0001015328 srt:WeightedAverageMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MeasurementInputDiscountRateMember us-gaap:ValuationTechniqueDiscountedCashFlowMember 2020-06-300001015328us-gaap:PerformanceSharesMember2020-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q



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

For the quarterly period ended June 30, ~~2020~~2021



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

For the transition period from to

Commission File Number 001-35077

_____________________________________

WINTRUST FINANCIAL ~~CORPORATION~~CORPORATION

(Exact name of registrant as specified in its charter)



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

9700 W. Higgins Road, Suite 800

Rosemont,, Illinois60018

(Address of principal executive offices)

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

(Registrant’s telephone number, including area code)



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

____________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ 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 ☑ 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

☑

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 ☑

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, ~~57,600,765~~57,040,656 shares, as of July 31, ~~2020~~2021

Table of Contents

TABLE OF CONTENTS


			Page
			~~Page~~
	PART I. — FINANCIAL INFORMATION
ITEM 1.		Financial Statements	1
ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	5456
ITEM 3.		Quantitative and Qualitative Disclosures About Market Risk	9396
ITEM 4.		Controls and Procedures	9598
		PART II. — OTHER INFORMATION
ITEM 1.		Legal Proceedings	9699
ITEM 1A.		Risk Factors	98100
ITEM 2.		Unregistered Sales of Equity Securities and Use of Proceeds	100
ITEM 3.		Defaults Upon Senior Securities	NA
ITEM 4.		Mine Safety Disclosures	NA
ITEM 5.		Other Information	NA
ITEM 6.		Exhibits	101
		Signatures	102

Table of Contents

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)	June 30, 2020			December 31, 2019			June 30, 2019			(In thousands, except share data)	June 30, 2021		December 31, 2020		June 30, 2020
Assets										Assets
Cash and due from banks	$	344,999		$	286,167		$	300,934		Cash and due from banks	$	434,957	$	322,415	$	344,999
Federal funds sold and securities purchased under resale agreements	58			309			58			Federal funds sold and securities purchased under resale agreements	52		59		58
Interest bearing deposits with banks	4,015,072			2,164,560			1,437,105
Interest-bearing deposits with banks										Interest-bearing deposits with banks	4,707,415		4,802,527		4,015,072
Available-for-sale securities, at fair value	3,194,961			3,106,214			2,186,154			Available-for-sale securities, at fair value	2,188,608		3,055,839		3,194,961
Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $65 at June 30, 2020 ($744.3 million, $1.1 billion and $1.2 billion fair value at June 30, 2020, December 31, 2019 and June 30, 2019 respectively)	728,465			1,134,400			1,191,634
Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $90, $59 and $65 at June 30, 2021, December 31, 2020 and June 30, 2020, respectively ($2.5 billion, $593.8 million and $744.3 million fair value at June 30, 2021, December 31, 2020 and June 30, 2020, respectively)										Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $90, $59 and $65 at June 30, 2021, December 31, 2020 and June 30, 2020, respectively ($2.5 billion, $593.8 million and $744.3 million fair value at June 30, 2021, December 31, 2020 and June 30, 2020, respectively)	2,498,232		579,138		728,465
Trading account securities	890			1,068			2,430			Trading account securities	2,667		671		890
Equity securities with readily determinable fair value	52,460			50,840			44,319			Equity securities with readily determinable fair value	86,316		90,862		52,460
Federal Home Loan Bank and Federal Reserve Bank stock	135,571			100,739			92,026			Federal Home Loan Bank and Federal Reserve Bank stock	136,625		135,588		135,571
Brokerage customer receivables	14,623			16,573			13,569			Brokerage customer receivables	23,093		17,436		14,623
Mortgage loans held-for-sale, at fair value	833,163			377,313			394,975			Mortgage loans held-for-sale, at fair value	984,994		1,272,090		833,163

Loans, net of unearned income	31,402,903			26,800,290			25,304,659			Loans, net of unearned income	32,911,187		32,079,073		31,402,903
Allowance for loan losses	(313,510		)	(156,828		)	(160,421		)	Allowance for loan losses	(261,089)		(319,374)		(313,510)

Net loans	31,089,393			26,643,462			25,144,238			Net loans	32,650,098		31,759,699		31,089,393
Premises and equipment, net	769,909			754,328			711,214			Premises and equipment, net	752,375		768,808		769,909
Lease investments, net	237,040			231,192			230,111			Lease investments, net	219,023		242,434		237,040

Accrued interest receivable and other assets	1,437,832			1,061,141			1,023,896			Accrued interest receivable and other assets	1,185,811		1,351,455		1,437,832
Trade date securities receivable	—			—			237,607			Trade date securities receivable	189,851		0		0

Goodwill	644,213			645,220			584,911			Goodwill	646,336		645,707		644,213
Other intangible assets	41,368			47,057			46,588			Other intangible assets	31,997		36,040		41,368
Total assets	$	43,540,017		$	36,620,583		$	33,641,769		Total assets	$	46,738,450	$	45,080,768	$	43,540,017
Liabilities and Shareholders’ Equity										Liabilities and Shareholders’ Equity
Deposits:										Deposits:
Non-interest bearing	$	10,204,791		$	7,216,758		$	6,719,958
Interest bearing	25,447,083			22,890,380			20,798,857
Non-interest-bearing										Non-interest-bearing	$	12,796,110	$	11,748,455	$	10,204,791
Interest-bearing										Interest-bearing	26,008,506		25,344,196		25,447,083
Total deposits	35,651,874			30,107,138			27,518,815			Total deposits	38,804,616		37,092,651		35,651,874

Federal Home Loan Bank advances	1,228,416			674,870			574,823			Federal Home Loan Bank advances	1,241,071		1,228,429		1,228,416

Other borrowings	508,535			418,174			418,057			Other borrowings	518,493		518,928		508,535

Subordinated notes	436,298			436,095			436,021			Subordinated notes	436,719		436,506		436,298
Junior subordinated debentures	253,566			253,566			253,566			Junior subordinated debentures	253,566		253,566		253,566
Trade date securities payable										Trade date securities payable	0		200,907		0
Accrued interest payable and other liabilities	1,471,110			1,039,490			993,537			Accrued interest payable and other liabilities	1,144,974		1,233,786		1,471,110

Total liabilities	39,549,799			32,929,333			30,194,819			Total liabilities	42,399,439		40,964,773		39,549,799
Shareholders’ Equity:
Shareholders' Equity:										Shareholders' Equity:
Preferred stock, no par value; 20,000,000 shares authorized:										Preferred stock, no par value; 20,000,000 shares authorized:
Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at June 30, 2020, December 31, 2019 and June 30, 2019	125,000			125,000			125,000
Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at June 30, 2020 and no shares issued and outstanding at December 31, 2019 and June 30, 2019	287,500			—			—
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at June 30, 2020, December 31, 2019 and June 30, 2019; 58,294,456 shares issued at June 30, 2020, 57,950,803 shares issued at December 31, 2019 and 56,794,328 shares issued at June 30, 2019	58,294			57,951			56,794

Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at June 30, 2021, December 31, 2020 and June 30, 2020										Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at June 30, 2021, December 31, 2020 and June 30, 2020	125,000		125,000		125,000
Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at June 30, 2021, December 31, 2020 and June 30, 2020										Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at June 30, 2021, December 31, 2020 and June 30, 2020	287,500		287,500		287,500
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at June 30, 2021, December 31, 2020 and June 30, 2020; 58,770,304 shares issued at June 30, 2021, 58,473,252 shares issued at December 31, 2020 and 58,294,456 shares issued at June 30, 2020										Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at June 30, 2021, December 31, 2020 and June 30, 2020; 58,770,304 shares issued at June 30, 2021, 58,473,252 shares issued at December 31, 2020 and 58,294,456 shares issued at June 30, 2020	58,770		58,473		58,294
Surplus	1,643,864			1,650,278			1,569,969			Surplus	1,669,002		1,649,990		1,643,864
Treasury stock, at cost, 720,784 shares at June 30, 2020, 128,912 shares at December 31, 2019, and 126,482 shares at June 30, 2019	(44,891		)	(6,931		)	(6,650		)
Treasury stock, at cost, 1,703,627 shares at June 30, 2021 and December 31, 2020, and 720,784 shares at June 30, 2020										Treasury stock, at cost, 1,703,627 shares at June 30, 2021 and December 31, 2020, and 720,784 shares at June 30, 2020	(100,363)		(100,363)		(44,891)
Retained earnings	1,921,048			1,899,630			1,747,266			Retained earnings	2,288,969		2,080,013		1,921,048
Accumulated other comprehensive loss	(597		)	(34,678		)	(45,429		)
Accumulated other comprehensive income (loss)										Accumulated other comprehensive income (loss)	10,133		15,382		(597)
Total shareholders’ equity	3,990,218			3,691,250			3,446,950			Total shareholders’ equity	4,339,011		4,115,995		3,990,218
Total liabilities and shareholders’ equity	$	43,540,017		$	36,620,583		$	33,641,769		Total liabilities and shareholders’ equity	$	46,738,450	$	45,080,768	$	43,540,017

See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
(In thousands, except per share data) June 30,
2020 June 30,
2019 June 30,
2020 June 30,
2019
Interest income
Interest and fees on loans $ 294,746
$ 309,161
$ 596,585
$ 606,148
Mortgage loans held-for-sale 4,764
3,104
7,929
5,313
Interest bearing deposits with banks 1,310
5,206
6,078
10,506
Federal funds sold and securities purchased under resale agreements 16
—
102
—
Investment securities 27,105
27,721
59,572
55,677
Trading account securities 13
5
20
13
Federal Home Loan Bank and Federal Reserve Bank stock 1,765
1,439
3,342
2,794
Brokerage customer receivables 97
178
255
333
Total interest income 329,816
346,814
673,883
680,784
Interest expense
Interest on deposits 50,057
67,024
117,492
128,000
Interest on Federal Home Loan Bank advances 4,934
4,193
8,294
6,643
Interest on other borrowings 3,436
3,525
6,982
7,158
Interest on subordinated notes 5,506
2,806
10,978
4,581
Interest on junior subordinated debentures 2,752
3,064
5,563
6,214
Total interest expense 66,685
80,612
149,309
152,596
Net interest income 263,131
266,202
524,574
528,188
Provision for credit losses 135,053
24,580
188,014
35,204
Net interest income after provision for credit losses 128,078
241,622
336,560
492,984
Non-interest income
Wealth management 22,636
24,139
48,577
48,116
Mortgage banking 102,324
37,411
150,650
55,569
Service charges on deposit accounts 10,420
9,277
21,685
18,125
Gains (losses) on investment securities, net 808
864
(3,551 ) 2,228
Fees from covered call options —
643
2,292
2,427
Trading losses, net (634 ) (44 ) (1,085 ) (215 )
Operating lease income, net 11,785
11,733
23,769
22,529
Other 14,654
14,135
32,898
31,036
Total non-interest income 161,993
98,158
275,235
179,815
Non-interest expense
Salaries and employee benefits 154,156
133,732
290,918
259,455
Equipment 15,846
12,759
30,680
24,529
Operating lease equipment depreciation 9,292
8,768
18,552
17,087
Occupancy, net 16,893
15,921
34,440
32,166
Data processing 10,406
6,204
18,779
13,729
Advertising and marketing 7,704
12,845
18,566
22,703
Professional fees 7,687
6,228
14,408
11,784
Amortization of other intangible assets 2,820
2,957
5,683
5,899
FDIC insurance 7,081
4,127
11,216
7,703
OREO expense, net 237
1,290
(639 ) 1,922
Other 27,246
24,776
51,406
47,004
Total non-interest expense 259,368
229,607
494,009
443,981
Income before taxes 30,703
110,173
117,786
228,818
Income tax expense 9,044
28,707
33,315
58,206
Net income $ 21,659
$ 81,466
$ 84,471
$ 170,612
Preferred stock dividends 2,050
2,050
4,100
4,100
Net income applicable to common shares $ 19,609
$ 79,416
$ 80,371
$ 166,512
Net income per common share—Basic $ 0.34
$ 1.40
$ 1.40
$ 2.94
Net income per common share—Diluted $ 0.34
$ 1.38
$ 1.38
$ 2.91
Cash dividends declared per common share $ 0.28
$ 0.25
$ 0.56
$ 0.50
Weighted average common shares outstanding 57,567
56,662
57,593
56,596
Dilutive potential common shares 414
699
481
700
Average common shares and dilutive common shares 57,981
57,361
58,074
57,296

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


	Three Months Ended				Six Months Ended
(In thousands, except per share data)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest income
Interest and fees on loans	$	284,701	$	294,746	$	558,801	$	596,585
Mortgage loans held-for-sale	8,183		4,764		17,219		7,929
Interest-bearing deposits with banks	1,153		1,310		2,352		6,078
Federal funds sold and securities purchased under resale agreements	0		16		0		102
Investment securities	23,623		27,105		42,887		59,572
Trading account securities	1		13		3		20
Federal Home Loan Bank and Federal Reserve Bank stock	1,769		1,765		3,514		3,342
Brokerage customer receivables	149		97		272		255
Total interest income	319,579		329,816		625,048		673,883
Interest expense
Interest on deposits	24,298		50,057		52,242		117,492
Interest on Federal Home Loan Bank advances	4,887		4,934		9,727		8,294
Interest on other borrowings	2,568		3,436		5,177		6,982
Interest on subordinated notes	5,512		5,506		10,989		10,978
Interest on junior subordinated debentures	2,724		2,752		5,428		5,563
Total interest expense	39,989		66,685		83,563		149,309
Net interest income	279,590		263,131		541,485		524,574
Provision for credit losses	(15,299)		135,053		(60,646)		188,014
Net interest income after provision for credit losses	294,889		128,078		602,131		336,560
Non-interest income
Wealth management	30,690		22,636		59,999		48,577
Mortgage banking	50,584		102,324		164,078		150,650
Service charges on deposit accounts	13,249		10,420		25,285		21,685
Gains (losses) on investment securities, net	1,285		808		2,439		(3,551)
Fees from covered call options	1,388		0		1,388		2,292
Trading losses, net	(438)		(634)		(19)		(1,085)
Operating lease income, net	12,240		11,785		26,680		23,769
Other	20,375		14,654		36,029		32,898
Total non-interest income	129,373		161,993		315,879		275,235
Non-interest expense
Salaries and employee benefits	172,817		154,156		353,626		290,918
Equipment	20,866		15,846		41,778		30,680
Operating lease equipment depreciation	9,949		9,292		20,720		18,552
Occupancy, net	17,687		16,893		37,683		34,440
Data processing	6,920		10,406		12,968		18,779
Advertising and marketing	11,305		7,704		19,851		18,566
Professional fees	7,304		7,687		14,891		14,408
Amortization of other intangible assets	2,039		2,820		4,046		5,683
FDIC insurance	6,405		7,081		12,963		11,216
OREO expense, net	769		237		518		(639)
Other	24,051		27,246		47,957		51,406
Total non-interest expense	280,112		259,368		567,001		494,009
Income before taxes	144,150		30,703		351,009		117,786
Income tax expense	39,041		9,044		92,752		33,315
Net income	$	105,109	$	21,659	$	258,257	$	84,471
Preferred stock dividends	6,991		2,050		13,982		4,100
Net income applicable to common shares	$	98,118	$	19,609	$	244,275	$	80,371
Net income per common share—Basic	$	1.72	$	0.34	$	4.29	$	1.40
Net income per common share—Diluted	$	1.70	$	0.34	$	4.24	$	1.38
Cash dividends declared per common share	$	0.31	$	0.28	$	0.62	$	0.56
Weighted average common shares outstanding	57,049		57,567		56,977		57,593
Dilutive potential common shares	726		414		691		481
Average common shares and dilutive common shares	57,775		57,981		57,668		58,074

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
(In thousands)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019			(In thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net income	$	21,659		$	81,466		$	84,471		$	170,612		Net income	$	105,109	$	21,659	$	258,257	$	84,471
Unrealized gains on available-for-sale securities
Unrealized gains (losses) on available-for-sale securities													Unrealized gains (losses) on available-for-sale securities
Before tax	5,068			26,177			96,422			64,452			Before tax	6,312		5,068		(54,414)		96,422
Tax effect	(1,350		)	(6,977		)	(25,697		)	(17,296		)	Tax effect	(1,684)		(1,350)		14,523		(25,697)
Net of tax	3,718			19,200			70,725			47,156			Net of tax	4,628		3,718		(39,891)		70,725
Reclassification of net (losses) gains on available-for-sale securities included in net income
Reclassification of net gains (losses) on available-for-sale securities included in net income													Reclassification of net gains (losses) on available-for-sale securities included in net income
Before tax	(341		)	523			150			456			Before tax	584		(341)		794		150
Tax effect	92			(140		)	(40		)	(122		)	Tax effect	(157)		92		(213)		(40)
Net of tax	(249		)	383			110			334			Net of tax	427		(249)		581		110
Reclassification of amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale													Reclassification of amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale
Before tax	46			214			124			358			Before tax	47		46		104		124
Tax effect	(12		)	(57		)	(33		)	(98		)	Tax effect	(13)		(12)		(28)		(33)
Net of tax	34			157			91			260			Net of tax	34		34		76		91
Net unrealized gains on available-for-sale securities	3,933			18,660			70,524			46,562
Unrealized losses on derivative instruments
Net unrealized gains (losses) on available-for-sale securities													Net unrealized gains (losses) on available-for-sale securities	4,167		3,933		(40,548)		70,524
Unrealized (losses) gains on derivative instruments													Unrealized (losses) gains on derivative instruments
Before tax	(2,867		)	(22,168		)	(41,560		)	(27,164		)	Before tax	(8,788)		(2,867)		42,004		(41,560)
Tax effect	773			5,918			11,095			7,263			Tax effect	2,341		773		(11,194)		11,095
Net unrealized losses on derivative instruments	(2,094		)	(16,250		)	(30,465		)	(19,901		)
Net unrealized (losses) gains on derivative instruments													Net unrealized (losses) gains on derivative instruments	(6,447)		(2,094)		30,810		(30,465)
Foreign currency adjustment													Foreign currency adjustment
Before tax	6,677			3,232			(7,655		)	6,123			Before tax	2,876		6,677		5,610		(7,655)
Tax effect	(1,510		)	(727		)	1,677			(1,341		)	Tax effect	(567)		(1,510)		(1,121)		1,677
Net foreign currency adjustment	5,167			2,505			(5,978		)	4,782			Net foreign currency adjustment	2,309		5,167		4,489		(5,978)
Total other comprehensive income	7,006			4,915			34,081			31,443
Total other comprehensive income (loss)													Total other comprehensive income (loss)	29		7,006		(5,249)		34,081
Comprehensive income	$	28,665		$	86,381		$	118,552		$	202,055		Comprehensive income	$	105,138	$	28,665	$	253,008	$	118,552

See accompanying notes to unaudited consolidated financial statements.

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

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

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

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

Table of Contents


WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(In thousands, except per share data)	Preferred stock		Common stock		Surplus		Treasury stock		Retained earnings		Accumulated other comprehensive (loss) income		Total shareholders’ equity
Balance at March 31, 2020	$	125,000	$	58,266	$	1,652,063	$	(44,891)	$	1,917,558	$	(7,603)	$	3,700,393

Net income	—		—		—		—		21,659		—		21,659
Other comprehensive income, net of tax	—		—		—		—		—		7,006		7,006
Cash dividends declared on common stock, $0.28 per share	—		—		—		—		(16,119)		—		(16,119)
Dividends on preferred stock, $0.41 per share	—		—		—		—		(2,050)		—		(2,050)

Stock-based compensation	—		—		541		—		—		—		541
Issuance of Series E preferred stock	287,500		—		(10,125)		—		—		—		277,375
Common stock issued for:

Exercise of stock options and warrants	—		3		158		—		—		—		161
Restricted stock awards	—		3		(3)		—		—		—		0
Employee stock purchase plan	—		22		654		—		—		—		676
Director compensation plan	—		—		576		—		—		—		576
Balance at June 30, 2020	$	412,500	$	58,294	$	1,643,864	$	(44,891)	$	1,921,048	$	(597)	$	3,990,218

Balance at January 1, 2020	$	125,000	$	57,951	$	1,650,278	$	(6,931)	$	1,899,630	$	(34,678)	$	3,691,250
Cumulative effect adjustment from the adoption of ASU 2016-13, net of tax	—		—		—		—		(26,717)		—		(26,717)
Net income	—		—		—		—		84,471		—		84,471
Other comprehensive income, net of tax	—		—		—		—		—		34,081		34,081
Cash dividends declared on common stock, $0.56 per share	—		—		—		—		(32,236)		—		(32,236)
Dividends on preferred stock, $0.82 per share	—		—		—		—		(4,100)		—		(4,100)
Common stock repurchases under authorized program	—		—		—		(37,116)		—		—		(37,116)
Stock-based compensation	—		—		(2,278)		—		—		—		(2,278)
Issuance of Series E preferred stock	287,500		—		(10,125)		—		—		—		277,375
Common stock issued for:

Exercise of stock options and warrants	—		98		3,701		(92)		—		—		3,707
Restricted stock awards	—		193		(193)		(752)		—		—		(752)
Employee stock purchase plan	—		32		1,353		—		—		—		1,385
Director compensation plan	—		20		1,128		—		—		—		1,148
Balance at June 30, 2020	$	412,500	$	58,294	$	1,643,864	$	(44,891)	$	1,921,048	$	(597)	$	3,990,218

Balance at March 31, 2021	$	412,500	$	58,727	$	1,663,008	$	(100,363)	$	2,208,535	$	10,104	$	4,252,511
Net income	—		—		—		—		105,109		—		105,109
Other comprehensive income, net of tax	—		—		—		—		—		29		29
Cash dividends declared on common stock, $0.31 per share	—		—		—		—		(17,684)		—		(17,684)
Dividends on Series D preferred stock, $0.41 per share and Series E preferred stock, $429.69 per share	—		—		—		—		(6,991)		—		(6,991)

Stock-based compensation	—		—		3,332		—		—		—		3,332

Common stock issued for:
Exercise of stock options and warrants	—		29		1,251		—		—		—		1,280
Restricted stock awards	—		3		(3)		—		—		—		0
Employee stock purchase plan	—		11		794		—		—		—		805
Director compensation plan	—		—		620		—		—		—		620
Balance at June 30, 2021	$	412,500	$	58,770	$	1,669,002	$	(100,363)	$	2,288,969	$	10,133	$	4,339,011

Balance at January 1, 2021	$	412,500	$	58,473	$	1,649,990	$	(100,363)	$	2,080,013	$	15,382	$	4,115,995
Net income	—		—		—		—		258,257		—		258,257
Other comprehensive loss, net of tax	—		—		—		—		—		(5,249)		(5,249)
Cash dividends declared on common stock, $0.62 per share	—		—		—		—		(35,319)		—		(35,319)
Dividends on Series D preferred stock, $0.82 per share and Series E preferred stock, $859.38 per share	—		—		—		—		(13,982)		—		(13,982)

Stock-based compensation	—		—		6,194		—		—		—		6,194

Common stock issued for:
Exercise of stock options and warrants	—		238		10,003		—		—		—		10,241
Restricted stock awards	—		10		(10)		—		—		—		0
Employee stock purchase plan	—		25		1,595		—		—		—		1,620
Director compensation plan	—		24		1,230		—		—		—		1,254
Balance at June 30, 2021	$	412,500	$	58,770	$	1,669,002	$	(100,363)	$	2,288,969	$	10,133	$	4,339,011

See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended							Six Months Ended
(In thousands)	June 30, 2020			June 30, 2019			(In thousands)	June 30, 2021		June 30, 2020
Operating Activities:							Operating Activities:
Net income	$	84,471		$	170,612		Net income	$	258,257	$	84,471
Adjustments to reconcile net income to net cash (used for) provided by operating activities
Adjustments to reconcile net income to net cash provided by (used for) operating activities							Adjustments to reconcile net income to net cash provided by (used for) operating activities
Provision for credit losses	188,014			35,204			Provision for credit losses	(60,646)		188,014
Depreciation, amortization and accretion, net	47,138			43,322			Depreciation, amortization and accretion, net	51,485		47,138
Stock-based compensation expense	(2,278		)	6,283
Net amortization of premium on securities	4,694			2,971
Stock-based compensation expense (benefit)							Stock-based compensation expense (benefit)	6,194		(2,278)

Amortization of premium on securities, net							Amortization of premium on securities, net	3,797		4,694
Accretion of discount and deferred fees on loans, net	(41,304		)	(11,746		)	Accretion of discount and deferred fees on loans, net	(47,975)		(41,304)
Mortgage servicing rights fair value change, net	35,509			19,122
Mortgage servicing rights fair value changes, net							Mortgage servicing rights fair value changes, net	6,203		38,233
Non-designated derivatives fair value changes, net							Non-designated derivatives fair value changes, net	(241)		(2,724)
Originations and purchases of mortgage loans held-for-sale	(3,426,911		)	(1,832,264		)	Originations and purchases of mortgage loans held-for-sale	(3,945,978)		(3,426,911)
Early buy-out exercises of mortgage loans held-for-sale guaranteed by U.S. Government Agencies, net of subsequent paydown or payoff							Early buy-out exercises of mortgage loans held-for-sale guaranteed by U.S. Government Agencies, net of subsequent paydown or payoff	(6,997)		0
Proceeds from sales of mortgage loans held-for-sale	3,035,641			1,736,063			Proceeds from sales of mortgage loans held-for-sale	4,357,804		3,035,641
Bank owned life insurance ("BOLI") income	(666		)	(2,740		)	Bank owned life insurance ("BOLI") income	(2,466)		(666)
Decrease (increase) in trading securities, net	178			(738		)
Net decrease (increase) in brokerage customer receivables	1,950			(960		)
(Increase) decrease in trading securities, net							(Increase) decrease in trading securities, net	(1,996)		178
(Increase) decrease in brokerage customer receivables, net							(Increase) decrease in brokerage customer receivables, net	(5,657)		1,950
Gains on mortgage loans sold	(155,108		)	(51,086		)	Gains on mortgage loans sold	(132,012)		(155,108)
Losses (gains) on investment securities, net	3,551			(2,228		)
Losses on sales of premises and equipment, net	3			37
Net (gains) losses on sales and fair value adjustments of other real estate owned	(694		)	1,115
Increase in accrued interest receivable and other assets, net	(171,099		)	(139,971		)
(Gains) losses on investment securities, net							(Gains) losses on investment securities, net	(2,439)		3,551

(Gains) losses on sales of premises and equipment, net, and sale of related deposit liabilities							(Gains) losses on sales of premises and equipment, net, and sale of related deposit liabilities	(3,782)		3
Gains on sales and fair value adjustments of other real estate owned, net							Gains on sales and fair value adjustments of other real estate owned, net	(332)		(694)
Decrease (increase) in accrued interest receivable and other assets, net							Decrease (increase) in accrued interest receivable and other assets, net	143,200		(171,099)
Increase in accrued interest payable and other liabilities, net	27,244			49,233			Increase in accrued interest payable and other liabilities, net	32,344		27,244
Net Cash (Used for) Provided by Operating Activities	(369,667		)	22,229
Net Cash Provided by (Used for) Operating Activities							Net Cash Provided by (Used for) Operating Activities	648,763		(369,667)
Investing Activities:							Investing Activities:
Proceeds from maturities and calls of available-for-sale securities	549,981			231,198			Proceeds from maturities and calls of available-for-sale securities	908,160		549,981
Proceeds from maturities and calls of held-to-maturity securities	529,974			51,393			Proceeds from maturities and calls of held-to-maturity securities	137,273		529,974
Proceeds from sales of available-for-sale securities	502,676			667,918			Proceeds from sales of available-for-sale securities	2,376		502,676

Proceeds from sales of equity securities with readily determinable fair value	4,030			11,000			Proceeds from sales of equity securities with readily determinable fair value	6,259		4,030
Proceeds from sales and capital distributions of equity securities without readily determinable fair value	444			609			Proceeds from sales and capital distributions of equity securities without readily determinable fair value	1,137		444
Purchases of available-for-sale securities	(1,048,539		)	(871,269		)	Purchases of available-for-sale securities	(290,583)		(1,048,539)
Purchases of held-to-maturity securities	(124,802		)	(178,331		)	Purchases of held-to-maturity securities	(2,257,847)		(124,802)
Purchases of equity securities with readily determinable fair value	(7,659		)	(18,677		)	Purchases of equity securities with readily determinable fair value	0		(7,659)
Purchases of equity securities without readily determinable fair value	(3,166		)	(1,072		)	Purchases of equity securities without readily determinable fair value	(3,359)		(3,166)
Purchases of Federal Home Loan Bank and Federal Reserve Bank stock, net	(34,832		)	(672		)	Purchases of Federal Home Loan Bank and Federal Reserve Bank stock, net	(1,037)		(34,832)
(Purchases of) distributions from investments in partnerships, net	(355		)	772
Net cash received (paid) in business combinations	—			748
Distributions from (contributions to) investments in partnerships, net							Distributions from (contributions to) investments in partnerships, net	44		(355)

Proceeds from sales of other real estate owned	5,405			5,155			Proceeds from sales of other real estate owned	5,314		5,405
Net increase in interest bearing deposits with banks	(1,852,194		)	(337,581		)
Net increase in loans	(4,460,325		)	(1,340,204		)

Decrease (increase) in interest-bearing deposits with banks, net							Decrease (increase) in interest-bearing deposits with banks, net	96,948		(1,852,194)
Increase in loans, net							Increase in loans, net	(795,270)		(4,460,325)

Purchases of premises and equipment, net	(38,132		)	(31,297		)	Purchases of premises and equipment, net	(12,113)		(38,132)
Net Cash Used for Investing Activities	(5,977,494		)	(1,810,310		)	Net Cash Used for Investing Activities	(2,202,698)		(5,977,494)
Financing Activities:							Financing Activities:
Increase in deposit accounts, net	5,545,133			1,262,941			Increase in deposit accounts, net	1,715,840		5,545,133
Increase in other borrowings, net	98,974			16,243
(Decrease) increase in other borrowings, net							(Decrease) increase in other borrowings, net	(9,230)		98,974
Increase in Federal Home Loan Bank advances, net	553,500			148,441			Increase in Federal Home Loan Bank advances, net	12,629		553,500
Proceeds from the issuance of subordinated notes, net	—			296,741

Proceeds from the issuance of preferred stock, net	277,375			—			Proceeds from the issuance of preferred stock, net	0		277,375

Cash payments to settle contingent consideration liabilities recognized in business combinations	(1,276		)	(66		)	Cash payments to settle contingent consideration liabilities recognized in business combinations	(16,583)		(1,276)
Issuance of common shares resulting from the exercise of stock options, employee stock purchase plan and conversion of common stock warrants	6,332			5,978			Issuance of common shares resulting from the exercise of stock options, employee stock purchase plan and conversion of common stock warrants	13,115		6,332
Common stock repurchases authorized	(37,116		)	—
Common stock repurchases under authorized program							Common stock repurchases under authorized program	0		(37,116)
Common stock repurchases for tax withholdings related to stock-based compensation	(844		)	(1,016		)	Common stock repurchases for tax withholdings related to stock-based compensation	0		(844)
Dividends paid	(36,336		)	(32,389		)	Dividends paid	(49,301)		(36,336)
Net Cash Provided by Financing Activities	6,405,742			1,696,873			Net Cash Provided by Financing Activities	1,666,470		6,405,742
Net Increase (Decrease) in Cash and Cash Equivalents	58,581			(91,208		)
Net Increase in Cash and Cash Equivalents							Net Increase in Cash and Cash Equivalents	112,535		58,581
Cash and Cash Equivalents at Beginning of Period	286,476			392,200			Cash and Cash Equivalents at Beginning of Period	322,474		286,476
Cash and Cash Equivalents at End of Period	$	345,057		$	300,992		Cash and Cash Equivalents at End of Period	$	435,009	$	345,057

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

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”~~its subsidiaries (collectively, “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"~~(“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, ~~2019~~2020 (“~~2019~~2020 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 credit losses, including the allowance for loan losses, the allowance for unfunded commitment losses and the allowance for held-to-maturity securities losses, ~~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 ~~2019~~2020 Form 10-K, some of which were superseded by the Company's adoption of certain accounting standards as of January 1, 2020. For further discussion of the Company's adoption of such accounting standards as of January 1, 2020, see Note 2 - Recent Accounting Developments.10-K.

(2) Recent Accounting Developments

~~Allowance for Credit Losses~~

In June 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” to replace the 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 lossesLegislation and considers additional reasonable and supportable forecasted information when determining lifetime 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 purchased credit deteriorated ("PCD") assets at the time of and subsequent to acquisition. Additionally, credit losses related to available-for-sale debt securities would be recorded through the allowance for credit losses and notRegulations Issued as a ~~direct adjustment to the amortized cost~~Result of the ~~securities.~~COVID-19 Pandemic

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

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

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

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

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

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

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

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

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

~~CARES Act~~

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

Section 4013 of the CARES Act allows financial institutions to suspend application of certain current troubled debt restructuring ("TDR") accounting guidance under Accounting Standards Codification ~~("ASC"~~(“ASC”) 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that defer or delay the payment of principal or interest, or change the interest rate on the loan. On December 27, 2020, the Consolidated Appropriations Act, 2021 (the "CAA"), which combined stimulus relief for the COVID-19 pandemic with an omnibus spending bill for the 2021 fiscal year, was signed by the President of the United States. The CAA included extension of TDR accounting relief provided under the CARES Act to January 1, 2022. The Company chose to apply this relief to eligible loan modifications. Further, in April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide further interpretation of when a borrower is experiencing financial difficulty, specifically indicating that if the modification is either short-term (e.g., six months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not experiencing financial difficulty under ASC 310-40. The Company continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing appropriate allowance for credit losses on its loan portfolio.

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

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

In April 2020, federal and state banking regulators issued the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus to provide separate relief, specifically indicating that if a modification is either short-term (e.g., six months) or mandated by a federal or state government in response to the COVID-19 pandemic, the borrower is not considered to be experiencing financial difficulty and thus does not represent a TDR under ASC 310-40. Additionally, in August 2020, regulators issued the Joint Statement on Additional Loan Accommodations

Table of Contents

Related to the COVID-19 pandemic to provide prudent risk management and consumer protection principles for financial institutions to consider while working with borrowers as loans near the end of initial loan accommodation periods applicable during the COVID-19 pandemic. The Company continues to prudently work with borrowers negatively impacted by the COVID-19 pandemic while managing credit risks and recognizing appropriate allowance for credit losses on its loan portfolio.

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides temporary optional relief for contracts modified as a result of reference rate reform meeting certain modification criteria, generally allowing an entity to account for contract modifications occurring due to reference rate reform as an event that does not require contract remeasurement or reassessment of a previous accounting determination at the modification date. The guidance also includes temporary optional expedients intended to provide relief from various hedge effectiveness requirements for hedging relationships affected by reference rate reform, provided certain criteria are met, and allows a one-time election to sell or transfer to either available-for-sale or trading any held-to-maturity ("HTM") debt securities that refer to an interest rate affected by reference rate reform and were classified as HTM prior to January 1, 2020. Additionally, in January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope,” which provided additional clarification that certain optional expedients and exceptions noted above apply to derivative instruments that use an interest rate for margining, discounting or contract price alignment that is modified as a result of reference rate reform. This guidance was effective upon issuance and can be applied prospectively, with certain exceptions, through December 31, 2022.

In November 2020, federal and state banking regulators issued the “Interagency Policy Statement on Reference Rates for Loans" to reiterate that a specific replacement rate for loans impacted by reference rate reform has not been endorsed and entities may utilize any replacement reference rate determined to be appropriate based on its funding model and customer needs. As discussed in the “Interagency Policy Statement on Reference Rates for Loans," fallback language should be included in lending contracts to provide for use of a robust fallback rate if the initial reference rate is discontinued. Additionally, federal banking regulators issued the "Interagency Statement on LIBOR Transition" acknowledging that the administrator of USD LIBOR benchmarks has announced it will consult on its intention to cease the publication of the one week and two month USD LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. On March 5, 2021, the administrator of USD LIBOR benchmarks confirmed these dates and will cease publication of USD LIBOR tenors accordingly. As discussed in the "Interagency Statement on LIBOR Transition," regulators encouraged banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, in order to facilitate an orderly, safe and sound LIBOR transition. The Company continues to monitor efforts and evaluate the impact of reference rate reform on its consolidated financial statements.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," to simplify the accounting for income taxes by removing certain exceptions to the general principles of ASC ~~740.~~740, "Income Taxes". The guidance also ~~improves~~improved consistent application by clarifying and amending existing guidance from ASC 740. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods therein and is to be applied on a retrospective, modified retrospective or prospective approach, depending on the specific amendment. Early adoption is permitted. The Company ~~does~~adopted ASU No. 2019-12 as of January 1, 2021. Adoption of this standard did not ~~expect this guidance to~~ have a material impact on the Company’s consolidated financial statements.

Investment Securities

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

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

~~This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods therein, and is to be applied~~The Company adopted ASU No. 2020-01 as of January 1, 2021 under a prospective approach. ~~Early adoption is permitted. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.~~

~~Codification Improvements to Financial Instruments~~

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

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

As the Company has already adopted the standards amended by this ASU, this guidance is effective upon issuance. Amendments to ASC 326 were applied under a modified retrospective approach through a cumulative-effect adjustment recognized by the Company directly to retained earnings on the Company's Consolidated Statements of Condition. Adoption of this ~~guidance~~standard did not have a material impact on the Company’s consolidated financial statements.

Table of Contents

~~Reference Rate Reform~~

Codification Improvements

In ~~March~~October 2020, the FASB issued ASU No. ~~2020-04, “Reference Rate Reform (Topic 848),~~2020-08, “Codification Improvements to Subtopic 310-20, Receivables — Nonrefundable Fees and Other Costs,” ~~which provides temporary optional relief~~clarifying that, for ~~contracts modified as a result of reference rate reform meeting certain modification criteria, generally allowing~~each reporting period, an entity

should reevaluate whether a callable debt security with multiple call dates is within the scope of ASC 310-20, which was amended to ~~account for contract modifications occurring due~~require amortization of any premium to ~~reference rate reform as an event that does not require contract remeasurement or reassessment of a previous accounting determination at~~ the ~~modification~~next call date. The guidance also includes temporary optional expedients intended to provide relief from various hedge effectiveness requirements for hedging relationships affected by reference rate reform, provided certain criteria are met, and allowsnext call date was defined as the first date when a one-time election to sell or transfer to either available-for-sale or trading any held-to-maturity ("HTM") debt securities that refer to an interest rate affected by reference rate reform and were classifiedcall option at a specified price becomes exercisable. The Company adopted ASU No. 2020-08 as ~~HTM prior to~~of January 1, ~~2020. This guidance is effective upon issuance and can be applied prospectively, with certain exceptions, through December 31, 2022. The Company continues to evaluate~~2021 under a prospective approach. Adoption of this standard did not have a material impact on the ~~impact of adopting this new guidance on the~~Company’s consolidated financial statements.

Additionally, the FASB issued ASU No. 2020-10, “Codification Improvements,” in October 2020 to improve the consistency of the Codification by adding or moving disclosure-specific guidance contained in the Other Presentation Matters section to the appropriate Disclosure Section for various Topics. The Company adopted ASU No. 2020-10 as of January 1, 2021 under a retrospective approach. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

SEC Amendments to Financial Disclosures about Acquired and Disposed Businesses

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

Debt

In August 2020, the FASB issued ASU No. 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which includes provisions for reducing the number of accounting models used in accounting for convertible debt instruments and convertible preferred stock, amending derivatives and earnings-per-share (EPS) guidance and expanding disclosures for convertible debt instruments and EPS. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods therein, and is to be applied under either a full or modified retrospective approach. Early adoption is permitted. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

SEC Update of Statistical Disclosures for Bank and Savings and Loan Registrants

In September 2020, the SEC issued a final rule on the “Update of Statistical Disclosures for Bank and Savings and Loan Registrants,” which adopts rules to update statistical disclosure requirements for banking registrants. The amendments update and expand the disclosures that registrants are required to provide, codify certain Industry Guide 3 disclosure items and eliminate other Guide 3 disclosures that overlap with SEC rules, GAAP or IFRS standards. In addition, Guide 3 is being rescinded and replaced with a new subpart of Regulation S-K. The SEC ruling is applicable to fiscal years beginning after December 15, 2021 and early compliance is permitted. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

Issuer’s Accounting for Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

In May 2021, the FASB issued ASU No. 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options,” which requires an issuer to account for any modification or exchange of the terms or conditions of a freestanding written call option classified as equity, such as warrants, that remains classified as equity as an exchange of the original instrument for a new instrument and provides a framework for measuring and recognizing the effect of the exchange as an adjustment to either equity or expense. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods therein, and is to be applied prospectively. Early adoption is permitted. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

Table of Contents

(3)~~Business Combinations and Asset Acquisitions~~

~~Bank Acquisitions~~

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

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

On May 24, 2019, the Company completed its acquisition of Rush-Oak Corporation ("ROC"). ROC was the parent company of Oak Bank. Through this business combination, the Company acquired Oak Bank's 1 banking location in Chicago, Illinois, as well as approximately $223.4 million in assets, including loans with a fair value of approximately $124.7 million, and deposits with a fair value of approximately $161.2 million. The Company recorded goodwill of $11.7 million on the acquisition.

~~(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)~~(4) Investment Securities

The following tables are a summary of the investment securities portfolios as of the dates shown:


	June 30, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale securities

U.S. Government agencies	$	75,169	$	3,685	$	0	$	78,854
Municipal	163,715		4,738		(157)		168,296
Corporate notes:
Financial issuers	98,827		520		(1,818)		97,529
Other	1,000		13		0		1,013
Mortgage-backed: (1)
Mortgage-backed securities	1,800,751		50,171		(16,839)		1,834,083
Collateralized mortgage obligations	8,596		237		0		8,833
Total available-for-sale securities	$	2,148,058	$	59,364	$	(18,814)	$	2,188,608
Held-to-maturity securities
U.S. Government agencies	$	176,152	$	1,064	$	(3,454)	$	173,762
Municipal	191,590		10,838		(308)		202,120
Mortgage-backed securities	2,078,678		5,139		(30,834)		2,052,983
Corporate notes	51,902		0		(535)		51,367
Total held-to-maturity securities	$	2,498,322	$	17,041	$	(35,131)	$	2,480,232
Less: Allowance for credit losses	(90)
Held-to-maturity securities, net of allowance for credit losses	$	2,498,232
Equity securities with readily determinable fair value	$	81,401	$	6,005	$	(1,090)	$	86,316

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

Table of Contents

June 30, 2020
(Dollars in thousands)
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
Available-for-sale securities
U.S. Treasury $ 59,949
$ 590
$ —
$ 60,539
U.S. Government agencies 287,811
5,696
—
293,507
Municipal 147,411
3,721
(253 ) 150,879
Corporate notes:
Financial issuers 106,744
514
(5,398 ) 101,860
Other 1,000
19
—
1,019
Mortgage-backed: ⁽¹⁾

Mortgage-backed securities 2,459,274
110,354
(7 ) 2,569,621
Collateralized mortgage obligations 17,110
427
(1 ) 17,536
Total available-for-sale securities $ 3,079,299
$ 121,321
$ (5,659 ) $ 3,194,961
Held-to-maturity securities
U.S. Government agencies $ 514,404
$ 4,961
$ —
$ 519,365
Municipal 214,126
10,952
(157 ) 224,921
Total held-to-maturity securities $ 728,530
$ 15,913
$ (157 ) $ 744,286
Less: Allowance for credit losses ⁽²⁾
(65 )
Held-to-maturity securities, net of allowance for credit losses $ 728,465

Equity securities with readily determinable fair value $ 51,673
$ 1,164
$ (377 ) $ 52,460


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


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


	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(Dollars in thousands)
Available-for-sale securities
U.S. Treasury	$	304,956	$	15	$	0	$	304,971
U.S. Government agencies	80,074		4,439		0		84,513
Municipal	141,244		5,707		(41)		146,910
Corporate notes:
Financial issuers	91,786		1,363		(2,764)		90,385
Other	1,000		20		0		1,020
Mortgage-backed: (1)
Mortgage-backed securities	2,330,332		86,721		(15)		2,417,038
Collateralized mortgage obligations	10,689		313		0		11,002
Total available-for-sale securities	$	2,960,081	$	98,578	$	(2,820)	$	3,055,839
Held-to-maturity securities
U.S. Government agencies	$	177,959	$	2,552	$	0	$	180,511
Municipal	200,707		12,232		(214)		212,725
Mortgage-backed securities	200,531		0		0		200,531
Total held-to-maturity securities	$	579,197	$	14,784	$	(214)	$	593,767
Less: Allowance for credit losses	(59)
Held-to-maturity securities, net of allowance for credit losses	$	579,138
Equity securities with readily determinable fair value	$	87,618	$	3,674	$	(430)	$	90,862

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

December 31, 2019

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
(Dollars in thousands)
Available-for-sale securities
U.S. Treasury $ 120,275
$ 813
$ —
$ 121,088
U.S. Government agencies 365,639
3,557
(3,754 ) 365,442
Municipal 141,701
3,785
(168 ) 145,318
Corporate notes:
Financial issuers 97,051
761
(4,002 ) 93,810
Other 1,000
31
—
1,031
Mortgage-backed: ⁽¹⁾

Mortgage-backed securities 2,328,383
21,240
(3,013 ) 2,346,610
Collateralized mortgage obligations 32,775
280
(140 ) 32,915
Total available-for-sale securities $ 3,086,824
$ 30,467
$ (11,077 ) $ 3,106,214
Held-to-maturity securities
U.S. Government agencies $ 902,974
$ 2,159
$ (5,460 ) $ 899,673
Municipal 231,426
7,536
(239 ) 238,723
Total held-to-maturity securities $ 1,134,400
$ 9,695
$ (5,699 ) $ 1,138,396
Equity securities with readily determinable fair value $ 48,044
$ 3,511
$ (715 ) $ 50,840


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


	June 30, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
(Dollars in thousands)
Available-for-sale securities
U.S. Treasury	$	59,949	$	590	$	0	$	60,539
U.S. Government agencies	287,811		5,696		0		293,507
Municipal	147,411		3,721		(253)		150,879
Corporate notes:
Financial issuers	106,744		514		(5,398)		101,860
Other	1,000		19		0		1,019
Mortgage-backed: (1)
Mortgage-backed securities	2,459,274		110,354		(7)		2,569,621
Collateralized mortgage obligations	17,110		427		(1)		17,536
Total available-for-sale securities	$	3,079,299	$	121,321	$	(5,659)	$	3,194,961
Held-to-maturity securities
U.S. Government agencies	$	514,404	$	4,961	$	0	$	519,365
Municipal	$	214,126	10,952		(157)		224,921
Total held-to-maturity securities	$	728,530	$	15,913	$	(157)	$	744,286
Less: Allowance for credit losses	(65)
Held-to-maturity securities, net of allowance for credit losses	$	728,465
Equity securities with readily determinable fair value	$	51,673	$	1,164	$	(377)	$	52,460

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

June 30, 2019

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value
(Dollars in thousands)
Available-for-sale securities
U.S. Treasury $ 131,238
$ 1,051
$ (20 ) $ 132,269
U.S. Government agencies 167,847
3,093
—
170,940
Municipal 138,097
4,627
(115 ) 142,609
Corporate notes:
Financial issuers 97,065
91
(7,293 ) 89,863
Other 1,000
50
—
1,050
Mortgage-backed: ⁽¹⁾

Mortgage-backed securities 1,606,549
13,402
(10,727 ) 1,609,224
Collateralized mortgage obligations 39,774
603
(178 ) 40,199
Total available-for-sale securities $ 2,181,570
$ 22,917
$ (18,333 ) $ 2,186,154
Held-to-maturity securities
U.S. Government agencies $ 952,526
$ 3,241
$ (2,603 ) $ 953,164
Municipal 239,108
6,521
(315 ) 245,314
Total held-to-maturity securities $ 1,191,634
$ 9,762
$ (2,918 ) $ 1,198,478
Equity securities with readily determinable fair value $ 42,087
$ 2,984
$ (752 ) $ 44,319


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

Equity securities without readily determinable fair values totaled ~~$31.1~~$34.0 million as of June 30, ~~2020.~~2021. 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 monitors its equity investments without readily determinable fair values

Table of Contents

to identify potential transactions that may indicate an observable price change in orderly transactions for the identical or a similar investment of the same issuer, requiring adjustment to its carrying amount. The Company recorded 0 upward and 0 downward adjustments related to such observable price changes for the three ~~months ended June 30, 2020~~ and ~~$393,000 of upward adjustments for the~~ six months ended June 30, ~~2020. NaN downward adjustments on such securities were recorded for the three and six month periods ended June 30, 2020.~~2021. The Company conducts a quarterly assessment of its equity securities without readily determinable fair values to determine whether impairment exists in such securities, considering, among other factors, the nature of the securities, financial condition of the issuer and expected future cash flows. ~~During~~The Company recorded 0 impairment of equity securities without readily determinable fair values for the three ~~and~~months ended June 30, 2021. During the six months ended June 30, ~~2020,~~2021, the Company recorded ~~$388,000 and $2.1 million, respectively,~~$30,000 of impairment of equity securities without readily determinable fair values.

The following table presents the portion of the Company’s available-for-sale investment securities portfolios ~~which has~~that have gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position at June 30, ~~2020:~~2021:


	Continuous unrealized losses existing for less than 12 months				Continuous unrealized losses existing for greater than 12 months				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-sale securities

U.S. Government agencies	$	0	$	0	$	0	$	0	$	0	$	0
Municipal	34,341		(155)		113		(2)		34,454		(157)
Corporate notes:
Financial issuers	24,381		(619)		47,782		(1,199)		72,163		(1,818)
Other	0		0		0		0		0		0
Mortgage-backed:
Mortgage-backed securities	591,896		(16,812)		936		(27)		592,832		(16,839)
Collateralized mortgage obligations	0		0		0		0		0		0
Total available-for-sale securities	$	650,618	$	(17,586)	$	48,831	$	(1,228)	$	699,449	$	(18,814)

Continuous unrealized
losses existing for
less than 12 months

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

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

The Company does not consider available-for-sale securities with unrealized losses at June 30, ~~2020~~2021 to be experiencing credit losses and recognized no resulting allowance for credit losses for such individually assessed credit losses. The Company does not intend to sell these investments and it is more likely than not that the Company will 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. Available-for-sale securities with continuous unrealized losses existing for more than twelve months were primarily corporate notes.

See Note 7—6—Allowance for Credit Losses for further discussion regarding any credit losses associated with held-to-maturity securities at June 30, ~~2020.~~2021.

Table of Contents

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 June 30,				Six months ended June 30,
(Dollars in thousands)	2021		2020		2021		2020
Realized gains on investment securities	$	613	$	151	$	829	$	647
Realized losses on investment securities	(29)		(492)		(35)		(497)
Net realized gains (losses) on investment securities	584		(341)		794		150
Unrealized gains on equity securities with readily determinable fair value	751		1,647		2,626		1,647
Unrealized losses on equity securities with readily determinable fair value	(50)		(110)		(951)		(3,656)
Net unrealized gains (losses) on equity securities with readily determinable fair value	701		1,537		1,675		(2,009)
Upward adjustments of equity securities without readily determinable fair values	0		0		0		393
Downward adjustments of equity securities without readily determinable fair values	0		0		0		0
Impairment of equity securities without readily determinable fair values	0		(388)		(30)		(2,085)
Adjustment and impairment, net, of equity securities without readily determinable fair values	0		(388)		(30)		(1,692)
Gains (losses) on investment securities, net	$	1,285	$	808	$	2,439	$	(3,551)





Proceeds from sales of available-for-sale securities(1)	$	2,376	$	502,185	$	2,376	$	502,676

Proceeds from sales of equity securities with readily determinable fair value	4,750		4,000		6,259		4,030
Proceeds from sales and capital distributions of equity securities without readily determinable fair value	751		156		1,137		444

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


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


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

Table of Contents

The amortized cost and fair value of available-for-sale and held-to-maturity investment securities as of June 30, ~~2020,~~2021, December 31, ~~2019~~2020 and June 30, ~~2019,~~2020, 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:


	June 30, 2021				December 31, 2020				June 30, 2020
(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale securities
Due in one year or less	$	38,298	$	38,508	$	343,601	$	343,846	$	120,316	$	121,023
Due in one to five years	87,939		89,869		67,901		70,334		74,427		76,284
Due in five to ten years	119,858		119,979		111,886		112,178		173,429		169,249
Due after ten years	92,616		97,336		95,672		101,441		234,743		241,248
Mortgage-backed	1,809,347		1,842,916		2,341,021		2,428,040		2,476,384		2,587,157
Total available-for-sale securities	$	2,148,058	$	2,188,608	$	2,960,081	$	3,055,839	$	3,079,299	$	3,194,961
Held-to-maturity securities
Due in one year or less	$	5,119	$	5,152	$	7,138	$	7,186	$	6,988	$	7,028
Due in one to five years	56,059		56,988		22,217		23,068		21,818		22,362
Due in five to ten years	171,908		178,864		150,621		159,293		146,937		153,664
Due after ten years	186,558		186,245		198,690		203,689		552,787		561,232
Mortgage-backed	2,078,678		2,052,983		200,531		200,531		0		0
Total held-to-maturity securities	$	2,498,322	$	2,480,232	$	579,197	$	593,767	$	728,530	$	744,286
Less: Allowance for credit losses	(90)				(59)				(65)
Held-to-maturity securities, net of allowance for credit losses	$	2,498,232			$	579,138			$	728,465

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


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

Securities having a carrying value of ~~$3.2~~$2.4 billion at June 30, ~~2020~~2021 as well as securities having a carrying value of ~~$1.7~~$2.4 billion and ~~$1.9~~$3.2 billion at December 31, ~~2019~~2020 and June 30, ~~2019,~~2020, respectively, were pledged as collateral for public deposits, trust deposits, Federal Home Loan Bank ~~("FHLB"~~(“FHLB”) advances and available lines of credit, securities sold under repurchase agreements and derivatives. At June 30, ~~2020,~~2021, there were 0 securities of a single issuer, other than U.S. Government-sponsored agency securities, which exceeded 10% of shareholders’ equity.

Table of Contents

~~(6)~~(5) Loans

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


	June 30,			December 31,			June 30,
(Dollars in thousands)	2021			2020			2020
Balance:
Commercial	$	11,442,276		$	11,955,967		$	11,859,232
Commercial real estate	8,678,369			8,494,132			8,200,745
Home equity	369,806			425,263			466,596
Residential real estate	1,530,285			1,259,598			1,427,429
Premium finance receivables
Commercial insurance	4,521,871			4,054,489			3,999,774
Life insurance	6,359,556			5,857,436			5,400,802
Consumer and other	9,024			32,188			48,325
Total loans, net of unearned income	$	32,911,187		$	32,079,073		$	31,402,903
Mix:
Commercial	35		%	37		%	38		%
Commercial real estate	26			26			26
Home equity	1			1			1
Residential real estate	5			5			5
Premium finance receivables
Commercial insurance	14			13			13
Life insurance	19			18			17
Consumer and other	0			0			0
Total loans, net of unearned income	100		%	100		%	100		%

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

The Company’s loan portfolio is generally comprised of loans to consumers and small to medium-sized businesses, which, for the commercial and commercial real estate portfolios, are located primarily within the geographic market areas that the banks serve. Various niche lending businesses, including lease finance and franchise lending, operate on a national level. Additionally, to provide short-term relief due to macroeconomic deterioration from the COVID-19 pandemic to small businesses within such market areas, the Company ~~originates~~originated loans through the Paycheck Protection Program ("PPP"), an expansion of guaranteed lending under Section 7(a) of the Small Business Act within the CARES Act. As of June 30, ~~2020,~~2021, the Company's commercial portfolio included approximately ~~$3.3~~$1.9 billion of such PPP loans. The premium finance receivables portfolios are made to customers throughout the United States and Canada. The Company strives to maintain a loan portfolio that is diverse in terms of loan type, industry, borrower and geographic concentrations. Such diversification reduces the exposure to economic downturns that may occur in different segments of the economy or in different industries.

Certain premium finance receivables are recorded net of unearned income. The unearned income portions of such premium finance receivables were $125.5 million at June 30, 2021, $113.1 million at December 31, 2020 and $114.8 million at June 30, ~~2020, $118.4 million at December 31, 2019 and $119.7 million at June 30, 2019.~~2020.

Total loans, excluding PCD loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $(6.3) million at June 30, 2021, $(3.2) million at December 31, 2020 and $(61.7) million at June 30, ~~2020, $9.1 million at December 31, 2019 and $5.6 million at~~2020. Net deferred fees as of June 30, ~~2019. Prior~~2021 includes $42.3 million of net deferred fees paid by the Small Business Administration ("SBA") for loans originated under the PPP. As PPP loans share similar characteristics (loan terms), and prepayments are considered probable and can reasonably be estimated due to ~~January 1, 2020, PCI loans were recorded net~~terms of ~~credit discounts. See “PCI Loans” below.~~the program, the Company considers estimated future principal prepayments in recognizing such deferred fees for determining a constant effective yield on the portfolio of loans.

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.

~~PCI Loans~~

Prior to January 1, 2020, PCI loans were aggregated into pools by common risk characteristics for accounting purposes, including recognition of interest income on a pool basis. Measurement of any allowance for loan losses on these loans were offset by the remaining credit discount related to the pool. Changes in expected cash flows would vary from period to period as the Company periodically updated its cash flow model assumptions for PCI loans. The factors that most significantly affect the estimates of gross cash flows expected to be collected, and accordingly the accretable yield, included changes in the benchmark interest rate indices for variable-rate products and changes in prepayment assumptions and loss estimates. As a result of the implementation

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

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

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

December 31, 2019
(In thousands) Unpaid
Principal
Balance Carrying
Value

PCI loans $ 455,784
$ 425,372

~~Accretable Yield Activity - PCI Loans~~

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

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


~~(1)~~	~~Reclassification is the result of subsequent increases in expected principal cash flows.~~

Table of Contents

~~(7)~~(6) Allowance for Credit Losses

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

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

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

Commercial real estate loans, including construction and development, and non-construction: The Company's commercial real estate loans are generally secured by a first mortgage lien and assignment of rents on the underlying property. Since most of the Company's bank branches are located in the Chicago metropolitan area and southern Wisconsin, a significant portion of the Company's commercial real estate loan portfolio is located in this region. As the risks and circumstances of such loans in construction

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

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

Residential real estate loans: The Company's residential real estate portfolio ~~predominantly~~ includes one- to four-family fixed and adjustable rate mortgages ~~that have~~with repricing terms generally ~~from one to three~~over five years, construction loans to individuals and bridge financing loans for qualifying customers. The Company's ~~adjustable rate~~residential mortgages relate to properties located principally in the Chicago metropolitan area and southern Wisconsin or vacation homes owned by local residents. Due to interest rate risk considerations, the Company generally sells in the secondary market loans originated with long-term fixed rates, however, certain of these loans may be retained within the banks’ own portfolios where they are non-agency conforming, or where the terms of the loans make them favorable to retain. The Company believes that since this loan portfolio consists primarily of locally originated loans, and since the majority of the borrowers are longer-term customers with lower LTV ratios, the Company faces a relatively low risk of borrower default and delinquency. It is not the Company's current practice to underwrite, and there are no plans to underwrite subprime, Alt A, no or little documentation loans, or option ARM loans.

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

The Company also originates life insurance premium finance receivables. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The life

Table of Contents

insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In some cases, the Company may make a loan that has a partially unsecured position.

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

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

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

Mortgage-backed securities: This security type includes debt obligations supported by pools of individual mortgage loans and issued by certain government-sponsored entities of the U.S. government such as Freddie Mac and Fannie Mae. Such securities are considered to contain an implicit guarantee of the U.S. government.

Corporate notes: The Company's corporate notes portfolio includes bond issues for various public companies representing a diversified population of industries. The risk of loss in this portfolio is considered low based on the characteristics of the investments, including the Company’s own past history with similar investments.

In accordance with ASC 326, the Company elected to not measure an allowance for credit losses on accrued interest as such accrued interest is written off in a timely manner when deemed uncollectible. Any such write-off of accrued interest will reverse previously recognized interest income. In addition, the Company elected to not include accrued interest within presentation and disclosures of the carrying amount of financial assets held at amortized cost. This election is applicable to the various disclosures included within the Company's financial statements. Accrued interest related to financial assets held at amortized cost is included within accrued interest receivable and other assets within the Company's Consolidated Statements of Condition and totaled $119.1 million at June 30, 2021, $121.9 million at December 31, 2020, and $109.1 million at June 30, 2020.

The tables below show the aging of the Company’s loan portfolio by the segmentation noted above at June 30, ~~2020,~~2021, December 31, ~~2019~~2020 and June 30, ~~2019. For periods prior to January 1, 2020, PCI loans are disclosed in segmentation consistent with that discussed above for comparative purposes. For accounting purposes, including recognition~~2020:


As of June 30, 2021			90+ days and still accruing		60-89 days past due		30-59 days past due
(In thousands)	Nonaccrual								Current		Total Loans
Loan Balances (includes PCD):
Commercial






Commercial, industrial and other, excluding PPP loans	$	23,232	$	1,244	$	5,204	$	18,468	$	9,514,721	$	9,562,869
Commercial PPP loans	0		0		0		10		1,879,397		1,879,407
Commercial real estate
Construction and development	1,030		0		0		2,207		1,382,012		1,385,249
Non-construction	25,005		0		4,382		17,491		7,246,242		7,293,120







Home equity	3,478		0		301		777		365,250		369,806
Residential real estate	23,050		0		1,584		2,139		1,503,512		1,530,285
Premium finance receivables
Commercial insurance loans	6,418		3,570		7,759		8,793		4,495,331		4,521,871
Life insurance loans	0		0		0		23,965		6,335,591		6,359,556

Consumer and other	485		178		22		75		8,264		9,024
Total loans, net of unearned income	$	82,698	$	4,992	$	19,252	$	73,925	$	32,730,320	$	32,911,187

Table of interest income, PCI loans were aggregated into pools by common risk characteristics separate from non-acquired loans. As a result of the implementation of ASU 2016-13, beginning in the first quarter of 2020, PCI loans transitioned to a classification of purchased financial assets with credit deterioration ("PCD"), which no longer maintains the prior pools and related accounting concepts. Recognition of interest income on PCD loans is considered at the individual asset level following the Company's accrual policies, instead of based upon the entire pool of loans. As a result, such PCD loans are included within nonaccrual status, if applicable.

Contents


As of December 31, 2020															As of December 31, 2020			90+ days and still accruing		60-89 days past due			30-59 days past due
(In thousands)															(In thousands)	Nonaccrual						Current			Total Loans
Loan Balances (includes PCD):															Loan Balances (includes PCD):
Commercial															Commercial

As of June 30, 2020			90+ days and still accruing			60-89 days past due		30-59 days past due
(In thousands)	Nonaccrual				Current					Total Loans
Loan Balances:
Commercial

Commercial, industrial and other, excluding PPP loans	$	42,882	$	1,374		$	8,952	$	23,720		$	8,446,936	$	8,523,864	Commercial, industrial and other, excluding PPP loans	$	21,743	$	307	$	6,900		$	44,345	$	9,166,751	$	9,240,046
Commercial PPP loans	—		—			—		—			3,335,368		3,335,368		Commercial PPP loans	0		0		0			36		2,715,885		2,715,921
Commercial real estate															Commercial real estate
Construction and development	9,829		—			1,944		17,313			1,310,962		1,340,048		Construction and development	5,633		0		0			5,344		1,360,825		1,371,802
Non-construction	54,728		—			24,536		58,215			6,723,218		6,860,697		Non-construction	40,474		0		5,178			26,772		7,049,906		7,122,330

Home equity	7,261		—			—		1,296			458,039		466,596		Home equity	6,529		0		47			637		418,050		425,263
Residential real estate	19,529		—			1,506		4,400			1,401,994		1,427,429		Residential real estate	26,071		0		1,635			12,584		1,219,308		1,259,598
Premium finance receivables															Premium finance receivables
Commercial insurance loans	16,445		35,638			35,967		46,556			3,865,168		3,999,774		Commercial insurance loans	13,264		12,792		6,798			18,809		4,002,826		4,054,489
Life insurance loans	15		—			6,386		14,604			5,379,797		5,400,802		Life insurance loans	0		0		21,003			30,465		5,805,968		5,857,436

Consumer and other	427		156			4		281			47,457		48,325		Consumer and other	436		264		24			136		31,328		32,188
Total loans, net of unearned income	$	151,116	$	37,168		$	79,295	$	166,385		$	30,968,939	$	31,402,903	Total loans, net of unearned income	$	114,150	$	13,363	$	41,585		$	139,128	$	31,770,847	$	32,079,073


As of June 30, 2020			90+ days and still accruing		60-89 days past due		30-59 days past due
(In thousands)	Nonaccrual								Current		Total Loans
Loan Balances (includes PCD):
Commercial






Commercial, industrial and other, excluding PPP loans	$	42,882	$	1,374	$	8,952	$	23,720	$	8,446,936	$	8,523,864
Commercial PPP loans	0		0		0		0		3,335,368		3,335,368
Commercial real estate
Construction and development	9,829		0		1,944		17,313		1,310,962		1,340,048
Non-construction	54,728		0		24,536		58,215		6,723,218		6,860,697







Home equity	7,261		0		0		1,296		458,039		466,596
Residential real estate	19,529		0		1,506		4,400		1,401,994		1,427,429
Premium finance receivables
Commercial insurance loans	16,445		35,638		35,967		46,556		3,865,168		3,999,774
Life insurance loans	15		0		6,386		14,604		5,379,797		5,400,802

Consumer and other	427		156		4		281		47,457		48,325
Total loans, net of unearned income	$	151,116	$	37,168	$	79,295	$	166,385	$	30,968,939	$	31,402,903

As of December 31, 2019 90+ days and still accruing 60-89 days past due 30-59 days past due
(In thousands) Nonaccrual Current Total Loans
Loan Balances:⁽¹⁾

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

As of June 30, 2019 90+ days and still accruing 60-89 days past due 30-59 days past due
(In thousands) Nonaccrual Current Total Loans
Loan Balances:⁽¹⁾

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

~~(1)~~

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

Credit Quality Indicators

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

Loan portfolios

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

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

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

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

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

Table of Contents

Loss/fully charged-off (risk rating 10): Assets in this category are considered fully uncollectible. As such, these assets have no carrying balance on the Company's Consolidated Statements of Condition.

The Company’s Problem Loan Reporting system 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 and, as a result, no longer share similar risk characteristics as its related pool. If that is the case, the individual loan is considered collateral dependent and individually assessed for an allowance for credit loss. The Company’s individual assessment utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions.

Through the credit risk rating process, loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to non-accrual status or a charge-off. If the Company determines 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 Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

The table below shows the Company’s loan portfolio by credit quality indicator and year of origination at June 30, ~~2020:~~2021:


As of June 30, 2021	Year of Origination														Revolving		Total
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		to Term		Loans
Loan Balances:
Commercial, industrial and other
Pass	$	1,131,727	$	1,736,155	$	1,095,110	$	802,071	$	577,407	$	668,532	$	2,985,792	$	10,191	$	9,006,985
Special mention	18,358		24,384		65,034		42,698		18,528		14,950		112,087		5,696		301,735
Substandard accrual	22,800		19,321		33,852		47,054		24,283		52,697		30,708		202		230,917
Substandard nonaccrual/doubtful	5,205		1,695		1,651		5,263		2,017		6,838		532		31		23,232
Total commercial, industrial and other	$	1,178,090	$	1,781,555	$	1,195,647	$	897,086	$	622,235	$	743,017	$	3,129,119	$	16,120	$	9,562,869
Commercial PPP
Pass	$	1,222,905	$	656,502	$	0	$	0	$	0	$	0	$	0	$	0	$	1,879,407
Special mention	0		0		0		0		0		0		0		0		0
Substandard accrual	0		0		0		0		0		0		0		0		0
Substandard nonaccrual/doubtful	0		0		0		0		0		0		0		0		0
Total commercial PPP	$	1,222,905	$	656,502	$	0	$	0	$	0	$	0	$	0	$	0	$	1,879,407
Construction and development
Pass	$	124,444	$	384,766	$	394,765	$	181,800	$	92,839	$	100,298	$	23,614	$	1,900	$	1,304,426
Special mention	282		12,048		16,506		19,952		23,892		3,272		0		0		75,952
Substandard accrual	0		0		318		586		2,140		643		154		0		3,841
Substandard nonaccrual/doubtful	0		0		0		0		0		1,030		0		0		1,030
Total construction and development	$	124,726	$	396,814	$	411,589	$	202,338	$	118,871	$	105,243	$	23,768	$	1,900	$	1,385,249
Non-construction
Pass	$	658,154	$	1,257,031	$	962,547	$	787,771	$	762,397	$	2,129,706	$	171,239	$	457	$	6,729,302
Special mention	3,898		10,104		62,404		57,544		49,909		187,409		10		0		371,278
Substandard accrual	0		1,980		38,518		25,626		19,949		81,462		0		0		167,535

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

Table of Contents


Substandard nonaccrual/doubtful	0		0		0		1,212		291		23,502		0		0		25,005
Total non-construction	$	662,052	$	1,269,115	$	1,063,469	$	872,153	$	832,546	$	2,422,079	$	171,249	$	457	$	7,293,120
Home equity
Pass	$	14	$	0	$	0	$	47	$	28	$	7,108	$	339,728	$	0	$	346,925
Special mention	0		0		0		0		0		1,524		5,390		243		7,157
Substandard accrual	0		0		0		185		0		10,425		898		738		12,246
Substandard nonaccrual/doubtful	0		0		0		0		149		2,740		589		0		3,478
Total home equity	$	14	$	0	$	0	$	232	$	177	$	21,797	$	346,605	$	981	$	369,806
Residential real estate
Pass	$	530,211	$	325,133	$	220,143	$	88,218	$	102,470	$	212,481	$	0	$	0	$	1,478,656
Special mention	443		274		537		2,135		1,872		8,045		0		0		13,306
Substandard accrual	1,142		2,277		618		892		1,877		8,467		0		0		15,273
Substandard nonaccrual/doubtful	0		183		1,516		742		5,325		15,284		0		0		23,050
Total residential real estate	$	531,796	$	327,867	$	222,814	$	91,987	$	111,544	$	244,277	$	0	$	0	$	1,530,285
Premium finance receivables - commercial
Pass	$	3,800,468	$	660,313	$	18,990	$	1,950	$	53	$	0	$	0	$	0	$	4,481,774
Special mention	27,229		4,809		19		0		0		0		0		0		32,057
Substandard accrual	322		1,229		6		65		0		0		0		0		1,622
Substandard nonaccrual/doubtful	1,378		4,821		196		23		0		0		0		0		6,418
Total premium finance receivables - commercial	$	3,829,397	$	671,172	$	19,211	$	2,038	$	53	$	0	$	0	$	0	$	4,521,871
Premium finance receivables - life
Pass	$	210,484	$	712,285	$	691,707	$	646,188	$	674,308	$	3,424,010	$	0	$	0	$	6,358,982
Special mention	0		0		0		0		574		0		0		0		574
Substandard accrual	0		0		0		0		0		0		0		0		0
Substandard nonaccrual/doubtful	0		0		0		0		0		0		0		0		0
Total premium finance receivables - life	$	210,484	$	712,285	$	691,707	$	646,188	$	674,882	$	3,424,010	$	0	$	0	$	6,359,556
Consumer and other
Pass	$	865	$	566	$	570	$	487	$	50	$	1,492	$	4,096	$	0	$	8,126
Special mention	0		4		22		0		82		86		6		0		200
Substandard accrual	0		1		0		0		0		209		3		0		213
Substandard nonaccrual/doubtful	0		1		0		101		0		383		0		0		485
Total consumer and other	$	865	$	572	$	592	$	588	$	132	$	2,170	$	4,105	$	0	$	9,024
Total loans (1)
Pass	$	7,679,272	$	5,732,751	$	3,383,832	$	2,508,532	$	2,209,552	$	6,543,627	$	3,524,469	$	12,548	$	31,594,583
Special mention	50,210		51,623		144,522		122,329		94,857		215,286		117,493		5,939		802,259
Substandard accrual	24,264		24,808		73,312		74,408		48,249		153,903		31,763		940		431,647
Substandard nonaccrual/doubtful	6,583		6,700		3,363		7,341		7,782		49,777		1,121		31		82,698
Total loans	$	7,760,329	$	5,815,882	$	3,605,029	$	2,712,610	$	2,360,440	$	6,962,593	$	3,674,846	$	19,458	$	32,911,187

(1)Includes $97.7 million of loans with COVID-19 related modifications that migrated from pass as of March 1, 2020 to special mention or substandard accrual as of June 30, 2021. These loans were further qualitatively evaluated as a part of the measurement of the allowance for credit losses as of June 30, 2021.

Consumer and other
Pass $ 1,279
$ 3,351
$ 2,351
$ 786
$ 581
$ 20,530
$ 18,219
$ —
$ 47,097
Special mention 16
30
1
130
1
353
2
—
533
Substandard accrual 15
8
—
—
—
242
3
—
268
Substandard nonaccrual/doubtful —
14
4
17
—
392
—
—
427
Total consumer and other $ 1,310
$ 3,403
$ 2,356
$ 933
$ 582
$ 21,517
$ 18,224
$ —
$ 48,325
Total loans ⁽¹⁾

Pass $ 8,794,036
$ 4,301,609
$ 3,117,115
$ 2,527,336
$ 2,009,059
$ 5,611,541
$ 3,066,382
$ 7,859
$ 29,434,937
Special mention 76,216
241,351
175,678
117,788
174,399
214,548
132,686
—
1,132,666
Substandard accrual 10,156
139,601
104,925
91,615
58,060
178,590
100,545
692
684,184
Substandard nonaccrual/doubtful 4,022
16,478
19,812
16,428
20,290
68,358
5,728
—
151,116
Total loans $ 8,884,430
$ 4,699,039
$ 3,417,530
$ 2,753,167
$ 2,261,808
$ 6,073,037
$ 3,305,341
$ 8,551
$ 31,402,903


~~(1)~~	Includes $702.7 million of loans with COVID-19 related modifications that migrated from pass as of March 1, 2020 to special mention or substandard accrual as of June 30, 2020. These loans were qualitatively evaluated as a part of the measurement of the allowance for credit losses as of June 30, 2020.

Held-to-maturity debt securities

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

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

Table of Contents


As of June 30, 2021	Year of Origination												Total
(In thousands)	2021		2020		2019		2018		2017		Prior		Balance
Amortized Cost Balances:
U.S. government agencies
1-4 internal grade	$	97,789	$	25,000	$	0	$	50,000	$	0	$	3,363	$	176,152
5-7 internal grade	0		0		0		0		0		0		0
8-10 internal grade	0		0		0		0		0		0		0
Total U.S. government agencies	$	97,789	$	25,000	$	0	$	50,000	$	0	$	3,363	$	176,152
Municipal
1-4 internal grade	$	1,374	$	0	$	161	$	7,528	$	43,574	$	138,953	$	191,590
5-7 internal grade	0		0		0		0		0		0		0
8-10 internal grade	0		0		0		0		0		0		0
Total municipal	$	1,374	$	0	$	161	$	7,528	$	43,574	$	138,953	$	191,590
Mortgage-backed securities
1-4 internal grade	$	2,078,678	$	0	$	0	$	0	$	0	$	0	$	2,078,678
5-7 internal grade	0		0		0		0		0		0		0
8-10 internal grade	0		0		0		0		0		0		0
Total mortgage-backed securities	$	2,078,678	$	0	$	0	$	0	$	0	$	0	$	2,078,678
Corporate notes
1-4 internal grade	$	0	$	13,620	$	7,440	$	3,305	$	3,259	$	24,278	$	51,902
5-7 internal grade	0		0		0		0		0		0		0
8-10 internal grade	0		0		0		0		0		0		0
Total corporate notes	$	0	$	13,620	$	7,440	$	3,305	$	3,259	$	24,278	$	51,902
Total held-to-maturity securities													$	2,498,322
Less: Allowance for credit losses													(90)
Held-to-maturity securities, net of allowance for credit losses													$	2,498,232

Measurement of Allowance for Credit Losses

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

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


	June 30,		December 31,		June 30,
(In thousands)	2021		2020		2020





Allowance for loan losses	$	261,089	$	319,374	$	313,510
Allowance for unfunded lending-related commitments losses	42,942		60,536		59,599
Allowance for loan losses and unfunded lending-related commitments losses	304,031		379,910		373,109
Allowance for held-to-maturity securities losses	90		59		65
Allowance for credit losses	$	304,121	$	379,969	$	373,174

Table of Contents

third party and reviewed within the Company's governance structure. For periods beyond the ability to develop reasonable and supportable forecasts, the Company reverts to historical loss rates at an input level, straight-line over a four quarter reversion period. Expected credit losses are measured over the contractual term of the financial asset with consideration of expected prepayments. Expected extensions, renewals or modifications of the financial asset are only considered when either 1) the expected extension, renewal or modification is contained within the existing agreement and is not unconditionally cancelable, or 2) the expected extension, renewal or modification is reasonably expected to result in a TDR. The methodologies discussed above are applied to both current asset balances on the Company's Consolidated Statements of Condition and off-balance sheet commitments (i.e. unfunded lending-related commitments).

Assets that do not share similar risk ~~characteristic~~characteristics with a pool are assessed for the allowance for credit losses on an individual basis. These typically include assets experiencing financial difficulties, including assets rated as substandard nonaccrual ~~assets~~ and doubtful as well as assets currently classified or expected to be classified as TDRs. If foreclosure is probable or the asset is considered collateral-dependent, expected credit losses are measured based upon the fair value of the underlying collateral adjusted for selling costs, if appropriate. Underlying collateral across the Company's segments consist primarily of real estate, land and construction assets as well as general business assets of the borrower. As of June 30, ~~2020,~~2021, excluding loans carried at fair value, substandard nonaccrual loans totaling ~~$83.4~~$50.1 million in carrying balance had no related allowance for credit losses. For certain accruing current and expected TDRs, expected credit losses are measured based upon the present value of future cash flows of the modified asset terms compared to the amortized cost of the asset. Considering accounting relief provided under Section 4013 of the CARES Act, loans identified as being reasonably expected to be modified into TDRs in the future totaled ~~$4.4 million~~$202,000 as of June 30, ~~2020.~~2021.

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

Loan portfolios

A summary of activity in the allowance for credit losses, specifically for the loan portfolio (i.e. allowance for loan losses and allowance for unfunded commitment losses), for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 is as follows. ~~Periods prior to January 1, 2020 are presented in accordance with accounting rules effective at that time.~~


Three months ended June 30, 2021			Commercial Real Estate		Home Equity		Residential Real Estate		Premium Finance Receivables		Consumer and Other		Total Loans
(In thousands)	Commercial

Allowance for credit losses at beginning of period	$	95,640	$	181,792	$	11,382	$	14,242	$	17,477	$	676	$	321,209

Other adjustments	0��		0		0		0		33		0		33
Charge-offs	(3,237)		(1,412)		(142)		(3)		(2,077)		(104)		(6,975)
Recoveries	902		514		328		36		3,239		34		5,053
Provision for credit losses	5,202		(22,372)		(361)		1,409		1,227		(394)		(15,289)


Allowance for credit losses at period end	$	98,507	$	158,522	$	11,207	$	15,684	$	19,899	$	212	$	304,031
Individually measured	$	8,625	$	1,257	$	213	$	1,045	$	0	$	77	$	11,217
Collectively measured	89,882		157,265		10,994		14,639		19,899		135		292,814

Loans at period end
Individually measured	$	30,144	$	35,694	$	18,080	$	29,384	$	0	$	552	$	113,854
Collectively measured	11,412,132		8,642,675		351,726		1,445,561		10,881,427		8,472		32,741,993

Loans held at fair value	0		0		0		55,340		0		0		55,340

Table of Contents


Three months ended June 30, 2020				Commercial Real Estate				Home Equity				Residential Real Estate			Premium Finance Receivables			Consumer and Other				Total Loans			Three months ended June 30, 2020	Commercial				Commercial Real Estate				Home Equity				Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
(In thousands)	Commercial										(In thousands)

Allowance for credit losses at beginning of period	$	107,346					$		112,796				$	12,394							$				12,550			$	7,880			$	446	$	253,412	Allowance for credit losses at beginning of period	$	107,346		$	112,796		$	12,394		$	12,550		$	7,880	$	446	$	253,412

Other adjustments	—			—				—				—			42			—				42			Other adjustments	0				0				0				0			42			0			42

Charge-offs	(5,686		)	(7,224		)		(239		)		(293		)	(3,434		)	(99		)		(16,975		)	Charge-offs	(5,686)				(7,224)				(239)				(293)			(3,434)			(99)			(16,975)
Recoveries	112			493				46				30			833			58				1,572			Recoveries	112				493				46				30			833			58			1,572
Provision for credit losses	31,825			91,061				(12		)		(372		)	12,271			285				135,058			Provision for credit losses	31,825				91,061				(12)				(372)			12,271			285			135,058
Allowance for credit losses at period end	$	133,597		$	197,126			$	12,189			$	11,915		$	17,592		$	690			$	373,109		Allowance for credit losses at period end	$	133,597			$	197,126			$	12,189			$	11,915		$	17,592		$	690		$	373,109
Individually measured	$	12,689		$	5,023			$	264			$	393		$	—		$	114			$	18,483		Individually measured	$	12,689			$	5,023			$	264			$	393		$	0		$	114		$	18,483
Collectively measured	120,908			192,103				11,925				11,522			17,592			576				354,626			Collectively measured	120,908				192,103				11,925				11,522			17,592			576			354,626

Loans at period end																									Loans at period end
Individually measured	$	48,220		$	83,664			$	22,782			$	28,145		$	—		$	554			$	183,365		Individually measured	$	48,220			$	83,664			$	22,782			$	28,145		$	0		$	554		$	183,365
Collectively measured	11,811,012			8,117,081				443,814				1,144,670			9,400,576			47,771				30,964,924			Collectively measured	11,811,012				8,117,081				443,814				1,144,670			9,400,576			47,771			30,964,924

Loans held at fair value	—			—				—				254,614			—			—				254,614			Loans held at fair value	0				0				0				254,614			0			0			254,614

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


Six months ended June 30, 2021			Commercial Real Estate		Home Equity		Residential Real Estate		Premium Finance Receivables		Consumer and Other		Total Loans
(In thousands)	Commercial

Allowance for credit losses at beginning of period	$	94,212	$	243,603	$	11,437	$	12,459	$	17,777	$	422	$	379,910

Other adjustments	0		0		0		0		63		0		63
Charge-offs	(15,018)		(2,392)		(142)		(5)		(5,316)		(218)		(23,091)
Recoveries	1,354		714		429		240		5,021		66		7,824
Provision for credit losses	17,959		(83,403)		(517)		2,990		2,354		(58)		(60,675)


Allowance for credit losses at period end	$	98,507	$	158,522	$	11,207	$	15,684	$	19,899	$	212	$	304,031


Six months ended June 30, 2020				Commercial Real Estate				Home Equity				Residential Real Estate				Premium Finance Receivables			Consumer and Other			Total Loans		Six months ended June 30, 2020					Commercial Real Estate				Home Equity				Residential Real Estate				Premium Finance Receivables				Consumer and Other				Total Loans
(In thousands)	Commercial										(In thousands)				Commercial

Allowance for credit losses at beginning of period	$	64,920					$		68,511				$	3,878				$			9,800				$	9,647	$	1,705			$	158,461		Allowance for credit losses at beginning of period	$	64,920			$	68,511			$	3,878			$	9,800			$	9,647	$	1,705	$	158,461
Cumulative effect adjustment from the adoption of ASU 2016-13	9,039			32,064				9,061				3,002				(4,959	)		(863	)		47,344		Cumulative effect adjustment from the adoption of ASU 2016-13	9,039				32,064				9,061				3,002				(4,959)				(863)				47,344
Other adjustments	—			—				—				—				(31	)		—			(31	)	Other adjustments	0				0				0				0				(31)				0				(31)
Charge-offs	(7,839		)	(7,794		)		(1,240		)		(694		)		(6,618	)		(227	)		(24,412	)	Charge-offs	(7,839)				(7,794)				(1,240)				(694)				(6,618)				(227)				(24,412)
Recoveries	495			756				340				90				1,943			100			3,724		Recoveries	495				756				340				90				1,943				100				3,724
Provision for credit losses	66,982			103,589				150				(283		)		17,610			(25	)		188,023		Provision for credit losses	66,982				103,589				150				(283)				17,610				(25)				188,023
Allowance for credit losses at period end	$	133,597		$	197,126			12,189				11,915				17,592			690			373,109		Allowance for credit losses at period end	$	133,597			$	197,126			$	12,189			$	11,915			$	17,592			$	690			$	373,109

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


~~(1)~~	Prior to January 1, 2020, measurement of any allowance for loan losses on PCI loans were offset by the remaining discount related to the acquired pool. As a result of the adoption of ASU 2016-13, PCI loans transitioned to a classification of PCD. Measurement of any allowance for loan losses on PCD loans is no longer offset by the remaining discount.

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

For the three and six month periods ended June 30, ~~2020,~~2021, the Company recognized approximately ~~$135.1~~$(15.3) million and ~~$188.0~~$(60.7) million of provision for credit losses, respectively, related to loans and lending ~~agreements,~~agreements. The provision for such periods was primarily ~~as a~~the result of improvements in the ~~continued change to~~forecasted macroeconomic ~~conditions created by~~forecast, specifically the COVID-19 pandemic, and the impact on the Company's macroeconomic forecasts of the Commercial Real-Estate Price Index as well as other key model inputs (Baa corporate credit spreads, gross domestic product and Dow Jones Total Stock Market Index). The Company's macroeconomic forecasts of key model inputs ~~assumes~~(most notably, Commercial Real Estate Price Index and Baa corporate credit spreads) as well as improvements in characteristics of the Company's loan portfolios. While uncertainties remain regarding expected economic recovery, ~~from~~macroeconomic forecasts as of June 30, 2021 assume that the impact of ~~the~~those uncertainties is less severe compared to that assumed at December 31, 2020. Other key drivers of provision for credit losses in these portfolios include, but are not

Table of Contents

limited to, decreases to COVID-19 ~~pandemic during 2021. The Company also considered certain qualitative factors, including its low exposure to industries with highest~~related loan modifications and positive loan risk ~~factors and the impact of government-sponsored stimulus programs.~~rating migration. Net charge-offs in the three and six month periods ending June 30, ~~2020~~2021, totaled ~~$15.4~~$1.9 million and ~~$20.7 million, respectively.~~$15.3 million.

Held-to-maturity debt securities

At January 1, 2020, the Company established an allowance for credit losses on its held-to-maturity debt securities totaling approximately $74,000, which is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company's Consolidated Statements of Condition. Such adjustment was recorded directly to the Company's retained earnings, net of taxes. For the three and six month periods ended June 30, ~~2020,~~2021, the Company recognized an approximately ~~$5,000~~$(10,000) and ~~$9,000 credit to~~$29,000 of provision for credit losses related to held-to-maturity securities, respectively.

TDRs

The Company’s approach to restructuring 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 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 possible TDR classification. In that event, ~~our~~the Company’s Managed Assets Division conducts an overall credit and collateral review. A modification of ~~these loans~~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.

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 individually assessed at the time of the modification and on a quarterly basis to measure an allowance for credit loss. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan's original rate, or for collateral dependent loans, to the fair value of the collateral. Any shortfall is recorded as a reserve. Each TDR was individually assessed at June 30, ~~2020~~2021 and approximately ~~$7.9~~$2.5 million of reserve was present and appropriately reserved for through the Company’s reserving methodology in the Company’s allowance for credit losses.

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

Table of Contents

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 June 30, ~~2020,~~2021, the Company had ~~$1.4~~$3.0 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 ~~$10.7~~$14.2 million and ~~$10.4~~$10.7 million at June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The tables below present a summary of the post-modification balance of loans restructured during the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, which represent TDRs:


Three months ended June 30, 2021 (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	$	395	3	$	395	0	$	0	0	$	0	0	$	0


Commercial real estate
Non-construction	3	2,707		2	2,164		1	543		0	0		0	0




Residential real estate and other	10	1,097		10	1,097		2	616		0	0		0	0
Total loans	16	$	4,199	15	$	3,656	3	$	1,159	0	$	0	0	$	0


Three months ended June 30, 2020 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾			Three months ended June 30, 2020 (Dollars in thousands)	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			Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial																Commercial
Commercial, industrial and other	7	$	3,431	5	$	443	—	$	—	4	$	3,257	—	$	—	Commercial, industrial and other	7	$	3,431	5	$	443	0	$	0	4	$	3,257	0	$	0

Commercial real estate																Commercial real estate

Non-construction	1	2,082		—	—		—	—		1	2,082		—	—		Non-construction	1	2,082		0	0		0	0		1	2,082		0	0
Residential real estate and other	21	3,504		21	3,505		10	1,590		—	—		—	—		Residential real estate and other	21	3,504		21	3,505		10	1,590		0	0		0	0
Total loans	29	$	9,017	26	$	3,948	10	$	1,590	5	$	5,339	—	$	—	Total loans	29	$	9,017	26	$	3,948	10	$	1,590	5	$	5,339	0	$	0

(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 June 30, 2019
(Dollars in thousands)

Total ⁽¹⁾⁽²⁾

Extension at
Below Market
Terms ⁽²⁾

Reduction of Interest
Rate ⁽²⁾

Modification to
Interest-only
Payments ⁽²⁾

Forgiveness of Debt⁽²⁾
Count Balance Count Balance Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 5
$ 2,455
5
$ 2,455
1
$ 550
2
$ 1,494
—
$ —
Commercial real estate
Non-construction 3
1,273
3
1,273
—
—
—
—
—
—
Residential real estate and other 22
5,761
22
5,761
9
1,942
—
—
—
—
Total loans 30
$ 9,489
30
$ 9,489
10
$ 2,492
2
$ 1,494
—
$ —


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


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

During the three months ended June 30, ~~2020, 29~~2021, 16 loans totaling ~~$9.0~~$4.2 million were determined to be TDRs, compared to 3029 loans totaling ~~$9.5~~$9.0 million during the three months ended June 30, ~~2019.~~2020. Of these loans extended at below market terms, the weighted average extension had a term of approximately 18106 months during the quarter ended June 30, ~~2020~~2021 compared to 1518 months for the quarter ended June 30, ~~2019.~~2020. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately ~~142~~183 basis points and ~~219~~142 basis points during the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Interest-only payment terms were approximately eight months ~~and six months~~ during the three months ended June 30, ~~2020 and 2019, respectively.~~2020. Additionally, 0 principal balances were forgiven induring the ~~second quarter of 2020~~quarters ended June 30, 2021 and ~~2019.~~2020.

Six months ended
June 30, 2020
(Dollars in thousands)

Total ⁽¹⁾⁽²⁾

Extension at
Below Market
Terms ⁽²⁾

Reduction of Interest
Rate ⁽²⁾

Modification to
Interest-only
Payments ⁽²⁾

Forgiveness of Debt⁽²⁾
Count Balance Count Balance Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 12
$ 9,033
8
$ 4,759
—
$ —
4
$ 3,257
1
$ 432
Commercial real estate
Non-construction 14
18,135
11
13,511
3
921
6
5,545
—
—
Residential real estate and other 41
5,646
33
5,395
15
2,376
—
—
—
—
Total loans 67
$ 32,814
52
$ 23,665
18
$ 3,297
10
$ 8,802
1
$ 432


Six months ended June 30, 2021 (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	5	$	546	5	$	546	0	$	0	0	$	0	0	$	0

Commercial real estate
Non-construction	5	2,944		4	2,401		2	656		1	113		0	0




Residential real estate and other	26	2,835		26	2,835		11	1,906		0	0		0	0
Total loans	36	$	6,325	35	$	5,782	13	$	2,562	1	$	113	0	$	0

Table of Contents

Six months ended June 30, 2019
(Dollars in thousands)

Total ⁽¹⁾⁽²⁾

Extension at
Below Market
Terms ⁽²⁾

Reduction of Interest
Rate ⁽²⁾

Modification to
Interest-only
Payments ⁽²⁾

Forgiveness of Debt⁽²⁾
Count Balance Count Balance Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 14
$ 21,385
7
$ 2,963
1
$ 550
9
$ 19,916
—
$ —
Commercial real estate
Non-construction 4
1,575
3
1,273
—
—
1
302
—
—
Residential real estate and other 42
10,247
42
10,247
15
3,489
—
—
—
—
Total loans 60
$ 33,207
52
$ 14,483
16
$ 4,039
10
$ 20,218
—
$ —


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


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


Six months ended June 30, 2020 (Dollars in thousands)	Total (1)(2)			Extension at Below Market Terms (2)			Reduction of Interest Rate (2)			Modification to Interest-only Payments (2)			Forgiveness of Debt(2)
	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	12	$	9,033	8	$	4,759	0	$	0	4	$	3,257	1	$	432


Commercial real estate




Non-construction	14	18,135		11	13,511		3	921		6	5,545		0	0
Residential real estate and other	41	5,646		33	5,395		15	2,376		0	0		0	0
Total loans	67	$	32,814	52	$	23,665	18	$	3,297	10	$	8,802	1	$	432

(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 six months ended June 30, ~~2020, 67~~2021, 36 loans totaling ~~$32.8~~$6.3 million were determined to be TDRs, compared to 6067 loans totaling ~~$33.2~~$32.8 million during the six months ended June 30, ~~2019.~~2020. Of these loans extended at below market terms, the weighted average extension had a term of approximately 10108 months during the six months ended June 30, ~~2020~~2021 compared to 1410 months for the six months ended June 30, ~~2019.~~2020. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately ~~158~~152 basis points and ~~216~~158 basis points for the year-to-date periods ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Interest-only payment terms were approximately 13six months and ~~three~~13 months during the six months

ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Additionally, ~~$453,000 of principal~~0 balances were forgiven in the first six months of 2021 compared to $453,000 of principal balances were forgiven in the same period of 2020.

The following table presents a summary of all loans restructured in TDRs during the twelve months ended June 30, ~~2020~~2021 and ~~2019,~~2020, and such loans that were in payment default under the restructured terms during the respective periods below:


(Dollars in thousands)	As of June 30, 2021			Three Months Ended June 30, 2021			Six Months Ended June 30, 2021
	Total (1)(3)			Payments in Default (2)(3)			Payments in Default (2)(3)
	Count	Balance		Count	Balance			Count	Balance
Commercial
Commercial, industrial and other	14	$	3,875	4	$	1,371		4	$	1,371



Commercial real estate


Non-construction	9	4,090		2	1,176			3	1,383




Residential real estate and other	70	11,418		5	379			5	379
Total loans	93	$	19,383	11	$	2,926		12	$	3,133


(Dollars in thousands)	As of June 30, 2020			Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
	Total (1)(3)			Payments in Default (2)(3)			Payments in Default (2)(3)
	Count	Balance		Count	Balance			Count	Balance
Commercial
Commercial, industrial and other	22	$	13,989	7	$	4,252		8	$	5,013



Commercial real estate


Non-construction	17	23,578		6	6,181			6	6,181




Residential real estate and other	144	15,606		12	2,507			13	2,818
Total loans	183	$	53,173	25	$	12,940		27	$	14,012

(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.

(Dollars in thousands) As of June 30, 2020 Three Months Ended June 30, 2020 Six Months Ended June 30, 2020
Total ⁽¹⁾⁽³⁾

Payments in Default⁽²⁾⁽³⁾

Payments in Default⁽²⁾⁽³⁾
Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 22
$ 13,989
7
$ 4,252
8
$ 5,013
Commercial real estate
Non-construction 17
23,578
6
6,181
6
6,181
Residential real estate and other 144
15,606
12
2,507
13
2,818
Total loans 183
$ 53,173
25
$ 12,940
27
$ 14,012

Table of Contents

(Dollars in thousands) As of June 30, 2019 Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Total ⁽¹⁾⁽³⁾

Payments in Default⁽²⁾⁽³⁾

Payments in Default⁽²⁾⁽³⁾
Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 17
$ 22,067
7
$ 12,220
7
$ 12,220
Commercial real estate
Non-construction 5
1,945
3
984
3
984
Residential real estate and other 90
17,842
7
1,100
8
1,229
Total loans 112
$ 41,854
17
$ 14,304
18
$ 14,433


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


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


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

~~(8)~~(7) Goodwill and Other Intangible Assets

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


(In thousands)	December 31, 2020		Goodwill Acquired		Impairment Loss		Goodwill Adjustments		June 30, 2021
Community banking	$	536,396	$	0	$	0	$	0	$	536,396
Specialty finance	39,938		0		0		629		40,567
Wealth management	69,373		0		0		0		69,373
Total	$	645,707	$	0	$	0	$	629	$	646,336

(Dollars in thousands)
December 31,
2019

Goodwill
Acquired

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

The specialty finance ~~unit's~~unit’s goodwill ~~decreased $1.0 million~~increased $629,000 in the first six months of ~~2020~~2021 as a result of foreign currency translation adjustments related to the Canadian acquisitions.

The Company assesses each reporting unit’s goodwill for impairment on at least an annual basis and considers potential indicators of impairment at each reporting date between annual goodwill impairment tests. At October 1, ~~2019,~~2020, the Company utilized a quantitative approach for its annual goodwill impairment ~~test~~tests of the banking, specialty finance and wealth management reporting units and determined that no impairment existed at that time. The Company utilized a qualitative approach as of October 1, 2019 for its annual goodwill impairment test of the community banking reporting unit and determined that it was not more likely than not that an impairment existed at that time. The Company previously performed a quantitative approach for its annual goodwill impairment test of the community banking reporting unit as of June 30, 2017.

At each reporting date between annual goodwill impairment tests, the Company considers potential indicators of impairment. Given the current and prior economic uncertainty and volatility surrounding COVID-19, the Company assessed whether such events and circumstances resulted in it being more likely than not that the fair value of any reporting unit was less than its carrying value. ~~Impairment~~Potential impairment indicators considered ~~comprised~~include the condition of the economy and banking industry; government intervention and regulatory updates; the impact of recent events to financial performance and cost factors of the reporting units; performance of the Company’s stock and other relevant events. ~~The Company further considered the amount by which fair value exceeded book value for each reporting unit in its most recent quantitative analysis and sensitivities performed.~~

At the conclusion of this assessment of all reporting units, the Company determined that as of June 30, ~~2020,~~2021, it was more likely than not that the fair value of all reporting units exceeded the respective carrying value of such reporting unit.

Table of Contents

A summary of intangible assets as of the dates shown and the expected amortization of finite-lived intangible assets as of June 30, ~~2020~~2021 is as follows:


(In thousands)	June 30, 2021		December 31, 2020		June 30, 2020
Community banking segment:
Core deposit intangibles with finite lives:
Gross carrying amount	$	55,206	$	55,206	$	55,206
Accumulated amortization	(35,549)		(32,680)		(29,673)
Net carrying amount	$	19,657	$	22,526	$	25,533
Trademark with indefinite lives:
Carrying amount	5,800		5,800		5,800
Total net carrying amount	$	25,457	$	28,326	$	31,333
Specialty finance segment:
Customer list intangibles with finite lives:
Gross carrying amount	$	1,969	$	1,966	$	1,959
Accumulated amortization	(1,686)		(1,644)		(1,602)
Net carrying amount	$	283	$	322	$	357
Wealth management segment:
Customer list and other intangibles with finite lives:
Gross carrying amount	$	20,430	$	20,430	$	20,430
Accumulated amortization	(14,173)		(13,038)		(10,752)
Net carrying amount	$	6,257	$	7,392	$	9,678
Total intangible assets:
Gross carrying amount	$	83,405	$	83,402	$	83,395
Accumulated amortization	(51,408)		(47,362)		(42,027)
Total intangible assets, net	$	31,997	$	36,040	$	41,368

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


Estimated amortization
Actual in six months ended June 30, 2021	$	4,046
Estimated remaining in 2021	3,687
Estimated—2022	6,114
Estimated—2023	4,658
Estimated—2024	3,259
Estimated—2025	2,552

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

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. The customer list and other intangibles recognized in connection with prior acquisitions within the wealth management segment are being amortized over a 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 acquisition of Veterans First ~~acquisition.~~Mortgage in 2018. 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 ~~$5.7~~$4.0 million and ~~$5.9~~$5.7 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Table of Contents

~~(9)~~(8) Mortgage Servicing Rights (“MSRs”)

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


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(In thousands)	2021		2020		2021		2020
Balance at beginning of the period	$	124,316	$	73,504	$	92,081	$	85,638
Additions from loans sold with servicing retained	17,512		20,351		42,128		29,798

Estimate of changes in fair value due to:
Early buyout options (“EBO”) exercised	(144)		0		(402)		0

Payoffs and paydowns	(8,540)		(8,670)		(18,708)		(15,694)
Changes in valuation inputs or assumptions	(5,540)		(7,982)		12,505		(22,539)
Fair value at end of the period	$	127,604	$	77,203	$	127,604	$	77,203
Unpaid principal balance of mortgage loans serviced for others	$	12,307,337	$	9,188,285

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

The Company recognizes MSR assets upon the sale of residential real estate loans to external third parties when it retains the obligation to service the loans and the servicing fee is more than adequate compensation. The initial recognition of MSR assets from loans sold with servicing retained and subsequent changes in fair value of all MSRs are recognized in mortgage banking revenue. MSRs are subject to changes in value from actual and expected prepayment of the underlying loans.

The estimation of fair value related to MSRs is partly impacted by the Company exercising its EBO on eligible loans previously sold to the Government National Mortgage Association (“GNMA”). Under such optional repurchase program, financial institutions acting as servicers are allowed to buy back from the securitized loan pool individual delinquent mortgage loans meeting certain criteria 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. At the time of such repurchase, any MSR value related to such loans is derecognized.

Starting in 2019, the Company periodically purchased options for the right to purchase securities not currently held within the ~~banks'~~banks’ investment portfolios and entered into interest rate swaps in which the Company elected to not designate such derivatives as hedging instruments. These option and swap transactions ~~are~~were designed primarily to economically hedge a portion of the fair value adjustments related to MSRs. During the second quarter of 2020, the Company terminated these interest rate swaps. There were no such options or interest rate swaps outstanding as of June 30, 2021. For more information regarding these hedges, see Note 1514 - Derivative Financial Instruments in Item 1 of this report.

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

Table of Contents

~~(10)~~(9) Deposits

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


(Dollars in thousands)	June 30, 2021			December 31, 2020			June 30, 2020
Balance:
Non-interest-bearing	$	12,796,110		$	11,748,455		$	10,204,791
NOW and interest-bearing demand deposits	3,625,538			3,349,021			3,440,348
Wealth management deposits	4,399,303			4,138,712			4,433,020
Money market	9,843,390			9,348,806			9,288,976
Savings	3,776,400			3,531,029			3,447,352
Time certificates of deposit	4,363,875			4,976,628			4,837,387
Total deposits	$	38,804,616		$	37,092,651		$	35,651,874
Mix:
Non-interest-bearing	33		%	32		%	29		%
NOW and interest-bearing demand deposits	9			9			10
Wealth management deposits	11			11			12
Money market	25			25			25
Savings	10			10			10
Time certificates of deposit	12			13			14
Total deposits	100		%	100		%	100		%

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

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

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

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


(In thousands)	June 30, 2021		December 31, 2020		June 30, 2020
FHLB advances	$	1,241,071	$	1,228,429	$	1,228,416
Other borrowings:
Notes payable	91,016		101,710		112,401
Short-term borrowings	15,597		11,366		8,458
Other	64,217		65,108		65,980
Secured borrowings	347,663		340,744		321,696
Total other borrowings	518,493		518,928		508,535
Subordinated notes	436,719		436,506		436,298
Total FHLB advances, other borrowings and subordinated notes	$	2,196,283	$	2,183,863	$	2,173,249

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

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 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

Table of Contents

an original outstanding balance of $150.0 million and a $50.0 million revolving credit facility ("Revolving Credit Facility"). At June 30, ~~2020,~~2021, the Company had a notes payable balance of ~~$112.4~~$91.0 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 June 30, ~~2020,~~2021, the Company had 0 outstanding balance under the Revolving Credit Facility. Unamortized costs paid by the Company in relation to the issuance of the Revolving Credit Facility are classified in other assets on the Consolidated Statements of Condition.

An amendment to the Credit Agreement was executed on and effective as of September 15, 2020. The amendment provided for, among other things, extension of the maturity date under the Revolving Credit Facility to September 14, 2021, revision of certain financial covenants; and the addition of a mechanism to replace LIBOR with an alternate benchmark rate.

Borrowings under the amended Credit Agreement that are considered “Base Rate Loans” bear interest at a rate equal to the sum of (1) 5060 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, or (c) the Eurodollar Rate (as defined below) that would be applicable for an interest period of one month plus 100 basis points. Borrowings under the agreement that are considered “Eurodollar Rate Loans” bear interest at a rate equal to the sum of (1) ~~125~~135 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%~~0.30% 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 amended 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. In September 2020, the required levels to maintain for certain restrictive covenants within the Credit Agreement were amended. At June 30, ~~2020,~~2021, the Company was in compliance with all such covenants. The Revolving Credit Facility and the Term Facility are available to be utilized, as needed, to provide capital to fund continued growth at the Company’s banks and to serve as an interim source of funds for acquisitions, common stock repurchases or other general corporate purposes.

Short-term Borrowings

Short-term borrowings include securities sold under repurchase agreements and federal funds purchased. These borrowings totaled $15.6 million at June 30, 2021 compared to $11.4 million at December 31, 2020 and $8.5 million at June 30, ~~2020 compared to $20.5 million at December 31, 2019 and $10.2 million at June 30, 2019.~~2020. At June 30, ~~2020,~~2021, December 31, ~~2019~~2020 and June 30, ~~2019,~~2020, securities sold under repurchase agreements represent ~~$8.5~~$15.6 million, ~~$20.5~~$11.4 million and ~~$10.2~~$8.5 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 June 30, ~~2020,~~2021, the Company had pledged securities related to its customer balances in sweep accounts of ~~$20.5~~$22.3 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~~portfolio as reflected on the Company’s Consolidated Statements of Condition.

The following is a summary of these securities pledged as of June 30, ~~2020~~2021 disaggregated by investment category and maturity of the related customer sweep account, and reconciled to the outstanding balance of securities sold under repurchase agreements:


(In thousands)	Overnight Sweep Collateral
Available-for-sale securities pledged

U.S. Government agencies	$	10,898




Mortgage-backed securities	11,434




Total collateral pledged	22,332
Excess collateral	6,735
Securities sold under repurchase agreements	$	15,597

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

Table of Contents

Other Borrowings

Other borrowings at June 30, ~~2020~~2021 represent a fixed-rate promissory note issued by the Company in June 2017 and amended in March 2020 ("Fixed-Rate Promissory Note") related to and secured by 3 office buildings owned by the Company. At June 30, ~~2020,~~2021, the Fixed-Rate Promissory Note had a balance of ~~$66.0~~$64.2 million compared to ~~$46.4~~$65.1 million at December 31, ~~2019~~2020 and ~~$47.1~~$66.0 million at June 30, ~~2019.~~2020. Under the Fixed-Rate Promissory Note, during the three months ended March 31, 2020, the Company made monthly principal payments and paid interest at a fixed rate of 3.36%. The Fixed-Rate Promissory Note contains several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and indebtedness. At June 30, 2020, the Company was in compliance with all such covenants. An amendment to the Fixed-Rate Promissory Note was executed on and effective as of March 31, 2020. The amendment increased the principal amount to $66.4 million, reduced the interest rate to 3.00% and extended the maturity date to March 31, 2025. The Fixed-Rate Promissory Note contains several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and indebtedness. At June 30, 2021, the Company was in compliance with all such covenants.

Secured Borrowings

Secured borrowings at June 30, ~~2020~~2021 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. The Receivables Purchase Agreement was again amended in February 2019, effectively extending the maturity date from December 16, 2019 to December 15, 2020. Additionally, in February 2019, the unrelated third party paid an additional C$20 million, which increased the total payments to C$210 million. In May 2019, the unrelated third party paid an additional C$70 million, which increased the total payments to C$280 million. In January 2020, the unrelated third party paid an additional C$40 million, which increased the total payments to C$320 million, and the Receivables Purchase Agreement was amended to effectively extend the maturity date from December 15, 2020 to December 15, 2021. In May 2020, the unrelated third party paid an additional C$100 million, which increased the total payments to C$420 million. In January 2021, the Receivables Purchase Agreement was amended to effectively extend the maturity date from December 15, 2021 to December 15, 2022. 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 June 30, ~~2020,~~2021, the translated balance of the secured borrowing totaled ~~$309.1~~$338.5 million compared to ~~$215.5~~$329.9 million at December 31, ~~2019~~2020 and ~~$213.7~~$309.1 million at June 30, ~~2019.~~2020. Additionally, the interest rate under the Receivables Purchase Agreement at June 30, ~~2020~~2021 was ~~1.7771%~~1.0790%. The remaining ~~$12.6~~$9.1 million within secured borrowings at June 30, ~~2020~~2021 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 June 30, ~~2020,~~2021, the Company had outstanding subordinated notes totaling ~~$436.3~~$436.7 million compared to ~~$436.1~~$436.5 million and ~~$436.0~~$436.3 million outstanding at December 31, ~~2019~~2020 and June 30, ~~2019,~~2020, respectively. During the second quarter of 2019, the Company issued $300.0 million of subordinated notes, receiving $296.7 million in net proceeds. The subordinated notes have a stated interest rate of 4.85% and mature in June 2029. In 2014, the Company issued $140.0 million of subordinated notes receiving $139.1 million in net proceeds. ~~These~~The subordinated notes have a stated interest rate of 5.00% and mature in June 2024. Subordinated notes are stated at par adjusted for unamortized issuance costs paid related to such debt.

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

As of June 30, ~~2020,~~2021, the Company owned 100% of the common securities of 11 trusts, Wintrust Capital Trust III, Wintrust Statutory Trust IV, Wintrust Statutory Trust V, Wintrust Capital Trust VII, Wintrust Capital Trust VIII, Wintrust Capital Trust IX, Northview Capital Trust I, Town Bankshares Capital Trust I, First Northwest Capital Trust I, Suburban Illinois Capital Trust II, and Community Financial Shares Statutory Trust II (the “Trusts”) set up to provide long-term financing. The Northview, Town, First Northwest, Suburban, and Community Financial Shares capital trusts were acquired as part of the acquisitions of Northview Financial Corporation, Town Bankshares, Ltd., First Northwest Bancorp, Inc., Suburban Illinois

Table of Contents

Bancorp, Inc. and ~~CFIS,~~Community Financial Shares, Inc., 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 June 30, ~~2020.~~2021. The junior subordinated debentures represent the par value of the obligations owed to the Trusts.


(Dollars in thousands)	Common Securities		Trust Preferred Securities		Junior Subordinated Debentures		Rate Structure	Contractual Rate at 6/30/2021		Issue Date	Maturity Date	Earliest Redemption Date
Wintrust Capital Trust III	$	774	$	25,000	$	25,774	L+3.25	3.43	%	04/2003	04/2033	04/2008
Wintrust Statutory Trust IV	619		20,000		20,619		L+2.80	2.95	%	12/2003	12/2033	12/2008
Wintrust Statutory Trust V	1,238		40,000		41,238		L+2.60	2.75	%	05/2004	05/2034	06/2009
Wintrust Capital Trust VII	1,550		50,000		51,550		L+1.95	2.07	%	12/2004	03/2035	03/2010
Wintrust Capital Trust VIII	1,238		25,000		26,238		L+1.45	1.60	%	08/2005	09/2035	09/2010
Wintrust Capital Trust IX	1,547		50,000		51,547		L+1.63	1.75	%	09/2006	09/2036	09/2011
Northview Capital Trust I	186		6,000		6,186		L+3.00	3.18	%	08/2003	11/2033	08/2008
Town Bankshares Capital Trust I	186		6,000		6,186		L+3.00	3.18	%	08/2003	11/2033	08/2008
First Northwest Capital Trust I	155		5,000		5,155		L+3.00	3.15	%	05/2004	05/2034	05/2009
Suburban Illinois Capital Trust II	464		15,000		15,464		L+1.75	1.87	%	12/2006	12/2036	12/2011
Community Financial Shares Statutory Trust II	109		3,500		3,609		L+1.62	1.74	%	06/2007	09/2037	06/2012
Total					$	253,566		2.33	%

(Dollars in thousands)
Common
Securities

Trust
Preferred
Securities

Junior
Subordinated
Debentures

Rate
Structure

Contractual rate
at 6/30/2020

Issue
Date

Maturity
Date

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

2.62 %

The junior subordinated debentures totaled $253.6 million at June 30, ~~2020,~~2021, December 31, ~~2019~~2020 and June 30, ~~2019.~~2020.

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 June 30, ~~2020,~~2021, the weighted average contractual interest rate on the junior subordinated debentures was ~~2.62%~~2.33%. The Company entered into interest rate swaps with an aggregate notional value of $210.0 million to hedge the variable cash flows on certain junior subordinated debentures. The hedge-adjusted contractual interest rate on the junior subordinated debentures as of June 30, ~~2020,~~2021, was ~~4.12%~~3.97%. 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 June 30, ~~2020,~~2021, the Company included $245.5 million of the junior subordinated debentures, net of common securities, in Tier 2 regulatory capital.

Table of Contents

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

Disaggregation of Revenue

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


(Dollars in thousands)		Three Months Ended				Six Months Ended
Revenue from contracts with customers	Location in income statement	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Brokerage and insurance product commissions	Wealth management	$	5,148	$	4,147	$	10,188	$	9,428
Trust	Wealth management	5,379		4,248		10,396		9,539
Asset management	Wealth management	20,163		14,241		39,415		29,610
Total wealth management		30,690		22,636		59,999		48,577
Mortgage broker fees	Mortgage banking	114		174		190		227
Service charges on deposit accounts	Service charges on deposit accounts	13,249		10,420		25,285		21,685
Administrative services	Other non-interest income	1,228		933		2,484		2,045
Card related fees	Other non-interest income	2,187		1,379		3,961		3,485
Other deposit related fees	Other non-interest income	3,265		2,914		6,582		6,092
Total revenue from contracts with customers		$	50,733	$	38,456	$	98,501	$	82,111

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

Wealth Management Revenue

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

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

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

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

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

Table of Contents

Mortgage Broker Fees

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

Service Charges on Deposit Accounts

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

Administrative Services

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

Card and Other Deposit Related Fees

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

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

Table of Contents

Contract Balances

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



(Dollars in thousands)	June 30, 2021		December 31, 2020		June 30, 2020
Contract assets	$	0	$	0	$	0

Contract liabilities	$	1,704	$	1,548	$	665

Mortgage broker fees receivable	$	11	$	20	$	59
Administrative services receivable	199		64		161
Wealth management receivable	11,274		10,144		10,297
Card related fees receivable	1,556		783		0
Total receivables from contracts with customer	$	13,040	$	11,011	$	10,517

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

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

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

Contract liabilities represent upfront fees that the Company received at inception of certain contracts. The revenue recognized that was included in the contract liability balance at beginning of the period totaled $698,000 and $1.1 million ~~and $382,000~~ for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Receivables are recognized in the period the Company provides services and 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~~The following table presents the estimated future timing of recognition of upfront fees related to card and deposit related fees. These upfront fees represent performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

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


(Dollars in thousands)
Estimated remaining in 2021	$	554
Estimated—2022	400
Estimated—2023	400
Estimated—2024	250
Estimated—2025	100

Total	$	1,704

Practical Expedients and Exemptions

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

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

Table of Contents

~~(14)~~(13) Segment Information

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

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

For purposes of internal segment profitability, management allocates certain intersegment and parent company balances. Management allocates a portion of revenues to the specialty finance segment related to loans and leases originated by the specialty finance segment and sold or assigned to the community banking segment. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates a portion of the net interest income earned by the community banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. See Note 109 — 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~~table 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 ~~2019~~2020 Form 10-K. The Company evaluates segment performance based on after-tax profit or loss and other appropriate profitability measures common to each segment.

Table of Contents

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


	Three Months Ended				$ Change in Contribution		% Change in Contribution
(Dollars in thousands)	June 30, 2021		June 30, 2020
Net interest income:
Community Banking	$	219,679	$	205,678	$	14,001	7	%
Specialty Finance	45,194		42,415		2,779		7
Wealth Management	7,765		8,586		(821)		(10)
Total Operating Segments	272,638		256,679		15,959		6
Intersegment Eliminations	6,952		6,452		500		8
Consolidated net interest income	$	279,590	$	263,131	$	16,459	6	%
Provision for credit losses:
Community Banking	$	(15,163)	$	132,149	$	(147,312)	NM
Specialty Finance	(136)		2,904		(3,040)		NM
Wealth Management	0		0		0		0	%
Total Operating Segments	(15,299)		135,053		(150,352)		NM
Intersegment Eliminations	0		0		0		0
Consolidated provision for credit losses	$	(15,299)	$	135,053	$	(150,352)	NM
Non-interest income:
Community Banking	$	90,410	$	129,698	$	(39,288)	(30)	%
Specialty Finance	22,464		21,831		633		3
Wealth Management	31,843		24,465		7,378		30
Total Operating Segments	144,717		175,994		(31,277)		(18)
Intersegment Eliminations	(15,344)		(14,001)		(1,343)		10
Consolidated non-interest income	$	129,373	$	161,993	$	(32,620)	(20)	%
Net revenue:
Community Banking	$	310,089	$	335,376	$	(25,287)	(8)	%
Specialty Finance	67,658		64,246		3,412		5
Wealth Management	39,608		33,051		6,557		20
Total Operating Segments	417,355		432,673		(15,318)		(4)
Intersegment Eliminations	(8,392)		(7,549)		(843)		11
Consolidated net revenue	$	408,963	$	425,124	$	(16,161)	(4)	%
Segment profit (loss):
Community Banking	$	72,752	$	(7,315)	$	80,067	NM
Specialty Finance	23,850		22,688		1,162		5	%
Wealth Management	8,507		6,286		2,221		35
Consolidated net income	$	105,109	$	21,659	$	83,450	385	%
Segment assets:
Community Banking	$	37,619,971	$	35,560,107	$	2,059,864	6	%
Specialty Finance	7,701,921		6,708,493		993,428		15
Wealth Management	1,416,558		1,271,417		145,141		11
Consolidated total assets	$	46,738,450	$	43,540,017	$	3,198,433	7	%

Three months ended
$ Change in
Contribution

% Change in
Contribution
(Dollars in thousands) June 30,
2020 June 30,
2019
Net interest income:
Community Banking $ 205,678
$ 214,309
$ (8,631 ) (4 )%
Specialty Finance 42,415
39,397
3,018
8
Wealth Management 8,586
6,936
1,650
24
Total Operating Segments 256,679
260,642
(3,963 ) (2 )
Intersegment Eliminations 6,452
5,560
892
16
Consolidated net interest income $ 263,131
$ 266,202
$ (3,071 ) (1 )%
Non-interest income:
Community Banking $ 129,698
$ 65,370
$ 64,328
98 %
Specialty Finance 21,831
19,579
2,252
12
Wealth Management 24,465
24,950
(485 ) (2 )
Total Operating Segments 175,994
109,899
66,095
60
Intersegment Eliminations (14,001 ) (11,741 ) (2,260 ) (19 )
Consolidated non-interest income $ 161,993
$ 98,158
$ 63,835
65 %
Net revenue:
Community Banking $ 335,376
$ 279,679
$ 55,697
20 %
Specialty Finance 64,246
58,976
5,270
9
Wealth Management 33,051
31,886
1,165
4
Total Operating Segments 432,673
370,541
62,132
17
Intersegment Eliminations (7,549 ) (6,181 ) (1,368 ) (22 )
Consolidated net revenue $ 425,124
$ 364,360
$ 60,764
17 %
Segment (loss) profit:
Community Banking $ (7,315 ) $ 53,435
$ (60,750 ) (114 )%
Specialty Finance 22,688
21,129
1,559
7
Wealth Management 6,286
6,902
(616 ) (9 )
Consolidated net income $ 21,659
$ 81,466
$ (59,807 ) (73 )%
Segment assets:
Community Banking $ 35,560,107
$ 27,005,555
$ 8,554,552
32 %
Specialty Finance 6,708,493
5,566,067
1,142,426
21
Wealth Management 1,271,417
1,070,147
201,270
19
Consolidated total assets $ 43,540,017
$ 33,641,769
$ 9,898,248
29 %
NM - Not meaningful

Six months ended
$ Change in
Contribution

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

~~(15)~~

Table of Contents


	Six Months Ended				$ Change in Contribution		% Change in Contribution
(Dollars in thousands)	June 30, 2021		June 30, 2020
Net interest income:
Community Banking	$	423,168	$	412,513	$	10,655	3	%
Specialty Finance	90,093		83,127		6,966		8
Wealth Management	15,214		16,378		(1,164)		(7)
Total Operating Segments	528,475		512,018		16,457		3
Intersegment Eliminations	13,010		12,556		454		4
Consolidated net interest income	$	541,485	$	524,574	$	16,911	3	%
Provision for credit losses:
Community Banking	$	(61,735)	$	183,826	$	(245,561)	NM
Specialty Finance	1,089		4,188		(3,099)		(74)	%
Wealth Management	0		0		0		0
Total Operating Segments	(60,646)		188,014		(248,660)		NM
Intersegment Eliminations	0		0		0		0
Consolidated provision for credit losses	$	(60,646)	$	188,014	$	(248,660)	NM
Non-interest income:
Community Banking	$	237,678	$	210,701	$	26,977	13	%
Specialty Finance	45,573		43,139		2,434		6
Wealth Management	62,094		48,595		13,499		28
Total Operating Segments	345,345		302,435		42,910		14
Intersegment Eliminations	(29,466)		(27,200)		(2,266)		8
Consolidated non-interest income	$	315,879	$	275,235	$	40,644	15	%
Net revenue:
Community Banking	$	660,846	$	623,214	$	37,632	6	%
Specialty Finance	135,666		126,266		9,400		7
Wealth Management	77,308		64,973		12,335		19
Total Operating Segments	873,820		814,453		59,367		7
Intersegment Eliminations	(16,456)		(14,644)		(1,812)		12
Consolidated net revenue	$	857,364	$	799,809	$	57,555	7	%
Segment profit:
Community Banking	$	194,553	$	27,274	$	167,279	613	%
Specialty Finance	47,753		44,821		2,932		7
Wealth Management	15,951		12,376		3,575		29
Consolidated net income	$	258,257	$	84,471	$	173,786	206	%

NM - Not meaningful

(14) 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; (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; and (5) options and swaps to economically hedge a portion of the fair value adjustments related to the Company's mortgage servicing rights portfolio. The Company also enters into derivatives (typically interest rate swaps) with certain qualified borrowers to facilitate the borrowers’ risk management strategies and concurrently enters into mirror-image derivatives with a third party counterparty, effectively making a market in the derivatives for such borrowers. Additionally, the Company enters into foreign currency contracts to manage foreign exchange risk associated with certain foreign currency denominated assets.

Table of Contents

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.

Changes in fair values of derivatives accounted for as fair value hedges are recorded in income in the same period and in the same income statement line as changes in the fair values of the hedged items that relate to the hedged risk(s). Changes in fair values of derivative financial instruments accounted for as cash flow hedges 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 June 30, ~~2020,~~2021, December 31, ~~2019~~2020 and June 30, ~~2019:~~2020:


	Derivative Assets						Derivative Liabilities

(In thousands)	June 30, 2021		December 31, 2020		June 30, 2020		June 30, 2021		December 31, 2020		June 30, 2020
Derivatives designated as hedging instruments under ASC 815:
Interest rate derivatives designated as Cash Flow Hedges	$	34,743	$	8,182	$	0	$	24,272	$	39,715	$	59,573
Interest rate derivatives designated as Fair Value Hedges	78		0		0		9,373		14,520		17,052
Total derivatives designated as hedging instruments under ASC 815	$	34,821	$	8,182	$	0	$	33,645	$	54,235	$	76,625
Derivatives not designated as hedging instruments under ASC 815:
Interest rate derivatives	$	153,510	$	221,205	$	268,709	$	153,714	$	221,608	$	266,894
Interest rate lock commitments	23,175		48,925		58,841		2,834		0		25
Forward commitments to sell mortgage loans	781		0		27		3,153		12,510		11,667
Foreign exchange contracts	93		111		47		93		112		54
Total derivatives not designated as hedging instruments under ASC 815	$	177,559	$	270,241	$	327,624	$	159,794	$	234,230	$	278,640
Total Derivatives	$	212,380	$	278,423	$	327,624	$	193,439	$	288,465	$	355,265

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

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 June 30, ~~2020,~~2021, the Company had 27 interest rate swap derivatives designated as cash flow hedges of variable rate deposits and certain junior subordinated debentures, and 1 interest rate collar derivative designated as a cash flow hedge of the Company's variable rate Term Facility. 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

Table of Contents

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 these cash flow hedges, summarized by derivative type and maturity, as of June 30, ~~2020:~~2021:


	June 30, 2021
(In thousands)	Notional		Fair Value
Maturity Date	Amount		Asset (Liability)
Interest Rate Swaps:
October 2021	$	25,000	$	(151)
November 2021	20,000		(179)
December 2021	165,000		(1,745)
March 2022	500,000		(102)
May 2022	370,000		(6,063)
June 2022	160,000		(2,875)
July 2022	230,000		(4,245)
August 2022	235,000		(4,813)
March 2023	250,000		(98)
April 2024	250,000		769
July 2027 (1)	1,000,000		33,974
Interest Rate Collars:
September 2023	91,071		(4,001)





Total Cash Flow Hedges	$	3,296,071	$	10,471

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

(1)Interest rate swaps effective starting in July 2022.

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


	Three Months Ended				Six Months Ended
(In thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Unrealized gain (loss) at beginning of period	$	19,259	$	(56,636)	$	(31,533)	$	(17,943)
Amount reclassified from accumulated other comprehensive income to interest expense on deposits, other borrowings and junior subordinated debentures	6,866		5,451		13,562		6,541
Amount of (loss) income recognized in other comprehensive income	(15,654)		(8,318)		28,442		(48,101)
Unrealized gain (loss) at end of period	$	10,471	$	(59,503)	$	10,471	$	(59,503)

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

As of June 30, ~~2020,~~2021, the Company estimates that during the next twelve months ~~$20.1~~$18.3 million will be reclassified from accumulated other comprehensive income or loss as an increase to interest expense.

Fair Value Hedges of Interest Rate Risk

Interest rate swaps designated as fair value hedges involve the payment of fixed amounts to a counterparty in exchange for the Company receiving variable payments over the life of the agreements without the exchange of the underlying notional amount. As of June 30, ~~2020,~~2021, the Company has 1614 interest rate swaps with an aggregate notional amount of ~~$166.4~~$148.0 million that were designated as fair value hedges primarily associated with fixed rate commercial and industrial and commercial real estate loans as well as life insurance premium finance receivables.

For derivatives designated and that qualify as fair value hedges, the net gain or loss 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 June 30, ~~2020:~~

2021:

Table of Contents

June 30, 2020
(In thousands)

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


		June 30, 2021
(In thousands) Derivatives in Fair Value Hedging Relationships	Location in the Statement of Condition	Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets (Liabilities) for which Hedge Accounting has been Discontinued
Interest rate swaps	Loans, net of unearned income	$	155,996	$	9,153	$	(144)
	Available-for-sale debt securities	1,272		93		0

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


(In thousands) Derivatives in Fair Value Hedging Relationships	Location of (Loss)/Gain Recognized in Income on Derivative	Three Months Ended		Six Months Ended
		June 30, 2021		June 30, 2021
Interest rate swaps	Interest and fees on loans	$	43	$	30
	Interest income - investment securities	0		0

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

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—Periodically, the Company may purchase interest rate cap derivatives designed to act as an economic hedge of the risk of the negative impact on its fixed-rate loan portfolios from rising interest rates, most notably the LIBOR index. As of June 30, ~~2020,~~2021, the Company held interest rate caps with an aggregate notional value of $1.0 billion.

Additionally, the Company has interest rate derivatives, including swaps and option products, resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products (typically interest rate swaps) directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively convert a variable rate loan to a fixed rate. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At June 30, ~~2020,~~2021, the Company had interest rate derivative transactions with an aggregate notional amount of approximately ~~$8.3~~$9.3 billion (all interest rate swaps and caps with customers and third parties) related to this program. These interest rate derivatives had maturity dates ranging from July ~~2020~~2021 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 June 30, ~~2020,~~2021, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately ~~$2.3~~$1.6 billion and interest rate lock commitments with an aggregate notional amount of approximately ~~$1.4 billion.~~$843.9 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

Table of Contents

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 June 30, ~~2020,~~2021, the Company held foreign currency derivatives with an aggregate notional amount of approximately ~~$6.8~~$14.3 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 0 covered call options outstanding as of June 30, ~~2020,~~2021, December 31, ~~2019~~2020 or June 30, ~~2019.~~2020.

Periodically, the Company will purchase options for the right to purchase securities not currently held within the banks' investment portfolios or enter into interest rate swaps in which the Company elects to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to the Company's mortgage servicing rights portfolio. The gain or loss associated with these derivative contracts are included in mortgage banking revenue. There were 0 such options or swaps outstanding as of June 30, ~~2020.~~2021.

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


(In thousands)		Three Months Ended				Six Months Ended
Derivative	Location in income statement	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest rate swaps and caps	Trading gains (losses), net	$	(539)	$	(703)	$	(111)	$	(1,131)
Mortgage banking derivatives	Mortgage banking revenue	(10,480)		43,292		(27,959)		60,559
Foreign exchange contracts	Trading gains (losses), net	(3)		(9)		(8)		(13)
Covered call options	Fees from covered call options	1,388		0		1,388		2,292
Derivative contract held as economic hedge on MSRs	Mortgage banking revenue	0		589		0		4,749

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

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 June 30, ~~2020,~~2021, 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 ~~$346.5~~$151.4 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.

Table of Contents

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

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


	Derivative Assets						Derivative Liabilities
	Fair Value						Fair Value
(In thousands)	June 30, 2021		December 31, 2020		June 30, 2020		June 30, 2021		December 31, 2020		June 30, 2020
Gross Amounts Recognized	$	188,331	$	229,387	$	268,709	$	187,359	$	275,843	$	343,519
Less: Amounts offset in the Statements of Financial Condition	0		0		0		0		0		0
Net amount presented in the Statements of Financial Condition	$	188,331	$	229,387	$	268,709	$	187,359	$	275,843	$	343,519
Gross amounts not offset in the Statements of Financial Condition
Offsetting Derivative Positions	(37,895)		(8,647)		(697)		(37,895)		(8,647)		(697)
Collateral Posted	0		0		0		(146,240)		(266,832)		(342,276)
Net Credit Exposure	$	150,436	$	220,740	$	268,012	$	3,224	$	364	$	546

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

~~(16)~~(15) 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.

•—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 these securities. When these inputs are not available, broker/dealer quotes may be obtained by the vendor to determine the fair value of the security. We review the vendor’s pricing methodologies to determine if observable market information is being used, versus unobservable inputs. Fair value measurements using significant inputs that are unobservable in the market due to limited activity or a less liquid market are classified as Level 3 in the fair value hierarchy.

Table of Contents

The fair value of U.S. Treasury

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

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

At June 30, ~~2020,~~2021, the Company classified ~~$117.3~~$117.6 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 $2.3 million of U.S. Government agency securities as Level 3 at June 30, 2020. The~~ Company’s methodology for pricing these securities focuses on three distinct inputs: equivalent rating, yield and other pricing terms. To determine the rating for a given non-rated ~~municipal bond,~~investment debt security, 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 second quarter of ~~2020,~~2021, all of the ratings derived by the Investment Operations Department using the above process were ~~"BBB"~~“BBB” or better. The fair value measurement ~~of municipal bonds~~noted above 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 June 30, ~~2020~~2021 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. Government 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. As such, these loans are classified as Level 2 in the fair value hierarchy.

Loans held-for-investment—The fair value for loans in which the Company elected the fair value option is estimated by discounting future scheduled cash flows for the specific loan through maturity, adjusted for estimated credit losses and prepayments. The Company uses a discount rate based on the actual coupon rate of the underlying loan. At June 30, ~~2020,~~2021, the Company classified ~~$14.0~~$11.0 million of loans held-for-investment as Level 3. The ~~weighted average~~assumed discount rate used as an input to value these loans at June 30, ~~2020~~2021 was ~~2.80% with discount rates applied ranging from 2%-3%~~2.88%. 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 ~~17.25%~~13.30% at June 30, ~~2020.~~2021. 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 ~~1.24%~~0.61% with credit loss discount ranging from 0%~~-6%~~-3% at June 30, ~~2020.~~2021.

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 June 30, ~~2020,~~2021, the Company classified ~~$77.2~~$127.6 million of MSRs as Level 3. The weighted average discount rate used as an input to value the pool of MSRs at June 30, ~~2020~~2021 was ~~10.21%~~9.85% with discount rates applied ranging from 3%6%-21%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. The fair value of MSRs was also estimated based on other assumptions including prepayment speeds and the cost to service. Prepayment speeds ranged from ~~0%-95%~~6%-92% or a weighted average prepayment speed of ~~17.25%~~13.30%. Further, for current and delinquent loans, the Company assumed a weighted average cost of servicing of ~~$77~~$76 and ~~$442,~~$340, 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 98 - 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 classified as Level 2 in the fair value hierarchy. The credit risk associated with derivative financial instruments that are subject to master netting agreements is measured on a net basis by counterparty portfolio. The fair value for mortgage-related derivatives is based on changes in mortgage rates from the

Table of Contents

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 June 30, ~~2020,~~2021, the Company classified ~~$58.4~~$22.6 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 June 30, ~~2020~~2021 was ~~79%~~84% with pull-through rates applied ranging from 0%1% 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. These assets are classified as Level 2 in the fair value hierarchy.

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


											June 30, 2021
	June 30, 2020
(Dollars in thousands)	Total		Level 1			Level 2		Level 3
(In thousands)										(In thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities										Available-for-sale securities
U.S. Treasury	$	60,539	$	60,539		$	—	$	—	U.S. Treasury	$	0	$	0	$	0	$	0
U.S. Government agencies	293,507		—			291,214		2,293		U.S. Government agencies	78,854		0		78,854		0
Municipal	150,879		—		��	33,624		117,255		Municipal	168,296		0		50,690		117,606
Corporate notes	102,879		—			102,879		—		Corporate notes	98,542		0		98,542		0
Mortgage-backed	2,587,157		—			2,587,157		—		Mortgage-backed	1,842,916		0		1,842,916		0

Trading account securities	890		—			890		—		Trading account securities	2,667		0		2,667		0
Equity securities with readily determinable fair value	52,460		44,394			8,066		—		Equity securities with readily determinable fair value	86,316		78,250		8,066		0
Mortgage loans held-for-sale	833,163		—			833,163		—		Mortgage loans held-for-sale	984,994		0		984,994		0
Loans held-for-investment	254,614		—			240,661		13,953		Loans held-for-investment	55,340		0		44,333		11,007
MSRs	77,203		—			—		77,203		MSRs	127,604		0		0		127,604
Nonqualified deferred compensation assets	13,576		—			13,576		—		Nonqualified deferred compensation assets	16,590		0		16,590		0
Derivative assets	327,624		—			269,191		58,433		Derivative assets	212,380		0		189,810		22,570
Total	$	4,754,491	$	104,933		$	4,380,421	$	269,137	Total	$	3,674,499	$	78,250	$	3,317,462	$	278,787
Derivative liabilities	$	355,265	$	—		$	355,265	$	—	Derivative liabilities	$	193,439	$	0	$	193,439	$	0


	December 31, 2020
(In thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities
U.S. Treasury	$	304,971	$	304,971	$	0	$	0
U.S. Government agencies	84,513		0		82,547		1,966
Municipal	146,910		0		37,034		109,876
Corporate notes	91,405		0		91,405		0
Mortgage-backed	2,428,040		0		2,428,040		0
Trading account securities	671		0		671		0
Equity securities with readily determinable fair value	90,862		82,796		8,066		0
Mortgage loans held-for-sale	1,272,090		0		1,272,090		0
Loans held-for-investment	55,134		0		44,854		10,280
MSRs	92,081		0		0		92,081
Nonqualified deferred compensation assets	15,398		0		15,398		0
Derivative assets	278,423		0		230,332		48,091
Total	$	4,860,498	$	387,767	$	4,210,437	$	262,294
Derivative liabilities	$	288,465	$	0	$	288,465	$	0

December 31, 2019
(Dollars in thousands) Total Level 1 Level 2 Level 3
Available-for-sale securities
U.S. Treasury $ 121,088
$ 121,088
$ —
$ —
U.S. Government agencies 365,442
—
362,796
2,646
Municipal 145,318
—
33,368
111,950
Corporate notes 94,841
—
94,841
—
Mortgage-backed 2,379,525
—
2,379,525
—
Trading account securities 1,068
—
1,068
—
Equity securities with readily determinable fair value 50,840
42,774
8,066
—
Mortgage loans held-for-sale 377,313
—
377,313
—
Loans held-for-investment 132,718
—
123,098
9,620
MSRs 85,638
—
—
85,638
Nonqualified deferred compensation assets 14,213
—
14,213
—
Derivative assets 103,644
—
101,013
2,631
Total $ 3,871,648
$ 163,862
$ 3,495,301
$ 212,485
Derivative liabilities $ 129,204
$ —
$ 129,204
$ —

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

Table of Contents


	June 30, 2020
(In thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities
U.S. Treasury	$	60,539	$	60,539	$	0	$	0
U.S. Government agencies	293,507		0		291,214		2,293
Municipal	150,879		0		33,624		117,255
Corporate notes	102,879		0		102,879		0
Mortgage-backed	2,587,157		0		2,587,157		0
Trading account securities	890		0		890		0
Equity securities with readily determinable fair value	52,460		44,394		8,066		0
Mortgage loans held-for-sale	833,163		0		833,163		0
Loans held-for-investment	254,614		0		240,661		13,953
MSRs	77,203		0		0		77,203
Nonqualified deferred compensation assets	13,576		0		13,576		0
Derivative assets	327,624		0		269,191		58,433
Total	$	4,754,491	$	104,933	$	4,380,421	$	269,137
Derivative liabilities	$	355,265	$	0	$	355,265	$	0

The aggregate remaining contractual principal balance outstanding as of June 30, ~~2020,~~2021, December 31, ~~2019~~2020 and June 30, ~~2019~~2020 for mortgage loans held-for-sale measured at fair value under ASC 825 was ~~$781.8~~$949.5 million, ~~$368.0 million~~$1.2 billion and ~~$378.8~~$781.8 million, respectively, while the aggregate fair value of mortgage loans held-for-sale was ~~$833.2~~$985.0 million, ~~$377.3 million~~$1.3 billion and ~~$395.0~~$833.2 million, for the same respective periods, as shown in the above tables. There were ~~$1.3~~$110.7 million of loans past due greater than 90 days and still accruing in the mortgage loans held-for-sale portfolio as of June 30, ~~2020~~2021 compared to ~~$1.8~~$134.1 million as of December 31, ~~2019~~2020 and $1.3 million as of June 30, ~~2019.~~2020. All of the loans past due greater than 90 days and still accruing as of June 30, 2021 were individual delinquent mortgage loans bought back from GNMA at the unconditional option of the Company as servicer for those loans.

The changes in Level 3 assets measured at fair value on a recurring basis during the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 are summarized as follows:


			U.S. Government agencies		Loans held-for- investment		Mortgage servicing rights		Derivative assets
(In thousands)	Municipal
Balance at April 1, 2021	$	101,748	$	1,784	$	6,408	$	124,316	$	25,634
Total net gains (losses) included in:
Net income (1)	0		(4)		167		3,288		(3,064)
Other comprehensive income (loss)	(374)		0		0		0		0
Purchases	18,163		0		0		0		0
Issuances	0		0		0		0		0
Sales	0		0		0		0		0
Settlements	(1,931)		(1,780)		(59)		0		0
Net transfers into/(out of) Level 3	0		0		4,491		0		0
Balance at June 30, 2021	$	117,606	$	0	$	11,007	$	127,604	$	22,570

U.S. Government Agencies Loans held-for- investment
Mortgage
servicing rights
Derivative Assets
(Dollars in thousands) Municipal
Balance at April 1, 2020 $ 113,267
$ 2,457
$ 9,568
$ 73,504
$ 39,816
Total net gains (losses) included in:
Net income ⁽¹⁾
—
—
200
3,699
18,617
Other comprehensive income (loss) (546 ) (7 ) —
—
—
Purchases 6,997
—
—
—
—
Issuances —
—
—
—
—
Sales —
—
—
—
—
Settlements (2,463 ) (157 ) (1,364 ) —
—
Net transfers into/(out of) Level 3
—
—
5,549
—
—
Balance at June 30, 2020 $ 117,255
$ 2,293
$ 13,953
$ 77,203
$ 58,433
(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.

Table of Contents


			U.S. Government Agencies		Loans held-for- investment		Mortgage servicing rights		Derivative Assets
(In thousands)	Municipal
Balance at January 1, 2021	$	109,876	$	1,966	$	10,280	$	92,081	$	48,091
Total net gains (losses) included in:
Net income (1)	0		(4)		(363)		35,523		(25,521)
Other comprehensive income (loss)	(2,442)		(24)		0		0		0
Purchases	18,163		0		0		0		0
Issuances	0		0		0		0		0
Sales	0		0		0		0		0
Settlements	(7,991)		(1,938)		(3,977)		0		0
Net transfers into/(out of) Level 3	0		0		5,067		0		0
Balance at June 30, 2021	$	117,606	$	0	$	11,007	$	127,604	$	22,570


			U.S. Government agencies		Loans held-for- investment		Mortgage servicing rights		Derivative assets
(In thousands)	Municipal
Balance at April 1, 2020	$	113,267	$	2,457	$	9,568	$	73,504	$	39,816
Total net gains (losses) included in:
Net income (1)	0		0		200		3,699		18,617
Other comprehensive income (loss)	(546)		(7)		0		0		0
Purchases	6,997		0		0		0		0
Issuances	0		0		0		0		0
Sales	0		0		0		0		0
Settlements	(2,463)		(157)		(1,364)		0		0
Net transfers into/(out of) Level 3	0		0		5,549		0		0
Balance at June 30, 2020	$	117,255	$	2,293	$	13,953	$	77,203	$	58,433


			U.S. Government Agencies		Loans held-for- investment		Mortgage servicing rights		Derivative Assets
(In thousands)	Municipal
Balance at January 1, 2020	$	111,950	$	2,646	$	9,620	$	85,638	$	2,631
Total net gains (losses) included in:
Net income (1)	0		0		122		(8,435)		55,802
Other comprehensive income (loss)	(1,795)		(39)		0		0		0
Purchases	12,872		0		0		0		0
Issuances	0		0		0		0		0
Sales	0		0		0		0		0
Settlements	(5,772)		(314)		(1,460)		0		0
Net transfers into/(out of) Level 3	0		0		5,671		0		0
Balance at June 30, 2020	$	117,255	$	2,293	$	13,953	$	77,203	$	58,433

(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, 2020 $ 111,950
$ 2,646
$ 9,620
$ 85,638
$ 2,631
Total net gains (losses) included in:
Net income ⁽¹⁾
—
—
122
(8,435 ) 55,802
Other comprehensive income (loss) (1,795 ) (39 ) —
—
—
Purchases 12,872
—
—
—
—
Issuances —
—
—
—
—
Sales —
—
—
—
—
Settlements (5,772 ) (314 ) (1,460 ) —
—
Net transfers into/(out of) Level 3
—
—
5,671
—
—
Balance at June 30, 2020 $ 117,255
$ 2,293
$ 13,953
$ 77,203
$ 58,433

Table of Contents

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

U.S. Government Agencies Loans held-for- investment
Mortgage
servicing rights
Derivative Assets
(Dollars in thousands) Municipal
Balance at January 1, 2019 $ 108,926
$ 3,150
$ 11,347
$ 75,183
$ 2,457
Total net gains (losses) included in:
Net income ⁽¹⁾
—
—
285
(2,740 ) 1,139
Other comprehensive income (loss) 8,056
143
—
—
—
Purchases 1,524
—
—
407
—
Issuances —
—
—
—
—
Sales —
—
—
—
—
Settlements (8,210 ) (316 ) (1,351 ) —
—
Net transfers into/(out of) Level 3 —
—
200
—
—
Balance at June 30, 2019 $ 110,296
$ 2,977
$ 10,481
$ 72,850
$ 3,596


~~(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.

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 June 30, ~~2020:~~2021:


	June 30, 2021								Three Months Ended June 30, 2021 Fair Value Losses Recognized, net		Six Months Ended June 30, 2021 Fair Value Losses Recognized, net
(In thousands)	Total		Level 1		Level 2		Level 3
Individually assessed loans - foreclosure probable and collateral-dependent	$	79,696	$	0	$	0	$	79,696	$	3,983	$	16,531
Other real estate owned (1)	15,572		0		0		15,572		749		919
Total	$	95,268	$	0	$	0	$	95,268	$	4,732	$	17,450

June 30, 2020
Three Months Ended June 30, 2020
Fair Value Losses Recognized, net

Six Months Ended June 30, 2020
Fair Value Losses Recognized, net
(Dollars in thousands) Total Level 1 Level 2 Level 3
Individually assessed loans - foreclosure probable and collateral-dependent $ 140,473
$ —
$ —
$ 140,473
$ 13,414
$ 17,474
Other real estate owned ⁽¹⁾
10,197
—
—
10,197
217
523
Total $ 150,670
$ —
$ —
$ 150,670
$ 13,631
$ 17,997
(1)Fair value losses recognized, net on other real estate owned include valuation adjustments and charge-offs during the respective period.


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

Individually assessed loans—In accordance with ASC 326, the allowance for credit losses for loans and other financial assets held at amortized cost should be measured on a collective or pooled basis when such assets exhibit similar risk characteristics. In instances in which a financial asset does not exhibit similar risk characteristics to a pool, the Company is required to measure such allowance for credit losses on an individual asset basis. For the Company's loan portfolio, nonaccrual loans and TDRs are considered to not exhibit similar risk characteristics as pools and thus are individually assessed. Credit losses are measured by estimating the fair value of the loan based on the present value of expected cash flows, the market price of the loan, or the fair value of the underlying collateral. Individually assessed loans are considered a fair value measurement where an allowance for credit loss is established based on the fair value of collateral. Appraised values on relevant real estate properties, which may require adjustments to market-based valuation inputs, are generally used on ~~real estate~~ foreclosure probable and collateral-dependent ~~loans.~~loans within the real estate portfolios.

The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs of individually assessed loans. For more information on individually assessed loans refer to Note 76 – Allowance for Credit Losses. At June 30, ~~2020,~~2021, the

Company had ~~$183.4~~$113.9 million of individually assessed loans classified as Level 3. Of the ~~$183.4~~$113.9 million of individually assessed loans, ~~$140.5~~$79.7 million were measured at fair value based on the underlying collateral of the loan as shown in the table above. The remaining ~~$42.9~~$34.2 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 June 30, ~~2020,~~2021, the Company had ~~$10.2~~$15.6 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 June 30, ~~2020~~2021 were as follows:

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

Weighted
Average
of Inputs

Impact to valuation
from an increased or
higher input value
Measured at fair value on a recurring basis:
Municipal Securities $ 117,255
Bond pricing Equivalent rating BBB-AA+ N/A Increase
U.S. Government agencies 2,293
Bond pricing Equivalent rating AAA AAA Increase
Loans held-for-investment 13,953
Discounted cash flows Discount rate 2%-3% 2.80% Decrease
Credit discount 0%-6% 1.24% Decrease
Constant prepayment rate (CPR) 17.25% 17.25% Decrease
MSRs 77,203
Discounted cash flows Discount rate 3%-21% 10.21% Decrease
Constant prepayment rate (CPR) 0%-95% 17.25% Decrease
Cost of servicing $70-$200 $77 Decrease
Cost of servicing - delinquent $200-$1,000 $442 Decrease
Derivatives 58,433
Discounted cash flows Pull-through rate 0%-100% 79% Increase
Measured at fair value on a non-recurring basis:
Individually assessed loans - foreclosure probable and collateral-dependent $ 140,473
Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease
Other real estate owned 10,197
Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease

Table of Contents

(Dollars in thousands)

Fair Value

Valuation Methodology

Significant Unobservable Input

Range
of Inputs

Weighted
Average
of Inputs

Impact to valuation
from an increased or
higher input value

Measured at fair value on a recurring basis:

Municipal Securities

117,606

Bond pricing

Equivalent rating

BBB-AA+

N/A

Increase

Loans held-for-investment

11,007

Discounted cash flows

Discount rate

2.88%

Decrease

Credit discount

0%-3%

0.61%

Decrease

Constant prepayment rate (CPR)

13.30%

Decrease

MSRs

127,604

Discounted cash flows

Discount rate

6%-21%

9.85%

Decrease

Constant prepayment rate (CPR)

6%-92%

13.30%

Decrease

Cost of servicing

$70-$200

$76

Decrease

Cost of servicing - delinquent

$200-$1,000

$340

Decrease

Derivatives

22,570

Discounted cash flows

Pull-through rate

1%-100%

83.98%

Increase

Measured at fair value on a non-recurring basis:

Individually assessed loans - foreclosure probable and collateral-dependent

79,696

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

Other real estate owned

15,572

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

Table of Contents

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

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


	At June 30, 2021				At December 31, 2020				At June 30, 2020
	Carrying		Fair		Carrying		Fair		Carrying		Fair
(In thousands)	Value		Value		Value		Value		Value		Value
Financial Assets:
Cash and cash equivalents	$	435,009	$	435,009	$	322,474	$	322,474	$	345,057	$	345,057
Interest-bearing deposits with banks	4,707,415		4,707,415		4,802,527		4,802,527		4,015,072		4,015,072
Available-for-sale securities	2,188,608		2,188,608		3,055,839		3,055,839		3,194,961		3,194,961
Held-to-maturity securities	2,498,232		2,480,232		579,138		593,767		728,465		744,286
Trading account securities	2,667		2,667		671		671		890		890
Equity securities with readily determinable fair value	86,316		86,316		90,862		90,862		52,460		52,460
FHLB and FRB stock, at cost	136,625		136,625		135,588		135,588		135,571		135,571
Brokerage customer receivables	23,093		23,093		17,436		17,436		14,623		14,623
Mortgage loans held-for-sale, at fair value	984,994		984,994		1,272,090		1,272,090		833,163		833,163
Loans held-for-investment, at fair value	55,340		55,340		55,134		55,134		254,614		254,614
Loans held-for-investment, at amortized cost	32,855,847		32,831,405		32,023,939		31,871,683		31,148,289		31,004,403

Nonqualified deferred compensation assets	16,590		16,590		15,398		15,398		13,576		13,576
Derivative assets	212,380		212,380		278,423		278,423		327,624		327,624

Accrued interest receivable and other	270,087		270,087		272,339		272,339		263,743		263,743
Total financial assets	$	44,473,203	$	44,430,761	$	42,921,858	$	42,784,231	$	41,328,108	$	41,200,043
Financial Liabilities
Non-maturity deposits	$	34,440,741	$	34,440,741	$	32,116,023	$	32,116,023	$	30,814,487	$	30,814,487
Deposits with stated maturities	4,363,875		4,352,116		4,976,628		4,969,849		4,837,387		4,838,831
FHLB advances	1,241,071		1,161,457		1,228,429		1,172,315		1,228,416		1,181,462
Other borrowings	518,493		518,493		518,928		518,928		508,535		508,535
Subordinated notes	436,719		476,683		436,506		473,093		436,298		473,324
Junior subordinated debentures	253,566		206,614		253,566		204,713		253,566		170,449
Derivative liabilities	193,439		193,439		288,465		288,465		355,265		355,265

Accrued interest payable	10,551		10,551		15,645		15,645		17,200		17,200
Total financial liabilities	$	41,458,455	$	41,360,094	$	39,834,190	$	39,759,031	$	38,451,154	$	38,359,553

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, accrued interest receivable and accrued interest payable and non-maturity deposits.

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

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

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

Table of Contents

scheduled cash flows through the estimated maturity using estimated market discount rates that reflect credit and interest rate risks inherent in the loan. 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)~~(16) 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 June 30, ~~2020,~~2021, approximately ~~2.1 million~~978,000 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 in 2021 consisted of a combination of performance-based stock awards with a performance condition metric, performance-based stock awards with a market condition metric and time-vested restricted shares, and in 2020 consisted of a combination of performance-based stock awards and performance-based cash awards (both with a performance condition metric) and time-vested restricted shares. LTIP grants from 2017 through 2019 consisted of a combination of performance-based stock awards and performance-based cash awards, and ~~time vested restricted shares. LTIP grants~~ prior to 2017, ~~included nonqualified-stock~~nonqualified stock options were in the ~~mix.~~mix of award types. Stock options granted under the LTIP have a term of seven years and generally vested equally over three years based on continued service. Performance-based stock and cash awards granted under the LTIP are contingent upon the achievement of pre-established long-term performance goals set in advance by the Compensation Committee over a three-year period starting at the beginning of each calendar year. Performance-based stock awards with a market condition metric are contingent on the total shareholder return performance over a three-year period starting at the beginning of each calendar year relative to the KBW Regional Bank Index. 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% 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

Table of Contents

stock awards are entitled to receive, at no cost, the shares earned based on the achievement of the pre-established long-term goals.

Holders of restricted share awards and performance-based stock awards received under the Plans are not entitled to vote or receive cash dividends (or cash payments equal to the cash dividends) on the underlying common shares until the awards are vested and shares are issued. Shares that are vested but not issuable pursuant to deferred compensation arrangements accrue additional shares based on the value of dividends otherwise paid. Except in limited circumstances, these awards are canceled upon termination of employment without any payment of consideration by the Company.

Stock-based compensation is measured as the fair value of an award on the date of grant, and the measured cost is recognized over the period which the recipient is required to provide service in exchange for the award. The fair value of restricted share and performance-based stock awards with a performance condition metric is determined based on the average of the high and low trading prices on the grant ~~date,~~date. The fair value of performance stock awards with a market condition metric is estimated using a Monte Carlo simulation model and the fair value of stock options is estimated using a Black-Scholes option-pricing model. The Monte Carlo simulation model ~~that utilizes various assumptions. Option-pricing models~~and the Black-Scholes option-pricing model require the input of highly subjective assumptions and are sensitive to changes in the ~~option's~~award's expected life and the price volatility of the underlying stock, which can materially affect the fair value ~~estimate.~~estimates. Management periodically reviews and adjusts the assumptions used to calculate the fair value of ~~an option in periods~~such awards when ~~options are~~ granted. NaN options ~~were~~have been granted 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 with a performance metric, 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 re-evaluated quarterly and total compensation expense is adjusted for any change in estimate in the current period. Stock-based compensation expense recognized in the Consolidated Statements of Income was $3.3 million in the second quarter of 2021 and $540,000 in the second quarter of 2020, and ~~$3.0~~$6.2 million and $(2.3) million in the ~~second quarter of 2019,~~2021 and ~~$(2.3) million and $6.3 million in the~~ 2020 ~~and 2019~~ year-to-date periods, respectively.

A summary of the Company's stock option activity for the six months ended June 30, ~~2020~~2021 and June 30, ~~2019~~2020 is presented below:


Stock Options	Common Shares	Weighted Average Strike Price		Remaining Contractual Term (1)	Intrinsic Value (2) (in thousands)
Outstanding at January 1, 2021	520,663	$	42.47
Granted	0	0
Exercised	(237,892)	43.05
Forfeited or canceled	(590)	46.86
Outstanding at June 30, 2021	282,181	$	41.98	1.7	$	9,496
Exercisable at June 30, 2021	280,632	$	41.95	1.6	$	9,453


Stock Options	Common Shares		Weighted Average Strike Price		Remaining Contractual Term⁽¹⁾	Intrinsic Value ⁽²⁾ ($000)		Stock Options	Common Shares	Weighted Average Strike Price		Remaining Contractual Term (1)	Intrinsic Value (2) (in thousands)
Outstanding at January 1, 2020	755,332		$	42.43				Outstanding at January 1, 2020	755,332	$	42.43

Granted	—		—					Granted	0	0
Exercised	(98,659	)	38.75					Exercised	(98,659)	38.75
Forfeited or canceled	(648	)	46.86					Forfeited or canceled	(648)	46.86
Outstanding at June 30, 2020	656,025		$	42.98	2.2	$	970	Outstanding at June 30, 2020	656,025	$	42.98	2.2	$	970
Exercisable at June 30, 2020	648,124		$	42.97	2.2	$	957	Exercisable at June 30, 2020	648,124	$	42.97	2.2	$	957

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

Stock Options
Common
Shares

Weighted
Average
Strike Price

Remaining
Contractual
Term ⁽¹⁾

Intrinsic
Value ⁽²⁾
($000)
Outstanding at January 1, 2019 795,014
$ 42.25

Granted —
—

Exercised (94,767 ) 38.00

Forfeited or canceled —
—

Outstanding at June 30, 2019 700,247
$ 42.83
2.7 $ 21,239
Exercisable at June 30, 2019 685,127
$ 42.80
2.7 $ 20,802
(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.


~~(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 six months ended June 30, ~~2020~~2021 and June 30, ~~2019,~~2020, was ~~$2.7~~$7.6 million and ~~$3.3~~$2.7 million, respectively. Cash received from option exercises under the Plans for the six months ended June 30, ~~2020~~2021 and June 30, ~~2019~~2020 was $10.2 million and $3.8 million, ~~and $3.6 million,~~ respectively.

Table of Contents

A summary of the Plans' restricted share activity for the six months ended June 30, 2021 and June 30, 2020 ~~and~~ ~~June 30, 2019~~ is presented below:


	Six months ended June 30, 2021			Six months ended June 30, 2020
Restricted Shares	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1	234,794	$	59.02	144,328	$	60.37
Granted	261,498	63.01		106,139	62.53
Vested and issued	(10,022)	75.15		(12,099)	76.98
Forfeited or canceled	(7,525)	63.76		(4,162)	79.22
Outstanding at June 30	478,745	$	60.79	234,206	$	60.16
Vested, but not issuable at June 30	94,729	$	52.30	92,910	$	52.14

Six months ended June 30, 2020 Six months ended June 30, 2019
Restricted Shares Common
Shares
Weighted
Average
Grant-Date
Fair Value
Common
Shares
Weighted
Average
Grant-Date
Fair Value
Outstanding at January 1 144,328
$ 60.37
143,263
$ 60.80
Granted 106,139
62.53
11,121
72.01
Vested and issued (12,099 ) 76.98
(13,401 ) 76.29
Forfeited or canceled (4,162 ) 79.22
(1,158 ) 78.36
Outstanding at June 30 234,206
$ 60.16
139,825
$ 60.06
Vested, but not issuable at June 30 92,910
$ 52.14
91,148
$ 52.08

A summary of the Plans' performance-based stock award activity, based on the target level of the awards, for the six months ended June 30, ~~2020~~2021 and June 30, ~~2019~~2020 is presented below:


	Six months ended June 30, 2021			Six months ended June 30, 2020
Performance-based Stock	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1	482,608	$	71.15	465,515	$	74.37
Granted	207,620	58.93		169,642	63.56
Added by performance factor at vesting	0	0		48,831	72.59
Vested and issued	0	0		(180,789)	72.59
Expired, canceled or forfeited	(131,287)	86.79		(8,666)	72.74
Outstanding at June 30	558,941	$	62.94	494,533	$	71.19
Vested, but deferred at June 30	34,889	$	43.41	34,219	$	43.07

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

~~(18)~~(17) 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 E Preferred Stock

In May 2020, the Company issued 11,500 shares of fixed-rate reset non-cumulative perpetual preferred stock, Series E, liquidation preference $25,000 per share (the “Series E Preferred Stock”) as part of a $287.5 million public offering of 11,500,000 depositary shares, each representing a 1/1,000th interest in a share of Series E Preferred Stock. When, as and if declared, dividends on the Series E Preferred Stock are payable quarterly in arrears at a fixed rate of 6.875% per annum starting on October 15, 2020.

Other

At the January ~~2020~~2021 Board of Directors meeting, a quarterly cash dividend of ~~$0.28~~$0.31 per share ($~~1.12~~1.24 on an annualized basis) was declared. It was paid on February ~~20, 2020~~25, 2021 to shareholders of record as of February ~~6, 2020.~~11, 2021. At the April ~~2020~~2021 Board of Directors meeting, a quarterly cash dividend of ~~$0.28~~$0.31 per share ($~~1.12~~1.24 on an annualized basis) was declared. It was paid on May ~~21, 2020~~20, 2021 to shareholders of record as of May ~~7, 2020.~~6, 2021.

Table of Contents

Accumulated Other Comprehensive Income (Loss)

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

Accumulated
Unrealized
Gains (Losses)
on Securities

Accumulated
Unrealized (Losses) Gains on
Derivative
Instruments

Accumulated
Foreign
Currency
Translation
Adjustments

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

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


	Accumulated Unrealized Gains (Losses) on Securities		Accumulated Unrealized Gains (Losses) on Derivative Instruments		Accumulated Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Income (Loss)
Balance at April 1, 2021	$	26,022	$	14,167	$	(30,085)	$	10,104
Other comprehensive income (loss) during the period, net of tax, before reclassifications	4,628		(11,483)		2,309		(4,546)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(427)		5,036		0		4,609
Amount reclassified from accumulated other comprehensive income (loss) related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(34)		0		0		(34)
Net other comprehensive income (loss) during the period, net of tax	$	4,167	$	(6,447)	$	2,309	$	29
Balance at June 30, 2021	$	30,189	$	7,720	$	(27,776)	$	10,133

Balance at January 1, 2021	$	70,737	$	(23,090)	$	(32,265)	$	15,382
Other comprehensive (loss) income during the period, net of tax, before reclassifications	(39,891)		20,862		4,489		(14,540)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(581)		9,948		0		9,367
Amount reclassified from accumulated other comprehensive income (loss) related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(76)		0		0		(76)
Net other comprehensive (loss) income during the period, net of tax	$	(40,548)	$	30,810	$	4,489	$	(5,249)
Balance at June 30, 2021	$	30,189	$	7,720	$	(27,776)	$	10,133


Balance at April 1, 2020	$	81,573	$	(41,512)	$	(47,664)	$	(7,603)
Other comprehensive income (loss) during the period, net of tax, before reclassifications	3,718		(6,092)		5,167		2,793
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	249		3,998		0		4,247
Amount reclassified from accumulated other comprehensive income (loss) related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(34)		0		0		(34)
Net other comprehensive income (loss) during the period, net of tax	$	3,933	$	(2,094)	$	5,167	$	7,006
Balance at June 30, 2020	$	85,506	$	(43,606)	$	(42,497)	$	(597)

Balance at January 1, 2020	$	14,982	$	(13,141)	$	(36,519)	$	(34,678)
Other comprehensive income (loss) during the period, net of tax, before reclassifications	70,725		(35,262)		(5,978)		29,485
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(110)		4,797		0		4,687
Amount reclassified from accumulated other comprehensive income (loss) related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(91)		0		0		(91)
Net other comprehensive income (loss) during the period, net of tax	$	70,524	$	(30,465)	$	(5,978)	$	34,081
Balance at June 30, 2020	$	85,506	$	(43,606)	$	(42,497)	$	(597)

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

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

Table of Contents


	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the
Details Regarding the Component of Accumulated Other Comprehensive Income (Loss)	Three Months Ended				Six Months Ended				Impacted Line on the Consolidated Statements of Income
	June 30,				June 30,
	2021		2020		2021		2020
Accumulated unrealized gains on securities
Gains (losses) included in net income	$	584	$	(341)	$	794	$	150	Gains (losses) on investment securities, net
	584		(341)		794		150		Income before taxes
Tax effect	(157)		92		(213)		(40)		Income tax expense
Net of tax	$	427	$	(249)	$	581	$	110	Net income

Accumulated unrealized gains on derivative instruments
Amount reclassified to interest expense on deposits	$	5,054	$	4,363	$	9,951	$	4,922	Interest on deposits
Amount reclassified to interest expense on other borrowings	653		426		1,322		718		Interest on other borrowings
Amount reclassified to interest expense on junior subordinated debentures	1,159		662		2,289		901		Interest on junior subordinated debentures
	(6,866)		(5,451)		(13,562)		(6,541)		Income before taxes
Tax effect	1,830		1,453		3,614		1,744		Income tax expense
Net of tax	$	(5,036)	$	(3,998)	$	(9,948)	$	(4,797)	Net income

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

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

Earnings per Share

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


		Three Months Ended				Six Months Ended
(In thousands, except per share data)		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net income		$	105,109	$	21,659	$	258,257	$	84,471
Less: Preferred stock dividends		6,991		2,050		13,982		4,100
Net income applicable to common shares	(A)	$	98,118	$	19,609	$	244,275	$	80,371

Weighted average common shares outstanding	(B)	57,049		57,567		56,977		57,593
Effect of dilutive potential common shares
Common stock equivalents		726		414		691		481
Weighted average common shares and effect of dilutive potential common shares	(C)	57,775		57,981		57,668		58,074
Net income per common share:
Basic	(A/B)	$	1.72	$	0.34	$	4.29	$	1.40
Diluted	(A/C)	$	1.70	$	0.34	$	4.24	$	1.38

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

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

Potentially dilutive common shares can result from stock options, restricted stock unit awards, stock warrants 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.

Table of Contents

ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition of Wintrust Financial Corporation and its subsidiaries (collectively, "Wintrust" or the "Company") as of June 30, ~~2020~~2021 compared with December 31, ~~2019~~2020 and June 30, ~~2019,~~2020, and the results of operations for the three and six month ~~periods~~period ended June 30, ~~2020~~2021 and June 30, ~~2019,~~2020, 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 Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 ("~~2019~~2020 Form 10-K"). and in Part II, Item 1A, of this Form 10-Q. 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

Impact of COVID-19

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

The Company activated its pandemic response plan in early March 2020, as well as applicable elements of its business continuity plan. In order to protect the health of our customers and employees, and in accordance with applicable government directives, we modified certain of our business protocols to direct employees to work from home unless their role required them to be on site, in which case we have implemented enhanced safety measures including social distancing, enhanced cleaning and sanitization, and certain personal protective equipment. With the phased reopening of certain state and municipal areas, the Company ~~has developed~~implemented a comprehensive plan that permits certain remote employees to return to their respective workplaces, where enhanced safety measures also have been implemented. At present, however, the majority of the Company’s workforce continues to work remotely on a nearly daily basis.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted. The CARES Act includes appropriations and other measures designed to address the impact of the COVID-19 pandemic, including the Paycheck Protection Program ("PPP"), which is designed to aid eligible small and medium-sized businesses through federally-guaranteed loans distributed through certain banks, under the administration of the Small Business Administration ("SBA"). ~~As of~~From the date the Company began accepting applications, April 3, 2020, through June 30, ~~2020,~~2021, the Company secured authorization from the SBA and funded over ~~11,000~~19,400 PPP loans with a carrying balance of approximately ~~$3.3~~$4.8 billion. PPP loans are forgivable under certain circumstances, including the borrower’s use of certain loan proceeds to fund employee payroll during a specific period ~~(i.e.~~(e.g., eight weeks, 24 weeks) following disbursement of the borrower’s PPP loan. ~~The SBA continues to issue guidance as to~~From the ~~administration of~~loans originated under the ~~loan forgiveness and guaranty process. The~~program, the Company has generated net fees of ~~$91.0~~$146.0 million to be recognized over the life of the PPP loan adjusted for estimated prepayments.

All of our three primary business segments ~~community~~(community banking, specialty finance and wealth ~~management,~~management), have been uniquely impacted and we expect will ~~likely~~ continue to be impacted by the COVID-19 pandemic, requiring the implementation of certain responses as circumstances evolve. As non-exclusive examples of such impacts, our community banking business, including our mortgage business, has received borrower requests for temporary payment relief including payment deferrals. As of June 30, ~~2020,~~2021, loans totaling approximately ~~$1.7 billion~~$145.6 million were modified as a result of COVID-19 disruption to our borrowers. Our insurance premium finance business is impacted by certain state legislation prohibiting canceling of insurance policies for designated periods. Our wealth management business is impacted by ~~factors including~~ increased stock market volatility.

Table of Contents

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

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

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

Second Quarter Highlights

The Company recorded net income of ~~$21.7~~$105.1 million for the second quarter of ~~2020~~2021 compared to ~~$81.5~~$21.7 million in the second quarter of ~~2019.~~2020. The results for the second quarter of ~~2020~~2021 demonstrate continued momentum on our operating strengths, including strong loan ~~and deposit~~ growth ~~driven by~~despite significant payoffs through forgiveness within the ~~Company's participation in~~Company’s PPP ~~and~~portfolio, increased revenue from mortgage banking services, offset by increased provision for credit losses primarily related to the implementation of CECL and the economic conditions created by the COVID-19 pandemic. Netnet interest income ~~decreased in the current period~~ as a result of ~~a decrease in net interest margin partially mitigated by continued loan~~ growth in earning assets, lower production by the ~~second quarter~~Company's mortgage banking business, and a release of ~~2020 compared~~credit reserves attributable to positive changes in the ~~same period of 2019.~~macroeconomic forecasts in addition to improvement in portfolio characteristics.

The Company increased its loan portfolio from ~~$25.3 billion at June 30, 2019 and $26.8 billion at December 31, 2019 to~~ $31.4 billion at June 30, ~~2020.~~2020 and $32.1 billion at December 31, 2020 to $32.9 billion at June 30, 2021. The increase in the current period compared to the prior periods was primarily a result of ~~the Company’s participation in PPP lending as well as~~ growth in several portfolios, including the commercial, industrial and other (excluding PPP loans), commercial real estate, residential real estate loans for investment, commercial insurance premium finance ~~receivables~~receivable and life insurance premium finance receivables portfolios. For more information regarding changes in the Company’s loan portfolio, see Financial Condition – Interest Earning Assets and Note 65 - Loans of the Consolidated Financial Statements in Item 1 of this report.

The Company recorded net interest income of $279.6 million in the second quarter of 2021 compared to $263.1 million in the second quarter of ~~2020 compared to $266.2 million in the second quarter of 2019. The decrease~~2020. This increase in net interest income recorded in the second quarter of ~~2020~~2021 compared to the second quarter of ~~2019~~2020 resulted primarily from growth in earning assets, specifically a ~~lower~~$ $2.7 billion increase in average loans. The increase in average earnings assets was partially offset by a reduced net interest margin between periods. Net interest margin of 2.62% (2.63% on a fully taxable-equivalent basis, non-GAAP) in the second quarter of 2021 compared to 2.73% (2.74% on a fully taxable-equivalent basis, non-GAAP) in the second quarter of 2020 ~~compared~~was primarily due to ~~3.62% (3.64%~~lower rates on ~~a fully taxable-equivalent basis, non-GAAP)~~earning assets in the ~~second~~first quarter of ~~2019. The reduction in net~~2021 from the declining interest ~~margin was partially offset by a $5.8 billion increase in average loans, and a $3.0 billion increase in average liquidity management assets~~rate environment (see "Net Interest Income" for further detail).

Non-interest income totaled $129.4 million in the second quarter of 2021 compared to $162.0 million in the second quarter of ~~2020 compared to $98.2 million in the second quarter of 2019.~~2020. This ~~increase~~decrease was primarily the result of ~~higher~~lower mortgage banking revenue (see “Non-Interest Income” for further detail).

Non-interest expense totaled ~~$259.4~~$280.1 million in the second quarter of ~~2020,~~2021, increasing ~~$29.8~~$20.7 million, or ~~13%~~8%, compared to the second quarter of ~~2019.~~2020. The increase compared to the second quarter of ~~2019~~2020 was primarily attributable to ~~addition of employees from acquisitions, increased staffing as the Company grows~~higher salaries and ~~higher commissions and incentive compensation due to increased origination volume associated with the Company's mortgage business~~employee benefits (see “Non-Interest Expense” for further detail).

Management considers the maintenance of adequate liquidity to be important to the management of risk. ~~During~~Accordingly, during the second quarter of ~~2020,~~2021, 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 June 30, ~~2020,~~2021, the Company had approximately ~~$4.4~~$5.1 billion in overnight liquid funds and interest-bearing deposits with banks. ~~Total cash inflows by the Company during the first six months~~

Table of 2020 were offset by $220.8 million in cash collateral posted to unaffiliated derivative counterparties in which the Company held a net liability position in such derivative transactions as well as the origination of mortgage loans pending the ultimate sale of such loans into the secondary market following June 30, 2020.Contents

RESULTS OF OPERATIONS

Earnings Summary

The Company’s key operating measures and growth rates for the three and six months ended June 30, ~~2020,~~2021, as compared to the same period last year, are shown below:


	Three months ended
(Dollars in thousands, except per share data)	June 30, 2021			June 30, 2020			Percentage (%) or Basis Point (bp) Change
Net income	$	105,109		$	21,659		385	%
Pre-tax income, excluding provision for credit losses (non-GAAP) (2)	128,851			165,756			(22)

Net income per common share—Diluted	1.70			0.34			400
Net revenue (1)	408,963			425,124			(4)
Net interest income	279,590			263,131			6
Net interest margin	2.62		%	2.73		%	(11)	bps
Net interest margin - fully taxable-equivalent (non-GAAP) (2)	2.63			2.74			(11)
Net overhead ratio (3)	1.32			0.93			39

Return on average assets	0.92			0.21			71
Return on average common equity	10.24			2.17			807
Return on average tangible common equity (non-GAAP) (2)	12.62			2.95			967


	Three months ended									Six months ended
(Dollars in thousands, except per share data)	June 30, 2020			June 30, 2019			Percentage (%) or Basis Point (bp) Change		(Dollars in thousands, except per share data)	June 30, 2021			June 30, 2020			Percentage (%) or Basis Point (bp) Change
Net income	$	21,659		$	81,466		(73	)%	Net income	$	258,257		$	84,471		206	%
Pre-tax income, excluding provision for credit losses (non-GAAP) ⁽²⁾	165,756			134,753			23		Pre-tax income, excluding provision for credit losses (non-GAAP) (2)	290,363			305,800			(5)
Pre-tax income, excluding provision for credit losses and MSR valuation adjustments (non-GAAP) ⁽²⁾	173,149			138,138			25

Net income per common share—Diluted	0.34			1.38			(75	)	Net income per common share—Diluted	4.24			1.38			206
Net revenue ⁽¹⁾	425,124			364,360			17		Net revenue (1)	857,364			799,809			7
Net interest income	263,131			266,202			(1	)	Net interest income	541,485			524,574			3
Net interest margin	2.73		%	3.62		%	(89) bp		Net interest margin	2.58		%	2.91		%	(33)	bps
Net interest margin - fully taxable-equivalent (non-GAAP) ⁽²⁾	2.74			3.64			(90	)
Net interest margin - fully taxable equivalent (non-GAAP) (2)									Net interest margin - fully taxable equivalent (non-GAAP) (2)	2.59		%	2.93		%	(34)
Net overhead ratio ⁽³⁾	0.93			1.64			(71	)	Net overhead ratio (3)	1.11		%	1.12		%	(1)

Return on average assets	0.21			1.02			(81	)	Return on average assets	1.15		%	0.43		%	72
Return on average common equity	2.17			9.68			(751	)	Return on average common equity	12.97		%	4.48		%	849
Return on average tangible common equity (non-GAAP) ⁽²⁾	2.95			12.28			(933	)	Return on average tangible common equity (non-GAAP) (2)	15.99		%	5.81		%	1,018
At end of period									At end of period
Total assets									Total assets	$	46,738,450		$	43,540,017		7	%
Total loans, excluding loans held-for-sale									Total loans, excluding loans held-for-sale	32,911,187			31,402,903			5
Total loans, including loans held-for-sale									Total loans, including loans held-for-sale	33,896,181			32,236,066			5
Total deposits									Total deposits	38,804,616			35,651,874			9
Total shareholders’ equity									Total shareholders’ equity	4,339,011			3,990,218			9

Book value per common share (2)									Book value per common share (2)	$	68.81		$	62.14		11
Tangible common book value per share (2)									Tangible common book value per share (2)	56.92			50.23			13
Market price per common share									Market price per common share	75.63			43.62			73

Allowance for loan and unfunded lending-related commitment losses to total loans									Allowance for loan and unfunded lending-related commitment losses to total loans	0.92		%	1.19		%	(27)	bps

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

(2)See following section titled, “Supplemental Non-GAAP Financial Measures/Ratios” for additional information on this performance measure/ratio.

Six months ended
(Dollars in thousands, except per share data) June 30,
2020 June 30,
2019 Percentage (%) or
Basis Point (bp) Change
Net income $ 84,471
$ 170,612
(50 )%
Pre-tax income, excluding provision for credit losses (non-GAAP) ⁽²⁾
305,800
264,022
16
Pre-tax income, excluding provision for credit losses and MSR valuation adjustments (non-GAAP)⁽²⁾
323,590
276,151
17
Net income per common share—Diluted 1.38
2.91
(53 )
Net revenue ⁽¹⁾
799,809
708,003
13
Net interest income 524,574
528,188
(1 )
Net interest margin 2.91 % 3.66 % (75) bp
Net interest margin - fully taxable equivalent (non-GAAP) ⁽²⁾
2.93 % 3.68 % (75 )
Net overhead ratio ⁽³⁾
1.12 % 1.68 % (56 )
Return on average assets 0.43 % 1.09 % (66 )
Return on average common equity 4.48 % 10.37 % (589 )
Return on average tangible common equity (non-GAAP) ⁽²⁾
5.81 % 13.19 % (738 )
At end of period
Total assets $ 43,540,017
$ 33,641,769
29 %
Total loans, excluding loans held-for-sale 31,402,903
25,304,659
24
Total loans, including loans held-for-sale 32,236,066
25,699,634
25
Total deposits 35,651,874
27,518,815
30
Total shareholders’ equity 3,990,218
3,446,950
16
Book value per common share ⁽²⁾
62.14
58.62
6
Tangible common book value per share ⁽²⁾
50.23
47.48
6
Market price per common share 43.62
73.16
(40 )
Allowance for loan and unfunded lending-related commitment losses to total loans 1.19 % 0.64 % 55 bp
(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.


~~(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.

Certain returns, yields, performance ratios, and quarterly growth rates are “annualized” 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%.

Table of Contents

SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES/RATIOS

The accounting and reporting policies of the Company conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components), taxable-equivalent net interest margin (including its individual components), the taxable-equivalent efficiency ratio, tangible common equity ratio, tangible book value per common share, return on average tangible common equity and pre-tax income, excluding provision for credit ~~losses and pre-tax income, excluding provision for credit losses and MSR valuation adjustment.~~losses. 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 basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax 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 fully taxable-equivalent basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability. Management considers ~~(i)~~ pre-tax income excluding provision for credit losses ~~and (ii) pre-tax income excluding provision for credit losses and MSR valuation adjustment~~ as useful measurements of the Company's core net income.

Table of Contents

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						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
(Dollars and shares in thousands)	2021			2020			2021			2020
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio
(A) Interest Income (GAAP)	$	319,579		$	329,816		$	625,048		$	673,883
Taxable-equivalent adjustment:
- Loans	415			576			799			1,436
- Liquidity management assets	494			538			994			1,089
- Other earning assets	—			3			—			5
(B) Interest Income (non-GAAP)	$	320,488		$	330,933		$	626,841		$	676,413
(C) Interest Expense (GAAP)	39,989			66,685			83,563			149,309
(D) Net Interest Income (GAAP) (A minus C)	279,590			263,131			541,485			524,574
(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C)	280,499			264,248			543,278			527,104

Net interest margin (GAAP)	2.62		%	2.73		%	2.58		%	2.91		%
Net interest margin, fully taxable-equivalent (non-GAAP)	2.63			2.74			2.59			2.93
(F) Non-interest income	$	129,373		$	161,993		$	315,879		$	275,235
(G) Gains (losses) on investment securities, net	1,285			808			2,439			(3,551)
(H) Non-interest expense	280,112			259,368			567,001			494,009
Efficiency ratio (H/(D+F-G))	68.71		%	61.13		%	66.32		%	61.49		%
Efficiency ratio (non-GAAP) (H/(E+F-G))	68.56		%	60.97		%	66.18		%	61.30		%

Reconciliation of Non-GAAP Tangible Common Equity ratio
Total shareholders’ equity (GAAP)	$	4,339,011		$	3,990,218

Less: Non-convertible preferred stock (GAAP)	(412,500)			(412,500)
Less: Intangible assets (GAAP)	(678,333)			(685,581)
(I) Total tangible common shareholders’ equity (non-GAAP)	$	3,248,178		$	2,892,137
(J) Total assets (GAAP)	$	46,738,450		$	43,540,017
Less: Intangible assets (GAAP)	(678,333)			(685,581)
(K) Total tangible assets (non-GAAP)	$	46,060,117		$	42,854,436
Common equity to assets ratio (GAAP) (L/J)	8.4		%	8.2		%
Tangible common equity ratio (non-GAAP) (I/K)	7.1		%	6.7		%

Reconciliation of tangible book value per common share
Total shareholders’ equity	$	4,339,011		$	3,990,218
Less: Preferred stock	(412,500)			(412,500)
(L) Total common equity	$	3,926,511		$	3,577,718
(M) Actual common shares outstanding	57,067			57,574
Book value per common share (L/M)	$	68.81		$	62.14
Tangible book value per common share (non-GAAP) (I/M)	$	56.92		$	50.23


Reconciliation of non-GAAP return on average tangible common equity
(N) Net income applicable to common shares	$	98,118		$	19,609		$	244,275		$	80,371
Add: Intangible asset amortization	2,039			2,820			4,046			5,683
Less: Tax effect of intangible asset amortization	(553)			(832)			(1,068)			(1,608)
After-tax intangible asset amortization	$	1,486		$	1,988		2,978			4,075
(O) Tangible net income applicable to common shares (non-GAAP)	99,604			21,597			247,253			84,446
Total average shareholders' equity	4,256,778			3,908,846			4,211,088			3,809,508
Less: Average preferred stock	(412,500)			(273,489)			(412,500)			(199,245)
(P) Total average common shareholders' equity	$	3,844,278		$	3,635,357		3,798,588			3,610,263
Less: Average intangible assets	(679,535)			(686,526)			(680,166)			(688,652)
(Q) Total average tangible common shareholders’ equity (non-GAAP)	$	3,164,743		$	2,948,831		3,118,422			2,921,611
Return on average common equity, annualized (N/P)	10.24		%	2.17		%	12.97		%	4.48		%
Return on average tangible common equity, annualized (non-GAAP) (O/Q)	12.62			2.95			15.99		%	5.81		%


Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:
Income before taxes	$	144,150	$	30,703	$	351,009	$	117,786
Add: Provision for credit losses	(15,299)		135,053		(60,646)		188,014
Pre-tax income, excluding provision for credit losses (non-GAAP)	$	128,851	$	165,756	$	290,363	$	305,800

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(Dollars and shares in thousands) 2020 2019 2020 2019
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio
(A) Interest Income (GAAP) $ 329,816
$ 346,814
$ 673,883
$ 680,784
Taxable-equivalent adjustment:
- Loans 576
1,031
1,436
2,065
- Liquidity Management Assets 538
568
1,089
1,133
- Other Earning Assets 3
1
5
3
(B) Interest Income (non-GAAP) $ 330,933
$ 348,414
$ 676,413
$ 683,985
(C) Interest Expense (GAAP) 66,685
80,612
149,309
152,596
(D) Net Interest Income (GAAP) (A minus C) 263,131
266,202
524,574
528,188
(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C) 264,248
267,802
527,104
531,389
Net interest margin (GAAP) 2.73 % 3.62 % 2.91 % 3.66 %
Net interest margin, fully taxable-equivalent (non-GAAP) 2.74
3.64
2.93
3.68
(F) Non-interest income $ 161,993
$ 98,158
$ 275,235
$ 179,815
Gains (losses) on investment securities, net 808
864
(3,551 ) 2,228
(H) Non-interest expense 259,368
229,607
494,009
443,981
Efficiency ratio (H/(D+F-G)) 61.13 % 63.17 % 61.49 % 62.91 %
Efficiency ratio (non-GAAP) (H/(E+F-G)) 60.97 % 62.89 % 61.30 % 62.62 %
Reconciliation of Non-GAAP Tangible Common Equity ratio
Total shareholders’ equity $ 3,990,218
$ 3,446,950

Less: Non-convertible preferred stock (412,500 ) (125,000 )
Less: Intangible assets (685,581 ) (631,499 )
(I) Total tangible common shareholders’ equity $ 2,892,137
$ 2,690,451

(J) Total assets $ 43,540,017
$ 33,641,769

Less: Intangible assets (685,581 ) (631,499 )
(K) Total tangible assets $ 42,854,436
$ 33,010,270

Common equity to assets ratio (GAAP) (L/J) 8.2 % 9.9 %
Tangible common equity ratio (non-GAAP) (I/K) 6.7 % 8.2 %
Reconciliation of tangible book value per share
Total shareholders’ equity $ 3,990,218
$ 3,446,950

Less: Preferred stock (412,500 ) (125,000 )
(L) Total common equity $ 3,577,718
$ 3,321,950

(M) Actual common shares outstanding 57,574
56,668

Book value per common share (L/M) $ 62.14
$ 58.62

Tangible common book value per share (non-GAAP) (I/M) $ 50.23
$ 47.48

Table of Contents

Reconciliation of non-GAAP return on average tangible common equity
(N) Net income applicable to common shares $ 19,609
$ 79,416
$ 80,371
$ 166,512
Add: Intangible asset amortization 2,820
2,957
5,683
5,899
Less: Tax effect of intangible asset amortization (832 ) (771 ) (1,608 ) (1,502 )
After-tax intangible asset amortization 1,988
2,186
4,075
4,397
(O) Tangible net income applicable to common shares (non-GAAP) 21,597
81,602
84,446
170,909
Total average shareholders' equity 3,908,846
3,414,340
3,809,508
3,362,000
Less: Average preferred stock (273,489 ) (125,000 ) (199,245 ) (125,000 )
(P) Total average common shareholders' equity 3,635,357
3,289,340
3,610,263
3,237,000
Less: Average intangible assets (686,526 ) (624,794 ) (688,652 ) (623,524 )
(Q) Total average tangible common shareholders’ equity (non-GAAP) 2,948,831
2,664,546
2,921,611
2,613,476
Return on average common equity, annualized (N/P) 2.17 % 9.68 % 4.48 % 10.37 %
Return on average tangible common equity, annualized (non-GAAP) (O/Q) 2.95 % 12.28 % 5.81 % 13.19 %

Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income and Pre-Tax, Pre-Provision,
Pre-MSR Adjustment Income:

Income before taxes $ 30,703
$ 110,173
$ 117,786
$ 228,818
Add: Provision for credit losses 135,053
24,580
188,014
35,204
Pre-tax income, excluding provision for credit losses (non-GAAP) $ 165,756
$ 134,753
$ 305,800

$ 264,022
Less: MSR valuation adjustment, net of (loss)/gain on derivative contract held as an economic hedge (7,393 ) (3,385 ) (17,790 ) (12,129 )
Pre-tax income, excluding provision for credit losses and MSR valuation adjustments (non-GAAP) $ 173,149
$ 138,138
$ 323,590
$ 276,151

Critical Accounting Policies

The Company’s Consolidated Financial Statements are prepared in accordance with GAAP in the United States and prevailing practices of the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. Certain policies and accounting principles inherently have a greater reliance on the use of estimates, assumptions and judgments, and as such have a greater possibility that changes in those estimates and assumptions could produce financial results that are materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event, are based on information available as of the date of the financial statements; accordingly, as information changes, the financial statements could reflect different estimates and assumptions. Management views critical accounting policies to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management currently views critical accounting policies to include the determination of the allowance for credit losses, including the allowance for loan losses, the allowance for unfunded commitment losses and the allowance for held-to-maturity securities losses, ~~on lending-related commitments, loans acquired with evidence of credit quality deterioration since origination,~~ estimations of fair value, the valuations required for impairment testing of goodwill, the valuation and accounting for derivative instruments and income taxes as the accounting areas that require the most subjective and complex judgments, and as such could be the most subject to revision as new information becomes available. For a more detailed discussion on these critical accounting policies, see “Summary of Critical Accounting Policies” beginning on page 5359 of the Company’s ~~2019~~2020 Form 10-K.

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

Net Income

Net income for the quarter ended June 30, ~~2020~~2021 totaled ~~$21.7~~$105.1 million, ~~a decrease~~an increase of ~~$59.8~~$83.5 million, or ~~73%~~385%, compared to the quarter ended June 30, ~~2019.~~2020. On a per share basis, net income for the second quarter of ~~2020~~2021 totaled ~~$0.34~~$1.70 per diluted common share compared to ~~$1.38~~$0.34 for the second quarter of ~~2019.~~2020.

The ~~most significant factors impacting~~increase in net income for the second quarter of ~~2020~~2021 as compared to the same period in the prior year ~~include an increase~~is primarily attributable to a release of credit reserves attributable to positive changes in the ~~provision for credit losses as a result of the adoption of CECL~~Company’s macroeconomic forecasts in addition to improvement in portfolio characteristics and ~~economic conditions created~~higher net interest income, partially offset by ~~the COVID–19 pandemic~~decreased mortgage banking revenue as well as increased salaries and employee benefits ~~expense, partially offset by increased mortgage banking revenue.~~expense. See "Net Interest Income", "Non-interest Income", "Non-interest Expense" and "Loan Portfolio and Asset Quality" for further detail.

Net Interest Income

The primary source of the Company’s revenue is net interest income. Net interest income is the difference between interest income and fees on ~~earnings~~earning 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.

Table of Contents

Quarter Ended June 30, ~~2020~~2021 compared to the Quarters Ended March 31, ~~2020~~2021 and June 30, ~~2019~~2020

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 second quarter of ~~2020~~2021 as compared to the first quarter of ~~2020~~2021 (sequential quarters) and second quarter of ~~2019~~2020 (linked quarters):


	Average Balance for three months ended,						Interest for three months ended,						Yield/Rate for three months ended,
(Dollars in thousands)	Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Jun 30, 2021		Mar 31, 2021		Jun 30, 2020		Jun 30, 2021		Mar 31, 2021		Jun 30, 2020
Interest-bearing deposits with banks and cash equivalents(1)	$	3,844,355	$	4,230,886	$	3,240,167	$	1,153	$	1,199	$	1,326	0.12	%	0.11	%	0.16	%
Investment securities (2)	4,771,403		3,944,676		4,309,471		24,117		19,764		27,643		2.03		2.03		2.58
FHLB and FRB stock	136,324		135,758		135,360		1,769		1,745		1,765		5.20		5.21		5.24
Liquidity management assets(3)(8)	$	8,752,082	$	8,311,320	$	7,684,998	$	27,039	$	22,708	$	30,734	1.24	%	1.11	%	1.61	%
Other earning assets(3)(4)(8)	23,354		20,370		16,917		150		125		113		2.59		2.50		2.71
Mortgage loans held-for-sale	991,011		1,151,848		705,702		8,183		9,036		4,764		3.31		3.18		2.72
Loans, net of unearned income(3)(5)(8)	33,085,174		32,442,927		30,336,626		285,116		274,484		295,322		3.46		3.43		3.92

Total earning assets(8)	$	42,851,621	$	41,926,465	$	38,744,243	$	320,488	$	306,353	$	330,933	3.00	%	2.96	%	3.44	%
Allowance for loan and investment security losses	(285,686)		(327,080)		(222,485)
Cash and due from banks	470,566		366,413		352,423
Other assets	2,910,250		3,022,935		3,168,548
Total assets	$	45,946,751	$	44,988,733	$	42,042,729

NOW and interest-bearing demand deposits	$	3,626,424	$	3,493,451	$	3,323,124	$	736	$	901	$	1,561	0.08	%	0.10	%	0.19	%
Wealth management deposits	4,369,998		4,156,398		4,380,996		7,686		7,351		7,244		0.71		0.72		0.67
Money market accounts	9,547,167		9,335,920		8,727,966		2,795		2,865		13,140		0.12		0.12		0.61
Savings accounts	3,728,271		3,587,566		3,394,480		402		430		3,840		0.04		0.05		0.45
Time deposits	4,632,796		4,875,392		5,104,701		12,679		16,397		24,272		1.10		1.36		1.91
Interest-bearing deposits	$	25,904,656	$	25,448,727	$	24,931,267	$	24,298	$	27,944	$	50,057	0.38	%	0.45	%	0.81	%
Federal Home Loan Bank advances	1,235,142		1,228,433		1,214,375		4,887		4,840		4,934		1.59		1.60		1.63
Other borrowings	525,924		518,188		493,350		2,568		2,609		3,436		1.96		2.04		2.80
Subordinated notes	436,644		436,532		436,226		5,512		5,477		5,506		5.05		5.02		5.05
Junior subordinated debentures	253,566		253,566		253,566		2,724		2,704		2,752		4.25		4.27		4.29
Total interest-bearing liabilities	$	28,355,932	$	27,885,446	$	27,328,784	$	39,989	$	43,574	$	66,685	0.56	%	0.63	%	0.98	%
Non-interest-bearing deposits	12,246,274		11,811,194		9,607,528
Other liabilities	1,087,767		1,127,203		1,197,571
Equity	4,256,778		4,164,890		3,908,846
Total liabilities and shareholders’ equity	$	45,946,751	$	44,988,733	$	42,042,729
Interest rate spread(6)(8)													2.44	%	2.33	%	2.46	%
Less: Fully taxable-equivalent adjustment							(909)		(884)		(1,117)		(0.01)		(0.01)		(0.01)
Net free funds/contribution(7)	$	14,495,689	$	14,041,019	$	11,415,459							0.19		0.21		0.28
Net interest income/margin (GAAP)(8)							$	279,590	$	261,895	$	263,131	2.62	%	2.53	%	2.73	%
Fully taxable-equivalent adjustment							909		884		1,117		0.01		0.01		0.01
Net interest income/margin, fully taxable-equivalent (non-GAAP)(8)							$	280,499	$	262,779	$	264,248	2.63	%	2.54	%	2.74	%

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

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

(3)Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020 were $909,000, $884,000and $1.1 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 Non-GAAP Financial Measures/Ratios” for additional information on this performance ratio.

Average Balance
for three months ended,

Interest
for three months ended,

Yield/Rate
for three months ended,
(Dollars in thousands) Jun 30,
2020 Mar 31,
2020 Jun 30,
2019 Jun 30,
2020 Mar 31,
2020 Jun 30,
2019 Jun 30,
2020 Mar 31,
2020 Jun 30,
2019
Interest-bearing deposits with banks and cash equivalents⁽¹⁾
$ 3,240,167
$ 1,418,809
$ 893,332
$ 1,326
$ 4,854
$ 5,206
0.16 % 1.38 % 2.34 %
Investment securities ⁽²⁾
4,309,471
4,780,709
3,653,580
27,643
33,018
28,290
2.58
2.78
3.11
FHLB and FRB stock 135,360
114,829
105,491
1,765
1,577
1,439
5.24
5.52
5.47
Liquidity management assets⁽³⁾⁽⁸⁾
$ 7,684,998
$ 6,314,347
$ 4,652,403
$ 30,734
$ 39,449
$ 34,935
1.61 % 2.51 % 3.01 %
Other earning assets^(3)(4)(8)
16,917
19,166
15,719
113
167
184
2.71
3.50
4.68
Mortgage loans held-for-sale 705,702
403,262
281,732
4,764
3,165
3,104
2.72
3.16
4.42
Loans, net of unearned
income^(3)(5)(8)
30,336,626
26,936,728
24,553,263
295,322
302,699
310,191
3.92
4.52
5.07
Total earning assets⁽⁸⁾
$ 38,744,243
$ 33,673,503
$ 29,503,117
$ 330,933
$ 345,480
$ 348,414
3.44 % 4.13 % 4.74 %
Allowance for loan losses (222,485 ) (176,291 ) (164,231 )
Cash and due from banks 352,423
321,982
273,679

Other assets 3,168,548
2,806,296
2,443,204

Total assets $ 42,042,729
$ 36,625,490
$ 32,055,769

NOW and interest bearing demand deposits $ 3,323,124
$ 3,113,733
$ 2,878,021
$ 1,561
$ 3,665
$ 5,553
0.19 % 0.47 % 0.77 %
Wealth management deposits 4,380,996
2,838,719
2,605,690
7,244
6,935
7,091
0.67
0.98
1.09
Money market accounts 8,727,966
7,990,775
6,095,285
13,140
22,363
21,451
0.61
1.13
1.41
Savings accounts 3,394,480
3,189,835
2,752,828
3,840
5,790
4,959
0.45
0.73
0.72
Time deposits 5,104,701
5,526,407
5,322,384
24,272
28,682
27,970
1.91
2.09
2.11
Interest-bearing deposits $ 24,931,267
$ 22,659,469
$ 19,654,208
$ 50,057
$ 67,435
$ 67,024
0.81 % 1.20 % 1.37 %
Federal Home Loan Bank advances 1,214,375
951,613
869,812
4,934
3,360
4,193
1.63
1.42
1.93
Other borrowings 493,350
469,577
419,064
3,436
3,546
3,525
2.80
3.04
3.37
Subordinated notes 436,226
436,119
220,771
5,506
5,472
2,806
5.05
5.02
5.08
Junior subordinated debentures 253,566
253,566
253,566
2,752
2,811
3,064
4.29
4.39
4.78
Total interest-bearing liabilities $ 27,328,784
$ 24,770,344
$ 21,417,421
$ 66,685
$ 82,624
$ 80,612
0.98 % 1.34 % 1.51 %
Non-interest bearing deposits 9,607,528
7,235,177
6,487,627

Other liabilities 1,197,571
909,800
736,381

Equity 3,908,846
3,710,169
3,414,340

Total liabilities and shareholders’ equity $ 42,042,729
$ 36,625,490
$ 32,055,769

Interest rate spread⁽⁶⁾⁽⁸⁾
2.46 % 2.79 % 3.23 %
Less: Fully tax-equivalent adjustment (1,117 ) (1,413 ) (1,600 ) (0.01 ) (0.02 ) (0.02 )
Net free funds/contribution⁽⁷⁾
$ 11,415,459
$ 8,903,159
$ 8,085,696
0.28
0.35
0.41
Net interest income/ margin(GAAP)⁽⁸⁾
$ 263,131
$ 261,443
$ 266,202
2.73 % 3.12 % 3.62 %
Fully taxable-equivalent adjustment 1,117
1,413
1,600
0.01
0.02
0.02
Net interest income/margin, fully taxable-equivalent (non-GAAP)⁽⁸⁾
$ 264,248
$ 262,856
$ 267,802
2.74 % 3.14 % 3.64 %


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


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


~~(3)~~	Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the three months ended June 30, 2020, March 31, 2020 and June 30, 2019 were $1.1 million, $1.4 million~~and $1.6 million, respectively.~~ Table of Contents


~~(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 second quarter of ~~2020,~~2021, net interest income totaled ~~$263.1~~$279.6 million, an increase of ~~$1.7~~$17.7 million as compared to the first quarter of ~~2020,~~2021, and ~~a decrease~~an increase of ~~$3.1~~$16.5 million as compared to the second quarter of ~~2019.~~2020. Net interest margin was 2.62% (2.63% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2021 compared to 2.53% (2.54% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2021, and 2.73% (2.74% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2020 compared to 3.12% (3.14% on a fully taxable-equivalent basis, non-GAAP) during the first quarter of 2020, and 3.62% (3.64% on a fully taxable-equivalent basis, non-GAAP) during the second quarter of 2019.2020.

Six months ended June 30, ~~2020~~2021 compared to six months ended June 30, ~~2019~~2020

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 six months ended June 30, ~~2020~~2021 compared to the six months ended June 30, ~~2019:~~2020:


	Average Balance for six months ended,		Interest for six months ended,				Yield/Rate for six months ended,
(Dollars in thousands)	June 30, 2021		June 30, 2020		June 30, 2021			June 30, 2020		June 30, 2021		June 30, 2020
Interest-bearing deposits with banks and cash equivalents (1)	$	4,036,553	$	2,329,488	$	2,352		$	6,180	0.12	%	0.53	%
Investment securities (2)	4,360,323		4,545,090		43,881			60,661		2.03		2.68
FHLB and FRB stock	136,043		125,094		3,514			3,342		5.21		5.37
Liquidity management assets (3)(8)	$	8,532,919	$	6,999,672	$	49,747		$	70,183	1.18	%	2.02	%
Other earning assets (3)(4)(8)	21,870		18,041		275			280		2.55		3.13
Mortgage loans held-for-sale	1,070,985		554,482		17,219			7,929		3.24		2.88
Loans, net of unearned income (3)(5)(8)	32,765,825		28,636,678		559,600			598,021		3.44		4.20

Total earning assets (8)	$	42,391,599	$	36,208,873	$	626,841		$	676,413	2.98	%	3.76	%
Allowance for loan and investment security losses	(306,268)		(199,388)
Cash and due from banks	418,777		337,202
Other assets	2,966,281		2,987,422
Total assets	$	45,470,389	$	39,334,109

NOW and interest-bearing demand deposits	$	3,560,305	$	3,218,429	$	1,637		$	5,227	0.09	%	0.33	%
Wealth management deposits	4,263,788		3,609,857		15,037			14,179		0.71		0.79
Money market accounts	9,442,127		8,359,370		5,660			35,503		0.12		0.85
Savings accounts	3,658,307		3,292,158		832			9,630		0.05		0.59
Time deposits	4,753,424		5,315,554		29,076			52,953		1.23		2.00
Interest-bearing deposits	$	25,677,951	$	23,795,368	$	52,242		$	117,492	0.41	%	0.99	%
Federal Home Loan Bank advances	1,231,806		1,082,994		9,727			8,294		1.59		1.54
Other borrowings	522,078		481,463		5,177			6,982		2.00		2.92
Subordinated notes	436,588		436,173		10,989			10,978		5.03		5.03
Junior subordinated debentures	253,566		253,566		5,428			5,563		4.26		4.34
Total interest-bearing liabilities	$	28,121,989	$	26,049,564	$	83,563		$	149,309	0.60	%	1.15	%
Non-interest-bearing deposits	12,029,936		8,421,353
Other liabilities	1,107,376		1,053,684
Equity	4,211,088		3,809,508
Total liabilities and shareholders’ equity	$	45,470,389	$	39,334,109
Interest rate spread (6)(8)										2.38	%	2.61	%
Less: Fully taxable-equivalent adjustment					(1,793)			(2,530)		(0.01)		(0.02)
Net free funds/contribution (7)	$	14,269,610	$	10,159,309						0.21		0.32
Net interest income/margin (GAAP) (8)					$	541,485		$	524,574	2.58	%	2.91	%
Fully taxable-equivalent adjustment					1,793			2,530		0.01		0.02
Net interest income/margin, fully taxable-equivalent (non-GAAP) (8)					$	543,278		$	527,104	2.59	%	2.93	%

Average Balance
for six months ended,
Interest
for six months ended,
Yield/Rate
for six months ended,
(Dollars in thousands) June 30,
2020 June 30,
2019 June 30,
2020 June 30,
2019 June 30,
2020 June 30,
2019
Interest-bearing deposits with banks and cash equivalents⁽¹⁾
$ 2,329,488
�� $ 895,497
$ 6,180
$ 10,506
0.53 % 2.37 %
Investment securities ⁽²⁾
4,545,090
3,642,142
60,661
56,811
2.68
3.15
FHLB and FRB stock 125,094
100,187
3,342
2,794
5.37
5.62
Liquidity management assets⁽³⁾⁽⁸⁾
$ 6,999,672
$ 4,637,826
$ 70,183
$ 70,111
2.02 % 3.05 %
Other earning assets^(3)(4)(8)
18,041
14,661
280
349
3.13
4.79
Mortgage loans held-for-sale 554,482
235,220
7,929
5,313
2.88
4.55
Loans, net of unearned income^(3)(5)(8)
28,636,678
24,218,946
598,021
608,212
4.20
5.06
Total earning assets⁽⁸⁾
$ 36,208,873
$ 29,106,653
$ 676,413
$ 683,985
3.76 % 4.74 %
Allowance for loan losses (199,388 ) (161,024 )
Cash and due from banks 337,202
278,324

Other assets 2,987,422
2,414,336

Total assets $ 39,334,109
$ 31,638,289

NOW and interest bearing demand deposits $ 3,218,429
$ 2,840,886
$ 5,227
$ 10,166
0.33 % 0.72 %
Wealth management deposits 3,609,857
2,609,839
14,179
14,091
0.79
1.09
Money market accounts 8,359,370
6,005,902
35,503
40,911
0.85
1.37
Savings accounts 3,292,158
2,734,228
9,630
9,208
0.59
0.68
Time deposits 5,315,554
5,295,241
52,953
53,624
2.00
2.04
Interest-bearing deposits $ 23,795,368
$ 19,486,096
$ 117,492
$ 128,000
0.99 % 1.32 %
FHLB advances 1,082,994
732,834
8,294
6,643
1.54
1.83
Other borrowings 481,463
442,189
6,982
7,158
2.92
3.26
Subordinated notes 436,173
180,219
10,978
4,581
5.03
5.08
Junior subordinated debentures 253,566
253,566
5,563
6,214
4.34
4.88
Total interest-bearing liabilities $ 26,049,564
$ 21,094,904
$ 149,309
$ 152,596
1.15 % 1.46 %
Non-interest bearing deposits 8,421,353
6,466,122

Other liabilities 1,053,684
715,263

Equity 3,809,508
3,362,000

Total liabilities and shareholders’ equity $ 39,334,109
$ 31,638,289

Interest rate spread⁽⁶⁾⁽⁸⁾
2.61 % 3.28 %
Less: Fully tax-equivalent adjustment (2,530 ) (3,201 ) (0.02 ) (0.02 )
Net free funds/contribution⁽⁷⁾
$ 10,159,309
$ 8,011,749
0.32
0.40
Net interest income/ margin (GAAP)⁽⁸⁾
$ 524,574
$ 528,188
2.91 % 3.66 %
Fully taxable-equivalent adjustment 2,530
3,201
0.02
0.02
Net interest income/ margin, fully taxable-equivalent (non-GAAP)⁽⁸⁾
$ 527,104
$ 531,389
2.93 % 3.68 %
(1)Includes interest-bearing deposits from banks, federal funds sold and securities purchased under resale agreements.


~~(1)~~	~~Includes interest-bearing deposits with banks, federal funds sold and securities purchased under resale agreements.~~ (2)Investment securities includes investment securities classified as available-for-sale and held-to-maturity, and equity securities with readily determinable fair values. Equity securities without readily determinable fair values are included within other assets. (3)


~~(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 taxable-equivalent adjustment based on a ~~tax-equivalent adjustment based on the~~ marginal federal corporate tax rate in effect as of the applicable period. The total adjustments ~~for the six months ended June 30, 2020 and June 30, 2019 were $2.5 million and $3.2 million, respectively.~~


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


~~(5)~~	~~Loans, net of unearned income, include loans held-for-sale and 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 six months ended June 30, 2020, net interest income totaled $524.6 million, a decrease of $3.6 million as compared to the first six months of 2019. Net interest margin was 2.91% (2.93% on a fully taxable-equivalent basis, non-GAAP) for the six months ended June 30, 2021 and June 30, 2020 ~~compared to 3.66% (3.68% on a fully taxable-equivalent basis, non-GAAP) for~~were $1.8 million and $2.5 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 ~~same period of 2019. The decrease in net interest margin compared to the first six months of 2019 is primarily the result of a decrease in~~difference between the yield earned on ~~interest~~ earning assets ~~partially offset by a decrease in~~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 ~~bearing~~margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.

(8)See “Supplemental Non-GAAP Financial Measures/Ratios” for additional information on this performance ratio.

Table of Contents

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~~period ended June 30, ~~2020~~2021 to each of the three month periods ended March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, and six month periods ended June 30, ~~2020~~2021 and ~~2019.~~2020. 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:


	Second Quarter of 2021 Compared to First Quarter of 2021		Second Quarter of 2021 Compared to Second Quarter of 2020		First Six Months of 2021 Compared to First Six Months of 2020
(In thousands)
Net interest income (GAAP) for comparative period	$	261,895	$	263,131	$	524,574
Change due to mix and growth of earning assets and interest-bearing liabilities (volume)	4,764		29,617		90,268
Change due to interest rate fluctuations (rate)	10,052		(13,158)		(70,459)
Change due to number of days in each period	2,879		—		(2,898)
Net interest income (GAAP) for the period ended June 30, 2021	$	279,590	$	279,590	$	541,485
Fully taxable-equivalent adjustment	909		909		1,793
Net interest income, fully taxable-equivalent (non-GAAP)	$	280,499	$	280,499	$	543,278

Second Quarter
of 2020
Compared to
First Quarter
of 2020

Second Quarter
of 2020
Compared to
Second Quarter
of 2019

First Six
Months of 2020
Compared to
First Six
Months of 2019
(In thousands)
Net interest income (GAAP) for comparative period $ 261,443
$ 266,202
$ 528,188
Change due to mix and growth of earning assets and interest-bearing liabilities (volume) 37,707
64,933
101,394
Change due to interest rate fluctuations (rate) (36,019 ) (68,004 ) (107,910 )
Change due to number of days in each period —
—
2,902
Net interest income (GAAP) for the period ended June 30, 2020 $ 263,131
$ 263,131
$ 524,574
Fully taxable-equivalent adjustment 1,117
1,117
2,530
Net interest income, fully taxable-equivalent (non-GAAP) $ 264,248
$ 264,248
$ 527,104

Non-interest Income

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


	Three Months Ended						$ Change				% Change				Three Months Ended									$ Change				% Change
(Dollars in thousands)	June 30, 2020			June 30, 2019						(Dollars in thousands)			June 30, 2021						June 30, 2020
Brokerage	$	4,147		$	4,764			$	(617	)			(13	)%	Brokerage		$	5,148				$	4,147			$	1,001			24	%
Trust and asset management	18,489			19,375			(886		)		(5	)	Trust and asset management		25,542					18,489					7,053				38
Total wealth management	22,636			24,139			(1,503		)		(6	)	Total wealth management		30,690					22,636				8,054				36
Mortgage banking	102,324			37,411			64,913				174		Mortgage banking		50,584					102,324				(51,740)				(51)
Service charges on deposit accounts	10,420			9,277			1,143				12		Service charges on deposit accounts		13,249					10,420				2,829				27
Gains on investment securities, net	808			864			(56		)		(6	)	Gains on investment securities, net		1,285					808				477				59
Fees from covered call options	—			643			(643		)		(100	)	Fees from covered call options		1,388					—				1,388				NM
Trading losses, net	(634		)	(44		)	(590		)		NM		Trading losses, net		(438)					(634)				196				(31)
Operating lease income, net	11,785			11,733			52				—		Operating lease income, net		12,240					11,785				455				4
Other:													Other:
Interest rate swap fees	5,693			3,224			2,469				77		Interest rate swap fees		2,820					5,693				(2,873)				(50)
BOLI	1,950			1,149			801				70		BOLI		1,342					1,950				(608)				(31)
Administrative services	933			1,009			(76		)		(8	)	Administrative services		1,228					933				295				32
Foreign currency remeasurement (losses) gains	(208		)	113			(321		)		NM
Foreign currency remeasurement losses													Foreign currency remeasurement losses		(782)					(208)				(574)				NM
Early pay-offs of capital leases	275			—			275				NM		Early pay-offs of capital leases		195					275				(80)				(29)
Miscellaneous	6,011			8,640			(2,629		)		(30	)	Miscellaneous		15,572					6,011				9,561				NM
Total Other	14,654			14,135			519				4		Total Other		20,375					14,654				5,721				39
Total Non-interest Income	$	161,993		$	98,158		$	63,835			65	%	Total Non-interest Income		$	129,373				$	161,993			$	(32,620)			(20)		%

NM - Not meaningful.

Table of Contents


	Six Months Ended						$ Change				% Change				Six Months Ended									$ Change				% Change
(Dollars in thousands)	June 30, 2020			June 30, 2019						(Dollars in thousands)			June 30, 2021						June 30, 2020
Brokerage	$	9,428		$	9,280			$	148				2	%	Brokerage		$	10,188				$	9,428			$	760			8	%
Trust and asset management	39,149			38,836			313				1		Trust and asset management		49,811					39,149					10,662				27
Total wealth management	48,577			48,116			461				1		Total wealth management		59,999					48,577				11,422				24
Mortgage banking	150,650			55,569			95,081				171		Mortgage banking		164,078					150,650				13,428				9
Service charges on deposit accounts	21,685			18,125			3,560				20		Service charges on deposit accounts		25,285					21,685				3,600				17
(Losses) gains on investment securities, net	(3,551		)	2,228			(5,779		)		NM
Gains (losses) on investment securities, net													Gains (losses) on investment securities, net		2,439					(3,551)				5,990				NM
Fees from covered call options	2,292			2,427			(135		)		(6	)	Fees from covered call options		1,388					2,292				(904)				(39)
Trading (losses) gains, net	(1,085		)	(215		)	(870		)		NM
Trading losses, net													Trading losses, net		(19)					(1,085)				1,066				(98)
Operating lease income, net	23,769			22,529			1,240				6		Operating lease income, net		26,680					23,769				2,911				12
Other:													Other:
Interest rate swap fees	11,759			6,055			5,704				94		Interest rate swap fees		5,308					11,759				(6,451)				(55)
BOLI	666			2,740			(2,074		)		(76	)	BOLI		2,466					666				1,800				NM
Administrative services	2,045			2,039			6				—		Administrative services		2,484					2,045				439				21
Foreign currency remeasurement (losses) gains	(359		)	577			(936		)		NM
Foreign currency remeasurement losses													Foreign currency remeasurement losses		(683)					(359)				(324)				90
Early pay-offs of capital leases	349			5			344				NM		Early pay-offs of capital leases		143					349				(206)				(59)
Miscellaneous	18,438			19,620			(1,182		)		(6	)	Miscellaneous		26,311					18,438				7,873				43
Total Other	32,898			31,036			1,862				6		Total Other		36,029					32,898				3,131				10
Total Non-interest Income	$	275,235		$	179,815		$	95,420			53	%	Total Non-interest Income		$	315,879				$	275,235			$	40,644			15		%

~~NM - Not meaningful.~~

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

Wealth management revenue ~~decreased~~increased in the second quarter of ~~2020~~2021 as compared to the second quarter of ~~2019~~2020 due to ~~a decline~~an increase in trust and asset management fees. Trust and asset management fees ~~and brokerage commissions. Declines~~are based primarily on the market value of the assets under management or administration as well as the volume of tax-deferred like-kind exchange services provided during a period. Such revenue increased in ~~asset~~the second quarter of 2021 primarily as a result of market appreciation related to managed money accounts with fees based on assets under management and ~~trust fees are primarily due to volatile equity markets since year end. Brokerage commissions were negatively impacted in the~~ ~~second~~ ~~quarter of 2020 due to lower transactional volume~~higher asset levels from new customers and new financial advisors as compared to the ~~prior year quarter.~~second quarter of 2020. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions atof Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

~~Mortgage banking revenue~~Service charges on deposits increased in the second quarter of ~~2020~~2021 as compared to the second quarter of ~~2019~~2020 as a result of ~~an increase~~higher account analysis fees on deposit accounts which increased as a result of the Company’s commercial banking initiatives.

Interest rate swap fees decreased in the second quarter of 2021 as compared to the second quarter of 2020. For more information on these interest rate swap fees, see Note 14 - Derivative Financial Instruments in Item 1 of this report.

Mortgage banking revenue decreased in the second quarter of 2021 as compared to the second quarter of 2020 as a result of a decrease in loans originated for sale and ~~higher production revenue.~~lower gain on sale margins and an unfavorable mortgage servicing rights portfolio fair value adjustment. Mortgage loans originated for sale totaled $1.7 billion in the second quarter of 2021 as compared to $2.2 billion in the second quarter of ~~2020 as compared to $1.2 billion in the second quarter of 2019.~~2020. 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 MSRs. The Company records MSRs at fair value on a recurring basis.

During the second quarter of ~~2020,~~2021, the fair value of the mortgage servicing rights portfolio ~~decreased~~increased due to ~~a negative~~increased capitalization of $17.5 million during the first quarter, partially offset by an unfavorable fair value adjustment of ~~$8.0~~$5.5 million ~~as well as~~and a reduction in value of ~~$8.7~~$8.5 million due to payoffs and paydowns of the existing ~~portfolio, partially offset by the gain on interest rate swaps held as an economic hedge of $589,000 and the capitalization of MSRs in the current period of $20.4 million.~~portfolio. Starting in 2019, the Company purchased options and entered into interest rate swaps to economically hedge a portion of the fair value changes recorded in earnings related to its MSRs portfolio. During the second quarter of 2020, the Company terminated these interest rate swaps. There were no such options or interest rate swaps outstanding as of June 30, ~~2020.~~2021.

Table of Contents

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


	Three Months Ended			Six Months Ended
(Dollars in thousands)	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Originations:
Retail originations	$	1,328,721		$	1,588,932		$	2,970,385		$	2,362,076

Veterans First originations	395,290			621,878			975,593			1,064,835
Total originations for sale (A)	$	1,724,011		$	2,210,810		$	3,945,978		$	3,426,911
Originations for investment	249,749			56,954			571,607			130,681
Total originations	$	1,973,760		$	2,267,764		$	4,517,585		$	3,557,592

Retail originations as percentage of originations for sale	77		%	72		%	75		%	69		%
Veterans First originations as a percentage of originations for sale	23			28			25			31

Purchases as a percentage of originations for sale	53		%	30		%	38		%	32		%
Refinances as a percentage of originations for sale	47			70			62			68




Production Margin:
Production revenue (B) (1)	$	37,531		$	93,433		$	108,813		$	142,760
Production margin (B/A)	2.18		%	4.23		%	2.76		%	4.17		%

Mortgage Servicing:
Loans serviced for others (C)	$	12,307,337		$	9,188,285
MSRs, at fair value (D)	127,604			77,203
Percentage of MSRs to loans serviced for others (D/C)	1.04		%	0.84		%
Servicing income	$	9,830		$	6,908		$	19,466		$	13,939

Components of MSR:

MSR - current period capitalization	$	17,512		$	20,351		$	42,128		$	29,798
MSR - collection of expected cash flow - paydowns	(991)			(419)			(1,719)			(966)
MSR - collection of expected cash flow - payoffs	(7,549)			(8,252)			(16,989)			(14,728)
Valuation:
MSR - changes in fair value model assumptions	(5,540)			(7,982)			12,505			(22,539)
Gain on derivative contract held as an economic hedge, net	—			589			—			4,749
MSR valuation adjustment, net of gain on derivative contract held as an economic hedge	$	(5,540)		$	(7,393)		$	12,505		$	(17,790)

Summary of Mortgage Banking Revenue:
Production revenue (1)	$	37,531		$	93,433		$	108,813		$	142,760
Servicing income	9,830			6,908			19,466			13,939
MSR activity	3,432			4,287			35,925			(3,686)
Other	(209)			(2,304)			(126)			(2,363)
Total mortgage banking revenue	$	50,584		$	102,324		$	164,078		$	150,650

Three Months Ended Six Months Ended
(Dollars in thousands) June 30,
2020 June 30,
2019 June 30,
2020 June 30,
2019
Originations:
Retail originations $ 1,588,932
$ 669,510
$ 2,362,076
$ 1,035,112
Correspondent originations —
182,966
—
331,066
Veterans First originations 621,878
301,324
1,064,835
466,086
Total originations for sale (A) $ 2,210,810
$ 1,153,800
$ 3,426,911
$ 1,832,264
Originations for investment 56,954
106,237
130,681
199,926
Total originations $ 2,267,764
$ 1,260,037
$ 3,557,592
$ 2,032,190

Purchases as a percentage of originations for sale 30 % 63 % 32 % 64 %
Refinances as a percentage of originations for sale 70
37
68
36
Total 100 % 100 % 100 % 100 %

Mandatory commitments to fund originations for sale⁽¹⁾
$ 1,275,648
$ 475,618

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

Mortgage Servicing:
Loans serviced for others (C) $ 9,188,285
$ 7,515,186

MSRs, at fair value (D) 77,203
72,850

Percentage of MSRs to loans serviced for others (D/C) 0.84 % 0.97 %
Servicing income $ 6,908
$ 5,460
$ 13,939
$ 10,920

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

Summary of Mortgage Banking Revenue:
Production revenue $ 93,433
$ 29,895
$ 142,760
$ 46,501
Servicing income 6,908
5,460
13,939
10,920
MSR activity 4,287
2,341
(3,686 ) (1,820 )
Other (2,304 ) (285 ) (2,363 ) (32 )
Total mortgage banking revenue $ 102,324
$ 37,411
$ 150,650
$ 55,569
(1)Production revenue represents revenue earned from the origination and subsequent sale of mortgages, including gains on loans sold and fees from originations, changes in other related financial instruments carried at fair value, processing and other related activities, and excludes servicing fees, changes in the fair value of servicing rights and changes to the mortgage recourse obligation and other non-production revenue.


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


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

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 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 June 30, ~~2020~~2021 and June 30, ~~2019.~~2020.

Miscellaneous revenue increased in the second quarter of 2021 as compared to the second quarter of 2020 primarily as a result of a $4.0 million net gain recorded on the previously announced sale of three branches in southwestern Wisconsin and an increase in partnership income.

Table of Contents

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)	June 30, 2020		June 30, 2019					(Dollars in thousands)			June 30, 2021			June 30, 2020
Salaries and employee benefits:												Salaries and employee benefits:
Salaries	$	87,105	$	75,360	$	11,745			16	%	Salaries	$	91,089		$	87,105		$	3,984		5		%
Commissions and incentive compensation	46,151		36,486		9,665				26		Commissions and incentive compensation	53,751			46,151		7,600			16
Benefits	20,900		21,886		(986		)		(5	)	Benefits	27,977			20,900		7,077			34
Total salaries and employee benefits	154,156		133,732		20,424				15		Total salaries and employee benefits	172,817			154,156		18,661			12
Equipment	15,846		12,759		3,087				24		Equipment	20,866			15,846		5,020			32
Operating lease equipment depreciation	9,292		8,768		524				6		Operating lease equipment depreciation	9,949			9,292		657			7
Occupancy, net	16,893		15,921		972				6		Occupancy, net	17,687			16,893		794			5
Data processing	10,406		6,204		4,202				68		Data processing	6,920			10,406		(3,486)			(33)
Advertising and marketing	7,704		12,845		(5,141		)		(40	)	Advertising and marketing	11,305			7,704		3,601			47
Professional fees	7,687		6,228		1,459				23		Professional fees	7,304			7,687		(383)			(5)
Amortization of other intangible assets	2,820		2,957		(137		)		(5	)	Amortization of other intangible assets	2,039			2,820		(781)			(28)
FDIC insurance	7,081		4,127		2,954				72		FDIC insurance	6,405			7,081		(676)			(10)
OREO expense, net	237		1,290		(1,053		)		(82	)	OREO expense, net	769			237		532			NM
Other:											Other:
Commissions—3rd party brokers	707		749		(42		)		(6	)	Commissions—3rd party brokers	889			707		182			26
Postage	1,591		2,606		(1,015		)		(39	)	Postage	1,900			1,591		309			19
Miscellaneous	24,948		21,421		3,527				16		Miscellaneous	21,262			24,948		(3,686)			(15)
Total other	27,246		24,776		2,470				10		Total other	24,051			27,246		(3,195)			(12)
Total Non-interest Expense	$	259,368	$	229,607	$	29,761			13	%	Total Non-interest Expense	$	280,112		$	259,368	$	20,744		8		%

NM - Not meaningful.


	Six Months Ended					$ Change				% Change			Six Months Ended					$ Change			% Change
(Dollars in thousands)	June 30, 2020			June 30, 2019					(Dollars in thousands)			June 30, 2021			June 30, 2020
Salaries and employee benefits:													Salaries and employee benefits:
Salaries	$	168,391		$	149,397	$	18,994			13	%	Salaries	$	182,142		$	168,391		$	13,751		8		%
Commissions and incentive compensation	77,726			68,085		9,641				14		Commissions and incentive compensation	115,118			77,726		37,392			48
Benefits	44,801			41,973		2,828				7		Benefits	56,366			44,801		11,565			26
Total salaries and employee benefits	290,918			259,455		31,463				12		Total salaries and employee benefits	353,626			290,918		62,708			22
Equipment	30,680			24,529		6,151				25		Equipment	41,778			30,680		11,098			36
Operating lease equipment depreciation	18,552			17,087		1,465				9		Operating lease equipment depreciation	20,720			18,552		2,168			12
Occupancy, net	34,440			32,166		2,274				7		Occupancy, net	37,683			34,440		3,243			9
Data processing	18,779			13,729		5,050				37		Data processing	12,968			18,779		(5,811)			(31)
Advertising and marketing	18,566			22,703		(4,137		)		(18	)	Advertising and marketing	19,851			18,566		1,285			7
Professional fees	14,408			11,784		2,624				22		Professional fees	14,891			14,408		483			3
Amortization of other intangible assets	5,683			5,899		(216		)		(4	)	Amortization of other intangible assets	4,046			5,683		(1,637)			(29)
FDIC insurance	11,216			7,703		3,513				46		FDIC insurance	12,963			11,216		1,747			16
OREO expense, net	(639		)	1,922		(2,561		)		NM		OREO expense, net	518			(639)		1,157			NM
Other:												Other:
Commissions—3rd party brokers	1,572			1,467		105				7		Commissions—3rd party brokers	1,735			1,572		163			10
Postage	3,540			5,056		(1,516		)		(30	)	Postage	3,643			3,540		103			3
Miscellaneous	46,294			40,481		5,813				14		Miscellaneous	42,579			46,294		(3,715)			(8)
Total other	51,406			47,004		4,402				9		Total other	47,957			51,406		(3,449)			(7)
Total Non-interest Expense	$	494,009		$	443,981	$	50,028			11	%	Total Non-interest Expense	$	567,001		$	494,009	$	72,992		15		%

NM - Not meaningful.

Table of Contents

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

~~Salaries~~Total salaries and employee benefits expense increased in the second quarter of ~~2020~~2021 compared to the second quarter of ~~2019~~2020 primarily due to increased salaries and commissions and incentive compensation expense. Salaries increased as a result of ~~the addition of employees from acquisitions,~~ increased staffing ascosts to support mortgage origination and investment in technology related services to satisfy customer demands and create efficiencies in operations. Commissions and incentive compensation increased primarily due to higher expenses associated with the ~~Company grows~~Company’s long term incentive program and higher commissions related to its mortgage and ~~incentive compensation due to increased origination volume associated with the Company's mortgage business.~~wealth management businesses.

Equipment expense increased in the second quarter of ~~2020~~2021 compared to the second quarter of ~~2019~~2020 as a result of higher software license fees ~~software~~ and ~~computer~~software depreciation expense.

Data processing expense decreased in the second quarter of 2021 compared to the second quarter of 2020 as the majority of conversion charges related to previously completed acquisitions was recognized in 2020.

Advertising and marketing expenses increased in the second quarter of ~~2020~~2021 compared to the second quarter of ~~2019 primarily~~2020 as a result of ~~the $4.5 million of conversion costs associated with the Countryside Bank acquisition.~~

~~Advertising and marketing expenses decreased~~increased sponsorship activity. Sponsorship activity was lower in the second quarter of 2020 ~~compared to the second quarter of 2019 as a result of decreased sponsorship costs~~ due to the cancellation of events, including sports sponsorships, as a result of the COVID-19 pandemic. Marketing costs are incurred to promote the Company's brand, commercial banking capabilities ~~the Company's~~and various products, and to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The level of marketing expenditures depends on the timing of sponsorship programs utilized, which are determined based on the market area, targeted audience, competition and various other factors.

~~FDIC insurance~~Miscellaneous expense ~~increased~~decreased in the second quarter of ~~2020~~2021 compared to the second quarter of ~~2019 as a result of higher assessment rates impacted by declines in the Tier 1 Leverage Ratio at the Company's bank affiliates as a result of asset growth, including PPP loans.~~

~~Other miscellaneous expense increased in the second quarter of~~ 2020 ~~compared to the second quarter of 2019 primarily~~ as a result of increased contingent consideration expense accrued in the second quarter of 2020 related to ~~the~~ previous acquisitions of mortgage ~~operations. The increase~~operations compared to a reversal of a portion of such contingent consideration expense in the second quarter of 2021. The liability for contingent consideration ~~accrual is a result of higher anticipated payments resulting from increases in both current and forecasted revenues~~expense related to the ~~acquired businesses due~~previous acquisition of mortgage operations is based upon forward looking mortgage origination volumes and the estimated profitability of that operation. Should those assumptions change going forward, the liability may need to be increased or decreased. The contractual period covering contingent consideration ends in January 2023 and the ~~favorable mortgage banking environment.~~final two years of the contract contemplate a lower ratio of contingent consideration relative to financial performance. Miscellaneous expense also includes ATM expenses, correspondent bank charges, ~~directors'~~directors fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses ~~operating losses~~ and lending origination costs that are not deferred.

Income Taxes

The Company recorded income tax expense of $39.0 million in the second quarter of 2021 compared to $9.0 million in the second quarter of ~~2020 compared to $28.7 million~~2020. The effective tax rates were 27.08% in the second quarter of ~~2019. The effective tax rates were~~2021 compared to 29.46% in the second quarter of ~~2020 compared to 26.06% in the second quarter of 2019.~~2020. During the first six months of ~~2020,~~2021, the Company recorded income tax expense of ~~$33.3~~$92.8 million compared to ~~$58.2~~$33.3 million for the first six months of ~~2019.~~2020. The effective tax rates were 26.42% for the first six months of 2021 and 28.28% for the first six months of ~~2020 and 25.44% for the first six months of 2019.~~2020.

The ~~higher~~ effective tax rates ~~in the 2020 quarterly and year-to-date periods compared to 2019~~ were ~~a result of a higher~~impacted by an overall lower level of ~~nondeductible expenses net of tax-exempt income relative to~~ pretax net income in the 2020 ~~periods. The increase in the year-to-date rate was also impacted by~~periods as well as the tax effects related to share-based ~~compensation. The tax effects of share-based~~ compensation which fluctuate based on the Company’s stock price and timing of employee stock option exercises and vesting of other share-based awards. The Company recorded excess tax benefits of $1.5 million in the first six months of 2021 and additional tax expense ~~related to share-based compensation~~ of $521,000 in the first six months of 2020 ~~and tax benefits of $1.6 million in the first six months of 2019, the majority~~related to share-based compensation, most of which was ~~recognized~~recorded in the first quarter of each year.

Operating Segment Results

As described in Note 1413 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

Table of Contents

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 June 30, ~~2020~~2021 totaled ~~$205.7~~$219.7 million as compared to ~~$214.3~~$205.7 million for the same period in ~~2019, a decrease~~2020, an increase of ~~$8.6~~$14.0 million, or 4%7%. On a year-to-date basis, net interest income for the segment ~~decreased~~increased by ~~$13.2~~$10.7 million from ~~$425.7~~$412.5 million for the six months ended June 30, ~~2019~~2020 to ~~$412.5~~$423.2 million for the six months ended June 30, 2021. The increase in the three month and six month periods was primarily attributable to earning asset growth, PPP loan fee income, and lower deposits rates. The community banking segment’s non-interest income totaled $90.4 million in the second quarter of 2021, a decrease of $39.3 million, or 30%, when compared to the second quarter of 2020 total of $129.7 million. On a year-to-date basis, non-interest income totaled $237.7 million for the six months ended June 30, 2021, an increase of $27.0 million, or 13%, compared to $210.7 million for the six months ended June 30, 2020. The decrease in the three month period was primarily the result of reduced mortgage banking revenue due to lower originations for sale and lower gain on sale margin. The increase in the six month period was primarily attributable to the favorable fair value of the mortgage servicing rights portfolio compared to the unfavorable fair value for the same period in 2020. A release of credit reserves of $15.2 million and $61.7 million was recorded in the community banking segment’s provision for credit losses for the three and six months ended June 30, 2021, respectively, compared to a provision for credit losses of $132.1 million and $183.8 million, respectively, for the same periods in 2020. The decrease in provision for credit losses for both the three and six month periods ~~is primarily~~was attributable to ~~compression of the net interest margin attributable to the decrease in interest rates~~positive changes in the ~~environment.~~macroeconomic forecasts in addition to improvement in portfolio characteristics. The community banking segment’s ~~non-interest~~net income for the quarter ended June 30, 2021 totaled ~~$129.7~~$72.8 million, an increase of $80.1 million as compared to net loss in the second quarter of 2020 ~~an increase~~ of ~~$64.3 million, or 98%, when compared to the second quarter of 2019 total of $65.4~~$7.3 million. On a year-to-date basis, non-interest income totaled $210.7 million for the six months ended June 30, 2020, an increase of $97.1 million, or 85%, compared to $113.6 million in the six months ended June 30, 2019. The increase in the three and six month periods is primarily the result of increased mortgage banking revenue from significantly increased mortgage originations during 2020. The community banking segment’s net loss for the quarter ended June 30, 2020 totaled $7.3 million, a decrease of $60.8 million as compared to net income in the second quarter of 2019 of $53.4 million. On a year-to-date basis, the community banking segment's net income was $27.3 million for the first six months of 2020 as compared to $113.8 million for the first six months of 2019. The decrease in net income in the three and six month periods is primarily attributable to higher provision for credit losses in 2020 due to the implementation of CECL and the macroeconomic conditions created by the COVID-19 pandemic. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation - Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

The specialty finance ~~segment's~~segment’s net interest income totaled ~~$42.4~~$45.2 million for the quarter ended June 30, ~~2020,~~2021, compared to ~~$39.4~~$42.4 million for the same period in ~~2019,~~2020, an increase of ~~$3.0~~$2.8 million, or 8%7%. On a year-to-date basis, net interest income for the segment increased ~~by $6.0~~$7.0 million, ~~in the first six months of 2020 as~~or 8% compared to the ~~first six months of 2019.~~same period in 2020. The increase infor both the three and six month periods iswas primarily attributable to growth in earning assets on the premium finance receivables portfolios. The specialty finance segment’s non-interest income totaled ~~$21.8~~$22.5 million and ~~$19.6~~$21.8 million for the three month periods ended June 30, 2021 and 2020, respectively, and ~~2019,~~$45.6 million and $43.1 million for the six month periods ended June 30, 2021 and 2020, respectively. ~~On a year-to-date basis, non-interest income increased by $4.0 million in the first six months of 2020 as compared to the first six months of 2019.~~ The increase in non-interest income infor both the three and six month ~~periods is~~periods was primarily the result of higher originations and increased balances related to the commercial premium finance portfolio and growth in business from the ~~Company's~~Company’s leasing division. Our commercial premium finance operations, life insurance finance operations, lease financing operations and accounts receivable finance operations accounted for 41%, ~~32%~~29%, ~~23%~~26% and 4%, respectively, of the total revenues of our specialty finance business for the six month period ended June 30, ~~2020.~~2021. The net income of the specialty finance segment for the quarter ended June 30, ~~2020~~2021 totaled ~~$22.7~~$23.9 million as compared to ~~$21.1~~$22.7 million for the quarter ended June 30, ~~2019.~~2020. On a year-to-date basis, the net income of the specialty finance segment for the six months ended June 30, ~~2020~~2021 totaled ~~$44.8~~$47.8 million as compared to ~~$43.0~~$44.8 million for the six months ended June 30, ~~2019.~~2020.

The wealth management segment reported net interest income of ~~$8.6~~$7.8 million for the second quarter of ~~2020~~2021 compared to ~~$6.9~~$8.6 million in the same quarter of ~~2019, an increase~~2020, a decrease of ~~$1.7~~$0.8 million, or ~~24%~~10%. On a year-to-date basis, net interest income totaled $15.2 million for the first six months of 2021 as compared to $16.4 million for the first six months of ~~2020 as compared to $14.4 million for the first six months of 2019.~~2020. 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~~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 ~~$2.0~~$2.2 billion and ~~$1.6~~$2.0 billion in the first six months of ~~2020~~2021 and ~~2019,~~2020, respectively. This segment recorded non-interest income of $31.8 million for the second quarter of 2021 compared to $24.5 million for the second quarter of ~~2020 compared to $25.0 million for the second quarter of 2019.~~2020. On a year-to-date basis, ~~the wealth management segment's~~this segment recorded non-interest income ~~totaled~~of $62.1 million as compared to $48.6 million ~~during~~for the first six months of ~~2020 as compared to $50.0 million in the first six months of 2019.~~2020. Distribution of wealth management services through each bank continues to be a focus of the 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 $8.5 million for the second quarter of 2021 compared to $6.3 million for the second quarter of ~~2020 compared to $6.9 million for the second quarter of 2019.~~2020. On a year-to-date basis, the wealth management ~~segment's~~segment’s net income totaled ~~$12.4~~$16.0 million and ~~$13.9~~$12.4 million for the six month ~~periods~~period ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Financial Condition

Total assets were ~~$43.5~~$46.7 billion at June 30, ~~2020,~~2021, representing an increase of ~~$9.9~~$3.2 billion, or ~~29%~~7%, when compared to June 30, ~~2019~~2020 and an increase of approximately ~~$4.7~~$1.1 billion, or ~~25%~~9% on an annualized basis, when compared to ~~March~~ March��31, ~~2020.~~2021. Total funding, which includes deposits, all notes and advances, including secured borrowings and the junior subordinated debentures, was $41.3 billion at June 30, 2021, $40.3 billion at March 31, 2021, and $38.1 billion at June 30, ~~2020, $33.8 billion at March 31, 2020, and $29.2 billion at June 30, 2019.~~2020. See Notes 4, 5, 6,9, 10 11 and 1211 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.

Table of Contents

Interest-Earning Assets

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


	Three Months Ended
	June 30, 2021				March 31, 2021				June 30, 2020
(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent
Mortgage loans held-for-sale	$	991,011	2	%	$	1,151,848	3	%	$	705,702	2	%
Loans, net of unearned income
Commercial, excluding PPP	$	9,377,392	22	%	$	9,180,308	22	%	$	8,685,218	22	%
Commercial - PPP	2,877,731		7		3,087,825		7		2,679,662		7
Commercial real estate	8,573,493		20		8,497,091		20		8,177,259		21
Home equity	379,853		1		408,565		1		478,302		1
Residential real estate	1,453,072		3		1,300,871		3		1,223,635		3
Premium finance receivables	10,383,218		24		9,910,388		24		9,014,719		23
Other loans	40,415		1		57,879		—		77,831		1
Total average loans (1)	$	33,085,174	78	%	$	32,442,927	77	%	$	30,336,626	78	%
Liquidity management assets (2)	8,752,082		20		8,311,320		20		7,684,998		20
Other earning assets (3)	23,354		—		20,370		—		16,917		—
Total average earning assets	$	42,851,621	100	%	$	41,926,465	100	%	$	38,744,243	100	%
Total average assets	$	45,946,751			$	44,988,733			$	42,042,729
Total average earning assets to total average assets			93	%			93	%			92	%

Three Months Ended
June 30, 2020 March 31, 2020 June 30, 2019
(Dollars in thousands) Balance Percent Balance Percent Balance Percent
Mortgage loans held-for-sale $ 705,702
2 % $ 403,262
1 % $ 281,732
1 %
Loans, net of unearned income
Commercial, excluding PPP $ 8,685,218
22 % $ 8,414,315
25 % $ 8,110,690
27 %
Commercial - PPP 2,679,662
7
—
—
—
—
Commercial real estate 8,177,259
21
8,125,827
24
7,120,936
24
Home equity 478,302
1
499,369
1
527,784
2
Residential real estate 1,223,635
3
1,243,031
4
995,417
3
Premium finance receivables 9,014,719
23
8,591,980
26
7,696,745
26
Other loans 77,831
1
62,206
—
101,691
1
Total average loans⁽¹⁾
$ 30,336,626
78 % $ 26,936,728
80 % $ 24,553,263
83 %
Liquidity management assets ⁽²⁾
7,684,998
20
6,314,347
19
4,652,403
16
Other earning assets ⁽³⁾
16,917
—
19,166
—
15,719
—
Total average earning assets $ 38,744,243
100 % $ 33,673,503
100 % $ 29,503,117
100 %
Total average assets $ 42,042,729
$ 36,625,490
$ 32,055,769

Total average earning assets to total average assets 92 % 92 % 92 %
(1)Includes non-accrual loans.


~~(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.~~

(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 $991.0 million in the second quarter of 2021, compared to $1.2 billion in the first quarter of 2021 and $705.7 million in the second quarter of ~~2020, compared to $403.3 million in the first quarter of 2020 and $281.7 million in the second quarter of 2019. By selling residential~~2020. These balances represent mortgage loans ~~into~~awaiting subsequent sale in the secondary market ~~the Company eliminates~~with such sales eliminating the interest-rate risk associated with these loans, as they are predominantly long-term fixed rate loans, and provides a source of non-interest revenue. The increase in average ~~balances compared~~balance from 2020 to ~~both periods~~2021 was primarily due to lower mortgage production in the ~~result~~first quarter of ~~increased mortgage demand associated~~2020 prior to the current low interest rate environment as well as higher balances repurchased by the Company under the early buyout option available for loans sold to GNMA with ~~historically low long-term interest rates.~~servicing retained. See “Loan Portfolio and Asset Quality” section below in this Item 2 for additional discussion of these early buyout options.

Loans, net of unearned income. Average total loans, net of unearned income, totaled ~~$30.3~~$33.1 billion in the second quarter of ~~2020,~~2021, increasing ~~$5.8~~$2.7 billion, or ~~24%~~9%, from the second quarter of ~~2019~~2020 and ~~$3.4 billion,~~$642.2 million, or ~~51%~~8% on an annualized basis, from the first quarter of 2021. Average commercial loans, excluding PPP loans, totaled $9.4 billion in the first quarter of 2021, and increased $692.2 million, or 8%, over the average balance in the second quarter of 2020 and $197.1 million, or 9% on an annualized basis, over the average balance in the first quarter of 2021. Average commercial PPP loans totaled $2.9 billion in the second quarter of 2021, and increased $198.1 million, or 7%, over the average balance in the second quarter of 2020 and decreased $210.1 million, or 27% on an annualized basis, over the average balance in the first quarter of 2021. The decrease in the second quarter of 2021 compared to the first quarter of 2021 is primarily the result of significant payoffs in the portfolio through the forgiveness process. Average commercial real estate loans totaled $8.6 billion in the first quarter of 2021, increasing $396.2 million, or 5%, over the second quarter of 2020. Combined, the commercial and commercial real estate loan categories comprised ~~64%~~63% of the average loan portfolio in the second quarter of ~~2020~~2021 as compared to ~~61%~~64% in the first quarter of ~~2020~~2021 and ~~62%~~64% in the second quarter of ~~2019. Growth~~2020. Excluding the impact of PPP loans, growth realized in these aggregated categories for the second quarter of ~~2020~~2021 as compared to the sequential and prior year periods is primarily attributable to ~~PPP lending and~~ increased business development efforts. ~~Additionally, growth realized in the second quarter 2020 as compared to the second quarter 2019 was partially attributable to the acquisition~~

Table of ~~ROC, SBC and STC in 2019 and originations of PPP loans in the second quarter 2020.~~Contents

Home equity loan portfolio averaged ~~$478.3~~$379.9 million in the second quarter of ~~2020,~~2021, and decreased ~~$49.5~~$98.4 million, or 9%21% from the average balance of ~~$527.8~~$478.3 million in same period of ~~2019.~~2020. The decrease in the home equity loan portfolio is primarily the result

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

Residential real estate loans averaged ~~$1.2~~$1.5 billion in the second quarter of ~~2020,~~2021, and increased ~~$228.2~~$229.4 million, or ~~23%~~19% from the average balance of ~~$995.4 million~~$1.2 billion in same period of ~~2019.~~2020. Additionally, compared to the quarter ended March 31, ~~2020,~~2021, the average balance ~~decreased $19.4~~increased $152.2 million, or 6%47% on an annualized basis. The ~~Company's residential real estate portfolio predominantly includes one-~~increase in average balance compared to ~~four-family adjustable rate~~both periods was partially due to the Company deciding to allocate more balances from its mortgage ~~loans that have repricing terms generally from one to three years, construction loans to individuals~~production for investment instead of for subsequent sale and ~~bridge financing loans for qualifying customers.~~servicing in the secondary market.

Average premium finance receivables totaled ~~$9.0~~$10.4 billion in the second quarter of ~~2020,~~2021, and accounted for ~~30%~~31% of the Company’s average total loans. The increase during the second quarter of ~~2020~~2021 compared to ~~both the first quarter of 2020 and~~ the second quarter of ~~2019~~2020 was the result of continued originations within the portfolio ~~in part~~ due to hardening insurance market conditions ~~increasing the~~driving a higher average size of new commercial insurance premium finance receivables ~~to approximately $38,000 in the second quarter of 2020.~~as well as effective marketing and customer servicing. Approximately ~~$3.1~~$3.4 billion of premium finance receivables were originated in the second quarter of ~~2020~~2021 compared to ~~$2.4~~$3.1 billion during the same period of ~~2019.~~2020. Premium finance receivables consist of a commercial portfolio and a life portfolio comprising approximately ~~41%~~40% and ~~59%~~60%, respectively, of the average total balance of premium finance receivables for the second quarter of ~~2020,~~2021, and 41% and 59%, respectively, for the second quarter of ~~2019.~~2020.

Other loans represent a wide variety of personal and consumer loans to individuals. Consumer loans generally have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk due to the type and nature of the collateral.

Total average loans for the first six months of 2020 increased $4.4 billion or 18% over the previous year period. Similar to the quarterly discussion above, approximately $1.9 billion of this increase relates to the commercial portfolio including PPP loans, $1.1 billion of this increase relates to the commercial real estate portfolio and $1.2 billion of this increase relates to the premium finance receivables portfolio.

Liquidity management assets. Funds that are not utilized for loan originations are used to purchase investment securities and short term money market investments, to sell as federal funds and to maintain in interest bearing deposits with banks. Average liquidity management assets accounted for 20% and 20% of total average earning assets in the second quarter of 2021 and 2020, respectively. Average liquidity management assets increased $1.1 billion in the second quarter of 2021 compared to the same period of 2020. The balances of these assets can fluctuate based on management’s ongoing effort to manage liquidity and for asset liability management purposes. ~~In response to the COVID-19 pandemic, the~~The Company will continue to prudently evaluate and utilize liquidity sources as needed, including the management of availability with the FHLB and FRB and utilization of the revolving credit facility with unaffiliated banks. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation - Overview and - Liquidity sections of this report for additional discussion of the impact of the COVID-19 pandemic.

Other earning assets. Other earning assets include brokerage customer receivables and trading account securities. In the normal course of business, Wintrust ~~Investments~~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~~customers’ 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~~customers’ 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.

Table of Contents

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:


	Six Months Ended
	June 30, 2021				June 30, 2020
(Dollars in thousands)	Balance		Percent		Balance		Percent
Mortgage loans held-for-sale	$	1,070,985	3	%	$	554,482	2	%
Loans:
Commercial, excluding PPP	$	9,279,395	22	%	$	8,549,767	24	%
Commercial - PPP	2,982,197		7		1,339,831		4
Commercial real estate	8,535,503		20		8,151,543		23
Home equity	394,130		1		488,836		1
Residential real estate	1,377,392		3		1,233,333		3
Premium finance receivables	10,148,109		24		8,803,350		24
Other loans	49,099		0		70,018		0
Total average loans(1)	$	32,765,825	77	%	$	28,636,678	79	%
Liquidity management assets (2)	8,532,919		20		6,999,672		19
Other earning assets (3)	21,870		0		18,041		0
Total average earning assets	$	42,391,599	100	%	$	36,208,873	100	%
Total average assets	$	45,470,389			$	39,334,109
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

Six Months Ended
June 30, 2020 June 30, 2019
(Dollars in thousands) Balance Percent Balance Percent
Mortgage loans held-for-sale $ 554,482
2 % $ 235,220
1 %
Loans:
Commercial $ 8,549,767
24 % $ 7,983,279
27 %
Commercial - PPP 1,339,831
4
—
—
Commercial real estate 8,151,543
23
7,042,828
24
Home equity 488,836
1
533,918
2
Residential real estate 1,233,333
3
967,048
3
Premium finance receivables 8,803,350
24
7,583,355
26
Other loans 70,018
—
108,518
1
Total average loans⁽¹⁾
$ 28,636,678
79 % $ 24,218,946
83 %
Liquidity management assets ⁽²⁾
6,999,672
19
4,637,826
16
Other earning assets ⁽³⁾
18,041
—
14,661
—
Total average earning assets $ 36,208,873
100 % $ 29,106,653
100 %
Total average assets $ 39,334,109
$ 31,638,289

Total average earning assets to total average assets 92 % 92 %

Table of Contents


~~(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.~~

LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio

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


	June 30, 2021				December 31, 2020				June 30, 2020
			% of				% of				% of
(In thousands)	Amount		Total		Amount		Total		Amount		Total
Commercial	$	11,442,276	35	%	$	11,955,967	37	%	$	11,859,232	38	%
Commercial real estate	8,678,369		26		8,494,132		26		8,200,745		26
Home equity	369,806		1		425,263		1		466,596		1
Residential real estate	1,530,285		5		1,259,598		5		1,427,429		5
Premium finance receivables—commercial	4,521,871		14		4,054,489		13		3,999,774		13
Premium finance receivables—life insurance	6,359,556		19		5,857,436		18		5,400,802		17
Consumer and other	9,024		0		32,188		0		48,325		0
Total loans, net of unearned income	$	32,911,187	100	%	$	32,079,073	100	%	$	31,402,903	100	%

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

Commercial and commercial real estate loans. Our commercial and commercial real estate loan portfolios are comprised primarily of ~~commercial real estate loans and~~ lines of credit for working capital ~~purposes.~~purposes and commercial real estate loans. The table below sets forth information regarding the types and amounts of our loans within these portfolios as of June 30, ~~2020~~2021 and ~~2019:~~2020:


	As of June 30, 2021				As of June 30, 2020
						Allowance						Allowance
			% of			For Credit				% of		For Credit
			Total			Losses				Total		Losses
(Dollars in thousands)	Balance		Balance			Allocation		Balance		Balance		Allocation
Commercial:











Commercial, industrial, and other, excluding commercial PPP	$	9,562,869	47.5	%		$	98,505	$	8,523,864	42.5	%	$	133,593
Commercial PPP	1,879,407		9.3			2		3,335,368		16.6		4
Total commercial	$	11,442,276	56.8	%		$	98,507	$	11,859,232	59.1	%	$	133,597
Commercial Real Estate:
Construction and development	$	1,385,249	6.9	%		$	38,550	$	1,340,048	6.7	%	$	73,316


Non-construction	7,293,120		36.3			119,972		6,860,697		34.2		123,810






Total commercial real estate	$	8,678,369	43.2	%		$	158,522	$	8,200,745	40.9	%	$	197,126
Total commercial and commercial real estate	$	20,120,645	100.0	%		$	257,029	$	20,059,977	100.0	%	$	330,723

Commercial real estate - collateral location by state:
Illinois	$	6,328,851	72.9	%				$	6,198,486	75.6	%
Wisconsin	770,366		8.9					760,839		9.3
Total primary markets	$	7,099,217	81.8	%				$	6,959,325	84.9	%
Indiana	295,103		3.4					249,423		3.0
Florida	113,222		1.3					133,810		1.6
Arizona	85,684		1.0					78,135		1.0
California	108,836		1.3					81,634		1.0
Texas	111,775		1.2					48,082		0.6
Other	864,532��		10.0					650,336		7.9
Total commercial real estate	$	8,678,369	100.0	%				$	8,200,745	100.0	%

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

Commercial real estate - collateral location by state:
Illinois $ 6,198,486
75.6 % $ 5,505,290
75.7 %
Wisconsin 760,839
9.3
740,288
10.2

Total primary markets $ 6,959,325
84.9 % $ 6,245,578
85.9 %
Indiana 249,423
3.0
179,977
2.5

Florida 133,810
1.6
60,343
0.8

Arizona 78,135
1.0
62,607
0.9

California 81,634
1.0
68,497
0.9

Other 698,418
8.5
659,242
9.0

Total commercial real estate $ 8,200,745
100.0 % $ 7,276,244
100.0 %

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. Such loans may vary in size based on customer need. In addition, the Company has participated in the PPP starting in the second quarter of ~~2020 as a result of COVID-19 disruption to the economy.~~2020. Commercial business lending

Table of Contents

is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. Primarily as a result of improvements in the ~~adoption of CECL~~Company’s macroeconomic forecasts and ~~deterioration~~changes in ~~macroeconomic conditions related to COVID-19,~~portfolio characteristics, our allowance for credit losses in our commercial loan portfolio ~~increased~~decreased to $98.5 million as of June 30, 2021 compared to $133.6 million as of June 30, ~~2020 compared to $74.9 million as of June 30, 2019.~~2020.

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, ~~84.9%~~81.8% of our commercial real estate loan portfolio is located in this region as of June 30, ~~2020.~~2021. We have been able to effectively manage our total non-performing commercial real estate loans. As of June 30, ~~2020,~~2021, our allowance for credit losses related to this portfolio ~~is $197.1~~was $158.5 million compared to ~~$63.3~~$197.1 million as of June 30, ~~2019~~2020. ~~Similar to the commercial loan portfolio, the increase~~The decrease in the allowance for credit losses in our commercial real estate portfolio is primarily due to the ~~adoption of CECL and deterioration in macroeconomic conditions~~ impact on the Company’s loan loss modeling from improving expectations between the two reporting dates primarily related to ~~COVID-19~~.the Commercial Real Estate Price Index.

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

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, construction loans to individuals and bridge financing loans for qualifying ~~customers.~~customers as well as certain long-term fixed rate loans. As of June 30, ~~2020,~~2021, our residential loan portfolio totaled ~~$1.4~~$1.5 billion, or 5% of our total outstanding loans.

Our adjustable rate mortgages relate to properties located principally in the Chicago metropolitan area and southern Wisconsin or vacation homes owned by local residents. These adjustable rate mortgages are often non-agency conforming. Adjustable rate mortgage loans decrease the interest rate risk we face on our mortgage portfolio. However, this risk is not eliminated due to the fact that such loans generally provide for periodic and lifetime limits on the interest rate adjustments among other features. Additionally, adjustable rate mortgages may pose a higher risk of delinquency and default because they require borrowers to make larger payments when interest rates rise. As of June 30, ~~2020, $19.5~~2021, $23.1 million of our residential real estate mortgages, or ~~1.4%~~1.5% of our residential real estate loan portfolio were classified as nonaccrual, no loans were 90 or more days past due and still accruing, ~~$5.9~~$3.7 million were 30 to 89 days past due, ~~(0.4%)~~or 0.2%, and ~~$1.4~~$1.5 billion were current, ~~(98.2%)~~or 98.3%. 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~~Due to interest rate risk considerations, we ~~can accommodate customer requests for fixed rate loans by originating such loans and then selling them into~~generally sell in the secondary market loans originated with long-term fixed rates, for which we receive fee income. We may also selectively retain certain of these loans within ~~the~~our 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 June 30, 2021 and 2020 ~~and 2019~~ was ~~$9.2~~$12.3 billion and ~~$7.5~~$9.2 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.

Table of Contents

The Government National Mortgage Association ("GNMA") optional repurchase programs allow financial institutions acting as servicers to ~~buy back~~buyout 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~~early buyout option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional repurchase option and the expected benefit of the potential repurchase is more than trivial, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans at fair value, regardless of whether the Company intends to exercise the ~~buy-back~~early buyout option. These rebooked loans are reported as loans held-for-investment, part of the residential real estate portfolio, with the offsetting liability being reported in accrued interest payable and other liabilities. Rebooked GNMA loans held-for-investment amounted to ~~$240.7~~$44.3 million at June 30, ~~2020,~~2021, compared to ~~$95.6~~$240.7 million balance at June 30, ~~2019.~~2020. The decrease in balance from June 30, 2020 to June 30, 2021 was the result of the Company increasing its exercise of such early buyout options subsequent to June 30, 2020 and continuing such practice into 2021. When the early buyout option on these rebooked GNMA loans is exercised, the repurchased loans continue to be carried at fair value. Additionally, such loans typically transfer to mortgage loans held-for-sale at the time of early buyout as the Company’s intent is to cure and resell such loans subsequent to repurchase from GNMA. As of June 30, 2021, early buyout exercised mortgage loans held-for-sale totaled $352.0 million compared to $18.5 million as of June 30, 2020.

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 June 30, 2020, approximately $977,000 of our mortgage loans consist of interest-only loans.~~

Premium finance receivables – commercial. FIRST Insurance Funding and FIFC Canada originated approximately ~~$2.8~~$3.0 billion in commercial insurance premium finance receivables in the second quarter of ~~2020~~2021 as compared to ~~$2.2~~$2.8 billion of originations in the second quarter of ~~2019.~~2020. During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, FIRST Insurance Funding and FIFC Canada originated approximately ~~$4.9~~$5.5 billion and ~~$4.1~~$4.9 billion, respectively, in commercial insurance premium finance receivables. 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 ~~$354.3~~$360.0 million in life insurance premium finance receivables in the second quarter of ~~2020~~2021 as compared to~~$230.9~~ $354.3 million of originations in the second quarter of ~~2019.~~2020. During the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, Wintrust Life Finance originated approximately ~~$645.2~~$690.3 million and ~~$474.9~~$645.2 million, respectively, in life insurance premium finance receivables. The Company continues to experience increased competition and pricing pressure within the current market. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The life insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In some cases, 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. 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.

Table of Contents

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table classifies the loan portfolio at June 30, ~~2020~~2021 by date at which the loans reprice or mature, and the type of rate exposure:


As of June 30, 2021	One year or less		From one to five years		Over five years
(In thousands)							Total
Commercial
Fixed rate	$	420,948	$	1,976,100	$	796,227	$	3,193,275
Fixed rate - PPP	597,356		1,282,051		—		1,879,407
Variable rate	6,365,838		3,694		62		6,369,594
Total commercial	$	7,384,142	$	3,261,845	$	796,289	$	11,442,276
Commercial real estate
Fixed rate	509,777		2,127,633		437,944		3,075,354
Variable rate	5,578,790		24,225		—		5,603,015
Total commercial real estate	$	6,088,567	$	2,151,858	$	437,944	$	8,678,369
Home equity
Fixed rate	14,613		7,095		47		21,755
Variable rate	348,051		—		—		348,051
Total home equity	$	362,664	$	7,095	$	47	$	369,806
Residential real estate
Fixed rate	20,305		10,381		777,239		807,925
Variable rate	60,029		273,717		388,614		722,360
Total residential real estate	$	80,334	$	284,098	$	1,165,853	$	1,530,285
Premium finance receivables - commercial
Fixed rate	4,398,271		123,600		—		4,521,871
Variable rate	—		—		—		—
Total premium finance receivables - commercial	$	4,398,271	$	123,600	$	—	$	4,521,871
Premium finance receivables - life insurance
Fixed rate	10,030		374,736		20,394		405,160
Variable rate	5,954,396		—		—		5,954,396
Total premium finance receivables - life insurance	$	5,964,426	$	374,736	$	20,394	$	6,359,556
Consumer and other
Fixed rate	2,269		1,748		388		4,405
Variable rate	4,619		—		—		4,619
Total consumer and other	$	6,888	$	1,748	$	388	$	9,024
Total per category
Fixed rate	5,376,213		4,621,293		2,032,239		12,029,745
Fixed rate - PPP	597,356		1,282,051		—		1,879,407
Variable rate	18,311,723		301,636		388,676		19,002,035
Total loans, net of unearned income	$	24,285,292	$	6,204,980	$	2,420,915	$	32,911,187
Variable Rate Loan Pricing by Index:
Prime							$	2,573,945
One- month LIBOR							9,384,417
Three- month LIBOR							374,067
Twelve- month LIBOR							6,359,426
Other							310,180
Total variable rate							$	19,002,035

As of June 30, 2020 One year or less From one to five years Over five years
(In thousands) Total
Commercial
Fixed rate $ 270,078
$ 1,782,100
$ 822,542
$ 2,874,720
Fixed rate - PPP —
3,335,368
—
3,335,368
Variable rate 5,628,606
20,411
127
5,649,144
Total commercial $ 5,898,684
$ 5,137,879
$ 822,669
$ 11,859,232
Commercial real estate
Fixed rate 542,353
2,163,918
431,543
3,137,814
Variable rate 5,021,539
41,392
—
5,062,931
Total commercial real estate $ 5,563,892
$ 2,205,310
$ 431,543
$ 8,200,745
Home equity
Fixed rate 23,244
4,807
27
28,078
Variable rate 438,518
—
—
438,518
Total home equity $ 461,762
$ 4,807
$ 27
$ 466,596
Residential real estate
Fixed rate 38,039
11,576
487,530
537,145
Variable rate 60,409
341,479
488,396
890,284
Total residential real estate $ 98,448
$ 353,055
$ 975,926
$ 1,427,429
Premium finance receivables - commercial
Fixed rate 3,909,677
90,096
1
3,999,774
Variable rate —
—
—
—
Total premium finance receivables - commercial $ 3,909,677
$ 90,096
$ 1
$ 3,999,774
Premium finance receivables - life insurance
Fixed rate 43,954
153,947
21,576
219,477
Variable rate 5,181,325
—
—
5,181,325
Total premium finance receivables - life insurance $ 5,225,279
$ 153,947
$ 21,576
$ 5,400,802
Consumer and other
Fixed rate 22,190
6,456
1,583
30,229
Variable rate 18,096
—
—
18,096
Total consumer and other $ 40,286
$ 6,456
$ 1,583
$ 48,325
Total per category
Fixed rate 4,849,535
4,212,900
1,764,802
10,827,237
Fixed rate - PPP —
3,335,368
—
3,335,368
Variable rate 16,348,493
403,282
488,523
17,240,298
Total loans, net of unearned income $ 21,198,028
$ 7,951,550
$ 2,253,325
$ 31,402,903
Variable Rate Loan Pricing by Index:
Prime $ 2,164,995
One- month LIBOR 8,661,027
Three- month LIBOR 301,327
Twelve- month LIBOR 5,846,946
Other 266,003
Total variable rate $ 17,240,298

Table of Contents

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~~assigns 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~~The Company maintains an internal loan review ~~firm~~function as well as utilizes a third-party loan review provider to independently ~~reviews~~review 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 and the ~~OCC,~~Office of the Comptroller of the Currency ("OCC"), and are also reviewed by our internal audit staff.

Table of Contents

determines 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 Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

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

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 individually assessed for measuring the allowance for credit losses and if necessary, a reserve is established. In determining the appropriate reserve for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

Table of Contents

Non-performing Assets

The following table sets forth the Company's non-performing assets and TDRs performing under the contractual terms of the loan agreement as of the dates shown. ~~Prior to January 1, 2020, PCI loans were aggregated into pools by common risk characteristics for accounting purposes, including recognition of interest income on a pool basis.~~


(Dollars in thousands)	June 30, 2021			March 31, 2021			December 31, 2020			June 30, 2020
Loans past due greater than 90 days and still accruing (1):
Commercial	$	1,244		$	—		$	307		$	1,374
Commercial real estate	—			—			—			—
Home equity	—			—			—			—
Residential real estate	—			—			—			—
Premium finance receivables—commercial	3,570			4,592			12,792			35,638
Premium finance receivables—life insurance	—			191			—			—
Consumer and other	178			161			264			156
Total loans past due greater than 90 days and still accruing	4,992			4,944			13,363			37,168
Non-accrual loans:
Commercial	23,232			22,459			21,743			42,882
Commercial real estate	26,035			34,380			46,107			64,557
Home equity	3,478			5,536			6,529			7,261
Residential real estate	23,050			21,553			26,071			19,529
Premium finance receivables—commercial	6,418			9,690			13,264			16,445
Premium finance receivables—life insurance	—			—			—			15
Consumer and other	485			497			436			427
Total non-accrual loans	82,698			94,115			114,150			151,116
Total non-performing loans:
Commercial	24,476			22,459			22,050			44,256
Commercial real estate	26,035			34,380			46,107			64,557
Home equity	3,478			5,536			6,529			7,261
Residential real estate	23,050			21,553			26,071			19,529
Premium finance receivables—commercial	9,988			14,282			26,056			52,083
Premium finance receivables—life insurance	—			191			—			15
Consumer and other	663			658			700			583
Total non-performing loans	$	87,690		$	99,059		$	127,513		$	188,284
Other real estate owned	10,510			8,679			9,711			2,409
Other real estate owned—from acquisitions	5,062			7,134			6,847			7,788
Other repossessed assets	—			—			—			—
Total non-performing assets	103,262			$	114,872		$	144,071		$	198,481
Accruing TDRs not included within non-performing assets	$	44,019		$	46,151		$	47,023		$	48,609
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial	0.21		%	0.18		%	0.18		%	0.37		%
Commercial real estate	0.30			0.40			0.54			0.79
Home equity	0.94			1.42			1.54			1.56
Residential real estate	1.51			1.52			2.07			1.37
Premium finance receivables—commercial	0.22			0.36			0.64			1.30
Premium finance receivables—life insurance	—			0.00			—			0.00
Consumer and other	7.35			1.83			2.17			1.21
Total non-performing loans	0.27		%	0.30		%	0.40		%	0.60		%
Total non-performing assets, as a percentage of total assets	0.22		%	0.25		%	0.32		%	0.46		%
Allowance for credit losses as a percentage of nonaccrual loans	367.64		%	341.29		%	332.82		%	246.90		%

(1)As a result of the implementation of CECL, beginning in the first quarter of 2020, PCI loans transitioned to a classification of PCD loans, which no longer maintains the prior pools and related accounting concepts. Recognition of interest income on PCD loans is considered at the individual asset level following the Company's accrual policies, instead of based upon the entire pool of loans. Due to the first quarter of 2020 adoption of CECL, the Company included $30.3 million and $35.4 million in non-performing PCD loans in total non-performing loans as of June 30, 2021, $320,000 of TDRs were past due greater than 90 days and still accruing interest. No TDRs were past due greater than 90 days and still accruing interest as of March 31, 2021, December 31, 2020 and ~~March 31, 2020, respectively.~~

(Dollars in thousands) June 30,
2020 March 31,
2020 December 31,
2019 June 30,
2019
Loans past due greater than 90 days and still accruing ⁽¹⁾:

Commercial $ 1,374
$ 1,241
$ —
$ 488
Commercial real estate —
516
—
—
Home equity —
—
—
—
Residential real estate —
605
—
—
Premium finance receivables—commercial 35,638
16,505
11,517
6,940
Premium finance receivables—life insurance —
—
—
—
Consumer and other 156
78
163
172
Total loans past due greater than 90 days and still accruing 37,168
18,945
11,680
7,600
Non-accrual loans ⁽²⁾:

Commercial 42,882
49,916
37,224
47,604
Commercial real estate 64,557
62,830
26,113
20,875
Home equity 7,261
7,243
7,363
8,489
Residential real estate 19,529
18,965
13,797
14,236
Premium finance receivables—commercial 16,445
21,058
20,590
13,833
Premium finance receivables—life insurance 15
—
590
590
Consumer and other 427
403
231
220
Total non-accrual loans 151,116
160,415
105,908
105,847
Total non-performing loans⁽³⁾:

Commercial 44,256
51,157
37,224
48,092
Commercial real estate 64,557
63,346
26,113
20,875
Home equity 7,261
7,243
7,363
8,489
Residential real estate 19,529
19,570
13,797
14,236
Premium finance receivables—commercial 52,083
37,563
32,107
20,773
Premium finance receivables—life insurance 15
—
590
590
Consumer and other 583
481
394
392
Total non-performing loans $ 188,284
$ 179,360
$ 117,588
$ 113,447
Other real estate owned 2,409
2,701
5,208
9,920
Other real estate owned—from acquisitions 7,788
8,325
9,963
9,917
Other repossessed assets —
—
4
263
Total non-performing assets $ 198,481
$ 190,386
$ 132,763
$ 133,547
Accruing TDRs not included within non-performing assets 48,609
47,049
36,725
45,862
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial 0.37 % 0.57 % 0.45 % 0.58 %
Commercial real estate 0.79
0.77
0.33
0.29
Home equity 1.56
1.46
1.44
1.61
Residential real estate 1.37
1.42
1.02
1.27
Premium finance receivables—commercial 1.30
1.08
0.93
0.62
Premium finance receivables—life insurance 0.00
0.00
0.01
0.01
Consumer and other 1.21
1.29
0.36
0.36
Total non-performing loans 0.60 % 0.65 % 0.44 % 0.45 %
Total non-performing assets, as a percentage of total assets 0.46 % 0.49 % 0.36 % 0.40 %
Allowance for loan losses as a percentage of total non-performing loans 166.51 % 120.46 % 133.37 % 141.41 %


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


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


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

June 30, 2020.

State emergency orders and pandemic delays on processing of return premiums, which serve as our collateral, contributed to the increase in 90 day past due premium finance receivables. Management is pursuing the resolution of all credits in this category.

At this time, management believes reserves are appropriate to absorb losses that are expected upon the ultimate resolution of these credits. While the ultimate effect of the COVID-19 pandemic on non-performing assets still remains unknown, significant increases may occur in subsequent periods. Management will continue to actively review and monitor its loan portfolios, in an effort to identify problem credits in a timely manner. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation ~~-Overview~~- Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

Table of Contents

Loan Portfolio Aging

The tables below show the aging of the Company’s loan portfolio at June 30, ~~2020~~2021 and March 31, ~~2020:~~2021:


	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
As of June 30, 2021
(Dollars in thousands)
Loan Balances:
Commercial






Commercial, industrial and other, excluding PPP loans	$	23,232	$	1,244	$	5,204	$	18,468	$	9,514,721	$	9,562,869
Commercial PPP loans	—		—		—		10		1,879,397		1,879,407
Commercial real estate
Construction and development	1,030		—		—		2,207		1,382,012		1,385,249
Non-construction	25,005		—		4,382		17,491		7,246,242		7,293,120







Home equity	3,478		—		301		777		365,250		369,806
Residential real estate	23,050		—		1,584		2,139		1,503,512		1,530,285
Premium finance receivables
Commercial insurance loans	6,418		3,570		7,759		8,793		4,495,331		4,521,871
Life insurance loans	—		—		—		23,965		6,335,591		6,359,556

Consumer and other	485		178		22		75		8,264		9,024
Total loans, net of unearned income	$	82,698	$	4,992	$	19,252	$	73,925	$	32,730,320	$	32,911,187


																				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 June 30, 2020
As of March 31, 2021																			Nonaccrual			90+ days and still accruing			60-89 days past due			30-59 days past due			Current			Total Loans
(Dollars in thousands)			Nonaccrual			90+ days and still accruing			60-89 days past due			30-59 days past due			Current			Total Loans																		(Dollars in thousands)
Loan Balances:	Loan Balances:
Commercial	Commercial
Commercial, industrial and other, excluding PPP loans	$	42,882		$	1,374		$	8,952		$	23,720		$	8,446,936		$	8,523,864		Commercial, industrial and other, excluding PPP loans	$	22,459		$	—		$	13,292		$	35,535		$	9,343,939		$	9,415,225
Commercial PPP loans	—			—			—			—			3,335,368			3,335,368			Commercial PPP loans	—			—			—			6			3,292,976			3,292,982

Commercial real estate																			Commercial real estate
Construction and development	9,829			—			1,944			17,313			1,310,962			1,340,048			Construction and development	2,673			—			499			23,967			1,326,185			1,353,324
Non-construction	54,728			—			24,536			58,215			6,723,218			6,860,697			Non-construction	31,707			—			7,657			46,201			7,105,890			7,191,455

Home equity	7,261			—			—			1,296			458,039			466,596			Home equity	5,536			—			492			780			383,445			390,253
Residential real estate	19,529			—			1,506			4,400			1,401,994			1,427,429			Residential real estate	21,553			—			944			13,768			1,385,708			1,421,973
Premium finance receivables																			Premium finance receivables
Commercial insurance loans	16,445			35,638			35,967			46,556			3,865,168			3,999,774			Commercial insurance loans	9,690			4,592			5,113			16,552			3,922,596			3,958,543
Life insurance loans	15			—			6,386			14,604			5,379,797			5,400,802			Life insurance loans	—			191			—			14,821			6,096,483			6,111,495

Consumer and other	427			156			4			281			47,457			48,325			Consumer and other	497			161			8			74			35,243			35,983
Total loans, net of unearned income	$	151,116		$	37,168		$	79,295		$	166,385		$	30,968,939		$	31,402,903		Total loans, net of unearned income	$	94,115		$	4,944		$	28,005		$	151,704		$	32,892,465		$	33,171,233

Nonaccrual 90+ days
and still
accruing 60-89
days past
due 30-59
days past
due Current Total Loans
As of March 31, 2020
(Dollars in thousands)
Loan Balances:⁽¹⁾

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

~~(1)~~

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

As of June 30, ~~2020, $79.3~~2021, $19.3 million of all loans, or ~~0.3%~~0.1%, were 60 to 89 days (or two payments) past due and ~~$166.4~~$73.9 million of all loans or ~~0.5%~~0.2%, were 30 to 59 days (or one payment) past due. As of March 31, ~~2020, $33.0~~2021, $28.0 million of all loans or 0.1%, were 60 to 89 days (or two payments) past due and ~~$262.7~~$151.7 million, or ~~0.9%~~0.5%, 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 June 30, ~~2020~~2021 that were current with regard to the contractual terms of the loan agreement represent ~~98.2%~~98.8% of the total home equity

portfolio. Residential real estate loans at June 30, ~~2020~~2021 that were current with regards to the contractual terms of the loan agreements comprise ~~98.2%~~98.3% of total residential real estate loans outstanding.

Table of Contents

Non-performing Loans Rollforward

The table below presents a summary of non-performing loans for the periods presented:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
(In thousands)	2021		2020		2021		2020
Balance at beginning of period	$	99,059	$	179,360	$	127,513	$	117,588
Additions from becoming non-performing in the respective period	12,762		20,803		22,656		52,998
Additions from the adoption of ASU 2016-13	—		—		—		37,285
Return to performing status	—		(2,566)		(654)		(3,052)
Payments received	(12,312)		(11,201)		(35,043)		(19,150)
Transfer to OREO and other repossessed assets	(3,660)		—		(5,032)		(1,297)
Charge-offs	(4,684)		(12,884)		(7,636)		(15,435)
Net change for niche loans (1)	(3,475)		14,772		(14,114)		19,347
Balance at end of period	$	87,690	$	188,284	$	87,690	$	188,284

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
(In thousands) 2020 2019 2020 2019
Balance at beginning of period $ 179,360
$ 117,586
$ 117,588
$ 113,234
Additions from becoming non-performing in the respective period 20,803
20,567
52,998
44,597
Additions from the adoption of ASU 2016-13 —
—
37,285
—
Return to performing status (2,566 ) (47 ) (3,052 ) (14,124 )
Payments received (11,201 ) (5,438 ) (19,150 ) (9,462 )
Transfer to OREO and other repossessed assets —
(1,486 ) (1,297 ) (1,568 )
Charge-offs (12,884 ) (16,817 ) (15,435 ) (20,809 )
Net change for niche loans ⁽¹⁾
14,772
(918 ) 19,347
1,579
Balance at end of period $ 188,284
$ 113,447
$ 188,284
$ 113,447
(1)This includes activity for premium finance receivables and indirect consumer loans.


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

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

Allowance for Credit Losses

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

Management determined that the allowance for credit losses was appropriate at June 30, ~~2020,~~2021, 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, when considered applicable. The relative level of allowance for credit losses is reviewed and compared to industry peers. This review encompasses levels of total non-performing loans, portfolio mix, portfolio concentrations ~~current geographic risks,~~and overall levels of net ~~charge-offs and expectations of future forecasts.~~charge-off. Historical trending of both the Company’s results and the industry peers is also reviewed to analyze comparative significance.

Table of Contents

Allowance for Credit Losses

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


	Three Months Ended						Six Months Ended
(Dollars in thousands)	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Allowance for credit losses at beginning of period	$	321,209		$	253,412		$	379,910		$	158,461
Cumulative effect adjustment from the adoption of ASU 2016-13	—			—			—			47,344
Provision for credit losses	(15,289)			135,058			(60,675)			188,023
Other adjustments	33			42			63			(31)

Charge-offs:
Commercial	3,237			5,686			15,018			7,839
Commercial real estate	1,412			7,224			2,392			7,794
Home equity	142			239			142			1,240
Residential real estate	3			293			5			694
Premium finance receivables	2,077			3,434			5,316			6,618
Consumer and other	104			99			218			227

Total charge-offs	6,975			16,975			23,091			24,412
Recoveries:
Commercial	902			112			1,354			496
Commercial real estate	514			493			714			756
Home equity	328			46			429			340
Residential real estate	36			30			240			90
Premium finance receivables	3,239			833			5,021			1,943
Consumer and other	34			58			66			99

Total recoveries	5,053			1,572			7,824			3,724
Net charge-offs	(1,922)			(15,403)			(15,267)			(20,688)
Allowance for credit losses at period end	$	304,031		$	373,109		$	304,031		$	373,109


Annualized net charge-offs by category as a percentage of its own respective category’s average:
Commercial	0.08		%	0.20		%	0.22		%	0.15		%
Commercial real estate	0.04			0.33			0.04			0.17
Home equity	(0.20)			0.16			(0.15)			0.37
Residential real estate	(0.01)			0.09			(0.03)			0.10
Premium finance receivables	(0.04)			0.12			0.01			0.11
Consumer and other	0.69			0.25			0.62			0.39

Total loans, net of unearned income	0.02		%	0.20		%	0.09		%	0.15		%

Loans at period-end	$	32,911,187		$	31,402,903
Allowance for loan losses as a percentage of loans at period end	0.79		%	1.00		%
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end	0.92		%	1.19
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end, excluding PPP loans	0.98		%	1.33

Three Months Ended Six Months Ended
(Dollars in thousands) June 30,
2020 June 30,
2019 June 30,
2020 June 30,
2019
Allowance for credit losses at beginning of period $ 253,412
$ 159,622
$ 158,461
$ 154,164
Cumulative effect adjustment from the adoption of ASU 2016-13 —
—
47,344
—
Provision for credit losses 135,058
24,580
188,023
35,204
Other adjustments 42
(11 ) (31 ) (38 )
Charge-offs:
Commercial 5,686
17,380
7,839
17,883
Commercial real estate 7,224
326
7,794
4,060
Home equity 239
690
1,240
778
Residential real estate 293
287
694
290
Premium finance receivables 3,434
5,009
6,618
7,219
Consumer and other 99
136
227
238
Total charge-offs 16,975
23,828
24,412
30,468
Recoveries:
Commercial 112
289
495
607
Commercial real estate 493
247
756
727
Home equity 46
68
340
130
Residential real estate 30
140
90
169
Premium finance receivables 833
734
1,943
1,290
Consumer and other 58
60
100
116
Total recoveries 1,572
1,538
3,724
3,039
Net charge-offs (15,403 ) (22,290 ) (20,688 ) (27,429 )
Allowance for credit losses at period end $ 373,109
$ 161,901
$ 373,109
$ 161,901
Annualized net charge-offs by category as a percentage of its own respective category’s average:
Commercial 0.20 % 0.85 % 0.15 % 0.44 %
Commercial real estate 0.33
0.00
0.17
0.10
Home equity 0.16
0.47
0.37
0.25
Residential real estate 0.09
0.06
0.10
0.03
Premium finance receivables 0.12
0.22
0.11
0.16
Consumer and other 0.25
0.30
0.39
0.23
Total loans, net of unearned income 0.20 % 0.36 % 0.15 % 0.23 %
Net charge-offs as a percentage of the provision for credit losses 11.41 % 90.68 % 11.00 % 77.92 %
Loans at period-end $ 31,402,903
$ 25,304,659

Allowance for loan losses as a percentage of loans at period end 1.00 % 0.63 %
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end 1.19
0.64

Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end, excluding PPP loans 1.33
0.64

The allowance for credit losses, as related to loans and lending-related commitments, is comprised of an allowance for loan losses, which is determined with respect to loans that we have originated, and an allowance for unfunded commitment losses. A separate allowance for held-to-maturity securities losses is measured related to such debt securities portfolio. Our allowance for unfunded commitment losses is determined with respect to funds that we have committed to lend but for which funds have not yet been disbursed and is computed using a methodology similar to that used to determine the allowance for loan losses. The allowance for unfunded lending-related commitments totaled ~~$59.6~~$42.9 million and ~~$1.5~~$59.6 million as of June 30, ~~2020~~2021 and June 30, ~~2019,~~2020, respectively.

Additions to the allowance for credit losses are charged to earnings through the provision for credit losses. Charge-offs represent the amount of loans that have been determined to be uncollectible during a given period, and are deducted from the allowance for credit losses, and recoveries represent the amount of collections received from loans that had previously been charged off, and are credited to the allowance for credit losses. See Note 76 of the Consolidated Financial Statements presented

Table of Contents

under Item 1 of this report for further discussion of activity within the allowance for credit losses during the period and the relationship with respective loan balances for each loan category and the total loan portfolio.

How We Determine the Allowance for Credit Losses

The allowance for credit losses is measured on a collective or pooled basis by loans that share similar risk characteristics. If the loan no longer exhibits risk characteristics similar to that of a pool, typically due to credit deterioration of the related borrower, the Company analyzes the loan for purposes of individually assessing a specific allowance for credit loss as part of the Problem Loan Reporting system review. A separate reserve is collectively measured for loans continuing to share risk characteristics and, as a result, remaining in the pools. See Note 76 of the Consolidated Financial Statements presented under Item 1 of this report for further discussion of the allowance for credit losses measurement process.

Collective Measurement

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

Individual Assessment

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

Home Equity, Residential Real Estate and Consumer Loans

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

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

Table of Contents

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 credit losses for premium finance receivables is an assumption-based approach focusing on historical loss rates in the portfolio, adjusted qualitatively for current macroeconomic conditions and reasonable and supportable forecasts.

Methodology in Assessing Impairment and Charge-off Amounts

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

In many cases, the Company simultaneously values the underlying collateral by marketing the property to market participants interested in purchasing properties of the same type. If the Company receives offers or indications of interest, we will analyze the price and review market conditions to assess whether in light of such information the appraised value overstates the likely price and that a lower price would be a better assessment of the market value of the property and would enable us to liquidate the collateral. Additionally, the Company takes into account the strength of any guarantees or other credit enhancements, and the ability of the borrower to provide value related to those guarantees in determining the ultimate charge-off or reserve associated with any individually assessed loans. Accordingly, the Company may charge-off a loan to a value below the net appraised value if it believes that an expeditious liquidation is desirable in the circumstance and it has legitimate offers or other indications of interest to support a value that is less than the net appraised value. Alternatively, the Company may carry a loan at a value that is in excess of the appraised value if the Company has a guarantee from a borrower or other credit enhancements that the Company believes has realizable value. In evaluating the strength of any guarantee, the Company evaluates the financial wherewithal of the guarantor, the guarantor’s reputation, and the guarantor’s willingness and desire to work with the Company. The Company then conducts a review of the strength of a guarantee on a frequency established as the circumstances and conditions of the borrower warrant.

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

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

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

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

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

Although an external appraisal is the primary source of valuation utilized for charge-offs on collateral

Table of Contents

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

TDRs

At June 30, ~~2020,~~2021, the Company had ~~$83.5~~$55.7 million in loans modified in TDRs. The ~~$83.5~~$55.7 million in TDRs represents ~~278~~273 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 decreased slightly ~~decreased~~ from ~~$83.6~~$56.6 million representing ~~263~~273 credits at March 31, ~~2020~~2021 and ~~increased~~decreased from ~~$76.0~~$83.5 million representing ~~182~~278 credits at June 30, ~~2019.~~2020.

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 76 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 individually assessed when measuring the allowance for credit losses at June 30, ~~2020~~2021 and approximately ~~$7.9~~$2.5 million was appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for credit losses. Additionally, at June 30, ~~2020,~~2021, the Company was committed to lend an additional ~~$114,000~~$112,000 of funds to borrowers under the contractual terms of TDRs.

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


	June 30,		March 31,		June 30,
(In thousands)	2021		2021		2020
Accruing TDRs:
Commercial	$	6,911	$	7,536	$	5,338
Commercial real estate	9,659		9,478		19,106
Residential real estate and other	27,449		29,137		24,165
Total accruing TDRs	$	44,019	$	46,151	$	48,609
Non-accrual TDRs: (1)
Commercial	$	4,104	$	5,583	$	20,788
Commercial real estate	3,434		1,309		8,545
Residential real estate and other	4,190		3,540		5,606
Total non-accrual TDRs	$	11,728	$	10,432	$	34,939
Total TDRs:
Commercial	$	11,015	$	13,119	$	26,126
Commercial real estate	13,093		10,787		27,651
Residential real estate and other	31,639		32,677		29,771
Total TDRs	$	55,747	$	56,583	$	83,548

(1)Included in total non-performing loans.

June 30, March 31, June 30,
(In thousands) 2020 2020 2019
Accruing TDRs:
Commercial $ 5,338
$ 6,500
$ 15,923
Commercial real estate 19,106
18,043
12,646
Residential real estate and other 24,165
22,506
17,293
Total accruing TDRs $ 48,609
$ 47,049
$ 45,862
Non-accrual TDRs: ⁽¹⁾

Commercial $ 20,788
$ 17,206
$ 21,850
Commercial real estate 8,545
14,420
2,854
Residential real estate and other 5,606
4,962
5,435
Total non-accrual TDRs $ 34,939
$ 36,588
$ 30,139
Total TDRs:
Commercial $ 26,126
$ 23,706
$ 37,773
Commercial real estate 27,651
32,463
15,500
Residential real estate and other 29,771
27,468
22,728
Total TDRs $ 83,548
$ 83,637
$ 76,001


~~(1)~~Table of Contents	~~Included in total non-performing loans.~~

TDR Rollforward

The tables below present a summary of TDRs as of June 30, ~~2020~~2021 and June 30, ~~2019,~~2020, and show the change in the balance during those periods:


Three Months Ended June 30, 2021 (In thousands)	Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Balance at beginning of period	$	13,119	$	10,787	$	32,677	$	56,583
Additions during the period	395		2,707		1,097		4,199
Reductions:
Charge-offs	(888)		(23)		(7)		(918)
Transferred to OREO and other repossessed assets	—		—		—		—
Removal of TDR loan status (1)	—		—		(515)		(515)
Payments received	(1,611)		(378)		(1,613)		(3,602)
Balance at period end	$	11,015	$	13,093	$	31,639	$	55,747


Three Months Ended June 30, 2020 (In thousands)	Commercial			Commercial Real Estate			Residential Real Estate and Other			Total			Three Months Ended June 30, 2020 (In thousands)	Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Balance at beginning of period	$	23,706		$	32,463		$	27,468		$	83,637		Balance at beginning of period	$	23,706	$	32,463	$	27,468	$	83,637
Additions during the period	3,431			2,082			3,504			9,017			Additions during the period	3,431		2,082		3,504		9,017
Reductions:													Reductions:
Charge-offs	—			(6,069		)	(41		)	(6,110		)	Charge-offs	—		(6,069)		(41)		(6,110)
Transferred to OREO and other repossessed assets	—			—			—			—			Transferred to OREO and other repossessed assets	—		—		—		—
Removal of TDR loan status (1)													Removal of TDR loan status (1)	—		—		—		—
Payments received	(1,011		)	(825		)	(1,160		)	(2,996		)	Payments received	(1,011)		(825)		(1,160)		(2,996)
Balance at period end	$	26,126		$	27,651		$	29,771		$	83,548		Balance at period end	$	26,126	$	27,651	$	29,771	$	83,548


Six Months Ended June 30, 2021 (In thousands)	Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Balance at beginning of period	$	18,190	$	16,726	$	33,276	$	68,192
Additions during the period	546		2,944		2,835		6,325
Reductions:
Charge-offs	(2,297)		(23)		(7)		(2,327)
Transferred to OREO and other repossessed assets	(99)		—		(459)		(558)
Removal of TDR loan status (1)	—		(800)		(939)		(1,739)
Payments received	(5,325)		(5,754)		(3,067)		(14,146)
Balance at period end	$	11,015	$	13,093	$	31,639	$	55,747


Three Months Ended June 30, 2019 (In thousands)	Commercial			Commercial Real Estate			Residential Real Estate and Other			Total
Six Months Ended June 30, 2020 (In thousands)													Six Months Ended June 30, 2020 (In thousands)	Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Balance at beginning of period	$	54,040		$	15,640		$	18,682		$	88,362		Balance at beginning of period	$	18,739	$	16,873	$	28,224	$	63,836
Additions during the period	2,454			1,274			5,762			9,490			Additions during the period	9,033		18,135		5,646		32,814
Reductions:													Reductions:
Charge-offs	(15,607		)	(127		)	128			(15,606		)	Charge-offs	—		(6,069)		(386)		(6,455)
Transferred to OREO and other repossessed assets	—			—			—			—			Transferred to OREO and other repossessed assets	—		—		(945)		(945)
Removal of TDR loan status (1)													Removal of TDR loan status (1)	—		—		—		—
Payments received	(3,114		)	(1,287		)	(1,844		)	(6,245		)	Payments received	(1,646)		(1,288)		(2,768)		(5,702)
Balance at period end	$	37,773		$	15,500		$	22,728		$	76,001		Balance at period end	$	26,126	$	27,651	$	29,771	$	83,548

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

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

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


~~(1)~~	~~Loan was previously classified as a TDR and subsequently performed in compliance with the loan's 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.

On March 22, 2020, interagency guidance was issued titled "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus" that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effect of COVID-19. Additionally, Section 4013 of the CARES Act further provides that a qualified loan modification is exempt by law

Table of Contents

from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 (subsequently extended to January 1, 2022 under CAA), or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak declared by the President of the United States under the National Emergencies Act (50 ~~U.S.C~~U.S.C. 1601 et seq.) terminates. Accordingly, we are offering short-term

modifications made in response to COVID-19 to borrowers who are current and otherwise not past due. These include short-term, 180 days or less, modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are ~~generally~~ insignificant. Modifications qualifying for the exemption from TDR classification totaled approximately ~~$1.7 billion~~$102.8 million as of June 30, ~~2020.~~2021.

The table below presents a summary of all COVID-19 related modified loans, including those not qualifying for the exemption under Section 4013, as of June 30, ~~2020,~~2021, presented by loan category and type of modification:


(in thousands)	Interest-only		Full Payment Deferral		Line Increases		Other		Total
Commercial	$	3,715	$	16,514	$	7,295	$	25,088	$	52,612
Commercial real estate	64,453		24,338		—		3,343		92,134
Home equity	—		—		—		—		—
Residential real estate	—		—		—		—		—
Premium finance receivables	—		781		—		—		781
Consumer and other	—		24		1		—		25
Total loans, net of unearned income	$	68,168	$	41,657	$	7,296	$	28,431	$	145,552

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

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 and shows the activity for the respective periods and the balance for each property type:


	Three Months Ended						Six Months Ended							Three Months Ended				Six Months Ended
(In thousands)	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019			(In thousands)	June 30, 2021		June 30, 2020			June 30, 2021		June 30, 2020
Balance at beginning of period	$	11,026		$	21,520		$	15,171		$	24,820		Balance at beginning of period	$	15,813	$	11,026		$	16,558	$	15,171
Disposal/resolved	(612		)	(2,397		)	(5,405		)	(5,155		)	Disposal/resolved	(3,152)		(612)			(5,314)		(5,405)
Transfers in at fair value, less costs to sell	—			1,746			954			1,778			Transfers in at fair value, less costs to sell	3,660		—			5,247		954

Fair value adjustments	(217		)	(1,032		)	(523		)	(1,606		)	Fair value adjustments	(749)		(217)			(919)		(523)
Balance at end of period	$	10,197		$	19,837		$	10,197		$	19,837		Balance at end of period	$	15,572	$	10,197		$	15,572	$	10,197


	Period End
(In thousands)	June 30, 2021		March 31, 2021		June 30, 2020
Residential real estate	$	1,952	$	2,713	$	1,382
Residential real estate development	1,030		1,287		—
Commercial real estate	12,590		11,813		8,815
Total	$	15,572	$	15,813	$	10,197

Period End
(In thousands) June 30,
2020 March 31,
2020 June 30,
2019
Residential real estate $ 1,382
$ 1,684
$ 1,312
Residential real estate development —
—
1,282
Commercial real estate 8,815
9,342
17,243
Total $ 10,197
$ 11,026
$ 19,837

Table of Contents

Deposits

Total deposits at June 30, ~~2020~~2021 were ~~$35.7~~$38.8 billion,an increase of ~~$8.1~~$3.2 billion, or ~~30%~~9%, compared to total deposits at June 30, ~~2019.~~2020. See Note 109 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 June 30, ~~2020:~~2021:


Time Certificates of Deposit Maturity/Re-pricing Analysis As of June 30, 2021 (Dollars in thousands)	Total Time Certificates of Deposits		Weighted-Average Rate of Maturing Time Certificates of Deposit (1)
1-3 months	$	1,049,387	1.40	%
4-6 months	844,945		1.08
7-9 months	726,341		0.60
10-12 months	566,664		0.43
13-18 months	601,524		0.59
19-24 months	274,328		0.62
24+ months	300,686		0.63
Total	$	4,363,875	0.87	%

Time Certificates of Deposit
Maturity/Re-pricing Analysis
As of June 30, 2020

(Dollars in thousands)

CDARs &
Brokered
Certificates
of Deposit ⁽¹⁾

MaxSafe
Certificates
of Deposit ⁽¹⁾

Variable Rate
Certificates
of Deposit ⁽²⁾

Other Fixed
Rate Certificates
of Deposit ⁽¹⁾

Total Time
Certificates of
Deposits

Weighted-Average
Rate of Maturing
Time Certificates
of Deposit ⁽³⁾
1-3 months $ 1,690
$ 33,600
$ 59,988
$ 651,964
$ 747,242
1.65 %
4-6 months 609
31,127
—
561,696
593,432
1.53
7-9 months —
9,547
—
802,262
811,809
1.91
10-12 months —
14,830
—
1,223,365
1,238,195
1.93
13-18 months 1,401
15,049
—
1,012,797
1,029,247
1.99
19-24 months —
4,580
—
200,078
204,658
1.19
24+ months 88
4,395
—
208,321
212,804
1.38
Total $ 3,788
$ 113,128
$ 59,988
$ 4,660,483
$ 4,837,387
1.79 %
(1)Weighted-average rate excludes the impact of purchase accounting fair value adjustments.


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


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


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

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


	Three Months Ended
	June 30, 2021				March 31, 2021				June 30, 2020
(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent
Non-interest-bearing	$	12,246,274	32	%	$	11,811,194	32	%	$	9,607,528	27	%
NOW and interest-bearing demand deposits	3,626,424		10		3,493,451		9		3,323,124		10
Wealth management deposits	4,369,998		11		4,156,398		11		4,380,996		13
Money market	9,547,167		25		9,335,920		25		8,727,966		25
Savings	3,728,271		10		3,587,566		10		3,394,480		10
Time certificates of deposit	4,632,796		12		4,875,392		13		5,104,701		15
Total average deposits	$	38,150,930	100	%	$	37,259,921	100	%	$	34,538,795	100	%

Three Months Ended
June 30, 2020 March 31, 2020 June 30, 2019
(Dollars in thousands) Balance Percent Balance Percent Balance Percent
Non-interest bearing $ 9,607,528
27 % $ 7,235,177
24 % $ 6,487,627
25 %
NOW and interest bearing demand deposits 3,323,124
10
3,113,733
11
2,878,021
11
Wealth management deposits 4,380,996
13
2,838,719
9
2,605,690
10
Money market 8,727,966
25
7,990,775
27
6,095,285
23
Savings 3,394,480
10
3,189,835
11
2,752,828
11
Time certificates of deposit 5,104,701
15
5,526,407
18
5,322,384
20
Total average deposits $ 34,538,795
100 % $ 29,894,646
100 % $ 26,141,835
100 %

Total average deposits for the second quarter of ~~2020~~2021 were ~~$34.5~~$38.2 billion, an increase of ~~$8.4~~$3.6 billion, or ~~32%~~10%, from the second quarter of ~~2019.~~2020. The increase in average deposits is primarily attributable to ~~the various acquisitions and branch openings along with~~ additional deposits related to PPP lending and organic growth of retail deposits.

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

Table of Contents

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:


	June 30,						December 31,
(Dollars in thousands)	2021			2020			2020			2019			2018
Total deposits	$	38,804,616		$	35,651,874		$	37,092,651		$	30,107,138		$	26,094,678
Brokered deposits	2,142,346			2,344,851			1,843,227			1,011,404			1,071,562
Brokered deposits as a percentage of total deposits	5.5		%	6.6		%	5.0		%	3.4		%	4.1		%

June 30, December 31,
(Dollars in thousands) 2020 2019 2019 2018 2017
Total deposits $ 35,651,874
$ 27,518,815
$ 30,107,138
$ 26,094,678
$ 23,183,347
Brokered deposits 2,344,851
1,764,261
1,011,404
1,071,562
1,445,306
Brokered deposits as a percentage of total deposits 6.6 % 6.4 % 3.4 % 4.1 % 6.2 %

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

Other Funding Sources

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

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


	Three Months Ended							Three Months Ended
	June 30,		March 31,		June 30,			June 30,		March 31,		June 30,
(In thousands)	2020		2020		2019		(In thousands)	2021		2021		2020
FHLB advances	$	1,214,375	$	951,613	$	869,812	FHLB advances	$	1,235,142	$	1,228,433	$	1,214,375
Other borrowings:							Other borrowings:
Notes payable	141,316		127,978		142,571		Notes payable	96,306		101,653		141,316
Short-term borrowings	9,881		45,089		42,214		Short-term borrowings	15,034		11,796		9,881
Secured borrowings	276,030		250,054		187,100		Secured borrowings	350,219		339,923		276,030
Other	66,123		46,456		47,179		Other	64,365		64,816		66,123
Total other borrowings	$	493,350	$	469,577	$	419,064	Total other borrowings	$	525,924	$	518,188	$	493,350
Subordinated notes	436,226		436,119		220,771		Subordinated notes	436,644		436,532		436,226
Junior subordinated debentures	253,566		253,566		253,566		Junior subordinated debentures	253,566		253,566		253,566
Total other funding sources	$	2,397,517	$	2,110,875	$	1,763,213	Total other funding sources	$	2,451,276	$	2,436,719	$	2,397,517

FHLB advances provide the banks with access to ~~fixed rate~~fixed-rate funds that are useful in mitigating interest rate risk and achieving an acceptable interest rate spread on ~~fixed rate~~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 $1.2 billion at each of June 30, ~~2020, compared to $1.2 billion at~~2021, March 31, ~~2020~~2021 and ~~$574.8 million at~~ June 30, ~~2019.~~2020.

Notes payable balances ~~as of June 30, 2020 and December 31, 2019~~ represent the balances on ~~our~~a $200.0 million loan agreement (“Credit Agreement”) with unaffiliated banks consisting of a $50.0 million revolving credit facility (“Revolving Credit Facility”) and a $150.0 million term ~~facility.~~facility (“Term Facility”). Both ~~loan facilities~~the Revolving Credit Facility and the Term Facility 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 June 30, ~~2020~~2021 and ~~December 31, 2019,~~2020, the Company had a balance under the ~~term facility~~Term Facility of ~~$112.4~~$91.0 million and ~~$123.1~~$112.4 million, respectively. The Company was contractually required to borrow the entire amount of the ~~term facility~~Term Facility on September 18, 2018 and all such borrowings must be repaid by September 18, 2023. At June 30, 2020, the Company had no outstanding balance under the Revolving Credit Facility.

Table of Contents

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

Other borrowings at June 30, ~~2020~~2021 include a fixed-rate promissory note issued by the Company in June 2017 and amended in March 2020 ("Fixed-Rate Promissory Note") related to and secured by three office buildings owned by the Company. At June 30, ~~2020,~~2021, the Fixed-Rate Promissory Note had a balance of ~~$66.0~~$64.2 million compared to ~~$66.3~~$64.7 million at March 31, ~~2020~~2021 and ~~$47.1~~$66.0 million at June 30, ~~2019.~~2020. Under the Fixed-Rate Promissory Note, during the three months ended March 31, 2020, the Company ~~makes~~made monthly principal payments and ~~pays~~paid interest at a fixed rate ~~until maturity.~~of 3.36%. An amendment to the Fixed-Rate Promissory Note was executed on and became effective as of March 31, 2020. The amendment increased the principal amount to $66.4 million, reduced the interest rate to 3.00% and extended the maturity date to March 31, 2025.

At June 30, ~~2020,~~2021, the Company had outstanding subordinated notes totaling ~~$436.3~~$436.7 million compared to ~~$436.2~~$436.6 million and ~~$436.0~~$436.3 million outstanding at March 31, ~~2020~~2021 and June 30, ~~2019,~~2020, respectively. During the second quarter of 2019, the Company issued $300.0 million of subordinated notes, receiving $296.7 million in net proceeds. The notes have a stated interest rate of 4.85% and mature in June 2029. In 2014, the Company issued $140.0 million of subordinated notes receiving $139.1 million in net proceeds. These notes have a stated interest rate of 5.00% and mature in June 2024. Subordinated notes are stated at par adjusted for unamortized costs paid related to the different issuances of such debt.

The Company had $253.6 million of junior subordinated debentures outstanding as of June 30, ~~2020,~~2021, March 31, ~~2020~~2021 and June 30, ~~2019.~~2020. The amounts reflected on the balance sheet represent the junior subordinated debentures issued to 11eleven trusts by the Company and equal the amount of the preferred and common securities issued by the trusts. At June 30, ~~2020,~~2021, the Company included $245.5 million of the junior subordinated debentures, net of common securities, in Tier 2 regulatory capital.

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

See Notes 1110 and 1211 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.

Table of Contents

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:


	June 30, 2021		March 31, 2021		June 30, 2020
Tier 1 leverage ratio	8.2	%	8.2	%	8.1	%
Risk-based capital ratios:
Tier 1 capital ratio	10.1		10.2		10.1
Common equity tier 1 capital ratio	9.0		9.0		8.8
Total capital ratio	12.4		12.6		12.8
Other ratio:
Total average equity-to-total average assets(1)	9.3		9.3		9.3

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


~~(1)~~	~~Based on quarterly average balances.~~

(1)Based on quarterly average balances.


	Minimum Capital Requirements		Well Capitalized			Minimum Capital Requirements		Minimum Ratio + Capital Conservation Buffer(1)	Minimum Well Capitalized(2)
Leverage ratio	4.0	%	5.0	%	Leverage ratio	4.0	%	N/A	N/A
Tier 1 capital to risk-weighted assets	6.0		8.0		Tier 1 capital to risk-weighted assets	6.0		8.50	6.0
Common equity Tier 1 capital to risk-weighted assets	4.5		6.5		Common equity Tier 1 capital to risk-weighted assets	4.5		7.00	N/A
Total capital to risk-weighted assets	8.0		10.0		Total capital to risk-weighted assets	8.0		10.50	10.0

(1)Reflects the Capital Conservation Buffer of 2.5%.

(2)Reflects the well-capitalized standard applicable to the Company for purposes of the Federal Reserve’s Regulation Y. The Federal Reserve has not yet revised the well-capitalized standard for BHCs to reflect the higher capital requirements imposed under the U.S. Basel III Rule or to add Common Equity Tier 1 capital ratio and Tier 1 leverage ratio requirements to this standard. As a result, the Common Equity Tier 1 capital ratio and Tier 1 leverage ratio are denoted as “N/A” in this column. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to BHCs as the standard applicable to our subsidiary banks, we believe the Company’s capital ratios as of June 30, 2021 would exceed such revised well-capitalized standard.

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

The Company’s principal sources of funds at the holding company level are dividends from its subsidiaries, borrowings under its loan agreement with unaffiliated banks and proceeds from the issuances of subordinated debt and additional equity. Refer to Notes 10, 11 12 and 1817 of the Consolidated Financial Statements in Item 1 for further information on these various funding sources. Management is committed to maintaining the Company’s capital levels above the “Well Capitalized” levels established by the FRB for bank holding companies.

The Company’s Board of Directors approves dividends from time to time, however, the ability to declare a dividend is limited by the Company's financial condition, the terms of the Company's Series D and Series E preferred stock, the terms of the Company’s Trust Preferred Securities offerings and under certain financial covenants in the Company’s revolving and term facilities. In January and April of 2021, the Company declared a quarterly cash dividend of $0.31 per common share. In January, April, July and October of 2020, the Company declared a quarterly cash dividend of $0.28 per common share. ~~In January, April, July and October of 2019, the Company declared a quarterly cash dividend of $0.25 per common share.~~

In response to the COVID-19 pandemic, the Company continues to leverage its capital management framework to assess and monitor risk when making capital decisions. The Company will continuously evaluate the adequacy of capital as a result of the

Table of Contents

uncertainty from the COVID-19 pandemic. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation - Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

See Note 1817 of the Consolidated Financial Statements presented under Item 1 of this report for details on the Company’s issuance of Series D ~~preferred stock~~Preferred Stock in June 2015 and Series E Preferred Stock and associated Depositary Shares in May 2020. The Company hereby incorporates by reference Note 1817 of the Consolidated Financial Statements presented under Item 1 of this report in its entirety.

Table of Contents

LIQUIDITY

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

In accordance with the liquidity management noted above, deposit growth and increases in borrowings from various sources have resulted in accumulating liquidity assets in recent periods. In the ~~first~~second quarter of ~~2020,~~2021, we ~~increased~~maintained our liquid assets to ensure that we have the balance sheet strength to serve our clients through the COVID-19 pandemic. As a result, the Company believes that it has sufficient funds and access to funds to effectively manage through the COVID-19 pandemic as well as meet its working capital and other needs. The Company will continue to prudently evaluate ~~and expand~~ liquidity sources, including the management of availability with the FHLB and FRB and utilization of the revolving credit facility with unaffiliated banks. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation -Interest-Earning Assets, -Deposits, -Other Funding Sources and -Shareholders’ Equity sections of this report for additional information regarding the Company’s liquidity position. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operation -Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

INFLATION

A banking organization’s assets and liabilities are primarily monetary. Changes in the rate of inflation do not have as great an impact on the financial condition of a bank as do changes in interest rates. Moreover, interest rates do not necessarily change at the same percentage as inflation. Accordingly, changes in inflation are not expected to have a material impact on the Company. An analysis of the Company’s asset and liability structure provides the best indication of how the organization is positioned to respond to changing interest rates. See “Quantitative and Qualitative Disclosures About Market 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, such as the impacts of the COVID-19 pandemic (including the emergence of variant strains), and which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the ~~Company’s Annual Report on~~2020 Form 10-K ~~for the year ended December 31, 2019~~and in Part II, Item 1A, of this Form 10-Q, and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

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

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

Table of Contents

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

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

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

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

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

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

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

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

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

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

•a prolonged period of near zero interest rates or potentially negative interest rates, either broadly or for some types of instruments, which may affect the Company’s net interest income and net interest margin, and which could materially adversely affect the Company’s profitability;

•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;~~cyberattacks (including ransomware);

•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;

•liabilities, potential customer loss or reputational harm related to closings of existing branches;

•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 ~~related changes to address~~ the impact of ~~COVID-19, and the impact~~such changes on the Company’s financial statements;

•the ability of the Company to receive dividends from its subsidiaries;

•uncertainty about the discontinued use of LIBOR and transition to an alternative rate;

•a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;

Table of Contents

•legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies, including those changes that are in response to the COVID-19 pandemic, including without limitation the CARES Act, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, and the rules and regulations that may be promulgated thereunder;

•a lowering of our credit rating;

•changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet, including changes in response to the COVID-19 pandemic or otherwise;

•regulatory restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business;

•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 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.

Table of Contents

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 maximizing net interest income.

The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases of 100 and 200 basis points and decreases of 100 basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months. Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenarios at June 30, ~~2020,~~2021, March 31, ~~2020~~2021 and June 30, ~~2019~~2020 is as follows:


Static Shock Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points
June 30, 2021	24.6	%	11.7	%	(6.9)	%
March 31, 2021	22.0		10.2		(7.2)
June 30, 2020	25.9		12.6		(8.3)

Static Shock Scenarios +200
Basis
Points +100
Basis
Points -100
Basis
Points
June 30, 2020 25.9 % 12.6 % (8.3 )%
March 31, 2020 22.5
10.6
(9.4 )
June 30, 2019 17.3
8.9
(10.2 )


Ramp Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points
June 30, 2021	11.4	%	5.8	%	(3.3)	%
March 31, 2021	10.7		5.4		(3.6)
June 30, 2020	13.0		6.7		(3.2)

Ramp Scenarios +200
Basis
Points +100
Basis
Points -100
Basis
Points
June 30, 2020 13.0 % 6.7 % (3.2 )%
March 31, 2020 7.7
3.7
(3.8 )
June 30, 2019 8.3
4.3
(4.6 )

One method utilized by financial institutions, including the Company, to manage interest rate risk is to enter into derivative financial instruments. Derivative financial instruments include interest rate swaps, interest rate caps, floors and collars, futures, forwards, option contracts and other financial instruments with similar characteristics. Additionally, the Company enters into

Table of Contents

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 1514 of the Consolidated Financial Statements in Item 1 of this report for further information on the Company’s derivative financial instruments.

During the first six months of 2020, ~~and 2019,~~ the Company entered into certain covered call option transactions related to certain securities held by the Company. The Company did not enter into such transactions during the first six months of 2021. The Company uses these option transactions (rather than entering into other derivative interest rate contracts, such as interest rate floors) to economically hedge positions and compensate for net interest margin compression by increasing the total return associated with the related securities through fees generated from these options. Although the revenue received from these options is recorded as non-interest income rather than interest income, the increased return attributable to the related securities from these options contributes to the Company’s overall profitability. The Company’s exposure to interest rate risk may be impacted by these transactions. To further mitigate this risk, the Company may acquire fixed rate term debt or use financial derivative instruments. There were no covered call options outstanding as of June 30, ~~2020~~2021 and ~~2019.~~June 30, 2020.

Table of Contents

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.

Table of Contents

PART II —

Item 1: Legal Proceedings

In accordance with applicable accounting principles, the Company establishes an accrued liability for litigation and threatened litigation actions and proceedings when those actions present loss contingencies, which are both probable and estimable. In actions for which a loss is reasonably possible in future periods, the Company determines whether it can estimate a loss or range of possible loss. To determine whether a possible loss is estimable, the Company reviews and evaluates its material litigation on an ongoing basis, in conjunction with any outside counsel handling the matter, in light of potentially relevant factual and legal developments. This review may include information learned through the discovery process, rulings on substantive or dispositive motions, and settlement discussions.

~~Lehman Holdings Matter~~

On January 15, 2015, Lehman Brothers Holdings, Inc. (“Lehman Holdings”) sent a demand letter asserting that Wintrust Mortgage must indemnify it for losses arising from loans sold by Wintrust Mortgage to Lehman Brothers Bank, FSB under a Loan Purchase Agreement between Wintrust Mortgage, as successor to SGB Corporation, and Lehman Brothers Bank. The demand was the precursor for triggering the alternative dispute resolution process mandated by the U.S. Bankruptcy Court for the Southern District of New York. Lehman Holdings triggered the mandatory alternative dispute resolution process on October 16, 2015. On February 3, 2016, following an adverse ruling by the federal Court of Appeals for the Tenth Circuit concerning the applicable statute of limitations on certain Lehman Holdings claims, Lehman Holdings filed a complaint against Wintrust Mortgage and 150 other entities from which it had purchased loans in the U.S. Bankruptcy Court for the Southern District of New York. On March 16, 2016, Wintrust Mortgage participated in the court-ordered mediation, but the mediation did not result in a consensual resolution of the dispute. 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 appealed the denial of its motion to dismiss based on improper venue and the denial of its motion to transfer venue.

On October 2, 2018, Lehman Holdings asked the court for permission to amend its complaints against Wintrust Mortgage and the other defendants to add loans allegedly purchased from the defendants and sold to various RMBS trusts. The court granted this request and allowed Lehman Holdings to assert the additional claims against existing defendants as a supplemental complaint. Lehman Holdings filed its supplemental complaint against Wintrust Mortgage on December 4, 2018. Wintrust Mortgage filed its response to the supplemental complaint on May 13, 2019. Fact discovery is ongoing. Wintrust Mortgage is currently evaluating whether it has obtained sufficient information to assess the merits of Lehman Holding's additional claims and to estimate the likelihood or amount of any potential liability for the additional claims.

The Company has reserved an amount for the Lehman Holdings action that is immaterial to its results of operations or financial condition. Such litigation and threatened litigation actions necessarily involve substantial uncertainty and it is not possible at this time to predict the ultimate resolution or to determine whether, or to what extent, any loss with respect to these legal proceedings may exceed the amounts reserved by the Company.

Wintrust Mortgage Matter

On October 17, 2018, a former Wintrust Mortgage employee filed a lawsuit in the Superior Court of Los Angeles County, California against Wintrust Mortgage alleging violation of California wage payment statutes on behalf of herself and all other hourly, non-exempt employees of Wintrust Mortgage in ~~California from October 17, 2014 through the present.~~California. Wintrust Mortgage received service of the complaint on November 4, 2018. Wintrust Mortgage filed its response to the complaint on February 25, 2019. On November 1, 2019, the ~~plaintiff’s~~plaintiff's counsel filed a letter with the California Department of Labor advising that it was initiating an action under ~~California’s~~California's Private Attorney General Act statute based on the same alleged violations. In November 2019, the parties reached a settlement agreement. The parties executed a settlement agreement and on February 26, 2020, plaintiff moved the court for approval. A hearing on the motion to approve settlement was originally set for June 16, 2020, but the court continued the motion to September 8, 2020. On September 8, 2020, the court requested the parties make certain changes to the settlement agreement that were immaterial to the parties’ settlement terms. The parties revised the settlement agreement consistent with the court's recommendations and submitted the revised settlement agreement to the court for its approval. On January 27, 2021, the court entered its preliminary approval of the settlement. After no class members opted out or objected to the settlement, the court issued its final approval of the settlement on June 17, 2021 and on June 18, 2021, Wintrust Mortgage tendered the settlement amount to the class claims administrator. The Company ~~has~~had reserved an amount for this ~~proposed~~ settlement that is immaterial to its results of operations or financial condition.

Northbrook Bank Matter

On October 17, 2018, two individual plaintiffs filed suit in the Circuit Court of Cook County, Illinois against Northbrook Bank and Tamer Moumen on behalf of themselves and a class of approximately 42 investors in a hedge fund run by defendant Moumen. Plaintiffs allege that defendant Moumen ran a fraudulent Ponzi scheme and ran those funds through deposit accounts at Northbrook Bank. They allege the bank was negligent in failing to close the deposit accounts and that it intentionally aided and abetted defendant Moumen in the alleged fraud. They contend that Northbrook Bank is liable for losses in excess of $6 million. Northbrook Bank filed its motion to dismiss the complaint on January 15, 2019, which the court granted on March 5, 2019. On April 3, 2019, ~~Plaintiffs~~the plaintiffs filed an amended complaint based on similar allegations. Northbrook Bank ~~did not believe the amended complaint cured the pleading defects recognized by the court and filed a motion~~again moved to ~~dismiss the Amended Complaint on May 17, 2019.~~dismiss. The court heard this motion on July 17, 2019 and once again dismissed the complaint without prejudice. Plaintiffs filed a second amended complaint on August 12, 2019. Northbrook ~~again~~ moved to dismiss the second amended complaint. On November 6, 2019, the court dismissed the complaint with prejudice. Plaintiffs filed an appeal on December 2, 2019. After this appeal was fully briefed, on September 4, 2020, the Appellate Court for the First District of Illinois remanded the case back to the trial court for lack of appellate jurisdiction. The Appellate Court determined it did not have jurisdiction to hear the appeal because the trial court did not dismiss the suit against defendant Moumen and plaintiffs did not obtain the trial court's consent for immediate appeal of the dismissal order against Northbrook Bank. On October 29, 2020, the plaintiffs cured the jurisdictional issue identified by the Appellate Court by dismissing defendant Moumen. Plaintiffs filed their renewed appeal on November 4, 2020. This ~~appeal has been~~matter was fully briefed and remains pending before the Illinois First District Appellate Court. Northbrook Bank believes plaintiffs’ allegations are legally and factually meritless and otherwise lacks sufficient information to estimate the amount of any potential liability.

~~Wintrust Bank Matter~~

On April 30, 2020, A.D. Sims LLC on behalf of itself and other similarly situated plaintiffs filed suit in the federal district court for the Northern District of Illinois against Wintrust Financial Corporation, Wintrust Bank, N.A., Bank of America, N.A., Cross River Bank, and an additional 4,971 named and unnamed defendants alleging the defendant financial institutions’ failure to pay agent fees on loans issued by them under the federal CARES Act’s Payroll Protection Program (“PPP”). Plaintiffs allege the collective damages could exceed $3.8 billion and have asked the court to require the defendants to establish, on a pro rata basis, a fund which could be used to pay agent fees due. Plaintiffs voluntarily dismissed Wintrust Financial Corporation as a defendant in this suit on June 29, 2020. Plaintiffs’ attorneys have filed similar actions across the country and have moved the federal panel for Multi-District Litigation to consolidate these PPP Agent Fee class actions before a single judge. This motion was heard on July 30, ~~2020 and denied on August 5, 2020. Wintrust Bank believes plaintiffs’ allegations are legally and factually meritless and otherwise lacks sufficient information to estimate~~2021, the ~~amount~~Appellate Court issued an opinion affirming the trial court’s dismissal of ~~any potential liability.~~the compliant with prejudice.

Other Matters

In addition, the Company and its subsidiaries, from time to time, are subject to pending and threatened legal action and proceedings arising in the ordinary course of business.

Based on information currently available and upon consultation with counsel, management believes that the eventual outcome of any pending or threatened legal actions and proceedings described above, including our ordinary course litigation, will not have a material adverse effect on the operations or financial condition of the Company. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations or financial condition for a particular period.

Table of Contents

Item 1A: Risk Factors

~~The following constitute~~There have been no material changes from the risk factors set forth under Part I, Item 1A “Risk Factors” in the ~~Company’s~~2020 Form ~~10-K for the fiscal year ended December 31, 2019.~~10-K.

The COVID-19 pandemic is adversely affecting us and our customers, employees and third-party service providers, and the adverse impact on our business, financial condition, results of operations and cash flows could be material.

The COVID-19 pandemic has negatively impacted us and many of our customers, and could continue to affect significantly more households and businesses in our geographic area as well as the overall domestic and global economy. U.S. federal, state and foreign governments have taken actions to address the pandemic, including travel bans, school and business closures and “shelter in place” orders. Even as restrictions have been lifted, it remains possible that such restrictions may be reinstated. These actions, together with responses to the pandemic by businesses and individuals, have resulted in rapid decreases in commercial and consumer activity, temporary closures of many businesses that have led to loss of revenues and a rapid increase in unemployment, material decreases in business valuations, disruption of global supply chains, market downturns and volatility, changes in consumer behavior and an expectation that Federal Reserve policy will maintain a low interest rate environment for the foreseeable future. These changes may have a significant adverse effect on the markets in which we conduct our business, the demand for our products and services, and our ability to operate in the normal course. All of our three primary business segments: community banking, specialty finance and wealth management, have been uniquely impacted and will likely continue to be impacted by the COVID-19 pandemic, requiring the implementation of certain responses as circumstances evolve.

We have increased our allowance for loan losses in response to the COVID-19 pandemic. The effects of the pandemic could cause us to recognize heightened credit losses in our loan portfolio and additional increases in our allowance for loan losses. Certain portions of our lending portfolio are particularly vulnerable to the COVID-19 pandemic, including commercial and industrial and commercial real estate loans. Until the effects of the pandemic subside, we could experience additional draws on lines of credit, downward pressure on deposits, and increased loan delinquencies. The effects of COVID-19 may impair the value of collateral securing our loans, especially commercial and residential real estate loans. Further, a significantly larger amount of delinquent mortgage loans may result in us having to repurchase or substitute loans that we have sold in the secondary market.

Market interest rates have declined significantly during the pandemic. The lower interest rate environment has negatively affected our interest rate margin and, especially if prolonged, could adversely affect our net interest income and profitability. The sharp deterioration in the U.S. economy has negatively affected the value of our market sensitive investment securities portfolio. Further, the pandemic could cause us to recognize impairment of our goodwill and other financial assets, may increase our cost of capital, may prevent us from satisfying our minimum regulatory capital ratios and other supervisory requirements, and could result in a downgrade in our credit ratings. The economic recession caused by the COVID-19 pandemic, especially if prolonged, may have a material adverse effect on our business, financial condition and results of operations.

To protect the health and safety of our employees and communities, many of our employees are working remotely. We may experience increased costs of operations or other operational difficulties, including increased cybersecurity risk, due to the remote working environments of our employees. We may also experience additional operational risk due to difficulties experienced by our vendors. The effects of the pandemic and measures taken in response may subject us to increased risk of litigation and governmental and regulatory scrutiny.

Given the ongoing and dynamic nature of the circumstances, it is not possible to accurately predict the extent, severity or duration of the pandemic or when normal economic and operating conditions will resume. Even after the pandemic has subsided, we may continue to experience adverse impacts to our business as a result of the virus’s impact on the domestic and global economy. Accordingly, the extent to which the COVID-19 pandemic may affect our business, financial condition, results of operations and cash flows (including without limitation our liquidity, regulatory capital ratios and credit ratings) is highly uncertain, unpredictable and depends on factors including, among other things, new information that may emerge regarding the COVID-19 pandemic, the duration and severity of the pandemic and responses to the pandemic by the government, businesses and consumers.

Material risks relating to our business that are heightened due to the COVID-19 pandemic are listed in in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K for the fiscal year ended December 31, 2019 under the headings:

~~Deterioration in economic conditions may materially adversely affect the financial services industry and our business, financial condition, results of operations and cash flows.~~

~~Since our business is concentrated in the Chicago metropolitan and southern Wisconsin market areas, economic declines in the economy of this region could adversely affect our business.~~

~~If our allowance for loan losses is not sufficient to absorb losses that may occur in our loan portfolio, our financial condition and liquidity could suffer.~~

~~A significant portion of our loan portfolio is comprised of commercial loans, the repayment of which is largely dependent upon the financial success and economic viability of the borrower.~~

A substantial portion of our loan portfolio is secured by real estate, in particular commercial real estate. Deterioration in the real estate markets could lead to additional losses, which could have a material adverse effect on our financial condition and results of operations.

~~Events impacting collateral consisting of real property could lead to additional losses which could have a material adverse effect on our financial condition and results of operations.~~

Any inaccurate assumptions in our analytical and forecasting models could cause us to miscalculate our projected revenue, capital, liquidity or losses, which could adversely affect our financial condition.

~~Changes in prevailing interest rates could adversely affect our net interest income, which is our largest source of income.~~

~~Our liquidity position may be negatively impacted if economic conditions do not continue to improve or if they decline.~~

~~Damage to our reputation may harm our business.~~

~~An actual or perceived reduction in our financial strength may cause others to reduce or cease doing business with us, which could result in a decrease in our net interest income and fee revenues.~~

~~If our credit rating is lowered, our financing costs could increase.~~

~~If our growth requires us to raise additional capital, that capital may not be available when it is needed or the cost of that capital may be very high.~~

~~Disruption in the financial markets could result in lower fair values for our investment securities portfolio.~~

~~Our controls and procedures may fail or be circumvented.~~

Our operational or security systems or infrastructure, or those of third parties, could fail or be breached, which could disrupt our business and adversely impact our results of operations, liquidity and financial condition, as well as cause legal or reputational harm.

We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion and data corruption attempts, in addition to the resulting identity theft that could result in the disclosure of confidential information, all of which could adversely affect our business or reputation, and create significant legal and financial exposure.

~~Our vendors may be responsible for failures that adversely affect our operations.~~

~~We are subject to claims and legal actions that could negatively affect our results of operations or financial condition.~~

Losses incurred in connection with actual or projected repurchases and indemnification payments related to mortgages that we have sold into the secondary market may exceed our financial statement reserves and we may be required to increase such reserves in the future. Increases to our reserves and losses incurred in connection with actual loan repurchases and indemnification payments could have a material adverse effect on our business, financial condition, results of operations or cash flows.

~~We may be adversely impacted by the soundness of other financial institutions.~~

~~Changes in accounting policies or accounting standards could materially adversely affect how we report our financial results and financial condition.~~

~~We are a bank holding company, and our sources of funds, including to pay dividends, are limited.~~

~~Our business could be adversely affected by the occurrence of extraordinary events, such as acts of war, terrorist attacks, natural disasters and public health threats.~~

~~If we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets.~~

~~Changes in the United States’ monetary policy may restrict our ability to conduct our business in a profitable manner.~~

Legislative and regulatory actions taken now or in the future regarding the financial services industry may significantly increase our costs or limit our ability to conduct our business in a profitable manner.

~~Our premium finance business may involve a higher risk of delinquency or collection than our other lending operations, and could expose us to losses.~~

Widespread financial difficulties or credit downgrades among commercial and life insurance providers could lessen the value of the collateral securing our premium finance loans and impair the financial condition and liquidity of FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening the other risks described in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K for the fiscal year ended December 31, 2019 as well as any subsequent filing with the SEC. If the pandemic is prolonged, the adverse impacts and heightened risks noted above could worsen.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), the Company and its banks are subject to additional risks of litigation from the banks’ customers or other parties regarding the banks’ processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act into law, which included a $349 billion loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. The Company’s banks are participating in the PPP as lenders. As of June 30, 2020, we have originated approximately 11,000 PPP loans with a carrying balance totaling approximately $3.3 billion.

The PPP opened to borrower applications on April 3, 2020; due to the short timeframe between the passing of the CARES Act and the launch of the PPP, there is some ambiguity in the laws, rules and guidance regarding the operation of the PPP. Subsequent rounds of legislation and associated agency guidance have not provided necessary clarity and have created potential additional inconsistencies and ambiguities. Accordingly, the Company is exposed to risks relating to compliance with the PPP requirements.

Additionally, since the launch of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP, as well as litigation regarding the alleged nonpayment of fees that may be due to certain agents who facilitated PPP loan applications. The Company and the banks may be exposed to the risk of litigation, from both customers and non-customers that approached the banks regarding PPP loans, regarding its process and procedures used in processing applications for the PPP. If any such litigation is filed against the Company or its banks and is not resolved in a manner favorable to the Company or the banks, it may result in significant financial liability or adversely affect the Company’s reputation. The Company and one of its banks were named as defendants in a putative class action regarding the alleged nonpayment of agency fees. See Part II, Item 1 “Legal Proceedings.” Regardless of outcome, litigation can be costly and distracting. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.

PPP loans are fixed, low interest rate loans that are guaranteed by the SBA and subject to numerous other regulatory requirements, and a borrower may apply to have all or a portion of the loan forgiven. If PPP borrowers fail to qualify for loan forgiveness, the banks face a heightened risk of holding these loans at unfavorable interest rates for an extended period of time. While the PPP loans are guaranteed by the SBA, various regulatory requirements will apply to the banks’ ability to seek recourse under the guarantees, and related procedures are currently subject to uncertainty.

The banks also have credit risk with respect to PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the banks, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by the Company, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

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

~~On October 24, 2019,~~Our previously authorized share repurchase program permitted the ~~Company’s Board~~repurchase of ~~Directors authorized the Company to repurchase~~ up to $125 million of ~~its outstanding shares of~~our common stock. InNo purchases of the ~~first quarter~~Company’s common shares were made by or on behalf of ~~2020,~~ the Company ~~repurchased approximately $37.1 million~~or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the ~~Company's common stock on the open market. Commencing in March, 2020, the Company temporarily suspended the common stock repurchase program, as a prudential measure to preserve liquidity in light~~six months ended June 30, 2021.

100

Table of ~~the COVID-19 pandemic.~~Contents

Item 6: Exhibits:

(a)Exhibits (Exhibits marked with a “*” denote management contracts or compensatory plans or arrangements)


~~(a)~~	~~Exhibits~~



3.1		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April ~~13, 2020,~~12, 2021, and incorporated herein by reference).

~~4.1~~10.1		~~Form of Subordinated Indenture between the Company~~Second Amended and ~~U.S. Bank National Association, as trustee~~Restated Wintrust Financial Corporation Employee Stock Purchase Plan (incorporated by reference to ~~Exhibit 4.5 of~~Annex A to the Company’s ~~Registration~~Definitive Proxy Statement on ~~Form S-3~~Schedule 14A, filed with the Securities and Exchange Commission on ~~May 6, 2020)~~April 8, 2021).*

~~4.2~~31.1		Certificate of Designations of the Company filed on May 7, 2020 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2020).

~~4.3~~	Deposit Agreement, dated May 15, 2020, between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2020).

~~4.4~~	Form of Depositary Receipt (included as Exhibit A to Exhibit 4.3 hereto) (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2020).

~~10.1~~	Eighth Amending Agreement to the Receivables Purchase Agreement, dated May 20, 2020, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust, in its capacity as trustee of the PLAZA Trust, by its Financial Service Agent, Royal Bank of Canada (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2020).

~~10.2~~	Performance Guarantee Confirmation, made as of May 20, 2020, by the Company in favor of CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2020).

~~10.3~~	Fee Letter, dated May 20, 2020, by and between First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company, in its capacity as trustee of PLAZA Trust (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 26, 2020).

~~31.1~~	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document ⁽¹⁾

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~(1)~~

~~Includes the following financial information included in the Company’s Quarterly Report on Form 10-Q for the quarter ended~~ ~~June 30, 2020~~,

(1)Includes the following financial information included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements

101

Table of Contents

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:

August 6, 2021

~~WINTRUST FINANCIAL CORPORATION~~

~~(Registrant)~~

~~Date:~~

~~August 7, 2020~~

/s/ DAVID L. STOEHR

David L. Stoehr

Executive Vice President and

Chief Financial Officer

(Principal Financial and Accounting Officer)

102



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



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



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



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



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



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



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



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



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



	June 30, 2020								Three Months Ended June 30, 2020 Fair Value Losses Recognized, net		Six Months Ended June 30, 2020 Fair Value Losses Recognized, net
(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Individually assessed loans - foreclosure probable and collateral-dependent	$	140,473	$	—	$	—	$	140,473	$	13,414	$	17,474
Other real estate owned ⁽¹⁾	10,197		—		—		10,197		217		523
Total	$	150,670	$	—	$	—	$	150,670	$	13,631	$	17,997



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



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

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



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

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



	Second Quarter of 2020 Compared to First Quarter of 2020			Second Quarter of 2020 Compared to Second Quarter of 2019			First Six Months of 2020 Compared to First Six Months of 2019
(In thousands)	Second Quarter of 2020 Compared to First Quarter of 2020			Second Quarter of 2020 Compared to Second Quarter of 2019
Net interest income (GAAP) for comparative period	$	261,443		$	266,202		$	528,188
Change due to mix and growth of earning assets and interest-bearing liabilities (volume)	37,707			64,933			101,394
Change due to interest rate fluctuations (rate)	(36,019		)	(68,004		)	(107,910		)
Change due to number of days in each period	—			—			2,902
Net interest income (GAAP) for the period ended June 30, 2020	$	263,131		$	263,131		$	524,574
Fully taxable-equivalent adjustment	1,117			1,117			2,530
Net interest income, fully taxable-equivalent (non-GAAP)	$	264,248		$	264,248		$	527,104



	Three Months Ended
	June 30, 2020				March 31, 2020				June 30, 2019
(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent
Mortgage loans held-for-sale	$	705,702	2	%	$	403,262	1	%	$	281,732	1	%
Loans, net of unearned income
Commercial, excluding PPP	$	8,685,218	22	%	$	8,414,315	25	%	$	8,110,690	27	%
Commercial - PPP	2,679,662		7		—		—		—		—
Commercial real estate	8,177,259		21		8,125,827		24		7,120,936		24
Home equity	478,302		1		499,369		1		527,784		2
Residential real estate	1,223,635		3		1,243,031		4		995,417		3
Premium finance receivables	9,014,719		23		8,591,980		26		7,696,745		26
Other loans	77,831		1		62,206		—		101,691		1
Total average loans⁽¹⁾	$	30,336,626	78	%	$	26,936,728	80	%	$	24,553,263	83	%
Liquidity management assets ⁽²⁾	7,684,998		20		6,314,347		19		4,652,403		16
Other earning assets ⁽³⁾	16,917		—		19,166		—		15,719		—
Total average earning assets	$	38,744,243	100	%	$	33,673,503	100	%	$	29,503,117	100	%
Total average assets	$	42,042,729			$	36,625,490			$	32,055,769
Total average earning assets to total average assets			92	%			92	%			92	%



(Dollars in thousands)	June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2019
Loans past due greater than 90 days and still accruing ⁽¹⁾:
Commercial	$	1,374		$	1,241		$	—		$	488
Commercial real estate	—			516			—			—
Home equity	—			—			—			—
Residential real estate	—			605			—			—
Premium finance receivables—commercial	35,638			16,505			11,517			6,940
Premium finance receivables—life insurance	—			—			—			—
Consumer and other	156			78			163			172
Total loans past due greater than 90 days and still accruing	37,168			18,945			11,680			7,600
Non-accrual loans ⁽²⁾:
Commercial	42,882			49,916			37,224			47,604
Commercial real estate	64,557			62,830			26,113			20,875
Home equity	7,261			7,243			7,363			8,489
Residential real estate	19,529			18,965			13,797			14,236
Premium finance receivables—commercial	16,445			21,058			20,590			13,833
Premium finance receivables—life insurance	15			—			590			590
Consumer and other	427			403			231			220
Total non-accrual loans	151,116			160,415			105,908			105,847
Total non-performing loans⁽³⁾:
Commercial	44,256			51,157			37,224			48,092
Commercial real estate	64,557			63,346			26,113			20,875
Home equity	7,261			7,243			7,363			8,489
Residential real estate	19,529			19,570			13,797			14,236
Premium finance receivables—commercial	52,083			37,563			32,107			20,773
Premium finance receivables—life insurance	15			—			590			590
Consumer and other	583			481			394			392
Total non-performing loans	$	188,284		$	179,360		$	117,588		$	113,447
Other real estate owned	2,409			2,701			5,208			9,920
Other real estate owned—from acquisitions	7,788			8,325			9,963			9,917
Other repossessed assets	—			—			4			263
Total non-performing assets	$	198,481		$	190,386		$	132,763		$	133,547
Accruing TDRs not included within non-performing assets	48,609			47,049			36,725			45,862
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial	0.37		%	0.57		%	0.45		%	0.58		%
Commercial real estate	0.79			0.77			0.33			0.29
Home equity	1.56			1.46			1.44			1.61
Residential real estate	1.37			1.42			1.02			1.27
Premium finance receivables—commercial	1.30			1.08			0.93			0.62
Premium finance receivables—life insurance	0.00			0.00			0.01			0.01
Consumer and other	1.21			1.29			0.36			0.36
Total non-performing loans	0.60		%	0.65		%	0.44		%	0.45		%
Total non-performing assets, as a percentage of total assets	0.46		%	0.49		%	0.36		%	0.40		%
Allowance for loan losses as a percentage of total non-performing loans	166.51		%	120.46		%	133.37		%	141.41		%



Time Certificates of Deposit Maturity/Re-pricing Analysis As of June 30, 2020 (Dollars in thousands)	CDARs & Brokered Certificates of Deposit ⁽¹⁾		MaxSafe Certificates of Deposit ⁽¹⁾		Variable Rate Certificates of Deposit ⁽²⁾		Other Fixed Rate Certificates of Deposit ⁽¹⁾		Total Time Certificates of Deposits		Weighted-Average Rate of Maturing Time Certificates of Deposit ⁽³⁾
1-3 months	$	1,690	$	33,600	$	59,988	$	651,964	$	747,242	1.65	%
4-6 months	609		31,127		—		561,696		593,432		1.53
7-9 months	—		9,547		—		802,262		811,809		1.91
10-12 months	—		14,830		—		1,223,365		1,238,195		1.93
13-18 months	1,401		15,049		—		1,012,797		1,029,247		1.99
19-24 months	—		4,580		—		200,078		204,658		1.19
24+ months	88		4,395		—		208,321		212,804		1.38
Total	$	3,788	$	113,128	$	59,988	$	4,660,483	$	4,837,387	1.79	%