Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _________________________________________
FORM 10-Q

þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018March 31, 2019
OR
¨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
(Exact name of registrant as specified in its charter) 
Illinois36-3873352
(State of incorporation or organization)(I.R.S. Employer Identification No.)
9700 W. Higgins Road, Suite 800
Rosemont, Illinois 60018
(Address of principal executive offices)

(847) 939-9000
(Registrant’s telephone number, including area code)
______________________________________ 
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.    Yes  þ    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).    Yes  þ    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,” “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, 56,392,33456,663,096 shares, as of October 31, 2018April 30, 2019
 

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
6253
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
10489
ITEM 4.
Controls and Procedures
10691
 PART II. — OTHER INFORMATION 
ITEM 1.
Legal Proceedings
10792
ITEM 1A.
Risk Factors
10894
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
10894
ITEM 3.Defaults Upon Senior SecuritiesNA
ITEM 4.Mine Safety DisclosuresNA
ITEM 5.Other InformationNA
ITEM 6.
Exhibits
10995
 
Signatures
11096

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,
2018		 December 31,
2017		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Assets          
Cash and due from banks$279,936
 $277,534
 $251,896
$270,765
 $392,142
 $231,407
Federal funds sold and securities purchased under resale agreements57
 57
 56
58
 58
 57
Interest bearing deposits with banks1,137,044
 1,063,242
 1,218,728
1,609,852
 1,099,594
 980,380
Available-for-sale securities, at fair value2,164,985
 1,803,666
 1,665,903
2,185,782
 2,126,081
 1,895,688
Held-to-maturity securities, at amortized cost ($911.6 million, $812.5 million and $807.0 million fair value at September 30, 2018, December 31, 2017 and September 30, 2017 respectively)966,438
 826,449
 819,340
Held-to-maturity securities, at amortized cost ($1.0 billion, $1.0 billion and $862.5 million fair value at March 31, 2019, December 31, 2018, and March 31, 2018 respectively)1,051,542
 1,067,439
 892,937
Trading account securities688
 995
 643
559
 1,692
 1,682
Equity securities with readily determinable fair value36,414
 —
 —
47,653
 34,717
 37,832
Federal Home Loan Bank and Federal Reserve Bank stock99,998
 89,989
 87,192
89,013
 91,354
 104,956
Brokerage customer receivables15,649
 26,431
 23,631
14,219
 12,609
 24,531
Mortgage loans held-for-sale, at fair value338,111
 313,592
 370,282
248,557
 264,070
 411,505
Loans, net of unearned income, excluding covered loans23,123,951
 21,640,797
 20,912,781
Covered loans—
 —
 46,601
Total loans23,123,951
 21,640,797
 20,959,382
Loans, net of unearned income24,214,629
 23,820,691
 22,062,134
Allowance for loan losses(149,756) (137,905) (133,119)(158,212) (152,770) (139,503)
Allowance for covered loan losses—
 —
 (758)
Net loans22,974,195
 21,502,892
 20,825,505
24,056,417
 23,667,921
 21,922,631
Premises and equipment, net664,469
 621,895
 609,978
676,037
 671,169
 626,687
Lease investments, net199,241
 212,335
 193,828
224,240
 233,208
 190,775
Accrued interest receivable and other assets700,568
 567,374
 580,612
888,492
 696,707
 601,794
Trade date securities receivable—
 90,014
 189,896
375,211
 263,523
 —
Goodwill537,560
 501,884
 502,021
573,658
 573,141
 511,497
Other intangible assets27,378
 17,621
 18,651
46,566
 49,424
 22,413
Total assets$30,142,731
 $27,915,970
 $27,358,162
$32,358,621
 $31,244,849
 $28,456,772
Liabilities and Shareholders’ Equity          
Deposits:          
Non-interest bearing$6,399,213
 $6,792,497
 $6,502,409
$6,353,456
 $6,569,880
 $6,612,319
Interest bearing18,517,502
 16,390,850
 16,392,654
20,451,286
 19,524,798
 16,667,008
Total deposits24,916,715
 23,183,347
 22,895,063
26,804,742
 26,094,678
 23,279,327
Federal Home Loan Bank advances615,000
 559,663
 468,962
576,353
 426,326
 915,000
Other borrowings373,571
 266,123
 251,680
372,194
 393,855
 247,092
Subordinated notes139,172
 139,088
 139,052
139,235
 139,210
 139,111
Junior subordinated debentures253,566
 253,566
 253,566
253,566
 253,566
 253,566
Trade date securities payable—
 —
 880
Accrued interest payable and other liabilities664,885
 537,244
 440,034
840,559
 669,644
 591,426
Total liabilities26,962,909
 24,939,031
 24,449,237
28,986,649
 27,977,279
 25,425,522
Shareholders’ Equity:          
Preferred stock, no par value; 20,000,000 shares authorized:     
Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at September 30, 2018, December 31, 2017 and September 30, 2017125,000
 125,000
 125,000
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at September 30, 2018, December 31, 2017 and September 30, 2017; 56,486,573 shares issued at September 30, 2018, 56,068,220 shares issued at December 31, 2017 and 55,939,801 shares issued at September 30, 201756,486
 56,068
 55,940
Preferred stock, no par value; 20,000,000 shares authorized at March 31, 2019, December 31, 2018 and March 31, 2018; Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at March 31, 2019, December 31, 2018 and March 31, 2018125,000
 125,000
 125,000
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at March 31, 2019, December 31, 2018 and March 31, 2018; 56,765,450 shares issued at March 31, 2019, 56,518,119 shares issued at December 31, 2018 and 56,363,786 shares issued at March 31, 201856,765
 56,518
 56,364
Surplus1,553,353
 1,529,035
 1,519,596
1,565,185
 1,557,984
 1,540,673
Treasury stock, at cost, 109,404 shares at September 30, 2018, 103,013 shares at December 31, 2017, and 101,738 shares at September 30, 2017(5,547) (4,986) (4,884)
Treasury stock, at cost, 126,482 shares at March 31, 2019, 110,561 shares at December 31, 2018, and 107,288 shares at March 31, 2018(6,650) (5,634) (5,355)
Retained earnings1,543,680
 1,313,657
 1,254,759
1,682,016
 1,610,574
 1,387,663
Accumulated other comprehensive loss(93,150) (41,835) (41,486)(50,344) (76,872) (73,095)
Total shareholders’ equity3,179,822
 2,976,939
 2,908,925
3,371,972
 3,267,570
 3,031,250
Total liabilities and shareholders’ equity$30,142,731
 $27,915,970
 $27,358,162
$32,358,621
 $31,244,849
 $28,456,772
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 EndedThree Months Ended
(In thousands, except per share data)September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		March 31,
2019		 March 31,
2018
Interest income          
Interest and fees on loans$271,134
 $223,897
 $761,191
 $628,876
$296,987
 $234,994
Mortgage loans held-for-sale5,285
 3,223
 12,329
 10,267
2,209
 2,818
Interest bearing deposits with banks5,423
 3,272
 11,462
 6,529
5,300
 2,796
Federal funds sold and securities purchased under resale agreements—
 —
 1
 2
Investment securities21,710
 16,058
 60,726
 45,155
27,956
 19,128
Trading account securities11
 8
 29
 23
8
 14
Federal Home Loan Bank and Federal Reserve Bank stock1,235
 1,080
 3,988
 3,303
1,355
 1,298
Brokerage customer receivables164
 150
 488
 473
155
 157
Total interest income304,962
 247,688
 850,214
 694,628
333,970
 261,205
Interest expense          
Interest on deposits48,736
 23,655
 110,578
 58,396
60,976
 26,549
Interest on Federal Home Loan Bank advances1,947
 2,151
 9,849
 6,674
2,450
 3,639
Interest on other borrowings2,003
 1,482
 5,400
 3,770
3,633
 1,699
Interest on subordinated notes1,773
 1,772
 5,333
 5,330
1,775
 1,773
Interest on junior subordinated debentures2,940
 2,640
 8,239
 7,481
3,150
 2,463
Total interest expense57,399
 31,700
 139,399
 81,651
71,984
 36,123
Net interest income247,563
 215,988
 710,815
 612,977
261,986
 225,082
Provision for credit losses11,042
 7,896
 24,431
 21,996
10,624
 8,346
Net interest income after provision for credit losses236,521
 208,092
 686,384
 590,981
251,362
 216,736
Non-interest income          
Wealth management22,634
 19,803
 68,237
 59,856
23,977
 22,986
Mortgage banking42,014
 28,184
 112,808
 86,061
18,158
 30,960
Service charges on deposit accounts9,331
 8,645
 27,339
 25,606
8,848
 8,857
Gains (losses) on investment securities, net90
 39
 (249) 31
1,364
 (351)
Fees from covered call options627
 1,143
 2,893
 2,792
1,784
 1,597
Trading (losses) gains, net(61) (129) 166
 (869)(171) 103
Operating lease income, net9,132
 8,461
 27,569
 21,048
10,796
 9,691
Other16,163
 13,585
 42,079
 43,943
16,901
 11,836
Total non-interest income99,930
 79,731
 280,842
 238,468
81,657
 85,679
Non-interest expense          
Salaries and employee benefits123,855
 106,251
 357,966
 312,069
125,723
 112,436
Equipment10,827
 9,947
 31,426
 28,858
11,770
 10,072
Operating lease equipment depreciation7,370
 6,794
 20,843
 17,092
8,319
 6,533
Occupancy, net14,404
 13,079
 41,834
 38,766
16,245
 13,767
Data processing9,335
 7,851
 26,580
 23,580
7,525
 8,493
Advertising and marketing11,120
 9,572
 31,726
 23,448
9,858
 8,824
Professional fees9,914
 6,786
 23,047
 18,956
5,556
 6,649
Amortization of other intangible assets1,163
 1,068
 3,164
 3,373
2,942
 1,004
FDIC insurance4,205
 3,877
 13,165
 11,907
3,576
 4,362
OREO expense, net596
 590
 4,502
 2,994
632
 2,926
Other20,848
 17,760
 60,502
 54,194
22,228
 19,283
Total non-interest expense213,637
 183,575
 614,755
 535,237
214,374
 194,349
Income before taxes122,814
 104,248
 352,471
 294,212
118,645
 108,066
Income tax expense30,866
 38,622
 88,962
 105,311
29,499
 26,085
Net income$91,948
 $65,626
 $263,509
 $188,901
$89,146
 $81,981
Preferred stock dividends2,050
 2,050
 6,150
 7,728
2,050
 2,050
Net income applicable to common shares$89,898
 $63,576
 $257,359
 $181,173
$87,096
 $79,931
Net income per common share—Basic$1.59
 $1.14
 $4.57
 $3.34
$1.54
 $1.42
Net income per common share—Diluted$1.57
 $1.12
 $4.50
 $3.23
$1.52
 $1.40
Cash dividends declared per common share$0.19
 $0.14
 $0.57
 $0.42
$0.25
 $0.19
Weighted average common shares outstanding56,366
 55,796
 56,268
 54,292
56,529
 56,137
Dilutive potential common shares918
 966
 912
 2,305
699
 888
Average common shares and dilutive common shares57,284
 56,762
 57,180
 56,597
57,228
 57,025
See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
Three Months Ended Nine Months EndedThree Months Ended
(In thousands)September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		March 31,
2019		 March 31,
2018
Net income$91,948
 $65,626
 $263,509
 $188,901
$89,146
 $81,981
Unrealized (losses) gains on available-for-sale securities       
Unrealized gains (losses) on available-for-sale securities   
Before tax(18,149) 811
 (63,788) 25,783
38,275
 (36,184)
Tax effect4,872
 (158) 17,123
 (9,968)(10,319) 9,710
Net of tax(13,277) 653
 (46,665) 15,815
27,956
 (26,474)
Reclassification of net gains on available-for-sale securities included in net income       
Reclassification of net losses on available-for-sale securities included in net income   
Before tax1,001
 39
 6
 31
(67) (975)
Tax effect(271) (15) (1) (12)18
 262
Net of tax730
 24
 5
 19
(49) (713)
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 net gains (losses) on investment securities transferred to held-to-maturity from available-for-sale   
Before tax33
 33
 49
 1,483
144
 (4)
Tax effect(9) (13) (13) (583)(41) 1
Net of tax24
 20
 36
 900
103
 (3)
Net unrealized (losses) gains on available-for-sale securities(14,031) 609
 (46,706) 14,896
Unrealized gains on derivative instruments       
Net unrealized gains (losses) on available-for-sale securities27,902
 (25,758)
Unrealized (losses) gains on derivative instruments   
Before tax212
 394
 4,369
 1,699
(4,996) 3,075
Tax effect(57) (158) (1,173) (669)1,345
 (826)
Net unrealized gains on derivative instruments155
 236
 3,196
 1,030
Net unrealized (losses) gains on derivative instruments(3,651) 2,249
Foreign currency adjustment          
Before tax2,586
 5,643
 (3,927) 10,678
2,891
 (3,853)
Tax effect(644) (1,437) 976
 (2,762)(614) 956
Net foreign currency adjustment1,942
 4,206
 (2,951) 7,916
2,277
 (2,897)
Total other comprehensive (loss) income(11,934) 5,051
 (46,461) 23,842
Total other comprehensive income (loss)26,528
 (26,406)
Comprehensive income$80,014
 $70,677
 $217,048
 $212,743
$115,674
 $55,575
See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
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
Preferred
stock
 
Common
stock
 Surplus 
Treasury
stock
 
Retained
earnings
 
Accumulated
other
comprehensive
loss
 
Total
shareholders’
equity
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
Balance at January 1, 2018$125,000
 $56,068
 $1,529,035
 $(4,986) $1,313,657
 $(41,835) $2,976,939
$125,000
 $56,068
 $1,529,035
 $(4,986) $1,313,657
 $(41,835) $2,976,939
Cumulative effect adjustment from the adoption of:             
Accounting Standards Update (“ASU”) 2016-01—
 —
 —
 —
 1,880
 (1,880) —
Cumulative effect adjustment from the adoption of Accounting Standards Update ("ASU"):             
ASU 2016-01—
 —
 —
 —
 1,880
 (1,880) —
ASU 2017-12—
 —
 —
 —
 (116) —
 (116)—
 —
 —
 —
 (116) —
 (116)
ASU 2018-02—
 —
 —
 —
 2,974
 (2,974) —
—
 —
 —
 —
 2,974
 (2,974) —
Net income—
 —
 —
 —
 263,509
 —
 263,509
—
 —
 —
 —
 81,981
 —
 81,981
Other comprehensive loss, net of tax—
 —
 —
 —
 —
 (46,461) (46,461)—
 —
 —
 —
 —
 (26,406) (26,406)
Cash dividends declared on common stock—
 —
 —
 —
 (32,074) —
 (32,074)
Cash dividends declared on common stock, $0.19 per share—
 —
 —
 —
 (10,663) —
 (10,663)
Dividends on preferred stock—
 —
 —
 —
 (6,150) —
 (6,150)—
 —
 —
 —
 (2,050) —
 (2,050)
Stock-based compensation—
 —
 10,346
 —
 —
 —
 10,346
—
 —
 3,683
 —
 —
 —
 3,683
Common stock issued for:                          
Exercise of stock options and warrants—
 283
 10,952
 (192) —
 —
 11,043
—
 179
 7,017
 —
 —
 —
 7,196
Restricted stock awards—
 93
 (93) (369) —
 —
 (369)—
 90
 (90) (369) —
 —
 (369)
Employee stock purchase plan—
 23
 1,862
 —
 —
 —
 1,885
—
 8
 622
 —
 —
 —
 630
Director compensation plan—
 19
 1,251
 —
 —
 —
 1,270
—
 19
 406
 —
 —
 —
 425
Balance at September 30, 2018$125,000
 $56,486
 $1,553,353
 $(5,547) $1,543,680
 $(93,150) $3,179,822
Balance at March 31, 2018$125,000
 $56,364
 $1,540,673
 $(5,355) $1,387,663
 $(73,095) $3,031,250
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:             
ASU 2017-08—
 —
 —
 —
 (1,531) —
 (1,531)
Net income—
 —
 —
 —
 89,146
 —
 89,146
Other comprehensive income, net of tax—
 —
 —
 —
 —
 26,528
 26,528
Cash dividends declared on common stock, $0.25 per share—
 —
 —
 —
 (14,123) —
 (14,123)
Dividends on preferred stock—
 —
 —
 —
 (2,050) —
 (2,050)
Stock-based compensation—
 —
 3,318
 —
 —
 —
 3,318
Common stock issued for:             
Exercise of stock options and warrants—
 79
 2,864
 (575) —
 —
 2,368
Restricted stock awards—
 139
 (139) (441) —
 —
 (441)
Employee stock purchase plan—
 11
 672
 —
 —
 —
 683
Director compensation plan—
 18
 486
 —
 —
 —
 504
Balance at March 31, 2019$125,000
 $56,765
 $1,565,185
 $(6,650) $1,682,016
 $(50,344) $3,371,972
See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months EndedThree Months Ended
(In thousands)September 30,
2018		 September 30,
2017		March 31,
2019		 March 31,
2018
Operating Activities:      
Net income$263,509
 $188,901
$89,146
 $81,981
Adjustments to reconcile net income to net cash provided by operating activities      
Provision for credit losses24,431
 21,996
10,624
 8,346
Depreciation, amortization and accretion, net48,908
 46,514
21,197
 15,883
Stock-based compensation expense10,346
 8,160
3,318
 3,683
Net amortization of premium on securities5,998
 4,694
1,367
 1,071
Accretion of discount on loans(15,510) (16,885)(5,162) (4,927)
Mortgage servicing rights fair value change, net(3,660) 1,338
10,741
 (2,931)
Originations and purchases of mortgage loans held-for-sale(3,027,658) (2,812,685)(678,464) (778,852)
Proceeds from sales of mortgage loans held-for-sale3,060,577
 2,916,368
705,785
 696,336
Bank owned life insurance ("BOLI") income(5,448) (2,770)(1,591) (714)
Decrease in trading securities, net307
 1,346
Net decrease in brokerage customer receivables10,782
 1,550
Decrease (increase) in trading securities, net1,133
 (687)
Net (increase) decrease in brokerage customer receivables(1,610) 1,900
Gains on mortgage loans sold(80,826) (67,239)(18,388) (18,917)
Losses (gains) on investment securities, net249
 (31)
Gains on sales of premises and equipment, net(34) (88)
(Gains) losses on investment securities, net(1,364) 351
(Gains) losses on sales of premises and equipment, net(5) 25
Net losses on sales and fair value adjustments of other real estate owned3,808
 969
186
 2,387
Increase in accrued interest receivable and other assets, net(97,844) (63,064)
Increase (decrease) in accrued interest payable and other liabilities, net63,166
 (80,099)
(Increase) decrease in accrued interest receivable and other assets, net(29,914) 4,434
(Decrease) increase in accrued interest payable and other liabilities, net(19,314) 12,857
Net Cash Provided by Operating Activities261,101
 148,975
87,685
 22,226
Investing Activities:      
Proceeds from maturities and calls of available-for-sale securities222,387
 215,522
168,575
 47,463
Proceeds from maturities and calls of held-to-maturity securities8,061
 102,361
45,173
 4,270
Proceeds from sales of available-for-sale securities209,640
 121,795
263,456
 210,891
Proceeds from sales of equity securities with readily determinable fair value1,895
 —
Proceeds from sales and capital distributions of equity securities without readily determinable fair value680
 —
220
 —
Purchases of available-for-sale securities(777,324) (446,278)(566,376) (333,999)
Purchases of held-to-maturity securities(148,865) (287,976)(31,643) (70,988)
Purchases of equity securities with readily determinable fair value(11,505) —
Purchases of equity securities without readily determinable fair value(3,779) —
(623) (1,801)
(Purchase) redemption of Federal Home Loan Bank and Federal Reserve Bank stock, net(10,009) 46,302
Redemption (purchases) of Federal Home Loan Bank and Federal Reserve Bank stock, net2,341
 (14,967)
Distributions from investments in partnerships, net3,181
 465
363
 132
Net cash paid in business combinations(13,749) (284)—
 (18,708)
Proceeds from sales of other real estate owned16,892
 12,892
2,758
 3,679
Cash paid to the FDIC related to reimbursements on covered assets—
 (258)
Net increase in interest bearing deposits with banks(75,636) (236,531)
Net (increase) decrease in interest bearing deposits with banks(510,517) 81,162
Net increase in loans(1,304,555) (1,176,279)(380,214) (394,433)
Redemption of BOLI8,134
 —
Purchases of premises and equipment, net(52,639) (39,583)(13,608) (11,580)
Net Cash Used for Investing Activities(1,915,686) (1,687,852)(1,031,600) (498,879)
Financing Activities:      
Increase in deposit accounts1,520,270
 1,236,548
710,061
 95,988
Increase (decrease) in subordinated notes and other borrowings, net109,112
 (20,111)
Decrease in subordinated notes and other borrowings, net(24,463) (15,631)
Increase in Federal Home Loan Bank advances, net52,000
 313,000
149,999
 355,000
Cash payments to settle contingent consideration liabilities recognized in business combinations—
 (1,058)
Issuance of common shares resulting from the exercise of stock options, employee stock purchase plan and conversion of common stock warrants14,390
 23,360
4,130
 8,251
Common stock repurchases for tax withholdings related to stock-based compensation(561) (295)(1,016) (369)
Dividends paid(38,224) (30,660)(16,173) (12,713)
Net Cash Provided by Financing Activities1,656,987
 1,520,784
822,538
 430,526
Net Increase (Decrease) in Cash and Cash Equivalents2,402
 (18,093)
Net Decrease in Cash and Cash Equivalents(121,377) (46,127)
Cash and Cash Equivalents at Beginning of Period277,591
 270,045
392,200
 277,591
Cash and Cash Equivalents at End of Period$279,993
 $251,952
$270,823
 $231,464
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”) 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, 20172018 (“20172018 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, 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 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 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 20172018 Form 10-K.

(2) Recent Accounting Developments

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("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 resulted in the guidance becoming effective for the Company as of January 1, 2018.

The FASB 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 became effective for the Company starting January 1, 2018.

The Company adopted ASU No. 2014-09 and all subsequent updates issued to clarify and improve specific areas of this ASU as of January 1, 2018. As certain significant revenue sources related to financial instruments such as interest income are considered not in-scope, the new guidance did not have a significant impact on the Company's consolidated financial statements. Revenue sources impacted by the new guidance include brokerage and trust and asset management fees from the wealth management business unit, card-based fees, deposit-related fees and other non-interest income. During implementation, the Company reviewed specific contracts with customers across these various sources of revenue. Reviews of such contracts assisted 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. After review of such contracts, the Company identified no indication within the terms of such contracts that a significant change in the Company's current practices and accounting policies was necessary. The Company elected to adopt the new guidance using the modified retrospective approach applied to all contracts as of the date of initial application at January 1, 2018. Electing the modified retrospective approach resulted in no cumulative effect adjustment to the opening balance of retained earnings at the date of initial application. Additional disclosures have been added in accordance with the new guidance. See Note 13 – Revenue from Contracts with Customers for discussion of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

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 securities with readily determinable fair values to be measured at fair value with changes recognized in net income. Such equity securities with readily determinable fair values are no longer classified as available-for-sale securities or trading securities within the consolidated financial statements of an entity. For equity securities without a readily determinable fair value, the value of the equity securities may be elected to 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.

The Company adopted this guidance as of January 1, 2018. For equity securities with a readily determinable fair value, this guidance was applied under a modified retrospective approach with a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. As of January 1, 2018, the Company reclassified approximately $1.9 million from accumulated other comprehensive income, related to previously recognized unrealized gains, net of deferred taxes, from equity securities with readily determinable fair values, to retained earnings. Equity securities with readily determinable fair values are now prospectively presented separate from available-for-sale securities and trading securities within the Company's Consolidated Statements of Condition. Additionally, for the nine months ended September 30, 2018, the Company recognized $456,000 of net unrealized gains from equity securities with readily determinable fair values directly to earnings. For equity securities without a readily determinable fair value, the Company elected to measure such investments 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, unless a qualitative assessment indicates impairment, which was applied prospectively. Equity securities without readily determinable fair values are included within accrued interest receivable and other assets within the Company's Consolidated Statements of Condition. See Note 5 - Investment Securities for further discussion of equity securities with and without readily determinable fair values.

In January 2018, the FASB issued ASU No. 2018-03, “Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” to clarify certain aspects of the guidance issued in ASU No. 2016-01, including aspects of equity securities without a readily determinable fair value. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years beginning after June 15, 2018. Early adoption is permitted. As these clarifications did not have a material impact on the Company's consolidated financial statements, the Company elected to early adopt this guidance as of January 1, 2018.


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. Further, 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. Additionally, in January 2018, the FASB issued ASU No. 2018-01, "Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842," to permit an entity to elect an optional practical expedient to not evaluate under Topic 842 land easements that exist or expired before the entity's adoption of Topic 842 and that were not previously accounted for as leases under existing accounting guidance. 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 FASB has continued to issue various updates to clarify and improve specific areas of ASU No. 2016-02. In July 2018, the FASB issued ASU No. 2018-10, “Codification Improvements to Topic 842, Leases,” to clarify the implementation guidance within ASU No. 2016-02 surrounding narrow aspects of Topic 842, including lessee reassessment of lease classifications, the rate implicit in a lease, lessor reassessment of lease terms and purchase options and variable lease payments that depend on an index or a rate. Also, in July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” to clarify the implementation guidance within ASU No. 2016-02 surrounding comparative period reporting requirements for initial adoption as well as separating lease and non-lease components in a contract and allocating consideration in the contract to the separate components. LikeAlso, in December 2018, the FASB issued ASU No. 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” to clarify the implementation guidance within ASU No. 2016-02 thissurrounding specific aspects of lessor accounting. In March 2019, the FASB issued ASU No. 2019-01, “Codification Improvements to Topic 842, Leases,” to clarify the implementation guidance is effective for fiscal years beginning after December 15, 2018,within ASU No. 2016-02 surrounding aspects of Topic 842, including interim periods within those fiscal years,determining the fair value of the underlying asset by lessors that are not manufacturers or dealers, presentation on the statement of cash flows, and istransition disclosures related to be applied under a modified retrospective approach.Topic 250, Accounting Changes and Error Corrections.


The Company continuesadopted ASU No. 2016-02 and all subsequent updates issued to evaluateclarify and improve specific areas of this ASU as of January 1, 2019. The Company elected an optional transition method to apply the impact of adopting this new guidance onat the consolidated financial statements. Excluding any impact from the clarificationdate of contracts representingadoption (i.e. January 1, 2019) and continue applying current lease accounting guidance for comparative periods (i.e. fiscal periods in 2018). As a lease,result, as of January 1, 2019, the Company expects to primarily recognizerecognized a separate lease liabilitiesliability and right toof use assetsasset of approximately $199.4 million and $170.6 million, respectively, for the amounts related to certain facilities under operating lease agreements disclosed in Note 15 - Minimum Lease Commitments in the 2017 Form 10-K. Other leasing arrangements in which the Company expects to recognizeis a lessee. The difference in the separate lease liability and right of use asset represents any remaining amounts related to prepayments, payment deferrals and lease incentives as of January 1, 2019. As of March 31, 2019, the separate lease liability and right of use asset was $196.9 million and $165.8 million, respectively. The separate liability and asset are included within accrued interest payable and other liabilities and right to useaccrued interest receivable and other assets, include thoserespectively, within the Company's Consolidated Statements of Condition. The leasing arrangements requiring recognition on the Consolidated Statements of Condition primarily related tocertain banking facilities under operating lease agreements as well as other leasing arrangements in which the Company has the right of use of specific signage related to certain sponsorships and other agreements and certain automatic teller machines.machines and other equipment. The Company doesutilized the following other transition elections and practical expedients:

For lessee arrangements of certain classes of underlying assets, including banking facilities and equipment, the Company elected the practical expedient to not expectseparate non-lease components from lease components and instead to significantly change operatingaccount for each separate lease agreementsand non-lease component as a single lease component.
For lessor arrangements that meet certain criteria (leasing of space in owned facilities), the Company elected the practical expedient to account for each separate lease and non-lease component as a single lease component.
A package of practical expedients applied to leases existing prior to adoption. Thethe effective date that must all be elected together and allow a Company has established a committee consisting of individuals from various areas of the Company tasked with transitioningto not reassess:
◦whether any expiring or existing contracts are or contain a lease;
◦lease classification for any expired or existing leases; and
◦whether initial direct costs for any expired or existing leases qualify for capitalization.
A practical expedient that permits the Company to the new guidance requirements. The Company continuescontinue applying its current policy for accounting for expired or existing land easements.
An accounting policy election for short-term leases (i.e. terms of 12 months or less with no purchase option expected to review lease agreements relatedbe exercised) to certain assets as well as other agreements with components representing a lease across its various business unitsapply accounting similar to determine the impact of adoption on the Company's consolidated financial statements. Additionally, the Company is reviewing methodologies for determining an appropriate discount rate for the measurement of ASC 840, specifically to not recognize separate lease liabilities and right of use assets. Current controls and processes are also being reviewed to determine any need for changes in response to the guidance.assets.

Derivatives

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, including to derivative instruments as well as allow a one-time election to reclassify fixed-rate, prepayable debt securities from a held-to-maturity classification to an available-for-sale classification. 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 and, if elected, fair value 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 elected to early adopt this guidance as of January 1, 2018. See Note 15 - Derivative Financial Instruments for further discussion of early adoption of this guidance. The impact of early adoption on the financial statements included the following:

As allowed under the guidance, for certain existing derivative instruments designated as fair value hedges, the Company transitioned the measurement methodology for the related hedged item (loans) to benoted above, in accordance with the guidance without dedesignation of the hedging relationship. This resulted in a negative cumulative basis adjustment to loans of $116,000 with a corresponding adjustment to retained earnings.
No fixed-rate, prepayable held-to-maturity securities were transferred to an available-for-sale classification.
The entire change in the hedging instrument included in the assessment of hedge effectiveness of fair value hedges is presented in the same income statement line as the current impact of the effective portion of such hedge, or interest income

ASU No. 2016-02 and interest expense for interest rate hedging. The Company has previously recognized this ineffectiveness within non-interest income. For the first nine months of 2018,all subsequent updates, the Company recognized $55,000a separate lease liability and right of such changeuse asset related to leasing arrangements in interest income.

In October 2018,which the FASB issued ASU No. 2018-16, “Derivatives and Hedging (Topic 815): InclusionCompany is the lessee of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes,” to permitidentified asset. These lease arrangements include primarily the use of certain buildings, retail space and office space for the OISthe Company's operations and are considered operating leases. The underlying agreements of these arrangements often require fixed payments on a monthly basis. These fixed payments are included as consideration when measuring the separate lease liability and right of use asset noted above. Other payments are made on a monthly basis for certain items that are considered variable, including payments for insurance, real estate taxes and maintenance. Additionally, underlying agreements often have an initial period of use followed by certain extension periods. The Company considers such extensions for purposes of lease classification and the measurement of the separate lease liability and right of use asset. If the Company is reasonably certain to elect to extend the leasing arrangement, the lease term would include these periods for the purposes noted above. As a lessee, the Company cannot readily determine the rate based on SOFR asimplicit in the lease. As a U.S. benchmark interestresult, the Company uses its incremental borrowing rate for hedge accounting purposes. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years,when measuring the separate lease liability and is to be applied prospectively for qualifying new or redesignated hedging relationships entered into on or afterright of use asset. The Company estimated the date of adoption. Early adoption is permittedincremental borrowing rate as the Company has early adopted ASU 2017-12 as discussed above.rate of interest that would be paid to borrow on a collateralized basis over a similar term in a similar economic environment.


The following tables provide a summary of lease costs and future required fixed payments related to the Company's leasing arrangements in which it is the lessee:

  Three Months Ended
(Dollars in thousands) March 31,
2019
Operating lease cost $6,095
Short-term lease cost 181
Variable lease cost 776
Sublease income (83)
Total lease cost $6,969
   
Cash paid for amounts included in the measurement of operating lease liabilities $5,763
Weighted average remaining lease term - operating leases 13.8 years
Weighted average discount rate - operating leases 3.96%
(Dollars in thousands) Payments
Remaining in 2019 $19,657
2020 22,596
2021 20,860
2022 20,104
2023 18,084
2024 17,167
2025 and thereafter 146,202
Total minimum future amounts $264,670
Impact of measuring the lease liability on a discounted basis (67,817)
Total lease liability $196,853

Allowance for Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, “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 credit loss estimates. This impacts the calculation of an allowance for credit losses for all financial assets measured under the amortized cost basis, including held-to-maturity debt securities and PCI loans 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. 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 modified retrospective approach.

The Company is currently evaluatingFASB 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 adopting this newthe guidance on the consolidated financial statements as well as the impact on current systemsoperating lease receivables. Like ASU No. 2016-13, this guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and processes. Specifically, theis to be applied under a modified retrospective approach.

The Company has established a committee consistingcontinued its efforts in implementation of individuals from the variousASU No. 2016-13 and all subsequent updates issued to clarify and improve specific areas of the Company tasked with transitioning to the new requirements.this ASU. At this time, the Company is finalizing potential accounting policy elections and potential modeling methodologies for estimating expected credit losses using reasonable and supportable forecast information. Additionally, the Company has identifiedis utilizing certain historical data and system requirements and hasa previously selected platformsplatform to build, store, execute and determine the financial impact. Current controlsControls and processes are also being reviewed to determine any need for changes in response to the guidance.

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 became effective as of January 1, 2018 and was applied under a retrospective approach resulting in additional disclosure, including cash payments made to settle contingent consideration liabilities recognized in prior business combinations.

In November 2016, the FASB issued ASU No. 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force),” to clarify the classification and presentation of changes in restricted cash on the statement of cash flows. This guidance became effective as of January 1, 2018 and did not have a material impact on the Company.

Income Taxes

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory,” to improve the accounting for intra-entity transfers of assets other than inventory. 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. This guidance became effective as of January 1, 2018 and did not have a material impact on the Company. 

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017, and the Company recognized a provisional tax benefit of $7.6 million in 2017 to reflect the impact of the Tax Act, primarily reflecting estimated effects of a lower federal income tax rate on its net deferred tax liabilities and a transition tax due on the deferred earnings of the Company's Canadian subsidiary. Estimates were made in good faith and were subject to change as additional information and interpretive guidance regarding provisions of the Tax Act became available. Staff Accounting Bulletin 118 provides a measurement period, not to extend beyond one year from the date of enactment, during which a company may complete the accountingdesigned for the impacts ofcontinued implementation process and after the Tax Act. During the three months ended September 30, 2018, the Company finalized the provisional amounts recorded for the year ended December 31, 2017 related to the Tax Cuts and Jobs Act and recorded an additional net tax benefit of $1.2 million.effective date.

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 became effective as of January 1, 2018 and was applied under a prospective approach. See Note 3 - Business Combinations for further discussion of business combinations including the acquisition of Chicago Shore Corporation ("CSC") as well as the acquisition of certain assets and assumption of certain liabilities of the mortgage banking business of iFreedom Direct Corporation DBA Veterans First Mortgage ("Veterans First") during the current period.

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 post-retirement 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 became effective as of January 1, 2018 and was applied under a retrospective approach related to presentation of the service cost component and a prospective approach related to capitalization of such costs. Adoption of this guidance did not 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 became effective as of January 1, 2018 and was applied under a prospective approach for awards modified on or after the adoption date. Adoption of this guidance did not 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 appliedThe Company adopted ASU No. 2017-08 as of January 1, 2019 under a modified retrospective approach. Early adoption is permitted asAs a result, the Company recognized a cumulative effect adjustment of $1.5 million representing the beginningaccelerated amortization of an annual period that has not been issued or made available for issuance. The Company did not early adopt this guidance as of January 1, 2018. The Company is currently evaluating the impact of adopting this new guidancepremiums on the consolidated financial statements.

Accumulated Other Comprehensive Income (Loss)

In February 2018, the FASB issued ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” to allow a reclassification from accumulated other comprehensive incomecertain callable debt securities directly to retained earnings related toon the stranded tax effects within other comprehensive income resulting from the Federal income tax rate reduction in the Tax Act. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and is to be applied either in the periodCompany's Consolidated Statements of adoption or retrospectively to each period or periods in which the effect of the Tax Act is recognized.Condition.


Early adoption is permitted as of the beginning of an annual period that has not been issued or made available for issuance. The Company elected to early adopt this guidance as of January 1, 2018 and applied such reclassification in the current period (period of adoption). As of January 1, 2018, the Company reclassified a stranded credit of $3.0 million from accumulated other comprehensive income to retained earnings. The Company has a policy for releasing the income tax effects from accumulated other comprehensive income using an individual security approach.

Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurement,” to modify disclosure requirements on fair value measurements and inputs. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is to be applied prospectively or retrospectively depending upon the disclosure requirement. Early adoption is permitted. The Company does not expect this guidance to have a material impact on the Company's consolidated financial statements.

Intangibles

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with similar requirements related to implementation costs incurred to develop or obtain internal-use software. In addition, the amendment requires any capitalized implementation costs related to a hosting arrangement to be expensed over the term of the hosting arrangement. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is to be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.

Codification Improvements

In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”. The FASB has continued to issue various updates to clarify and improve specific areas of ASU No. 2016-01, ASU No. 2016-13, and ASU No. 2017-12. Amendments related to ASU No. 2016-01 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and can be early adopted, under a modified retrospective approach, since the Company has already adopted ASU No. 2016-01. Since the Company has not yet adopted ASU No. 2016-13, the effective dates and transition requirements for the amendments related to ASU No. 2019-04 are the same as the effective dates and transition requirements in ASU No. 2016-13 described above. Amendments related to ASU No. 2017-12 are effective as of the beginning of the first annual period beginning after the issuance date of ASU No. 2019-04 and can be early adopted since the Company has already adopted ASU No. 2017-12. 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 December 7, 2018, the Company completed its acquisition of certain assets and the assumption of certain liabilities of American Enterprise Bank ("AEB"). Through this asset acquisition, the Company acquired approximately $164.0 million in assets, including approximately $119.3 million in loans, and approximately $150.8 million in deposits.

On August 1, 2018, the Company acquired CSC.completed its acquisition of Chicago Shore Corporation ("CSC"). CSC was the parent company of Delaware Place Bank. Through this transaction,business combination, the Company acquired Delaware Place Bank’s one banking location in Chicago, Illinois. Delaware Place Bank was merged into the Company's wholly-owned subsidiary Wintrust Bank. The Company acquiredIllinois, approximately $282.8 million in assets, with a fair value of approximately $282.2 million, including approximately $151.0$152.7 million ofin loans, and assumed deposits with a fair value of approximately $213.1 million.million in deposits. Additionally, the Company recorded goodwill of $27.2$26.5 million on the acquisition.

FDIC-Assisted Transactions

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 comprised the majority of the assets acquired in nearly all of these FDIC-assisted transactions, of which eight such transactions were subject to loss sharing agreements with the FDIC whereby the FDIC agreed to reimburse the Company for 80% of losses incurred on the purchased loans, other real estate owned (“OREO”), and certain other assets. Additionally, clawback provisions within these loss share agreements with the FDIC required the Company to reimburse the FDIC for actual losses on covered assets that were 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.

As of dates subject to such agreements, the loans covered by the loss share agreements were classified and presented as covered loans and the estimated reimbursable losses were recorded as an FDIC indemnification asset or liability in the Consolidated Statements of Condition. The Company recorded the acquired assets and liabilities at their estimated fair values at the acquisition date. The fair value for loans reflected expected credit losses at the acquisition date. Therefore, the Company only recognized 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 covered realized losses on loans, foreclosed real estate and certain other assets and required the Company to record loss share assets and liabilities that were measured separately from the loan portfolios because they were not contractually embedded in the loans and were not transferable with the loans had the Company chosen 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 were 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 reduced the FDIC indemnification assets. Reductions to expected losses, to the extent such reductions to expected losses were the result of an improvement to the actual or expected cash flows from the covered assets, also reduced the FDIC indemnification assets and, if necessary, increased any loss share liability when necessary reductions exceeded the current value of the FDIC indemnification assets. In accordance with the clawback provision noted above, the Company was required to reimburse the FDIC when actual losses were less than certain thresholds established for each loss share agreement. The balance of these estimated reimbursements in accordance with clawback provisions and any related amortization were 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 were recorded as a reduction to the FDIC indemnification asset or, if necessary, an increase to the loss share liability, which was 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 liability as a result of an adjustment related to such clawback provisions. Although these assets were contractual receivables from the FDIC and these liabilities were contractual payables to the FDIC, there were no contractual interest rates. Additional expected losses, to the extent such expected losses resulted in recognition of an allowance for covered loan losses, increased the FDIC indemnification asset or reduced the FDIC indemnification liability. The corresponding amortization was recorded as a component of non-interest income on the Consolidated Statements of Income during periods covered by loss share agreements.

The following table summarizes the activity in the Company’s FDIC indemnification liability during the periods covered by loss share agreements indicated below:
 Three Months Ended Nine Months Ended
(Dollars in thousands)September 30,
2017		 September 30,
2017
Balance at beginning of period$15,375
 $16,701
Reductions from reimbursable expenses(159) (316)
Amortization311
 1,010
Changes in expected reimbursements to the FDIC for changes in expected credit losses and reimbursable expenses994
 (1,665)
Payments received from the FDIC(1,049) (258)
Balance at end of period$15,472
 $15,472

On October 16, 2017, the Company entered into agreements with the FDIC that terminated all existing loss share agreements with the FDIC. Under the 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.

Mortgage Banking Acquisitions

On January 4, 2018, the Company acquired iFreedom Direct Corporation DBA Veterans First Mortgage ("Veterans First") with assets including mortgage-servicing-rights on approximately 10,000 loans, totaling an estimated $1.6 billion in unpaid principal balance. The Company recorded goodwill of $9.1 million on the acquisition.

Wealth Management Acquisitions

On FebruaryDecember 14, 2017,2018, the Company acquired certain assets and assumed certain liabilitiesElektra Holding Company, LLC ("Elektra"), the parent company of Chicago Deferred Exchange Company, LLC ("CDEC"). CDEC is a provider of Qualified Intermediary services (as defined by U.S. Treasury regulations) for taxpayers seeking to structure tax-deferred like-kind exchanges under Internal Revenue Code Section 1031. CDEC has successfully facilitated more than 8,000 like-kind exchanges in the past decade for taxpayers nationwide. These transactions typically generate customer deposits during the period following the sale of the mortgage banking business of American Homestead Mortgage, LLC ("AHM") inproperty until such proceeds are used to purchase a business combination.replacement property. The Company recordedrecoded goodwill of $999,000$37.6 million on the acquisition.

Purchased Credit Impaired ("PCI") Loans

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date. For PCI loans, 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 expected 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 PCI loans, and in subsequent accounting, the Company aggregates these purchased loans 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 interest income prospectively. Subsequent decreases to the expected cash flows will result in a provision for loan losses.

The Company purchased a portfolio 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

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.

(5) Investment Securities

The following tables are a summary of the investment securities portfolios as of the dates shown:
September 30, 2018March 31, 2019
(Dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available-for-sale securities              
U.S. Treasury$125,153
 $—
 $(392) $124,761
$126,236
 $579
 $(97) $126,718
U.S. Government agencies111,997
 8
 (985) 111,020
129,258
 1,431
 (2) 130,687
Municipal133,006
 1,481
 (1,114) 133,373
132,870
 3,701
 (218) 136,353
Corporate notes:              
Financial issuers97,085
 87
 (4,719) 92,453
97,072
 63
 (4,802) 92,333
Other1,000
 —
 —
 1,000
1,000
 —
 —
 1,000
Mortgage-backed: (1)
              
Mortgage-backed securities1,744,600
 121
 (87,950) 1,656,771
1,677,903
 6,041
 (27,662) 1,656,282
Collateralized mortgage obligations47,909
 4
 (2,306) 45,607
42,514
 293
 (398) 42,409
Equity securities (2)
—
 —
 —
 —
Total available-for-sale securities$2,260,750
 $1,701
 $(97,466) $2,164,985
$2,206,853
 $12,108
 $(33,179) $2,185,782
Held-to-maturity securities              
U.S. Government agencies$713,423
 $—
 $(47,706) $665,717
$806,293
 $1,945
 $(14,580) $793,658
Municipal253,015
 629
 (7,764) 245,880
245,249
 3,669
 (881) 248,037
Total held-to-maturity securities$966,438
 $629
 $(55,470) $911,597
$1,051,542
 $5,614
 $(15,461) $1,041,695
Equity securities with readily determinable fair value (2)
$33,512
 $4,206
 $(1,304) $36,414
Equity securities with readily determinable fair value$45,915
 $2,708
 $(970) $47,653

December 31, 2017December 31, 2018
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in thousands)  
Available-for-sale securities              
U.S. Treasury$144,904
 $—
 $(1,082) $143,822
$126,199
 $391
 $(186) $126,404
U.S. Government agencies157,638
 2
 (725) 156,915
139,420
 917
 (30) 140,307
Municipal113,197
 2,712
 (557) 115,352
136,831
 2,427
 (768) 138,490
Corporate notes:              
Financial issuers30,309
 43
 (301) 30,051
97,079
 35
 (7,069) 90,045
Other1,000
 —
 (1) 999
1,000
 —
 —
 1,000
Mortgage-backed: (1)
              
Mortgage-backed securities1,291,695
 446
 (31,955) 1,260,186
1,641,146
 2,510
 (57,317) 1,586,339
Collateralized mortgage obligations60,092
 64
 (617) 59,539
43,819
 500
 (823) 43,496
Equity securities (2)
34,234
 3,357
 (789) 36,802
Total available-for-sale securities$1,833,069
 $6,624
 $(36,027) $1,803,666
$2,185,494
 $6,780
 $(66,193) $2,126,081
Held-to-maturity securities              
U.S. Government agencies$579,062
 $23
 $(14,066) $565,019
$814,864
 $1,141
 $(28,576) $787,429
Municipal247,387
 2,668
 (2,558) 247,497
252,575
 1,100
 (5,008) 248,667
Total held-to-maturity securities$826,449
 $2,691
 $(16,624) $812,516
$1,067,439
 $2,241
 $(33,584) $1,036,096
Equity securities with readily determinable fair value$34,410
 $1,532
 $(1,225) $34,717
(1)Consisting entirely of residential mortgage-backed securities, none of which are subprime.
(2)As a result of the adoption of ASU No. 2016-01 effective January 1, 2018, equity securities with readily determinable fair value are no longer presented within available-for-sale securities and are now presented as equity securities with readily determinable fair values in the Company's Consolidated Statements of Condition for the current period.


September 30, 2017March 31, 2018
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in thousands)  
Available-for-sale securities              
U.S. Treasury$144,872
 $—
 $(727) $144,145
$25,022
 $—
 $(295) $24,727
U.S. Government agencies159,884
 10
 (566) 159,328
149,899
 —
 (563) 149,336
Municipal113,796
 2,493
 (273) 116,016
120,396
 2,218
 (856) 121,758
Corporate notes:              
Financial issuers60,325
 63
 (771) 59,617
100,294
 16
 (1,595) 98,715
Other1,000
 —
 (3) 997
1,000
 —
 (1) 999
Mortgage-backed: (1)
              
Mortgage-backed securities1,114,655
 1,477
 (30,436) 1,085,696
1,510,421
 169
 (64,077) 1,446,513
Collateralized mortgage obligations63,934
 230
 (412) 63,752
55,836
 7
 (2,203) 53,640
Equity securities (2)
33,166
 3,867
 (681) 36,352
Total available-for-sale securities$1,691,632
 $8,140
 $(33,869) $1,665,903
$1,962,868
 $2,410
 $(69,590) $1,895,688
Held-to-maturity securities              
U.S. Government agencies$585,061
 $249
 $(12,579) $572,731
$639,442
 $—
 $(25,891) $613,551
Municipal234,279
 2,185
 (2,159) 234,305
253,495
 939
 (5,458) 248,976
Total held-to-maturity securities$819,340
 $2,434
 $(14,738) $807,036
$892,937
 $939
 $(31,349) $862,527
Equity securities with readily determinable fair value$34,230
 $4,670
 $(1,068) $37,832
(1)Consisting entirely of residential mortgage-backed securities, none of which are subprime.
(2)As a result of the adoption of ASU No. 2016-01 effective January 1, 2018, equity securities with readily determinable fair value are no longer presented within available-for-sale securities and are now presented as equity securities with readily determinable fair values in the Company's Consolidated Statements of Condition for the current period.

Equity securities without readily determinable fair values totaled $26.6$27.0 million as of September 30, 2018.March 31, 2019. Equity securities without readily determinable fair values are included as part of accrued interest receivable and other assets in the Company's Consolidated Statements of Condition. The Company recorded no upward or downward adjustments on such securities in the thirdfirst quarter of 2018 and $156,000 on a year-to-date basis,2019 related to observable price changes in orderly transactions for the identical or a similar investment of the same issuer in accordance with the adoption of ASU No. 2016-01. No downward adjustments of equity securities without readily determinable fair values related to observable price changes in orderly transactions for the identical or a similar investment of the same issuer were recorded during the current periods.issuer. The Company monitors its equity investments without a readily determinable fair values to identify potential transactions that may indicate an observable price change requiring adjustment to its carrying amount.


The following table presents the portion of the Company’s available-for-sale and held-to-maturity 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 September 30, 2018:March 31, 2019:
Continuous unrealized
losses existing for
less than 12 months
 
Continuous unrealized
losses existing for
greater than 12 months
 Total
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 LossesFair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Available-for-sale securities                      
U.S. Treasury$100,008
 $(131) $24,753
 $(261) $124,761
 $(392)$—
 $—
 $24,908
 $(97) $24,908
 $(97)
U.S. Government agencies37,672
 (914) 70,032
 (71) 107,704
 (985)—
 —
 208
 (2) 208
 (2)
Municipal38,774
 (553) 20,489
 (561) 59,263
 (1,114)6,448
 (12) 15,087
 (206) 21,535
 (218)
Corporate notes:                      
Financial issuers68,639
 (4,475) 3,730
 (244) 72,369
 (4,719)9,987
 (11) 72,283
 (4,791) 82,270
 (4,802)
Other—
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
Mortgage-backed:                      
Mortgage-backed securities573,401
 (14,706) 1,079,068
 (73,244) 1,652,469
 (87,950)—
 —
 1,315,030
 (27,662) 1,315,030
 (27,662)
Collateralized mortgage obligations22,524
 (1,228) 22,671
 (1,078) 45,195
 (2,306)—
 —
 13,708
 (398) 13,708
 (398)
Total available-for-sale securities$841,018
 $(22,007) $1,220,743
 $(75,459) $2,061,761
 $(97,466)$16,435
 $(23) $1,441,224
 $(33,156) $1,457,659
 $(33,179)
Held-to-maturity securities                      
U.S. Government agencies$298,736
 $(12,317) $366,981
 $(35,389) $665,717
 $(47,706)$—
 $—
 $403,196
 $(14,580) $403,196
 $(14,580)
Municipal146,750
 (3,854) 83,874
 (3,910) 230,624
 (7,764)7,951
 (111) 50,196
 (770) 58,147
 (881)
Total held-to-maturity securities$445,486
 $(16,171) $450,855
 $(39,299) $896,341
 $(55,470)$7,951
 $(111) $453,392
 $(15,350) $461,343
 $(15,461)


The Company conducts a regular assessment of its available-for-sale and held-to-maturity 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 available-for-sale and held-to-maturity securities with unrealized losses at September 30, 2018March 31, 2019 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 mortgage-backed securities, U.S. Government agency securities and corporate notes.


The following table provides information as to the 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 September 30, Nine months ended September 30,Three months ended March 31,
(Dollars in thousands)2018 2017 2018 20172019 2018
Realized gains on investment securities$1,051
 $58
 $1,057
 $106
$17
 $—
Realized losses on investment securities(50) (19) (1,051) (75)(84) (975)
Net realized gains on investment securities1,001
 $39
 6
 $31
Net realized losses on investment securities(67) $(975)
Unrealized gains on equity securities with readily determinable fair value530
 —
 2,632
 —
1,431
 1,873
Unrealized losses on equity securities with readily determinable fair value(1,111) —
 (2,176) —
—
 (843)
Net unrealized (losses) gains on equity securities with readily determinable fair value(581) —
 456
 —
Net unrealized gains on equity securities with readily determinable fair value1,431
 1,030
Upward adjustments of equity securities without readily determinable fair values—
 —
 156
 —
—
 131
Downward adjustments of equity securities without readily determinable fair values—
 —
 —
 —
—
 —
Impairment of equity securities without readily determinable fair values(330) —
 (867) —
—
 (537)
Adjustment and impairment, net, of equity securities without readily determinable fair values(330) —
 (711) —
—
 (406)
Other than temporary impairment charges—
 —
 —
 —
—
 —
Gains (losses) on investment securities, net$90
 $39
 $(249) $31
$1,364
 $(351)
Proceeds from sales of available-for-sale securities$649
 $133,089
 $209,640
 $121,795
$263,456
 $210,891
Proceeds from sales of equity securities with readily determinable fair value1,895
 —
 1,895
 —
—
 —
Proceeds from sales and capital distributions of equity securities without readily determinable fair value64
 —
 680
 —
220
 —

During the three months ended September 30, 2018,March 31, 2019, the Company recorded $330,000no of impairment of equity securities without readily determinable fair values. On a year-to-date basis, the Company recorded impairment of equity securities without readily determinable fair values totaling $867,000. The Company conducts a quarterly assessment of its equity securities without a 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.


The amortized cost and fair value of available-for-sale and held-to-maturity investment securities as of September 30, 2018,March 31, 2019, December 31, 20172018 and September 30, 2017,March 31, 2018, 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 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, 2018 December 31, 2017 September 30, 2017March 31, 2019 December 31, 2018 March 31, 2018
(Dollars in thousands)Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair ValueAmortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
Available-for-sale securities                      
Due in one year or less$128,184
 $127,844
 $300,833
 $299,285
 $150,907
 $150,241
$68,996
 $69,060
 $82,206
 $82,153
 $180,899
 $180,333
Due in one to five years174,968
 174,877
 97,019
 97,326
 282,443
 282,121
171,058
 172,673
 168,855
 169,307
 90,073
 89,953
Due in five to ten years118,229
 113,875
 33,947
 35,029
 38,339
 39,458
116,901
 113,825
 121,129
 115,206
 116,909
 116,517
Due after ten years46,860
 46,011
 15,249
 15,499
 8,188
 8,283
129,481
 131,533
 128,339
 129,580
 8,730
 8,732
Mortgage-backed1,792,509
 1,702,378
 1,351,787
 1,319,725
 1,178,589
 1,149,448
1,720,417
 1,698,691
 1,684,965
 1,629,835
 1,566,257
 1,500,153
Equity securities (1)
—
 —
 34,234
 36,802
 33,166
 36,352
Total available-for-sale securities$2,260,750
 $2,164,985
 $1,833,069
 $1,803,666
 $1,691,632
 $1,665,903
$2,206,853
 $2,185,782
 $2,185,494
 $2,126,081
 $1,962,868
 $1,895,688
Held-to-maturity securities                      
Due in one year or less$5,521
 $5,511
 $170
 $171
 $170
 $171
$9,134
 $9,112
 $10,009
 $9,979
 $3,786
 $3,775
Due in one to five years31,782
 31,160
 38,392
 38,012
 36,914
 36,734
27,477
 27,539
 29,436
 28,995
 34,495
 33,994
Due in five to ten years255,146
 243,608
 205,227
 203,680
 193,387
 192,581
301,971
 302,066
 295,897
 290,206
 210,705
 205,823
Due after ten years673,989
 631,318
 582,660
 570,653
 588,869
 577,550
712,960
 702,978
 732,097
 706,916
 643,951
 618,935
Total held-to-maturity securities$966,438
 $911,597
 $826,449
 $812,516
 $819,340
 $807,036
$1,051,542
 $1,041,695
 $1,067,439
 $1,036,096
 $892,937
 $862,527
(1)As a result of the adoption of ASU No. 2016-01 effective January 1, 2018, equity securities with readily determinable fair value are no longer presented within available-for-sale securities and are now presented as equity securities with readily determinable fair values in the Company's Consolidated Statements of Condition for the current period.

Securities having a fair value of $1.7 billion at September 30, 2018March 31, 2019 as well as securities having a fair value of $1.7 billion and $1.6$1.5 billion at December 31, 20172018 and September 30, 2017,March 31, 2018, respectively, 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, 2018,March 31, 2019, 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,March 31, December 31, March 31,
(Dollars in thousands)2018 2017 20172019 2018 2018
Balance:          
Commercial$7,473,958
 $6,787,677
 $6,456,034
$7,994,191
 $7,828,538
 $7,060,871
Commercial real estate6,746,774
 6,580,618
 6,400,781
6,973,505
 6,933,252
 6,633,520
Home equity578,844
 663,045
 672,969
528,448
 552,343
 626,547
Residential real estate924,250
 832,120
 789,499
1,053,524
 1,002,464
 869,104
Premium finance receivables—commercial2,885,327
 2,634,565
 2,664,912
2,988,788
 2,841,659
 2,576,150
Premium finance receivables—life insurance4,398,971
 4,035,059
 3,795,474
4,555,369
 4,541,794
 4,189,961
Consumer and other115,827
 107,713
 133,112
120,804
 120,641
 105,981
Total loans, net of unearned income, excluding covered loans$23,123,951
 $21,640,797
 $20,912,781
Covered loans—
 —
 46,601
Total loans$23,123,951
 $21,640,797
 $20,959,382
Total loans, net of unearned income$24,214,629
 $23,820,691
 $22,062,134
Mix:          
Commercial32% 31% 31%33% 33% 32%
Commercial real estate29
 30
 31
29
 29
 30
Home equity3
 3
 3
2
 2
 3
Residential real estate4
 4
 3
4
 4
 4
Premium finance receivables—commercial12
 12
 13
12
 12
 12
Premium finance receivables—life insurance19
 19
 18
19
 19
 19
Consumer and other1
 1
 1
1
 1
 —
Total loans, net of unearned income, excluding covered loans100% 100% 100%
Covered loans—
 —
 —
Total loans100% 100% 100%
Total loans, net of unearned income100% 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 $98.1$110.0 million at September 30, 2018, $87.0March 31, 2019, $112.9 million at December 31, 20172018 and $80.4$85.4 million at September 30, 2017.March 31, 2018.

Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $6.5$6.4 million at September 30, 2018, $9.3March 31, 2019, $4.5 million at December 31, 20172018 and $8.0$9.4 million at September 30, 2017.March 31, 2018. PCI loans are recorded net of credit discounts. See “Acquired Loan Information at Acquisition - PCI Loans” 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, 2018 December 31, 2017
 (Dollars in thousands)
Unpaid
Principal
Balance
 
Carrying
Value
 Unpaid
Principal
Balance		 Carrying
Value
 
 PCI loans$325,019
 $304,726
 $375,237
 $350,690
  March 31, 2019 December 31, 2018
 (Dollars in thousands)
Unpaid
Principal
Balance
 
Carrying
Value
 Unpaid
Principal
Balance		 Carrying
Value
 
 PCI loans$334,654
 $313,221
 $341,555
 $318,394

See Note 7—Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans for further discussion regarding the allowance for loan losses associated with PCI loans at September 30, 2018.

The following table provides estimated details as of the date of acquisition on loans acquired in 2018 with evidence of credit quality deterioration since origination:
(Dollars in thousands)Delaware Place Bank
Contractually required payments including interest$13,367
Less: Nonaccretable difference1,197
   Cash flows expected to be collected (1)  
$12,170
Less: Accretable yield2,321
    Fair value of PCI loans acquired$9,849
(1) Represents undiscounted expected principal and interest cash at acquisition.March 31, 2019.

Accretable Yield Activity - PCI Loans

Changes in expected cash flows may vary from period to period as the Company periodically updates 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 changes in the benchmark interest rate indices for variable-rate products and changes in prepayment assumptions and loss estimates. The following table provides activity for the accretable yield of PCI loans:

Three Months Ended Nine Months EndedThree Months Ended
(Dollars in thousands)September 30,
2018
September 30,
2017
September 30,
2018		 September 30,
2017		March 31,
2019		 March 31,
2018
Accretable yield, beginning balance$34,347
 $45,510
 $36,565
 $49,408
$34,876
 $36,565
Acquisitions2,321
 —
 2,321
 426
—
 —
Accretable yield amortized to interest income(4,144) (5,025) (12,915) (16,101)(3,829) (4,619)
Accretable yield amortized to indemnification asset/liability (1)
—
 (371) —
 (1,086)
Reclassification from non-accretable difference (2)
1,734
 1,017
 4,596
 7,106
Reclassification from non-accretable difference (1)
1,574
 1,556
Increases in interest cash flows due to payments and changes in interest rates(1,093) (875) 2,598
 503
1,471
 2,190
Accretable yield, ending balance$33,165
 $40,256
 $33,165
 $40,256
$34,092
 $35,692
(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.

Accretion to interest income accounted for under ASC 310-30 totaled $4.1$3.8 million and $5.0$4.6 million in the thirdfirst quarter of 20182019 and 2017, respectively. For the nine months ended September 30, 2018, and 2017, the Company recorded accretion to interest income of $12.9 million and $16.1 million, respectively. These amounts are included within interest and fees on loans in the Consolidated Statements of Income.


(7) Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans

The tables below show the aging of the Company’s loan portfolio at September 30, 2018,March 31, 2019, December 31, 20172018 and September 30, 2017:March 31, 2018:
As of September 30, 2018  90+ days and still accruing 60-89 days past due 30-59 days past due    
As of March 31, 2019  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 LoansNonaccrual Current Total Loans
Loan Balances:                
Commercial                      
Commercial, industrial and other$41,322
 $—
 $2,535
 $16,451
 $4,745,178
 $4,805,486
$38,858
 $—
 $1,787
 $38,094
 $5,172,214
 $5,250,953
Franchise16,351
 5,122
 —
 —
 915,817
 937,290
15,799
 —
 —
 534
 863,573
 879,906
Mortgage warehouse lines of credit—
 —
 3,000
 —
 168,860
 171,860
—
 —
 —
 —
 174,284
 174,284
Asset-based lending910
 —
 590
 9,083
 1,023,268
 1,033,851
1,135
 —
 —
 7,821
 1,031,878
 1,040,834
Leases4
 —
 —
 80
 509,591
 509,675
—
 —
 —
 2,796
 620,088
 622,884
PCI - commercial (1)
—
 3,372
 15
 —
 12,409
 15,796
—
 2,499
 —
 455
 22,376
 25,330
Total commercial58,587
 8,494
 6,140
 25,614
 7,375,123
 7,473,958
55,792
 2,499
 1,787
 49,700
 7,884,413
 7,994,191
Commercial real estate:                      
Construction1,554
 —
 1,823
 16,228
 778,725
 798,330
1,030
 —
 496
 3,877
 798,266
 803,669
Land228
 —
 365
 —
 118,411
 119,004
54
 —
 —
 3,888
 143,759
 147,701
Office1,532
 —
 4,058
 3,021
 932,166
 940,777
4,482
 —
 —
 3,364
 918,529
 926,375
Industrial178
 —
 122
 145
 885,486
 885,931
267
 —
 1,039
 10,643
 953,011
 964,960
Retail10,586
 —
 4,570
 10,645
 861,901
 887,702
7,645
 —
 —
 8,149
 879,473
 895,267
Multi-family318
 —
 —
 1,162
 922,413
 923,893
303
 —
 187
 675
 1,116,220
 1,117,385
Mixed use and other3,119
 —
 9,654
 11,503
 2,062,179
 2,086,455
2,152
 —
 1,084
 17,243
 1,987,008
 2,007,487
PCI - commercial real estate (1)
—
 5,578
 6,448
 1,380
 91,276
 104,682
—
 4,265
 2,806
 7,033
 96,557
 110,661
Total commercial real estate17,515
 5,578
 27,040
 44,084
 6,652,557
 6,746,774
15,933
 4,265
 5,612
 54,872
 6,892,823
 6,973,505
Home equity8,523
 —
 1,075
 3,478
 565,768
 578,844
7,885
 —
 810
 4,315
 515,438
 528,448
Residential real estate, including PCI16,062
 1,865
 1,714
 603
 904,006
 924,250
15,879
 1,481
 509
 11,112
 1,024,543
 1,053,524
Premium finance receivables                      
Commercial insurance loans13,802
 7,028
 5,945
 13,239
 2,845,313
 2,885,327
14,797
 6,558
 5,628
 20,767
 2,941,038
 2,988,788
Life insurance loans—
 —
 —
 22,016
 4,203,465
 4,225,481
—
 168
 4,788
 35,046
 4,349,597
 4,389,599
PCI - life insurance loans (1)
—
 —
 —
 —
 173,490
 173,490
—
 —
 —
 —
 165,770
 165,770
Consumer and other, including PCI355
 295
 430
 329
 114,418
 115,827
326
 280
 47
 350
 119,801
 120,804
Total loans, net of unearned income$114,844
 $23,260
 $42,344
 $109,363
 $22,834,140
 $23,123,951
$110,612
 $15,251
 $19,181
 $176,162
 $23,893,423
 $24,214,629

As of December 31, 2017  90+ days and still accruing 60-89 days past due 30-59 days past due    
As of December 31, 2018  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 LoansNonaccrual Current Total Loans
Loan Balances:                
Commercial                      
Commercial, industrial and other$11,260
 $—
 $3,746
 $13,392
 $4,314,107
 $4,342,505
$34,298
 $—
 $1,451
 $21,618
 $5,062,729
 $5,120,096
Franchise2,447
 —
 —
 —
 845,150
 847,597
16,051
 —
 —
 8,738
 924,190
 948,979
Mortgage warehouse lines of credit—
 —
 —
 4,000
 190,523
 194,523
—
 —
 —
 —
 144,199
 144,199
Asset-based lending1,550
 —
 283
 10,057
 968,576
 980,466
635
 —
 200
 3,156
 1,022,065
 1,026,056
Leases439
 —
 3
 1,958
 410,772
 413,172
—
 —
 —
 1,250
 564,430
 565,680
PCI - commercial (1)
—
 877
 186
 —
 8,351
 9,414
—
 3,313
 —
 99
 20,116
 23,528
Total commercial15,696
 877
 4,218
 29,407
 6,737,479
 6,787,677
50,984
 3,313
 1,651
 34,861
 7,737,729
 7,828,538
Commercial real estate                      
Construction3,143
 —
 —
 200
 742,171
 745,514
1,554
 —
 —
 9,424
 749,846
 760,824
Land188
 —
 —
 5,156
 121,140
 126,484
107
 —
 170
 107
 141,097
 141,481
Office2,438
 —
 —
 4,458
 887,937
 894,833
3,629
 —
 877
 5,077
 929,739
 939,322
Industrial811
 —
 —
 2,412
 879,796
 883,019
285
 —
 —
 16,596
 885,367
 902,248
Retail12,328
 —
 668
 148
 938,383
 951,527
10,753
 —
 1,890
 1,729
 878,106
 892,478
Multi-family—
 —
 —
 1,034
 914,610
 915,644
311
 —
 77
 5,575
 970,597
 976,560
Mixed use and other3,140
 —
 1,423
 9,641
 1,921,501
 1,935,705
2,490
 —
 1,617
 8,983
 2,192,105
 2,205,195
PCI - commercial real estate (1)
—
 7,135
 2,255
 6,277
 112,225
 127,892
—
 6,241
 6,195
 4,075
 98,633
 115,144
Total commercial real estate22,048
 7,135
 4,346
 29,326
 6,517,763
 6,580,618
19,129
 6,241
 10,826
 51,566
 6,845,490
 6,933,252
Home equity8,978
 —
 518
 4,634
 648,915
 663,045
7,147
 —
 131
 3,105
 541,960
 552,343
Residential real estate, including PCI17,977
 5,304
 1,303
 8,378
 799,158
 832,120
16,383
 1,292
 1,692
 6,171
 976,926
 1,002,464
Premium finance receivables                      
Commercial insurance loans12,163
 9,242
 17,796
 15,849
 2,579,515
 2,634,565
11,335
 7,799
 11,382
 15,085
 2,796,058
 2,841,659
Life insurance loans—
 —
 4,837
 10,017
 3,820,936
 3,835,790
—
 —
 8,407
 24,628
 4,340,856
 4,373,891
PCI - life insurance loans (1)
—
 —
 —
 —
 199,269
 199,269
—
 —
 —
 —
 167,903
 167,903
Consumer and other, including PCI740
 101
 242
 727
 105,903
 107,713
348
 227
 87
 733
 119,246
 120,641
Total loans, net of unearned income$77,602
 $22,659
 $33,260
 $98,338
 $21,408,938
 $21,640,797
$105,326
 $18,872
 $34,176
 $136,149
 $23,526,168
 $23,820,691
(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 30, 2017  90+ days and still accruing 60-89 days past due 30-59 days past due    
As of March 31, 2018  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 LoansNonaccrual Current Total Loans
Loan Balances:                
Commercial                      
Commercial, industrial and other$12,281
 $—
 $3,161
 $13,710
 $4,091,381
 $4,120,533
$10,051
 $—
 $594
 $31,475
 $4,518,760
 $4,560,880
Franchise—
 —
 —
 16,719
 836,997
 853,716
2,401
 —
 44
 1,203
 931,710
 935,358
Mortgage warehouse lines of credit—
 —
 —
 312
 194,058
 194,370
—
 —
 —
 5,771
 157,699
 163,470
Asset-based lending1,141
 —
 1,533
 4,515
 889,147
 896,336
1,194
 —
 47
 12,611
 963,883
 977,735
Leases509
 —
 281
 1,194
 379,410
 381,394
361
 —
 —
 3,170
 410,667
 414,198
PCI - commercial (1)
—
 1,489
 61
 —
 8,135
 9,685
—
 856
 86
 3
 8,285
 9,230
Total commercial13,931
 1,489
 5,036
 36,450
 6,399,128
 6,456,034
14,007
 856
 771
 54,233
 6,991,004
 7,060,871
Commercial real estate:                      
Construction1,607
 —
 366
 2,064
 669,940
 673,977
3,139
 —
 —
 9,576
 802,921
 815,636
Land196
 —
 —
 —
 102,557
 102,753
182
 —
 —
 4,527
 117,981
 122,690
Office5,148
 —
 —
 1,220
 874,583
 880,951
474
 —
 925
 11,466
 878,206
 891,071
Industrial1,848
 —
 137
 438
 834,062
 836,485
1,427
 —
 823
 5,027
 898,867
 906,144
Retail2,200
 —
 3,030
 3,674
 925,335
 934,239
12,274
 —
 —
 4,785
 878,563
 895,622
Multi-family569
 —
 68
 3,058
 861,290
 864,985
19
 —
 —
 328
 931,008
 931,355
Mixed use and other3,310
 —
 843
 3,561
 1,966,601
 1,974,315
4,310
 —
 192
 13,626
 1,937,328
 1,955,456
PCI - commercial real estate (1)
—
 8,443
 1,394
 2,940
 120,299
 133,076
—
 3,107
 1,623
 9,134
 101,682
 115,546
Total commercial real estate14,878
 8,443
 5,838
 16,955
 6,354,667
 6,400,781
21,825
 3,107
 3,563
 58,469
 6,546,556
 6,633,520
Home equity7,581
 —
 446
 2,590
 662,352
 672,969
9,828
 —
 1,505
 4,033
 611,181
 626,547
Residential real estate, including PCI14,743
 1,120
 2,055
 165
 771,416
 789,499
17,214
 1,437
 229
 8,808
 841,416
 869,104
Premium finance receivables                      
Commercial insurance loans9,827
 9,584
 7,421
 9,966
 2,628,114
 2,664,912
17,342
 8,547
 6,543
 17,756
 2,525,962
 2,576,150
Life insurance loans—
 6,740
 946
 6,937
 3,571,388
 3,586,011
—
 —
 5,125
 11,420
 3,986,181
 4,002,726
PCI - life insurance loans (1)
—
 —
 —
 —
 209,463
 209,463
—
 —
 —
 —
 187,235
 187,235
Consumer and other, including PCI540
 221
 242
 685
 131,424
 133,112
720
 269
 216
 291
 104,485
 105,981
Total loans, net of unearned income, excluding covered loans$61,500
 $27,597
 $21,984
 $73,748
 $20,727,952
 $20,912,781
Covered loans1,936
 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
$80,936
 $14,216
 $17,952
 $155,010
 $21,794,020
 $22,062,134
(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.

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.

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.

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 or an impairment reserve may be established. The Company’s impairment analysis 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, a charge-off or the establishment of a specific impairment reserve. If 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.

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, 2018,March 31, 2019, December 31, 20172018 and September 30, 2017:March 31, 2018:
Performing Non-performing TotalPerforming Non-performing Total
(Dollars in thousands)September 30,
2018		 December 31,
2017		 September 30,
2017		 September 30,
2018		 December 31,
2017		 September 30,
2017		 September 30,
2018		 December 31,
2017		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018		 March 31,
2019		 December 31,
2018		 March 31,
2018		 March 31,
2019		 December 31,
2018		 March 31,
2018
Loan Balances:                                  
Commercial                                  
Commercial, industrial and other$4,764,164
 $4,331,245
 $4,108,252
 $41,322
 $11,260
 $12,281
 $4,805,486
 $4,342,505
 $4,120,533
$5,212,095
 $5,085,798
 $4,550,829
 $38,858
 $34,298
 $10,051
 $5,250,953
 $5,120,096
 $4,560,880
Franchise915,817
 845,150
 853,716
 21,473
 2,447
 —
 937,290
 847,597
 853,716
864,107
 932,928
 932,957
 15,799
 16,051
 2,401
 879,906
 948,979
 935,358
Mortgage warehouse lines of credit171,860
 194,523
 194,370
 —
 —
 —
 171,860
 194,523
 194,370
174,284
 144,199
 163,470
 —
 —
 —
 174,284
 144,199
 163,470
Asset-based lending1,032,941
 978,916
 895,195
 910
 1,550
 1,141
 1,033,851
 980,466
 896,336
1,039,699
 1,025,421
 976,541
 1,135
 635
 1,194
 1,040,834
 1,026,056
 977,735
Leases509,671
 412,733
 380,885
 4
 439
 509
 509,675
 413,172
 381,394
622,884
 565,680
 413,837
 —
 —
 361
 622,884
 565,680
 414,198
PCI - commercial (1)
15,796
 9,414
 9,685
 —
 —
 —
 15,796
 9,414
 9,685
25,330
 23,528
 9,230
 —
 —
 —
 25,330
 23,528
 9,230
Total commercial7,410,249
 6,771,981
 6,442,103
 63,709
 15,696
 13,931
 7,473,958
 6,787,677
 6,456,034
7,938,399
 7,777,554
 7,046,864
 55,792
 50,984
 14,007
 7,994,191
 7,828,538
 7,060,871
Commercial real estate                                  
Construction796,776
 742,371
 672,370
 1,554
 3,143
 1,607
 798,330
 745,514
 673,977
802,639
 759,270
 812,497
 1,030
 1,554
 3,139
 803,669
 760,824
 815,636
Land118,776
 126,296
 102,557
 228
 188
 196
 119,004
 126,484
 102,753
147,647
 141,374
 122,508
 54
 107
 182
 147,701
 141,481
 122,690
Office939,245
 892,395
 875,803
 1,532
 2,438
 5,148
 940,777
 894,833
 880,951
921,893
 935,693
 890,597
 4,482
 3,629
 474
 926,375
 939,322
 891,071
Industrial885,753
 882,208
 834,637
 178
 811
 1,848
 885,931
 883,019
 836,485
964,693
 901,963
 904,717
 267
 285
 1,427
 964,960
 902,248
 906,144
Retail877,116
 939,199
 932,039
 10,586
 12,328
 2,200
 887,702
 951,527
 934,239
887,622
 881,725
 883,348
 7,645
 10,753
 12,274
 895,267
 892,478
 895,622
Multi-family923,575
 915,644
 864,416
 318
 —
 569
 923,893
 915,644
 864,985
1,117,082
 976,249
 931,336
 303
 311
 19
 1,117,385
 976,560
 931,355
Mixed use and other2,083,336
 1,932,565
 1,971,005
 3,119
 3,140
 3,310
 2,086,455
 1,935,705
 1,974,315
2,005,335
 2,202,705
 1,951,146
 2,152
 2,490
 4,310
 2,007,487
 2,205,195
 1,955,456
PCI - commercial real estate(1)
104,682
 127,892
 133,076
 —
 —
 —
 104,682
 127,892
 133,076
110,661
 115,144
 115,546
 —
 —
 —
 110,661
 115,144
 115,546
Total commercial real estate6,729,259
 6,558,570
 6,385,903
 17,515
 22,048
 14,878
 6,746,774
 6,580,618
 6,400,781
6,957,572
 6,914,123
 6,611,695
 15,933
 19,129
 21,825
 6,973,505
 6,933,252
 6,633,520
Home equity570,321
 654,067
 665,388
 8,523
 8,978
 7,581
 578,844
 663,045
 672,969
520,563
 545,196
 616,719
 7,885
 7,147
 9,828
 528,448
 552,343
 626,547
Residential real estate, including PCI908,188
 810,865
 774,756
 16,062
 21,255
 14,743
 924,250
 832,120
 789,499
1,037,615
 986,081
 851,890
 15,909
 16,383
 17,214
 1,053,524
 1,002,464
 869,104
Premium finance receivables                                  
Commercial insurance loans2,864,497
 2,613,160
 2,645,501
 20,830
 21,405
 19,411
 2,885,327
 2,634,565
 2,664,912
2,967,433
 2,822,525
 2,550,261
 21,355
 19,134
 25,889
 2,988,788
 2,841,659
 2,576,150
Life insurance loans4,225,481
 3,835,790
 3,579,271
 —
 —
 6,740
 4,225,481
 3,835,790
 3,586,011
4,389,431
 4,373,891
 4,002,726
 168
 —
 —
 4,389,599
 4,373,891
 4,002,726
PCI - life insurance loans (1)
173,490
 199,269
 209,463
 —
 —
 —
 173,490
 199,269
 209,463
165,770
 167,903
 187,235
 —
 —
 —
 165,770
 167,903
 187,235
Consumer and other, including PCI115,239
 106,933
 132,413
 588
 780
 699
 115,827
 107,713
 133,112
120,260
 120,184
 105,054
 544
 457
 927
 120,804
 120,641
 105,981
Total loans, net of unearned income, excluding covered loans$22,996,724
 $21,550,635
 $20,834,798
 $127,227
 $90,162
 $77,983
 $23,123,951
 $21,640,797
 $20,912,781
Total loans, net of unearned income$24,097,043
 $23,707,457
 $21,972,444
 $117,586
 $113,234
 $89,690
 $24,214,629
 $23,820,691
 $22,062,134
(1)PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. See Note 6 - Loans for further discussion of these purchased loans.


A summary of activity in the allowance for credit losses by loan portfolio (excluding covered loans) for the ninethree months ended September 30, 2018March 31, 2019 and 20172018 is as follows:
Three months ended September 30, 2018  Commercial Real Estate Home  Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total, Excluding Covered Loans
Three months ended March 31, 2019  Commercial Real Estate Home  Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total Loans
(Dollars in thousands)Commercial Commercial Real Estate Home  Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total, Excluding Covered LoansCommercial 
Allowance for credit losses               
Allowance for loan losses at beginning of period$60,727
 $57,660
 $9,551
 $6,336
 $7,734
 $1,394
 $143,402
$67,826
 $60,267
 $8,507
 $7,194
 $7,715
 $1,261
 $152,770
Other adjustments(1) (15) (2) (14) 14
 —
 (18)—
 (24) (7) (7) 11
 —
 (27)
Reclassification from allowance for unfunded lending-related commitments—
 (2) —
 —
 —
 —
 (2)—
 (16) —
 —
 —
 —
 (16)
Charge-offs(3,219) (208) (561) (337) (2,512) (144) (6,981)(503) (3,734) (88) (3) (2,210) (102) (6,640)
Recoveries304
 193
 142
 466
 1,142
 66
 2,313
318
 480
 62
 29
 556
 56
 1,501
Provision for credit losses8,934
 619
 13
 (160) 1,796
 (160) 11,042
6,997
 877
 153
 417
 2,147
 33
 10,624
Allowance for loan losses at period end$66,745
 $58,247
 $9,143
 $6,291
 $8,174
 $1,156
 $149,756
$74,638
 $57,850
 $8,627
 $7,630
 $8,219
 $1,248
 $158,212
Allowance for unfunded lending-related commitments at period end$—
 $1,245
 $—
 $—
 $—
 $—
 $1,245
$—
 $1,410
 $—
 $—
 $—
 $—
 $1,410
Allowance for credit losses at period end$66,745
 $59,492
 $9,143
 $6,291
 $8,174
 $1,156
 $151,001
$74,638
 $59,260
 $8,627
 $7,630
 $8,219
 $1,248
 $159,622
Individually evaluated for impairment$10,164
 $3,158
 $611
 $325
 $—
 $117
 $14,375
$11,858
 $517
 $796
 $302
 $—
 $133
 $13,606
Collectively evaluated for impairment55,987
 56,316
 8,532
 5,894
 8,174
 1,039
 135,942
62,317
 58,623
 7,831
 7,267
 8,219
 1,115
 145,372
Loans acquired with deteriorated credit quality594
 18
 —
 72
 —
 —
 684
463
 120
 —
 61
 —
 —
 644
Loans at period end                          
Individually evaluated for impairment$67,381
 $31,952
 $11,284
 $21,781
 $—
 $401
 $132,799
$75,442
 $30,300
 $15,779
 $22,464
 $—
 $376
 $144,361
Collectively evaluated for impairment7,390,781
 6,610,140
 567,560
 815,442
 7,110,808
 113,812
 22,608,543
7,893,419
 6,832,544
 512,669
 921,204
 7,378,387
 117,753
 23,655,976
Loans acquired with deteriorated credit quality15,796
 104,682
 —
 9,144
 173,490
 1,614
 304,726
25,330
 110,661
 —
 8,785
 165,770
 2,675
 313,221
Loans held at fair value—
 —
 —
 77,883
 —
 —
 77,883
—
 —
 —
 101,071
 —
 —
 101,071
Three months ended September 30, 2017Commercial Commercial Real Estate Home  Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total, Excluding Covered Loans
Three months ended March 31, 2018Commercial Commercial Real Estate Home  Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total 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
$57,811
 $55,227
 $10,493
 $6,688
 $6,846
 $840
 $137,905
Other adjustments(2) (38) —
 (31) 32
 —
 (39)(1) (24) —
 (3) (12) —
 (40)
Reclassification from allowance for unfunded lending-related commitments500
 (406) —
 —
 —
 —
 94
—
 26
 —
 —
 —
 —
 26
Charge-offs(2,265) (989) (968) (267) (1,716) (213) (6,418)(2,687) (813) (357) (571) (4,721) (129) (9,278)
Recoveries801
 323
 178
 55
 499
 93
 1,949
262
 1,687
 123
 40
 385
 47
 2,544
Provision for credit losses4,343
 811
 212
 757
 1,386
 433
 7,942
2,251
 1,378
 (399) 124
 4,835
 157
 8,346
Allowance for loan losses at period end$55,735
 $52,040
 $10,556
 $6,657
 $6,553
 $1,578
 $133,119
$57,636
 $57,481
 $9,860
 $6,278
 $7,333
 $915
 $139,503
Allowance for unfunded lending-related commitments at period end$—
 $1,276
 $—
 $—
 $—
 $—
 $1,276
$—
 $1,243
 $—
 $—
 $—
 $—
 $1,243
Allowance for credit losses at period end$55,735
 $53,316
 $10,556
 $6,657
 $6,553
 $1,578
 $134,395
$57,636
 $58,724
 $9,860
 $6,278
 $7,333
 $915
 $140,746
Individually evaluated for impairment$4,568
 $1,184
 $691
 $758
 $—
 $34
 $7,235
$2,344
 $3,611
 $749
 $148
 $—
 $25
 $6,877
Collectively evaluated for impairment50,623
 52,048
 9,865
 5,813
 6,553
 1,544
 126,446
54,789
 55,042
 9,111
 6,029
 7,333
 890
 133,194
Loans acquired with deteriorated credit quality544
 84
 —
 86
 —
 —
 714
503
 71
 —
 101
 —
 —
 675
Loans at period end                          
Individually evaluated for impairment$18,086
 $31,698
 $7,729
 $21,263
 $—
 $544
 $79,320
$33,810
 $38,237
 $10,102
 $20,558
 $—
 $748
 $103,455
Collectively evaluated for impairment6,428,263
 6,236,007
 665,240
 735,185
 6,250,923
 13,581
 20,447,199
7,017,831
 6,479,737
 616,445
 768,859
 6,578,876
 103,224
 21,564,972
Loans acquired with deteriorated credit quality9,685
 133,076
 —
 3,637
 209,463
 987
 356,848
9,230
 115,546
 —
 11,725
 187,235
 2,009
 325,745
Loans held at fair value—
 —
 —
 29,414
 —
 —
 29,414
—
 —
 —
 67,962
 —
 —
 67,962


Nine months ended September 30, 2018  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$57,811
 $55,227
 $10,493
 $6,688
 $6,846
 $840
 $137,905
Other adjustments(3) (66) (2) (19) (12) —
 (102)
Reclassification from allowance for unfunded lending-related commitments—
 24
 —
 —
 —
 —
 24
Charge-offs(8,116) (1,176) (1,530) (1,088) (10,487) (732) (23,129)
Recoveries1,232
 4,267
 436
 2,028
 2,502
 162
 10,627
Provision for credit losses15,821
 (29) (254) (1,318) 9,325
 886
 24,431
Allowance for loan losses at period end$66,745
 $58,247
 $9,143
 $6,291
 $8,174
 $1,156
 $149,756
Allowance for unfunded lending-related commitments at period end$—
 $1,245
 $—
 $—
 $—
 $—
 $1,245
Allowance for credit losses at period end$66,745
 $59,492
 $9,143
 $6,291
 $8,174
 $1,156
 $151,001

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 commitments500
 (438) —
 —
 —
 —
 62
Charge-offs(3,819) (3,235) (3,224) (742) (5,021) (522) (16,563)
Recoveries1,635
 1,153
 387
 287
 1,515
 267
 5,244
Provision for credit losses12,949
 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

A summary of activity in the allowance for covered loan losses for the three and nine months ended September 30, 2017 is as follows:
 Three Months Ended Nine Months Ended
 September 30, September 30,
(Dollars in thousands)2017 2017
Balance at beginning of period$1,074
 $1,322
Provision for covered loan losses before benefit attributable to FDIC loss share agreements(225) (1,063)
Benefit attributable to FDIC loss share agreements180
 850
Net provision for covered loan losses(45) (213)
Increase in FDIC indemnification liability(180) (850)
Loans charged-off(155) (491)
Recoveries of loans charged-off64
 990
Net (charge-offs) recoveries(91) 499
Balance at end of period$758
 $758

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 resulted in the recognition of an allowance for loan losses, increased the FDIC loss share asset or reduced any FDIC loss share liability. The allowance for loan losses for loans acquired in FDIC-assisted transactions was determined without giving consideration to the amounts recoverable through loss share agreements (since the loss share agreements were separately accounted for and thus presented “gross” on the balance sheet). On the Consolidated Statements of Income, the provision for credit losses was reported net of changes in the amount recoverable under the loss share agreements. Reductions to expected losses, to the extent such reductions to expected losses were the result of an improvement to the actual or expected cash flows from the covered assets, reduced the FDIC loss share asset or increased any FDIC loss share liability. Additions to expected losses required 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 terminated all existing loss share agreements with the FDIC. As a result, the allowance for covered loan losses previously measured is included within the allowance for credit losses, excluding covered loans, presented above for subsequent periods. See Note 3 - Business Combinations 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,March 31, December 31, March 31,
(Dollars in thousands)2018 2017 20172019 2018 2018
Impaired loans (included in non-performing and TDRs):          
Impaired loans with an allowance for loan loss required (1)
$83,349
 $36,084
 $30,864
$72,539
 $60,219
 $37,572
Impaired loans with no allowance for loan loss required49,173
 69,004
 47,730
71,579
 67,050
 65,559
Total impaired loans (2)
$132,522
 $105,088
 $78,594
$144,118
 $127,269
 $103,131
Allowance for loan losses related to impaired loans$14,365
 $8,023
 $7,218
$13,599
 $11,437
 $6,863
TDRs$66,219
 $49,786
 $33,183
$88,362
 $66,102
 $47,676
(1)These impaired loans require an allowance for loan losses because the estimated fair value of the loans or related collateral is less than the recorded investment in the loans.
(2)
Impaired loans are considered by the Company to be non-accrual loans, TDRs or loans with principal and/or interest at risk, even if the loan is current with all payments of principal and interest.


The following tables present impaired loans by loan class excluding covered loans, for the periods ended as follows:
      For the Nine Months Ended      For the Three Months Ended
As of September 30, 2018 September 30, 2018As of March 31, 2019 March 31, 2019
Recorded Investment Unpaid Principal Balance Related Allowance Average  Recorded Investment Interest Income RecognizedRecorded 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$36,564
 $36,699
 $8,242
 $30,259
 $1,404
$33,360
 $33,623
 $6,919
 $33,641
 $656
Franchise16,316
 18,504
 1,638
 18,387
 771
15,776
 16,256
 4,702
 15,855
 243
Asset-based lending646
 646
 283
 724
 39
331
 331
 237
 335
 7
Leases1,777
 1,777
 1
 1,836
 69
1,691
 1,691
 —
 1,701
 21
Commercial real estate                  
Construction1,554
 1,554
 390
 1,554
 56
—
 —
 —
 —
 —
Land1,375
 1,375
 1
 1,508
 53
45
 45
 9
 45
 1
Office579
 647
 26
 591
 19
3,055
 3,120
 149
 3,070
 35
Industrial45
 154
 1
 56
 6
—
 —
 —
 —
 —
Retail15,325
 15,567
 2,413
 15,376
 535
5,114
 5,114
 41
 5,116
 51
Multi-family1,197
 1,197
 8
 1,209
 32
1,185
 1,185
 30
 1,185
 12
Mixed use and other1,590
 1,801
 309
 1,754
 76
1,082
 1,118
 281
 1,085
 13
Home equity2,287
 2,651
 611
 2,303
 78
6,316
 6,694
 796
 6,335
 60
Residential real estate3,977
 4,291
 325
 3,998
 128
4,390
 4,664
 302
 4,403
 42
Consumer and other117
 130
 117
 119
 5
194
 241
 133
 195
 3
Impaired loans with no related ASC 310 allowance recorded                  
Commercial                  
Commercial, industrial and other$5,758
 $7,022
 $—
 $9,325
 $465
$17,411
 $20,125
 $—
 $17,481
 $316
Franchise5,157
 5,158
 —
 5,376
 302
5,145
 5,147
 —
 5,147
 101
Asset-based lending264
 1,088
 —
 1,623
 89
934
 1,332
 —
 1,120
 24
Leases899
 930
 —
 974
 43
794
 831
 —
 810
 13
Commercial real estate                  
Construction1,117
 1,117
 —
 1,252
 40
2,146
 2,671
 —
 2,496
 33
Land2,325
 2,431
 —
 2,366
 98
3,285
 3,380
 —
 3,301
 47
Office1,532
 2,077
 —
 1,541
 86
1,991
 2,006
 —
 1,993
 29
Industrial178
 195
 —
 188
 9
295
 432
 —
 304
 7
Retail777
 946
 —
 874
 42
8,059
 11,405
 —
 10,198
 150
Multi-family318
 412
 —
 329
 9
303
 403
 —
 306
 3
Mixed use and other3,763
 4,362
 —
 3,950
 194
3,496
 3,812
 —
 3,528
 58
Home equity8,997
 12,131
 —
 9,015
 462
9,463
 12,658
 —
 9,560
 155
Residential real estate17,804
 20,291
 —
 18,193
 643
18,075
 20,823
 —
 18,098
 225
Consumer and other284
 408
 —
 295
 15
182
 276
 —
 184
 3
Total impaired loans, net of unearned income$132,522
 $145,561
 $14,365
 $134,975
 $5,768
$144,118
 $159,383
 $13,599
 $147,492
 $2,308

      For the Twelve Months Ended      For the Twelve Months Ended
As of December 31, 2017 December 31, 2017As of December 31, 2018 December 31, 2018
Recorded Investment Unpaid Principal Balance Related Allowance Average  Recorded Investment Interest Income RecognizedRecorded 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$6,233
 $7,323
 $3,951
 $7,220
 $452
$16,703
 $17,029
 $4,866
 $17,868
 $1,181
Franchise—
 —
 —
 —
 —
16,021
 16,256
 1,375
 16,221
 909
Asset-based lending948
 949
 355
 1,302
 72
557
 557
 317
 689
 50
Leases2,331
 2,337
 158
 2,463
 117
1,730
 1,730
 —
 1,812
 91
Commercial real estate                  
Construction3,097
 3,897
 403
 3,690
 197
1,554
 1,554
 550
 1,554
 76
Land—
 —
 —
 —
 —
—
 —
 —
 —
 —
Office471
 471
 5
 481
 24
573
 638
 21
 587
 25
Industrial408
 408
 40
 414
 25
—
 —
 —
 —
 —
Retail15,599
 15,657
 1,336
 15,736
 624
14,633
 14,633
 3,413
 14,694
 676
Multi-family—
 —
 —
 —
 —
—
 —
 —
 —
 —
Mixed use and other1,567
 1,586
 379
 1,599
 77
1,188
 1,221
 293
 1,354
 66
Home equity1,606
 1,869
 784
 1,626
 81
3,133
 3,470
 282
 3,165
 131
Residential real estate3,798
 3,910
 586
 3,790
 146
4,011
 4,263
 204
 4,056
 159
Consumer and other26
 28
 26
 27
 2
116
 129
 116
 119
 7
Impaired loans with no related ASC 310 allowance recorded                  
Commercial                  
Commercial, industrial and other$8,460
 $12,259
 $—
 $10,170
 $683
$18,314
 $21,501
 $—
 $20,547
 $1,143
Franchise16,256
 16,256
 —
 17,089
 780
5,152
 5,154
 —
 5,320
 403
Asset-based lending602
 602
 —
 688
 40
207
 601
 —
 569
 51
Leases782
 782
 —
 845
 49
845
 879
 —
 936
 56
Commercial real estate                  
Construction1,367
 1,678
 —
 1,555
 84
1,117
 1,117
 —
 1,218
 52
Land3,961
 4,192
 —
 4,129
 182
3,396
 3,491
 —
 3,751
 198
Office2,438
 6,140
 —
 3,484
 330
3,629
 3,642
 —
 3,651
 184
Industrial403
 2,010
 —
 1,849
 174
322
 450
 —
 363
 30
Retail2,393
 3,538
 —
 2,486
 221
1,592
 1,945
 —
 1,699
 110
Multi-family1,231
 2,078
 —
 1,246
 76
1,498
 1,595
 —
 1,529
 55
Mixed use and other5,275
 6,731
 —
 5,559
 351
3,522
 3,836
 —
 3,611
 227
Home equity7,648
 11,648
 —
 9,114
 603
9,122
 12,383
 —
 9,323
 564
Residential real estate17,455
 20,327
 —
 17,926
 860
18,053
 20,765
 —
 18,552
 883
Consumer and other733
 890
 —
 773
 48
281
 407
 —
 293
 20
Total impaired loans, net of unearned income$105,088
 $127,566
 $8,023
 $115,261
 $6,298
$127,269
 $139,246
 $11,437
 $133,481
 $7,347

      For the Nine Months Ended      For the Three Months Ended
As of September 30, 2017 September 30, 2017As of March 31, 2018 March 31, 2018
Recorded Investment Unpaid Principal Balance Related Allowance Average  Recorded Investment Interest Income RecognizedRecorded 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
$5,521
 $5,587
 $1,738
 $5,607
 $83
Franchise—
 —
 —
 —
 —
—
 —
 —
 —
 —
Asset-based lending588
 589
 161
 588
 21
1,107
 1,107
 475
 1,166
 20
Leases2,440
 2,444
 215
 2,539
 91
2,213
 2,221
 131
 2,247
 27
Commercial real estate                  
Construction1,607
 2,408
 94
 2,319
 93
3,097
 3,897
 599
 3,097
 50
Land—
 —
 —
 —
 —
1,500
 1,500
 3
 1,567
 17
Office2,225
 2,291
 570
 2,280
 94
1,479
 2,078
 73
 1,483
 24
Industrial408
 408
 75
 415
 19
63
 172
 1
 63
 2
Retail5,932
 6,072
 158
 5,998
 191
15,347
 15,415
 2,512
 15,315
 166
Multi-family1,239
 1,239
 8
 1,250
 33
1,234
 1,277
 21
 1,254
 12
Mixed use and other1,537
 1,695
 263
 1,580
 60
2,036
 2,281
 388
 2,054
 30
Home equity1,511
 1,721
 691
 1,528
 53
1,697
 1,889
 749
 1,699
 19
Residential real estate5,842
 6,154
 758
 5,842
 177
2,253
 2,956
 148
 2,258
 33
Consumer and other223
 224
 34
 225
 10
25
 27
 25
 25
 —
Impaired loans with no related ASC 310 allowance recorded                  
Commercial                  
Commercial, industrial and other$5,995
 $7,260
 $—
 $6,662
 $294
$5,480
 $6,777
 $—
 $5,650
 $109
Franchise—
 —
 —
 —
 —
18,657
 18,661
 —
 18,675
 239
Asset-based lending553
 553
 —
 728
 31
86
 231
 —
 182
 3
Leases817
 817
 —
 862
 38
746
 746
 —
 754
 11
Commercial real estate                  
Construction1,504
 1,504
 —
 1,524
 49
1,363
 1,364
 —
 1,364
 15
Land3,968
 4,217
 —
 4,110
 136
2,329
 2,434
 —
 2,339
 31
Office3,400
 3,585
 —
 3,565
 147
59
 754
 —
 61
 11
Industrial1,440
 2,729
 —
 2,885
 183
1,427
 1,485
 —
 1,430
 20
Retail1,978
 1,988
 —
 2,008
 103
2,695
 2,992
 —
 2,710
 58
Multi-family569
 653
 —
 571
 23
—
 84
 —
 —
 1
Mixed use and other5,546
 6,267
 —
 5,745
 241
5,284
 5,981
 —
 5,340
 80
Home equity6,218
 9,523
 —
 7,231
 339
8,405
 12,535
 —
 8,255
 151
Residential real estate15,421
 17,859
 —
 15,726
 575
18,305
 20,983
 —
 18,630
 222
Consumer and other321
 433
 —
 334
 16
723
 870
 —
 726
 12
Total impaired loans, net of unearned income$78,594
 $91,091
 $7,218
 $84,905
 $3,424
$103,131
 $116,304
 $6,863
 $103,951
 $1,446

TDRs

At September 30, 2018,March 31, 2019, the Company had $66.2$88.4 million in loans modified in TDRs. The $66.2$88.4 million in TDRs represents 111163 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 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 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 at the time of the modification and on a quarterly basis to determine if a specific reserve is necessary. 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 at September 30, 2018March 31, 2019 and approximately $3.9$6.7 million of impairment was present and appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for loan 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,March 31, 2019 and 2018, and 2017, the Company recorded $32,000$34,000 and $68,000, respectively, of interest income, which was reflected as a decrease in impairment. For the nine months ended September 30, 2018 and 2017, the Company recorded $89,000 and $172,000,$21,000, respectively, of interest income, which was reflected as a decrease in impairment.

TDRs may arise 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. At September 30, 2018,March 31, 2019, the Company had $5.7$4.2 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 $14.2 million and $12.1$11.4 million at September 30,March 31, 2019 and 2018, and 2017, respectively.

The tables below present a summary of the post-modification balance of loans restructured during the three and nine months ended September 30,March 31, 2019 and 2018, and 2017, respectively, which represent TDRs:
Three months ended
September 30, 2018

(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
March 31, 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)
Count Balance Count Balance Count Balance Count Balance Count Balance
Commercial                                        
Commercial, industrial and other 1
 $519
 1
 $519
 —
 $—
 —
 $—
 —
 $—
 8
 $18,854
 1
 $432
 —
 $—
 7
 $18,422
 —
 $—
Franchise 1
 35
 1
 35
 —
 —
 —
 —
 —
 —
Leases —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Asset-based lending 1
 76
 1
 76
 —
 —
 —
 —
 —
 —
Commercial real estate                                        
Office —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Mixed use and other —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 1
 302
 —
 —
 —
 —
 1
 302
 —
 —
Residential real estate and other 20
 3,679
 20
 3,679
 7
 621
 —
 —
 —
 —
 20
 4,486
 20
 4,486
 6
 1,547
 —
 —
 —
 —
Total loans 22
 $4,233
 22
 $4,233
 7
 $621
 —
 $—
 —
 $—
 30
 $23,718
 22
 $4,994
 6
 $1,547
 8
 $18,724
 —
 $—
(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.


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 March 31, 2018

(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
 $1,408
 —
 $—
 —
 $—
 3
 $1,408
 —
 $—
 1
 $96
 1
 $96
 —
 $—
 —
 $—
 —
 $—
Franchise —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Leases —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Commercial real estate                                        
Office —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 1
 59
 1
 59
 —
 —
 —
 —
 —
 —
Mixed use and other —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Residential real estate and other 2
 255
 1
 186
 2
 255
 —
 —
 1
 69
 5
 835
 5
 835
 2
 111
 —
 —
 —
 —
Total loans 5
 $1,663
 1
 $186
 2
 $255
 3
 $1,408
 1
 $69
 7
 $990
 7
 $990
 2
 $111
 —
 $—
 —
 $—
(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 SeptemberMarch 31, 2019, 30 2018, 22 loans totaling $4.2$23.7 million were determined to be TDRs, compared to fiveseven loans totaling $1.7 million$990,000 during the three months ended September 30, 2017.March 31, 2018. Of these loans extended at below market terms, the weighted average extension had a term of approximately 7212 months during the quarter ended September 30, 2018March 31, 2019 compared to 3674 months for the quarter ended September 30, 2017.March 31, 2018. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 140211 basis points and 225287 basis points during the three months ended September 30,March 31, 2019 and 2018, and 2017, respectively. Interest-only payment terms were approximately twothree months during the three months ended September 30, 2017. Additionally, no principal balances were forgiven in the third quarter of 2018 compared to $73,000 of principal balances forgiven in the third quarter of 2017.

Nine months ended September 30, 2018

(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 4
 $13,442
 3
 $692
 —
 $—
 1
 $12,750
 —
 $—
Franchise 3
 5,157
 1
 35
 —
 —
 2
 5,122
 —
 —
Leases 1
 239
 1
 239
 —
 —
 —
 —
 —
 —
Commercial real estate                    
Office 1
 59
 1
 59
 —
 —
 —
 —
 —
 —
Mixed use and other 1
 85
 1
 85
 1
 85
 —
 —
 —
 —
Residential real estate and other 31
 5,846
 31
 5,846
 12
 1,417
 —
 —
 —
 —
Total loans 41
 $24,828
 38
 $6,956
 13
 $1,502
 3
 $17,872
 —
 $—

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
Commercial                    
Commercial, industrial and other 4
 $1,503
 1
 $95
 —
 $—
 3
 $1,408
 —
 $—
Franchise —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Leases —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Commercial real estate                    
Office —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Mixed use and other 1
 1,245
 1
 1,245
 —
 —
 —
 —
 —
 —
Residential real estate and other 8
 2,638
 7
 2,569
 7
 2,589
 —
 —
 1
 69
Total loans 13
 $5,386
 9
 $3,909
 7
 $2,589
 3
 $1,408
 1
 $69
(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 months ended September 30, 2018, 41 loans totaling $24.8 million were determined to be TDRs, compared to 13 loans totaling $5.4 million in the same period of 2017. Of these loans extended at below market terms, the weighted average extension had a term of approximately 64 months during the nine months ended September 30, 2018 compared to 36 months for the nine months ended

September 30, 2017. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 160 basis points and 188 basis points for the year-to-date periods September 30, 2018 and 2017, respectively. Interest-only payment terms were approximately seven months during the nine months ended September 30, 2018 compared to two months during the same period of 2017.March 31, 2019. Additionally, no principal balances were forgiven in the first nine monthsquarter of 2018 compared to $73,000 of principal balances forgiven in the first nine months of 2017.2019 and 2018.

The following table presents a summary of all loans restructured in TDRs during the twelve months ended September 30,March 31, 2019 and 2018, and 2017, and such loans which were in payment default under the restructured terms during the respective periods below:
(Dollars in thousands)As of September 30, 2018 Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Total (1)(3)
 
Payments in Default  (2)(3)
 
Payments in Default  (2)(3)
Count Balance Count Balance Count Balance
Commercial           
Commercial, industrial and other5
 $15,714
 3
 $2,447
 3
 $2,447
Franchise6
 21,413
 2
 5,122
 2
 5,122
Leases1
 239
 —
 —
 —
 —
Commercial real estate           
Office1
 59
 —
 —
 —
 —
Industrial—
 —
 —
 —
 —
 —
Mixed use and other1
 85
 1
 85
 1
 85
Residential real estate and other35
 6,257
 7
 1,457
 7
 1,457
Total loans49
 $43,767
 13
 $9,111
 13
 $9,111

(Dollars in thousands)As of September 30, 2017 Three Months Ended
September 30, 2017		 Nine Months Ended September 30, 2017As of March 31, 2019 Three Months Ended March 31, 2019 As of March 31, 2018 
Three Months Ended
March 31, 2018
Total (1)(3)
 
Payments in Default  (2)(3)
 
Payments in Default  (2)(3)
Total (1)(3)
 
Payments in Default  (2)(3)
 
Total (1)(3)
 
Payments in Default  (2)(3)
Count Balance Count Balance Count BalanceCount Balance Count Balance Count Balance Count Balance
Commercial                          
Commercial, industrial and other4
 $1,503
 —
 $—
 —
 $—
11
 $32,199
 1
 $77
 5
 $3,776
 5
 $3,776
Franchise—
 —
 —
 —
 —
 —
3
 5,157
 —
 —
 —
 —
 —
 —
Asset-based lending2
 206
 2
 206
 —
 —
 —
 —
Leases2
 2,949
 —
 —
 —
 —
1
 239
 —
 —
 3
 16,256
 —
 —
Commercial real estate                          
Office—
 —
 —
 —
 —
 —
—
 —
 —
 —
 1
 59
 —
 —
Mixed use and other1
 1,245
 1
 1,245
 1
 1,245
3
 757
 3
 757
 —
 —
 —
 —
Residential real estate and other12
 3,137
 1
 52
 2
 284
74
 13,411
 9
 1,759
 15
 3,711
 5
 2,551
Total loans19
 $8,834
 2
 $1,297
 3
 $1,529
94
 $51,969
 15
 $2,799
 24
 $23,802
 10
 $6,327
(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 is presented in the following table:
(Dollars in thousands)
January 1,
2018
 
Goodwill
Acquired
 
Impairment
Loss
 Goodwill Adjustments September 30,
2018
January 1,
2019
 
Goodwill
Acquired
 
Impairment
Loss
 Goodwill Adjustments March 31,
2019
Community banking$429,520
 $36,307
 $—
 $—
 $465,827
$465,085
 $—
 $—
 $37
 $465,122
Specialty finance40,250
 —
 —
 (631) 39,619
38,343
 —
 —
 480
 38,823
Wealth management32,114
 —
 —
 —
 32,114
69,713
 —
 —
 —
 69,713
Total$501,884
 $36,307
 $—
 $(631) $537,560
$573,141
 $—
 $—
 $517
 $573,658

The community banking segment's goodwill increased $36.3 million$37,000 in the first nine monthsquarter of 20182019 primarily as a result of a purchase accounting adjustment related to the acquisition of CSC and Veterans First.Delaware Place Bank. The specialty finance segment's goodwill decreased $631,000increased $480,000 in the first nine monthsquarter of 20182019 as a result of foreign currency translation adjustments related to the Canadian acquisitions.

At June 30, 2018, the Company utilized a qualitative approach for its annual goodwill impairment test of the community banking segment and determined that it is not more likely than not that an impairment existed at that time. At December 31, 2017,2018, the Company utilized a quantitative approach for its annual goodwill impairment tests of the specialty finance and wealth management segments and determined that no impairment existed at that time. At each reporting date between annual goodwill impairment

tests, the Company considers potential indicators of impairment. As of September 30, 2018,March 31, 2019, the Company identified no such indicators of goodwill impairment within the community banking, specialty finance and wealth management segments.

A summary of intangible assets as of the dates shown and the expected amortization of finite-lived intangible assets as of September 30, 2018March 31, 2019 is as follows:
(Dollars in thousands)September 30,
2018		 December 31,
2017		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Community banking segment:          
Core deposit intangibles with finite lives:          
Gross carrying amount$44,395
 $37,272
 $37,272
$55,447
 $55,366
 $37,272
Accumulated amortization(28,142) (25,427) (24,550)(31,022) (29,406) (26,280)
Net carrying amount$16,253
 $11,845
 $12,722
$24,425
 $25,960
 $10,992
Trademark with indefinite lives:          
Carrying amount5,800
 —
 —
5,800
 5,800
 5,800
Total net carrying amount$22,053
 $11,845
 $12,722
$30,225
 $31,760
 $16,792
Specialty finance segment:          
Customer list intangibles with finite lives:          
Gross carrying amount$1,967
 $1,972
 $1,972
$1,961
 $1,958
 $1,967
Accumulated amortization(1,407) (1,298) (1,258)(1,468) (1,436) (1,335)
Net carrying amount$560
 $674
 $714
$493
 $522
 $632
Wealth management segment:          
Customer list and other intangibles with finite lives:          
Gross carrying amount$7,940
 $7,940
 $7,940
$20,430
 $20,430
 $7,940
Accumulated amortization(3,175) (2,838) (2,725)(4,582) (3,288) (2,951)
Net carrying amount$4,765
 $5,102
 $5,215
$15,848
 $17,142
 $4,989
Total other intangible assets, net$27,378
 $17,621
 $18,651
Total intangible assets:     
Gross carrying amount$83,638
 $83,554
 $52,979
Accumulated amortization(37,072) (34,130) (30,566)
Total intangible assets, net$46,566
 $49,424
 $22,413
Estimated amortization  
Actual in nine months ended September 30, 2018$3,164
Estimated remaining in 20181,253
Estimated—20194,517
Actual in three months ended March 31, 2019$2,942
Estimated remaining in 20198,414
Estimated—20203,681
9,595
Estimated—20213,014
6,385
Estimated—20222,388
4,957
Estimated—20233,630

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 thebasis. 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 $3.2$2.9 million and $3.4$1.0 million for the ninethree months ended September 30,March 31, 2019 and 2018, and 2017, 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 Nine Months Ended Three Months Ended
 September 30, September 30, September 30, September 30, March 31, March 31,
(Dollars in thousands) 2018 2017 2018 2017 2019 2018
Balance at beginning of the period $63,194
 $27,307
 $33,676
 $19,103
 $75,183
 $33,676
Additions from loans sold with servicing retained 11,340
 4,948
 23,388
 13,162
 6,580
 4,159
Additions from acquisitions —
 —
 13,806
 —
 —
 13,806
Estimate of changes in fair value due to:            
Payoffs and paydowns (1,081) (641) (3,647) (1,632) (1,997) (1,202)
Changes in valuation inputs or assumptions 1,077
 (2,200) 7,307
 (1,219) (8,744) 4,133
Fair value at end of the period $74,530
 $29,414
 $74,530
 $29,414
 $71,022
 $54,572
Unpaid principal balance of mortgage loans serviced for others $5,904,300
 $2,622,411
     $7,014,269
 $4,795,335

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. The Company doesdid not specifically hedge the value of its MSRs.MSRs during the first quarter of 2019 and 2018.

Fair values are 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.

(10) Deposits

The following table is a summary of deposits as of the dates shown: 
(Dollars in thousands)September 30,
2018		 December 31,
2017		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Balance:          
Non-interest bearing$6,399,213
 $6,792,497
 $6,502,409
$6,353,456
 $6,569,880
 $6,612,319
NOW and interest bearing demand deposits2,512,259
 2,315,055
 2,273,025
2,948,576
 2,897,133
 2,315,122
Wealth management deposits2,520,120
 2,323,699
 2,171,758
3,328,781
 2,996,764
 2,495,134
Money market5,429,921
 4,515,353
 4,607,995
6,093,596
 5,704,866
 4,617,122
Savings2,595,164
 2,829,373
 2,673,201
2,729,626
 2,665,194
 2,901,504
Time certificates of deposit5,460,038
 4,407,370
 4,666,675
5,350,707
 5,260,841
 4,338,126
Total deposits$24,916,715
 $23,183,347
 $22,895,063
$26,804,742
 $26,094,678
 $23,279,327
Mix:          
Non-interest bearing26% 29% 28%24% 25% 28%
NOW and interest bearing demand deposits10
 10
 10
11
 11
 10
Wealth management deposits10
 10
 10
12
 12
 11
Money market22
 20
 20
23
 22
 20
Savings10
 12
 12
10
 10
 12
Time certificates of deposit22
 19
 20
20
 20
 19
Total deposits100% 100% 100%100% 100% 100%

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


(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:
(Dollars in thousands)September 30,
2018		 December 31,
2017		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
FHLB advances$615,000
 $559,663
 $468,962
$576,353
 $426,326
 $915,000
Other borrowings:          
Notes payable149,799
 41,222
 41,216
139,119
 144,461
 33,727
Short-term borrowings17,431
 17,209
 19,959
16,212
 50,593
 17,977
Other48,043
 49,131
 49,502
47,394
 47,722
 48,742
Secured borrowings158,298
 158,561
 141,003
169,469
 151,079
 146,646
Total other borrowings373,571
 266,123
 251,680
372,194
 393,855
 247,092
Subordinated notes139,172
 139,088
 139,052
139,235
 139,210
 139,111
Total FHLB advances, other borrowings and subordinated notes$1,127,743
 $964,874
 $859,694
$1,087,782
 $959,391
 $1,301,203

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

On September 18, 2018, the Company established a $150.0 million term facility ("Term Facility"), which is part of a $200.0 million loan agreement ("Credit Agreement") with unaffiliated banks. The Credit Agreement consists of the Term Facility with an original outstanding balance of $150.0 million and a $50.0 million revolving credit facility ("Revolving Credit Facility"). At September 30, 2018,March 31, 2019, the Company had a notes payable balance of $149.8$139.1 million 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 September 18, 2018 and all such borrowings must be repaid by September 18, 2023. Beginning December 31, 2018, the Company is required to make quarterly payments of principal plus interest on the Term Facility. At September 30, 2018,March 31, 2019, the Company had no outstanding balance under the Revolving Credit Facility. As no outstanding balance exists on the Revolving Credit Facility, unamortized costs paid by the Company in relation to the issuance of this debt are classified in other assets on the Consolidated Statements of Condition.
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 (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) 125 basis points (in the case of a borrowing under the Revolving Credit Facility) or 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 30, 2018,March 31, 2019, 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.

In connection with the establishment of the Credit Agreement, all outstanding notes payable under a $150.0 million loan agreement with unaffiliated banks dated December 15, 2014 (as subsequently amended) were paid in full. This loan agreement consisted of a term facility with an original outstanding balance of $75.0 million and a $75.0 million revolving credit facility. The Company had a balance under this loan agreement of $41.2$33.7 million at DecemberMarch 31, 2017 and $41.2 million at September 30, 2017.2018.

Short-term Borrowings

Short-term borrowings include securities sold under repurchase agreements and federal funds purchased. These borrowings totaled $17.4$16.2 million at September 30, 2018March 31, 2019 compared to $17.2$50.6 million at December 31, 20172018 and $20.0$18.0 million at September 30, 2017.March 31, 2018. At September 30, 2018,March 31, 2019, December 31, 20172018 and September 30, 2017,March 31, 2018, securities sold under repurchase agreements represent $17.4$16.2 million, $17.2$50.6 million and $20.0$18.0 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 30, 2018,March 31, 2019, the Company had pledged securities related to its customer balances in sweep accounts of $35.9$53.3 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 30, 2018March 31, 2019 disaggregated by investment category and maturity of the related customer sweep account, and reconciled to the outstanding balance of securities sold under repurchase agreements:
(Dollars in thousands) Overnight Sweep Collateral Overnight Sweep Collateral
Available-for-sale securities pledged    
U.S. Government agencies $—
Mortgage-backed securities $9,547
 38,942
Held-to-maturity securities pledged    
U.S. Government agencies 26,364
 14,400
Total collateral pledged $35,911
 $53,342
Excess collateral 18,480
 37,130
Securities sold under repurchase agreements $17,431
 $16,212

Other Borrowings

Other borrowings at September 30, 2018March 31, 2019 represent a fixed-rate promissory note issued by the Company in June 2017 ("Fixed-Rate Promissory Note") related to and secured by two 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 30, 2018,March 31, 2019, the Fixed-Rate Promissory Note had a balance of $48.0$47.4 million compared to $49.0$47.7 million at December 31, 20172018 and $49.3$48.7 million at September 30, 2017.March 31, 2018. Under the Fixed-Rate Promissory Note, the Company will make monthly principal payments and pay interest at a fixed rate of 3.36% until maturity on June 30, 2022. 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 September 30, 2018,March 31, 2019, the Company was in compliance with all such covenants. At September 30, 2018, there were no non-recourse notes related to certain capital leases, compared to $151,000 and $225,000 at December 31, 2017 and September 30, 2017, respectively.

Secured Borrowings

Secured borrowings at September 30, 2018March 31, 2019 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"). 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. In February 2019, the unrelated third party paid an additional C$20 million, which increased the total payments to C$210 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 30, 2018,March 31, 2019, the translated balance of the secured borrowing totaled $147.2$157.2 million compared to $135.1$139.3 million at December 31, 20172018 and $128.3$131.7 million at September 30, 2017.March 31, 2018. Additionally, the interest rate under the Receivables Purchase Agreement at September 30, 2018March 31, 2019 was 2.7189%2.9398%. The remaining $11.1$12.3 million within secured borrowings at September 30, 2018

March 31, 2019 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 30, 2018,March 31, 2019, the Company had outstanding subordinated notes totaling $139.2 million compared to $139.1$139.2 million and $139.1 million outstanding at December 31, 20172018 and September 30, 2017,March 31, 2018, respectively. The notes have a stated interest rate of 5.00% and mature in June 2024. These notes are stated at par adjusted for unamortized costs paid related to the issuance of this debt.

(12) Junior Subordinated Debentures

As of September 30, 2018,March 31, 2019, the Company owned 100% of the common securities of eleven 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.

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 investment securities.

The following table provides a summary of the Company’s junior subordinated debentures as of September 30, 2018.March 31, 2019. 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 9/30/2018
 
Issue
Date
 
Maturity
Date
 
Earliest
Redemption
Date
Common
Securities
 
Trust 
Preferred
Securities
 
Junior
Subordinated
Debentures
 
Rate
Structure
 
Contractual rate
at 3/31/2019
 
Issue
Date
 
Maturity
Date
 
Earliest
Redemption
Date
Wintrust Capital Trust III$774
 $25,000
 $25,774
 L+3.25 5.59% 04/2003 04/2033 04/2008$774
 $25,000
 $25,774
 L+3.25 6.04% 04/2003 04/2033 04/2008
Wintrust Statutory Trust IV619
 20,000
 20,619
 L+2.80 5.20% 12/2003 12/2033 12/2008619
 20,000
 20,619
 L+2.80 5.39% 12/2003 12/2033 12/2008
Wintrust Statutory Trust V1,238
 40,000
 41,238
 L+2.60 5.00% 05/2004 05/2034 06/20091,238
 40,000
 41,238
 L+2.60 5.19% 05/2004 05/2034 06/2009
Wintrust Capital Trust VII1,550
 50,000
 51,550
 L+1.95 4.28% 12/2004 03/2035 03/20101,550
 50,000
 51,550
 L+1.95 4.56% 12/2004 03/2035 03/2010
Wintrust Capital Trust VIII1,238
 25,000
 26,238
 L+1.45 3.85% 08/2005 09/2035 09/20101,238
 25,000
 26,238
 L+1.45 4.04% 08/2005 09/2035 09/2010
Wintrust Capital Trust IX1,547
 50,000
 51,547
 L+1.63 3.96% 09/2006 09/2036 09/20111,547
 50,000
 51,547
 L+1.63 4.24% 09/2006 09/2036 09/2011
Northview Capital Trust I186
 6,000
 6,186
 L+3.00 5.34% 08/2003 11/2033 08/2008186
 6,000
 6,186
 L+3.00 5.74% 08/2003 11/2033 08/2008
Town Bankshares Capital Trust I186
 6,000
 6,186
 L+3.00 5.34% 08/2003 11/2033 08/2008186
 6,000
 6,186
 L+3.00 5.74% 08/2003 11/2033 08/2008
First Northwest Capital Trust I155
 5,000
 5,155
 L+3.00 5.40% 05/2004 05/2034 05/2009155
 5,000
 5,155
 L+3.00 5.59% 05/2004 05/2034 05/2009
Suburban Illinois Capital Trust II464
 15,000
 15,464
 L+1.75 4.08% 12/2006 12/2036 12/2011464
 15,000
 15,464
 L+1.75 4.36% 12/2006 12/2036 12/2011
Community Financial Shares Statutory Trust II109
 3,500
 3,609
 L+1.62 3.95% 06/2007 09/2037 06/2012109
 3,500
 3,609
 L+1.62 4.23% 06/2007 09/2037 06/2012
Total    $253,566
 
 4.55%     $253,566
 
 4.82% 

The junior subordinated debentures totaled $253.6 million at September 30, 2018,March 31, 2019, December 31, 20172018 and September 30, 2017.March 31, 2018.

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 30, 2018,March 31, 2019, the weighted average contractual interest rate on the junior subordinated debentures was 4.55%4.82%. 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.

At September 30, 2018,March 31, 2019, the Company included $245.5 million of the junior subordinated debentures, net of common securities, in Tier 2 regulatory capital.

(13) Revenue from Contracts with Customers

As of January 1, 2018, the Company adopted ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” and all subsequent updates issued to clarify and improve specific areas of ASU 2014-09. The Company elected to adopt the new guidance using the modified retrospective approach applied to all contracts as of the date of initial application at January 1, 2018. Under the modified retrospective approach, the Company recognized no cumulative effect adjustment to the opening balance of retained earnings at the date of initial application.
Disaggregation of Revenue

As certain significant revenue sources related to financial instruments such as interest income are considered not in-scope, ASU 2014-09 did not have a significant impact on the Company's consolidated financial statements. The following table presents revenue from contracts with customers, considered in-scope under ASU 2014-09, disaggregated by the revenue source:
(Dollars in thousands) Three Months Ended Nine Months Ended Three Months Ended
Revenue from contracts with customers Location in income statementSeptember 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		 Location in income statementMarch 31,
2019		 March 31,
2018
Brokerage and insurance product commissions Wealth management$5,579
 $5,127
 $17,394
 $16,796
 Wealth management$4,516
 $6,031
Trust Wealth management3,003
 2,932
 9,646
 9,477
 Wealth management5,327
 3,417
Asset management Wealth management14,052
 11,744
 41,197
 33,583
 Wealth management14,134
 13,538
Total wealth management 22,634
 19,803
 68,237
 59,856
 23,977
 22,986
Mortgage broker fees Mortgage banking295
 412
 862
 1,142
 Mortgage banking182
 279
Service charges on deposit accounts Service charges on deposit accounts9,331
 8,645
 27,339
 25,606
 Service charges on deposit accounts8,848
 8,857
Administrative services Other non-interest income1,099
 1,052
 3,365
 3,062
 Other non-interest income1,030
 1,061
Card related fees Other non-interest income2,328
 1,471
 5,583
 4,315
 Other non-interest income2,556
 2,139
Other deposit related fees Other non-interest income3,035
 3,032
 8,927
 8,243
 Other non-interest income2,789
 2,858
Total revenue from contracts with customers $38,722
 $34,415
 $114,313
 $102,224
 $39,382
 $38,180

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 threefour wealth management subsidiaries: Wintrust Investments, Great Lakes Advisors, LLC ("GLA") and, 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.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 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)September 30,
2018		 December 31,
2017		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Contract assets$—
 $—
 $—
$—
 $—
 $—
          
Contract liabilities$1,429
 $1,706
 $1,799
$1,639
 $1,727
 $1,614
          
Mortgage broker fees receivable$9
 $69
 $69
$34
 $44
 $20
Administrative services receivable2,425
 —
 —
147
 275
 —
Wealth management receivable7,779
 8,102
 7,443
10,397
 13,610
 8,111
Card related fees receivable—
 202
 89
385
 —
 320
Total receivables from contracts with customer$10,213
 $8,373
 $7,601
$10,963
 $13,929
 $8,451

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 $278,000 and $267,000$92,000 for the ninethree months ended September 30,March 31, 2019 and 2018, and 2017, 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 2018$92
Estimated—2019369
Estimated remaining in 2019$671
Estimated—2020369
369
Estimated—2021303
303
Estimated—2022153
153
Estimated—2023143
143
Estimated—2024—
Total$1,429
$1,639

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 services 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 primary segments: community banking, specialty finance and wealth management.

The three 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 bank subsidiaries’ operations and profitability separately, these subsidiaries have been aggregated into one 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 10 — 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 20172018 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
(Dollars in thousands)September 30,
2018		 September 30,
2017		 
Net interest income:       
Community Banking$202,435
 $176,526
 $25,909
 15 %
Specialty Finance36,398
 30,501
 5,897
 19
Wealth Management4,048
 4,557
 (509) (11)
Total Operating Segments242,881
 211,584
 31,297
 15
Intersegment Eliminations4,682
 4,404
 278
 6
Consolidated net interest income$247,563
 $215,988
 $31,575
 15 %
Non-interest income:       
Community Banking$69,776
 $52,554
 $17,222
 33 %
Specialty Finance16,963
 16,315
 648
 4
Wealth Management23,535
 20,371
 3,164
 16
Total Operating Segments110,274
 89,240
 21,034
 24
Intersegment Eliminations(10,344) (9,509) (835) (9)
Consolidated non-interest income$99,930
 $79,731
 $20,199
 25 %
Net revenue:       
Community Banking$272,211
 $229,080
 $43,131
 19 %
Specialty Finance53,361
 46,816
 6,545
 14
Wealth Management27,583
 24,928
 2,655
 11
Total Operating Segments353,155
 300,824
 52,331
 17
Intersegment Eliminations(5,662) (5,105) (557) (11)
Consolidated net revenue$347,493
 $295,719
 $51,774
 18 %
Segment profit:       
Community Banking$63,735
 $44,799
 $18,936
 42 %
Specialty Finance22,971
 17,043
 5,928
 35
Wealth Management5,242
 3,784
 1,458
 39
Consolidated net income$91,948
 $65,626
 $26,322
 40 %
Segment assets:       
Community Banking$24,590,027
 $22,426,049
 $2,163,978
 10 %
Specialty Finance4,897,664
 4,305,960
 591,704
 14
Wealth Management655,040
 626,153
 28,887
 5
Consolidated total assets$30,142,731
 $27,358,162
 $2,784,569
 10 %


Nine months ended 
$ Change in
Contribution
 
% Change  in
Contribution
Three months ended 
$ Change in
Contribution
 
% Change  in
Contribution
(Dollars in thousands)September 30,
2018		 September 30,
2017		 March 31,
2019		 March 31,
2018		 
Net interest income:              
Community Banking$583,926
 $499,135
 $84,791
 17 %$211,424
 $183,254
 $28,170
 15 %
Specialty Finance100,104
 85,871
 14,233
 17
37,706
 32,912
 4,794
 15
Wealth Management12,729
 14,532
 (1,803) (12)7,502
 4,441
 3,061
 69
Total Operating Segments696,759
 599,538
 97,221
 16
256,632
 220,607
 36,025
 16
Intersegment Eliminations14,056
 13,439
 617
 5
5,354
 4,475
 879
 20
Consolidated net interest income$710,815
 $612,977
 $97,838
 16 %$261,986
 $225,082
 $36,904
 16 %
Non-interest income:              
Community Banking$192,028
 $160,277
 $31,751
 20 %$48,267
 $56,547
 $(8,280) (15)%
Specialty Finance49,005
 44,192
 4,813
 11
19,606
 15,725
 3,881
 25
Wealth Management69,789
 61,746
 8,043
 13
25,035
 22,958
 2,077
 9
Total Operating Segments310,822
 266,215
 44,607
 17
92,908
 95,230
 (2,322) (2)
Intersegment Eliminations(29,980) (27,747) (2,233) (8)(11,251) (9,551) (1,700) (18)
Consolidated non-interest income$280,842
 $238,468
 $42,374
 18 %$81,657
 $85,679
 $(4,022) (5)%
Net revenue:              
Community Banking$775,954
 $659,412
 $116,542
 18 %$259,691
 $239,801
 $19,890
 8 %
Specialty Finance149,109
 130,063
 19,046
 15
57,312
 48,637
 8,675
 18
Wealth Management82,518
 76,278
 6,240
 8
32,537
 27,399
 5,138
 19
Total Operating Segments1,007,581
 865,753
 141,828
 16
349,540
 315,837
 33,703
 11
Intersegment Eliminations(15,924) (14,308) (1,616) (11)(5,897) (5,076) (821) (16)
Consolidated net revenue$991,657
 $851,445
 $140,212
 16 %$343,643
 $310,761
 $32,882
 11 %
Segment profit:              
Community Banking$187,395
 $128,502
 $58,893
 46 %$60,326
 $57,280
 $3,046
 5 %
Specialty Finance61,482
 47,990
 13,492
 28
21,848
 20,000
 1,848
 9
Wealth Management14,632
 12,409
 2,223
 18
6,972
 4,701
 2,271
 48
Consolidated net income$263,509
 $188,901
 $74,608
 39 %$89,146
 $81,981
 $7,165
 9 %
Segment assets:       
Community Banking$25,997,025
 $23,213,499
 $2,783,526
 12 %
Specialty Finance5,234,210
 4,568,906
 665,304
 15
Wealth Management1,127,386
 674,367
 453,019
 67
Consolidated total assets$32,358,621
 $28,456,772
 $3,901,849
 14 %

(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 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. 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.

As of January 1, 2018, the Company elected to early adopt ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” Generally, changesChanges 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 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 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 30, 2018,March 31, 2019, December 31, 20172018 and September 30, 2017:March 31, 2018:
Derivative Assets Derivative LiabilitiesDerivative Assets Derivative Liabilities
(Dollars in thousands)September 30,
2018		 December 31,
2017		 September 30,
2017		 September 30,
2018		 December 31,
2017		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018		 March 31,
2019		 December 31,
2018		 March 31,
2018
Derivatives designated as hedging instruments under ASC 815:                      
Interest rate derivatives designated as Cash Flow Hedges$16,271
 $11,914
 $8,643
 $—
 $12
 $—
$3,353
 $6,270
 $15,012
 $2,589
 $1,656
 $35
Interest rate derivatives designated as Fair Value Hedges5,126
 2,932
 2,036
 —
 —
 53
1,260
 2,636
 4,962
 3,167
 1,756
 —
Total derivatives designated as hedging instruments under ASC 815$21,397
 $14,846
 $10,679
 $—
 $12
 $53
$4,613
 $8,906
 $19,974
 $5,756
 $3,412
 $35
Derivatives not designated as hedging instruments under ASC 815:                      
Interest rate derivatives$69,865
 $34,139
 $34,489
 $69,342
 $33,704
 $33,982
$63,704
 $59,519
 $52,996
 $63,536
 $59,159
 $52,408
Interest rate lock commitments4,128
 2,843
 2,851
 —
 269
 1
4,387
 3,405
 5,449
 —
 2,694
 1,207
Forward commitments to sell mortgage loans12
 14
 19
 1,330
 1,457
 1,495
2,416
 —
 3
 4,180
 1,486
 1,464
Foreign exchange contracts751
 227
 160
 709
 229
 242
384
 1,342
 538
 396
 1,337
 585
Total derivatives not designated as hedging instruments under ASC 815$74,756
 $37,223
 $37,519
 $71,381
 $35,659
 $35,720
$70,891
 $64,266
 $58,986
 $68,112
 $64,676
 $55,664
Total Derivatives$96,153
 $52,069
 $48,198
 $71,381
 $35,671
 $35,773
$75,504
 $73,172
 $78,960
 $73,868
 $68,088
 $55,699

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 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 collars designated as cash flow hedges involve the receipt of amounts in which the interest rate specified in the contract exceeds the agreed upon cap strike 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 30, 2018,March 31, 2019, the Company had eightthree interest rate swap derivatives designated as cash flow hedges of variable rate deposits and one interest rate collar derivative designated as a cash flow hedge of variable rate debt. When the relationship between the hedged item and hedging instrument is highly effective at achieving offsetting changes in cash flows attributable to the hedged risk, changes in the fair value of these cash flow hedges are recorded in accumulated other comprehensive income or loss and are

subsequently reclassified to interest expense as interest payments are made on such variable rate deposits. The changes in fair value (net of tax) are separately disclosed in the Consolidated Statements of Comprehensive Income.


The table below provides details on each of these cash flow hedges as of September 30, 2018:March 31, 2019:
September 30, 2018March 31, 2019
(Dollars in thousands)Notional Fair ValueNotional Fair Value
Maturity DateAmount Asset (Liability)Amount Asset (Liability)
Interest Rate Swaps:      
June 2019$200,000
 $1,445
$200,000
 $429
July 2019250,000
 3,275
250,000
 1,083
August 2019275,000
 4,399
275,000
 1,841
January 2020175,000
 1,554
January 202025,000
 222
April 202050,000
 317
April 2020200,000
 1,267
June 2020200,000
 3,741
Interest Rate Collars:      
September 2023150,000
 51
139,286
 (2,589)
Total Cash Flow Hedges$1,525,000
 $16,271
$864,286
 $764
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 Nine months endedThree months ended
(Dollars in thousands)September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		March 31,
2019		 March 31,
2018
Unrealized gain at beginning of period$16,059
 $8,249
 $11,902
 $6,944
$10,742
 $11,902
Amount reclassified from accumulated other comprehensive loss to interest expense on deposits and junior subordinated debentures(2,319) 14
 (4,338) 1,051
Amount of gain recognized in other comprehensive income2,531
 380
 8,707
 648
Amount reclassified from accumulated other comprehensive income to interest expense on deposits and other borrowings(3,562) (680)
Amount of (loss) gain recognized in other comprehensive income(1,434) 3,755
Unrealized gain at end of period$16,271
 $8,643
 $16,271
 $8,643
$5,746
 $14,977

As of September 30, 2018,March 31, 2019, the Company estimates that during the next twelve months $14.2$7.7 million will be reclassified from accumulated other comprehensive gain (loss)income or loss as a reduction 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 30, 2018,March 31, 2019, the Company has twelvesixteen interest rate swaps with an aggregate notional amount of $164.2$172.3 million that were designated as fair value hedges primarily associated with fixed rate commercial and industrial and commercial franchisereal estate loans as well as life insurance premium finance receivables. TwoOne of these interest rate swaps with an aggregate notional amount of $55.3$6.9 million werewas effective starting after September 30, 2018.March 31, 2019.

For derivatives designated and that qualify as fair value hedges, the net gain or loss from the entire change in the fair value of the derivative instrument is recognized in the same income statement line item as the earnings effect, including the net gain or loss, of the hedged item (interest income earned on fixed rate loans) when the hedged item affects earnings.


The following table presents the carrying amount of the hedged assets/(liabilities) and the cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/(liabilities) that are designated as a fair value hedge accounting relationship as of September 30, 2018:March 31, 2019:

 September 30, 2018 March 31, 2019
(Dollars 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 DiscontinuedLocation 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 swapsLoans, net of unearned income, excluding covered loans $129,496
 $(5,082) $—
Loans, net of unearned income $165,746
 $1,776
 $—
Available-for-sale debt securities 1,461
 57
 —

The following table presents the loss or gain recognized related to derivative instruments that are designated as fair value hedges for the respective periods:period:
(Dollars in thousands)
Derivatives in Fair Value Hedging Relationships
 
Location of (Loss)/Gain Recognized
in Income on Derivative
 Three Months Ended Nine Months Ended 
Location of (Loss)/Gain Recognized
in Income on Derivative
 Three Months Ended
September 30, 2018 September 30, 2018March 31, 2019
Interest rate swaps Interest and fees on loans $(25) $(55) Interest and fees on loans $(42)
 Interest income - investment securities —

During the three months ended September 30, 2018, one interest rate swap designated as a fair value hedge accounting relationship was terminated as a result of the full prepayment of the underlying loan (hedged asset). At the time of the termination, the fair value of the interest rate swap asset was approximately $1.4 million with an offsetting cumulative amount of fair value hedging adjustments included in the carrying value of the underlying loan totaling $1.6 million. As the underlying loan was fully paid-off, the remaining cumulative amount of fair value hedging adjustments included in the carrying value of the underlying loan was recorded to interest income.

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 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 30, 2018,March 31, 2019, the Company had interest rate derivative transactions with an aggregate notional amount of approximately $6.1$6.4 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 2018April 2019 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 30, 2018,March 31, 2019, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately $698.2$651.9 million and interest rate lock commitments with an aggregate notional amount of approximately $379.5$403.2 million. 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 30, 2018March 31, 2019, the Company held foreign currency derivatives with an aggregate notional amount of approximately $37.9$37.1 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 no covered call options outstanding as of September 30, 2018,March 31, 2019, December 31, 20172018 or September 30, 2017.March 31, 2018.

Amounts included in the Consolidated Statements of Income related to derivative instruments not designated in hedge relationships were as follows:
(Dollars in thousands)  Three Months Ended Nine Months Ended  Three Months Ended
DerivativeLocation in income statement September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		Location in income statement March 31,
2019		 March 31,
2018
Interest rate swaps and capsTrading (losses) gains, net $(55) $(94) $89
 $(762)Trading (losses) gains, net $(191) $153
Mortgage banking derivativesMortgage banking revenue (1,122) 708
 858
 1,398
Mortgage banking revenue 50
 1,418
Covered call optionsFees from covered call options 627
 1,143
 2,893
 2,792
Fees from covered call options 1,784
 1,597
Foreign exchange contractsTrading (losses) gains, net (18) (23) 51
 (115)Trading (losses) gains, net (12) (43)

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 30, 2018,March 31, 2019, 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 $162,000.$36.5 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 LiabilitiesDerivative Assets Derivative Liabilities
Fair Value Fair ValueFair Value Fair Value
(Dollars in thousands)September 30,
2018		 December 31,
2017		 September 30,
2017		 September 30,
2018		 December 31,
2017		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018		 March 31,
2019		 December 31,
2018		 March 31,
2018
Gross Amounts Recognized$91,262
 $48,985
 $45,168
 $69,342
 $33,716
 $34,035
$68,317
 $68,425
 $72,970
 $69,292
 $62,571
 $52,443
Less: Amounts offset in the Statements of Financial Condition—
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
Net amount presented in the Statements of Financial Condition$91,262
 $48,985
 $45,168
 $69,342
 $33,716
 $34,035
$68,317
 $68,425
 $72,970
 $69,292
 $62,571
 $52,443
Gross amounts not offset in the Statements of Financial Condition                      
Offsetting Derivative Positions$(7,887) (14,878) (16,213) $(7,887) (14,878) (16,213)(18,878) (28,124) (9,627) (18,878) (28,124) (9,627)
Collateral Posted(76,530) (18,060) (2,950) (340) (2,220) (17,130)—
 (23,810) (54,490) (45,540) (2,640) (340)
Net Credit Exposure$6,845
 $16,047
 $26,005
 $61,115
 $16,618
 $692
$49,439
 $16,491
 $8,853
 $4,874
 $31,807
 $42,476

(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 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 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. 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 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 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. 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 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 30, 2018,March 31, 2019, the Company classified $97.6$103.8 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 $3.3$3.0 million of U.S. governmentGovernment agencies as Level 3 at September 30, 2018.March 31, 2019. 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 thirdfirst quarter of 2018,2019, all of the ratings derived by the Investment Operations Department using the above process were "BBB" or 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 30, 2018March 31, 2019 are 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. governmentGovernment agency securities, the Investment Operations Department assigned a AAA rating as it is guaranteed by the U.S. government.

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.

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 30, 2018,March 31, 2019, the Company classified $13.5$11.2 million of loans held-for-investment as Level 3. The weighted average discount rate used as an input to value these loans at September 30, 2018March 31, 2019 was 4.57%3.94% with discount rates applied ranging from 4%-5%3%-4%. 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 10.31%14.01% at September 30, 2018.March 31, 2019. 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 discount used as an input to value the specific loans was 1.00%1.24% with credit loss discount ranging from 0%-7% at September 30, 2018.March 31, 2019.

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 30, 2018,March 31, 2019, the Company classified $74.5$71.0 million of MSRs as Level 3. The weighted average discount rate used as an input to value the pool of MSRs at September 30, 2018March 31, 2019 was 10.03%9.96% with discount rates applied ranging from 7%-18%-17%. 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, 2018March 31, 2019 ranged from 0%-81%-93% or a weighted average prepayment speed of 10.03%14.01%. Further, for current and delinquent loans, the Company assumed a weighted average cost of servicing of $78$77 and $274,$407, 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 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 collars are valued by a third party, using models that primarily use market observable inputs, such as yield curves, and are validated by comparison with valuations provided by the respective counterparties. 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 30, 2018,March 31, 2019, the Company classified $2.5$3.1 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 30, 2018March 31, 2019 was 91.12%78.82% with pull-through rates applied ranging from 20%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.

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.

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis for the periods presented:
September 30, 2018March 31, 2019
(Dollars in thousands)Total Level 1 Level 2 Level 3Total Level 1 Level 2 Level 3
Available-for-sale securities              
U.S. Treasury$124,761
 $—
 $124,761
 $—
$126,718
 $126,718
 $—
 $—
U.S. Government agencies111,020
 —
 107,705
 3,315
130,687
 —
 127,694
 2,993
Municipal133,373
 —
 35,787
 97,586
136,353
 —
 32,519
 103,834
Corporate notes93,453
 —
 93,453
 —
93,333
 —
 93,333
 —
Mortgage-backed1,702,378
 —
 1,702,378
 —
1,698,691
 —
 1,698,691
 —
Trading account securities688
 —
 688
 —
559
 —
 559
 —
Equity securities with readily determinable fair value36,414
 —
 36,414
 —
47,653
 39,587
 8,066
 —
Mortgage loans held-for-sale338,111
 —
 338,111
 —
248,557
 —
 248,557
 —
Loans held-for-investment77,883
 —
 64,427
 13,456
101,071
 —
 89,822
 11,249
MSRs74,530
 —
 —
 74,530
71,022
 —
 —
 71,022
Nonqualified deferred compensation assets12,503
 —
 12,503
 —
13,230
 —
 13,230
 —
Derivative assets96,153
 —
 93,661
 2,492
75,504
 —
 72,415
 3,089
Total$2,801,267
 $—
 $2,609,888
 $191,379
$2,743,378
 $166,305
 $2,384,886
 $192,187
Derivative liabilities$71,381
 $—
 $71,381
 $—
$73,868
 $—
 $73,868
 $—
 
 December 31, 2017 December 31, 2018
(Dollars in thousands) Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
Available-for-sale securities                
U.S. Treasury $143,822
 $—
 $143,822
 $—
 $126,404
 $126,404
 $—
 $—
U.S. Government agencies 156,915
 —
 153,136
 3,779
 140,307
 —
 137,157
 3,150
Municipal 115,352
 —
 38,171
 77,181
 138,490
 —
 29,564
 108,926
Corporate notes 31,050
 —
 31,050
 —
 91,045
 —
 91,045
 —
Mortgage-backed 1,319,725
 —
 1,319,725
 —
 1,629,835
 —
 1,629,835
 —
Equity securities 36,802
 —
 36,802
 —
Trading account securities 995
 —
 995
 —
 1,692
 —
 1,692
 —
Equity securities with readily determinable fair value 34,717
 —
 34,717
 —
Mortgage loans held-for-sale 313,592
 —
 313,592
 —
 264,070
 —
 264,070
 —
Loans held-for-investment 33,717
 —
 —
 33,717
 93,857
 —
 82,510
 11,347
MSRs 33,676
 —
 —
 33,676
 75,183
 —
 —
 75,183
Nonqualified deferred compensation assets 11,065
 —
 11,065
 —
 11,282
 —
 11,282
 —
Derivative assets 52,069
 —
 49,912
 2,157
 73,172
 —
 70,715
 2,457
Total $2,248,780
 $—
 $2,098,270
 $150,510
 $2,680,054
 $126,404
 $2,352,587
 $201,063
Derivative liabilities $35,671
 $—
 $35,671
 $—
 $68,088
 $—
 $68,088
 $—


September 30, 2017March 31, 2018
(Dollars in thousands)Total Level 1 Level 2 Level 3Total Level 1 Level 2 Level 3
Available-for-sale securities              
U.S. Treasury$144,145
 $—
 $144,145
 $—
$24,727
 $—
 $24,727
 $—
U.S. Government agencies159,328
 —
 155,385
 3,943
149,336
 —
 145,720
 3,616
Municipal116,016
 —
 47,633
 68,383
121,758
 —
 37,166
 84,592
Corporate notes60,614
 —
 60,614
 —
99,714
 —
 99,714
 —
Mortgage-backed1,149,448
 —
 1,149,448
 —
1,500,153
 —
 1,500,153
 —
Equity securities36,352
 —
 36,352
 —
Trading account securities643
 —
 643
 —
1,682
 —
 1,682
 —
Equity securities with readily determinable fair value37,832
 —
 37,832
 —
Mortgage loans held-for-sale370,282
 —
 370,282
 —
411,505
 —
 411,505
 —
Loans held-for-investment29,704
 —
 —
 29,704
67,962
 —
 41,342
 26,620
MSRs29,414
 —
 —
 29,414
54,572
 —
 —
 54,572
Nonqualified deferred compensation assets10,824
 —
 10,824
 —
11,724
 —
 11,724
 —
Derivative assets48,198
 —
 46,982
 1,216
78,960
 —
 74,355
 4,605
Total$2,154,968
 $—
 $2,022,308
 $132,660
$2,559,925
 $—
 $2,385,920
 $174,005
Derivative liabilities$35,773
 $—
 $35,773
 $—
$55,699
 $—
 $55,699
 $—

The aggregate remaining contractual principal balance outstanding as of September 30, 2018,March 31, 2019, December 31, 20172018 and September 30, 2017March 31, 2018 for mortgage loans held-for-sale measured at fair value under ASC 825 was $317.4$243.6 million, $299.5$253.7 million and $356.4$396.9 million, respectively, while the aggregate fair value of mortgage loans held-for-sale was $338.1$248.6 million, $313.6$264.1 million and $370.3$411.5 million, for the same respective periods, as shown in the above tables. There were $622,000$1.9 million of loans past due greater than 90 days and still accruing in the mortgage loans held-for-sale portfolio as of September 30,March 31, 2019 and December 31, 2018 and no loans as of DecemberMarch 31, 2017 and September 30, 2017.2018.

The changes in Level 3 assets measured at fair value on a recurring basis during the three and nine months ended September 30,March 31, 2019 and 2018 and 2017 are summarized as follows:

  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, 2018$96,566
 $3,482
 $13,764
 $63,194
 $3,819
Balance at January 1, 2019$108,926
 $3,150
 $11,347
 $75,183
 $2,457
Total net gains (losses) included in:                  
Net income (1)
—
 —
 (32) 11,336
 (1,327)—
 —
 167
 (4,161) 632
Other comprehensive loss(2,573) (9) —
 —
 —
1,537
 1
 —
 —
 —
Purchases4,830
 —
 —
 —
 —
969
 —
 —
 —
 —
Issuances—
 —
 —
 —
 —
—
 —
 —
 —
 —
Sales—
 —
 —
 —
 —
—
 —
 —
 —
 —
Settlements(1,237) (158) (1,520) —
 —
(7,598) (158) (465) —
 —
Net transfers into/(out of) Level 3
—
 —
 1,244
 —
 —
—
 —
 200
 —
 —
Balance at September 30, 2018$97,586
 $3,315
 $13,456
 $74,530
 $2,492
Balance at March 31, 2019$103,834
 $2,993
 $11,249
 $71,022
 $3,089
(1)Changes in the balance of MSRs and derivative assets related to fair value adjustments are recorded as components of mortgage banking revenue. Changes in the balance of loans held-for-investment related to fair value adjustments are recorded as other non-interest income.


   U.S. Government Agencies Loans held-for- investment 
Mortgage
servicing rights
 Derivative Assets
(Dollars in thousands)Municipal    
Balance at January 1, 2018$77,181
 $3,779
 $33,717
 $33,676
 $2,157
Total net gains (losses) included in:         
Net income (1)
—
 —
 (1,420) 27,048
 335
Other comprehensive loss(5,658) (306) —
 —
 —
Purchases (2)
31,846
 —
 —
 13,806
 —
Issuances—
 —
 —
 —
 —
Sales—
 —
 —
 —
 —
Settlements(5,783) (158) (24,177) —
 —
Net transfers into/(out of) Level 3 
—
 —
 5,336
 —
 —
Balance at September 30, 2018$97,586
 $3,315
 $13,456
 $74,530
 $2,492

   U.S. Government Agencies Loans held-for- investment 
Mortgage
servicing rights
 Derivative Assets
(Dollars in thousands)Municipal    
Balance at July 1, 2017$77,341
 $4,110
 $30,173
 $27,307
 $1,047
Total net gains (losses) included in:         
Net income (1)
—
 —
 177
 2,107
 169
Other comprehensive income (loss)(4,113) (167) —
 —
 —
Purchases—
 —
 —
 —
 —
Issuances—
 —
 —
 —
 —
Sales—
 —
 —
 —
 —
Settlements(4,845) —
 (4,504) —
 —
Net transfers into/(out of) Level 3—
 —
 3,858
 —
 —
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  U.S. Government Agencies Loans held-for- investment 
Mortgage
servicing rights
 Derivative Assets
(Dollars in thousands)Municipal  Municipal  
Balance at January 1, 2017$79,626
 $—
 $22,137
 $19,103
 $2,291
Balance at January 1, 2018$77,181
 $3,779
 $33,717
 $33,676
 $2,157
Total net gains (losses) included in:                  
Net income (1)
—
 —
 1,369
 10,311
 (1,075)—
 —
 (1,128) 7,090
 2,448
Other comprehensive income (loss)(1,084) (340) —
 —
 —
(2,190) (163) —
 —
 —
Purchases(2)10,879
 —
 —
 —
 —
12,270
 —
 —
 13,806
 —
Issuances—
 —
 —
 —
 —
—
 —
 —
 —
 —
Sales—
 —
 —
 —
 —
—
 —
 —
 —
 —
Settlements(21,038) —
 (9,995) —
 —
(2,669) —
 (6,255) —
 —
Net transfers into/(out of) Level 3—
 4,283
 16,193
 —
 —
—
 —
 286
 —
 —
Balance at September 30, 2017$68,383
 $3,943
 $29,704
 $29,414
 $1,216
Balance at March 31, 2018$84,592
 $3,616
 $26,620
 $54,572
 $4,605
(1)Changes in the balance of MSRs and derivative assets related to fair value adjustments are recorded as components of mortgage banking revenue. Changes in the balance of loans held-for-investment related to fair value adjustments are recorded as other non-interest income.
(2)Purchased as a part of the Veterans First business combination. See Note 3 - Business Combinations and Asset Acquisitions for further discussion.


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 30, 2018.March 31, 2019.
September 30, 2018 
Three Months Ended September 30, 2018
Fair Value Losses Recognized, net
 Nine Months Ended September 30, 2018 Fair Value Losses Recognized, netMarch 31, 2019 
Three Months Ended March 31, 2019
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$106,219
 $—
 $—
 $106,219
 $3,978
 $11,152
$101,331
 $—
 $—
 $101,331
 $4,378
Other real estate owned (1)
28,303
 —
 —
 28,303
 1,504
 5,173
21,520
 —
 —
 21,520
 574
Total$134,522
 $—
 $—
 $134,522
 $5,482
 $16,325
$122,851
 $—
 $—
 $122,851
 $4,952
(1)Fair value losses recognized, net on other real estate owned include valuation adjustments and charge-offs during the respective period.

Impaired loans—A loan is considered to be impaired when, based on current information 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 is 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 loans are considered a fair value measurement where an allowance 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 collateral-dependent impaired loans.

The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs of impaired loans. For more information on the Managed Assets Division review of impaired loans refer to Note 7 – Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans. At September 30, 2018,March 31, 2019, the Company had $132.5$144.1 million of impaired loans classified as Level 3. Of the $132.5$144.1 million of impaired loans, $106.2$101.3 million were measured at fair value based on the underlying collateral of the loan as shown in the table above. The remaining $26.3$42.8 million were valued based on discounted cash flows in accordance with ASC 310.

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 other real estate owned. At September 30, 2018,March 31, 2019, the Company had $28.3$21.5 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 30, 2018March 31, 2019 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
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$97,586
 Bond pricing Equivalent rating BBB-AA+ N/A Increase$103,834
 Bond pricing Equivalent rating BBB-AA+ N/A Increase
U.S. Government agencies3,315
 Bond pricing Equivalent rating AAA AAA Increase2,993
 Bond pricing Equivalent rating AAA AAA Increase
Loans held-for-investment13,456
 Discounted cash flows Discount rate 4%-5% 4.57% Decrease11,249
 Discounted cash flows Discount rate 3%-4% 3.94% Decrease
  Credit discount 0%-7% 1.00% Decrease  Credit discount 0%-7% 1.24% Decrease
  Constant prepayment rate (CPR) 10.31% 10.31% Decrease  Constant prepayment rate (CPR) 14.01% 14.01% Decrease
MSRs74,530
 Discounted cash flows Discount rate 7%-18% 10.03% Decrease71,022
 Discounted cash flows Discount rate 7%-17% 9.96% Decrease
  Constant prepayment rate (CPR) 0%-81% 10.03% Decrease  Constant prepayment rate (CPR) 0%-93% 14.01% Decrease
  Cost of servicing $15-$200 $78 Decrease  Cost of servicing $70-$200 $77 Decrease
  Cost of servicing - delinquent $200-$1,000 $274 Decrease  Cost of servicing - delinquent $200-$1,000 $407 Decrease
Derivatives2,492
 Discounted cash flows Pull-through rate 20%-100% 91.12% Increase3,089
 Discounted cash flows Pull-through rate 0%-100% 78.82% Increase
Measured at fair value on a non-recurring basis:    
Impaired loans—collateral based$106,219
 Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease$101,331
 Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease
Other real estate owned28,303
 Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease21,520
 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 statementsConsolidated 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 September 30, 2018 At December 31, 2017 At September 30, 2017At March 31, 2019 At December 31, 2018 At March 31, 2018
Carrying Fair Carrying Fair Carrying FairCarrying Fair Carrying Fair Carrying Fair
(Dollars in thousands)Value Value Value Value Value ValueValue Value Value Value Value Value
Financial Assets:                      
Cash and cash equivalents$279,993
 $279,993
 $277,591
 $277,591
 $251,952
 $251,952
$270,823
 $270,823
 $392,200
 $392,200
 $231,464
 $231,464
Interest bearing deposits with banks1,137,044
 1,137,044
 1,063,242
 1,063,242
 1,218,728
 1,218,728
1,609,852
 1,609,852
 1,099,594
 1,099,594
 980,380
 980,380
Available-for-sale securities2,164,985
 2,164,985
 1,803,666
 1,803,666
 1,665,903
 1,665,903
2,185,782
 2,185,782
 2,126,081
 2,126,081
 1,895,688
 1,895,688
Held-to-maturity securities966,438
 911,597
 826,449
 812,516
 819,340
 807,036
1,051,542
 1,041,695
 1,067,439
 1,036,096
 892,937
 862,527
Trading account securities688
 688
 995
 995
 643
 643
559
 559
 1,692
 1,692
 1,682
 1,682
Equity securities with readily determinable fair value36,414
 36,414
 —
 —
 —
 —
47,653
 47,653
 34,717
 34,717
 37,832
 37,832
FHLB and FRB stock, at cost99,998
 99,998
 89,989
 89,989
 87,192
 87,192
89,013
 89,013
 91,354
 91,354
 104,956
 104,956
Brokerage customer receivables15,649
 15,649
 26,431
 26,431
 23,631
 23,631
14,219
 14,219
 12,609
 12,609
 24,531
 24,531
Mortgage loans held-for-sale, at fair value338,111
 338,111
 313,592
 313,592
 370,282
 370,282
248,557
 248,557
 264,070
 264,070
 411,505
 411,505
Loans held-for-investment, at fair value77,883
 77,883
 33,717
 33,717
 29,704
 29,704
101,071
 101,071
 93,857
 93,857
 67,962
 67,962
Loans held-for-investment, at amortized cost23,046,068
 23,261,545
 21,607,080
 21,768,978
 20,929,678
 21,064,801
24,113,558
 24,123,328
 23,726,834
 23,780,739
 21,994,172
 22,234,795
MSRs74,530
 74,530
 33,676
 33,676
 29,414
 29,414
Nonqualified deferred compensation assets12,503
 12,503
 11,065
 11,065
 10,824
 10,824
13,230
 13,230
 11,282
 11,282
 11,724
 11,724
Derivative assets96,153
 96,153
 52,069
 52,069
 48,198
 48,198
75,504
 75,504
 73,172
 73,172
 78,960
 78,960
Accrued interest receivable and other254,879
 254,879
 227,649
 227,649
 225,435
 225,435
275,464
 275,464
 260,281
 260,281
 236,131
 236,131
Total financial assets$28,601,336
 $28,761,972
 $26,367,211
 $26,515,176
 $25,710,924
 $25,833,743
$30,096,827
 $30,096,750
 $29,255,182
 $29,277,744
 $26,969,924
 $27,180,137
Financial Liabilities                      
Non-maturity deposits$19,456,677
 $19,456,677
 $18,775,977
 $18,775,977
 $18,228,388
 $18,228,388
$21,454,035
 $21,454,035
 $20,833,837
 $20,833,837
 $18,941,201
 $18,941,201
Deposits with stated maturities5,460,038
 5,475,048
 4,407,370
 4,350,004
 4,666,675
 4,608,760
5,350,707
 5,377,388
 5,260,841
 5,283,063
 4,338,126
 4,344,584
FHLB advances615,000
 615,342
 559,663
 544,750
 468,962
 454,753
576,353
 604,976
 426,326
 429,830
 915,000
 916,513
Other borrowings373,571
 373,571
 266,123
 266,123
 251,680
 251,680
372,194
 372,194
 393,855
 393,855
 247,092
 247,092
Subordinated notes139,172
 146,838
 139,088
 144,266
 139,052
 145,376
139,235
 144,019
 139,210
 138,345
 139,111
 140,889
Junior subordinated debentures253,566
 258,488
 253,566
 264,696
 253,566
 240,305
253,566
 252,451
 253,566
 263,846
 253,566
 268,873
Derivative liabilities71,381
 71,381
 35,671
 35,671
 35,773
 35,773
73,868
 73,868
 68,088
 68,088
 55,699
 55,699
FDIC indemnification liability—
 —
 —
 —
 15,472
 15,472
Accrued interest payable15,374
 15,374
 8,030
 8,030
 9,177
 9,177
19,569
 19,569
 16,025
 16,025
 11,442
 11,442
Total financial liabilities$26,384,779
 $26,412,719
 $24,445,488
 $24,389,517
 $24,068,745
 $23,989,684
$28,239,527
 $28,298,500
 $27,391,748
 $27,426,889
 $24,901,237
 $24,926,293

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 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 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.

(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. 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 30, 2018,March 31, 2019, approximately 3.42.6 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 generally vest ratably over periods of three to five years and have a maximum term of seven years from the date of grant. 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 of a combination of time-vested non-qualified stock options, performance-based stock awards and performance-based cash awards. 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 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 of restricted share and performance-based stock awards are 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 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 reviews and adjusts the assumptions used to calculate the fair value of an option on a periodic basis to better reflect expected trends. No options were granted in the nine month periods ended September 30, 2018 and September 30, 2017.since 2016.

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 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 $3.2$3.3 million in the thirdfirst quarter of 20182019 and $2.4$3.7 million in the thirdfirst quarter of 2017, and $10.3 million and $8.2 million for the 2018 and 2017
year-to-date periods, respectively.2018.

A summary of the Company's stock option activity for the ninethree months ended September 30,March 31, 2019 and March 31, 2018 and September 30, 2017 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, 20181,084,756
 $41.98
    
Outstanding at January 1, 2019795,014
 $42.25
    
Granted—
 —
  —
 —
  
Exercised(271,674) 41.36
  (78,667) 37.41
  
Forfeited or canceled(6,942) 39.81
    —
 —
    
Outstanding at September 30, 2018806,140
 $42.20
 3.3 $34,452
Exercisable at September 30, 2018609,752
 $42.42
 3.0 $25,924
Outstanding at March 31, 2019716,347
 $42.79
 2.9 $17,583
Exercisable at March 31, 2019701,227
 $42.75
 2.9 $17,234

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, 20171,698,912
 $41.50
    
Outstanding at January 1, 20181,084,756
 $41.98
    
Granted—
 —
  —
 —
  
Exercised(499,222) 40.57
  (169,387) 42.47
  
Forfeited or canceled(16,378) 43.07
    (1,703) 40.87
    
Outstanding at September 30, 20171,183,312
 $41.87
 4.2 $43,122
Exercisable at September 30, 2017640,759
 $41.58
 3.5 $23,532
Outstanding at March 31, 2018913,666
 $41.89
 3.7 $40,351
Exercisable at March 31, 2018712,535
 $42.00
 3.4 $31,391
(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.


The aggregate intrinsic value of options exercised during the ninethree months ended September 30,March 31, 2019 and March 31, 2018, and September 30, 2017, was $12.9$2.8 million and $16.3$7.5 million, respectively. Cash received from option exercises under the Plan for the ninethree months ended September 30,March 31, 2019 and March 31, 2018 and September 30, 2017 was $11.2$2.9 million and $20.3$7.2 million, respectively.


A summary of the Plans' restricted share activity for the ninethree months ended September 30, 2018March 31, 2019 and September 30, 2017March 31, 2018 is presented below:
Nine months ended September 30, 2018 Nine months ended September 30, 2017Three months ended March 31, 2019 Three months ended March 31, 2018
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 1127,787
 $53.33
 133,425
 $49.94
143,263
 $60.80
 127,787
 $53.33
Granted28,506
 87.65
 14,249
 72.53
9,673
 71.66
 20,700
 86.42
Vested and issued(10,438) 56.88
 (10,695) 46.03
(11,042) 75.00
 (7,258) 53.47
Forfeited or canceled(982) 55.39
 (2,551) 52.26
(215) 93.14
 (982) 55.39
Outstanding at September 30144,873
 $59.82
 134,428
 $52.60
Vested, but not issuable at September 3090,294
 $51.88
 89,563
 $51.59
Outstanding at March 31141,679
 $60.38
 140,247
 $58.20
Vested, but not issuable at March 3190,824
 $52.02
 89,924
 $51.71

A summary of the Plans' performance-based stock award activity, based on the target level of the awards, for the ninethree months ended September 30,March 31, 2019 and March 31, 2018 and September 30, 2017 is presented below:
Nine months ended September 30, 2018 Nine months ended September 30, 2017Three months ended March 31, 2019 Three months ended March 31, 2018
Performance-based StockCommon
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 1359,196
 $54.37
 298,180
 $43.64
396,855
 $67.71
 359,196
 $54.37
Granted134,326
 88.28
 145,829
 72.60
173,856
 71.57
 127,419
 88.20
Vested and issued(82,307) 44.39
 (68,712) 46.85
(94,288) 41.00
 (82,307) 44.39
Forfeited(13,582) 59.18
 (14,164) 52.81
(2,747) 67.85
 (6,580) 49.42
Outstanding at September 30397,633
 $67.72
 361,133
 $54.36
Vested, but deferred at September 3021,477
 $43.52
 13,616
 $42.66
Outstanding at March 31473,676
 $74.44
 397,728
 $67.35
Vested, but deferred at March 3133,451
 $42.70
 21,388
 $43.32

The actual number of shares vested and issued in the first quarter of 2019 were 33,950 more than target due to performance achievement above the target level. The Company issues new shares to satisfy its obligation to issue shares granted pursuant to the Plans.

(18) Shareholders’ Equity and Earnings Per Share

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 C Preferred Stock

In March 2012, the Company issued and sold 126,500 shares of non-cumulative perpetual convertible preferred stock, Series C, liquidation preference $1,000 per share (the “Series C Preferred Stock”) for $126.5 million in a public offering. When, as and if declared, dividends on the Series C Preferred Stock were payable quarterly in arrears at a rate of 5.00% 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, on and after April 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. 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.

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 $22.57 at September 30, 2018. 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 2018, 15,951 warrant shares were exercised, which resulted in 11,764 shares of common stock issued. At September 30, 2018, all remainingcertain holders of the interest in the warrant were ableexercised 22,952 warrant shares, which resulted in 16,571 shares of common stock issued. On December 19, 2018, the Company’s warrant shares expired. Any warrant shares not exercised prior to exercise 7,410 warrant shares.this date expired and became void, and the holder did not receive any shares of the Company’s common stock.

Other

At the January 20182019 Board of Directors meeting, a quarterly cash dividend of $0.19$0.25 per share ($0.761.00 on an annualized basis) was declared. It was paid on February 22, 201821, 2019 to shareholders of record as of February 8, 2018. At the April 2018 Board of Directors meeting, a quarterly cash dividend of $0.19 per share ($0.76 on an annualized basis) was declared. It was paid on May 24, 2018 to shareholders of record as of May 10, 2018. At the July 2018 Board of Directors meeting, a quarterly cash dividend of $0.19 per share ($0.76 on an annualized basis) was declared. It was paid on August 23, 2018 to shareholders of record as of August 9, 2018.7, 2019.


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
Losses
on Securities
 
Accumulated
Unrealized
Gains on
Derivative
Instruments
 
Accumulated
Foreign
Currency
Translation
Adjustments
 
Total
Accumulated
Other
Comprehensive
Loss
Accumulated
Unrealized
Losses
on Securities
 
Accumulated
Unrealized
Gains on
Derivative
Instruments
 
Accumulated
Foreign
Currency
Translation
Adjustments
 
Total
Accumulated
Other
Comprehensive
Loss
Balance at July 1, 2018$(54,885) $11,748
 $(38,079) $(81,216)
Other comprehensive (loss) income during the period, net of tax, before reclassifications(13,277) 1,851
 1,942
 (9,484)
Balance at January 1, 2019$(42,353) $7,857
 $(42,376) $(76,872)
Other comprehensive income (loss) during the period, net of tax, before reclassifications27,956
 (1,039) 2,277
 29,194
Amount reclassified from accumulated other comprehensive loss into net income, net of tax(730) (1,696) —
 (2,426)49
 (2,612) —
 (2,563)
Amount reclassified from accumulated other comprehensive loss related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax(24) —
 —
 (24)(103) —
 —
 (103)
Net other comprehensive (loss) income during the period, net of tax$(14,031) $155
 $1,942
 $(11,934)
Balance at September 30, 2018$(68,916) $11,903
 $(36,137) $(93,150)
Net other comprehensive income (loss) during the period, net of tax$27,902
 $(3,651) $2,277
 $26,528
Balance at March 31, 2019$(14,451) $4,206
 $(40,099) $(50,344)
       
       
       Accumulated
Unrealized
Losses
on Securities		 Accumulated
Unrealized
Gains on
Derivative
Instruments		 Accumulated
Foreign
Currency
Translation
Adjustments		 Total
Accumulated
Other
Comprehensive
Loss
Balance at January 1, 2018$(15,813) $7,164
 $(33,186) $(41,835)$(15,813) $7,164
 $(33,186) $(41,835)
Cumulative effect adjustment from the adoption of:              
ASU 2016-01(1,880) —
 —
 (1,880)(1,880) —
 —
 (1,880)
ASU 2018-02(4,517) 1,543
 —
 (2,974)(4,517) 1,543
 —
 (2,974)
Other comprehensive (loss) income during the period, net of tax, before reclassifications(46,665) 6,368
 (2,951) (43,248)(26,474) 2,746
 (2,897) (26,625)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax(5) (3,172) —
 (3,177)
Amount reclassified from accumulated other comprehensive loss into net income, net of tax713
 (497) —
 216
Amount reclassified from accumulated other comprehensive loss related to amortization of unrealized losses on investment securities transferred to held-to-maturity from available-for-sale, net of tax(36) —
 —
 (36)3
 —
 —
 3
Net other comprehensive (loss) income during the period, net of tax$(46,706) $3,196
 $(2,951) $(46,461)$(25,758) $2,249
 $(2,897) $(26,406)
Balance at September 30, 2018$(68,916) $11,903
 $(36,137) $(93,150)
       
Balance at March 31, 2018$(47,968) $10,956
 $(36,083) $(73,095)


 Accumulated
Unrealized
Losses
on Securities		 Accumulated
Unrealized
Gains 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 during the period, net of tax, before reclassifications653
 228
 4,206
 5,087
Amount reclassified from accumulated other comprehensive income into net income, net of tax(24) 8
 —
 (16)
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(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 during the period, net of tax, before reclassifications15,815
 393
 7,916
 24,124
Amount reclassified from accumulated other comprehensive income into net income, net of tax(19) 637
 —
 618
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(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)

 Amount Reclassified from Accumulated Other Comprehensive Income for the  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
 Three Months Ended 
Impacted Line on the
Consolidated Statements of Income
September 30, September 30,  March 31, 
2018 2017 2018 2017  2019 2018 
Accumulated unrealized losses on securities              
Gains included in net income $1,001
 $39
 $6
 $31
 Gains (losses) on investment securities, net
Losses included in net income $(67) $(975) Gains (losses) on investment securities, net
 1,001
 39
 6
 31
 Income before taxes (67) (975) Income before taxes
Tax effect $(271) $(15) $(1) $(12) Income tax expense $18
 $262
 Income tax expense
Net of tax $730
 $24
 $5
 $19
 Net income $(49) $(713) Net income
              
Accumulated unrealized losses on derivative instruments              
Amount reclassified to interest expense on deposits $(2,319) $(380) $(4,338) $(15) Interest on deposits $(3,589) $(680) Interest on deposits
Amount reclassified to interest expense on junior subordinated debentures —
 394
 —
 1,066
 Interest on junior subordinated debentures
Amount reclassified to interest expense on other borrowings 27
 —
 Interest on other borrowings
 2,319
 (14) 4,338
 (1,051) Income before taxes 3,562
 680
 Income before taxes
Tax effect $(623) $6
 $(1,166) $414
 Income tax expense $(950) $(183) Income tax expense
Net of tax $1,696
 $(8) $3,172
 $(637) Net income $2,612
 $497
 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 Nine Months Ended Three Months Ended
(In thousands, except per share data) September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		 March 31,
2019		 March 31,
2018
Net income $91,948
 $65,626
 $263,509
 $188,901
 $89,146
 $81,981
Less: Preferred stock dividends 2,050
 2,050
 6,150
 7,728
 2,050
 2,050
Net income applicable to common shares—Basic(A) 89,898
 63,576
 257,359
 181,173
Add: Dividends on convertible preferred stock, if dilutive —
 —
 —
 1,578
Net income applicable to common shares—Diluted(B) 89,898
 63,576
 257,359
 182,751
Net income applicable to common shares(A) 87,096
 79,931
Weighted average common shares outstanding(C) 56,366
 55,796
 56,268
 54,292
(B) 56,529
 56,137
Effect of dilutive potential common shares            
Common stock equivalents 918
 966
 912
 988
 699
 888
Convertible preferred stock, if dilutive —
 —
 —
 1,317
Total dilutive potential common shares 918
 966
 912
 2,305
Weighted average common shares and effect of dilutive potential common shares(D) 57,284
 56,762
 57,180
 56,597
(C) 57,228
 57,025
Net income per common share:            
Basic(A/C) $1.59
 $1.14
 $4.57
 $3.34
(A/B) $1.54
 $1.42
Diluted(B/D) $1.57
 $1.12
 $4.50
 $3.23
(A/C) $1.52
 $1.40

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.


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 30, 2018March 31, 2019 compared with December 31, 20172018 and September 30, 2017,March 31, 2018, and the results of operations for the three and nine month periods ended September 30,March 31, 2019 and March 31, 2018, and September 30, 2017, 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 20172018 Annual Report on 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, southern Wisconsin and northwest Indiana, and operates other financing businesses on a national basis and in Canada through several non-bank business units. Additionally, Wintrust offers a full array of wealth management services primarily to customers in the Chicago metropolitan area, southern Wisconsin and northwest Indiana.

Overview

ThirdFirst Quarter Highlights

The Company recorded net income of $91.9$89.1 million for the thirdfirst quarter of 20182019 compared to $65.6$82.0 million in the thirdfirst quarter of 2017.2018. The results for the thirdfirst quarter of 20182019 demonstrate continued momentum on our operating strengths including steady loan and deposit growth and increased revenue from wealth management and mortgage banking services. Combined with the noted continued loan growth, the improvement in net interest margin during the thirdfirst quarter of 20182019 compared to the same period of 20172018 resulted in higher net interest income in the current period. Additionally, the Company's effective tax rate decreased from 37.0% in the third quarter of 2017 to 25.1% in the third quarter of 2018 primarily due to the reduction of the federal corporate tax rate effective in 2018 as a result of the enactment of the Tax Act.

The Company increased its loan portfolio excluding covered loans, from $20.9$22.1 billion at September 30, 2017March 31, 2018 and $21.6$23.8 billion at December 31, 20172018 to $23.1$24.2 billion at September 30, 2018.March 31, 2019. The increase in the current quarter compared to the prior quarters was primarily a result of the Company’s growth in the commercial, commercial real estate, commercial 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 Condition – Interest Earning Assets and Note 6 - Loans of the Consolidated Financial Statements in Item 1 of this report.

The Company recorded net interest income of $247.6$262.0 million in the thirdfirst quarter of 20182019 compared to $216.0$225.1 million in the thirdfirst quarter of 2017.2018. The higher level of net interest income recorded in the thirdfirst quarter of 20182019 compared to the thirdfirst quarter of 20172018 resulted primarily from a $2.0$2.2 billion increase in average loans, excluding covered loans, and a substantial improvement in the yield on earning assets. This was partially offset by an increase in the average balance and cost of interest-bearing liabilities (see "Net Interest Income" for further detail).

Non-interest income totaled $99.9$81.7 million in the thirdfirst quarter of 20182019 compared to $79.7$85.7 million in the thirdfirst quarter of 2017.2018. This increasedecrease was primarily the result of increases from wealth management revenue, higherlower mortgage banking revenue and increased income on bank-owned life insurance (see “Non-Interest Income” for further detail).

Non-interest expense totaled $213.6$214.4 million in the thirdfirst quarter of 2018,2019, increasing $30.1$20.0 million, or 16%10%, compared to the thirdfirst quarter of 2017.2018. The increase compared to the thirdfirst quarter of 20172018 was primarily attributable to higher salary and employee benefit costs caused by the addition of employees from acquisitions merit-based salary increases for current employees effective in February 2018, an increase ofand increased staffing as the minimum wage for eligible hourly employees effective in March 2018,Company grows, higher bonusoccupancy expenses and long-term performance-based incentive compensation due to higher earnings, increased professional fees primarily due to certain consulting agreements paidamortization on other intangible assets recognized in relation to the acquisition of CSC, higher occupancy expenses, higher data processing expenses and an increase in advertising and marketing expensesrecent acquisitions (see “Non-Interest Expense” for further detail).

Management considers the maintenance of adequate liquidity to be important to the management of risk. During the thirdfirst quarter of 2018,2019, 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 30, 2018,March 31, 2019, the Company had approximately $1.4$1.9 billion in overnight liquid funds and interest-bearing deposits with banks.


RESULTS OF OPERATIONS

Earnings Summary

The Company’s key operating measures and growth rates for the three and nine months ended September 30, 2018,March 31, 2019, as compared to the same period last year, are shown below:
 Three months ended  
(Dollars in thousands, except per share data)September 30,
2018		 September 30,
2017		 Percentage (%) or
Basis Point (bp) Change
Net income$91,948
 $65,626
 40%
Net income per common share—Diluted1.57
 1.12
 40
Net revenue (1)
347,493
 295,719
 18
Net interest income247,563
 215,988
 15
Net interest margin3.59% 3.43% 16 bp
Net interest margin - fully taxable equivalent (non-GAAP) (2)
3.61
 3.46
 15
Net overhead ratio (3)
1.53
 1.53
 —
Return on average assets1.24
 0.96
 28
Return on average common equity11.86
 9.15
 271
Return on average tangible common equity (non-GAAP) (2)
14.64
 11.39
 325
Nine months ended  Three months ended  
(Dollars in thousands, except per share data)September 30,
2018		 September 30,
2017		 Percentage (%) or
Basis Point (bp) Change		March 31,
2019		 March 31,
2018		 Percentage (%) or
Basis Point (bp) Change
Net income$263,509
 $188,901
 39%$89,146
 $81,981
 9%
Net income per common share—Diluted4.50
 3.23
 39
1.52
 1.40
 9
Net revenue (1)
991,657
 851,445
 16
343,643
 310,761
 11
Net interest income710,815
 612,977
 16
261,986
 225,082
 16
Net interest margin3.58% 3.40
 18 bp
3.70% 3.54% 16 bp
Net interest margin - fully taxable equivalent (non-GAAP) (2)
3.60
 3.43
 17
3.72
 3.56
 16
Net overhead ratio (3)
1.56
 1.52
 4
1.72
 1.58
 14
Return on average assets1.23
 0.97
 26
1.16
 1.20
 (4)
Return on average common equity11.71
 9.21
 250
11.09
 11.29
 (20)
Return on average tangible common equity (non-GAAP) (2)
14.47
 11.62
 285
14.14
 14.02
 12
At end of period          
Total assets$30,142,731
 $27,358,162
 10%$32,358,621
 $28,456,772
 14%
Total loans, excluding loans held-for-sale, excluding covered loans23,123,951
 20,912,781
 11
Total loans, including loans held-for-sale, excluding covered loans23,462,062
 21,283,063
 10
Total loans, excluding loans held-for-sale24,214,629
 22,062,134
 10
Total loans, including loans held-for-sale24,463,186
 22,473,639
 9
Total deposits24,916,715
 22,895,063
 9
26,804,742
 23,279,327
 15
Total shareholders’ equity3,179,822
 2,908,925
 9
3,371,972
 3,031,250
 11
Book value per common share (2)
54.19
 49.86
 9
57.33
 51.66
 11
Tangible common book value per share (2)
44.16
 40.53
 9
46.38
 42.17
 10
Market price per common share84.94
 78.31
 8
67.33
 86.05
 (22)
Excluding covered loans:     
Allowance for credit losses to total loans (4)
0.65% 0.64% 1 bp
0.66% 0.64% 2bp
Non-performing loans to total loans0.55
 0.37
 18
0.49
 0.41
 8
(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 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. 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 FTEfully 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.


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 EndedThree Months Ended
September 30, September 30, September 30, September 30,March 31, March 31,
(Dollars and shares in thousands)2018 2017 2018 20172019 2018
Calculation of Net Interest Margin and Efficiency Ratio          
(A) Interest Income (GAAP)$304,962
 $247,688
 $850,214
 $694,628
$333,970
 $261,205
Taxable-equivalent adjustment:          
- Loans941
 1,033
 2,423
 2,654
1,034
 670
- Liquidity Management Assets575
 921
 1,672
 2,694
565
 531
- Other Earning Assets3
 5
 7
 12
2
 3
(B) Interest Income - FTE$306,481
 $249,647
 $854,316
 $699,988
(B) Interest Income (non-GAAP)$335,571
 $262,409
(C) Interest Expense (GAAP)57,399
 31,700
 139,399
 81,651
71,984
 36,123
(D) Net Interest Income - FTE (B minus C)$249,082
 $217,947
 $714,917
 $618,337
(E) Net Interest Income (GAAP) (A minus C)$247,563
 $215,988
 $710,815
 $612,977
Net interest margin (GAAP-derived)3.59% 3.43% 3.58% 3.40%
Net interest margin - FTE3.61% 3.46% 3.60% 3.43%
(D) Net Interest Income (GAAP) (A minus C)261,986
 225,082
(E) Net Interest Income (non-GAAP) (B minus C)263,587
 226,286
Net interest margin (GAAP)3.70% 3.54%
Net interest margin (non-GAAP)3.72% 3.56%
(F) Non-interest income$99,930
 $79,731
 $280,842
 $238,468
$81,657
 $85,679
(G) Gains (losses) on investment securities, net90
 39
 (249) 31
1,364
 (351)
(H) Non-interest expense213,637
 183,575
 614,755
 535,237
214,374
 194,349
Efficiency ratio (H/(E+F-G))61.50% 62.09% 61.98% 62.86%
Efficiency ratio - FTE (H/(D+F-G))61.23% 61.68% 61.72% 62.47%
Efficiency ratio (H/(D+F-G))62.63% 62.47%
Efficiency ratio (non-GAAP) (H/(E+F-G))62.34% 62.23%
Calculation of Tangible Common Equity ratio (at period end)          
Total shareholders’ equity$3,179,822
 $2,908,925
    $3,371,972
 $3,031,250
Less: Non-convertible preferred stock(125,000) (125,000)    (125,000) (125,000)
Less: Intangible assets(564,938) (520,672)    (620,224) (533,910)
(I) Total tangible common shareholders’ equity$2,489,884
 $2,263,253
    $2,626,748
 $2,372,340
Total assets$30,142,731
 $27,358,162
    
(J) Total assets$32,358,621
 $28,456,772
Less: Intangible assets(564,938) (520,672)    (620,224) (533,910)
(J) Total tangible assets$29,577,793
 $26,837,490
    
Tangible common equity ratio (I/J)8.4% 8.4%    
(K) Total tangible assets$31,738,397
 $27,922,862
Common equity to assets ratio (GAAP) (L/J)10.0% 10.2%
Tangible common equity ratio (non-GAAP) (I/K)8.3% 8.5%
Calculation of book value per share          
Total shareholders’ equity$3,179,822
 $2,908,925
    $3,371,972
 $3,031,250
Less: Preferred stock(125,000) (125,000)    (125,000) (125,000)
(K) Total common equity$3,054,822
 $2,783,925
    
(L) Actual common shares outstanding56,377
 55,838
    
Book value per common share (K/L)$54.19
 $49.86
    
Tangible common book value per share (I/L)$44.16
 $40.53
    
(L) Total common equity$3,246,972
 $2,906,250
(M) Actual common shares outstanding56,639
 56,256
Book value per common share (L/M)$57.33
 $51.66
Tangible common book value per share (I/M)$46.38
 $42.17
Calculation of return on average common equity       
(M) Net income applicable to common shares89,898
 63,576
 257,359
 181,173
 Add: After-tax intangible asset amortization871
 672
 2,366
 2,169
(N) Tangible net income applicable to common shares90,769
 64,248
 259,725
 183,342
Total average shareholders' equity3,131,943
 2,882,682
 3,064,396
 2,808,072
Less: Average preferred stock(125,000) (125,000) (125,000) (178,632)
(O) Total average common shareholders' equity3,006,943
 2,757,682
 2,939,396
 2,629,440
Less: Average intangible assets(547,552) (520,333) (539,281) (520,006)
(P) Total average tangible common shareholders’ equity2,459,391
 2,237,349
 2,400,115
 2,109,434
Return on average common equity, annualized (M/O)11.86% 9.15% 11.71% 9.21%
Return on average tangible common equity, annualized (N/P)14.64% 11.39% 14.47% 11.62%
Calculation of return on average common equity   
(N) Net income applicable to common shares$87,096
 $79,931
Add: Intangible asset amortization2,942
 1,004
Less: Tax effect of intangible asset amortization(731) (243)
After-tax intangible asset amortization2,211
 761
(O) Tangible net income applicable to common shares89,307
 80,692
Total average shareholders' equity3,309,078
 2,995,592
Less: Average preferred stock(125,000) (125,000)
(P) Total average common shareholders' equity3,184,078
 2,870,592
Less: Average intangible assets(622,240) (536,676)
(Q) Total average tangible common shareholders’ equity2,561,838
 2,333,916
Return on average common equity, annualized (N/P)11.09% 11.29%
Return on average tangible common equity, annualized (O/Q)14.14% 14.02%



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 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 5556 of the Company’s 20172018 Form 10-K.

Net Income

Net income for the quarter ended September 30, 2018March 31, 2019 totaled $91.9$89.1 million, an increase of $26.3$7.2 million, or 40%9%, compared to the quarter ended September 30, 2017.March 31, 2018. On a per share basis, net income for the thirdfirst quarter of 20182019 totaled $1.57$1.52 per diluted common share compared to $1.12$1.40 for the thirdfirst quarter of 2017.2018.

The most significant factors impacting net income for the thirdfirst quarter of 20182019 as compared to the same period in the prior year include an increase in net interest income as a result of growth in earning assets and ana significant improvement in net interest margin and an increase in wealth management revenue, higher mortgage banking revenue, higher BOLI income and a reduction in the Company's effective tax rate due to the reduction of the federal corporate tax rate as a result of the Tax Act.revenue. These improvements were partially offset by lower mortgage banking revenue, an increase in non-interest expense primarily attributable to higher salary and employee benefit costs caused by the addition of employees from acquisitions and growth within the CSC and Veterans First acquisitions, merit-based salary increases for current employees effective in February 2018, an increase of the minimum wage for eligible hourly employees effective in March 2018, higher bonus and long-term performance-based incentive compensation due to higher earnings,Company, higher occupancy expenses and increased data processing costs, higher professional fees from increased consulting costs driven by certain consulting agreements paidamortization on other intangible assets recognized in relation to the acquisition of CSC and an increase in marketing costs from spending related to deposit generation and brand awareness to grow our loan and deposit portfolios.recent acquisitions.

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 30, 2018March 31, 2019 compared to the Quarters Ended June 30,December 31, 2018 and September 30, 2017March 31, 2018

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 thirdfirst quarter of 20182019 as compared to the secondfourth quarter of 2018 (sequential quarters) and thirdfirst quarter of 20172018 (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,
2018		 June 30,
2018		 September 30,
2017		 September 30,
2018		 June 30,
2018		 September 30,
2017		 September 30,
2018		 June 30,
2018		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018		 March 31,
2019		 December 31,
2018		 March 31,
2018		 March 31,
2019		 December 31,
2018		 March 31,
2018
Interest-bearing deposits with banks and cash equivalents(1)
$998,004
 $759,425
 $1,003,572
 $5,423
 $3,244
 $3,272
 2.16 % 1.71 % 1.29 %$897,629
 $1,042,860
 $749,973
 $5,300
 $5,628
 $2,796
 2.39 % 2.14 % 1.51 %
Investment securities (2)
3,046,272
 2,890,828
 2,652,119
 22,285
 20,454
 16,979
 2.90
 2.84
 2.54
3,630,577
 3,347,496
 2,892,617
 28,521
 27,242
 19,659
 3.19
 3.23
 2.76
FHLB and FRB stock88,335
 115,119
 81,928
 1,235
 1,455
 1,080
 5.54
 5.07
 5.23
94,882
 98,084
 105,414
 1,355
 1,343
 1,298
 5.79
 5.43
 4.99
Liquidity management assets(3)(8)
$4,132,611
 $3,765,372
 $3,737,619
 $28,943
 $25,153
 $21,331
 2.78 % 2.68 % 2.26 %$4,623,088
 $4,488,440
 $3,748,004
 $35,176
 $34,213
 $23,753
 3.09 % 3.02 % 2.57 %
Other earning assets(3)(4)(8)
17,862
 21,244
 25,844
 178
 172
 163
 3.95
 3.24
 2.49
13,591
 16,204
 27,571
 165
 253
 174
 4.91
 6.19
 2.56
Mortgage loans held-for-sale380,235
 403,967
 336,604
 5,285
 4,226
 3,223
 5.51
 4.20
 3.80
188,190
 265,717
 281,181
 2,209
 3,409
 2,818
 4.76
 5.09
 4.06
Loans, net of unearned
income(3)(5)(8)
22,823.378
 22,283,541
 20,858,618
 272,075
 255,875
 224,330
 4.73
 4.61
 4.27
23,880,916
 23,164,154
 21,711,342
 298,021
 284,291
 235,664
 5.06
 4.87
 4.40
Covered loans—
 —
 48,415
 —
 —
 600
 —
 —
 4.91
Total earning assets(8)
$27,354,086
 $26,474,124
 $25,007,100
 $306,481
 $285,426
 $249,647
 4.45 % 4.32 % 3.96 %$28,705,785
 $27,934,515
 $25,768,098
 $335,571
 $322,166
 $262,409
 4.74 % 4.58 % 4.13 %
Allowance for loan and covered loan losses(148,503) (147,192) (135,519)            
Allowance for loan losses(157,782) (154,438) (143,108)            
Cash and due from banks268,006
 270,240
 242,186
            283,019
 271,403
 254,489
            
Other assets2,051,520
 1,970,407
 1,898,528
            2,385,149
 2,128,407
 1,930,118
            
Total assets$29,525,109
 $28,567,579
 $27,012,295
            $31,216,171
 $30,179,887
 $27,809,597
            
                                  
NOW and interest bearing demand deposits$2,519,445
 $2,295,268
 $2,344,848
 $2,479
 $1,901
 $1,313
 0.39 % 0.33 % 0.22 %$2,803,338
 $2,671,283
 $2,255,692
 $4,613
 $4,007
 $1,386
 0.67 % 0.60 % 0.25 %
Wealth management deposits2,517,141
 2,365,191
 2,320,674
 8,287
 6,992
 4,715
 1.31
 1.19
 0.81
2,614,035
 2,289,904
 2,250,139
 7,000
 7,119
 5,441
 1.09
 1.23
 0.98
Money market accounts5,369,324
 4,883,645
 4,471,342
 13,260
 8,111
 3,505
 0.98
 0.67
 0.31
5,915,525
 5,632,268
 4,520,620
 19,460
 16,936
 4,667
 1.33
 1.19
 0.42
Savings accounts2,672,077
 2,702,665
 2,581,946
 2,907
 2,709
 2,162
 0.43
 0.40
 0.33
2,715,422
 2,553,133
 2,813,772
 4,249
 3,096
 2,732
 0.63
 0.48
 0.39
Time deposits5,214,637
 4,557,187
 4,573,081
 21,803
 15,580
 11,960
 1.66
 1.37
 1.04
5,267,796
 5,381,029
 4,322,111
 25,654
 24,817
 12,323
 1.98
 1.83
 1.16
Interest-bearing deposits$18,292,624
 $16,803,956
 $16,291,891
 $48,736
 $35,293
 $23,655
 1.06 % 0.84 % 0.58 %$19,316,116
 $18,527,617
 $16,162,334
 $60,976
 $55,975
 $26,549
 1.29 % 1.20 % 0.67 %
Federal Home Loan Bank advances429,739
 1,006,407
 324,996
 1,947
 4,263
 2,151
 1.80
 1.70
 2.63
594,335
 551,846
 872,811
 2,450
 2,563
 3,639
 1.67
 1.84
 1.69
Other borrowings268,278
 240,066
 268,850
 2,003
 1,698
 1,482
 2.96
 2.84
 2.19
465,571
 385,878
 263,125
 3,633
 3,199
 1,699
 3.16
 3.29
 2.62
Subordinated notes139,155
 139,125
 139,035
 1,773
 1,787
 1,772
 5.10
 5.14
 5.10
139,217
 139,186
 139,094
 1,775
 1,788
 1,773
 5.10
 5.14
 5.10
Junior subordinated debentures253,566
 253,566
 253,566
 2,940
 2,836
 2,640
 4.54
 4.42
 4.07
253,566
 253,566
 253,566
 3,150
 2,983
 2,463
 4.97
 4.60
 3.89
Total interest-bearing liabilities$19,383,362
 $18,443,120
 $17,278,338
 $57,399
 $45,877
 $31,700
 1.17 % 1.00 % 0.73 %$20,768,805
 $19,858,093
 $17,690,930
 $71,984
 $66,508
 $36,123
 1.40 % 1.33 % 0.83 %
Non-interest bearing deposits6,461,195
 6,539,731
 6,419,326
            6,444,378
 6,542,228
 6,639,845
            
Other liabilities548,609
 520,574
 431,949
            693,910
 578,912
 483,230
            
Equity3,131,943
 3,064,154
 2,882,682
            3,309,078
 3,200,654
 2,995,592
            
Total liabilities and shareholders’ equity$29,525,109
 $28,567,579
 $27,012,295
            $31,216,171
 $30,179,887
 $27,809,597
            
Interest rate spread(6)(8)
            3.28 % 3.32 % 3.23 %            3.34 % 3.25 % 3.30 %
Less: Fully tax-equivalent adjustment      (1,519) (1,379) (1,959) (0.02) (0.02) (0.03)      (1,601) (1,570) (1,204) (0.02) (0.02) (0.02)
Net free funds/contribution(7)
$7,970,724
 $8,031,004
 $7,728,762
       0.33
 0.31
 0.23
$7,936,980
 $8,076,422
 $8,077,168
       0.38
 0.38
 0.26
Net interest income/ margin(8) (GAAP)
      $247,563
 $238,170
 $215,988
 3.59 % 3.61 % 3.43 %      $261,986
 $254,088
 $225,082
 3.70 % 3.61 % 3.54 %
Fully tax-equivalent adjustment      1,519
 $1,379
 $1,959
 0.02
 0.02
 0.03
      1,601
 $1,570
 $1,204
 0.02
 0.02
 0.02
Net interest income/ margin - FTE (8)
      $249,082
 $239,549
 $217,947
 3.61 % 3.63 % 3.46 %
Net interest income/margin - (non-GAAP) (8)
      $263,587
 $255,658
 $226,286
 3.72 % 3.63 % 3.56 %

(1)Includes interest-bearing deposits fromwith 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 the applicable period. The total adjustments for the three months ended September 30, 2018, June 30,March 31, 2019, December 31, 2018 and September 30, 2017March 31, 2018 were $1.5$1.6 million, $1.4$1.6 million and $2.0$1.2 million, respectively.
(4)Other earning assets include brokerage customer receivables and trading account securities.
(5)Loans, net of unearned income, include non-accrual loans.
(6)Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(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.
(8)See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio.

For the thirdfirst quarter of 2018,2019, net interest income totaled $247.6$262.0 million, an increase of $9.4$7.9 million as compared to the secondfourth quarter of 2018, and an increase of $31.6$36.9 million as compared to the thirdfirst quarter of 2017.2018. Net interest margin was 3.59% (3.61%3.70% (3.72% on a fully tax-equivalent basis)basis, non-GAAP) during the thirdfirst quarter of 20182019 compared to 3.61% (3.63% on a fully tax-equivalent basis)basis, non-GAAP) during the secondfourth quarter of 2018, and 3.43% (3.46%3.54% (3.56% on a fully tax-equivalent basis)basis, non-GAAP) during the thirdfirst quarter of 2017.

Nine months endedSeptember 30, 2018 compared to nine months ended September 30, 2017

The following table presents a summary of the Company’s net interest income and related net interest margin, including a calculation on a fully taxable equivalent basis, for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017:
 Average Balance for nine months ended, Interest for nine months ended, Yield/Rate for nine months ended,
(Dollars in thousands)September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017
Interest-bearing deposits with banks and cash equivalents (1)
$836,710
 $836,373
 $11,463
 $6,531
 1.83 % 1.04 %
Investment securities (2)
2,943,802
 2,541,061
 62,398
 47,849
 2.83
 2.52
FHLB and FRB stock102,893
 91,774
 3,988
 3,303
 5.18
 4.81
Liquidity management assets(3)(8)
$3,883,405
 $3,469,208
 $77,849
 $57,683
 2.68 % 2.22 %
Other earning assets(3)(4)(8)
22,190
 25,612
 524
 508
 3.15
 2.65
Mortgage loans held-for-sale355,491
 313,675
 12,329
 9,041
 4.64
 3.85
Loans, net of unearned income(3)(5)(8)
22,276,827
 20,263,832

763,614

630,591
 4.58
 4.16
Covered loans—
 52,339
 —
 2,165
 —
 5.53
Total earning assets(8)
$26,537,913
 $24,124,666
 $854,316
 $699,988
 4.30 % 3.88 %
Allowance for loan and covered loan losses(146,287) (131,695)        
Cash and due from banks264,294
 238,136
        
Other assets1,984,460
 1,865,702
        
Total assets$28,640,380
 $26,096,809
        
            
NOW and interest bearing demand deposits$2,357,768
 $2,441,911
 $5,765
 $3,620
 0.33 % 0.20 %
Wealth management deposits2,378,468
 2,165,610
 20,721
 9,894
 1.16
 0.61
Money market accounts4,927,639
 4,438,537
 26,038
 8,433
 0.71
 0.25
Savings accounts2,728,986
 2,380,688
 8,348
 4,999
 0.41
 0.28
Time deposits4,701,247
 4,369,688
 49,706
 31,450
 1.41
 0.96
Interest-bearing deposits$17,094,108
 $15,796,434
 $110,578
 $58,396
 0.86 % 0.49 %
Federal Home Loan Bank advances768,029
 399,171
 9,849
 6,674
 1.71
 2.24
Other borrowings257,175
 254,854
 5,400
 3,770
 2.81
 1.98
Subordinated notes139,125
 139,008
 5,333
 5,330
 5.11
 5.11
Junior subordinated debentures253,566
 253,566
 8,239
 7,481
 4.28
 3.89
Total interest-bearing liabilities$18,512,003
 $16,843,033
 $139,399
 $81,651
 1.01 % 0.65 %
Non-interest bearing deposits6,546,269
 6,039,329
        
Other liabilities517,712
 406,375
        
Equity3,064,396
 2,808,072
        
Total liabilities and shareholders’ equity$28,640,380
 $26,096,809
        
Interest rate spread(6)(8)
        3.29 % 3.23 %
Less: Fully tax-equivalent adjustment    (4,102) (5,360) (0.02) (0.03)
Net free funds/contribution(7)
$8,025,910
 $7,281,633
     0.31
 0.20
Net interest income/ margin(8) (GAAP)
    $710,815
 $612,977
 3.58 % 3.40 %
Fully tax-equivalent adjustment    4,102
 5,360
 0.02
 0.03
Net interest income/ margin - FTE (8)
    $714,917
 $618,337
 3.60 % 3.43 %
(1)Includes interest-bearing deposits from 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 a marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the nine months ended September 30, 2018 and 2017 were $4.1 million and $5.4 million respectively.
(4)Other earning assets include brokerage customer receivables and trading account securities.
(5)Loans, net of unearned income, include non-accrual loans.
(6)Interest rate spread is the difference between the yield earned on earning assets and the rate paid on interest-bearing liabilities.
(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.
(8)See “Supplemental Financial Measures/Ratios” for additional information on this performance ratio.


For the first nine months of 2018, net interest income totaled $710.8 million, an increase of $97.8 million as compared to the first nine months of 2017. Net interest margin was 3.58% (3.60% on a fully tax-equivalent basis) for the first nine months of 2018 compared to 3.40% (3.43% on a fully tax-equivalent basis) for the same period of 2017.2018.

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, 2018March 31, 2019 to June 30,December 31, 2018 and September 30, 2017 and the nine month periods ended September 30, 2018 and September 30, 2017.March 31, 2018. 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 2018
Compared to
Second Quarter
of 2018
 
Third Quarter
of 2018
Compared to
Third Quarter
of 2017
 
First Nine
Months of 2018
Compared to
First Nine
Months of 2017
First Quarter
of 2019
Compared to
Fourth Quarter
of 2018
 
First Quarter
of 2019
Compared to
First Quarter
of 2018
(Dollars in thousands)  
Net interest income (GAAP) for comparative period$238,170
 $215,988
 $612,977
$254,088
 $225,082
Change due to mix and growth of earning assets and interest-bearing liabilities (volume)9,098
 20,396
 60,067
5,527
 24,198
Change due to interest rate fluctuations (rate)(2,294) 11,179
 37,771
8,017
 12,706
Change due to number of days in each period2,589
 —
 —
(5,646) —
Net interest income (GAAP) for the period ended September 30, 2018$247,563
 $247,563
 $710,815
Net interest income (GAAP) for the period ended Match 31, 2019$261,986
 $261,986
Fully tax-equivalent adjustment1,519
 1,519
 4,102
1,601
 1,601
Net interest income - FTE$249,082
 $249,082
 $714,917
Net interest income (non-GAAP)$263,587
 $263,587


Non-interest Income

The following table presents non-interest income by category for the periods presented:
 Three Months Ended 
$
Change
 
%
Change
(Dollars in thousands)September 30,
2018		 September 30,
2017		  
Brokerage$5,579
 $5,127
 $452
 9 %
Trust and asset management17,055
 14,676
 2,379
 16
Total wealth management$22,634
 $19,803
 $2,831
 14 %
Mortgage banking42,014
 28,184
 13,830
 49
Service charges on deposit accounts9,331
 8,645
 686
 8
Gains on investment securities, net90
 39
 51
 NM
Fees from covered call options627
 1,143
 (516) (45)
Trading (losses) gains, net(61) (129) 68
 (53)
Operating lease income, net9,132
 8,461
 671
 8
Other:       
Interest rate swap fees2,359
 1,762
 597
 34
BOLI3,190
 897
 2,293
 NM
Administrative services1,099
 1,052
 47
 4
Early pay-offs of capital leases11
 —
 11
 NM
Miscellaneous9,504
 9,874
 (370) (4)
Total Other$16,163
 $13,585
 $2,578
 19 %
Total Non-Interest Income$99,930
 $79,731
 $20,199
 25 %



Nine Months Ended 
$
Change
 
%
Change
Three Months Ended 
$
Change
 
%
Change
(Dollars in thousands)September 30,
2018		 September 30,
2017		 March 31,
2019		 March 31,
2018		 
Brokerage$17,394
 $16,796
 $598
 4 %$4,516
 $6,031
 $(1,515) (25)%
Trust and asset management50,843
 43,060
 7,783
 18
19,461
 16,955
 2,506
 15
Total wealth management$68,237
 $59,856
 $8,381
 14 %$23,977
 $22,986
 $991
 4 %
Mortgage banking112,808
 86,061
 26,747
 31
18,158
 30,960
 (12,802) (41)
Service charges on deposit accounts27,339
 25,606
 1,733
 7
8,848
 8,857
 (9) —
(Losses) gains on investment securities, net(249) 31
 (280) NM
Gains (losses) on investment securities, net1,364
 (351) 1,715
 NM
Fees from covered call options2,893
 2,792
 101
 4
1,784
 1,597
 187
 12
Trading gains (losses), net166
 (869) 1,035
 NM
Trading (losses) gains, net(171) 103
 (274) NM
Operating lease income, net27,569
 21,048
 6,521
 31
10,796
 9,691
 1,105
 11
Other:              
Interest rate swap fees8,425
 5,416
 3,009
 56
2,831
 2,237
 594
 27
BOLI5,448
 2,770
 2,678
 97
1,591
 714
 877
 NM
Administrative services3,365
 3,062
 303
 10
1,030
 1,061
 (31) (3)
Foreign currency remeasurement gains (losses)464
 (328) 792
 NM
Early pay-offs of capital leases598
 1,221
 (623) (51)5
 33
 (28) (85)
Miscellaneous24,243
 31,474
 (7,231) (23)10,980
 8,119
 2,861
 35
Total Other$42,079
 $43,943
 $(1,864) (4)%$16,901
 $11,836
 $5,065
 43 %
Total Non-Interest Income$280,842
 $238,468
 $42,374
 18 %$81,657
 $85,679
 $(4,022) (5)%
NM - Not Meaningfulmeaningful.

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

The increase in wealth management revenue during the current period as compared to the same periodfirst quarter of 20172018 is primarily attributable to growth in assets under management along withhigher fees on tax-deferred like-kind exchange services and market appreciation related to managed money accounts with fees based on assets under management. 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 Wintrust Investments.Investments and fees from tax-deferred like-kind exchange services provided by CDEC.

The increasedecrease in mortgage banking revenue in the currentfirst quarter of 2019 as compared to the same periodfirst quarter of 20172018 resulted primarily from increased revenue fromlower origination volumes and negative fair value adjustments recognized on mortgage servicing rights related to changes in valuation assumptions and pay-offs and lower production margins. Mortgage loans originated and sold, higher positive fair market value adjustmentfor sale totaled $678.5 million in the first quarter of 2019 as compared to MSRs and higher servicing income as$778.9 million in the Company's loan servicing portfolio increased due to the acquisitionfirst quarter of Veterans First, partially offset by lower production margins.2018. 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 MSRsmortgage servicing rights ("MSRs") as the Company doesdid not hedge this change in fair value. The Company originates mortgage loans held-for-sale with associated MSRs either retained or released.value for the periods presented. The Company records MSRs at fair value on a recurring basis. The table below presents additional selected information regarding mortgage banking revenue for the respective periods.


The table below presents additional selected information regarding mortgage banking revenue for the respective periods.
 Three months ended Nine Months Ended Three months ended
(Dollars in thousands) September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		 March 31,
2019		 March 31,
2018
Retail originations $642,213
 $809,961
 $1,949,036
 $2,398,328
 $365,602
 $539,911
Correspondent originations 310,446
 145,999
 559,896
 414,357
 148,100
 126,464
Veterans First originations 199,774
 —
 518,726
 —
 164,762
 112,477
Total originations (A) $1,152,433
 $955,960
 $3,027,658
 $2,812,685
Total originations for sale (A) $678,464
 $778,852
Originations for investment 93,689
 43,249
Total originations $772,153
 $822,101
            
Purchases as a percentage of originations 76% 80% 77% 78%
Refinances as a percentage of originations 24
 20
 23
 22
Purchases as a percentage of originations for sale 67% 73%
Refinances as a percentage of originations for sale 33
 27
Total 100% 100% 100% 100% 100% 100%
            
Production Margin:            
Production revenue (1) (B)
 $25,253
 $24,038
 $73,593
 $69,855
 $16,606
 $20,526
Production margin (B/A) 2.19% 2.51% 2.43% 2.48% 2.45% 2.64%
            
Mortgage Servicing:            
Loans serviced for others (C) $5,904,300
 $2,622,411
     $7,014,269
 $4,795,335
MSRs, at fair value (D) 74,530
 29,414
     71,022
 54,572
Percentage of MSRs to loans serviced for others (D/C) 1.26% 1.12%     1.01% 1.14%
            
Components of Mortgage Banking Revenue:            
Production revenue $25,253
 $24,038
 $73,593
 $69,855
 $16,606
 $20,526
MSR capitalization, net of payoffs and paydowns 10,249
 4,308
 19,731
 11,531
MSR fair value adjustments 1,077
 (2,201) 7,307
 (1,220)
MSR current period capitalization 6,580
 4,159
MSR collection of expected cash flow - paydowns (505) (443)
MSR collection of expected cash flow - payoffs (1,492) (759)
MSR changes in fair value model assumptions (8,744) 4,133
Servicing income 3,942
 1,702
 10,352
 4,475
 5,460
 2,905
Other 1,493
 337
 1,825
 1,420
 253
 439
Total mortgage banking revenue $42,014
 $28,184
 $112,808
 $86,061
 $18,158
 $30,960
(1)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 fair value of servicing rights and changes to the mortgage recourse obligation.


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. There were no outstanding call option contracts at September 30, 2018March 31, 2019 and September 30, 2017.March 31, 2018.

The increase in operating leasemiscellaneous non-interest income in the current year periodsfirst quarter of 2019 as compared to the prior year periodsfirst quarter of 2018 is primarily relateddue to growthhigher loan syndication revenue and higher income from investments in business from the Company's leasing divisions.partnerships.



Non-interest Expense

The following table presents non-interest expense by category for the periods presented:
Three months ended 
$
Change
 
%
Change
Three months ended 
$
Change
 
%
Change
(Dollars in thousands)September 30,
2018		 September 30,
2017		 March 31,
2019		 March 31,
2018		 
Salaries and employee benefits:              
Salaries$69,893
 $57,689
 $12,204
 21%$74,037
 $61,986
 $12,051
 19 %
Commissions and incentive compensation34,046
 32,095
 1,951
 6
31,599
 31,949
 (350) (1)
Benefits19,916
 16,467
 3,449
 21
20,087
 18,501
 1,586
 9
Total salaries and employee benefits$123,855
 $106,251
 $17,604
 17%$125,723
 $112,436
 $13,287
 12 %
Equipment10,827
 9,947
 880
 9
11,770
 10,072
 1,698
 17
Operating lease equipment depreciation7,370
 6,794
 576
 8
8,319
 6,533
 1,786
 27
Occupancy, net14,404
 13,079
 1,325
 10
16,245
 13,767
 2,478
 18
Data processing9,335
 7,851
 1,484
 19
7,525
 8,493
 (968) (11)
Advertising and marketing11,120
 9,572
 1,548
 16
9,858
 8,824
 1,034
 12
Professional fees9,914
 6,786
 3,128
 46
5,556
 6,649
 (1,093) (16)
Amortization of other intangible assets1,163
 1,068
 95
 9
2,942
 1,004
 1,938
 NM
FDIC insurance4,205
 3,877
 328
 8
3,576
 4,362
 (786) (18)
OREO expense, net596
 590
 6
 1
632
 2,926
 (2,294) (78)
Other:              
Commissions—3rd party brokers1,059
 990
 69
 7
718
 1,252
 (534) (43)
Postage2,205
 1,814
 391
 22
2,450
 1,866
 584
 31
Miscellaneous17,584
 14,956
 2,628
 18
19,060
 16,165
 2,895
 18
Total other$20,848
 $17,760
 $3,088
 17%$22,228
 $19,283
 $2,945
 15 %
Total Non-Interest Expense$213,637
 $183,575
 $30,062
 16%$214,374
 $194,349
 $20,025
 10 %
 Nine months ended $
Change		 %
Change
(Dollars in thousands)September 30,
2018		 September 30,
2017		  
Salaries and employee benefits:       
Salaries$198,855
 $167,912
 $30,943
 18 %
Commissions and incentive compensation101,902
 92,788
 9,114
 10
Benefits57,209
 51,369
 5,840
 11
Total salaries and employee benefits357,966
 312,069
 45,897
 15
Equipment31,426
 28,858
 2,568
 9
Operating lease equipment depreciation20,843
 17,092
 3,751
 22
Occupancy, net41,834
 38,766
 3,068
 8
Data processing26,580
 23,580
 3,000
 13
Advertising and marketing31,726
 23,448
 8,278
 35
Professional fees23,047
 18,956
 4,091
 22
Amortization of other intangible assets3,164
 3,373
 (209) (6)
FDIC insurance13,165
 11,907
 1,258
 11
OREO expense, net4,502
 2,994
 1,508
 50
Other:       
Commissions—3rd party brokers3,485
 3,121
 364
 12
Postage6,638
 5,336
 1,302
 24
Miscellaneous50,379
 45,737
 4,642
 10
Total other60,502
 54,194
 6,308
 12
Total Non-Interest Expense$614,755
 $535,237
 $79,518
 15 %


NM - Not meaningful.

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

Salaries and employee benefits expense increased in the current periodfirst quarter of 2019 compared to the same periodfirst quarter of 2017,2018 primarily as a result of the addition of employees from the CSC and Veterans First acquisition and the growth ofacquisitions, increased staffing as the Company merit-based salary increases for current employees effective in February 2018, an increase of the minimum wage for eligible hourly employees effective in March 2018grows and higher bonus and long-term performance-based incentive compensation due to higher earnings.

Operating lease equipment depreciation increased in the current quarter compared to the same period of 2017, primarily as a result of growth in business from the Company's leasing divisions.employee benefits.

Occupancy expense increased in the thirdfirst quarter of 20182019 compared to the samefirst quarter of 2017,2018 primarily as a result of higher maintenance and repairs and real estate taxes.costs related to additional locations. Occupancy expense includes depreciation on premises, real estate taxes and insurance, utilities and maintenance of premises, as well as net rent expense for leased premises.

The increaseAmortization expense increased in advertising and marketing expenses during the currentfirst quarter of 2019 compared to the same periodfirst quarter of 2017 is2018 primarily related to higher expenses from community sponsorships as well as increased spending related to deposit generation and brand awareness to grow our loan and deposit portfolios. 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 expansiona result 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.

The increase in professional fees during the current quarter compared to the same period of 2017 is primarily related to higher fees on consulting services. The increase in consulting fees was driven by certain consulting agreements paid in relation tointangible assets associated with the acquisition of Delaware Place Bank totaling $2.1 million. Approximately $147,000 of additional payments will be madeCDEC in the fourth quarter of 2018.

OREO expense decreased in the first quarter of 2019 compared to the first quarter of 2018 primarily due to lower write-offs related to these agreements. Professional feescollateral valuation adjustments. OREO expenses include legal, auditall costs associated with obtaining, maintaining and tax fees, external loan review costs, consulting arrangements and normal regulatory exam assessments.selling other real estate owned properties as well as valuation adjustments.

Other miscellaneous expense increased during the first quarter of 2019 compared to the first quarter of 2018 as a result of various other expenses, including a $1.0 million non-tax-deductible settlement in the first quarter of 2019.

Income Taxes

The Company recorded income tax expense of $30.9$29.5 million infor the third quarter of 2018three months ended March 31, 2019, compared to $32.0$26.1 million infor the second quartersame period of 2018 and $38.6 million in the third quarter of 2017.2018. The effective tax rates were 25.13% in the third quarter of 2018, 26.33% in the second quarter of 201824.9% and 37.05% in the third quarter of 2017. During the nine months ended September 30, 2018, the Company recorded income tax expense of $89.0 million (25.24% effective tax rate) compared to $105.3 million (35.79% effective tax rate)24.1% for the same periodfirst quarters of 2017. The lower effective tax rates for the2019 and 2018, quarterly and year-to-date periods as compared to 2017 were primarily due to the reduction of the federal statutory income tax rates effective in 2018 as a result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017. During the third quarter of 2018, the Company finalized the provisional amounts recorded for the year ended December 31, 2017 related to the Tax Cuts and Jobs Act and recorded an additional net tax benefit of $1.2 million.respectively. The effective tax rates in both quarters were also impacted by the recording of excess tax benefits related to share-based compensation. These excess tax benefits were $370,000 in the third quarter of 2018compensation totaling $1.6 million and $712,000 in the second quarter of 2018, compared to $1.1$2.6 million in the third quarterfirst quarters of 2017. Excess tax benefits were $3.7 million2019 and $5.0 million for the year to date periods of 2018, and 2017, respectively. 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 stock price and timing of employee stock option exercises and vesting of other share-based awards.

Operating Segment Results

As described in Note 14 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 30, 2018March 31, 2019 totaled $202.4$211.4 million as compared to $176.5$183.3 million for the same period in 2017,2018, an increase of $25.9$28.2 million, or 15%. On a year-to-date basis, net interest income for the segment increased by $84.8 million from $499.1 million for the nine months ended September 30, 2017 to $583.9 million for the nine months ended September 30, 2018. The increase in both three and nine month periods is primarily attributable to growth in earning assets and higher net interest margin. The community banking segment’s non-interest income totaled $69.8$48.3 million in the thirdfirst quarter of 2018, an increase2019, a decrease of $17.2$8.3 million, or 33%15%, when compared to the thirdfirst quarter of 20172018 total of $52.6$56.5 million. On a year-to-date basis, non-interest income totaled $192.0 million for the nine months ended September 30, 2018, an increase of $31.8 million, or 20%, compared to $160.3 million in the nine months ended September 30, 2017. The increasedecrease in non-interest income in the third quarter and year-to-date periods wasis primarily attributable to an increasea decrease in mortgage banking revenue higher interest rate swap feesas a result of lower origination volumes and increased service chargesnegative fair value adjustments recognized on deposit accounts.mortgage servicing rights related to changes in valuation assumptions and pay-offs and lower production margins. The community banking segment’s net income for the quarter ended September 30, 2018March 31, 2019 totaled $63.7$60.3 million, an increase of $18.9$3.0 million as compared to net income in the thirdfirst quarter of 20172018 of $44.8$57.3 million. On a year-to-date basis, the community banking segment's net income was $187.4 million for the first nine months of 2018 as compared to $128.5 million for the first nine months of 2017.

The specialty finance segment's net interest income totaled $36.4$37.7 million for the quarter ended September 30, 2018,March 31, 2019, compared to $30.5$32.9 million for the same period in 2017,2018, an increase of $5.9$4.8 million, or 19%15%. On a year-to-date basis, net interest income increased by $14.2 million in the first nine months of 2018 as compared to the first nine months of 2017. The increase during both periods is primarily attributable to growth in earning assets and higher yields on the premium finance receivables portfolios. The specialty finance segment’s non-interest income totaled $17.0$19.6 million and $16.3$15.7 million for the three month periods ended September 30,March 31, 2019 and 2018, and 2017, respectively. On a year-to-date basis, non-interest income increased by $4.8 million in the first nine months of 2018 as compared to the first nine months of 2017. The increase in non-interest income in the current year periodsperiod is primarily the result of higher originations and increased balances related to the commercial premium finance portfolio and growth in business from the Company's leasing division. Our commercial premium finance operations, life insurance finance operations, lease financing operations and accounts receivable finance operations accounted for 40%39%, 36%, 18%21% and 6%4%, respectively, of the total revenues of our specialty finance business for the ninethree month period ended September 30, 2018.March 31, 2019. The net income of the specialty finance segment for the quarter ended September 30, 2018March 31, 2019 totaled $23.0$21.8 million as compared to $17.0$20.0 million for the quarter ended September 30, 2017. On a year-to-date basis, the net income of the specialty finance segment for the nine months ended September 30, 2018 totaled $61.5 million as compared to $48.0 million for the nine months ended September 30, 2017.March 31, 2018.

The wealth management segment reported net interest income of $4.0$7.5 million for the thirdfirst quarter of 20182019 compared to $4.6$4.4 million in the same quarter of 2017. On a year-to-date basis, net interest income totaled $12.7 million for the first nine months of 2018 as compared to $14.5 million for the first nine months of 2017.2018. 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 $874.8$1.7 billion and $935.9 million and $1.0 billion in the first nine monthsquarter of 20182019 and 2017,2018, respectively. This segment recorded non-interest income of $23.5$25.0 million for the thirdfirst quarter of 20182019 compared to $20.4$23.0 million for the thirdfirst quarter of 2017. On a year-to-date basis, the wealth management segment's non-interest income totaled $69.8 million during the first nine months of 2018 as compared to $61.7 million in the first nine months of 2017.2018. 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 $5.2$7.0 million for the thirdfirst quarter of 20182019 compared to $3.8$4.7 million for the thirdfirst quarter of 2017. On a year-to-date basis, the wealth management segment's net income totaled $14.6 million and $12.4 million for the nine month periods ended September 30, 2018 and 2017, respectively.2018.


Financial Condition

Total assets were $30.1$32.4 billion at September 30, 2018,March 31, 2019, representing an increase of $2.8$3.9 billion, or 10%14%, when compared to September 30, 2017March 31, 2018 and an increase of approximately $0.7$1.1 billion, or 9%14% on an annualized basis, when compared to June 30,December 31, 2018. Total funding, which includes deposits, all notes and advances, including secured borrowings and the junior subordinated debentures, was $26.3$28.1 billion at September 30, 2018, $25.7March 31, 2019, $27.3 billion at June 30,December 31, 2018, and $24.0$24.8 billion at September 30, 2017.March 31, 2018. See Notes 5, 6, 10, 11 and 12 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 EndedThree Months Ended
September 30, 2018 June 30, 2018 September 30, 2017March 31, 2019 December 31, 2018 March 31, 2018
(Dollars in thousands)Balance Percent Balance Percent Balance PercentBalance Percent Balance Percent Balance Percent
Mortgage loans held-for-sale$380,235
 1% $403,967
 2% $336,604
 1%$188,190
 1% $265,717
 1% $281,181
 1%
Loans, net of unearned income                      
Commercial7,337,150
 27
 7,167,150
 27
 6,399,589
 26
7,854,451
 27
 7,543,062
 27
 6,837,100
 27
Commercial real estate6,658,800
 24
 6,624,140
 25
 6,401,278
 26
6,963,852
 24
 6,746,565
 24
 6,590,145
 26
Home equity589,242
 2
 609,455
 2
 679,668
 2
540,121
 2
 562,600
 2
 648,827
 2
Residential real estate847,703
 3
 834,633
 3
 778,033
 3
938,364
 3
 886,492
 3
 829,634
 3
Premium finance receivables7,257,505
 27
 6,912,264
 26
 6,470,190
 26
7,468,706
 26
 7,282,636
 26
 6,680,095
 26
Other loans132,978
 1
 135,899
 1
 129,860
 1
115,422
 1
 142,799
 1
 125,541
 —
Total loans, net of unearned income excluding covered loans$22,823,378
 84% $22,283,541
 84% $20,858,618
 84%
Covered loans—
 —
 —
 —
 48,415
 —
Total average loans (1)
$22,823,378
 84% $22,283,541
 84% $20,907,033
 84%$23,880,916
 83% $23,164,154
 83% $21,711,342
 84%
Liquidity management assets (2)
$4,132,611
 15% $3,765,372
 14% $3,737,619
 15%$4,623,088
 16% $4,488,440
 16% $3,748,004
 15%
Other earning assets (3)
17,862
 —
 21,244
 —
 25,844
 —
13,591
 —
 16,204
 —
 27,571
 —
Total average earning assets$27,354,086
 100% $26,474,124
 100% $25,007,100
 100%$28,705,785
 100% $27,934,515
 100% $25,768,098
 100%
Total average assets$29,525,109
   $28,567,579
   $27,012,295
  $31,216,171
   $30,179,887
   $27,809,597
  
Total average earning assets to total average assets  93%   93%   93%  92%   93%   93%
(1)Includes non-accrual loans
(2)Liquidity management assets include investment securities, other securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements
(3)Other earning assets include brokerage customer receivables and trading account securities

Mortgage loans held-for-sale. Average mortgage loans held-for-sale totaled $380.2$188.2 million in the thirdfirst quarter of 2018,2019, compared to $404.0$265.7 million in the secondfourth quarter of 2018 and $336.6$281.2 million in the thirdfirst quarter of 2017.2018. 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.

Loans, net of unearned income. Average total loans, net of unearned income, totaled $22.8$23.9 billion in the thirdfirst quarter of 2019, increasing $2.2 billion, or 10%, from the first quarter of 2018 increasing $1.9 billion, or 9%, from the third quarter of 2017 and $539.8$716.8 million, or 10%13% on an annualized basis, from the secondfourth quarter of 2018. Combined, the commercial and commercial real estate loan categories comprised 61%62% of the average loan portfolio in both of the thirdfirst quarter of 20182019 and 2017.2018. Growth realized in these categories for the thirdfirst quarter of 20182019 as compared to the sequential and prior year periods is primarily attributable to increased business development efforts and the acquisition of AEB. Additionally, growth realized in the first quarter of 2019 as compared to the first quarter of 2018 was partially attributable to the acquisition of CSC.

Home equity loan portfolio averaged $589.2$540.1 million in the thirdfirst quarter of 2018,2019, and decreased $90.4$108.7 million, or 13%17% from the average balance of $679.7$648.8 million in same period of 2017.2018. 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 $847.7$938.4 million in the thirdfirst quarter of 2018,2019, and increased $69.7$108.7 million, or 9%13% from the average balance of $778.0$829.6 million in same period of 2017.2018. Additionally, compared to the quarter ended June 30,December 31, 2018, the

average balance increased $13.1$51.9 million, or 6%24% 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 $7.3$7.5 billion in the thirdfirst quarter of 2018,2019, and accounted for 32%31% of the Company’s average total loans. The increase during the thirdfirst quarter of 20182019 compared to both the secondfourth quarter of 2018 and the thirdfirst quarter of 20172018 was the result of continued originations within the portfolio due to the effective marketing and customer servicing. Approximately $1.9$2.1 billion of premium finance receivables were originated in the thirdfirst quarter of 20182019 compared to $1.8 billion during the same period of 2017.2018. Premium finance receivables consist of a commercial portfolio and a life portfolio comprising approximately 40%39% and 60%61%, respectively, of the average total balance of premium finance receivables for the thirdfirst quarter of 2018,2019, and 42%39% and 58%61%, respectively, for the thirdfirst quarter of 2017.2018.

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. 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 the loan portfolios of more traditional community banks depending on the marketability of the collateral.

Covered loans represented loans acquired through eight FDIC-assisted transactions, all of which occurred prior to 2013. These loans were 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 terminated all existing loss share agreements with the FDIC. The Company is solely responsible for all future charge-offs, recoveries, gains, losses and expenses related to the previously covered assets as the FDIC no longer shares 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.

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.

Other earning assets. Other earning assets include brokerage customer receivables and trading account securities. In the normal course of business, Wintrust Investments activities involve the execution, settlement, and financing of various securities transactions. Wintrust Investments customer securities activities are transacted on either a cash or margin basis. In margin transactions, 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, 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 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, 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. 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. 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
 September 30, 2018 September 30, 2017
(Dollars in thousands)Balance Percent Balance Percent
Mortgage loans held-for-sale$355,491
 1% $313,675
 1%
Loans:       
Commercial7,115,633
 27
 6,173,563
 26
Commercial real estate6,624,613
 25
 6,306,508
 26
Home equity615,623
 2
 698,956
 3
Residential real estate837,389
 3
 747,487
 3
Premium finance receivables6,952,069
 26
 6,211,151
 26
Other loans131,500
 1
 126,167
 1
Total loans, net of unearned income excluding covered loans$22,276,827
 84% $20,263,832
 85%
Covered loans—
 —
 52,339
 —
Total average loans (1)
$22,276,827
 84% $20,316,171
 85%
Liquidity management assets (2)
$3,883,405
 15% $3,469,208
 14%
Other earning assets (3)
22,190
 —
 25,612
 —
Total average earning assets$26,537,913
 100% $24,124,666
 100%
Total average assets$28,640,380
   $26,096,809
  
Total average earning assets to total average assets  93%   92%
(1)Includes non-accrual loans
(2)Liquidity management assets include investment securities, other securities, interest earning deposits with banks, federal funds sold and securities purchased under resale agreements
(3)Other earning assets include brokerage customer receivables and trading account securities

Total average loans for the first nine months of 2018 increased $2.0 billion or 10% over the previous year period. Similar to the quarterly discussion above, approximately $942.1 million of this increase relates to the commercial portfolio, $318.1 million of this increase relates to the commercial real estate portfolio and $740.9 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, 2018 December 31, 2017 September 30, 2017March 31, 2019 December 31, 2018 March 31, 2018
  % of   % of   % of  % of   % of   % of
(Dollars in thousands)Amount Total Amount Total Amount TotalAmount Total Amount Total Amount Total
Commercial$7,473,958
 32% $6,787,677
 31% $6,456,034
 31%$7,994,191
 33% $7,828,538
 33% $7,060,871
 32%
Commercial real estate6,746,774
 29
 6,580,618
 30
 6,400,781
 31
6,973,505
 29
 6,933,252
 29
 6,633,520
 30
Home equity578,844
 3
 663,045
 3
 672,969
 3
528,448
 2
 552,343
 2
 626,547
 3
Residential real estate924,250
 4
 832,120
 4
 789,499
 3
1,053,524
 4
 1,002,464
 4
 869,104
 4
Premium finance receivables—commercial2,885,327
 12
 2,634,565
 12
 2,664,912
 13
2,988,788
 12
 2,841,659
 12
 2,576,150
 12
Premium finance receivables—life insurance4,398,971
 19
 4,035,059
 19
 3,795,474
 18
4,555,369
 19
 4,541,794
 19
 4,189,961
 19
Consumer and other115,827
 1
 107,713
 1
 133,112
 1
120,804
 1
 120,641
 1
 105,981
 —
Total loans, net of unearned income, excluding covered loans$23,123,951
 100% $21,640,797
 100% $20,912,781
 100%
Covered loans—
 —
 —
 —
 46,601
 —
Total loans$23,123,951
 100% $21,640,797
 100% $20,959,382
 100%
Total loans, net of unearned income$24,214,629
 100% $23,820,691
 100% $22,062,134
 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 30, 2018March 31, 2019 and 2017:2018:
As of September 30, 2018 As of September 30, 2017As of March 31, 2019 As of March 31, 2018
    Allowance     Allowance    Allowance     Allowance
  % of For Loan   % of For Loan  % of For Loan   % of For Loan
 Total Losses   Total Losses  Total Losses   Total Losses
(Dollars in thousands)Balance Balance Allocation Balance Balance AllocationBalance Balance Allocation Balance Balance Allocation
Commercial:                      
Commercial, industrial and other$4,805,486
 33.8% $45,111
 $4,120,533
 32.0% $38,708
$5,250,953
 35.0% $50,178
 $4,560,880
 33.4% $39,182
Franchise937,290
 6.6
 8,962
 853,716
 6.6
 6,154
879,906
 5.9
 12,055
 935,358
 6.8
 7,116
Mortgage warehouse lines of credit171,860
 1.2
 1,350
 194,370
 1.5
 1,438
174,284
 1.2
 1,399
 163,470
 1.2
 1,297
Asset-based lending1,033,851
 7.3
 9,389
 896,336
 7.0
 7,683
1,040,834
 7.0
 8,868
 977,735
 7.1
 8,316
Leases509,675
 3.6
 1,338
 381,394
 3.0
 1,208
622,884
 4.2
 1,675
 414,198
 3.0
 1,222
PCI - commercial loans (1)
15,796
 0.1
 594
 9,685
 0.1
 544
25,330
 0.1
 463
 9,230
 0.1
 503
Total commercial$7,473,958
 52.6% $66,744
 $6,456,034
 50.2% $55,735
$7,994,191
 53.4% $74,638
 $7,060,871
 51.6% $57,636
Commercial Real Estate:                      
Construction$798,330
 5.6% $9,259
 $673,977
 5.2% $7,565
$803,669
 5.4% $9,142
 $815,636
 6.0% $9,596
Land119,004
 0.9
 3,816
 102,753
 0.8
 3,354
147,701
 1.0
 4,194
 122,690
 0.9
 3,990
Office940,777
 6.6
 6,339
 880,951
 6.9
 6,249
926,375
 6.2
 6,267
 891,071
 6.5
 5,800
Industrial885,931
 6.2
 6,002
 836,485
 6.5
 5,538
964,960
 6.4
 6,534
 906,144
 6.6
 5,899
Retail887,702
 6.2
 8,195
 934,239
 7.3
 6,107
895,267
 6.0
 6,065
 895,622
 6.5
 8,135
Multi-family923,893
 6.5
 8,900
 864,985
 6.7
 8,873
1,117,385
 7.5
 10,875
 931,355
 6.8
 9,613
Mixed use and other2,086,455
 14.7
 15,717
 1,974,315
 15.4
 14,270
2,007,487
 13.4
 14,653
 1,955,456
 14.3
 14,377
PCI - commercial real estate (1)
104,682
 0.7
 18
 133,076
 1.0
 84
110,661
 0.7
 120
 115,546
 0.8
 71
Total commercial real estate$6,746,774
 47.4% $58,246
 $6,400,781
 49.8% $52,040
$6,973,505
 46.6% $57,850
 $6,633,520
 48.4% $57,481
Total commercial and commercial real estate$14,220,732
 100.0% $124,990
 $12,856,815
 100.0% $107,775
$14,967,696
 100.0% $132,488
 $13,694,391
 100.0% $115,117
                      
Commercial real estate - collateral location by state:                      
Illinois$5,213,719
 77.3%   $4,981,379
 77.8%  $5,331,784
 76.5%   $5,199,090
 78.4%  
Wisconsin694,205
 10.3
   683,229
 10.7
  758,097
 10.9
   706,076
 10.6
  
Total primary markets$5,907,924
 87.6%   $5,664,608
 88.5%  $6,089,881
 87.4%   $5,905,166
 89.0%  
Indiana151,725
 2.2
   140,749
 2.2
  175,350
 2.5
   138,999
 2.1
  
Florida50,819
 0.8
   114,599
 1.8
  55,528
 0.8
   57,260
 0.9
  
Arizona58,880
 0.9
   58,192
 0.9
  61,375
 0.9
   55,914
 0.8
  
Michigan45,502
 0.7
   44,664
 0.7
  35,650
 0.5
   46,230
 0.7
  
California54,692
 0.8
   36,366
 0.6
  67,545
 1.0
   67,922
 1.0
  
Other477,232
 7.0
   341,603
 5.3
  488,176
 6.9
   362,029
 5.5
  
Total$6,746,774
 100.0%   $6,400,781
 100.0%  $6,973,505
 100.0%   $6,633,520
 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. 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 in the commercial portfolio and higher specific reserves on impaired loans within the portfolio, our allowance for loan losses in our commercial loan portfolio is $66.7$74.6 million as of September 30, 2018March 31, 2019 compared to $55.7$57.6 million as of September 30, 2017.March 31, 2018.

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, 87.6%87.4% of our commercial real estate loan portfolio is located in this region as of September 30, 2018. While commercial real estate market conditions are generally considered to be good, a few of our specific markets have stress conditions.March 31, 2019. We have been able to effectively manage our total non-performing commercial real estate loans. As of September 30, 2018,March 31, 2019, our allowance for loan losses related to this portfolio is $58.2$57.9 million compared to $52.0$57.5 million as of September 30, 2017March 31, 2018.

The Company also participates in mortgage warehouse lending 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 portfolio totaled $171.9$174.3 million as of September 30, 2018March 31, 2019 compared to $194.4$163.5 million as of September 30, 2017.March 31, 2018.

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. 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 30, 2018,March 31, 2019, our residential loan portfolio totaled $924.3 million,$1.1 billion, or 4% 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 30, 2018, $16.1March 31, 2019, $15.9 million of our residential real estate mortgages, or 1.7%1.5% of our residential real estate loan portfolio were classified as nonaccrual, $1.9$1.5 million were 90 or more days past due and still accruing (0.2%(0.1%), $2.3$11.6 million were 30 to 89 days past due (0.3%(1.1%) and $904.0 million$1.0 billion were current (97.8%(97.3%). 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 30,March 31, 2019 and 2018 and 2017 was $5.9$7.0 billion and $2.6$4.8 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 buy-backrepurchase option and the expected benefit of the potential buy-backrepurchase 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 $64.4$89.8 million at September 30, 2018,March 31, 2019, compared to no$41.3 million balance at September 30, 2017.March 31, 2018.

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 30, 2018,March 31, 2019, approximately $1.3 million of our mortgage loans consist of interest-only loans.

Premium finance receivables – commercial. FIRST Insurance Funding and FIFC Canada originated approximately $1.7$1.9 billion in commercial insurance premium finance receivables in the thirdfirst quarter of 20182019 as compared to $1.6 billion of originations in the thirdfirst quarter of 2017. During the nine months ended September 30, 2018 and 2017, FIRST Insurance Funding and FIFC Canada originated approximately $5.1 billion and $4.6 billion, respectively, in commercial insurance premium finance receivables

2018. 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. Wintrust Life Finance originated approximately $200.0$244.1 million in life insurance premium finance receivables in the thirdfirst quarter of 20182019 as compared to $205.9224.5 million of originations in the thirdfirst quarter of 2017. During the nine months ended September 30, 2018 and 2017, Wintrust Life Finance originated approximately $654.6 million and $653.1 million, respectively, in life insurance premium finance receivables.

2018. 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, 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. The 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 were 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 terminated all existing loss share agreements with the FDIC. Starting on October 16,
2017, the Company is solely responsible for all charge-offs, recoveries, gains, losses and expenses related to the previously covered assets as the FDIC no longer shares 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 at September 30, 2018March 31, 2019 by date at which the loans reprice or mature, and the type of rate exposure:
As of September 30, 2018One year or less From one to five years Over five years  
As of March 31, 2019One year or less From one to five years Over five years  
(Dollars in thousands)One year or less From one to five years Over five years Total Total
Commercial         
Fixed rate$140,679
 $1,016,116
 $691,306
 $1,848,101
$164,370
 $1,149,701
 $755,402
 $2,069,473
Variable rate5,619,143
 6,714
 —
 5,625,857
5,917,650
 6,923
 145
 5,924,718
Total commercial$5,759,822
 $1,022,830
 $691,306
 $7,473,958
$6,082,020
 $1,156,624
 $755,547
 $7,994,191
Commercial real estate              
Fixed rate378,163
 1,860,693
 283,884
 2,522,740
419,045
 1,956,704
 332,469
 2,708,218
Variable rate4,194,363
 28,461
 1,210
 4,224,034
4,237,177
 28,102
 8
 4,265,287
Total commercial real estate$4,572,526
 $1,889,154
 $285,094
 $6,746,774
$4,656,222
 $1,984,806
 $332,477
 $6,973,505
Home equity              
Fixed rate10,787
 11,906
 27,167
 49,860
16,272
 12,934
 4,981
 34,187
Variable rate528,984
 —
 —
 528,984
494,261
 —
 —
 494,261
Total home equity$539,771
 $11,906
 $27,167
 $578,844
$510,533
 $12,934
 $4,981
 $528,448
Residential real estate              
Fixed rate32,621
 23,239
 206,214
 262,074
30,648
 20,501
 235,107
 286,256
Variable rate60,733
 274,323
 327,120
 662,176
49,860
 314,090
 403,318
 767,268
Total residential real estate$93,354
 $297,562
 $533,334
 $924,250
$80,508
 $334,591
 $638,425
 $1,053,524
Premium finance receivables - commercial              
Fixed rate2,811,527
 73,800
 —
 2,885,327
2,928,872
 59,916
 —
 2,988,788
Variable rate—
 —
 —
 —
—
 —
 —
 —
Total premium finance receivables - commercial$2,811,527
 $73,800
 $—
 $2,885,327
$2,928,872
 $59,916
 $—
 $2,988,788
Premium finance receivables - life insurance              
Fixed rate12,739
 2,855
 3,955
 19,549
19,925
 66,737
 6,087
 92,749
Variable rate4,379,422
 —
 —
 4,379,422
4,462,620
 —
 —
 4,462,620
Total premium finance receivables - life insurance$4,392,161
 $2,855
 $3,955
 $4,398,971
$4,482,545
 $66,737
 $6,087
 $4,555,369
Consumer and other              
Fixed rate70,151
 9,729
 2,313
 82,193
80,068
 11,236
 2,072
 93,376
Variable rate33,592
 42
 —
 33,634
27,387
 41
 —
 27,428
Total consumer and other$103,743
 $9,771
 $2,313
 $115,827
$107,455
 $11,277
 $2,072
 $120,804
Total per category              
Fixed rate3,456,667
 2,998,338
 1,214,839
 7,669,844
3,659,200
 3,277,729
 1,336,118
 8,273,047
Variable rate14,816,237
 309,540
 328,330
 15,454,107
15,188,955
 349,156
 403,471
 15,941,582
Total loans, net of unearned income, excluding covered loans$18,272,904
 $3,307,878
 $1,543,169
 $23,123,951
Total loans, net of unearned income$18,848,155
 $3,626,885
 $1,739,589
 $24,214,629
Variable Rate Loan Pricing by Index:              
Prime$2,457,259
      $2,307,308
      
One- month LIBOR7,772,158
      8,188,860
      
Three- month LIBOR457,638
      381,204
      
Twelve- month LIBOR4,529,883
      4,836,490
      
Other237,169
      227,720
      
Total variable rate$15,454,107
      $15,941,582
      


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 and are also reviewed by our internal audit staff.
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 or an impairment reserve may be established. The Company’s impairment analysis 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, a charge-off or the establishment of a specific impairment reserve. In the event a collateral shortfall is identified during the credit review process, 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 determine 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 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.

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 at the time of modification and on a quarterly basis to determine if a specific reserve is needed. 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 less the estimated cost to sell. 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 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 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:
(Dollars in thousands)September 30,
2018		 June 30,
2018		 
December 31, 2017 (3)
 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Loans past due greater than 90 days and still accruing (1):
            
Commercial$5,122
 $—
 $—
 $—
$—
 $—
 $—
Commercial real estate—
 —
 —
 —
—
 —
 —
Home equity—
 —
 —
 —
—
 —
 —
Residential real estate—
 —
 3,278
 —
30
 —
 —
Premium finance receivables—commercial7,028
 5,159
 9,242
 9,584
6,558
 7,799
 8,547
Premium finance receivables—life insurance—
 —
 —
 6,740
168
 —
 —
Consumer and other233
 224
 40
 159
218
 109
 207
Total loans past due greater than 90 days and still accruing12,383
 5,383
 12,560
 16,483
6,974
 7,908
 8,754
Non-accrual loans (2):
            
Commercial58,587
 18,388
 15,696
 13,931
55,792
 50,984
 14,007
Commercial real estate17,515
 19,195
 22,048
 14,878
15,933
 19,129
 21,825
Home equity8,523
 9,096
 8,978
 7,581
7,885
 7,147
 9,828
Residential real estate16,062
 15,825
 17,977
 14,743
15,879
 16,383
 17,214
Premium finance receivables—commercial13,802
 14,832
 12,163
 9,827
14,797
 11,335
 17,342
Premium finance receivables—life insurance—
 —
 —
 —
—
 —
 —
Consumer and other355
 563
 740
 540
326
 348
 720
Total non-accrual loans114,844
 77,899
 77,602
 61,500
110,612
 105,326
 80,936
Total non-performing loans:            
Commercial63,709
 18,388
 15,696
 13,931
55,792
 50,984
 14,007
Commercial real estate17,515
 19,195
 22,048
 14,878
15,933
 19,129
 21,825
Home equity8,523
 9,096
 8,978
 7,581
7,885
 7,147
 9,828
Residential real estate16,062
 15,825
 21,255
 14,743
15,909
 16,383
 17,214
Premium finance receivables—commercial20,830
 19,991
 21,405
 19,411
21,355
 19,134
 25,889
Premium finance receivables—life insurance—
 —
 —
 6,740
168
 —
 —
Consumer and other588
 787
 780
 699
544
 457
 927
Total non-performing loans$127,227
 $83,282
 $90,162
 $77,983
$117,586
 $113,234
 $89,690
Other real estate owned14,924
 18,925
 20,244
 17,312
9,154
 11,968
 18,481
Other real estate owned—from acquisitions13,379
 16,406
 20,402
 20,066
12,366
 12,852
 18,117
Other repossessed assets294
 305
 153
 301
270
 280
 113
Total non-performing assets$155,824
 $118,918
 $130,961
 $115,662
$139,376
 $138,334
 $126,401
TDRs performing under the contractual terms of the loan agreement31,487
 57,249
 39,683
 26,972
48,305
 33,281
 39,562
Total non-performing loans by category as a percent of its own respective category’s period-end balance:            
Commercial0.85% 0.25% 0.23% 0.22%0.70% 0.65% 0.20%
Commercial real estate0.26
 0.29
 0.34
 0.23
0.23
 0.28
 0.33
Home equity1.47
 1.53
 1.35
 1.13
1.49
 1.29
 1.57
Residential real estate1.74
 1.77
 2.55
 1.87
1.51
 1.63
 1.98
Premium finance receivables—commercial0.72
 0.71
 0.81
 0.73
0.71
 0.67
 1.00
Premium finance receivables—life insurance—
 —
 —
 0.18
0.00
 —
 —
Consumer and other0.51
 0.65
 0.72
 0.53
0.45
 0.38
 0.87
Total non-performing loans0.55% 0.37% 0.42% 0.37%0.49% 0.48% 0.41%
Total non-performing assets, as a percentage of total assets0.52% 0.40% 0.47% 0.42%0.43% 0.44% 0.44%
Allowance for loan losses as a percentage of total non-performing loans117.71% 172.19% 152.95% 170.70%134.55% 134.92% 155.54%
(1)
Loans past due greater than 90 days and still accruing interest included TDRs totaling $5.1 million as of September 30, 2018. As of June 30, 2018, December 31, 2017 and September 30, 2017, the dates shown, no TDRs were past due greater than 90 days and still accruing interest.
(2)Non-accrual loans included TDRs totaling $34.7$40.1 million, $8.1 million, $10.1$32.8 million and $6.2$8.1 million as of September 30, 2018, June 30, 2018,March 31, 2019, December 31, 20172018 and September 30, 2017March 31, 2018, respectively.
(3) Includes $2.6 million of non-performing loans and $2.9 million of other real estate owned reclassified from covered assets
as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017.


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.



Loan Portfolio Aging

The tables below show the aging of the Company’s loan portfolio at September 30, 2018March 31, 2019 and June 30,December 31, 2018:
Nonaccrual 90+ days
and still
accruing		 60-89
days past
due		 30-59
days past
due		 Current Total LoansNonaccrual 90+ days
and still
accruing		 60-89
days past
due		 30-59
days past
due		 Current Total Loans
As of September 30, 2018
As of March 31, 2019
(Dollars in thousands)Nonaccrual 90+ days
and still
accruing		 60-89
days past
due		 30-59
days past
due		 Current Total LoansNonaccrual 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$41,322
 $—
 $2,535
 $16,451
 $4,745,178
 $4,805,486
$38,858
 $—
 $1,787
 $38,094
 $5,172,214
 $5,250,953
Franchise16,351
 5,122
 —
 —
 915,817
 937,290
15,799
 —
 —
 534
 863,573
 879,906
Mortgage warehouse lines of credit—
 —
 3,000
 —
 168,860
 171,860
—
 —
 —
 —
 174,284
 174,284
Asset-based lending910
 —
 590
 9,083
 1,023,268
 1,033,851
1,135
 —
 —
 7,821
 1,031,878
 1,040,834
Leases4
 —
 —
 80
 509,591
 509,675
—
 —
 —
 2,796
 620,088
 622,884
PCI - commercial (1)
—
 3,372
 15
 —
 12,409
 15,796
—
 2,499
 —
 455
 22,376
 25,330
Total commercial58,587
 8,494
 6,140
 25,614
 7,375,123
 7,473,958
55,792
 2,499
 1,787
 49,700
 7,884,413
 7,994,191
Commercial real estate                      
Construction1,554
 —
 1,823
 16,228
 778,725
 798,330
1,030
 —
 496
 3,877
 798,266
 803,669
Land228
 —
 365
 —
 118,411
 119,004
54
 —
 —
 3,888
 143,759
 147,701
Office1,532
 —
 4,058
 3,021
 932,166
 940,777
4,482
 —
 —
 3,364
 918,529
 926,375
Industrial178
 —
 122
 145
 885,486
 885,931
267
 —
 1,039
 10,643
 953,011
 964,960
Retail10,586
 —
 4,570
 10,645
 861,901
 887,702
7,645
 —
 —
 8,149
 879,473
 895,267
Multi-family318
 —
 —
 1,162
 922,413
 923,893
303
 —
 187
 675
 1,116,220
 1,117,385
Mixed use and other3,119
 —
 9,654
 11,503
 2,062,179
 2,086,455
2,152
 —
 1,084
 17,243
 1,987,008
 2,007,487
PCI - commercial real estate (1)
—
 5,578
 6,448
 1,380
 91,276
 104,682
—
 4,265
 2,806
 7,033
 96,557
 110,661
Total commercial real estate17,515
 5,578
 27,040
 44,084
 6,652,557
 6,746,774
15,933
 4,265
 5,612
 54,872
 6,892,823
 6,973,505
Home equity8,523
 —
 1,075
 3,478
 565,768
 578,844
7,885
 —
 810
 4,315
 515,438
 528,448
Residential real estate, including PCI16,062
 1,865
 1,714
 603
 904,006
 924,250
15,879
 1,481
 509
 11,112
 1,024,543
 1,053,524
Premium finance receivables                      
Commercial insurance loans13,802
 7,028
 5,945
 13,239
 2,845,313
 2,885,327
14,797
 6,558
 5,628
 20,767
 2,941,038
 2,988,788
Life insurance loans—
 —
 —
 22,016
 4,203,465
 4,225,481
—
 168
 4,788
 35,046
 4,349,597
 4,389,599
PCI - life insurance loans (1)
—
 —
 —
 —
 173,490
 173,490
—
 —
 —
 —
 165,770
 165,770
Consumer and other, including PCI355
 295
 430
 329
 114,418
 115,827
326
 280
 47
 350
 119,801
 120,804
Total loans, net of unearned income$114,844
 $23,260
 $42,344
 $109,363
 $22,834,140
 $23,123,951
$110,612
 $15,251
 $19,181
 $176,162
 $23,893,423
 $24,214,629
Aging as a % of Loan Balance:
As of March 31, 2019		Nonaccrual 
90+ days
and still
accruing
 
60-89
days past
due
 
30-59
days past
due
 Current Total Loans
Commercial           
Commercial, industrial and other0.7% —% —% 0.7% 98.6% 100.0%
Franchise1.8
 —
 —
 0.1
 98.1
 100.0
Mortgage warehouse lines of credit—
 —
 —
 —
 100.0
 100.0
Asset-based lending0.1
 —
 —
 0.8
 99.1
 100.0
Leases—
 —
 —
 0.4
 99.6
 100.0
PCI - commercial (1)
—
 9.9
 —
 1.8
 88.3
 100.0
Total commercial0.7
 —
 —
 0.6
 98.7
 100.0
Commercial real estate           
Construction0.1
 —
 0.1
 0.5
 99.3
 100.0
Land—
 —
 —
 2.6
 97.4
 100.0
Office0.5
 —
 —
 0.4
 99.1
 100.0
Industrial—
 —
 0.1
 1.1
 98.8
 100.0
Retail0.9
 —
 —
 0.9
 98.2
 100.0
Multi-family—
 —
 —
 0.1
 99.9
 100.0
Mixed use and other0.1
 —
 0.1
 0.9
 98.9
 100.0
PCI - commercial real estate (1)
—
 3.9
 2.5
 6.4
 87.2
 100.0
Total commercial real estate0.2
 0.1
 0.1
 0.8
 98.8
 100.0
Home equity1.5
 —
 0.2
 0.8
 97.5
 100.0
Residential real estate, including PCI1.5
 0.1
 —
 1.1
 97.3
 100.0
Premium finance receivables           
Commercial insurance loans0.5
 0.2
 0.2
 0.7
 98.4
 100.0
Life insurance loans—
 —
 0.1
 0.8
 99.1
 100.0
PCI - life insurance loans (1)
—
 —
 —
 —
 100.0
 100.0
Consumer and other, including PCI0.3
 0.2
 —
 0.3
 99.2
 100.0
Total loans, net of unearned income0.5% 0.1% 0.1% 0.7% 98.6% 100.0%

Aging as a % of Loan Balance:
As of September 30, 2018		Nonaccrual 
90+ days
and still
accruing
 
60-89
days past
due
 
30-59
days past
due
 Current Total Loans
Nonaccrual 90+ days
and still
accruing		 60-89
days past
due		 30-59
days past
due		 Current Total Loans
As of December 31, 2018
(Dollars in thousands)
Loan Balances:           
Commercial                      
Commercial, industrial and other0.9% —% 0.1% 0.3% 98.7% 100.0%$34,298
 —
 1,451
 21,618
 5,062,729
 5,120,096
Franchise1.7
 0.5
 —
 —
 97.8
 100.0
16,051
 —
 —
 8,738
 924,190
 948,979
Mortgage warehouse lines of credit—
 —
 1.7
 —
 98.3
 100.0
—
 —
 —
 —
 144,199
 144,199
Asset-based lending0.1
 —
 0.1
 0.9
 98.9
 100.0
635
 —
 200
 3,156
 1,022,065
 1,026,056
Leases—
 —
 —
 —
 100.0
 100.0
—
 —
 —
 1,250
 564,430
 565,680
PCI - commercial (1)
—
 21.3
 0.1
 —
 78.6
 100.0
—
 3,313
 —
 99
 20,116
 23,528
Total commercial0.8
 0.1
 0.1
 0.3
 98.7
 100.0
50,984
 3,313
 1,651
 34,861
 7,737,729
 7,828,538
Commercial real estate                      
Construction0.2
 —
 0.2
 2.0
 97.6
 100.0
1,554
 —
 —
 9,424
 749,846
 760,824
Land0.2
 —
 0.3
 —
 99.5
 100.0
107
 —
 170
 107
 141,097
 141,481
Office0.2
 —
 0.4
 0.3
 99.1
 100.0
3,629
 —
 877
 5,077
 929,739
 939,322
Industrial—
 —
 —
 —
 100.0
 100.0
285
 —
 —
 16,596
 885,367
 902,248
Retail1.2
 —
 0.5
 1.2
 97.1
 100.0
10,753
 —
 1,890
 1,729
 878,106
 892,478
Multi-family—
 —
 —
 0.1
 99.9
 100.0
311
 —
 77
 5,575
 970,597
 976,560
Mixed use and other0.1
 —
 0.5
 0.6
 98.8
 100.0
2,490
 —
 1,617
 8,983
 2,192,105
 2,205,195
PCI - commercial real estate (1)
—
 5.3
 6.2
 1.3
 87.2
 100.0
—
 6,241
 6,195
 4,075
 98,633
 115,144
Total commercial real estate0.3
 0.1
 0.4
 0.7
 98.5
 100.0
19,129
 6,241
 10,826
 51,566
 6,845,490
 6,933,252
Home equity1.5
 —
 0.2
 0.6
 97.7
 100.0
7,147
 —
 131
 3,105
 541,960
 552,343
Residential real estate, including PCI1.7
 0.2
 0.2
 0.1
 97.8
 100.0
16,383
 1,292
 1,692
 6,171
 976,926
 1,002,464
Premium finance receivables                      
Commercial insurance loans0.5
 0.2
 0.2
 0.5
 98.6
 100.0
11,335
 7,799
 11,382
 15,085
 2,796,058
 2,841,659
Life insurance loans—
 —
 —
 0.5
 99.5
 100.0
—
 —
 8,407
 24,628
 4,340,856
 4,373,891
PCI - life insurance loans (1)
—
 —
 —
 —
 100.0
 100.0
—
 —
 —
 —
 167,903
 167,903
Consumer and other, including PCI0.3
 0.3
 0.4
 0.3
 98.7
 100.0
348
 227
 87
 733
 119,246
 120,641
Total loans, net of unearned income0.5% 0.1% 0.2% 0.5% 98.7% 100.0%$105,326
 $18,872
 $34,176
 $136,149
 $23,526,168
 $23,820,691
 Nonaccrual 90+ days
and still
accruing		 60-89
days past
due		 30-59
days past
due		 Current Total Loans
As of June 30, 2018
(Dollars in thousands)
Loan Balances:           
Commercial           
Commercial, industrial and other$13,543
 $—
 1,384
 9,196
 4,597,666
 4,621,789
Franchise2,438
 —
 408
 —
 954,493
 957,339
Mortgage warehouse lines of credit—
 —
 —
 —
 200,060
 200,060
Asset-based lending2,158
 —
 1,146
 6,411
 1,033,040
 1,042,755
Leases249
 —
 —
 89
 458,276
 458,614
PCI - commercial (1)
—
 882
 126
 227
 7,268
 8,503
Total commercial18,388
 882
 3,064
 15,923
 7,250,803
 7,289,060
Commercial real estate           
Construction1,554
 —
 —
 1,098
 804,583
 807,235
Land228
 —
 —
 478
 114,651
 115,357
Office1,333
 —
 207
 1,403
 891,406
 894,349
Industrial185
 —
 —
 1,126
 881,214
 882,525
Retail11,540
 —
 372
 5,473
 850,254
 867,639
Multi-family342
 —
 —
 611
 951,095
 952,048
Mixed use and other4,013
 —
 408
 9,856
 1,934,965
 1,949,242
PCI - commercial real estate (1)
—
 3,194
 3,132
 7,637
 92,726
 106,689
Total commercial real estate19,195
 3,194
 4,119
 27,682
 6,520,894
 6,575,084
Home equity9,096
 —
 —
 3,226
 581,178
 593,500
Residential real estate, including PCI15,825
 1,472
 3,637
 1,534
 873,002
 895,470
Premium finance receivables           
Commercial insurance loans14,832
 5,159
 8,848
 10,535
 2,794,078
 2,833,452
Life insurance loans—
 —
 26,770
 17,211
 4,074,685
 4,118,666
PCI - life insurance loans (1)
—
 —
 —
 —
 183,622
 183,622
Consumer and other, including PCI563
 286
 150
 310
 120,397
 121,706
Total loans, net of unearned income$77,899
 $10,993
 $46,588
 $76,421
 $22,398,659
 $22,610,560

Aging as a % of Loan Balance:
As of June 30, 2018
Nonaccrual 90+ days
and still
accruing		 60-89
days past
due		 30-59
days past
due		 Current Total Loans
Aging as a % of Loan Balance:
As of December 31, 2018
Nonaccrual 90+ days
and still
accruing		 60-89
days past
due		 30-59
days past
due		 Current Total Loans
Commercial                      
Commercial, industrial and other0.3% —% —% 0.2% 99.5% 100.0%0.7% —% —% 0.4% 98.9% 100.0%
Franchise0.3
 —
 —
 —
 99.7
 100.0
1.7
 —
 —
 0.9
 97.4
 100.0
Mortgage warehouse lines of credit—
 —
 —
 —
 100.0
 100.0
—
 —
 —
 —
 100.0
 100.0
Asset-based lending0.2
 —
 0.1
 0.6
 99.1
 100.0
0.1
 —
 —
 0.3
 99.6
 100.0
Leases0.1
 —
 —
 —
 99.9
 100.0
—
 —
 —
 0.2
 99.8
 100.0
PCI - commercial (1)
—
 10.4
 1.5
 2.7
 85.4
 100.0
—
 14.1
 —
 0.4
 85.5
 100.0
Total commercial0.3
 —
 —
 0.2
 99.5
 100.0
0.7
 —
 —
 0.4
 98.9
 100.0
Commercial real estate                      
Construction0.2
 —
 —
 0.1
 99.7
 100.0
0.2
 —
 —
 1.2
 98.6
 100.0
Land0.2
 —
 —
 0.4
 99.4
 100.0
0.1
 —
 0.1
 0.1
 99.7
 100.0
Office0.1
 —
 —
 0.2
 99.7
 100.0
0.4
 —
 0.1
 0.5
 99.0
 100.0
Industrial—
 —
 —
 0.1
 99.9
 100.0
—
 —
 —
 1.8
 98.1
 100.0
Retail1.3
 —
 —
 0.6
 98.1
 100.0
1.2
 —
 0.2
 0.2
 98.4
 100.0
Multi-family—
 —
 —
 0.1
 99.9
 100.0
—
 —
 —
 0.6
 99.4
 100.0
Mixed use and other0.2
 —
 —
 0.5
 99.3
 100.0
0.1
 —
 0.1
 0.4
 99.4
 100.0
PCI - commercial real estate (1)
—
 3.0
 2.9
 7.2
 86.9
 100.0
—
 5.4
 5.4
 3.5
 85.7
 100.0
Total commercial real estate0.3
 —
 0.1
 0.4
 99.2
 100.0
0.3
 0.1
 0.2
 0.7
 98.7
 100.0
Home equity1.5
 —
 —
 0.5
 98.0
 100.0
1.3
 —
 —
 0.6
 98.1
 100.0
Residential real estate, including PCI1.8
 0.2
 0.4
 0.2
 97.4
 100.0
1.6
 0.1
 0.2
 0.6
 97.5
 100.0
Premium finance receivables                      
Commercial insurance loans0.5
 0.2
 0.3
 0.4
 98.6
 100.0
0.4
 0.3
 0.4
 0.5
 98.4
 100.0
Life insurance loans—
 —
 0.6
 0.4
 99.0
 100.0
—
 —
 0.2
 0.5
 99.3
 100.0
PCI - life insurance loans (1)
—
 —
 —
 —
 100.0
 100.0
—
 —
 —
 —
 100.0
 100.0
Consumer and other, including PCI0.5
 0.2
 0.1
 0.3
 98.9
 100.0
0.3
 0.2
 0.1
 0.6
 98.8
 100.0
Total loans, net of unearned income0.3% —% 0.2% 0.3% 99.2% 100.0%0.4% 0.1% 0.1% 0.6% 98.8% 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 30, 2018, $42.3March 31, 2019, $19.2 million of all loans or 0.2%0.1%, were 60 to 89 days past due and $109.4$176.2 million of all loans or 0.5%0.7%, were 30 to 59 days (or one payment) past due. As of June 30,December 31, 2018, $46.6$34.2 million of all loans or 0.2%0.1%, were 60 to 89 days past due and $76.4$136.1 million, or 0.3%0.6%, 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 30, 2018March 31, 2019 that were current with regard to the contractual terms of the loan agreement represent 97.7%97.5% of the total home equity portfolio. Residential real estate loans at September 30, 2018March 31, 2019 that were current with regards to the contractual terms of the loan agreements comprise 97.8%97.3% 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 EndedThree Months Ended
September 30, September 30, September 30, September 30,March 31, March 31,
(Dollars in thousands)2018 2017 2018 20172019 2018
Balance at beginning of period$83,282
 $69,050
 $90,162
 $87,454
$113,234
 $90,162
Additions, net56,864
 10,622
 73,875
 30,119
24,030
 6,608
Return to performing status(3,782) (603) (8,294) (3,170)(14,077) (3,753)
Payments received(6,212) (6,633) (13,370) (22,931)(4,024) (2,569)
Transfer to OREO and other repossessed assets(659) (1,072) (6,168) (5,276)(82) (1,981)
Charge-offs(3,108) (2,295) (8,631) (7,919)(3,992) (3,555)
Net change for niche loans (1)
842
 8,914
 (347) (294)2,497
 4,778
Balance at end of period$127,227
 $77,983
 $127,227
 $77,983
$117,586
 $89,690
(1)
This includes activity for premium finance receivables and indirect consumer loans.

PCI loans are excluded from non-performing loans as they continue to earn interest income from the related accretable yield, independent of performance with contractual terms of the loan. See Note 7 of the Consolidated Financial Statements in Item 1 for further discussion of non-performing loans and the loan aging during the respective periods.

Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of the probable and reasonably estimable loan losses that are inherent in the loan portfolio. The allowance for loan 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.

Management determined that the allowance for loan losses was appropriate at September 30, 2018,March 31, 2019, 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. 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. 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 during the periods indicated.
 
Three Months Ended Nine Months EndedThree Months Ended
(Dollars in thousands)September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		March 31,
2019		 March 31,
2018
Allowance for loan losses at beginning of period$143,402
 $129,591
 $137,905
 $122,291
$152,770
 $137,905
Provision for credit losses11,042
 7,942
 24,431
 22,210
10,624
 8,346
Other adjustments(18) (39) (102) (125)(27) (40)
Reclassification to allowance for unfunded lending-related commitments(2) 94
 24
 62
(16) 26
Charge-offs:          
Commercial3,219
 2,265
 8,116
 3,819
503
 2,687
Commercial real estate208
 989
 1,176
 3,235
3,734
 813
Home equity561
 968
 1,530
 3,224
88
 357
Residential real estate337
 267
 1,088
 742
3
 571
Premium finance receivables—commercial2,512
 1,716
 10,487
 5,021
2,210
 4,721
Premium finance receivables—life insurance—
 —
 —
 —
—
 —
Consumer and other144
 213
 732
 522
102
 129
Total charge-offs6,981
 6,418
 23,129
 16,563
6,640
 9,278
Recoveries:          
Commercial304
 801
 1,232
 1,635
318
 262
Commercial real estate193
 323
 4,267
 1,153
480
 1,687
Home equity142
 178
 436
 387
62
 123
Residential real estate466
 55
 2,028
 287
29
 40
Premium finance receivables—commercial1,142
 499
 2,502
 1,515
556
 385
Premium finance receivables—life insurance—
 —
 —
 —
—
 —
Consumer and other66
 93
 162
 267
56
 47
Total recoveries2,313
 1,949
 10,627
 5,244
1,501
 2,544
Net charge-offs(4,668) (4,469) (12,502) (11,319)(5,139) (6,734)
Allowance for loan losses at period end$149,756
 $133,119
 $149,756
 $133,119
$158,212
 $139,503
Allowance for unfunded lending-related commitments at period end1,245
 1,276
 1,245
 1,276
1,410
 1,243
Allowance for credit losses at period end$151,001
 $134,395
 $151,001
 $134,395
$159,622
 $140,746
Annualized net charge-offs by category as a percentage of its own respective category’s average:          
Commercial0.16 % 0.09% 0.13 % 0.05%0.01 % 0.14 %
Commercial real estate0.00
 0.04
 (0.06) 0.04
0.19
 (0.05)
Home equity0.28
 0.46
 0.24
 0.54
0.02
 0.15
Residential real estate(0.06) 0.11
 (0.15) 0.08
(0.01) 0.26
Premium finance receivables—commercial0.19
 0.18
 0.39
 0.18
0.23
 0.68
Premium finance receivables—life insurance0.00
 0.00
 0.00
 0.00
0.00
 0.00
Consumer and other0.23
 0.37
 0.58
 0.27
0.16
 0.26
Total loans, net of unearned income, excluding covered loans0.08 % 0.08% 0.08 % 0.07%
Total loans, net of unearned income0.09 % 0.13 %
Net charge-offs as a percentage of the provision for credit losses42.27 % 56.27% 51.17 % 50.96%48.37 % 80.69 %
Loans at period-end, excluding covered loans$23,123,951
 $20,912,781
    
Loans at period-end$24,214,629
 $22,062,134
Allowance for loan losses as a percentage of loans at period end0.65 % 0.64%    0.65 % 0.63 %
Allowance for credit losses as a percentage of loans at period end0.65 % 0.64%    0.66 % 0.64 %

The allowance for credit losses, excluding the allowance for covered loan losses, 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. Our allowance for lending-related commitments 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 $1.2$1.4 million and $1.3$1.2 million as of September 30,March 31, 2019 and March 31, 2018, and September 30, 2017, respectively.


Additions to the allowance for loan 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 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 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 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 losses includes an element for estimated probable but undetected losses and for imprecision in the credit risk models used to calculate the allowance. If the loan is impaired, the Company analyzes the loan for purposes of calculating our specific impairment reserves as part of the Problem Loan Reporting system review. A general reserve is separately determined for loans not considered impaired. 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 for each loan category and the total loan portfolio, excluding covered loans.

Specific Impairment Reserves:

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 (impaired loan). If a loan is impaired, 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 less the estimated cost to sell. Any shortfall is recorded as a specific impairment reserve.

At September 30, 2018,March 31, 2019, the Company had $132.5$144.1 million of impaired loans with $83.3$72.5 million of this balance requiring $14.4$13.6 million of specific impairment reserves. At June 30,December 31, 2018, the Company had $120.3$127.3 million of impaired loans with $40.0$60.2 million of this balance requiring $8.5$11.4 million of specific impairment reserves. The most significant fluctuations in the recorded investment of impaired loans with specific impairment from June 30,December 31, 2018 to September 30, 2018March 31, 2019 occurred within the commercial, industrial and other and commercial franchise portfolios. The recorded investment and specific impairment reserves in commercial, industrial and otherthis portfolio increased by $27.6$16.7 million and $5.3$2.1 million, respectively, which was primarily the result of certain loans becoming nonperforming and requiring $5.9 million of specific impairment reserve during the third quarter of 2018. The recorded investment and specific impairment reserves in commercial franchise portfolio increased by $13.9 million and $430,000, respectively, which was primarily the result of one relationship totaling $18 million becoming non-performingimpaired and requiring $1.6$1.1 million of specific impairment reserve.reserve during the first quarter of 2019. 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:

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 2018, the Company modified its historical loss experience analysis by incorporating eight-year average loss rate assumptions for its historical loss experience to capture an extended credit cycle. The current eight-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-, six- and six-yearseven-year average historical loss rates on a quarterly basis as a comparison.

Home Equity and Residential Real Estate Loans:

The determination of the appropriate allowance for loan losses for residential real estate and home equity loans differs slightly from the process used for commercial and commercial real estate loans. The same credit risk rating system, Problem Loan Reporting system, collateral coding methodology and loss factor assignment 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:

The determination of the appropriate allowance for loan losses for premium finance receivables is based on the assigned credit risk rating of loans in the portfolio. Loss factors are assigned to each risk rating in order to calculate an allowance for credit losses. The allowance for loan losses for these categories is entirely a general reserve.

Methodology in Assessing Impairment and Charge-off Amounts

In determining the amount of impairment 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 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 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 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 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 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 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 30, 2018,March 31, 2019, the Company had $66.2$88.4 million in loans modified in TDRs. The $66.2$88.4 million in TDRs represents 111163 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 increased from $65.3$66.1 million representing 94134 credits at June 30,December 31, 2018 and increased from $33.2$47.7 million representing 7885 credits at September 30, 2017.March 31, 2018.

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 for impairment at September 30, 2018March 31, 2019 and approximately $3.9$6.7 million of impairment was present and appropriately reserved for through the Company’s normal reserving methodology in

the Company’s allowance for loan losses. Additionally, at September 30, 2018,March 31, 2019, the Company was committed to lend an additional $720,000$34,000 of funds to borrowers under the contractual terms of TDRs.

The table below presents a summary of restructured loans for the respective periods, presented by loan category and accrual status:
 
September 30, June 30, September 30,March 31, December 31, March 31,
(Dollars in thousands)2018 2018 20172019 2018 2018
Accruing TDRs:          
Commercial$8,794
 $37,560
 $3,774
$19,650
 $8,545
 $19,803
Commercial real estate14,160
 15,086
 16,475
14,123
 13,895
 16,087
Residential real estate and other8,533
 4,603
 6,723
14,532
 10,841
 3,672
Total accruing TDRs$31,487
 $57,249
 $26,972
$48,305
 $33,281
 $39,562
Non-accrual TDRs: (1)
          
Commercial$30,452
 $1,671
 $2,493
$34,390
 $27,774
 $1,741
Commercial real estate1,326
 1,362
 1,492
1,517
 1,552
 1,304
Residential real estate and other2,954
 5,028
 2,226
4,150
 3,495
 5,069
Total non-accrual TDRs$34,732
 $8,061
 $6,211
$40,057
 $32,821
 $8,114
Total TDRs:          
Commercial$39,246
 $39,231
 $6,267
$54,040
 $36,319
 $21,544
Commercial real estate15,486
 16,448
 17,967
15,640
 15,447
 17,391
Residential real estate and other11,487
 9,631
 8,949
18,682
 14,336
 8,741
Total TDRs$66,219
 $65,310
 $33,183
$88,362
 $66,102
 $47,676
Weighted-average contractual interest rate of TDRs5.48% 5.46% 4.39%
(1)
Included in total non-performing loans.


TDR Rollforward

The tables below present a summary of TDRs as of September 30,March 31, 2019 and March 31, 2018, and September 30, 2017, and shows the changes in the balance during those periods:
Three Months Ended September 30, 2018
(Dollars in thousands)
Commercial Commercial
Real Estate		 Residential
Real Estate
and Other		 Total
Three Months Ended March 31, 2019
(Dollars in thousands)
Commercial Commercial
Real Estate		 Residential
Real Estate
and Other		 Total
Balance at beginning of period$39,231
 $16,448
 $9,631
 $65,310
$36,319
 $15,447
 $14,336
 $66,102
Additions during the period554
 —
 3,679
 4,233
18,930
 302
 4,486
 23,718
Reductions:              
Charge-offs—
 —
 (83) (83)—
 —
 —
 —
Transferred to OREO and other repossessed assets—
 —
 —
 —
—
 —
 —
 —
Removal of TDR loan status(1)(395) (461) —
 (856)—
 —
 —
 —
Payments received(144) (501) (1,740) (2,385)(1,209) (109) (140) (1,458)
Balance at period end$39,246
 $15,486
 $11,487
 $66,219
$54,040
 $15,640
 $18,682
 $88,362
(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.


Three Months Ended September 30, 2017
(Dollars 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
Additions during the period1,407
 —
 256
 1,663
Reductions:       
Charge-offs—
 —
 (31) (31)
Transferred to OREO and other repossessed assets—
 (160) (69) (229)
Removal of TDR loan status (1)
—
 —
 —
 —
Payments received(136) (1,061) (114) (1,311)
Balance at period end$6,267
 $17,967
 $8,949
 $33,183

Nine Months Ended September 30, 2018
(Dollars in thousands)
Commercial Commercial
Real Estate		 Residential
Real Estate
and Other		 Total
Balance at beginning of period$23,917
 $17,500
 $8,369
 $49,786
Additions during the period18,838
 144
 5,846
 24,828
Reductions:       
Charge-offs(2,208) —
 (453) (2,661)
Transferred to OREO and other repossessed assets—
 —
 —
 —
Removal of TDR loan status (1)
(395) (631) —
 (1,026)
Payments received(906) (1,527) (2,275) (4,708)
Balance at period end$39,246
 $15,486
 $11,487
 $66,219
Nine Months Ended September 30, 2017
(Dollars in thousands)
Commercial Commercial
Real Estate		 Residential
Real Estate
and Other		 Total
Three Months Ended March 31, 2018
(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
$23,917
 $17,500
 $8,369
 $49,786
Additions during the period1,502
 1,245
 2,639
 5,386
96
 59
 835
 990
Reductions:              
Charge-offs(315) (925) (108) (1,348)(2,208) —
 (355) (2,563)
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)(261) (168) (108) (537)
Balance at period end$6,267
 $17,967
 $8,949
 $33,183
$21,544
 $17,391
 $8,741
 $47,676
(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 EndedThree Months Ended
(Dollars in thousands)September 30,
2018		 September 30,
2017		 September 30,
2018		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Balance at beginning of period$35,331
 $39,361
 $40,646
 $40,282
$24,820
 $28,303
 $40,646
Disposal/resolved(7,291) (2,391) (15,527) (9,305)(2,758) (3,848) (3,679)
Transfers in at fair value, less costs to sell349
 898
 6,939
 7,131
32
 997
 1,789
Transfers in from covered OREO subsequent to loss share expiration—
 —
 —
 760
Additions from acquisition1,418
 —
 1,418
 —
—
 160
 —
Fair value adjustments(1,504) (490) (5,173) (1,490)(574) (792) (2,158)
Balance at end of period$28,303
 $37,378
 $28,303
 $37,378
$21,520
 $24,820
 $36,598
 
Period EndPeriod End
(Dollars in thousands)September 30,
2018		 June 30,
2018		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Residential real estate$3,735
 $5,155
 $7,236
$3,037
 $3,446
 $6,407
Residential real estate development1,952
 2,205
 676
1,139
 1,426
 2,229
Commercial real estate22,616
 27,971
 29,466
17,344
 19,948
 27,962
Total$28,303
 $35,331
 $37,378
$21,520
 $24,820
 $36,598


Deposits

Total deposits at September 30, 2018March 31, 2019 were $24.9$26.8 billion, an increase of $2.0$3.5 billion, or 9%15%, compared to total deposits at September 30, 2017.March 31, 2018. See Note 10 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 30, 2018:March 31, 2019:
Time Certificates of Deposit
Maturity/Re-pricing Analysis
As of September 30, 2018

(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 March 31, 2019

(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 $75,033
 $38,489
 $107,833
 $880,119
 $1,101,474
 1.39% $249
 $32,771
 $99,466
 $874,080
 $1,006,566
 1.52%
4-6 months 59
 27,323
 —
 831,304
 858,686
 1.45% 75,064
 30,871
 —
 701,663
 807,598
 1.74%
7-9 months 249
 22,001
 —
 817,515
 839,765
 1.63% —
 13,019
 —
 583,211
 596,230
 1.80%
10-12 months 75,019
 22,576
 —
 641,856
 739,451
 1.71% —
 22,078
 —
 686,059
 708,137
 1.98%
13-18 months —
 19,863
 —
 670,023
 689,886
 1.78% —
 7,181
 —
 909,809
 916,990
 2.24%
19-24 months —
 4,859
 —
 582,323
 587,182
 2.35% —
 15,942
 —
 459,659
 475,601
 2.70%
24+ months 1,000
 19,346
 —
 623,248
 643,594
 2.46% 1,000
 9,496
 —
 829,089
 839,585
 2.65%
Total $151,360
 $154,457
 $107,833
 $5,046,388
 $5,460,038
 1.76% $76,313
 $131,358
 $99,466
 $5,043,570
 $5,350,707
 2.05%
(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 EndedThree Months Ended
September 30, 2018 June 30, 2018 September 30, 2017March 31, 2019 December 31, 2018 March 31, 2018
(Dollars in thousands)Balance Percent Balance Percent Balance PercentBalance Percent Balance Percent Balance Percent
Non-interest bearing$6,461,195
 26% $6,539,731
 27% $6,419,326
 29%$6,444,378
 25% $6,542,228
 27% $6,639,845
 29%
NOW and interest bearing demand deposits2,519,445
 10
 2,295,268
 10
 2,344,848
 10
2,803,338
 11
 2,671,283
 11
 2,255,692
 10
Wealth management deposits2,517,141
 10
 2,365,191
 10
 2,320,674
 10
2,614,035
 10
 2,289,904
 9
 2,250,139
 10
Money market5,369,324
 22
 4,883,645
 21
 4,471,342
 20
5,915,525
 23
 5,632,268
 22
 4,520,620
 20
Savings2,672,077
 11
 2,702,665
 12
 2,581,946
 11
2,715,422
 11
 2,553,133
 10
 2,813,772
 12
Time certificates of deposit5,214,637
 21
 4,557,187
 20
 4,573,081
 20
5,267,796
 20
 5,381,029
 21
 4,322,111
 19
Total average deposits$24,753,819
 100% $23,343,687
 100% $22,711,217
 100%$25,760,494
 100% $25,069,845
 100% $22,802,179
 100%

Total average deposits for the thirdfirst quarter of 20182019 were $24.8$25.8 billion, an increase of $2.0$3.0 billion, or 9.0%13.0%, from the thirdfirst quarter of 2017.2018. The increase in average deposits is primarily attributable to the CSC acquisitionvarious acquisitions and branch openings along with additional deposits associated with relationships from marketing efforts during 2018.

Wealth management deposits are funds from the brokerage customers of Wintrust Investments, theCDEC, 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,March 31, December 31,
(Dollars in thousands)2018 2017 2017 2016 20152019 2018 2018 2017 2016
Total deposits$24,916,715
 $22,895,063
 $23,183,347
 $21,658,632
 $18,639,634
$26,804,742
 $23,279,327
 $26,094,678
 $23,183,347
 $21,658,632
Brokered deposits1,842,895
 1,280,492
 1,445,306
 1,159,475
 862,026
1,622,842
 1,599,455
 1,071,562
 1,445,306
 1,159,475
Brokered deposits as a percentage of total deposits7.4% 5.6% 6.2% 5.4% 4.6%6.1% 6.9% 4.1% 6.2% 5.4%

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 EndedThree Months Ended
September 30, June 30, September 30,March 31, December 31, March 31,
(Dollars in thousands)2018 2018 20172019 2018 2018
FHLB advances$429,739
 $1,006,407
 $324,996
$594,335
 $551,846
 $872,811
Other borrowings:          
Notes payable46,913
 33,645
 44,878
144,284
 149,744
 37,389
Short-term borrowings16,814
 14,985
 34,674
111,413
 31,671
 21,547
Secured borrowings156,399
 142,948
 139,549
162,367
 156,633
 155,313
Other48,152
 48,488
 49,749
47,507
 47,830
 48,876
Total other borrowings$268,278
 $240,066
 $268,850
$465,571
 $385,878
 $263,125
Subordinated notes139,155
 139,125
 139,035
139,217
 139,186
 139,094
Junior subordinated debentures253,566
 253,566
 253,566
253,566
 253,566
 253,566
Total other funding sources$1,090,738
 $1,639,164
 $986,447
$1,452,689
 $1,330,476
 $1,528,596
FHLB advances provide the banks with access to fixed rate funds which 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 $615.0$576.4 million at September 30, 2018,March 31, 2019, compared to $667.0$426.3 million at June 30,December 31, 2018 and $469.0$915.0 million at September 30, 2017.March 31, 2018.

Notes payable balances as of September 30,March 31, 2019 and December 31, 2018 represent the balances on a $200.0 million loan agreement with unaffiliated banks consisting of a $50.0 million revolving credit facility and a $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 30,March 31, 2019 and December 31, 2018, the Company had a balance under the term facility of $149.8 million.$139.1 million and $144.5 million, respectively. The Company was contractually required to borrow the entire amount of the term facility on September 18, 2018 and all such borrowings must be repaid by September 18, 2023. At September 30,March 31, 2019 and December 31, 2018 the Company had no outstanding balance on the $50.0 million revolving credit facility.

In connection with the establishment of the $200.0 million loan agreement, all outstanding notes payable balances under a $150.0 million loan agreement with unaffiliated banks consisting of a $75.0 million revolving credit facility and a $75.0 million term facility were paid in full. This $150.0 million loan agreement was also 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 June 30,March 31, 2018, and September 30, 2017, the Company had a balance under the term facility of $30.0 million and $41.2 million, respectively.$33.7 million. At June 30,March 31, 2018, and September 30, 2017, the Company had no outstanding balance on the $75.0 million revolving credit facility.
Short-term borrowings include securities sold under repurchase agreements and federal funds purchased. These borrowings totaled $17.4$16.2 million at September 30, 2018March 31, 2019 compared to $21.4$50.6 million at June 30,December 31, 2018 and $20.0$18.0 million at September 30, 2017.March 31, 2018. 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. In February 2019, the unrelated third party paid an additional C$20 million, which increased the total payments to C$210 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 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 $147.2$157.2 million at September 30, 2018March 31, 2019 compared to $144.6$139.3 million at June 30,December 31, 2018 and $128.3$131.7 million at September 30, 2017.March 31, 2018. At September 30, 2018,March 31, 2019, the interest rate of the Canadian Secured Borrowing was 2.7189%2.9398%. The remaining balance within secured borrowings at March 31, 20182019 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 September 30, 2018March 31, 2019 include a fixed-rate promissory note issued by the Company in June 2017 ("Fixed-Rate Promissory Note") related to and secured by two 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 30, 2018,March 31, 2019, the Fixed-Rate Promissory Note had a balance of $48.0$47.4 million compared to $48.4$47.7 million at June 30,December 31, 2018 and $49.3$48.7 million at September 30, 2017.March 31, 2018. Under the Fixed-Rate Promissory Note, the Company makes monthly principal payments and pay interest at a fixed rate of 3.36% until maturity on June 30, 2022. At September 30, 2018, there were no non-recourse notes related to certain capital leases.

At September 30, 2018,March 31, 2019, the Company had outstanding subordinated notes totaling $139.2 million compared to $139.1$139.2 million and $139.1 million outstanding at June 30,December 31, 2018 and September 30, 2017,March 31, 2018, respectively. The notes have a stated interest rate of 5.00% and mature in June 2024. These notes are stated at par adjusted for unamortized costs paid related to the issuance of this debt.

The Company had $253.6 million of junior subordinated debentures outstanding as of September 30, 2018, June 30,March 31, 2019, December 31, 2018 and September 30, 2017.March 31, 2018. The amounts reflected on the balance sheet represent the junior subordinated debentures issued to eleven trusts by the Company and equal the amount of the preferred and common securities issued by the trusts. At September 30, 2018,March 31, 2019, the Company included $245.5 million of the junior subordinated debentures, net of common securities, in Tier 2 regulatory capital.

See Notes 11 and 12 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,
2018		 June 30,
2018		 September 30,
2017		March 31,
2019		 December 31,
2018		 March 31,
2018
Leverage ratio9.3% 9.4% 9.2%9.1% 9.1% 9.3%
Tier 1 capital to risk-weighted assets10.0
 10.0
 10.0
9.8
 9.7
 10.0
Common equity Tier 1 capital to risk-weighted assets9.5
 9.6
 9.5
9.3
 9.3
 9.5
Total capital to risk-weighted assets12.0
 12.1
 12.2
11.7
 11.6
 12.0
Total average equity-to-total average assets(1)
10.6
 10.7
 10.7
10.6
 10.6
 10.8
(1)Based on quarterly average balances.
 
Minimum
Capital
Requirements
 
Well
Capitalized
Leverage ratio4.0% 5.0%
Tier 1 capital to risk-weighted assets6.0
 8.0
Common equity Tier 1 capital to risk-weighted assets4.5
 6.5
Total capital to risk-weighted assets8.0
 10.0

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 11, 12 and 18 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 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 2019 the Company declared a quarterly cash dividend of $0.25 per common share. In January, April, July and JulyOctober of 2018, the Company declared a quarterly cash dividend of $0.19 per common share. In January, April, July and October of 2017, the Company declared a quarterly cash dividend of $0.14 per common share.

See Note 18 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 mandatory conversion of the Series C preferred stock in April 2017.2015. The Company hereby incorporates by reference Note 18 of the Consolidated Financial Statements presented under Item 1 of this report in its entirety.

Announced Acquisitions

On July 31, 2018,February 20, 2019, the Company announced that its subsidiary Northbrook Bank & Trust Company signedthe signing of a definitive agreement to acquire certain assets and assume certain liabilitiesRush-Oak Corporation (“ROC”). ROC is the parent company of American EnterpriseOak Bank, (“AEB”) which is headquarteredoperates one banking location in Buffalo Grove,the Gold Coast neighborhood of Chicago, Illinois. As of June 30, 2018, AEBMarch 31, 2019, Oak Bank had approximately $200$201 million in assets, including approximately $151$141 million in loans, and approximately $157$163 million in deposits. The assets to be acquired include substantially all of AEB’s loans, investment securities and customer deposits at closing, as well as specified OREO properties.  Excluded assets and liabilities include real property owned by AEB (other than OREO properties).

LIQUIDITY

Wintrust 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 liquidity to meet these demands 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.

The Company believes that it has sufficient funds and access to funds to meet its working capital and other needs. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation - Interest-Earning Assets, -Deposits, -

Other-Other Funding Sources and -Shareholders’ Equity sections of this report for additional information regarding the Company’s liquidity position.


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 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,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 20172018 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

economic conditions that affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;
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��sCompany’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 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;
harm to the Company’s reputation;
any negative perception of the Company’s 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 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, and any unanticipated impact of the Tax Act;
changes in accounting standards, rules and interpretations such as the new CECL standard, and the impact on the Company’s financial statements;
the ability of the Company to receive dividends from its subsidiaries;
uncertainty about the future of LIBOR;
a decrease in the Company’s capital ratios, including as a result of 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;
a lowering of our credit rating;
changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet as a result of the end of its program of quantitative easing or otherwise;
restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business resulting from the Dodd-Frank Act;
increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory 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 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 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 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, 2018, June 30,March 31, 2019, December 31, 2018 and September 30, 2017March 31, 2018 is as follows:
Static Shock Scenarios+200
Basis
Points		 +100
Basis
Points		 -100
Basis
Points
September 30, 201818.1% 9.1% (10.0)%
June 30, 201819.3% 9.7% (10.7)%
September 30, 201719.5% 9.8% (12.9)%
Static Shock Scenarios+200
Basis
Points		 +100
Basis
Points		 -100
Basis
Points
March 31, 201914.9% 7.8% (8.5)%
December 31, 201815.6% 7.9% (8.6)%
March 31, 201818.8% 9.7% (11.6)%

Ramp Scenarios+200
Basis
Points		 +100
Basis
Points		 -100
Basis
Points
September 30, 20188.5% 4.3% (4.2)%
June 30, 20188.7% 4.5% (4.4)%
September 30, 20179.0% 4.6% (5.3)%
Ramp Scenarios+200
Basis
Points		 +100
Basis
Points		 -100
Basis
Points
March 31, 20196.7% 3.5% (3.3)%
December 31, 20187.4% 3.8% (3.6)%
March 31, 20189.0% 4.6% (4.8)%

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 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 of mortgage loans to third party investors. See Note 15 of the Consolidated Financial Statements in Item 1 of this report for further information on the Company’s derivative financial instruments.

During the first ninethree months of 20182019 and 2017,2018, 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 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 30, 2018March 31, 2019 and 2017.2018.


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.

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 a ruling by the federal Court of Appeals for the Tenth Circuit that was adverse to Lehman Holdings on the statute of limitations that is applicable to similar loan purchase 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 March 16, 2016, but 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. Argument on the motions to dismiss were heard on June 12, 2018. The motion to dismiss for lack of subject matter jurisdiction was denied on August 14, 2018 and the defendants’ motion to transfer venue denied on October 2, 2018. Wintrust Mortgage has 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 has considered thegranted this request and indicated her willingness to allowallowed Lehman Holdings to assert the additional claims but no determination of the procedureagainst existing defendants as a supplemental complaint. Lehman Holdings should use to assert the new claims, whether via amendment or afiled its supplemental pleading, has been made. Lehman Holdings has not providedcomplaint against Wintrust Mortgage withon December 4, 2018. Wintrust Mortgage's response to the supplemental complaint is due May 13, 2019. Wintrust Mortgage is currently evaluating whether it has obtained sufficient information to allow Wintrust Mortgage to assess the merits of Lehman Holding’sHolding's additional claims orand to estimate either 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.

On April 9, 2018, JPMorgan Chase & Co. as successor in interest to Bear Stearns and certain related Bear Stearns entities (collectively, “JPMC”) sent a demand letter to Wintrust Mortgage asserting an indemnification claim of approximately $4.6 million. JPMC alleges that it incurred this loss due to its reliance on misrepresentations in the loans Wintrust Mortgage originated, underwrote and sold to JPMC in the years prior to 2009. Wintrust Mortgage disputed JPMC’s allegations. On March 27, 2019, JPMC has since amended and reduced its claim toWintrust Mortgage settled the dispute for an immaterial amount. JPMC has not provided

On October 17, 2018, a former Wintrust Mortgage withemployee filed a lawsuit 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 service of the complaint on November 4, 2018. Wintrust Mortgage's response to the complaint was filed on February 25, 2019. At this time, Wintrust Mortgage lacks sufficient information concerning the loans allegedly at issue to allow Wintrust Mortgage to assess the merits of JPMC’sthe allegations or to estimate either the likelihood or amount of any potential liability.

On October 17, 2018, two individual plaintiffs filed suit 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 for losses in excess of $6 million. Northbrook Bank filed its motion to dismiss the complaint on January 15, 2019, which was granted on March 5, 2019. On April 3, 2019, Plaintiffs filed an amended complaint

based on similar allegations. Northbrook Bank’s motion to dismiss the amended complaint is due May 17, 2019 and hearing is scheduled for July 2, 2019. Northbrook Bank believes the allegations in the amended complaint to be legally and factually meritless and otherwise lacks sufficient information to estimate the amount of any potential liability.

On August 1, 2018, Wintrust Bank acquired Delaware Place Bank. As part of the acquisition, Wintrust Bank took over litigation of a pending commercial real estate collection matter against Foulds, Inc., the borrower, and Christopher Bradley, the guarantor. Defendants asserted counterclaims alleging Delaware Place Bank breached its contractual and fiduciary duties to the borrower and made certain fraudulent misrepresentations. The counterclaim does not specify the amount of damages sought. Wintrust Bank believes the allegations to be legally and factually meritless and otherwise lacks sufficient information to estimate the amount of any potential liability.

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 have been no 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, 2017.2018.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

No purchases of the Company’s common shares were made by or on behalf 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, 2018.March 31, 2019. There is currently no authorization to repurchase shares of outstanding common stock.


Item 6: Exhibits:

(a)
Exhibits
10.1
Credit Agreement, dated as of September 18, 2018, among the Company, the lenders named therein, and Wells Fargo Bank, N.A., as administrative agent (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 September 19, 2018).
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, 2018March 31, 2019, 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

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:NovemberMay 9, 20182019/s/ DAVID L. STOEHR
  David L. Stoehr
  
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)

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