0001015328us-gaap:PerformanceSharesMember2021-09-30

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 ~~March 31,~~September 30, 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

(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, Illinois 60018

(Address of principal executive offices)

(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 1/1,000th Interest 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, ~~57,039,674~~57,007,314 shares, as of ~~April 30,~~October 31, 2021

Table of Contents

TABLE OF CONTENTS


		Page
	PART I. — FINANCIAL INFORMATION
ITEM 1.	Financial Statements	1
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5258
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	8998
ITEM 4.	Controls and Procedures	91100
	PART II. — OTHER INFORMATION
ITEM 1.	Legal Proceedings	92101
ITEM 1A.	Risk Factors	94102
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	94102
ITEM 3.	Defaults Upon Senior Securities	NA
ITEM 4.	Mine Safety Disclosures	NA
ITEM 5.	Other Information	NA
ITEM 6.	Exhibits	95103
	Signatures	96104

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)	(In thousands, except share data)	March 31, 2021		December 31, 2020		March 31, 2020		(In thousands, except share data)	September 30, 2021		December 31, 2020		September 30, 2020
Assets	Assets							Assets
Cash and due from banks	Cash and due from banks	$	426,325	$	322,415	$	349,118	Cash and due from banks	$	462,244	$	322,415	$	308,639
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	52		59		309		Federal funds sold and securities purchased under resale agreements	55		59		56
Interest-bearing deposits with banks	Interest-bearing deposits with banks	3,348,794		4,802,527		1,943,743		Interest-bearing deposits with banks	5,232,315		4,802,527		3,825,823
Available-for-sale securities, at fair value	Available-for-sale securities, at fair value	2,430,749		3,055,839		3,570,959		Available-for-sale securities, at fair value	2,373,478		3,055,839		2,946,459
Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $99, $59 and $70 at March 31, 2021, December 31, 2020 and March 31, 2020, respectively ($2.1 billion, $593.8 million and $879.2 million fair value at March 31, 2021, December 31, 2020 and March 31, 2020, respectively)		2,166,419		579,138		865,376
Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $83, $59 and $63 at September 30, 2021, December 31, 2020 and September 30, 2020, respectively ($2.7 billion, $593.8 million and $575.9 million fair value at September 30, 2021, December 31, 2020 and September 30, 2020, respectively)								Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $83, $59 and $63 at September 30, 2021, December 31, 2020 and September 30, 2020, respectively ($2.7 billion, $593.8 million and $575.9 million fair value at September 30, 2021, December 31, 2020 and September 30, 2020, respectively)	2,736,722		579,138		560,267
Trading account securities	Trading account securities	951		671		2,257		Trading account securities	1,103		671		1,720
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	90,338		90,862		47,310		Equity securities with readily determinable fair value	88,193		90,862		54,398
Federal Home Loan Bank and Federal Reserve Bank stock	Federal Home Loan Bank and Federal Reserve Bank stock	135,881		135,588		134,546		Federal Home Loan Bank and Federal Reserve Bank stock	135,408		135,588		135,568
Brokerage customer receivables	Brokerage customer receivables	19,056		17,436		16,293		Brokerage customer receivables	26,378		17,436		16,818
Mortgage loans held-for-sale, at fair value	Mortgage loans held-for-sale, at fair value	1,260,193		1,272,090		656,934		Mortgage loans held-for-sale, at fair value	925,312		1,272,090		959,671

Loans, net of unearned income	Loans, net of unearned income	33,171,233		32,079,073		27,807,321		Loans, net of unearned income	33,264,043		32,079,073		32,135,555
Allowance for loan losses	Allowance for loan losses	(277,709)		(319,374)		(216,050)		Allowance for loan losses	(248,612)		(319,374)		(325,959)

Net loans	Net loans	32,893,524		31,759,699		27,591,271		Net loans	33,015,431		31,759,699		31,809,596
Premises and equipment, net		760,522		768,808		764,583
Premises, software and equipment, net								Premises, software and equipment, net	748,872		768,808		774,288
Lease investments, net	Lease investments, net	238,984		242,434		207,147		Lease investments, net	243,933		242,434		230,373

Accrued interest receivable and other assets	Accrued interest receivable and other assets	1,230,362		1,351,455		1,460,168		Accrued interest receivable and other assets	1,166,917		1,351,455		1,424,728
Trade date securities receivable		0		0		502,207

Goodwill	Goodwill	646,017		645,707		643,441		Goodwill	645,792		645,707		644,644
Other intangible assets	Other intangible assets	34,035		36,040		44,185		Other intangible assets	30,118		36,040		38,670
Total assets	Total assets	$	45,682,202	$	45,080,768	$	38,799,847	Total assets	$	47,832,271	$	45,080,768	$	43,731,718
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity							Liabilities and Shareholders’ Equity
Deposits:	Deposits:							Deposits:
Non-interest-bearing	Non-interest-bearing	$	12,297,337	$	11,748,455	$	7,556,755	Non-interest-bearing	$	13,255,417	$	11,748,455	$	10,409,747
Interest-bearing	Interest-bearing	25,575,315		25,344,196		23,904,905		Interest-bearing	26,697,141		25,344,196		25,434,675
Total deposits	Total deposits	37,872,652		37,092,651		31,461,660		Total deposits	39,952,558		37,092,651		35,844,422

Federal Home Loan Bank advances	Federal Home Loan Bank advances	1,228,436		1,228,429		1,174,894		Federal Home Loan Bank advances	1,241,071		1,228,429		1,228,422

Other borrowings	Other borrowings	516,877		518,928		487,503		Other borrowings	504,527		518,928		507,395

Subordinated notes	Subordinated notes	436,595		436,506		436,179		Subordinated notes	436,811		436,506		436,385
Junior subordinated debentures	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	995		200,907		0		Trade date securities payable	1,348		200,907		—
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	1,120,570		1,233,786		1,285,652		Accrued interest payable and other liabilities	1,032,073		1,233,786		1,387,439

Total liabilities	Total liabilities	41,429,691		40,964,773		35,099,454		Total liabilities	43,421,954		40,964,773		39,657,629
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:							Preferred stock, no par value; 20,000,000 shares authorized:

Series D -$25 liquidation value; 5,000,000 shares issued and outstanding at March 31, 2021, December 31, 2020 and March 31, 2020		125,000		125,000		125,000
Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at March 31, 2021 and December 31, 2020 and 0 shares issued at March 31, 2020		287,500		287,500		0
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at March 31, 2021, December 31, 2020 and March 31, 2020; 58,726,900 shares issued at March 31, 2021, 58,473,252 shares issued at December 31, 2020 and 58,266,136 shares issued at March 31, 2020		58,727		58,473		58,266
Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at September 30, 2021, December 31, 2020 and September 30, 2020								Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at September 30, 2021, December 31, 2020 and September 30, 2020	125,000		125,000		125,000
Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at September 30, 2021, December 31, 2020 and September 30, 2020								Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at September 30, 2021, December 31, 2020 and September 30, 2020	287,500		287,500		287,500
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at September 30, 2021, December 31, 2020 and September 30, 2020; 58,793,715 shares issued at September 30, 2021, 58,473,252 shares issued at December 31, 2020 and 58,322,775 shares issued at September 30, 2020								Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at September 30, 2021, December 31, 2020 and September 30, 2020; 58,793,715 shares issued at September 30, 2021, 58,473,252 shares issued at December 31, 2020 and 58,322,775 shares issued at September 30, 2020	58,794		58,473		58,323
Surplus	Surplus	1,663,008		1,649,990		1,652,063		Surplus	1,674,062		1,649,990		1,647,049
Treasury stock, at cost, 1,703,627 shares at March 31, 2021 and December 31, 2020, and 720,784 shares at March 31, 2020		(100,363)		(100,363)		(44,891)
Treasury stock, at cost, 1,837,689 shares at September 30, 2021 and 1,703,627 shares at December 31, 2020, and 720,784 shares at September 30, 2020								Treasury stock, at cost, 1,837,689 shares at September 30, 2021 and 1,703,627 shares at December 31, 2020, and 720,784 shares at September 30, 2020	(109,903)		(100,363)		(44,891)
Retained earnings	Retained earnings	2,208,535		2,080,013		1,917,558		Retained earnings	2,373,447		2,080,013		2,001,949
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	10,104		15,382		(7,603)		Accumulated other comprehensive income (loss)	1,417		15,382		(841)
Total shareholders’ equity	Total shareholders’ equity	4,252,511		4,115,995		3,700,393		Total shareholders’ equity	4,410,317		4,115,995		4,074,089
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	45,682,202	$	45,080,768	$	38,799,847	Total liabilities and shareholders’ equity	$	47,832,271	$	45,080,768	$	43,731,718

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


		Three Months Ended				Three Months Ended				Nine Months Ended
(In thousands, except per share data)	(In thousands, except per share data)	March 31, 2021		March 31, 2020			(In thousands, except per share data)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Interest income	Interest income						Interest income
Interest and fees on loans	Interest and fees on loans	$	274,100	$	301,839		Interest and fees on loans	$	285,587	$	280,479	$	844,388	$	877,064
Mortgage loans held-for-sale	Mortgage loans held-for-sale	9,036		3,165			Mortgage loans held-for-sale	7,716		5,791		24,935		13,720
Interest-bearing deposits with banks	Interest-bearing deposits with banks	1,199		4,768			Interest-bearing deposits with banks	2,000		1,181		4,352		7,259
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	0		86			Federal funds sold and securities purchased under resale agreements	—		—		—		102
Investment securities	Investment securities	19,264		32,467			Investment securities	25,189		21,819		68,076		81,391
Trading account securities	Trading account securities	2		7			Trading account securities	3		6		6		26
Federal Home Loan Bank and Federal Reserve Bank stock	Federal Home Loan Bank and Federal Reserve Bank stock	1,745		1,577			Federal Home Loan Bank and Federal Reserve Bank stock	1,777		1,774		5,291		5,116
Brokerage customer receivables	Brokerage customer receivables	123		158			Brokerage customer receivables	185		106		457		361
Total interest income	Total interest income	305,469		344,067			Total interest income	322,457		311,156		947,505		985,039
Interest expense	Interest expense						Interest expense
Interest on deposits	Interest on deposits	27,944		67,435			Interest on deposits	19,305		39,084		71,547		156,576
Interest on Federal Home Loan Bank advances	Interest on Federal Home Loan Bank advances	4,840		3,360			Interest on Federal Home Loan Bank advances	4,931		4,947		14,658		13,241
Interest on other borrowings	Interest on other borrowings	2,609		3,546			Interest on other borrowings	2,501		3,012		7,678		9,994
Interest on subordinated notes	Interest on subordinated notes	5,477		5,472			Interest on subordinated notes	5,480		5,474		16,469		16,452
Interest on junior subordinated debentures	Interest on junior subordinated debentures	2,704		2,811			Interest on junior subordinated debentures	2,744		2,703		8,172		8,266
Total interest expense	Total interest expense	43,574		82,624			Total interest expense	34,961		55,220		118,524		204,529
Net interest income	Net interest income	261,895		261,443			Net interest income	287,496		255,936		828,981		780,510
Provision for credit losses	Provision for credit losses	(45,347)		52,961			Provision for credit losses	(7,916)		25,026		(68,562)		213,040
Net interest income after provision for credit losses	Net interest income after provision for credit losses	307,242		208,482			Net interest income after provision for credit losses	295,412		230,910		897,543		567,470
Non-interest income	Non-interest income						Non-interest income
Wealth management	Wealth management	29,309		25,941			Wealth management	31,531		24,957		91,530		73,534
Mortgage banking	Mortgage banking	113,494		48,326			Mortgage banking	55,794		108,544		219,872		259,194
Service charges on deposit accounts	Service charges on deposit accounts	12,036		11,265			Service charges on deposit accounts	14,149		11,497		39,434		33,182
Gains (losses) on investment securities, net		1,154		(4,359)
(Losses) gains on investment securities, net							(Losses) gains on investment securities, net	(2,431)		411		8		(3,140)
Fees from covered call options	Fees from covered call options	0		2,292			Fees from covered call options	1,157		—		2,545		2,292
Trading gains (losses), net	Trading gains (losses), net	419		(451)			Trading gains (losses), net	58		183		39		(902)
Operating lease income, net	Operating lease income, net	14,440		11,984			Operating lease income, net	12,807		11,717		39,487		35,486
Other	Other	15,654		18,244			Other	23,409		13,284		59,438		46,182
Total non-interest income	Total non-interest income	186,506		113,242			Total non-interest income	136,474		170,593		452,353		445,828
Non-interest expense	Non-interest expense						Non-interest expense
Salaries and employee benefits	Salaries and employee benefits	180,809		136,762			Salaries and employee benefits	170,912		164,042		524,538		454,960
Equipment		20,912		14,834
Software and equipment							Software and equipment	22,029		17,251		63,807		47,931
Operating lease equipment depreciation	Operating lease equipment depreciation	10,771		9,260			Operating lease equipment depreciation	10,013		9,425		30,733		27,977
Occupancy, net	Occupancy, net	19,996		17,547			Occupancy, net	18,158		15,830		55,841		50,270
Data processing	Data processing	6,048		8,373			Data processing	7,104		5,689		20,072		24,468
Advertising and marketing	Advertising and marketing	8,546		10,862			Advertising and marketing	13,443		7,880		33,294		26,446
Professional fees	Professional fees	7,587		6,721			Professional fees	7,052		6,488		21,943		20,896
Amortization of other intangible assets	Amortization of other intangible assets	2,007		2,863			Amortization of other intangible assets	1,877		2,701		5,923		8,384
FDIC insurance	FDIC insurance	6,558		4,135			FDIC insurance	6,750		6,772		19,713		17,988
OREO expense, net	OREO expense, net	(251)		(876)			OREO expense, net	(1,531)		(168)		(1,013)		(807)
Other	Other	23,906		24,160			Other	26,337		28,309		74,294		79,715
Total non-interest expense	Total non-interest expense	286,889		234,641			Total non-interest expense	282,144		264,219		849,145		758,228
Income before taxes	Income before taxes	206,859		87,083			Income before taxes	149,742		137,284		500,751		255,070
Income tax expense	Income tax expense	53,711		24,271			Income tax expense	40,605		29,969		133,357		63,284
Net income	Net income	$	153,148	$	62,812		Net income	$	109,137	$	107,315	$	367,394	$	191,786
Preferred stock dividends	Preferred stock dividends	6,991		2,050			Preferred stock dividends	6,991		10,286		20,973		14,386
Net income applicable to common shares	Net income applicable to common shares	$	146,157	$	60,762		Net income applicable to common shares	$	102,146	$	97,029	$	346,421	$	177,400
Net income per common share—Basic	Net income per common share—Basic	$	2.57	$	1.05		Net income per common share—Basic	$	1.79	$	1.68	$	6.08	$	3.08
Net income per common share—Diluted	Net income per common share—Diluted	$	2.54	$	1.04		Net income per common share—Diluted	$	1.77	$	1.67	$	6.00	$	3.06
Cash dividends declared per common share	Cash dividends declared per common share	$	0.31	$	0.28		Cash dividends declared per common share	$	0.31	$	0.28	$	0.93	$	0.84
Weighted average common shares outstanding	Weighted average common shares outstanding	56,904		57,620			Weighted average common shares outstanding	57,000		57,597		56,985		57,595
Dilutive potential common shares	Dilutive potential common shares	681		575			Dilutive potential common shares	753		449		728		469
Average common shares and dilutive common shares	Average common shares and dilutive common shares	57,585		58,195			Average common shares and dilutive common shares	57,753		58,046		57,713		58,064

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				Three Months Ended				Nine Months Ended
(In thousands)	(In thousands)	March 31, 2021		March 31, 2020			(In thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net income	Net income	$	153,148	$	62,812		Net income	$	109,137	$	107,315	$	367,394	$	191,786
Unrealized (losses) gains on available-for-sale securities	Unrealized (losses) gains on available-for-sale securities						Unrealized (losses) gains on available-for-sale securities
Before tax	Before tax	(60,726)		91,354			Before tax	(14,141)		(14,563)		(68,555)		81,859
Tax effect	Tax effect	16,207		(24,347)			Tax effect	3,767		3,881		18,290		(21,816)
Net of tax	Net of tax	(44,519)		67,007			Net of tax	(10,374)		(10,682)		(50,265)		60,043
Reclassification of net gains on available-for-sale securities included in net income	Reclassification of net gains on available-for-sale securities included in net income						Reclassification of net gains on available-for-sale securities included in net income
Before tax	Before tax	210		491			Before tax	350		50		1,144		200
Tax effect	Tax effect	(56)		(132)			Tax effect	(94)		(14)		(307)		(54)
Net of tax	Net of tax	154		359			Net of tax	256		36		837		146
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						Reclassification of amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale
Before tax	Before tax	57		78			Before tax	54		54		158		178
Tax effect	Tax effect	(15)		(21)			Tax effect	(14)		(14)		(42)		(47)
Net of tax	Net of tax	42		57			Net of tax	40		40		116		131
Net unrealized (losses) gains on available-for-sale securities	Net unrealized (losses) gains on available-for-sale securities	(44,715)		66,591			Net unrealized (losses) gains on available-for-sale securities	(10,670)		(10,758)		(51,218)		59,766
Unrealized gains (losses) on derivative instruments	Unrealized gains (losses) on derivative instruments						Unrealized gains (losses) on derivative instruments
Before tax	Before tax	50,792		(38,693)			Before tax	9,004		10,393		51,008		(31,167)
Tax effect	Tax effect	(13,535)		10,322			Tax effect	(2,400)		(2,770)		(13,594)		8,325
Net unrealized gains (losses) on derivative instruments	Net unrealized gains (losses) on derivative instruments	37,257		(28,371)			Net unrealized gains (losses) on derivative instruments	6,604		7,623		37,414		(22,842)
Foreign currency adjustment	Foreign currency adjustment						Foreign currency adjustment
Before tax	Before tax	2,734		(14,333)			Before tax	(5,858)		3,716		(248)		(3,939)
Tax effect	Tax effect	(554)		3,188			Tax effect	1,208		(825)		87		852
Net foreign currency adjustment	Net foreign currency adjustment	2,180		(11,145)			Net foreign currency adjustment	(4,650)		2,891		(161)		(3,087)
Total other comprehensive (loss) income	Total other comprehensive (loss) income	(5,278)		27,075			Total other comprehensive (loss) income	(8,716)		(244)		(13,965)		33,837
Comprehensive income	Comprehensive income	$	147,870	$	89,887		Comprehensive income	$	100,421	$	107,071	$	353,429	$	225,623

See accompanying notes to unaudited consolidated financial statements.

Table of Contents


WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)	WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)															WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(In thousands)		Preferred stock		Common stock		Surplus		Treasury stock		Retained earnings		Accumulated other comprehensive (loss) income		Total shareholders’ equity
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)
(In thousands, except per share data)																(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 June 30, 2020																Balance at June 30, 2020	$	412,500	$	58,294	$	1,643,864	$	(44,891)	$	1,921,048	$	(597)	$	3,990,218

Net income	Net income	—		—		—		—		62,812		—		62,812		Net income	—		—		—		—		107,315		—		107,315
Other comprehensive income, net of tax		—		—		—		—		—		27,075		27,075
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax	—		—		—		—		—		(244)		(244)
Cash dividends declared on common stock, $0.28 per share	Cash dividends declared on common stock, $0.28 per share	—		—		—		—		(16,117)		—		(16,117)		Cash dividends declared on common stock, $0.28 per share	—		—		—		—		(16,128)		—		(16,128)
Dividends on preferred stock, $0.41 per share		—		—		—		—		(2,050)		—		(2,050)
Common stock repurchases under authorized program		—		—		—		(37,116)		—		—		(37,116)
Dividends on Series D preferred stock, $0.41 per share and Series E preferred stock, $716.15 per share																Dividends on Series D preferred stock, $0.41 per share and Series E preferred stock, $716.15 per share	—		—		—		—		(10,286)		—		(10,286)

Stock-based compensation	Stock-based compensation	—		—		(2,819)		—		—		—		(2,819)		Stock-based compensation	—		—		1,255		—		—		—		1,255

Common stock issued for:	Common stock issued for:															Common stock issued for:

Exercise of stock options and warrants	Exercise of stock options and warrants	—		95		3,543		(92)		—		—		3,546		Exercise of stock options and warrants	—		7		490		—		—		—		497
Restricted stock awards	Restricted stock awards	—		190		(190)		(752)		—		—		(752)		Restricted stock awards	—		2		(2)		—		—		—		—
Employee stock purchase plan	Employee stock purchase plan	—		10		699		—		—		—		709		Employee stock purchase plan	—		20		827		—		—		—		847
Director compensation plan	Director compensation plan	—		20		552		—		—		—		572		Director compensation plan	—		—		615		—		—		—		615
Balance at March 31, 2020		$	125,000	$	58,266	$	1,652,063	$	(44,891)	$	1,917,558	$	(7,603)	$	3,700,393
Balance at September 30, 2020																Balance at September 30, 2020	$	412,500	$	58,323	$	1,647,049	$	(44,891)	$	2,001,949	$	(841)	$	4,074,089

Balance at January 1, 2020																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																Cumulative effect adjustment from the adoption of ASU 2016-13, net of tax	—		—		—		—		(26,717)		—		(26,717)
Net income																Net income	—		—		—		—		191,786		—		191,786
Other comprehensive income, net of tax																Other comprehensive income, net of tax	—		—		—		—		—		33,837		33,837
Cash dividends declared on common stock, $0.84 per share																Cash dividends declared on common stock, $0.84 per share	—		—		—		—		(48,364)		—		(48,364)
Dividends on Series D preferred stock, $1.23 per share and Series E preferred stock, $716.15 per share																Dividends on Series D preferred stock, $1.23 per share and Series E preferred stock, $716.15 per share	—		—		—		—		(14,386)		—		(14,386)
Common stock repurchases under authorized program																Common stock repurchases under authorized program	—		—		—		(37,116)		—		—		(37,116)
Stock-based compensation																Stock-based compensation	—		—		(1,023)		—		—		—		(1,023)
Issuance of Series E preferred stock																Issuance of Series E preferred stock	287,500		—		(9,857)		—		—		—		277,643
Common stock issued for:																Common stock issued for:

Exercise of stock options and warrants																Exercise of stock options and warrants	—		105		3,923		(92)		—		—		3,936
Restricted stock awards																Restricted stock awards	—		195		(195)		(752)		—		—		(752)
Employee stock purchase plan																Employee stock purchase plan	—		52		2,180		—		—		—		2,232
Director compensation plan																Director compensation plan	—		20		1,743		—		—		—		1,763
Balance at September 30, 2020																Balance at September 30, 2020	$	412,500	$	58,323	$	1,647,049	$	(44,891)	$	2,001,949	$	(841)	$	4,074,089

Balance at January 1, 2021		$	412,500	$	58,473	$	1,649,990	$	(100,363)	$	2,080,013	$	15,382	$	4,115,995
Balance at June 30, 2021																Balance at June 30, 2021	$	412,500	$	58,770	$	1,669,002	$	(100,363)	$	2,288,969	$	10,133	$	4,339,011
Net income	Net income	—		—		—		—		153,148		—		153,148		Net income	—		—		—		—		109,137		—		109,137
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—		—		—		—		(5,278)		(5,278)		Other comprehensive loss, net of tax	—		—		—		—		—		(8,716)		(8,716)
Cash dividends declared on common stock, $0.31 per share	Cash dividends declared on common stock, $0.31 per share	—		—		—		—		(17,635)		—		(17,635)		Cash dividends declared on common stock, $0.31 per share	—		—		—		—		(17,668)		—		(17,668)
Dividends on Series D preferred stock, $0.41 per share and Series E preferred stock, $429.69 per share	Dividends on Series D preferred stock, $0.41 per share and Series E preferred stock, $429.69 per share	—		—		—		—		(6,991)		—		(6,991)		Dividends on Series D preferred stock, $0.41 per share and Series E preferred stock, $429.69 per share	—		—		—		—		(6,991)		—		(6,991)

Common stock repurchases under authorized program																Common stock repurchases under authorized program	—		—		—		(9,540)		—		—		(9,540)
Stock-based compensation	Stock-based compensation	—		—		2,862		—		—		—		2,862		Stock-based compensation	—		—		3,243		—		—		—		3,243

Common stock issued for:	Common stock issued for:															Common stock issued for:
Exercise of stock options and warrants	Exercise of stock options and warrants	—		209		8,752		—		—		—		8,961		Exercise of stock options and warrants	—		8		310		—		—		—		318
Restricted stock awards	Restricted stock awards	—		7		(7)		—		—		—		—		Restricted stock awards	—		3		(3)		—		—		—		—
Employee stock purchase plan	Employee stock purchase plan	—		14		801		—		—		—		815		Employee stock purchase plan	—		13		915		—		—		—		928
Director compensation plan	Director compensation plan	—		24		610		—		—		—		634		Director compensation plan	—		—		595		—		—		—		595
Balance at March 31, 2021		$	412,500	$	58,727	$	1,663,008	$	(100,363)	$	2,208,535	$	10,104	$	4,252,511
Balance at September 30, 2021																Balance at September 30, 2021	$	412,500	$	58,794	$	1,674,062	$	(109,903)	$	2,373,447	$	1,417	$	4,410,317

Balance at January 1, 2021																Balance at January 1, 2021	$	412,500	$	58,473	$	1,649,990	$	(100,363)	$	2,080,013	$	15,382	$	4,115,995
Net income																Net income	—		—		—		—		367,394		—		367,394
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax	—		—		—		—		—		(13,965)		(13,965)
Cash dividends declared on common stock, $0.93 per share																Cash dividends declared on common stock, $0.93 per share	—		—		—		—		(52,987)		—		(52,987)
Dividends on Series D preferred stock, $1.23 per share and Series E preferred stock, $1,289.07 per share																Dividends on Series D preferred stock, $1.23 per share and Series E preferred stock, $1,289.07 per share	—		—		—		—		(20,973)		—		(20,973)
Common stock repurchased under authorized program																Common stock repurchased under authorized program	—		—		—		(9,540)		—		—		(9,540)
Stock-based compensation																Stock-based compensation	—		—		9,437		—		—		—		9,437

Common stock issued for:																Common stock issued for:
Exercise of stock options and warrants																Exercise of stock options and warrants	—		246		10,313		—		—		—		10,559
Restricted stock awards																Restricted stock awards	—		13		(13)		—		—		—		—
Employee stock purchase plan																Employee stock purchase plan	—		38		2,510		—		—		—		2,548
Director compensation plan																Director compensation plan	—		24		1,825		—		—		—		1,849
Balance at September 30, 2021																Balance at September 30, 2021	$	412,500	$	58,794	$	1,674,062	$	(109,903)	$	2,373,447	$	1,417	$	4,410,317

See accompanying notes to unaudited consolidated financial statements.

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


		Three Months Ended					Nine Months Ended
(In thousands)	(In thousands)	March 31, 2021		March 31, 2020		(In thousands)	September 30, 2021		September 30, 2020
Operating Activities:	Operating Activities:					Operating Activities:
Net income	Net income	$	153,148	$	62,812	Net income	$	367,394	$	191,786
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					Adjustments to reconcile net income to net cash provided by (used for) operating activities
Provision for credit losses	Provision for credit losses	(45,347)		52,961		Provision for credit losses	(68,562)		213,040
Depreciation, amortization and accretion, net	Depreciation, amortization and accretion, net	25,561		23,376		Depreciation, amortization and accretion, net	75,389		71,295
Stock-based compensation expense (benefit)	Stock-based compensation expense (benefit)	2,862		(2,819)		Stock-based compensation expense (benefit)	9,437		(1,023)

Net amortization of premium on securities		2,000		1,762
Amortization of premium on securities, net						Amortization of premium on securities, net	5,188		8,079
Accretion of discount and deferred fees on loans, net	Accretion of discount and deferred fees on loans, net	(21,335)		(10,730)		Accretion of discount and deferred fees on loans, net	(68,413)		(60,451)
Mortgage servicing rights fair value changes, net	Mortgage servicing rights fair value changes, net	(7,877)		21,580		Mortgage servicing rights fair value changes, net	15,685		49,097
Non-designated derivatives fair value changes, net	Non-designated derivatives fair value changes, net	(723)		(4,707)		Non-designated derivatives fair value changes, net	(378)		(600)
Originations and purchases of mortgage loans held-for-sale	Originations and purchases of mortgage loans held-for-sale	(2,221,967)		(1,216,101)		Originations and purchases of mortgage loans held-for-sale	(5,504,906)		(5,653,486)
Early buy-out exercises of mortgage loans held-for-sale guaranteed by U.S. Government Agencies, net of subsequent paydown or payoff		(24,362)		0
Early buy-out exercises of mortgage loans held-for-sale guaranteed by U.S. Government Agencies, net of subsequent paydowns or payoffs						Early buy-out exercises of mortgage loans held-for-sale guaranteed by U.S. Government Agencies, net of subsequent paydowns or payoffs	(9,747)		(71,625)
Proceeds from sales of mortgage loans held-for-sale	Proceeds from sales of mortgage loans held-for-sale	2,336,246		961,842		Proceeds from sales of mortgage loans held-for-sale	6,014,689		5,280,587
Bank owned life insurance ("BOLI") income	Bank owned life insurance ("BOLI") income	(1,124)		1,284		Bank owned life insurance ("BOLI") income	(4,620)		(1,884)
Increase in trading securities, net	Increase in trading securities, net	(280)		(1,189)		Increase in trading securities, net	(432)		(652)
Net (increase) decrease in brokerage customer receivables		(1,620)		280
Increase in brokerage customer receivables, net						Increase in brokerage customer receivables, net	(8,942)		(245)
Gains on mortgage loans sold	Gains on mortgage loans sold	(85,200)		(51,134)		Gains on mortgage loans sold	(178,927)		(260,622)
(Gains) losses on investment securities, net	(Gains) losses on investment securities, net	(1,154)		4,359		(Gains) losses on investment securities, net	(8)		3,140

Losses (gains) on sales of premises and equipment, net		29		(4)
Net gains on sales and fair value adjustments of other real estate owned		(604)		(1,001)
(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	(3,649)		192
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	(2,134)		(933)
Decrease (increase) in accrued interest receivable and other assets, net	Decrease (increase) in accrued interest receivable and other assets, net	109,554		(214,552)		Decrease (increase) in accrued interest receivable and other assets, net	121,657		(154,912)
Decrease in accrued interest payable and other liabilities, net	Decrease in accrued interest payable and other liabilities, net	(1,026)		(7,829)		Decrease in accrued interest payable and other liabilities, net	(27,720)		(33,935)
Net Cash Provided by (Used for) Operating Activities	Net Cash Provided by (Used for) Operating Activities	216,781		(379,810)		Net Cash Provided by (Used for) Operating Activities	731,001		(423,152)
Investing Activities:	Investing Activities:					Investing Activities:
Proceeds from maturities and calls of available-for-sale securities	Proceeds from maturities and calls of available-for-sale securities	595,248		162,824		Proceeds from maturities and calls of available-for-sale securities	1,101,149		1,005,968
Proceeds from maturities and calls of held-to-maturity securities	Proceeds from maturities and calls of held-to-maturity securities	106,535		393,148		Proceeds from maturities and calls of held-to-maturity securities	177,668		698,305
Proceeds from sales of available-for-sale securities	Proceeds from sales of available-for-sale securities	0		0		Proceeds from sales of available-for-sale securities	192,227		502,676

Proceeds from sales of equity securities with readily determinable fair value	Proceeds from sales of equity securities with readily determinable fair value	1,509		30		Proceeds from sales of equity securities with readily determinable fair value	9,759		6,530
Proceeds from sales and capital distributions of equity securities without readily determinable fair value	Proceeds from sales and capital distributions of equity securities without readily determinable fair value	386		288		Proceeds from sales and capital distributions of equity securities without readily determinable fair value	2,467		1,691
Purchases of available-for-sale securities	Purchases of available-for-sale securities	(31,524)		(1,039,817)		Purchases of available-for-sale securities	(682,172)		(1,273,798)
Purchases of held-to-maturity securities	Purchases of held-to-maturity securities	(1,894,837)		(124,575)		Purchases of held-to-maturity securities	(2,537,242)		(125,220)
Purchases of equity securities with readily determinable fair value	Purchases of equity securities with readily determinable fair value	0		(46)		Purchases of equity securities with readily determinable fair value	(6,000)		(11,367)
Purchases of equity securities without readily determinable fair value	Purchases of equity securities without readily determinable fair value	(2,360)		(893)		Purchases of equity securities without readily determinable fair value	(7,295)		(3,666)
Purchases of Federal Home Loan Bank and Federal Reserve Bank stock, net	Purchases of Federal Home Loan Bank and Federal Reserve Bank stock, net	(293)		(33,807)		Purchases of Federal Home Loan Bank and Federal Reserve Bank stock, net	180		(34,829)
Distributions from (contributions to) investments in partnerships, net		60		(355)
Contributions to investments in partnerships, net						Contributions to investments in partnerships, net	(2,757)		(606)

Proceeds from sales of other real estate owned	Proceeds from sales of other real estate owned	2,162		4,793		Proceeds from sales of other real estate owned	7,263		6,937

Net decrease in interest-bearing deposits with banks		1,454,501		216,944
Net increase in loans		(1,082,709)		(1,006,031)
Increase in interest-bearing deposits with banks, net						Increase in interest-bearing deposits with banks, net	(428,917)		(1,662,172)
Increase in loans, net						Increase in loans, net	(1,169,636)		(5,174,163)

Purchases of premises and equipment, net	Purchases of premises and equipment, net	(4,388)		(21,385)		Purchases of premises and equipment, net	(23,434)		(54,392)
Net Cash Used for Investing Activities	Net Cash Used for Investing Activities	(855,710)		(1,448,882)		Net Cash Used for Investing Activities	(3,366,740)		(6,118,106)
Financing Activities:	Financing Activities:					Financing Activities:
Increase in deposit accounts, net	Increase in deposit accounts, net	780,009		1,354,778		Increase in deposit accounts, net	2,863,778		5,737,721
(Decrease) increase in other borrowings, net	(Decrease) increase in other borrowings, net	(6,378)		88,073		(Decrease) increase in other borrowings, net	(15,716)		91,823
Increase in Federal Home Loan Bank advances, net	Increase in Federal Home Loan Bank advances, net	0		500,000		Increase in Federal Home Loan Bank advances, net	12,629		553,500

Proceeds from the issuance of preferred stock, net						Proceeds from the issuance of preferred stock, net	—		277,643

Cash payments to settle contingent consideration liabilities recognized in business combinations	Cash payments to settle contingent consideration liabilities recognized in business combinations	(16,583)		0		Cash payments to settle contingent consideration liabilities recognized in business combinations	(16,583)		(4,523)
Issuance of common shares resulting from the exercise of stock options, employee stock purchase plan and conversion of common stock warrants	Issuance of common shares resulting from the exercise of stock options, employee stock purchase plan and conversion of common stock warrants	10,410		4,919		Issuance of common shares resulting from the exercise of stock options, employee stock purchase plan and conversion of common stock warrants	14,956		8,023
Common stock repurchases under authorized program	Common stock repurchases under authorized program	0		(37,041)		Common stock repurchases under authorized program	(9,540)		(37,116)
Common stock repurchases for tax withholdings related to stock-based compensation	Common stock repurchases for tax withholdings related to stock-based compensation	0		(919)		Common stock repurchases for tax withholdings related to stock-based compensation	—		(844)
Dividends paid	Dividends paid	(24,626)		(18,167)		Dividends paid	(73,960)		(62,750)
Net Cash Provided by Financing Activities	Net Cash Provided by Financing Activities	742,832		1,891,643		Net Cash Provided by Financing Activities	2,775,564		6,563,477
Net Increase in Cash and Cash Equivalents	Net Increase in Cash and Cash Equivalents	103,903		62,951		Net Increase in Cash and Cash Equivalents	139,825		22,219
Cash and Cash Equivalents at Beginning of Period	Cash and Cash Equivalents at Beginning of Period	322,474		286,476		Cash and Cash Equivalents at Beginning of Period	322,474		286,476
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period	$	426,377	$	349,427	Cash and Cash Equivalents at End of Period	$	462,299	$	308,695

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 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”). 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, 2020 (“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, 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~~Company’s significant accounting policies are included in Note 1 - “Summary of Significant Accounting Policies” of the 2020 Form 10-K.

(2) Recent Accounting Developments

Legislation and Regulations Issued as a Result of the COVID-19 Pandemic

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

Section 4013 of the CARES Act allows financial institutions to suspend application of certain current troubled debt restructuring ("TDR") accounting guidance under Accounting Standards Codification (“ASC”) 310-40 for loan modifications related to the COVID-19 pandemic made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the COVID-19 national emergency, provided certain criteria are met. This relief can be applied to loan modifications for borrowers that were not more than 30 days past due as of December 31, 2019 and to loan modifications that defer or delay the payment of principal or interest, or change the interest rate on the loan. 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.

The business tax provisions of the Act include temporary changes to income and non-income based tax laws, including immediate recovery of qualified improvement property costs and acceleration of Alternative Minimum Tax (AMT) credits. These provisions did not 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

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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~~London Interbank Offered Rate (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, "Income Taxes". The guidance also improved consistent application by clarifying and amending existing guidance from ASC 740. The Company adopted ASU No. 2019-12 as of January 1, 2021. Adoption of this standard did not 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),” which 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 amended ASC 815, Derivatives & Hedging, to clarify that, when determining the accounting for certain 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.

The Company adopted ASU No. 2020-01 as of January 1, 2021 under a prospective approach. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

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Codification Improvements

In October 2020, the FASB issued ASU No. 2020-08, “Codification Improvements to Subtopic 310-20, Receivables — Nonrefundable Fees and Other Costs,” clarifying that, for 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 require amortization of any premium to the next call date. The next call date was defined as the first date when a call option at a specified price becomes exercisable. The Company adopted ASU No. 2020-08 as of January 1, 2021 under a prospective approach. Adoption of this standard did not have a material impact 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 was effective on January 1, 2021. The Company does not expect this to have a material impact on the Company’s consolidated financial statements.

In August 2021, the FASB issued ASU No. 2021-06, "Presentation of Financial Statements (Topic 206), Financial Services - Depository and Lending (Topic 942), and Financial Services - Investment Companies (Topic 946)" which amends certain SEC paragraphs in the codification in response to SEC final rule over Financial Disclosures about Acquired and Disposed Businesses by amending ASC Topic 946 by providing additional guidance on financial statement requirements related to Regulation S-X Rule 6-11, Financial Statements of Funds Acquired or to be Acquired. This guidance was effective upon issuance on August 9, 2021. Adoption of this standard did not 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.

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Topic 942. This guidance was effective upon issuance on August 9, 2021. Adoption of this standard did not 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.

Leases - Certain Leases with Variable Lease Payments

In July 2021, the FASB issued ASU No. 2021-05, "Leases (Topic 842): Lessors – Certain Leases with Variable Lease Payments" which amends lessor lease classification requirements to allow leases with variable lease payments that are not dependent on a reference index or rate to be classified and accounted for as an operating lease, provided the lease would have been classified as a sales-type or direct financing lease and the lessor would have otherwise recognized a day-one loss. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods therein, with early adoption permitted. As the Company has adopted ASC Topic 842, this guidance is to be applied retrospectively to leases that commenced or were modified after adoption or prospectively to leases that will commence or be modified after the application of these amendments. The Company does not expect this guidance to have a material impact on the Company's consolidated financial statements.

(3) 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.

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(4) Investment Securities

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


		March 31, 2021									September 30, 2021
(Dollars in thousands)	(Dollars in thousands)	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	Available-for-sale securities									Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	64,999	$	2	$	0	$	65,001	U.S. Treasury	$	6,000	$	—	$	—	$	6,000
U.S. Government agencies	U.S. Government agencies	77,908		3,618		0		81,526		U.S. Government agencies	50,163		3,112		—		53,275
Municipal	Municipal	143,711		4,761		(172)		148,300		Municipal	170,612		4,202		(214)		174,600
Corporate notes:	Corporate notes:									Corporate notes:
Financial issuers	Financial issuers	91,806		461		(935)		91,332		Financial issuers	98,848		500		(1,241)		98,107
Other	Other	1,000		17		0		1,017		Other	1,000		11		—		1,011
Mortgage-backed: (1)	Mortgage-backed: (1)									Mortgage-backed: (1)
Mortgage-backed securities	Mortgage-backed securities	2,007,092		52,855		(26,038)		2,033,909		Mortgage-backed securities	1,913,139		44,931		(25,434)		1,932,636
Collateralized mortgage obligations	Collateralized mortgage obligations	9,411		253		0		9,664		Collateralized mortgage obligations	107,657		192		—		107,849
Total available-for-sale securities	Total available-for-sale securities	$	2,395,927	$	61,967	$	(27,145)	$	2,430,749	Total available-for-sale securities	$	2,347,419	$	52,948	$	(26,889)	$	2,373,478
Held-to-maturity securities	Held-to-maturity securities									Held-to-maturity securities
U.S. Government agencies	U.S. Government agencies	$	176,160	$	1,644	$	(7,230)	$	170,574	U.S. Government agencies	$	176,143	$	482	$	(2,878)	$	173,747
Municipal	Municipal	197,865		10,713		(535)		208,043		Municipal	190,662		10,321		(334)		200,649
Mortgage-backed securities	Mortgage-backed securities	1,737,115		265		(49,114)		1,688,266		Mortgage-backed securities	2,318,309		1,924		(46,102)		2,274,131
Corporate notes	Corporate notes	55,378		0		(1,196)		54,182		Corporate notes	51,691		—		(738)		50,953
Total held-to-maturity securities	Total held-to-maturity securities	$	2,166,518	$	12,622	$	(58,075)	$	2,121,065	Total held-to-maturity securities	$	2,736,805	$	12,727	$	(50,052)	$	2,699,480
Less: Allowance for credit losses	Less: Allowance for credit losses	(99)								Less: Allowance for credit losses	(83)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses	$	2,166,419							Held-to-maturity securities, net of allowance for credit losses	$	2,736,722
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	$	86,121	$	5,362	$	(1,145)	$	90,338	Equity securities with readily determinable fair value	$	83,909	$	5,678	$	(1,394)	$	88,193

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

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


		March 31, 2020										September 30, 2020
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
(Dollars in thousands)	(Dollars in thousands)							(Dollars in thousands)
Available-for-sale securities	Available-for-sale securities														Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	120,404	$	1,266	$	0		$	121,670	U.S. Treasury		$	279,903		$	206		$	(1)		$	280,108
U.S. Government agencies	U.S. Government agencies	362,969		5,674		0			368,643		U.S. Government agencies	172,951			5,715			—			178,666
Municipal	Municipal	143,273		3,571		(235)			146,609		Municipal	150,333			3,996			(134)			154,195
Corporate notes:	Corporate notes:										Corporate notes:
Financial issuers	Financial issuers	111,718		90		(11,821)			99,987		Financial issuers	106,764			455			(4,110)			103,109
Other	Other	1,000		31		0			1,031		Other	1,000			26			—			1,026
Mortgage-backed: (1)	Mortgage-backed: (1)										Mortgage-backed: (1)
Mortgage-backed securities	Mortgage-backed securities	2,697,264		111,275		(4)			2,808,535		Mortgage-backed securities	2,121,423			94,543			(11)			2,215,955
Collateralized mortgage obligations	Collateralized mortgage obligations	24,077		416		(9)			24,484		Collateralized mortgage obligations	13,036			365			(1)			13,400
Total available-for-sale securities	Total available-for-sale securities	$	3,460,705	$	122,323	$	(12,069)		$	3,570,959	Total available-for-sale securities	$	2,845,410		$	105,306		$	(4,257)		$	2,946,459
Held-to-maturity securities	Held-to-maturity securities										Held-to-maturity securities
U.S. Government agencies	U.S. Government agencies	$	646,976	$	5,996	$	(4)		$	652,968	U.S. Government agencies	$	349,415		$	4,396		$	—		$	353,811
Municipal	Municipal	$	218,470	7,909		(155)			226,224		Municipal	$	210,915		11,339			(118)			222,136
Total held-to-maturity securities	Total held-to-maturity securities	$	865,446	$	13,905	$	(159)		$	879,192	Total held-to-maturity securities	$	560,330		$	15,735		$	(118)		$	575,947
Less: Allowance for credit losses	Less: Allowance for credit losses	(70)									Less: Allowance for credit losses	(63)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses	$	865,376								Held-to-maturity securities, net of allowance for credit losses	$	560,267
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	$	48,060	$	781	$	(1,531)		$	47,310	Equity securities with readily determinable fair value	$	53,250		$	1,537		$	(389)		$	54,398

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

Equity securities without readily determinable fair values totaled ~~$33.3~~$35.2 million as of ~~March 31,~~September 30, 2021. Equity securities without readily determinable fair values are included as part of accrued interest receivable and other assets in the ~~Company's~~Company’s Consolidated Statements of Condition. The Company monitors its equity investments without readily determinable fair values

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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 0no upward and 0no downward adjustments related to such observable price changes for the three and nine months ended ~~March 31,~~September 30, 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 $2.1 million of impairment of equity securities without readily determinable fair values for the three months ended ~~March 31,~~September 30, 2021. For the nine months ended September 30, 2021, the Company recorded ~~$30,000~~$2.2 million 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 that have gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position at ~~March 31,~~September 30, 2021:


		Continuous unrealized losses existing for less than 12 months				Continuous unrealized losses existing for greater than 12 months				Total					Continuous unrealized losses existing for less than 12 months				Continuous unrealized losses existing for greater than 12 months				Total
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Available-for-sale securities	Available-for-sale securities													Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	0	$	0	$	0	$	0	$	0	$	0	U.S. Treasury	$	—	$	—	$	—	$	—	$	—	$	—
U.S. Government agencies	U.S. Government agencies	0		0		0		0		0		0		U.S. Government agencies	—		—		—		—		—		—
Municipal	Municipal	24,326		(168)		110		(4)		24,436		(172)		Municipal	54,995		(210)		111		(4)		55,106		(214)
Corporate notes:	Corporate notes:													Corporate notes:
Financial issuers	Financial issuers	14,850		(150)		48,196		(785)		63,046		(935)		Financial issuers	24,778		(223)		45,975		(1,018)		70,753		(1,241)
Other	Other	0		0		0		0		0		0		Other	—		—		—		—		—		—
Mortgage-backed:	Mortgage-backed:													Mortgage-backed:
Mortgage-backed securities	Mortgage-backed securities	571,821		(26,037)		61		(1)		571,882		(26,038)		Mortgage-backed securities	850,161		(25,434)		—		—		850,161		(25,434)
Collateralized mortgage obligations	Collateralized mortgage obligations	0		0		0		0		0		0		Collateralized mortgage obligations	—		—		—		—		—		—
Total available-for-sale securities	Total available-for-sale securities	$	610,997	$	(26,355)	$	48,367	$	(790)	$	659,364	$	(27,145)	Total available-for-sale securities	$	929,934	$	(25,867)	$	46,086	$	(1,022)	$	976,020	$	(26,889)

The Company conducts a regular assessment of its investment securities to determine whether securities are experiencing credit 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 ~~March 31,~~September 30, 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 6—Allowance for Credit Losses for further discussion regarding any credit losses associated with held-to-maturity securities at ~~March 31,~~September 30, 2021.

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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 March 31,				Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020			(Dollars in thousands)	2021		2020		2021		2020
Realized gains on investment securities	Realized gains on investment securities	$	216	$	496		Realized gains on investment securities	$	355	$	78	$	1,184	$	725
Realized losses on investment securities	Realized losses on investment securities	(6)		(5)			Realized losses on investment securities	(5)		(28)		(40)		(525)
Net realized gains on investment securities	Net realized gains on investment securities	210		491			Net realized gains on investment securities	350		50		1,144		200
Unrealized gains on equity securities with readily determinable fair value	Unrealized gains on equity securities with readily determinable fair value	1,875		0			Unrealized gains on equity securities with readily determinable fair value	1		471		2,627		2,118
Unrealized losses on equity securities with readily determinable fair value	Unrealized losses on equity securities with readily determinable fair value	(901)		(3,546)			Unrealized losses on equity securities with readily determinable fair value	(634)		(110)		(1,585)		(3,766)
Net unrealized gains (losses) on equity securities with readily determinable fair value		974		(3,546)
Net unrealized (losses) gains on equity securities with readily determinable fair value							Net unrealized (losses) gains on equity securities with readily determinable fair value	(633)		361		1,042		(1,648)
Upward adjustments of equity securities without readily determinable fair values	Upward adjustments of equity securities without readily determinable fair values	0		393			Upward adjustments of equity securities without readily determinable fair values	—		—		—		393
Downward adjustments of equity securities without readily determinable fair values	Downward adjustments of equity securities without readily determinable fair values	0		0			Downward adjustments of equity securities without readily determinable fair values	—		—		—		—
Impairment of equity securities without readily determinable fair values	Impairment of equity securities without readily determinable fair values	(30)		(1,697)			Impairment of equity securities without readily determinable fair values	(2,148)		—		(2,178)		(2,085)
Adjustment and impairment, net, of equity securities without readily determinable fair values	Adjustment and impairment, net, of equity securities without readily determinable fair values	(30)		(1,304)			Adjustment and impairment, net, of equity securities without readily determinable fair values	(2,148)		—		(2,178)		(1,692)
Gains (losses) on investment securities, net		$	1,154	$	(4,359)
(Losses) gains on investment securities, net							(Losses) gains on investment securities, net	$	(2,431)	$	411	$	8	$	(3,140)

Proceeds from sales of available-for-sale securities(1)	Proceeds from sales of available-for-sale securities(1)	$	0	$	0		Proceeds from sales of available-for-sale securities(1)	$	189,851	$	—	$	192,227	$	502,676

Proceeds from sales of equity securities with readily determinable fair value	Proceeds from sales of equity securities with readily determinable fair value	1,509		30			Proceeds from sales of equity securities with readily determinable fair value	3,500		2,500		9,759		6,530
Proceeds from sales and capital distributions of equity securities without readily determinable fair value	Proceeds from sales and capital distributions of equity securities without readily determinable fair value	386		288			Proceeds from sales and capital distributions of equity securities without readily determinable fair value	1,330		1,247		2,467		1,691

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

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


		March 31, 2021				December 31, 2020				March 31, 2020					September 30, 2021				December 31, 2020				September 30, 2020
(Dollars in thousands)	(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		(Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale securities	Available-for-sale securities													Available-for-sale securities
Due in one year or less	Due in one year or less	$	100,140	$	100,361	$	343,601	$	343,846	$	186,538	$	187,789	Due in one year or less	$	45,459	$	45,549	$	343,601	$	343,846	$	338,702	$	338,954
Due in one to five years	Due in one to five years	76,104		78,291		67,901		70,334		70,812		71,825		Due in one to five years	92,457		94,134		67,901		70,334		76,843		78,843
Due in five to ten years	Due in five to ten years	110,125		110,928		111,886		112,178		174,262		164,479		Due in five to ten years	121,099		121,650		111,886		112,178		108,688		105,968
Due after ten years	Due after ten years	93,055		97,596		95,672		101,441		307,752		313,847		Due after ten years	67,608		71,660		95,672		101,441		186,718		193,339
Mortgage-backed	Mortgage-backed	2,016,503		2,043,573		2,341,021		2,428,040		2,721,341		2,833,019		Mortgage-backed	2,020,796		2,040,485		2,341,021		2,428,040		2,134,459		2,229,355
Total available-for-sale securities	Total available-for-sale securities	$	2,395,927	$	2,430,749	$	2,960,081	$	3,055,839	$	3,460,705	$	3,570,959	Total available-for-sale securities	$	2,347,419	$	2,373,478	$	2,960,081	$	3,055,839	$	2,845,410	$	2,946,459
Held-to-maturity securities	Held-to-maturity securities													Held-to-maturity securities
Due in one year or less	Due in one year or less	$	6,812	$	6,863	$	7,138	$	7,186	$	5,310	$	5,333	Due in one year or less	$	5,466	$	5,493	$	7,138	$	7,186	$	6,911	$	6,942
Due in one to five years	Due in one to five years	50,318		50,734		22,217		23,068		23,801		24,158		Due in one to five years	75,724		76,173		22,217		23,068		21,392		21,999
Due in five to ten years	Due in five to ten years	184,677		191,539		150,621		159,293		143,783		148,746		Due in five to ten years	150,908		157,282		150,621		159,293		144,468		151,175
Due after ten years	Due after ten years	187,596		183,663		198,690		203,689		692,552		700,955		Due after ten years	186,398		186,401		198,690		203,689		387,559		395,831
Mortgage-backed	Mortgage-backed	1,737,115		1,688,266		200,531		200,531		0		—		Mortgage-backed	2,318,309		2,274,131		200,531		200,531		—		—
Total held-to-maturity securities	Total held-to-maturity securities	$	2,166,518	$	2,121,065	$	579,197	$	593,767	$	865,446	$	879,192	Total held-to-maturity securities	$	2,736,805	$	2,699,480	$	579,197	$	593,767	$	560,330	$	575,947
Less: Allowance for credit losses	Less: Allowance for credit losses	(99)				(59)				(70)				Less: Allowance for credit losses	(83)				(59)				(63)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses	$	2,166,419			$	579,138			$	865,376			Held-to-maturity securities, net of allowance for credit losses	$	2,736,722			$	579,138			$	560,267

Securities having a carrying value of ~~$2.1~~$2.5 billion at ~~March 31,~~September 30, 2021 as well as securities having a carrying value of $2.4 billion and ~~$1.5~~$3.0 billion at December 31, 2020 and ~~March 31,~~September 30, 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

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agreements and derivatives. At ~~March 31,~~September 30, 2021, there were 0no securities of a single issuer, other than U.S. Government-sponsored agency securities, which exceeded 10% of shareholders’ equity.

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(5) Loans

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


		March 31,			December 31,			March 31,				September 30,			December 31,			September 30,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			2020			(Dollars in thousands)	2021			2020			2020
Balance:	Balance:										Balance:
Commercial	Commercial	$	12,708,207		$	11,955,967		$	9,025,886		Commercial	$	11,187,972		$	11,955,967		$	12,276,999
Commercial real estate	Commercial real estate	8,544,779			8,494,132			8,185,531			Commercial real estate	8,885,714			8,494,132			8,423,142
Home equity	Home equity	390,253			425,263			494,655			Home equity	347,662			425,263			446,274
Residential real estate	Residential real estate	1,421,973			1,259,598			1,377,389			Residential real estate	1,547,736			1,259,598			1,384,810
Premium finance receivables	Premium finance receivables										Premium finance receivables
Commercial insurance	Commercial insurance	3,958,543			4,054,489			3,465,055			Commercial insurance	4,616,977			4,054,489			4,060,144
Life insurance	Life insurance	6,111,495			5,857,436			5,221,639			Life insurance	6,655,453			5,857,436			5,488,832
Consumer and other	Consumer and other	35,983			32,188			37,166			Consumer and other	22,529			32,188			55,354
Total loans, net of unearned income	Total loans, net of unearned income	$	33,171,233		$	32,079,073		$	27,807,321		Total loans, net of unearned income	$	33,264,043		$	32,079,073		$	32,135,555
Mix:	Mix:										Mix:
Commercial	Commercial	38		%	37		%	32		%	Commercial	33		%	37		%	39		%
Commercial real estate	Commercial real estate	26			26			29			Commercial real estate	27			26			26
Home equity	Home equity	1			1			2			Home equity	1			1			1
Residential real estate	Residential real estate	4			5			5			Residential real estate	5			5			4
Premium finance receivables	Premium finance receivables										Premium finance receivables
Commercial insurance	Commercial insurance	12			13			13			Commercial insurance	14			13			13
Life insurance	Life insurance	19			18			19			Life insurance	20			18			17
Consumer and other	Consumer and other	0			0			0			Consumer and other	0			0			0
Total loans, net of unearned income	Total loans, net of unearned income	100		%	100		%	100		%	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 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 ~~March 31,~~September 30, 2021, the Company's commercial portfolio included approximately ~~$3.3~~$1.1 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 ~~$114.4~~$124.0 million at ~~March 31,~~September 30, 2021, $113.1 million at December 31, 2020 and ~~$115.2~~$108.5 million at ~~March 31,~~September 30, 2020.

Total loans, excluding PCD loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling ~~$(32.2)~~$13.1 million at ~~March 31,~~September 30, 2021, $(3.2) million at December 31, 2020 and ~~$11.1~~$(42.3) million at ~~March 31,~~September 30, 2020. Net deferred fees as of ~~March 31,~~September 30, 2021 includes ~~$64.6~~$24.8 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 terms of 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.

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(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 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~~bank’s 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 includes one- to four-family fixed and adjustable rate mortgages 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 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

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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 ~~$128.8~~$119.2 million at ~~March 31,~~September 30, 2021, $121.9 million at December 31, 2020, and ~~$116.4~~$116.9 million at ~~March 31,~~September 30, 2020.

The tables below show the aging of the Company’s loan portfolio by the segmentation noted above at ~~March 31,~~September 30, 2021, December 31, 2020 and ~~March 31,~~September 30, 2020:


As of March 31, 2021				90+ days and still accruing			60-89 days past due				30-59 days past due
As of September 30, 2021															As of September 30, 2021						90+ days and still accruing					60-89 days past due				30-59 days past due
(In thousands)	(In thousands)	Nonaccrual				90+ days and still accruing							60-89 days past due				30-59 days past due							Current								Total Loans		(In thousands)		Nonaccrual											Current			Total Loans
Loan Balances (includes PCD):	Loan Balances (includes PCD):																		Loan Balances (includes PCD):
Commercial	Commercial																					Commercial

Commercial, industrial and other, excluding PPP loans	Commercial, industrial and other, excluding PPP loans	$	22,459	$	0				$	13,292			$	35,535			$	9,343,939				$	9,415,225		Commercial, industrial and other, excluding PPP loans	$	26,468			$	—			$	9,768				$	24,086			$	10,045,662				$	10,105,984
Commercial PPP loans	Commercial PPP loans	0		0			0				6				3,292,976				3,292,982			Commercial PPP loans		—				—				—					1,138				1,080,850				1,081,988
Commercial real estate	Commercial real estate																					Commercial real estate
Construction and development	Construction and development	2,673		0			499				23,967				1,326,185				1,353,324			Construction and development		1,030				—				—					12,631				1,330,054				1,343,715
Non-construction	Non-construction	31,707		0			7,657				46,201				7,105,890				7,191,455			Non-construction		22,676				—				5,395					67,187				7,446,741				7,541,999

Home equity	Home equity	5,536		0			492				780				383,445				390,253			Home equity		3,449				164				340					867				342,842				347,662
Residential real estate	Residential real estate	21,553		0			944				13,768				1,385,708				1,421,973			Residential real estate		22,633				—				1,540					1,076				1,522,487				1,547,736
Premium finance receivables	Premium finance receivables																					Premium finance receivables
Commercial insurance loans	Commercial insurance loans	9,690		4,592			5,113				16,552				3,922,596				3,958,543			Commercial insurance loans		7,300				5,811				10,642					14,614				4,578,610				4,616,977
Life insurance loans	Life insurance loans	0		191			0				14,821				6,096,483				6,111,495			Life insurance loans		—				—				5,162					7,040				6,643,251				6,655,453

Consumer and other	Consumer and other	497		161			8				74				35,243				35,983			Consumer and other		384				126				16					125				21,878				22,529
Total loans, net of unearned income	Total loans, net of unearned income	$	94,115	$	4,944		$	28,005			$	151,704			$	32,892,465			$	33,171,233		Total loans, net of unearned income		$	83,940			$	6,101			$	32,863				$	128,764			$	33,012,375			$	33,264,043

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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								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		(In thousands)	Nonaccrual									Current					Total Loans
Loan Balances (includes PCD):	Loan Balances (includes PCD):																			Loan Balances (includes PCD):
Commercial	Commercial																Commercial

Commercial, industrial and other, excluding PPP loans	Commercial, industrial and other, excluding PPP loans	$	21,743	$	307	$	6,900		$	44,345	$	9,166,751			$	9,240,046	Commercial, industrial and other, excluding PPP loans	$	21,743		$	307		$	6,900	$	44,345		$	9,166,751	$	9,240,046
Commercial PPP loans	Commercial PPP loans	0		0		0			36		2,715,885				2,715,921		Commercial PPP loans	—			—			—		36			2,715,885		2,715,921
Commercial real estate	Commercial real estate																Commercial real estate
Construction and development	Construction and development	5,633		0		0			5,344		1,360,825				1,371,802		Construction and development	5,633			—			—		5,344			1,360,825		1,371,802
Non-construction	Non-construction	40,474		0		5,178			26,772		7,049,906				7,122,330		Non-construction	40,474			—			5,178		26,772			7,049,906		7,122,330

Home equity	Home equity	6,529		0		47			637		418,050				425,263		Home equity	6,529			—			47		637			418,050		425,263
Residential real estate	Residential real estate	26,071		0		1,635			12,584		1,219,308				1,259,598		Residential real estate	26,071			—			1,635		12,584			1,219,308		1,259,598
Premium finance receivables	Premium finance receivables																Premium finance receivables
Commercial insurance loans	Commercial insurance loans	13,264		12,792		6,798			18,809		4,002,826				4,054,489		Commercial insurance loans	13,264			12,792			6,798		18,809			4,002,826		4,054,489
Life insurance loans	Life insurance loans	0		0		21,003			30,465		5,805,968				5,857,436		Life insurance loans	—			—			21,003		30,465			5,805,968		5,857,436

Consumer and other	Consumer and other	436		264		24			136		31,328				32,188		Consumer and other	436			264			24		136			31,328		32,188
Total loans, net of unearned income	Total loans, net of unearned income	$	114,150	$	13,363	$	41,585		$	139,128	$	31,770,847			$	32,079,073	Total loans, net of unearned income	$	114,150		$	13,363		$	41,585	$	139,128		$	31,770,847	$	32,079,073


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

Commercial, industrial and other, excluding PPP loans	Commercial, industrial and other, excluding PPP loans	$	49,916	$	1,241				$	8,873			$	86,129			$	8,879,727				$	9,025,886		Commercial, industrial and other, excluding PPP loans	$	42,036			$	—			$	2,168				$	48,271			$	8,805,511				$	8,897,986
Commercial PPP loans	Commercial PPP loans	0		0			0				0				0				0			Commercial PPP loans		—				—				—					—				3,379,013				3,379,013
Commercial real estate	Commercial real estate																					Commercial real estate
Construction and development	Construction and development	7,422		147			1,859				16,938				1,274,987				1,301,353			Construction and development		10,980				—				—					12,150				1,310,019				1,333,149
Non-construction	Non-construction	55,408		369			8,353				58,130				6,761,918				6,884,178			Non-construction		57,835				—				8,299					41,312				6,982,547				7,089,993

Home equity	Home equity	7,243		0			214				2,096				485,102				494,655			Home equity		6,329				—				70					1,148				438,727				446,274
Residential real estate	Residential real estate	18,965		605			345				28,983				1,328,491				1,377,389			Residential real estate		22,069				—				814					2,443				1,359,484				1,384,810
Premium finance receivables	Premium finance receivables																					Premium finance receivables
Commercial insurance loans	Commercial insurance loans	21,058		16,505			10,327				32,811				3,384,354				3,465,055			Commercial insurance loans		21,080				12,177				7,495					18,839				4,000,553				4,060,144
Life insurance loans	Life insurance loans	0		0			2,403				37,374				5,181,862				5,221,639			Life insurance loans		—				—				30,791					61,893				5,396,148				5,488,832

Consumer and other	Consumer and other	403		78			625				207				35,853				37,166			Consumer and other		422				175				273					493				53,991				55,354
Total loans, net of unearned income	Total loans, net of unearned income	$	160,415	$	18,945		$	32,999			$	262,668			$	27,332,294			$	27,807,321		Total loans, net of unearned income		$	160,751			$	12,352			$	49,910				$	186,549			$	31,725,993			$	32,135,555

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.

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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 ~~March 31,~~September 30, 2021:


As of March 31, 2021		Year of Origination														Revolving		Total
As of September 30, 2021																				As of September 30, 2021	Year of Origination														Revolving		Total
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		to Term		Loans		(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving		to Term		Loans
Loan Balances:	Loan Balances:																			Loan Balances:
Commercial, industrial and other	Commercial, industrial and other																			Commercial, industrial and other
Pass	Pass	$	574,195	$	1,951,426	$	1,158,699	$	840,181	$	611,479	$	742,116	$	2,908,239	$	4,925	$	8,791,260	Pass	$	1,876,457	$	1,567,410	$	1,005,156	$	711,177	$	481,140	$	620,202	$	3,301,541	$	10,236	$	9,573,319
Special mention	Special mention	965		27,786		83,315		38,930		33,116		24,760		86,729		36		295,637		Special mention	18,468		52,692		67,528		42,470		31,785		22,358		106,454		5,841		347,596
Substandard accrual	Substandard accrual	22,738		19,675		65,902		71,312		25,052		61,313		39,766		111		305,869		Substandard accrual	17,805		5,246		21,901		33,886		8,712		41,590		28,641		820		158,601
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	0		1,887		1,770		2,117		2,078		14,074		533		0		22,459		Substandard nonaccrual/doubtful	5,227		3,803		5,008		4,206		2,189		5,503		532		—		26,468
Total commercial, industrial and other	Total commercial, industrial and other	$	597,898	$	2,000,774	$	1,309,686	$	952,540	$	671,725	$	842,263	$	3,035,267	$	5,072	$	9,415,225	Total commercial, industrial and other	$	1,917,957	$	1,629,151	$	1,099,593	$	791,739	$	523,826	$	689,653	$	3,437,168	$	16,897	$	10,105,984
Commercial PPP	Commercial PPP																			Commercial PPP
Pass	Pass	$	1,242,766	$	2,049,342	$	0	$	0	$	0	$	0	$	0	$	0	$	3,292,108	Pass	$	909,139	$	171,213	$	—	$	—	$	—	$	—	$	—	$	—	$	1,080,352
Special mention	Special mention	874		0		0		0		0		0		0		0		874		Special mention	—		1,356		—		—		—		—		—		—		1,356
Substandard accrual	Substandard accrual	0		0		0		0		0		0		0		0		0		Substandard accrual	—		280		—		—		—		—		—		—		280
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	0		0		0		0		0		0		0		0		0		Substandard nonaccrual/doubtful	—		—		—		—		—		—		—		—		—
Total commercial PPP	Total commercial PPP	$	1,243,640	$	2,049,342	$	0	$	0	$	0	$	0	$	0	$	0	$	3,292,982	Total commercial PPP	$	909,139	$	172,849	$	—	$	—	$	—	$	—	$	—	$	—	$	1,081,988
Construction and development	Construction and development																			Construction and development
Pass	Pass	$	40,266	$	346,452	$	433,184	$	196,502	$	89,377	$	109,596	$	29,747	$	0	$	1,245,124	Pass	$	214,644	$	403,619	$	326,654	$	131,600	$	79,752	$	88,452	$	24,382	$	2,688	$	1,271,791
Special mention	Special mention	282		11,935		16,864		21,075		24,465		4,068		0		0		78,689		Special mention	282		8,475		12,144		17,685		23,435		3,234		—		—		65,255
Substandard accrual	Substandard accrual	0		0		1,207		21,872		2,929		678		152		0		26,838		Substandard accrual	—		—		316		2,558		2,132		478		155		—		5,639
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	0		0		0		1,571		0		1,102		0		0		2,673		Substandard nonaccrual/doubtful	—		—		—		—		—		1,030		—		—		1,030
Total construction and development	Total construction and development	$	40,548	$	358,387	$	451,255	$	241,020	$	116,771	$	115,444	$	29,899	$	0	$	1,353,324	Total construction and development	$	214,926	$	412,094	$	339,114	$	151,843	$	105,319	$	93,194	$	24,537	$	2,688	$	1,343,715
Non-construction	Non-construction																			Non-construction
Pass	Pass	$	249,241	$	1,295,535	$	1,030,111	$	816,725	$	772,702	$	2,189,960	$	184,304	$	244	$	6,538,822	Pass	$	1,039,349	$	1,215,988	$	997,258	$	796,708	$	752,951	$	2,053,618	$	185,418	$	4,979	$	7,046,269
Special mention	Special mention	3,875		9,905		65,413		66,860		69,759		220,549		0		0		436,361		Special mention	3,517		10,307		51,203		61,392		44,193		155,150		—		—		325,762
Substandard accrual	Substandard accrual	0		2,023		42,238		9,358		21,352		109,584		10		0		184,565		Substandard accrual	—		1,960		33,544		20,725		21,345		69,718		—		—		147,292

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Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	0		0		266		1,221		2,131		28,089		0		0		31,707		Substandard nonaccrual/doubtful	—		—		—		112		169		22,395		—		—		22,676
Total non-construction	Total non-construction	$	253,116	$	1,307,463	$	1,138,028	$	894,164	$	865,944	$	2,548,182	$	184,314	$	244	$	7,191,455	Total non-construction	$	1,042,866	$	1,228,255	$	1,082,005	$	878,937	$	818,658	$	2,300,881	$	185,418	$	4,979	$	7,541,999
Home equity	Home equity																			Home equity
Pass	Pass	$	0	$	44	$	0	$	47	$	28	$	7,082	$	356,197	$	0	$	363,398	Pass	$	8	$	—	$	—	$	—	$	28	$	7,050	$	319,725	$	—	$	326,811
Special mention	Special mention	0		0		0		0		0		2,103		4,905		245		7,253		Special mention	—		—		—		—		—		614		5,355		242		6,211
Substandard accrual	Substandard accrual	0		0		0		317		0		11,953		1,053		743		14,066		Substandard accrual	—		—		—		184		67		9,341		949		650		11,191
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	0		0		0		0		157		3,799		1,580		0		5,536		Substandard nonaccrual/doubtful	—		—		—		47		81		2,794		527		—		3,449
Total home equity	Total home equity	$	0	$	44	$	0	$	364	$	185	$	24,937	$	363,735	$	988	$	390,253	Total home equity	$	8	$	—	$	—	$	231	$	176	$	19,799	$	326,556	$	892	$	347,662
Residential real estate	Residential real estate																			Residential real estate
Pass	Pass	$	301,904	$	346,823	$	265,543	$	100,023	$	115,609	$	240,205	$	0	$	0	$	1,370,107	Pass	$	672,993	$	299,739	$	193,715	$	79,703	$	87,361	$	162,230	$	—	$	—	$	1,495,741
Special mention	Special mention	80		302		237		2,017		2,163		8,467		0		0		13,266		Special mention	884		269		459		2,123		1,848		8,331		—		—		13,914
Substandard accrual	Substandard accrual	291		2,304		1,025		897		2,300		10,230		0		0		17,047		Substandard accrual	1,129		2,234		731		887		2,033		8,434		—		—		15,448
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	0		186		1,121		745		5,034		14,467		0		0		21,553		Substandard nonaccrual/doubtful	—		994		1,554		859		4,807		14,419		—		—		22,633
Total residential real estate	Total residential real estate	$	302,275	$	349,615	$	267,926	$	103,682	$	125,106	$	273,369	$	0	$	0	$	1,421,973	Total residential real estate	$	675,006	$	303,236	$	196,459	$	83,572	$	96,049	$	193,414	$	—	$	—	$	1,547,736
Premium finance receivables - commercial	Premium finance receivables - commercial																			Premium finance receivables - commercial
Pass	Pass	$	2,001,412	$	1,896,547	$	27,366	$	2,961	$	54	$	0	$	0	$	0	$	3,928,340	Pass	$	4,453,036	$	106,802	$	13,179	$	1,429	$	49	$	—	$	—	$	—	$	4,574,495
Special mention	Special mention	8,051		11,093		8		0		0		0		0		0		19,152		Special mention	31,671		1,693		9		—		1		—		—		—		33,374
Substandard accrual	Substandard accrual	1		1,267		13		80		0		0		0		0		1,361		Substandard accrual	1,153		608		2		45		—		—		—		—		1,808
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	512		7,898		1,252		28		0		0		0		0		9,690		Substandard nonaccrual/doubtful	4,620		2,601		67		12		—		—		—		—		7,300
Total premium finance receivables - commercial	Total premium finance receivables - commercial	$	2,009,976	$	1,916,805	$	28,639	$	3,069	$	54	$	0	$	0	$	0	$	3,958,543	Total premium finance receivables - commercial	$	4,490,480	$	111,704	$	13,257	$	1,486	$	50	$	—	$	—	$	—	$	4,616,977
Premium finance receivables - life	Premium finance receivables - life																			Premium finance receivables - life
Pass	Pass	$	112,896	$	636,815	$	658,163	$	620,034	$	678,197	$	3,404,823	$	0	$	0	$	6,110,928	Pass	$	340,318	$	782,936	$	734,280	$	673,416	$	699,250	$	3,424,672	$	—	$	—	$	6,654,872
Special mention	Special mention	0		0		0		0		567		0		0		0		567		Special mention	—		—		—		—		581		—		—		—		581
Substandard accrual	Substandard accrual	0		0		0		0		0		0		0		0		0		Substandard accrual	—		—		—		—		—		—		—		—		—
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	0		0		0		0		0		0		0		0		0		Substandard nonaccrual/doubtful	—		—		—		—		—		—		—		—		—
Total premium finance receivables - life	Total premium finance receivables - life	$	112,896	$	636,815	$	658,163	$	620,034	$	678,764	$	3,404,823	$	0	$	0	$	6,111,495	Total premium finance receivables - life	$	340,318	$	782,936	$	734,280	$	673,416	$	699,831	$	3,424,672	$	—	$	—	$	6,655,453
Consumer and other	Consumer and other																			Consumer and other
Pass	Pass	$	1,204	$	1,955	$	1,749	$	1,389	$	179	$	14,366	$	14,206	$	0	$	35,048	Pass	$	2,769	$	1,120	$	1,254	$	1,230	$	84	$	4,595	$	10,647	$	—	$	21,699
Special mention	Special mention	3		10		19		0		86		91		6		0		215		Special mention	—		4		17		—		80		82		6		—		189
Substandard accrual	Substandard accrual	0		4		1		0		0		215		3		0		223		Substandard accrual	—		3		1		—		—		250		3		—		257
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	0		1		0		104		0		392		0		0		497		Substandard nonaccrual/doubtful	—		4		—		100		—		280		—		—		384
Total consumer and other	Total consumer and other	$	1,207	$	1,970	$	1,769	$	1,493	$	265	$	15,064	$	14,215	$	0	$	35,983	Total consumer and other	$	2,769	$	1,131	$	1,272	$	1,330	$	164	$	5,207	$	10,656	$	—	$	22,529
Total loans (1)	Total loans (1)																			Total loans (1)
Pass	Pass	$	4,523,884	$	8,524,939	$	3,574,815	$	2,577,862	$	2,267,625	$	6,708,148	$	3,492,693	$	5,169	$	31,675,135	Pass	$	9,508,713	$	4,548,827	$	3,271,496	$	2,395,263	$	2,100,615	$	6,360,819	$	3,841,713	$	17,903	$	32,045,349
Special mention	Special mention	14,130		61,031		165,856		128,882		130,156		260,038		91,640		281		852,014		Special mention	54,822		74,796		131,360		123,670		101,923		189,769		111,815		6,083		794,238
Substandard accrual	Substandard accrual	23,030		25,273		110,386		103,836		51,633		193,973		40,984		854		549,969		Substandard accrual	20,087		10,331		56,495		58,285		34,289		129,811		29,748		1,470		340,516
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	512		9,972		4,409		5,786		9,400		61,923		2,113		0		94,115		Substandard nonaccrual/doubtful	9,847		7,402		6,629		5,336		7,246		46,421		1,059		—		83,940
Total loans	Total loans	$	4,561,556	$	8,621,215	$	3,855,466	$	2,816,366	$	2,458,814	$	7,224,082	$	3,627,430	$	6,304	$	33,171,233	Total loans	$	9,593,469	$	4,641,356	$	3,465,980	$	2,582,554	$	2,244,073	$	6,726,820	$	3,984,335	$	25,456	$	33,264,043

(1)Includes ~~$164.7~~$37.5 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 ~~March 31,~~September 30, 2021. These loans were further qualitatively evaluated as a part of the measurement of the allowance for credit losses as of ~~March 31,~~September 30, 2021.

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.

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As of March 31, 2021		Year of Origination												Total
As of September 30, 2021																As of September 30, 2021	Year of Origination												Total
(In thousands)	(In thousands)	2021		2020		2019		2018		2017		Prior		Balance		(In thousands)	2021		2020		2019		2018		2017		Prior		Balance
Amortized Cost Balances:	Amortized Cost Balances:															Amortized Cost Balances:
U.S. government agencies	U.S. government agencies															U.S. government agencies
1-4 internal grade	1-4 internal grade	$	97,786	$	25,000	$	0	$	50,000	$	0	$	3,374	$	176,160	1-4 internal grade	$	97,790	$	25,000	$	—	$	50,000	$	—	$	3,353	$	176,143
5-7 internal grade	5-7 internal grade	0		0		0		0		0		0		0		5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	8-10 internal grade	0		0		0		0		0		0		0		8-10 internal grade	—		—		—		—		—		—		—
Total U.S. government agencies	Total U.S. government agencies	$	97,786	$	25,000	$	0	$	50,000	$	0	$	3,374	$	176,160	Total U.S. government agencies	$	97,790	$	25,000	$	—	$	50,000	$	—	$	3,353	$	176,143
Municipal	Municipal															Municipal
1-4 internal grade	1-4 internal grade	$	1,377	$	0	$	161	$	7,549	$	43,603	$	145,175	$	197,865	1-4 internal grade	$	1,371	$	—	$	161	$	7,508	$	43,358	$	138,264	$	190,662
5-7 internal grade	5-7 internal grade	0		0		0		0		0		0		0		5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	8-10 internal grade	0		0		0		0		0		0		0		8-10 internal grade	—		—		—		—		—		—		—
Total municipal	Total municipal	$	1,377	$	0	$	161	$	7,549	$	43,603	$	145,175	$	197,865	Total municipal	$	1,371	$	—	$	161	$	7,508	$	43,358	$	138,264	$	190,662
Mortgage-backed securities	Mortgage-backed securities															Mortgage-backed securities
1-4 internal grade	1-4 internal grade	$	1,737,115	$	0	$	0	$	0	$	0	$	0	$	1,737,115	1-4 internal grade	$	2,318,309	$	—	$	—	$	—	$	—	$	—	$	2,318,309
5-7 internal grade	5-7 internal grade	0		0		0		0		0		0		0		5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	8-10 internal grade	0		0		0		0		0		0		0		8-10 internal grade	—		—		—		—		—		—		—
Total mortgage-backed securities	Total mortgage-backed securities	$	1,737,115	$	0	$	0	$	0	$	0	$	0	$	1,737,115	Total mortgage-backed securities	$	2,318,309	$	—	$	—	$	—	$	—	$	—	$	2,318,309
Corporate notes	Corporate notes															Corporate notes
1-4 internal grade	1-4 internal grade	$	0	$	13,661	$	7,462	$	3,325	$	3,282	$	27,648	$	55,378	1-4 internal grade	$	—	$	13,578	$	7,419	$	3,285	$	3,237	$	24,172	$	51,691
5-7 internal grade	5-7 internal grade	0		0		0		0		0		0		0		5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	8-10 internal grade	0		0		0		0		0		0		0		8-10 internal grade	—		—		—		—		—		—		—
Total corporate notes	Total corporate notes	$	0	$	13,661	$	7,462	$	3,325	$	3,282	$	27,648	$	55,378	Total corporate notes	$	—	$	13,578	$	7,419	$	3,285	$	3,237	$	24,172	$	51,691
Total held-to-maturity securities	Total held-to-maturity securities													$	2,166,518	Total held-to-maturity securities													$	2,736,805
Less: Allowance for credit losses	Less: Allowance for credit losses													(99)		Less: Allowance for credit losses													(83)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses													$	2,166,419	Held-to-maturity securities, net of allowance for credit losses													$	2,736,722

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.


		March 31,		December 31,		March 31,			September 30,		December 31,		September 30,
(In thousands)	(In thousands)	2021		2020		2020		(In thousands)	2021		2020		2020

Allowance for loan losses	Allowance for loan losses	$	277,709	$	319,374	$	216,050	Allowance for loan losses	$	248,612	$	319,374	$	325,959
Allowance for unfunded lending-related commitments losses	Allowance for unfunded lending-related commitments losses	43,500		60,536		37,362		Allowance for unfunded lending-related commitments losses	47,443		60,536		62,949
Allowance for loan losses and unfunded lending-related commitments losses	Allowance for loan losses and unfunded lending-related commitments losses	321,209		379,910		253,412		Allowance for loan losses and unfunded lending-related commitments losses	296,055		379,910		388,908
Allowance for held-to-maturity securities losses	Allowance for held-to-maturity securities losses	99		59		70		Allowance for held-to-maturity securities losses	83		59		63
Allowance for credit losses	Allowance for credit losses	$	321,308	$	379,969	$	253,482	Allowance for credit losses	$	296,138	$	379,969	$	388,971

1921

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~~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).

Assets that do not share similar risk 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 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 ~~March 31,~~September 30, 2021, excluding loans carried at fair value, substandard nonaccrual loans totaling ~~$56.8~~$47.3 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 ~~$198,000~~$335,000 as of ~~March 31,~~September 30, 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 nine months ended ~~March 31,~~September 30, 2021 and 2020 is as follows.


Three months ended March 31, 2021				Commercial Real Estate			Home Equity				Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
Three months ended September 30, 2021													Three months ended September 30, 2021			Commercial Real Estate							Home Equity				Residential Real Estate			Premium Finance Receivables					Consumer and Other					Total Loans
(In thousands)	(In thousands)	Commercial				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	Allowance for credit losses at beginning of period	$	94,212	$	243,603				$	11,437				$	12,459		$	17,777							$	422		$		379,910	Allowance for credit losses at beginning of period		$	98,507				$	158,522				$	11,207			$	15,684			$	19,899	$	212	$	304,031

Other adjustments	Other adjustments	0		0			0				0			30			0			30				Other adjustments		0			—			—						—					(65)				—				(65)
Charge-offs	Charge-offs	(11,781)		(980)			0				(2)			(3,239)			(114)			(16,116)			Charge-offs		(1,352)			(406)			(59)					(10)					(1,390)				(112)				(3,329)
Recoveries	Recoveries	452		200			101				204			1,782			32			2,771			Recoveries		816			373			313					5					1,728				92				3,327
Provision for credit losses	Provision for credit losses	12,757		(61,031)			(156)				1,581			1,127			336			(45,386)			Provision for credit losses		11,811			(18,454)			(522)					593					(1,597)				260				(7,909)

Allowance for credit losses at period end	Allowance for credit losses at period end	$	95,640	$	181,792		$	11,382			$	14,242		$	17,477		$	676		$	321,209		Allowance for credit losses at period end		$	109,782		$	140,035		$	10,939				$	16,272				$	18,575			$	452			$	296,055
Individually measured	Individually measured	$	5,046	$	2,042		$	338			$	822		$	0		$	81		$	8,329		Individually measured		$	8,222		$	1,308		$	221				$	940				$	—			$	68			$	10,759
Collectively measured	Collectively measured	90,594		179,750			11,044				13,420			17,477			595			312,880			Collectively measured		101,560			138,727			10,718					15,332					18,575				384				285,296

Loans at period end	Loans at period end																						Loans at period end
Individually measured	Individually measured	$	30,144	$	43,858		$	21,167			$	28,675		$	0		$	560		$	124,404		Individually measured		$	31,001		$	32,091		$	16,486				$	28,966				$	—			$	467			$	109,011
Collectively measured	Collectively measured	12,678,063		8,500,921			369,086				1,341,382			10,070,038			35,423			32,994,913			Collectively measured		11,156,971			8,853,623			331,176					1,487,791					11,272,430				22,062				33,124,053

Loans held at fair value	Loans held at fair value	0		0			0				51,916			0			0			51,916			Loans held at fair value		—			—			—					30,979					—				—				30,979

2022

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Three months ended March 31, 2020		Commercial			Commercial Real Estate				Home Equity			Residential Real Estate				Premium Finance Receivables					Consumer and Other			Total Loans
Three months ended September 30, 2020														Three months ended September 30, 2020	Commercial								Commercial Real Estate							Home Equity			Residential Real Estate			Premium Finance Receivables				Consumer and Other					Total Loans
(In thousands)	(In thousands)			Commercial							Commercial Real Estate			Home Equity						Residential Real Estate				Premium Finance Receivables							Consumer and Other							Total Loans					(In thousands)

Allowance for credit losses at beginning of period	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		$	133,597				$	197,126			$	12,189			$	11,915	$	17,592	$	690	$	373,109
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	Other adjustments	0			0				0			0				(73)					0			(73)			Other adjustments		—			—			—				—					55				—				55

Charge-offs	Charge-offs	(2,153)			(570)				(1,001)			(401)				(3,184)					(128)			(7,437)			Charge-offs		(5,270)			(1,529)			(138)				(83)					(4,640)				(103)				(11,763)
Recoveries	Recoveries	384			263				294			60				1,110					41			2,152			Recoveries		428			175			111				25					1,720				20				2,479
Provision for credit losses	Provision for credit losses	35,156			12,528				162			89				5,339					(309)			52,965			Provision for credit losses		(15,861)			38,238			(485)				(67)					3,129				74				25,028
Allowance for credit losses at period end	Allowance for credit losses at period end	$	107,346		$	112,796			$	12,394		$	12,550			$	7,880				$	446		$	253,412		Allowance for credit losses at period end		$	112,894		$	234,010		$	11,677			$	11,790				$	17,856			$	681			$	388,908
Individually measured	Individually measured	$	12,524		$	9,108			$	290		$	466			$	0				$	104		$	22,492		Individually measured		$	10,642		$	4,741		$	196			$	680				$	—			$	108			$	16,367
Collectively measured	Collectively measured	94,822			103,688				12,104			12,084				7,880					342			230,920			Collectively measured		102,252			229,269			11,481				11,110					17,856				573				372,541

Loans at period end	Loans at period end																										Loans at period end
Individually measured	Individually measured	$	56,416		$	80,873			$	23,060		$	27,854			$	0				$	537		$	188,740		Individually measured		$	49,900		$	79,661		$	22,962			$	30,596				$	—			$	548			$	183,667
Collectively measured	Collectively measured	8,969,470			8,104,658				471,595			1,207,268				8,686,694					36,629			27,476,314			Collectively measured		12,227,099			8,343,481			423,312				1,100,699					9,548,976				54,806				31,698,373

Loans held at fair value	Loans held at fair value	0			0				0			142,267				0					0			142,267			Loans held at fair value		—			—			—				253,515					—				—				253,515


Nine months ended September 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	—		—		—		—		(2)		—		(2)
Charge-offs	(16,370)		(2,798)		(201)		(15)		(6,706)		(330)		(26,420)
Recoveries	2,170		1,087		742		245		6,749		158		11,151
Provision for credit losses	29,770		(101,857)		(1,039)		3,583		757		202		(68,584)


Allowance for credit losses at period end	$	109,782	$	140,035	$	10,939	$	16,272	$	18,575	$	452	$	296,055


Nine months ended September 30, 2020			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	$	64,920	$	68,511	$	3,878	$	9,800	$	9,647	$	1,705	$	158,461
Cumulative effect adjustment from the adoption of ASU 2016-13	9,039		32,064		9,061		3,002		(4,959)		(863)		47,344
Other adjustments	—		—		—		—		24		—		24
Charge-offs	(13,109)		(9,323)		(1,378)		(777)		(11,258)		(330)		(36,175)
Recoveries	924		931		451		115		3,663		119		6,203
Provision for credit losses	51,120		141,827		(335)		(350)		20,739		50		213,051
Allowance for credit losses at period end	$	112,894	$	234,010	$	11,677	$	11,790	$	17,856	$	681	$	388,908

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 ~~months~~and nine month periods ended ~~March 31,~~September 30, 2021, ~~and 2020,~~ the Company recognized approximately ~~$(45.4)~~$(7.9) million and ~~$53.0~~$(68.6) million of provision for credit losses, respectively, related to loans and lending agreements. The ~~decreased~~negative provision for such periods was primarily the result of improvements in the forecasted macroeconomic ~~conditions created by the COVID-19 pandemic, and the resulting impact on~~forecast, specifically the Company's macroeconomic forecasts of key model inputs (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,~~performance, macroeconomic forecasts as of ~~March 31,~~September 30, 2021 assume that the impact of those uncertainties is less severe compared to that assumed at December 31, 2020. Other key drivers of provision for credit losses in

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these portfolios include, but are not limited to, ~~net new~~decreases to COVID-19 related loan ~~growth~~modifications and positive loan risk rating migration. Net charge-offs in the three and nine month ~~period~~periods ending ~~March 31,~~September 30, 2021, totaled ~~$13.3~~$2,000 and $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 nine month ~~period~~periods ended ~~March 31,~~September 30, 2021, the Company recognized approximately ~~$39,000~~$(7,000) and $22,000 of provision for credit losses related to held-to-maturity ~~securities.~~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

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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, the Company’s 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 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 ~~March 31,~~September 30, 2021 and approximately ~~$2.5~~$2.3 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

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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 ~~March 31,~~September 30, 2021, the Company had ~~$4.0~~$2.5 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 ~~$13.8~~$14.3 million and ~~$10.6~~$17.7 million at ~~March 31,~~September 30, 2021 and 2020, respectively.

The tables below present a summary of the post-modification balance of loans restructured during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively, which represent TDRs:


Three months ended March 31, 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
Three months ended September 30, 2021 (Dollars in thousands)																	Three months ended September 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																Commercial
Commercial, industrial and other	Commercial, industrial and other	2	$	151	2	$	151	0	$	0	0	$	0	0	$	0	Commercial, industrial and other	1	$	1	1	$	1	—	$	—	—	$	—	—	$	—

Commercial real estate	Commercial real estate																Commercial real estate
Non-construction	Non-construction	2	237		2	237		1	113		1	113		0	0		Non-construction	—	—		—	—		—	—		—	—		—	—

Residential real estate and other	Residential real estate and other	16	1,738		16	1,738		9	1,290		0	0		0	0		Residential real estate and other	8	558		7	441		2	202		—	—		—	—
Total loans	Total loans	20	$	2,126	20	$	2,126	10	$	1,403	1	$	113	0	$	0	Total loans	9	$	559	8	$	442	2	$	202	—	$	—	—	$	—

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Three months ended March 31, 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
Three months ended September 30, 2020 (Dollars in thousands)																	Three months ended September 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																Commercial
Commercial, industrial and other	Commercial, industrial and other	5	$	5,602	3	$	4,316	0	$	0	0	$	0	1	$	432	Commercial, industrial and other	5	$	1,013	5	$	1,013	—	$	—	—	$	—	—	$	—

Commercial real estate	Commercial real estate																Commercial real estate

Non-construction	Non-construction	13	16,053		11	13,511		3	921		5	3,463		0	0		Non-construction	3	1,045		3	1,045		—	—		1	207		—	—
Residential real estate and other	Residential real estate and other	20	2,142		12	1,890		5	786		0	0		0	0		Residential real estate and other	28	5,538		21	5,281		13	1,829		1	190		—	—
Total loans	Total loans	38	$	23,797	26	$	19,717	8	$	1,707	5	$	3,463	1	$	432	Total loans	36	$	7,596	29	$	7,339	13	$	1,829	2	$	397	—	$	—

(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 ~~March 31,~~September 30, 2021, 209 loans totaling ~~$2.1 million~~$559,000 were determined to be TDRs, compared to 3836 loans totaling ~~$23.8~~$7.6 million during the three months ended ~~March 31,~~September 30, 2020. Of these loans extended at below market terms, the weighted average extension had a term of approximately ~~110~~105 months during the quarter ended ~~March 31,~~September 30, 2021 compared to ~~eight~~26 months for the quarter ended ~~March 31,~~September 30, 2020. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately ~~127~~129 basis points and ~~173~~116 basis points during the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Interest-only payment terms were approximately five months during the three months ended September 30, 2020. Additionally, no principal balances were forgiven during the quarters ended September 30, 2021 and 2020.


Nine months ended September 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	6	$	547	6	$	547	—	$	—	—	$	—	—	$	—

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




Residential real estate and other	34	3,393		33	3,276		13	2,108		—	—		—	—
Total loans	45	$	6,884	43	$	6,224	15	$	2,764	1	$	113	—	$	—

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Nine months ended September 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	17	$	10,046	13	$	5,772	—	$	—	4	$	3,257	1	$	432


Commercial real estate




Non-construction	17	19,180		14	14,556		3	921		7	5,752		—	—
Residential real estate and other	69	11,184		54	10,676		28	4,205		1	190		—	—
Total loans	103	$	40,410	81	$	31,004	31	$	5,126	12	$	9,199	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 nine months ended September 30, 2021, 45 loans totaling $6.9 million were determined to be TDRs, compared to 103 loans totaling $40.4 million during the nine months ended September 30, 2020. Of these loans extended at below market terms, the weighted average extension had a term of approximately 108 months during the nine months ended September 30, 2021 compared to 14 months for the nine months ended September 30, 2020. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 151 basis points and 143 basis points for the year-to-date periods ended September 30, 2021 and 2020, respectively. Interest-only payment terms were approximately six months and 2113 months during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively. Additionally, ~~0 principal~~no balances were forgiven ~~during~~in the ~~quarter ended March 31,~~first nine months of 2021 ~~and~~compared to $453,000 of principal balances were forgiven in the ~~quarter ended March 31,~~same period of 2020.

The following table presents a summary of all loans restructured in TDRs during the twelve months ended ~~March 31,~~September 30, 2021 and 2020, and such loans that were in payment default under the restructured terms during the respective periods below:


(Dollars in thousands)	(Dollars in thousands)	As of March 31, 2021			Three Months Ended March 31, 2021			As of March 31, 2020		Three Months Ended March 31, 2020				(Dollars in thousands)	As of September 30, 2021					Three Months Ended September 30, 2021					Nine months ended September 30, 2021
		Total (1)(3)			Payments in Default (2)(3)			Payments in Default (2)(3)							Total (1)(3)					Payments in Default (2)(3)					Payments in Default (2)(3)
		Count	Balance		Count	Balance			Count		Balance		Count			Balance		(Dollars in thousands)	Count	Balance		Count	Balance			Count	Balance
Commercial	Commercial
Commercial, industrial and other	Commercial, industrial and other	18	$	6,910	5	$	1,496		20		$	13,013	8			$	4,836		10	$	2,863	1	$	199		4	$	1,524

Commercial real estate	Commercial real estate																	Commercial real estate

Non-construction	Non-construction	7	3,466		3	3,121			19		22,770		3			758		Non-construction	6	3,045		3	2,275			3	2,275

Residential real estate and other	Residential real estate and other	81	13,825		5	596			145		17,863		11			2,510		Residential real estate and other	50	6,437		2	116			2	116
Total loans	Total loans	106	$	24,201	13	$	5,213		184		$	53,646	22			$	8,104	Total loans	66	$	12,345	6	$	2,590		9	$	3,915


(Dollars in thousands)	As of September 30, 2020			Three Months Ended September 30, 2020			Nine months ended September 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	$	11,476	7	$	4,607		7	$	4,607



Commercial real estate


Non-construction	18	19,432		13	14,595			13	14,595




Residential real estate and other	112	16,265		11	2,131			14	2,582
Total loans	152	$	47,173	31	$	21,333		34	$	21,784

(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~~past due subsequent to the restructuring.

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

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(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)	(In thousands)	December 31, 2020		Goodwill Acquired		Impairment Loss		Goodwill Adjustments		March 31, 2021		(In thousands)	December 31, 2020		Goodwill Acquired		Impairment Loss		Goodwill Adjustments		September 30, 2021
Community banking	Community banking	$	536,396	$	0	$	0	$	0	$	536,396	Community banking	$	536,396	$	—	$	—	$	—	$	536,396
Specialty finance	Specialty finance	39,938		0		0		310		40,248		Specialty finance	39,938		—		—		85		40,023
Wealth management	Wealth management	69,373		0		0		0		69,373		Wealth management	69,373		—		—		—		69,373
Total	Total	$	645,707	$	0	$	0	$	310	$	646,017	Total	$	645,707	$	—	$	—	$	85	$	645,792

The specialty finance unit’s goodwill increased ~~$310,000~~$85,000 in the first ~~three~~nine months of 2021 as a result of foreign currency translation adjustments related to the Canadian acquisitions.

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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, 2020, the Company utilized a quantitative approach for its annual goodwill impairment tests of the banking, specialty finance and wealth management reporting units and determined that no impairment existed at that time.

At each reporting date between annual goodwill impairment tests, the Company considers potential indicators of impairment. 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 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 ~~March 31,~~September 30, 2021, it was more likely than not that the fair value of all reporting units exceeded the respective carrying value of such reporting unit.

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A summary of intangible assets as of the dates shown and the expected amortization of finite-lived intangible assets as of ~~March 31,~~September 30, 2021 is as follows:


(In thousands)	(In thousands)	March 31, 2021		December 31, 2020		March 31, 2020		(In thousands)	September 30, 2021		December 31, 2020		September 30, 2020
Community banking segment:	Community banking segment:							Community banking segment:
Core deposit intangibles with finite lives:	Core deposit intangibles with finite lives:							Core deposit intangibles with finite lives:
Gross carrying amount	Gross carrying amount	$	55,206	$	55,206	$	55,206	Gross carrying amount	$	55,206	$	55,206	$	55,206
Accumulated amortization	Accumulated amortization	(34,099)		(32,680)		(28,024)		Accumulated amortization	(36,840)		(32,680)		(31,209)
Net carrying amount	Net carrying amount	$	21,107	$	22,526	$	27,182	Net carrying amount	$	18,366	$	22,526	$	23,997
Trademark with indefinite lives:	Trademark with indefinite lives:							Trademark with indefinite lives:
Carrying amount	Carrying amount	5,800		5,800		5,800		Carrying amount	5,800		5,800		5,800
Total net carrying amount	Total net carrying amount	$	26,907	$	28,326	$	32,982	Total net carrying amount	$	24,166	$	28,326	$	29,797
Specialty finance segment:	Specialty finance segment:							Specialty finance segment:
Customer list intangibles with finite lives:	Customer list intangibles with finite lives:							Customer list intangibles with finite lives:
Gross carrying amount	Gross carrying amount	$	1,968	$	1,966	$	1,956	Gross carrying amount	$	1,967	$	1,966	$	1,962
Accumulated amortization	Accumulated amortization	(1,665)		(1,644)		(1,574)		Accumulated amortization	(1,705)		(1,644)		(1,624)
Net carrying amount	Net carrying amount	$	303	$	322	$	382	Net carrying amount	$	262	$	322	$	338
Wealth management segment:	Wealth management segment:							Wealth management segment:
Customer list and other intangibles with finite lives:	Customer list and other intangibles with finite lives:							Customer list and other intangibles with finite lives:
Gross carrying amount	Gross carrying amount	$	20,430	$	20,430	$	20,430	Gross carrying amount	$	20,430	$	20,430	$	20,430
Accumulated amortization	Accumulated amortization	(13,605)		(13,038)		(9,609)		Accumulated amortization	(14,740)		(13,038)		(11,895)
Net carrying amount	Net carrying amount	$	6,825	$	7,392	$	10,821	Net carrying amount	$	5,690	$	7,392	$	8,535
Total intangible assets:	Total intangible assets:							Total intangible assets:
Gross carrying amount	Gross carrying amount	$	83,404	$	83,402	$	83,392	Gross carrying amount	$	83,403	$	83,402	$	83,398
Accumulated amortization	Accumulated amortization	(49,369)		(47,362)		(39,207)		Accumulated amortization	(53,285)		(47,362)		(44,728)
Total intangible assets, net	Total intangible assets, net	$	34,035	$	36,040	$	44,185	Total intangible assets, net	$	30,118	$	36,040	$	38,670


Estimated amortization
Actual in ~~three~~nine months ended ~~March 31,~~September 30, 2021	$	~~2,007~~5,923
Estimated remaining in 2021	~~5,685~~1,809
Estimated—2022	~~6,135~~6,115
Estimated—2023	~~4,670~~4,658
Estimated—2024	~~3,263~~3,259
Estimated—2025	2,552

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

~~Table of~~ ~~Contents~~

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 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 ~~$2.0~~$5.9 million and ~~$2.9~~$8.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively.

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(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				Three Months Ended				Nine Months Ended
		March 31,		March 31,				September 30,		September 30,		September 30,		September 30,
(In thousands)	(In thousands)	2021		2020			(In thousands)	2021		2020		2021		2020
Balance at beginning of the period	Balance at beginning of the period	$	92,081	$	85,638		Balance at beginning of the period	$	127,604	$	77,203	$	92,081	$	85,638
Additions from loans sold with servicing retained	Additions from loans sold with servicing retained	24,616		9,447			Additions from loans sold with servicing retained	15,546		20,936		57,674		50,734

Estimate of changes in fair value due to:	Estimate of changes in fair value due to:						Estimate of changes in fair value due to:
Early buyout options (“EBO”) exercised	Early buyout options (“EBO”) exercised	(258)		0			Early buyout options (“EBO”) exercised	(116)		(367)		(518)		(367)

Payoffs and paydowns	Payoffs and paydowns	(10,168)		(7,024)			Payoffs and paydowns	(8,594)		(7,863)		(27,302)		(23,557)
Changes in valuation inputs or assumptions	Changes in valuation inputs or assumptions	18,045		(14,557)			Changes in valuation inputs or assumptions	(888)		(3,002)		11,617		(25,541)
Fair value at end of the period	Fair value at end of the period	$	124,316	$	73,504		Fair value at end of the period	$	133,552	$	86,907	$	133,552	$	86,907
Unpaid principal balance of mortgage loans serviced for others	Unpaid principal balance of mortgage loans serviced for others	$	11,530,676	$	8,314,634		Unpaid principal balance of mortgage loans serviced for others	$	12,720,126	$	10,139,878

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’ 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 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 ~~March 31,~~September 30, 2021. For more information regarding these hedges, see Note 14 - 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.

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(9) Deposits

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


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021			December 31, 2020			March 31, 2020			(Dollars in thousands)	September 30, 2021			December 31, 2020			September 30, 2020
Balance:	Balance:										Balance:
Non-interest-bearing	Non-interest-bearing	$	12,297,337		$	11,748,455		$	7,556,755		Non-interest-bearing	$	13,255,417		$	11,748,455		$	10,409,747
NOW and interest-bearing demand deposits	NOW and interest-bearing demand deposits	3,562,312			3,349,021			3,181,159			NOW and interest-bearing demand deposits	3,769,825			3,349,021			3,294,071
Wealth management deposits	Wealth management deposits	4,274,527			4,138,712			3,936,968			Wealth management deposits	4,177,820			4,138,712			4,235,583
Money market	Money market	9,236,434			9,348,806			8,114,659			Money market	10,757,654			9,348,806			9,423,653
Savings	Savings	3,690,892			3,531,029			3,282,340			Savings	3,861,296			3,531,029			3,415,073
Time certificates of deposit	Time certificates of deposit	4,811,150			4,976,628			5,389,779			Time certificates of deposit	4,130,546			4,976,628			5,066,295
Total deposits	Total deposits	$	37,872,652		$	37,092,651		$	31,461,660		Total deposits	$	39,952,558		$	37,092,651		$	35,844,422
Mix:	Mix:										Mix:
Non-interest-bearing	Non-interest-bearing	32		%	32		%	24		%	Non-interest-bearing	33		%	32		%	29		%
NOW and interest-bearing demand deposits	NOW and interest-bearing demand deposits	9			9			10			NOW and interest-bearing demand deposits	9			9			9
Wealth management deposits	Wealth management deposits	11			11			13			Wealth management deposits	11			11			12
Money market	Money market	25			25			26			Money market	27			25			26
Savings	Savings	10			10			10			Savings	10			10			10
Time certificates of deposit	Time certificates of deposit	13			13			17			Time certificates of deposit	10			13			14
Total deposits	Total deposits	100		%	100		%	100		%	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”), Chicago Deferred Exchange Company (“CDEC”), trust and asset management customers of the Company and brokerage customers from unaffiliated companies.

(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)	(In thousands)	March 31, 2021		December 31, 2020		March 31, 2020		(In thousands)	September 30, 2021		December 31, 2020		September 30, 2020
FHLB advances	FHLB advances	$	1,228,436	$	1,228,429	$	1,174,894	FHLB advances	$	1,241,071	$	1,228,429	$	1,228,422
Other borrowings:	Other borrowings:							Other borrowings:
Notes payable	Notes payable	96,363		101,710		167,746		Notes payable	85,668		101,710		107,056
Short-term borrowings	Short-term borrowings	12,416		11,366		12,127		Short-term borrowings	14,051		11,366		7,983
Other	Other	64,659		65,108		66,266		Other	63,770		65,108		65,548
Secured borrowings	Secured borrowings	343,439		340,744		241,364		Secured borrowings	341,038		340,744		326,808
Total other borrowings	Total other borrowings	516,877		518,928		487,503		Total other borrowings	504,527		518,928		507,395
Subordinated notes	Subordinated notes	436,595		436,506		436,179		Subordinated notes	436,811		436,506		436,385
Total FHLB advances, other borrowings and subordinated notes	Total FHLB advances, other borrowings and subordinated notes	$	2,181,908	$	2,183,863	$	2,098,576	Total FHLB advances, other borrowings and subordinated notes	$	2,182,409	$	2,183,863	$	2,172,202

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, 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"~~Facility”), which is part of a $200.0 million loan agreement ("(“Credit ~~Agreement"~~Agreement”) with unaffiliated banks. The Credit Agreement consists of the Term Facility with

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an original outstanding balance of $150.0 million and a $50.0 million revolving credit facility ("(“Revolving Credit ~~Facility"~~Facility”). At ~~March 31,~~September 30, 2021, the Company had a notes payable balance of ~~$96.4~~$85.7 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 ~~March 31,~~September 30, 2021, the Company had 0no 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. An amendment to the Credit Agreement was executed on and effective as of September 14, 2021. The amendment provided for, among other things, extension of the maturity date under the Revolving Credit Facility to September 13, 2022.

Borrowings under the amended Credit Agreement that are considered “Base Rate Loans” bear interest at a rate equal to the sum of (1) 60 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) 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 0.30% of the actual daily amount by which the ~~lenders'~~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. InAt September ~~2020, the required levels to maintain for certain restrictive covenants within the Credit Agreement were amended. At March 31,~~30, 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 ~~$12.4~~$14.1 million at ~~March 31,~~September 30, 2021 compared to $11.4 million at December 31, 2020 and ~~$12.1~~$8.0 million at ~~March 31,~~September 30, 2020. At ~~March 31,~~September 30, 2021, December 31, 2020 and ~~March 31,~~September 30, 2020, securities sold under repurchase agreements represent ~~$12.4~~$14.1 million, $11.4 million and ~~$12.1~~$8.0 million, respectively, of customer sweep accounts in connection with master repurchase agreements at the banks. The Company records securities sold under repurchase agreements at their gross value and does not offset positions on the Consolidated Statements of Condition. As of ~~March 31,~~September 30, 2021, the Company had pledged securities related to its customer balances in sweep accounts of ~~$20.6~~$26.1 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 mortgage-backed ~~securities.~~securities, U.S. Government agencies and collateralized mortgage obligations. These securities are included in the available-for-sale portfolio as reflected on the Company’s Consolidated Statements of Condition.

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The following is a summary of these securities pledged as of ~~March 31,~~September 30, 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	$	10,773




Mortgage-backed securities	$		~~20,580~~14,941
Collateralized mortgage obligations	344



Total collateral pledged	~~20,580~~26,058
Excess collateral	~~8,164~~12,007
Securities sold under repurchase agreements	$	~~12,416~~14,051

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Other Borrowings

Other borrowings at ~~March 31,~~September 30, 2021 represent a fixed-rate promissory note issued by the Company in June 2017 and amended in March 2020 ("(“Fixed-Rate Promissory ~~Note"~~Note”) related to and secured by 3 office buildings owned by the Company. At ~~March 31,~~September 30, 2021, the Fixed-Rate Promissory Note had a balance of ~~$64.7~~$63.8 million compared to $65.1 million at December 31, 2020 and ~~$66.3~~$65.5 million at ~~March 31,~~September 30, 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%. 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 ~~March 31,~~September 30, 2021, the Company was in compliance with all such covenants.

Secured Borrowings

Secured borrowings at ~~March 31,~~September 30, 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"~~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 ~~March 31,~~September 30, 2021, the translated balance of the secured borrowing totaled ~~$334.1~~$331.0 million compared to $329.9 million at December 31, 2020 and ~~$227.4~~$315.1 million at ~~March 31,~~September 30, 2020. Additionally, the interest rate under the Receivables Purchase Agreement at ~~March 31,~~September 30, 2021 was ~~1.1015%~~1.0694%. The remaining ~~$9.4~~$10.0 million within secured borrowings at ~~March 31,~~September 30, 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.

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Subordinated Notes

At ~~March 31,~~September 30, 2021, the Company had outstanding subordinated notes totaling ~~$436.6~~$436.8 million compared to $436.5 million and ~~$436.2~~$436.4 million outstanding at December 31, 2020 and ~~March 31,~~September 30, 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. 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.

(11) Junior Subordinated Debentures

As of ~~March 31,~~September 30, 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

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Illinois Bancorp, Inc. and 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 ~~March 31,~~September 30, 2021. The junior subordinated debentures represent the par value of the obligations owed to the Trusts.


(Dollars in thousands)	(Dollars in thousands)	Common Securities		Trust Preferred Securities		Junior Subordinated Debentures		Rate Structure	Contractual rate at 3/31/2021		Issue Date	Maturity Date	Earliest Redemption Date	(Dollars in thousands)	Common Securities		Trust Preferred Securities		Junior Subordinated Debentures		Rate Structure	Contractual Rate at 9/30/2021		Issue Date	Maturity Date	Earliest Redemption Date
Wintrust Capital Trust III	Wintrust Capital Trust III	$	774	$	25,000	$	25,774	L+3.25	3.49	%	04/2003	04/2033	04/2008	Wintrust Capital Trust III	$	774	$	25,000	$	25,774	L+3.25	3.38	%	04/2003	04/2033	04/2008
Wintrust Statutory Trust IV	Wintrust Statutory Trust IV	619		20,000		20,619		L+2.80	3.00	%	12/2003	12/2033	12/2008	Wintrust Statutory Trust IV	619		20,000		20,619		L+2.80	2.93	%	12/2003	12/2033	12/2008
Wintrust Statutory Trust V	Wintrust Statutory Trust V	1,238		40,000		41,238		L+2.60	2.80	%	05/2004	05/2034	06/2009	Wintrust Statutory Trust V	1,238		40,000		41,238		L+2.60	2.73	%	05/2004	05/2034	06/2009
Wintrust Capital Trust VII	Wintrust Capital Trust VII	1,550		50,000		51,550		L+1.95	2.13	%	12/2004	03/2035	03/2010	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	Wintrust Capital Trust VIII	1,238		25,000		26,238		L+1.45	1.65	%	08/2005	09/2035	09/2010	Wintrust Capital Trust VIII	1,238		25,000		26,238		L+1.45	1.58	%	08/2005	09/2035	09/2010
Wintrust Capital Trust IX	Wintrust Capital Trust IX	1,547		50,000		51,547		L+1.63	1.81	%	09/2006	09/2036	09/2011	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	Northview Capital Trust I	186		6,000		6,186		L+3.00	3.21	%	08/2003	11/2033	08/2008	Northview Capital Trust I	186		6,000		6,186		L+3.00	3.13	%	08/2003	11/2033	08/2008
Town Bankshares Capital Trust I	Town Bankshares Capital Trust I	186		6,000		6,186		L+3.00	3.21	%	08/2003	11/2033	08/2008	Town Bankshares Capital Trust I	186		6,000		6,186		L+3.00	3.13	%	08/2003	11/2033	08/2008
First Northwest Capital Trust I	First Northwest Capital Trust I	155		5,000		5,155		L+3.00	3.20	%	05/2004	05/2034	05/2009	First Northwest Capital Trust I	155		5,000		5,155		L+3.00	3.13	%	05/2004	05/2034	05/2009
Suburban Illinois Capital Trust II	Suburban Illinois Capital Trust II	464		15,000		15,464		L+1.75	1.93	%	12/2006	12/2036	12/2011	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	Community Financial Shares Statutory Trust II	109		3,500		3,609		L+1.62	1.80	%	06/2007	09/2037	06/2012	Community Financial Shares Statutory Trust II	109		3,500		3,609		L+1.62	1.74	%	06/2007	09/2037	06/2012
Total	Total					$	253,566		2.39	%				Total					$	253,566		2.32	%

The junior subordinated debentures totaled $253.6 million at ~~March 31,~~September 30, 2021, December 31, 2020 and ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2021, the weighted average contractual interest rate on the junior subordinated debentures was ~~2.39%~~2.32%. 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 ~~March 31,~~September 30, 2021, was ~~3.98%~~3.96%. 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.

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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"~~(“FRB”) approval, if then required under applicable guidelines or regulations.

At ~~March 31,~~September 30, 2021, the Company included $245.5 million of the junior subordinated debentures, net of common securities, in Tier 2 regulatory capital.

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(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)	(Dollars in thousands)		Three Months Ended				(Dollars in thousands)		Three Months Ended				Nine Months Ended
Revenue from contracts with customers	Revenue from contracts with customers	Location in income statement	March 31, 2021		March 31, 2020			Revenue from contracts with customers		Location in income statement	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Brokerage and insurance product commissions	Brokerage and insurance product commissions	Wealth management	$	5,040	$	5,281		Brokerage and insurance product commissions		Wealth management	$	5,230	$	4,563	$	15,418	$	13,991
Trust	Trust	Wealth management	5,017		5,291			Trust		Wealth management	5,369		4,179		15,765		13,718
Asset management	Asset management	Wealth management	19,252		15,369			Asset management		Wealth management	20,932		16,215		60,347		45,825
Total wealth management	Total wealth management		29,309		25,941			Total wealth management			31,531		24,957		91,530		73,534
Mortgage broker fees	Mortgage broker fees	Mortgage banking	76		53			Mortgage broker fees		Mortgage banking	270		85		460		312
Service charges on deposit accounts	Service charges on deposit accounts	Service charges on deposit accounts	12,036		11,265			Service charges on deposit accounts		Service charges on deposit accounts	14,149		11,497		39,434		33,182
Administrative services	Administrative services	Other non-interest income	1,256		1,112			Administrative services		Other non-interest income	1,359		1,077		3,843		3,122
Card related fees	Card related fees	Other non-interest income	1,774		2,106			Card related fees		Other non-interest income	2,513		2,021		6,474		5,506
Other deposit related fees	Other deposit related fees	Other non-interest income	3,317		3,178			Other deposit related fees		Other non-interest income	3,397		3,160		9,979		9,252
Total revenue from contracts with customers	Total revenue from contracts with customers		$	47,768	$	43,655		Total revenue from contracts with customers			$	53,219	$	42,797	$	151,720	$	124,908

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

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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.

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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.

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Contract Balances

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


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		December 31, 2020		March 31, 2020		(Dollars in thousands)	September 30, 2021		December 31, 2020		September 30, 2020
Contract assets	Contract assets	$	0	$	0	$	0	Contract assets	$	—	$	—	$	—

Contract liabilities	Contract liabilities	$	1,818	$	1,548	$	728	Contract liabilities	$	1,632	$	1,548	$	1,543

Mortgage broker fees receivable	Mortgage broker fees receivable	$	31	$	20	$	11	Mortgage broker fees receivable	$	31	$	20	$	28
Administrative services receivable	Administrative services receivable	215		64		214		Administrative services receivable	185		64		191
Wealth management receivable	Wealth management receivable	11,315		10,144		8,218		Wealth management receivable	12,001		10,144		10,232
Card related fees receivable	Card related fees receivable	1,075		783		422		Card related fees receivable	462		783		201
Total receivables from contracts with customer	Total receivables from contracts with customer	$	12,636	$	11,011	$	8,865	Total receivables from contracts with customer	$	12,679	$	11,011	$	10,652

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 ~~$414,000~~$798,000 and ~~$628,000~~$1.3 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 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 2021

~~668~~291

Estimated—2022

~~400~~591

Estimated—2023

400

Estimated—2024

250

Estimated—2025

100

Total

~~1,818~~1,632

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.

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(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 9 — 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 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 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.

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


		Three months ended				$ Change in Contribution		% Change in Contribution			Three Months Ended				$ Change in Contribution		% Change in Contribution
(Dollars in thousands)	(Dollars in thousands)	March 31, 2021		March 31, 2020						(Dollars in thousands)	September 30, 2021		September 30, 2020
Net interest income:	Net interest income:									Net interest income:
Community Banking	Community Banking	$	203,489	$	206,835	$	(3,346)	(2)	%	Community Banking	$	220,007	$	196,803	$	23,204	12	%
Specialty Finance	Specialty Finance	44,899		40,712		4,187		10		Specialty Finance	52,659		46,454		6,205		13
Wealth Management	Wealth Management	7,449		7,792		(343)		(4)		Wealth Management	7,983		6,894		1,089		16
Total Operating Segments	Total Operating Segments	255,837		255,339		498		0		Total Operating Segments	280,649		250,151		30,498		12
Intersegment Eliminations	Intersegment Eliminations	6,058		6,104		(46)		(1)		Intersegment Eliminations	6,847		5,785		1,062		18
Consolidated net interest income	Consolidated net interest income	$	261,895	$	261,443	$	452	0	%	Consolidated net interest income	$	287,496	$	255,936	$	31,560	12	%
Provision for credit losses:	Provision for credit losses:									Provision for credit losses:
Community Banking	Community Banking	$	(46,572)	$	51,677	$	(98,249)	(190)	%	Community Banking	$	(7,433)	$	23,342	$	(30,775)	NM
Specialty Finance	Specialty Finance	1,225		1,284		(59)		(5)		Specialty Finance	(483)		1,684		(2,167)		NM
Wealth Management	Wealth Management	0		0		0		0		Wealth Management	—		—		—		—	%
Total Operating Segments	Total Operating Segments	(45,347)		52,961		(98,308)		(186)		Total Operating Segments	(7,916)		25,026		(32,942)		NM
Intersegment Eliminations	Intersegment Eliminations	0		0		0		0		Intersegment Eliminations	—		—		—		—
Consolidated provision for credit losses	Consolidated provision for credit losses	$	(45,347)	$	52,961	$	(98,308)	(186)	%	Consolidated provision for credit losses	$	(7,916)	$	25,026	$	(32,942)	NM
Non-interest income:	Non-interest income:									Non-interest income:
Community Banking	Community Banking	$	147,268	$	81,003	$	66,265	82	%	Community Banking	$	94,292	$	136,996	$	(42,704)	(31)	%
Specialty Finance	Specialty Finance	23,109		21,308		1,801		8		Specialty Finance	24,426		21,409		3,017		14
Wealth Management	Wealth Management	30,251		24,130		6,121		25		Wealth Management	33,557		26,152		7,405		28
Total Operating Segments	Total Operating Segments	200,628		126,441		74,187		59		Total Operating Segments	152,275		184,557		(32,282)		(17)
Intersegment Eliminations	Intersegment Eliminations	(14,122)		(13,199)		(923)		7		Intersegment Eliminations	(15,801)		(13,964)		(1,837)		13
Consolidated non-interest income	Consolidated non-interest income	$	186,506	$	113,242	$	73,264	65	%	Consolidated non-interest income	$	136,474	$	170,593	$	(34,119)	(20)	%
Net revenue:	Net revenue:									Net revenue:
Community Banking	Community Banking	$	350,757	$	287,838	$	62,919	22	%	Community Banking	$	314,299	$	333,799	$	(19,500)	(6)	%
Specialty Finance	Specialty Finance	68,008		62,020		5,988		10		Specialty Finance	77,085		67,863		9,222		14
Wealth Management	Wealth Management	37,700		31,922		5,778		18		Wealth Management	41,540		33,046		8,494		26
Total Operating Segments	Total Operating Segments	456,465		381,780		74,685		20		Total Operating Segments	432,924		434,708		(1,784)		0
Intersegment Eliminations	Intersegment Eliminations	(8,064)		(7,095)		(969)		14		Intersegment Eliminations	(8,954)		(8,179)		(775)		9
Consolidated net revenue	Consolidated net revenue	$	448,401	$	374,685	$	73,716	20	%	Consolidated net revenue	$	423,970	$	426,529	$	(2,559)	(1)	%
Segment profit:	Segment profit:									Segment profit:
Community Banking	Community Banking	$	121,801	$	34,589	$	87,212	252	%	Community Banking	$	68,790	$	70,584	$	(1,794)	(3)	%
Specialty Finance	Specialty Finance	23,903		22,133		1,770		8		Specialty Finance	30,202		29,859		343		1	%
Wealth Management	Wealth Management	7,444		6,090		1,354		22		Wealth Management	10,145		6,872		3,273		48
Consolidated net income	Consolidated net income	$	153,148	$	62,812	$	90,336	144	%	Consolidated net income	$	109,137	$	107,315	$	1,822	2	%
Segment assets:	Segment assets:									Segment assets:
Community Banking	Community Banking	$	37,102,603	$	31,499,899	$	5,602,704	18	%	Community Banking	$	38,464,169	$	35,729,021	$	2,735,148	8	%
Specialty Finance	Specialty Finance	7,174,269		6,133,548		1,040,721		17		Specialty Finance	7,918,933		6,732,765		1,186,168		18
Wealth Management	Wealth Management	1,405,330		1,166,400		238,930		20		Wealth Management	1,449,169		1,269,932		179,237		14
Consolidated total assets	Consolidated total assets	$	45,682,202	$	38,799,847	$	6,882,355	18	%	Consolidated total assets	$	47,832,271	$	43,731,718	$	4,100,553	9	%

NM - Not meaningful

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	Nine Months Ended				$ Change in Contribution		% Change in Contribution
(Dollars in thousands)	September 30, 2021		September 30, 2020
Net interest income:
Community Banking	$	643,175	$	609,316	$	33,859	6	%
Specialty Finance	142,752		129,581		13,171		10
Wealth Management	23,197		23,272		(75)		0
Total Operating Segments	809,124		762,169		46,955		6
Intersegment Eliminations	19,857		18,341		1,516		8
Consolidated net interest income	$	828,981	$	780,510	$	48,471	6	%
Provision for credit losses:
Community Banking	$	(69,168)	$	207,168	$	(276,336)	NM
Specialty Finance	606		5,872		(5,266)		(90)	%
Wealth Management	—		—		—		—
Total Operating Segments	(68,562)		213,040		(281,602)		NM
Intersegment Eliminations	—		—		—		—
Consolidated provision for credit losses	$	(68,562)	$	213,040	$	(281,602)	NM
Non-interest income:
Community Banking	$	331,970	$	347,697	$	(15,727)	(5)	%
Specialty Finance	69,999		64,548		5,451		8
Wealth Management	95,651		74,747		20,904		28
Total Operating Segments	497,620		486,992		10,628		2
Intersegment Eliminations	(45,267)		(41,164)		(4,103)		10
Consolidated non-interest income	$	452,353	$	445,828	$	6,525	1	%
Net revenue:
Community Banking	$	975,145	$	957,013	$	18,132	2	%
Specialty Finance	212,751		194,129		18,622		10
Wealth Management	118,848		98,019		20,829		21
Total Operating Segments	1,306,744		1,249,161		57,583		5
Intersegment Eliminations	(25,410)		(22,823)		(2,587)		11
Consolidated net revenue	$	1,281,334	$	1,226,338	$	54,996	4	%
Segment profit:
Community Banking	$	263,343	$	97,858	$	165,485	NM
Specialty Finance	77,955		74,680		3,275		4	%
Wealth Management	26,096		19,248		6,848		36
Consolidated net income	$	367,394	$	191,786	$	175,608	92	%

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

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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.

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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 ~~March 31,~~September 30, 2021, December 31, 2020 and ~~March 31,~~September 30, 2020:


		Derivative Assets						Derivative Liabilities							Derivative Assets						Derivative Liabilities

(In thousands)	(In thousands)	March 31, 2021		December 31, 2020		March 31, 2020		March 31, 2021		December 31, 2020		March 31, 2020		(In thousands)	September 30, 2021		December 31, 2020		September 30, 2020		September 30, 2021		December 31, 2020		September 30, 2020
Derivatives designated as hedging instruments under ASC 815:	Derivatives designated as hedging instruments under ASC 815:													Derivatives designated as hedging instruments under ASC 815:
Interest rate derivatives designated as Cash Flow Hedges	Interest rate derivatives designated as Cash Flow Hedges	$	50,420	$	8,182	$	0	$	31,161	$	39,715	$	57,274	Interest rate derivatives designated as Cash Flow Hedges	$	37,529	$	8,182	$	—	$	18,054	$	39,715	$	49,110
Interest rate derivatives designated as Fair Value Hedges	Interest rate derivatives designated as Fair Value Hedges	121		0		0		9,569		14,520		16,123		Interest rate derivatives designated as Fair Value Hedges	839		—		—		8,427		14,520		16,213
Total derivatives designated as hedging instruments under ASC 815	Total derivatives designated as hedging instruments under ASC 815	$	50,541	$	8,182	$	0	$	40,730	$	54,235	$	73,397	Total derivatives designated as hedging instruments under ASC 815	$	38,368	$	8,182	$	—	$	26,481	$	54,235	$	65,323
Derivatives not designated as hedging instruments under ASC 815:	Derivatives not designated as hedging instruments under ASC 815:													Derivatives not designated as hedging instruments under ASC 815:
Interest rate derivatives	Interest rate derivatives	$	155,695	$	221,205	$	259,986	$	155,361	$	221,608	$	256,193	Interest rate derivatives	$	130,947	$	221,205	$	253,238	$	131,097	$	221,608	$	253,530
Interest rate lock commitments	Interest rate lock commitments	44,313		48,925		39,816		1,342		0		1,105		Interest rate lock commitments	16,795		48,925		68,201		753		—		—
Forward commitments to sell mortgage loans	Forward commitments to sell mortgage loans	2,920		0		1,514		3,283		12,510		36,872		Forward commitments to sell mortgage loans	5,260		—		—		2,740		12,510		8,088
Foreign exchange contracts	Foreign exchange contracts	40		111		52		42		112		53		Foreign exchange contracts	242		111		49		243		112		49
Total derivatives not designated as hedging instruments under ASC 815	Total derivatives not designated as hedging instruments under ASC 815	$	202,968	$	270,241	$	301,368	$	160,028	$	234,230	$	294,223	Total derivatives not designated as hedging instruments under ASC 815	$	153,244	$	270,241	$	321,488	$	134,833	$	234,230	$	261,667
Total Derivatives	Total Derivatives	$	253,509	$	278,423	$	301,368	$	200,758	$	288,465	$	367,620	Total Derivatives	$	191,612	$	278,423	$	321,488	$	161,314	$	288,465	$	326,990

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.

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As of ~~March 31,~~September 30, 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 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.

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The table below provides details on these cash flow hedges, summarized by derivative type and maturity, as of ~~March 31,~~September 30, 2021:


		March 31, 2021					September 30, 2021
(In thousands)	(In thousands)	Notional		Fair Value		(In thousands)	Notional		Fair Value
Maturity Date	Maturity Date	Amount		Asset (Liability)		Maturity Date	Amount		Asset (Liability)
Interest Rate Swaps:	Interest Rate Swaps:					Interest Rate Swaps:
October 2021	October 2021	$	25,000	$	(286)	October 2021	$	25,000	$	(9)
November 2021	November 2021	20,000		(287)		November 2021	20,000		(65)
December 2021	December 2021	165,000		(2,614)		December 2021	165,000		(812)
March 2022	March 2022	500,000		(220)		March 2022	500,000		(110)
May 2022	May 2022	370,000		(7,884)		May 2022	370,000		(4,335)
June 2022	June 2022	160,000		(3,652)		June 2022	160,000		(2,156)
July 2022	July 2022	230,000		(5,359)		July 2022	230,000		(3,218)
August 2022	August 2022	235,000		(5,944)		August 2022	235,000		(3,795)
March 2023	March 2023	250,000		(300)		March 2023	250,000		(133)
April 2024	April 2024	250,000		598		April 2024	250,000		784
July 2027 (1)	July 2027 (1)	1,000,000		49,823		July 2027 (1)	1,000,000		36,745
Interest Rate Collars:	Interest Rate Collars:					Interest Rate Collars:
September 2023	September 2023	96,429		(4,616)		September 2023	85,714		(3,421)

Total Cash Flow Hedges	Total Cash Flow Hedges	$	3,301,429	$	19,259	Total Cash Flow Hedges	$	3,290,714	$	19,475

(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			Three Months Ended						Nine Months Ended
(In thousands)	(In thousands)		March 31, 2021			March 31, 2020		(In thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Unrealized loss at beginning of period			$	(31,533)		$	(17,943)
Unrealized gain (loss) at beginning of period								Unrealized gain (loss) at beginning of period	$	10,471	$	(59,503)	$	(31,533)	$	(17,943)
Amount reclassified from accumulated other comprehensive income to interest expense on deposits, other borrowings and junior subordinated debentures	Amount reclassified from accumulated other comprehensive income to interest expense on deposits, other borrowings and junior subordinated debentures		6,696			1,090		Amount reclassified from accumulated other comprehensive income to interest expense on deposits, other borrowings and junior subordinated debentures	6,780		5,667		20,342		12,208
Amount of income (loss) recognized in other comprehensive income	Amount of income (loss) recognized in other comprehensive income		44,096			(39,783)		Amount of income (loss) recognized in other comprehensive income	2,224		4,726		30,666		(43,375)
Unrealized gain (loss) at end of period	Unrealized gain (loss) at end of period		$	19,259		$	(56,636)	Unrealized gain (loss) at end of period	$	19,475	$	(49,110)	$	19,475	$	(49,110)

As of ~~March 31,~~September 30, 2021, the Company estimates that during the next twelve months ~~$19.9~~$14.9 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 ~~March 31,~~September 30, 2021, the Company has 1715 interest rate swaps with an aggregate notional amount of ~~$167.5~~$229.6 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. NaN of these interest rate swaps with an aggregate notional amount of $73.9 million has terms starting after September 30, 2021.

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.

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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 ~~March 31,~~September 30, 2021:

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			March 31, 2021								September 30, 2021
(In thousands) Derivatives in Fair Value Hedging Relationships	(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		(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	Interest rate swaps	Loans, net of unearned income	$	175,605	$	9,262	$	(157)	Interest rate swaps	Loans, net of unearned income		$	162,775	$	7,815	$	(138)
		Available-for-sale debt securities	1,303		94		0			Available-for-sale debt securities		1,229		84		—

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~~

~~March 31, 2021~~

~~Interest rate swaps~~

~~Interest and fees on loans~~

~~(13)~~

~~Interest income - investment securities~~


(In thousands) Derivatives in Fair Value Hedging Relationships	Location of (Loss)/Gain Recognized in Income on Derivative	Three Months Ended		Nine Months Ended
		September 30, 2021		September 30, 2021
Interest rate swaps	Interest and fees on loans	$	31	$	61
	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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2021, the Company had interest rate derivative transactions with an aggregate notional amount of approximately ~~$9.0~~$9.2 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 ~~April~~October 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 ~~March 31,~~September 30, 2021, the Company had forward commitments to sell mortgage loans with an aggregate notional amount of approximately ~~$2.3~~$1.3 billion and interest rate lock commitments with an aggregate notional amount of approximately ~~$1.1 billion.~~$624.8 million. The fair values of these derivatives were

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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

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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 ~~March 31,~~September 30, 2021, the Company held foreign currency derivatives with an aggregate notional amount of approximately ~~$3.8~~$19.3 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 0no covered call options outstanding as of ~~March 31,~~September 30, 2021, December 31, 2020 or ~~March 31,~~September 30, 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 0no such options or swaps outstanding as of ~~March~~September 30, 2021, December 31, ~~2021.~~2020 or September 30, 2020.

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


(In thousands)	(In thousands)		Three Months Ended			(In thousands)				Three Months Ended			Nine Months Ended
Derivative	Derivative	Location in income statement		March 31, 2021			March 31, 2020		Derivative	Location in income statement	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Interest rate swaps and caps	Interest rate swaps and caps	Trading gains (losses), net		$	428		$	(428)	Interest rate swaps and caps	Trading gains (losses), net	$	55	$	135	$	(56)	$	(996)
Mortgage banking derivatives	Mortgage banking derivatives	Mortgage banking revenue		(17,479)			17,267		Mortgage banking derivatives	Mortgage banking revenue	(4,201)		11,202		(32,160)		71,761
Foreign exchange contracts	Foreign exchange contracts	Trading gains (losses), net		(5)			(4)		Foreign exchange contracts	Trading (losses) gains, net	(1)		5		(9)		(8)
Covered call options	Covered call options	Fees from covered call options		0			2,292		Covered call options	Fees from covered call options	1,157		—		2,545		2,292
Derivative contract held as economic hedge on MSRs	Derivative contract held as economic hedge on MSRs	Mortgage banking revenue		0			4,160		Derivative contract held as economic hedge on MSRs	Mortgage banking revenue	—		—		—		4,749

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 ~~March 31,~~September 30, 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 ~~$131.4~~$115.7 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

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have been required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty.

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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							Derivative Assets						Derivative Liabilities
		Fair Value						Fair Value							Fair Value						Fair Value
(In thousands)	(In thousands)	March 31, 2021		December 31, 2020		March 31, 2020		March 31, 2021		December 31, 2020		March 31, 2020		(In thousands)	September 30, 2021		December 31, 2020		September 30, 2020		September 30, 2021		December 31, 2020		September 30, 2020
Gross Amounts Recognized	Gross Amounts Recognized	$	206,236	$	229,387	$	259,986	$	196,091	$	275,843	$	329,590	Gross Amounts Recognized	$	169,315	$	229,387	$	253,238	$	157,578	$	275,843	$	318,853
Less: Amounts offset in the Statements of Financial Condition	Less: Amounts offset in the Statements of Financial Condition	0		0		0		0		0		0		Less: Amounts offset in the Statements of Financial Condition	—		—		—		—		—		—
Net amount presented in the Statements of Financial Condition	Net amount presented in the Statements of Financial Condition	$	206,236	$	229,387	$	259,986	$	196,091	$	275,843	$	329,590	Net amount presented in the Statements of Financial Condition	$	169,315	$	229,387	$	253,238	$	157,578	$	275,843	$	318,853
Gross amounts not offset in the Statements of Financial Condition	Gross amounts not offset in the Statements of Financial Condition													Gross amounts not offset in the Statements of Financial Condition
Offsetting Derivative Positions	Offsetting Derivative Positions	(60,593)		(8,647)		(1,048)		(60,593)		(8,647)		(1,048)		Offsetting Derivative Positions	(42,645)		(8,647)		(353)		(42,645)		(8,647)		(353)
Collateral Posted	Collateral Posted	0		0		0		(125,818)		(266,832)		(328,542)		Collateral Posted	—		—		—		(110,440)		(266,832)		(318,071)
Net Credit Exposure	Net Credit Exposure	$	145,643	$	220,740	$	258,938	$	9,680	$	364	$	0	Net Credit Exposure	$	126,670	$	220,740	$	252,885	$	4,493	$	364	$	429

(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.

•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

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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.

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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 ~~March 31,~~September 30, 2021, the Company classified ~~$101.7~~$117.7 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 $1.8 million of U.S. Government agency securities as Level 3 at March 31, 2021.~~ 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 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 ~~first~~third quarter of 2021, all of the ratings derived by the Investment Operations Department using the above process were “BBB” or better. The fair value measurement 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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2021, the Company classified ~~$6.4~~$12.1 million of loans held-for-investment as Level 3. The ~~weighted average~~assumed discount rate used as an input to value these loans at ~~March 31,~~September 30, 2021 was ~~2.38% 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 ~~12.99%~~12.77% at ~~March 31,~~September 30, 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 ~~0.26%~~0.51% with credit loss discount ranging from 0%-3% at ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2021, the Company classified ~~$124.3~~$133.6 million of MSRs as Level 3. The weighted average discount rate used as an input to value the pool of MSRs at ~~March 31,~~September 30, 2021 was ~~9.88%~~9.82% with discount rates applied ranging from 3%7%-19%. 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 6%-92% or a weighted average prepayment speed of ~~12.99%~~12.77%. Further, for current and delinquent loans, the Company assumed a weighted average cost of servicing of ~~$76~~$75 and ~~$354,~~$287, 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 8 - 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

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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

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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 ~~March 31,~~September 30, 2021, the Company classified ~~$25.6~~$14.6 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 ~~March 31,~~September 30, 2021 was 86% with pull-through rates applied ranging from ~~14%~~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:


		March 31, 2021									September 30, 2021
(In thousands)	(In thousands)	Total		Level 1		Level 2		Level 3		(In thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities	Available-for-sale securities									Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	65,001	$	65,001	$	0	$	0	U.S. Treasury	$	6,000	$	6,000	$	—	$	—
U.S. Government agencies	U.S. Government agencies	81,526		0		79,742		1,784		U.S. Government agencies	53,275		—		53,275		—
Municipal	Municipal	148,300		0		46,552		101,748		Municipal	174,600		—		56,876		117,724
Corporate notes	Corporate notes	92,349		0		92,349		0		Corporate notes	99,118		—		99,118		—
Mortgage-backed	Mortgage-backed	2,043,573		0		2,043,573		0		Mortgage-backed	2,040,485		—		2,040,485		—

Trading account securities	Trading account securities	951		0		951		0		Trading account securities	1,103		—		1,103		—
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	90,338		82,272		8,066		0		Equity securities with readily determinable fair value	88,193		80,127		8,066		—
Mortgage loans held-for-sale	Mortgage loans held-for-sale	1,260,193		0		1,260,193		0		Mortgage loans held-for-sale	925,312		—		925,312		—
Loans held-for-investment	Loans held-for-investment	51,916		0		45,508		6,408		Loans held-for-investment	30,979		—		18,847		12,132
MSRs	MSRs	124,316		0		0		124,316		MSRs	133,552		—		—		133,552
Nonqualified deferred compensation assets	Nonqualified deferred compensation assets	15,891		0		15,891		0		Nonqualified deferred compensation assets	15,797		—		15,797		—
Derivative assets	Derivative assets	253,509		0		227,875		25,634		Derivative assets	191,612		—		177,000		14,612
Total	Total	$	4,227,863	$	147,273	$	3,820,700	$	259,890	Total	$	3,760,026	$	86,127	$	3,395,879	$	278,020
Derivative liabilities	Derivative liabilities	$	200,758	$	0	$	200,758	$	0	Derivative liabilities	$	161,314	$	—	$	161,314	$	—


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

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		March 31, 2020									September 30, 2020
(In thousands)	(In thousands)	Total		Level 1		Level 2		Level 3		(In thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities	Available-for-sale securities									Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	121,670	$	121,670	$	0	$	0	U.S. Treasury	$	280,108	$	280,108	$	—	$	—
U.S. Government agencies	U.S. Government agencies	368,643		0		366,186		2,457		U.S. Government agencies	178,666		—		176,537		2,129
Municipal	Municipal	146,609		0		33,342		113,267		Municipal	154,195		—		34,724		119,471
Corporate notes	Corporate notes	101,018		0		101,018		0		Corporate notes	104,135		—		104,135		—
Mortgage-backed	Mortgage-backed	2,833,019		0		2,833,019		0		Mortgage-backed	2,229,355		—		2,229,355		—
Trading account securities	Trading account securities	2,257		0		2,257		0		Trading account securities	1,720		—		1,720		—
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	47,310		39,244		8,066		0		Equity securities with readily determinable fair value	54,398		46,332		8,066		—
Mortgage loans held-for-sale	Mortgage loans held-for-sale	656,934		0		656,934		0		Mortgage loans held-for-sale	959,671		—		959,671		—
Loans held-for-investment	Loans held-for-investment	142,267		0		132,699		9,568		Loans held-for-investment	253,515		—		240,902		12,613
MSRs	MSRs	73,504		0		0		73,504		MSRs	86,907		—		—		86,907
Nonqualified deferred compensation assets	Nonqualified deferred compensation assets	12,253		0		12,253		0		Nonqualified deferred compensation assets	14,197		—		14,197		—
Derivative assets	Derivative assets	301,368		0		261,552		39,816		Derivative assets	321,488		—		254,601		66,887
Total	Total	$	4,806,852	$	160,914	$	4,407,326	$	238,612	Total	$	4,638,355	$	326,440	$	4,023,908	$	288,007
Derivative liabilities	Derivative liabilities	$	367,620	$	0	$	367,620	$	0	Derivative liabilities	$	326,990	$	—	$	326,990	$	—

The aggregate remaining contractual principal balance outstanding as of ~~March 31,~~September 30, 2021, December 31, 2020 and ~~March 31,~~September 30, 2020 for mortgage loans held-for-sale measured at fair value under ASC 825 was ~~$1.2 billion,~~$900.8 million, $1.2 billion and ~~$618.7~~$927.1 million, respectively, while the aggregate fair value of mortgage loans held-for-sale was ~~$1.3 billion,~~$925.3 million, $1.3 billion and ~~$656.9~~$959.7 million, for the same respective periods, as shown in the above tables. There were ~~$115.2~~$122.6 million of loans past due greater than 90 days and still accruing in the mortgage loans held-for-sale portfolio as of ~~March��31,~~September 30, 2021 compared to $134.1 million as of December 31, 2020 and ~~$358,000~~$27.3 million as of ~~March 31,~~September 30, 2020. All of the loans past due greater than 90 days and still accruing as of ~~March 31,~~September 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 nine months ended ~~March 31,~~September 30, 2021 and 2020 are summarized as follows:


				U.S. Government agencies				Loans held-for- investment			Mortgage servicing rights			Derivative assets									U.S. Government agencies		Loans held-for- investment			Mortgage servicing rights			Derivative assets
(In thousands)	(In thousands)	Municipal								Derivative assets			Municipal							U.S. Government agencies	Loans held-for- investment	Mortgage servicing rights
Balance at January 1, 2021		$	109,876			$	1,966				$	10,280				$	92,081	$	48,091
Balance at July 1, 2021																	Balance at July 1, 2021	$	117,606							$	—		$	11,007		$	127,604	$	22,570
Total net gains (losses) included in:	Total net gains (losses) included in:																Total net gains (losses) included in:
Net income (1)	Net income (1)	0		0				(530)			32,235			(22,457)			Net income (1)	—					—		54			5,948			(7,958)
Other comprehensive income (loss)	Other comprehensive income (loss)	(2,068)		(24)				0			0			0			Other comprehensive income (loss)	(757)					—		—			—			—
Purchases	Purchases	0		0				0			0			0			Purchases	875					—		—			—			—
Issuances	Issuances	0		0				0			0			0			Issuances	—					—		—			—			—
Sales	Sales	0		0				0			0			0			Sales	—					—		—			—			—
Settlements	Settlements	(6,060)		(158)				(3,918)			0			0			Settlements	—					—		(588)			—			—
Net transfers into/(out of) Level 3	Net transfers into/(out of) Level 3	0		0				576			0			0			Net transfers into/(out of) Level 3	—					—		1,659			—			—
Balance at March 31, 2021		$	101,748	$	1,784			$	6,408		$	124,316		$	25,634
Balance at September 30, 2021																	Balance at September 30, 2021	$	117,724				$	—	$	12,132		$	133,552		$	14,612

(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.

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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 (78) (12,134) 37,185
Other comprehensive income (loss) (1,249) (32) 0 0 0
Purchases 5,875 0 0 0 0
Issuances 0 0 0 0 0
Sales 0 0 0 0 0
Settlements (3,309) (157) (96) 0 0
Net transfers into/(out of) Level 3 0 0 122 0 0
Balance at March 31, 2020 $ 113,267 $ 2,457 $ 9,568 $ 73,504 $ 39,816


			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)	—		(4)		(309)		41,471		(33,479)
Other comprehensive income (loss)	(3,199)		(24)		—		—		—
Purchases	19,038		—		—		—		—
Issuances	—		—		—		—		—
Sales	—		—		—		—		—
Settlements	(7,991)		(1,938)		(4,565)		—		—
Net transfers into/(out of) Level 3	—		—		6,726		—		—
Balance at September 30, 2021	$	117,724	$	—	$	12,132	$	133,552	$	14,612


			U.S. Government agencies		Loans held-for- investment		Mortgage servicing rights		Derivative assets
(In thousands)	Municipal
Balance at July 1, 2020	$	117,255	$	2,293	$	13,953	$	77,203	$	58,433
Total net gains (losses) included in:
Net income (1)	—		—		47		9,704		8,454
Other comprehensive income (loss)	64		(7)		—		—		—
Purchases	3,221		—		—		—		—
Issuances	—		—		—		—		—
Sales	—		—		—		—		—
Settlements	(1,069)		(157)		(7,877)		—		—
Net transfers into/(out of) Level 3	—		—		6,490		—		—
Balance at September 30, 2020	$	119,471	$	2,129	$	12,613	$	86,907	$	66,887


			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)	—		—		169		1,269		64,256
Other comprehensive income (loss)	(1,731)		(46)		—		—		—
Purchases	16,093		—		—		—		—
Issuances	—		—		—		—		—
Sales	—		—		—		—		—
Settlements	(6,841)		(471)		(9,337)		—		—
Net transfers into/(out of) Level 3	—		—		12,161		—		—
Balance at September 30, 2020	$	119,471	$	2,129	$	12,613	$	86,907	$	66,887

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Also, the Company may be required, from time to time, to measure certain other 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 ~~March 31,~~September 30, 2021:


		March 31, 2021								Three Months Ended March 31, 2021 Fair Value Losses Recognized, net					September 30, 2021												Three Months Ended September 30, 2021 Fair Value Losses Recognized, net			Nine Months Ended September 30, 2021 Fair Value Losses Recognized, net
(In thousands)	(In thousands)	Total		Level 1		Level 2		Level 3				(In thousands)	Total				Level 1			Level 2			Level 3			Three Months Ended September 30, 2021 Fair Value Losses Recognized, net			Nine Months Ended September 30, 2021 Fair Value Losses Recognized, net
Individually assessed loans - foreclosure probable and collateral-dependent	Individually assessed loans - foreclosure probable and collateral-dependent	$	87,757	$	0	$	0	$	87,757	$	12,548			Individually assessed loans - foreclosure probable and collateral-dependent	$	78,653		$	—		$	—		$	78,653		$	1,425		$	17,956
Other real estate owned (1)	Other real estate owned (1)	15,813		0		0		15,813		170				Other real estate owned (1)	13,845			—			—			13,845			93			1,012
Total	Total	$	103,570	$	0	$	0	$	103,570	$	12,718			Total	$	92,498		$	—		$	—		$	92,498		$	1,518		$	18,968

(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 foreclosure probable and collateral-dependent 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 6 – Allowance for Credit Losses. At ~~March 31,~~September 30, 2021, the Company had ~~$124.4~~$109.0 million of individually assessed loans classified as Level 3. Of the ~~$124.4~~$109.0 million of individually assessed loans, ~~$87.8~~$78.7 million were measured at fair value based on the underlying collateral of the loan as shown in the table above. The remaining ~~$36.6~~$30.3 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 ~~March 31,~~September 30, 2021, the Company had ~~$15.8~~$13.8 million of other real estate owned classified as Level 3. The unobservable

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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 ~~March 31,~~September 30, 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 $ 101,748 Bond pricing Equivalent rating BBB-AA+ N/A Increase
U.S. Government agencies 1,784 Bond pricing Equivalent rating AAA AAA Increase
Loans held-for-investment 6,408 Discounted cash flows Discount rate 2%-3% 2.38% Decrease
Credit discount 0%-3% 0.26% Decrease
Constant prepayment rate (CPR) 12.99% 12.99% Decrease
MSRs 124,316 Discounted cash flows Discount rate 3%-19% 9.88% Decrease
Constant prepayment rate (CPR) 6%-92% 12.99% Decrease
Cost of servicing $70-$200 $76 Decrease
Cost of servicing - delinquent $200-$1,000 $354 Decrease
Derivatives 25,634 Discounted cash flows Pull-through rate 14%-100% 86.39% Increase
Measured at fair value on a non-recurring basis:
Individually assessed loans - foreclosure probable and collateral-dependent $ 87,757 Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease
Other real estate owned 15,813 Appraisal value Appraisal adjustment - cost of sale 10% 10.00% Decrease

4449

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(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

117,724

Bond pricing

Equivalent rating

BBB-AA+

N/A

Increase

Loans held-for-investment

12,132

Discounted cash flows

Discount rate

2.88%

Decrease

Credit discount

0%-3%

0.51%

Decrease

Constant prepayment rate (CPR)

12.77%

Decrease

MSRs

133,552

Discounted cash flows

Discount rate

7%-19%

9.82%

Decrease

Constant prepayment rate (CPR)

6%-92%

12.77%

Decrease

Cost of servicing

$70-$200

$75

Decrease

Cost of servicing - delinquent

$200-$1,000

$287

Decrease

Derivatives

14,612

Discounted cash flows

Pull-through rate

1%-100%

86.28%

Increase

Measured at fair value on a non-recurring basis:

Individually assessed loans - foreclosure probable and collateral-dependent

78,653

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

Other real estate owned

13,845

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

The Company is required under applicable accounting guidance to report the fair value of all financial instruments on the Consolidated Statements 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 March 31, 2021 At December 31, 2020 At March 31, 2020
Carrying Fair Carrying Fair Carrying Fair
(In thousands) Value Value Value Value Value Value
Financial Assets:
Cash and cash equivalents $ 426,377 $ 426,377 $ 322,474 $ 322,474 $ 349,427 $ 349,427
Interest-bearing deposits with banks 3,348,794 3,348,794 4,802,527 4,802,527 1,943,743 1,943,743
Available-for-sale securities 2,430,749 2,430,749 3,055,839 3,055,839 3,570,959 3,570,959
Held-to-maturity securities 2,166,419 2,121,065 579,138 593,767 865,376 879,192
Trading account securities 951 951 671 671 2,257 2,257
Equity securities with readily determinable fair value 90,338 90,338 90,862 90,862 47,310 47,310
FHLB and FRB stock, at cost 135,881 135,881 135,588 135,588 134,546 134,546
Brokerage customer receivables 19,056 19,056 17,436 17,436 16,293 16,293
Mortgage loans held-for-sale, at fair value 1,260,193 1,260,193 1,272,090 1,272,090 656,934 656,934
Loans held-for-investment, at fair value 51,916 51,916 55,134 55,134 142,267 142,267
Loans held-for-investment, at amortized cost 33,119,317 33,066,760 32,023,939 31,871,683 27,665,054 27,469,489
Nonqualified deferred compensation assets 15,891 15,891 15,398 15,398 12,253 12,253
Derivative assets 253,509 253,509 278,423 278,423 301,368 301,368
Accrued interest receivable and other 281,020 281,020 272,339 272,339 275,499 275,499
Total financial assets $ 43,600,411 $ 43,502,500 $ 42,921,858 $ 42,784,231 $ 35,983,286 $ 35,801,537
Financial Liabilities
Non-maturity deposits $ 33,061,502 $ 33,061,502 $ 32,116,023 $ 32,116,023 $ 26,071,881 $ 26,071,881
Deposits with stated maturities 4,811,150 4,801,257 4,976,628 4,969,849 5,389,779 5,394,523
FHLB advances 1,228,436 1,121,269 1,228,429 1,172,315 1,174,894 1,130,327
Other borrowings 516,877 516,877 518,928 518,928 487,503 487,503
Subordinated notes 436,595 458,832 436,506 473,093 436,179 487,745
Junior subordinated debentures 253,566 208,132 253,566 204,713 253,566 224,523
Derivative liabilities 200,758 200,758 288,465 288,465 367,620 367,620
Accrued interest payable 19,940 19,940 15,645 15,645 27,696 27,696
Total financial liabilities $ 40,528,824 $ 40,388,567 $ 39,834,190 $ 39,759,031 $ 34,209,118 $ 34,191,818


	At September 30, 2021				At December 31, 2020				At September 30, 2020
	Carrying		Fair		Carrying		Fair		Carrying		Fair
(In thousands)	Value		Value		Value		Value		Value		Value
Financial Assets:
Cash and cash equivalents	$	462,299	$	462,299	$	322,474	$	322,474	$	308,695	$	308,695
Interest-bearing deposits with banks	5,232,315		5,232,315		4,802,527		4,802,527		3,825,823		3,825,823
Available-for-sale securities	2,373,478		2,373,478		3,055,839		3,055,839		2,946,459		2,946,459
Held-to-maturity securities	2,736,722		2,699,480		579,138		593,767		560,267		575,947
Trading account securities	1,103		1,103		671		671		1,720		1,720
Equity securities with readily determinable fair value	88,193		88,193		90,862		90,862		54,398		54,398
FHLB and FRB stock, at cost	135,408		135,408		135,588		135,588		135,568		135,568
Brokerage customer receivables	26,378		26,378		17,436		17,436		16,818		16,818
Mortgage loans held-for-sale, at fair value	925,312		925,312		1,272,090		1,272,090		959,671		959,671
Loans held-for-investment, at fair value	30,979		30,979		55,134		55,134		253,515		253,515
Loans held-for-investment, at amortized cost	33,233,064		33,276,688		32,023,939		31,871,683		31,882,040		31,723,559

Nonqualified deferred compensation assets	15,797		15,797		15,398		15,398		14,197		14,197
Derivative assets	191,612		191,612		278,423		278,423		321,488		321,488

Accrued interest receivable and other	272,293		272,293		272,339		272,339		272,940		272,940
Total financial assets	$	45,724,953	$	45,731,335	$	42,921,858	$	42,784,231	$	41,553,599	$	41,410,798
Financial Liabilities
Non-maturity deposits	$	35,822,012	$	35,822,012	$	32,116,023	$	32,116,023	$	30,778,127	$	30,778,127
Deposits with stated maturities	4,130,546		4,124,199		4,976,628		4,969,849		5,066,295		5,063,732
FHLB advances	1,241,071		1,164,168		1,228,429		1,172,315		1,228,422		1,207,203
Other borrowings	504,527		504,527		518,928		518,928		507,395		507,395
Subordinated notes	436,811		474,171		436,506		473,093		436,385		473,825
Junior subordinated debentures	253,566		207,675		253,566		204,713		253,566		208,333
Derivative liabilities	161,314		161,314		288,465		288,465		326,990		326,990

Accrued interest payable	15,030		15,030		15,645		15,645		21,310		21,310
Total financial liabilities	$	42,564,877	$	42,473,096	$	39,834,190	$	39,759,031	$	38,618,490	$	38,586,915

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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 scheduled cash flows through the estimated maturity using estimated market discount rates that reflect credit and interest rate

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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.

(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 ~~March 31,~~September 30, 2021, approximately ~~951,000~~976,000 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

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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. 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~~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~~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 prior to 2017, nonqualified stock options were in the 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 stock awards are entitled to receive, at no cost, the shares earned based on the achievement of the pre-established long-term goals.

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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. 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 and the Black-Scholes option-pricing model require the input of highly subjective assumptions and are sensitive to changes in the award's expected life and the price volatility of the underlying stock, which can materially affect the fair value estimates. Management periodically reviews and adjusts the assumptions used to calculate the fair value of such awards when granted. ~~NaN~~No options 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 ~~$2.9~~$3.2 million in the ~~first~~third quarter of 2021 and ~~$(2.8)~~$1.3 million in the ~~first~~third quarter of ~~2020.~~2020, and $9.4 million and $(1.0) million in the 2021 and 2020 year-to-date periods, respectively.

A summary of the Company's stock option activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 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 (208,579) 42.96
Forfeited or canceled (590) 46.86
Outstanding at March 31, 2021 311,494 $ 42.14 1.8 $ 10,485
Exercisable at March 31, 2021 309,945 $ 42.11 1.8 $ 10,441

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Stock Options	Stock Options	Common Shares	Weighted Average Strike Price		Remaining Contractual Term (1)	Intrinsic Value (2) (in thousands)		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, 2021								Outstanding at January 1, 2021	520,663	$	42.47
Granted	Granted	0	0					Granted	—	—
Exercised	Exercised	(94,653)	38.69					Exercised	(245,286)	43.05
Forfeited or canceled	Forfeited or canceled	0	0					Forfeited or canceled	(590)	46.86
Outstanding at March 31, 2020		660,679	$	42.97	2.5	$	0
Exercisable at March 31, 2020		650,456	$	42.95	2.4	$	1
Outstanding at September 30, 2021								Outstanding at September 30, 2021	274,787	$	41.95	1.4	$	10,557
Exercisable at September 30, 2021								Exercisable at September 30, 2021	273,238	$	41.92	1.4	$	10,506


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

Granted	—	—
Exercised	(104,703)	38.71
Forfeited or canceled	(5,608)	44.34
Outstanding at September 30, 2020	645,021	$	43.02	1.9	$	52
Exercisable at September 30, 2020	637,120	$	43.01	1.8	$	52

(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 ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020, was ~~$6.6~~$7.9 million and $2.7 million, respectively. Cash received from option exercises under the Plans for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 was ~~$9.0~~$10.6 million and ~~$3.7~~$4.1 million, respectively.

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A summary of the Plans' restricted share activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 is presented below:


		Three months ended March 31, 2021			Three months ended March 31, 2020				Nine months ended September 30, 2021			Nine months ended September 30, 2020
Restricted Shares	Restricted Shares	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value		Restricted Shares	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1	Outstanding at January 1	234,794	$	59.02	144,328	$	60.37	Outstanding at January 1	234,794	$	59.02	144,328	$	60.37
Granted	Granted	257,189	62.79		99,963	64.10		Granted	268,429	63.22		113,156	61.32
Vested and issued	Vested and issued	(7,104)	78.13		(9,633)	75.69		Vested and issued	(13,120)	72.01		(13,917)	77.77
Forfeited or canceled	Forfeited or canceled	(849)	63.44		(3,538)	81.89		Forfeited or canceled	(12,624)	63.55		(6,547)	73.71
Outstanding at March 31		484,030	$	60.73	231,120	$	61.02
Vested, but not issuable at March 31		94,348	$	52.21	92,244	$	52.23
Outstanding at September 30								Outstanding at September 30	477,479	$	60.90	237,020	$	59.43
Vested, but not issuable at September 30								Vested, but not issuable at September 30	95,215	$	52.39	93,514	$	52.08

A summary of the Plans' performance-based stock award activity, based on the target level of the awards, for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 is presented below:


		Three months ended March 31, 2021			Three months ended March 31, 2020				Nine months ended September 30, 2021			Nine months ended September 30, 2020
Performance-based Stock	Performance-based Stock	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value		Performance-based Stock	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1	Outstanding at January 1	482,608	$	71.15	465,515	$	74.37	Outstanding at January 1	482,608	$	71.15	465,515	$	74.37
Granted	Granted	206,465	58.85		166,547	64.10		Granted	208,732	58.97		169,864	63.62
Added by performance factor at vesting	Added by performance factor at vesting	0	0		48,831	72.59		Added by performance factor at vesting	—	—		48,831	72.59
Vested and issued	Vested and issued	0	0		(180,596)	72.59		Vested and issued	—	—		(180,789)	72.59
Expired, canceled or forfeited	Expired, canceled or forfeited	(125,622)	87.88		(6,071)	73.66		Expired, canceled or forfeited	(132,998)	86.51		(18,727)	72.66
Outstanding at March 31		563,451	$	62.91	494,226	$	71.39
Vested, but deferred at March 31		34,748	$	43.28	34,166	$	43.27
Outstanding at September 30								Outstanding at September 30	558,342	$	62.94	484,694	$	71.15
Vested, but deferred at September 30								Vested, but deferred at September 30	35,040	$	43.53	34,441	$	43.07

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(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 2021 Board of Directors meeting, a quarterly cash dividend of $0.31 per share ($1.24 on an annualized basis) was declared. It was paid on February 25, 2021 to shareholders of record as of February 11, 2021. At the April 2021 Board of Directors meeting, a quarterly cash dividend of $0.31 per share ($1.24 on an annualized basis) was declared. It was paid on May 20, 2021 to shareholders of record as of May 6, 2021. At the July 2021 Board of Directors meeting, a quarterly cash dividend of $0.31 per share ($1.24 on an annualized basis) was declared. It was paid on August 19, 2021 to shareholders of record as of August 5, 2021.

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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
Income (Loss)
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 (44,519) 32,345 2,180 (9,994)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax (154) 4,912 0 4,758
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 (42) 0 0 (42)
Net other comprehensive (loss) income during the period, net of tax $ (44,715) $ 37,257 $ 2,180 $ (5,278)
Balance at March 31, 2021 $ 26,022 $ 14,167 $ (30,085) $ 10,104
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 67,007 (29,170) (11,145) 26,692
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax (359) 799 0 440
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 (57) 0 0 (57)
Net other comprehensive income (loss) during the period, net of tax $ 66,591 $ (28,371) $ (11,145) $ 27,075
Balance at March 31, 2020 $ 81,573 $ (41,512) $ (47,664) $ (7,603)


	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 July 1, 2021	$	30,189	$	7,720	$	(27,776)	$	10,133
Other comprehensive (loss) income during the period, net of tax, before reclassifications	(10,374)		1,631		(4,650)		(13,393)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(256)		4,973		—		4,717
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	(40)		—		—		(40)
Net other comprehensive (loss) income during the period, net of tax	$	(10,670)	$	6,604	$	(4,650)	$	(8,716)
Balance at September 30, 2021	$	19,519	$	14,324	$	(32,426)	$	1,417

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	(50,265)		22,493		(161)		(27,933)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(837)		14,921		—		14,084
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	(116)		—		—		(116)
Net other comprehensive (loss) income during the period, net of tax	$	(51,218)	$	37,414	$	(161)	$	(13,965)
Balance at September 30, 2021	$	19,519	$	14,324	$	(32,426)	$	1,417


Balance at July 1, 2020	$	85,506	$	(43,606)	$	(42,497)	$	(597)
Other comprehensive (loss) income during the period, net of tax, before reclassifications	(10,682)		3,466		2,891		(4,325)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(36)		4,157		—		4,121
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	(40)		—		—		(40)
Net other comprehensive (loss) income during the period, net of tax	$	(10,758)	$	7,623	$	2,891	$	(244)
Balance at September 30, 2020	$	74,748	$	(35,983)	$	(39,606)	$	(841)

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	60,043		(31,796)		(3,087)		25,160
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(146)		8,954		—		8,808
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	(131)		—		—		(131)
Net other comprehensive income (loss) during the period, net of tax	$	59,766	$	(22,842)	$	(3,087)	$	33,837
Balance at September 30, 2020	$	74,748	$	(35,983)	$	(39,606)	$	(841)

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		Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the						Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the
Details Regarding the Component of Accumulated Other Comprehensive Income (Loss)	Details Regarding the Component of Accumulated Other Comprehensive Income (Loss)	Three Months Ended				Impacted Line on the Consolidated Statements of Income	Details Regarding the Component of Accumulated Other Comprehensive Income (Loss)				Three Months Ended								Nine Months Ended							Impacted Line on the Consolidated Statements of Income
		March 31,									September 30,								September 30,
		2021		2020				Details Regarding the Component of Accumulated Other Comprehensive Income (Loss)					2021				2020				2021				Impacted Line on the Consolidated Statements of Income
Accumulated unrealized gains on securities	Accumulated unrealized gains on securities
Gains included in net income	Gains included in net income	$	210	$	491					Gains (losses) on investment securities, net				$	350			$	50			$	1,144					$	200
		210		491					Income before taxes						350				50				1,144			200				Income before taxes
Tax effect	Tax effect	(56)		(132)					Income tax expense			Tax effect			(94)				(14)				(307)			(54)				Income tax expense
Net of tax	Net of tax	$	154	$	359				Net income			Net of tax			$	256			$	36			$	837		$	146			Net income

Accumulated unrealized gains on derivative instruments	Accumulated unrealized gains on derivative instruments											Accumulated unrealized gains on derivative instruments
Amount reclassified to interest expense on deposits	Amount reclassified to interest expense on deposits	$	4,897	$	559				Interest on deposits			Amount reclassified to interest expense on deposits			$	4,947			$	3,884			$	14,898		$	8,806			Interest on deposits
Amount reclassified to interest expense on other borrowings	Amount reclassified to interest expense on other borrowings	669		292					Interest on other borrowings			Amount reclassified to interest expense on other borrowings			636				740				1,958			1,458				Interest on other borrowings
Amount reclassified to interest expense on junior subordinated debentures	Amount reclassified to interest expense on junior subordinated debentures	1,130		239					Interest on junior subordinated debentures			Amount reclassified to interest expense on junior subordinated debentures			1,197				1043				3,486			1944				Interest on junior subordinated debentures
		(6,696)		(1,090)					Income before taxes						(6,780)				(5,667)				(20,342)			(12,208)				Income before taxes
Tax effect	Tax effect	1,784		291					Income tax expense			Tax effect			1,807				1,510				5,421			3,254				Income tax expense
Net of tax	Net of tax	$	(4,912)	$	(799)				Net income			Net of tax			$	(4,973)			$	(4,157)			$	(14,921)		$	(8,954)			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					Three Months Ended			Nine Months Ended
(In thousands, except per share data)	(In thousands, except per share data)		March 31, 2021		March 31, 2020		(In thousands, except per share data)		September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net income	Net income		$	153,148	$	62,812	Net income		$	109,137	$	107,315	$	367,394	$	191,786
Less: Preferred stock dividends	Less: Preferred stock dividends		6,991		2,050		Less: Preferred stock dividends		6,991		10,286		20,973		14,386
Net income applicable to common shares	Net income applicable to common shares	(A)	$	146,157	$	60,762	Net income applicable to common shares	(A)	$	102,146	$	97,029	$	346,421	$	177,400

Weighted average common shares outstanding	Weighted average common shares outstanding	(B)	56,904		57,620		Weighted average common shares outstanding	(B)	57,000		57,597		56,985		57,595
Effect of dilutive potential common shares	Effect of dilutive potential common shares						Effect of dilutive potential common shares
Common stock equivalents	Common stock equivalents		681		575		Common stock equivalents		753		449		728		469
Weighted average common shares and effect of dilutive potential common shares	Weighted average common shares and effect of dilutive potential common shares	(C)	57,585		58,195		Weighted average common shares and effect of dilutive potential common shares	(C)	57,753		58,046		57,713		58,064
Net income per common share:	Net income per common share:						Net income per common share:
Basic	Basic	(A/B)	$	2.57	$	1.05	Basic	(A/B)	$	1.79	$	1.68	$	6.08	$	3.08
Diluted	Diluted	(A/C)	$	2.54	$	1.04	Diluted	(A/C)	$	1.77	$	1.67	$	6.00	$	3.06

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.

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(18) Subsequent Events

On ~~April 23,~~November 1, 2021 the Company ~~and Greenwoods Financial Group, Inc., the parent company of The Greenwood’s State Bank (“Greenwoods”),~~ announced ~~the closing of the previously announced branch~~that it had agreed to purchase and assumption transaction for 3 southwestern Wisconsin branch locations of Town Bank, N.A., the Company’s wholly-owned subsidiary. The 3 branches subject to the transaction are located in Albany, Darlington and Monroe, Wisconsin. Through this transaction, Greenwoods assumed approximately ~~$77.4~~$570 million of ~~deposits and acquired~~loans from the ~~branch facilities and various other assets.~~Allstate Corporation. The loan portfolio is comprised of approximately 1,800 loans to Allstate agents nationally.

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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 ~~March 31,~~September 30, 2021 compared with December 31, 2020 and ~~March 31,~~September 30, 2020, and the results of operations for the three and nine month period ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020, should be read in conjunction with the unaudited consolidated financial statements and notes contained in this report and the risk factors discussed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 ("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 led to rapid changes in business revenues, increased unemployment, and negatively impacted consumer activity, all of which have impacted 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 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 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"). From the date the Company began accepting applications, April 3, 2020, through ~~March 31,~~June 30, 2021, the Company secured authorization from the SBA and funded over 19,400 PPP loans with a carrying balance of approximately $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 (e.g., eight weeks, 24 weeks) following disbursement of the borrower’s PPP loan. From the loans originated under the program, the Company has generated net fees of ~~$143.1~~$146.0 million to be recognized over the life of the PPP ~~loan~~loans adjusted for estimated prepayments.

All of our three primary business segments (community banking, specialty finance and wealth management), have been uniquely impacted and we expect will 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 ~~March 31,~~September 30, 2021, loans totaling approximately ~~$253.7~~$72.0 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 increased stock market volatility.

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Given the continued uncertainty regarding future economic conditions, the Company has taken a number of actions to help ensure that it has adequate liquidity and capital to manage through the COVID-19 pandemic, including 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 1/1,000th 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 available liquidity sources 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 refer to Part II, Item 1A, “Risk Factors” of this Form 10-Q for additional information.

~~First~~Third Quarter Highlights

The Company recorded net income of ~~$153.1~~$109.1 million for the ~~first~~third quarter of 2021 compared to ~~$62.8~~$107.3 million in the ~~first~~third quarter of 2020. The results for the ~~first~~third quarter of 2021 demonstrate continued momentum on our operating strengths, including ~~strong~~significant organic loan and deposit growth ~~driven by~~despite significant payoffs through forgiveness within the ~~Company's continued participation in the~~Company’s PPP ~~stable~~portfolio, increased net interest income ~~despite the current interest rate environment, significant production by the Company's mortgage banking business,~~as a result of growth in earning assets, record wealth management revenue and a release of credit reserves attributable to positive changes in the macroeconomic forecasts in addition to improvement in portfolio ~~characteristics.~~characteristics, partially offset by lower production by the Company’s mortgage banking business.

The Company increased its loan portfolio from ~~$27.8~~$32.1 billion at ~~March 31,~~September 30, 2020 and $32.1 billion at December 31, 2020 to ~~$33.2~~$33.3 billion at ~~March 31,~~September 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~~organic growth in several portfolios, including the commercial, industrial and other (excluding PPP loans), commercial real estate, residential real estate loans held for investment, commercial insurance premium finance 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 5 - Loans of the Consolidated Financial Statements in Item 1 of this report.

The Company recorded net interest income of ~~$261.9~~$287.5 million in the ~~first~~third quarter of 2021 compared to ~~$261.4~~$255.9 million in the ~~first~~third quarter of 2020. This ~~slight~~ increase in net interest income recorded in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 resulted primarily from growth in earning assets, specifically a ~~$5.5~~$1.4 billion increase in average loans. The increase in average earnings assets ~~was partially offset by~~and runoff of higher rate deposits resulted in a ~~reduced~~stabilized net interest margin between periods. Net interest margin of ~~2.53% (2.54%~~2.58% (2.59% on a fully taxable-equivalent basis, non-GAAP) in the ~~first~~third quarter of 2021 compared favorably to ~~3.12% (3.14%~~2.56% (2.57% on a fully taxable-equivalent basis, non-GAAP) in the ~~first~~third quarter of 2020, ~~was~~ primarily due to lower rates on ~~earning assets in the first quarter of 2021~~deposits from the declining interest rate environment (see "Net Interest Income" for further detail).

Non-interest income totaled ~~$186.5~~$136.5 million in the ~~first~~third quarter of 2021 compared to ~~$113.2~~$170.6 million in the ~~first~~third quarter of 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 ~~$286.9~~$282.1 million in the ~~first~~third quarter of 2021, increasing ~~$52.2~~$17.9 million, or ~~22%~~7%, compared to the ~~first~~third quarter of 2020. The increase compared to the ~~first~~third quarter of 2020 was primarily attributable to higher ~~expenses associated with the Company's long term incentive program~~salaries and ~~higher commissions related to its mortgage business due to~~employee benefits, increased ~~origination volume~~software and equipment costs, and greater advertising and marketing expense (see “Non-Interest Expense” for further detail).

Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during the ~~first~~third quarter of 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 ~~March 31,~~September 30, 2021, the Company had approximately ~~$3.8~~$5.7 billion in overnight liquid funds and interest-bearing deposits with banks.

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RESULTS OF OPERATIONS

Earnings Summary

The Company’s key operating measures and growth rates for the three and nine months ended ~~March 31,~~September 30, 2021, as compared to the same period last year, are shown below:


		Three months ended									Three months ended
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	March 31, 2021			March 31, 2020			Percentage (%) or Basis Point (bp) Change		(Dollars in thousands, except per share data)	September 30, 2021			September 30, 2020			Percentage (%) or Basis Point (bp) Change
Net income	Net income	$	153,148		$	62,812		144	%	Net income	$	109,137		$	107,315		2	%
Pre-tax income, excluding provision for credit losses (non-GAAP) (2)	Pre-tax income, excluding provision for credit losses (non-GAAP) (2)	161,512			140,044			15		Pre-tax income, excluding provision for credit losses (non-GAAP) (2)	141,826			162,310			(13)

Net income per common share—Diluted	Net income per common share—Diluted	2.54			1.04			144		Net income per common share—Diluted	1.77			1.67			6
Net revenue (1)	Net revenue (1)	448,401			374,685			20		Net revenue (1)	423,970			426,529			(1)
Net interest income	Net interest income	261,895			261,443			—		Net interest income	287,496			255,936			12
Net interest margin	Net interest margin	2.53		%	3.12		%	(59)	bps	Net interest margin	2.58		%	2.56		%	2	bps
Net interest margin - fully taxable-equivalent (non-GAAP) (2)	Net interest margin - fully taxable-equivalent (non-GAAP) (2)	2.54			3.14			(60)		Net interest margin - fully taxable-equivalent (non-GAAP) (2)	2.59			2.57			2
Net overhead ratio (3)	Net overhead ratio (3)	0.90			1.33			(43)		Net overhead ratio (3)	1.22			0.87			35

Return on average assets	Return on average assets	1.38			0.69			69		Return on average assets	0.92			0.99			(7)
Return on average common equity	Return on average common equity	15.80			6.82			898		Return on average common equity	10.31			10.66			(35)
Return on average tangible common equity (non-GAAP) (2)	Return on average tangible common equity (non-GAAP) (2)	19.49			8.73			1,076		Return on average tangible common equity (non-GAAP) (2)	12.62			13.43			(81)


								Nine months ended
(Dollars in thousands, except per share data)											(Dollars in thousands, except per share data)	September 30, 2021			September 30, 2020			Percentage (%) or Basis Point (bp) Change
Net income											Net income	$	367,394		$	191,786		92	%
Pre-tax income, excluding provision for credit losses (non-GAAP) (2)											Pre-tax income, excluding provision for credit losses (non-GAAP) (2)	432,189			468,110			(8)

Net income per common share—Diluted											Net income per common share—Diluted	6.00			3.06			96
Net revenue (1)											Net revenue (1)	1,281,334			1,226,338			4
Net interest income											Net interest income	828,981			780,510			6
Net interest margin											Net interest margin	2.58		%	2.79		%	(21)	bps
Net interest margin - fully taxable equivalent (non-GAAP) (2)											Net interest margin - fully taxable equivalent (non-GAAP) (2)	2.59		%	2.80		%	(21)
Net overhead ratio (3)											Net overhead ratio (3)	1.15		%	1.03		%	12

Return on average assets											Return on average assets	1.07		%	0.63		%	44
Return on average common equity											Return on average common equity	12.05		%	6.56		%	549
Return on average tangible common equity (non-GAAP) (2)											Return on average tangible common equity (non-GAAP) (2)	14.82		%	8.38		%	644
At end of period	At end of period										At end of period
Total assets	Total assets	$	45,682,202		$	38,799,847			18	%	Total assets	$	47,832,271		$	43,731,718		9	%
Total loans, excluding loans held-for-sale	Total loans, excluding loans held-for-sale	33,171,233			27,807,321				19		Total loans, excluding loans held-for-sale	33,264,043			32,135,555			4
Total loans, including loans held-for-sale	Total loans, including loans held-for-sale	34,431,426			28,464,255				21		Total loans, including loans held-for-sale	34,189,355			33,095,226			3
Total deposits	Total deposits	37,872,652			31,461,660				20		Total deposits	39,952,558			35,844,422			11
Total shareholders’ equity	Total shareholders’ equity	4,252,511			3,700,393				15		Total shareholders’ equity	4,410,317			4,074,089			8

Book value per common share (2)	Book value per common share (2)	$	67.34		$	62.13			8		Book value per common share (2)	$	70.19		$	63.57		10
Tangible common book value per share (2)	Tangible common book value per share (2)	55.42			50.18				10		Tangible common book value per share (2)	58.32			51.70			13
Market price per common share	Market price per common share	75.80			32.86				131		Market price per common share	80.37			40.05			101

Allowance for loan and unfunded lending-related commitment losses to total loans	Allowance for loan and unfunded lending-related commitment losses to total loans	0.97		%	0.91		%		6 bps		Allowance for loan and unfunded lending-related commitment losses to total loans	0.89		%	1.21		%	(32)	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.

(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%.

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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. 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 pre-tax income, excluding provision for credit losses, as a useful ~~measurements~~measurement of the ~~Company's~~Company’s core net income.

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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						Three Months Ended								Nine Months Ended
		March 31,			March 31,					September 30,			June 30,			September 30,			September 30,			September 30,
(Dollars and shares in thousands)	(Dollars and shares in thousands)	2021			2020				(Dollars and shares in thousands)	2021			2021			2020			2021			2020
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:									Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:
(A) Interest Income (GAAP)	(A) Interest Income (GAAP)	$	305,469		$	344,067			(A) Interest Income (GAAP)	$	322,457		$	319,579		$	311,156		$	947,505		$	985,039
Taxable-equivalent adjustment:	Taxable-equivalent adjustment:								Taxable-equivalent adjustment:
- Loans	- Loans	384			860				- Loans	411			415			481			1,210			1,917
- Liquidity management assets	- Liquidity management assets	500			551				- Liquidity management assets	492			494			546			1,486			1,635
- Other earning assets	- Other earning assets	—			2				- Other earning assets	—			—			1			—			6
(B) Interest Income (non-GAAP)	(B) Interest Income (non-GAAP)	$	306,353		$	345,480			(B) Interest Income (non-GAAP)	$	323,360		$	320,488		$	312,184		$	950,201		$	988,597
(C) Interest Expense (GAAP)	(C) Interest Expense (GAAP)	43,574			82,624				(C) Interest Expense (GAAP)	34,961			39,989			55,220			118,524			204,529
(D) Net Interest Income (GAAP) (A minus C)	(D) Net Interest Income (GAAP) (A minus C)	261,895			261,443				(D) Net Interest Income (GAAP) (A minus C)	$	287,496		$	279,590		$	255,936		$	828,981		$	780,510
(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C)	(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C)	262,779			262,856				(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C)	$	288,399		$	280,499		$	256,964		$	831,677		$	784,068

Net interest margin (GAAP)	Net interest margin (GAAP)	2.53		%	3.12		%		Net interest margin (GAAP)	2.58		%	2.62		%	2.56		%	2.58		%	2.79		%
Net interest margin, fully taxable-equivalent (non-GAAP)	Net interest margin, fully taxable-equivalent (non-GAAP)	2.54			3.14				Net interest margin, fully taxable-equivalent (non-GAAP)	2.59			2.63			2.57			2.59			2.80
(F) Non-interest income	(F) Non-interest income	$	186,506		$	113,242			(F) Non-interest income	$	136,474		$	129,373		$	170,593		$	452,353		$	445,828
(G) Gains (losses) on investment securities, net		1,154			(4,359)
(G) (Losses) gains on investment securities, net									(G) (Losses) gains on investment securities, net	(2,431)			1,285			411			8			(3,140)
(H) Non-interest expense	(H) Non-interest expense	286,889			234,641				(H) Non-interest expense	282,144			280,112			264,219			849,145			758,228
Efficiency ratio (H/(D+F-G))	Efficiency ratio (H/(D+F-G))	64.15		%	61.90		%		Efficiency ratio (H/(D+F-G))	66.17		%	68.71		%	62.01		%	66.27		%	61.67		%
Efficiency ratio (non-GAAP) (H/(E+F-G))	Efficiency ratio (non-GAAP) (H/(E+F-G))	64.02		%	61.67		%		Efficiency ratio (non-GAAP) (H/(E+F-G))	66.03			68.56			61.86			66.13			61.49

Reconciliation of Non-GAAP Tangible Common Equity ratio
Reconciliation of Non-GAAP Tangible Common Equity Ratio:									Reconciliation of Non-GAAP Tangible Common Equity Ratio:
Total shareholders’ equity (GAAP)	Total shareholders’ equity (GAAP)	$	4,252,511		$	3,700,393			Total shareholders’ equity (GAAP)	$	4,410,317		$	4,339,011		$	4,074,089

Less: Non-convertible preferred stock (GAAP)	Less: Non-convertible preferred stock (GAAP)	(412,500)			(125,000)				Less: Non-convertible preferred stock (GAAP)	(412,500)			(412,500)			(412,500)
Less: Intangible assets (GAAP)	Less: Intangible assets (GAAP)	(680,052)			(687,626)				Less: Intangible assets (GAAP)	(675,910)			(678,333)			(683,314)
(I) Total tangible common shareholders’ equity (non-GAAP)	(I) Total tangible common shareholders’ equity (non-GAAP)	$	3,159,959		$	2,887,767			(I) Total tangible common shareholders’ equity (non-GAAP)	$	3,321,907		$	3,248,178		$	2,978,275
(J) Total assets (GAAP)	(J) Total assets (GAAP)	$	45,682,202		$	38,799,847			(J) Total assets (GAAP)	$	47,832,271		$	46,738,450		$	43,731,718
Less: Intangible assets (GAAP)	Less: Intangible assets (GAAP)	(680,052)			(687,626)				Less: Intangible assets (GAAP)	(675,910)			(678,333)			(683,314)
(K) Total tangible assets (non-GAAP)	(K) Total tangible assets (non-GAAP)	$	45,002,150		$	38,112,221			(K) Total tangible assets (non-GAAP)	$	47,156,361		$	46,060,117		$	43,048,404
Common equity to assets ratio (GAAP) (L/J)	Common equity to assets ratio (GAAP) (L/J)	8.4		%	9.2		%		Common equity to assets ratio (GAAP) (L/J)	8.4		%	8.4		%	8.4		%
Tangible common equity ratio (non-GAAP) (I/K)	Tangible common equity ratio (non-GAAP) (I/K)	7.0		%	7.6		%		Tangible common equity ratio (non-GAAP) (I/K)	7.0			7.1			6.9

Reconciliation of tangible book value per common share
Reconciliation of Non-GAAP Tangible Book Value per Common Share:									Reconciliation of Non-GAAP Tangible Book Value per Common Share:
Total shareholders’ equity	Total shareholders’ equity	$	4,252,511		$	3,700,393			Total shareholders’ equity	$	4,410,317		$	4,339,011		$	4,074,089
Less: Preferred stock	Less: Preferred stock	(412,500)			(125,000)				Less: Preferred stock	(412,500)			(412,500)			(412,500)
(L) Total common equity	(L) Total common equity	$	3,840,011		$	3,575,393			(L) Total common equity	$	3,997,817		$	3,926,511		$	3,661,589
(M) Actual common shares outstanding	(M) Actual common shares outstanding	57,023			57,545				(M) Actual common shares outstanding	56,956			57,067			57,602
Book value per common share (L/M)	Book value per common share (L/M)	$	67.34		$	62.13			Book value per common share (L/M)	$	70.19		$	68.81		$	63.57
Tangible book value per common share (non-GAAP) (I/M)	Tangible book value per common share (non-GAAP) (I/M)	$	55.42		$	50.18			Tangible book value per common share (non-GAAP) (I/M)	58.32			56.92			51.70


Reconciliation of non-GAAP return on average tangible common equity
Reconciliation of Non-GAAP Return on Average Tangible Common Equity:								Reconciliation of Non-GAAP Return on Average Tangible Common Equity:
(N) Net income applicable to common shares	(N) Net income applicable to common shares	$	146,157		$	60,762		(N) Net income applicable to common shares	$	102,146		$	98,118		$	97,029		$	346,421		$	177,400
Add: Intangible asset amortization	Add: Intangible asset amortization	2,007			2,863			Add: Intangible asset amortization	1,877			2,039			2,701			5,923			8,384
Less: Tax effect of intangible asset amortization	Less: Tax effect of intangible asset amortization	(522)			(799)			Less: Tax effect of intangible asset amortization	(509)			(553)			(589)			(1,576)			(2,079)
After-tax intangible asset amortization	After-tax intangible asset amortization	$	1,485		$	2,064		After-tax intangible asset amortization	$	1,368		$	1,486		$	2,112		$	4,347		$	6,305
(O) Tangible net income applicable to common shares (non-GAAP)	(O) Tangible net income applicable to common shares (non-GAAP)	147,642			62,826			(O) Tangible net income applicable to common shares (non-GAAP)	$	103,514		$	99,604		$	99,141		$	350,768		$	183,705
Total average shareholders' equity	Total average shareholders' equity	4,164,890			3,710,169			Total average shareholders' equity	$	4,343,915		$	4,256,778		$	4,034,902		$	4,255,851		$	3,885,187
Less: Average preferred stock	Less: Average preferred stock	(412,500)			(125,000)			Less: Average preferred stock	(412,500)			(412,500)			(412,500)			(412,500)			(270,849)
(P) Total average common shareholders' equity	(P) Total average common shareholders' equity	$	3,752,390		$	3,585,169		(P) Total average common shareholders' equity	$	3,931,415		$	3,844,278		$	3,622,402		$	3,843,351		$	3,614,338
Less: Average intangible assets	Less: Average intangible assets	(680,805)			(690,777)			Less: Average intangible assets	(677,201)			(679,535)			(684,717)			(679,167)			(687,331)
(Q) Total average tangible common shareholders’ equity (non-GAAP)	(Q) Total average tangible common shareholders’ equity (non-GAAP)	$	3,071,585		$	2,894,392		(Q) Total average tangible common shareholders’ equity (non-GAAP)	$	3,254,214		$	3,164,743		$	2,937,685		$	3,164,184		$	2,927,007
Return on average common equity, annualized (N/P)	Return on average common equity, annualized (N/P)	15.80		%	6.82		%	Return on average common equity, annualized (N/P)	10.31		%	10.24		%	10.66		%	12.05		%	6.56		%
Return on average tangible common equity, annualized (non-GAAP) (O/Q)	Return on average tangible common equity, annualized (non-GAAP) (O/Q)	19.49			8.73			Return on average tangible common equity, annualized (non-GAAP) (O/Q)	12.62			12.62			13.43			14.82			8.38


Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:	Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:					Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:
Income before taxes	Income before taxes	$	206,859	$	87,083	Income before taxes	$	149,742	$	144,150	$	137,284	$	500,751	$	255,070
Add: Provision for credit losses	Add: Provision for credit losses	(45,347)		52,961		Add: Provision for credit losses	(7,916)		(15,299)		25,026		(68,562)		213,040
Pre-tax income, excluding provision for credit losses (non-GAAP)	Pre-tax income, excluding provision for credit losses (non-GAAP)	$	161,512	$	140,044	Pre-tax income, excluding provision for credit losses (non-GAAP)	$	141,826	$	128,851	$	162,310	$	432,189	$	468,110

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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, 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 59 of the Company’s 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~~Company’s financial results. Please refer to ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operation - Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

Net Income

Net income for the quarter ended ~~March 31,~~September 30, 2021 totaled ~~$153.1~~$109.1 million, an increase of ~~$90.3~~$1.8 million, or ~~144%~~2%, compared to the quarter ended ~~March 31,~~September 30, 2020. On a per share basis, net income for the ~~first~~third quarter of 2021 totaled ~~$2.54~~$1.77 per diluted common share compared to ~~$1.04~~$1.67 for the ~~first~~third quarter of 2020.

The increase in net income for the ~~first~~third quarter of 2021 as compared to the same period in the prior year is primarily attributable to ~~increased mortgage banking revenue,~~ a release of credit reserves attributable to positive changes in the Company’s macroeconomic forecasts in addition to improvement in portfolio characteristics and higher net interest income, partially offset by decreased mortgage banking revenue as well as increased salaries and employee benefits ~~expense.~~and other expenses related to continued investment in the Company’s growth. 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 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.

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Quarter Ended ~~March 31,~~September 30, 2021 compared to the Quarters Ended ~~December 31, 2020~~June 30, 2021 and ~~March 31,~~September 30, 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 ~~first~~third quarter of 2021 as compared to the ~~fourth~~second quarter of ~~2020~~2021 (sequential quarters) and ~~first~~third quarter of 2020 (linked quarters):


		Average Balance for three months ended,						Interest for three months ended,						Yield/Rate for three months ended,							Average Balance for three months ended,						Interest for three months ended,						Yield/Rate for three months ended,
(Dollars in thousands)	(Dollars in thousands)	Mar 31, 2021		Dec 31, 2020		Mar 31, 2020		Mar 31, 2021		Dec 31, 2020		Mar 31, 2020		Mar 31, 2021		Dec 31, 2020		Mar 31, 2020		(Dollars in thousands)	Sep 30, 2021		Jun 30, 2021		Sep 30, 2020		Sep 30, 2021		Jun 30, 2021		Sep 30, 2020		Sep 30, 2021		Jun 30, 2021		Sep 30, 2020
Interest-bearing deposits with banks and cash equivalents(1)	Interest-bearing deposits with banks and cash equivalents(1)	$	4,230,886	$	4,381,040	$	1,418,809	$	1,199	$	1,294	$	4,854	0.11	%	0.12	%	1.38	%	Interest-bearing deposits with banks and cash equivalents(1)	$	5,112,720	$	3,844,355	$	3,411,164	$	2,000	$	1,153	$	1,181	0.16	%	0.12	%	0.14	%
Investment securities (2)	Investment securities (2)	3,944,676		3,534,594		4,780,709		19,764		18,773		33,018		2.03		2.11		2.78		Investment securities (2)	5,065,593		4,771,403		3,789,422		25,681		24,117		22,365		2.01		2.03		2.35
FHLB and FRB stock	FHLB and FRB stock	135,758		135,569		114,829		1,745		1,775		1,577		5.21		5.21		5.52		FHLB and FRB stock	136,001		136,324		135,567		1,777		1,769		1,774		5.18		5.20		5.21
Liquidity management assets(3)(8)	Liquidity management assets(3)(8)	$	8,311,320	$	8,051,203	$	6,314,347	$	22,708	$	21,842	$	39,449	1.11	%	1.08	%	2.51	%	Liquidity management assets(3)(8)	$	10,314,314	$	8,752,082	$	7,336,153	$	29,458	$	27,039	$	25,320	1.13	%	1.24	%	1.37	%
Other earning assets(3)(4)(8)	Other earning assets(3)(4)(8)	20,370		18,716		19,166		125		130		167		2.50		2.79		3.50		Other earning assets(3)(4)(8)	28,238		23,354		16,656		188		150		113		2.64		2.59		2.71
Mortgage loans held-for-sale	Mortgage loans held-for-sale	1,151,848		893,395		403,262		9,036		6,357		3,165		3.18		2.83		3.16		Mortgage loans held-for-sale	871,824		991,011		822,908		7,716		8,183		5,791		3.51		3.31		2.80
Loans, net of unearned income(3)(5)(8)	Loans, net of unearned income(3)(5)(8)	32,442,927		31,783,279		26,936,728		274,484		280,509		302,699		3.43		3.51		4.52		Loans, net of unearned income(3)(5)(8)	32,985,445		33,085,174		31,634,608		285,998		285,116		280,960		3.44		3.46		3.53

Total earning assets(8)	Total earning assets(8)	$	41,926,465	$	40,746,593	$	33,673,503	$	306,353	$	308,838	$	345,480	2.96	%	3.02	%	4.13	%	Total earning assets(8)	$	44,199,821	$	42,851,621	$	39,810,325	$	323,360	$	320,488	$	312,184	2.90	%	3.00	%	3.12	%
Allowance for loan and investment security losses	Allowance for loan and investment security losses	(327,080)		(336,139)		(176,291)														Allowance for loan and investment security losses	(269,963)		(285,686)		(321,732)
Cash and due from banks	Cash and due from banks	366,413		344,536		321,982														Cash and due from banks	425,000		470,566		345,438
Other assets	Other assets	3,022,935		3,055,015		2,806,296														Other assets	2,837,652		2,910,250		3,128,813
Total assets	Total assets	$	44,988,733	$	43,810,005	$	36,625,490													Total assets	$	47,192,510	$	45,946,751	$	42,962,844

NOW and interest-bearing demand deposits	NOW and interest-bearing demand deposits	$	3,493,451	$	3,320,527	$	3,113,733	$	901	$	1,074	$	3,665	0.10	%	0.13	%	0.47	%	NOW and interest-bearing demand deposits	$	3,757,677	$	3,626,424	$	3,435,089	$	767	$	736	$	1,342	0.08	%	0.08	%	0.16	%
Wealth management deposits	Wealth management deposits	4,156,398		4,066,948		2,838,719		7,351		7,436		6,935		0.72		0.73		0.98		Wealth management deposits	4,672,402		4,369,998		4,239,300		7,888		7,686		7,662		0.67		0.71		0.72
Money market accounts	Money market accounts	9,335,920		9,435,344		7,990,775		2,865		3,740		22,363		0.12		0.16		1.13		Money market accounts	10,027,424		9,547,167		9,332,668		2,342		2,795		7,245		0.09		0.12		0.31
Savings accounts	Savings accounts	3,587,566		3,413,388		3,189,835		430		773		5,790		0.05		0.09		0.73		Savings accounts	3,851,523		3,728,271		3,419,586		406		402		2,104		0.04		0.04		0.24
Time deposits	Time deposits	4,875,392		5,043,558		5,526,407		16,397		19,579		28,682		1.36		1.54		2.09		Time deposits	4,236,317		4,632,796		4,900,839		7,902		12,679		20,731		0.74		1.10		1.68
Interest-bearing deposits	Interest-bearing deposits	$	25,448,727	$	25,279,765	$	22,659,469	$	27,944	$	32,602	$	67,435	0.45	%	0.51	%	1.20	%	Interest-bearing deposits	$	26,545,343	$	25,904,656	$	25,327,482	$	19,305	$	24,298	$	39,084	0.29	%	0.38	%	0.61	%
Federal Home Loan Bank advances	Federal Home Loan Bank advances	1,228,433		1,228,425		951,613		4,840		4,952		3,360		1.60		1.60		1.42		Federal Home Loan Bank advances	1,241,073		1,235,142		1,228,421		4,931		4,887		4,947		1.58		1.59		1.60
Other borrowings	Other borrowings	518,188		510,725		469,577		2,609		2,779		3,546		2.04		2.16		3.04		Other borrowings	512,785		525,924		512,787		2,501		2,568		3,012		1.94		1.96		2.34
Subordinated notes	Subordinated notes	436,532		436,433		436,119		5,477		5,509		5,472		5.02		5.05		5.02		Subordinated notes	436,746		436,644		436,323		5,480		5,512		5,474		5.02		5.05		5.02
Junior subordinated debentures	Junior subordinated debentures	253,566		253,566		253,566		2,704		2,742		2,811		4.27		4.23		4.39		Junior subordinated debentures	253,566		253,566		253,566		2,744		2,724		2,703		4.23		4.25		4.17
Total interest-bearing liabilities	Total interest-bearing liabilities	$	27,885,446	$	27,708,914	$	24,770,344	$	43,574	$	48,584	$	82,624	0.63	%	0.70	%	1.34	%	Total interest-bearing liabilities	$	28,989,513	$	28,355,932	$	27,758,579	$	34,961	$	39,989	$	55,220	0.48	%	0.56	%	0.79	%
Non-interest-bearing deposits	Non-interest-bearing deposits	11,811,194		10,874,912		7,235,177														Non-interest-bearing deposits	12,834,084		12,246,274		9,988,769
Other liabilities	Other liabilities	1,127,203		1,175,893		909,800														Other liabilities	1,024,998		1,087,767		1,180,594
Equity	Equity	4,164,890		4,050,286		3,710,169														Equity	4,343,915		4,256,778		4,034,902
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	44,988,733	$	43,810,005	$	36,625,490													Total liabilities and shareholders’ equity	$	47,192,510	$	45,946,751	$	42,962,844
Interest rate spread(6)(8)	Interest rate spread(6)(8)													2.33	%	2.32	%	2.79	%	Interest rate spread(6)(8)													2.42	%	2.44	%	2.33	%
Less: Fully tax-equivalent adjustment								(884)		(857)		(1,413)		(0.01)		(0.01)		(0.02)
Less: Fully taxable-equivalent adjustment																				Less: Fully taxable-equivalent adjustment							(903)		(909)		(1,028)		(0.01)		(0.01)		(0.01)
Net free funds/contribution(7)	Net free funds/contribution(7)	$	14,041,019	$	13,037,679	$	8,903,159							0.21		0.22		0.35		Net free funds/contribution(7)	$	15,210,308	$	14,495,689	$	12,051,746							0.17		0.19		0.24
Net interest income/ margin (GAAP)(8)								$	261,895	$	259,397	$	261,443	2.53	%	2.53	%	3.12	%
Net interest income/margin (GAAP)(8)																				Net interest income/margin (GAAP)(8)							$	287,496	$	279,590	$	255,936	2.58	%	2.62	%	2.56	%
Fully taxable-equivalent adjustment	Fully taxable-equivalent adjustment							884		857		1,413		0.01		0.01		0.02		Fully taxable-equivalent adjustment							903		909		1,028		0.01		0.01		0.01
Net interest income/margin, fully taxable-equivalent (non-GAAP)(8)	Net interest income/margin, fully taxable-equivalent (non-GAAP)(8)							$	262,779	$	260,254	$	262,856	2.54	%	2.54	%	3.14	%	Net interest income/margin, fully taxable-equivalent (non-GAAP)(8)							$	288,399	$	280,499	$	256,964	2.59	%	2.63	%	2.57	%

(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 ~~March 31,~~September 30, 2021, ~~December 31, 2020~~June 30, 2021 and ~~March 31,~~September 30, 2020 were ~~$884,000, $857,000~~$903,000, $909,000 and ~~$1.4~~$1.0 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.

5864

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For the ~~first~~third quarter of 2021, net interest income totaled ~~$261.9~~$287.5 million, an increase of ~~$2.5~~$7.9 million as compared to the ~~fourth~~second quarter of ~~2020,~~2021, and an increase of ~~$452,000~~$31.6 million as compared to the ~~first~~third quarter of 2020. Net interest margin was ~~2.53% (2.54%~~2.58% (2.59% on a fully taxable-equivalent basis, non-GAAP) during the ~~first~~third quarter of 2021 compared to ~~2.53% (2.54%~~2.62% (2.63% on a fully taxable-equivalent basis, non-GAAP) during the ~~fourth~~second quarter of ~~2020,~~2021, and ~~3.12% (3.14%~~2.56% (2.57% on a fully taxable-equivalent basis, non-GAAP) during the ~~first~~third quarter of 2020.

Nine months endedSeptember 30, 2021 compared to nine months ended September 30, 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 nine months ended September 30, 2021 compared to the nine months ended September 30, 2020:


	Average Balance for nine months ended,		Interest for nine months ended,				Yield/Rate for nine months ended,
(Dollars in thousands)	September 30, 2021		September 30, 2020		September 30, 2021			September 30, 2020		September 30, 2021		September 30, 2020
Interest-bearing deposits with banks and cash equivalents (1)	$	4,399,217	$	2,692,678	$	4,352		$	7,361	0.13	%	0.37	%
Investment securities (2)	4,597,997		4,291,362		69,562			83,026		2.02		2.58
FHLB and FRB stock	136,028		128,611		5,291			5,116		5.20		5.31
Liquidity management assets (3)(8)	$	9,133,242	$	7,112,651	$	79,205		$	95,503	1.16	%	1.79	%
Other earning assets (3)(4)(8)	24,016		17,576		463			393		2.59		2.99
Mortgage loans held-for-sale	1,003,868		644,611		24,935			13,720		3.32		2.84
Loans, net of unearned income (3)(5)(8)	32,839,837		29,643,281		845,598			878,981		3.44		3.96

Total earning assets (8)	$	43,000,963	$	37,418,119	$	950,201		$	988,597	2.95	%	3.53	%
Allowance for loan and investment security losses	(294,033)		(240,467)
Cash and due from banks	420,874		339,968
Other assets	2,922,933		3,034,897
Total assets	$	46,050,737	$	40,552,517

NOW and interest-bearing demand deposits	$	3,626,819	$	3,291,176	$	2,404		$	6,569	0.09	%	0.27	%
Wealth management deposits	4,401,489		3,821,203		22,925			21,840		0.70		0.76
Money market accounts	9,639,370		8,686,171		8,002			42,748		0.11		0.66
Savings accounts	3,723,420		3,334,944		1,238			11,736		0.04		0.47
Time deposits	4,579,161		5,176,307		36,978			73,683		1.08		1.90
Interest-bearing deposits	$	25,970,259	$	24,309,801	$	71,547		$	156,576	0.37	%	0.86	%
Federal Home Loan Bank advances	1,234,929		1,131,823		14,658			13,241		1.59		1.56
Other borrowings	518,946		491,981		7,678			9,994		1.98		2.71
Subordinated notes	436,641		436,223		16,469			16,452		5.03		5.03
Junior subordinated debentures	253,566		253,566		8,172			8,266		4.25		4.28
Total interest-bearing liabilities	$	28,414,341	$	26,623,394	$	118,524		$	204,529	0.56	%	1.03	%
Non-interest-bearing deposits	12,300,931		8,947,639
Other liabilities	1,079,614		1,096,297
Equity	4,255,851		3,885,187
Total liabilities and shareholders’ equity	$	46,050,737	$	40,552,517
Interest rate spread (6)(8)										2.39	%	2.50	%
Less: Fully taxable-equivalent adjustment					(2,696)			(3,558)		(0.01)		(0.01)
Net free funds/contribution (7)	$	14,586,622	$	10,794,725						0.20		0.30
Net interest income/margin (GAAP) (8)					$	828,981		$	780,510	2.58	%	2.79	%
Fully taxable-equivalent adjustment					2,696			3,558		0.01		0.01
Net interest income/margin, fully taxable-equivalent (non-GAAP) (8)					$	831,677		$	784,068	2.59	%	2.80	%

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

(3)Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on a marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the nine months ended September 30, 2021 and September 30, 2020 were $2.7 million and $3.6 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.

(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 ~~March 31,~~September 30, 2021 to each of the three month periods ended ~~December 31,~~June 30, 2021 and September 30, 2020, and ~~March 31,~~nine month periods ended September 30, 2021 and 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:


		First Quarter of 2021 Compared to Fourth Quarter of 2020		First Quarter of 2021 Compared to First Quarter of 2020					Third Quarter of 2021 Compared to Second Quarter of 2021			Third Quarter of 2021 Compared to Third Quarter of 2020			First Nine Months of 2021 Compared to First Nine Months of 2020
(In thousands)	(In thousands)					(In thousands)	Third Quarter of 2021 Compared to Second Quarter of 2021				Third Quarter of 2021 Compared to Third Quarter of 2020			First Nine Months of 2021 Compared to First Nine Months of 2020
Net interest income (GAAP) for comparative period	Net interest income (GAAP) for comparative period	$	259,397	$	261,443				$	279,590		$	255,936		$	780,510
Change due to mix and growth of earning assets and interest-bearing liabilities (volume)	Change due to mix and growth of earning assets and interest-bearing liabilities (volume)	8,757		61,586				Change due to mix and growth of earning assets and interest-bearing liabilities (volume)	2,212			19,747			109,475
Change due to interest rate fluctuations (rate)	Change due to interest rate fluctuations (rate)	(494)		(58,229)				Change due to interest rate fluctuations (rate)	2,655			11,813			(58,145)
Change due to number of days in each period	Change due to number of days in each period	(5,765)		(2,905)				Change due to number of days in each period	3,039			—			(2,859)
Net interest income (GAAP) for the period ended March 31, 2021		$	261,895	$	261,895
Net interest income (GAAP) for the period ended September 30, 2021								Net interest income (GAAP) for the period ended September 30, 2021	$	287,496		$	287,496		$	828,981
Fully taxable-equivalent adjustment	Fully taxable-equivalent adjustment	884		884				Fully taxable-equivalent adjustment	903			903			2,696
Net interest income, fully taxable-equivalent (non-GAAP)	Net interest income, fully taxable-equivalent (non-GAAP)	$	262,779	$	262,779			Net interest income, fully taxable-equivalent (non-GAAP)	$	288,399		$	288,399		$	831,677

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)	(Dollars in thousands)	March 31, 2021		March 31, 2020				(Dollars in thousands)		September 30, 2021					September 30, 2020
Brokerage	Brokerage	$	5,040	$	5,281			$	(241)					(5)		%	Brokerage	$	5,230		$	4,563		$	667		15	%
Trust and asset management	Trust and asset management	24,269		20,660		3,609					17		Trust and asset management	26,301					20,394			5,907			29
Total wealth management	Total wealth management	29,309		25,941		3,368					13		Total wealth management	31,531					24,957			6,574			26
Mortgage banking	Mortgage banking	113,494		48,326		65,168					135		Mortgage banking	55,794					108,544			(52,750)			(49)
Service charges on deposit accounts	Service charges on deposit accounts	12,036		11,265		771					7		Service charges on deposit accounts	14,149					11,497			2,652			23
Gains (losses) on investment securities, net		1,154		(4,359)		5,513					NM
(Losses) gains on investment securities, net													(Losses) gains on investment securities, net	(2,431)					411			(2,842)			NM
Fees from covered call options	Fees from covered call options	—		2,292		(2,292)					(100)		Fees from covered call options	1,157					—			1,157			NM
Trading gains (losses), net		419		(451)		870					NM
Trading gains, net													Trading gains, net	58					183			(125)			(68)
Operating lease income, net	Operating lease income, net	14,440		11,984		2,456					20		Operating lease income, net	12,807					11,717			1,090			9
Other:	Other:												Other:
Interest rate swap fees	Interest rate swap fees	2,488		6,066		(3,578)					(59)		Interest rate swap fees	4,868					4,029			839			21
BOLI	BOLI	1,124		(1,284)		2,408					NM		BOLI	2,154					1,218			936			77
Administrative services	Administrative services	1,256		1,112		144					13		Administrative services	1,359					1,077			282			26
Foreign currency remeasurement gains (losses)	Foreign currency remeasurement gains (losses)	99		(151)		250					NM		Foreign currency remeasurement gains (losses)	77					(54)			131			NM
Early pay-offs of capital leases	Early pay-offs of capital leases	(52)		74		(126)					NM		Early pay-offs of capital leases	209					165			44			27
Miscellaneous	Miscellaneous	10,739		12,427		(1,688)					(14)		Miscellaneous	14,742					6,849			7,893			NM
Total Other	Total Other	15,654		18,244		(2,590)					(14)		Total Other	23,409					13,284			10,125			76
Total Non-interest Income	Total Non-interest Income	$	186,506	$	113,242	$	73,264				65	%	Total Non-interest Income	$	136,474				$	170,593		$	(34,119)		(20)	%

NM - Not meaningful.

Table of Contents


	Nine Months Ended				$ Change		% Change
(Dollars in thousands)	September 30, 2021		September 30, 2020
Brokerage	$	15,418	$	13,991	$	1,427	10	%
Trust and asset management	76,112		59,543		16,569		28
Total wealth management	91,530		73,534		17,996		24
Mortgage banking	219,872		259,194		(39,322)		(15)
Service charges on deposit accounts	39,434		33,182		6,252		19
Gains (losses) on investment securities, net	8		(3,140)		3,148		NM
Fees from covered call options	2,545		2,292		253		11
Trading gains (losses), net	39		(902)		941		NM
Operating lease income, net	39,487		35,486		4,001		11
Other:
Interest rate swap fees	10,176		15,788		(5,612)		(36)
BOLI	4,620		1,884		2,736		NM
Administrative services	3,843		3,122		721		23
Foreign currency remeasurement losses	(606)		(413)		(193)		47
Early pay-offs of capital leases	352		514		(162)		(32)
Miscellaneous	41,053		25,287		15,766		62
Total Other	59,438		46,182		13,256		29
Total Non-interest Income	$	452,353	$	445,828	$	6,525	1	%

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

Wealth management revenue increased in the ~~first~~third quarter of 2021 as compared to the ~~first~~third quarter of 2020 due to an increase in trust and asset management fees. Trust and asset management fees 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

~~Table of~~ ~~Contents~~

revenue increased in the ~~first~~third quarter of 2021 primarily as a result of market appreciation related to managed money accounts with fees based on assets under management and higher asset levels from new customers and new financial advisors as compared to the ~~first~~third 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 of Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

~~The Company recognized net gains~~Service charges on investment securities in the first quarter of 2021 and net losses in the first quarter of 2020. This difference was primarily a result of unrealized gains in the first quarter of 2021 compared to unrealized losses in the first quarter of 2020 from market appreciation on market sensitive equity securities with readily determinable fair value.

~~Operating lease income~~deposits increased in the ~~first~~third quarter of 2021 as compared to the ~~first~~third quarter of ~~2020. This increase is primarily due to~~2020 as a ~~$1.5~~result of higher account analysis fees on deposit accounts which increased as a result of the Company’s commercial banking initiatives.

The Company recognized net losses on investment securities of $2.4 million ~~gain recognized on sale of lease assets~~ in the ~~first~~third quarter of ~~2021.~~2021 primarily as a result of a loss on one equity investment.

Mortgage banking revenue ~~increased~~decreased in the ~~first~~third quarter of 2021 as compared to the ~~first~~third quarter of 2020 as a result of ~~an increase~~a decrease in loans originated for sale ~~resulting in higher production revenue.~~and lower gain on sale margins, partially offset by more favorable fair value adjustments of mortgage servicing rights. Mortgage loans originated for sale totaled ~~$2.2~~$1.6 billion in the ~~first~~third quarter of 2021 as compared to ~~$1.2~~$2.2 billion in the ~~first~~third quarter of 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 ~~first~~third quarter of 2021, the fair value of the mortgage servicing rights portfolio increased due to increased capitalization of $~~24.6~~15.5 million during the ~~first~~third quarter, ~~and a positive~~partially offset by an unfavorable fair value adjustment of ~~$18.0 million. This was partially offset due to~~$888,000 and a reduction in value of ~~$10.2~~$8.6 million due to payoffs and paydowns of the existing 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 ~~March 31,~~September 30, 2021.

6067

Table of Contents

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


		Three Months Ended						Three Months Ended		Nine Months Ended
(Dollars in thousands)	(Dollars in thousands)	March 31, 2021			March 31, 2020				(Dollars in thousands)	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Originations:	Originations:								Originations:
Retail originations	Retail originations	$	1,641,664		$	773,144			Retail originations	$	1,153,265		$	1,590,699		$	4,123,650		$	3,952,775

Veterans First originations	Veterans First originations	580,303			442,957				Veterans First originations	405,663			635,876			1,381,256			1,700,711
Total originations for sale (A)	Total originations for sale (A)	$	2,221,967		$	1,216,101			Total originations for sale (A)	$	1,558,928		$	2,226,575		$	5,504,906		$	5,653,486
Originations for investment	Originations for investment	321,858			73,727				Originations for investment	181,886			73,711			753,493			204,392
Total originations	Total originations	$	2,543,825		$	1,289,828			Total originations	$	1,740,814		$	2,300,286		$	6,258,399		$	5,857,878

Retail originations as percentage of originations for sale									Retail originations as percentage of originations for sale	74		%	71		%	75		%	70		%
Veterans First originations as a percentage of originations for sale									Veterans First originations as a percentage of originations for sale	26			29			25			30

Purchases as a percentage of originations for sale	Purchases as a percentage of originations for sale	27		%	37		%		Purchases as a percentage of originations for sale	56		%	41		%	43		%	36		%
Refinances as a percentage of originations for sale	Refinances as a percentage of originations for sale	73			63				Refinances as a percentage of originations for sale	44			59			57			64
Total		100		%	100		%

Production Margin:	Production Margin:								Production Margin:
Production revenue (B) (1)	Production revenue (B) (1)	$	71,282		$	49,327			Production revenue (B) (1)	$	39,247		$	94,148		$	148,060		$	236,908
Production margin (B/A)		3.21		%	4.06		%

Total originations for sale (A)									Total originations for sale (A)	$	1,558,928		$	2,226,575		$	5,504,906		$	5,653,486
Add: Current period end mandatory interest rate lock commitments to fund originations for sale (2)									Add: Current period end mandatory interest rate lock commitments to fund originations for sale (2)	510,982			1,544,234			510,982			1,544,234
Less: Prior period end mandatory interest rate lock commitments to fund originations for sale (2)									Less: Prior period end mandatory interest rate lock commitments to fund originations for sale (2)	605,400			1,275,648			1,072,717			372,357
Total mortgage production volume (C)									Total mortgage production volume (C)	$	1,464,510		$	2,495,161		$	4,943,171		$	6,825,363
Production margin (B/C)									Production margin (B/C)	2.68		%	3.77		%	3.00		%	3.47		%

Mortgage Servicing:	Mortgage Servicing:								Mortgage Servicing:
Loans serviced for others (C)		$	11,530,676		$	8,314,634
MSRs, at fair value (D)		124,316			73,504
Percentage of MSRs to loans serviced for others (D/C)		1.08		%	0.88		%
Loans serviced for others (D)									Loans serviced for others (D)	$	12,720,126		$	10,139,878
MSRs, at fair value (E)									MSRs, at fair value (E)	133,552			86,907
Percentage of MSRs to loans serviced for others (E/D)									Percentage of MSRs to loans serviced for others (E/D)	1.05		%	0.86		%
Servicing income	Servicing income	$	9,636		$	7,031			Servicing income	$	10,454		$	8,118		$	29,920		$	22,057

Components of MSR:	Components of MSR:								Components of MSR:

MSR - current period capitalization	MSR - current period capitalization	$	24,616		$	9,447			MSR - current period capitalization	$	15,546		$	20,936		$	57,674		$	50,734
MSR - collection of expected cash flow - paydowns	MSR - collection of expected cash flow - paydowns	(728)			(547)				MSR - collection of expected cash flow - paydowns	(1,036)			(590)			(2,755)			(1,556)
MSR - collection of expected cash flow - payoffs	MSR - collection of expected cash flow - payoffs	(9,440)			(6,476)				MSR - collection of expected cash flow - payoffs	(7,558)			(7,272)			(24,547)			(22,000)
Valuation:	Valuation:								Valuation:
MSR - changes in fair value model assumptions	MSR - changes in fair value model assumptions	18,045			(14,557)				MSR - changes in fair value model assumptions	(888)			(3,002)			11,617			(25,541)
Gain on derivative contract held as an economic hedge, net	Gain on derivative contract held as an economic hedge, net	—			4,160				Gain on derivative contract held as an economic hedge, net	—			—			—			4,749
MSR valuation adjustment, net of gain on derivative contract held as an economic hedge	MSR valuation adjustment, net of gain on derivative contract held as an economic hedge	$	18,045		$	(10,397)			MSR valuation adjustment, net of gain on derivative contract held as an economic hedge	$	(888)		$	(3,002)		$	11,617		$	(20,792)

Summary of Mortgage Banking Revenue:	Summary of Mortgage Banking Revenue:								Summary of Mortgage Banking Revenue:
Production revenue (1)	Production revenue (1)	$	71,282		$	49,327			Production revenue (1)	$	39,247		$	94,148		$	148,060		$	236,908
Servicing income	Servicing income	9,636			7,031				Servicing income	10,454			8,118			29,920			22,057
MSR activity	MSR activity	32,493			(7,973)				MSR activity	6,064			10,072			41,989			6,386
Other	Other	83			(59)				Other	29			(3,794)			(97)			(6,157)
Total mortgage banking revenue	Total mortgage banking revenue	$	113,494		$	48,326			Total mortgage banking revenue	$	55,794		$	108,544		$	219,872		$	259,194

(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 ~~derivative activity,~~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.

(2)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.

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 ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020.

Miscellaneous revenue ~~decreased~~increased in the ~~first~~third quarter of 2021 as compared to the ~~first~~third quarter of 2020 ~~due to~~primarily as a ~~decrease~~result of an increase in ~~syndication fees and other miscellaneous income, partially offset by increased~~ partnership income.

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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)	(Dollars in thousands)	March 31, 2021		March 31, 2020				(Dollars in thousands)	September 30, 2021					September 30, 2020
Salaries and employee benefits:	Salaries and employee benefits:														Salaries and employee benefits:
Salaries	Salaries	$	91,053	$	81,286	$	9,767			12	%	Salaries	$	88,161		$	89,849	$	(1,688)	(2)	%
Commissions and incentive compensation	Commissions and incentive compensation	61,367		31,575		29,792				94		Commissions and incentive compensation	57,026			48,475		8,551		18
Benefits	Benefits	28,389		23,901		4,488				19		Benefits	25,725			25,718		7		0
Total salaries and employee benefits	Total salaries and employee benefits	180,809		136,762		44,047				32		Total salaries and employee benefits	170,912			164,042		6,870		4
Equipment		20,912		14,834		6,078				41
Software and equipment												Software and equipment	22,029			17,251		4,778		28
Operating lease equipment depreciation	Operating lease equipment depreciation	10,771		9,260		1,511				16		Operating lease equipment depreciation	10,013			9,425		588		6
Occupancy, net	Occupancy, net	19,996		17,547		2,449				14		Occupancy, net	18,158			15,830		2,328		15
Data processing	Data processing	6,048		8,373		(2,325)				(28)		Data processing	7,104			5,689		1,415		25
Advertising and marketing	Advertising and marketing	8,546		10,862		(2,316)				(21)		Advertising and marketing	13,443			7,880		5,563		71
Professional fees	Professional fees	7,587		6,721		866				13		Professional fees	7,052			6,488		564		9
Amortization of other intangible assets	Amortization of other intangible assets	2,007		2,863		(856)				(30)		Amortization of other intangible assets	1,877			2,701		(824)		(31)
FDIC insurance	FDIC insurance	6,558		4,135		2,423				59		FDIC insurance	6,750			6,772		(22)		0
OREO expense, net	OREO expense, net	(251)		(876)		625				(71)		OREO expense, net	(1,531)			(168)		(1,363)		NM
Other:	Other:											Other:
Commissions—3rd party brokers	Commissions—3rd party brokers	846		865		(19)				(2)		Commissions—3rd party brokers	884			778		106		14
Postage	Postage	1,743		1,949		(206)				(11)		Postage	2,018			1,529		489		32
Miscellaneous	Miscellaneous	21,317		21,346		(29)				—		Miscellaneous	23,435			26,002		(2,567)		(10)
Total other	Total other	23,906		24,160		(254)				(1)		Total other	26,337			28,309		(1,972)		(7)
Total Non-interest Expense	Total Non-interest Expense	$	286,889	$	234,641	$	52,248			22	%	Total Non-interest Expense	$	282,144		$	264,219	$	17,925	7	%

NM - Not meaningful.


	Nine Months Ended				$ Change		% Change
(Dollars in thousands)	September 30, 2021		September 30, 2020
Salaries and employee benefits:
Salaries	$	270,303	$	258,240	$	12,063	5	%
Commissions and incentive compensation	172,144		126,201		45,943		36
Benefits	82,091		70,519		11,572		16
Total salaries and employee benefits	524,538		454,960		69,578		15
Software and equipment	63,807		47,931		15,876		33
Operating lease equipment depreciation	30,733		27,977		2,756		10
Occupancy, net	55,841		50,270		5,571		11
Data processing	20,072		24,468		(4,396)		(18)
Advertising and marketing	33,294		26,446		6,848		26
Professional fees	21,943		20,896		1,047		5
Amortization of other intangible assets	5,923		8,384		(2,461)		(29)
FDIC insurance	19,713		17,988		1,725		10
OREO expense, net	(1,013)		(807)		(206)		NM
Other:
Commissions—3rd party brokers	2,619		2,350		269		11
Postage	5,661		5,069		592		12
Miscellaneous	66,014		72,296		(6,282)		(9)
Total other	74,294		79,715		(5,421)		(7)
Total Non-interest Expense	$	849,145	$	758,228	$	90,917	12	%

NM - Not meaningful.

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

Total salaries and employee benefits expense increased in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 primarily due to increased ~~salaries and~~ commissions and incentive compensation expense. Salaries increased as a result of increased staffing costs 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’s annual bonus and long term incentive ~~program and higher commissions related to its mortgage and wealth management businesses.~~program.

~~Equipment~~Software and equipment expense increased in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 as a result of higher software license fees as well as higher computer and software ~~and computer~~ depreciation expense.

~~Data processing~~Occupancy expense ~~decreased~~increased in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 primarily as ~~the majority~~a result of ~~conversion charges related to previously completed acquisitions was recognized in 2020.~~increased real estate tax assessment estimates.

Advertising and marketing expenses ~~decreased~~increased in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 as a result of ~~decreased~~increased sponsorship ~~costs~~activity. Sponsorship activity was lower in the third quarter of 2020 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 and various products, and to attract loans and deposits and 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 ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 as a result of ~~higher assessment rates impacted by declines~~a reversal of a portion of contingent consideration expense in the ~~Tier 1 Leverage Ratio at~~third quarter of 2021 related to a previous acquisition of mortgage operations compared to an increase in such contingent consideration expense in the ~~Company's~~third quarter of 2020, partially offset by increased expenses associated with in-person client relationship meetings and conferences as well as some additional expense associated with an all-employee event to celebrate Wintrust’s 30th anniversary and to thank our employees for performing so well during the pandemic. The liability for contingent consideration expense related to the 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 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 ~~affiliates as a result of asset growth, including PPP loans.~~charges, directors fees, telephone, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses and lending origination costs that are not deferred.

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Income Taxes

The Company recorded income tax expense of ~~$53.7~~$40.6 million in the ~~first~~third quarter of 2021 compared to ~~$24.3~~$30.0 million in the ~~first~~third quarter of 2020. The effective tax rates were ~~25.97%~~27.12% in the ~~first~~third quarter of 2021 compared to ~~27.87%~~21.83% in the third quarter of 2020. During the first ~~quarter~~nine months of 2021, the Company recorded income tax expense of $133.4 million compared to $63.3 million for the first nine months of 2020. The effective tax rates were 26.63% for the first nine months of 2021 and 24.81% for the first nine months of 2020.

The effective tax rates were impacted by the recognition of a $9.0 million state income tax benefit ($7.1 million after federal taxes) related to the settlement of an uncertain tax position in the third quarter of 2020, an overall lower level of pretax net income in the 2020 periods, and the tax effects related to 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 ~~$1.3~~$1.6 million in the first ~~quarter~~nine months of 2021 and additional tax expense of ~~$486,000~~$597,000 in the first nine months of 2020 related to share-based compensation, most of which was recorded in the first quarter of ~~2020 related to share-based compensation.~~each year.

Operating Segment Results

As described in Note 13 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

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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 ~~March 31,~~September 30, 2021 totaled ~~$203.5~~$220.0 million as compared to ~~$206.8~~$196.8 million for the same period in 2020, ~~a decrease~~an increase of ~~$3.3~~$23.2 million, or 2%12%. On a year-to-date basis, net interest income for the segment increased by $33.9 million from $609.3 million for the nine months ended September 30, 2020 to $643.2 million for the nine months ended September 30, 2021. The ~~decrease~~increase in the three and nine month ~~period is~~periods was primarily attributable to ~~compression of the net interest margin attributable to the decrease in interest rates in the environment.~~earning asset growth, PPP loan fee income, and lower deposits rates. The community banking segment’s non-interest income totaled ~~$147.3~~$94.3 million in the ~~first~~third quarter of 2021, ~~an increase~~a decrease of ~~$66.3~~$42.7 million, or ~~82%~~31%, when compared to the ~~first~~third quarter of 2020 total of ~~$81.0~~$137.0 million. On a year-to-date basis, non-interest income totaled $332.0 million for the nine months ended September 30, 2021, a decrease of $15.7 million, or 5%, compared to $347.7 million for the nine months ended September 30, 2020. The ~~increase~~decrease in the three and nine month ~~period is~~periods was primarily the result of ~~increased~~reduced mortgage banking revenue ~~from significantly increased mortgage~~due to lower originations ~~during 2021.~~for sale and lower gain on sale margin. A release of credit reserves of ~~$46.6~~$7.4 million and $69.2 million was recorded in the community banking segment’s provision for credit losses for the ~~quarter~~three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to a provision for credit losses of ~~$51.7~~$23.3 million and $207.2 million, respectively, for the same ~~period~~periods in 2020. The decrease in provision for credit losses ~~of $98,249~~for both the three and nine month periods was attributable to positive changes in the macroeconomic forecasts in addition to improvement in portfolio characteristics. The community banking segment’s net income for the quarter ended ~~March 31,~~September 30, 2021 totaled ~~$121.8~~$68.8 million, ~~an increase~~a decrease of ~~$87.2~~$1.8 million as compared to net income in the ~~first~~third quarter of 2020 of ~~$34.6~~$70.6 million. On a year-to-date basis, the net income of the community banking segment for the nine months ended September 30, 2021 totaled $263.3 million as compared to $97.9 million for the nine months ended September 30, 2020.

The specialty finance ~~segment's~~segment’s net interest income totaled ~~$44.9~~$52.7 million for the quarter ended ~~March 31,~~September 30, 2021, compared to ~~$40.7~~$46.5 million for the same period in 2020, an increase of ~~$4.2~~$6.2 million, or 13%. On a year-to-date basis, net interest income for the segment increased $13.2 million, or 10%. compared to the same period in 2020. The increase isfor both the three and nine month periods was primarily attributable to growth in earning assets on the premium finance receivables portfolios. The specialty finance segment’s non-interest income totaled ~~$23.1~~$24.4 million and ~~$21.3~~$21.4 million for the three ~~month periods~~months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and $70.0 million and $64.5 million for the nine months ended September 30, 2021 and 2020, respectively. The increase in non-interest income infor both the three and nine month ~~period 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%~~42%, ~~28%~~29%, ~~27%~~25% and 4%, respectively, of the total revenues of our specialty finance business for the ~~three~~nine month period ended ~~March 31,~~September 30, 2021. The net income of the specialty finance segment for the quarter ended ~~March 31,~~September 30, 2021 totaled ~~$23.9~~$30.2 million as compared to ~~$22.1~~$29.9 million for the quarter ended ~~March 31,~~September 30, 2020. On a year-to-date basis, the net income of the specialty finance segment for the nine months ended September 30, 2021 totaled $78.0 million as compared to $74.7 million for the nine months ended September 30, 2020.

The wealth management segment reported net interest income of ~~$7.4~~$8.0 million for the ~~first~~third quarter of 2021 compared to ~~$7.8~~$6.9 million in the same quarter of 2020, an increase of $1.1 million, or 16%. On a ~~decrease~~year-to-date basis, net interest income totaled $23.2 million for the first nine months of ~~$343,000, or 4%.~~2021 as compared to $23.3 million for the first nine months of 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 and interest-bearing wealth management customer account balances on deposit at the banks. Wealth management customer account balances on deposit at the banks averaged ~~$2.2~~$2.3 billion and ~~$1.8~~$2.0 billion in the first ~~three~~nine months of 2021 and 2020, respectively. This segment recorded non-interest income of ~~$30.3~~$33.6 million for the ~~first~~third quarter of 2021 compared to ~~$24.1~~$26.2 million for the third quarter of 2020. On a year-to-date basis, this segment recorded non-interest income of $95.7 million as compared to $74.7 million for the first ~~quarter~~nine months of 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 ~~$7.4~~$10.1 million for the ~~first~~third quarter of 2021 compared to ~~$6.1~~$6.9 million for the ~~first~~third quarter of 2020. On a year-to-date basis, the wealth management segment’s net income totaled $26.1 million and $19.2 million for the nine month periods ended September 30, 2021 and 2020, respectively.

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Financial Condition

Total assets were ~~$45.7~~$47.8 billion at ~~March 31,~~September 30, 2021, representing an increase of ~~$6.9~~$4.1 billion, or ~~18%~~9%, when compared to ~~March 31,~~September 30, 2020 and an increase of approximately ~~$601.4 million,~~$1.1 billion, or 5%9% on an annualized basis, when compared to ~~December 31, 2020.~~June 30, 2021. Total funding, which includes deposits, all notes and advances, including secured borrowings and the junior subordinated debentures, was ~~$40.3~~$42.4 billion at ~~March 31,~~September 30, 2021, ~~$39.5~~$41.3 billion at ~~December 31, 2020,~~June 30, 2021, and ~~$33.8~~$38.3 billion at ~~March 31,~~September 30, 2020.

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See Notes 4, 5, 9, 10 and 11 of the Consolidated Financial Statements presented under Item 1 of this report for additional period-end detail on the Company’s interest-earning assets and funding liabilities.

Interest-Earning Assets

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


		Three Months Ended													Three Months Ended
		March 31, 2021				December 31, 2020				March 31, 2020					September 30, 2021				June 30, 2021				September 30, 2020
(Dollars in thousands)	(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent		(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent
Mortgage loans held-for-sale	Mortgage loans held-for-sale	$	1,151,848	3	%	$	893,395	2	%	$	403,262	1	%	Mortgage loans held-for-sale	$	871,824	2	%	$	991,011	2	%	$	822,908	2	%
Loans, net of unearned income	Loans, net of unearned income													Loans, net of unearned income
Commercial, excluding PPP	Commercial, excluding PPP	$	9,180,308	22	%	$	8,904,090	22	%	$	8,414,315	25	%	Commercial, excluding PPP	$	9,732,838	22	%	$	9,377,392	22	%	$	8,647,069	22	%
Commercial - PPP	Commercial - PPP	3,087,825		7		3,098,424		8		—		—		Commercial - PPP	1,475,304		3		2,877,731		7		3,364,890		8
Commercial real estate	Commercial real estate	8,497,091		20		8,481,722		20		8,125,827		24		Commercial real estate	8,776,342		20		8,573,493		20		8,329,285		21
Home equity	Home equity	408,565		1		434,424		1		499,369		1		Home equity	355,510		1		379,853		1		455,589		1
Residential real estate	Residential real estate	1,300,871		3		1,131,728		3		1,243,031		4		Residential real estate	1,496,847		3		1,453,072		3		1,173,639		3
Premium finance receivables	Premium finance receivables	9,910,388		24		9,646,725		24		8,591,980		26		Premium finance receivables	11,118,607		26		10,383,218		24		9,596,817		24
Other loans	Other loans	57,879		—		86,166		—		62,206		—		Other loans	29,997		0		40,415		1		67,319		1
Total average loans (1)	Total average loans (1)	$	32,442,927	77	%	$	31,783,279	78	%	$	26,936,728	80	%	Total average loans (1)	$	32,985,445	75	%	$	33,085,174	78	%	$	31,634,608	80	%
Liquidity management assets (2)	Liquidity management assets (2)	8,311,320		20		8,051,203		20		6,314,347		19		Liquidity management assets (2)	10,314,314		23		8,752,082		20		7,336,153		18
Other earning assets (3)	Other earning assets (3)	20,370		—		18,716		—		19,166		—		Other earning assets (3)	28,238		0		23,354		0		16,656		0
Total average earning assets	Total average earning assets	$	41,926,465	100	%	$	40,746,593	100	%	$	33,673,503	100	%	Total average earning assets	$	44,199,821	100	%	$	42,851,621	100	%	$	39,810,325	100	%
Total average assets	Total average assets	$	44,988,733			$	43,810,005			$	36,625,490			Total average assets	$	47,192,510			$	45,946,751			$	42,962,844
Total average earning assets to total average assets	Total average earning assets to total average assets			93	%			93	%			92	%	Total average earning assets to total average assets			94	%			93	%			93	%

(1)Includes non-accrual loans.

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

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

Mortgage loans held-for-sale. Average mortgage loans held-for-sale totaled ~~$1.2 billion~~$871.8 million in the ~~first~~third quarter of 2021, compared to ~~$893.4~~$991.0 million in the ~~fourth~~second quarter of ~~2020~~2021 and ~~$403.3~~$822.9 million in the ~~first~~third quarter of 2020. These balances represent mortgage loans awaiting subsequent sale in the secondary market 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 balance from 2020 to 2021 was primarily due to ~~continued high mortgage production in 2020 and the first quarter of 2021 due to the 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 servicing ~~retained.~~retained, partially offset by lower mortgage origination production. 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 ~~$32.4~~$33.0 billion in the ~~first~~third quarter of 2021, increasing ~~$5.5~~$1.4 billion, or ~~20%~~4%, from the ~~first~~third quarter of 2020 and ~~$659.6~~decreasing $99.7 million, or 8%1% on an annualized basis, from the ~~fourth~~second quarter of ~~2020.~~2021. Average commercial loans, excluding PPP loans, totaled ~~$9.2~~$9.7 billion in the ~~first~~third quarter of 2021, and increased ~~$766.0 million,~~$1.1 billion, or 9%13%, over the average balance in the ~~first~~third quarter of 2020 and ~~$276.2~~$355.4 million, or ~~13%~~15% on an annualized basis, over the average balance in the ~~fourth~~second quarter of ~~2020.~~2021. Average commercial PPP loans totaled ~~$3.1~~$1.5 billion in the ~~first~~third quarter of 2021, ~~relatively unchanged from~~and decreased $1.9 billion, or 56%, over the ~~fourth~~average balance in the third quarter of ~~2020.~~2020 and decreased $1.4 billion over the average balance in the second quarter of 2021. The decrease in the third quarter of 2021 compared to the second quarter of 2021 and third quarter of 2020 is primarily the result of significant payoffs in the portfolio through the forgiveness process administered by the SBA. Average commercial real estate loans totaled ~~$8.5~~$8.8 billion in the ~~first~~third quarter of 2021, increasing ~~$371.3~~$447.1 million, or 5%, over the ~~first~~third quarter of 2020. Combined, the commercial and commercial real estate loan categories comprised ~~64%~~61% of the average loan portfolio in the ~~first~~third quarter of 2021 as compared to 63% in the second quarter of 2021 and 64% in the

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~~fourth quarter of 2020 and 61% in the first~~ third quarter of 2020. ~~Growth~~Excluding the impact of PPP loans, growth realized in these aggregated categories for the ~~first~~third quarter of 2021 as compared to the sequential and prior year periods is primarily attributable to ~~PPP lending and~~ increased business development efforts.

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Home equity loan portfolio averaged ~~$408.6~~$355.5 million in the ~~first~~third quarter of 2021, and decreased ~~$90.8~~$100.1 million, or ~~18%~~22% from the average balance of ~~$499.4~~$455.6 million in same period of 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 ~~$1.3~~$1.5 billion in the ~~first~~third quarter of 2021, and increased ~~$57.8~~$323.2 million, or 5%28% from the average balance of $1.2 billion in same period of 2020. Additionally, compared to the quarter ended ~~December 31, 2020,~~June 30, 2021, the average balance increased ~~$169.1~~$43.8 million, or ~~61%~~12% on an annualized basis. The increase in average balance compared to both periods was partially due to the Company deciding to allocate more balances from its mortgage production for investment instead of for subsequent sale and servicing in the secondary market.

Average premium finance receivables totaled ~~$9.9~~$11.1 billion in the ~~first~~third quarter of 2021, and accounted for ~~31%~~34% of the Company’s average total loans. The increase during the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 was the result of continued originations within the portfolio due to hardening insurance market conditions driving a higher average size of new commercial insurance premium finance receivables as well as effective marketing and customer servicing. Approximately ~~$2.8~~$3.1 billion of premium finance receivables were originated in the ~~first~~third quarter of 2021 compared to ~~$2.5~~$2.8 billion during the same period of 2020. Premium finance receivables consist of a commercial portfolio and a life portfolio comprising approximately ~~40%~~42% and ~~60%~~58%, respectively, of the average total balance of premium finance receivables for the ~~first~~third quarter of 2021, and ~~40%~~43% and ~~60%~~57%, respectively, for the ~~first~~third quarter of 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.

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%~~23% and ~~19%~~18% of total average earning assets in the ~~first~~third quarter of 2021 and 2020, respectively. Average liquidity management assets increased ~~$2.0~~$3.0 billion in the ~~first~~third 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. 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' 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 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 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.

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


	Nine Months Ended
	September 30, 2021				September 30, 2020
(Dollars in thousands)	Balance		Percent		Balance		Percent
Mortgage loans held-for-sale	$	1,003,868	2	%	$	644,611	2	%
Loans:
Commercial, excluding PPP	$	9,432,203	22	%	$	8,582,438	23	%
Commercial - PPP	2,474,380		6		2,019,778		5
Commercial real estate	8,616,665		20		8,211,222		22
Home equity	381,115		1		477,672		1
Residential real estate	1,417,648		3		1,213,289		3
Premium finance receivables	10,475,164		25		9,069,770		24
Other loans	42,662		0		69,112		1
Total average loans(1)	$	32,839,837	77	%	$	29,643,281	79	%
Liquidity management assets (2)	9,133,242		21		7,112,651		19
Other earning assets (3)	24,016		0		17,576		0
Total average earning assets	$	43,000,963	100	%	$	37,418,119	100	%
Total average assets	$	46,050,737			$	40,552,517
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.

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LOAN PORTFOLIO AND ASSET QUALITY

Loan Portfolio

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

March 31, 2021 December 31, 2020 March 31, 2020
% of % of % of
(In thousands) Amount Total Amount Total Amount Total
Commercial $ 12,708,207 38 % $ 11,955,967 37 % $ 9,025,886 32 %
Commercial real estate 8,544,779 26 8,494,132 26 8,185,531 29
Home equity 390,253 1 425,263 1 494,655 2
Residential real estate 1,421,973 4 1,259,598 5 1,377,389 5
Premium finance receivables—commercial 3,958,543 12 4,054,489 13 3,465,055 13
Premium finance receivables—life insurance 6,111,495 19 5,857,436 18 5,221,639 19
Consumer and other 35,983 0 32,188 0 37,166 0
Total loans, net of unearned income $ 33,171,233 100 % $ 32,079,073 100 % $ 27,807,321 100 %


	September 30, 2021				December 31, 2020				September 30, 2020
			% of				% of				% of
(Dollars in thousands)	Amount		Total		Amount		Total		Amount		Total
Commercial	$	11,187,972	33	%	$	11,955,967	37	%	$	12,276,999	39	%
Commercial real estate	8,885,714		27		8,494,132		26		8,423,142		26
Home equity	347,662		1		425,263		1		446,274		1
Residential real estate	1,547,736		5		1,259,598		5		1,384,810		4
Premium finance receivables—commercial	4,616,977		14		4,054,489		13		4,060,144		13
Premium finance receivables—life insurance	6,655,453		20		5,857,436		18		5,488,832		17
Consumer and other	22,529		0		32,188		0		55,354		0
Total loans, net of unearned income	$	33,264,043	100	%	$	32,079,073	100	%	$	32,135,555	100	%

Commercial and commercial real estate loans. Our commercial and commercial real estate loan portfolios are comprised primarily of lines of credit for working capital 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 ~~March 31,~~September 30, 2021 and 2020:


		As of March 31, 2021				As of March 31, 2020					As of September 30, 2021								As of September 30, 2020
							Allowance							Allowance							Allowance						Allowance
				% of			For Credit					% of		For Credit					% of		For Credit				% of		For Credit
				Total			Losses					Total		Losses					Total		Losses				Total		Losses
(Dollars in thousands)	(Dollars in thousands)	Balance		Balance			Allocation		Balance			Balance		Allocation		(Dollars in thousands)	Balance		Balance		Allocation		Balance		Balance		Allocation
Commercial:	Commercial:															Commercial:

Commercial, industrial, and other, excluding commercial PPP	Commercial, industrial, and other, excluding commercial PPP	$	9,415,225	44.3	%		$	95,637	$	9,025,886		52.4	%	$	107,346	Commercial, industrial, and other, excluding commercial PPP	$	10,105,984	50.3	%	$	109,780	$	8,897,986	43.0	%	$	112,891
Commercial PPP	Commercial PPP	3,292,982		15.5			3		—			—		—		Commercial PPP	1,081,988		5.4		2		3,379,013		16.3		3
Total commercial	Total commercial	$	12,708,207	59.8	%		$	95,640	$	9,025,886		52.4	%	$	107,346	Total commercial	$	11,187,972	55.7	%	$	109,782	$	12,276,999	59.3	%	$	112,894
Commercial Real Estate:	Commercial Real Estate:															Commercial Real Estate:
Construction and development	Construction and development	$	1,353,324	6.4	%		$	45,327	$	1,301,353		7.6	%	$	33,862	Construction and development	$	1,343,715	6.7	%	$	34,101	$	1,333,149	6.4	%	$	77,126

Non-construction	Non-construction	7,191,455		33.8			136,465		6,884,178			40.0		78,934		Non-construction	7,541,999		37.6		105,934		7,089,993		34.3		156,884

Total commercial real estate	Total commercial real estate	$	8,544,779	40.2	%		$	181,792	$	8,185,531		47.6	%	$	112,796	Total commercial real estate	$	8,885,714	44.3	%	$	140,035	$	8,423,142	40.7	%	$	234,010
Total commercial and commercial real estate	Total commercial and commercial real estate	$	21,252,986	100.0	%		$	277,432	$	17,211,417		100.0	%	$	220,142	Total commercial and commercial real estate	$	20,073,686	100.0	%	$	249,817	$	20,700,141	100.0	%	$	346,904

Commercial real estate - collateral location by state:	Commercial real estate - collateral location by state:															Commercial real estate - collateral location by state:
Illinois	Illinois	$	6,256,230	73.2	%				$	6,171,606		75.4	%			Illinois	$	6,425,279	72.3	%			$	6,270,584	74.4	%
Wisconsin	Wisconsin	771,382		9.0					793,145			9.7				Wisconsin	790,477		8.9				783,241		9.3
Total primary markets	Total primary markets	$	7,027,612	82.2	%				$	6,964,751		85.1	%			Total primary markets	$	7,215,756	81.2	%			$	7,053,825	83.7	%
Indiana	Indiana	310,494		3.6					249,680			3.1				Indiana	307,631		3.5				265,905		3.2
Florida	Florida	130,759		1.5					126,786			1.5				Florida	117,990		1.3				133,602		1.6
Arizona	Arizona	73,892		0.9					72,214			0.9				Arizona	81,850		0.9				79,086		0.9
California	California	88,514		1.0					63,883			0.8				California	107,693		1.2				82,852		1.0
Texas	Texas	85,228		1.0					59,647			0.7				Texas	108,239		1.2				55,229		0.7
Other	Other	828,280		9.8					648,570			7.9				Other	946,555		10.7				752,643		8.9
Total commercial real estate	Total commercial real estate	$	8,544,779	100.0	%				$	8,185,531		100.0	%			Total commercial real estate	$	8,885,714	100.0	%			$	8,423,142	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. Commercial business lending

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is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. Primarily as a result

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of improvements in the Company’s macroeconomic forecasts and ~~improvement~~changes in portfolio characteristics, our allowance for credit losses in our commercial loan portfolio decreased to ~~$95.6~~$109.8 million as of ~~March 31,~~September 30, 2021 compared to ~~$107.3~~$112.9 million as of ~~March 31,~~September 30, 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, ~~82.2%~~81.2% of our commercial real estate loan portfolio is located in this region as of ~~March 31,~~September 30, 2021. We have been able to effectively manage our total non-performing commercial real estate loans. As of ~~March 31,~~September 30, 2021, our allowance for credit losses related to this portfolio was ~~$181.8~~$140.0 million compared to ~~$112.8~~$234.0 million as of ~~March 31,~~September 30, 2020. The ~~increase~~decrease in the allowance for credit losses in our commercial real estate portfolio is primarily due to ~~declining~~the impact on the Company’s loan loss modeling from improving expectations between the two reporting dates primarily related to 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 includes one- to four-family adjustable rate mortgages, construction loans to individuals and bridge financing loans for qualifying customers as well as certain long-term fixed rate loans. As of ~~March 31,~~September 30, 2021, our residential loan portfolio totaled ~~$1.4~~$1.5 billion, or 4%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 ~~March 31,~~September 30, 2021, ~~$21.6~~$22.6 million of our residential real estate mortgages, or 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, ~~$14.7~~$2.6 million were 30 to 89 days past due, or ~~1.0%~~0.2%, and ~~$1.4~~$1.5 billion were current, or ~~97.4%~~98.4%. 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.

Due to interest rate risk considerations, we 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 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 ~~March 31,~~September 30, 2021 and 2020 was ~~$11.5~~$12.7 billion and ~~$8.3~~$10.1 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.

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The Government National Mortgage Association ("GNMA") optional repurchase programs allow financial institutions acting as servicers to 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 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 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 ~~$45.5~~$18.8 million at ~~March 31,~~September 30, 2021, compared to ~~$132.7~~$240.9 million balance at ~~March 31,~~September 30, 2020. The decrease in balance from ~~March 31,~~September 30, 2020 to ~~March 31,~~September 30, 2021 was the result of the Company increasing its exercise of such early buyout options subsequent to ~~March 31,~~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 ~~March 31,~~September 30, 2021, early buyout exercised mortgage loans held-for-sale totaled ~~$369.4~~$354.6 million compared to ~~$14.5~~$96.7 million as of ~~March 31,~~September 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 March 31, 2021, approximately $550,000 of our mortgage loans consist of interest-only loans.~~

Premium finance receivables – commercial. FIRST Insurance Funding and FIFC Canada originated approximately ~~$2.4~~$2.8 billion in commercial insurance premium finance receivables in the ~~first~~third quarter of 2021 as compared to ~~$2.2~~$2.5 billion of originations in the ~~first~~third quarter of 2020. During the nine months ended September 30, 2021 and 2020, FIRST Insurance Funding and FIFC Canada originated approximately $8.2 billion and $7.4 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 ~~$330.3~~$371.9 million in life insurance premium finance receivables in the ~~first~~third quarter of 2021 as compared to ~~$290.9~~$315.4 million of originations in the ~~first~~third quarter of 2020. During the nine months ended September 30, 2021 and 2020, Wintrust Life Finance originated approximately $1.1 billion and $960.6 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.

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Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table classifies the loan portfolio at ~~March 31,~~September 30, 2021 by date at which the loans reprice or mature, and the type of rate exposure:


As of March 31, 2021		One year or less			From one to five years				Over five years
As of September 30, 2021											As of September 30, 2021		One year or less						From one to five years				Over five years
(In thousands)	(In thousands)			One year or less					From one to five years							Over five years									Total		(In thousands)								Total
Commercial	Commercial										Commercial
Fixed rate	Fixed rate	$	310,427				$	2,025,263			$	784,277					$	3,119,967		Fixed rate	$	484,771			$	2,015,188			$	837,153			$	3,337,112
Fixed rate - PPP	Fixed rate - PPP	—			3,292,982				—					3,292,982				Fixed rate - PPP		141,394				940,594				—				1,081,988
Variable rate	Variable rate	6,291,842			3,350				66					6,295,258			Variable rate		6,765,489				3,323				60				6,768,872
Total commercial	Total commercial	$	6,602,269		$	5,321,595			$	784,343				$	12,708,207		Total commercial		$	7,391,654			$	2,959,105			$	837,213			$	11,187,972
Commercial real estate	Commercial real estate																Commercial real estate
Fixed rate	Fixed rate	550,899			2,075,177				382,447					3,008,523			Fixed rate		558,728				2,201,827				493,256				3,253,811
Variable rate	Variable rate	5,505,986			30,270				—					5,536,256			Variable rate		5,607,888				24,015				—				5,631,903
Total commercial real estate	Total commercial real estate	$	6,056,885		$	2,105,447			$	382,447				$	8,544,779		Total commercial real estate		$	6,166,616			$	2,225,842			$	493,256			$	8,885,714
Home equity	Home equity																Home equity
Fixed rate	Fixed rate	14,653			8,665				51					23,369			Fixed rate		14,818				4,618				45				19,481
Variable rate	Variable rate	366,884			—				—					366,884			Variable rate		328,181				—				—				328,181
Total home equity	Total home equity	$	381,537		$	8,665			$	51				$	390,253		Total home equity		$	342,999			$	4,618			$	45			$	347,662
Residential real estate	Residential real estate																Residential real estate
Fixed rate	Fixed rate	23,194			11,244				617,596					652,034			Fixed rate		19,165				6,415				819,685				845,265
Variable rate	Variable rate	65,907			290,906				413,126					769,939			Variable rate		58,698				258,143				385,630				702,471
Total residential real estate	Total residential real estate	$	89,101		$	302,150			$	1,030,722				$	1,421,973		Total residential real estate		$	77,863			$	264,558			$	1,205,315			$	1,547,736
Premium finance receivables - commercial	Premium finance receivables - commercial																Premium finance receivables - commercial
Fixed rate	Fixed rate	3,851,457			107,086				—					3,958,543			Fixed rate		4,479,551				137,426				—				4,616,977
Variable rate	Variable rate	—			—				—					—			Variable rate		—				—				—				—
Total premium finance receivables - commercial	Total premium finance receivables - commercial	$	3,851,457		$	107,086			$	—				$	3,958,543		Total premium finance receivables - commercial		$	4,479,551			$	137,426			$	—			$	4,616,977
Premium finance receivables - life insurance	Premium finance receivables - life insurance																Premium finance receivables - life insurance
Fixed rate	Fixed rate	11,493			348,721				20,365					380,579			Fixed rate		9,046				438,568				21,813				469,427
Variable rate	Variable rate	5,730,916			—				—					5,730,916			Variable rate		6,186,026				—				—				6,186,026
Total premium finance receivables - life insurance	Total premium finance receivables - life insurance	$	5,742,409		$	348,721			$	20,365				$	6,111,495		Total premium finance receivables - life insurance		$	6,195,072			$	438,568			$	21,813			$	6,655,453
Consumer and other	Consumer and other																Consumer and other
Fixed rate	Fixed rate	14,753			4,536				1,154					20,443			Fixed rate		4,366				4,852				906				10,124
Variable rate	Variable rate	15,540			—				—					15,540			Variable rate		12,405				—				—				12,405
Total consumer and other	Total consumer and other	$	30,293		$	4,536			$	1,154				$	35,983		Total consumer and other		$	16,771			$	4,852			$	906			$	22,529
Total per category	Total per category																Total per category
Fixed rate	Fixed rate	4,776,876			4,580,692				1,805,890					11,163,458			Fixed rate		5,570,445				4,808,894				2,172,858				12,552,197
Fixed rate - PPP	Fixed rate - PPP	—			3,292,982				—					3,292,982			Fixed rate - PPP		141,394				940,594				—				1,081,988
Variable rate	Variable rate	17,977,075			324,526				413,192					18,714,793			Variable rate		18,958,687				285,481				385,690				19,629,858
Total loans, net of unearned income	Total loans, net of unearned income	$	22,753,951		$	8,198,200			$	2,219,082				$	33,171,233		Total loans, net of unearned income		$	24,670,526			$	6,034,969			$	2,558,548			$	33,264,043
Variable Rate Loan Pricing by Index:	Variable Rate Loan Pricing by Index:																Variable Rate Loan Pricing by Index:
Prime	Prime													$	2,296,647		Prime														$	2,989,860
One- month LIBOR	One- month LIBOR													9,493,060			One- month LIBOR														9,177,387
Three- month LIBOR	Three- month LIBOR													413,942			Three- month LIBOR														374,045
Twelve- month LIBOR	Twelve- month LIBOR													6,225,191			Twelve- month LIBOR														6,499,434
Thirty-day moving-average SOFR																	Thirty-day moving-average SOFR														174,768
Other	Other													285,953			Other														414,364
Total variable rate	Total variable rate													$	18,714,793		Total variable rate														$	19,629,858

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

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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.

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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.


(Dollars in thousands)	(Dollars in thousands)	March 31, 2021			December 31, 2020			March 31, 2020			(Dollars in thousands)	September 30, 2021			June 30, 2021			December 31, 2020			September 30, 2020
Loans past due greater than 90 days and still accruing (1):	Loans past due greater than 90 days and still accruing (1):										Loans past due greater than 90 days and still accruing (1):
Commercial	Commercial	$	—		$	307		$	1,241		Commercial	$	—		$	1,244		$	307		$	—
Commercial real estate	Commercial real estate	—			—			516			Commercial real estate	—			—			—			—
Home equity	Home equity	—			—			—			Home equity	164			—			—			—
Residential real estate	Residential real estate	—			—			605			Residential real estate	—			—			—			—
Premium finance receivables—commercial	Premium finance receivables—commercial	4,592			12,792			16,505			Premium finance receivables—commercial	5,811			3,570			12,792			12,177
Premium finance receivables—life insurance	Premium finance receivables—life insurance	191			—			—			Premium finance receivables—life insurance	—			—			—			—
Consumer and other	Consumer and other	161			264			78			Consumer and other	126			178			264			175
Total loans past due greater than 90 days and still accruing	Total loans past due greater than 90 days and still accruing	4,944			13,363			18,945			Total loans past due greater than 90 days and still accruing	6,101			4,992			13,363			12,352
Non-accrual loans (2):
Non-accrual loans:											Non-accrual loans:
Commercial	Commercial	22,459			21,743			49,916			Commercial	26,468			23,232			21,743			42,036
Commercial real estate	Commercial real estate	34,380			46,107			62,830			Commercial real estate	23,706			26,035			46,107			68,815
Home equity	Home equity	5,536			6,529			7,243			Home equity	3,449			3,478			6,529			6,329
Residential real estate	Residential real estate	21,553			26,071			18,965			Residential real estate	22,633			23,050			26,071			22,069
Premium finance receivables—commercial	Premium finance receivables—commercial	9,690			13,264			21,058			Premium finance receivables—commercial	7,300			6,418			13,264			21,080
Premium finance receivables—life insurance	Premium finance receivables—life insurance	—			—			—			Premium finance receivables—life insurance	—			—			—			—
Consumer and other	Consumer and other	497			436			403			Consumer and other	384			485			436			422
Total non-accrual loans	Total non-accrual loans	94,115			114,150			160,415			Total non-accrual loans	83,940			82,698			114,150			160,751
Total non-performing loans:	Total non-performing loans:										Total non-performing loans:
Commercial	Commercial	22,459			22,050			51,157			Commercial	26,468			24,476			22,050			42,036
Commercial real estate	Commercial real estate	34,380			46,107			63,346			Commercial real estate	23,706			26,035			46,107			68,815
Home equity	Home equity	5,536			6,529			7,243			Home equity	3,613			3,478			6,529			6,329
Residential real estate	Residential real estate	21,553			26,071			19,570			Residential real estate	22,633			23,050			26,071			22,069
Premium finance receivables—commercial	Premium finance receivables—commercial	14,282			26,056			37,563			Premium finance receivables—commercial	13,111			9,988			26,056			33,257
Premium finance receivables—life insurance	Premium finance receivables—life insurance	191			—			—			Premium finance receivables—life insurance	—			—			—			—
Consumer and other	Consumer and other	658			700			481			Consumer and other	510			663			700			597
Total non-performing loans	Total non-performing loans	$	99,059		$	127,513		$	179,360		Total non-performing loans	$	90,041		$	87,690		$	127,513		$	173,103
Other real estate owned	Other real estate owned	8,679			9,711			2,701			Other real estate owned	9,934			10,510			9,711			2,891
Other real estate owned—from acquisitions	Other real estate owned—from acquisitions	7,134			6,847			8,325			Other real estate owned—from acquisitions	3,911			5,062			6,847			6,326
Other repossessed assets	Other repossessed assets	—			—			—			Other repossessed assets	—			—			—			—
Total non-performing assets	Total non-performing assets	$	114,872		$	144,071		$	190,386		Total non-performing assets	103,886			$	103,262		$	144,071		$	182,320
Accruing TDRs not included within non-performing assets	Accruing TDRs not included within non-performing assets	$	46,151		$	47,023		$	47,049		Accruing TDRs not included within non-performing assets	$	38,468		$	44,019		$	47,023		$	46,410
Total non-performing loans by category as a percent of its own respective category’s period-end balance:	Total non-performing loans by category as a percent of its own respective category’s period-end balance:										Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial	Commercial	0.18		%	0.18		%	0.57		%	Commercial	0.24		%	0.21		%	0.18		%	0.34		%
Commercial real estate	Commercial real estate	0.40			0.54			0.77			Commercial real estate	0.27			0.30			0.54			0.82
Home equity	Home equity	1.42			1.54			1.46			Home equity	1.04			0.94			1.54			1.42
Residential real estate	Residential real estate	1.52			2.07			1.42			Residential real estate	1.46			1.51			2.07			1.59
Premium finance receivables—commercial	Premium finance receivables—commercial	0.36			0.64			1.08			Premium finance receivables—commercial	0.28			0.22			0.64			0.82
Premium finance receivables—life insurance	Premium finance receivables—life insurance	0.00			—			—			Premium finance receivables—life insurance	—			—			—			—
Consumer and other	Consumer and other	1.83			2.17			1.29			Consumer and other	2.26			7.35			2.17			1.08
Total non-performing loans	Total non-performing loans	0.30		%	0.40		%	0.65		%	Total non-performing loans	0.27		%	0.27		%	0.40		%	0.54		%
Total non-performing assets, as a percentage of total assets	Total non-performing assets, as a percentage of total assets	0.25		%	0.32		%	0.49		%	Total non-performing assets, as a percentage of total assets	0.22		%	0.22		%	0.32		%	0.42		%
Allowance for credit losses as a percentage of nonaccrual loans	Allowance for credit losses as a percentage of nonaccrual loans	341.29		%	332.82		%	157.97		%	Allowance for credit losses as a percentage of nonaccrual loans	352.70		%	367.64		%	332.82		%	241.93		%

(1)As of ~~the dates shown, no~~September 30, 2021, and June 30, 2021, $445,000 and $320,000, respectively, of TDRs were ~~included as~~ past due greater than 90 days and still accruing interest.

~~(2)Non-accrual loans included~~ No TDRs ~~totaling $10.4 million, $21.2 million,~~were past due greater than 90 days and ~~$36.6 million~~still accruing interest as of ~~March 31, 2021,~~ December 31, 2020 and ~~March 31, 2020, respectively.~~September 30, 2020.

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 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 ~~March 31,~~September 30, 2021 and ~~December 31, 2020:~~June 30, 2021:


		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 March 31, 2021
As of September 30, 2021														As of September 30, 2021
(Dollars in thousands)	(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)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:	Loan Balances:													Loan Balances:
Commercial	Commercial													Commercial

Commercial, industrial and other, excluding PPP loans	Commercial, industrial and other, excluding PPP loans	$	22,459	$	—	$	13,292	$	35,535	$	9,343,939	$	9,415,225	Commercial, industrial and other, excluding PPP loans	$	26,468	$	—	$	9,768	$	24,086	$	10,045,662	$	10,105,984
Commercial PPP loans	Commercial PPP loans	—		—		—		6		3,292,976		3,292,982		Commercial PPP loans	—		—		—		1,138		1,080,850		1,081,988
Commercial real estate	Commercial real estate													Commercial real estate
Construction and development	Construction and development	2,673		—		499		23,967		1,326,185		1,353,324		Construction and development	1,030		—		—		12,631		1,330,054		1,343,715
Non-construction	Non-construction	31,707		—		7,657		46,201		7,105,890		7,191,455		Non-construction	22,676		—		5,395		67,187		7,446,741		7,541,999

Home equity	Home equity	5,536		—		492		780		383,445		390,253		Home equity	3,449		164		340		867		342,842		347,662
Residential real estate	Residential real estate	21,553		—		944		13,768		1,385,708		1,421,973		Residential real estate	22,633		—		1,540		1,076		1,522,487		1,547,736
Premium finance receivables	Premium finance receivables													Premium finance receivables
Commercial insurance loans	Commercial insurance loans	9,690		4,592		5,113		16,552		3,922,596		3,958,543		Commercial insurance loans	7,300		5,811		10,642		14,614		4,578,610		4,616,977
Life insurance loans	Life insurance loans	—		191		—		14,821		6,096,483		6,111,495		Life insurance loans	—		—		5,162		7,040		6,643,251		6,655,453

Consumer and other	Consumer and other	497		161		8		74		35,243		35,983		Consumer and other	384		126		16		125		21,878		22,529
Total loans, net of unearned income	Total loans, net of unearned income	$	94,115	$	4,944	$	28,005	$	151,704	$	32,892,465	$	33,171,233	Total loans, net of unearned income	$	83,940	$	6,101	$	32,863	$	128,764	$	33,012,375	$	33,264,043


		Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans			Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
As of December 31, 2020
As of June 30, 2021														As of June 30, 2021
(Dollars in thousands)	(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)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:	Loan Balances:													Loan Balances:
Commercial	Commercial													Commercial
Commercial, industrial and other, excluding PPP loans	Commercial, industrial and other, excluding PPP loans	$	21,743	$	307	$	6,900	$	44,345	$	9,166,751	$	9,240,046	Commercial, industrial and other, excluding PPP loans	$	23,232	$	1,244	$	5,204	$	18,468	$	9,514,721	$	9,562,869
Commercial PPP loans	Commercial PPP loans	—		—		—		36		2,715,885		2,715,921		Commercial PPP loans	—		—		—		10		1,879,397		1,879,407

Commercial real estate	Commercial real estate													Commercial real estate
Construction and development	Construction and development	5,633		—		—		5,344		1,360,825		1,371,802		Construction and development	1,030		—		—		2,207		1,382,012		1,385,249
Non-construction	Non-construction	40,474		—		5,178		26,772		7,049,906		7,122,330		Non-construction	25,005		—		4,382		17,491		7,246,242		7,293,120

Home equity	Home equity	6,529		—		47		637		418,050		425,263		Home equity	3,478		—		301		777		365,250		369,806
Residential real estate	Residential real estate	26,071		—		1,635		12,584		1,219,308		1,259,598		Residential real estate	23,050		—		1,584		2,139		1,503,512		1,530,285
Premium finance receivables	Premium finance receivables													Premium finance receivables
Commercial insurance loans	Commercial insurance loans	13,264		12,792		6,798		18,809		4,002,826		4,054,489		Commercial insurance loans	6,418		3,570		7,759		8,793		4,495,331		4,521,871
Life insurance loans	Life insurance loans	—		—		21,003		30,465		5,805,968		5,857,436		Life insurance loans	—		—		—		23,965		6,335,591		6,359,556

Consumer and other	Consumer and other	436		264		24		136		31,328		32,188		Consumer and other	485		178		22		75		8,264		9,024
Total loans, net of unearned income	Total loans, net of unearned income	$	114,150	$	13,363	$	41,585	$	139,128	$	31,770,847	$	32,079,073	Total loans, net of unearned income	$	82,698	$	4,992	$	19,252	$	73,925	$	32,730,320	$	32,911,187

As of ~~March 31,~~September 30, 2021, ~~$28.0~~$32.9 million of all loans, or 0.1%, were 60 to 89 days (or two payments) past due and ~~$151.7~~$128.8 million of all loans or ~~0.5%~~0.4%, were 30 to 59 days (or one payment) past due. As of ~~December 31, 2020, $41.6~~June 30, 2021, $19.3 million of all loans or 0.1%, were 60 to 89 days (or two payments) past due and ~~$139.1~~$73.9 million, or ~~0.4%~~0.2%, 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 ~~March 31,~~September 30, 2021 that were current with regard to the contractual terms of the loan agreement represent ~~98.3%~~98.6% of the total home equity portfolio. Residential real estate loans at ~~March 31,~~September 30, 2021 that were current with regards to the contractual terms of the loan agreements comprise ~~97.4%~~98.4% of total residential real estate loans outstanding.

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Non-performing Loans Rollforward

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


		Three Months Ended				Three Months Ended				Nine Months Ended
		March 31,		March 31,				September 30,		September 30,		September 30,		September 30,
(In thousands)	(In thousands)	2021		2020			(In thousands)	2021		2020		2021		2020
Balance at beginning of period	Balance at beginning of period	$	127,513	$	117,588		Balance at beginning of period	$	87,690	$	188,284	$	127,513	$	117,588
Additions from becoming non-performing in the respective period	Additions from becoming non-performing in the respective period	9,894		32,195			Additions from becoming non-performing in the respective period	9,341		19,771		31,997		72,769
Additions from the adoption of ASU 2016-13	Additions from the adoption of ASU 2016-13	—		37,285			Additions from the adoption of ASU 2016-13	—		—		—		37,285
Return to performing status	Return to performing status	(654)		(486)			Return to performing status	(3,322)		(6,202)		(3,976)		(9,254)
Payments received	Payments received	(22,731)		(7,949)			Payments received	(5,568)		(3,733)		(40,611)		(22,883)
Transfer to OREO and other repossessed assets	Transfer to OREO and other repossessed assets	(1,372)		(1,297)			Transfer to OREO and other repossessed assets	(720)		(598)		(5,752)		(1,895)
Charge-offs	Charge-offs	(2,952)		(2,551)			Charge-offs	(548)		(6,583)		(8,184)		(22,018)
Net change for niche loans (1)	Net change for niche loans (1)	(10,639)		4,575			Net change for niche loans (1)	3,168		(17,836)		(10,946)		1,511
Balance at end of period	Balance at end of period	$	99,059	$	179,360		Balance at end of period	$	90,041	$	173,103	$	90,041	$	173,103

(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.

Management determined that the allowance for credit losses was appropriate at ~~March 31,~~September 30, 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 and overall levels of net charge-off. Historical trending of both the Company’s results and the industry peers is also reviewed to analyze comparative significance.

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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						Three Months Ended					Nine Months Ended
(Dollars in thousands)	(Dollars in thousands)	March 31, 2021			March 31, 2020				(Dollars in thousands)	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Allowance for credit losses at beginning of period	Allowance for credit losses at beginning of period	$	379,910		$	158,461			Allowance for credit losses at beginning of period	$	304,031		$	373,109		$	379,910		$	158,461
Cumulative effect adjustment from the adoption of ASU 2016-13	Cumulative effect adjustment from the adoption of ASU 2016-13	—			47,344				Cumulative effect adjustment from the adoption of ASU 2016-13	—			—			—			47,344
Provision for credit losses	Provision for credit losses	(45,386)			52,965				Provision for credit losses	(7,909)			25,028			(68,584)			213,051
Other adjustments	Other adjustments	30			(73)				Other adjustments	(65)			55			(2)			24

Charge-offs:	Charge-offs:								Charge-offs:
Commercial	Commercial	11,781			2,153				Commercial	1,352			5,270			16,370			13,109
Commercial real estate	Commercial real estate	980			570				Commercial real estate	406			1,529			2,798			9,323
Home equity	Home equity	—			1,001				Home equity	59			138			201			1,378
Residential real estate	Residential real estate	2			401				Residential real estate	10			83			15			777
Premium finance receivables	Premium finance receivables	3,239			3,184				Premium finance receivables	1,390			4,640			6,706			11,258
Consumer and other	Consumer and other	114			128				Consumer and other	112			103			330			330

Total charge-offs	Total charge-offs	16,116			7,437				Total charge-offs	3,329			11,763			26,420			36,175
Recoveries:	Recoveries:								Recoveries:
Commercial	Commercial	452			384				Commercial	816			428			2,170			924
Commercial real estate	Commercial real estate	200			263				Commercial real estate	373			175			1,087			931
Home equity	Home equity	101			294				Home equity	313			111			742			451
Residential real estate	Residential real estate	204			60				Residential real estate	5			25			245			115
Premium finance receivables	Premium finance receivables	1,782			1,110				Premium finance receivables	1,728			1,720			6,749			3,663
Consumer and other	Consumer and other	32			41				Consumer and other	92			20			158			119

Total recoveries	Total recoveries	2,771			2,152				Total recoveries	3,327			2,479			11,151			6,203
Net charge-offs	Net charge-offs	(13,345)			(5,285)				Net charge-offs	(2)			(9,284)			(15,269)			(29,972)
Allowance for credit losses at period end	Allowance for credit losses at period end	$	321,209		$	253,412			Allowance for credit losses at period end	$	296,055		$	388,908		$	296,055		$	388,908

Annualized net charge-offs by category as a percentage of its own respective category’s average:	Annualized net charge-offs by category as a percentage of its own respective category’s average:								Annualized net charge-offs by category as a percentage of its own respective category’s average:
Commercial	Commercial	0.37		%	0.08		%		Commercial	0.02		%	0.16		%	0.16		%	0.15		%
Commercial real estate	Commercial real estate	0.04			0.02				Commercial real estate	0.00			0.06			0.03			0.14
Home equity	Home equity	(0.10)			0.57				Home equity	(0.28)			0.02			(0.19)			0.26
Residential real estate	Residential real estate	(0.06)			0.11				Residential real estate	0.00			0.02			(0.02)			0.07
Premium finance receivables	Premium finance receivables	0.06			0.10				Premium finance receivables	(0.01)			0.12			0.00			0.11
Consumer and other	Consumer and other	0.57			0.56				Consumer and other	0.26			0.49			0.54			0.41

Total loans, net of unearned income	Total loans, net of unearned income	0.17		%	0.08		%		Total loans, net of unearned income	0.00		%	0.12		%	0.06		%	0.14		%

Loans at period-end	Loans at period-end	$	33,171,233		$	27,807,321			Loans at period-end	$	33,264,043		$	32,135,555
Allowance for loan losses as a percentage of loans at period end	Allowance for loan losses as a percentage of loans at period end	0.84		%	0.78		%		Allowance for loan losses as a percentage of loans at period end	0.75		%	1.01		%
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end	Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end	0.97			0.91				Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end	0.89			1.21
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end, excluding PPP loans	Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end, excluding PPP loans	1.08			0.91				Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end, excluding PPP loans	0.92			1.35

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 ~~$43.5~~$47.4 million and ~~$37.4~~$62.9 million as of ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 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 6 of the Consolidated Financial Statements presented

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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 6 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 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 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.

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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 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

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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 ~~March 31,~~September 30, 2021, the Company had ~~$56.6~~$48.5 million in loans modified in TDRs. The ~~$56.6~~$48.5 million in TDRs represents ~~273~~254 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 from ~~$68.2~~$55.7 million representing ~~286~~273 credits at ~~December 31, 2020~~June 30, 2021 and decreased from ~~$83.6~~$78.5 million representing ~~263~~291 credits at ~~March 31,~~September 30, 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 6 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 ~~March 31,~~September 30, 2021 and approximately ~~$2.5~~$2.3 million was appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for credit losses. Additionally, at ~~March 31,~~September 30, 2021, the Company was committed to lend an additional ~~$930,000~~$127,000 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:


		March 31,		December 31,		March 31,			September 30,		June 30,		September 30,
(In thousands)	(In thousands)	2021		2020		2020		(In thousands)	2021		2021		2020
Accruing TDRs:	Accruing TDRs:							Accruing TDRs:
Commercial	Commercial	$	7,536	$	7,699	$	6,500	Commercial	$	4,532	$	6,911	$	7,863
Commercial real estate	Commercial real estate	9,478		10,549		18,043		Commercial real estate	8,385		9,659		10,846
Residential real estate and other	Residential real estate and other	29,137		28,775		22,506		Residential real estate and other	25,551		27,449		27,701
Total accruing TDRs	Total accruing TDRs	$	46,151	$	47,023	$	47,049	Total accruing TDRs	$	38,468	$	44,019	$	46,410
Non-accrual TDRs: (1)	Non-accrual TDRs: (1)							Non-accrual TDRs: (1)
Commercial	Commercial	$	5,583	$	10,491	$	17,206	Commercial	$	3,079	$	4,104	$	13,132
Commercial real estate	Commercial real estate	1,309		6,177		14,420		Commercial real estate	3,239		3,434		13,601
Residential real estate and other	Residential real estate and other	3,540		4,501		4,962		Residential real estate and other	3,685		4,190		5,392
Total non-accrual TDRs	Total non-accrual TDRs	$	10,432	$	21,169	$	36,588	Total non-accrual TDRs	$	10,003	$	11,728	$	32,125
Total TDRs:	Total TDRs:							Total TDRs:
Commercial	Commercial	$	13,119	$	18,190	$	23,706	Commercial	$	7,611	$	11,015	$	20,995
Commercial real estate	Commercial real estate	10,787		16,726		32,463		Commercial real estate	11,624		13,093		24,447
Residential real estate and other	Residential real estate and other	32,677		33,276		27,468		Residential real estate and other	29,236		31,639		33,093
Total TDRs	Total TDRs	$	56,583	$	68,192	$	83,637	Total TDRs	$	48,471	$	55,747	$	78,535

(1)Included in total non-performing loans.

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TDR Rollforward

The tables below present a summary of TDRs as of ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020, and show the change in the balance during those periods:


Three Months Ended March 31, 2021 (In thousands)		Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Three months ended September 30, 2021 (In thousands)										Three months ended September 30, 2021 (In thousands)	Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Balance at beginning of period	Balance at beginning of period	$	18,190	$	16,726	$	33,276	$	68,192	Balance at beginning of period	$	11,015	$	13,093	$	31,639	$	55,747
Additions during the period	Additions during the period	151		237		1,738		2,126		Additions during the period	1		—		558		559
Reductions:	Reductions:									Reductions:
Charge-offs	Charge-offs	(1,409)		—		—		(1,409)		Charge-offs	(61)		—		—		(61)
Transferred to OREO and other repossessed assets	Transferred to OREO and other repossessed assets	(99)		—		(459)		(558)		Transferred to OREO and other repossessed assets	—		—		—		—
Removal of TDR loan status (1)	Removal of TDR loan status (1)	—		(800)		(424)		(1,224)		Removal of TDR loan status (1)	(2,121)		—		(617)		(2,738)
Payments received	Payments received	(3,714)		(5,376)		(1,454)		(10,544)		Payments received	(1,223)		(1,469)		(2,344)		(5,036)
Balance at period end	Balance at period end	$	13,119	$	10,787	$	32,677	$	56,583	Balance at period end	$	7,611	$	11,624	$	29,236	$	48,471


Three Months Ended March 31, 2020 (In thousands)		Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Three months ended September 30, 2020 (In thousands)										Three months ended September 30, 2020 (In thousands)	Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Balance at beginning of period	Balance at beginning of period	$	18,739	$	16,873	$	28,224	$	63,836	Balance at beginning of period	$	26,126	$	27,651	$	29,771	$	83,548
Additions during the period	Additions during the period	5,602		16,053		2,142		23,797		Additions during the period	1,013		1,045		5,538		7,596
Reductions:	Reductions:									Reductions:
Charge-offs	Charge-offs	—		—		(345)		(345)		Charge-offs	(4,808)		(1,439)		(33)		(6,280)
Transferred to OREO and other repossessed assets	Transferred to OREO and other repossessed assets	—		—		(945)		(945)		Transferred to OREO and other repossessed assets	—		—		—		—
Removal of TDR loan status (1)	Removal of TDR loan status (1)	—		—		—		—		Removal of TDR loan status (1)	—		—		(866)		(866)
Payments received	Payments received	(635)		(463)		(1,608)		(2,706)		Payments received	(1,336)		(2,810)		(1,317)		(5,463)
Balance at period end	Balance at period end	$	23,706	$	32,463	$	27,468	$	83,637	Balance at period end	$	20,995	$	24,447	$	33,093	$	78,535


Nine months ended September 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	547		2,944		3,393		6,884
Reductions:
Charge-offs	(2,358)		(23)		(7)		(2,388)
Transferred to OREO and other repossessed assets	(99)		—		(459)		(558)
Removal of TDR loan status (1)	(2,121)		(800)		(1,556)		(4,477)
Payments received	(6,548)		(7,223)		(5,411)		(19,182)
Balance at period end	$	7,611	$	11,624	$	29,236	$	48,471


Nine months ended September 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	10,046		19,180		11,184		40,410
Reductions:
Charge-offs	(4,808)		(7,508)		(419)		(12,735)
Transferred to OREO and other repossessed assets	—		—		(945)		(945)
Removal of TDR loan status (1)	—		—		(866)		(866)
Payments received	(2,982)		(4,098)		(4,085)		(11,165)
Balance at period end	$	20,995	$	24,447	$	33,093	$	78,535

(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

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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. 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 insignificant. Modifications qualifying for the exemption from TDR classification totaled approximately ~~$175.2~~$57.3 million as of ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2021, presented by loan category and type of modification:


(in thousands)		Interest-only		Full Payment Deferral		Line Increases		Other		Total
(In thousands)												(In thousands)	Interest-only		Full Payment Deferral		Line Increases		Other		Total
Commercial	Commercial	$	50,669	$	19,102	$	36,329	$	29,367	$	135,467	Commercial	$	1,082	$	3,823	$	—	$	2,256	$	7,161
Commercial real estate	Commercial real estate	74,806		28,593		—		9,776		113,175		Commercial real estate	59,955		1,478		—		3,303		64,736
Home equity	Home equity	—		1,706		—		—		1,706		Home equity	—		—		—		—		—
Residential real estate	Residential real estate	—		—		—		—		—		Residential real estate	—		—		—		—		—
Premium finance receivables	Premium finance receivables	—		3,336		—		—		3,336		Premium finance receivables	—		70		—		—		70
Consumer and other	Consumer and other	—		41		1		—		42		Consumer and other	—		—		1		—		1
Total loans, net of unearned income	Total loans, net of unearned income	$	125,475	$	52,778	$	36,330	$	39,143	$	253,726	Total loans, net of unearned income	$	61,037	$	5,371	$	1	$	5,559	$	71,968

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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				Three Months Ended				Nine Months Ended
(In thousands)	(In thousands)	March 31, 2021		March 31, 2020			(In thousands)	September 30, 2021			September 30, 2020		September 30, 2021		September 30, 2020
Balance at beginning of period	Balance at beginning of period	$	16,558	$	15,171		Balance at beginning of period	$	15,572		$	10,197	$	16,558	$	15,171
Disposal/resolved	Disposal/resolved	(2,162)		(4,793)			Disposal/resolved	(1,949)			(1,532)		(7,263)		(6,937)
Transfers in at fair value, less costs to sell	Transfers in at fair value, less costs to sell	1,587		954			Transfers in at fair value, less costs to sell	315			777		5,562		1,731

Fair value adjustments	Fair value adjustments	(170)		(306)			Fair value adjustments	(93)			(225)		(1,012)		(748)
Balance at end of period	Balance at end of period	$	15,813	$	11,026		Balance at end of period	$	13,845		$	9,217	$	13,845	$	9,217


		Period End							Period End
(In thousands)	(In thousands)	March 31, 2021		December 31, 2020		March 31, 2020		(In thousands)	September 30, 2021		June 30, 2021		September 30, 2020
Residential real estate	Residential real estate	$	2,713	$	2,324	$	1,684	Residential real estate	$	1,592	$	1,952	$	1,839
Residential real estate development	Residential real estate development	1,287		1,691		—		Residential real estate development	934		1,030		—
Commercial real estate	Commercial real estate	11,813		12,543		9,342		Commercial real estate	11,319		12,590		7,378
Total	Total	$	15,813	$	16,558	$	11,026	Total	$	13,845	$	15,572	$	9,217

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Deposits

Total deposits at ~~March 31,~~September 30, 2021 were ~~$37.9~~$40.0 billion, an increase of ~~$6.4~~$4.1 billion, or ~~20%~~11%, compared to total deposits at ~~March 31,~~September 30, 2020. See Note 9 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 ~~March 31,~~September 30, 2021:


Time Certificates of Deposit Maturity/Re-pricing Analysis As of March 31, 2021 (Dollars in thousands)		Total Time Certificates of Deposits		Weighted-Average Rate of Maturing Time Certificates of Deposit (1)
Time Certificates of Deposit Maturity/Re-pricing Analysis As of September 30, 2021 (Dollars in thousands)						Time Certificates of Deposit Maturity/Re-pricing Analysis As of September 30, 2021 (Dollars in thousands)	Total Time Certificates of Deposits		Weighted-Average Rate of Maturing Time Certificates of Deposit (1)
1-3 months	1-3 months	$	1,385,311	1.75	%	1-3 months	$	918,517	0.99	%
4-6 months	4-6 months	993,635		1.50		4-6 months	780,345		0.57
7-9 months	7-9 months	806,574		1.13		7-9 months	628,839		0.41
10-12 months	10-12 months	662,375		0.64		10-12 months	602,854		0.42
13-18 months	13-18 months	496,540		0.69		13-18 months	621,320		0.56
19-24 months	19-24 months	217,147		0.92		19-24 months	272,526		0.48
24+ months	24+ months	249,568		0.74		24+ months	306,145		0.55
Total	Total	$	4,811,150	1.24	%	Total	$	4,130,546	0.61	%

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

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


		Three Months Ended													Three Months Ended
		March 31, 2021				December 31, 2020				March 31, 2020					September 30, 2021				June 30, 2021				September 30, 2020
(Dollars in thousands)	(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent		(Dollars in thousands)	Balance		Percent		Balance		Percent		Balance		Percent
Non-interest-bearing	Non-interest-bearing	$	11,811,194	32	%	$	10,874,912	30	%	$	7,235,177	24	%	Non-interest-bearing	$	12,834,084	32	%	$	12,246,274	32	%	$	9,988,769	28	%
NOW and interest-bearing demand deposits	NOW and interest-bearing demand deposits	3,493,451		9		3,320,527		9		3,113,733		11		NOW and interest-bearing demand deposits	3,757,677		10		3,626,424		10		3,435,089		10
Wealth management deposits	Wealth management deposits	4,156,398		11		4,066,948		11		2,838,719		9		Wealth management deposits	4,672,402		12		4,369,998		11		4,329,300		12
Money market	Money market	9,335,920		25		9,435,344		26		7,990,775		27		Money market	10,027,424		25		9,547,167		25		9,332,668		26
Savings	Savings	3,587,566		10		3,413,388		10		3,189,835		11		Savings	3,851,523		10		3,728,271		10		3,419,586		10
Time certificates of deposit	Time certificates of deposit	4,875,392		13		5,043,558		14		5,526,407		18		Time certificates of deposit	4,236,317		11		4,632,796		12		4,900,839		14
Total average deposits	Total average deposits	$	37,259,921	100	%	$	36,154,677	100	%	$	29,894,646	100	%	Total average deposits	$	39,379,427	100	%	$	38,150,930	100	%	$	35,406,251	100	%

Total average deposits for the ~~first~~third quarter of 2021 were ~~$37.3~~$39.4 billion, an increase of ~~$7.4~~$4.0 billion, or ~~25%~~11%, from the ~~first~~third quarter of 2020. The increase in average deposits is primarily attributable to 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.

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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:


		March 31,						December 31,										September 30,						December 31,
(Dollars in thousands)	(Dollars in thousands)	2021			2020			2020			2019			2018			(Dollars in thousands)	2021			2020			2020			2019			2018
Total deposits	Total deposits	$	37,872,652		$	31,461,660		$	37,092,651		$	30,107,138		$	26,094,678		Total deposits	$	39,952,558		$	35,844,422		$	37,092,651		$	30,107,138		$	26,094,678
Brokered deposits	Brokered deposits	2,142,257			2,181,090			1,843,227			1,011,404			1,071,562			Brokered deposits	1,877,093			2,293,328			1,843,227			1,011,404			1,071,562
Brokered deposits as a percentage of total deposits	Brokered deposits as a percentage of total deposits	5.7		%	6.9		%	5.0		%	3.4		%	4.1		%	Brokered deposits as a percentage of total deposits	4.7		%	6.4		%	5.0		%	3.4		%	4.1		%

Brokered deposits include certificates of deposit obtained through deposit brokers, deposits received through the Certificate of Deposit Account Registry Program (“~~CDARS”~~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
		March 31,		December 31,		March 31,			September 30,		June 30,		September 30,
(In thousands)	(In thousands)	2021		2020		2020		(In thousands)	2021		2021		2020
FHLB advances	FHLB advances	$	1,228,433	$	1,228,425	$	951,613	FHLB advances	$	1,241,073	$	1,235,142	$	1,228,421
Other borrowings:	Other borrowings:							Other borrowings:
Notes payable	Notes payable	101,653		107,000		127,978		Notes payable	90,960		96,306		112,345
Short-term borrowings	Short-term borrowings	11,796		9,313		45,089		Short-term borrowings	13,183		15,034		7,784
Secured borrowings	Secured borrowings	339,923		329,159		250,054		Secured borrowings	344,724		350,219		326,964
Other	Other	64,816		65,253		46,456		Other	63,918		64,365		65,694
Total other borrowings	Total other borrowings	$	518,188	$	510,725	$	469,577	Total other borrowings	$	512,785	$	525,924	$	512,787
Subordinated notes	Subordinated notes	436,532		436,433		436,119		Subordinated notes	436,746		436,644		436,323
Junior subordinated debentures	Junior subordinated debentures	253,566		253,566		253,566		Junior subordinated debentures	253,566		253,566		253,566
Total other funding sources	Total other funding sources	$	2,436,719	$	2,429,149	$	2,110,875	Total other funding sources	$	2,444,170	$	2,451,276	$	2,431,097

FHLB advances provide the banks with access to fixed-rate funds that are useful in mitigating interest rate risk and achieving an acceptable interest rate spread on fixed-rate loans or securities. Additionally, the banks have the ability to borrow shorter-term, overnight funding from the FHLB for other general purposes. FHLB advances to the banks totaled $1.2 billion at each of ~~March 31,~~September 30, 2021, ~~December 31, 2020~~June 30, 2021 and ~~March 31,~~September 30, 2020.

Notes payable balances represent the balances on 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 (“Term Facility”). Both 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 ~~March 31,~~September 30, 2021 and ~~December 31,~~ 2020, the Company had a balance under the Term Facility of ~~$96.4~~$85.7 million and ~~$101.7~~$107.1 million, respectively. The Company was contractually required to borrow the entire amount of the Term Facility on September 18, 2018 and all such borrowings must be repaid by September 18, 2023. At ~~March 31, 2020,~~September 30, 2021, the Company had no outstanding balance under the Revolving Credit Facility.

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The balance of secured borrowings primarily represents a third party Canadian transaction (“Canadian Secured Borrowing”). Under the Canadian Secured Borrowing, the Company, through its subsidiary, FIFC Canada, sells an undivided co-ownership interest in all receivables owed to FIFC Canada to an unrelated third party in exchange for cash payments pursuant to a receivables purchase agreement (“Receivables Purchase Agreement”).

Other borrowings at ~~March 31,~~September 30, 2021 include a fixed-rate promissory note issued by the Company in June 2017 and amended in March 2020 ("(“Fixed-Rate Promissory ~~Note"~~Note”) related to and secured by three office buildings owned by the Company. At ~~March 31,~~September 30, 2021, the Fixed-Rate Promissory Note had a balance of ~~$64.7~~$63.8 million compared to ~~$65.1~~$64.2 million at ~~December 31, 2020~~June 30, 2021 and ~~$66.3~~$65.5 million at ~~March 31,~~September 30, 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%. 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 ~~March 31,~~September 30, 2021, the Company had outstanding subordinated notes totaling ~~$436.6~~$436.8 million compared to ~~$436.5~~$436.7 million and ~~$436.2~~$436.4 million outstanding at ~~December 31, 2020~~June 30, 2021 and ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2021, ~~December 31, 2020~~June 30, 2021 and ~~March 31,~~September 30, 2020. The amounts reflected on the balance sheet represent the junior subordinated debentures issued to eleven trusts by the Company and equal the amount of the preferred and common securities issued by the trusts. At ~~March 31,~~September 30, 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~~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 10 and 11 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.

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Shareholders’ Equity

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


		March 31, 2021		December 31, 2020		March 31, 2020			September 30, 2021		June 30, 2021		September 30, 2020
Tier 1 leverage ratio	Tier 1 leverage ratio	8.2	%	8.1	%	8.5	%	Tier 1 leverage ratio	8.1	%	8.2	%	8.2	%
Risk-based capital ratios:	Risk-based capital ratios:							Risk-based capital ratios:
Tier 1 capital ratio	Tier 1 capital ratio	10.2		10.0		9.3		Tier 1 capital ratio	9.9		10.1		10.2
Common equity tier 1 capital ratio	Common equity tier 1 capital ratio	9.0		8.8		8.9		Common equity tier 1 capital ratio	8.9		9.0		9.0
Total capital ratio	Total capital ratio	12.6		12.6		11.9		Total capital ratio	12.1		12.4		12.9
Other ratio:	Other ratio:							Other ratio:
Total average equity-to-total average assets(1)	Total average equity-to-total average assets(1)	9.3		9.2		10.1		Total average equity-to-total average assets(1)	9.2		9.3		9.4

(1)Based on quarterly average balances.


	Minimum Capital Requirements		Minimum Ratio + Capital Conservation Buffer(1)	Minimum Well Capitalized(2)
Leverage ratio	4.0	%	N/A	N/A
Tier 1 capital to risk-weighted assets	6.0		8.50	6.0
Common equity Tier 1 capital to risk-weighted assets	4.5		7.00	N/A
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~~bank holding companies (“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 ~~March 31,~~September 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 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 and 17 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~~Company’s financial condition, the terms of the ~~Company's~~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, April and July 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 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

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uncertainty from the COVID-19 pandemic. Please refer to ~~Management's~~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 17 of the Consolidated Financial Statements presented under Item 1 of this report for details on the Company’s issuance of Series D Preferred Stock in June 2015 and Series E Preferred Stock and associated Depositary Shares in May 2020. The Company hereby incorporates by reference Note 17 of the Consolidated Financial Statements presented under Item 1 of this report in its entirety.

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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 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~~third quarter of 2021, we 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 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, 2020 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, 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;

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•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 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, and the impact of 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;

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•legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products

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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.

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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 ~~March 31,~~September 30, 2021, ~~December 31, 2020~~June 30, 2021 and ~~March 31,~~September 30, 2020 is as follows:

Static Shock Scenarios +200
Basis
Points +100
Basis
Points -100
Basis
Points
March 31, 2021 22.0 % 10.2 % (7.2) %
December 31, 2020 25.0 11.6 (7.9)
March 31, 2020 22.5 10.6 (9.4)


Static Shock Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points
September 30, 2021	24.3	%	11.5	%	(7.8)	%
June 30, 2021	24.6		11.7		(6.9)
September 30, 2020	23.4		10.9		(8.1)

Ramp Scenarios +200
Basis
Points +100
Basis
Points -100
Basis
Points
March 31, 2021 10.7 % 5.4 % (3.6) %
December 31, 2020 11.4 5.7 (3.3)
March 31, 2020 7.7 3.7 (3.8)


Ramp Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points
September 30, 2021	10.8	%	5.4	%	(3.8)	%
June 30, 2021	11.4		5.8		(3.3)
September 30, 2020	10.7		5.2		(3.5)

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,

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forwards, option contracts and other financial instruments with similar characteristics. Additionally, the Company enters into commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors. See Note 14 of the Consolidated Financial Statements in Item 1 of this report for further information on the Company’s derivative financial instruments.

During the first ~~three~~nine months of 2020, 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 ~~three~~nine 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 ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020.

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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.

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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, 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. Lehman Holdings filed an amended complaint against Wintrust Mortgage on December 29, 2016. 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. On October 5, 2020, Wintrust Mortgage and Lehman Holdings executed a settlement agreement to resolve the dispute for an amount that is immaterial to the Company's results of operations or financial condition. On October 15, 2020, the court entered an order dismissing the entire suit against Wintrust Mortgage with prejudice.

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. 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 counsel filed a letter with the California Department of Labor advising that it was initiating an action under California's Private Attorney General Act statute based on the same alleged violations. In November 2019, the parties reached a settlement agreement. The parties executed a settlement agreement and on February 26, 2020, plaintiff moved the court for approval. A hearing on the motion to approve settlement was originally set for June 16, 2020, but the court continued the motion to September 8, 2020. On September 8, 2020, the court requested the parties make certain changes to the settlement agreement that were immaterial to the ~~parties'~~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. ~~Notices~~After no class members opted out or objected to the settlement, the court issued its final approval of the settlement ~~were timely sent~~on June 17, 2021 and on June 18, 2021, Wintrust Mortgage tendered the settlement amount to the class claims administrator and payments to class members ~~who will~~ have ~~until May 2, 2021 to opt out of the settlement.~~been completed. The Company ~~has~~had reserved an amount for this ~~proposed~~ settlement that is immaterial to its results of operations or financial condition.

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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, the plaintiffs filed an amended complaint based on similar allegations. Northbrook Bank again moved to 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 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 matter ~~has been~~was fully briefed and ~~is awaiting decision by~~on July 30, 2021, the Appellate Court issued an opinion affirming the trial court’s dismissal of the complaint with prejudice. On August 30, 2021, Plaintiffs filed a petition seeking permission to appeal to the Illinois Supreme Court. Northbrook Bank ~~believes the plaintiffs' allegations are legally and factually meritless and otherwise lacks sufficient information~~filed its response to ~~estimate the amount of any potential liability.~~Plaintiffs’ petition on September 23, 2021. Plaintiffs’ petition remains pending.

~~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. Plaintiffs allege the defendant financial institutions failed to pay agent fees on loans issued by them under the federal CARES Act's Paycheck Protection Program ("PPP") in violation of applicable law. 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 that could be used to pay agent fees due. Plaintiffs voluntarily dismissed Wintrust Financial Corporation as a defendant in this suit on June 29, 2020. On September 28, 2020, the class defendants filed an omnibus motion to dismiss the lawsuit. This motion was fully briefed on November 23, 2020. On December 27, 2020, legislation amending the CARES Act was enacted. The new legislation expressly stated that lenders do not owe fees to agents for assisting borrowers to obtain PPP loans absent a fee agreement between the lender and the agent. In light of this legislation, plaintiff asked the court to dismiss the case. On January 22, 2021, the district court entered plaintiff's voluntary dismissal order.

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.

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Item 1A: Risk Factors

There have been no material changes from the risk factors set forth under Part I, Item 1A “Risk Factors” in the ~~Company’s~~2020 Form ~~10-K for the fiscal year ended December 31, 2020.~~10-K.

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

Our previously authorized share repurchase program permitted the repurchase of up to $125 million of our common stock. ~~No purchases~~On October 28, 2021, the Board of Directors of the Company authorized the repurchase of up to $200 million of the Company’s outstanding shares of common ~~shares were made by or on behalf~~stock. This authorization is incremental to the remaining authorization of ~~the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3)~~approximately $23 million under the ~~Securities Exchange Act~~previous program, which the Board approved in the fourth quarter of ~~1934, as amended, during the three months ended March 31, 2021.~~2019. The repurchase authorization does not have an expiration date.

The table below provides information of such repurchases by month in 2021.


Month Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs (in thousands)






July 1, 2021 to July 31, 2021	40,000	$	70.93	40,000	$	30,107
August 1, 2021 to August 31, 2021	94,062	71.25		94,062	23,405
September 1, 2021 to September 30, 2021	—	—		—	23,405
October 1, 2021 to October 31, 2021 (1)	—	—		—	223,405


Total	134,062	$	71.16	134,062	$	223,405

(1)Maximum dollar value that may yet be purchased includes the October 28, 2021 increase in authorization.

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Item 6: Exhibits:

(a)Exhibits ~~(Exhibits marked with a “*” denote management contracts or compensatory plans or arrangements)~~



~~3.1~~10.1*						~~Amended~~Third Amendment, dated as of September 14, 2021, to the Credit Agreement dated as of September 18, 2018, as amended, among Wintrust Financial Corporation, the lenders named therein, and ~~Restated Bylaws of the Company~~Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit ~~3.2 to~~10.1 of the ~~Company’s~~Company ’s Current ~~Report~~ Re p ort on Form 8-K filed with the Securities and Exchange ~~Commission~~Comm ission on ~~April 12, 2021, and incorporated herein by reference)~~September 14 , 2021).

~~10.1~~						Ninth Amending Agreement to the Receivables Purchase Agreement, dated January 15, 2021, 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 January 20, 2021).

~~10.2~~						Performance Guarantee Confirmation made as of January 15, 2021 by Wintrust Financial Corporation in favor of CIBC Mellon Trust Company, 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 January 20, 2021).

~~10.3~~						Fee Letter dated as of January 15, 2021 by CIBC Mellon Trust Company, in its capacity as trustee of Plaza Trust, by its Financial Service Agent, Royal Bank of Canada and acknowledged by First Insurance Funding of Canada Inc. (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 January 20, 2021).

~~10.4~~						Form of Restricted Share Unit Award Agreement under the Company’s 2015 Stock Incentive Plan.*

~~10.5~~						Form of Performance Award Agreement - Share Settled under the Company’s 2015 Stock Incentive Plan.*

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 ~~March 31,~~September 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

*Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Wintrust agrees to furnish supplementally a copy of any omitted schedules or exhibits to the Securities and Exchange Commission upon request.

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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:

~~May 7,~~November 8, 2021

/s/ DAVID L. STOEHR

David L. Stoehr

Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting ~~Officer)~~Officer and duly authorized officer)

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	At March 31, 2021				At December 31, 2020				At March 31, 2020
	Carrying		Fair		Carrying		Fair		Carrying		Fair
(In thousands)	Value		Value		Value		Value		Value		Value
Financial Assets:
Cash and cash equivalents	$	426,377	$	426,377	$	322,474	$	322,474	$	349,427	$	349,427
Interest-bearing deposits with banks	3,348,794		3,348,794		4,802,527		4,802,527		1,943,743		1,943,743
Available-for-sale securities	2,430,749		2,430,749		3,055,839		3,055,839		3,570,959		3,570,959
Held-to-maturity securities	2,166,419		2,121,065		579,138		593,767		865,376		879,192
Trading account securities	951		951		671		671		2,257		2,257
Equity securities with readily determinable fair value	90,338		90,338		90,862		90,862		47,310		47,310
FHLB and FRB stock, at cost	135,881		135,881		135,588		135,588		134,546		134,546
Brokerage customer receivables	19,056		19,056		17,436		17,436		16,293		16,293
Mortgage loans held-for-sale, at fair value	1,260,193		1,260,193		1,272,090		1,272,090		656,934		656,934
Loans held-for-investment, at fair value	51,916		51,916		55,134		55,134		142,267		142,267
Loans held-for-investment, at amortized cost	33,119,317		33,066,760		32,023,939		31,871,683		27,665,054		27,469,489

Nonqualified deferred compensation assets	15,891		15,891		15,398		15,398		12,253		12,253
Derivative assets	253,509		253,509		278,423		278,423		301,368		301,368

Accrued interest receivable and other	281,020		281,020		272,339		272,339		275,499		275,499
Total financial assets	$	43,600,411	$	43,502,500	$	42,921,858	$	42,784,231	$	35,983,286	$	35,801,537
Financial Liabilities
Non-maturity deposits	$	33,061,502	$	33,061,502	$	32,116,023	$	32,116,023	$	26,071,881	$	26,071,881
Deposits with stated maturities	4,811,150		4,801,257		4,976,628		4,969,849		5,389,779		5,394,523
FHLB advances	1,228,436		1,121,269		1,228,429		1,172,315		1,174,894		1,130,327
Other borrowings	516,877		516,877		518,928		518,928		487,503		487,503
Subordinated notes	436,595		458,832		436,506		473,093		436,179		487,745
Junior subordinated debentures	253,566		208,132		253,566		204,713		253,566		224,523
Derivative liabilities	200,758		200,758		288,465		288,465		367,620		367,620

Accrued interest payable	19,940		19,940		15,645		15,645		27,696		27,696
Total financial liabilities	$	40,528,824	$	40,388,567	$	39,834,190	$	39,759,031	$	34,209,118	$	34,191,818


	Accumulated Unrealized Gains (Losses) on Securities		Accumulated Unrealized (Losses) Gains on Derivative Instruments		Accumulated Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive Income (Loss)
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	(44,519)		32,345		2,180		(9,994)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax	(154)		4,912		0		4,758
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	(42)		0		0		(42)
Net other comprehensive (loss) income during the period, net of tax	$	(44,715)	$	37,257	$	2,180	$	(5,278)
Balance at March 31, 2021	$	26,022	$	14,167	$	(30,085)	$	10,104