteria, generally allowing an entity

to account for contract modifications occurring due to reference rate reform as an event that does not require contract remeasurement or reassessment of a previous accounting determination at the ~~beginning~~modification date. The guidance also includes temporary optional expedients intended to provide relief from various hedge effectiveness requirements for hedging relationships affected by reference rate reform, provided certain criteria are met, and allows a one-time election to sell or transfer to either available-for-sale or trading any held-to-maturity ("HTM") debt securities that refer to an interest rate affected by reference rate reform and were classified as HTM prior to January 1, 2020. This guidance is effective upon issuance and can be applied prospectively, with certain exceptions, through December 31, 2022. The Company continues to evaluate the impact of adopting this new guidance on the ~~period~~consolidated financial statements.

SEC Amendments to Financial Disclosures about Acquired and Disposed Businesses

In May 2020, the SEC issued a final rule on “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” which provides for specific disclosure changes, including revising the investment and income significance tests, conforming the significance threshold and tests for a disposed business to those used for an acquired business, permitting abbreviated financial statements for certain acquisitions of ~~adoption.~~ a component of an entity, and reducing the maximum number of years for which financial statements are required for acquired businesses from three years to two years, among other amendments. This guidance is effective on January 1, 2021 and early compliance is permitted. The Company does not expect this guidance to have a material impact on the ~~Company's consolidated financial statements.~~

~~Consolidation~~

~~In October 2016, the FASB issued ASU No. 2016-17,~~ “~~Consolidation (Topic 810): Interest Held through Related Parties That Are under Common Control,~~”to amend guidance from ASU No. 2015-02 regarding how a reporting entity treats indirect interests in a variable interest entity (“VIE”) held through related parties under common control when determining whether the reporting entity is the primary beneficiary of such VIE~~. This guidance was effective for fiscal years beginning after December 15, 2016 and did not have a material impact on the Company's consolidated financial statements.~~

~~Business Combinations~~

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” to improve such definition and, as a result, assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or as business combinations. The definition of a business impacts many areas of accounting including acquisitions, disposals, goodwill and consolidation. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and is to be applied under a prospective approach. The Company expects the adoption of this new guidance to impact the determination of whether future acquisitions are considered a business combination and the resulting impact of such determination on theCompany’s consolidated financial statements.

~~Goodwill~~

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” to simplify the subsequent measurement of goodwill. When the carrying amount of a reporting unit exceeds its fair value, an entity would no longer be required to determine goodwill impairment by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit was acquired in a business combination. Goodwill impairment would be recognized according to the excess of the carrying amount of the reporting unit over the calculated fair value of such unit. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is to be applied under a prospective approach. ~~The Company does not expect this guidance to have a material impact on the Company's consolidated financial statements.~~

~~Compensation~~

In March 2017, the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. An entity will be required to report the service cost component of such costs in the same line item or items as other compensation costs related to services rendered. Additionally, only the service cost component will be eligible for capitalization when applicable. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and is to be applied under a retrospective approach related to presentation of the service cost component and a prospective approach related to capitalization of such costs. Early adoption is permitted as of the beginning of an annual period that has not been issued or made available for issuance. The Company has not early adopted this guidance. When adopted, ~~the Company does not expect this guidance to have a material impact on the Company's consolidated financial statements.~~

In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting,” to clarify when modification accounting is appropriate for changes to the terms and conditions of a share-based payment award. An entity will be required to account for such changes as a modification unless certain criteria is met. This guidance

is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and is to be applied under a prospective approach for awards modified on or after the adoption date. Early adoption is permitted as of the beginning of an annual period that has not been issued or made available for issuance. The Company has not early adopted this guidance. When adopted, ~~the Company does not expect this guidance to have a material impact on the Company's consolidated financial statements.~~

~~Amortization of Premium on Certain Debt Securities~~

In March 2017, the FASB issued ASU No. 2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities,” to amend the amortization period for certain purchased callable debt securities held at a premium. The amortization period for such securities will be shortened to the earliest call date. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is to be applied under a modified retrospective approach. Early adoption is permitted as of the beginning of an annual period that has not been issued or made available for issuance. The Company has not early adopted this guidance. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.

(3) Business Combinations and Asset Acquisitions

~~Non-FDIC Assisted~~ Bank Acquisitions

On November ~~18, 2016~~, 1, 2019, the Company ~~acquired First Community Financial Corporation~~completed its acquisition of SBC, Incorporated ("~~FCFC"~~SBC"). ~~FCFC~~SBC was the parent company of ~~First Community~~Countryside Bank. Through this ~~transaction,~~business combination, the Company acquired ~~First Community~~Countryside Bank's ~~two~~6 banking ~~locations~~offices located in ~~Elgin, Illinois~~Countryside, Burbank, Darien, Homer Glen, Oak Brook and Chicago, Illinois. As of the acquisition date, the Company acquired approximately $619.8 million in assets, including approximately $423.0 million in loans, and approximately $507.8 million in deposits. The Company recorded goodwill of approximately $40.3 million related to the acquisition.

On October 7, 2019, the Company completed its acquisition of STC Bancshares Corp. ("STC"). ~~First Community Bank~~STC was ~~merged into~~ the ~~Company's wholly-owned subsidiary~~parent company of STC Capital Bank. Through this business combination, the Company acquired STC Capital Bank's 5 banking offices located in the communities of St. Charles, ~~Bank & Trust~~Geneva and South Elgin, Illinois. As of the acquisition date, the Company ~~("St. Charles Bank").~~acquired approximately $250.1 million in assets, including approximately $174.3 million in loans, and approximately $201.2 million in deposits. The Company recorded goodwill of approximately $19.1 million related to the acquisition.

On May 24, 2019, the Company completed its acquisition of Rush-Oak Corporation ("ROC"). ROC was the parent company of Oak Bank. Through this business combination, the Company acquired Oak Bank's 1 banking location in Chicago, Illinois, as well as approximately $223.4 million in assets, including loans with a fair value of approximately ~~$187.2~~$124.7 million, ~~including approximately $79.5 million of loans,~~ and ~~assumed~~ deposits with a fair value of approximately ~~$150.3~~$161.2 million. ~~Additionally, the~~The Company recorded goodwill of ~~$13.8 million on the acquisition.~~

On August 19, 2016, the Company, through its wholly-owned subsidiary Lake Forest Bank & Trust Company ("Lake Forest Bank"), acquired approximately $561.4 million in performing loans and related relationships from an affiliate of GE Capital Franchise Finance. The loans are to franchise operators (primarily quick service restaurant concepts) in the Midwest and in the Western portion of the United States.

On March 31, 2016, the Company acquired Generations Bancorp, Inc. ("Generations"). Generations was the parent company of Foundations Bank, which had one banking location in Pewaukee, Wisconsin. Foundations Bank was merged into the Company's wholly-owned subsidiary Town Bank. The Company acquired assets with a fair value of approximately $134.2 million, including approximately $67.4 million of loans, and assumed deposits with a fair value of approximately $100.2 million. Additionally, the Company recorded goodwill of $11.5$11.7 million on the acquisition.

~~FDIC-Assisted Transactions~~

(4) Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Company considers cash and cash equivalents to include cash on hand, cash items in the process of collection, non-interest bearing amounts due from correspondent banks, federal funds sold and securities purchased under resale agreements with original maturities of three months or less. These items are included within the Company’s Consolidated Statements of Condition as cash and due from banks, and federal funds sold and securities purchased under resale agreements.

From 2010 to 2012, the Company acquired the banking operations, including the acquisition of certain assets and the assumption of liabilities, of nine financial institutions in FDIC-assisted transactions. Loans comprise the majority(5) Investment Securities

The following tables are a summary of the ~~assets acquired in nearly all~~investment securities portfolios as of ~~these FDIC-assisted transactions,~~the dates shown:



	June 30, 2020
(Dollars in thousands)	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities
U.S. Treasury	$	59,949		$	590	$	—		$	60,539
U.S. Government agencies	287,811			5,696		—			293,507
Municipal	147,411			3,721		(253		)	150,879
Corporate notes:
Financial issuers	106,744			514		(5,398		)	101,860
Other	1,000			19		—			1,019
Mortgage-backed: ⁽¹⁾
Mortgage-backed securities	2,459,274			110,354		(7		)	2,569,621
Collateralized mortgage obligations	17,110			427		(1		)	17,536
Total available-for-sale securities	$	3,079,299		$	121,321	$	(5,659	)	$	3,194,961
Held-to-maturity securities
U.S. Government agencies	$	514,404		$	4,961	$	—		$	519,365
Municipal	214,126			10,952		(157		)	224,921
Total held-to-maturity securities	$	728,530		$	15,913	$	(157	)	$	744,286
Less: Allowance for credit losses ⁽²⁾	(65		)
Held-to-maturity securities, net of allowance for credit losses	$	728,465
Equity securities with readily determinable fair value	$	51,673		$	1,164	$	(377	)	$	52,460


(1)	Consisting entirely of residential mortgage-backed securities, none of which are subprime.


(2)	As of January 1, 2020, the Company adopted ASU 2016-13 related to credit losses on financial assets held at amortized cost. As a result of such adoption, the Company measured an allowance for credit losses related to lifetime expected credit losses on held-to-maturity investment securities.



	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities
U.S. Treasury	$	120,275	$	813	$	—		$	121,088
U.S. Government agencies	365,639		3,557		(3,754		)	365,442
Municipal	141,701		3,785		(168		)	145,318
Corporate notes:
Financial issuers	97,051		761		(4,002		)	93,810
Other	1,000		31		—			1,031
Mortgage-backed: ⁽¹⁾
Mortgage-backed securities	2,328,383		21,240		(3,013		)	2,346,610
Collateralized mortgage obligations	32,775		280		(140		)	32,915
Total available-for-sale securities	$	3,086,824	$	30,467	$	(11,077	)	$	3,106,214
Held-to-maturity securities
U.S. Government agencies	$	902,974	$	2,159	$	(5,460	)	$	899,673
Municipal	231,426		7,536		(239		)	238,723
Total held-to-maturity securities	$	1,134,400	$	9,695	$	(5,699	)	$	1,138,396
Equity securities with readily determinable fair value	$	48,044	$	3,511	$	(715	)	$	50,840


(1)	Consisting entirely of residential mortgage-backed securities, none of which are subprime.



	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities
U.S. Treasury	$	131,238	$	1,051	$	(20	)	$	132,269
U.S. Government agencies	167,847		3,093		—			170,940
Municipal	138,097		4,627		(115		)	142,609
Corporate notes:
Financial issuers	97,065		91		(7,293		)	89,863
Other	1,000		50		—			1,050
Mortgage-backed: ⁽¹⁾
Mortgage-backed securities	1,606,549		13,402		(10,727		)	1,609,224
Collateralized mortgage obligations	39,774		603		(178		)	40,199
Total available-for-sale securities	$	2,181,570	$	22,917	$	(18,333	)	$	2,186,154
Held-to-maturity securities
U.S. Government agencies	$	952,526	$	3,241	$	(2,603	)	$	953,164
Municipal	239,108		6,521		(315		)	245,314
Total held-to-maturity securities	$	1,191,634	$	9,762	$	(2,918	)	$	1,198,478
Equity securities with readily determinable fair value	$	42,087	$	2,984	$	(752	)	$	44,319


(1)	Consisting entirely of residential mortgage-backed securities, NaN of which are subprime.

Equity securities without readily determinable fair values totaled $31.1 million as of ~~which eight such transactions~~June 30, 2020. Equity securities without readily determinable fair values are ~~subject to loss sharing agreements with the FDIC whereby the FDIC has agreed to reimburse the Company for 80%~~included as part of ~~losses incurred on the purchased loans,~~accrued interest receivable and other real estate owned (“OREO”), and certain other assets. Additionally, clawback provisions within these loss share agreements with the FDIC require the Company to reimburse the FDIC in the event that actual losses on covered assets are lower than the original loss estimates agreed upon with the FDIC with respect of such assets in the loss share agreements. The Company refers to the loans subject to these loss sharing agreements as “covered loans” and uses the term “covered assets” to refer to covered loans, covered OREO and certain other covered assets during periods subject to such agreements. The agreements with the FDIC require that the Company follow certain servicing procedures or risk losing the FDIC reimbursement of covered asset losses.

As of dates subject to such agreements, the loans covered by loss share agreements are classified and presented as covered loans and the estimated reimbursable losses are recorded as an FDIC indemnification asset or other liability in theCompany's Consolidated Statements of Condition. The Company ~~recorded the acquired assets and liabilities at their estimated~~monitors its equity investments without readily determinable fair values to identify potential transactions that may indicate an observable price change in orderly transactions for the identical or a similar investment of the same issuer, requiring adjustment to its carrying amount. The Company recorded 0 upward adjustments related to such observable price changes for the three months ended June 30, 2020 and $393,000 of upward adjustments for the six months ended June 30, 2020. NaN downward adjustments on such securities were recorded for the three and six month periods ended June 30, 2020. The Company conducts a quarterly assessment of its equity securities without readily determinable fair values to determine whether impairment exists in such securities, considering, among other factors, the nature of the securities, financial condition of the issuer and expected future cash flows. During the three and six months ended June 30, 2020, the Company recorded $388,000 and $2.1 million, respectively, of impairment of equity securities without readily determinable fair values.

The following table presents the portion of the Company’s available-for-sale investment securities portfolios which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position at ~~the acquisition date.~~ June 30, 2020:



	Continuous unrealized losses existing for less than 12 months					Continuous unrealized losses existing for greater than 12 months					Total
(Dollars in thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-sale securities
U.S. Treasury	$	—	$	—		$	—	$	—		$	—	$	—
U.S. Government agencies	—		—			—		—			—		—
Municipal	42,604		(238		)	944		(15		)	43,548		(253		)
Corporate notes:
Financial issuers	6,469		(526		)	62,112		(4,872		)	68,581		(5,398		)
Other	—		—			—		—			—		—
Mortgage-backed:
Mortgage-backed securities	1,068		(7		)	—		—			1,068		(7		)
Collateralized mortgage obligations	396		(1		)	—		—			396		(1		)
Total available-for-sale securities	$	50,537	$	(772	)	$	63,056	$	(4,887	)	$	113,593	$	(5,659	)

The ~~fair value for loans reflected expected~~Company conducts a regular assessment of its investment securities to determine whether securities are experiencing credit losses considering, among other factors, the nature of the securities, credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows, market conditions and the Company’s ability to hold the securities through the anticipated recovery period.

The Company does not consider available-for-sale securities with unrealized losses at ~~the acquisition date. Therefore,~~June 30, 2020 to be experiencing credit losses and recognized no resulting allowance for credit losses for such individually assessed credit losses. The Company does not intend to sell these investments and it is more likely than not that the Company will only recognize a provision for credit losses and charge-offs on the acquired loans for any further credit deterioration subsequent to the acquisition date. See Note 7 — Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans for further discussion of the allowance on covered loans.

The loss share agreements with the FDIC cover realized losses on loans, foreclosed real estate and certain other assets and require the Company to record loss share assets and liabilities that are measured separately from the loan portfolios because they are not contractually embedded in the loans and are not transferable with the loans should the Company choose to dispose of them. Fair values at the acquisition dates were estimated based on projected cash flows available for loss share based on the credit adjustments estimated for each loan pool and the loss share percentages. The loss share assets and liabilities are recorded as FDIC indemnification assets and other liabilities, respectively, on the Consolidated Statements of Condition as of dates covered by loss share agreements. Subsequent to the acquisition date, reimbursements received from the FDIC for actual incurred losses will reduce the FDIC indemnification assets. Reductions to expected losses, to the extent such reductions to expected losses are the result of an improvement to the actual or expected cash flows from the covered assets, will also reduce the FDIC indemnification assets and, if necessary, increase any loss share liability when necessary reductions exceed the current value of the FDIC indemnification assets. In accordance with the clawback provision noted above, the Company may be required to ~~reimburse~~sell these investments before recovery of the ~~FDIC when actual~~amortized cost bases, which may be the maturity dates of the securities. The unrealized losses ~~are less than certain thresholds established for~~within each loss share agreement. The balance of these estimated reimbursements in accordance with clawback provisions and any related amortization are adjusted periodically for changes in the expected losses on covered assets. On the Consolidated Statements of Condition as of dates subject to loss share agreements, estimated reimbursements from clawback provisions are recorded as a reduction to the FDIC indemnification asset or, if necessary, an increase to the loss share liability, which is included within accrued interest payable and other liabilities. In the second quarter of 2017, the Company recorded a $4.9 million reduction to the estimated loss share liabilitycategory have occurred as a result of ~~an adjustment related~~changes in interest rates, market spreads and market conditions subsequent to such clawback provisions. Although these assets are contractual receivables from the FDIC and these liabilities are contractual payables to the FDIC, there are no contractual interest rates. Additional expectedpurchase. Available-for-sale securities with continuous unrealized losses ~~to the extent such expected~~existing for more than twelve months were primarily corporate notes.

See Note 7—Allowance for Credit Losses for further discussion regarding any credit losses result in recognition of an allowance for covered loan losses, will increase the FDIC indemnification asset or reduce the FDIC indemnification liability. The corresponding amortization is recorded as a component of non-interest income on the Consolidated Statements of Income during periods covered by loss share agreements.associated with held-to-maturity securities at June 30, 2020.

The following table ~~summarizes~~provides information as to the ~~activity~~amount of gross gains and losses, adjustments and impairment on investment securities recognized in earnings and proceeds received through the sale or call of investment securities:



	Three months ended June 30,						Six months ended June 30,
(Dollars in thousands)	2020			2019			2020			2019
Realized gains on investment securities	$	151		$	530		$	647		$	547
Realized losses on investment securities	(492		)	(7		)	(497		)	(91		)
Net realized (losses) gains on investment securities	(341		)	523			150			456
Unrealized gains on equity securities with readily determinable fair value	1,647			703			1,647			2,134
Unrealized losses on equity securities with readily determinable fair value	(110		)	(209		)	(3,656		)	(209		)
Net unrealized gains (losses) on equity securities with readily determinable fair value	1,537			494			(2,009		)	1,925
Upward adjustments of equity securities without readily determinable fair values	—			110			393			110
Downward adjustments of equity securities without readily determinable fair values	—			—			—			—
Impairment of equity securities without readily determinable fair values	(388		)	(263		)	(2,085		)	(263		)
Adjustment and impairment, net, of equity securities without readily determinable fair values	(388		)	(153		)	(1,692		)	(153		)
Other than temporary impairment charges ⁽¹⁾	—			—			—			—
Gains (losses) on investment securities, net	$	808		$	864		$	(3,551	)	$	2,228
Proceeds from sales of available-for-sale securities⁽²⁾	$	502,185		$	404,462		$	502,676		$	667,918
Proceeds from sales of equity securities with readily determinable fair value	4,000			11,000			4,030			11,000
Proceeds from sales and capital distributions of equity securities without readily determinable fair value	156			396			444			609


(1)	Applicable to periods prior to the adoption of ASU 2016-13.


(2)	Includes proceeds from available-for-sale securities sold in accordance with written covered call options sold to a third party.

The amortized cost and fair value of available-for-sale and held-to-maturity investment securities as of June 30, 2020, December 31, 2019 and June 30, 2019, by contractual maturity, are shown in the ~~Company’s FDIC indemnification liability during~~following table. Contractual maturities may differ from actual maturities as borrowers may have the ~~periods indicated:~~right to call or repay obligations with or without call or prepayment penalties. Mortgage-backed securities are not included in the maturity categories in the following maturity summary as actual maturities may differ from contractual maturities because the underlying mortgages may be called or prepaid without penalties:



	June 30, 2020					December 31, 2019				June 30, 2019
(Dollars in thousands)	Amortized Cost			Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale securities
Due in one year or less	$	120,316		$	121,023	$	183,996	$	185,035	$	114,853	$	115,231
Due in one to five years	74,427			76,284		62,679		64,064		137,427		139,958
Due in five to ten years	173,429			169,249		186,683		184,666		114,428		109,246
Due after ten years	234,743			241,248		292,308		292,924		168,539		172,296
Mortgage-backed	2,476,384			2,587,157		2,361,158		2,379,525		1,646,323		1,649,423
Total available-for-sale securities	$	3,079,299		$	3,194,961	$	3,086,824	$	3,106,214	$	2,181,570	$	2,186,154
Held-to-maturity securities
Due in one year or less	$	6,988		$	7,028	$	6,061	$	6,074	$	7,573	$	7,566
Due in one to five years	21,818			22,362		28,697		28,986		27,768		27,952
Due in five to ten years	146,937			153,664		213,104		216,957		321,474		325,009
Due after ten years	552,787			561,232		886,538		886,379		834,819		837,951
Total held-to-maturity securities	$	728,530		$	744,286	$	1,134,400	$	1,138,396	$	1,191,634	$	1,198,478
Less: Allowance for credit losses⁽¹⁾	(65		)
Held-to-maturity securities, net of allowance for credit losses	$	728,465


(1)	As of January 1, 2020, the Company adopted ASU 2016-13 related to credit losses on financial assets held at amortized cost. As a result of such adoption, the Company measured an allowance for credit losses as of June 30, 2020 related to lifetime expected credit losses on held-to-maturity investment securities.

Three Months Ended Nine Months Ended
(Dollars in thousands) September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Balance at beginning of period $ 15,375
$ 11,729
$ 16,701
$ 6,100
Reductions from reimbursable expenses (159 ) (21 ) (316 ) (751 )
Amortization 311
456
1,010
1,322
Changes in expected reimbursements from (to) the FDIC for changes in expected credit losses and reimbursable expenses 994
4,077
(1,665 ) 9,150
Payments (paid to) received from the FDIC (1,049 ) 1,704
(258 ) 2,124
Balance at end of period $ 15,472
$ 17,945
$ 15,472
$ 17,945
Securities having a carrying value of $3.2 billion at June 30, 2020 as well as securities having a carrying value of $1.7 billion and $1.9 billion at December 31, 2019 and June 30, 2019, respectively, were pledged as collateral for public deposits, trust deposits, Federal Home Loan Bank ("FHLB") advances and available lines of credit, securities sold under repurchase agreements and derivatives. At June 30, 2020, there were 0 securities of a single issuer, other than U.S. Government-sponsored agency securities, which exceeded 10% of shareholders’ equity.

~~On October 16, 2017,~~(6) Loans

The following table shows the Company’s loan portfolio by category as of the dates shown:



	June 30,			December 31,			June 30,
(Dollars in thousands)	2020			2019			2019
Balance:
Commercial	$	11,859,232		$	8,285,920		$	8,270,774
Commercial real estate	8,200,745			8,020,276			7,276,244
Home equity	466,596			513,066			527,370
Residential real estate	1,427,429			1,354,221			1,118,178
Premium finance receivables
Commercial insurance	3,999,774			3,442,027			3,368,423
Life insurance	5,400,802			5,074,602			4,634,478
Consumer and other	48,325			110,178			109,192
Total loans, net of unearned income	$	31,402,903		$	26,800,290		$	25,304,659
Mix:
Commercial	38		%	31		%	33		%
Commercial real estate	26			30			29
Home equity	1			2			2
Residential real estate	5			5			4
Premium finance receivables
Commercial insurance	13			13			13
Life insurance	17			19			18
Consumer and other	0			0			1
Total loans, net of unearned income	100		%	100		%	100		%

The Company’s loan portfolio is generally comprised of loans to consumers and small to medium-sized businesses located within the geographic market areas that the banks serve. Additionally, to provide short-term relief due to macroeconomic deterioration from the COVID-19 pandemic to small businesses within such market areas, the Company ~~entered into agreements with~~originates loans through the ~~FDIC that terminate all existing loss share agreements with the FDIC. See Note 17 - Subsequent Events for further discussion~~Paycheck Protection Program ("PPP"), an expansion of guaranteed lending under Section 7(a) of the ~~termination~~Small Business Act within the CARES Act. As of ~~FDIC loss share agreements.~~June 30, 2020, the Company's commercial portfolio included approximately $3.3 billion of such PPP loans. The premium finance receivables portfolios are made to customers throughout the United States and Canada. The Company strives to maintain a loan portfolio that is diverse in terms of loan type, industry, borrower and geographic concentrations. Such diversification reduces the exposure to economic downturns that may occur in different segments of the economy or in different industries.

~~Mortgage Banking Acquisitions~~Certain premium finance receivables are recorded net of unearned income. The unearned income portions of such premium finance receivables were $114.8 million at June 30, 2020, $118.4 million at December 31, 2019 and $119.7 million at June 30, 2019.

~~On February 14, 2017,~~Total loans, excluding PCD loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $(61.7) million at June 30, 2020, $9.1 million at December 31, 2019 and $5.6 million at June 30, 2019. Prior to January 1, 2020, PCI loans were recorded net of credit discounts. See “PCI Loans” below.

It is the policy of the Company ~~acquired certain~~to review each prospective credit in order to determine the appropriateness and, when required, the adequacy of security or collateral necessary to obtain when making a loan. The type of collateral, when required, will vary from liquid assets ~~and assumed certain liabilities of the mortgage banking business of American Homestead Mortgage, LLC ("AHM").~~to real estate. The Company ~~recorded goodwill~~seeks to ensure access to collateral, in the event of ~~$999,000 on~~default, through adherence to state lending laws and the ~~acquisition.~~Company’s credit monitoring procedures.

PCI Loans

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. Expected future cash flows at the purchase date in excess of the fair value of loans are recorded as interest income over the life of the loans if the timing and amount of the future cash flows is reasonably estimable (“accretable yield”). The difference between contractually required payments and the cash flows expectedPrior to ~~be collected at acquisition is referred to as the non-accretable difference and represents probable losses in the portfolio.~~

~~In determining the acquisition date fair value of~~January 1, 2020, PCI loans ~~and in subsequent accounting, the Company aggregates these purchased loans~~were aggregated into pools ~~of loans~~ by common risk characteristics ~~such as credit risk rating and loan type. Subsequent to the purchase date, increases in cash flows over those expected at the purchase date are recognized as~~for accounting purposes, including recognition of interest income ~~prospectively. Subsequent decreases to the expected cash flows will generally result in~~on a ~~provision for loan losses.~~

~~The Company purchased a portfolio~~pool basis. Measurement of life insurance premium finance receivables in 2009. These purchased life insurance premium finance receivables are valued on an individual basis. If credit related conditions deteriorate, an allowance related to these loans will be established as part of the provision for credit losses.

~~See Note 6—Loans, for additional information on PCI loans.~~

~~(4)~~ ~~Cash and Cash Equivalents~~

~~(5)~~ ~~Investment Securities~~

~~The following tables are a summary of the available-for-sale and held-to-maturity securities portfolios as of the dates shown:~~

September 30, 2017
(Dollars in thousands)
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
Available-for-sale securities
U.S. Treasury $ 144,872
$ —
$ (727 ) $ 144,145
U.S. Government agencies 159,884
10
(566 ) 159,328
Municipal 113,796
2,493
(273 ) 116,016
Corporate notes:
Financial issuers 60,325
63
(771 ) 59,617
Other 1,000
—
(3 ) 997
Mortgage-backed: ⁽¹⁾

Mortgage-backed securities 1,114,655
1,477
(30,436 ) 1,085,696
Collateralized mortgage obligations 63,934
230
(412 ) 63,752
Equity securities 33,166
3,867
(681 ) 36,352
Total available-for-sale securities $ 1,691,632
$ 8,140
$ (33,869 ) $ 1,665,903
Held-to-maturity securities
U.S. Government agencies $ 585,061
$ 249
$ (12,579 ) $ 572,731
Municipal 234,279
2,185
(2,159 ) 234,305
Total held-to-maturity securities $ 819,340
$ 2,434
$ (14,738 ) $ 807,036

December 31, 2016

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
(Dollars in thousands)
Available-for-sale securities
U.S. Treasury $ 142,741
$ 1
$ (759 ) $ 141,983
U.S. Government agencies 189,540
47
(435 ) 189,152
Municipal 129,446
2,969
(606 ) 131,809
Corporate notes:
Financial issuers 65,260
132
(1,000 ) 64,392
Other 1,000
—
(1 ) 999
Mortgage-backed: ⁽¹⁾

Mortgage-backed securities 1,185,448
284
(54,330 ) 1,131,402
Collateralized mortgage obligations 30,105
67
(490 ) 29,682
Equity securities 32,608
3,429
(789 ) 35,248
Total available-for-sale securities $ 1,776,148
$ 6,929
$ (58,410 ) $ 1,724,667
Held-to-maturity securities
U.S. Government agencies $ 433,343
$ 7
$ (24,470 ) $ 408,880
Municipal 202,362
647
(4,287 ) 198,722
Total held-to-maturity securities $ 635,705
$ 654
$ (28,757 ) $ 607,602

September 30, 2016

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
(Dollars in thousands)
Available-for-sale securities
U.S. Treasury $ 30,017
$ 19
$ —
$ 30,036
U.S. Government agencies 93,561
163
(41 ) 93,683
Municipal 106,033
3,395
(147 ) 109,281
Corporate notes:
Financial issuers 65,215
299
(1,311 ) 64,203
Other 1,000
—
—
1,000
Mortgage-backed: ⁽¹⁾

Mortgage-backed securities 1,257,070
7,958
(54 ) 1,264,974
Collateralized mortgage obligations 35,935
304
(102 ) 36,137
Equity securities 48,568
2,998
(784 ) 50,782
Total available-for-sale securities $ 1,637,399
$ 15,136
$ (2,439 ) $ 1,650,096
Held-to-maturity securities
U.S. Government agencies $ 729,417
$ 7,577
$ (2,879 ) $ 734,115
Municipal 203,350
5,515
(314 ) 208,551
Total held-to-maturity securities $ 932,767
$ 13,092
$ (3,193 ) $ 942,666


~~(1)~~	~~Consisting entirely of residential mortgage-backed securities, none of which are subprime.~~

The following table presents the portion of the Company’s available-for-sale and held-to-maturity securities portfolios which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position at September 30, 2017:

Continuous unrealized
losses existing for
less than 12 months

Continuous unrealized
losses existing for
greater than 12 months
Total
(Dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Available-for-sale securities
U.S. Treasury $ 144,144
$ (727 ) $ —
$ —
$ 144,144
$ (727 )
U.S. Government agencies 112,268
(451 ) 41,980
(115 ) 154,248
(566 )
Municipal 24,117
(138 ) 10,725
(135 ) 34,842
(273 )
Corporate notes:
Financial issuers —
—
35,194
(771 ) 35,194
(771 )
Other —
—
997
(3 ) 997
(3 )
Mortgage-backed:
Mortgage-backed securities 51,035
(6,629 ) 798,152
(23,807 ) 849,187
(30,436 )
Collateralized mortgage obligations 25,685
(195 ) 7,216
(217 ) 32,901
(412 )
Equity securities 9,177
(283 ) 6,102
(398 ) 15,279
(681 )
Total available-for-sale securities $ 366,426
$ (8,423 ) $ 900,366
$ (25,446 ) $ 1,266,792
$ (33,869 )
Held-to-maturity securities
U.S. Government agencies $ 400,980
$ (12,579 ) $ —
$ —
$ 400,980
$ (12,579 )
Municipal 115,384
(2,159 ) —
—
115,384
(2,159 )
Total held-to-maturity securities $ 516,364
$ (14,738 ) $ —
$ —
$ 516,364
$ (14,738 )

The Company conducts a regular assessment of its investment securities to determine whether securities are other-than-temporarily impaired considering, among other factors, the nature of the securities, credit ratings or financial condition of the issuer, the extent and duration of the unrealized loss, expected cash flows, market conditions and the Company’s ability to hold the securities through the anticipated recovery period.

~~The Company does not consider securities with unrealized losses at~~ ~~September 30, 2017~~ ~~to be other-than-temporarily impaired.~~ ~~The~~ Company does not intend to sell these investments and it is more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost bases, which may be the maturity dates of the securities. The unrealized losses within each category have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase. Securities with continuous unrealized losses existing for more than twelve months were primarily corporate notes

~~and mortgage-backed securities. Unrealized losses recognized on corporate notes and mortgage-backed securities are the result of increases in yields for similar types of securities.~~

~~The following table provides information as to the amount of gross gains and gross losses realized and proceeds received through the sale or call of investment securities:~~

Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 2017 2016
Realized gains $ 58
$ 3,429
$ 106
$ 7,466
Realized losses (19 ) (124 ) (75 ) (1,396 )
Net realized gains $ 39
$ 3,305
$ 31
$ 6,070
Other than temporary impairment charges —
—
—
—
Gains on investment securities, net $ 39
$ 3,305
$ 31
$ 6,070
Proceeds from sales and calls of available-for-sale securities $ 136,789
$ 1,114,666
$ 146,518
$ 2,186,662
Proceeds from calls of held-to-maturity securities 17
141,885
51,079
423,866

~~The amortized cost and fair value of securities as of~~ ~~September 30, 2017~~, ~~December 31, 2016~~ ~~and~~ ~~September 30, 2016~~, by contractual maturity, are shown in the following table. Contractual maturities may differ from actual maturities as borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Mortgage-backed securities determined to be available-for-sale are not included in the maturity categories in the following maturity summary as actual maturities may differ from contractual maturities because the underlying mortgages may be called or prepaid without penalties:

September 30, 2017 December 31, 2016 September 30, 2016
(Dollars in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
Available-for-sale securities
Due in one year or less $ 150,907
$ 150,241
$ 145,353
$ 145,062
$ 115,227
$ 115,487
Due in one to five years 282,443
282,121
321,019
320,423
141,364
141,368
Due in five to ten years 38,339
39,458
27,319
28,451
28,696
31,319
Due after ten years 8,188
8,283
34,296
34,399
10,539
10,029
Mortgage-backed 1,178,589
1,149,448
1,215,553
1,161,084
1,293,005
1,301,111
Equity securities 33,166
36,352
32,608
35,248
48,568
50,782
Total available-for-sale securities $ 1,691,632
$ 1,665,903
$ 1,776,148
$ 1,724,667
$ 1,637,399
$ 1,650,096
Held-to-maturity securities
Due in one year or less $ 170
$ 171
$ —
$ —
$ —
$ —
Due in one to five years 36,914
36,734
29,794
29,416
25,927
26,023
Due in five to ten years 193,387
192,581
69,664
67,820
64,835
65,842
Due after ten years 588,869
577,550
536,247
510,366
842,005
850,801
Total held-to-maturity securities $ 819,340
$ 807,036
$ 635,705
$ 607,602
$ 932,767
$ 942,666

Securities having a fair value of $1.6 billion at September 30, 2017 as well as securities having a fair value of $1.4 billion at December 31, 2016 and September 30, 2016 were pledged as collateral for public deposits, trust deposits, Federal Home Loan Bank ("FHLB") advances, securities sold under repurchase agreements and derivatives. At ~~September 30, 2017, there were~~ no ~~securities of a single issuer, other than U.S. Government-sponsored agency securities, which exceeded~~ ~~10%~~ ~~of shareholders’ equity.~~

~~(6)~~ ~~Loans~~

~~The following table shows the Company’s loan portfolio by category as of the dates shown:~~

September 30, December 31, September 30,
(Dollars in thousands) 2017 2016 2016
Balance:
Commercial $ 6,456,034
$ 6,005,422
$ 5,951,544
Commercial real estate 6,400,781
6,196,087
5,908,684
Home equity 672,969
725,793
742,868
Residential real estate 789,499
705,221
663,598
Premium finance receivables—commercial 2,664,912
2,478,581
2,430,233
Premium finance receivables—life insurance 3,795,474
3,470,027
3,283,359
Consumer and other 133,112
122,041
120,975
Total loans, net of unearned income, excluding covered loans $ 20,912,781
$ 19,703,172
$ 19,101,261
Covered loans 46,601
58,145
95,940
Total loans $ 20,959,382
$ 19,761,317
$ 19,197,201
Mix:
Commercial 31 % 30 % 31 %
Commercial real estate 31
31
31
Home equity 3
4
4
Residential real estate 3
4
3
Premium finance receivables—commercial 13
12
13
Premium finance receivables—life insurance 18
18
17
Consumer and other 1
1
1
Total loans, net of unearned income, excluding covered loans 100 % 100 % 100 %
Covered loans —
—
—
Total loans 100 % 100 % 100 %

The Company’s loan portfolio is generally comprised of loans to consumers and small to medium-sized businesses located within the geographic market areas that the banks serve. The premium finance receivables portfolios are made to customers throughout the United States and Canada. The Company strives to maintain a loan portfolio that is diverse in terms of loan type, industry, borrower and geographic concentrations. Such diversification reduces the exposure to economic downturns that may occur in different segments of the economy or in different industries.

Certain premium finance receivables are recorded net of unearned income. The unearned income portions of such premium finance receivables were $80.4 million at September 30, 2017, $69.6 million at December 31, 2016 and $64.4 million at September 30, 2016.

Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $8.0 million at September 30, 2017, $2.6 million at December 31, 2016 and $873,000 at September 30, 2016. PCI loans are recorded net of credit discounts. See “Acquired Loan Information at Acquisition” below.

It is the policy of the Company to review each prospective credit in order to determine the appropriateness and, when required, the adequacy of security or collateral necessary to obtain when making a loan. The type of collateral, when required, will vary from liquid assets to real estate. The Company seeks to ensure access to collateral, in the event of default, through adherence to state lending laws and the Company’s credit monitoring procedures.

~~Acquired Loan Information at Acquisition—PCI Loans~~

As part of the Company's previous acquisitions, the Company acquired loans for which there was evidence of credit quality deterioration since origination (PCI loans) and determined that it was probable that the Company would be unable to collect all contractually required principal and interest payments. The following table presents the unpaid principal balance and carrying value for these acquired loans:

September 30, 2017 December 31, 2016
(Dollars in thousands)
Unpaid
Principal
Balance

Carrying
Value
Unpaid
Principal
Balance Carrying
Value

PCI loans $ 406,891
$ 379,407
$ 509,446
$ 471,786

~~See Note 7—Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans for further discussion regarding the~~any allowance for loan losses ~~associated with PCI~~on these loans ~~at September 30, 2017.~~

~~Accretable Yield Activity - PCI Loans~~

were offset by the remaining credit discount related to the pool. Changes in expected cash flows ~~may~~would vary from period to period as the Company periodically ~~updates~~updated its cash flow model assumptions for PCI loans. The factors that most significantly affect the estimates of gross cash flows expected to be collected, and accordingly the accretable yield, ~~include~~included changes in the benchmark interest rate indices for variable-rate products and changes in prepayment assumptions and loss estimates. As a result of the implementation

of CECL, beginning in the first quarter of 2020, PCI loans transitioned to a classification of PCD, which no longer maintains the prior pools and related accounting concepts. The following tables present the required disclosures for PCI loans before the adoption of CECL.

Acquired Loan Information at Acquisition—PCI Loans

The following table presents the unpaid principal balance and carrying value for these acquired loans:



	December 31, 2019
(In thousands)	Unpaid Principal Balance		Carrying Value
(In thousands)	Unpaid Principal Balance		Carrying Value
PCI loans	$	455,784	$	425,372

Accretable Yield Activity - PCI Loans

The following table provides activity for the accretable yield of PCI ~~loans:~~loans as of June 30, 2019:



	Three Months Ended			Six Months Ended
(In thousands)	June 30, 2019			June 30, 2019
Accretable yield, beginning balance	$	34,092		$	34,876
Acquisitions	1,874			1,874
Accretable yield amortized to interest income	(4,084		)	(7,913		)
Reclassification from non-accretable difference ⁽¹⁾	432			2,006
Increases in interest cash flows due to payments and changes in interest rates	1,975			3,446
Accretable yield, ending balance	$	34,289		$	34,289

Three Months Ended Nine Months Ended
(Dollars in thousands) September 30,
2017
September 30,
2016
September 30,
2017 September 30,
2016
Accretable yield, beginning balance $ 45,510
$ 55,630
$ 49,408
$ 63,902
Acquisitions —
—
426
1,082
Accretable yield amortized to interest income (5,025 ) (6,449 ) (16,101 ) (17,105 )
Accretable yield amortized to indemnification asset/liability ⁽¹⁾
(371 ) (1,744 ) (1,086 ) (5,539 )
Reclassification from non-accretable difference ⁽²⁾
1,017
5,370
7,106
12,099
Decreases in interest cash flows due to payments and changes in interest rates (875 ) 170
503
(1,462 )
Accretable yield, ending balance ⁽³⁾
$ 40,256
$ 52,977
$ 40,256
$ 52,977


(1)	Represents the portion of the current period accreted yield, resulting from lower expected losses, applied to reduce the loss share indemnification asset or increase the loss share indemnification liability.


~~(2)~~	Reclassification is the result of subsequent increases in expected principal cash flows.


~~(3)~~	~~As of September 30, 2017, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset or liability for the bankacquisitions is approximately $24,000. The remainder of the accretable yield related to bank acquisitions is expected to be amortized to interest income.~~

~~Accretion~~

(7) Allowance for Credit Losses

In accordance with ASC 326, the Company is required to ~~interest income accounted~~measure the allowance for ~~under ASC 310-30 totaled $5.0 million~~credit losses of financial assets with similar risk characteristics on a collective or pooled basis. In considering the segmentation of financial assets measured at amortized cost into pools, the Company considered various risk characteristics in its analysis. Generally, the segmentation utilized represents the level at which the Company develops and ~~$6.4 million~~documents its systematic methodology to determine the allowance for credit losses for the financial asset held at amortized cost, specifically the Company's loan portfolio and debt securities classified as held-to-maturity. Below is a summary of the Company's loan portfolio segments and major debt security types:

Commercial loans, including PPP loans:The Company makes commercial loans for many purposes, including working capital lines and leasing arrangements, that are generally renewable annually and supported by business assets, personal guarantees and additional collateral. Underlying collateral includes receivables, inventory, enterprise value and the assets of the business. Commercial business lending is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. This portfolio includes a range of industries, including manufacturing, restaurants, franchise, professional services, equipment finance and leasing, mortgage warehouse lending and industrial.

The Company also originates loans through PPP. Administered by the Small Business Administration ("SBA"), PPP provides short-term relief primarily related to the disruption from COVID-19 to companies and non-profits that meet the SBA’s definition of an eligible small business. Under the program, the SBA will forgive all or a portion of the loan if, during a certain period, loans are used for qualifying expenses. If all or a portion of the loan is not forgiven, the borrower is responsible for repayment. PPP loans are fully guaranteed by the SBA, including any portion not forgiven. The SBA guarantee exists at the inception of the loan and throughout its life and is not separated from the loan if the loan is subsequently sold or transferred. As it is not considered a freestanding contract, the Company considers the impact of the SBA guarantee when measuring the allowance for credit losses.

Commercial real estate loans, including construction and development, and non-construction: The Company's commercial real estate loans are generally secured by a first mortgage lien and assignment of rents on the underlying property. Since most of the Company's bank branches are located in the ~~third quarter~~Chicago metropolitan area and southern Wisconsin, a significant portion of ~~2017~~the Company's commercial real estate loan portfolio is located in this region. As the risks and ~~2016, respectively. For the nine months ended September 30, 2017 and 2016, the Company recorded accretion to interest income~~circumstances of ~~$16.1 million and $17.1 million, respectively. These amounts include accretion from both covered and non-covered loans, and are both included within interest and fees on~~such loans in ~~the Consolidated Statements of Income.~~construction

phase vary from that of non-construction commercial real estate loans, the Company assessed the allowance for credit losses separately for these two segments.

~~(7)~~ ~~Allowance~~

Home equity loans: The Company's home equity loans and lines of credit are primarily originated by each of the bank subsidiaries in their local markets where there is a strong understanding of the underlying real estate value. The Company's banks monitor and manage these loans, and conduct an automated review of all home equity loans and lines of credit at least twice per year. The banks subsidiaries use this information to manage loans that may be higher risk and to determine whether to obtain additional credit information or updated property valuations. In a limited number of cases, the Company may issue home equity credit together with first mortgage financing, and requests for such financing are evaluated on a combined basis.

Residential real estate loans: The Company's residential real estate portfolio predominantly includes one- to four-family adjustable rate mortgages that have repricing terms generally from one to three years, construction loans to individuals and bridge financing loans for qualifying customers. The Company's adjustable rate mortgages relate to properties located principally in the Chicago metropolitan area and southern Wisconsin or vacation homes owned by local residents. The Company believes that since this loan portfolio consists primarily of locally originated loans, and since the majority of the borrowers are longer-term customers with lower LTV ratios, the Company faces a relatively low risk of borrower default and delinquency. It is not the Company's current practice to underwrite, and there are no plans to underwrite subprime, Alt A, no or little documentation loans, or option ARM loans.

Premium finance receivables: The Company makes loans to businesses to finance the insurance premiums they pay on their commercial insurance policies. The loans are indirectly originated by working through independent medium and large insurance agents and brokers located throughout the United States and Canada. The insurance premiums financed are primarily for commercial customers’ purchases of liability, property and casualty and other commercial insurance. This lending involves relatively rapid turnover of the loan portfolio and high volume of loan originations. The Company performs ongoing credit and other reviews of the agents and brokers to mitigate against the risk of fraud.

The Company also originates life insurance premium finance receivables. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The life insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In some cases, the Company may make a loan that has a partially unsecured position.

Consumer and other loans: Included in the consumer and other loan category is a wide variety of personal and consumer loans to individuals. The Company originates consumer loans in order to provide a wider range of financial services to their customers. Consumer loans generally have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk than mortgage loans due to the type and nature of the collateral.

U.S. government agency securities: This security type includes debt obligations of certain government-sponsored entities of the U.S. government such as the Federal Home Loan ~~Losses, Allowance~~Bank, Federal Agricultural Mortgage Corporation, Federal Farm Credit Banks Funding Corporation and Fannie Mae. Such securities often contain an explicit or implicit guarantee of the U.S. government.

Municipal securities: The Company's municipal securities portfolio include bond issues for ~~Losses~~various municipal government entities located throughout the United States, including the Chicago metropolitan area and southern Wisconsin, some of which are privately placed and non-rated. Though the risk of loss is typically low, including within the Company, default history exists on ~~Lending-Related Commitments and Impaired Loans~~municipal securities within the United States.

The tables below show the aging of the Company’s loan portfolio by the segmentation noted above at ~~September~~June 30, ~~2017,~~2020, December 31, ~~2016~~2019 and ~~September~~June 30, ~~2016:~~2019. For periods prior to January 1, 2020, PCI loans are disclosed in segmentation consistent with that discussed above for comparative purposes. For accounting purposes, including recognition of interest income, PCI loans were aggregated into pools by common risk characteristics separate from non-acquired loans. As a result of the implementation of ASU 2016-13, beginning in the first quarter of 2020, PCI loans transitioned to a classification of purchased financial assets with credit deterioration ("PCD"), which no longer maintains the prior pools and related accounting concepts. Recognition of interest income on PCD loans is considered at the individual asset level following the Company's accrual policies, instead of based upon the entire pool of loans. As a result, such PCD loans are included within nonaccrual status, if applicable.

As of September 30, 2017 90+ days and still accruing 60-89 days past due 30-59 days past due
(Dollars in thousands) Nonaccrual Current Total Loans
Loan Balances:
Commercial
Commercial, industrial and other $ 12,281
$ —
$ 3,161
$ 13,710
$ 4,091,381
$ 4,120,533
Franchise —
—
—
16,719
836,997
853,716
Mortgage warehouse lines of credit —
—
—
312
194,058
194,370
Asset-based lending 1,141
—
1,533
4,515
889,147
896,336
Leases 509
—
281
1,194
379,410
381,394
PCI - commercial ⁽¹⁾
—
1,489
61
—
8,135
9,685
Total commercial 13,931
1,489
5,036
36,450
6,399,128
6,456,034
Commercial real estate:
Construction 1,607
—
366
2,064
669,940
673,977
Land 196
—
—
—
102,557
102,753
Office 5,148
—
—
1,220
874,583
880,951
Industrial 1,848
—
137
438
834,062
836,485
Retail 2,200
—
3,030
3,674
925,335
934,239
Multi-family 569
—
68
3,058
861,290
864,985
Mixed use and other 3,310
—
843
3,561
1,966,601
1,974,315
PCI - commercial real estate ⁽¹⁾
—
8,443
1,394
2,940
120,299
133,076
Total commercial real estate 14,878
8,443
5,838
16,955
6,354,667
6,400,781
Home equity 7,581
—
446
2,590
662,352
672,969
Residential real estate, including PCI 14,743
1,120
2,055
165
771,416
789,499
Premium finance receivables
Commercial insurance loans 9,827
9,584
7,421
9,966
2,628,114
2,664,912
Life insurance loans —
6,740
946
6,937
3,571,388
3,586,011
PCI - life insurance loans ⁽¹⁾
—
—
—
—
209,463
209,463
Consumer and other, including PCI 540
221
242
685
131,424
133,112
Total loans, net of unearned income, excluding covered loans $ 61,500
$ 27,597
$ 21,984
$ 73,748
$ 20,727,952
$ 20,912,781
Covered loans 1,936
2,233
1,074
45
41,313
46,601
Total loans, net of unearned income $ 63,436
$ 29,830
$ 23,058
$ 73,793
$ 20,769,265
$ 20,959,382



As of June 30, 2020			90+ days and still accruing		60-89 days past due		30-59 days past due
(In thousands)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:
Commercial
Commercial, industrial and other, excluding PPP loans	$	42,882	$	1,374	$	8,952	$	23,720	$	8,446,936	$	8,523,864
Commercial PPP loans	—		—		—		—		3,335,368		3,335,368
Commercial real estate
Construction and development	9,829		—		1,944		17,313		1,310,962		1,340,048
Non-construction	54,728		—		24,536		58,215		6,723,218		6,860,697
Home equity	7,261		—		—		1,296		458,039		466,596
Residential real estate	19,529		—		1,506		4,400		1,401,994		1,427,429
Premium finance receivables
Commercial insurance loans	16,445		35,638		35,967		46,556		3,865,168		3,999,774
Life insurance loans	15		—		6,386		14,604		5,379,797		5,400,802
Consumer and other	427		156		4		281		47,457		48,325
Total loans, net of unearned income	$	151,116	$	37,168	$	79,295	$	166,385	$	30,968,939	$	31,402,903



As of December 31, 2019			90+ days and still accruing		60-89 days past due		30-59 days past due
(In thousands)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:⁽¹⁾
Commercial
Commercial, industrial and other, excluding PPP loans	$	37,224	$	1,855	$	3,275	$	77,324	$	8,166,242	$	8,285,920
Commercial PPP loans	—		—		—		—		—		—
Commercial real estate
Construction and development	2,112		3,514		5,292		48,964		1,223,567		1,283,449
Non-construction	24,001		11,432		26,254		48,603		6,626,537		6,736,827
Home equity	7,363		—		454		3,533		501,716		513,066
Residential real estate	13,797		5,771		3,089		18,041		1,313,523		1,354,221
Premium finance receivables
Commercial insurance loans	20,590		11,517		12,119		18,783		3,379,018		3,442,027
Life insurance loans	590		—		—		32,559		5,041,453		5,074,602
Consumer and other	231		287		40		344		109,276		110,178
Total loans, net of unearned income	$	105,908	$	34,376	$	50,523	$	248,151	$	26,361,332	$	26,800,290



As of June 30, 2019			90+ days and still accruing		60-89 days past due		30-59 days past due
(In thousands)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:⁽¹⁾
Commercial
Commercial, industrial and other, excluding PPP loans	$	47,604	$	1,939	$	5,283	$	16,102	$	8,199,846	$	8,270,774
Commercial PPP loans	—		—		—		—		—		—
Commercial real estate
Construction and development	2,256		—		577		25,929		971,631		1,000,393
Non-construction	18,619		5,124		10,622		47,058		6,194,428		6,275,851
Home equity	8,489		—		321		2,155		516,405		527,370
Residential real estate	14,236		1,867		1,306		1,832		1,098,937		1,118,178
Premium finance receivables
Commercial insurance loans	13,833		6,940		17,977		16,138		3,313,535		3,368,423
Life insurance loans	590		—		18,580		19,673		4,595,635		4,634,478
Consumer and other	220		235		242		227		108,268		109,192
Total loans, net of unearned income	$	105,847	$	16,105	$	54,908	$	129,114	$	24,998,685	$	25,304,659

(1)

Includes PCD loans and, for periods prior to the adoption of ASU 2016-13, PCI loans. PCI loans ~~represent~~represented loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30.Loan agings disclosed in comparative periods are based upon contractually required payments. As a result of the adoption of ASU 2016-13, the Company transitioned all previously classified PCI loans to PCD loans effective January 1, 2020.

Credit Quality Indicators

As of December 31, 2016 90+ days and still accruing 60-89 days past due 30-59 days past due
(Dollars in thousands) Nonaccrual Current Total Loans
Loan Balances:
Commercial
Commercial, industrial and other $ 13,441
$ 174
$ 2,341
$ 11,779
$ 3,716,977
$ 3,744,712
Franchise —
—
—
493
869,228
869,721
Mortgage warehouse lines of credit —
—
—
—
204,225
204,225
Asset-based lending 1,924
—
135
1,609
871,402
875,070
Leases 510
—
—
1,331
293,073
294,914
PCI - commercial ⁽¹⁾
—
1,689
100
2,428
12,563
16,780
Total commercial 15,875
1,863
2,576
17,640
5,967,468
6,005,422
Commercial real estate
Construction 2,408
—
—
1,824
606,007
610,239
Land 394
—
188
—
104,219
104,801
Office 4,337
—
4,506
1,232
857,599
867,674
Industrial 7,047
—
4,516
2,436
756,602
770,601
Retail 597
—
760
3,364
907,872
912,593
Multi-family 643
—
322
1,347
805,312
807,624
Mixed use and other 6,498
—
1,186
12,632
1,931,859
1,952,175
PCI - commercial real estate ⁽¹⁾
—
16,188
3,775
8,888
141,529
170,380
Total commercial real estate 21,924
16,188
15,253
31,723
6,110,999
6,196,087
Home equity 9,761
—
1,630
6,515
707,887
725,793
Residential real estate, including PCI 12,749
1,309
936
8,271
681,956
705,221
Premium finance receivables
Commercial insurance loans 14,709
7,962
5,646
14,580
2,435,684
2,478,581
Life insurance loans —
3,717
17,514
16,204
3,182,935
3,220,370
PCI - life insurance loans ⁽¹⁾
—
—
—
—
249,657
249,657
Consumer and other, including PCI 439
207
100
887
120,408
122,041
Total loans, net of unearned income, excluding covered loans $ 75,457
$ 31,246
$ 43,655
$ 95,820
$ 19,456,994
$ 19,703,172
Covered loans 2,121
2,492
225
1,553
51,754
58,145
Total loans, net of unearned income $ 77,578
$ 33,738
$ 43,880
$ 97,373
$ 19,508,748
$ 19,761,317

Credit quality indicators, specifically the Company's internal risk rating systems, reflect how the Company monitors credit losses and represents factors used by the Company when measuring the allowance for credit losses. The following discusses the Company's credit quality indicators by financial asset.

As of September 30, 2016 90+ days and still accruing 60-89 days past due 30-59 days past due
(Dollars in thousands) Nonaccrual Current Total Loans
Loan Balances:
Commercial
Commercial, industrial and other $ 15,809
$ —
$ 7,324
$ 8,987
$ 3,573,396
$ 3,605,516
Franchise —
—
458
1,626
872,661
874,745
Mortgage warehouse lines of credit —
—
—
—
309,632
309,632
Asset-based lending 234
—
3,772
3,741
837,972
845,719
Leases 375
—
239
—
299,339
299,953
PCI - commercial ⁽¹⁾
—
1,783
—
1,036
13,160
15,979
Total commercial 16,418
1,783
11,793
15,390
5,906,160
5,951,544
Commercial real estate:
Construction 400
—
—
3,775
447,302
451,477
Land 1,208
—
787
300
105,406
107,701
Office 3,609
—
6,457
8,062
865,954
884,082
Industrial 9,967
—
940
2,961
753,636
767,504
Retail 909
—
1,340
8,723
884,369
895,341
Multi-family 90
—
3,051
2,169
789,645
794,955
Mixed use and other 6,442
—
2,157
5,184
1,837,724
1,851,507
PCI - commercial real estate ⁽¹⁾
—
21,433
1,509
4,066
129,109
156,117
Total commercial real estate 22,625
21,433
16,241
35,240
5,813,145
5,908,684
Home equity 9,309
—
1,728
3,842
727,989
742,868
Residential real estate, including PCI 12,205
1,496
2,232
1,088
646,577
663,598
Premium finance receivables
Commercial insurance loans 14,214
7,754
6,968
10,291
2,391,006
2,430,233
Life insurance loans —
—
9,960
3,717
3,006,795
3,020,472
PCI - life insurance loans ⁽¹⁾
—
—
—
—
262,887
262,887
Consumer and other, including PCI 543
124
204
871
119,233
120,975
Total loans, net of unearned income, excluding covered loans $ 75,314
$ 32,590
$ 49,126
$ 70,439
$ 18,873,792
$ 19,101,261
Covered loans 2,331
4,806
1,545
2,456
84,802
95,940
Total loans, net of unearned income $ 77,645
$ 37,396
$ 50,671
$ 72,895
$ 18,958,594
$ 19,197,201


~~(1)~~	~~PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30.Loan agings are based upon contractually required payments.~~

Loan portfolios

The Company's ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, the Company operates a credit risk rating system under which ~~our~~ credit management personnel assign a credit risk rating (1 to 10 rating) to each loan at the time of origination and review loans on a regular basis. These credit risk ratings are also an important aspect of the Company's allowance for credit losses measurement methodology. The credit risk rating structure and classifications are shown below:

Pass (risk rating 1 to 5): Based on various factors (liquidity, leverage, etc.), the Company believes asset quality is acceptable and is deemed to not require additional monitoring by the Company.

Special mention (risk rating 6):Assets in this category are currently protected, potentially weak, but not to the point of substandard classification. Loss potential is moderate if corrective action is not taken.

Substandard accrual (risk rating 7):Assets in this category have well defined weaknesses that jeopardize the liquidation of the debt. Loss potential is distinct but with no discernible impairment.

Substandard nonaccrual/doubtful (risk rating 8 and 9): Assets have all the weaknesses in those classified “substandard accrual” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, improbable.

The Company’s Problem Loan Reporting system ~~automatically~~ includes all loans with credit risk ratings of 6 through 9. This system is designed to provide an on-going detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible orand, as a result, no longer share similar risk characteristics as its related pool. If that is the case, the individual loan is considered collateral dependent and individually assessed for an ~~impairment reserve may be established.~~allowance for credit loss. The Company’s ~~impairment analysis~~individual assessment utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions.

Through the credit risk rating process, loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to non-accrual status or a ~~charge-off or~~charge-off. If the ~~establishment of a specific impairment reserve. If~~Company determines that a loan amount or portion thereof is ~~determined to be~~ uncollectible, the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses.

If, based on current information and events, it is probable that the Company will be unable to collect all amounts due to it according to the contractual terms of the loan agreement, a specific impairment reserve is established. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

The table below shows the Company’s loan portfolio by credit quality indicator and year of origination at June 30, 2020:



As of June 30, 2020	Year of Origination														Revolving		Total
(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving		to Term		Loans
Loan Balances:
Commercial, industrial and other
Pass	$	1,072,045	$	1,333,365	$	1,070,718	$	749,203	$	349,600	$	549,941	$	2,434,548	$	7,480	$	7,566,900
Special mention	42,463		132,621		64,833		46,902		73,195		22,074		122,136		—		504,224
Substandard accrual	8,334		109,572		76,045		54,875		26,689		37,065		97,278		—		409,858
Substandard nonaccrual/doubtful	1,266		3,135		8,983		6,248		7,596		11,662		3,992		—		42,882
Total commercial, industrial and other	$	1,124,108	$	1,578,693	$	1,220,579	$	857,228	$	457,080	$	620,742	$	2,657,954	$	7,480	$	8,523,864
Commercial PPP
Pass	$	3,335,368	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	3,335,368
Special mention	—		—		—		—		—		—		—		—		—
Substandard accrual	—		—		—		—		—		—		—		—		—
Substandard nonaccrual/doubtful	—		—		—		—		—		—		—		—		—
Total commercial PPP	$	3,335,368	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	3,335,368
Construction and development
Pass	$	97,379	$	445,363	$	352,613	$	180,506	$	86,444	$	65,689	$	22,102	$	—	$	1,250,096
Special mention	—		19,198		25,776		—		—		13,214		—		—		58,188
Substandard accrual	—		1,140		10,161		3,403		4,011		3,220		—		—		21,935
Substandard nonaccrual/doubtful	—		—		1,997		3,082		1,072		3,678		—		—		9,829
Total construction and development	$	97,379	$	465,701	$	390,547	$	186,991	$	91,527	$	85,801	$	22,102	$	—	$	1,340,048
Non-construction
Pass	$	578,157	$	1,047,153	$	945,334	$	835,676	$	701,769	$	1,818,599	$	169,035	$	379	$	6,096,102
Special mention	1,914		75,935		82,827		66,962		98,309		164,795		1,573		—		492,315
Substandard accrual	1,376		24,969		17,159		30,774		21,377		121,063		834		—		217,552
Substandard nonaccrual/doubtful	—		1,127		6,193		3,376		8,753		35,279		—		—		54,728
Total non-construction	$	581,447	$	1,149,184	$	1,051,513	$	936,788	$	830,208	$	2,139,736	$	171,442	$	379	$	6,860,697
Home equity
Pass	$	—	$	—	$	47	$	28	$	43	$	7,701	$	422,478	$	—	$	430,297
Special mention	—		—		—		393		83		5,007		8,975		—		14,458
Substandard accrual	—		—		135		—		239		11,084		2,430		692		14,580
Substandard nonaccrual/doubtful	—		57		—		90		240		5,138		1,736		—		7,261
Total home equity	$	—	$	57	$	182	$	511	$	605	$	28,930	$	435,619	$	692	$	466,596
Residential real estate
Pass	$	108,260	$	404,584	$	165,085	$	168,879	$	136,930	$	388,898	$	—	$	—	$	1,372,636
Special mention	54		2,217		2,238		2,811		2,811		9,105		—		—		19,236
Substandard accrual	—		519		1,286		2,563		5,744		5,916		—		—		16,028
Substandard nonaccrual/doubtful	—		338		757		3,611		2,629		12,194		—		—		19,529
Total residential real estate	$	108,314	$	407,658	$	169,366	$	177,864	$	148,114	$	416,113	$	—	$	—	$	1,427,429
Premium finance receivables - commercial
Pass	$	3,347,679	$	579,537	$	8,624	$	404	$	—	$	—	$	—	$	—	$	3,936,244
Special mention	31,769		11,350		3		—		—		—		—		—		43,122
Substandard accrual	431		3,393		139		—		—		—		—		—		3,963
Substandard nonaccrual/doubtful	2,756		11,807		1,878		4		—		—		—		—		16,445
Total premium finance receivables - commercial	$	3,382,635	$	606,087	$	10,644	$	408	$	—	$	—	$	—	$	—	$	3,999,774
Premium finance receivables - life
Pass	$	253,869	$	488,256	$	572,343	$	591,854	$	733,692	$	2,760,183	$	—	$	—	$	5,400,197
Special mention	—		—		—		590		—		—		—		—		590
Substandard accrual	—		—		—		—		—		—		—		—		—
Substandard nonaccrual/doubtful	—		—		—		—		—		15		—		—		15
Total premium finance receivables - life	$	253,869	$	488,256	$	572,343	$	592,444	$	733,692	$	2,760,198	$	—	$	—	$	5,400,802

Non-performing loans include all non-accrual loans (8 and 9 risk ratings) as well as loans 90 days past due and still accruing interest, excluding PCI and covered loans. The remainder of the portfolio is considered performing under the contractual terms of the loan agreement. The following table presents the recorded investment based on performance of loans by class, excluding covered loans, per the most recent analysis at September 30, 2017, December 31, 2016 and September 30, 2016:



Consumer and other
Pass	$	1,279	$	3,351	$	2,351	$	786	$	581	$	20,530	$	18,219	$	—	$	47,097
Special mention	16		30		1		130		1		353		2		—		533
Substandard accrual	15		8		—		—		—		242		3		—		268
Substandard nonaccrual/doubtful	—		14		4		17		—		392		—		—		427
Total consumer and other	$	1,310	$	3,403	$	2,356	$	933	$	582	$	21,517	$	18,224	$	—	$	48,325
Total loans ⁽¹⁾
Pass	$	8,794,036	$	4,301,609	$	3,117,115	$	2,527,336	$	2,009,059	$	5,611,541	$	3,066,382	$	7,859	$	29,434,937
Special mention	76,216		241,351		175,678		117,788		174,399		214,548		132,686		—		1,132,666
Substandard accrual	10,156		139,601		104,925		91,615		58,060		178,590		100,545		692		684,184
Substandard nonaccrual/doubtful	4,022		16,478		19,812		16,428		20,290		68,358		5,728		—		151,116
Total loans	$	8,884,430	$	4,699,039	$	3,417,530	$	2,753,167	$	2,261,808	$	6,073,037	$	3,305,341	$	8,551	$	31,402,903

Performing Non-performing Total
(Dollars in thousands) September 30,
2017 December 31,
2016 September 30,
2016 September 30,
2017 December 31,
2016 September 30,
2016 September 30,
2017 December 31,
2016 September 30,
2016
Loan Balances:
Commercial
Commercial, industrial and other $ 4,108,252
$ 3,731,097
$ 3,589,707
$ 12,281
$ 13,615
$ 15,809
$ 4,120,533
$ 3,744,712
$ 3,605,516
Franchise 853,716
869,721
874,745
—
—
—
853,716
869,721
874,745
Mortgage warehouse lines of credit 194,370
204,225
309,632
—
—
—
194,370
204,225
309,632
Asset-based lending 895,195
873,146
845,485
1,141
1,924
234
896,336
875,070
845,719
Leases 380,885
294,404
299,578
509
510
375
381,394
294,914
299,953
PCI - commercial ⁽¹⁾
9,685
16,780
15,979
—
—
—
9,685
16,780
15,979
Total commercial 6,442,103
5,989,373
5,935,126
13,931
16,049
16,418
6,456,034
6,005,422
5,951,544
Commercial real estate
Construction 672,370
607,831
451,077
1,607
2,408
400
673,977
610,239
451,477
Land 102,557
104,407
106,493
196
394
1,208
102,753
104,801
107,701
Office 875,803
863,337
880,473
5,148
4,337
3,609
880,951
867,674
884,082
Industrial 834,637
763,554
757,537
1,848
7,047
9,967
836,485
770,601
767,504
Retail 932,039
911,996
894,432
2,200
597
909
934,239
912,593
895,341
Multi-family 864,416
806,981
794,865
569
643
90
864,985
807,624
794,955
Mixed use and other 1,971,005
1,945,677
1,845,065
3,310
6,498
6,442
1,974,315
1,952,175
1,851,507
PCI - commercial real estate⁽¹⁾
133,076
170,380
156,117
—
—
—
133,076
170,380
156,117
Total commercial real estate 6,385,903
6,174,163
5,886,059
14,878
21,924
22,625
6,400,781
6,196,087
5,908,684
Home equity 665,388
716,032
733,559
7,581
9,761
9,309
672,969
725,793
742,868
Residential real estate, including PCI 774,756
692,472
651,393
14,743
12,749
12,205
789,499
705,221
663,598
Premium finance receivables
Commercial insurance loans 2,645,501
2,455,910
2,408,265
19,411
22,671
21,968
2,664,912
2,478,581
2,430,233
Life insurance loans 3,579,271
3,216,653
3,020,472
6,740
3,717
—
3,586,011
3,220,370
3,020,472
PCI - life insurance loans ⁽¹⁾
209,463
249,657
262,887
—
—
—
209,463
249,657
262,887
Consumer and other, including PCI 132,413
121,458
120,372
699
583
603
133,112
122,041
120,975
Total loans, net of unearned income, excluding covered loans $ 20,834,798
$ 19,615,718
$ 19,018,133
$ 77,983
$ 87,454
$ 83,128
$ 20,912,781
$ 19,703,172
$ 19,101,261

(1)

~~PCI~~Includes $702.7 million of loans ~~represent~~with COVID-19 related modifications that migrated from pass as of March 1, 2020 to special mention or substandard accrual as of June 30, 2020. These loans ~~acquired with evidence~~were qualitatively evaluated as a part of the measurement of the allowance for credit ~~quality deterioration since origination, in accordance with ASC 310-30. See Note 6 - Loans for further discussion~~losses as of ~~these purchased loans.~~June 30, 2020.

Held-to-maturity debt securities

The Company conducts an assessment of its investment securities, including those classified as held-to-maturity, at the time of purchase and on at least an annual basis to ensure such investment securities remain within appropriate levels of risk and continue to perform satisfactorily in fulfilling its obligations. The Company considers, among other factors, the nature of the securities and credit ratings or financial condition of the issuer. If available, the Company obtains a credit rating for issuers from a Nationally Recognized Statistical Rating Organization (“NRSRO”) for consideration. If no such rating is available for an issuer, the Company performs an internal rating based on the scale utilized within the loan portfolio as discussed above. For purposes of the table below, the Company has converted any issuer rating from an NRSRO into the Company’s internal ratings based on Investment Policy and review by the Company’s management.



As of June 30, 2020	Year of Origination												Total
(In thousands)	2020		2019		2018		2017		2016		Prior		Balance
Amortized Cost Balances:
U.S. government agencies
1-4 internal grade	$	124,575	$	284,973	$	101,450	$	—	$	—	$	3,406	$	514,404
5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	—		—		—		—		—		—		—
Total U.S. government agencies	$	124,575	$	284,973	$	101,450	$	—	$	—	$	3,406	$	514,404
Municipal
1-4 internal grade	$	—	$	162	$	7,611	$	44,073	$	10,200	$	152,080	$	214,126
5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	—		—		—		—		—		—		—
Total municipal	$	—	$	162	$	7,611	$	44,073	$	10,200	$	152,080	$	214,126
Total held-to-maturity securities													$	728,530
Less: Allowance for credit losses													(65		)
Held-to-maturity securities, net of allowance for credit losses													$	728,465

Measurement of Allowance for Credit Losses

The Company's allowance for credit losses consists of the allowance for loan losses, the allowance for unfunded commitment losses and the allowance for held-to-maturity debt security losses. In accordance with ASC 326, the Company measures the allowance for credit losses at the time of origination or purchase of a financial asset, representing an estimate of lifetime expected credit losses on the related asset. When developing its estimate, the Company considers available information relevant to assessing the collectability of cash flows, from both internal and external sources. Historical credit loss experience is one input in the estimation process as well as inputs relevant to current conditions and reasonable and supportable forecasts. In considering past events, the Company considers the relevance, or lack thereof, of historical information due to changes in such things as financial asset underwriting or collection practices, and changes in portfolio mix due to changing business plans and strategies. In considering current conditions and forecasts, the Company considers both the current economic environment and the forecasted direction of the economic environment with emphasis on those factors deemed relevant to or driving changes in expected credit losses. As significant judgment is required, the review of the appropriateness of the allowance for credit losses is performed quarterly by various committees with participation by the Company's executive management.



	June 30,		December 31,		June 30,
(In thousands)	2020		2019		2019
Allowance for loan losses	$	313,510	156,828		$	160,421
Allowance for unfunded lending-related commitments losses	59,599		1,633		1,480
Allowance for loan losses and unfunded lending-related commitments losses	373,109		158,461		161,901
Allowance for held-to-maturity securities losses	65		—		—
Allowance for credit losses	$	373,174	$	158,461	$	161,901

The allowance for credit losses is measured on a collective or pooled basis when similar risk characteristics exist, based upon the segmentation discussed above. The Company utilizes modeling methodologies that estimate lifetime credit loss rates on each pool, including methodologies estimating the probability of default and loss given default on specific segments. Historical credit loss history is adjusted for reasonable and supportable forecasts developed by the Company on a quantitative or qualitative basis. Reasonable and supportable forecasts consider the macroeconomic factors that are most relevant to evaluating and predicting expected credit losses in the Company's financial assets. Currently, the Company utilizes an eight quarter forecast period using a single macroeconomic scenario provided by a third-party and reviewed within the Company's governance structure. For periods beyond the ability to develop reasonable and supportable forecasts, the Company reverts to historical loss rates at an input level, straight-line over a four quarter reversion period. Expected credit losses are measured over the contractual term of the financial asset with consideration of expected prepayments. Expected extensions, renewals or modifications of the financial asset are only considered when either 1) the expected extension, renewal or modification is contained within the existing agreement and is not unconditionally cancelable, or 2) the expected extension, renewal or modification is reasonably expected to result in a TDR. The methodologies discussed above are applied to both current asset balances on the Company's Consolidated Statements of Condition and off-balance sheet commitments (i.e. unfunded lending-related commitments).

Assets that do not share similar risk characteristic with a pool are assessed for the allowance for credit losses on an individual basis. These typically include assets experiencing financial difficulties, including substandard nonaccrual assets and assets currently classified or expected to be classified as TDRs. If foreclosure is probable or the asset is considered collateral-dependent, expected credit losses are measured based upon the fair value of the underlying collateral adjusted for selling costs, if appropriate. Underlying collateral across the Company's segments consist primarily of real estate, land and construction assets as well as general business assets of the borrower. As of June 30, 2020, substandard nonaccrual loans totaling $83.4 million in carrying balance had no related allowance for credit losses. For certain accruing current and expected TDRs, expected credit losses are measured based upon the present value of future cash flows of the modified asset terms compared to the amortized cost of the asset. Considering accounting relief provided under Section 4013 of the CARES Act, loans identified as being reasonably expected to be modified into TDRs in the future totaled $4.4 million as of June 30, 2020.

The Company does not measure an allowance for credit losses on accrued interest receivable balances because these balances are written off in a timely manner as a reduction to interest income when assets are placed on nonaccrual status.

Loan portfolios

A summary of activity in the allowance for credit losses, byspecifically for the loan portfolio ~~(excluding covered loans)~~(i.e. allowance for loan losses and allowance for unfunded commitment losses), for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 is as ~~follows:~~follows. Periods prior to January 1, 2020 are presented in accordance with accounting rules effective at that time.

Three months ended September 30, 2017 Commercial Real Estate Home Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total, Excluding Covered Loans
(Dollars in thousands) Commercial
Allowance for credit losses
Allowance for loan losses at beginning of period $ 52,358
$ 52,339
$ 11,134
$ 6,143
$ 6,352
$ 1,265
$ 129,591
Other adjustments (2 ) (38 ) —
(31 ) 32
—
(39 )
Reclassification from allowance for unfunded lending-related commitments 500
(406 ) —
—
—
—
94
Charge-offs (2,265 ) (989 ) (968 ) (267 ) (1,716 ) (213 ) (6,418 )
Recoveries 801
323
178
55
499
93
1,949
Provision for credit losses 4,343
811
212
757
1,386
433
7,942
Allowance for loan losses at period end $ 55,735
$ 52,040
$ 10,556
$ 6,657
$ 6,553
$ 1,578
$ 133,119
Allowance for unfunded lending-related commitments at period end $ —
$ 1,276
$ —
$ —
$ —
$ —
$ 1,276
Allowance for credit losses at period end $ 55,735
$ 53,316
$ 10,556
$ 6,657
$ 6,553
$ 1,578
$ 134,395
Individually evaluated for impairment $ 4,568
$ 1,184
$ 691
$ 758
$ —
$ 34
$ 7,235
Collectively evaluated for impairment 50,623
52,048
9,865
5,813
6,553
1,544
126,446
Loans acquired with deteriorated credit quality 544
84
—
86
—
—
714
Loans at period end
Individually evaluated for impairment $ 18,086
$ 31,698
$ 7,729
$ 21,263
$ —
$ 544
$ 79,320
Collectively evaluated for impairment 6,428,263
6,236,007
665,240
735,185
6,250,923
131,581
20,447,199
Loans acquired with deteriorated credit quality 9,685
133,076
—
3,637
209,463
987
356,848
Loans held at fair value —
—
—
29,414
—
—
29,414



Three months ended June 30, 2020				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
(In thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
Allowance for credit losses at beginning of period	$	107,346		$	112,796		$	12,394		$	12,550		$	7,880		$	446		$	253,412
Other adjustments	—			—			—			—			42			—			42
Charge-offs	(5,686		)	(7,224		)	(239		)	(293		)	(3,434		)	(99		)	(16,975		)
Recoveries	112			493			46			30			833			58			1,572
Provision for credit losses	31,825			91,061			(12		)	(372		)	12,271			285			135,058
Allowance for credit losses at period end	$	133,597		$	197,126		$	12,189		$	11,915		$	17,592		$	690		$	373,109
Individually measured	$	12,689		$	5,023		$	264		$	393		$	—		$	114		$	18,483
Collectively measured	120,908			192,103			11,925			11,522			17,592			576			354,626
Loans at period end
Individually measured	$	48,220		$	83,664		$	22,782		$	28,145		$	—		$	554		$	183,365
Collectively measured	11,811,012			8,117,081			443,814			1,144,670			9,400,576			47,771			30,964,924
Loans held at fair value	—			—			—			254,614			—			—			254,614

Three months ended September 30, 2016 Commercial Commercial Real Estate Home Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total, Excluding Covered Loans
(Dollars in thousands)
Allowance for credit losses
Allowance for loan losses at beginning of period $ 41,654
$ 46,824
$ 11,383
$ 5,405
$ 7,814
$ 1,276
$ 114,356
Other adjustments (35 ) (57 ) —
(10 ) (10 ) —
(112 )
Reclassification from allowance for unfunded lending-related commitments (500 ) (79 ) —
—
—
—
(579 )
Charge-offs (3,469 ) (382 ) (574 ) (134 ) (1,959 ) (389 ) (6,907 )
Recoveries 176
364
65
61
456
72
1,194
Provision for credit losses 5,212
1,678
810
781
974
286
9,741
Allowance for loan losses at period end $ 43,038
$ 48,348
$ 11,684
$ 6,103
$ 7,275
$ 1,245
$ 117,693
Allowance for unfunded lending-related commitments at period end $ 500
$ 1,148
$ —
$ —
$ —
$ —
$ 1,648
Allowance for credit losses at period end $ 43,538
$ 49,496
$ 11,684
$ 6,103
$ 7,275
$ 1,245
$ 119,341
Individually evaluated for impairment $ 2,554
$ 2,491
$ 964
$ 1,166
$ —
$ 192
$ 7,367
Collectively evaluated for impairment 40,252
46,983
10,720
4,867
7,275
1,053
111,150
Loans acquired with deteriorated credit quality 732
22
—
70
—
—
824
Loans at period end
Individually evaluated for impairment $ 19,133
$ 45,290
$ 9,309
$ 17,040
$ —
$ 602
$ 91,374
Collectively evaluated for impairment 5,916,432
5,707,277
733,559
625,030
5,450,705
119,162
18,552,165
Loans acquired with deteriorated credit quality 15,979
156,117
—
3,925
262,887
1,211
440,119
Loans held at fair value —
—
—
17,603
—
—
17,603



Three months ended June 30, 2019	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
(In thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
Allowance for credit losses
Allowance for credit losses at beginning of period	$	74,638		$	59,260		$	8,627		$	7,630		$	8,219		$	1,248		$	159,622
Other adjustments	—			(11		)	(13		)	(8		)	21			—			(11		)
Charge-offs	(17,380		)	(326		)	(690		)	(287		)	(5,009		)	(136		)	(23,828		)
Recoveries	289			247			68			140			734			60			1,538
Provision for credit losses	17,346			5,580			(4,361		)	671			4,975			369			24,580
Allowance for credit losses at period end	$	74,893		$	64,750		$	3,631		$	8,146		$	8,940		$	1,541		$	161,901
Individually measured	$	10,588		$	3,979		$	209		$	321		$	—		$	109		$	15,206
Collectively measured	63,891			60,717			3,422			7,762			8,940			1,432			146,164
Loans acquired with deteriorated credit quality ⁽¹⁾	414			54			—			63			—			—			531
Loans at period end
Individually measured	$	63,528		$	33,749		$	18,303		$	21,663		$	—		$	271		$	137,514
Collectively measured	8,182,921			7,115,504			509,067			980,167			7,856,344			106,276			24,750,279
Loans acquired with deteriorated credit quality ⁽¹⁾	24,325			126,991			—			10,267			146,557			2,645			310,785
Loans held at fair value	—			—			—			106,081			—			—			106,081



Six months ended June 30, 2020				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
(In thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
Allowance for credit losses at beginning of period	$	64,920		$	68,511		$	3,878		$	9,800		$	9,647		$	1,705		$	158,461
Cumulative effect adjustment from the adoption of ASU 2016-13	9,039			32,064			9,061			3,002			(4,959		)	(863		)	47,344
Other adjustments	—			—			—			—			(31		)	—			(31		)
Charge-offs	(7,839		)	(7,794		)	(1,240		)	(694		)	(6,618		)	(227		)	(24,412		)
Recoveries	495			756			340			90			1,943			100			3,724
Provision for credit losses	66,982			103,589			150			(283		)	17,610			(25		)	188,023
Allowance for credit losses at period end	$	133,597		$	197,126		12,189			11,915			17,592			690			373,109

Nine months ended September 30, 2017 Commercial Real Estate Home Equity Residential Real Estate Premium Finance Receivable Consumer and Other Total, Excluding Covered Loans
(Dollars in thousands) Commercial
Allowance for credit losses
Allowance for loan losses at beginning of period $ 44,493
$ 51,422
$ 11,774
$ 5,714
$ 7,625
$ 1,263
$ 122,291
Other adjustments (23 ) (121 ) —
(38 ) 57
—
(125 )
Reclassification from allowance for unfunded lending-related commitments 500
(438 ) —
—
—
—
62
Charge-offs (3,819 ) (3,235 ) (3,224 ) (742 ) (5,021 ) (522 ) (16,563 )
Recoveries 1,635
1,153
387
287
1,515
267
5,244
Provision for credit losses 12,949
3,259
1,619
1,436
2,377
570
22,210
Allowance for loan losses at period end $ 55,735
$ 52,040
$ 10,556
$ 6,657
$ 6,553
$ 1,578
$ 133,119
Allowance for unfunded lending-related commitments at period end $ —
$ 1,276
$ —
$ —
$ —
$ —
$ 1,276
Allowance for credit losses at period end $ 55,735
$ 53,316
$ 10,556
$ 6,657
$ 6,553
$ 1,578
$ 134,395

Nine months ended September 30, 2016 Commercial Real Estate Home Equity Residential Real Estate Premium Finance Receivable Consumer and Other Total, Excluding Covered Loans
(Dollars in thousands) Commercial
Allowance for credit losses
Allowance for loan losses at beginning of period $ 36,135
$ 43,758
$ 12,012
$ 4,734
$ 7,233
$ 1,528
$ 105,400
Other adjustments (103 ) (203 ) —
(49 ) 31
—
(324 )
Reclassification from allowance for unfunded lending-related commitments (500 ) (200 ) —
—
—
—
(700 )
Charge-offs (4,861 ) (1,555 ) (3,672 ) (1,320 ) (6,350 ) (720 ) (18,478 )
Recoveries 926
1,029
184
204
1,876
143
4,362
Provision for credit losses 11,441
5,519
3,160
2,534
4,485
294
27,433
Allowance for loan losses at period end $ 43,038
$ 48,348
$ 11,684
$ 6,103
$ 7,275
$ 1,245
$ 117,693
Allowance for unfunded lending-related commitments at period end $ 500
$ 1,148
$ —
$ —
$ —
$ —
$ 1,648
Allowance for credit losses at period end $ 43,538
$ 49,496
$ 11,684
$ 6,103
$ 7,275
$ 1,245
$ 119,341

~~A summary of activity in the allowance for covered loan losses for the three and nine months ended September 30, 2017 and 2016 is as follows:~~

Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
(Dollars in thousands) 2017 2016 2017 2016
Balance at beginning of period $ 1,074
$ 2,412
$ 1,322
$ 3,026
Provision for covered loan losses before benefit attributable to FDIC loss share agreements (225 ) (847 ) (1,063 ) (3,495 )
Benefit attributable to FDIC loss share agreements 180
677
850
2,796
Net provision for covered loan losses (45 ) (170 ) (213 ) (699 )
Increase in FDIC indemnification liability (180 ) (677 ) (850 ) (2,796 )
Loans charged-off (155 ) (918 ) (491 ) (1,291 )
Recoveries of loans charged-off 64
775
990
3,182
Net (charge-offs) recoveries (91 ) (143 ) 499
1,891
Balance at end of period $ 758
$ 1,422
$ 758
$ 1,422

In conjunction with FDIC-assisted transactions, the Company entered into loss share agreements with the FDIC. Additional expected losses, to the extent such expected losses result in the recognition of an allowance for loan losses, will increase the FDIC loss share asset or reduce any FDIC loss share liability. The allowance for loan losses for loans acquired in FDIC-assisted transactions is determined without giving consideration to the amounts recoverable through loss share agreements (since the loss share agreements are separately accounted for and thus presented “gross” on the balance sheet). On the Consolidated Statements of Income, the provision for credit losses is reported net of changes in the amount recoverable under the loss share agreements during the period subject to loss share agreement. Reductions to expected losses, to the extent such reductions to expected losses are the result of an improvement to the actual or expected

cash flows from the covered assets, will reduce the FDIC loss share asset or increase any FDIC loss share liability. Additions to expected losses will require an increase to the allowance for covered loan losses, and a corresponding increase to the FDIC loss share asset or reduction to any FDIC loss share liability. See “FDIC-Assisted Transactions” within Note 3 – Business Combinations for more detail.

On October 16, 2017, the Company entered into agreements with the FDIC that terminate all existing loss share agreements with the FDIC. As a result, the allowance for covered loan losses previously measured will be included within the allowance for credit losses, excluding covered loans, presented above for subsequent periods. See Note 17 - Subsequent Events for further discussion of the termination of FDIC loss share agreements.

~~Impaired Loans~~

~~A summary of impaired loans, including troubled debt restructurings ("TDRs"), is as follows:~~

September 30, December 31, September 30,
(Dollars in thousands) 2017 2016 2016
Impaired loans (included in non-performing and TDRs):
Impaired loans with an allowance for loan loss required ⁽¹⁾
$ 30,864
$ 33,146
$ 39,022
Impaired loans with no allowance for loan loss required 47,730
57,370
51,518
Total impaired loans ⁽²⁾
$ 78,594
$ 90,516
$ 90,540
Allowance for loan losses related to impaired loans $ 7,218
$ 6,377
$ 6,836
TDRs $ 33,183
$ 41,708
$ 44,276



Six months ended June 30, 2019				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
(In thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
Allowance for credit losses at beginning of period	$	67,826		$	61,661		$	8,507		$	7,194		$	7,715		$	1,261		$	154,164
Other adjustments	—			(35		)	(20		)	(15		)	32			—			(38		)
Charge-offs	(17,883		)	(4,060		)	(778		)	(290		)	(7,219		)	(238		)	(30,468		)
Recoveries	607			727			130			169			1,290			116			3,039
Provision for credit losses	24,343			6,457			(4,208		)	1,088			7,122			402			35,204
Allowance for credit losses at period end	$	74,893		$	64,750		$	3,631		$	8,146		$	8,940		$	1,541		$	161,901

(1)

~~These impaired loans require an~~Prior to January 1, 2020, measurement of any allowance for loan losses ~~because~~on PCI loans were offset by the ~~estimated fair value~~remaining discount related to the acquired pool. As a result of the adoption of ASU 2016-13, PCI loans ~~or related collateral~~transitioned to a classification of PCD. Measurement of any allowance for loan losses on PCD loans is ~~less than the recorded investment in the loans.~~


~~(2)~~	~~Impaired loans are considered~~no longer offset by the ~~Company to be non-accrual loans, TDRs or loans with principal and/or interest at risk, even if theloan is current with all payments of principal and interest.~~ remaining discount.

At January 1, 2020, the Company adopted ASU 2016-13, which replaced the previous incurred loss methodology for measuring the allowance for credit losses with a lifetime expected loss methodology. At adoption, the allowance for credit losses related to loans and lending agreements increased approximately $47.3 million, including an increase of approximately $33.2 million recorded to the allowance for unfunded commitment losses within accrued interest and other liabilities on the Company's Consolidated Statements of Condition, with an offsetting amount recorded directly to retained earnings, net of taxes. The remaining $14.2 million cumulative effect adjustment was recorded to the allowance for loan losses, presented separately on the Company's Consolidated Statements of Condition. Of the amount recorded to the allowance for loan losses, $11.0 million related to PCD loans with such offsetting amount added directly to the carrying balance of the loans and the remaining $3.2 million not related to PCD loans recorded directly to retained earnings, net of taxes, on the Company's Consolidated Statements of Condition.

~~The following tables present impaired loans by loan class, excluding covered loans, for~~

For the three and six month periods ended June 30, 2020, the Company recognized approximately $135.1 million and $188.0 million of provision for credit losses, respectively, related to loans and lending agreements, primarily as ~~follows:~~a result of the continued change to macroeconomic conditions created by the COVID-19 pandemic, and the impact on the Company's macroeconomic forecasts of the Commercial Real-Estate Price Index as well as other key model inputs (Baa corporate credit spreads, gross domestic product and Dow Jones Total Stock Market Index). The Company's macroeconomic forecasts of key model inputs assumes economic recovery from the impact of the COVID-19 pandemic during 2021. The Company also considered certain qualitative factors, including its low exposure to industries with highest risk factors and the impact of government-sponsored stimulus programs. Net charge-offs in the three and six month periods ending June 30, 2020 totaled $15.4 million and $20.7 million, respectively.

For the Nine Months Ended
As of September 30, 2017 September 30, 2017
Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other $ 7,312
$ 8,458
$ 4,191
$ 8,390
$ 407
Asset-based lending 588
589
161
588
21
Leases 2,440
2,444
215
2,539
91
Commercial real estate
Construction 1,607
2,408
94
2,319
93
Land —
—
—
—
—
Office 2,225
2,291
570
2,280
94
Industrial 408
408
75
415
19
Retail 5,932
6,072
158
5,998
191
Multi-family 1,239
1,239
8
1,250
33
Mixed use and other 1,537
1,695
263
1,580
60
Home equity 1,511
1,721
691
1,528
53
Residential real estate 5,842
6,154
758
5,842
177
Consumer and other 223
224
34
225
10
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other $ 5,995
$ 7,260
$ —
$ 6,662
$ 294
Asset-based lending 553
553
—
728
31
Leases 817
817
—
862
38
Commercial real estate
Construction 1,504
1,504
—
1,524
49
Land 3,968
4,217
—
4,110
136
Office 3,400
3,585
—
3,565
147
Industrial 1,440
2,729
—
2,885
183
Retail 1,978
1,988
—
2,008
103
Multi-family 569
653
—
571
23
Mixed use and other 5,546
6,267
—
5,745
241
Home equity 6,218
9,523
—
7,231
339
Residential real estate 15,421
17,859
—
15,726
575
Consumer and other 321
433
—
334
16
Total impaired loans, net of unearned income $ 78,594
$ 91,091
$ 7,218
$ 84,905
$ 3,424
Held-to-maturity debt securities

At January 1, 2020, the Company established an allowance for credit losses on its held-to-maturity debt securities totaling approximately $74,000, which is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company's Consolidated Statements of Condition. Such adjustment was recorded directly to the Company's retained earnings, net of taxes. For the three and six month periods ended June 30, 2020, the Company recognized an approximately $5,000 and $9,000 credit to provision for credit losses related to held-to-maturity securities, respectively.

For the Twelve Months Ended
As of December 31, 2016 December 31, 2016
Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other $ 2,601
$ 2,617
$ 1,079
$ 2,649
$ 134
Asset-based lending 233
235
26
235
10
Leases 2,441
2,443
107
2,561
128
Commercial real estate
Construction 5,302
5,302
86
5,368
164
Land 1,283
1,283
1
1,303
47
Office 2,687
2,697
324
2,797
137
Industrial 5,207
5,843
1,810
7,804
421
Retail 1,750
1,834
170
2,039
101
Multi-family —
—
—
—
—
Mixed use and other 3,812
4,010
592
4,038
195
Home equity 1,961
1,873
1,233
1,969
75
Residential real estate 5,752
6,327
849
5,816
261
Consumer and other 117
121
100
131
7
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other $ 12,534
$ 14,704
$ —
$ 14,944
$ 948
Asset-based lending 1,691
2,550
—
8,467
377
Leases 873
873
—
939
56
Commercial real estate
Construction 4,003
4,003
—
4,161
81
Land 3,034
3,503
—
3,371
142
Office 3,994
5,921
—
4,002
323
Industrial 2,129
2,436
—
2,828
274
Retail —
—
—
—
—
Multi-family 1,903
1,987
—
1,825
84
Mixed use and other 6,815
7,388
—
6,912
397
Home equity 8,033
10,483
—
8,830
475
Residential real estate 11,983
14,124
—
12,041
622
Consumer and other 378
489
—
393
26
Total impaired loans, net of unearned income $ 90,516
$ 103,046
$ 6,377
$ 105,423
$ 5,485

For the Nine Months Ended
As of September 30, 2016 September 30, 2016
Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other $ 5,426
$ 5,434
$ 1,887
$ 5,487
$ 212
Asset-based lending 234
235
44
235
7
Leases 375
375
116
388
14
Commercial real estate
Construction —
—
—
—
—
Land 2,620
2,620
44
2,670
80
Office 1,697
2,361
182
1,722
79
Industrial 6,855
7,338
1,388
7,069
284
Retail 6,605
6,623
240
6,668
160
Multi-family 1,266
1,266
8
1,134
29
Mixed use and other 5,437
5,511
605
5,452
198
Home equity 2,373
2,457
964
2,404
63
Residential real estate 5,942
6,428
1,166
5,807
190
Consumer and other 192
192
192
194
8
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other $ 12,669
$ 16,261
$ —
$ 14,745
$ 717
Asset-based lending —
—
—
—
—
Leases —
—
—
—
—
Commercial real estate
Construction 1,995
1,995
—
2,273
94
Land 3,864
8,088
—
4,316
408
Office 4,980
6,243
—
4,978
260
Industrial 3,508
3,827
—
3,574
200
Retail 805
913
—
936
36
Multi-family 89
174
—
109
5
Mixed use and other 5,164
5,712
—
5,300
236
Home equity 6,936
9,108
—
7,736
320
Residential real estate 11,098
13,077
—
11,125
445
Consumer and other 410
520
—
428
21
Total impaired loans, net of unearned income $ 90,540
$ 106,758
$ 6,836
$ 94,750
$ 4,066

TDRs

The Company’s approach to restructuring ~~loans, excluding PCI~~ loans is built on its credit risk rating system, which requires credit management personnel to assign a credit risk rating to each loan. In each case, the loan officer is responsible for recommending a credit risk rating for each loan and ensuring the credit risk ratings are appropriate. These credit risk ratings are then reviewed and approved by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors, including a borrower’s financial strength, cash flow coverage, collateral protection and guarantees. The Company’s credit risk rating scale is one through ten with higher scores indicating higher risk. In the case of loans rated six or worse following modification, the Company’s Managed Assets Division evaluates the loan and the credit risk rating and determines that the loan has been restructured to be reasonably assured of repayment and of performance according to the modified terms and is supported by a current, well-documented credit assessment of the borrower’s financial condition and prospects for repayment under the revised terms.

A modification of a loan ~~excluding PCI loans,~~ with an existing credit risk rating of 6 or worse or a modification of any other credit, which will result in a restructured credit risk rating of ~~six~~6 or worse, must be reviewed for possible TDR classification. In that event, our Managed Assets Division conducts an overall credit and collateral review. A modification of these loans is considered to be a TDR if both (1) the borrower is experiencing financial difficulty and (2) for economic or legal reasons, the bank grants a concession to a borrower that it would not otherwise consider. The modification of a loan ~~excluding PCI loans,~~ where the credit risk rating is 5 or better both before and after such modification is not considered to be a TDR. Based on the Company’s credit risk rating system, it considers that borrowers whose credit risk rating is 5 or better are not experiencing financial difficulties and therefore, are not considered TDRs.

All credits determined to be a TDR will continue to be classified as a TDR in all subsequent periods, unless the borrower has been in compliance with the loan’s modified terms for a period of six months (including over a calendar year-end) and the current interest rate represents a market rate at the time of restructuring. The Managed Assets Division, in consultation with the respective loan officer, determines whether the modified interest rate represented a current market rate at the time of restructuring. Using knowledge of current market conditions and rates, competitive pricing on recent loan originations, and an assessment of various characteristics of the modified loan (including collateral position and payment history), an appropriate market rate for a new borrower with similar risk is determined. If the modified interest rate meets or exceeds this market rate for a new borrower with similar risk, the modified interest rate represents a market rate at the time of restructuring. Additionally, before removing a loan from TDR classification, a review of the current or previously measured impairment on the loan and any concerns related to future performance by the borrower is conducted. If concerns exist about the future ability of the borrower to meet its obligations under the loans based on a credit review by the Managed Assets Division, the TDR classification is not removed from the loan.

TDRs are ~~reviewed~~individually assessed at the time of the modification and on a quarterly basis to ~~determine if a specific reserve is necessary.~~measure an allowance for credit loss. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan's original rate, or for collateral dependent loans, to the fair value of the collateral. Any shortfall is recorded as a ~~specific~~ reserve. ~~The Company, in accordance with ASC 310-10, continues to individually measure impairment of these loans after the TDR classification is removed.~~

Each TDR was ~~reviewed for impairment~~individually assessed at ~~September~~June 30, ~~2017~~2020 and approximately ~~$1.2~~$7.9 million of ~~impairment~~reserve was present and appropriately reserved for through the Company’s ~~normal~~ reserving methodology in the Company’s allowance for ~~loan~~credit losses. For TDRs in which impairment is calculated by the present value of future cash flows, the Company records interest income representing the decrease in impairment resulting from the passage of time during the respective period, which differs from interest income from contractually required interest on these specific loans. During the three months ended September 30, 2017 and 2016, the Company recorded $68,000 and $98,000, respectively, of interest income, which was reflected as a decrease in impairment. For the nine months ended September 30, 2017 and 2016, the Company recorded $172,000 and $323,000, respectively, of interest income, which was reflected as a decrease in impairment.

TDRs may arise ~~in which,~~when, due to financial difficulties experienced by the borrower, the Company obtains through physical possession one or more collateral assets in satisfaction of all or part of an existing credit. Once possession is obtained, the Company reclassifies the appropriate portion of the remaining balance of the credit from loans to OREO, which is included within other assets in the Consolidated Statements of Condition. For any residential real estate property collateralizing a consumer mortgage loan, the Company is considered to possess the related collateral only if legal title is obtained upon completion of foreclosure, or the borrower conveys all interest in the residential real estate property to the Company through completion of a deed in lieu of foreclosure or similar legal agreement. ~~Excluding covered OREO, at September~~At June 30, ~~2017,~~2020, the Company had ~~$7.9~~$1.4 million of foreclosed residential real estate properties included within OREO. Furthermore, the recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled ~~$12.1~~$10.7 million and $10.4 million at ~~September~~June 30, ~~2017.~~2020 and 2019, respectively.

The tables below present a summary of the post-modification balance of loans restructured during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively, which represent TDRs:


Three months ended September 30, 2017 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Three months ended June 30, 2020 (Dollars in thousands)																Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
Three months ended June 30, 2020 (Dollars in thousands)																Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	3	$	1,408	—	$	—	—	$	—	3	$	1,408	—	$	—	7	$	3,431	5	$	443	—	$	—	4	$	3,257	—	$	—
Commercial real estate
Office	—	—		—	—		—	—		—	—		—	—
Industrial	—	—		—	—		—	—		—	—		—	—
Mixed use and other	—	—		—	—		—	—		—	—		—	—
Non-construction																1	2,082		—	—		—	—		1	2,082		—	—
Residential real estate and other	2	255		1	186		2	255		—	—		1	69		21	3,504		21	3,505		10	1,590		—	—		—	—
Total loans	5	$	1,663	1	$	186	2	$	255	3	$	1,408	1	$	69	29	$	9,017	26	$	3,948	10	$	1,590	5	$	5,339	—	$	—


Three months ended September 30, 2016 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Three months ended June 30, 2019 (Dollars in thousands)																Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
Three months ended June 30, 2019 (Dollars in thousands)																Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	1	$	28	1	$	28	—	$	—	—	$	—	—	$	—	5	$	2,455	5	$	2,455	1	$	550	2	$	1,494	—	$	—
Commercial real estate
Office	—	—		—	—		—	—		—	—		—	—
Industrial	—	—		—	—		—	—		—	—		—	—
Mixed use and other	—	—		—	—		—	—		—	—		—	—
Non-construction																3	1,273		3	1,273		—	—		—	—		—	—
Residential real estate and other	1	43		1	43		1	43		—	—		—	—		22	5,761		22	5,761		9	1,942		—	—		—	—
Total loans	2	$	71	2	$	71	1	$	43	—	$	—	—	$	—	30	$	9,489	30	$	9,489	10	$	2,492	2	$	1,494	—	$	—


(1)	TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.


(2)	Balances represent the recorded investment in the loan at the time of the restructuring.

During the three months ended ~~September~~June 30, ~~2017, five~~2020, 29 loans totaling ~~$1.7~~$9.0 million were determined to be TDRs, compared to ~~two~~30 loans totaling ~~$71,000~~$9.5 million during the three months ended ~~September~~June 30, ~~2016.~~2019. Of these loans extended at below market terms, the weighted average extension had a term of approximately 3618 months during the quarter ended ~~September~~June 30, ~~2017~~2020 compared to 2215 months for the quarter ended ~~September~~June 30, ~~2016.~~2019. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately ~~225~~142 basis points and ~~150~~219 basis points during the three months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively. Interest-only ~~payments~~payment terms were approximately ~~two~~eight months and six months during the three months ended ~~September~~June 30, ~~2017.~~2020 and 2019, respectively. Additionally, ~~$73,000 of~~0 principal ~~balance was~~balances were forgiven in the ~~third~~second quarter of ~~2017 compared to no principal balances in the third quarter of 2016.~~2020 and 2019.



Six months ended June 30, 2020 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
Six months ended June 30, 2020 (Dollars in thousands)	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	12	$	9,033	8	$	4,759	—	$	—	4	$	3,257	1	$	432
Commercial real estate
Non-construction	14	18,135		11	13,511		3	921		6	5,545		—	—
Residential real estate and other	41	5,646		33	5,395		15	2,376		—	—		—	—
Total loans	67	$	32,814	52	$	23,665	18	$	3,297	10	$	8,802	1	$	432


Nine months ended September 30, 2017 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Six months ended June 30, 2019 (Dollars in thousands)																Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
Six months ended June 30, 2019 (Dollars in thousands)																Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	4	$	1,503	1	$	95	—	$	—	3	$	1,408	—	$	—	14	$	21,385	7	$	2,963	1	$	550	9	$	19,916	—	$	—
Commercial real estate
Office	—	—		—	—		—	—		—	—		—	—
Industrial	—	—		—	—		—	—		—	—		—	—
Mixed use and other	1	1,245		1	1,245		—	—		—	—		—	—
Non-construction																4	1,575		3	1,273		—	—		1	302		—	—
Residential real estate and other	8	2,638		7	2,569		7	2,589		—	—		1	69		42	10,247		42	10,247		15	3,489		—	—		—	—
Total loans	13	$	5,386	9	$	3,909	7	$	2,589	3	$	1,408	1	$	69	60	$	33,207	52	$	14,483	16	$	4,039	10	$	20,218	—	$	—


(1)	TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.


(2)	Balances represent the recorded investment in the loan at the time of the restructuring.

Nine months ended
September 30, 2016

(Dollars in thousands)

Total⁽¹⁾⁽²⁾

Extension at
Below Market
Terms ⁽²⁾

Reduction of Interest
Rate ⁽²⁾

Modification to
Interest-only
Payments ⁽²⁾

Forgiveness of Debt⁽²⁾
Count Balance Count Balance Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 3
$ 345
3
$ 345
—
$ —
—
$ —
1
$ 275
Commercial real estate
Office 1
450
1
450
—
—
—
—
—
—
Industrial 6
7,921
6
7,921
3
7,196
—
—
—
—
Mixed use and other 2
150
2
150
—
—
—
—
—
—
Residential real estate and other 3
583
2
423
3
583
1
380
—
—
Total loans 15
$ 9,449
14
$ 9,289
6
$ 7,779
1
$ 380
1
$ 275


~~(1)~~	~~TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.~~


~~(2)~~	~~Balances represent the recorded investment in the loan at the time of the restructuring.~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2017, 13~~2020, 67 loans totaling ~~$5.4~~$32.8 million were determined to be TDRs, compared to 1560 loans totaling ~~$9.4~~$33.2 million induring the ~~same period of 2016.~~six months ended June 30, 2019. Of these loans extended at below market terms, the weighted average extension had a term of approximately 3610 months during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 compared to ~~six~~14 months for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2019. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately ~~188~~158 basis points and 30216 basis points for the year-to-date periods ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively. Interest-only payment terms were approximately ~~two~~13 months and three months during the ~~nine months ended September 30, 2017 compared to~~ six months ~~during the same period of 2016.~~

ended June 30, 2020 and 2019, respectively. Additionally, ~~$73,000~~$453,000 of principal ~~balance was~~balances were forgiven in the first ~~nine~~six months of ~~2017 compared to $300,000 of principal balance forgiven during the same period of 2016.~~2020.

The following table presents a summary of all loans restructured in TDRs during the twelve months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, and such loans ~~which~~that were in payment default under the restructured terms during the respective periods below:


(Dollars in thousands)	As of September 30, 2017			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			As of June 30, 2020			Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
	Total ⁽¹⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾			Total ⁽¹⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	4	$	1,503	—	$	—	—	$	—	22	$	13,989	7	$	4,252	8	$	5,013
Leases	2	2,949		—	—		—	—
Commercial real estate
Office	—	—		—	—		—	—
Industrial	—	—		—	—		—	—
Mixed use and other	1	1,245		1	1,245		1	1,245
Non-construction										17	23,578		6	6,181		6	6,181
Residential real estate and other	12	3,137		1	52		2	284		144	15,606		12	2,507		13	2,818
Total loans	19	$	8,834	2	$	1,297	3	$	1,529	183	$	53,173	25	$	12,940	27	$	14,012


(Dollars in thousands)	As of September 30, 2016			Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016			As of June 30, 2019			Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
	Total ⁽¹⁾⁽³⁾			Payments in Default ⁽²⁾⁽³⁾			Payments in Default ⁽²⁾⁽³⁾			Total ⁽¹⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	3	$	345	—	$	—	—	$	—	17	$	22,067	7	$	12,220	7	$	12,220
Leases	—	—		—	—		—	—
Commercial real estate
Office	1	450		1	450		1	450
Industrial	6	7,921		3	725		3	725
Mixed use and other	4	351		1	16		3	217
Non-construction										5	1,945		3	984		3	984
Residential real estate and other	3	583		—	—		—	—		90	17,842		7	1,100		8	1,229
Total loans	17	$	9,650	5	$	1,191	7	$	1,392	112	$	41,854	17	$	14,304	18	$	14,433


(1)	Total TDRs represent all loans restructured in TDRs during the previous twelve months from the date indicated.


(2)	TDRs considered to be in payment default are over 30 days past-due subsequent to the restructuring.


(3)	Balances represent the recorded investment in the loan at the time of the restructuring.

(8) Goodwill and Other Intangible Assets

A summary of the Company’s goodwill assets by ~~business segment~~reporting unit is presented in the following table:



(Dollars in thousands)	December 31, 2019		Goodwill Acquired		Impairment Loss		Goodwill Adjustments			June 30, 2020
Community banking	$	536,396	$	—	$	—	$	—		$	536,396
Specialty finance	39,451		—		—		(1,007		)	38,444
Wealth management	69,373		—		—		—			69,373
Total	$	645,220	$	—	$	—	$	(1,007	)	$	644,213

(Dollars in thousands)
January 1,
2017

Goodwill
Acquired

Impairment
Loss
Goodwill Adjustments September 30,
2017
Community banking $ 427,781
$ 999
$ —
$ 685
$ 429,465
Specialty finance 38,692
—
—
1,750
40,442
Wealth management 32,114
—
—
—
32,114
Total $ 498,587
$ 999
$ —
$ 2,435
$ 502,021

The ~~community banking segment's~~specialty finance unit's goodwill ~~increased $1.7~~decreased $1.0 million in the first ~~nine~~six months of 2017 primarily as a result of the acquisition of AHM and subsequent purchase adjustments related to the acquisition of FCFC. The specialty finance segment's goodwill increased $1.8 million in the first nine months of 20172020 as a result of foreign currency translation adjustments related to the Canadian acquisitions.

At ~~June 30, 2017,~~October 1, 2019, the Company utilized a quantitative approach for its annual goodwill impairment test of the ~~community banking segment~~specialty finance and wealth management reporting units and determined that no impairment existed at that time. ~~At December 31, 2016,~~The Company utilized a qualitative approach as of October 1, 2019 for its annual goodwill impairment test of the community banking reporting unit and determined that it was not more likely than not that an impairment existed at that time. The Company ~~utilized~~previously performed a quantitative approach for its annual goodwill impairment ~~tests~~test of the ~~specialty finance and wealth management segments and determined that no impairment existed at that time.~~ community banking reporting unit as of June 30, 2017.

At each reporting date between annual goodwill impairment tests, the Company considers potential indicators of impairment. ~~As of September 30, 2017,~~Given the current economic uncertainty and volatility surrounding COVID-19, the Company ~~identified no~~assessed whether such events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value. Impairment indicators considered comprised the condition of ~~goodwill impairment~~the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting units; performance of the Company’s stock and other relevant events. The Company further considered the amount by which fair value exceeded book value for each ~~business segment.~~reporting unit in its most recent quantitative analysis and sensitivities performed.

At the conclusion of this assessment of all reporting units, the Company determined that as of June 30, 2020, it was more likely than not that the fair value of all reporting units exceeded the respective carrying value of such reporting unit.

A summary of ~~finite-lived~~ intangible assets as of the dates shown and the expected amortization of finite-lived intangible assets as of ~~September~~June 30, ~~2017~~2020 is as follows:



(Dollars in thousands)	June 30, 2020			December 31, 2019			June 30, 2019
Community banking segment:
Core deposit intangibles with finite lives:
Gross carrying amount	$	55,206		$	55,206		$	58,423
Accumulated amortization	(29,673		)	(26,326		)	(32,652		)
Net carrying amount	$	25,533		$	28,880		$	25,771
Trademark with indefinite lives:
Carrying amount	5,800			5,800			5,800
Total net carrying amount	$	31,333		$	34,680		$	31,571
Specialty finance segment:
Customer list intangibles with finite lives:
Gross carrying amount	$	1,959		$	1,965		$	1,964
Accumulated amortization	(1,602		)	(1,552		)	(1,500		)
Net carrying amount	$	357		$	413		$	464
Wealth management segment:
Customer list and other intangibles with finite lives:
Gross carrying amount	$	20,430		$	20,430		$	20,430
Accumulated amortization	(10,752		)	(8,466		)	(5,877		)
Net carrying amount	$	9,678		$	11,964		$	14,553
Total intangible assets:
Gross carrying amount	$	83,395		$	83,401		$	86,617
Accumulated amortization	(42,027		)	(36,344		)	(40,029		)
Total intangible assets, net	$	41,368		$	47,057		$	46,588

(Dollars in thousands) September 30,
2017 December 31,
2016 September 30,
2016
Community banking segment:
Core deposit intangibles:
Gross carrying amount $ 37,272
$ 37,272
$ 34,998
Accumulated amortization (24,550 ) (21,614 ) (20,598 )
Net carrying amount $ 12,722
$ 15,658
$ 14,400
Specialty finance segment:
Customer list intangibles:
Gross carrying amount $ 1,972
$ 1,800
$ 1,800
Accumulated amortization (1,258 ) (1,159 ) (1,129 )
Net carrying amount $ 714
$ 641
$ 671
Wealth management segment:
Customer list and other intangibles:
Gross carrying amount $ 7,940
$ 7,940
$ 7,940
Accumulated amortization (2,725 ) (2,388 ) (2,275 )
Net carrying amount $ 5,215
$ 5,552
$ 5,665
Total other intangible assets, net $ 18,651
$ 21,851
$ 20,736



Estimated amortization
Actual in six months ended June 30, 2020	$	5,683
Estimated remaining in 2020	5,335
Estimated—2021	7,692
Estimated—2022	6,135
Estimated—2023	4,670
Estimated—2024	3,263

Estimated amortization
Actual in nine months ended September 30, 2017 $ 3,373
Estimated remaining in 2017 1,027
Estimated—2018 3,796
Estimated—2019 3,223
Estimated—2020 2,597
Estimated—2021 2,056

The core deposit intangibles recognized in connection with prior bank acquisitions are amortized over a ten-year period on an accelerated basis. The customer list intangibles recognized in connection with the purchase of life insurance premium finance

assets in 2009 are being amortized over an 18-year period on an accelerated ~~basis while the~~basis. The customer list and other intangibles recognized in connection with prior acquisitions within the wealth management segment are being amortized over a ~~ten-year~~ period of up to ten years on a straight-line basis. Indefinite-lived intangible assets consist of certain trade and domain names recognized in connection with the Veterans First acquisition. As indefinite-lived intangible assets are not amortized, the Company assesses impairment on at least an annual basis.

Total amortization expense associated with finite-lived intangibles totaled approximately ~~$3.4~~$5.7 million and ~~$3.6~~$5.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

(9) Mortgage Servicing Rights (“MSRs”)

The following is a summary of the changes in the carrying value of MSRs, accounted for at fair value, for the periods indicated:



	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
(In thousands)	2020			2019			2020			2019
Balance at beginning of the period	$	73,504		$	71,022		$	85,638		$	75,183
Additions from loans sold with servicing retained	20,351			9,802			29,798			16,382
Additions from acquisitions	—			407			—			407
Estimate of changes in fair value due to:
Payoffs and paydowns	(8,670		)	(4,076		)	(15,694		)	(6,073		)
Changes in valuation inputs or assumptions	(7,982		)	(4,305		)	(22,539		)	(13,049		)
Fair value at end of the period	$	77,203		$	72,850		$	77,203		$	72,850
Unpaid principal balance of mortgage loans serviced for others	$	9,188,285		$	7,515,186

The Company recognizes MSR assets upon the sale of residential real estate loans to external third parties when it retains the obligation to service the loans and the servicing fee is more than adequate compensation. The initial recognition of MSR assets from loans sold with servicing retained and subsequent changes in fair value of all MSRs are recognized in mortgage banking revenue. MSRs are subject to changes in value from actual and expected prepayment of the underlying loans. Starting in 2019, the Company periodically purchased options for the right to purchase securities not currently held within the banks' investment portfolios and entered into interest rate swaps in which the Company elected to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to MSRs. For more information regarding these hedges, see Note 15 - Derivative Financial Instruments in Item 1 of this report.

The MSR asset fair value is determined by using a discounted cash flow model that incorporates the objective characteristics of the portfolio as well as subjective valuation parameters that purchasers of servicing would apply to such portfolios sold into the secondary market. The subjective factors include loan prepayment speeds, discount rates, servicing costs and other economic factors. The Company uses a third party to assist in the valuation of MSRs.

~~(9)~~ (10) Deposits

The following table is a summary of deposits as of the dates shown:



(Dollars in thousands)	June 30, 2020			December 31, 2019			June 30, 2019
Balance:
Non-interest bearing	$	10,204,791		$	7,216,758		$	6,719,958
NOW and interest bearing demand deposits	3,440,348			3,093,159			2,788,976
Wealth management deposits	4,433,020			3,123,063			3,220,256
Money market	9,288,976			7,854,189			6,460,098
Savings	3,447,352			3,196,698			2,823,904
Time certificates of deposit	4,837,387			5,623,271			5,505,623
Total deposits	$	35,651,874		$	30,107,138		$	27,518,815
Mix:
Non-interest bearing	29		%	24		%	24		%
NOW and interest bearing demand deposits	10			10			10
Wealth management deposits	12			10			12
Money market	25			26			24
Savings	10			11			10
Time certificates of deposit	14			19			20
Total deposits	100		%	100		%	100		%

(Dollars in thousands) September 30,
2017 December 31,
2016 September 30,
2016
Balance:
Non-interest bearing $ 6,502,409
$ 5,927,377
$ 5,711,042
NOW and interest bearing demand deposits 2,273,025
2,624,442
2,552,611
Wealth management deposits 2,171,758
2,209,617
2,283,233
Money market 4,607,995
4,441,811
4,421,631
Savings 2,673,201
2,180,482
1,977,661
Time certificates of deposit 4,666,675
4,274,903
4,201,477
Total deposits $ 22,895,063
$ 21,658,632
$ 21,147,655
Mix:
Non-interest bearing 28 % 27 % 27 %
NOW and interest bearing demand deposits 10
12
12
Wealth management deposits 10
10
11
Money market 20
21
21
Savings 12
10
9
Time certificates of deposit 20
20
20
Total deposits 100 % 100 % 100 %

Wealth management deposits represent deposit balances (primarily money market accounts) at the Company’s subsidiary banks from brokerage customers of ~~Wayne Hummer~~Wintrust Investments, LLC ("~~WHI"~~Wintrust Investments"), CDEC, trust and asset management customers of the Company and brokerage customers from unaffiliated companies.

~~(10)~~ (11) FHLB Advances, Other Borrowings and Subordinated Notes

The following table is a summary of FHLB advances, other borrowings and subordinated notes as of the dates shown:



(In thousands)	June 30, 2020		December 31, 2019		June 30, 2019
FHLB advances	$	1,228,416	$	674,870	$	574,823
Other borrowings:
Notes payable	112,401		123,090		133,776
Short-term borrowings	8,458		20,520		10,182
Other	65,980		46,447		47,072
Secured borrowings	321,696		228,117		227,027
Total other borrowings	508,535		418,174		418,057
Subordinated notes	436,298		436,095		436,021
Total FHLB advances, other borrowings and subordinated notes	$	2,173,249	$	1,529,139	$	1,428,901

(Dollars in thousands) September 30,
2017 December 31,
2016 September 30,
2016
FHLB advances $ 468,962
$ 153,831
$ 419,632
Other borrowings:
Notes payable 41,216
52,445
56,191
Short-term borrowings 19,959
61,809
33,173
Other 49,502
18,154
18,360
Secured borrowings 141,003
130,078
133,642
Total other borrowings 251,680
262,486
241,366
Subordinated notes 139,052
138,971
138,943
Total FHLB advances, other borrowings and subordinated notes $ 859,694
$ 555,288
$ 799,941

FHLB Advances

FHLB advances consist of obligations of the banks and are collateralized by qualifying commercial and residential real estate and home equity loans and certain securities. FHLB advances are stated at par value of the debt adjusted for unamortized prepayment

fees paid at the time of prior restructurings of FHLB advances and unamortized fair value adjustments recorded in connection with advances acquired through ~~acquisitions.~~acquisitions and debt issuance costs.

Notes Payable

AtOn September ~~30, 2017, notes payable represented~~18, 2018, the Company established a ~~$41.2~~$150.0 million term facility ("Term Facility"), which is part of a ~~$150.0~~$200.0 million loan agreement ("Credit Agreement") with unaffiliated ~~banks dated December 15, 2014.~~banks. The Credit Agreement consists of the Term Facility with an original outstanding balance of ~~$75.0~~$150.0 million and a ~~$75.0~~$50.0 million revolving credit facility ("Revolving Credit Facility"). At ~~September~~June 30, ~~2017,~~2020, the Company had a notes payable balance of ~~$41.2~~$112.4 million ~~compared to $52.4 million at December 31, 2016 and $56.2 million at September 30, 2016~~ under the Term Facility. The Term Facility is stated at par of the current outstanding balance of the debt adjusted for unamortized costs paid by the Company in relation to the debt issuance. The Company was contractually required to borrow the entire amount of the Term Facility on ~~June 15, 2015~~September 18, 2018 and all such borrowings must be repaid by ~~June 15, 2020.~~September 18, 2023. Beginning ~~September 30, 2015,~~December 31, 2018, the Company ~~was~~is required to make ~~straight-line~~ quarterly ~~amortizing~~ payments of principal plus interest on the Term Facility. At ~~September~~June 30, ~~2017, December 31, 2016 and September 30, 2016,~~2020, the Company had no0 outstanding balance under the Revolving Credit Facility. ~~As no outstanding balance exists on the Revolving Credit Facility, unamortized~~Unamortized costs paid by the Company in relation to the issuance of ~~this debt~~the Revolving Credit Facility are classified in other assets on the Consolidated Statements of Condition. In December 2015, the Company amended the Credit Agreement, effectively extending the maturity date on the Revolving Credit Facility from December 14, 2015 to December 12, 2016. In December 2016, the Company again amended the Credit Agreement, effectively extending the maturity date on the Revolving Credit Facility from December 12, 2016 to December 11, 2017.

Borrowings under the Credit Agreement that are considered “Base Rate Loans” bear interest at a rate equal to the sum of (1) 50 basis points (in the case of a borrowing under the Revolving Credit Facility) or 75 basis points (in the case of a borrowing under the Term Facility) plus (2) the highest of (a) the federal funds rate plus 50 basis points, (b) the lender's prime rate, ~~and~~or (c) the Eurodollar Rate (as defined below) that would be applicable for an interest period of one month plus 100 basis points. Borrowings under the agreement that are considered “Eurodollar Rate Loans” bear interest at a rate equal to the sum of (1) ~~150~~125 basis points (in the case of a borrowing under the Revolving Credit Facility) or ~~175~~125 basis points (in the case of a borrowing under the Term Facility) plus (2) the LIBOR rate for the applicable period, as adjusted for statutory reserve requirements for eurocurrency liabilities (the “Eurodollar Rate”). A commitment fee is payable quarterly equal to 0.20% of the actual daily amount by which the lenders' commitment under the Revolving Credit Facility exceeded the amount outstanding under such facility.

Borrowings under the Credit Agreement are secured by pledges of and first priority perfected security interests in the Company's equity interest in its bank subsidiaries and contain several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and other indebtedness. At ~~September~~June 30, ~~2017,~~2020, the Company was in compliance with all such covenants. The Revolving Credit Facility and the Term Facility are available to be utilized, as needed, to provide capital to fund continued growth at the Company’s banks and to serve as an interim source of funds for acquisitions, common stock repurchases or other general corporate purposes.

Short-term Borrowings

Short-term borrowings include securities sold under repurchase agreements and federal funds purchased. These borrowings totaled ~~$20.0~~$8.5 million at ~~September~~June 30, ~~2017~~2020 compared to ~~$61.8~~$20.5 million at December 31, ~~2016~~2019 and ~~$33.2~~$10.2 million at ~~September~~June 30, ~~2016.~~2019. At ~~September~~June 30, ~~2017,~~2020, December 31, ~~2016~~2019 and ~~September~~June 30, ~~2016,~~2019, securities sold under repurchase agreements represent ~~$20.0~~$8.5 million, ~~$61.8~~$20.5 million and ~~$33.2~~$10.2 million, respectively, of customer sweep accounts in connection with master repurchase agreements at the banks. The Company records securities sold under repurchase agreements at their gross value and does not offset positions on the Consolidated Statements of Condition. As of ~~September~~June 30, ~~2017,~~2020, the Company had pledged securities related to its customer balances in sweep accounts of ~~$60.0~~$20.5 million. Securities pledged for customer balances in sweep accounts and short-term borrowings from brokers are maintained under the Company’s control and consist of U.S. Government agency and mortgage-backed securities. These securities are included in the available-for-sale and held-to-maturity securities portfolios as reflected on the Company’s Consolidated Statements of Condition.

The following is a summary of these securities pledged as of ~~September~~June 30, ~~2017~~2020 disaggregated by investment category and maturity of the related customer sweep account, and reconciled to the outstanding balance of securities sold under repurchase agreements:



(In thousands)	Overnight Sweep Collateral
Available-for-sale securities pledged
Mortgage-backed securities	$	3,598
Collateralized mortgage obligations	2,363
Held-to-maturity securities pledged
U.S. Government agencies	14,575
Total collateral pledged	$	20,536
Excess collateral	12,078
Securities sold under repurchase agreements	$	8,458

(Dollars in thousands) Overnight Sweep Collateral
Available-for-sale securities pledged
U.S. Treasury $ 24,830
Mortgage-backed securities 10,162
Held-to-maturity securities pledged
U.S. Government agencies 25,000
Total collateral pledged $ 59,992
Excess collateral 40,033
Securities sold under repurchase agreements $ 19,959

Other Borrowings

Other borrowings at ~~September~~June 30, ~~2017~~2020 represent a fixed-rate promissory note issued by the Company in June 2017 and amended in March 2020 ("Fixed-Rate Promissory Note") related to and secured by ~~two~~3 office buildings owned by the ~~Company, and non-recourse notes issued by the Company to other banks related to certain capital leases.~~Company. At ~~September~~June 30, ~~2017,~~2020, the Fixed-Rate Promissory Note had a balance of ~~$49.3 million.~~$66.0 million compared to $46.4 million at December 31, 2019 and $47.1 million at June 30, 2019. Under the Fixed-Rate Promissory Note, during the three months ended March 31, 2020, the Company ~~will make~~made monthly principal payments and ~~pay~~paid interest at a fixed rate of 3.36% ~~until maturity~~. The Fixed-Rate Promissory Note contains several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and indebtedness. At June 30, ~~2022. Under a previous fixed-rate promissory note with an unrelated creditor related to and secured by an office building owned by~~2020, the Company ~~other borrowings totaled $17.7 million and $17.8 million at December 31, 2016 and September 30, 2016, respectively. In June 2017, this previous fixed-rate promissory note~~ was ~~paid off upon the Company's issuance of~~in compliance with all such covenants. An amendment to the Fixed-Rate Promissory ~~Note. At September 30, 2017,~~Note was executed on and effective as of March 31, 2020. The amendment increased the ~~non-recourse notes related~~principal amount to ~~certain capital leases totaled $225,000 compared~~$66.4 million, reduced the interest rate to ~~$447,000~~3.00% and ~~$519,000 at December~~extended the maturity date to March 31, ~~2016 and September 30, 2016, respectively.~~2025.

Secured Borrowings

Secured borrowings at ~~September~~June 30, ~~2017~~2020 primarily represents transactions to sell an undivided co-ownership interest in all receivables owed to the Company's subsidiary, First Insurance Funding of Canada ("FIFC ~~Canada.~~Canada"). In December 2014, FIFC Canada sold such interest to an unrelated third party in exchange for a cash payment of approximately C$150 million pursuant to a receivables purchase agreement (“Receivables Purchase Agreement”). The Receivables Purchase Agreement was amended in December 2015, effectively extending the maturity date from December 15, 2015 to December 15, 2017. Additionally, at that time, the unrelated third party paid an additional C$10 million, which increased the total payments to C$160 million. The Receivables Purchase Agreement was again amended in December 2017, effectively extending the maturity date from December 15, 2017 to December 16, 2019. Additionally, in December 2017, the unrelated third party paid an additional C$10 million, which increased the total payments to C$170 million. In June 2018, the unrelated third party paid an additional C$20 million, which increased the total payments to C$190 million. The Receivables Purchase Agreement was again amended in February 2019, effectively extending the maturity date from December 16, 2019 to December 15, 2020. Additionally, in February 2019, the unrelated third party paid an additional C$20 million, which increased the total payments to C$210 million. In May 2019, the unrelated third party paid an additional C$70 million, which increased the total payments to C$280 million. In January 2020, the unrelated third party paid an additional C$40 million, which increased the total payments to C$320 million, and the Receivables Purchase Agreement was amended to effectively extend the maturity date from December 15, 2020 to December 15, 2021. In May 2020, the unrelated third party paid an additional C$100 million, which increased the total payments to C$420 million. These transactions were not considered

sales of receivables and, as such, related proceeds received are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the unrelated third party, net of unamortized debt issuance costs, and translated to the Company’s reporting currency as of the respective date. At ~~September~~June 30, ~~2017,~~2020, the translated balance of the secured borrowing totaled ~~$128.3~~$309.1 million compared to ~~$119.0~~$215.5 million at December 31, ~~2016~~2019 and ~~$121.9~~$213.7 million at ~~September~~June 30, ~~2016.~~2019. Additionally, the interest rate under the Receivables Purchase Agreement at ~~September~~June 30, ~~2017~~2020 was ~~1.9094%~~1.7771%. The remaining ~~$12.7~~$12.6 million within secured borrowings at ~~September~~June 30, ~~2017~~2020 represents other sold interests in certain loans by the Company that were not considered sales and, as such, related proceeds received are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the various unrelated third parties.

Subordinated Notes

At ~~September~~June 30, ~~2017,~~2020, the Company had outstanding subordinated notes totaling ~~$139.1~~$436.3 million compared to ~~$139.0~~$436.1 million and ~~$138.9~~$436.0 million outstanding at December 31, ~~2016~~2019 and ~~September~~June 30, ~~2016,~~2019, respectively. During the second quarter of 2019, the Company issued $300.0 million of subordinated notes, receiving $296.7 million in net proceeds. The notes have a stated interest rate of 4.85% and mature in June 2029. In 2014, the Company issued $140.0 million of subordinated notes receiving $139.1 million in net proceeds. These notes have a stated interest rate of 5.00% and mature in June 2024. ~~These~~Subordinated notes are stated at par adjusted for unamortized issuance costs paid related to ~~the issuance of this~~such debt.

~~(11)~~ (12) Junior Subordinated Debentures

As of ~~September~~June 30, ~~2017,~~2020, the Company owned 100% of the common securities of ~~eleven~~11 trusts, Wintrust Capital Trust III, Wintrust Statutory Trust IV, Wintrust Statutory Trust V, Wintrust Capital Trust VII, Wintrust Capital Trust VIII, Wintrust Capital Trust IX, Northview Capital Trust I, Town Bankshares Capital Trust I, First Northwest Capital Trust I, Suburban Illinois Capital Trust II, and Community Financial Shares Statutory Trust II (the “Trusts”) set up to provide long-term financing. The Northview,

Town, First Northwest, Suburban, and Community Financial Shares capital trusts were acquired as part of the acquisitions of Northview Financial Corporation, Town Bankshares, Ltd., First Northwest Bancorp, Inc., Suburban and CFIS, respectively. The Trusts were formed for purposes of issuing trust preferred securities to third-party investors and investing the proceeds from the issuance of the trust preferred securities and common securities solely in junior subordinated debentures issued by the Company (or assumed by the Company in connection with an acquisition), with the same maturities and interest rates as the trust preferred securities. The junior subordinated debentures are the sole assets of the Trusts. In each Trust, the common securities represent approximately 3% of the junior subordinated debentures and the trust preferred securities represent approximately 97% of the junior subordinated debentures.

In January 2016, the Company acquired $15.0 million of the $40.0 million of trust preferred securities issued by Wintrust Capital Trust VIII from a third-party investor. The purchase effectively extinguished $15.0 million of junior subordinated debentures related to Wintrust Capital Trust VIII and resulted in a $4.3 million gain from the early extinguishment of debt.

The Trusts are reported in the Company’s consolidated financial statements as unconsolidated subsidiaries. Accordingly, in the Consolidated Statements of Condition, the junior subordinated debentures issued by the Company to the Trusts are reported as liabilities and the common securities of the Trusts, all of which are owned by the Company, are included in ~~available-for-sale~~investment securities.

The following table provides a summary of the Company’s junior subordinated debentures as of ~~September~~June 30, ~~2017.~~2020. The junior subordinated debentures represent the par value of the obligations owed to the Trusts.



(Dollars in thousands)	Common Securities		Trust Preferred Securities		Junior Subordinated Debentures		Rate Structure	Contractual rate at 6/30/2020		Issue Date	Maturity Date	Earliest Redemption Date
Wintrust Capital Trust III	$	774	$	25,000	$	25,774	L+3.25	4.47	%	04/2003	04/2033	04/2008
Wintrust Statutory Trust IV	619		20,000		20,619		L+2.80	3.11	%	12/2003	12/2033	12/2008
Wintrust Statutory Trust V	1,238		40,000		41,238		L+2.60	2.91	%	05/2004	05/2034	06/2009
Wintrust Capital Trust VII	1,550		50,000		51,550		L+1.95	2.26	%	12/2004	03/2035	03/2010
Wintrust Capital Trust VIII	1,238		25,000		26,238		L+1.45	1.76	%	08/2005	09/2035	09/2010
Wintrust Capital Trust IX	1,547		50,000		51,547		L+1.63	1.94	%	09/2006	09/2036	09/2011
Northview Capital Trust I	186		6,000		6,186		L+3.00	3.69	%	08/2003	11/2033	08/2008
Town Bankshares Capital Trust I	186		6,000		6,186		L+3.00	3.69	%	08/2003	11/2033	08/2008
First Northwest Capital Trust I	155		5,000		5,155		L+3.00	3.31	%	05/2004	05/2034	05/2009
Suburban Illinois Capital Trust II	464		15,000		15,464		L+1.75	2.06	%	12/2006	12/2036	12/2011
Community Financial Shares Statutory Trust II	109		3,500		3,609		L+1.62	1.93	%	06/2007	09/2037	06/2012
Total					$	253,566		2.62	%

(Dollars in thousands)
Common
Securities

Trust
Preferred
Securities

Junior
Subordinated
Debentures

Rate
Structure

Contractual rate
at 9/30/2017

Issue
Date

Maturity
Date

Earliest
Redemption
Date
Wintrust Capital Trust III $ 774
$ 25,000
$ 25,774
L+3.25 4.55 % 04/2003 04/2033 04/2008
Wintrust Statutory Trust IV 619
20,000
20,619
L+2.80 4.14 % 12/2003 12/2033 12/2008
Wintrust Statutory Trust V 1,238
40,000
41,238
L+2.60 3.94 % 05/2004 05/2034 06/2009
Wintrust Capital Trust VII 1,550
50,000
51,550
L+1.95 3.27 % 12/2004 03/2035 03/2010
Wintrust Capital Trust VIII 1,238
25,000
26,238
L+1.45 2.79 % 08/2005 09/2035 09/2010
Wintrust Capital Trust IX 1,547
50,000
51,547
L+1.63 2.95 % 09/2006 09/2036 09/2011
Northview Capital Trust I 186
6,000
6,186
L+3.00 4.31 % 08/2003 11/2033 08/2008
Town Bankshares Capital Trust I 186
6,000
6,186
L+3.00 4.31 % 08/2003 11/2033 08/2008
First Northwest Capital Trust I 155
5,000
5,155
L+3.00 4.34 % 05/2004 05/2034 05/2009
Suburban Illinois Capital Trust II 464
15,000
15,464
L+1.75 3.07 % 12/2006 12/2036 12/2011
Community Financial Shares Statutory Trust II 109
3,500
3,609
L+1.62 2.94 % 06/2007 09/2037 06/2012
Total $ 253,566

3.52 %

The junior subordinated debentures totaled $253.6 million at ~~September~~June 30, ~~2017,~~2020, December 31, ~~2016~~2019 and ~~September~~June 30, ~~2016.~~2019.

The interest rates on the variable rate junior subordinated debentures are based on the three-month LIBOR rate and reset on a quarterly basis. At ~~September~~June 30, ~~2017,~~2020, the weighted average contractual interest rate on the junior subordinated debentures was ~~3.52%~~2.62%. The Company entered into interest rate swaps with an aggregate notional value of $210.0 million to hedge the variable cash flows on certain junior subordinated debentures. The hedge-adjusted contractual interest rate on the junior subordinated debentures as of June 30, 2020, was 4.12%. Distributions on the common and preferred securities issued by the Trusts are payable quarterly at a rate per annum equal to the interest rates being earned by the Trusts on the junior subordinated debentures. Interest expense on the junior subordinated debentures is deductible for income tax purposes.

The Company has guaranteed the payment of distributions and payments upon liquidation or redemption of the trust preferred securities, in each case to the extent of funds held by the Trusts. The Company and the Trusts believe that, taken together, the obligations of the Company under the guarantees, the junior subordinated debentures, and other related agreements provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a subordinated basis, of all of the obligations of the Trusts under the trust preferred securities. Subject to certain limitations, the Company has the right to defer the payment of interest on the junior subordinated debentures at any time, or from time to time, for a period not to exceed 20 consecutive quarters. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable in whole or in part prior to maturity at any time after the earliest redemption dates shown in the table, and earlier at the discretion of the Company if certain conditions are met, and, in any event, only after the Company has obtained Federal Reserve Bank ("FRB") approval, if then required under applicable guidelines or regulations.

~~Prior to January 1, 2015, the junior subordinated debentures, subject to certain limitations, qualified as Tier 1 regulatory capital of~~At June 30, 2020, the Company ~~and the amount in excess of those certain limitations could, subject to other restrictions, be~~ included ~~in Tier 2~~

capital. Starting in 2015, a portion of these junior subordinated debentures still qualified as Tier 1 regulatory capital of the Company and the amount in excess of those certain limitations, subject to certain restrictions, was included in Tier 2 capital. Starting in 2016, none of the junior subordinated debentures qualified as Tier 1 regulatory capital of the Company resulting in $245.5 million of the junior subordinated debentures, net of common securities, ~~being included~~ in ~~the Company's~~ Tier 2 regulatory capital.

~~(12)~~ (13) Revenue from Contracts with Customers

Disaggregation of Revenue

The following table presents revenue from contracts with customers, disaggregated by the revenue source:



(Dollars in thousands)		Three Months Ended				Six Months Ended
Revenue from contracts with customers	Location in income statement	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Brokerage and insurance product commissions	Wealth management	$	4,147	$	4,764	$	9,428	$	9,280
Trust	Wealth management	4,248		4,640		9,539		9,967
Asset management	Wealth management	14,241		14,735		29,610		28,869
Total wealth management		22,636		24,139		48,577		48,116
Mortgage broker fees	Mortgage banking	174		191		227		373
Service charges on deposit accounts	Service charges on deposit accounts	10,420		9,277		21,685		18,125
Administrative services	Other non-interest income	933		1,009		2,045		2,039
Card related fees	Other non-interest income	1,379		2,156		3,485		4,712
Other deposit related fees	Other non-interest income	2,914		3,293		6,092		6,082
Total revenue from contracts with customers		$	38,456	$	40,065	$	82,111	$	79,447

Wealth Management Revenue

Wealth management revenue is comprised of brokerage and insurance product commissions, managed money fees and trust and asset management revenue of the Company's 4 wealth management subsidiaries: Wintrust Investments, Great Lakes Advisors, LLC ("GLA"), The Chicago Trust Company, N.A. ("CTC") and CDEC. All wealth management revenue is recognized in the wealth management segment.

Brokerage and insurance product commissions consists primarily of commissions earned from trade execution services on behalf of customers and from selling mutual funds, insurance and other investment products to customers. For trade execution services, the Company recognizes commissions and receives payment from the brokerage customers at the point of transaction execution. Commissions received from the investment or insurance product providers are recognized at the point of sale of the product. The

Company also receives trail and other commissions from providers for certain plans. These are generally based on qualifying account values and are recognized once the performance obligation, specific to each provider, is satisfied on a monthly, quarterly or annual basis.

Trust revenue is earned primarily from trust and custody services that are generally performed over time as well as fees earned on funds held during the facilitation of tax-deferred like-kind exchange transactions. Revenue is determined periodically based on a schedule of fees applied to the value of each customer account using a time-elapsed method to measure progress toward complete satisfaction of the performance obligation. Fees are typically billed on a calendar month or quarter basis in advance or in arrears depending upon the contract. Upfront fees received related to the facilitation of tax-deferred like-kind exchange transactions are deferred until the transaction is completed. Additional fees earned for certain extraordinary services performed on behalf of the customers are recognized when the service has been performed.

Asset management revenue is earned from money management and advisory services that are performed over time. Revenue is based primarily on the market value of assets under management or administration using a time-elapsed method to measure progress toward complete satisfaction of the performance obligation. Fees are typically billed on a calendar month or quarter basis in advance or in arrears depending upon the contract. Certain programs provide the customer with an option of paying fees as a percentage of the account value or incurring commission charges for each trade similar to brokerage and insurance product commissions. Trade commissions and any other fees received for additional services are recognized at a point in time once the performance obligation is satisfied.

Mortgage Broker Fees

For customers desiring a mortgage product not currently offered by the Company, the Company may refer such customers and, with permission, direct such customers' applications to certain third party mortgage brokers. Mortgage broker fees are received from these brokers for such customer referrals upon settlement of the underlying mortgage. The Company's entitlement to the consideration is contingent on the settlement of the mortgage which is highly susceptible to factors outside of the Company's influence, such as third party broker's underwriting requirements. Also, the uncertainty surrounding the consideration could be resolved in varying lengths of time, dependent upon the third party brokers. Therefore, mortgage broker fees are recognized at the settlement of the underlying mortgage when the consideration is received. Broker fees are recognized in the community banking segment.

Service Charges on Deposit Accounts

Service charges on deposit accounts include fees charged to deposit customers for various services, including account analysis services, and are based on factors such as the size and type of customer, type of product and number of transactions. The fees are based on a standard schedule of fees and, depending on the nature of the service performed, the service is performed at a point in time or over a period of a month. When the service is performed at a point in time, the Company recognizes and receives revenue when the service has been performed. When the service is performed over a period of a month, the Company recognizes and receives revenue in the month the service has been performed. Service charges on deposit accounts are recognized in the community banking segment.

Administrative Services

Administrative services revenue is earned from providing outsourced administrative services, such as data processing of payrolls, billing and cash management services, to temporary staffing service clients located throughout the United States. Fees are charged periodically (typically a payroll cycle) and computed in accordance with the contractually determined rate applied to the total gross billings administered for the period. The revenue is recognized over the period using a time-elapsed method to measure progress toward complete satisfaction of the performance obligation. Other fees are charged on a per occurrence basis as the service is provided in the billing cycle. The Company has certain contracts with customers to perform outsourced administrative services and short-term accounts receivable financing. For these contracts, the total fee is allocated between the administrative services revenue and interest income during the client onboarding process based on the specific client and services provided. Administrative services revenue is recognized in the specialty finance segment.

Card and Other Deposit Related Fees

Card related fees include interchange and merchant revenue, and fees related to debit and credit cards. Interchange revenue is related to the Company issued debit cards. Other deposit related fees primarily include pay by phone processing fees, ATM and safe deposit box fees, check order charges and foreign currency related fees. Card and deposit related fees are generally based on

volume of transactions and are recognized at the point in time when the service has been performed. For any consideration that is constrained, the revenue is recognized once the uncertainty is known. Upfront fees received from certain contracts are recognized on a straight line basis over the term of the contract. Card and deposit related fees are recognized in the community banking segment.

Contract Balances

The following table provides information about contract assets, contract liabilities and receivables from contracts with customers:



(Dollars in thousands)	June 30, 2020		December 31, 2019		June 30, 2019
Contract assets	$	—	$	—	$	—

Contract liabilities	$	665	$	1,356	$	1,540

Mortgage broker fees receivable	$	59	$	19	$	16
Administrative services receivable	161		194		48
Wealth management receivable	10,297		9,118		9,909
Card related fees receivable	—		266		—
Total receivables from contracts with customer	$	10,517	$	9,597	$	9,973

Contract liabilities represent upfront fees that the Company received at inception of certain contracts. The revenue recognized that was included in the contract liability balance at beginning of the period totaled $1.1 million and $382,000 for the six months ended June 30, 2020 and 2019, respectively. Receivables are recognized in the period the Company provides services when the Company's right to consideration is unconditional. Card related fee receivable is the result of volume based fee that the Company receives from a customer on an annual basis in the second quarter of each year. Payment terms on other invoiced amounts are typically 30 days or less. Contract liabilities and receivables from contracts with customers are included within the accrued interest payable and other liabilities and accrued interest receivable and other assets line items, respectively, in the Consolidated Statements of Condition.

Transaction price allocated to the remaining performance obligations

For contracts with an original expected length of more than one year, the following table presents the estimated future timing of recognition of upfront fees related to card and deposit related fees. These upfront fees represent performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.



(Dollars in thousands)
Estimated remaining in 2020	$	495
Estimated—2021	160
Estimated—2022	10
Estimated—2023	—
Estimated—2024	—
Total	$	665

Practical Expedients and Exemptions

The Company does not adjust the promised amount of consideration for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a promised service to a customer and when the customer pays for that service is one year or less.

The Company recognizes the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

(14) Segment Information

The Company’s operations consist of ~~three~~3 primary segments: community banking, specialty finance and wealth management.

The ~~three~~3 reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies. In addition, each segment’s customer base has varying characteristics and each segment has a different regulatory environment. While the Company’s management monitors each of the ~~fifteen~~15 bank subsidiaries’ operations and profitability separately, these subsidiaries have been aggregated into ~~one~~1 reportable operating segment due to the similarities in products and services, customer base, operations, profitability measures, and economic characteristics.

For purposes of internal segment profitability, management allocates certain intersegment and parent company balances. Management allocates a portion of revenues to the specialty finance segment related to loans and leases originated by the specialty finance segment and sold or assigned to the community banking segment. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates a portion of the net interest income earned by the community banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. See Note 910 — Deposits, for more information on these deposits. Finally, expenses incurred at the Wintrust parent company are allocated to each segment based on each segment's risk-weighted assets.

The segment financial information provided in the following tables has been derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Company. The accounting policies of the segments are substantially similar to those described in “Summary of Significant Accounting Policies” in Note 1 of the Company’s ~~2016~~2019 Form 10-K. The Company evaluates segment performance based on after-tax profit or loss and other appropriate profitability measures common to each segment.

The following is a summary of certain operating information for reportable segments:


	Three months ended						$ Change in Contribution			% Change in Contribution		Three months ended						$ Change in Contribution			% Change in Contribution
(Dollars in thousands)	September 30, 2017			September 30, 2016			$ Change in Contribution			% Change in Contribution		June 30, 2020			June 30, 2019			$ Change in Contribution			% Change in Contribution
Net interest income:
Community Banking	$	176,526		$	150,159		$	26,367		18	%	$	205,678		$	214,309		$	(8,631	)	(4	)%
Specialty Finance	30,501			25,543			4,958			19		42,415			39,397			3,018			8
Wealth Management	4,557			4,835			(278		)	(6	)	8,586			6,936			1,650			24
Total Operating Segments	211,584			180,537			31,047			17		256,679			260,642			(3,963		)	(2	)
Intersegment Eliminations	4,404			4,099			305			7		6,452			5,560			892			16
Consolidated net interest income	$	215,988		$	184,636		$	31,352		17	%	$	263,131		$	266,202		$	(3,071	)	(1	)%
Non-interest income:
Community Banking	$	52,554		$	62,730		$	(10,176	)	(16	)%	$	129,698		$	65,370		$	64,328		98	%
Specialty Finance	16,315			12,226			4,089			33		21,831			19,579			2,252			12
Wealth Management	20,371			20,045			326			2		24,465			24,950			(485		)	(2	)
Total Operating Segments	89,240			95,001			(5,761		)	(6	)	175,994			109,899			66,095			60
Intersegment Eliminations	(9,509		)	(8,397		)	(1,112		)	(13	)	(14,001		)	(11,741		)	(2,260		)	(19	)
Consolidated non-interest income	$	79,731		$	86,604		$	(6,873	)	(8	)%	$	161,993		$	98,158		$	63,835		65	%
Net revenue:
Community Banking	$	229,080		$	212,889		$	16,191		8	%	$	335,376		$	279,679		$	55,697		20	%
Specialty Finance	46,816			37,769			9,047			24		64,246			58,976			5,270			9
Wealth Management	24,928			24,880			48			—		33,051			31,886			1,165			4
Total Operating Segments	300,824			275,538			25,286			9		432,673			370,541			62,132			17
Intersegment Eliminations	(5,105		)	(4,298		)	(807		)	(19	)	(7,549		)	(6,181		)	(1,368		)	(22	)
Consolidated net revenue	$	295,719		$	271,240		$	24,479		9	%	$	425,124		$	364,360		$	60,764		17	%
Segment profit:
Segment (loss) profit:
Community Banking	$	44,799		$	37,527		$	7,272		19	%	$	(7,315	)	$	53,435		$	(60,750	)	(114	)%
Specialty Finance	17,043			12,767			4,276			33		22,688			21,129			1,559			7
Wealth Management	3,784			2,821			963			34		6,286			6,902			(616		)	(9	)
Consolidated net income	$	65,626		$	53,115		$	12,511		24	%	$	21,659		$	81,466		$	(59,807	)	(73	)%
Segment assets:
Community Banking	$	22,426,049		$	21,019,002		$	1,407,047		7	%	$	35,560,107		$	27,005,555		$	8,554,552		32	%
Specialty Finance	4,305,960			3,702,241			603,719			16		6,708,493			5,566,067			1,142,426			21
Wealth Management	626,153			600,516			25,637			4		1,271,417			1,070,147			201,270			19
Consolidated total assets	$	27,358,162		$	25,321,759		$	2,036,403		8	%	$	43,540,017		$	33,641,769		$	9,898,248		29	%



	Six months ended						$ Change in Contribution			% Change in Contribution
(Dollars in thousands)	June 30, 2020			June 30, 2019			$ Change in Contribution			% Change in Contribution
Net interest income:
Community Banking	$	412,513		$	425,733		$	(13,220	)	(3	)%
Specialty Finance	83,127			77,103			6,024			8
Wealth Management	16,378			14,438			1,940			13
Total Operating Segments	512,018			517,274			(5,256		)	(1	)
Intersegment Eliminations	12,556			10,914			1,642			15
Consolidated net interest income	$	524,574		$	528,188		$	(3,614	)	(1	)%
Non-interest income:
Community Banking	$	210,701		$	113,637		$	97,064		85	%
Specialty Finance	43,139			39,185			3,954			10
Wealth Management	48,595			49,985			(1,390		)	(3	)
Total Operating Segments	302,435			202,807			99,628			49
Intersegment Eliminations	(27,200		)	(22,992		)	(4,208		)	18
Consolidated non-interest income	$	275,235		$	179,815		$	95,420		53	%
Net revenue:
Community Banking	$	623,214		$	539,370		$	83,844		16	%
Specialty Finance	126,266			116,288			9,978			9
Wealth Management	64,973			64,423			550			1
Total Operating Segments	814,453			720,081			94,372			13
Intersegment Eliminations	(14,644		)	(12,078		)	(2,566		)	21
Consolidated net revenue	$	799,809		$	708,003		$	91,806		13	%
Segment profit:
Community Banking	$	27,274		$	113,761		$	(86,487	)	(76	)%
Specialty Finance	44,821			42,977			1,844			4
Wealth Management	12,376			13,874			(1,498		)	(11	)
Consolidated net income	$	84,471		$	170,612		$	(86,141	)	(50	)%

Nine months ended
$ Change in
Contribution

% Change in
Contribution
(Dollars in thousands) September 30,
2017 September 30,
2016
Net interest income:
Community Banking $ 499,135
$ 434,108
$ 65,027
15 %
Specialty Finance 85,871
71,075
14,796
21
Wealth Management 14,532
13,701
831
6
Total Operating Segments 599,538
518,884
80,654
16
Intersegment Eliminations 13,439
12,531
908
7
Consolidated net interest income $ 612,977
$ 531,415
$ 81,562
15 %
Non-interest income:
Community Banking $ 160,277
$ 169,210
$ (8,933 ) (5 )%
Specialty Finance 44,192
37,111
7,081
19
Wealth Management 61,746
58,660
3,086
5
Total Operating Segments 266,215
264,981
1,234
—
Intersegment Eliminations (27,747 ) (24,826 ) (2,921 ) (12 )
Consolidated non-interest income $ 238,468
$ 240,155
$ (1,687 ) (1 )%
Net revenue:
Community Banking $ 659,412
$ 603,318
$ 56,094
9 %
Specialty Finance 130,063
108,186
21,877
20
Wealth Management 76,278
72,361
3,917
5
Total Operating Segments 865,753
783,865
81,888
10
Intersegment Eliminations (14,308 ) (12,295 ) (2,013 ) (16 )
Consolidated net revenue $ 851,445
$ 771,570
$ 79,875
10 %
Segment profit:
Community Banking $ 128,502
$ 106,860
$ 21,642
20 %
Specialty Finance 47,990
36,283
11,707
32
Wealth Management 12,409
9,124
3,285
36
Consolidated net income $ 188,901
$ 152,267
$ 36,634
24 %

~~(13)~~ (15) Derivative Financial Instruments

The Company primarily enters into derivative financial instruments as part of its strategy to manage its exposure to changes in interest rates. Derivative instruments represent contracts between parties that result in one party delivering cash to the other party based on a notional amount and an underlying term (such as a rate, security price or price index) as specified in the contract. The amount of cash delivered from one party to the other is determined based on the interaction of the notional amount of the contract with the underlying term. Derivatives are also implicit in certain contracts and commitments.

The derivative financial instruments currently used by the Company to manage its exposure to interest rate risk include: (1) interest rate swaps and ~~caps~~collars to manage the interest rate risk of certain fixed and variable rate assets and variable rate liabilities; (2) interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market; (3) forward commitments for the future delivery of such mortgage loans to protect the Company from adverse changes in interest rates and corresponding changes in the value of mortgage loans held-for-sale; ~~and~~ (4) covered call options to economically hedge specific investment securities and receive fee income effectively enhancing the overall yield on such securities to compensate for net interest margin ~~compression.~~compression; and (5) options and swaps to economically hedge a portion of the fair value adjustments related to the Company's mortgage servicing rights portfolio. The Company also enters into derivatives (typically interest rate swaps) with certain qualified borrowers to facilitate the borrowers’ risk management strategies and concurrently enters into mirror-image derivatives with a third party counterparty, effectively making a market in the derivatives for such borrowers. Additionally, the Company enters into foreign currency contracts to manage foreign exchange risk associated with certain foreign currency denominated assets.

The Company recognizes derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. The Company records derivative assets and derivative liabilities on the Consolidated Statements of Condition within accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively. Changes in the fair value of derivative financial instruments are either recognized in income or in shareholders’ equity as a component of accumulated other comprehensive income or loss depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value hedge or cash flow hedge. ~~Generally, changes~~

Changes in fair values of derivatives

accounted for as fair value hedges are recorded in income in the same period and in the same income statement line as changes in the fair values of the hedged items that relate to the hedged risk(s). Changes in fair values of derivative financial instruments accounted for as cash flow hedges ~~to the extent they are effective hedges,~~ are recorded as a component of accumulated other comprehensive income or loss, net of deferred taxes, and reclassified to earnings when the hedged transaction affects earnings. Changes in fair values of derivative financial instruments not designated in a hedging relationship pursuant to ASC 815 ~~including changes in fair value related to the ineffective portion of cash flow hedges,~~ are reported in non-interest income during the period of the change. Derivative financial instruments are valued by a third party and are corroborated by comparison with valuations provided by the respective counterparties. Fair values of certain mortgage banking derivatives (interest rate lock commitments and forward commitments to sell mortgage loans) are estimated based on changes in mortgage interest rates from the date of the loan commitment. The fair value of foreign currency derivatives is computed based on changes in foreign currency rates stated in the contract compared to those prevailing at the measurement date.

The table below presents the fair value of the Company’s derivative financial instruments as of ~~September~~June 30, ~~2017,~~2020, December 31, ~~2016~~2019 and ~~September~~June 30, ~~2016:~~2019:



	Derivative Assets						Derivative Liabilities
(In thousands)	June 30, 2020		December 31, 2019		June 30, 2019		June 30, 2020		December 31, 2019		June 30, 2019
Derivatives designated as hedging instruments under ASC 815:
Interest rate derivatives designated as Cash Flow Hedges	$	—	$	—	$	616	$	59,573	$	19,385	$	20,851
Interest rate derivatives designated as Fair Value Hedges	—		310		417		17,052		6,523		6,698
Total derivatives designated as hedging instruments under ASC 815	$	—	$	310	$	1,033	$	76,625	$	25,908	$	27,549
Derivatives not designated as hedging instruments under ASC 815:
Interest rate derivatives	$	268,709	$	100,259	$	103,529	$	266,894	$	100,897	$	103,486
Interest rate lock commitments	58,841		2,860		4,054		25		259		96
Forward commitments to sell mortgage loans	27		142		96		11,667		2,070		5,112
Foreign exchange contracts	47		73		72		54		70		69
Total derivatives not designated as hedging instruments under ASC 815	$	327,624	$	103,334	$	107,751	$	278,640	$	103,296	$	108,763
Total Derivatives	$	327,624	$	103,644	$	108,784	$	355,265	$	129,204	$	136,312

Derivative Assets Derivative Liabilities
(Dollars in thousands) September 30,
2017 December 31,
2016 September 30,
2016 September 30,
2017 December 31,
2016 September 30,
2016
Derivatives designated as hedging instruments under ASC 815:
Interest rate derivatives designated as Cash Flow Hedges $ 8,643
$ 8,011
$ 549
$ —
$ —
$ 7
Interest rate derivatives designated as Fair Value Hedges 2,036
2,228
177
53
—
907
Total derivatives designated as hedging instruments under ASC 815 $ 10,679
$ 10,239
$ 726
$ 53
$ —
$ 914
Derivatives not designated as hedging instruments under ASC 815:
Interest rate derivatives $ 34,489
$ 38,974
$ 79,477
$ 33,982
$ 37,665
$ 79,199
Interest rate lock commitments 2,851
4,265
8,352
1
1,325
4,060
Forward commitments to sell mortgage loans 19
2,037
—
1,495
—
3,505
Foreign exchange contracts 160
879
273
242
849
270
Total derivatives not designated as hedging instruments under ASC 815 $ 37,519
$ 46,155
$ 88,102
$ 35,720
$ 39,839
$ 87,034
Total Derivatives $ 48,198
$ 56,394
$ 88,828
$ 35,773
$ 39,839
$ 87,948

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to net interest income and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps ~~and interest rate caps~~ as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate ~~caps~~collars designated as cash flow hedges involve the receipt of ~~payments at the end of each period~~amounts in which the interest rate specified in the contract exceeds the agreed upon cap strike ~~price.~~price or the payment of amounts in which the interest rate specified in the contract is below the agreed upon floor strike price at the end of each period.

As of ~~September~~June 30, ~~2017,~~2020, the Company had ~~four~~27 interest rate swap derivatives designated as cash flow hedges of variable rate ~~deposits. The~~deposits and certain junior subordinated debentures, and 1 interest rate ~~swap derivatives had notional amounts~~collar derivative designated as a cash flow hedge of ~~$200.0 million, $250.0 million, $275.0 million~~the Company's variable rate Term Facility. When the relationship between the hedged item and ~~$200.0 million and mature~~hedging instrument is highly effective at achieving offsetting changes in ~~June 2019, July 2019, August 2019 and June 2020, respectively. The effective portion of~~cash flows attributable to the hedged risk, changes in the fair value of these cash flow hedges isare recorded in accumulated other comprehensive income or loss and isare subsequently reclassified to interest expense as interest payments are made on ~~the Company’s~~such variable rate ~~junior subordinated debentures.~~deposits. The changes in fair value (net of tax) are separately disclosed in the Consolidated Statements of Comprehensive Income. The ineffective portion of the change in fair value of these derivatives is recognized directly in earnings; however, no hedge ineffectiveness was recognized during the nine months ended September 30, 2017 or September 30, 2016. The Company uses the hypothetical derivative method to assess and measure hedge effectiveness.

The table below provides details on ~~each of~~ these cash flow hedges, summarized by derivative type and maturity, as of ~~September~~June 30, ~~2017:~~2020:



	June 30, 2020
(In thousands)	Notional		Fair Value
Maturity Date	Amount		Asset (Liability)
Interest Rate Swaps:
October 2021	$	25,000	$	(681	)
November 2021	20,000		(604		)
December 2021	165,000		(5,239		)
March 2022	500,000		(1,080		)
May 2022	370,000		(13,819		)
June 2022	160,000		(6,198		)
July 2022	230,000		(9,013		)
August 2022	235,000		(9,715		)
March 2023	250,000		(1,469		)
April 2024	250,000		(2,439		)
July 2027	1,000,000		(2,356		)
Interest Rate Collars:
September 2023	112,500		(6,960		)
Total Cash Flow Hedges	$	3,317,500	$	(59,573	)

September 30, 2017
(Dollars in thousands) Notional Fair Value
Maturity Date Amount Asset (Liability)
Interest Rate Swaps:
June 2019 $ 200,000
$ 295
July 2019 250,000
3,549
August 2019 275,000
4,434
June 2020 200,000
365
Total Cash Flow Hedges $ 925,000
$ 8,643

A rollforward of the amounts in accumulated other comprehensive income or loss related to interest rate derivatives designated as cash flow hedges follows:



	Three Months Ended						Six Months Ended
(In thousands)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Unrealized (loss) gain at beginning of period	$	(56,636	)	$	5,746		$	(17,943	)	$	10,742
Amount reclassified from accumulated other comprehensive income to interest expense on deposits, other borrowings and junior subordinated debentures	5,451			(4,081		)	6,541			(7,643		)
Amount of loss recognized in other comprehensive income	(8,318		)	(18,087		)	(48,101		)	(19,521		)
Unrealized loss at end of period	$	(59,503	)	$	(16,422	)	$	(59,503	)	$	(16,422	)

Three months ended Nine months ended
(Dollars in thousands) September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Unrealized gain (loss) at beginning of period $ 8,249
$ (3,574 ) $ 6,944
$ (3,529 )
Amount reclassified from accumulated other comprehensive loss to interest expense on deposits and junior subordinated debentures 14
1,065
1,051
2,620
Amount of (loss) gain recognized in other comprehensive income 380
1,708
648
108
Unrealized gain (loss) at end of period $ 8,643
$ (801 ) $ 8,643
$ (801 )

As of ~~September~~June 30, ~~2017,~~2020, the Company estimates that during the next twelve months ~~$3.5~~$20.1 million will be reclassified from accumulated other comprehensive ~~gain~~income or loss as an increase to interest expense.

Fair Value Hedges of Interest Rate Risk

Interest rate swaps designated as fair value hedges involve the payment of fixed amounts to a counterparty in exchange for the Company receiving variable payments over the life of the agreements without the exchange of the underlying notional amount. As of ~~September~~June 30, ~~2017,~~2020, the Company has ~~eleven~~16 interest rate swaps with an aggregate notional amount of ~~$126.1~~$166.4 million that were designated as fair value hedges primarily associated with fixed rate commercial and industrial and commercial ~~franchise~~real estate loans as well as life insurance premium finance receivables.

For derivatives designated and that qualify as fair value hedges, the net gain or loss onfrom the entire change in the fair value of the derivative ~~as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are~~instrument is recognized in ~~earnings. The Company includes the gain or loss on the hedged item in~~ the same income statement line item as the ~~offsetting loss or gain on~~earnings effect, including the ~~related derivatives. The Company recognized a~~ net gain or loss, of ~~$12,000 and $35,000 in other~~the hedged item (interest income ~~related to hedge ineffectiveness for~~earned on fixed rate loans) when the three months ended September 30, 2017 and 2016, respectively. On a year-to-date basis, the Company recognized a net gain of $41,000 and a net gain of $13,000 in other income related to hedge ineffectiveness for the nine months ended September 30, 2017 and 2016, respectively.hedged item affects earnings.

The following table presents the ~~gain/(loss) and hedge ineffectiveness recognized on derivative instruments~~carrying amount of the hedged assets/(liabilities) and the ~~related~~cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged ~~items~~assets/(liabilities) that are designated as a fair value hedge accounting relationship as of ~~September~~June 30, ~~2017 and 2016:~~2020:

(Dollars in thousands)

Derivatives in Fair Value
Hedging Relationships
Location of Gain/(Loss)
Recognized in Income on
Derivative
Amount of (Loss)/Gain Recognized
in Income on Derivative
Three Months Ended

Amount of Gain/(Loss) Recognized
in Income on Hedged Item
Three Months Ended

Income Statement Gain
due to Hedge
Ineffectiveness
Three Months Ended
September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Interest rate swaps Trading losses, net $ (64 ) $ 269
$ 76
$ (234 ) $ 12
$ 35



		June 30, 2020
(In thousands) Derivatives in Fair Value Hedging Relationships	Location in the Statement of Condition	Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets (Liabilities) for which Hedge Accounting has been Discontinued
Interest rate swaps	Loans, net of unearned income	$	181,803	$	16,691	$	—
	Available-for-sale debt securities	1,393		147		—

The following table presents the loss or gain recognized related to derivative instruments that are designated as fair value hedges for the respective period:



(In thousands) Derivatives in Fair Value Hedging Relationships	Location of (Loss)/Gain Recognized in Income on Derivative	Three Months Ended			Six Months Ended
	Location of (Loss)/Gain Recognized in Income on Derivative	June 30, 2020			June 30, 2020
Interest rate swaps	Interest and fees on loans	$	(37	)	$	(18	)
	Interest income - investment securities	—			—

(Dollars in thousands)

Derivatives in Fair Value
Hedging Relationships
Location of Gain/(Loss)
Recognized in Income on
Derivative

Amount of Loss Recognized
in Income on Derivative
Nine Months Ended

Amount of Gain Recognized
in Income on Hedged Item
Nine Months Ended

Income Statement Gain
due to Hedge
Ineffectiveness
Nine Months Ended
September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Interest rate swaps Trading losses, net $ (245 ) $ (614 ) $ 286
$ 627
$ 41
$ 13

Non-Designated Hedges

The Company does not use derivatives for speculative purposes. Derivatives not designated as accounting hedges are used to manage the Company’s economic exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of ASC 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

Interest Rate Derivatives—~~The~~Periodically, the Company may purchase interest rate cap derivatives designed to act as an economic hedge of the risk of the negative impact on its fixed-rate loan portfolios from rising interest rates, most notably the LIBOR index. As of June 30, 2020, the Company held interest rate caps with an aggregate notional value of $1.0 billion.

Additionally, the Company has interest rate derivatives, including swaps and option products, resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products (typically interest rate swaps) directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively convert a variable rate loan to a fixed rate. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At ~~September~~June 30, ~~2017,~~2020, the Company had interest rate derivative transactions with an aggregate notional amount of approximately ~~$4.9~~$8.3 billion (all interest rate swaps and caps with customers and third parties) related to this program. These interest rate derivatives had maturity dates ranging from ~~October 2017~~July 2020 to February 2045.

Mortgage Banking Derivatives—These derivatives include interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. It is the Company’s practice to enter into forward commitments for the future delivery of a portion of our residential mortgage loan production when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company’s mortgage banking derivatives have not been designated as being in hedge relationships. At ~~September~~June 30, ~~2017,~~2020, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately ~~$773.5 million~~$2.3 billion and interest rate lock commitments with an aggregate notional amount of approximately ~~$409.3 million.~~$1.4 billion. The fair values of these derivatives were estimated based on changes in mortgage rates from the dates of the commitments. Changes in the fair value of these mortgage banking derivatives are included in mortgage banking revenue.

Foreign Currency Derivatives—These derivatives include foreign currency contracts used to manage the foreign exchange risk associated with foreign currency denominated assets and transactions. Foreign currency contracts, which include spot and forward contracts, represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date. As a result of fluctuations in foreign currencies, the U.S. dollar-equivalent value of the foreign currency denominated assets or forecasted transactions increase or decrease. Gains or losses on the derivative instruments related to these foreign currency denominated assets or forecasted transactions are expected to substantially offset this variability.

As of ~~September~~June 30, ~~2017~~2020, the Company held foreign currency derivatives with an aggregate notional amount of approximately ~~$43.4~~$6.8 million.

Other Derivatives—Periodically, the Company will sell options to a bank or dealer for the right to purchase certain securities held within the banks’ investment portfolios (covered call options). These option transactions are designed primarily to mitigate overall interest rate risk and to increase the total return associated with the investment securities portfolio. These options do not qualify as accounting hedges pursuant to ASC 815, and, accordingly, changes in fair value of these contracts are recognized as other non-interest income. There were no0 covered call options outstanding as of ~~September~~June 30, ~~2017,~~2020, December 31, ~~2016~~2019 or ~~September~~June 30, ~~2016.~~2019.

Periodically, the Company will purchase options for the right to purchase securities not currently held within the banks' investment portfolios or enter into interest rate swaps in which the Company elects to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to the Company's mortgage servicing rights portfolio. The gain or loss associated with these derivative contracts are included in mortgage banking revenue. There were 0 such options or swaps outstanding as of June 30, 2020.

Amounts included in the Consolidated Statements of Income related to derivative instruments not designated in hedge relationships were as follows:



(In thousands)		Three Months Ended						Six Months Ended
Derivative	Location in income statement	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Interest rate swaps and caps	Trading (losses) gains, net	$	(703	)	$	(126	)	$	(1,131	)	$	(317	)
Mortgage banking derivatives	Mortgage banking revenue	43,292			13			60,559			63
Foreign exchange contracts	Trading (losses) gains, net	(9		)	30			(13		)	18
Covered call options	Fees from covered call options	—			643			2,292			2,427
Derivative contract held as economic hedge on MSRs	Mortgage banking revenue	589			920			4,749			920

(Dollars in thousands) Three Months Ended Nine Months Ended
Derivative Location in income statement September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Interest rate swaps and caps Trading losses, net $ (94 ) $ (395 ) $ (762 ) $ (751 )
Mortgage banking derivatives Mortgage banking revenue 708
(2,215 ) 1,398
(3,058 )
Covered call options Fees from covered call options 1,143
3,633
2,792
9,994
Foreign exchange contracts Trading losses, net (23 ) (26 ) (115 ) (262 )

Credit Risk

Derivative instruments have inherent risks, primarily market risk and credit risk. Market risk is associated with changes in interest rates and credit risk relates to the risk that the counterparty will fail to perform according to the terms of the agreement. The amounts potentially subject to market and credit risks are the streams of interest payments under the contracts and the market value of the derivative instrument and not the notional principal amounts used to express the volume of the transactions. Market and credit risks are managed and monitored as part of the Company's overall asset-liability management process, except that the credit risk related to derivatives entered into with certain qualified borrowers is managed through the Company's standard loan underwriting process since these derivatives are secured through collateral provided by the loan agreements. Actual exposures are monitored against various types of credit limits established to contain risk within parameters. When deemed necessary, appropriate types and amounts of collateral are obtained to minimize credit exposure.

The Company has agreements with certain of its interest rate derivative counterparties that contain cross-default provisions, which provide that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain of its derivative counterparties that contain a provision allowing the counterparty to terminate the derivative positions if the Company fails to maintain its status as a well or adequately capitalized institution, which would require the Company to settle its obligations under the agreements. As of ~~September~~June 30, ~~2017,~~2020, the fair value of interest rate derivatives in a net liability position that were subject to such agreements, which includes accrued interest related to these agreements, was ~~$9.8~~$346.5 million. If the Company had breached any of these provisions and the derivatives were terminated as a result, the Company would have been required to settle its obligations under the agreements at the termination value and would have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty.

The Company is also exposed to the credit risk of its commercial borrowers who are counterparties to interest rate derivatives with the banks. This counterparty risk related to the commercial borrowers is managed and monitored through the banks' standard underwriting process applicable to loans since these derivatives are secured through collateral provided by the loan agreement. The counterparty risk associated with the mirror-image swaps executed with third parties is monitored and managed in connection with the Company's overall asset liability management process.

The Company records interest rate derivatives subject to master netting agreements at their gross value and does not offset derivative assets and liabilities on the Consolidated Statements of Condition. The tables below summarize the Company's interest rate derivatives and offsetting positions as of the dates shown.



	Derivative Assets									Derivative Liabilities
	Fair Value									Fair Value
(In thousands)	June 30, 2020			December 31, 2019			June 30, 2019			June 30, 2020			December 31, 2019			June 30, 2019
Gross Amounts Recognized	$	268,709		$	100,569		$	104,562		$	343,519		$	126,805		$	131,035
Less: Amounts offset in the Statements of Financial Condition	—			—			—			—			—			—
Net amount presented in the Statements of Financial Condition	$	268,709		$	100,569		$	104,562		$	343,519		$	126,805		$	131,035
Gross amounts not offset in the Statements of Financial Condition
Offsetting Derivative Positions	(697		)	(2,561		)	(3,934		)	(697		)	(2,561		)	(3,934		)
Collateral Posted	—			—			—			(342,276		)	(124,244		)	(127,101		)
Net Credit Exposure	$	268,012		$	98,008		$	100,628		$	546		$	—		$	—

Derivative Assets Derivative Liabilities
Fair Value Fair Value
(Dollars in thousands) September 30,
2017 December 31,
2016 September 30,
2016 September 30,
2017 December 31,
2016 September 30,
2016
Gross Amounts Recognized $ 45,168
$ 49,213
$ 80,203
$ 34,035
$ 37,665
$ 80,113
Less: Amounts offset in the Statements of Financial Condition —
—
—
—
—
—
Net amount presented in the Statements of Financial Condition $ 45,168
$ 49,213
$ 80,203
$ 34,035
$ 37,665
$ 80,113
Gross amounts not offset in the Statements of Financial Condition
Offsetting Derivative Positions $ (16,213 ) (14,441 ) (958 ) $ (16,213 ) (14,441 ) (958 )
Collateral Posted ⁽¹⁾
(2,950 ) (8,530 ) —
(17,130 ) (12,400 ) (79,155 )
Net Credit Exposure $ 26,005
$ 26,242
$ 79,245
$ 692
$ 10,824
$ —


~~(1)~~	As of September 30, 2016, the Company posted collateral of $86.0 million, which resulted in excess collateral with its counterparties. For purposes of this disclosure, the amount of posted collateral is limited to the amount offsetting the derivative liability.

~~(14)~~ (16) Fair Values of Assets and Liabilities

The Company measures, monitors and discloses certain of its assets and liabilities on a fair value basis. These financial assets and financial liabilities are measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the ~~assumptions~~inputs used to determine fair value. These levels are:

Level 1—unadjusted quoted prices in active markets for identical assets or liabilities.

•

Level 2—inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

~~Level 2~~—inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3—significant unobservable inputs that reflect the Company’s own assumptions that market participants would use in pricing the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A financial instrument’s categorization within the above valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the assets or liabilities. ~~Following~~The following is a description of the valuation methodologies used for the Company’s assets and liabilities measured at fair value on a recurring basis.

Available-for-sale ~~and~~debt securities, trading account securities and equity securities with readily determinable fair value—Fair values for available-for-sale debt securities, trading account securities and ~~trading~~equity securities with readily determinable fair value are typically based on prices obtained from independent pricing vendors. Securities measured with these valuation techniques are generally classified as Level 2 of the fair value hierarchy. Typically, standard inputs such as benchmark yields, reported trades for similar securities, issuer spreads, benchmark securities, bids, offers and reference data including market research publications are used to fair value ~~a security.~~these securities. When these inputs are not available, broker/dealer quotes may be obtained by the vendor to determine the fair value of the security. We review the vendor’s pricing methodologies to determine if observable market information is being used, versus unobservable inputs. Fair value measurements using significant inputs that are unobservable in the market due to limited activity or a less liquid market are classified as Level 3 in the fair value hierarchy. The fair value of U.S. Treasury

securities and certain equity securities with readily determinable fair value are based on unadjusted quoted prices in active markets for identical securities. As such, these securities are classified as Level 1 in the fair value hierarchy.

The Company’s Investment Operations Department is responsible for the valuation of Level 3 available-for-sale debt securities. The methodology and variables used as inputs in pricing Level 3 securities are derived from a combination of observable and unobservable inputs. The unobservable inputs are determined through internal assumptions that may vary from period to period due to external factors, such as market movement and credit rating adjustments.

At ~~September~~June 30, ~~2017,~~2020, the Company classified ~~$68.4~~$117.3 million of municipal securities as Level 3. These municipal securities are bond issues for various municipal government entities primarily located in the Chicago metropolitan area and southern Wisconsin and are privately placed, non-rated bonds without CUSIP numbers. The Company also classified ~~$3.9~~$2.3 million of U.S. ~~government agencies~~Government agency securities as Level 3 at ~~September~~June 30, ~~2017.~~2020. The Company’s methodology for pricing these securities focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated municipal bond, the Investment Operations Department references a rated, publicly issued bond by the same issuer if available. A reduction is then applied to the rating obtained from the comparable bond, as the Company believes if liquidated, a non-rated bond would be valued less than a similar bond with a verifiable rating. The reduction applied by the Company is one complete rating grade (i.e. a “AA” rating for a comparable bond would be reduced to “A” for the Company’s valuation). For bond issues without comparable bond proxies, a rating of "BBB" was assigned. In the ~~third~~second quarter of ~~2017,~~2020, all of the ratings derived inby the Investment Operations Department using the above process ~~by Investment Operations~~ were ~~BBB~~"BBB" or ~~better, for both bonds with and without comparable bond proxies.~~better. The fair value measurement of municipal bonds is sensitive to the rating input, as a higher rating typically results in an increased valuation. The remaining pricing inputs used in the bond valuation are observable. Based on the rating determined in the above process, Investment Operations obtains a corresponding current market yield curve available to market participants. Other terms including coupon, maturity date, redemption price, number of coupon payments per year, and accrual method are obtained from the individual bond term sheets. Certain municipal bonds held by the Company at ~~September~~June 30, ~~2017 have a call date that has passed, and~~2020 are ~~now~~ continuously callable. When valuing these bonds, the fair value is capped at par value as the Company assumes a market participant would not pay more than par for a continuously callable bond. To determine the rating for the U.S. ~~government~~Government agency securities, the Investment Operations Department assigned a AAA rating as it is guaranteed by the U.S. government.

At September 30, 2017, December 31, 2016 and September 30, 2016, the Company held no equity securities classified as Level 3. In prior periods, equity securities in Level 3 were primarily comprised of auction rate preferred securities. The Company’s valuation methodology at that time included modeling the contractual cash flows of the underlying preferred securities and applying a discount to these cash flows by a market spread derived from the market price of the securities underlying debt. In the third quarter of 2016, the Company exchanged these auction rate securities for the underlying preferred securities, resulting in a $2.4 million gain on the nonmonetary sale. The Company classified the preferred securities received as Level 2 in the fair value hierarchy at the time of the transaction due to observable inputs other than quoted prices existing for the preferred securities.

Mortgage loans held-for-sale—The fair value of mortgage loans held-for-sale is determined by reference to investor price sheets for loan products with similar characteristics. As such, these loans are classified as Level 2 in the fair value hierarchy.

Loans held-for-investment—The fair value for loans in which the Company elected the fair value option is estimated by discounting future scheduled cash flows for the specific loan through maturity, adjusted for estimated credit losses and prepayments. The Company uses a discount rate based on the actual coupon rate of the underlying loan. At ~~September~~June 30, ~~2017,~~2020, the Company classified ~~$29.7~~$14.0 million of loans held-for-investment as Level 3. The weighted average discount rate used as an input to value these loans at ~~September~~June 30, ~~2017~~2020 was ~~3.65%~~2.80% with discount rates applied ranging from ~~3%-4%~~2%-3%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. As noted above, the fair value estimate also includes assumptions of prepayment speeds and credit losses. The Company included a prepayments speed assumption of ~~9.62%~~17.25% at ~~September~~June 30, ~~2017.~~2020. Prepayment speeds are inversely related to the fair value of these loans as an increase in prepayment speeds results in a decreased valuation. Additionally, the weighted average credit ~~loss rate~~discount used as an input to value the specific loans was ~~0.94%~~1.24% with credit loss ~~rates~~discount ranging from 0%~~-3%~~-6% at ~~September~~June 30, ~~2017.~~2020.

~~Mortgage servicing rights ("MSRs")~~MSRs—Fair value for MSRs is determined utilizing a valuation model which calculates the fair value of each servicing rights based on the present value of estimated future cash flows. The Company uses a discount rate commensurate with the risk associated with each servicing rights, given current market conditions. At ~~September~~June 30, ~~2017,~~2020, the Company classified ~~$29.4~~$77.2 million of MSRs as Level 3. The weighted average discount rate used as an input to value the pool of MSRs at ~~September~~June 30, ~~2017~~2020 was ~~9.97%~~10.21% with discount rates applied ranging from ~~9%-15%~~3%-21%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. The fair value of MSRs was also estimated based on other assumptions including prepayment speeds and the cost to service. Prepayment speeds ~~used as an input to value the MSRs at September 30, 2017~~ ranged from 0%~~-47%~~-95% or a weighted average prepayment speed of ~~10.50%~~17.25%. Further, for current and delinquent loans, the Company assumed a weighted average cost of servicing of ~~$69~~$77 and ~~$634,~~$442, respectively, per loan. Prepayment speeds and the cost to service are both inversely related to the fair value of MSRs as an increase in prepayment speeds or the cost to service results in a decreased valuation. See Note 9 - Mortgage Servicing Rights (“MSRs”) for further discussion of MSRs.

Derivative instruments—The Company’s derivative instruments include interest rate swaps, caps and ~~caps,~~collars, commitments to fund mortgages for sale into the secondary market (interest rate locks), forward commitments to end investors for the sale of mortgage

loans and foreign currency contracts. Interest rate swaps, caps and ~~caps~~collars are valued by a third party, using models that primarily use market observable inputs, such as yield curves, and are ~~corroborated by comparison with valuations provided by~~classified as Level 2 in the ~~respective counterparties.~~fair value hierarchy. The credit risk associated with derivative financial instruments that are subject to master netting agreements is measured on a net basis by counterparty portfolio. The fair value for mortgage-related derivatives is based on changes in mortgage rates from the date of the

commitments. The fair value of foreign currency derivatives is computed based on change in foreign currency rates stated in the contract compared to those prevailing at the measurement date.

At ~~September~~June 30, ~~2017,~~2020, the Company classified ~~$1.2~~$58.4 million of derivative assets related to interest rate locks as Level 3. The fair value of interest rate locks is based on prices obtained for loans with similar characteristics from third parties, adjusted for the pull-through rate, which represents the Company’s best estimate of the likelihood that a committed loan will ultimately fund. The weighted-average pull-through rate at ~~September~~June 30, ~~2017~~2020 was ~~88.85%~~79% with pull-through rates applied ranging from ~~38%~~0% to 100%. Pull-through rates are directly related to the fair value of interest rate locks as an increase in the pull-through rate results in an increased ~~valuation~~valuation.

Nonqualified deferred compensation assets—The underlying assets relating to the nonqualified deferred compensation plan are included in a trust and primarily consist of non-exchange traded institutional funds which are priced based by an independent third party service. These assets are classified as Level 2 in the fair value hierarchy.

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis for the periods presented:


	September 30, 2017								June 30, 2020
(Dollars in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1			Level 2		Level 3
Available-for-sale securities
U.S. Treasury	$	144,145	$	—	$	144,145	$	—	$	60,539	$	60,539		$	—	$	—
U.S. Government agencies	159,328		—		155,385		3,943		293,507		—			291,214		2,293
Municipal	116,016		—		47,633		68,383		150,879		—		��	33,624		117,255
Corporate notes	60,614		—		60,614		—		102,879		—			102,879		—
Mortgage-backed	1,149,448		—		1,149,448		—		2,587,157		—			2,587,157		—
Equity securities	36,352		—		36,352		—
Trading account securities	643		—		643		—		890		—			890		—
Equity securities with readily determinable fair value									52,460		44,394			8,066		—
Mortgage loans held-for-sale	370,282		—		370,282		—		833,163		—			833,163		—
Loans held-for-investment	29,704		—		—		29,704		254,614		—			240,661		13,953
MSRs	29,414		—		—		29,414		77,203		—			—		77,203
Nonqualified deferred compensation assets	10,824		—		10,824		—		13,576		—			13,576		—
Derivative assets	48,198		—		46,982		1,216		327,624		—			269,191		58,433
Total	$	2,154,968	$	—	$	2,022,308	$	132,660	$	4,754,491	$	104,933		$	4,380,421	$	269,137
Derivative liabilities	$	35,773	$	—	$	35,773	$	—	$	355,265	$	—		$	355,265	$	—


	December 31, 2016								December 31, 2019
(Dollars in thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Available-for-sale securities
U.S. Treasury	$	141,983	$	—	$	141,983	$	—	$	121,088	$	121,088	$	—	$	—
U.S. Government agencies	189,152		—		189,152		—		365,442		—		362,796		2,646
Municipal	131,809		—		52,183		79,626		145,318		—		33,368		111,950
Corporate notes	65,391		—		65,391		—		94,841		—		94,841		—
Mortgage-backed	1,161,084		—		1,161,084		—		2,379,525		—		2,379,525		—
Equity securities	35,248		—		35,248		—
Trading account securities	1,989		—		1,989		—		1,068		—		1,068		—
Equity securities with readily determinable fair value									50,840		42,774		8,066		—
Mortgage loans held-for-sale	418,374		—		418,374		—		377,313		—		377,313		—
Loans held-for-investment	22,137		—		—		22,137		132,718		—		123,098		9,620
MSRs	19,103		—		—		19,103		85,638		—		—		85,638
Nonqualified deferred compensation assets	9,228		—		9,228		—		14,213		—		14,213		—
Derivative assets	56,394		—		54,103		2,291		103,644		—		101,013		2,631
Total	$	2,251,892	$	—	$	2,128,735	$	123,157	$	3,871,648	$	163,862	$	3,495,301	$	212,485
Derivative liabilities	$	39,839	$	—	$	39,839	$	—	$	129,204	$	—	$	129,204	$	—



	June 30, 2019
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities
U.S. Treasury	$	132,269	$	132,269	$	—	$	—
U.S. Government agencies	170,940		—		167,963		2,977
Municipal	142,609		—		32,313		110,296
Corporate notes	90,913		—		90,913		—
Mortgage-backed	1,649,423		—		1,649,423		—
Trading account securities	2,430		—		2,430		—
Equity securities with readily determinable fair value	44,319		36,253		8,066		—
Mortgage loans held-for-sale	394,975		—		394,975		—
Loans held-for-investment	106,081		—		95,600		10,481
MSRs	72,850		—		—		72,850
Nonqualified deferred compensation assets	13,672		—		13,672		—
Derivative assets	108,784		—		105,188		3,596
Total	$	2,929,265	$	168,522	$	2,560,543	$	200,200
Derivative liabilities	$	136,312	$	—	$	136,312	$	—

September 30, 2016
(Dollars in thousands) Total Level 1 Level 2 Level 3
Available-for-sale securities
U.S. Treasury $ 30,036
$ —
$ 30,036
$ —
U.S. Government agencies 93,683
—
93,683
—
Municipal 109,281
—
42,073
67,208
Corporate notes 65,203
—
65,203
—
Mortgage-backed 1,301,111
—
1,301,111
—
Equity securities 50,782
—
50,782
—
Trading account securities 1,092
—
1,092
—
Mortgage loans held-for-sale 559,634
—
559,634
—
Loans held-for-investment 17,603
—
17,603
—
MSRs 13,901
—
—
13,901
Nonqualified deferred compensation assets 9,218
—
9,218
—
Derivative assets 88,828
—
82,791
6,037
Total $ 2,340,372
$ —
$ 2,253,226
$ 87,146
Derivative liabilities $ 87,948
$ —
$ 87,948
$ —

The aggregate remaining contractual principal balance outstanding as of ~~September~~June 30, ~~2017,~~2020, December 31, ~~2016~~2019 and ~~September~~June 30, ~~2016~~2019 for mortgage loans held-for-sale measured at fair value under ASC 825 was ~~$356.4~~$781.8 million, ~~$414.4~~$368.0 million and ~~$537.0~~$378.8 million, respectively, while the aggregate fair value of mortgage loans held-for-sale was ~~$370.3~~$833.2 million, ~~$418.4~~$377.3 million and ~~$559.6~~$395.0 million, for the same respective periods, as shown in the above tables. There were ~~no nonaccrual loans or~~$1.3 million of loans past due greater than 90 days and still accruing in the mortgage loans held-for-sale portfolio as of ~~September~~June 30, ~~2017,~~2020 compared to $1.8 million as of December 31, ~~2016~~2019 and ~~September~~$1.3 million as of June 30, ~~2016.~~2019.

The changes in Level 3 assets measured at fair value on a recurring basis during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 are summarized as follows:


				Equity securities			U.S. Government Agencies				Loans held-for- investment			Mortgage servicing rights		Derivative Assets					U.S. Government Agencies			Loans held-for- investment			Mortgage servicing rights		Derivative Assets
(Dollars in thousands)	Municipal									Municipal
Balance at July 1, 2017	$	77,341				$	—			$			4,110			$	30,173		$	27,307		$	1,047
Balance at April 1, 2020																		$	113,267		$	2,457		$	9,568		$	73,504	$	39,816
Total net gains (losses) included in:
Net income ⁽¹⁾	—			—			—				177			2,107		169		—			—			200			3,699		18,617
Other comprehensive loss	(4,113		)	—			(167		)		—			—		—
Other comprehensive income (loss)																		(546		)	(7		)	—			—		—
Purchases	—			—			—				—			—		—		6,997			—			—			—		—
Issuances	—			—			—				—			—		—		—			—			—			—		—
Sales	—			—			—				—			—		—		—			—			—			—		—
Settlements	(4,845		)	—			—				(4,504		)	—		—		(2,463		)	(157		)	(1,364		)	—		—
Net transfers into/(out of) Level 3	—			—			—				3,858			—		—		—			—			5,549			—		—
Balance at September 30, 2017	$	68,383		$	—		$	3,943			$	29,704		$	29,414	$	1,216
Balance at June 30, 2020																		$	117,255		$	2,293		$	13,953		$	77,203	$	58,433


~~(1)~~	~~Changes in the balance of MSRs are recorded as a component of mortgage banking revenue in non-interest income.~~



				U.S. Government Agencies			Loans held-for- investment			Mortgage servicing rights			Derivative Assets
(Dollars in thousands)	Municipal			U.S. Government Agencies			Loans held-for- investment			Mortgage servicing rights			Derivative Assets
Balance at January 1, 2020	$	111,950		$	2,646		$	9,620		$	85,638		$	2,631
Total net gains (losses) included in:
Net income ⁽¹⁾	—			—			122			(8,435		)	55,802
Other comprehensive income (loss)	(1,795		)	(39		)	—			—			—
Purchases	12,872			—			—			—			—
Issuances	—			—			—			—			—
Sales	—			—			—			—			—
Settlements	(5,772		)	(314		)	(1,460		)	—			—
Net transfers into/(out of) Level 3	—			—			5,671			—			—
Balance at June 30, 2020	$	117,255		$	2,293		$	13,953		$	77,203		$	58,433

Equity securities U.S. Government Agencies Loans held-for- investment
Mortgage
servicing rights
Derivative Assets
(Dollars in thousands) Municipal
Balance at January 1, 2017 $ 79,626
$ —
$ —
$ 22,137
$ 19,103
$ 2,291
Total net gains (losses) included in:
Net income ⁽¹⁾
—
—
—
1,369
10,311
(1,075 )
Other comprehensive loss (1,084 ) —
(340 ) —
—
—
Purchases 10,879
—
—
—
—
—
Issuances —
—
—
—
—
—
Sales —
—
—
—
—
—
Settlements (21,038 ) —
—
(9,995 ) —
—
Net transfers into/(out of) Level 3
—
—
4,283
16,193
—
—
Balance at September 30, 2017 $ 68,383
$ —
$ 3,943
$ 29,704
$ 29,414
$ 1,216



				U.S. Government Agencies			Loans held-for- investment			Mortgage servicing rights		Derivative Assets
(Dollars in thousands)	Municipal			U.S. Government Agencies			Loans held-for- investment			Mortgage servicing rights		Derivative Assets
Balance at April 1, 2019	$	103,834		$	2,993		$	11,249		$	71,022	$	3,089
Total net gains (losses) included in:
Net income ⁽¹⁾	—			—			118			1,421		507
Other comprehensive income (loss)	6,519			142			—			—		—
Purchases	555			—			—			407		—
Issuances	—			—			—			—		—
Sales	—			—			—			—		—
Settlements	(612		)	(158		)	(886		)	—		—
Net transfers into/(out of) Level 3	—			—			—			—		—
Balance at June 30, 2019	$	110,296		$	2,977		$	10,481		$	72,850	$	3,596


				Equity securities				U.S. Government Agencies			Loans held-for- investment			Mortgage servicing rights				Derivative Assets						U.S. Government Agencies			Loans held-for- investment			Mortgage servicing rights			Derivative Assets
(Dollars in thousands)	Municipal									Municipal
Balance at July 1, 2016	$	69,812					$	25,187		$			—			$	—				$	13,382		$	9,731
Balance at January 1, 2019																					$	108,926		$	3,150		$	11,347		$	75,183		$	2,457
Total net gains (losses) included in:
Net income ⁽¹⁾	—			—				—			—			519				(3,694		)	—			—			285			(2,740		)	1,139
Other comprehensive loss	(241		)					—			—			—				—
Other comprehensive income (loss)																					8,056			143			—			—			—
Purchases	2,184			—				—			—			—				—			1,524			—			—			407			—
Issuances	—			—				—			—			—				—			—			—			—			—			—
Sales	—			(25,187		)		—			—			—				—			—			—			—			—			—
Settlements	(4,547		)	—				—			—			—				—			(8,210		)	(316		)	(1,351		)	—			—
Net transfers into/(out of) Level 3	—			—				—			—			—				—			—			—			200			—			—
Balance at September 30, 2016	$	67,208		$	—			$	—		$	—		$	13,901			$	6,037
Balance at June 30, 2019																					$	110,296		$	2,977		$	10,481		$	72,850		$	3,596

Equity securities U.S. Government Agencies Loans held-for- investment
Mortgage
servicing rights
Derivative Assets
(Dollars in thousands) Municipal
Balance at January 1, 2016 $ 68,613
$ 25,199
$ —
$ —
$ 9,092
$ 7,021
Total net gains (losses) included in:
Net income ⁽¹⁾
—
—
—
—
4,809
(984 )
Other comprehensive loss (141 ) (12 ) —
—
—
—
Purchases 6,458
—
—
—
—
—
Issuances —
—
—
—
—
—
Sales —
(25,187 ) —
—
—
—
Settlements (7,722 ) —
—
—
—
—
Net transfers into/(out of) Level 3 —
—
—
—
—
—
Balance at September 30, 2016 $ 67,208
$ —
$ —
$ —
$ 13,901
$ 6,037


(1)	Changes in the balance of MSRs and derivative assets related to fair value adjustments are recorded as ~~a component~~components of mortgage banking ~~revenue~~revenue. Changes in the balance of loans held-for-investment related to fair value adjustments are recorded as other non-interest income.

Also, the Company may be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from impairment charges on individual assets. For assets measured at fair value on a nonrecurring basis that were still held in the balance sheet at the end of the period, the following table provides the carrying value of the related individual assets or portfolios at ~~September~~June 30, ~~2017.~~2020:


	September 30, 2017								Three Months Ended September 30, 2017 Fair Value Losses Recognized, net				Nine Months Ended September 30, 2017 Fair Value Losses Recognized, net		June 30, 2020								Three Months Ended June 30, 2020 Fair Value Losses Recognized, net		Six Months Ended June 30, 2020 Fair Value Losses Recognized, net
(Dollars in thousands)	Total		Level 1		Level 2		Level 3					Total				Level 1		Level 2		Level 3
Impaired loans—collateral based	$	57,548	$	—	$	—	$	57,548		$	4,259				$	10,589
Other real estate owned, including covered other real estate owned ⁽¹⁾	40,229		—		—		40,229		490				1,760
Individually assessed loans - foreclosure probable and collateral-dependent															$	140,473	$	—	$	—	$	140,473	$	13,414	$	17,474
Other real estate owned ⁽¹⁾															10,197		—		—		10,197		217		523
Total	$	97,777	$	—	$	—	$	97,777	$	4,749			$	12,349	$	150,670	$	—	$	—	$	150,670	$	13,631	$	17,997


(1)	Fair value losses recognized, net on other real estate owned include valuation adjustments and charge-offs during the respective period.

~~Impaired~~Individually assessed loans—AIn accordance with ASC 326, the allowance for credit losses for loans and other financial assets held at amortized cost should be measured on a collective or pooled basis when such assets exhibit similar risk characteristics. In instances in which a financial asset does not exhibit similar risk characteristics to a pool, the Company is required to measure such allowance for credit losses on an individual asset basis. For the Company's loan isportfolio, nonaccrual loans and TDRs are considered to ~~be impaired when, based on current information~~not exhibit similar risk characteristics as pools and events, it is probable that the Company will be unable to collect all amounts due pursuant to the contractual terms of the loan agreement. A loan modified in a TDR is an impaired loan according to applicable accounting guidance. Impairment isthus are individually assessed. Credit losses are measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the fair value of the underlying collateral. ~~Impaired~~Individually assessed loans are considered a fair value measurement where an allowance for credit loss is established based on the fair value of collateral. Appraised values, which may require adjustments to market-based valuation inputs, are generally used on real estate foreclosure probable and collateral-dependent ~~impaired~~ loans.

The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs of ~~impaired~~individually assessed loans. For more information on ~~the Managed Assets Division review of impaired~~individually assessed loans refer to Note 7 – Allowance for ~~Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans.~~Credit Losses. At ~~September~~June 30, ~~2017,~~2020, the

Company had ~~$78.6~~$183.4 million of ~~impaired~~individually assessed loans classified as Level 3. Of the ~~$78.6~~$183.4 million of ~~impaired~~individually assessed loans, ~~$57.5~~$140.5 million were measured at fair value based on the underlying collateral of the loan as shown in the table above. The remaining ~~$21.1~~$42.9 million were valued based on discounted cash flows in accordance with ASC 310.

Other real estate owned ~~(including covered other real estate owned)~~—Other real estate owned is comprised of real estate acquired in partial or full satisfaction of loans and is included in other assets. Other real estate owned is recorded at its estimated fair value less estimated selling costs at the date of transfer, with any excess of the related loan balance over the fair value less expected selling costs charged to the allowance for loan losses. Subsequent changes in value are reported as adjustments to the carrying amount and are recorded in other non-interest expense. Gains and losses upon sale, if any, are also charged to other non-interest expense. Fair value is generally based on third party appraisals and internal estimates that are adjusted by a discount representing the estimated cost of sale and is therefore considered a Level 3 valuation.

The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs for ~~non-covered other real estate owned and covered~~ other real estate owned. At ~~September~~June 30, ~~2017,~~2020, the Company had ~~$40.2~~$10.2 million of other real estate owned classified as Level 3. The unobservable input applied to other real estate owned relates to the 10% reduction to the appraisal value representing the estimated cost of sale of the foreclosed property. A higher discount for the estimated cost of sale results in a decreased carrying value.

The valuation techniques and significant unobservable inputs used to measure both recurring and non-recurring Level 3 fair value measurements at ~~September~~June 30, ~~2017~~2020 were as follows:

(Dollars in thousands)

Fair Value

Valuation Methodology

Significant Unobservable Input

Range

of Inputs

Weighted

Average

of Inputs

Impact to valuation

from an increased or

higher input value

Measured at fair value on a recurring basis:

Municipal Securities

117,255

Bond pricing

Equivalent rating

BBB-AA+

N/A

Increase

U.S. Government agencies

2,293

Bond pricing

Equivalent rating

AAA

Increase

Loans held-for-investment

13,953

Discounted cash flows

Discount rate

2%-3%

2.80%

Decrease

Credit discount

0%-6%

1.24%

Decrease

Constant prepayment rate (CPR)

17.25%

Decrease

MSRs

77,203

Discounted cash flows

Discount rate

3%-21%

10.21%

Decrease

Constant prepayment rate (CPR)

0%-95%

17.25%

Decrease

Cost of servicing

$70-$200

$77

Decrease

Cost of servicing - delinquent

$200-$1,000

$442

Decrease

Derivatives

58,433

Discounted cash flows

Pull-through rate

0%-100%

79%

Increase

Measured at fair value on a non-recurring basis:

Individually assessed loans - foreclosure probable and collateral-dependent

140,473

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

Other real estate owned

10,197

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

(Dollars in thousands) Fair Value Valuation Methodology Significant Unobservable Input
Range
of Inputs

Weighted
Average
of Inputs

Impact to valuation
from an increased or
higher input value
Measured at fair value on a recurring basis:
Municipal Securities $ 68,383
Bond pricing Equivalent rating BBB-AA+ N/A Increase
U.S. Government agencies 3,943
Bond pricing Equivalent rating AAA AAA Increase
Loans held-for-investment 29,704
Discounted cash flows Discount rate 3%-4% 3.65% Decrease
Credit loss rate 0%-3% 0.94% Decrease
Constant prepayment rate (CPR) 9.62% 9.62% Decrease
MSRs 29,414
Discounted cash flows Discount rate 9%-15% 9.97% Decrease
Constant prepayment rate (CPR) 0%-47% 10.50% Decrease
Cost of servicing $65-$200 $69 Decrease
Cost of servicing - delinquent $200-$1,000 $634 Decrease
Derivatives 1,216
Discounted cash flows Pull-through rate 38%-100% 88.85% Increase
Measured at fair value on a non-recurring basis:
Impaired loans—collateral based $ 57,548
Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease
Other real estate owned, including covered other real estate owned 40,229
Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease

The Company is required under applicable accounting guidance to report the fair value of all financial instruments on the ~~consolidated statements~~Consolidated Statements of ~~condition,~~Condition, including those financial instruments carried at cost. The table below presents the carrying amounts and estimated fair values of the Company’s financial instruments as of the dates shown:



	At June 30, 2020				At December 31, 2019				At June 30, 2019
	Carrying		Fair		Carrying		Fair		Carrying		Fair
(In thousands)	Value		Value		Value		Value		Value		Value
Financial Assets:
Cash and cash equivalents	$	345,057	$	345,057	$	286,476	$	286,476	$	300,992	$	300,992
Interest bearing deposits with banks	4,015,072		4,015,072		2,164,560		2,164,560		1,437,105		1,437,105
Available-for-sale securities	3,194,961		3,194,961		3,106,214		3,106,214		2,186,154		2,186,154
Held-to-maturity securities	728,465		744,286		1,134,400		1,138,396		1,191,634		1,198,478
Trading account securities	890		890		1,068		1,068		2,430		2,430
Equity securities with readily determinable fair value	52,460		52,460		50,840		50,840		44,319		44,319
FHLB and FRB stock, at cost	135,571		135,571		100,739		100,739		92,026		92,026
Brokerage customer receivables	14,623		14,623		16,573		16,573		13,569		13,569
Mortgage loans held-for-sale, at fair value	833,163		833,163		377,313		377,313		394,975		394,975
Loans held-for-investment, at fair value	254,614		254,614		132,718		132,718		106,081		106,081
Loans held-for-investment, at amortized cost	31,148,289		31,004,403		26,667,572		26,659,903		25,198,578		25,086,371
Nonqualified deferred compensation assets	13,576		13,576		14,213		14,213		13,672		13,672
Derivative assets	327,624		327,624		103,644		103,644		108,784		108,784
Accrued interest receivable and other	263,743		263,743		303,090		303,090		271,988		271,988
Total financial assets	$	41,328,108	$	41,200,043	$	34,459,420	$	34,455,747	$	31,362,307	$	31,256,944
Financial Liabilities
Non-maturity deposits	$	30,814,487	$	30,814,487	$	24,483,867	$	24,483,867	$	22,013,192	$	22,013,192
Deposits with stated maturities	4,837,387		4,838,831		5,623,271		5,635,475		5,505,623		5,526,715
FHLB advances	1,228,416		1,181,462		674,870		715,129		574,823		596,689
Other borrowings	508,535		508,535		418,174		418,174		418,057		418,057
Subordinated notes	436,298		473,324		436,095		458,796		436,021		451,874
Junior subordinated debentures	253,566		170,449		253,566		243,158		253,566		250,697
Derivative liabilities	355,265		355,265		129,204		129,204		136,312		136,312
Accrued interest payable	17,200		17,200		19,940		19,940		17,503		17,503
Total financial liabilities	$	38,451,154	$	38,359,553	$	32,038,987	$	32,103,743	$	29,355,097	$	29,411,039

At September 30, 2017 At December 31, 2016 At September 30, 2016
Carrying Fair Carrying Fair Carrying Fair
(Dollars in thousands) Value Value Value Value Value Value
Financial Assets:
Cash and cash equivalents $ 251,952
$ 251,952
$ 270,045
$ 270,045
$ 246,947
$ 246,947
Interest bearing deposits with banks 1,218,728
1,218,728
980,457
980,457
816,104
816,104
Available-for-sale securities 1,665,903
1,665,903
1,724,667
1,724,667
1,650,096
1,650,096
Held-to-maturity securities 819,340
807,036
635,705
607,602
932,767
942,666
Trading account securities 643
643
1,989
1,989
1,092
1,092
FHLB and FRB stock, at cost 87,192
87,192
133,494
133,494
129,630
129,630
Brokerage customer receivables 23,631
23,631
25,181
25,181
25,511
25,511
Mortgage loans held-for-sale, at fair value 370,282
370,282
418,374
418,374
559,634
559,634
Loans held-for-investment, at fair value 29,704
29,704
22,137
22,137
17,603
17,603
Loans held-for-investment, at amortized cost 20,929,678
21,064,801
19,739,180
20,755,320
19,179,598
20,233,915
MSRs 29,414
29,414
19,103
19,103
13,901
13,901
Nonqualified deferred compensation assets 10,824
10,824
9,228
9,228
9,218
9,218
Derivative assets 48,198
48,198
56,394
56,394
88,828
88,828
Accrued interest receivable and other 225,435
225,435
204,513
204,513
205,725
205,725
Total financial assets $ 25,710,924
$ 25,833,743
$ 24,240,467
$ 25,228,504
$ 23,876,654
$ 24,940,870
Financial Liabilities
Non-maturity deposits $ 18,228,388
$ 18,228,388
$ 17,383,729
$ 17,383,729
$ 16,946,178
$ 16,946,178
Deposits with stated maturities 4,666,675
4,608,760
4,274,903
4,263,576
4,201,477
4,200,278
FHLB advances 468,962
454,753
153,831
157,051
419,632
427,103
Other borrowings 251,680
251,680
262,486
262,486
241,366
241,366
Subordinated notes 139,052
145,376
138,971
135,268
138,943
138,715
Junior subordinated debentures 253,566
240,305
253,566
254,384
253,566
254,108
Derivative liabilities 35,773
35,773
39,839
39,839
87,948
87,948
FDIC indemnification liability 15,472
15,472
16,701
16,701
17,945
17,945
Accrued interest payable 9,177
9,177
6,421
6,421
8,007
8,007
Total financial liabilities $ 24,068,745
$ 23,989,684
$ 22,530,447
$ 22,519,455
$ 22,315,062
$ 22,321,648

Not all the financial instruments listed in the table above are subject to the disclosure provisions of ASC Topic 820, as certain assets and liabilities result in their carrying value approximating fair value. These include cash and cash equivalents, interest bearing deposits with banks, brokerage customer receivables, FHLB and FRB stock, ~~FDIC indemnification asset and liability,~~ accrued interest receivable and accrued interest payable and non-maturity deposits.

The following methods and assumptions were used by the Company in estimating fair values of financial instruments that were not previously disclosed.

Held-to-maturity securities. Held-to-maturity securities include U.S. Government-sponsored agency securities and municipal bonds issued by various municipal government entities primarily located in the Chicago metropolitan area and southern Wisconsin. Fair values for held-to-maturity securities are typically based on prices obtained from independent pricing vendors. In accordance with ASC 820, the Company has generally categorized these held-to-maturity securities as a Level 2 fair value measurement. Fair values for certain other held-to-maturity securities are based on the bond pricing methodology discussed previously related to certain available-for-sale securities. In accordance with ASC 820, the Company has categorized these held-to-maturity securities as a Level 3 fair value measurement.

Loans held-for-investment, at amortized cost. Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are analyzed by type such as commercial, residential real estate, etc. Each category is further segmented by interest rate type (fixed and variable) and term. For variable-rate loans that reprice frequently, estimated fair values are based on carrying values. The fair value of residential loans is based on secondary market sources for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value for other fixed rate loans is estimated by discounting scheduled cash flows

through the estimated maturity using estimated market discount rates that reflect credit and interest rate risks inherent in the loan. The primary impact of credit risk on the present value of the loan portfolio, however, was assessed through the use of the allowance for loan losses, which is believed to represent the current fair value of probable incurred losses for purposes of the fair value calculation. In accordance with ASC 820, the Company has categorized loans as a Level 3 fair value measurement.

Deposits with stated maturities. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently in effect for deposits of similar remaining maturities. In accordance with ASC 820, the Company has categorized deposits with stated maturities as a Level 3 fair value measurement.

FHLB advances. The fair value of FHLB advances is obtained from the FHLB which uses a discounted cash flow analysis based on current market rates of similar maturity debt securities to discount cash flows. In accordance with ASC 820, the Company has categorized FHLB advances as a Level 3 fair value measurement.

Subordinated notes. The fair value of the subordinated notes is based on a market price obtained from an independent pricing vendor. In accordance with ASC 820, the Company has categorized subordinated notes as a Level 2 fair value measurement.

Junior subordinated debentures. The fair value of the junior subordinated debentures is based on the discounted value of contractual cash flows. In accordance with ASC 820, the Company has categorized junior subordinated debentures as a Level 3 fair value measurement.

~~(15)~~ (17) Stock-Based Compensation Plans

In May 2015, the Company’s shareholders approved the 2015 Stock Incentive Plan (“the 2015 Plan”) which provides for the issuance of up to 5,485,000 shares of common stock. The 2015 Plan replaced the 2007 Stock Incentive Plan (“the 2007 Plan”) which replaced the 1997 Stock Incentive Plan (“the 1997 Plan”). The 2015 Plan, the 2007 Plan and the 1997 Plan are collectively referred to as “the Plans.” The 2015 Plan has substantially similar terms to the 2007 Plan and the 1997 Plan. ~~Outstanding awards~~Awards granted under the Plans for which common shares are not issued by reason of cancellation, forfeiture, lapse of such award or settlement of such award in cash, are again available under the 2015 Plan. All grants made after the approval of the 2015 Plan are made pursuant to the 2015 Plan. As of ~~September~~June 30, ~~2017,~~2020, approximately ~~4.0~~2.1 million shares were available for future grants assuming the maximum number of shares are issued for the performance awards outstanding. The Plans cover substantially all employees of Wintrust. The Compensation Committee of the Board of Directors administers all stock-based compensation programs and authorizes all awards granted pursuant to the Plans.

The Plans permit the grant of incentive stock options, non-qualified stock options, stock appreciation rights, stock awards, restricted share or unit awards, performance awards and other incentive awards valued in whole or in part by reference to the Company’s common stock, all on a stand alone, combination or tandem basis. The Company historically awarded stock-based compensation in the form of time-vested non-qualified stock options and time-vested restricted share unit awards (“restricted shares”). The grants of options provide for the purchase of shares of the Company’s common stock at the fair market value of the stock on the date the options are granted. Stock options ~~under the 2015 Plan and the 2007 Plan~~ generally vest ratably over periods of three to five years and have a maximum term of seven years from the date of grant. ~~Stock options granted under the 1997 Plan provided for a maximum term of 10 years.~~ Restricted shares entitle the holders to receive, at no cost, shares of the Company’s common stock. Restricted shares generally vest over periods of one to five years from the date of grant.

Beginning in 2011, the Company has awarded annual grants under the Long-Term Incentive Program (“LTIP”), which is administered under the Plans. The LTIP is designed in part to align the interests of management with the interests of shareholders, foster retention, create a long-term focus based on sustainable results and provide participants with a target long-term incentive opportunity. It is anticipated that LTIP awards will continue to be granted annually. LTIP grants ~~generally consist~~in 2020 consisted of a combination of ~~time-vested non-qualified stock options,~~ performance-based stock awards, ~~and~~ performance-based cash ~~awards.~~awards and time vested restricted shares. LTIP grants prior to 2017 included nonqualified-stock options in the mix. Stock options granted under the LTIP have a term of seven years and generally vested equally over three years based on continued service. Performance-based stock and cash awards granted under the LTIP are contingent upon the achievement of pre-established long-term performance goals set in advance by the Compensation Committee over a three-year period starting at the beginning of each calendar year. These performance awards are granted at a target level, and based on the Company’s achievement of the pre-established long-term goals, the actual payouts can range from 0% to a maximum of 150% ~~(for awards granted after 2014) or 200% (for awards granted prior to 2015)~~ of the target award. The awards typically vest in the quarter after the end of the performance period upon certification of the payout by the Compensation Committee of the Board of Directors. Holders of performance-based stock awards are entitled to receive, at no cost, the shares earned based on the achievement of the pre-established long-term goals.

Holders of restricted share awards and performance-based stock awards received under the Plans are not entitled to vote or receive cash dividends (or cash payments equal to the cash dividends) on the underlying common shares until the awards are vested and shares are issued. Shares that are vested but not issuable pursuant to deferred compensation arrangements accrue additional shares based on

the value of dividends otherwise paid. Except in limited circumstances, these awards are canceled upon termination of employment without any payment of consideration by the Company.

Stock-based compensation is measured as the fair value of an award on the date of grant, and the measured cost is recognized over the period which the recipient is required to provide service in exchange for the award. The fair ~~values~~value of restricted share and performance-based stock awards ~~are~~is determined based on the average of the high and low trading prices on the grant date, and the fair value of stock options is estimated using a Black-Scholes option-pricing model that utilizes ~~the assumptions outlined in the following table.~~various assumptions. Option-pricing models require the input of highly subjective assumptions and are sensitive to changes in the option's expected life and the price volatility of the underlying stock, which can materially affect the fair value estimate. Options granted since the inception of the LTIP in 2011 were primarily granted as LTIP awards. Expected life of options granted since the inception of the LTIP awards has been based on the safe harbor rule of the SEC Staff Accounting Bulletin No. 107 “Share-Based Payment” as the Company believes historical exercise data may not provide a reasonable basis to estimate the expected term of these options. Expected stock price volatility is based on historical volatility of the Company's common stock, which correlates with the expected life of the options, and the risk-free interest rate is based on comparable U.S. Treasury rates. Management periodically reviews and adjusts the assumptions used to calculate the fair value of an option ~~on a periodic basis to better reflect expected trends.~~

~~The following table presents the weighted average assumptions used to determine the fair value of~~in periods when options ~~granted in the nine month period ended September 30, 2016. No~~are granted. NaN options were granted ~~in the nine month period ended September 30, 2017.~~since 2016.



	~~Nine Months Ended~~
	~~September 30,~~
	~~2016~~
~~Expected dividend yield~~	~~0.9~~	%
~~Expected volatility~~	~~25.2~~	%
~~Risk-free rate~~	~~1.3~~	%
~~Expected option life (in years)~~	~~4.5~~

Stock based compensation is recognized based upon the number of awards that are ultimately expected to vest, taking into account expected forfeitures. In addition, for performance-based awards, an estimate is made of the number of shares expected to vest as a result of actual performance against the performance criteria in the award to determine the amount of compensation expense to recognize. The estimate is ~~reevaluated periodically~~re-evaluated quarterly and total compensation expense is adjusted for any change in estimate in the current period. Stock-based compensation expense recognized in the Consolidated Statements of Income was ~~$2.4~~$540,000 in the second quarter of 2020 and $3.0 million in the ~~third~~second quarter of ~~2017~~2019, and ~~$2.0~~$(2.3) million and $6.3 million in the ~~third quarter of 2016,~~2020 and ~~$8.2 million and $6.8 million for the 2017 and 2016~~2019 year-to-date periods, respectively.

A summary of the Company's stock option activity for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016~~2019 is presented below:


Stock Options	Common Shares		Weighted Average Strike Price		Remaining Contractual Term⁽¹⁾	Intrinsic Value ⁽²⁾ ($000)		Common Shares		Weighted Average Strike Price		Remaining Contractual Term⁽¹⁾	Intrinsic Value ⁽²⁾ ($000)
Outstanding at January 1, 2017	1,698,912		$	41.50
Outstanding at January 1, 2020								755,332		$	42.43
Granted	—		—					—		—
Exercised	(499,222	)	40.57					(98,659	)	38.75
Forfeited or canceled	(16,378	)	43.07					(648	)	46.86
Outstanding at September 30, 2017	1,183,312		$	41.87	4.2	$	43,122
Exercisable at September 30, 2017	640,759		$	41.58	3.5	$	23,532
Outstanding at June 30, 2020								656,025		$	42.98	2.2	$	970
Exercisable at June 30, 2020								648,124		$	42.97	2.2	$	957



Stock Options	Common Shares		Weighted Average Strike Price		Remaining Contractual Term ⁽¹⁾	Intrinsic Value ⁽²⁾ ($000)
Outstanding at January 1, 2019	795,014		$	42.25
Granted	—		—
Exercised	(94,767	)	38.00
Forfeited or canceled	—		—
Outstanding at June 30, 2019	700,247		$	42.83	2.7	$	21,239
Exercisable at June 30, 2019	685,127		$	42.80	2.7	$	20,802


(1)	Represents the remaining weighted average contractual life in years.

(2)

Aggregate intrinsic value represents the total pre-tax intrinsic value (i.e., the difference between the Company's stock price on the last trading day of the quarter and the option exercise price, multiplied by the number of shares) that would have been received by the option holders if they had exercised their options on the last day of the quarter. Options with exercise prices above the stock price on the last trading day of the quarter are excluded from the calculation of intrinsic value. The intrinsic value will change based on the fair market value of the Company's stock.

Stock Options
Common
Shares

Weighted
Average
Strike Price

Remaining
Contractual
Term ⁽¹⁾

Intrinsic
Value ⁽²⁾
($000)
Outstanding at January 1, 2016 1,551,734
$ 41.32

Granted 562,166
41.04

Exercised (184,366 ) 37.43

Forfeited or canceled (86,039 ) 48.93

Outstanding at September 30, 2016 1,843,495
$ 41.27
4.8 $ 26,363
Exercisable at September 30, 2016 813,666
$ 39.27
3.5 $ 13,265


~~(1)~~	~~Represents the remaining weighted average contractual life in years.~~

~~(2)~~

~~The weighted average grant date fair value per share of options granted during the nine months ended September 30, 2016 was $8.61.~~ The aggregate intrinsic value of options exercised during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016,~~2019, was ~~$16.3~~$2.7 million and ~~$2.7~~$3.3 million, respectively. Cash received from option exercises under the ~~Plan~~Plans for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016 were $20.3~~2019 was $3.8 million and ~~$6.9~~$3.6 million, respectively.

A summary of the Plans' restricted share activity for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016~~2019 is presented below:


	Nine months ended September 30, 2017				Nine months ended September 30, 2016				Six months ended June 30, 2020				Six months ended June 30, 2019
Restricted Shares	Common Shares		Weighted Average Grant-Date Fair Value		Common Shares		Weighted Average Grant-Date Fair Value		Common Shares		Weighted Average Grant-Date Fair Value		Common Shares		Weighted Average Grant-Date Fair Value
Outstanding at January 1	133,425		$	49.94	137,593		$	49.63	144,328		$	60.37	143,263		$	60.80
Granted	14,249		72.53		15,764		44.72		106,139		62.53		11,121		72.01
Vested and issued	(10,695	)	46.03		(10,041	)	43.78		(12,099	)	76.98		(13,401	)	76.29
Forfeited or canceled	(2,551	)	52.26		(598	)	44.26		(4,162	)	79.22		(1,158	)	78.36
Outstanding at September 30	134,428		$	52.60	142,718		$	49.52
Vested, but not issuable at September 30	89,563		$	51.59	88,889		$	51.44
Outstanding at June 30									234,206		$	60.16	139,825		$	60.06
Vested, but not issuable at June 30									92,910		$	52.14	91,148		$	52.08

A summary of the Plans' performance-based stock award activity, based on the target level of the awards, for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016~~2019 is presented below:



	Six months ended June 30, 2020				Six months ended June 30, 2019
Performance-based Stock	Common Shares		Weighted Average Grant-Date Fair Value		Common Shares		Weighted Average Grant-Date Fair Value
Outstanding at January 1	465,515		$	74.37	396,855		$	67.71
Granted	169,642		63.65		174,187		71.58
Added by performance factor at vesting	48,831		72.59		33,950		40.99
Vested and issued	(180,789	)	72.59		(128,238	)	41.00
Expired, canceled or forfeited	(8,666	)	72.74		(6,590	)	72.96
Outstanding at June 30	494,533		$	71.19	470,164		$	74.43
Vested, but deferred at June 30	34,219		$	43.07	33,570		$	42.84

Nine months ended September 30, 2017 Nine months ended September 30, 2016
Performance-based Stock Common
Shares Weighted
Average
Grant-Date
Fair Value Common
Shares Weighted
Average
Grant-Date
Fair Value
Outstanding at January 1 298,180
$ 43.64
276,533
$ 43.01
Granted 145,829
72.60
118,072
41.02
Vested and issued (68,712 ) 46.85
(78,410 ) 37.90
Forfeited (14,164 ) 52.81
(13,229 ) 41.12
Outstanding at September 30 361,133
$ 54.36
302,966
$ 43.64
Vested, but deferred at September 30 13,616
$ 42.66
6,660
$ 37.93

~~The Company issues new shares to satisfy its obligation to issue shares granted pursuant to the Plans.~~

~~(16)~~ (18) Shareholders’ Equity and Earnings Per Share

~~Common Stock Offering~~

~~In June 2016, the Company issued through a public offering a total of 3,000,000 shares of its common stock. Net proceeds to the Company totaled approximately $152.9 million.~~

Series D Preferred Stock

In June 2015, the Company issued and sold 5,000,000 shares of fixed-to-floating non-cumulative perpetual preferred stock, Series D, liquidation preference $25 per share (the “Series D Preferred Stock”) for $125.0 million in a public offering. When, as and if declared, dividends on the Series D Preferred Stock are payable quarterly in arrears at a fixed rate of 6.50% per annum from the original issuance date to, but excluding, July 15, 2025, and from (and including) that date at a floating rate equal to three-month LIBOR plus a spread of 4.06% per annum.

Series CE Preferred Stock

In ~~March 2012,~~May 2020, the Company issued ~~and sold 126,500~~11,500 shares of fixed-rate reset non-cumulative perpetual ~~convertible~~ preferred stock, Series C,E, liquidation preference ~~$1,000~~$25,000 per share (the “Series CE Preferred Stock”) ~~for $126.5~~as part of a $287.5 million public offering of 11,500,000 depositary shares, each representing a 1/1,000th interest in a ~~public offering.~~share of Series E Preferred Stock. When, as and if declared, dividends on the Series CE Preferred Stock ~~were~~are payable quarterly in arrears at a fixed rate of ~~5.00%~~6.875% per ~~annum. The Series C Preferred Stock was convertible into common stock at the option of the holder subject to customary anti-dilution adjustments. Additionally,~~annum starting on ~~and after April~~October 15, 2017, the Company had the right under certain circumstances to cause the Series C Preferred Stock to be converted into common stock if the closing price of the Company’s common stock exceeded a certain amount. In 2016, pursuant to such terms, 30 shares of the Series C Preferred Stock were converted at the option of the respective holders into 729 shares of the Company's common stock. On April 25, 2017, 2,073 shares of the Series C Preferred Stock were converted at the option of the respective holder into 51,244 shares of the Company's common stock, pursuant to the terms of the Series C Preferred Stock. On April 27, 2017, the Company caused a mandatory conversion of its remaining 124,184 shares of Series C Preferred Stock into 3,069,828 shares of the Company's common stock at a conversion rate of 24.72 shares of common stock per share of Series C Preferred Stock. Cash was paid in lieu of fractional shares for an amount considered insignificant.2020.

~~Common Stock Warrant~~

Pursuant to the U.S. Department of the Treasury’s (the “U.S. Treasury”) Capital Purchase Program, on December 19, 2008, the Company issued to the U.S. Treasury a warrant to exercise 1,643,295 warrant shares of Wintrust common stock with a term of 10 years. The exercise price, subject to customary anti-dilution, was $22.66 at September 30, 2017. In February 2011, the U.S. Treasury sold all of its interest in the warrant issued to it in a secondary underwritten public offering. During the first nine months of 2017 294,993 warrant shares were exercised, which resulted in 202,325 shares of common stock issued. At September 30, 2017, all remaining holders of the interest in the warrant were able to exercise 46,859 warrant shares.

Other

At the January ~~2017~~2020 Board of Directors meeting, a quarterly cash dividend of ~~$0.14~~$0.28 per share ($~~0.56~~1.12 on an annualized basis) was declared. It was paid on February ~~23, 2017~~20, 2020 to shareholders of record as of February ~~9, 2017.~~6, 2020. At the April ~~2017~~2020 Board of Directors meeting, a quarterly cash dividend of ~~$0.14~~$0.28 per share ($~~0.56~~1.12 on an annualized basis) was declared. It was paid on May ~~25, 2017~~21, 2020 to shareholders of record as of May 11, 2017. At the July 2017 Board of Directors meeting, a quarterly cash dividend of $0.14 per share ($0.56 on an annualized basis) was declared. It was paid on August 24, 2017 to shareholders of record as of August 10, 2017.7, 2020.

Accumulated Other Comprehensive Income (Loss)

The following tables summarize the components of other comprehensive income (loss), including the related income tax effects, and the related amount reclassified to net income for the periods presented (in thousands).



	Accumulated Unrealized Gains (Losses) on Securities			Accumulated Unrealized (Losses) Gains on Derivative Instruments			Accumulated Foreign Currency Translation Adjustments			Total Accumulated Other Comprehensive Loss
Balance at April 1, 2020	$	81,573		$	(41,512	)	$	(47,664	)	$	(7,603	)
Other comprehensive income during the period, net of tax, before reclassifications	3,718			(6,092		)	5,167			2,793
Amount reclassified from accumulated other comprehensive gain (loss) into net income, net of tax	249			3,998			—			4,247
Amount reclassified from accumulated other comprehensive loss related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(34		)	—			—			(34		)
Net other comprehensive income (loss) during the period, net of tax	$	3,933		$	(2,094	)	$	5,167		$	7,006
Balance at June 30, 2020	$	85,506		$	(43,606	)	$	(42,497	)	$	(597	)

Balance at January 1, 2020	$	14,982		$	(13,141	)	$	(36,519	)	$	(34,678	)
Other comprehensive income (loss) during the period, net of tax, before reclassifications	70,725			(35,262		)	(5,978		)	29,485
Amount reclassified from accumulated other comprehensive gain (loss) into net income, net of tax	(110		)	4,797			—			4,687
Amount reclassified from accumulated other comprehensive loss related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(91		)	—			—			(91		)
Net other comprehensive income (loss) during the period, net of tax	$	70,524		$	(30,465	)	$	(5,978	)	$	34,081
Balance at June 30, 2020	$	85,506		$	(43,606	)	$	(42,497	)	$	(597	)

Accumulated
Unrealized
Gains (Losses)
on Securities

Accumulated
Unrealized
Losses on
Derivative
Instruments

Accumulated
Foreign
Currency
Translation
Adjustments

Total
Accumulated
Other
Comprehensive
Loss
Balance at July 1, 2017 $ (15,022 ) $ 4,959
$ (36,474 ) $ (46,537 )
Other comprehensive income (loss) during the period, net of tax, before reclassifications 653
228
4,206
5,087
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax (24 ) 8
—
(16 )
Amount reclassified from accumulated other comprehensive income related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax (20 ) —
—
(20 )
Net other comprehensive income during the period, net of tax $ 609
$ 236
$ 4,206
$ 5,051
Balance at September 30, 2017 $ (14,413 ) $ 5,195
$ (32,268 ) $ (41,486 )

Balance at January 1, 2017 $ (29,309 ) $ 4,165
$ (40,184 ) $ (65,328 )
Other comprehensive income (loss) during the period, net of tax, before reclassifications 15,815
393
7,916
24,124
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax (19 ) 637
—
618
Amount reclassified from accumulated other comprehensive income related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax $ (900 ) $ —
$ —
$ (900 )
Net other comprehensive income during the period, net of tax $ 14,896
$ 1,030
$ 7,916
$ 23,842
Balance at September 30, 2017 $ (14,413 ) $ 5,195
$ (32,268 ) $ (41,486 )

Balance at July 1, 2016 $ 3,971
$ (2,220 ) $ (36,191 ) $ (34,440 )
Other comprehensive income (loss) during the period, net of tax, before reclassifications 1,532
1,037
(1,644 ) 925
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax (2,005 ) 646
—
(1,359 )
Amount reclassified from accumulated other comprehensive income related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax 2,295
—
—
2,295
Net other comprehensive income (loss) during the period, net of tax $ 1,822
$ 1,683
$ (1,644 ) $ 1,861
Balance at September 30, 2016 $ 5,793
$ (537 ) $ (37,835 ) $ (32,579 )

Balance at January 1, 2016 $ (17,674 ) $ (2,193 ) $ (42,841 ) $ (62,708 )
Other comprehensive income during the period, net of tax, before reclassifications 20,444
66
5,006
25,516
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax (3,684 ) 1,590
—
(2,094 )
Amount reclassified from accumulated other comprehensive income related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax 6,707
—
—
6,707
Net other comprehensive income during the period, net of tax $ 23,467
$ 1,656
$ 5,006
$ 30,129
Balance at September 30, 2016 $ 5,793
$ (537 ) $ (37,835 ) $ (32,579 )



Balance at April 1, 2019	$	(14,451	)	$	4,206		$	(40,099	)	$	(50,344	)
Other comprehensive income (loss) during the period, net of tax, before reclassifications	19,200			(13,257		)	2,505			8,448
Amount reclassified from accumulated other comprehensive loss into net income, net of tax	(383		)	(2,993		)	—			(3,376		)
Amount reclassified from accumulated other comprehensive loss related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(157		)	—			—			(157		)
Net other comprehensive income (loss) during the period, net of tax	$	18,660		$	(16,250	)	$	2,505		$	4,915
Balance at June 30, 2019	$	4,209		$	(12,044	)	$	(37,594	)	$	(45,429	)

Balance at January 1, 2019	$	(42,353	)	$	7,857		$	(42,376	)	$	(76,872	)
Other comprehensive income (loss) during the period, net of tax, before reclassifications	47,156			(14,296		)	4,782			37,642
Amount reclassified from accumulated other comprehensive loss into net income, net of tax	(334		)	(5,605		)	—			(5,939		)
Amount reclassified from accumulated other comprehensive loss related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(260		)	—			—			(260		)
Net other comprehensive income (loss) during the period, net of tax	$	46,562		$	(19,901	)	$	4,782		$	31,443
Balance at June 30, 2019	$	4,209		$	(12,044	)	$	(37,594	)	$	(45,429	)



	Amount Reclassified from Accumulated Other Comprehensive Income for the
Details Regarding the Component of Accumulated Other Comprehensive Income	Three Months Ended						Six Months Ended						Impacted Line on the Consolidated Statements of Income
	June 30,						June 30,
	2020			2019			2020			2019
Accumulated unrealized gains (losses) on securities
Gains (losses) included in net income	$	(341	)	$	523		$	150		$	456		Gains (losses) on investment securities, net
	(341		)	523			150			456			Income before taxes
Tax effect	92			(140		)	(40		)	(122		)	Income tax expense
Net of tax	$	(249	)	$	383		$	110		$	334		Net income

Accumulated unrealized gains (losses) on derivative instruments
Amount reclassified to interest expense on deposits	$	4,363		$	(4,179	)	$	4,922		$	(7,768	)	Interest on deposits
Amount reclassified to interest expense on other borrowings	426			98			718			125			Interest on other borrowings
Amount reclassified to interest expense on junior subordinated debentures	662			—			901			—			Interest on junior subordinated debentures
	(5,451		)	4,081			(6,541		)	7,643			Income before taxes
Tax effect	1,453			(1,088		)	1,744			(2,038		)	Income tax expense
Net of tax	$	(3,998	)	$	2,993		$	(4,797	)	$	5,605		Net income

Amount Reclassified from Accumulated Other Comprehensive Income for the
Details Regarding the Component of Accumulated Other Comprehensive Income Three Months Ended Nine Months Ended Impacted Line on the Consolidated Statements of Income
September 30, September 30,
2017 2016 2017 2016
Accumulated unrealized losses on securities
Gains included in net income $ 39
$ 3,305
$ 31
$ 6,070
Gains on investment securities, net
39
3,305
31
6,070
Income before taxes
Tax effect $ (15 ) $ (1,300 ) $ (12 ) $ (2,386 ) Income tax expense
Net of tax $ 24
$ 2,005
$ 19
$ 3,684
Net income

Accumulated unrealized losses on derivative instruments
Amount reclassified to interest expense on deposits $ (380 ) $ 528
$ (15 ) $ 1,121
Interest on deposits
Amount reclassified to interest expense on junior subordinated debentures 394
537
$ 1,066
$ 1,499
Interest on junior subordinated debentures
(14 ) (1,065 ) (1,051 ) (2,620 ) Income before taxes
Tax effect $ 6
$ 419
$ 414
$ 1,030
Income tax expense
Net of tax $ (8 ) $ (646 ) $ (637 ) $ (1,590 ) Net income

Earnings per Share

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



		Three Months Ended				Six Months Ended
(In thousands, except per share data)		June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Net income		$	21,659	$	81,466	$	84,471	$	170,612
Less: Preferred stock dividends		2,050		2,050		4,100		4,100
Net income applicable to common shares	(A)	$	19,609	$	79,416	$	80,371	$	166,512

Weighted average common shares outstanding	(B)	$	57,567	$	56,662	$	57,593	$	56,596
Effect of dilutive potential common shares
Common stock equivalents		414		699		481		700
Weighted average common shares and effect of dilutive potential common shares	(C)	$	57,981	$	57,361	$	58,074	$	57,296
Net income per common share:
Basic	(A/B)	$	0.34	$	1.40	$	1.40	$	2.94
Diluted	(A/C)	$	0.34	$	1.38	$	1.38	$	2.91

Three Months Ended Nine Months Ended
(In thousands, except per share data) September 30,
2017 September 30,
2016 September 30,
2017 September 30,
2016
Net income $ 65,626
$ 53,115
$ 188,901
$ 152,267
Less: Preferred stock dividends 2,050
3,628
7,728
10,884
Net income applicable to common shares—Basic (A) 63,576
49,487
181,173
141,383
Add: Dividends on convertible preferred stock, if dilutive —
1,578
1,578
4,735
Net income applicable to common shares—Diluted (B) 63,576
51,065
182,751
146,118
Weighted average common shares outstanding (C) 55,796
51,679
54,292
49,763
Effect of dilutive potential common shares
Common stock equivalents 966
938
988
822
Convertible preferred stock, if dilutive —
3,109
1,317
3,109
Total dilutive potential common shares 966
4,047
2,305
3,931
Weighted average common shares and effect of dilutive potential common shares (D) 56,762
55,726
56,597
53,694
Net income per common share:
Basic (A/C) $ 1.14
$ 0.96
$ 3.34
$ 2.84
Diluted (B/D) $ 1.12
$ 0.92
$ 3.23
$ 2.72

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 for a period, net income applicable to common shares is not adjusted by the associated preferred dividends.

~~(17)~~ ~~Subsequent Events~~

On October 16, 2017, the Company entered in agreements with the FDIC that terminate all existing loss share agreements with the FDIC. The remaining loss share agreements were related to the Company’s acquisition of assets and assumption of liabilities of eight failed banks through FDIC assisted transactions in 2010, 2011 and 2012. Under terms of the agreements, the Company made a net payment of $15.2 million to the FDIC as consideration for the early termination of the loss share agreements. The Company recorded a pre-tax gain of approximately $0.4 million in the fourth quarter of 2017 to write off the remaining loss share asset, relieve the claw-back liability and recognize the payment to the FDIC.

ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition as of ~~September~~June 30, ~~2017~~2020 compared with December 31, ~~2016~~2019 and ~~September~~June 30, ~~2016,~~2019, and the results of operations for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016,~~2019, should be read in conjunction with the unaudited consolidated financial statements and notes contained in this report and the risk factors discussed herein and under Item 1A of the Company’s ~~2016~~ Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2019 ("2019 Form 10-K"). This discussion contains forward-looking statements that involve risks and uncertainties and, as such, future results could differ significantly from management’s current expectations. See the last section of this discussion for further information on forward-looking statements.

Introduction

Wintrust is a financial holding company that provides traditional community banking services, primarily in the Chicago metropolitan area, ~~and~~ southern Wisconsin and northwest Indiana, and operates other financing businesses on a national basis and in Canada through several non-bank ~~subsidiaries.~~business units. Additionally, Wintrust offers a full array of wealth management services primarily to customers in the Chicago metropolitan area, southern Wisconsin and ~~southern Wisconsin.~~northwest Indiana.

Overview

Impact of COVID-19

In March 2020, the outbreak of COVID-19 was recognized as a global pandemic by the World Health Organization, resulting in unprecedented uncertainty and volatility in world-wide financial markets. Governments' actions calling for shelter in place and social distancing have led to rapid changes in business revenues, increased unemployment, and have impacted consumer activity; all of which have impacted and may continue to impact the Company's current and future results.

The Company activated its pandemic response plan in early March, as well as applicable elements of its business continuity plan. In order to protect the health of our customers and employees, and in accordance with applicable government directives, we modified certain of our business protocols to direct employees to work from home unless their role required them to be on site, in which case we have implemented enhanced safety measures including social distancing, enhanced cleaning and sanitization, and certain personal protective equipment. With the phased reopening of certain state and municipal areas, the Company has developed a comprehensive plan that permits certain remote employees to return to their respective workplaces, where enhanced safety measures also have been implemented. At present, however, the majority of the Company’s workforce continues to work remotely on a nearly daily basis.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted. The CARES Act includes appropriations and other measures designed to address the impact of the COVID-19 pandemic, including the Paycheck Protection Program ("PPP"), which is designed to aid eligible small and medium-sized businesses through federally-guaranteed loans distributed through certain banks, under the administration of the Small Business Administration ("SBA"). As of June 30, 2020, the Company secured authorization from the SBA and funded over 11,000 PPP loans with a carrying balance of approximately $3.3 billion. PPP loans are forgivable under certain circumstances, including the borrower’s use of certain loan proceeds to fund employee payroll during a specific period (i.e. eight weeks, 24 weeks) following disbursement of the borrower’s PPP loan. The SBA continues to issue guidance as to the administration of the loan forgiveness and guaranty process. The Company generated net fees of $91.0 million to be recognized over the life of the PPP loan adjusted for estimated prepayments.

All of our three primary business segments, community banking, specialty finance and wealth management, have been uniquely impacted and will likely continue to be impacted by the COVID-19 pandemic, requiring the implementation of certain responses as circumstances evolve. As non-exclusive examples of such impacts, our community banking business, including our mortgage business, has received borrower requests for temporary payment relief including payment deferrals. As of June 30, 2020, loans totaling approximately $1.7 billion were modified as a result of COVID-19 disruption to our borrowers. Our insurance premium finance business is impacted by certain state legislation prohibiting canceling of insurance policies for designated periods. Our wealth management business is impacted by factors including increased stock market volatility.

Given the continued uncertainty regarding future economic conditions, the Company continues to take actions to help ensure that it has adequate liquidity and capital to manage through the COVID-19 pandemic, including the temporary suspension of our common stock repurchase program and the issuance of fixed-rate reset non-cumulative perpetual preferred stock, Series E, liquidation preference $25,000 per share (the “Series E Preferred Stock”) as part of a public offering of depositary shares, each

~~Overview~~representing a 1/1,000^th interest in a share of Series E Preferred Stock (the “Depositary Shares”). We believe the Company currently has adequate liquidity and capital to effectively manage through the COVID-19 pandemic. However, we will continue to prudently evaluate and expand liquidity sources, including the possible utilization of the PPP liquidity facility, if necessary.

~~Third~~We continue to monitor the impact of COVID-19 closely; however, the extent to which the COVID-19 pandemic will impact our operations and financial conditions remains highly uncertain. Please also refer to Part II, Item 1A, “Risk Factors” of this Form 10-Q for additional information.

Second Quarter Highlights

The Company recorded net income of ~~$65.6~~$21.7 million for the ~~third~~second quarter of ~~2017~~2020 compared to ~~$53.1~~$81.5 million in the ~~third~~second quarter of ~~2016.~~2019. The results for the ~~third~~second quarter of ~~2017~~2020 demonstrate continued momentum on our operating strengths including strong loan and deposit growth driven by the Company's participation in PPP, and ~~stable credit quality metrics, partially~~increased revenue from mortgage banking services, offset by ~~a reduction in mortgage banking revenue due to lower origination volumes and a $2.2 million negative fair value adjustment~~increased provision for credit losses primarily related to ~~MSRs. Combined with~~ the ~~noted continued loan growth,~~implementation of CECL and the ~~improvement~~economic conditions created by the COVID-19 pandemic. Net interest income decreased in the current period as a result of a decrease in net interest margin ~~during~~partially mitigated by continued loan growth in the ~~third~~second quarter of ~~2017 resulted in higher net interest income in~~2020 compared to the ~~current period.~~same period of 2019.

The Company increased its loan portfolio ~~excluding covered loans and mortgage loans held-for-sale,~~ from ~~$19.1~~$25.3 billion at ~~September~~June 30, ~~2016~~2019 and ~~$19.7~~$26.8 billion at December 31, ~~2016~~2019 to ~~$20.9~~$31.4 billion at ~~September~~June 30, ~~2017.~~2020. The increase in the current ~~quarter~~period compared to the prior ~~quarters~~periods was primarily a result of the Company’s participation in PPP lending as well as growth in ~~the~~ commercial ~~commercial real estate~~premium finance receivables and life insurance premium finance receivables portfolios. ~~The Company is focused on making new loans, including in the commercial and commercial real estate sector, where opportunities that meet our underwriting standards exist.~~ For more information regarding changes in the Company’s loan portfolio, see ~~“Financial~~Financial Condition – Interest Earning ~~Assets”~~Assets and Note 6 ~~“Loans”~~- Loans of the Consolidated Financial Statements in Item 1 of this report.

The Company recorded net interest income of ~~$216.0~~$263.1 million in the ~~third~~second quarter of ~~2017~~2020 compared to ~~$184.6~~$266.2 million in the ~~third~~second quarter of ~~2016.~~2019. The ~~higher level of~~decrease in net interest income recorded in the ~~third~~second quarter of ~~2017~~2020 compared to the ~~third~~second quarter of ~~2016~~2019 resulted primarily from a ~~$2.1~~lower net interest margin of 2.73% (2.74% on a fully taxable-equivalent basis, non-GAAP) in the second quarter of 2020 compared to 3.62% (3.64% on a fully taxable-equivalent basis, non-GAAP) in the second quarter of 2019. The reduction in net interest margin was partially offset by a $5.8 billion increase in average loans, ~~excluding covered loans,~~ and a ~~substantial improvement in the net interest margin. This was partially offset by an~~$3.0 billion increase in ~~the~~ average ~~balance and cost of interest-bearing liabilities~~liquidity management assets (see "Net Interest Income" for further detail).

Non-interest income totaled ~~$79.7~~$162.0 million in the ~~third~~second quarter of ~~2017~~2020 compared to ~~$86.6~~$98.2 million in the ~~third~~second quarter of ~~2016. Decreases in~~2019. This increase was primarily the result of higher mortgage banking revenue lower fees from covered call options, lower fees from interest rate swaps and lower gains realized on sales of investment securities were partially offset by increased wealth management revenue, higher operating lease income and an increase in service charges on deposits (see “Non-Interest Income” for further detail).

Non-interest expense totaled ~~$183.6~~$259.4 million in the ~~third~~second quarter of ~~2017,~~2020, increasing ~~$7.0~~$29.8 million, or 4%13%, compared to the ~~third~~second quarter of ~~2016.~~2019. The increase compared to the ~~third~~second quarter of ~~2016~~2019 was primarily attributable to ~~higher salary and employee benefit costs caused by the~~ addition of employees from acquisitions, ~~and higher~~increased staffing ~~levels~~ as the Company grows and higher commissions and incentive compensation due to increased ~~operating lease equipment depreciation, higher professional fees and an increase in advertising and marketing expenses~~origination volume associated with the Company's mortgage business (see “Non-Interest Expense” for further detail).

Management considers the maintenance of adequate liquidity to be important to the management of risk. During the ~~third~~second quarter of ~~2017,~~2020, the Company continued its practice of maintaining appropriate funding capacity to provide the Company with adequate liquidity for its ongoing operations. In this regard, the Company benefited from its strong deposit base, a liquid short-term investment portfolio and its access to funding from a variety of external funding sources. At ~~September~~June 30, ~~2017,~~2020, the Company had approximately ~~$1.5~~$4.4 billion in overnight liquid funds and interest-bearing deposits with banks. Total cash inflows by the Company during the first six months of 2020 were offset by $220.8 million in cash collateral posted to unaffiliated derivative counterparties in which the Company held a net liability position in such derivative transactions as well as the origination of mortgage loans pending the ultimate sale of such loans into the secondary market following June 30, 2020.

RESULTS OF OPERATIONS

Earnings Summary

The Company’s key operating measures and growth rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2020, as compared to the same ~~periods~~period last year, are shown below:


	Three months ended								Three months ended
(Dollars in thousands, except per share data)	September 30, 2017			September 30, 2016			Percentage (%) or Basis Point (bp) Change		June 30, 2020			June 30, 2019			Percentage (%) or Basis Point (bp) Change
Net income	$	65,626		$	53,115		24	%	$	21,659		$	81,466		(73	)%
Pre-tax income, excluding provision for credit losses (non-GAAP) ⁽²⁾									165,756			134,753			23
Pre-tax income, excluding provision for credit losses and MSR valuation adjustments (non-GAAP) ⁽²⁾									173,149			138,138			25
Net income per common share—Diluted	1.12			0.92			22		0.34			1.38			(75	)
Net revenue ⁽¹⁾	295,719			271,240			9		425,124			364,360			17
Net interest income	215,988			184,636			17		263,131			266,202			(1	)
Net interest margin	3.43		%	3.21		%	22 bp		2.73		%	3.62		%	(89) bp
Net interest margin - fully taxable equivalent (non-GAAP) ⁽²⁾	3.46			3.24			22
Net interest margin - fully taxable-equivalent (non-GAAP) ⁽²⁾									2.74			3.64			(90	)
Net overhead ratio ⁽³⁾	1.53			1.44			9		0.93			1.64			(71	)
Return on average assets	0.96			0.85			11		0.21			1.02			(81	)
Return on average common equity	9.15			8.20			95		2.17			9.68			(751	)
Return on average tangible common equity (non-GAAP) ⁽²⁾	11.39			10.55			84		2.95			12.28			(933	)


	Nine months ended								Six months ended
(Dollars in thousands, except per share data)	September 30, 2017			September 30, 2016			Percentage (%) or Basis Point (bp) Change		June 30, 2020			June 30, 2019			Percentage (%) or Basis Point (bp) Change
Net income	$	188,901		$	152,267		24	%	$	84,471		$	170,612		(50	)%
Pre-tax income, excluding provision for credit losses (non-GAAP) ⁽²⁾									305,800			264,022			16
Pre-tax income, excluding provision for credit losses and MSR valuation adjustments (non-GAAP)⁽²⁾									323,590			276,151			17
Net income per common share—Diluted	3.23			2.72			19		1.38			2.91			(53	)
Net revenue ⁽¹⁾	851,445			771,570			10		799,809			708,003			13
Net interest income	612,977			531,415			15		524,574			528,188			(1	)
Net interest margin	3.40		%	3.25		%	15 bp		2.91		%	3.66		%	(75) bp
Net interest margin - fully taxable equivalent (non-GAAP) ⁽²⁾	3.43			3.27			16		2.93		%	3.68		%	(75	)
Net overhead ratio ⁽³⁾	1.52			1.46			6		1.12		%	1.68		%	(56	)
Return on average assets	0.97			0.85			12		0.43		%	1.09		%	(66	)
Return on average common equity	9.21			8.39			82		4.48		%	10.37		%	(589	)
Return on average tangible common equity (non-GAAP) ⁽²⁾	11.62			10.98			64		5.81		%	13.19		%	(738	)
At end of period
Total assets	$	27,358,162		$	25,321,759		8	%	$	43,540,017		$	33,641,769		29	%
Total loans, excluding loans held-for-sale, excluding covered loans	20,912,781			19,101,261			9
Total loans, including loans held-for-sale, excluding covered loans	21,283,063			19,660,895			8
Total loans, excluding loans held-for-sale									31,402,903			25,304,659			24
Total loans, including loans held-for-sale									32,236,066			25,699,634			25
Total deposits	22,895,063			21,147,655			8		35,651,874			27,518,815			30
Total shareholders’ equity	2,908,925			2,674,474			9		3,990,218			3,446,950			16
Book value per common share ⁽²⁾	49.86			46.86			6		62.14			58.62			6
Tangible common book value per share ⁽²⁾	40.53			37.06			9		50.23			47.48			6
Market price per common share	78.31			55.57			41		43.62			73.16			(40	)
Excluding covered loans:
Allowance for credit losses to total loans ⁽⁴⁾	0.64		%	0.62		%	2 bp
Non-performing loans to total loans	0.37			0.44			(7	)
Allowance for loan and unfunded lending-related commitment losses to total loans									1.19		%	0.64		%	55 bp


(1)	Net revenue is net interest income plus non-interest income.


(2)	See following section titled, “Supplementary 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 allowance for credit losses includes both the allowance for loan losses and the allowance for lending-related commitments.~~

Certain returns, yields, performance ratios, and quarterly growth rates are “annualized” ~~in this presentation and~~ throughout this report 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, balance sheet growth rates are most often expressed in terms of an annual rate. As such, 5% growth during a quarter would represent an annualized growth rate of 20%.

SUPPLEMENTAL FINANCIAL MEASURES/RATIOS

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

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

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 is shown below:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,			September 30,			September 30,			September 30,			June 30,			June 30,			June 30,			June 30,
(Dollars and shares in thousands)	2017			2016			2017			2016			2020			2019			2020			2019
Calculation of Net Interest Margin and Efficiency Ratio
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio
(A) Interest Income (GAAP)	$	247,688		$	208,149		$	694,628		$	597,444		$	329,816		$	346,814		$	673,883		$	680,784
Taxable-equivalent adjustment:
- Loans	1,033			584			2,654			1,616			576			1,031			1,436			2,065
- Liquidity Management Assets	921			963			2,694			2,815			538			568			1,089			1,133
- Other Earning Assets	5			9			12			23			3			1			5			3
(B) Interest Income - FTE	$	249,647		$	209,705		$	699,988		$	601,898
(B) Interest Income (non-GAAP)													$	330,933		$	348,414		$	676,413		$	683,985
(C) Interest Expense (GAAP)	31,700			23,513			81,651			66,029			66,685			80,612			149,309			152,596
(D) Net Interest Income - FTE (B minus C)	$	217,947		$	186,192		$	618,337		$	535,869
(E) Net Interest Income (GAAP) (A minus C)	$	215,988		$	184,636		$	612,977		$	531,415
Net interest margin (GAAP-derived)	3.43		%	3.21		%	3.40		%	3.25		%
Net interest margin - FTE	3.46		%	3.24		%	3.43		%	3.27		%
(D) Net Interest Income (GAAP) (A minus C)													263,131			266,202			524,574			528,188
(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C)													264,248			267,802			527,104			531,389
Net interest margin (GAAP)													2.73		%	3.62		%	2.91		%	3.66		%
Net interest margin, fully taxable-equivalent (non-GAAP)													2.74			3.64			2.93			3.68
(F) Non-interest income	$	79,731		$	86,604		$	238,468		$	240,155		$	161,993		$	98,158		$	275,235		$	179,815
(G) Gains on investment securities, net	39			3,305			31			6,070
Gains (losses) on investment securities, net													808			864			(3,551		)	2,228
(H) Non-interest expense	183,575			176,615			535,237			501,314			259,368			229,607			494,009			443,981
Efficiency ratio (H/(E+F-G))	62.09		%	65.92		%	62.86		%	65.49		%
Efficiency ratio - FTE (H/(D+F-G))	61.68		%	65.54		%	62.47		%	65.11		%
Calculation of Tangible Common Equity ratio (at period end)
Efficiency ratio (H/(D+F-G))													61.13		%	63.17		%	61.49		%	62.91		%
Efficiency ratio (non-GAAP) (H/(E+F-G))													60.97		%	62.89		%	61.30		%	62.62		%
Reconciliation of Non-GAAP Tangible Common Equity ratio
Total shareholders’ equity	$	2,908,925		$	2,674,474								$	3,990,218		$	3,446,950
(I) Less: Convertible preferred stock	—			(126,257		)
Less: Non-convertible preferred stock	(125,000		)	(125,000		)							(412,500		)	(125,000		)
Less: Intangible assets	(520,672		)	(506,674		)							(685,581		)	(631,499		)
(J) Total tangible common shareholders’ equity	$	2,263,253		$	1,916,543
Total assets	$	27,358,162		$	25,321,759
(I) Total tangible common shareholders’ equity													$	2,892,137		$	2,690,451
(J) Total assets													$	43,540,017		$	33,641,769
Less: Intangible assets	(520,672		)	(506,674		)							(685,581		)	(631,499		)
(K) Total tangible assets	$	26,837,490		$	24,815,085								$	42,854,436		$	33,010,270
Tangible common equity ratio (J/K)	8.4		%	7.7		%
Tangible common equity ratio, assuming full conversion of convertible preferred stock ((J-I)/K)	8.4		%	8.2		%
Calculation of book value per share
Common equity to assets ratio (GAAP) (L/J)													8.2		%	9.9		%
Tangible common equity ratio (non-GAAP) (I/K)													6.7		%	8.2		%
Reconciliation of tangible book value per share
Total shareholders’ equity	$	2,908,925		$	2,674,474								$	3,990,218		$	3,446,950
Less: Preferred stock	(125,000		)	(251,257		)							(412,500		)	(125,000		)
(L) Total common equity	$	2,783,925		$	2,423,217								$	3,577,718		$	3,321,950
(M) Actual common shares outstanding	55,838			51,715									57,574			56,668
Book value per common share (L/M)	$	49.86		$	46.86								$	62.14		$	58.62
Tangible common book value per share (J/M)	$	40.53		$	37.06
Tangible common book value per share (non-GAAP) (I/M)													$	50.23		$	47.48


Calculation of return on average common equity
Reconciliation of non-GAAP return on average tangible common equity
(N) Net income applicable to common shares	63,576		49,487		181,173		141,383		$	19,609		$	79,416		$	80,371		$	166,512
Add: After-tax intangible asset amortization	672		677		2,169		2,270
(O) Tangible net income applicable to common shares	64,248		50,164		183,342		143,653
Add: Intangible asset amortization									2,820			2,957			5,683			5,899
Less: Tax effect of intangible asset amortization									(832		)	(771		)	(1,608		)	(1,502		)
After-tax intangible asset amortization									1,988			2,186			4,075			4,397
(O) Tangible net income applicable to common shares (non-GAAP)									21,597			81,602			84,446			170,909
Total average shareholders' equity	2,882,682		2,651,684		2,808,072		2,502,940		3,908,846			3,414,340			3,809,508			3,362,000
Less: Average preferred stock	(125,000	)	(251,257	)	(178,632	)	(251,259	)	(273,489		)	(125,000		)	(199,245		)	(125,000		)
(P) Total average common shareholders' equity	2,757,682		2,400,427		2,629,440		2,251,681		3,635,357			3,289,340			3,610,263			3,237,000
Less: Average intangible assets	(520,333	)	(508,812	)	(520,006	)	(503,966	)	(686,526		)	(624,794		)	(688,652		)	(623,524		)
(Q) Total average tangible common shareholders’ equity	2,237,349		1,891,615		2,109,434		1,747,715
(Q) Total average tangible common shareholders’ equity (non-GAAP)									2,948,831			2,664,546			2,921,611			2,613,476
Return on average common equity, annualized (N/P)	9.15	%	8.20	%	9.21	%	8.39	%	2.17		%	9.68		%	4.48		%	10.37		%
Return on average tangible common equity, annualized (O/Q)	11.39	%	10.55	%	11.62	%	10.98	%
Return on average tangible common equity, annualized (non-GAAP) (O/Q)									2.95		%	12.28		%	5.81		%	13.19		%



Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income and Pre-Tax, Pre-Provision, Pre-MSR Adjustment Income:
Income before taxes	$	30,703		$	110,173		$	117,786		$	228,818
Add: Provision for credit losses	135,053			24,580			188,014			35,204
Pre-tax income, excluding provision for credit losses (non-GAAP)	$	165,756		$	134,753		$	305,800		$	264,022
Less: MSR valuation adjustment, net of (loss)/gain on derivative contract held as an economic hedge	(7,393		)	(3,385		)	(17,790		)	(12,129		)
Pre-tax income, excluding provision for credit losses and MSR valuation adjustments (non-GAAP)	$	173,149		$	138,138		$	323,590		$	276,151

Critical Accounting Policies

The Company’s Consolidated Financial Statements are prepared in accordance with GAAP in the United States and prevailing practices of the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. Certain policies and accounting principles inherently have a greater reliance on the use of estimates, assumptions and judgments, and as such have a greater possibility that changes in those estimates and assumptions could produce financial results that are materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event, are based on information available as of the date of the financial statements; accordingly, as information changes, the financial statements could reflect different estimates and assumptions. Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management currently views critical accounting policies to include the determination of the allowance for ~~loan~~credit losses, including the allowance for ~~covered~~ loan losses and the allowance for losses on lending-related commitments, loans acquired with evidence of credit quality deterioration since origination, estimations of fair value, the valuations required for impairment testing of goodwill, the valuation and accounting for derivative instruments and income taxes as the accounting areas that require the most subjective and complex judgments, and as such could be most subject to revision as new information becomes available. For a more detailed discussion on these critical accounting policies, see “Summary of Critical Accounting Policies” beginning on page 5553 of the Company’s ~~2016~~2019 Form 10-K.

The COVID-19 pandemic, specifically the uncertainty related to the ultimate magnitude of impact on the economy and banking industry, is expected to impact many of the estimates, assumptions, and judgments noted above that are used by management. This could result in volatility in the related accounting estimates, which will directly impact the Company's financial results. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation -Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

Net Income

Net income for the quarter ended ~~September~~June 30, ~~2017~~2020 totaled ~~$65.6~~$21.7 million, ~~an increase~~a decrease of ~~$12.5~~$59.8 million, or ~~24%~~73%, compared to the ~~third~~ quarter ~~of 2016.~~ended June 30, 2019. On a per share basis, net income for the ~~third~~second quarter of ~~2017~~2020 totaled ~~$1.12~~$0.34 per diluted common share compared to ~~$0.92 in~~$1.38 for the ~~third~~second quarter of ~~2016.~~2019.

The most significant factors impacting net income for the ~~third~~second quarter of ~~2017~~2020 as compared to the same period in the prior year include an increase in ~~net interest income~~the provision for credit losses as a result of ~~growth in earning assets~~the adoption of CECL and ~~an improvement in net interest margin,~~economic conditions created by the COVID–19 pandemic as well as increased ~~operating lease income, an increase in wealth management revenue~~salaries and ~~a decrease in other expenses due to a charge related to legal disputes recognized during the third quarter of 2016. These improvements were~~employee benefits expense, partially offset by ~~a decrease in~~increased mortgage banking ~~revenue~~revenue. See "Net Interest Income", "Non-interest Income", "Non-interest Expense" and ~~fees from covered call options, lower gains on investment securities~~"Loan Portfolio and an increase in non-interest expense primarily attributable to higher salary and employee benefit costs caused by higher staffing levels as the Company grows, increased operating lease equipment depreciation and an increase in professional fees and marketing expenses.Asset Quality" for further detail.

Net Interest Income

The primary source of the Company’s revenue is net interest income. Net interest income is the difference between interest income and fees on earnings assets, such as loans and securities, and interest expense on the liabilities to fund those assets, including interest bearing deposits and other borrowings. The amount of net interest income is affected by both changes in the level of interest rates, and the amount and composition of earning assets and interest bearing liabilities.

Quarter Ended ~~September~~June 30, ~~2017~~2020 compared to the Quarters Ended March 31, 2020 and June 30, ~~2017 and September 30, 2016~~2019

The following table presents a summary of the Company’s average balances, net interest income and related net interest margins, including a calculation on a fully taxable equivalent basis, for the ~~third~~second quarter of ~~2017~~2020 as compared to the first quarter of 2020 (sequential quarters) and second quarter of ~~2017 (sequential quarters) and third quarter of 2016~~2019 (linked quarters):


	Average Balance for three months ended,									Interest for three months ended,									Yield/Rate for three months ended,						Average Balance for three months ended,									Interest for three months ended,									Yield/Rate for three months ended,
(Dollars in thousands)	September 30, 2017			June 30, 2017			September 30, 2016			September 30, 2017			June 30, 2017			September 30, 2016			September 30, 2017		June 30, 2017		September 30, 2016		Jun 30, 2020			Mar 31, 2020			Jun 30, 2019			Jun 30, 2020			Mar 31, 2020			Jun 30, 2019			Jun 30, 2020		Mar 31, 2020		Jun 30, 2019
Interest-bearing deposits with banks and cash equivalents⁽¹⁾	1,003,572			722,349			851,385			3,272			1,635			1,157			1.29	%	0.91	%	0.54	%	$	3,240,167		$	1,418,809		$	893,332		$	1,326		$	4,854		$	5,206		0.16	%	1.38	%	2.34	%
Investment securities(2)	2,652,119			2,572,619			2,692,691			16,979			16,390			16,459			2.54		2.55		2.43		4,309,471			4,780,709			3,653,580			27,643			33,018			28,290			2.58		2.78		3.11
FHLB and FRB stock	81,928			99,438			127,501			1,080			1,153			1,094			5.23		4.66		3.41		135,360			114,829			105,491			1,765			1,577			1,439			5.24		5.52		5.47
Liquidity management assets⁽²⁾⁽⁷⁾	$	3,737,619		$	3,394,406		$	3,671,577		$	21,331		$	19,178		$	18,710		2.26	%	2.27	%	2.03	%
Liquidity management assets⁽³⁾⁽⁸⁾																									$	7,684,998		$	6,314,347		$	4,652,403		$	30,734		$	39,449		$	34,935		1.61	%	2.51	%	3.01	%
Other earning assets⁽⁷⁾⁽⁸⁾	25,844			25,749			29,875			163			162			222			2.49		2.53		2.96		16,917			19,166			15,719			113			167			184			2.71		3.50		4.68
Loans, net of unearned income^(2)(4)(7)	21,195,222			20,599,718			19,071,621			227,553			212,892			189,637			4.26		4.15		3.96
Covered loans	48,415			51,823			101,570			600			648			1,136			4.91		5.01		4.45
Mortgage loans held-for-sale																									705,702			403,262			281,732			4,764			3,165			3,104			2.72		3.16		4.42
Loans, net of unearned income^(3)(5)(8)																									30,336,626			26,936,728			24,553,263			295,322			302,699			310,191			3.92		4.52		5.07
Total earning assets⁽⁷⁾⁽⁸⁾	$	25,007,100		$	24,071,696		$	22,874,643		$	249,647		$	232,880		$	209,705		3.96	%	3.88	%	3.65	%	$	38,744,243		$	33,673,503		$	29,503,117		$	330,933		$	345,480		$	348,414		3.44	%	4.13	%	4.74	%
Allowance for loan and covered loan losses	(135,519		)	(132,053		)	(121,156		)
Allowance for loan losses																									(222,485		)	(176,291		)	(164,231		)
Cash and due from banks	242,186			242,495			240,239																		352,423			321,982			273,679
Other assets	1,898,528			1,868,811			1,885,526																		3,168,548			2,806,296			2,443,204
Total assets	$	27,012,295		$	26,050,949		$	24,879,252																	$	42,042,729		$	36,625,490		$	32,055,769

NOW and interest bearing demand deposits																									$	3,323,124		$	3,113,733		$	2,878,021		$	1,561		$	3,665		$	5,553		0.19	%	0.47	%	0.77	%
Wealth management deposits																									4,380,996			2,838,719			2,605,690			7,244			6,935			7,091			0.67		0.98		1.09
Money market accounts																									8,727,966			7,990,775			6,095,285			13,140			22,363			21,451			0.61		1.13		1.41
Savings accounts																									3,394,480			3,189,835			2,752,828			3,840			5,790			4,959			0.45		0.73		0.72
Time deposits																									5,104,701			5,526,407			5,322,384			24,272			28,682			27,970			1.91		2.09		2.11
Interest-bearing deposits	$	16,291,891		$	15,621,674		$	15,117,102		$	23,655		$	18,471		$	15,621		0.58	%	0.47	%	0.41	%	$	24,931,267		$	22,659,469		$	19,654,208		$	50,057		$	67,435		$	67,024		0.81	%	1.20	%	1.37	%
FHLB advances	324,996			689,600			459,198			2,151			2,933			2,577			2.63		1.71		2.23
Federal Home Loan Bank advances																									1,214,375			951,613			869,812			4,934			3,360			4,193			1.63		1.42		1.93
Other borrowings	268,850			240,547			249,307			1,482			1,149			1,137			2.19		1.92		1.81		493,350			469,577			419,064			3,436			3,546			3,525			2.80		3.04		3.37
Subordinated notes	139,035			139,007			138,925			1,772			1,786			1,778			5.10		5.14		5.12		436,226			436,119			220,771			5,506			5,472			2,806			5.05		5.02		5.08
Junior subordinated notes	253,566			253,566			253,566			2,640			2,433			2,400			4.07		3.80		3.70
Junior subordinated debentures																									253,566			253,566			253,566			2,752			2,811			3,064			4.29		4.39		4.78
Total interest-bearing liabilities	$	17,278,338		$	16,944,394		$	16,218,098		$	31,700		$	26,772		$	23,513		0.73	%	0.63	%	0.58	%	$	27,328,784		$	24,770,344		$	21,417,421		$	66,685		$	82,624		$	80,612		0.98	%	1.34	%	1.51	%
Non-interest bearing deposits	6,419,326			5,904,679			5,566,983																		9,607,528			7,235,177			6,487,627
Other liabilities	431,949			400,971			442,487																		1,197,571			909,800			736,381
Equity	2,882,682			2,800,905			2,651,684																		3,908,846			3,710,169			3,414,340
Total liabilities and shareholders’ equity	$	27,012,295		$	26,050,949		$	24,879,252																	$	42,042,729		$	36,625,490		$	32,055,769
Interest rate spread⁽⁵⁾⁽⁷⁾																			3.23	%	3.25	%	3.07	%
Interest rate spread⁽⁶⁾⁽⁸⁾																																											2.46	%	2.79	%	3.23	%
Less: Fully tax-equivalent adjustment										(1,959		)	(1,699		)	(1,556		)	(0.03	)	(0.02	)	(0.03	)										(1,117		)	(1,413		)	(1,600		)	(0.01	)	(0.02	)	(0.02	)
Net free funds/contribution⁽⁶⁾	$	7,728,762		$	7,127,302		$	6,656,545											0.23		0.18		0.17
Net interest income/ margin⁽⁷⁾ (GAAP)										$	215,988		$	204,409		$	184,636		3.43	%	3.41	%	3.21	%
Fully tax-equivalent adjustment										1,959			$	1,699		$	1,556		0.03		0.02		0.03
Net interest income/ margin - FTE ⁽⁷⁾										$	217,947		$	206,108		$	186,192		3.46	%	3.43	%	3.24	%
Net free funds/contribution⁽⁷⁾																									$	11,415,459		$	8,903,159		$	8,085,696											0.28		0.35		0.41
Net interest income/ margin(GAAP)⁽⁸⁾																																		$	263,131		$	261,443		$	266,202		2.73	%	3.12	%	3.62	%
Fully taxable-equivalent adjustment																																		1,117			1,413			1,600			0.01		0.02		0.02
Net interest income/margin, fully taxable-equivalent (non-GAAP)⁽⁸⁾																																		$	264,248		$	262,856		$	267,802		2.74	%	3.14	%	3.64	%


(1)	Includes interest-bearing deposits ~~from~~with banks, federal funds sold and securities purchased under resale agreements.


(2)	Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.

(3)

Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on athe marginal federal corporate tax rate in effect as of ~~35%.~~the applicable period. The total adjustments for the three months ended ~~September 30, 2017~~, June 30, ~~2017~~2020, March 31, 2020 and ~~September~~June 30, ~~2016~~2019 were ~~$2.0~~$1.1 million, ~~$1.7~~$1.4 millionand $1.6 million, respectively.


~~(3)~~(4)	Other earning assets include brokerage customer receivables and trading account securities.


~~(4)~~(5)	Loans, net of unearned income, include ~~loans held-for-sale and~~ non-accrual loans.


~~(5)~~(6)	Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.


~~(6)~~(7)	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)~~(8)	See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio.

For the ~~third~~second quarter of ~~2017,~~2020, net interest income totaled ~~$216.0~~$263.1 million, an increase of ~~$11.6~~$1.7 million as compared to the first quarter of 2020, and a decrease of $3.1 million as compared to the second quarter of ~~2017 and an increase of $31.4 million as compared to the third quarter of 2016.~~2019. Net interest margin was ~~3.43% (3.46%~~2.73% (2.74% on a fully ~~tax-equivalent basis) during the third quarter of 2017 compared to 3.41% (3.43% on a fully tax-equivalent basis)~~taxable-equivalent basis, non-GAAP) during the second quarter of ~~2017 and 3.21% (3.24%~~2020 compared to 3.12% (3.14% on a fully ~~tax-equivalent basis)~~taxable-equivalent basis, non-GAAP) during the ~~third~~first quarter of ~~2016.~~2020, and 3.62% (3.64% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2019.

~~Nine~~Six months ended~~September~~June 30, ~~2017~~2020 compared to ~~nine~~six months ended ~~September~~June 30, ~~2016~~2019

The following table presents a summary of the Company’s ~~average balances,~~ net interest income and related net interest ~~margins,~~margin, including a calculation on a fully taxable equivalent basis, for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016:~~

2019:


	Average Balance for nine months ended,						Interest for nine months ended,						Yield/Rate for nine months ended,				Average Balance for six months ended,							Interest for six months ended,						Yield/Rate for six months ended,
(Dollars in thousands)	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			September 30, 2017		September 30, 2016		June 30, 2020				June 30, 2019			June 30, 2020			June 30, 2019			June 30, 2020		June 30, 2019
Interest-bearing deposits with banks and cash equivalents(1)	836,373			688,208			6,531			2,699			1.04	%	0.52	%
Interest-bearing deposits with banks and cash equivalents⁽¹⁾																	$	2,329,488		��	$	895,497		$	6,180		$	10,506		0.53	%	2.37	%
Investment securities(2)	2,541,061			2,656,969			47,849			51,898			2.52		2.61		4,545,090				3,642,142			60,661			56,811			2.68		3.15
FHLB and FRB stock	91,774			117,198			3,303			3,143			4.81		3.58		125,094				100,187			3,342			2,794			5.37		5.62
Liquidity management assets⁽⁷⁾⁽⁸⁾	$	3,469,208		$	3,462,375		$	57,683		$	57,740		2.22	%	2.23	%	$	6,999,672			$	4,637,826		$	70,183		$	70,111		2.02	%	3.05	%
Other earning assets⁽⁷⁾⁽⁸⁾	25,612			29,457			508			696			2.65		3.16		18,041				14,661			280			349			3.13		4.79
Loans, net of unearned income^(2)(4)(7)	20,577,507			18,264,545			639,632			538,833			4.16		3.94
Covered loans	52,339			117,427			2,165			4,629			5.53		5.27
Mortgage loans held-for-sale																	554,482				235,220			7,929			5,313			2.88		4.55
Loans, net of unearned income^(3)(5)(8)																	28,636,678				24,218,946			598,021			608,212			4.20		5.06
Total earning assets⁽⁷⁾⁽⁸⁾	$	24,124,666		$	21,873,804		$	699,988		$	601,898		3.88	%	3.68	%	$	36,208,873			$	29,106,653		$	676,413		$	683,985		3.76	%	4.74	%
Allowance for loan and covered loan losses	(131,695		)	(116,739		)
Allowance for loan losses																	(199,388		)		(161,024		)
Cash and due from banks	238,136			257,443													337,202				278,324
Other assets	1,865,702			1,834,904													2,987,422				2,414,336
Total assets	$	26,096,809		$	23,849,412												$	39,334,109			$	31,638,289

NOW and interest bearing demand deposits																	$	3,218,429			$	2,840,886		$	5,227		$	10,166		0.33	%	0.72	%
Wealth management deposits																	3,609,857				2,609,839			14,179			14,091			0.79		1.09
Money market accounts																	8,359,370				6,005,902			35,503			40,911			0.85		1.37
Savings accounts																	3,292,158				2,734,228			9,630			9,208			0.59		0.68
Time deposits																	5,315,554				5,295,241			52,953			53,624			2.00		2.04
Interest-bearing deposits	$	15,796,434		$	14,303,125		$	58,396		$	41,996		0.49	%	0.39	%	$	23,795,368			$	19,486,096		$	117,492		$	128,000		0.99	%	1.32	%
FHLB advances	399,171			742,423			6,674			8,447			2.24		1.52		1,082,994				732,834			8,294			6,643			1.54		1.83
Other borrowings	254,854			251,633			3,770			3,281			1.98		1.74		481,463				442,189			6,982			7,158			2.92		3.26
Subordinated notes	139,008			138,898			5,330			5,332			5.11		5.12		436,173				180,219			10,978			4,581			5.03		5.08
Junior subordinated notes	253,566			254,935			7,481			6,973			3.89		3.59
Junior subordinated debentures																	253,566				253,566			5,563			6,214			4.34		4.88
Total interest-bearing liabilities	$	16,843,033		$	15,691,014		$	81,651		$	66,029		0.65	%	0.56	%	$	26,049,564			$	21,094,904		$	149,309		$	152,596		1.15	%	1.46	%
Non-interest bearing deposits	6,039,329			5,244,552													8,421,353				6,466,122
Other liabilities	406,375			410,906													1,053,684				715,263
Equity	2,808,072			2,502,940													3,809,508				3,362,000
Total liabilities and shareholders’ equity	$	26,096,809		$	23,849,412												$	39,334,109			$	31,638,289
Interest rate spread⁽⁵⁾⁽⁷⁾													3.23	%	3.12	%
Interest rate spread⁽⁶⁾⁽⁸⁾																														2.61	%	3.28	%
Less: Fully tax-equivalent adjustment							(5,360		)	(4,454		)	(0.03	)	(0.02	)								(2,530		)	(3,201		)	(0.02	)	(0.02	)
Net free funds/contribution⁽⁶⁾	$	7,281,633		$	6,182,790								0.20		0.15
Net interest income/ margin⁽⁷⁾ (GAAP)							$	612,977		$	531,415		3.40	%	3.25	%
Fully tax-equivalent adjustment							5,360			4,454			0.03		0.02
Net interest income/ margin - FTE ⁽⁷⁾							$	618,337		$	535,869		3.43	%	3.27	%
Net free funds/contribution⁽⁷⁾																	$	10,159,309			$	8,011,749								0.32		0.40
Net interest income/ margin (GAAP)⁽⁸⁾																								$	524,574		$	528,188		2.91	%	3.66	%
Fully taxable-equivalent adjustment																								2,530			3,201			0.02		0.02
Net interest income/ margin, fully taxable-equivalent (non-GAAP)⁽⁸⁾																								$	527,104		$	531,389		2.93	%	3.68	%


(1)	Includes interest-bearing deposits ~~from~~with banks, federal funds sold and securities purchased under resale agreements.


(2)	Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets.

(3)

Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on athe marginal federal corporate tax rate in effect as of ~~35%.~~the applicable period. The total adjustments for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016~~2019 were ~~$5.4~~$2.5 million and ~~$4.5~~$3.2 million, respectively.


~~(3)~~(4)	Other earning assets include brokerage customer receivables and trading account securities.


~~(4)~~(5)	Loans, net of unearned income, include loans held-for-sale and non-accrual loans.


~~(5)~~(6)	Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.


~~(6)~~(7)	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)~~(8)	See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio.

For the ~~first nine~~six months ~~of 2017~~ended June 30, 2020, net interest income totaled ~~$613.0~~$524.6 million, ~~an increase~~a decrease of ~~$81.6~~$3.6 million as compared to the first ~~nine~~six months of ~~2016.~~2019. Net interest margin was ~~3.40% (3.43%~~2.91% (2.93% on a fully ~~tax-equivalent basis)~~taxable-equivalent basis, non-GAAP) for the ~~first nine~~six months ~~of 2017~~ended June 30, 2020 compared to ~~3.25% (3.27%~~3.66% (3.68% on a fully ~~tax-equivalent basis)~~taxable-equivalent basis, non-GAAP) for the same period of 2019. The decrease in net interest margin compared to the first ~~nine~~six months of ~~2016.~~2019 is primarily the result of a decrease in the yield earned on interest earning assets, partially offset by a decrease in the rate paid on interest bearing liabilities.

Analysis of Changes in Net Interest Income (GAAP)

The following table presents an analysis of the changes in the Company’s net interest income comparing the three month periods ended ~~September 30, 2017 to~~ June 30, ~~2017~~2020 to March 31, 2020 and ~~September~~June 30, ~~2016~~2019, and ~~the nine~~six month periods ended ~~September~~June 30, ~~2017~~2020 and ~~September 30, 2016.~~2019. The reconciliations set forth the changes in the GAAP-derived net interest income as a result of changes in volumes, changes in rates and differing number of days in each period:


	Third Quarter of 2017 Compared to Second Quarter of 2017		Third Quarter of 2017 Compared to Third Quarter of 2016			First nine Months of 2017 Compared to First Nine Months of 2016			Second Quarter of 2020 Compared to First Quarter of 2020				Second Quarter of 2020 Compared to Second Quarter of 2019			First Six Months of 2020 Compared to First Six Months of 2019
(Dollars in thousands)	Third Quarter of 2017 Compared to Second Quarter of 2017								Second Quarter of 2020 Compared to First Quarter of 2020				Second Quarter of 2020 Compared to Second Quarter of 2019
(In thousands)									Second Quarter of 2020 Compared to First Quarter of 2020				Second Quarter of 2020 Compared to Second Quarter of 2019			First Six Months of 2020 Compared to First Six Months of 2019
Net interest income (GAAP) for comparative period	$	204,409	Third Quarter of 2017 Compared to Third Quarter of 2016	$	184,636			$	Second Quarter of 2020 Compared to First Quarter of 2020			531,415	Second Quarter of 2020 Compared to Second Quarter of 2019
Change due to mix and growth of earning assets and interest-bearing liabilities (volume)	8,774		19,642			61,411			37,707				64,933			101,394
Change due to interest rate fluctuations (rate)	583		11,710			22,097			(36,019		)		(68,004		)	(107,910		)
Change due to number of days in each period	2,222		—			(1,946		)	—				—			2,902
Net interest income (GAAP) for the period ended September 30, 2017	$	215,988	$	215,988		$	612,977
Fully tax-equivalent adjustment	1,959		1,959			5,360
Net interest income - FTE	$	217,947	$	217,947		$	618,337
Net interest income (GAAP) for the period ended June 30, 2020									$	263,131			$	263,131		$	524,574
Fully taxable-equivalent adjustment									1,117				1,117			2,530
Net interest income, fully taxable-equivalent (non-GAAP)									$	264,248			$	264,248		$	527,104

Non-interest Income

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


	Three Months Ended						$ Change				% Change		Three Months Ended								$ Change				% Change
(Dollars in thousands)	September 30, 2017			September 30, 2016						June 30, 2020				June 30, 2019							$ Change				% Change
Brokerage	$	5,127		$	6,752		$ Change	$	(1,625	)	% Change			(24	)%	$	4,147			$	4,764			$	(617	)	(13	)%
Trust and asset management	14,676			12,582			2,094				17		18,489				19,375				(886		)		(5	)
Total wealth management	19,803			19,334			469				2		22,636				24,139				(1,503		)		(6	)
Mortgage banking	28,184			34,712			(6,528		)		(19	)	102,324				37,411				64,913				174
Service charges on deposit accounts	8,645			8,024			621				8		10,420				9,277				1,143				12
Gains on investment securities, net	39			3,305			(3,266		)		(99	)	808				864				(56		)		(6	)
Fees from covered call options	1,143			3,633			(2,490		)		(69	)	—				643				(643		)		(100	)
Trading losses, net	(129		)	(432		)	303				(70	)	(634		)		(44		)		(590		)		NM
Operating lease income, net	8,461			4,459			4,002				90		11,785				11,733				52				—
Other:
Interest rate swap fees	1,762			2,881			(1,119		)		(39	)	5,693				3,224				2,469				77
BOLI	897			884			13				1		1,950				1,149				801				70
Administrative services	1,052			1,151			(99		)		(9	)	933				1,009				(76		)		(8	)
Early pay-offs of leases	—			—			—				NM
Foreign currency remeasurement (losses) gains													(208		)		113				(321		)		NM
Early pay-offs of capital leases													275				—				275				NM
Miscellaneous	9,874			8,653			1,221				14		6,011				8,640				(2,629		)		(30	)
Total Other	13,585			13,569			16				—		14,654				14,135				519				4
Total Non-Interest Income	$	79,731		$	86,604		$	(6,873	)		(8	)%
Total Non-interest Income													$	161,993			$	98,158			$	63,835			65	%

NM - Not ~~Meaningful~~meaningful.


	Nine Months Ended						$ Change				% Change		Six Months Ended								$ Change				% Change
(Dollars in thousands)	September 30, 2017			September 30, 2016						June 30, 2020				June 30, 2019							$ Change				% Change
Brokerage	$	16,796		$	19,111		$ Change	$	(2,315	)	% Change			(12	)%	$	9,428			$	9,280			$	148		2	%
Trust and asset management	43,060			37,395			5,665				15		39,149				38,836				313				1
Total wealth management	59,856			56,506			3,350				6		48,577				48,116				461				1
Mortgage banking	86,061			93,254			(7,193		)		(8	)	150,650				55,569				95,081				171
Service charges on deposit accounts	25,606			23,156			2,450				11		21,685				18,125				3,560				20
Gains on investment securities, net	31			6,070			(6,039		)		(99	)
(Losses) gains on investment securities, net													(3,551		)		2,228				(5,779		)		NM
Fees from covered call options	2,792			9,994			(7,202		)		(72	)	2,292				2,427				(135		)		(6	)
Trading losses, net	(869		)	(916		)	47				(5	)
Trading (losses) gains, net													(1,085		)		(215		)		(870		)		NM
Operating lease income, net	21,048			11,270			9,778				87		23,769				22,529				1,240				6
Other:
Interest rate swap fees	5,416			9,154			(3,738		)		(41	)	11,759				6,055				5,704				94
BOLI	2,770			2,613			157				6		666				2,740				(2,074		)		(76	)
Administrative services	3,062			3,294			(232		)		(7	)	2,045				2,039				6				—
Gain on extinguishment of debt	—			4,305			(4,305		)		NM
Early pay-offs of leases	1,221			—			1,221				NM
Foreign currency remeasurement (losses) gains													(359		)		577				(936		)		NM
Early pay-offs of capital leases													349				5				344				NM
Miscellaneous	31,474			21,455			10,019				47		18,438				19,620				(1,182		)		(6	)
Total Other	43,943			40,821			3,122				8		32,898				31,036				1,862				6
Total Non-Interest Income	$	238,468		$	240,155		$	(1,687	)		(1	)%
Total Non-interest Income													$	275,235			$	179,815			$	95,420			53	%

NM - Not ~~Meaningful~~meaningful.

Notable contributions to the change in non-interest income are as follows:

~~The increase in wealth~~Wealth management revenue ~~during~~decreased in the ~~current period~~second quarter of 2020 as compared to the ~~third~~second quarter of ~~2016 is primarily attributable to growth in assets under management~~2019 due to ~~new customers.~~a decline in asset management fees and brokerage commissions. Declines in asset management and trust fees are primarily due to volatile equity markets since year end. Brokerage commissions were negatively impacted in the second quarter of 2020 due to lower transactional volume as compared to the prior year quarter. 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 ~~WHI.~~Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

~~The decrease in mortgage~~Mortgage banking revenue increased in the ~~current~~second quarter of 2020 as compared to the ~~same period~~second quarter of ~~2016 resulted primarily from lower origination volumes~~2019 as a result of an increase in ~~the current quarter.~~loans originated for sale and higher production revenue. Mortgage loans originated ~~or purchased~~ for sale ~~decreased during the current quarter, totaling $956.0 million~~totaled $2.2 billion in the ~~third~~second quarter of ~~2017~~2020 as compared to ~~$1.3~~$1.2 billion in the ~~third~~second quarter of ~~2016.~~2019. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. Mortgage revenue is also impacted by changes in the fair value of ~~mortgage servicing rights ("MSRs") as the Company does not hedge this change in fair value. The Company originates mortgage loans held-for-sale with associated MSRs either retained or released.~~MSRs. The Company records MSRs at fair value on a recurring basis.

During the second quarter of 2020, the fair value of the mortgage servicing rights portfolio decreased due to a negative fair value adjustment of $8.0 million as well as a reduction in value of $8.7 million due to payoffs and paydowns of the existing portfolio, partially offset by the gain on interest rate swaps held as an economic hedge of $589,000 and the capitalization of MSRs in the current period of $20.4 million. Starting in 2019, the Company purchased options and entered into interest rate swaps to economically hedge a portion of the fair value changes recorded in earnings related to its MSRs portfolio. During the second quarter of 2020, the Company terminated these interest rate swaps. There were no such options or interest rate swaps outstanding as of June 30, 2020.

The table below presents additional selected information regarding mortgage banking ~~revenue~~ for the respective periods.


	Three months ended						Nine Months Ended						Three Months Ended						Six Months Ended
(Dollars in thousands)	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Originations:
Retail originations	$	809,961		$	1,138,571		$	2,398,328		$	2,978,643		$	1,588,932		$	669,510		$	2,362,076		$	1,035,112
Correspondent originations	145,999			121,007			414,357			229,825			—			182,966			—			331,066
Total originations (A)	$	955,960		$	1,259,578		$	2,812,685		$	3,208,468
Veterans First originations													621,878			301,324			1,064,835			466,086
Total originations for sale (A)													$	2,210,810		$	1,153,800		$	3,426,911		$	1,832,264
Originations for investment													56,954			106,237			130,681			199,926
Total originations													$	2,267,764		$	1,260,037		$	3,557,592		$	2,032,190

Purchases as a percentage of originations	80		%	57		%	78		%	60		%
Refinances as a percentage of originations	20			43			22			40
Purchases as a percentage of originations for sale													30		%	63		%	32		%	64		%
Refinances as a percentage of originations for sale													70			37			68			36
Total	100		%	100		%	100		%	100		%	100		%	100		%	100		%	100		%

Production revenue ⁽¹⁾(B)	$	24,038		$	32,889		$	69,855		$	85,040
Mandatory commitments to fund originations for sale⁽¹⁾													$	1,275,648		$	475,618

Production Margin:
Production revenue (B) ⁽²⁾													$	93,433		$	29,895		$	142,760		$	46,501
Production margin (B/A)	2.51		%	2.61		%	2.48		%	2.65		%	4.23		%	2.59		%	4.17		%	2.54		%

Mortgage Servicing:
Loans serviced for others (C)	$	2,622,411		$	1,508,469								$	9,188,285		$	7,515,186
MSRs, at fair value (D)	29,414			13,901									77,203			72,850
Percentage of MSRs to loans serviced for others (D/C)	1.12		%	0.92		%							0.84		%	0.97		%
Servicing income													$	6,908		$	5,460		$	13,939		$	10,920

Components of Mortgage Banking Revenue:
MSR - current period capitalization													$	20,351		$	9,802		$	29,798		$	16,382
MSR - collection of expected cash flow - paydowns													(419		)	(457		)	(966		)	(962		)
MSR - collection of expected cash flow - payoffs													(8,252		)	(3,619		)	(14,728		)	(5,111		)
Valuation:
MSR - changes in fair value model assumptions													(7,982		)	(4,305		)	(22,539		)	(13,049		)
Gain on derivative contract held as an economic hedge, net													589			920			4,749			920
MSR valuation adjustment, net of gain on derivative contract held as an economic hedge													$	(7,393	)	$	(3,385	)	$	(17,790	)	$	(12,129	)

Summary of Mortgage Banking Revenue:
Production revenue													$	93,433		$	29,895		$	142,760		$	46,501
Servicing income													6,908			5,460			13,939			10,920
MSR activity													4,287			2,341			(3,686		)	(1,820		)
Other													(2,304		)	(285		)	(2,363		)	(32		)
Total mortgage banking revenue													$	102,324		$	37,411		$	150,650		$	55,569


(1)	Certain volume adjusted for the estimated pull-through rate of the loan, which represents the Company’s best estimate of the likelihood that a committed loan will ultimately fund.


(2)	Production revenue represents revenue earned from the origination and subsequent sale of mortgages, including gains on loans sold and fees from originations, processing and other related activities, and excludes servicing fees, changes in the fair value of servicing rights and changes to the mortgage recourse ~~obligation.~~obligation and other non-production revenue.

The decrease in net gains on investment securities in the current quarter primarily relates to the realized gains on sales and calls of certain securities that were held in the Company's investment securities portfolio in the prior year periods.

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 do not qualify as hedges pursuant to accounting guidance. Fees from covered call options decreased in the current year compared to the same period of 2016 primarily as a result of selling call options against a smaller value of underlying securities resulting in lower premiums received by the Company. There were no outstanding call option contracts at ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016.~~2019.

~~The increase in operating lease income in the current year periods compared to the prior year periods is primarily related to growth in business from the Company's leasing divisions.~~

Non-interest Expense

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

Three months ended
$
Change

%
Change
(Dollars in thousands) September 30,
2017 September 30,
2016
Salaries and employee benefits:
Salaries $ 57,689
$ 54,309
$ 3,380
6 %
Commissions and incentive compensation 32,095
33,740
(1,645 ) (5 )
Benefits 16,467
15,669
798
5
Total salaries and employee benefits 106,251
103,718
2,533
2
Equipment 9,947
9,449
498
5
Operating lease equipment depreciation 6,794
3,605
3,189
88
Occupancy, net 13,079
12,767
312
2
Data processing 7,851
7,432
419
6
Advertising and marketing 9,572
7,365
2,207
30
Professional fees 6,786
5,508
1,278
23
Amortization of other intangible assets 1,068
1,085
(17 ) (2 )
FDIC insurance 3,877
3,686
191
5
OREO expense, net 590
1,436
(846 ) (59 )
Other:
Commissions—3rd party brokers 990
1,362
(372 ) (27 )
Postage 1,814
1,889
(75 ) (4 )
Miscellaneous 14,956
17,313
(2,357 ) (14 )
Total other 17,760
20,564
(2,804 ) (14 )
Total Non-Interest Expense $ 183,575
$ 176,615
$ 6,960
4 %


	Nine months ended				$ Change				% Change		Three months ended				$ Change			% Change
(Dollars in thousands)	September 30, 2017		September 30, 2016					June 30, 2020				June 30, 2019			$ Change			% Change
Salaries and employee benefits:					$ Change				% Change
Salaries	$	167,912	$	157,515	$	10,397			7	%	$	87,105	$	75,360	$	11,745		16	%
Commissions and incentive compensation	92,788		92,646		142				—		46,151		36,486		9,665			26
Benefits	51,369		50,262		1,107				2		20,900		21,886		(986		)	(5	)
Total salaries and employee benefits	312,069		300,423		11,646				4		154,156		133,732		20,424			15
Equipment	28,858		27,523		1,335				5		15,846		12,759		3,087			24
Operating lease equipment depreciation	17,092		9,040		8,052				89		9,292		8,768		524			6
Occupancy, net	38,766		36,658		2,108				6		16,893		15,921		972			6
Data processing	23,580		21,089		2,491				12		10,406		6,204		4,202			68
Advertising and marketing	23,448		18,085		5,363				30		7,704		12,845		(5,141		)	(40	)
Professional fees	18,956		14,986		3,970				26		7,687		6,228		1,459			23
Amortization of other intangible assets	3,373		3,631		(258		)		(7	)	2,820		2,957		(137		)	(5	)
FDIC insurance	11,907		11,339		568				5		7,081		4,127		2,954			72
OREO expense, net	2,994		3,344		(350		)		(10	)	237		1,290		(1,053		)	(82	)
Other:
Commissions—3rd party brokers	3,121		3,996		(875		)		(22	)	707		749		(42		)	(6	)
Postage	5,336		5,229		107				2		1,591		2,606		(1,015		)	(39	)
Miscellaneous	45,737		45,971		(234		)		(1	)	24,948		21,421		3,527			16
Total other	54,194		55,196		(1,002		)		(2	)	27,246		24,776		2,470			10
Total Non-Interest Expense	$	535,237	$	501,314	$	33,923			7	%
Total Non-interest Expense											$	259,368	$	229,607	$	29,761		13	%

NM - Not meaningful.



	Six Months Ended					$ Change			% Change
(Dollars in thousands)	June 30, 2020			June 30, 2019		$ Change			% Change
Salaries and employee benefits:
Salaries	$	168,391		$	149,397	$	18,994		13	%
Commissions and incentive compensation	77,726			68,085		9,641			14
Benefits	44,801			41,973		2,828			7
Total salaries and employee benefits	290,918			259,455		31,463			12
Equipment	30,680			24,529		6,151			25
Operating lease equipment depreciation	18,552			17,087		1,465			9
Occupancy, net	34,440			32,166		2,274			7
Data processing	18,779			13,729		5,050			37
Advertising and marketing	18,566			22,703		(4,137		)	(18	)
Professional fees	14,408			11,784		2,624			22
Amortization of other intangible assets	5,683			5,899		(216		)	(4	)
FDIC insurance	11,216			7,703		3,513			46
OREO expense, net	(639		)	1,922		(2,561		)	NM
Other:
Commissions—3rd party brokers	1,572			1,467		105			7
Postage	3,540			5,056		(1,516		)	(30	)
Miscellaneous	46,294			40,481		5,813			14
Total other	51,406			47,004		4,402			9
Total Non-interest Expense	$	494,009		$	443,981	$	50,028		11	%

NM - Not meaningful.

Notable contributions to the change in non-interest expense are as follows:

Salaries and employee benefits expense increased in the ~~current period~~second quarter of 2020 compared to the ~~same period~~second quarter of ~~2016~~2019 primarily as a result of the addition of employees from acquisitions, increased staffing as the Company grows and higher ~~employee benefits offset somewhat by lower~~commissions and incentive compensation ~~on variable pay based arrangements related~~due to increased origination volume associated with the Company's mortgage ~~banking commissions.~~business.

~~Operating lease equipment depreciation~~Equipment expense increased in the ~~current~~second quarter of 2020 compared to the ~~same period~~second quarter of ~~2016~~2019 as a result of higher software license fees, software and computer depreciation expense.

Data processing expense increased in the second quarter of 2020 compared to the second quarter of 2019 primarily as a result of ~~growth in business from~~ the ~~Company's leasing divisions.~~$4.5 million of conversion costs associated with the Countryside Bank acquisition.

~~The increase in advertising~~Advertising and marketing expenses ~~during~~decreased in the ~~current~~second quarter of 2020 compared to the ~~same period~~second quarter of ~~2016 is primarily related~~2019 as a result of decreased sponsorship costs due to ~~higher expenses from community advertisements and sponsorships.~~the cancellation of events, including sports sponsorships, as a result of the COVID-19 pandemic. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities, the Company's various products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the timing of sponsorship programs ~~and type of marketing programs~~ utilized which are determined based on the market area, targeted audience, competition and various other factors.

FDIC insurance expense increased in the second quarter of 2020 compared to the second quarter of 2019 as a result of higher assessment rates impacted by declines in the Tier 1 Leverage Ratio at the Company's bank affiliates as a result of asset growth, including PPP loans.

Other miscellaneous expense increased in the second quarter of 2020 compared to the second quarter of 2019 primarily as a result of increased contingent consideration expense accrued in the second quarter of 2020 related to the previous acquisitions of mortgage operations. The increase in ~~professional fees during~~ the contingent consideration accrual is a result of higher anticipated payments resulting from increases in both current ~~quarter compared~~and forecasted revenues related to the ~~third quarter of 2016 is primarily related~~acquired businesses due to ~~consulting fees. Professional~~the favorable mortgage banking environment. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors' fees, ~~include legal, audit~~telephone, travel and ~~tax fees, external~~entertainment, corporate insurance, dues and subscriptions, problem loan ~~review~~expenses, operating losses and lending origination costs ~~consulting arrangements and normal regulatory exam assessments.~~that are not deferred.

Income Taxes

The Company recorded income tax expense of ~~$38.6~~$9.0 million ~~for~~in the ~~three months ended September 30, 2017,~~second quarter of 2020 compared to ~~$31.9~~$28.7 million ~~for same period~~in the second quarter of ~~2016. Income tax expense was $105.3 million and $91.3 million for the nine months ended September 30, 2017 and 2016, respectively.~~2019. The effective tax rates were ~~37.0% and 37.6%~~29.46% in the second quarter of 2020 compared to 26.06% in the second quarter of 2019. During the first six months of 2020, the Company recorded income tax expense of $33.3 million compared to $58.2 million for the ~~third quarters~~first six months of ~~2017 and 2016, respectively, and 35.8% and 37.5%~~2019. The effective tax rates were 28.28% for the ~~2017~~first six months of 2020 and ~~2016~~25.44% for the first six months of 2019.

The higher effective tax rates in the 2020 quarterly and year-to-date periods ~~respectively. The lower effective tax rate in the first nine months of 2017 was primarily~~compared to 2019 were a result of ~~recording $5.0 million~~a higher level of ~~excess~~nondeductible expenses net of tax-exempt income relative to pretax net income in the 2020 periods. The increase in the year-to-date rate was also impacted by the tax ~~benefits~~effects related to ~~the adoption~~share-based compensation. The tax effects of ~~new accounting rules over income taxes attributed to~~ share-based compensation that became effective on January 1, 2017. Approximately $3.4 million of these excess tax benefits were recorded in the first quarter of 2017. Excess tax benefits are expected to be higher in the first quarter when the majority of the Company's share-based awards vest, and will fluctuate ~~throughout the year~~ based on the ~~Company's~~Company’s stock price and timing of employee stock option exercises and vesting of other share-based awards. The Company recorded additional tax expense related to share-based compensation of $521,000 in the first six months of 2020, and tax benefits of $1.6 million in the first six months of 2019, the majority of which was recognized in the first quarter of each year.

Operating Segment Results

As described in Note 1214 to the Consolidated Financial Statements in Item 1, the Company’s operations consist of three primary segments: community banking, specialty finance and wealth management. The Company’s profitability is primarily dependent on the net interest income, provision for credit losses, non-interest income and operating expenses of its community banking segment. For purposes of internal segment profitability, management allocates certain intersegment and parent company balances. Management allocates a portion of revenues to the specialty finance segment related to loans and leases originated by the specialty finance segment and sold or assigned to the community banking segment. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates a portion of the net interest income earned by the community banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. Finally, expenses incurred at the Wintrust parent company are allocated to each segment based on each segment's risk-weighted assets.

The community banking segment’s net interest income for the quarter ended ~~September~~June 30, ~~2017~~2020 totaled ~~$176.5~~$205.7 million as compared to ~~$150.2~~$214.3 million for the same period in ~~2016, an increase~~2019, a decrease of ~~$26.4~~$8.6 million, or ~~18%~~4%. On a year-to-date basis, net interest income for the segment ~~increased~~decreased by ~~$65.0~~$13.2 million from ~~$434.1~~$425.7 million for the ~~first nine~~six months ~~of 2016~~ended June 30, 2019 to ~~$499.1~~$412.5 million for the ~~first nine~~six months ~~of 2017.~~ended June 30, 2020. The ~~increase~~decrease in ~~both~~ the three and ~~nine~~six month periods is primarily attributable to ~~growth in earning assets and higher~~compression of the net interest ~~margin.~~margin attributable to the decrease in interest rates in the environment. The community banking segment’s non-interest income totaled ~~$52.6~~$129.7 million in the ~~third~~second quarter of ~~2017, a decrease~~2020, an increase of ~~$10.2~~$64.3 million, or ~~16%~~98%, when compared to the ~~third~~second quarter of ~~2016~~2019 total of ~~$62.7~~$65.4 million. On a year-to-date basis, non-interest income totaled ~~$160.3~~$210.7 million for the ~~first nine~~six months ended June 30, 2020, an increase of ~~2017, a decrease of $8.9~~$97.1 million, or 5%85%, compared to ~~$169.2~~$113.6 million in the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2019. The ~~decrease in non-interest income~~increase in the ~~quarter~~three and ~~year-to-date~~six month periods ~~was~~is primarily ~~attributable to decrease in~~the result of increased mortgage banking revenue ~~lower gains realized on sales of investment securities and lower fees~~ from ~~covered call options.~~significantly increased mortgage originations during 2020. The community banking segment’s net ~~income~~loss for the quarter ended ~~September~~June 30, ~~2017~~2020 totaled ~~$44.8~~$7.3 million, ~~an increase~~a decrease of ~~$7.3~~$60.8 million as compared to net income in the ~~third~~second quarter of ~~2016~~2019 of ~~$37.5~~$53.4 million. On a year-to-date basis, the community banking segment's net income was ~~$128.5~~$27.3 million for the first ~~nine~~six months of ~~2017~~2020 as compared to ~~$106.9~~$113.8 million for the first ~~nine~~six months of ~~2016.~~2019. The decrease in net income in the three and six month periods is primarily attributable to higher provision for credit losses in 2020 due to the implementation of CECL and the macroeconomic conditions created by the COVID-19 pandemic. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation - Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

The specialty finance segment's net interest income totaled ~~$30.5~~$42.4 million for the quarter ended ~~September~~June 30, ~~2017,~~2020, compared to ~~$25.5~~$39.4 million for the same period in ~~2016,~~2019, an increase of ~~$5.0~~$3.0 million, or ~~19%~~8%. On a year-to-date basis, net interest income increased by ~~$14.8~~$6.0 million in the first ~~nine~~six months of ~~2017~~2020 as compared to the first ~~nine~~six months of ~~2016.~~2019. The increase ~~during both~~in the three and six month periods is primarily attributable to growth in earning ~~assets.~~assets on the premium finance receivables portfolios. The specialty finance segment’s non-interest income totaled ~~$16.3~~$21.8 million and ~~$12.2~~$19.6 million for the three month periods ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively. On a year-to-date basis, non-interest income increased by ~~$7.1~~$4.0 million in the first ~~nine~~six months of ~~2017~~2020 as compared to the first ~~nine~~six months of ~~2016.~~2019. The increase in non-interest income in the ~~current year~~three and six month periods is primarily the result of higher originations and increased balances related to the ~~life insurance~~commercial premium finance portfolio ~~as well as increased~~and growth in business from the Company's leasing ~~activity since the prior year periods.~~division. Our commercial premium finance operations, life insurance finance operations, lease financing operations and accounts receivable

finance operations accounted for ~~43%~~41%, ~~35%~~32%, ~~17%~~23% and 6%4%, respectively, of the total revenues of our specialty finance business for the ~~nine~~six month period ended ~~September~~June 30, ~~2017.~~2020. The net income of the specialty finance segment for the quarter ended ~~September~~June 30, ~~2017~~2020 totaled ~~$17.0~~$22.7 million as compared to ~~$12.8~~$21.1 million for the quarter ended ~~September~~June 30, ~~2016.~~2019. On a year-to-date basis, the net income of the specialty finance segment for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 totaled ~~$48.0~~$44.8 million as compared to ~~$36.3~~$43.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2019.

The wealth management segment reported net interest income of ~~$4.6~~$8.6 million for the ~~third~~second quarter of ~~2017~~2020 compared to ~~$4.8~~$6.9 million in the same quarter of ~~2016.~~2019, an increase of $1.7 million, or 24%. On a year-to-date basis, net interest income totaled ~~$14.5~~$16.4 million for the first ~~nine~~six months of ~~2017~~2020 as compared to ~~$13.7~~$14.4 million for the first ~~nine~~six months of ~~2016.~~2019. Net interest income for this segment is primarily comprised of an allocation of the net interest income earned by the community banking segment on non-interest bearing and interest-bearing wealth management customer account balances on deposit at the banks. Wealth management customer account balances on deposit at the banks averaged ~~$1.0~~$2.0 billion and ~~$987.8 million~~$1.6 billion in the first ~~nine~~six months of ~~2017~~2020 and ~~2016,~~2019, respectively. This segment recorded non-interest income of ~~$20.4~~$24.5 million for the ~~third~~second quarter of ~~2017~~2020 compared to ~~$20.0~~$25.0 million for the ~~third~~second quarter of ~~2016.~~2019. On a year-to-date basis, the wealth management segment's non-interest income totaled ~~$61.7~~$48.6 million during the first ~~nine~~six months of ~~2017~~2020 as compared to ~~$58.7~~$50.0 million in the first ~~nine~~six months of ~~2016.~~2019. Distribution of wealth management services through each bank continues to be a focus of the ~~Company as the number of financial advisors in its banks continues to increase.~~Company. The Company is committed to growing the wealth management segment in order to better service its customers and create a more diversified revenue stream. The wealth management segment’s net income totaled ~~$3.8~~$6.3 million for the ~~third~~second quarter of ~~2017~~2020 compared to ~~$2.8~~$6.9 million for the ~~third~~second quarter of ~~2016.~~2019. On a year-to-date basis, the wealth management segment's net income totaled $12.4 million and ~~$9.1~~$13.9 million for the ~~nine~~six month periods ended ~~September~~June 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

Financial Condition

Total assets were ~~$27.4~~$43.5 billion at ~~September~~June 30, ~~2017,~~2020, representing an increase of ~~$2.0~~$9.9 billion, or 8%29%, when compared to ~~September~~June 30, ~~2016~~2019 and an increase of approximately ~~$428.9 million,~~$4.7 billion, or 6%25% on an annualized basis, when compared to ~~June 30, 2017.~~March 31, 2020. Total funding, which includes deposits, all notes and advances, including secured borrowings and the junior subordinated debentures, was ~~$24.0 billion at September 30, 2017, $23.6~~$38.1 billion at June 30, ~~2017, and $22.2~~2020, $33.8 billion at ~~September~~March 31, 2020, and $29.2 billion at June 30, ~~2016.~~2019. See Notes 5, 6, 9, 10, 11 and 1112 of the Consolidated Financial Statements presented under Item 1 of this report for additional period-end detail on the Company’s interest-earning assets and funding liabilities.

Interest-Earning Assets

The following table sets forth, by category, the composition of average earning asset balances and the relative percentage of total average earning assets for the periods presented:


	Three Months Ended												Three Months Ended
	September 30, 2017				June 30, 2017				September 30, 2016				June 30, 2020				March 31, 2020				June 30, 2019
(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent
Loans:
Commercial	$	6,399,589	26	%	$	6,184,352	26	%	$	5,468,228	24	%
Mortgage loans held-for-sale													$	705,702	2	%	$	403,262	1	%	$	281,732	1	%
Loans, net of unearned income
Commercial, excluding PPP													$	8,685,218	22	%	$	8,414,315	25	%	$	8,110,690	27	%
Commercial - PPP													2,679,662		7		—		—		—		—
Commercial real estate	6,401,278		26		6,324,735		26		5,852,874		26		8,177,259		21		8,125,827		24		7,120,936		24
Home equity	679,668		2		698,112		3		751,788		3		478,302		1		499,369		1		527,784		2
Residential real estate ⁽¹⁾	1,114,637		4		1,079,339		4		1,165,027		5
Residential real estate													1,223,635		3		1,243,031		4		995,417		3
Premium finance receivables	6,470,190		26		6,186,230		26		5,697,113		25		9,014,719		23		8,591,980		26		7,696,745		26
Other loans	129,860		1		126,950		1		136,591		1		77,831		1		62,206		—		101,691		1
Total loans, net of unearned income excluding covered loans ⁽²⁾	$	21,195,222	85	%	$	20,599,718	86	%	$	19,071,621	84	%
Covered loans	48,415		—		51,823		—		101,570		—
Total average loans ⁽²⁾⁽¹⁾	$	21,243,637	85	%	$	20,651,541	86	%	$	19,173,191	84	%	$	30,336,626	78	%	$	26,936,728	80	%	$	24,553,263	83	%
Liquidity management assets ⁽³⁾⁽²⁾	$	3,737,619	15	%	$	3,394,406	14	%	3,671,577		16	%	7,684,998		20		6,314,347		19		4,652,403		16
Other earning assets ⁽⁴⁾⁽³⁾	25,844		—		25,749		—		29,875		—		16,917		—		19,166		—		15,719		—
Total average earning assets	$	25,007,100	100	%	$	24,071,696	100	%	$	22,874,643	100	%	$	38,744,243	100	%	$	33,673,503	100	%	$	29,503,117	100	%
Total average assets	$	27,012,295			$	26,050,949			$	24,879,252			$	42,042,729			$	36,625,490			$	32,055,769
Total average earning assets to total average assets			93	%			92	%			92	%			92	%			92	%			92	%


(1)	Includes ~~mortgage loans held-for-sale~~non-accrual loans.


(2)	~~Includes loans held-for-sale and non-accrual loans~~


~~(3)~~	Liquidity management assets include investment securities, other securities, interest earning deposits with banks, federal funds sold and securities purchased under resale ~~agreements~~agreements.


~~(4)~~(3)	Other earning assets include brokerage customer receivables and trading account ~~securities~~securities.

~~Loans.~~ Mortgage loans held-for-sale. Average ~~total~~mortgage loans ~~net of unearned income,~~held-for-sale totaled ~~$21.2 billion~~$705.7 million in ~~the third quarter of 2017, increasing $2.1 billion, or 11%, from the third quarter of 2016 and $592.1 million, or 11% on an annualized basis, from~~ the second quarter of 2017. Combined, the commercial and commercial real estate loan categories comprised 60% and 59% of the average loan portfolio in the third quarter of 2017 and 2016, respectively. Growth realized in these categories for the third quarter of 2017 as2020, compared to ~~the sequential and prior year periods is primarily attributable to increased business development efforts.~~

~~Home equity loan portfolio averaged $679.7~~$403.3 million in the ~~third~~first quarter of ~~2017,~~2020 and ~~decreased $72.1 million, or 10% from the average balance of $751.8~~$281.7 million in same period of 2016. The Company has been actively managing its home equity portfolio to ensure that diligent pricing, appraisal and other underwriting activities continue to exist. The Company has not sacrificed asset quality or pricing standards when originating new home equity loans.

~~Residential real estate loans averaged $1.1 billion in~~ the ~~third~~second quarter of 2017, and decreased $50.4 million, or 4% from the average balance of $1.2 billion in same period of 2016. Additionally, compared to the quarter ended June 30, 2017, the average balance increased $35.3 million, or 13% on an annualized basis. The residential real estate loan category includes mortgage loans held-for-sale.2019. By selling residential mortgage loans into the secondary market, the Company eliminates the interest-rate risk associated with these loans, as they are predominantly long-term fixed rate loans, and provides a source of non-interest revenue. The increase in average balances compared to both periods was primarily the result of increased mortgage demand associated with historically low long-term interest rates.

Loans, net of unearned income. Average total loans, net of unearned income, totaled $30.3 billion in the second quarter of 2020, increasing $5.8 billion, or 24%, from the second quarter of 2019 and $3.4 billion, or 51% on an annualized basis, from the first quarter of 2020. Combined, the commercial and commercial real estate loan categories comprised 64% of the average loan portfolio in the second quarter of 2020 as compared to 61% in the first quarter of 2020 and 62% in the second quarter of 2019. Growth realized in these aggregated categories for the second quarter of 2020 as compared to the sequential and prior year periods is primarily attributable to PPP lending and increased business development efforts. Additionally, growth realized in the second quarter 2020 as compared to the second quarter 2019 was partially attributable to the acquisition of ROC, SBC and STC in 2019 and originations of PPP loans in the second quarter 2020.

Home equity loan portfolio averaged $478.3 million in the second quarter of 2020, and decreased $49.5 million, or 9% from the average balance of $527.8 million in same period of 2019. The decrease in the home equity loan portfolio is primarily the result

of borrowers preferring to finance through longer term, low rate mortgage loans. The Company has been actively managing its home equity portfolio to ensure that diligent pricing, appraisal and other underwriting activities continue to exist.

Residential real estate loans averaged $1.2 billion in the second quarter of 2020, and increased $228.2 million, or 23% from the average balance of $995.4 million in same period of 2019. Additionally, compared to the quarter ended March 31, 2020, the average balance decreased $19.4 million, or 6% on an annualized basis. The Company's residential real estate portfolio predominantly includes one- to four-family adjustable rate mortgage loans that have repricing terms generally from one to three years, construction loans to individuals and bridge financing loans for qualifying customers.

Average premium finance receivables totaled ~~$6.5~~$9.0 billion in the ~~third~~second quarter of ~~2017,~~2020, and accounted for 30% of the Company’s average total loans. The increase during the ~~third~~second quarter of ~~2017~~2020 compared to both the first quarter of 2020 and the second quarter of ~~2017 and the third quarter of 2016~~2019 was the result of continued originations within the portfolio in part due to hardening insurance market conditions increasing the ~~effective marketing and customer servicing.~~average size of new commercial insurance premium finance receivables to approximately $38,000 in the second quarter of 2020. Approximately ~~$1.8~~$3.1 billion of premium finance receivables were originated in the ~~third~~second quarter of ~~2017~~2020 compared to ~~$1.7~~$2.4 billion during the same period of ~~2016.~~2019. Premium finance receivables consist of a commercial portfolio and a life portfolio comprising approximately ~~42%~~41% and ~~58%~~59%, respectively, of the average total balance of premium finance receivables for the ~~third~~second quarter of ~~2017,~~2020, and ~~44%~~41% and ~~56%~~59%, respectively, for the ~~third~~second quarter of ~~2016.~~2019.

Other loans represent a wide variety of personal and consumer loans to ~~individuals as well as high-yielding short-term accounts receivable financing to clients in the temporary staffing industry located throughout the United States.~~individuals. Consumer loans generally

have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk due to the type and nature of the collateral. ~~Additionally, short-term accounts receivable financing may also involve greater credit risks than generally associated with~~

Total average loans for the ~~loan portfolios~~first six months of ~~more traditional community banks depending on~~2020 increased $4.4 billion or 18% over the ~~marketability~~previous year period. Similar to the quarterly discussion above, approximately $1.9 billion of this increase relates to the ~~collateral.~~

~~Covered~~commercial portfolio including PPP loans, ~~represent loans acquired through eight FDIC-assisted transactions, all~~$1.1 billion of ~~which occurred prior~~this increase relates to ~~2013. These loans are subject to loss sharing agreements with~~ the ~~FDIC. The FDIC has agreed to reimburse the Company for 80% of losses incurred on the purchased loans, foreclosed~~commercial real estate portfolio and certain other assets. On October 16, 2017, the Company entered into agreements with the FDIC that terminate all existing loss share agreements with the FDIC. The Company will be solely responsible for all future charge-offs, recoveries, gains, losses and expenses related$1.2 billion of this increase relates to the previously covered assets as the FDIC will no longer share in those amounts. See Note 3 of the Consolidated Financial Statements presented under Item 1 of this report for a discussion of these acquisitions, including the aggregation of these loans by risk characteristics when determining the initial and subsequent fair value.premium finance receivables portfolio.

Liquidity management assets. Funds that are not utilized for loan originations are used to purchase investment securities and short term money market investments, to sell as federal funds and to maintain in interest bearing deposits with banks. The balances of these assets can fluctuate based on management’s ongoing effort to manage liquidity and for asset liability management purposes. In response to the COVID-19 pandemic, the Company will continue to prudently evaluate and utilize liquidity sources as needed, including the management of availability with the FHLB and FRB and utilization of the revolving credit facility with unaffiliated banks. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation - Overview and - Liquidity sections of this report for additional discussion of the impact of the COVID-19 pandemic.

Other earning assets. Other earning assets include brokerage customer receivables and trading account securities. In the normal course of business, ~~WHI~~Wintrust Investments activities involve the execution, settlement, and financing of various securities transactions. ~~WHI’s~~Wintrust Investments customer securities activities are transacted on either a cash or margin basis. In margin transactions, ~~WHI,~~Wintrust Investments, under an agreement with an out-sourced securities firm, extends credit to its customers, subject to various regulatory and internal margin requirements, collateralized by cash and securities in customer’s accounts. In connection with these activities, ~~WHI~~Wintrust Investments executes and the out-sourced firm clears customer transactions relating to the sale of securities not yet purchased, substantially all of which are transacted on a margin basis subject to individual exchange regulations. Such transactions may expose ~~WHI~~Wintrust Investments to off-balance-sheet risk, particularly in volatile trading markets, in the event margin requirements are not sufficient to fully cover losses that customers may incur. In the event a customer fails to satisfy its obligations, ~~WHI~~Wintrust Investments under the agreement with the outsourced securities firm, may be required to purchase or sell financial instruments at prevailing market prices to fulfill the customer’s obligations. ~~WHI~~Wintrust Investments seeks to control the risks associated with its customers’ activities by requiring customers to maintain margin collateral in compliance with various regulatory and internal guidelines. ~~WHI~~Wintrust Investments monitors required margin levels daily and, pursuant to such guidelines, requires customers to deposit additional collateral or to reduce positions when necessary.

The following table sets forth, by category, the composition of average earning asset balances and the relative percentage of total average earning assets for the periods presented:


	Nine Months Ended								Six Months Ended
	September 30, 2017				September 30, 2016				June 30, 2020				June 30, 2019
(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent
Mortgage loans held-for-sale									$	554,482	2	%	$	235,220	1	%
Loans:
Commercial	$	6,173,563	26	%	$	5,063,499	23	%	$	8,549,767	24	%	$	7,983,279	27	%
Commercial - PPP									1,339,831		4		—		—
Commercial real estate	6,306,508		26		5,764,773		26		8,151,543		23		7,042,828		24
Home equity	698,956		3		767,703		3		488,836		1		533,918		2
Residential real estate ⁽¹⁾	1,061,162		4		1,034,916		5
Residential real estate									1,233,333		3		967,048		3
Premium finance receivables	6,211,151		26		5,497,715		25		8,803,350		24		7,583,355		26
Other loans	126,167		1		135,939		1		70,018		—		108,518		1
Total loans, net of unearned income excluding covered loans ⁽²⁾	$	20,577,507	86	%	$	18,264,545	83	%
Covered loans	52,339		—		117,427		1
Total average loans ⁽²⁾⁽¹⁾	$	20,629,846	86	%	$	18,381,972	84	%	$	28,636,678	79	%	$	24,218,946	83	%
Liquidity management assets ⁽³⁾⁽²⁾	$	3,469,208	14	%	$	3,462,375	16	%	6,999,672		19		4,637,826		16
Other earning assets ⁽⁴⁾⁽³⁾	25,612		—		29,457		—		18,041		—		14,661		—
Total average earning assets	$	24,124,666	100	%	$	21,873,804	100	%	$	36,208,873	100	%	$	29,106,653	100	%
Total average assets	$	26,096,809			$	23,849,412			$	39,334,109			$	31,638,289
Total average earning assets to total average assets			92	%			92	%			92	%			92	%


(1)	Includes ~~mortgage loans held-for-sale~~non-accrual loans.


(2)	~~Includes loans held-for-sale and non-accrual loans~~


~~(3)~~	Liquidity management assets include investment securities, other securities, interest earning deposits with banks, federal funds sold and securities purchased under resale ~~agreements~~agreements.


~~(4)~~(3)	Other earning assets include brokerage customer receivables and trading account ~~securities~~securities.

Total average loans for the first nine months of 2017 increased $2.2 billion or 12% over the previous year period. Similar to the quarterly discussion above, approximately $1.1 billion of this increase relates to the commercial portfolio, $541.7 million of this increase relates to the commercial real estate portfolio and $713.4 million of this increase relates to the premium finance receivables portfolio.

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio

The following table shows the Company’s loan portfolio by category as of the dates shown:


	September 30, 2017				December 31, 2016				September 30, 2016				June 30, 2020				December 31, 2019				June 30, 2019
			% of				% of				% of				% of				% of				% of
(Dollars in thousands)	Amount		Total		Amount		Total		Amount		Total
(In thousands)													Amount		Total		Amount		Total		Amount		Total
Commercial	$	6,456,034	31	%	$	6,005,422	30	%	$	5,951,544	31	%	$	11,859,232	38	%	$	8,285,920	31	%	$	8,270,774	33	%
Commercial real estate	6,400,781		31		6,196,087		31		5,908,684		31		8,200,745		26		8,020,276		30		7,276,244		29
Home equity	672,969		3		725,793		4		742,868		4		466,596		1		513,066		2		527,370		2
Residential real estate	789,499		3		705,221		4		663,598		3		1,427,429		5		1,354,221		5		1,118,178		4
Premium finance receivables—commercial	2,664,912		13		2,478,581		12		2,430,233		13		3,999,774		13		3,442,027		13		3,368,423		13
Premium finance receivables—life insurance	3,795,474		18		3,470,027		18		3,283,359		17		5,400,802		17		5,074,602		19		4,634,478		18
Consumer and other	133,112		1		122,041		1		120,975		1		48,325		0		110,178		0		109,192		1
Total loans, net of unearned income, excluding covered loans	$	20,912,781	100	%	$	19,703,172	100	%	$	19,101,261	100	%
Covered loans	46,601		—		58,145		—		95,940		—
Total loans	$	20,959,382	100	%	$	19,761,317	100	%	$	19,197,201	100	%
Total loans, net of unearned income													$	31,402,903	100	%	$	26,800,290	100	%	$	25,304,659	100	%

Commercial and commercial real estate loans. Our commercial and commercial real estate loan portfolios are comprised primarily of commercial real estate loans and lines of credit for working capital purposes. The table below sets forth information regarding the types and amounts of our loans within these portfolios ~~(excluding covered loans)~~ as of ~~September~~June 30, ~~2017~~2020 and ~~2016:~~2019:

As of September 30, 2017 As of September 30, 2016
Allowance Allowance
% of For Loan % of For Loan
Total Losses Total Losses
(Dollars in thousands) Balance Balance Allocation Balance Balance Allocation
Commercial:
Commercial, industrial and other $ 4,120,533
32.0 % $ 38,708
$ 3,605,516
30.4 % $ 29,087
Franchise 853,716
6.6
6,154
874,745
7.4
3,357
Mortgage warehouse lines of credit 194,370
1.5
1,438
309,632
2.6
2,241
Asset-based lending 896,336
7.0
7,683
845,719
7.2
6,728
Leases 381,394
3.0
1,208
299,953
2.5
893
PCI - commercial loans ⁽¹⁾
9,685
0.1
544
15,979
0.1
732
Total commercial $ 6,456,034
50.2 % $ 55,735
$ 5,951,544
50.2 % $ 43,038
Commercial Real Estate:
Construction $ 673,977
5.2 % $ 7,565
$ 451,477
3.8 % $ 4,778
Land 102,753
0.8
3,354
107,701
0.9
3,577
Office 880,951
6.9
6,249
884,082
7.5
6,003
Industrial 836,485
6.5
5,538
767,504
6.5
6,353
Retail 934,239
7.3
6,107
895,341
7.5
6,063
Multi-family 864,985
6.7
8,873
794,955
6.7
7,966
Mixed use and other 1,974,315
15.4
14,270
1,851,507
15.6
13,586
PCI - commercial real estate ⁽¹⁾
133,076
1.0
84
156,117
1.3
22
Total commercial real estate $ 6,400,781
49.8 % $ 52,040
$ 5,908,684
49.8 % $ 48,348
Total commercial and commercial real estate $ 12,856,815
100.0 % $ 107,775
$ 11,860,228
100.0 % $ 91,386

Commercial real estate - collateral location by state:
Illinois $ 4,981,379
77.8 % $ 4,652,758
78.8 %
Wisconsin 683,229
10.7
646,116
10.9

Total primary markets $ 5,664,608
88.5 % $ 5,298,874
89.7 %
Indiana 140,749
2.2
111,206
1.9

Florida 114,599
1.8
77,836
1.3

Arizona 58,192
0.9
45,620
0.8

Michigan 44,664
0.7
36,350
0.6

California 36,366
0.6
38,195
0.6

Other 341,603
5.3
300,603
5.1

Total $ 6,400,781
100.0 % $ 5,908,684
100.0 %



	As of June 30, 2020						As of June 30, 2019
					Allowance						Allowance
			% of		For Credit				% of		For Credit
			Total		Losses				Total		Losses
(Dollars in thousands)	Balance		Balance		Allocation		Balance		Balance		Allocation
Commercial:
Commercial, industrial, and other, excluding commercial PPP	$	8,523,864	42.5	%	$	133,593	$	8,270,774	53.3	%	$	74,893
Commercial PPP	3,335,368		16.6		4		—		—		—
Total commercial	$	11,859,232	59.1	%	$	133,597	$	8,270,774	53.3	%	$	74,893
Commercial Real Estate:
Construction and development	$	1,340,048	6.7	%	$	73,316	$	1,000,393	6.2	%	$	13,536
Non-construction	6,860,697		34.2		123,810		6,275,851		40.5		49,734
Total commercial real estate	$	8,200,745	40.9	%	$	197,126	$	7,276,244	46.7	%	$	63,270
Total commercial and commercial real estate	$	20,059,977	100.0	%	$	330,723	$	15,547,018	100.0	%	$	138,163

Commercial real estate - collateral location by state:
Illinois	$	6,198,486	75.6	%			$	5,505,290	75.7	%
Wisconsin	760,839		9.3				740,288		10.2
Total primary markets	$	6,959,325	84.9	%			$	6,245,578	85.9	%
Indiana	249,423		3.0				179,977		2.5
Florida	133,810		1.6				60,343		0.8
Arizona	78,135		1.0				62,607		0.9
California	81,634		1.0				68,497		0.9
Other	698,418		8.5				659,242		9.0
Total commercial real estate	$	8,200,745	100.0	%			$	7,276,244	100.0	%


~~(1)~~	~~PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments.~~

We make commercial loans for many purposes, including working capital lines, which are generally renewable annually and supported by business assets, personal guarantees and additional collateral. In addition, the Company has participated in PPP starting in the second quarter of 2020 as a result of COVID-19 disruption to the economy. Commercial business lending is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. Primarily as a result of ~~growth~~the adoption of CECL and deterioration in ~~the commercial portfolio,~~macroeconomic conditions related to COVID-19, our allowance for ~~loan~~credit losses in our commercial loan portfolio ~~is $55.7~~increased to $133.6 million as of ~~September~~June 30, ~~2017~~2020 compared to ~~$43.0~~$74.9 million as of ~~September~~June 30, ~~2016.~~2019.

Our commercial real estate loans are generally secured by a first mortgage lien and assignment of rents on the property. Since most of our bank branches are located in the Chicago metropolitan area and southern Wisconsin, ~~88.5%~~84.9% of our commercial real estate loan portfolio is located in this region as of ~~September~~June 30, ~~2017. While commercial real estate market conditions have improved recently, a number of specific markets continue to be under stress.~~2020. We have been able to effectively manage our total non-performing commercial real estate loans. As of ~~September~~June 30, ~~2017,~~2020, our allowance for ~~loan~~credit losses related to this portfolio is ~~$52.0~~$197.1 million compared to ~~$48.3~~$63.3 million as of ~~September~~June 30, ~~2016~~2019. Similar to the commercial loan portfolio, the increase in the allowance for credit losses is primarily due to the adoption of CECL and deterioration in macroeconomic conditions related to COVID-19.

The Company also participates in mortgage warehouse lending, which is included above within commercial, industrial and other, by providing interim funding to unaffiliated mortgage bankers to finance residential mortgages originated by such bankers for sale into the secondary market. The Company’s loans to the mortgage bankers are secured by the business assets of the mortgage companies as well as the specific mortgage loans funded by the Company, after they have been pre-approved for purchase by third party end lenders. The Company may also provide interim financing for packages of mortgage loans on a bulk basis in circumstances where the mortgage bankers desire to competitively bid on a number of mortgages for sale as a package in the secondary market. Amounts advanced with respect to any particular mortgage loan are usually required to be repaid within 21 days. ~~Mortgage warehouse lines decreased to $194.4 million as of September 30, 2017 from $309.6 million as of September 30, 2016.~~

Home equity loans. Our home equity loans and lines of credit are originated by each of our banks in their local markets where we have a strong understanding of the underlying real estate value. Our banks monitor and manage these loans, and we conduct an automated review of all home equity loans and lines of credit at least twice per year. This review collects current credit performance

for each home equity borrower and identifies situations where the credit strength of the borrower is declining, or where there are events that may influence repayment, such as tax liens or judgments. Our banks use this information to manage loans that may be higher risk and to determine whether to obtain additional credit information or updated property valuations.

The rates we offer on new home equity lending are based on several factors, including appraisals and valuation due diligence, in order to reflect inherent risk, and we place additional scrutiny on larger home equity requests. In a limited number of cases, we issue home equity credit together with first mortgage financing, and requests for such financing are evaluated on a combined basis. It is not our practice to advance more than 85% of the appraised value of the underlying asset, which ratio we refer to as the loan-to-value ratio, or LTV ratio, and a majority of the credit we previously extended, when issued, had an LTV ratio of less than 80%.

Our home equity loan portfolio has performed well in light of the ongoing volatility in the overall residential real estate market.

Residential real ~~estate mortgages.~~estate. Our residential real estate portfolio predominantly includes one- to four-family adjustable rate mortgages, ~~that have repricing terms generally from one to three years,~~ construction loans to individuals and bridge financing loans for qualifying customers. As of ~~September~~June 30, ~~2017,~~2020, our residential loan portfolio totaled ~~$789.5 million,~~$1.4 billion, or 3%5% of our total outstanding loans.

Our adjustable rate mortgages relate to properties located principally in the Chicago metropolitan area and southern Wisconsin or vacation homes owned by local residents. These adjustable rate mortgages are often non-agency conforming. Adjustable rate mortgage loans decrease the interest rate risk we face on our mortgage portfolio. However, this risk is not eliminated due to the fact that such loans generally provide for periodic and lifetime limits on the interest rate adjustments among other features. Additionally, adjustable rate mortgages may pose a higher risk of delinquency and default because they require borrowers to make larger payments when interest rates rise. As of ~~September~~June 30, ~~2017, $14.7~~2020, $19.5 million of our residential real estate mortgages, or ~~1.9%~~1.4% of our residential real estate loan portfolio were classified as nonaccrual, ~~$1.1 million~~no loans were 90 or more days past due and still accruing, ~~(0.1%), $2.2~~$5.9 million were 30 to 89 days past due ~~(0.3%~~(0.4%) and ~~$771.4 million~~$1.4 billion were current ~~(97.7%~~(98.2%). We believe that since our loan portfolio consists primarily of locally originated loans, and since the majority of our borrowers are longer-term customers with lower LTV ratios, we face a relatively low risk of borrower default and delinquency.

While we generally do not originate loans for our own portfolio with long-term fixed rates due to interest rate risk considerations, we can accommodate customer requests for fixed rate loans by originating such loans and then selling them into the secondary market, for which we receive fee income. We may also selectively retain certain of these loans within the banks’ own portfolios where they are non-agency conforming, or where the terms of the loans make them favorable to retain. A portion of the loans we sold into the secondary market were sold with the servicing of those loans retained. The amount of loans serviced for others as of ~~September~~June 30, ~~2017~~2020 and ~~2016~~2019 was ~~$2.6~~$9.2 billion and ~~$1.5~~$7.5 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.

The Government National Mortgage Association ("GNMA") optional repurchase programs allow financial institutions acting as servicers to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution was the original transferor of such loans. At the option of the servicer and without prior authorization from GNMA, the servicer may repurchase such delinquent loans for an amount equal to the remaining principal balance of the loan. Under FASB ASC Topic 860, “Transfers and Servicing,” this buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional repurchase option and the expected benefit of the potential repurchase is more than trivial, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans, regardless of whether the Company intends to exercise the buy-back option. These loans are reported as loans held-for-investment, part of the residential real estate portfolio, with the offsetting liability being reported in accrued interest payable and other liabilities. Rebooked GNMA loans held-for-investment amounted to $240.7 million at June 30, 2020, compared to $95.6 million balance at June 30, 2019.

It is not our current practice to underwrite, and we have no plans to underwrite, subprime, Alt A, no or little documentation loans, or option ARM loans. As of ~~September~~June 30, ~~2017,~~2020, approximately ~~$1.6 million~~$977,000 of our mortgage loans consist of interest-only loans.

Premium finance receivables – commercial. ~~FIFC~~ FIRST Insurance Funding and FIFC Canada originated approximately ~~$1.6~~$2.8 billion in commercial insurance premium finance receivables in the ~~third~~second quarter of ~~2017~~2020 as compared to ~~$1.4~~$2.2 billion of originations in the ~~third~~second quarter of ~~2016.~~2019. During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016, FIFC~~2019, FIRST Insurance Funding and FIFC Canada originated approximately ~~$4.6~~$4.9 billion and ~~$4.3~~$4.1 billion, respectively, in commercial insurance premium finance receivables. ~~FIFC~~FIRST Insurance Funding and FIFC Canada make loans to businesses to finance the insurance premiums they pay on their commercial insurance policies. The loans are originated by working through independent medium and large insurance agents and brokers located throughout the United States and Canada. The insurance premiums financed are primarily for commercial customers’ purchases of liability, property and casualty and other commercial insurance.

This lending involves relatively rapid turnover of the loan portfolio and high volume of loan originations. Because of the indirect nature of this lending through third party agents and brokers and because the borrowers are located nationwide and in Canada, this segment is more susceptible to third party fraud than relationship lending. The Company performs ongoing credit and other reviews of the agents and brokers, and performs various internal audit steps to mitigate against the risk of any fraud. The majority of these loans are purchased by the banks in order to more fully utilize their lending capacity as these loans generally provide the banks with higher yields than alternative investments.

Premium finance receivables—life insurance. ~~FIFC~~ Wintrust Life Finance originated approximately ~~$205.9~~$354.3 million in life insurance premium finance receivables in the ~~third~~second quarter of ~~2017~~2020 as compared to $~~274.1~~230.9 million of originations in the ~~third~~second quarter of ~~2016.~~2019. During the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2020 and ~~2016, FIFC~~2019, Wintrust Life Finance originated approximately ~~$653.1~~$645.2 million and ~~$754.7~~$474.9 million, respectively, in life insurance premium finance receivables. The Company continues to experience increased competition and pricing pressure within the current market. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The life insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In some cases, ~~FIFC~~Wintrust Life Finance may make a loan that has a partially unsecured position.

Consumer and other. Included in the consumer and other loan category is a wide variety of personal and consumer loans to ~~individuals as well as high yielding short-term accounts receivable financing to clients in the temporary staffing industry located throughout the United States.~~individuals. The ~~Banks~~banks originate consumer loans in order to provide a wider range of financial services to their customers.

Consumer loans generally have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk than mortgage loans due to the type and nature of the collateral. Additionally, short-term accounts receivable financing may also involve greater credit risks than generally associated with the loan portfolios of more traditional community banks depending on the marketability of the collateral.

~~Covered loans.~~ Covered loans represent loans acquired through eight FDIC-assisted transactions, all of which occurred prior to 2013. These loans are subject to loss sharing agreements with the FDIC. The FDIC agreed to reimburse the Company for 80% of losses incurred on the purchased loans, foreclosed real estate, and certain other assets. On October 16, 2017, the Company entered into agreements with the FDIC that terminate all existing loss share agreements with the FDIC. The Company will be solely responsible for all future charge-offs, recoveries, gains, losses and expenses related to the previously covered assets as the FDIC will no longer share in those amounts. See Note 3 of the Consolidated Financial Statements presented under Item 1 of this report for a discussion of these acquisitions, including the aggregation of these loans by risk characteristics when determining the initial and subsequent fair value.

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table classifies the loan portfolio ~~excluding covered loans,~~ at ~~September~~June 30, ~~2017~~2020 by date at which the loans reprice or mature, and the type of rate exposure:


As of September 30, 2017	One year or less		From one to five years			Over five years
(Dollars in thousands)	One year or less				Total
As of June 30, 2020												One year or less			From one to five years			Over five years
(In thousands)												One year or less					Total
Commercial			From one to five years
Fixed rate	$	173,603	$	668,211		Over five years	$	442,587		$	1,284,401		$	270,078	From one to five years		$	Over five years		1,782,100		$	822,542	$	2,874,720
Fixed rate - PPP												—			3,335,368			—			3,335,368
Variable rate	5,163,750		6,042			1,841			5,171,633			5,628,606			20,411			127			5,649,144
Total commercial	$	5,337,353	$	674,253		$	444,428		$	6,456,034		$	5,898,684		$	5,137,879		$	822,669		$	11,859,232
Commercial real estate
Fixed rate	405,258		1,769,399			263,307			2,437,964			542,353			2,163,918			431,543			3,137,814
Variable rate	3,932,069		30,085			663			3,962,817			5,021,539			41,392			—			5,062,931
Total commercial real estate	$	4,337,327	$	1,799,484		$	263,970		$	6,400,781		$	5,563,892		$	2,205,310		$	431,543		$	8,200,745
Home equity
Fixed rate	8,126		4,047			62,070			74,243			23,244			4,807			27			28,078
Variable rate	598,726		—			—			598,726			438,518			—			—			438,518
Total home equity	$	606,852	$	4,047		$	62,070		$	672,969		$	461,762		$	4,807		$	27		$	466,596
Residential real estate
Fixed rate	45,854		30,097			143,789			219,740			38,039			11,576			487,530			537,145
Variable rate	54,908		197,720			317,131			569,759			60,409			341,479			488,396			890,284
Total residential real estate	$	100,762	$	227,817		$	460,920		$	789,499		$	98,448		$	353,055		$	975,926		$	1,427,429
Premium finance receivables - commercial
Fixed rate	2,575,106		89,806			—			2,664,912			3,909,677			90,096			1			3,999,774
Variable rate	—		—			—			—			—			—			—			—
Total premium finance receivables - commercial	$	2,575,106	$	89,806		$	—		$	2,664,912		$	3,909,677		$	90,096		$	1		$	3,999,774
Premium finance receivables - life insurance
Fixed rate	11,659		33,294			7,082			52,035			43,954			153,947			21,576			219,477
Variable rate	3,743,439		—			—			3,743,439			5,181,325			—			—			5,181,325
Total premium finance receivables - life insurance	$	3,755,098	$	33,294		$	7,082		$	3,795,474		$	5,225,279		$	153,947		$	21,576		$	5,400,802
Consumer and other
Fixed rate	71,223		14,930			3,178			89,331			22,190			6,456			1,583			30,229
Variable rate	43,781		—			—			43,781			18,096			—			—			18,096
Total consumer and other	$	115,004	$	14,930		$	3,178		$	133,112		$	40,286		$	6,456		$	1,583		$	48,325
Total per category
Fixed rate	3,290,829		2,609,784			922,013			6,822,626			4,849,535			4,212,900			1,764,802			10,827,237
Fixed rate - PPP												—			3,335,368			—			3,335,368
Variable rate	13,536,673		233,847			319,635			14,090,155			16,348,493			403,282			488,523			17,240,298
Total loans, net of unearned income, excluding covered loans	$	16,827,502	$	2,843,631		$	1,241,648		$	20,912,781
Total loans, net of unearned income												$	21,198,028		$	7,951,550		$	2,253,325		$	31,402,903
Variable Rate Loan Pricing by Index:
Prime	$	2,891,012																			$	2,164,995
One- month LIBOR	6,631,241																				8,661,027
Three- month LIBOR	473,085																				301,327
Twelve- month LIBOR	3,663,204																				5,846,946
Other	431,613																				266,003
Total variable rate	$	14,090,155																			$	17,240,298

Past Due Loans and Non-Performing Assets

Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, the Company operates a credit risk rating system under which our credit management personnel assign a credit risk rating to each loan at the time of origination and review loans on a regular basis to determine each loan’s credit risk rating on a scale of 1 through 10 with higher scores indicating higher risk. The credit risk rating structure used is shown below:



1 Rating —		Minimal Risk (Loss Potential – none or extremely low) (Superior asset quality, excellent liquidity, minimal leverage)

2 Rating —		Modest Risk (Loss Potential demonstrably low) (Very good asset quality and liquidity, strong leverage capacity)

3 Rating —		Average Risk (Loss Potential low but no longer refutable) (Mostly satisfactory asset quality and liquidity, good leverage capacity)

4 Rating —		Above Average Risk (Loss Potential variable, but some potential for deterioration) (Acceptable asset quality, little excess liquidity, modest leverage capacity)

5 Rating —		Management Attention Risk (Loss Potential moderate if corrective action not taken) (Generally acceptable asset quality, somewhat strained liquidity, minimal leverage capacity)

6 Rating —		Special Mention (Loss Potential moderate if corrective action not taken) (Assets in this category are currently protected, potentially weak, but not to the point of substandard classification)

7 Rating —		Substandard Accrual (Loss Potential distinct possibility that the bank may sustain some loss, but no discernable impairment) (Must have well defined weaknesses that jeopardize the liquidation of the debt)

8 Rating —		Substandard Non-accrual (Loss Potential well documented probability of loss, including potential impairment) (Must have well defined weaknesses that jeopardize the liquidation of the debt)

9 Rating —		Doubtful (Loss Potential extremely high) (These assets have all the weaknesses in those classified “substandard” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly improbable)

10 Rating —		Loss (fully charged-off) (Loans in this category are considered fully uncollectible.)

Each loan officer is responsible for monitoring his or her loan portfolio, recommending a credit risk rating for each loan in his or her portfolio and ensuring the credit risk ratings are appropriate. These credit risk ratings are then ratified by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including a borrower’s financial strength, cash flow coverage, collateral protection and guarantees. A third party loan review firm independently reviews a significant portion of the loan portfolio at each of the Company’s subsidiary banks to evaluate the appropriateness of the management-assigned credit risk ratings. These ratings are subject to further review at each of our bank subsidiaries by the applicable regulatory authority, including the FRB of Chicago ~~the OCC, the State of Illinois~~ and the ~~State of Wisconsin~~OCC, and are also reviewed by our internal audit staff.

The Company’s ~~problem loan reporting~~Problem Loan Reporting system ~~automatically~~ includes all loans with credit risk ratings of 6 through 9. This system is designed to provide an on-going detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible orand, as a result, no longer share similar risk characteristics as its related pool. If that is the case, the individual loan is considered collateral dependent and individually assessed for an ~~impairment reserve may be established.~~allowance for credit loss. The Company’s ~~impairment analysis~~individual assessment utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions. An appraisal is ordered at least once a year for these loans, or more often if market conditions dictate. In the event that the underlying value of the collateral cannot be easily determined, a detailed valuation methodology is prepared by the Managed Asset Division. A summary of this analysis is provided to the directors’ loan committee of the bank which originated the credit for approval of a charge-off, if necessary.

Through the credit risk rating process, loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to non-accrual status or a ~~charge-off or the establishment of a specific impairment reserve. In the event a collateral shortfall is identified during the credit review process,~~charge-off. If the Company will work with the borrower for a principal reduction and/or a pledge of additional collateral and/or additional guarantees. In the event that these options are not available, the loan may be subject to a downgrade of the credit risk rating. If we determinedetermines that a loan amount or portion thereof is uncollectible, the loan’s credit risk rating is immediately downgraded to an 8

or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The ~~Managed Asset Division~~Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

The Company’s approach to workout plans and restructuring loans is built on the credit-risk rating process. A modification of a loan with an existing credit risk rating of 6 or worse or a modification of any other credit, which will result in a restructured credit risk rating of 6 or worse must be reviewed for TDR classification. In that event, our Managed Assets Division conducts an overall credit and collateral review. A modification of a loan is considered to be a TDR if both (1) the borrower is experiencing financial difficulty and (2) for economic or legal reasons, the bank grants a concession to a borrower that it would not otherwise consider. The modification of a loan where the credit risk rating is 5 or better both before and after such modification is not considered to be a TDR. Based on the Company’s credit risk rating system, it considers that borrowers whose credit risk rating is 5 or better are not experiencing financial difficulties and therefore, are not considered TDRs.

TDRs ~~which~~ are ~~by definition considered impaired loans, are reviewed~~individually assessed at the time of the modification and on a quarterly basis to ~~determine if a specific reserve is needed.~~measure an allowance for credit loss. The carrying amount of the loan is compared to the expected payments to be received, discounted at the ~~loan’s~~loan's original rate, or for collateral dependent loans, to the fair value of the ~~collateral less the estimated cost to sell.~~collateral. Any shortfall is recorded as a ~~specific~~ reserve.

For non-TDR loans, if based on current information and events, it is probable that the Company will be unable to collect all amounts due to it according to the contractual terms of the loan agreement, a loan is ~~considered impaired, and a specific impairment reserve analysis is performed~~individually assessed for measuring the allowance for credit losses and if necessary, a ~~specific~~ reserve is established. In determining the appropriate reserve for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

Non-performing Assets ~~excluding covered assets~~

The following table sets forth ~~Wintrust’s~~the Company's non-performing assets and TDRs performing under the contractual terms of the loan agreement ~~excluding covered assets and PCI loans,~~ as of the dates ~~shown:~~shown. Prior to January 1, 2020, PCI loans were aggregated into pools by common risk characteristics for accounting purposes, including recognition of interest income on a pool basis. As a result of the implementation of CECL, beginning in the first quarter of 2020, PCI loans transitioned to a classification of PCD loans, which no longer maintains the prior pools and related accounting concepts. Recognition of interest income on PCD loans is considered at the individual asset level following the Company's accrual policies, instead of based upon the entire pool of loans. Due to the first quarter of 2020 adoption of CECL, the Company included $30.3 million and $35.4 million in non-performing PCD loans in total non-performing loans as of June 30, 2020 and March 31, 2020, respectively.


(Dollars in thousands)	September 30, 2017			June 30, 2017			December 31, 2016			September 30, 2016			June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2019
Loans past due greater than 90 days and still accruing ⁽¹⁾:
Commercial	$	—		$	—		$	174		$	—		$	1,374		$	1,241		$	—		$	488
Commercial real estate	—			—			—			—			—			516			—			—
Home equity	—			—			—			—			—			—			—			—
Residential real estate	—			179			—			—			—			605			—			—
Premium finance receivables—commercial	9,584			5,922			7,962			7,754			35,638			16,505			11,517			6,940
Premium finance receivables—life insurance	6,740			1,046			3,717			—			—			—			—			—
Consumer and other	159			63			144			60			156			78			163			172
Total loans past due greater than 90 days and still accruing	16,483			7,210			11,997			7,814			37,168			18,945			11,680			7,600
Non-accrual loans ⁽²⁾:
Commercial	13,931			10,191			15,875			16,418			42,882			49,916			37,224			47,604
Commercial real estate	14,878			16,980			21,924			22,625			64,557			62,830			26,113			20,875
Home equity	7,581			9,482			9,761			9,309			7,261			7,243			7,363			8,489
Residential real estate	14,743			14,292			12,749			12,205			19,529			18,965			13,797			14,236
Premium finance receivables—commercial	9,827			10,456			14,709			14,214			16,445			21,058			20,590			13,833
Premium finance receivables—life insurance	—			—			—			—			15			—			590			590
Consumer and other	540			439			439			543			427			403			231			220
Total non-accrual loans	61,500			61,840			75,457			75,314			151,116			160,415			105,908			105,847
Total non-performing loans:
Total non-performing loans⁽³⁾:
Commercial	13,931			10,191			16,049			16,418			44,256			51,157			37,224			48,092
Commercial real estate	14,878			16,980			21,924			22,625			64,557			63,346			26,113			20,875
Home equity	7,581			9,482			9,761			9,309			7,261			7,243			7,363			8,489
Residential real estate	14,743			14,471			12,749			12,205			19,529			19,570			13,797			14,236
Premium finance receivables—commercial	19,411			16,378			22,671			21,968			52,083			37,563			32,107			20,773
Premium finance receivables—life insurance	6,740			1,046			3,717			—			15			—			590			590
Consumer and other	699			502			583			603			583			481			394			392
Total non-performing loans	$	77,983		$	69,050		$	87,454		$	83,128		$	188,284		$	179,360		$	117,588		$	113,447
Other real estate owned	17,312			16,853			17,699			19,933			2,409			2,701			5,208			9,920
Other real estate owned—from acquisitions	20,066			22,508			22,583			15,117			7,788			8,325			9,963			9,917
Other repossessed assets	301			532			581			428			—			—			4			263
Total non-performing assets	$	115,662		$	108,943		$	128,317		$	118,606		$	198,481		$	190,386		$	132,763		$	133,547
TDRs performing under the contractual terms of the loan agreement	26,972			28,008			29,911			29,440
Accruing TDRs not included within non-performing assets													48,609			47,049			36,725			45,862
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial	0.22		%	0.16		%	0.27		%	0.28		%	0.37		%	0.57		%	0.45		%	0.58		%
Commercial real estate	0.23			0.27			0.35			0.38			0.79			0.77			0.33			0.29
Home equity	1.13			1.38			1.34			1.25			1.56			1.46			1.44			1.61
Residential real estate	1.87			1.90			1.81			1.84			1.37			1.42			1.02			1.27
Premium finance receivables—commercial	0.73			0.62			0.91			0.90			1.30			1.08			0.93			0.62
Premium finance receivables—life insurance	0.18			0.03			0.11			—			0.00			0.00			0.01			0.01
Consumer and other	0.53			0.44			0.48			0.50			1.21			1.29			0.36			0.36
Total non-performing loans	0.37		%	0.33		%	0.44		%	0.44		%	0.60		%	0.65		%	0.44		%	0.45		%
Total non-performing assets, as a percentage of total assets	0.42		%	0.40		%	0.50		%	0.47		%	0.46		%	0.49		%	0.36		%	0.40		%
Allowance for loan losses as a percentage of total non-performing loans	170.70		%	187.68		%	139.83		%	141.58		%	166.51		%	120.46		%	133.37		%	141.41		%


(1)	As of the dates shown no TDRs were past due greater than 90 days and still accruing interest.


(2)	Non-accrual loans included TDRs totaling ~~$6.2~~$34.9 million, ~~$5.1~~$36.6 million, ~~$11.8~~$27.1 million and ~~$14.8~~$30.1 million as of ~~September 30, 2017,~~ June 30, ~~2017,~~2020, March 31, 2020, December 31, ~~2016~~2019 and ~~September~~June 30, ~~2016~~2019, respectively.


(3)	Includes PCD loans. As a result of the adoption of ASU 2016-13, the Company transitioned all previously classified PCI loans to PCD loans effective January 1, 2020.

State emergency orders and pandemic delays on processing of return premiums, which serve as our collateral, contributed to the increase in 90 day past due premium finance receivables. 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 upon the ultimate resolution of these credits.While the ultimate effect of the COVID-19 pandemic on non-performing assets remains unknown, significant increases may occur in subsequent periods. Management will continue to actively review and monitor its loan portfolios, in an effort to identify problem credits in a timely manner. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation -Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

Loan Portfolio Aging

The tables below show the aging of the Company’s loan portfolio at ~~September 30, 2017 and~~ June 30, ~~2017:~~2020 and March 31, 2020:

Nonaccrual 90+ days
and still
accruing 60-89
days past
due 30-59
days past
due Current Total Loans
As of September 30, 2017
(Dollars in thousands)
Loan Balances:
Commercial
Commercial, industrial and other $ 12,281
$ —
$ 3,161
$ 13,710
$ 4,091,381
$ 4,120,533
Franchise —
—
—
16,719
836,997
853,716
Mortgage warehouse lines of credit —
—
—
312
194,058
194,370
Asset-based lending 1,141
—
1,533
4,515
889,147
896,336
Leases 509
—
281
1,194
379,410
381,394
PCI - commercial ⁽¹⁾
—
1,489
61
—
8,135
9,685
Total commercial 13,931
1,489
5,036
36,450
6,399,128
6,456,034
Commercial real estate
Construction 1,607
—
366
2,064
669,940
673,977
Land 196
—
—
—
102,557
102,753
Office 5,148
—
—
1,220
874,583
880,951
Industrial 1,848
—
137
438
834,062
836,485
Retail 2,200
—
3,030
3,674
925,335
934,239
Multi-family 569
—
68
3,058
861,290
864,985
Mixed use and other 3,310
—
843
3,561
1,966,601
1,974,315
PCI - commercial real estate ⁽¹⁾
—
8,443
1,394
2,940
120,299
133,076
Total commercial real estate 14,878
8,443
5,838
16,955
6,354,667
6,400,781
Home equity 7,581
—
446
2,590
662,352
672,969
Residential real estate, including PCI 14,743
1,120
2,055
165
771,416
789,499
Premium finance receivables
Commercial insurance loans 9,827
9,584
7,421
9,966
2,628,114
2,664,912
Life insurance loans —
6,740
946
6,937
3,571,388
3,586,011
PCI - life insurance loans ⁽¹⁾
—
—
—
—
209,463
209,463
Consumer and other, including PCI 540
221
242
685
131,424
133,112
Total loans, net of unearned income, excluding covered loans $ 61,500
$ 27,597
$ 21,984
$ 73,748
$ 20,727,952
$ 20,912,781
Covered loans 1,936
2,233
1,074
45
41,313
46,601
Total loans, net of unearned income $ 63,436
$ 29,830
$ 23,058
$ 73,793
$ 20,769,265
$ 20,959,382



	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
As of June 30, 2020
(Dollars in thousands)
Loan Balances:
Commercial
Commercial, industrial and other, excluding PPP loans	$	42,882	$	1,374	$	8,952	$	23,720	$	8,446,936	$	8,523,864
Commercial PPP loans	—		—		—		—		3,335,368		3,335,368
Commercial real estate
Construction and development	9,829		—		1,944		17,313		1,310,962		1,340,048
Non-construction	54,728		—		24,536		58,215		6,723,218		6,860,697
Home equity	7,261		—		—		1,296		458,039		466,596
Residential real estate	19,529		—		1,506		4,400		1,401,994		1,427,429
Premium finance receivables
Commercial insurance loans	16,445		35,638		35,967		46,556		3,865,168		3,999,774
Life insurance loans	15		—		6,386		14,604		5,379,797		5,400,802
Consumer and other	427		156		4		281		47,457		48,325
Total loans, net of unearned income	$	151,116	$	37,168	$	79,295	$	166,385	$	30,968,939	$	31,402,903

Aging as a % of Loan Balance:
As of September 30, 2017 Nonaccrual
90+ days
and still
accruing

60-89
days past
due

30-59
days past
due
Current Total Loans
Commercial
Commercial, industrial and other 0.3 % — % 0.1 % 0.3 % 99.3 % 100.0 %
Franchise —
—
—
2.0
98.0
100.0
Mortgage warehouse lines of credit —
—
—
0.2
99.8
100.0
Asset-based lending 0.1
—
0.2
0.5
99.2
100.0
Leases 0.1
—
0.1
0.3
99.5
100.0
PCI - commercial ⁽¹⁾
—
15.4
0.6
—
84.0
100.0
Total commercial 0.2
—
0.1
0.6
99.1
100.0
Commercial real estate
Construction 0.2
—
0.1
0.3
99.4
100.0
Land 0.2
—
—
—
99.8
100.0
Office 0.6
—
—
0.1
99.3
100.0
Industrial 0.2
—
—
0.1
99.7
100.0
Retail 0.2
—
0.3
0.4
99.1
100.0
Multi-family 0.1
—
—
0.4
99.5
100.0
Mixed use and other 0.2
—
—
0.2
99.6
100.0
PCI - commercial real estate ⁽¹⁾
—
6.3
1.0
2.2
90.5
100.0
Total commercial real estate 0.2
0.1
0.1
0.3
99.3
100.0
Home equity 1.1
—
0.1
0.4
98.4
100.0
Residential real estate, including PCI 1.9
0.1
0.3
—
97.7
100.0
Premium finance receivables
Commercial insurance loans 0.4
0.4
0.3
0.4
98.5
100.0
Life insurance loans —
0.2
—
0.2
99.6
100.0
PCI - life insurance loans ⁽¹⁾
—
—
—
—
100.0
100.0
Consumer and other, including PCI 0.4
0.2
0.2
0.5
98.7
100.0
Total loans, net of unearned income, excluding covered loans 0.3 % 0.1 % 0.1 % 0.4 % 99.1 % 100.0 %
Covered loans 4.2
4.8
2.3
0.1
88.6
100.0
Total loans, net of unearned income 0.3 % 0.1 % 0.1 % 0.4 % 99.1 % 100.0 %



	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
As of March 31, 2020
(Dollars in thousands)
Loan Balances:⁽¹⁾
Commercial
Commercial, industrial and other, excluding PPP loans	$	49,916	$	1,241	$	8,873	$	86,129	$	8,879,727	$	9,025,886
Commercial PPP loans	—		—		—		—		—		—
Commercial real estate
Construction and development	7,422		147		1,859		16,938		1,274,987		1,301,353
Non-construction	55,408		369		8,353		58,130		6,761,918		6,884,178
Home equity	7,243		—		214		2,096		485,102		494,655
Residential real estate	18,965		605		345		28,983		1,328,491		1,377,389
Premium finance receivables
Commercial insurance loans	21,058		16,505		10,327		32,811		3,384,354		3,465,055
Life insurance loans	—		—		2,403		37,374		5,181,862		5,221,639
Consumer and other	403		78		625		207		35,853		37,166
Total loans, net of unearned income	$	160,415	$	18,945	$	32,999	$	262,668	$	27,332,294	$	27,807,321

(1)

Includes PCD loans and, for periods prior to the adoption of ASU 2016-13, purchased credit impaired ("PCI") loans. PCI loans ~~represent~~represented loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings disclosed in comparative periods are based upon contractually required payments. As a result of the adoption of ASU 2016-13, the Company transitioned all previously classified PCI loans to PCD loans effective January 1, 2020.

Nonaccrual 90+ days
and still
accruing 60-89
days past
due 30-59
days past
due Current Total Loans
As of June 30, 2017
(Dollars in thousands)
Loan Balances:
Commercial
Commercial, industrial and other $ 8,720
$ —
$ 5,917
$ 12,658
$ 4,067,237
$ 4,094,532
Franchise —
—
—
—
838,394
838,394
Mortgage warehouse lines of credit —
—
—
2,361
232,282
234,643
Asset-based lending 936
—
983
7,293
862,694
871,906
Leases 535
—
—
60
356,009
356,604
PCI - commercial ⁽¹⁾
—
1,572
162
—
8,476
10,210
Total commercial 10,191
1,572
7,062
22,372
6,365,092
6,406,289
Commercial real estate
Construction 2,408
—
—
—
707,179
709,587
Land 202
—
—
6,455
105,496
112,153
Office 4,806
—
607
7,725
874,546
887,684
Industrial 2,193
—
—
709
789,889
792,791
Retail 1,635
—
—
15,081
903,778
920,494
Multi-family 354
—
—
1,186
813,058
814,598
Mixed use and other 5,382
—
713
7,590
2,005,265
2,018,950
PCI - commercial real estate ⁽¹⁾
—
8,768
322
3,303
133,844
146,237
Total commercial real estate 16,980
8,768
1,642
42,049
6,333,055
6,402,494
Home equity 9,482
—
855
2,858
676,288
689,483
Residential real estate, including PCI 14,292
775
1,273
300
746,170
762,810
Premium finance receivables
Commercial insurance loans 10,456
5,922
4,951
11,713
2,615,344
2,648,386
Life insurance loans —
1,046
—
16,977
3,474,686
3,492,709
PCI - life insurance loans⁽¹⁾
—
—
—
—
226,334
226,334
Consumer and other, including PCI 439
125
331
515
113,417
114,827
Total loans, net of unearned income, excluding covered loans $ 61,840
$ 18,208
$ 16,114
$ 96,784
$ 20,550,386
$ 20,743,332
Covered loans 1,961
2,504
113
598
44,943
50,119
Total loans, net of unearned income $ 63,801
$ 20,712
$ 16,227
$ 97,382
$ 20,595,329
$ 20,793,451

Aging as a % of Loan Balance:
As of June 30, 2017
Nonaccrual 90+ days
and still
accruing 60-89
days past
due 30-59
days past
due Current Total Loans
Commercial
Commercial, industrial and other 0.2 % — % 0.1 % 0.3 % 99.4 % 100.0 %
Franchise —
—
—
—
100.0
100.0
Mortgage warehouse lines of credit —
—
—
1.0
99.0
100.0
Asset-based lending 0.1
—
0.1
0.8
99.0
100.0
Leases 0.2
—
—
—
99.8
100.0
PCI - commercial ⁽¹⁾
—
15.4
1.6
—
83.0
100.0
Total commercial 0.2
—
0.1
0.3
99.4
100.0
Commercial real estate
Construction 0.3
—
—
—
99.7
100.0
Land 0.2
—
—
5.8
94.0
100.0
Office 0.5
—
0.1
0.9
98.5
100.0
Industrial 0.3
—
—
0.1
99.6
100.0
Retail 0.2
—
—
1.6
98.2
100.0
Multi-family —
—
—
0.1
99.9
100.0
Mixed use and other 0.3
—
—
0.4
99.3
100.0
PCI - commercial real estate ⁽¹⁾
—
6.0
0.2
2.3
91.5
100.0
Total commercial real estate 0.3
0.1
—
0.7
98.9
100.0
Home equity 1.4
—
0.1
0.4
98.1
100.0
Residential real estate, including PCI 1.9
0.1
0.2
—
97.8
100.0
Premium finance receivables
Commercial insurance loans 0.4
0.2
0.2
0.4
98.8
100.0
Life insurance loans —
—
—
0.5
99.5
100.0
PCI - life insurance loans ⁽¹⁾
—
—
—
—
100.0
100.0
Consumer and other, including PCI 0.4
0.1
0.3
0.4
98.8
100.0
Total loans, net of unearned income, excluding covered loans 0.3 % 0.1 % 0.1 % 0.5 % 99.0 % 100.0 %
Covered loans 3.9
5.0
0.2
1.2
89.7
100.0
Total loans, net of unearned income 0.3 % 0.1 % 0.1 % 0.5 % 99.0 % 100.0 %


~~(1)~~	~~PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments.~~

As of ~~September~~June 30, ~~2017, $22.0~~2020, $79.3 million of all loans, ~~excluding covered loans,~~ or ~~0.1%~~0.3%, were 60 to 89 days past due and ~~$73.7~~$166.4 million of all loans or ~~0.4%~~0.5%, were 30 to 59 days (or one payment) past due. As of ~~June 30, 2017, $16.1~~March 31, 2020, $33.0 million of all ~~loans, excluding covered~~ loans or 0.1%, were 60 to 89 days past due and ~~$96.8~~$262.7 million, or ~~0.5%~~0.9%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company's home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at ~~September~~June 30, ~~2017~~2020 that were current with regard to the contractual terms of the loan agreement represent ~~98.4%~~98.2% of the total home equity

portfolio. Residential real estate loans at ~~September~~June 30, ~~2017~~2020 that were current with regards to the contractual terms of the loan agreements comprise ~~97.7%~~98.2% of total residential real estate loans outstanding.

Non-performing Loans Rollforward

The table below presents a summary of non-performing loans ~~excluding covered loans and PCI loans,~~ for the periods presented:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,			September 30,			September 30,			September 30,			June 30,			June 30,			June 30,			June 30,
(Dollars in thousands)	2017			2016			2017			2016
(In thousands)													2020			2019			2020			2019
Balance at beginning of period	$	69,050		$	88,119		$	87,454		$	84,057		$	179,360		$	117,586		$	117,588		$	113,234
Additions, net	10,622			9,522			30,119			32,039
Additions from becoming non-performing in the respective period													20,803			20,567			52,998			44,597
Additions from the adoption of ASU 2016-13													—			—			37,285			—
Return to performing status	(603		)	(231		)	(3,170		)	(3,110		)	(2,566		)	(47		)	(3,052		)	(14,124		)
Payments received	(6,633		)	(5,235		)	(22,931		)	(13,353		)	(11,201		)	(5,438		)	(19,150		)	(9,462		)
Transfer to OREO and other repossessed assets	(1,072		)	(2,270		)	(5,276		)	(6,168		)	—			(1,486		)	(1,297		)	(1,568		)
Charge-offs	(2,295		)	(3,353		)	(7,919		)	(6,829		)	(12,884		)	(16,817		)	(15,435		)	(20,809		)
Net change for niche loans ⁽¹⁾	8,914			(3,424		)	(294		)	(3,508		)	14,772			(918		)	19,347			1,579
Balance at end of period	$	77,983		$	83,128		$	77,983		$	83,128		$	188,284		$	113,447		$	188,284		$	113,447


(1)	This includes activity for premium finance receivables and indirect consumer loans.

Prior to January 1, 2020, PCI loans ~~are~~were excluded from non-performing loans as they ~~continue~~continued to earn interest income from the related accretable yield, independent of performance with contractual terms of the loan. ~~See Note 7~~As a result of the ~~Consolidated Financial Statements~~adoption of ASU 2016-13 effective January 1, 2020, the Company transitioned all previously classified PCI loans to PCD loans, which no longer maintain the prior pools and related accounting concepts. Specifically, recognition of interest income on PCD loans is considered at the individual asset level following the Company's accrual policies, instead of based upon the entire pool of loans. As such, after adoption, the Company includes PCD loans in ~~Item 1 for further discussion of~~total non-performing ~~loans and the loan aging during the respective periods.~~loans.

Allowance for ~~Loan~~Credit Losses

The allowance for ~~loan~~credit losses, specifically the allowance for loans losses and the allowance for unfunded commitment losses, represents management’s estimate of lifetime expected credit losses in the ~~probable and reasonably estimable~~ loan ~~losses that our loan portfolio is expected to incur.~~portfolio. The allowance for ~~loan~~credit losses is determined quarterly using a methodology that incorporates important risk characteristics of each loan, as described below under “How We Determine the Allowance for Credit Losses” in this Item 2. This process is subject to review at each of our bank subsidiaries by the applicable regulatory authority, including the FRB of Chicago, ~~the OCC, the State of Illinois~~ and the ~~State of Wisconsin.~~OCC.

Management determined that the allowance for ~~loan~~credit losses was appropriate at ~~September~~June 30, ~~2017,~~2020, and that the loan portfolio is well diversified and well secured, without undue concentration in any specific risk area. While this process involves a high degree of management judgment, the allowance for credit losses is based on a comprehensive, well documented, and consistently applied analysis of the Company’s loan portfolio. This analysis takes into consideration all available information existing as of the financial statement date, including environmental factors such as economic, industry, geographical and political ~~factors.~~factors, when considered applicable. The relative level of allowance for credit losses is reviewed and compared to industry peers. This review encompasses levels of total non-performing loans, portfolio mix, portfolio concentrations, current geographic risks, ~~and~~ overall levels of net ~~charge-offs.~~charge-offs and expectations of future forecasts. Historical trending of both the Company’s results and the industry peers is also reviewed to analyze comparative significance.

Allowance for Credit Losses ~~excluding covered loans~~

The following table summarizes the activity in our allowance for credit losses, specifically related to loans and unfunded lending-related commitments, during the periods indicated.


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(Dollars in thousands)	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Allowance for loan losses at beginning of period	$	129,591		$	114,356		$	122,291		$	105,400
Allowance for credit losses at beginning of period													$	253,412		$	159,622		$	158,461		$	154,164
Cumulative effect adjustment from the adoption of ASU 2016-13													—			—			47,344			—
Provision for credit losses	7,942			9,741			22,210			27,433			135,058			24,580			188,023			35,204
Other adjustments	(39		)	(112		)	(125		)	(324		)	42			(11		)	(31		)	(38		)
Reclassification to allowance for unfunded lending-related commitments	94			(579		)	62			(700		)
Charge-offs:
Commercial	2,265			3,469			3,819			4,861			5,686			17,380			7,839			17,883
Commercial real estate	989			382			3,235			1,555			7,224			326			7,794			4,060
Home equity	968			574			3,224			3,672			239			690			1,240			778
Residential real estate	267			134			742			1,320			293			287			694			290
Premium finance receivables—commercial	1,716			1,959			5,021			6,350
Premium finance receivables—life insurance	—			—			—			—
Premium finance receivables													3,434			5,009			6,618			7,219
Consumer and other	213			389			522			720			99			136			227			238
Total charge-offs	6,418			6,907			16,563			18,478			16,975			23,828			24,412			30,468
Recoveries:
Commercial	801			176			1,635			926			112			289			495			607
Commercial real estate	323			364			1,153			1,029			493			247			756			727
Home equity	178			65			387			184			46			68			340			130
Residential real estate	55			61			287			204			30			140			90			169
Premium finance receivables—commercial	499			456			1,515			1,876
Premium finance receivables—life insurance	—			—			—			—
Premium finance receivables													833			734			1,943			1,290
Consumer and other	93			72			267			143			58			60			100			116
Total recoveries	1,949			1,194			5,244			4,362			1,572			1,538			3,724			3,039
Net charge-offs	(4,469		)	(5,713		)	(11,319		)	(14,116		)	(15,403		)	(22,290		)	(20,688		)	(27,429		)
Allowance for loan losses at period end	$	133,119		$	117,693		$	133,119		$	117,693
Allowance for unfunded lending-related commitments at period end	1,276			1,648			1,276			1,648
Allowance for credit losses at period end	$	134,395		$	119,341		$	134,395		$	119,341		$	373,109		$	161,901		$	373,109		$	161,901
Annualized net charge-offs by category as a percentage of its own respective category’s average:
Commercial	0.09		%	0.24		%	0.05		%	0.10		%	0.20		%	0.85		%	0.15		%	0.44		%
Commercial real estate	0.04			0.00			0.04			0.01			0.33			0.00			0.17			0.10
Home equity	0.46			0.27			0.54			0.61			0.16			0.47			0.37			0.25
Residential real estate	0.08			0.03			0.06			0.14			0.09			0.06			0.10			0.03
Premium finance receivables—commercial	0.18			0.24			0.18			0.25
Premium finance receivables—life insurance	0.00			0.00			0.00			0.00
Premium finance receivables													0.12			0.22			0.11			0.16
Consumer and other	0.37			0.92			0.27			0.56			0.25			0.30			0.39			0.23
Total loans, net of unearned income, excluding covered loans	0.08		%	0.12		%	0.07		%	0.10		%
Total loans, net of unearned income													0.20		%	0.36		%	0.15		%	0.23		%
Net charge-offs as a percentage of the provision for credit losses	56.27		%	58.65		%	50.96		%	51.46		%	11.41		%	90.68		%	11.00		%	77.92		%
Loans at period-end, excluding covered loans	$	20,912,781		$	19,101,261
Loans at period-end													$	31,402,903		$	25,304,659
Allowance for loan losses as a percentage of loans at period end	0.64		%	0.62		%							1.00		%	0.63		%
Allowance for credit losses as a percentage of loans at period end	0.64		%	0.62		%
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end													1.19			0.64
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end, excluding PPP loans													1.33			0.64

The allowance for credit losses, ~~excluding the allowance for covered loan losses,~~as related to loans and lending-related commitments, is comprised of an allowance for loan losses, which is determined with respect to loans that we have originated, and an allowance for ~~lending-related commitments.~~unfunded commitment losses. A separate allowance for held-to-maturity securities losses is measured related to such debt securities portfolio. Our allowance for ~~lending-related commitments~~unfunded commitment losses is determined with respect to funds that we have committed to lend but for which funds have not yet been disbursed and is computed using a methodology similar to that used to determine the allowance for loan losses. The allowance for unfunded lending-related commitments totaled ~~$1.3~~$59.6 million and ~~$1.6~~$1.5 million as of ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016,~~2019, respectively.

Additions to the allowance for ~~loan~~credit losses are charged to earnings through the provision for credit losses. Charge-offs represent the amount of loans that have been determined to be uncollectible during a given period, and are deducted from the allowance for ~~loan~~credit losses, and recoveries represent the amount of collections received from loans that had previously been charged off, and are credited to the allowance for ~~loan~~credit losses. See Note 7 of the Consolidated Financial Statements presented under Item 1 of this report for further discussion of activity within the allowance for ~~loan~~credit losses during the period and the relationship with respective loan balances for each loan category and the total loan ~~portfolio, excluding covered loans.~~portfolio.

How We Determine the Allowance for Credit Losses

The allowance for ~~loan~~credit losses ~~includes an element for estimated probable but undetected losses and for imprecision in the credit~~is measured on a collective or pooled basis by loans that share similar risk ~~models used to calculate the allowance.~~characteristics. If the loan ~~is impaired,~~no longer exhibits risk characteristics similar to that of a pool, typically due to credit deterioration of the related borrower, the Company analyzes the loan for purposes of ~~calculating our~~individually assessing a specific ~~impairment reserves~~allowance for credit loss as part of the Problem Loan Reporting system review. A ~~general~~separate reserve is ~~separately determined~~collectively measured for loans ~~not considered impaired.~~continuing to share risk characteristics and, as a result, remaining in the pools. See Note 7 of the Consolidated Financial Statements presented under Item 1 of this report for further discussion of the ~~specific impairment reserve and general reserve as it relates to the~~ allowance for credit losses measurement process.

Collective Measurement

The allowance for credit losses is measured on a collective or pooled basis when similar risk characteristics exist, based upon the segmentation discussed above. The Company utilizes modeling methodologies that estimate lifetime credit loss rates on each ~~loan category~~pool, including methodologies estimating the probability of default and loss given default on specific segments. Historical credit loss history is adjusted for reasonable and supportable forecasts developed by the ~~total loan portfolio, excluding covered loans.~~Company on a quantitative or qualitative basis. Reasonable and supportable forecasts consider the macroeconomic factors that are most relevant to evaluating and predicting expected credit losses in the Company's financial assets. Currently, the Company utilizes an eight quarter forecast period using a single macroeconomic scenario provided by a third-party and reviewed within the Company's governance structure. For periods beyond the ability to develop reasonable and supportable forecasts, the Company reverts to historical loss rates at an input level, straight-line over a four quarter reversion period. Expected credit losses are measured over the contractual term of the financial asset with consideration of expected prepayments. Expected extensions, renewals or modifications of the financial asset are only considered when either 1) the expected extension, renewal or modification is contained within the existing agreement and is not unconditionally cancelable, or 2) the expected extension, renewal or modification is reasonably expected to result in a TDR. The methodologies discussed above are applied to both current asset balances on the Company's Consolidated Statements of Condition and off-balance sheet commitments (i.e. unfunded lending-related commitments).

~~Specific Impairment Reserves:~~Individual Assessment

Loans with a credit risk rating of a 6 through 9 are reviewed on a monthly basis to determine if (a) an amount is deemed uncollectible (a charge-off) or (b) it is probable that the Company will be unable to collect amounts due in accordance with the original contractual terms of the loan. In cases in which collectability is not probable, the loan ~~(impaired loan).~~is considered to no longer exhibit shared risk characteristics of a pool and as a result, is individually assessed for allowance for credit losses measurement purposes. If a loan is ~~impaired,~~individually assessed, the carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for foreclosure-probable and collateral dependent loans, to the fair value of the collateral less the estimated cost to ~~sell.~~sell, when appropriate under accounting rules. Any shortfall is recorded as a specific ~~impairment reserve.~~

At September 30, 2017, the Company had $78.6 million of impaired loans with $30.9 million of this balance requiring $7.2 million of specific impairment reserves. At June 30, 2017, the Company had $79.3 million of impaired loans with $29.0 million of this balance requiring $5.6 million of specific impairment reserves. The most significant fluctuations in the recorded investment of impaired loans with specific impairment from June 30, 2017 to September 30, 2017 occurredreserve within the commercial, industrial and other portfolio. The recorded investment and specific impairment reserves in this portfolio increased by $4.3 million and $2.7 million, respectively, which was primarily the result of one loan becoming non-performing and requiring $2.0 million of specific impairment reserves. See Note 7 of the Consolidated Financial Statements presented under Item 1 of this report for further discussion of impaired loans and the related specific impairment reserve.

~~General Reserves:~~

For loans with a credit risk rating of 1 through 7 that are not considered impaired loans, reserves are established based on the type of loan collateral, if any, and the assigned credit risk rating. Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on the average historical loss experience over a six-year period, and consideration of current environmental factors and economic trends, all of which may be susceptible to significant change.

~~We determine this component of~~ the allowance for ~~loan losses by classifying each loan into (i) categories based on the type of collateral that secures the loan (if any), and (ii) one of ten categories based on the~~ credit risk rating of the loan, as described above under “Past Due Loans and Non-Performing Assets” in this Item 2. Each combination of collateral and credit risk rating is then assigned a specific loss factor that incorporates the following factors:losses.

~~historical loss experience;~~

~~changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;~~

~~changes in national, regional, and local economic and business conditions and developments that affect the collectibility of the portfolio;~~

~~changes in the nature and volume of the portfolio and in the terms of the loans;~~

~~changes in the experience, ability, and depth of lending management and other relevant staff;~~

~~changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans;~~

~~changes in the quality of the bank’s loan review system;~~

~~changes in the underlying collateral for collateral dependent loans;~~

~~the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and~~

~~the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the bank’s existing portfolio.~~

In 2017, the Company modified its historical loss experience analysis by incorporating seven-year average loss rate assumptions, for its historical loss experience to capture an extended credit cycle. The current seven-year average loss rate assumption analysis is computed for each of the Company’s collateral codes. The historical loss experience is combined with the specific loss factor for each combination of collateral and credit risk rating which is then applied to each individual loan balance to determine an appropriate general reserve. The historical loss rates are updated on a quarterly basis and are driven by the performance of the portfolio and any changes to the specific loss factors are driven by management judgment and analysis of the factors described above. The Company also analyzes the three-, four-, five- and six-year average historical loss rates on a quarterly basis as a comparison.

Home Equity, ~~and~~ Residential Real Estate ~~Loans:~~and Consumer Loans

The determination of the appropriate allowance for loan losses for home equity, residential real estate and ~~home equity~~consumer loans differs ~~slightly~~ from the process used for commercial and commercial real estate loans. These portfolios utilize the weighted-average remaining maturity ("WARM") methodology. The WARM methodology is an assumption-based approach that utilizes historical loss and prepayment information as the basis to estimate prepayment and credit adjusted contractual cash flows. The Company considers a qualitative factor to adjust historical information for current conditions and reasonable and supportable forecasts. The same credit risk rating system and Problem Loan Reporting ~~system, collateral coding methodology and loss factor assignment~~systems are used. The only significant difference is in how the credit risk ratings are assigned to these loans.

The home equity loan portfolio is reviewed on a loan by loan basis by analyzing current FICO scores of the borrowers, line availability, recent line usage, an approaching maturity and the aging status of the loan. Certain of these factors, or combination of these factors, may cause a portion of the credit risk ratings of home equity loans across all banks to be downgraded. Similar to commercial and commercial real estate loans, once a home equity loan’s credit risk rating is downgraded to a 6 through 9, the Company’s Managed Asset Division reviews and advises the subsidiary banks as to collateral valuations and as to the ultimate resolution of the credits that deteriorate to a non-accrual status to minimize losses.

Residential real estate loans that are downgraded to a credit risk rating of 6 through 9 also enter the problem loan reporting system and have the underlying collateral evaluated by the Managed Assets Division.

Premium Finance ~~Receivables:~~Receivables

The determination of the appropriate allowance for ~~loan~~credit losses for premium finance receivables is ~~based~~an assumption-based approach focusing on ~~the assigned credit risk rating of loans~~historical loss rates in the ~~portfolio. Loss factors are assigned to each risk rating in order to calculate an allowance~~portfolio, adjusted qualitatively for ~~credit losses. The allowance for loan losses for these categories is entirely a general reserve.~~current macroeconomic conditions and reasonable and supportable forecasts.

Methodology in Assessing Impairment and Charge-off Amounts

In determining the amount of ~~impairment~~reserves or charge-offs associated with collateral dependent loans, the Company values the loan generally by starting with a valuation obtained from an appraisal of the underlying collateral and then deducting estimated selling costs, if appropriate, to arrive at a net appraised value. We obtain the appraisals of the underlying collateral typically on an annual basis from one of a pre-approved list of independent, third party appraisal firms. Types of appraisal valuations include “as-is,” “as-complete,” “as-stabilized,” bulk, fair market, liquidation and “retail sellout” values.

In many cases, the Company simultaneously values the underlying collateral by marketing the property to market participants interested in purchasing properties of the same type. If the Company receives offers or indications of interest, we will analyze the price and review market conditions to assess whether in light of such information the appraised value overstates the likely price and that a lower price would be a better assessment of the market value of the property and would enable us to liquidate the collateral. Additionally, the Company takes into account the strength of any guarantees or other credit enhancements, and the ability of the borrower to provide value related to those guarantees in determining the ultimate charge-off or reserve associated with any ~~impaired~~individually assessed loans. Accordingly, the Company may charge-off a loan to a value below the net appraised value if it believes that an expeditious liquidation is desirable

in the circumstance and it has legitimate offers or other indications of interest to support a value that is less than the net appraised value. Alternatively, the Company may carry a loan at a value that is in excess of the appraised value if the Company has a guarantee from a borrower or other credit enhancements that the Company believes has realizable value. In evaluating the strength of any guarantee, the Company evaluates the financial wherewithal of the guarantor, the guarantor’s reputation, and the guarantor’s willingness and desire to work with the Company. The Company then conducts a review of the strength of a guarantee on a frequency established as the circumstances and conditions of the borrower warrant.

In circumstances where the Company has received an appraisal but has no third party offers or indications of interest, the Company may enlist the input of realtors in the local market as to the highest valuation that the realtor believes would result in a liquidation of the property given a reasonable marketing period of approximately 90 days. To the extent that the realtors’ indication of market clearing price under such scenario is less than the net appraised valuation, the Company may take a charge-off on the loan to a valuation that is less than the net appraised valuation.

The Company may also charge-off a loan below the net appraised valuation if the Company holds a junior mortgage position in a piece of collateral whereby the risk to acquiring control of the property through the purchase of the senior mortgage position is deemed to potentially increase the risk of loss upon liquidation due to the amount of time to ultimately market the property and the volatile market conditions. In such cases, the Company may abandon its junior mortgage and charge-off the loan balance in full.

In other cases, the Company may allow the borrower to conduct a “short sale,” which is a sale where the Company allows the borrower to sell the property at a value less than the amount of the loan. Many times, it is possible for the current owner to receive a better price than if the property is marketed by a financial institution which the market place perceives to have a greater desire to liquidate the property at a lower price. To the extent that we allow a short sale at a price below the value indicated by an appraisal, we may take a charge-off beyond the value that an appraisal would have indicated.

Other market conditions may require a reserve to bring the carrying value of the loan below the net appraised valuation such as litigation surrounding the borrower and/or property securing our loan or other market conditions impacting the value of the collateral.

Having determined the net value based on the factors such as those noted above and compared that value to the book value of the loan, the Company arrives at a charge-off amount or a specific reserve included in the allowance for loan losses. In summary, for collateral dependent loans, appraisals are used as the fair value starting point in the estimate of net value. Estimated costs to sell are deducted from the appraised value, when appropriate under current accounting rules, to arrive at the net appraised value.

Although an external appraisal is the primary source of valuation utilized for charge-offs on collateral dependent loans, alternative sources of valuation may become available between appraisal dates. As a result, we may utilize values obtained through these ~~alternating~~alternative sources, which include purchase and sale agreements, legitimate indications of interest, negotiated short sales, realtor price opinions, sale of the note or support from guarantors, as the basis for charge-offs. These alternative sources of value are used only if deemed to be more representative of value based on updated information regarding collateral resolution. In addition, if an appraisal is not deemed current, a discount to appraised value may be utilized. Any adjustments from appraised value to net value are detailed and justified in an impairment analysis, which is reviewed and approved by the Company’s Managed Assets Division.

TDRs

At ~~September~~June 30, ~~2017,~~2020, the Company had ~~$33.2~~$83.5 million in loans modified in TDRs. The ~~$33.2~~$83.5 million in TDRs represents 78278 credits in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay. The balance slightly decreased from $83.6 million representing 263 credits at March 31, 2020 and increased from ~~$33.1~~$76.0 million representing 77182 credits at June 30, ~~2017 and decreased from $44.3 million representing 89 credits at September 30, 2016.~~2019.

Concessions were granted on a case-by-case basis working with these borrowers to find modified terms that would assist them in retaining their businesses or their homes and attempt to keep these loans in an accruing status for the Company. Typical concessions include reduction of the interest rate on the loan to a rate considered lower than market and other modification of terms including forgiveness of a portion of the loan balance, extension of the maturity date, and/or modifications from principal and interest payments to interest-only payments for a certain period. See Note 7 of the Consolidated Financial Statements in Item 1 of this report for further discussion regarding the effectiveness of these modifications in keeping the modified loans current based upon contractual terms.

Subsequent to its restructuring, any TDR that becomes nonaccrual or more than 90 days past-due and still accruing interest will be included in the Company’s non-performing loans. Each TDR was ~~reviewed~~individually assessed when measuring the allowance for ~~impairment~~credit losses at ~~September~~June 30, ~~2017~~2020 and approximately ~~$1.2~~$7.9 million ~~of impairment~~ was ~~present and~~ appropriately reserved for through the Company’s normal reserving

methodology in the Company’s allowance for ~~loan~~credit losses. Additionally, at ~~September~~June 30, ~~2017,~~2020, the Company was committed to lend an additional ~~$408,000~~$114,000 of funds to borrowers under the contractual terms of TDRs.

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


	September 30,			June 30,			September 30,			June 30,		March 31,		June 30,
(Dollars in thousands)	2017			2017			2016
(In thousands)										2020		2020		2019
Accruing TDRs:
Commercial	$	3,774		$	3,886		$	2,285		$	5,338	$	6,500	$	15,923
Commercial real estate	16,475			17,349			22,261			19,106		18,043		12,646
Residential real estate and other	6,723			6,773			4,894			24,165		22,506		17,293
Total accruing TDRs	$	26,972		$	28,008		$	29,440		$	48,609	$	47,049	$	45,862
Non-accrual TDRs: ⁽¹⁾
Commercial	$	2,493		$	1,110		$	2,134		$	20,788	$	17,206	$	21,850
Commercial real estate	1,492			1,839			10,610			8,545		14,420		2,854
Residential real estate and other	2,226			2,134			2,092			5,606		4,962		5,435
Total non-accrual TDRs	$	6,211		$	5,083		$	14,836		$	34,939	$	36,588	$	30,139
Total TDRs:
Commercial	$	6,267		$	4,996		$	4,419		$	26,126	$	23,706	$	37,773
Commercial real estate	17,967			19,188			32,871			27,651		32,463		15,500
Residential real estate and other	8,949			8,907			6,986			29,771		27,468		22,728
Total TDRs	$	33,183		$	33,091		$	44,276		$	83,548	$	83,637	$	76,001
Weighted-average contractual interest rate of TDRs	4.39		%	4.28		%	4.33		%


(1)	Included in total non-performing loans.

TDR Rollforward

The tables below present a summary of TDRs as of ~~September~~June 30, ~~2017~~2020 and ~~September~~June 30, ~~2016,~~2019, and ~~shows~~show the ~~changes~~change in the balance during those periods:


Three Months Ended September 30, 2017 (Dollars in thousands)	Commercial			Commercial Real Estate			Residential Real Estate and Other			Total
Three Months Ended June 30, 2020 (In thousands)													Commercial			Commercial Real Estate			Residential Real Estate and Other			Total
Balance at beginning of period	$	4,996		$	19,188		$	8,907		$	33,091		$	23,706		$	32,463		$	27,468		$	83,637
Additions during the period	1,407			—			256			1,663			3,431			2,082			3,504			9,017
Reductions:
Charge-offs	—			—			(31		)	(31		)	—			(6,069		)	(41		)	(6,110		)
Transferred to OREO and other repossessed assets	—			(160		)	(69		)	(229		)	—			—			—			—
Removal of TDR loan status ⁽¹⁾	—			—			—			—
Payments received	(136		)	(1,061		)	(114		)	(1,311		)	(1,011		)	(825		)	(1,160		)	(2,996		)
Balance at period end	$	6,267		$	17,967		$	8,949		$	33,183		$	26,126		$	27,651		$	29,771		$	83,548



Three Months Ended June 30, 2019 (In thousands)	Commercial			Commercial Real Estate			Residential Real Estate and Other			Total
Balance at beginning of period	$	54,040		$	15,640		$	18,682		$	88,362
Additions during the period	2,454			1,274			5,762			9,490
Reductions:
Charge-offs	(15,607		)	(127		)	128			(15,606		)
Transferred to OREO and other repossessed assets	—			—			—			—
Payments received	(3,114		)	(1,287		)	(1,844		)	(6,245		)
Balance at period end	$	37,773		$	15,500		$	22,728		$	76,001



Six Months Ended June 30, 2020 (In thousands)	Commercial			Commercial Real Estate			Residential Real Estate and Other			Total
Balance at beginning of period	$	18,739		$	16,873		$	28,224		$	63,836
Additions during the period	9,033			18,135			5,646			32,814
Reductions:
Charge-offs	—			(6,069		)	(386		)	(6,455		)
Transferred to OREO and other repossessed assets	—			—			(945		)	(945		)
Payments received	(1,646		)	(1,288		)	(2,768		)	(5,702		)
Balance at period end	$	26,126		$	27,651		$	29,771		$	83,548



Six Months Ended June 30, 2019 (In thousands)	Commercial			Commercial Real Estate			Residential Real Estate and Other			Total
Balance at beginning of period	$	36,319		$	15,447		$	14,336		$	66,102
Additions during the period	21,384			1,576			10,248			33,208
Reductions:
Charge-offs	(15,607		)	(127		)	128			(15,606		)
Transferred to OREO and other repossessed assets	—			—			—			—
Payments received	(4,323		)	(1,396		)	(1,984		)	(7,703		)
Balance at period end	$	37,773		$	15,500		$	22,728		$	76,001


(1)	Loan was previously classified as a TDR and subsequently performed in compliance with the loan's modifiedterms for a period of six months (including over a calendar year-end) at a modified interest rate which represented a market rate at the time of restructuring. Per our TDR policy, the TDR classification is removed.

On March 22, 2020, interagency guidance was issued titled "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effect of COVID-19. Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by the President of the United States under the National Emergencies Act (50 U.S.C 1601 et seq.) terminates. Accordingly, we are offering short-term

modifications made in response to COVID-19 to borrowers who are current and otherwise not past due. These include short-term, 180 days or less, modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are generally insignificant. Modifications qualifying for the exemption from TDR classification totaled approximately $1.7 billion as of June 30, 2020.

The table below presents a summary of all COVID-19 related modified loans as of June 30, 2020, presented by loan category and type of modification:

Three Months Ended September 30, 2016
(Dollars in thousands)
Commercial
Commercial
Real Estate
Residential
Real Estate
and Other
Total
Balance at beginning of period $ 5,408
$ 36,690
$ 7,537
$ 49,635
Additions during the period 28
—
43
71
Reductions:
Charge-offs (761 ) (204 ) —
(965 )
Transferred to OREO and other repossessed assets —
(681 ) (535 ) (1,216 )
Removal of TDR loan status ⁽¹⁾
—
(1,323 ) —
(1,323 )
Payments received (256 ) (1,611 ) (59 ) (1,926 )
Balance at period end $ 4,419
$ 32,871
$ 6,986
$ 44,276



(in thousands)	Interest-only		Full Payment Deferral		Line Increases		Other		Total
Commercial	$	482,477	$	312,012	$	34,009	$	53,592	$	882,090
Commercial real estate	439,125		348,618		—		34,854		822,597
Home equity	—		12,900		—		252		13,152
Residential real estate	—		955		—		—		955
Premium finance receivables	—		1,116		—		11,030		12,146
Consumer and other	—		467		123		—		590
Total loans, net of unearned income	$	921,602	$	676,068	$	34,132	$	99,728	$	1,731,530

Nine Months Ended September 30, 2017
(Dollars in thousands)
Commercial Commercial
Real Estate Residential
Real Estate
and Other Total
Balance at beginning of period $ 6,130
$ 28,146
$ 7,432
$ 41,708
Additions during the period 1,502
1,245
2,639
5,386
Reductions:
Charge-offs (315 ) (925 ) (108 ) (1,348 )
Transferred to OREO and other repossessed assets —
(770 ) (165 ) (935 )
Removal of TDR loan status ⁽¹⁾
(610 ) (2,331 ) —
(2,941 )
Payments received (440 ) (7,398 ) (849 ) (8,687 )
Balance at period end $ 6,267
$ 17,967
$ 8,949
$ 33,183

Nine Months Ended September 30, 2016
(Dollars in thousands)
Commercial Commercial
Real Estate Residential
Real Estate
and Other Total
Balance at beginning of period $ 5,747
$ 38,707
$ 7,399
$ 51,853
Additions during the period 345
8,521
583
9,449
Reductions:
Charge-offs (781 ) (1,038 ) (212 ) (2,031 )
Transferred to OREO and other repossessed assets —
(1,365 ) (535 ) (1,900 )
Removal of TDR loan status ⁽¹⁾
—
(6,479 ) —
(6,479 )
Payments received (892 ) (5,475 ) (249 ) (6,616 )
Balance at period end $ 4,419
$ 32,871
$ 6,986
$ 44,276


~~(1)~~	~~Loan was previously classified as a TDR and subsequently performed in compliance with the loan's modified~~terms for a period of six months (including over a calendar year-end) at a modified interest rate which represented a market rate at the time of restructuring. Per our TDR policy, the TDR classification is removed.

Other Real Estate Owned ("OREO")

In certain circumstances, the Company is required to take action against the real estate collateral of specific loans. The Company uses foreclosure only as a last resort for dealing with borrowers experiencing financial hardships. The Company employs extensive contact and restructuring procedures to attempt to find other solutions for our borrowers. The tables below present a summary of other real estate owned ~~excluding covered other real estate owned,~~ and shows the activity for the respective periods and the balance for each property type:


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
(Dollars in thousands)	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
(In thousands)													June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Balance at beginning of period	$	39,361		$	38,063		$	40,282		$	43,945		$	11,026		$	21,520		$	15,171		$	24,820
Disposal/resolved	(2,391		)	(5,967		)	(9,305		)	(19,324		)	(612		)	(2,397		)	(5,405		)	(5,155		)
Transfers in at fair value, less costs to sell	898			3,958			7,131			8,558			—			1,746			954			1,778
Transfers in from covered OREO subsequent to loss share expiration	—			—			760			3,300
Additions from acquisition	—			—			—			1,064
Fair value adjustments	(490		)	(1,004		)	(1,490		)	(2,493		)	(217		)	(1,032		)	(523		)	(1,606		)
Balance at end of period	$	37,378		$	35,050		$	37,378		$	35,050		$	10,197		$	19,837		$	10,197		$	19,837


	Period End						Period End
(Dollars in thousands)	September 30, 2017		June 30, 2017		September 30, 2016
(In thousands)							June 30, 2020		March 31, 2020		June 30, 2019
Residential real estate	$	7,236	$	7,684	$	9,602	$	1,382	$	1,684	$	1,312
Residential real estate development	676		755		2,114		—		—		1,282
Commercial real estate	29,466		30,922		23,334		8,815		9,342		17,243
Total	$	37,378	$	39,361	$	35,050	$	10,197	$	11,026	$	19,837

Deposits

Total deposits at ~~September~~June 30, ~~2017~~2020 were ~~$22.9~~$35.7 billion, an increase of ~~$1.7~~$8.1 billion, or 8%30%, compared to total deposits at ~~September~~June 30, ~~2016.~~2019. See Note 910 to the Consolidated Financial Statements in Item 1 of this report for a summary of period end deposit balances.

The following table sets forth, by category, the maturity of time certificates of deposit as of ~~September~~June 30, ~~2017:~~2020:


Time Certificates of Deposit Maturity/Re-pricing Analysis As of September 30, 2017 (Dollars in thousands)	CDARs & Brokered Certificates of Deposit ⁽¹⁾		MaxSafe Certificates of Deposit ⁽¹⁾		Variable Rate Certificates of Deposit ⁽²⁾		Other Fixed Rate Certificates of Deposit ⁽¹⁾		Total Time Certificates of Deposits		Weighted-Average Rate of Maturing Time Certificates of Deposit ⁽³⁾
Time Certificates of Deposit Maturity/Re-pricing Analysis As of June 30, 2020 (Dollars in thousands)													CDARs & Brokered Certificates of Deposit ⁽¹⁾		MaxSafe Certificates of Deposit ⁽¹⁾		Variable Rate Certificates of Deposit ⁽²⁾		Other Fixed Rate Certificates of Deposit ⁽¹⁾		Total Time Certificates of Deposits		Weighted-Average Rate of Maturing Time Certificates of Deposit ⁽³⁾
1-3 months	$	1,253	$	40,644	$	128,579	$	851,813	$	1,022,289	0.84	%	$	1,690	$	33,600	$	59,988	$	651,964	$	747,242	1.65	%
4-6 months	1,493		28,487		—		892,779		922,759		0.97	%	609		31,127		—		561,696		593,432		1.53
7-9 months	59,737		16,700		—		736,366		812,803		1.05	%	—		9,547		—		802,262		811,809		1.91
10-12 months	—		20,191		—		592,693		612,884		1.02	%	—		14,830		—		1,223,365		1,238,195		1.93
13-18 months	—		13,716		—		765,773		779,489		1.28	%	1,401		15,049		—		1,012,797		1,029,247		1.99
19-24 months	249		11,431		—		208,626		220,306		1.43	%	—		4,580		—		200,078		204,658		1.19
24+ months	1,000		15,892		—		279,253		296,145		1.50	%	88		4,395		—		208,321		212,804		1.38
Total	$	63,732	$	147,061	$	128,579	$	4,327,303	$	4,666,675	1.07	%	$	3,788	$	113,128	$	59,988	$	4,660,483	$	4,837,387	1.79	%


(1)	This category of certificates of deposit is shown by contractual maturity date.


(2)	This category includes variable rate certificates of deposit and savings certificates with the majority repricing on at least a monthly basis.


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

The following table sets forth, by category, the composition of average deposit balances and the relative percentage of total average deposits for the periods presented:


	Three Months Ended												Three Months Ended
	September 30, 2017				June 30, 2017				September 30, 2016				June 30, 2020				March 31, 2020				June 30, 2019
(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent		Balance		Percent
Non-interest bearing	$	6,419,326	29	%	$	5,904,679	27	%	$	5,566,982	27	%	$	9,607,528	27	%	$	7,235,177	24	%	$	6,487,627	25	%
NOW and interest bearing demand deposits	2,344,848		10		2,470,131		11		2,502,388		12		3,323,124		10		3,113,733		11		2,878,021		11
Wealth management deposits	2,320,674		10		2,091,251		10		2,092,115		10		4,380,996		13		2,838,719		9		2,605,690		10
Money market	4,471,342		20		4,435,670		21		4,471,399		22		8,727,966		25		7,990,775		27		6,095,285		23
Savings	2,581,946		11		2,329,195		11		1,914,408		9		3,394,480		10		3,189,835		11		2,752,828		11
Time certificates of deposit	4,573,081		20		4,295,427		20		4,136,791		20		5,104,701		15		5,526,407		18		5,322,384		20
Total average deposits	$	22,711,217	100	%	$	21,526,353	100	%	$	20,684,083	100	%	$	34,538,795	100	%	$	29,894,646	100	%	$	26,141,835	100	%

Total average deposits for the ~~third~~second quarter of ~~2017~~2020 were ~~$22.7~~$34.5 billion, an increase of ~~$2.0~~$8.4 billion, or ~~9.8%~~32%, from the ~~third~~second quarter of ~~2016.~~2019. The increase in average deposits is primarily attributable to the various acquisitions and branch openings along with additional deposits ~~associated with the Company's bank acquisitions as well as increased commercial~~related to PPP lending ~~relationships. The Company continues to see a beneficial shift in its deposit mix as average non-interest bearing deposits increased $852.3 million, or 15.3%, in the third quarter~~and organic growth of ~~2017 compared to the third quarter of 2016~~.retail deposits.

Wealth management deposits are funds from the brokerage customers of ~~WHI, the~~Wintrust Investments, CDEC, trust and asset management customers of the Company and brokerage customers from unaffiliated companies which have been placed into deposit accounts of the banks (“wealth management deposits” in the table above). Wealth Management deposits consist primarily of money market accounts. Consistent with reasonable interest rate risk parameters, these funds have generally been invested in loan production of the banks as well as other investments suitable for banks.

Brokered Deposits

While the Company obtains a portion of its total deposits through brokered deposits, the Company does so primarily as an asset-liability management tool to assist in the management of interest rate risk, and the Company does not consider brokered deposits to be a vital component of its current liquidity resources. Historically, brokered deposits have represented a small component of the Company’s total deposits outstanding, as set forth in the table below:


	September 30,						December 31,									June 30,						December 31,
(Dollars in thousands)	2017			2016			2016			2015			2014			2020			2019			2019			2018			2017
Total deposits	$	22,895,063		$	21,147,655		$	21,658,632		$	18,639,634		$	16,281,844		$	35,651,874		$	27,518,815		$	30,107,138		$	26,094,678		$	23,183,347
Brokered deposits	1,280,492			1,142,679			1,159,475			862,026			718,986			2,344,851			1,764,261			1,011,404			1,071,562			1,445,306
Brokered deposits as a percentage of total deposits	5.6		%	5.4		%	5.4		%	4.6		%	4.4		%	6.6		%	6.4		%	3.4		%	4.1		%	6.2		%

Brokered deposits include certificates of deposit obtained through deposit brokers, deposits received through the Certificate of Deposit Account Registry Program (“CDARS”), and wealth management deposits of brokerage customers from unaffiliated companies which have been placed into deposit accounts of the banks.

Other Funding Sources

Although deposits are the Company’s primary source of funding its interest-earning assets, the Company’s ability to manage the types and terms of deposits is somewhat limited by customer preferences and market competition. As a result, in addition to deposits and the issuance of equity securities and the retention of earnings, the Company uses several other funding sources to support its growth. These sources include short-term borrowings, notes payable, FHLB advances, subordinated debt, secured borrowings and junior subordinated debentures. The Company evaluates the terms and unique characteristics of each source, as well as its asset-liability management position, in determining the use of such funding sources.

The following table sets forth, by category, the composition of the average balances of other funding sources for the quarterly periods presented:


	Three Months Ended						Three Months Ended
	September 30,		June 30,		September 30,		June 30,		March 31,		June 30,
(Dollars in thousands)	2017		2017		2016
(In thousands)							2020		2020		2019
FHLB advances	$	324,996	$	689,600	$	459,198	$	1,214,375	$	951,613	$	869,812
Other borrowings:
Notes payable	44,878		48,662		59,896		141,316		127,978		142,571
Short-term borrowings	34,674		42,074		36,615		9,881		45,089		42,214
Secured borrowings	139,549		131,582		134,331		276,030		250,054		187,100
Other	49,749		18,229		18,465		66,123		46,456		47,179
Total other borrowings	$	268,850	$	240,547	$	249,307	$	493,350	$	469,577	$	419,064
Subordinated notes	139,035		139,007		138,925		436,226		436,119		220,771
Junior subordinated debentures	253,566		253,566		253,566		253,566		253,566		253,566
Total other funding sources	$	986,447	$	1,322,720	$	1,100,996	$	2,397,517	$	2,110,875	$	1,763,213

FHLB advances provide the banks with access to fixed rate funds ~~which~~that are useful in mitigating interest rate risk and achieving an acceptable interest rate spread on fixed rate loans or securities. Additionally, the banks have the ability to borrow shorter-term, overnight funding from the FHLB for other general purposes. FHLB advances to the banks totaled ~~$469.0 million~~$1.2 billion at ~~September~~June 30, ~~2017,~~2020, compared to ~~$318.3~~$1.2 billion at March 31, 2020 and $574.8 million at June 30, ~~2017 and $419.6 million at September 30, 2016.~~2019.

Notes payable balances as of June 30, 2020 and December 31, 2019 represent the balances on ~~a $150~~our $200.0 million loan agreement with unaffiliated banks consisting of a ~~$75.0~~$50.0 million revolving credit facility and a ~~$75.0~~$150.0 million term facility. Both loan facilities are available for corporate purposes such as to provide capital to fund continued growth at existing bank subsidiaries, possible future acquisitions and for other general corporate matters. At ~~September~~June 30, ~~2017,~~2020 and December 31, 2019, the Company had a balance under the term facility of ~~$41.2~~$112.4 million ~~compared to $45.0~~and $123.1 million, ~~at June 30, 2017 and $56.2 million at September 30, 2016.~~respectively. The Company was contractually required to borrow the entire amount of the term facility on ~~June 15, 2015~~September 18, 2018 and all such borrowings must be repaid by ~~June 15, 2020.~~September 18, 2023. At ~~September 30, 2017,~~ June 30, ~~2017 and September 30, 2016,~~2020, the Company had no outstanding balance onunder the ~~$75.0 million revolving credit facility.~~

Revolving Credit Facility.

Short-term borrowings include securities sold under repurchase agreements and federal funds purchased. These borrowings totaled ~~$20.0 million at September 30, 2017 compared to $46.3~~$8.5 million at June 30, ~~2017 and $33.2~~2020 compared to $12.1 million at ~~September~~March 31, 2020 and $10.2 million at June 30, ~~2016.~~2019. Securities sold under repurchase agreements represent sweep accounts for certain customers in connection with master repurchase agreements at the banks. This funding category typically fluctuates based on customer preferences and daily liquidity needs of the banks, their customers and the banks’ operating subsidiaries.

The average balance of secured borrowings primarily represents a third party Canadian transaction ("Canadian Secured Borrowing"). Under the Canadian Secured Borrowing, in December 2014, the Company, through its subsidiary, FIFC Canada, sold an undivided co-ownership interest in all receivables owed to FIFC Canada to an unrelated third party in exchange for a cash payment of approximately C$150 million pursuant to a receivables purchase agreement (“Receivables Purchase Agreement”). The Receivables Purchase Agreement was amended in December 2015, effectively extending the maturity date from December 15, 2015 to December 15, 2017. Additionally, at that time, the unrelated third party paid an additional C$10 million, which increased the total payments to C$160 million. The Receivables Purchase Agreement was again amended in December 2017, effectively extending the maturity date from December 15, 2017 to December 16, 2019. Additionally, in December 2017, the unrelated third party paid an additional C$10 million, which increased the total payments to C$170 million. In June 2018, the unrelated third party paid an additional C$20 million, which increased the total payments to C$190 million. The Receivables Purchase Agreement was again amended in February 2019, effectively extending the maturity date from December 16, 2019 to December 15, 2020. Additionally, in February 2019, the unrelated third party paid an additional C$20 million, which increased the total payments to C$210 million. In May 2019, the unrelated third party paid an additional C$70 million, which increased the total payments to C$280 million. In January 2020, the unrelated third party paid an additional C$40 million, which increased the total payments to C$320 million, and the Receivables Purchase Agreement was amended to effectively extend the maturity date from December 15, 2020 to December 15, 2021. In May 2020, the unrelated third party paid an additional C$100 million, which increased the total payments to C$420 million. These transactions were not considered sales of receivables and, as such, related proceeds received ~~from these transactions~~ are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the unrelated third party and translated to the Company’s reporting currency as of the respective date. The translated balance of the Canadian Secured Borrowing under the Receivables Purchase Agreement totaled ~~$128.3 million at September 30, 2017 compared to $123.4~~$309.1 million at June 30, ~~2017 and $121.9~~2020 compared to $227.4 million at ~~September~~March 31, 2020 and $213.7 million at June 30, ~~2016.~~2019. At ~~September~~June 30, ~~2017,~~2020, the interest rate of the Canadian Secured Borrowing was ~~1.9094%~~1.7771%. The remaining balance within secured borrowings at June 30, 2020 represents other sold interests in certain loans by the Company that were not considered sales and, as such, related proceeds received are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the various unrelated third parties.

Other borrowings at June 30, 2020 include a fixed-rate promissory ~~notes related to office buildings owned by the Company and non-recourse notes~~note issued by the Company to other banks related to certain capital leases. At September 30, 2017, the fixed-rate promissory note had a balance of $49.3 million compared to $49.5 million at June 30, 2017 and $17.8 million at September 30, 2016. The increase in 2017 was the result of the Company issuing a $49.6 million fixed-rate promissory note in June 2017 ("Fixed-Rate Promissory Note") related to and secured by ~~two~~three office buildings owned by the Company. At ~~that time,~~June 30, 2020, the ~~previous note~~Fixed-Rate Promissory Note had a balance of $66.0 million compared to ~~an unrelated creditor~~$66.3 million at March 31, 2020 and $47.1 million at June 30, 2019. Under the Fixed-Rate Promissory Note, the Company makes monthly principal payments and pays interest at a fixed rate until maturity. An amendment to the Fixed-Rate Promissory Note was ~~paid off by~~executed on and effective as of March 31, 2020. The amendment increased the ~~Company.~~principal amount to $66.4 million, reduced the interest rate to 3.00% and extended the maturity date to March 31, 2025.

At ~~September~~June 30, ~~2017,~~2020, the Company had outstanding subordinated notes totaling ~~$139.1~~$436.3 million compared to ~~$139.0~~$436.2 million and ~~$138.9~~$436.0 million outstanding at March 31, 2020 and June 30, ~~2017~~2019, respectively. During the second quarter of 2019, the Company issued $300.0 million of subordinated notes, receiving $296.7 million in net proceeds. The notes have a stated interest rate of 4.85% and ~~September 30, 2016, respectively. The~~mature in June 2029. In 2014, the Company issued $140.0 million of subordinated notes receiving $139.1 million in net proceeds. These notes have a stated interest rate of 5.00% and mature in June 2024. ~~These~~Subordinated notes are stated at par adjusted for unamortized costs paid related to the ~~issuance~~different issuances of ~~this~~such debt.

The Company had $253.6 million of junior subordinated debentures outstanding as of ~~September 30, 2017,~~ June 30, ~~2017~~2020, March 31, 2020 and ~~September~~June 30, ~~2016.~~ 2019. The amounts reflected on the balance sheet represent the junior subordinated debentures issued to ~~eleven~~11 trusts by the Company and equal the amount of the preferred and common securities issued by the trusts. ~~In January 2016,~~At June 30, 2020, the Company acquired $15.0 million of the $40.0 million of trust preferred securities issued by Wintrust Capital Trust VIII from a third-party investor. The purchase effectively extinguished $15.0 million of junior subordinated debentures related to Wintrust Capital Trust VIII and resulted in a $4.3 million gain from the early extinguishment of debt. ~~Starting in 2016, none of the junior subordinated debentures qualified as Tier 1 regulatory capital of the Company resulting in~~included $245.5 million of the junior subordinated debentures, net of common securities, ~~being included~~ in ~~the Company's~~ Tier 2 regulatory capital.

In response to the COVID-19 pandemic, the Company will continue to manage funding sources discussed above, including the utilization of availability with the FHLB and FRB and the Revolving Credit Facility with unaffiliated banks, to access needed liquidity in a timely manner. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation - Overview and - Liquidity sections of this report for additional discussion of the impact of the COVID-19 pandemic.

See Notes 1011 and 1112 of the Consolidated Financial Statements presented under Item 1 of this report for details of period end balances and other information for these various funding sources.

Shareholders’ Equity

The following tables reflect various consolidated measures of capital as of the dates presented and the capital guidelines established by the FRB for a bank holding company:

September 30,
2017 June 30,
2017 September 30,
2016
Leverage ratio 9.2 % 9.2 % 9.0 %
Tier 1 capital to risk-weighted assets 10.0
9.8
9.8
Common equity Tier 1 capital to risk-weighted assets 9.5
9.3
8.7
Total capital to risk-weighted assets 12.2
12.0
12.1
Total average equity-to-total average assets⁽¹⁾
10.7
10.8
10.7



	June 30, 2020		March 31, 2020		June 30, 2019
Tier 1 leverage ratio	8.1	%	8.5	%	9.1	%
Risk-based capital ratios:
Tier 1 capital ratio	10.1		9.3		9.6
Common equity tier 1 capital ratio	8.8		8.9		9.2
Total capital ratio	12.8		11.9		12.4
Other ratio:
Total average equity-to-total average assets⁽¹⁾	9.3		10.1		10.7


(1)	Based on quarterly average balances.



	Minimum Capital Requirements		Well Capitalized
Leverage ratio	4.0	%	5.0	%
Tier 1 capital to risk-weighted assets	6.0		8.0
Common equity Tier 1 capital to risk-weighted assets	4.5		6.5
Total capital to risk-weighted assets	8.0		10.0

In February 2019, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC issued a final rule to address the changes to the measurement of the allowance for credit losses, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the adverse effects on regulatory capital that may result from the adoption of the new accounting standard as of its date of adoption, or January 1, 2020. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC published an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company is adopting the capital transition relief over the permissible five-year period.

The Company’s principal sources of funds at the holding company level are dividends from its subsidiaries, borrowings under its loan agreement with unaffiliated banks and proceeds from the issuances of subordinated debt and additional equity. Refer to Notes ~~10,~~ 11, 12 and 1618 of the Consolidated Financial Statements in Item 1 for further information on these various funding sources. Management is committed to maintaining the Company’s capital levels above the “Well Capitalized” levels established by the FRB for bank holding companies.

The Company’s Board of Directors approves dividends from time to time, however, the ability to declare a dividend is limited by the Company's financial condition, the terms of the Company's Series D and Series E preferred stock, the terms of the Company’s Trust Preferred Securities offerings and under certain financial covenants in the Company’s revolving and term facilities. In January and April ~~and July~~ of ~~2017,~~2020 the Company declared a quarterly cash dividend of ~~$0.14~~$0.28 per common share. In January, April, July and October of ~~2016,~~2019, the Company declared a quarterly cash dividend of ~~$0.12~~$0.25 per common share.

In response to the COVID-19 pandemic, the Company continues to leverage its capital management framework to assess and monitor risk when making capital decisions. The Company will continuously evaluate the adequacy of capital as a result of the uncertainty from the COVID-19 pandemic. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation - Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

See Note 1618 of the Consolidated Financial Statements presented under Item 1 of this report for details on the Company’s issuance of Series D ~~and Series C~~ preferred stock in June 2015 and ~~March 2012, respectively, as well as details on the Company's offering of common stock~~Series E Preferred Stock and associated Depositary Shares in ~~June 2016 and the mandatory conversion of the Series C preferred stock in April 2017.~~May 2020. The Company hereby incorporates by reference Note 1618 of the Consolidated Financial Statements presented under Item 1 of this report in its entirety.

LIQUIDITY

~~Wintrust~~The Company manages the liquidity position of its banking operations to ensure that sufficient funds are available to meet customers’ needs for loans and deposit withdrawals. The management process includes the utilization of stress testing processes and other aspects of the Company's liquidity management framework to assess and monitor risk, and inform decision making. The liquidity to meet ~~these~~the demands of customers is provided by maturing assets, liquid assets that can be converted to cash and the ability to attract funds from external sources. Liquid assets refer to money market assets such as Federal funds sold and interest bearing deposits with banks, as well as available-for-sale debt securities and equity securities with readily determinable fair values which are not pledged to secure public funds. In addition, trade date receivables represent certain sales or calls of available-for-sale securities that await cash settlement, typically in the month following the trade date.

~~The~~In accordance with the liquidity management noted above, deposit growth and increases in borrowings from various sources have resulted in accumulating liquidity assets in recent periods. In the first quarter of 2020, we increased our liquid assets to ensure that we have the balance sheet strength to serve our clients through the COVID-19 pandemic. As a result, the Company believes that it has sufficient funds and access to funds to effectively manage through the COVID-19 pandemic as well as meet its working capital and other needs. The Company will continue to prudently evaluate and expand liquidity sources, including the management of availability with the FHLB and FRB and utilization of the revolving credit facility with unaffiliated banks. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation ~~- Interest-Earning~~-Interest-Earning Assets, -Deposits, -Other Funding Sources and -Shareholders’ Equity sections of this report for additional information regarding the Company’s liquidity position. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation -Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

INFLATION

A banking organization’s assets and liabilities are primarily monetary. Changes in the rate of inflation do not have as great an impact on the financial condition of a bank as do changes in interest rates. Moreover, interest rates do not necessarily change at the same percentage as inflation. Accordingly, changes in inflation are not expected to have a material impact on the Company. An analysis of the Company’s asset and liability structure provides the best indication of how the organization is positioned to respond to changing interest rates. See “Quantitative and Qualitative Disclosures About Market ~~Risks”~~Risk” section of this report for additional information.

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, such as the impacts of the COVID-19 pandemic, and which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s ~~2016~~ Annual Report on Form 10-K for the year ended December 31, 2019 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:

the severity, magnitude and duration of the COVID-19 pandemic and the direct and indirect impact of such pandemic, as well as responses to the pandemic by the government, business and consumers, on our operations and personnel, commercial activity and demand across our business and our customers’ businesses;

the disruption of global, national, state and local economies associated with the COVID-19 pandemic, which could affect the Company’s liquidity and capital positions, impair the ability of our borrowers to repay outstanding loans, impair collateral values and further increase our allowance for credit losses;

~~negative~~ the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges;

economic conditions that ~~adversely~~ affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;

negative effects suffered by us or our customers resulting from changes in U.S. trade policies;

the extent of defaults and losses on the Company’s loan portfolio, which may require further increases in its allowance for credit losses;

estimates of fair value of certain of the Company’s assets and liabilities, which could change in value significantly from period to period;

the financial success and economic viability of the borrowers of our commercial loans;

commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;

the extent of commercial and consumer delinquencies and declines in real estate values, which may require further increases in the Company’s allowance for loan ~~and lease~~ losses;

inaccurate assumptions in our analytical and forecasting models used to manage our loan portfolio;

changes in the level and volatility of interest rates, the capital markets and other market indices (including developments and volatility arising from or related to the COVID-19 pandemic) that may affect, among other things, the Company’s liquidity and the value of its assets and liabilities;

competitive pressures in the financial services business which may affect the pricing of the Company’s loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products;

failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of the Company’s recent or future acquisitions;

unexpected difficulties and losses related to FDIC-assisted ~~acquisitions, including those resulting from our loss-sharing arrangements with~~acquisitions;

harm to the ~~FDIC;~~Company’s reputation;

any negative perception of the Company’s ~~reputation or~~ financial strength;

ability of the Company to raise additional capital on acceptable terms when needed;

disruption in capital markets, which may lower fair values for the Company’s investment portfolio;

ability of the Company to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations and to manage risks associated therewith;

failure or breaches of our security systems or infrastructure, or those of third parties;

security breaches, including denial of service attacks, hacking, social engineering attacks, malware intrusion or data corruption attempts and identity theft;

adverse effects on our information technology systems resulting from failures, human error or cyberattack, any of which could result in an information or security breach, the disclosure or misuse of confidential or proprietary information, significant legal and financial losses and reputational harm;cyberattacks;

adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors;

increased costs as a result of protecting our customers from the impact of stolen debit card information;

accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions;

ability of the Company to attract and retain senior management experienced in the banking and financial services industries;

environmental liability risk associated with lending activities;

the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation;

losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith;

the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank;

the soundness of other financial institutions;

the expenses and delayed returns inherent in opening new branches and de novo banks;

examinations and challenges by tax ~~authorities;~~authorities, and any unanticipated impact of the Tax Act;

changes in accounting standards, rules and interpretations such as the new CECL standard and related changes to address the impact of COVID-19, and the impact on the Company’s financial statements;

the ability of the Company to receive dividends from its subsidiaries;

uncertainty about the discontinued use of LIBOR and transition to an alternative rate;

a decrease in the Company’s ~~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~~changes that are in response to the ~~Dodd-Frank Act;~~COVID-19 pandemic, including without limitation the CARES Act and the rules and regulations that may be promulgated thereunder;

a lowering of our credit rating;

changes in U.S. monetary ~~policy;~~policy and changes to the Federal Reserve’s balance sheet, including changes in response to the COVID-19 pandemic or otherwise;

regulatory 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;~~business;

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;~~environment;

the impact of heightened capital requirements;

increases in the Company’s FDIC insurance premiums, or the collection of special assessments by the FDIC;

delinquencies or fraud with respect to the Company’s premium finance business;

credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans;

the Company’s ability to comply with covenants under its credit facility; and

fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation.

Therefore, there can be no assurances that future actual results will correspond to these forward-looking statements. The reader is cautioned not to place undue reliance on any forward-looking statement made by the Company. Any such statement speaks only as of the date the statement was made or as of such date that may be referenced within the statement. The Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events ~~that arise~~ after the date ~~the forward-looking statement was made.~~of this report. 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.

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISKS~~RISK

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. This effort entails providing a reasonable balance between interest rate risk, credit risk, liquidity risk and maintenance of yield. Asset-liability management policies are established and monitored by management in conjunction with the boards of directors of the banks, subject to general oversight by the Risk Management Committee of the Company’s Board of Directors. The policies establish guidelines for acceptable limits on the sensitivity of the market value of assets and liabilities to changes in interest rates.

Interest rate risk arises when the maturity or re-pricing periods and interest rate indices of the interest earning assets, interest bearing liabilities, and derivative financial instruments are different. It is the risk that changes in the level of market interest rates will result in disproportionate changes in the value of, and the net earnings generated from, the Company’s interest earning assets, interest bearing liabilities and derivative financial instruments. The Company continuously monitors not only the organization’s current net interest margin, but also the historical trends of these margins. In addition, management attempts to identify potential adverse changes in net interest income in future years as a result of interest rate fluctuations by performing simulation analysis of various interest rate environments. If a potential adverse change in net interest margin and/or net income is identified, management would take appropriate actions with its asset-liability structure to mitigate these potentially adverse situations.

Since the Company’s primary source of interest bearing liabilities is from customer deposits, the Company’s ability to manage the types and terms of such deposits is somewhat limited by customer preferences and local competition in the market areas in which the banks operate. The rates, terms and interest rate indices of the Company’s interest earning assets result primarily from the Company’s strategy of investing in loans and securities that permit the Company to limit its exposure to interest rate risk, together with credit risk, while at the same time achieving an acceptable interest rate spread.

The Company’s exposure to interest rate risk is reviewed on a regular basis by management and the Risk Management Committees of the boards of directors of the banks and the Company. The objective of the review is to measure the effect on net income and to adjust balance sheet and derivative financial instruments to minimize the inherent risk while at the same time ~~maximize~~maximizing net interest income.

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 decreases 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 Scenarios at ~~September 30, 2017,~~ June 30, ~~2017~~2020, March 31, 2020 and ~~September~~June 30, ~~2016~~2019 is as follows:

Static Shock Scenarios +200
Basis
Points +100
Basis
Points -100
Basis
Points
September 30, 2017 19.5 % 9.8 % (12.9 )%
June 30, 2017 19.3 % 10.4 % (13.5 )%
September 30, 2016 19.6 % 10.1 % (10.4 )%



Static Shock Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points
June 30, 2020	25.9	%	12.6	%	(8.3	)%
March 31, 2020	22.5		10.6		(9.4	)
June 30, 2019	17.3		8.9		(10.2	)

Ramp Scenarios +200
Basis
Points +100
Basis
Points -100
Basis
Points
September 30, 2017 9.0 % 4.6 % (5.3 )%
June 30, 2017 7.8 % 4.0 % (4.6 )%
September 30, 2016 7.8 % 3.9 % (4.1 )%



Ramp Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points
June 30, 2020	13.0	%	6.7	%	(3.2	)%
March 31, 2020	7.7		3.7		(3.8	)
June 30, 2019	8.3		4.3		(4.6	)

One method utilized by financial institutions, including the Company, to manage interest rate risk is to enter into derivative financial instruments. Derivative financial instruments include interest rate swaps, interest rate caps, floors and ~~floors,~~collars, futures, forwards, option contracts and other financial instruments with similar characteristics. Additionally, the Company enters into commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future ~~delivery~~

delivery of mortgage loans to third party investors. See Note 1315 of the Consolidated Financial Statements in Item 1 of this report for further information on the Company’s derivative financial instruments.

During the first ~~nine~~six months of ~~2017~~2020 and ~~2016,~~2019, the Company entered into certain covered call option transactions related to certain securities held by the Company. The Company uses these option transactions (rather than entering into other derivative interest rate contracts, such as interest rate floors) to economically hedge positions and compensate for net interest margin compression by increasing the total return associated with the related securities through fees generated from these options. Although the revenue received from these options is recorded as non-interest income rather than interest income, the increased return attributable to the related securities from these options contributes to the Company’s overall profitability. The Company’s exposure to interest rate risk may be impacted by these transactions. To further mitigate this risk, the Company may acquire fixed rate term debt or use financial derivative instruments. There were no covered call options outstanding as of ~~September~~June 30, ~~2017~~2020 and ~~2016.~~2019.

ITEM 4

CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer carried out an evaluation under their supervision, with the participation of other members of management as they deemed appropriate, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as contemplated by Exchange Act Rule 13a-15. Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective, in all material respects, in timely alerting them to material information relating to the Company (and its consolidated subsidiaries) required to be included in the periodic reports the Company is required to file and submit to the SEC under the Exchange Act.

There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the period that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II —

Item 1: Legal Proceedings

In accordance with applicable accounting principles, the Company establishes an accrued liability for litigation and threatened litigation actions and proceedings when those actions present loss contingencies, which are both probable and estimable. In actions for which a loss is reasonably possible in future periods, the Company determines whether it can estimate a loss or range of possible loss. To determine whether a possible loss is estimable, the Company reviews and evaluates its material litigation on an ongoing basis, in conjunction with any outside counsel handling the matter, in light of potentially relevant factual and legal developments. This review may include information learned through the discovery process, rulings on substantive or dispositive motions, and settlement discussions.

Lehman Holdings Matter

On January 15, 2015, Lehman Brothers Holdings, Inc. (“Lehman Holdings”) sent a demand letter asserting that Wintrust Mortgage must indemnify it for losses arising from loans sold by Wintrust Mortgage to Lehman Brothers Bank, FSB under a Loan Purchase Agreement between Wintrust Mortgage, as successor to SGB Corporation, and Lehman Brothers Bank. The demand was the precursor for triggering the alternative dispute resolution process mandated by the U.S. Bankruptcy Court for the Southern District of New York. Lehman Holdings triggered the mandatory alternative dispute resolution process on October 16, 2015. On February 3, 2016, following aan adverse ruling by the federal Court of Appeals for the Tenth Circuit ~~that was adverse to Lehman Holdings on~~concerning the applicable statute of limitations ~~that is applicable to similar loan purchase~~on certain Lehman Holdings claims, Lehman Holdings filed a complaint against Wintrust Mortgage and 150 other entities from which it had purchased loans in the U.S. Bankruptcy Court for the Southern District of New York. ~~The mandatory mediation was held on~~On March 16, 2016, Wintrust Mortgage participated in the court-ordered mediation, but the mediation did not result in a consensual resolution of the dispute. ~~The court entered a case management order governing the litigation on November 1, 2016.~~ Lehman Holdings filed an amended complaint against Wintrust Mortgage on December 29, 2016. On March 31, 2017, Wintrust Mortgage moved to dismiss the amended complaint for lack of subject matter jurisdiction and improper venue or to transfer venue. ~~This~~Argument on the motions to dismiss were heard on June 12, 2018. The motion ~~remains pending before~~to dismiss for lack of subject matter jurisdiction was denied on August 14, 2018 and the ~~court.~~defendants’ motion to transfer venue denied on October 2, 2018. Wintrust Mortgage appealed the denial of its motion to dismiss based on improper venue and the denial of its motion to transfer venue.

On October 2, 2018, Lehman Holdings asked the court for permission to amend its complaints against Wintrust Mortgage and the other defendants to add loans allegedly purchased from the defendants and sold to various RMBS trusts. The court granted this request and allowed Lehman Holdings to assert the additional claims against existing defendants as a supplemental complaint. Lehman Holdings filed its supplemental complaint against Wintrust Mortgage on December 4, 2018. Wintrust Mortgage filed its response to the supplemental complaint on May 13, 2019. Fact discovery is ongoing. Wintrust Mortgage is currently evaluating whether it has obtained sufficient information to assess the merits of Lehman Holding's additional claims and to estimate the likelihood or amount of any potential liability for the additional claims.

The Company has reserved an amount for the Lehman Holdings action that is immaterial to its results of operations or financial condition. Such litigation and threatened litigation actions necessarily involve substantial uncertainty and it is not possible at this time to predict the ultimate resolution or to determine whether, or to what extent, any loss with respect to these legal proceedings may exceed the amounts reserved by the Company.

Wintrust Mortgage Matter

On ~~August 28, 2015,~~October 17, 2018, a former Wintrust Mortgage employee filed a lawsuit in the Superior Court of Los Angeles County, California against Wintrust Mortgage alleging violation of California wage payment statutes on behalf of herself and all other hourly, non-exempt employees of Wintrust Mortgage in California from October 17, 2014 through the present. Wintrust Mortgage received ~~a demand from RFC Liquidating Trust asserting that~~service of the complaint on November 4, 2018. Wintrust Mortgage filed its response to the complaint on February 25, 2019. On November 1, 2019, the plaintiff’s counsel filed a letter with the California Department of Labor advising that it was initiating an action under California’s Private Attorney General Act statute based on the same alleged violations. In November 2019, the parties reached a settlement agreement. The parties executed a settlement agreement and on February 26, 2020, plaintiff moved the court for approval. A hearing on the motion to approve settlement was originally set for June 16, 2020, but the court continued the motion to September 8, 2020. The Company has reserved an amount for this proposed settlement that is immaterial to its results of operations or financial condition.

Northbrook Bank Matter

On October 17, 2018, two individual plaintiffs filed suit in the Circuit Court of Cook County, Illinois against Northbrook Bank and Tamer Moumen on behalf of themselves and a class of approximately 42 investors in a hedge fund run by defendant Moumen. Plaintiffs allege that defendant Moumen ran a fraudulent Ponzi scheme and ran those funds through deposit accounts at Northbrook Bank. They allege the bank was negligent in failing to close the deposit accounts and that it intentionally aided and abetted defendant Moumen in the alleged fraud. They contend that Northbrook Bank is liable ~~to it~~ for losses ~~arising from~~in excess of $6 million. Northbrook Bank filed its motion to dismiss the complaint on January 15, 2019, which the court granted on March 5, 2019. On April 3, 2019, Plaintiffs filed an amended complaint based on similar allegations. Northbrook Bank did not believe the amended complaint cured the pleading defects recognized by the court and filed a motion to dismiss the Amended Complaint on May 17, 2019. The court heard this motion on July 17, 2019 and once again dismissed the complaint without prejudice. Plaintiffs filed a second amended complaint on August 12, 2019. Northbrook again moved to dismiss the complaint. On November 6, 2019, the court dismissed the complaint with prejudice. Plaintiffs filed an appeal on December 2, 2019. This appeal has been fully briefed and remains pending before the Illinois First District Appellate Court. Northbrook Bank believes plaintiffs’ allegations are legally and factually meritless and otherwise lacks sufficient information to estimate the amount of any potential liability.

Wintrust Bank Matter

On April 30, 2020, A.D. Sims LLC on behalf of itself and other similarly situated plaintiffs filed suit in the federal district court for the Northern District of Illinois against Wintrust Financial Corporation, Wintrust Bank, N.A., Bank of America, N.A., Cross River Bank, and an additional 4,971 named and unnamed defendants alleging the defendant financial institutions’ failure to pay agent fees on loans ~~sold~~issued by them under the federal CARES Act’s Payroll Protection Program (“PPP”). Plaintiffs allege the collective damages could exceed $3.8 billion and have asked the court to require the defendants to establish, on a pro rata basis, a fund which could be used to pay agent fees due. Plaintiffs voluntarily dismissed Wintrust ~~Mortgage or its predecessors~~Financial Corporation as a defendant in this suit on June 29, 2020. Plaintiffs’ attorneys have filed similar actions across the country and have moved the federal panel for Multi-District Litigation to ~~Residential Funding Company LLC and/or related entities.~~consolidate these PPP Agent Fee class actions before a single judge. This motion was heard on July 30, 2020 and denied on August 5, 2020. Wintrust ~~Mortgage recently negotiated a settlement~~Bank believes plaintiffs’ allegations are legally and factually meritless and otherwise lacks sufficient information to estimate the amount of ~~the RFC Liquidating Trust’s claim for an immaterial amount, which was finalized on October 30, 2017.~~any potential liability.

Other Matters

In addition, the Company and its subsidiaries, from time to time, are subject to pending and threatened legal action and proceedings arising in the ordinary course of business.

Based on information currently available and upon consultation with counsel, management believes that the eventual outcome of any pending or threatened legal actions and proceedings described above, including our ordinary course litigation, will not have a material adverse effect on the operations or financial condition of the Company. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations or financial condition for a particular period.

Item 1A: Risk Factors

~~There were no~~The following constitute material changes from the risk factors set forth under Part I, Item 1A “Risk Factors” in the Company’s Form 10-K for the fiscal year ended December 31, ~~2016.~~2019.

The COVID-19 pandemic is adversely affecting us and our customers, employees and third-party service providers, and the adverse impact on our business, financial condition, results of operations and cash flows could be material.

The COVID-19 pandemic has negatively impacted us and many of our customers, and could continue to affect significantly more households and businesses in our geographic area as well as the overall domestic and global economy. U.S. federal, state and foreign governments have taken actions to address the pandemic, including travel bans, school and business closures and “shelter in place” orders. Even as restrictions have been lifted, it remains possible that such restrictions may be reinstated. These actions, together with responses to the pandemic by businesses and individuals, have resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses that have led to loss of revenues and a rapid increase in unemployment, material decreases in business valuations, disruption of global supply chains, market downturns and volatility, changes in consumer behavior and an expectation that Federal Reserve policy will maintain a low interest rate environment for the foreseeable future. These changes may have a significant adverse effect on the markets in which we conduct our business, the demand for our products and services, and our ability to operate in the normal course. All of our three primary business segments: community banking, specialty finance and wealth management, have been uniquely impacted and will likely continue to be impacted by the COVID-19 pandemic, requiring the implementation of certain responses as circumstances evolve.

We have increased our allowance for loan losses in response to the COVID-19 pandemic. The effects of the pandemic could cause us to recognize heightened credit losses in our loan portfolio and additional increases in our allowance for loan losses. Certain portions of our lending portfolio are particularly vulnerable to the COVID-19 pandemic, including commercial and industrial and commercial real estate loans. Until the effects of the pandemic subside, we could experience additional draws on lines of credit, downward pressure on deposits, and increased loan delinquencies. The effects of COVID-19 may impair the value of collateral securing our loans, especially commercial and residential real estate loans. Further, a significantly larger amount of delinquent mortgage loans may result in us having to repurchase or substitute loans that we have sold in the secondary market.

Market interest rates have declined significantly during the pandemic. The lower interest rate environment has negatively affected our interest rate margin and, especially if prolonged, could adversely affect our net interest income and profitability. The sharp deterioration in the U.S. economy has negatively affected the value of our market sensitive investment securities portfolio. Further, the pandemic could cause us to recognize impairment of our goodwill and other financial assets, may increase our cost of capital, may prevent us from satisfying our minimum regulatory capital ratios and other supervisory requirements, and could result in a downgrade in our credit ratings. The economic recession caused by the COVID-19 pandemic, especially if prolonged, may have a material adverse effect on our business, financial condition and results of operations.

To protect the health and safety of our employees and communities, many of our employees are working remotely. We may experience increased costs of operations or other operational difficulties, including increased cybersecurity risk, due to the remote working environments of our employees. We may also experience additional operational risk due to difficulties experienced by our vendors. The effects of the pandemic and measures taken in response may subject us to increased risk of litigation and governmental and regulatory scrutiny.

Given the ongoing and dynamic nature of the circumstances, it is not possible to accurately predict the extent, severity or duration of the pandemic or when normal economic and operating conditions will resume. Even after the pandemic has subsided, we may continue to experience adverse impacts to our business as a result of the virus’s impact on the domestic and global economy. Accordingly, the extent to which the COVID-19 pandemic may affect our business, financial condition, results of operations and cash flows (including without limitation our liquidity, regulatory capital ratios and credit ratings) is highly uncertain, unpredictable and depends on factors including, among other things, new information that may emerge regarding the COVID-19 pandemic, the duration and severity of the pandemic and responses to the pandemic by the government, businesses and consumers.

Material risks relating to our business that are heightened due to the COVID-19 pandemic are listed in in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K for the fiscal year ended December 31, 2019 under the headings:

Deterioration in economic conditions may materially adversely affect the financial services industry and our business, financial condition, results of operations and cash flows.

Since our business is concentrated in the Chicago metropolitan and southern Wisconsin market areas, economic declines in the economy of this region could adversely affect our business.

If our allowance for loan losses is not sufficient to absorb losses that may occur in our loan portfolio, our financial condition and liquidity could suffer.

A significant portion of our loan portfolio is comprised of commercial loans, the repayment of which is largely dependent upon the financial success and economic viability of the borrower.

A substantial portion of our loan portfolio is secured by real estate, in particular commercial real estate. Deterioration in the real estate markets could lead to additional losses, which could have a material adverse effect on our financial condition and results of operations.

Events impacting collateral consisting of real property could lead to additional losses which could have a material adverse effect on our financial condition and results of operations.

Any inaccurate assumptions in our analytical and forecasting models could cause us to miscalculate our projected revenue, capital, liquidity or losses, which could adversely affect our financial condition.

Changes in prevailing interest rates could adversely affect our net interest income, which is our largest source of income.

Our liquidity position may be negatively impacted if economic conditions do not continue to improve or if they decline.

Damage to our reputation may harm our business.

An actual or perceived reduction in our financial strength may cause others to reduce or cease doing business with us, which could result in a decrease in our net interest income and fee revenues.

If our credit rating is lowered, our financing costs could increase.

If our growth requires us to raise additional capital, that capital may not be available when it is needed or the cost of that capital may be very high.

Disruption in the financial markets could result in lower fair values for our investment securities portfolio.

Our controls and procedures may fail or be circumvented.

Our operational or security systems or infrastructure, or those of third parties, could fail or be breached, which could disrupt our business and adversely impact our results of operations, liquidity and financial condition, as well as cause legal or reputational harm.

We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion and data corruption attempts, in addition to the resulting identity theft that could result in the disclosure of confidential information, all of which could adversely affect our business or reputation, and create significant legal and financial exposure.

Our vendors may be responsible for failures that adversely affect our operations.

We are subject to claims and legal actions that could negatively affect our results of operations or financial condition.

Losses incurred in connection with actual or projected repurchases and indemnification payments related to mortgages that we have sold into the secondary market may exceed our financial statement reserves and we may be required to increase such reserves in the future. Increases to our reserves and losses incurred in connection with actual loan repurchases and indemnification payments could have a material adverse effect on our business, financial condition, results of operations or cash flows.

We may be adversely impacted by the soundness of other financial institutions.

Changes in accounting policies or accounting standards could materially adversely affect how we report our financial results and financial condition.

We are a bank holding company, and our sources of funds, including to pay dividends, are limited.

Our business could be adversely affected by the occurrence of extraordinary events, such as acts of war, terrorist attacks, natural disasters and public health threats.

If we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets.

Changes in the United States’ monetary policy may restrict our ability to conduct our business in a profitable manner.

Legislative and regulatory actions taken now or in the future regarding the financial services industry may significantly increase our costs or limit our ability to conduct our business in a profitable manner.

Our premium finance business may involve a higher risk of delinquency or collection than our other lending operations, and could expose us to losses.

Widespread financial difficulties or credit downgrades among commercial and life insurance providers could lessen the value of the collateral securing our premium finance loans and impair the financial condition and liquidity of FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening the other risks described in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K for the fiscal year ended December 31, 2019 as well as any subsequent filing with the SEC. If the pandemic is prolonged, the adverse impacts and heightened risks noted above could worsen.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), the Company and its banks are subject to additional risks of litigation from the banks’ customers or other parties regarding the banks’ processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act into law, which included a $349 billion loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. The Company’s banks are participating in the PPP as lenders. As of June 30, 2020, we have originated approximately 11,000 PPP loans with a carrying balance totaling approximately $3.3 billion.

The PPP opened to borrower applications on April 3, 2020; due to the short timeframe between the passing of the CARES Act and the launch of the PPP, there is some ambiguity in the laws, rules and guidance regarding the operation of the PPP. Subsequent rounds of legislation and associated agency guidance have not provided necessary clarity and have created potential additional inconsistencies and ambiguities. Accordingly, the Company is exposed to risks relating to compliance with the PPP requirements.

Additionally, since the launch of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP, as well as litigation regarding the alleged nonpayment of fees that may be due to certain agents who facilitated PPP loan applications. The Company and the banks may be exposed to the risk of litigation, from both customers and non-customers that approached the banks regarding PPP loans, regarding its process and procedures used in processing applications for the PPP. If any such litigation is filed against the Company or its banks and is not resolved in a manner favorable to the Company or the banks, it may result in significant financial liability or adversely affect the Company’s reputation. The Company and one of its banks were named as defendants in a putative class action regarding the alleged nonpayment of agency fees. See Part II, Item 1 “Legal Proceedings.” Regardless of outcome, litigation can be costly and distracting. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.

PPP loans are fixed, low interest rate loans that are guaranteed by the SBA and subject to numerous other regulatory requirements, and a borrower may apply to have all or a portion of the loan forgiven. If PPP borrowers fail to qualify for loan forgiveness, the banks face a heightened risk of holding these loans at unfavorable interest rates for an extended period of time. While the PPP loans are guaranteed by the SBA, various regulatory requirements will apply to the banks’ ability to seek recourse under the guarantees, and related procedures are currently subject to uncertainty.

The banks also have credit risk with respect to PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the banks, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by the Company, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

~~No purchases~~On October 24, 2019, the Company’s Board of Directors authorized the Company to repurchase up to $125 million of its outstanding shares of common stock. In the first quarter of 2020, the Company repurchased approximately $37.1 million of the ~~Company’s~~Company's common ~~shares were made by or~~stock on ~~behalf~~the open market. Commencing in March, 2020, the Company temporarily suspended the common stock repurchase program, as a prudential measure to preserve liquidity in light of the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the three months ended September 30, 2017. There is currently no authorization to repurchase shares of outstanding common stock.COVID-19 pandemic.

Item 6: Exhibits:


(a)	Exhibits



~~31.1~~3.1		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 13, 2020, and incorporated herein by reference).

4.1		Form of Subordinated Indenture between the Company and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission on May 6, 2020).

4.2		Certificate of Designations of the Company filed on May 7, 2020 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2020).

4.3		Deposit Agreement, dated May 15, 2020, between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2020).

4.4		Form of Depositary Receipt (included as Exhibit A to Exhibit 4.3 hereto) (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2020).

10.1		Eighth Amending Agreement to the Receivables Purchase Agreement, dated May 20, 2020, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust, in its capacity as trustee of the PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2020).

10.2		Performance Guarantee Confirmation, made as of May 20, 2020, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2020).

10.3		Fee Letter, dated May 20, 2020, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2020).

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document ⁽¹⁾

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)

Includes the following financial information included in the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2017~~2020, formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		WINTRUST FINANCIAL CORPORATION (Registrant)
Date:	~~November 8, 2017~~August 7, 2020	/s/ DAVID L. STOEHR
		David L. Stoehr
		Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

~~INDEX OF EXHIBITS~~

102



~~Exhibit No.~~		~~Exhibit Description~~
~~31.1~~		~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~		~~Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~		~~Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~		~~XBRL Instance Document (1)~~

~~101.SCH~~		~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL~~		~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~(1)~~

~~Includes the following financial information included in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017~~, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

~~101~~



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2017			2016			2017			2016
Realized gains	$	58		$	3,429		$	106		$	7,466
Realized losses	(19		)	(124		)	(75		)	(1,396		)
Net realized gains	$	39		$	3,305		$	31		$	6,070
Other than temporary impairment charges	—			—			—			—
Gains on investment securities, net	$	39		$	3,305		$	31		$	6,070
Proceeds from sales and calls of available-for-sale securities	$	136,789		$	1,114,666		$	146,518		$	2,186,662
Proceeds from calls of held-to-maturity securities	17			141,885			51,079			423,866



As of December 31, 2016			90+ days and still accruing		60-89 days past due		30-59 days past due
(Dollars in thousands)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:
Commercial
Commercial, industrial and other	$	13,441	$	174	$	2,341	$	11,779	$	3,716,977	$	3,744,712
Franchise	—		—		—		493		869,228		869,721
Mortgage warehouse lines of credit	—		—		—		—		204,225		204,225
Asset-based lending	1,924		—		135		1,609		871,402		875,070
Leases	510		—		—		1,331		293,073		294,914
PCI - commercial ⁽¹⁾	—		1,689		100		2,428		12,563		16,780
Total commercial	15,875		1,863		2,576		17,640		5,967,468		6,005,422
Commercial real estate
Construction	2,408		—		—		1,824		606,007		610,239
Land	394		—		188		—		104,219		104,801
Office	4,337		—		4,506		1,232		857,599		867,674
Industrial	7,047		—		4,516		2,436		756,602		770,601
Retail	597		—		760		3,364		907,872		912,593
Multi-family	643		—		322		1,347		805,312		807,624
Mixed use and other	6,498		—		1,186		12,632		1,931,859		1,952,175
PCI - commercial real estate ⁽¹⁾	—		16,188		3,775		8,888		141,529		170,380
Total commercial real estate	21,924		16,188		15,253		31,723		6,110,999		6,196,087
Home equity	9,761		—		1,630		6,515		707,887		725,793
Residential real estate, including PCI	12,749		1,309		936		8,271		681,956		705,221
Premium finance receivables
Commercial insurance loans	14,709		7,962		5,646		14,580		2,435,684		2,478,581
Life insurance loans	—		3,717		17,514		16,204		3,182,935		3,220,370
PCI - life insurance loans ⁽¹⁾	—		—		—		—		249,657		249,657
Consumer and other, including PCI	439		207		100		887		120,408		122,041
Total loans, net of unearned income, excluding covered loans	$	75,457	$	31,246	$	43,655	$	95,820	$	19,456,994	$	19,703,172
Covered loans	2,121		2,492		225		1,553		51,754		58,145
Total loans, net of unearned income	$	77,578	$	33,738	$	43,880	$	97,373	$	19,508,748	$	19,761,317



	Performing						Non-performing						Total
(Dollars in thousands)	September 30, 2017		December 31, 2016		September 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016		September 30, 2017		December 31, 2016		September 30, 2016
Loan Balances:
Commercial
Commercial, industrial and other	$	4,108,252	$	3,731,097	$	3,589,707	$	12,281	$	13,615	$	15,809	$	4,120,533	$	3,744,712	$	3,605,516
Franchise	853,716		869,721		874,745		—		—		—		853,716		869,721		874,745
Mortgage warehouse lines of credit	194,370		204,225		309,632		—		—		—		194,370		204,225		309,632
Asset-based lending	895,195		873,146		845,485		1,141		1,924		234		896,336		875,070		845,719
Leases	380,885		294,404		299,578		509		510		375		381,394		294,914		299,953
PCI - commercial ⁽¹⁾	9,685		16,780		15,979		—		—		—		9,685		16,780		15,979
Total commercial	6,442,103		5,989,373		5,935,126		13,931		16,049		16,418		6,456,034		6,005,422		5,951,544
Commercial real estate
Construction	672,370		607,831		451,077		1,607		2,408		400		673,977		610,239		451,477
Land	102,557		104,407		106,493		196		394		1,208		102,753		104,801		107,701
Office	875,803		863,337		880,473		5,148		4,337		3,609		880,951		867,674		884,082
Industrial	834,637		763,554		757,537		1,848		7,047		9,967		836,485		770,601		767,504
Retail	932,039		911,996		894,432		2,200		597		909		934,239		912,593		895,341
Multi-family	864,416		806,981		794,865		569		643		90		864,985		807,624		794,955
Mixed use and other	1,971,005		1,945,677		1,845,065		3,310		6,498		6,442		1,974,315		1,952,175		1,851,507
PCI - commercial real estate⁽¹⁾	133,076		170,380		156,117		—		—		—		133,076		170,380		156,117
Total commercial real estate	6,385,903		6,174,163		5,886,059		14,878		21,924		22,625		6,400,781		6,196,087		5,908,684
Home equity	665,388		716,032		733,559		7,581		9,761		9,309		672,969		725,793		742,868
Residential real estate, including PCI	774,756		692,472		651,393		14,743		12,749		12,205		789,499		705,221		663,598
Premium finance receivables
Commercial insurance loans	2,645,501		2,455,910		2,408,265		19,411		22,671		21,968		2,664,912		2,478,581		2,430,233
Life insurance loans	3,579,271		3,216,653		3,020,472		6,740		3,717		—		3,586,011		3,220,370		3,020,472
PCI - life insurance loans ⁽¹⁾	209,463		249,657		262,887		—		—		—		209,463		249,657		262,887
Consumer and other, including PCI	132,413		121,458		120,372		699		583		603		133,112		122,041		120,975
Total loans, net of unearned income, excluding covered loans	$	20,834,798	$	19,615,718	$	19,018,133	$	77,983	$	87,454	$	83,128	$	20,912,781	$	19,703,172	$	19,101,261



Three months ended September 30, 2017				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	52,358		$	52,339		$	11,134		$	6,143		$	6,352		$	1,265		$	129,591
Other adjustments	(2		)	(38		)	—			(31		)	32			—			(39		)
Reclassification from allowance for unfunded lending-related commitments	500			(406		)	—			—			—			—			94
Charge-offs	(2,265		)	(989		)	(968		)	(267		)	(1,716		)	(213		)	(6,418		)
Recoveries	801			323			178			55			499			93			1,949
Provision for credit losses	4,343			811			212			757			1,386			433			7,942
Allowance for loan losses at period end	$	55,735		$	52,040		$	10,556		$	6,657		$	6,553		$	1,578		$	133,119
Allowance for unfunded lending-related commitments at period end	$	—		$	1,276		$	—		$	—		$	—		$	—		$	1,276
Allowance for credit losses at period end	$	55,735		$	53,316		$	10,556		$	6,657		$	6,553		$	1,578		$	134,395
Individually evaluated for impairment	$	4,568		$	1,184		$	691		$	758		$	—		$	34		$	7,235
Collectively evaluated for impairment	50,623			52,048			9,865			5,813			6,553			1,544			126,446
Loans acquired with deteriorated credit quality	544			84			—			86			—			—			714
Loans at period end
Individually evaluated for impairment	$	18,086		$	31,698		$	7,729		$	21,263		$	—		$	544		$	79,320
Collectively evaluated for impairment	6,428,263			6,236,007			665,240			735,185			6,250,923			131,581			20,447,199
Loans acquired with deteriorated credit quality	9,685			133,076			—			3,637			209,463			987			356,848
Loans held at fair value	—			—			—			29,414			—			—			29,414



Three months ended September 30, 2016	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	41,654		$	46,824		$	11,383		$	5,405		$	7,814		$	1,276		$	114,356
Other adjustments	(35		)	(57		)	—			(10		)	(10		)	—			(112		)
Reclassification from allowance for unfunded lending-related commitments	(500		)	(79		)	—			—			—			—			(579		)
Charge-offs	(3,469		)	(382		)	(574		)	(134		)	(1,959		)	(389		)	(6,907		)
Recoveries	176			364			65			61			456			72			1,194
Provision for credit losses	5,212			1,678			810			781			974			286			9,741
Allowance for loan losses at period end	$	43,038		$	48,348		$	11,684		$	6,103		$	7,275		$	1,245		$	117,693
Allowance for unfunded lending-related commitments at period end	$	500		$	1,148		$	—		$	—		$	—		$	—		$	1,648
Allowance for credit losses at period end	$	43,538		$	49,496		$	11,684		$	6,103		$	7,275		$	1,245		$	119,341
Individually evaluated for impairment	$	2,554		$	2,491		$	964		$	1,166		$	—		$	192		$	7,367
Collectively evaluated for impairment	40,252			46,983			10,720			4,867			7,275			1,053			111,150
Loans acquired with deteriorated credit quality	732			22			—			70			—			—			824
Loans at period end
Individually evaluated for impairment	$	19,133		$	45,290		$	9,309		$	17,040		$	—		$	602		$	91,374
Collectively evaluated for impairment	5,916,432			5,707,277			733,559			625,030			5,450,705			119,162			18,552,165
Loans acquired with deteriorated credit quality	15,979			156,117			—			3,925			262,887			1,211			440,119
Loans held at fair value	—			—			—			17,603			—			—			17,603



							For the Nine Months Ended
	As of September 30, 2017						September 30, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	7,312	$	8,458	$	4,191	$	8,390	$	407
Asset-based lending	588		589		161		588		21
Leases	2,440		2,444		215		2,539		91
Commercial real estate
Construction	1,607		2,408		94		2,319		93
Land	—		—		—		—		—
Office	2,225		2,291		570		2,280		94
Industrial	408		408		75		415		19
Retail	5,932		6,072		158		5,998		191
Multi-family	1,239		1,239		8		1,250		33
Mixed use and other	1,537		1,695		263		1,580		60
Home equity	1,511		1,721		691		1,528		53
Residential real estate	5,842		6,154		758		5,842		177
Consumer and other	223		224		34		225		10
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	5,995	$	7,260	$	—	$	6,662	$	294
Asset-based lending	553		553		—		728		31
Leases	817		817		—		862		38
Commercial real estate
Construction	1,504		1,504		—		1,524		49
Land	3,968		4,217		—		4,110		136
Office	3,400		3,585		—		3,565		147
Industrial	1,440		2,729		—		2,885		183
Retail	1,978		1,988		—		2,008		103
Multi-family	569		653		—		571		23
Mixed use and other	5,546		6,267		—		5,745		241
Home equity	6,218		9,523		—		7,231		339
Residential real estate	15,421		17,859		—		15,726		575
Consumer and other	321		433		—		334		16
Total impaired loans, net of unearned income	$	78,594	$	91,091	$	7,218	$	84,905	$	3,424



							For the Twelve Months Ended
	As of December 31, 2016						December 31, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	2,601	$	2,617	$	1,079	$	2,649	$	134
Asset-based lending	233		235		26		235		10
Leases	2,441		2,443		107		2,561		128
Commercial real estate
Construction	5,302		5,302		86		5,368		164
Land	1,283		1,283		1		1,303		47
Office	2,687		2,697		324		2,797		137
Industrial	5,207		5,843		1,810		7,804		421
Retail	1,750		1,834		170		2,039		101
Multi-family	—		—		—		—		—
Mixed use and other	3,812		4,010		592		4,038		195
Home equity	1,961		1,873		1,233		1,969		75
Residential real estate	5,752		6,327		849		5,816		261
Consumer and other	117		121		100		131		7
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	12,534	$	14,704	$	—	$	14,944	$	948
Asset-based lending	1,691		2,550		—		8,467		377
Leases	873		873		—		939		56
Commercial real estate
Construction	4,003		4,003		—		4,161		81
Land	3,034		3,503		—		3,371		142
Office	3,994		5,921		—		4,002		323
Industrial	2,129		2,436		—		2,828		274
Retail	—		—		—		—		—
Multi-family	1,903		1,987		—		1,825		84
Mixed use and other	6,815		7,388		—		6,912		397
Home equity	8,033		10,483		—		8,830		475
Residential real estate	11,983		14,124		—		12,041		622
Consumer and other	378		489		—		393		26
Total impaired loans, net of unearned income	$	90,516	$	103,046	$	6,377	$	105,423	$	5,485



Nine months ended September 30, 2016 (Dollars in thousands)	Total⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	3	$	345	3	$	345	—	$	—	—	$	—	1	$	275
Commercial real estate
Office	1	450		1	450		—	—		—	—		—	—
Industrial	6	7,921		6	7,921		3	7,196		—	—		—	—
Mixed use and other	2	150		2	150		—	—		—	—		—	—
Residential real estate and other	3	583		2	423		3	583		1	380		—	—
Total loans	15	$	9,449	14	$	9,289	6	$	7,779	1	$	380	1	$	275



(Dollars in thousands)	January 1, 2017		Goodwill Acquired		Impairment Loss		Goodwill Adjustments		September 30, 2017
Community banking	$	427,781	$	999	$	—	$	685	$	429,465
Specialty finance	38,692		—		—		1,750		40,442
Wealth management	32,114		—		—		—		32,114
Total	$	498,587	$	999	$	—	$	2,435	$	502,021



Estimated amortization
Actual in nine months ended September 30, 2017	$	3,373
Estimated remaining in 2017	1,027
Estimated—2018	3,796
Estimated—2019	3,223
Estimated—2020	2,597
Estimated—2021	2,056



(Dollars in thousands) Derivatives in Fair Value Hedging Relationships	Location of Gain/(Loss) Recognized in Income on Derivative	Amount of (Loss)/Gain Recognized in Income on Derivative Three Months Ended					Amount of Gain/(Loss) Recognized in Income on Hedged Item Three Months Ended					Income Statement Gain due to Hedge Ineffectiveness Three Months Ended
	Location of Gain/(Loss) Recognized in Income on Derivative	September 30, 2017			September 30, 2016		September 30, 2017		September 30, 2016			September 30, 2017		September 30, 2016
Interest rate swaps	Trading losses, net	$	(64	)	$	269	$	76	$	(234	)	$	12	$	35



(Dollars in thousands) Derivatives in Fair Value Hedging Relationships	Location of Gain/(Loss) Recognized in Income on Derivative	Amount of Loss Recognized in Income on Derivative Nine Months Ended						Amount of Gain Recognized in Income on Hedged Item Nine Months Ended				Income Statement Gain due to Hedge Ineffectiveness Nine Months Ended
	Location of Gain/(Loss) Recognized in Income on Derivative	September 30, 2017			September 30, 2016			September 30, 2017		September 30, 2016		September 30, 2017		September 30, 2016
Interest rate swaps	Trading losses, net	$	(245	)	$	(614	)	$	286	$	627	$	41	$	13



	At September 30, 2017				At December 31, 2016				At September 30, 2016
	Carrying		Fair		Carrying		Fair		Carrying		Fair
(Dollars in thousands)	Value		Value		Value		Value		Value		Value
Financial Assets:
Cash and cash equivalents	$	251,952	$	251,952	$	270,045	$	270,045	$	246,947	$	246,947
Interest bearing deposits with banks	1,218,728		1,218,728		980,457		980,457		816,104		816,104
Available-for-sale securities	1,665,903		1,665,903		1,724,667		1,724,667		1,650,096		1,650,096
Held-to-maturity securities	819,340		807,036		635,705		607,602		932,767		942,666
Trading account securities	643		643		1,989		1,989		1,092		1,092
FHLB and FRB stock, at cost	87,192		87,192		133,494		133,494		129,630		129,630
Brokerage customer receivables	23,631		23,631		25,181		25,181		25,511		25,511
Mortgage loans held-for-sale, at fair value	370,282		370,282		418,374		418,374		559,634		559,634
Loans held-for-investment, at fair value	29,704		29,704		22,137		22,137		17,603		17,603
Loans held-for-investment, at amortized cost	20,929,678		21,064,801		19,739,180		20,755,320		19,179,598		20,233,915
MSRs	29,414		29,414		19,103		19,103		13,901		13,901
Nonqualified deferred compensation assets	10,824		10,824		9,228		9,228		9,218		9,218
Derivative assets	48,198		48,198		56,394		56,394		88,828		88,828
Accrued interest receivable and other	225,435		225,435		204,513		204,513		205,725		205,725
Total financial assets	$	25,710,924	$	25,833,743	$	24,240,467	$	25,228,504	$	23,876,654	$	24,940,870
Financial Liabilities
Non-maturity deposits	$	18,228,388	$	18,228,388	$	17,383,729	$	17,383,729	$	16,946,178	$	16,946,178
Deposits with stated maturities	4,666,675		4,608,760		4,274,903		4,263,576		4,201,477		4,200,278
FHLB advances	468,962		454,753		153,831		157,051		419,632		427,103
Other borrowings	251,680		251,680		262,486		262,486		241,366		241,366
Subordinated notes	139,052		145,376		138,971		135,268		138,943		138,715
Junior subordinated debentures	253,566		240,305		253,566		254,384		253,566		254,108
Derivative liabilities	35,773		35,773		39,839		39,839		87,948		87,948
FDIC indemnification liability	15,472		15,472		16,701		16,701		17,945		17,945
Accrued interest payable	9,177		9,177		6,421		6,421		8,007		8,007
Total financial liabilities	$	24,068,745	$	23,989,684	$	22,530,447	$	22,519,455	$	22,315,062	$	22,321,648



	Accumulated Unrealized Gains (Losses) on Securities			Accumulated Unrealized Losses on Derivative Instruments			Accumulated Foreign Currency Translation Adjustments			Total Accumulated Other Comprehensive Loss
Balance at July 1, 2017	$	(15,022	)	$	4,959		$	(36,474	)	$	(46,537	)
Other comprehensive income (loss) during the period, net of tax, before reclassifications	653			228			4,206			5,087
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(24		)	8			—			(16		)
Amount reclassified from accumulated other comprehensive income related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(20		)	—			—			(20		)
Net other comprehensive income during the period, net of tax	$	609		$	236		$	4,206		$	5,051
Balance at September 30, 2017	$	(14,413	)	$	5,195		$	(32,268	)	$	(41,486	)

Balance at January 1, 2017	$	(29,309	)	$	4,165		$	(40,184	)	$	(65,328	)
Other comprehensive income (loss) during the period, net of tax, before reclassifications	15,815			393			7,916			24,124
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(19		)	637			—			618
Amount reclassified from accumulated other comprehensive income related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax	$	(900	)	$	—		$	—		$	(900	)
Net other comprehensive income during the period, net of tax	$	14,896		$	1,030		$	7,916		$	23,842
Balance at September 30, 2017	$	(14,413	)	$	5,195		$	(32,268	)	$	(41,486	)

Balance at July 1, 2016	$	3,971		$	(2,220	)	$	(36,191	)	$	(34,440	)
Other comprehensive income (loss) during the period, net of tax, before reclassifications	1,532			1,037			(1,644		)	925
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(2,005		)	646			—			(1,359		)
Amount reclassified from accumulated other comprehensive income related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax	2,295			—			—			2,295
Net other comprehensive income (loss) during the period, net of tax	$	1,822		$	1,683		$	(1,644	)	$	1,861
Balance at September 30, 2016	$	5,793		$	(537	)	$	(37,835	)	$	(32,579	)

Balance at January 1, 2016	$	(17,674	)	$	(2,193	)	$	(42,841	)	$	(62,708	)
Other comprehensive income during the period, net of tax, before reclassifications	20,444			66			5,006			25,516
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(3,684		)	1,590			—			(2,094		)
Amount reclassified from accumulated other comprehensive income related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax	6,707			—			—			6,707
Net other comprehensive income during the period, net of tax	$	23,467		$	1,656		$	5,006		$	30,129
Balance at September 30, 2016	$	5,793		$	(537	)	$	(37,835	)	$	(32,579	)