0001015328us-gaap:FairValueInputsLevel3Memberus-gaap:CostApproachValuationTechniqueMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:MeasurementInputDiscountForLackOfMarketabilityMember2022-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q


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

For the quarterly period ended ~~June 30, 2022~~March 31, 2023


☐			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
Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, 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 Preferred Stock, Series E, 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, ~~60,736,285~~61,192,818 shares, as of ~~July 29, 2022~~April 28, 2023

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	5844
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	9768
ITEM 4.	Controls and Procedures	9969
	PART II. — OTHER INFORMATION
ITEM 1.	Legal Proceedings	~~100~~70
ITEM 1A.	Risk Factors	~~101~~71
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~101~~71
ITEM 3.	Defaults Upon Senior Securities	NA
ITEM 4.	Mine Safety Disclosures	NA
ITEM 5.	Other Information	NA71
ITEM 6.	Exhibits	~~102~~72
	Signatures	~~103~~73

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)	June 30, 2022		December 31, 2021		June 30, 2021		(In thousands, except share data)	March 31, 2023		December 31, 2022		March 31, 2022
Assets	Assets							Assets
Cash and due from banks	Cash and due from banks	$	498,891	$	411,150	$	434,957	Cash and due from banks	$	445,928	$	490,908	$	462,516
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	475,056		700,055		52		Federal funds sold and securities purchased under resale agreements	58		58		700,056
Interest-bearing deposits with banks	Interest-bearing deposits with banks	3,266,541		5,372,603		4,707,415		Interest-bearing deposits with banks	1,563,578		1,988,719		4,013,597
Available-for-sale securities, at fair value	Available-for-sale securities, at fair value	2,970,121		2,327,793		2,188,608		Available-for-sale securities, at fair value	3,259,845		3,243,017		2,998,898
Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $83, $78 and $90 at June 30, 2022, December 31, 2021 and June 30, 2021, respectively ($2.9 billion, $2.9 billion and $2.5 billion fair value at June 30, 2022, December 31, 2021 and June 30, 2021, respectively)		3,413,469		2,942,285		2,498,232
Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $463, $488 and $159 at March 31, 2023, December 31, 2022 and March 31, 2022, respectively ($3.0 billion, $2.9 billion and $3.1 billion fair value at March 31, 2023, December 31, 2022 and March 31, 2022, respectively)								Held-to-maturity securities, at amortized cost, net of allowance for credit losses of $463, $488 and $159 at March 31, 2023, December 31, 2022 and March 31, 2022, respectively ($3.0 billion, $2.9 billion and $3.1 billion fair value at March 31, 2023, December 31, 2022 and March 31, 2022, respectively)	3,606,391		3,640,567		3,435,729
Trading account securities	Trading account securities	1,010		1,061		2,667		Trading account securities	102		1,127		852
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	93,295		90,511		86,316		Equity securities with readily determinable fair value	111,943		110,365		92,689
Federal Home Loan Bank and Federal Reserve Bank stock	Federal Home Loan Bank and Federal Reserve Bank stock	136,138		135,378		136,625		Federal Home Loan Bank and Federal Reserve Bank stock	244,957		224,759		136,163
Brokerage customer receivables	Brokerage customer receivables	21,527		26,068		23,093		Brokerage customer receivables	16,042		16,387		22,888
Mortgage loans held-for-sale, at fair value	Mortgage loans held-for-sale, at fair value	513,232		817,912		984,994		Mortgage loans held-for-sale, at fair value	302,493		299,935		606,545

Loans, net of unearned income	Loans, net of unearned income	37,053,103		34,789,104		32,911,187		Loans, net of unearned income	39,565,471		39,196,485		35,280,547
Allowance for loan losses	Allowance for loan losses	(251,769)		(247,835)		(261,089)		Allowance for loan losses	(287,972)		(270,173)		(250,539)

Net loans	Net loans	36,801,334		34,541,269		32,650,098		Net loans	39,277,499		38,926,312		35,030,008
Premises, software and equipment, net	Premises, software and equipment, net	762,381		766,405		752,375		Premises, software and equipment, net	760,283		764,798		761,213
Lease investments, net	Lease investments, net	223,813		242,082		219,023		Lease investments, net	256,301		253,928		240,656

Accrued interest receivable and other assets	Accrued interest receivable and other assets	1,112,697		1,084,115		1,185,811		Accrued interest receivable and other assets	1,413,795		1,391,342		1,066,750
Trade date securities receivable	Trade date securities receivable	—		—		189,851		Trade date securities receivable	939,758		921,717		—

Goodwill	Goodwill	654,709		655,149		646,336		Goodwill	653,587		653,524		655,402
Other acquisition-related intangible assets	Other acquisition-related intangible assets	25,118		28,307		31,997		Other acquisition-related intangible assets	20,951		22,186		26,699
Total assets	Total assets	$	50,969,332	$	50,142,143	$	46,738,450	Total assets	$	52,873,511	$	52,949,649	$	50,250,661

Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity							Liabilities and Shareholders’ Equity
Deposits:	Deposits:							Deposits:
Non-interest-bearing	Non-interest-bearing	$	13,855,844	$	14,179,980	$	12,796,110	Non-interest-bearing	$	11,236,083	$	12,668,160	$	13,748,918
Interest-bearing	Interest-bearing	28,737,482		27,915,605		26,008,506		Interest-bearing	31,482,128		30,234,384		28,470,404
Total deposits	Total deposits	42,593,326		42,095,585		38,804,616		Total deposits	42,718,211		42,902,544		42,219,322

Federal Home Loan Bank advances	Federal Home Loan Bank advances	1,166,071		1,241,071		1,241,071		Federal Home Loan Bank advances	2,316,071		2,316,071		1,241,071

Other borrowings	Other borrowings	482,787		494,136		518,493		Other borrowings	583,548		596,614		482,516

Subordinated notes	Subordinated notes	437,162		436,938		436,719		Subordinated notes	437,493		437,392		437,033
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	—		—		437
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	1,308,797		1,122,159		1,144,974		Accrued interest payable and other liabilities	1,549,116		1,646,624		1,124,460

Total liabilities	Total liabilities	46,241,709		45,643,455		42,399,439		Total liabilities	47,858,005		48,152,811		45,758,405
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 June 30, 2022, December 31, 2021 and June 30, 2021		125,000		125,000		125,000
Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at June 30, 2022, December 31, 2021 and June 30, 2021		287,500		287,500		287,500
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at June 30, 2022, December 31, 2021 and June 30, 2021; 60,721,889 shares issued at June 30, 2022, 58,891,780 shares issued at December 31, 2021 and 58,770,304 shares issued at June 30, 2021		60,722		58,892		58,770
Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at March 31, 2023, December 31, 2022 and March 31, 2022								Series D - $25 liquidation value; 5,000,000 shares issued and outstanding at March 31, 2023, December 31, 2022 and March 31, 2022	125,000		125,000		125,000
Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at March 31, 2023, December 31, 2022 and March 31, 2022								Series E - $25,000 liquidation value; 11,500 shares issued and outstanding at March 31, 2023, December 31, 2022 and March 31, 2022	287,500		287,500		287,500
Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at March 31, 2023, December 31, 2022 and March 31, 2022; 61,197,979 shares issued at March 31, 2023, 60,797,270 shares issued at December 31, 2022 and 59,090,903 shares issued at March 31, 2022								Common stock, no par value; $1.00 stated value; 100,000,000 shares authorized at March 31, 2023, December 31, 2022 and March 31, 2022; 61,197,979 shares issued at March 31, 2023, 60,797,270 shares issued at December 31, 2022 and 59,090,903 shares issued at March 31, 2022	61,198		60,797		59,091
Surplus	Surplus	1,880,913		1,685,572		1,669,002		Surplus	1,913,947		1,902,474		1,698,093
Treasury stock, at cost, no shares at June 30, 2022, 1,837,689 shares at December 31, 2021, and 1,703,627 shares at June 30, 2021		—		(109,903)		(100,363)
Treasury stock, at cost, 21,564 shares at March 31, 2023, 3,262 shares at December 31, 2022, and 1,837,689 shares at March 31, 2022								Treasury stock, at cost, 21,564 shares at March 31, 2023, 3,262 shares at December 31, 2022, and 1,837,689 shares at March 31, 2022	(1,966)		(304)		(109,903)
Retained earnings	Retained earnings	2,616,525		2,447,535		2,288,969		Retained earnings	2,997,263		2,849,007		2,548,474
Accumulated other comprehensive (loss) income		(243,037)		4,092		10,133
Accumulated other comprehensive loss								Accumulated other comprehensive loss	(367,436)		(427,636)		(115,999)
Total shareholders’ equity	Total shareholders’ equity	4,727,623		4,498,688		4,339,011		Total shareholders’ equity	5,015,506		4,796,838		4,492,256
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	50,969,332	$	50,142,143	$	46,738,450	Total liabilities and shareholders’ equity	$	52,873,511	$	52,949,649	$	50,250,661

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


		Three Months Ended				Six Months Ended					Three Months Ended
(In thousands, except per share data)	(In thousands, except per share data)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021		(In thousands, except per share data)	March 31, 2023		March 31, 2022
Interest income	Interest income									Interest income
Interest and fees on loans	Interest and fees on loans	$	320,501	$	284,701	$	606,199	$	558,801	Interest and fees on loans	$	558,692	$	285,698
Mortgage loans held-for-sale	Mortgage loans held-for-sale	5,740		8,183		11,827		17,219		Mortgage loans held-for-sale	3,528		6,087
Interest-bearing deposits with banks	Interest-bearing deposits with banks	5,790		1,153		7,477		2,352		Interest-bearing deposits with banks	13,468		1,687
Federal funds sold and securities purchased under resale agreements	Federal funds sold and securities purchased under resale agreements	1,364		—		1,795		—		Federal funds sold and securities purchased under resale agreements	70		431
Investment securities	Investment securities	36,541		23,623		68,939		42,887		Investment securities	59,943		32,398
Trading account securities	Trading account securities	4		1		9		3		Trading account securities	14		5
Federal Home Loan Bank and Federal Reserve Bank stock	Federal Home Loan Bank and Federal Reserve Bank stock	1,823		1,769		3,595		3,514		Federal Home Loan Bank and Federal Reserve Bank stock	3,680		1,772
Brokerage customer receivables	Brokerage customer receivables	205		149		379		272		Brokerage customer receivables	295		174
Total interest income	Total interest income	371,968		319,579		700,220		625,048		Total interest income	639,690		328,252
Interest expense	Interest expense									Interest expense
Interest on deposits	Interest on deposits	18,985		24,298		33,839		52,242		Interest on deposits	144,802		14,854
Interest on Federal Home Loan Bank advances	Interest on Federal Home Loan Bank advances	4,878		4,887		9,694		9,727		Interest on Federal Home Loan Bank advances	19,135		4,816
Interest on other borrowings	Interest on other borrowings	2,734		2,568		4,973		5,177		Interest on other borrowings	7,854		2,239
Interest on subordinated notes	Interest on subordinated notes	5,517		5,512		10,999		10,989		Interest on subordinated notes	5,488		5,482
Interest on junior subordinated debentures	Interest on junior subordinated debentures	2,050		2,724		3,617		5,428		Interest on junior subordinated debentures	4,416		1,567
Total interest expense	Total interest expense	34,164		39,989		63,122		83,563		Total interest expense	181,695		28,958
Net interest income	Net interest income	337,804		279,590		637,098		541,485		Net interest income	457,995		299,294
Provision for credit losses	Provision for credit losses	20,417		(15,299)		24,523		(60,646)		Provision for credit losses	23,045		4,106
Net interest income after provision for credit losses	Net interest income after provision for credit losses	317,387		294,889		612,575		602,131		Net interest income after provision for credit losses	434,950		295,188
Non-interest income	Non-interest income									Non-interest income
Wealth management	Wealth management	31,369		30,690		62,763		59,999		Wealth management	29,945		31,394
Mortgage banking	Mortgage banking	33,314		50,584		110,545		164,078		Mortgage banking	18,264		77,231
Service charges on deposit accounts	Service charges on deposit accounts	15,888		13,249		31,171		25,285		Service charges on deposit accounts	12,903		15,283
(Losses) gains on investment securities, net		(7,797)		1,285		(10,579)		2,439
Gains (losses) on investment securities, net										Gains (losses) on investment securities, net	1,398		(2,782)
Fees from covered call options	Fees from covered call options	1,069		1,388		4,811		1,388		Fees from covered call options	10,391		3,742
Trading gains (losses), net		176		(438)		4,065		(19)
Trading gains, net										Trading gains, net	813		3,889
Operating lease income, net	Operating lease income, net	15,007		12,240		30,482		26,680		Operating lease income, net	13,046		15,475
Other	Other	13,916		20,375		32,474		36,029		Other	21,009		18,558
Total non-interest income	Total non-interest income	102,942		129,373		265,732		315,879		Total non-interest income	107,769		162,790
Non-interest expense	Non-interest expense									Non-interest expense
Salaries and employee benefits	Salaries and employee benefits	167,326		172,817		339,681		353,626		Salaries and employee benefits	176,781		172,355
Software and equipment	Software and equipment	24,250		20,866		47,060		41,778		Software and equipment	24,697		22,810
Operating lease equipment depreciation		8,774		9,949		18,482		20,720
Operating lease equipment										Operating lease equipment	9,833		9,708
Occupancy, net	Occupancy, net	17,651		17,687		35,475		37,683		Occupancy, net	18,486		17,824
Data processing	Data processing	8,010		6,920		15,515		12,968		Data processing	9,409		7,505
Advertising and marketing	Advertising and marketing	16,615		11,305		28,539		19,851		Advertising and marketing	11,946		11,924
Professional fees	Professional fees	7,876		7,304		16,277		14,891		Professional fees	8,163		8,401
Amortization of other acquisition-related intangible assets	Amortization of other acquisition-related intangible assets	1,579		2,039		3,188		4,046		Amortization of other acquisition-related intangible assets	1,235		1,609
FDIC insurance	FDIC insurance	6,949		6,405		14,678		12,963		FDIC insurance	8,669		7,729
Other real estate owned expense, net	Other real estate owned expense, net	294		769		(738)		518		Other real estate owned expense, net	(207)		(1,032)
Other	Other	29,344		24,051		54,809		47,957		Other	30,157		25,465
Total non-interest expense	Total non-interest expense	288,668		280,112		572,966		567,001		Total non-interest expense	299,169		284,298
Income before taxes	Income before taxes	131,661		144,150		305,341		351,009		Income before taxes	243,550		173,680
Income tax expense	Income tax expense	37,148		39,041		83,437		92,752		Income tax expense	63,352		46,289
Net income	Net income	$	94,513	$	105,109	$	221,904	$	258,257	Net income	$	180,198	$	127,391
Preferred stock dividends	Preferred stock dividends	6,991		6,991		13,982		13,982		Preferred stock dividends	6,991		6,991
Net income applicable to common shares	Net income applicable to common shares	$	87,522	$	98,118	$	207,922	$	244,275	Net income applicable to common shares	$	173,207	$	120,400
Net income per common share—Basic	Net income per common share—Basic	$	1.51	$	1.72	$	3.61	$	4.29	Net income per common share—Basic	$	2.84	$	2.11
Net income per common share—Diluted	Net income per common share—Diluted	$	1.49	$	1.70	$	3.56	$	4.24	Net income per common share—Diluted	$	2.80	$	2.07
Cash dividends declared per common share	Cash dividends declared per common share	$	0.34	$	0.31	$	0.68	$	0.62	Cash dividends declared per common share	$	0.40	$	0.34
Weighted average common shares outstanding	Weighted average common shares outstanding	58,063		57,049		57,632		56,977		Weighted average common shares outstanding	60,950		57,196
Dilutive potential common shares	Dilutive potential common shares	775		726		823		691		Dilutive potential common shares	873		862
Average common shares and dilutive common shares	Average common shares and dilutive common shares	58,838		57,775		58,455		57,668		Average common shares and dilutive common shares	61,823		58,058

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS)~~ INCOME (UNAUDITED)


		Three Months Ended				Six Months Ended					Three Months Ended
(In thousands)	(In thousands)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021		(In thousands)	March 31, 2023		March 31, 2022
Net income	Net income	$	94,513	$	105,109	$	221,904	$	258,257	Net income	$	180,198	$	127,391
Unrealized (losses) gains on available-for-sale securities
Unrealized gains (losses) on available-for-sale securities										Unrealized gains (losses) on available-for-sale securities
Before tax	Before tax	(166,536)		6,312		(372,553)		(54,414)		Before tax	47,040		(206,017)
Tax effect	Tax effect	44,382		(1,684)		99,285		14,523		Tax effect	(12,537)		54,903
Net of tax	Net of tax	(122,154)		4,628		(273,268)		(39,891)		Net of tax	34,503		(151,114)
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	—		584		250		794		Before tax	560		250
Tax effect	Tax effect	—		(157)		(67)		(213)		Tax effect	(151)		(67)
Net of tax	Net of tax	—		427		183		581		Net of tax	409		183
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	44		47		86		104		Before tax	43		42
Tax effect	Tax effect	(12)		(13)		(23)		(28)		Tax effect	(11)		(11)
Net of tax	Net of tax	32		34		63		76		Net of tax	32		31
Net unrealized (losses) gains on available-for-sale securities		(122,186)		4,167		(273,514)		(40,548)
Unrealized gains (losses) on derivative instruments
Net unrealized gains (losses) on available-for-sale securities										Net unrealized gains (losses) on available-for-sale securities	34,062		(151,328)
Unrealized gains on derivative instruments										Unrealized gains on derivative instruments
Before tax	Before tax	2,375		(8,788)		41,856		42,004		Before tax	34,666		39,481
Tax effect	Tax effect	(634)		2,341		(11,166)		(11,194)		Tax effect	(9,238)		(10,532)
Net unrealized gains (losses) on derivative instruments		1,741		(6,447)		30,690		30,810
Net unrealized gains on derivative instruments										Net unrealized gains on derivative instruments	25,428		28,949
Foreign currency adjustment	Foreign currency adjustment									Foreign currency adjustment
Before tax	Before tax	(8,260)		2,876		(5,418)		5,610		Before tax	890		2,842
Tax effect	Tax effect	1,667		(567)		1,113		(1,121)		Tax effect	(180)		(554)
Net foreign currency adjustment	Net foreign currency adjustment	(6,593)		2,309		(4,305)		4,489		Net foreign currency adjustment	710		2,288
Total other comprehensive (loss) income		(127,038)		29		(247,129)		(5,249)
Comprehensive (loss) income		$	(32,525)	$	105,138	$	(25,225)	$	253,008
Total other comprehensive income (loss)										Total other comprehensive income (loss)	60,200		(120,091)
Comprehensive income										Comprehensive income	$	240,398	$	7,300

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, except per share data)	(In thousands, except per share data)	Preferred stock		Common stock		Surplus		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity		(In thousands, except per share data)	Preferred stock		Common stock		Surplus		Treasury stock		Retained earnings		Accumulated other comprehensive income (loss)		Total shareholders’ equity
Balance at March 31, 2021		$	412,500	$	58,727	$	1,663,008	$	(100,363)	$	2,208,535	$	10,104	$	4,252,511
Balance at January 1, 2022																Balance at January 1, 2022	$	412,500	$	58,892	$	1,685,572	$	(109,903)	$	2,447,535	$	4,092	$	4,498,688

Net income	Net income	—		—		—		—		105,109		—		105,109		Net income	—		—		—		—		127,391		—		127,391
Other comprehensive income, net of tax		—		—		—		—		—		29		29
Cash dividends declared on common stock, $0.31 per share		—		—		—		—		(17,684)		—		(17,684)
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax	—		—		—		—		—		(120,091)		(120,091)
Cash dividends declared on common stock, $0.34 per share																Cash dividends declared on common stock, $0.34 per share	—		—		—		—		(19,461)		—		(19,461)
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)

Stock-based compensation	Stock-based compensation	—		—		3,332		—		—		—		3,332		Stock-based compensation	—		—		7,891		—		—		—		7,891

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

Exercise of stock options and warrants	Exercise of stock options and warrants	—		29		1,251		—		—		—		1,280		Exercise of stock options and warrants	—		79		3,279		—		—		—		3,358
Restricted stock awards	Restricted stock awards	—		3		(3)		—		—		—		—		Restricted stock awards	—		52		(52)		—		—		—		—
Employee stock purchase plan	Employee stock purchase plan	—		11		794		—		—		—		805		Employee stock purchase plan	—		10		832		—		—		—		842
Director compensation plan	Director compensation plan	—		—		620		—		—		—		620		Director compensation plan	—		58		571		—		—		—		629
Balance at June 30, 2021		$	412,500	$	58,770	$	1,669,002	$	(100,363)	$	2,288,969	$	10,133	$	4,339,011
Balance at March 31, 2022																Balance at March 31, 2022	$	412,500	$	59,091	$	1,698,093	$	(109,903)	$	2,548,474	$	(115,999)	$	4,492,256

Balance at January 1, 2021		$	412,500	$	58,473	$	1,649,990	$	(100,363)	$	2,080,013	$	15,382	$	4,115,995

Balance at January 1, 2023																Balance at January 1, 2023	$	412,500	$	60,797	$	1,902,474	$	(304)	$	2,849,007	$	(427,636)	$	4,796,838
Cumulative effect adjustment from the adoption of ASU 2022-02																Cumulative effect adjustment from the adoption of ASU 2022-02	—		—		—		—		(544)		—		(544)
Net income	Net income	—		—		—		—		258,257		—		258,257		Net income	—		—		—		—		180,198		—		180,198
Other comprehensive loss, net of tax		—		—		—		—		—		(5,249)		(5,249)
Cash dividends declared on common stock, $0.62 per share		—		—		—		—		(35,319)		—		(35,319)
Dividends on Series D preferred stock, $0.82 per share and Series E preferred stock, $859.38 per share		—		—		—		—		(13,982)		—		(13,982)
Other comprehensive income, net of tax																Other comprehensive income, net of tax	—		—		—		—		—		60,200		60,200
Cash dividends declared on common stock, $0.40 per share																Cash dividends declared on common stock, $0.40 per share	—		—		—		—		(24,407)		—		(24,407)
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)

Stock-based compensation	Stock-based compensation	—		—		6,194		—		—		—		6,194		Stock-based compensation	—		—		8,295		—		—		—		8,295

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

Exercise of stock options and warrants	Exercise of stock options and warrants	—		238		10,003		—		—		—		10,241		Exercise of stock options and warrants	—		54		2,162		—		—		—		2,216
Restricted stock awards	Restricted stock awards	—		10		(10)		—		—		—		—		Restricted stock awards	—		275		(275)		(1,662)		—		—		(1,662)
Employee stock purchase plan	Employee stock purchase plan	—		25		1,595		—		—		—		1,620		Employee stock purchase plan	—		9		685		—		—		—		694
Director compensation plan	Director compensation plan	—		24		1,230		—		—		—		1,254		Director compensation plan	—		63		606		—		—		—		669
Balance at June 30, 2021		$	412,500	$	58,770	$	1,669,002	$	(100,363)	$	2,288,969	$	10,133	$	4,339,011

Balance at March 31, 2022		$	412,500	$	59,091	$	1,698,093	$	(109,903)	$	2,548,474	$	(115,999)	$	4,492,256
Net income		—		—		—		—		94,513		—		94,513
Other comprehensive loss, net of tax		—		—		—		—		—		(127,038)		(127,038)
Cash dividends declared on common stock, $0.34 per share		—		—		—		—		(19,471)		—		(19,471)
Dividends on Series D preferred stock, $0.41 per share and Series E preferred stock, $429.69 per share		—		—		—		—		(6,991)		—		(6,991)
Balance at March 31, 2023																Balance at March 31, 2023	$	412,500	$	61,198	$	1,913,947	$	(1,966)	$	2,997,263	$	(367,436)	$	5,015,506

Stock-based compensation		—		—		6,998		—		—		—		6,998

Common stock issued for:
New issuance, net of cost		—		1,612		174,206		109,903		—		—		285,721
Exercise of stock options and warrants		—		5		177		—		—		—		182
Restricted stock awards		—		4		(4)		—		—		—		—
Employee stock purchase plan		—		9		784		—		—		—		793
Director compensation plan		—		1		659		—		—		—		660
Balance at June 30, 2022		$	412,500	$	60,722	$	1,880,913	$	—	$	2,616,525	$	(243,037)	$	4,727,623

Balance at January 1, 2022		$	412,500	$	58,892	$	1,685,572	$	(109,903)	$	2,447,535	$	4,092	$	4,498,688
Net income		—		—		—		—		221,904		—		221,904
Other comprehensive loss, net of tax		—		—		—		—		—		(247,129)		(247,129)
Cash dividends declared on common stock, $0.68 per share		—		—		—		—		(38,932)		—		(38,932)
Dividends on Series D preferred stock, $0.82 per share and Series E preferred stock, $859.38 per share		—		—		—		—		(13,982)		—		(13,982)

Stock-based compensation		—		—		14,889		—		—		—		14,889

Common stock issued for:
New issuance, net of cost		—		1,612		174,206		109,903		—		—		285,721
Exercise of stock options and warrants		—		84		3,456		—		—		—		3,540
Restricted stock awards		—		56		(56)		—		—		—		—
Employee stock purchase plan		—		19		1,616		—		—		—		1,635
Director compensation plan		—		59		1,230		—		—		—		1,289
Balance at June 30, 2022		$	412,500	$	60,722	$	1,880,913	$	—	$	2,616,525	$	(243,037)	$	4,727,623

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

WINTRUST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


		Six Months Ended					Three Months Ended
(In thousands)	(In thousands)	June 30, 2022		June 30, 2021		(In thousands)	March 31, 2023		March 31, 2022
Operating Activities:	Operating Activities:					Operating Activities:
Net income	Net income	$	221,904	$	258,257	Net income	$	180,198	$	127,391
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Provision for credit losses	Provision for credit losses	24,523		(60,646)		Provision for credit losses	23,045		4,106
Depreciation, amortization and accretion, net	Depreciation, amortization and accretion, net	45,187		51,485		Depreciation, amortization and accretion, net	18,798		24,526
Stock-based compensation expense	Stock-based compensation expense	14,889		6,194		Stock-based compensation expense	8,295		7,891

Amortization of premium on securities, net	Amortization of premium on securities, net	1,475		3,797		Amortization of premium on securities, net	275		893
Accretion of discount and deferred fees on loans, net	Accretion of discount and deferred fees on loans, net	(13,960)		(47,975)		Accretion of discount and deferred fees on loans, net	(4,263)		(7,540)
Mortgage servicing rights fair value changes, net		(39,658)		6,203
Mortgage servicing rights fair value changes, net of economic hedge						Mortgage servicing rights fair value changes, net of economic hedge	10,863		(37,349)
Non-designated derivatives fair value changes, net	Non-designated derivatives fair value changes, net	(236)		(241)		Non-designated derivatives fair value changes, net	(2,805)		(4,046)
Originations and purchases of mortgage loans held-for-sale	Originations and purchases of mortgage loans held-for-sale	(1,716,502)		(3,945,978)		Originations and purchases of mortgage loans held-for-sale	(366,006)		(887,393)
Early buy-out exercises of mortgage loans held-for-sale guaranteed by U.S. Government Agencies, net of subsequent paydowns or payoffs		43,288		(6,997)
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	(6,334)		(4,065)
Proceeds from sales of mortgage loans held-for-sale	Proceeds from sales of mortgage loans held-for-sale	1,916,314		4,357,804		Proceeds from sales of mortgage loans held-for-sale	366,509		1,085,471
Bank owned life insurance (“BOLI”) loss (income)	Bank owned life insurance (“BOLI”) loss (income)	836		(2,466)		Bank owned life insurance (“BOLI”) loss (income)	1,351		(48)
Decrease (increase) in trading securities, net		51		(1,996)
Decrease (increase) in brokerage customer receivables, net		4,541		(5,657)
Decrease in trading securities, net						Decrease in trading securities, net	1,025		209
Decrease in brokerage customer receivables, net						Decrease in brokerage customer receivables, net	345		3,180
Gains on mortgage loans sold	Gains on mortgage loans sold	(31,137)		(132,012)		Gains on mortgage loans sold	(10,795)		(20,690)
Losses (gains) on investment securities, net		10,579		(2,439)
(Gains) losses on investment securities, net						(Gains) losses on investment securities, net	(1,398)		2,782

Losses (gains) on sales of premises and equipment, net, and sale of related deposit liabilities		2,126		(3,782)
Gains on sales and fair value adjustments of other real estate owned, net		(868)		(332)
Decrease in accrued interest receivable and other assets, net		130,148		143,200
Increase in accrued interest payable and other liabilities, net		209,824		32,344
Losses (gains) on sales of premises and equipment, net						Losses (gains) on sales of premises and equipment, net	93		(9)
Losses (gains) on sales and fair value adjustments of other real estate owned, net						Losses (gains) on sales and fair value adjustments of other real estate owned, net	99		(1,038)
(Increase) decrease in accrued interest receivable and other assets, net						(Increase) decrease in accrued interest receivable and other assets, net	(97,024)		110,691
(Decrease) increase in accrued interest payable and other liabilities, net						(Decrease) increase in accrued interest payable and other liabilities, net	(53,830)		53,062
Net Cash Provided by Operating Activities	Net Cash Provided by Operating Activities	823,324		648,763		Net Cash Provided by Operating Activities	68,441		458,024
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	208,534		908,160		Proceeds from maturities and calls of available-for-sale securities	1,008,597		119,041
Proceeds from maturities and calls of held-to-maturity securities	Proceeds from maturities and calls of held-to-maturity securities	124,986		137,273		Proceeds from maturities and calls of held-to-maturity securities	40,342		66,966
Proceeds from sales of available-for-sale securities	Proceeds from sales of available-for-sale securities	—		2,376		Proceeds from sales of available-for-sale securities	—		—

Proceeds from sales of equity securities with readily determinable fair value	Proceeds from sales of equity securities with readily determinable fair value	18,753		6,259		Proceeds from sales of equity securities with readily determinable fair value	23,592		18,753
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	529		1,137		Proceeds from sales and capital distributions of equity securities without readily determinable fair value	67		250
Purchases of available-for-sale securities	Purchases of available-for-sale securities	(1,224,316)		(290,583)		Purchases of available-for-sale securities	(996,433)		(996,293)
Purchases of held-to-maturity securities	Purchases of held-to-maturity securities	(596,897)		(2,257,847)		Purchases of held-to-maturity securities	(6,443)		(560,903)
Purchases of equity securities with readily determinable fair value	Purchases of equity securities with readily determinable fair value	(27,805)		—		Purchases of equity securities with readily determinable fair value	(23,697)		(23,255)
Purchases of equity securities without readily determinable fair value	Purchases of equity securities without readily determinable fair value	(8,480)		(3,359)		Purchases of equity securities without readily determinable fair value	(4,850)		(1,010)
Purchases of Federal Home Loan Bank and Federal Reserve Bank stock, net		(760)		(1,037)
Redemptions (purchases) of Federal Home Loan Bank and Federal Reserve Bank stock, net						Redemptions (purchases) of Federal Home Loan Bank and Federal Reserve Bank stock, net	20,198		(785)
Distributions from investments in partnerships, net	Distributions from investments in partnerships, net	3,196		44		Distributions from investments in partnerships, net	2,794		124

Proceeds from sales of other real estate owned	Proceeds from sales of other real estate owned	3,669		5,314		Proceeds from sales of other real estate owned	435		2,497
Decrease in securities purchased under resale agreements with terms exceeding three months, net		225,000		—

Decrease in interest-bearing deposits with banks, net	Decrease in interest-bearing deposits with banks, net	2,105,160		96,948		Decrease in interest-bearing deposits with banks, net	424,842		1,359,947
Increase in loans, net	Increase in loans, net	(2,202,286)		(795,270)		Increase in loans, net	(365,885)		(472,409)
Redemption of BOLI	Redemption of BOLI	960		—		Redemption of BOLI	—		960
Purchases of premises and equipment, net	Purchases of premises and equipment, net	(23,366)		(12,113)		Purchases of premises and equipment, net	(9,139)		(7,722)
Net Cash Used for Investing Activities		(1,393,123)		(2,202,698)
Net Cash Provided by (Used for) Investing Activities						Net Cash Provided by (Used for) Investing Activities	114,420		(493,839)
Financing Activities:	Financing Activities:					Financing Activities:
Increase in deposit accounts, net		497,735		1,715,840
(Decrease) increase in deposit accounts, net						(Decrease) increase in deposit accounts, net	(184,335)		123,733
Decrease in other borrowings, net	Decrease in other borrowings, net	(5,059)		(9,230)		Decrease in other borrowings, net	(13,968)		(14,928)
(Decrease) increase in Federal Home Loan Bank advances, net		(75,000)		12,629
Proceeds from common stock offering, net		286,315		—
Increase in Federal Home Loan Bank advances, net						Increase in Federal Home Loan Bank advances, net	—		—

Cash payments to settle contingent consideration liabilities recognized in business combinations	Cash payments to settle contingent consideration liabilities recognized in business combinations	—		(16,583)		Cash payments to settle contingent consideration liabilities recognized in business combinations	(57)		—
Issuance of common shares resulting from the exercise of stock options, employee stock purchase plan and conversion of common stock warrants		6,464		13,115
Issuance of common shares resulting from the exercise of stock options and employee stock purchase plan						Issuance of common shares resulting from the exercise of stock options and employee stock purchase plan	3,579		4,829

Common stock repurchases for tax withholdings related to stock-based compensation						Common stock repurchases for tax withholdings related to stock-based compensation	(1,662)		—
Dividends paid	Dividends paid	(52,914)		(49,301)		Dividends paid	(31,398)		(26,452)
Net Cash Provided by Financing Activities		657,541		1,666,470
Net Increase in Cash and Cash Equivalents		87,742		112,535
Net Cash (Used for) Provided by Financing Activities						Net Cash (Used for) Provided by Financing Activities	(227,841)		87,182
Net (Decrease) Increase in Cash and Cash Equivalents						Net (Decrease) Increase in Cash and Cash Equivalents	(44,980)		51,367
Cash and Cash Equivalents at Beginning of Period	Cash and Cash Equivalents at Beginning of Period	411,205		322,474		Cash and Cash Equivalents at Beginning of Period	490,966		411,205
Cash and Cash Equivalents at End of Period	Cash and Cash Equivalents at End of Period	$	498,947	$	435,009	Cash and Cash Equivalents at End of Period	$	445,986	$	462,572

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, ~~2021~~2022 (“~~2021~~2022 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 significant accounting policies are included in Note ~~1 - Summary~~(1) “Summary of Significant Accounting ~~Policies~~Policies” of the ~~2021~~2022 Form 10-K. In preparation of these financial statements, subsequent events were evaluated through the time the financial statements were issued. Financial statements are considered issued when they are widely distributed to all shareholders and other financial statement users or filed with the SEC.

(2) Recent Accounting Developments

~~Debt~~Business Combinations

In ~~August 2020,~~October 2021, 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):~~2021-08, “Business Combinations (Topic 805), Accounting for ~~Convertible Instruments~~Contract Assets and Contract Liabilities from Contracts ~~in an Entity’s Own Equity,~~with Customers,” which ~~includes provisions for reducing~~clarifies diversity in practice related to recognition and measurement of contract assets and liabilities related to revenue contracts with customers which are acquired in a business combination by aligning business combination accounting with the ~~number of accounting models used in~~subsequent accounting for ~~convertible debt instruments~~contract assets and ~~convertible preferred stock, amending derivatives~~liabilities by requiring entities to apply ASC Topic 606, Revenue from Contracts with Customers, in order to recognize and ~~earnings-per-share (EPS)~~measure deferred revenue in a business combination. The guidance also creates an exception to the general recognition and ~~expanding disclosures~~measurement principle in ASC Topic 805, Business Combinations, under which such amounts are recognized by the acquirer at fair value on the acquisition date by providing two practical expedients for ~~convertible debt instruments and EPS.~~acquirers. The Company adopted ASU No. ~~2020-06~~2021-08 as of January 1, ~~2022.~~2023. 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. The Company adopted ASU No. 2021-04 as of January 1, 2022 under a prospective approach. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

~~Table of Contents~~

~~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. The Company adopted ASU No. 2021-05 as of January 1, 2022. As the Company has adopted ASC Topic 842, this guidance was applied retrospectively to leases that commenced or were modified after the adoption of ASC Topic 842 and prospectively to leases that will commence or be modified after January 1, 2022. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Fair Value Hedging - Portfolio Layer Method

In March 2022, the FASB issued ASU No. 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method” which expands the current last-of-layer method by allowing multiple hedged layers to be designated for a single closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments. ~~This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods therein, and is to be applied under a prospective approach. Early adoption is permitted.~~ The Company ~~is currently evaluating the~~adopted ASU No. 2022-01 as of January 1, 2023. Adoption of this standard did not have a material impact ~~of the updated guidance~~ on the Company’s consolidated financial statements.

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Troubled Debt Restructurings and Vintage Disclosures

In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” which eliminates the separate recognition and measurement guidance for ~~Troubled Debt Restructurings ("TDRs"~~troubled debt restructurings (“TDRs”) by creditors, while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty, and requiring entities to disclose current-period gross write-offs by year of origination for certain financing receivables and net investments in leases. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods therein, with early adoption permitted. If the Company elects to early adopt in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. The Company may elect to early adopt the amendments related to TDRs separately from the amendments related to vintage disclosures. The amendments related to disclosures for loan modifications and the vintage disclosures should be applied under a prospective approach, while the guidance on TDRs should be applied using either a prospective or modified retrospective approach. The Company is currently evaluating the impact of the updated guidance on the Company’s consolidated financial statements and plans to adopt the new guidanceadopted ASU No. 2022-02 as of January 1, 2023. Guidance was adopted under a modified retrospective approach and, at January 1, 2023, the Company recognized a cumulative-effect adjustment to the allowance for loan losses of $741,000 representing the change in methodology of estimating expected credit losses for loans previously classified as TDRs. This amount was a positive adjustment to the allowance for loan losses, presented separately on the Company’s Consolidated Statements of Condition, with an offsetting negative adjustment recorded directly to retained earnings, net of taxes.

Fair Value Measurement - Equity Securities with Contractual Sale Restrictions

In June 2022, the FASB issued ASU No. 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” which clarifies the guidance in ASC 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, and also requires specific disclosures related to these types of securities. This guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein, and is to be applied under a prospective approach. Early adoption is permitted. The Company ~~is currently evaluating the~~does not expect this guidance to have a material impact ~~of the updated guidance~~ on the Company’s consolidated financial statements.

Legislation Issued Related to Stock Repurchases

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed by the President of the United States. Among other things, the IRA imposes a 1% excise tax on the fair market value of stock repurchased after December 31, 2022. With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements. This new legislation did not have a material impact on the Company's consolidated financial statements.

Equity Method and Joint Ventures - Investments in Tax Credit Structures

In March 2023, the FASB issued ASU No. 2023-02, “Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” which allows reporting entities the option to apply the proportional amortization method to other tax credit programs besides the Low-Income Housing Tax Credit (“LIHTC”) structures. The guidance requires application of the proportional amortization method on a tax-credit-program-by-tax-credit-program basis rather than electing the method at the reporting level entity level. This guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein, and is to be applied under either a modified retrospective or 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.

(3)~~Business Combinations~~

On November 15, 2021, the Company completed its acquisition of certain assets from The Allstate Corporation (“Allstate”). Through this business combination, the Company acquired approximately $581.6 million of loans, net of allowance for credit losses measured on the acquisition date. The loan portfolio was comprised of approximately 1,800 loans to Allstate agents nationally. In addition to acquiring the loans, the Company became the national preferred provider of loans to Allstate agents. In connection with the loan acquisition, a team of Allstate agency lending specialists joined the Company to augment and expand Wintrust’s existing insurance agency finance business. For more information regarding these loans, see Note 6 - Loans in Item 1 of this report. As the transaction was determined to be a business combination, the Company recorded goodwill of approximately $9.3 million on the acquisition.

~~Table of Contents~~

~~(4)~~ Cash and Cash Equivalents

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

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~~(5)~~(4) Investment Securities

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


		June 30, 2022									March 31, 2023
(In thousands)	(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(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	$	—	$	—	$	—	$	—	U.S. Treasury	$	4,947	$	1	$	—	$	4,948
U.S. government agencies	U.S. government agencies	50,000		—		(1,913)		48,087		U.S. government agencies	80,000		—		(5,138)		74,862
Municipal	Municipal	170,268		570		(4,133)		166,705		Municipal	164,110		439		(4,163)		160,386
Corporate notes:	Corporate notes:									Corporate notes:
Financial issuers	Financial issuers	93,994		—		(5,177)		88,817		Financial issuers	93,995		—		(11,320)		82,675
Other	Other	1,000		—		(4)		996		Other	1,000		—		—		1,000
Mortgage-backed: (1)	Mortgage-backed: (1)									Mortgage-backed: (1)
Mortgage-backed securities	Mortgage-backed securities	2,915,107		28		(336,517)		2,578,618		Mortgage-backed securities	3,300,048		1,787		(445,405)		2,856,430
Collateralized mortgage obligations	Collateralized mortgage obligations	101,132		1		(14,235)		86,898		Collateralized mortgage obligations	95,880		—		(16,336)		79,544
Total available-for-sale securities	Total available-for-sale securities	$	3,331,501	$	599	$	(361,979)	$	2,970,121	Total available-for-sale securities	$	3,739,980	$	2,227	$	(482,362)	$	3,259,845
Held-to-maturity securities	Held-to-maturity securities									Held-to-maturity securities
U.S. government agencies	U.S. government agencies	$	294,631	$	—	$	(53,222)	$	241,409	U.S. government agencies	$	339,608	$	24	$	(70,064)	$	269,568
Municipal	Municipal	179,642		1,195		(2,796)		178,041		Municipal	174,720		1,117		(2,880)		172,957
Mortgage-backed: (1)	Mortgage-backed: (1)									Mortgage-backed: (1)
Mortgage-backed securities	Mortgage-backed securities	2,719,754		—		(438,050)		2,281,704		Mortgage-backed securities	2,872,591		1,197		(533,415)		2,340,373
Collateralized mortgage obligations	Collateralized mortgage obligations	170,951		—		(16,254)		154,697		Collateralized mortgage obligations	161,874		—		(22,431)		139,443
Corporate notes	Corporate notes	48,574		2		(4,158)		44,418		Corporate notes	58,061		14		(4,218)		53,857
Total held-to-maturity securities	Total held-to-maturity securities	$	3,413,552	$	1,197	$	(514,480)	$	2,900,269	Total held-to-maturity securities	$	3,606,854	$	2,352	$	(633,008)	$	2,976,198
Less: Allowance for credit losses	Less: Allowance for credit losses	(83)								Less: Allowance for credit losses	(463)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses	$	3,413,469							Held-to-maturity securities, net of allowance for credit losses	$	3,606,391
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	$	96,247	$	3,143	$	(6,095)	$	93,295	Equity securities with readily determinable fair value	$	116,296	$	3,065	$	(7,418)	$	111,943

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

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		December 31, 2021										December 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
(In thousands)	(In thousands)							(In thousands)
Available-for-sale securities	Available-for-sale securities														Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	—	$	—	$	—		$	—	U.S. Treasury		$	14,943		$	5		$	—		$	14,948
U.S. government agencies	U.S. government agencies	50,158		2,349		—			52,507		U.S. government agencies	80,000			36			(5,814)			74,222
Municipal	Municipal	161,618		4,193		(217)			165,594		Municipal	173,861			230			(5,436)			168,655
Corporate notes:	Corporate notes:										Corporate notes:
Financial issuers	Financial issuers	96,878		418		(2,599)			94,697		Financial issuers	93,994			—			(9,291)			84,703
Other	Other	1,000		7		—			1,007		Other	1,000			2			—			1,002
Mortgage-backed: (1)	Mortgage-backed: (1)										Mortgage-backed: (1)
Mortgage-backed securities	Mortgage-backed securities	1,901,005		32,830		(25,854)			1,907,981		Mortgage-backed securities	3,308,494			238			(488,795)			2,819,937
Collateralized mortgage obligations	Collateralized mortgage obligations	105,710		297		—			106,007		Collateralized mortgage obligations	97,342			—			(17,792)			79,550
Total available-for-sale securities	Total available-for-sale securities	$	2,316,369	$	40,094	$	(28,670)		$	2,327,793	Total available-for-sale securities	$	3,769,634		$	511		$	(527,128)		$	3,243,017
Held-to-maturity securities	Held-to-maturity securities										Held-to-maturity securities
U.S. government agencies	U.S. government agencies	$	180,192	$	201	$	(3,314)		$	177,079	U.S. government agencies	$	339,614		$	—		$	(75,293)		$	264,321
Municipal	Municipal	187,486		9,544		(223)			196,807		Municipal	179,027			477			(4,066)			175,438
Mortgage-backed: (1)	Mortgage-backed: (1)										Mortgage-backed: (1)
Mortgage-backed securities	Mortgage-backed securities	2,530,730		864		(47,622)			2,483,972		Mortgage-backed securities	2,900,031			—			(583,682)			2,316,349
Collateralized mortgage obligations	Collateralized mortgage obligations	—		—		—			—		Collateralized mortgage obligations	164,151			—			(23,322)			140,829
Corporate notes	Corporate notes	43,955		—		(1,119)			42,836		Corporate notes	58,232			—			(5,348)			52,884
Total held-to-maturity securities	Total held-to-maturity securities	$	2,942,363	$	10,609	$	(52,278)		$	2,900,694	Total held-to-maturity securities	$	3,641,055		$	477		$	(691,711)		$	2,949,821
Less: Allowance for credit losses	Less: Allowance for credit losses	(78)									Less: Allowance for credit losses	(488)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses	$	2,942,285								Held-to-maturity securities, net of allowance for credit losses	$	3,640,567
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	$	86,989	$	5,354	$	(1,832)		$	90,511	Equity securities with readily determinable fair value	$	115,552		$	2,935		$	(8,122)		$	110,365

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

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		June 30, 2021										March 31, 2022
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value			Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value
(In thousands)	(In thousands)							(In thousands)
Available-for-sale securities	Available-for-sale securities														Available-for-sale securities
U.S. Treasury	U.S. Treasury	$	—	$	—	$	—		$	—	U.S. Treasury		$	—		$	—		$	—		$	—
U.S. government agencies	U.S. government agencies	75,169		3,685		—			78,854		U.S. government agencies	50,000			366			(729)			49,637
Municipal	Municipal	163,715		4,738		(157)			168,296		Municipal	157,563			1,019			(3,093)			155,489
Corporate notes:	Corporate notes:										Corporate notes:
Financial issuers	Financial issuers	98,827		520		(1,818)			97,529		Financial issuers	86,994			1			(5,047)			81,948
Other	Other	1,000		13		—			1,013		Other	1,000			—			(9)			991
Mortgage-backed: (1)	Mortgage-backed: (1)										Mortgage-backed: (1)
Mortgage-backed securities	Mortgage-backed securities	1,800,751		50,171		(16,839)			1,834,083		Mortgage-backed securities	2,794,760			591			(177,899)			2,617,452
Collateralized mortgage obligations	Collateralized mortgage obligations	8,596		237		—			8,833		Collateralized mortgage obligations	103,424			1			(10,044)			93,381
Total available-for-sale securities	Total available-for-sale securities	$	2,148,058	$	59,364	$	(18,814)		$	2,188,608	Total available-for-sale securities	$	3,193,741		$	1,978		$	(196,821)		$	2,998,898
Held-to-maturity securities	Held-to-maturity securities										Held-to-maturity securities
U.S. government agencies	U.S. government agencies	$	176,152	$	1,064	$	(3,454)		$	173,762	U.S. government agencies	$	264,661		$	35		$	(27,673)		$	237,023
Municipal	Municipal	191,590		10,838		(308)			202,120		Municipal	180,548			3,176			(1,693)			182,031
Mortgage-backed: (1)	Mortgage-backed: (1)										Mortgage-backed: (1)
Mortgage-backed securities	Mortgage-backed securities	2,078,678		5,139		(30,834)			2,052,983		Mortgage-backed securities	2,772,622			—			(253,254)			2,519,368
Collateralized mortgage obligations	Collateralized mortgage obligations	—		—		—			—		Collateralized mortgage obligations	174,273			—			(6,847)			167,426
Corporate Notes		51,902		—		(535)			51,367
Corporate notes											Corporate notes	43,784			—			(3,205)			40,579
Total held-to-maturity securities	Total held-to-maturity securities	$	2,498,322	$	17,041	$	(35,131)		$	2,480,232	Total held-to-maturity securities	$	3,435,888		$	3,211		$	(292,672)		$	3,146,427
Less: Allowance for credit losses	Less: Allowance for credit losses	(90)									Less: Allowance for credit losses	(159)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses	$	2,498,232								Held-to-maturity securities, net of allowance for credit losses	$	3,435,729
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	$	81,401	$	6,005	$	(1,090)		$	86,316	Equity securities with readily determinable fair value	$	91,629		$	5,259		$	(4,199)		$	92,689

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

Equity securities without readily determinable fair values totaled ~~$42.1~~$52.5 million as of ~~June 30, 2022.~~March 31, 2023. Equity securities without readily determinable fair values are included as part of accrued interest receivable and other assets in the Company’s Consolidated Statements of Condition. The Company monitors its equity investments without readily determinable fair values 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 no upward ~~and no~~or downward adjustments related to such observable price changes for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 or March 31, 2022. 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. ~~The~~During the three months ended March 31, 2023, the Company recorded ~~$3.8 million of~~no impairment of equity securities without readily determinable fair ~~values for~~values. During the three months ended ~~June 30, 2022. For the six months ended June 30,~~March 31, 2022, the Company recorded ~~$4.4 million~~$571,000 of impairment of equity securities without readily determinable fair values.

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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 ~~June 30, 2022:~~March 31, 2023:


		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
(In thousands)	(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(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. government agencies	U.S. government agencies	48,087		(1,913)		—		—		48,087		(1,913)		U.S. government agencies	$	29,945	$	(55)	$	44,917	$	(5,083)	$	74,862	$	(5,138)
Municipal	Municipal	100,593		(3,587)		11,811		(546)		112,404		(4,133)		Municipal	58,695		(624)		55,413		(3,539)		114,108		(4,163)
Corporate notes:	Corporate notes:													Corporate notes:
Financial issuers	Financial issuers	21,256		(744)		67,561		(4,433)		88,817		(5,177)		Financial issuers	9,912		(87)		72,763		(11,233)		82,675		(11,320)
Other		996		(4)		—		—		996		(4)

Mortgage-backed:(1)	Mortgage-backed:(1)													Mortgage-backed:(1)
Mortgage-backed securities	Mortgage-backed securities	2,130,876		(236,361)		435,412		(100,156)		2,566,288		(336,517)		Mortgage-backed securities	219,643		(7,558)		2,297,025		(437,847)		2,516,668		(445,405)
Collateralized mortgage obligations	Collateralized mortgage obligations	86,849		(14,235)		—		—		86,849		(14,235)		Collateralized mortgage obligations	72		(1)		79,472		(16,335)		79,544		(16,336)
Total available-for-sale securities	Total available-for-sale securities	$	2,388,657	$	(256,844)	$	514,784	$	(105,135)	$	2,903,441	$	(361,979)	Total available-for-sale securities	$	318,267	$	(8,325)	$	2,549,590	$	(474,037)	$	2,867,857	$	(482,362)

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

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 ~~June 30, 2022~~March 31, 2023 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 at March 31, 2023 were primarily mortgage-backed securities with unrealized losses due to increased market rates during such period.

See Note ~~7 - Allowance~~(6) “Allowance for Credit ~~Losses~~Losses” for further discussion regarding any credit losses associated with held-to-maturity securities at ~~June 30, 2022.~~March 31, 2023.

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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 June 30,				Six months ended June 30,					Three months ended March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022
Realized gains on investment securities	Realized gains on investment securities	$	7	$	613	$	265	$	829	Realized gains on investment securities	$	605	$	258
Realized losses on investment securities	Realized losses on investment securities	(7)		(29)		(14)		(35)		Realized losses on investment securities	(45)		(8)
Net realized gains on investment securities	Net realized gains on investment securities	—		584		251		794		Net realized gains on investment securities	560		250
Unrealized gains on equity securities with readily determinable fair value	Unrealized gains on equity securities with readily determinable fair value	2		751		182		2,626		Unrealized gains on equity securities with readily determinable fair value	2,290		180
Unrealized losses on equity securities with readily determinable fair value	Unrealized losses on equity securities with readily determinable fair value	(4,013)		(50)		(6,655)		(951)		Unrealized losses on equity securities with readily determinable fair value	(1,452)		(2,641)
Net unrealized (losses) gains on equity securities with readily determinable fair value		(4,011)		701		(6,473)		1,675
Net unrealized gains (losses) on equity securities with readily determinable fair value										Net unrealized gains (losses) on equity securities with readily determinable fair value	838		(2,461)
Upward adjustments of equity securities without readily determinable fair values	Upward adjustments of equity securities without readily determinable fair values	—		—		—		—		Upward adjustments of equity securities without readily determinable fair values	—		—
Downward adjustments of equity securities without readily determinable fair values	Downward adjustments of equity securities without readily determinable fair values	—		—		—		—		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	(3,786)		—		(4,357)		(30)		Impairment of equity securities without readily determinable fair values	—		(571)
Adjustment and impairment, net, of equity securities without readily determinable fair values	Adjustment and impairment, net, of equity securities without readily determinable fair values	(3,786)		—		(4,357)		(30)		Adjustment and impairment, net, of equity securities without readily determinable fair values	—		(571)
(Losses) gains on investment securities, net		$	(7,797)	$	1,285	$	(10,579)	$	2,439
Gains (losses) on investment securities, net										Gains (losses) on investment securities, net	$	1,398	$	(2,782)

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

Proceeds from sales of equity securities with readily determinable fair value	Proceeds from sales of equity securities with readily determinable fair value	—		4,750		18,753		6,259		Proceeds from sales of equity securities with readily determinable fair value	23,592		18,753
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	279		751		529		1,137		Proceeds from sales and capital distributions of equity securities without readily determinable fair value	67		250

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

~~Table of Contents~~

The amortized cost and fair value of available-for-sale and held-to-maturity investment securities as of ~~June 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~June 30, 2021,~~March 31, 2022, by contractual maturity, are shown in the following table. Contractual maturities may differ from actual maturities as borrowers may have the right to call or repay obligations with or without call or prepayment penalties. Mortgage-backed securities are not included in the maturity categories in the following maturity summary as actual maturities may differ from contractual maturities because the underlying mortgages may be called or prepaid without penalties:


		June 30, 2022				December 31, 2021				June 30, 2021					March 31, 2023				December 31, 2022				March 31, 2022
(In thousands)	(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		(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	$	55,058	$	54,824	$	49,714	$	49,822	$	38,298	$	38,508	Due in one year or less	$	108,880	$	108,429	$	119,830	$	119,275	$	48,130	$	47,945
Due in one to five years	Due in one to five years	75,941		74,559		72,382		73,850		87,939		89,869		Due in one to five years	131,959		122,172		63,644		61,701		67,138		66,034
Due in five to ten years	Due in five to ten years	115,378		109,492		118,358		117,573		119,858		119,979		Due in five to ten years	39,019		35,158		115,734		105,076		110,960		105,670
Due after ten years	Due after ten years	68,885		65,730		69,200		72,560		92,616		97,336		Due after ten years	64,194		58,112		64,590		57,478		69,329		68,416
Mortgage-backed	Mortgage-backed	3,016,239		2,665,516		2,006,715		2,013,988		1,809,347		1,842,916		Mortgage-backed	3,395,928		2,935,974		3,405,836		2,899,487		2,898,184		2,710,833
Total available-for-sale securities	Total available-for-sale securities	$	3,331,501	$	2,970,121	$	2,316,369	$	2,327,793	$	2,148,058	$	2,188,608	Total available-for-sale securities	$	3,739,980	$	3,259,845	$	3,769,634	$	3,243,017	$	3,193,741	$	2,998,898
Held-to-maturity securities	Held-to-maturity securities													Held-to-maturity securities
Due in one year or less	Due in one year or less	$	1,457	$	1,458	$	2,976	$	2,992	$	5,119	$	5,152	Due in one year or less	$	2,302	$	2,300	$	1,340	$	1,332	$	1,208	$	1,213
Due in one to five years	Due in one to five years	84,906		80,705		79,422		79,705		56,059		56,988		Due in one to five years	98,207		93,717		94,705		89,093		83,085		80,210
Due in five to ten years	Due in five to ten years	105,450		105,491		106,713		112,667		171,908		178,864		Due in five to ten years	110,967		110,892		115,318		113,758		101,410		102,940
Due after ten years	Due after ten years	331,034		276,214		222,522		221,358		186,558		186,245		Due after ten years	360,913		289,473		365,510		288,460		303,290		275,270
Mortgage-backed	Mortgage-backed	2,890,705		2,436,401		2,530,730		2,483,972		2,078,678		2,052,983		Mortgage-backed	3,034,465		2,479,816		3,064,182		2,457,178		2,946,895		2,686,794
Total held-to-maturity securities	Total held-to-maturity securities	$	3,413,552	$	2,900,269	$	2,942,363	$	2,900,694	$	2,498,322	$	2,480,232	Total held-to-maturity securities	$	3,606,854	$	2,976,198	$	3,641,055	$	2,949,821	$	3,435,888	$	3,146,427
Less: Allowance for credit losses	Less: Allowance for credit losses	(83)				(78)				(90)				Less: Allowance for credit losses	(463)				(488)				(159)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses	$	3,413,469			$	2,942,285			$	2,498,232			Held-to-maturity securities, net of allowance for credit losses	$	3,606,391			$	3,640,567			$	3,435,729

Securities having a carrying value of ~~$2.8~~$5.7 billion at ~~June 30, 2022~~March 31, 2023 as well as securities having a carrying value of ~~$2.6~~$2.8 billion and ~~$2.4~~$2.5 billion at December 31, ~~2021~~2022 and ~~June 30, 2021,~~March 31, 2022, respectively, were pledged as collateral for public deposits, trust

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deposits, Federal Home Loan Bank (“FHLB”) advances and available lines of credit, securities sold under repurchase agreements and derivatives. At ~~June 30, 2022,~~March 31, 2023, there were no securities of a single issuer, other than U.S. government-sponsored agency securities, which exceeded 10% of shareholders’ equity.

~~Table of Contents~~

~~(6)~~(5) Loans

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


		June 30,			December 31,			June 30,				March 31,			December 31,			March 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			2021			(Dollars in thousands)	2023			2022			2022
Balance:	Balance:										Balance:
Commercial	Commercial	$	12,047,105		$	11,904,068		$	11,442,276		Commercial	$	12,576,985		$	12,549,164		$	11,583,963
Commercial real estate	Commercial real estate	9,407,205			8,990,286			8,678,369			Commercial real estate	10,239,078			9,950,947			9,235,074
Home equity	Home equity	325,826			335,155			369,806			Home equity	337,016			332,698			321,435
Residential real estate	Residential real estate	2,078,907			1,637,099			1,530,285			Residential real estate	2,505,545			2,372,383			1,799,985
Premium finance receivables	Premium finance receivables										Premium finance receivables
Property and casualty insurance	Property and casualty insurance	5,541,447			4,855,487			4,521,871			Property and casualty insurance	5,738,880			5,849,459			4,937,408
Life insurance	Life insurance	7,608,433			7,042,810			6,359,556			Life insurance	8,125,802			8,090,998			7,354,163
Consumer and other	Consumer and other	44,180			24,199			9,024			Consumer and other	42,165			50,836			48,519
Total loans, net of unearned income	Total loans, net of unearned income	$	37,053,103		$	34,789,104		$	32,911,187		Total loans, net of unearned income	$	39,565,471		$	39,196,485		$	35,280,547
Mix:	Mix:										Mix:
Commercial	Commercial	32		%	34		%	35		%	Commercial	32		%	32		%	33		%
Commercial real estate	Commercial real estate	25			26			26			Commercial real estate	26			25			26
Home equity	Home equity	1			1			1			Home equity	1			1			1
Residential real estate	Residential real estate	6			5			5			Residential real estate	6			6			5
Premium finance receivables	Premium finance receivables										Premium finance receivables
Property and casualty insurance	Property and casualty insurance	15			14			14			Property and casualty insurance	14			15			14
Life insurance	Life insurance	21			20			19			Life insurance	21			21			21
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 June 30, 2022, the Company's commercial portfolio included approximately $82.1 million 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 ~~$160.6~~$244.0 million at ~~June 30, 2022, $135.5~~March 31, 2023, $224.5 million at December 31, ~~2021~~2022 and ~~$125.5~~$140.3 million at ~~June 30, 2021.~~March 31, 2022.

Total loans, excluding purchased credit deteriorated (“PCD”) loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling ~~$70.2~~$70.9 million at ~~June 30, 2022, $50.8~~March 31, 2023, $71.8 million at December 31, ~~2021~~2022 and ~~$(6.3)~~$59.3 million at June 30, 2021. Net deferred fees as of June 30, 2022 includes $2.1 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 the 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.March 31, 2022.

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.

~~Table of Contents~~

~~Acquired Loan Information — PCD Loans~~

As part of the Company’s prior acquisitions, the Company acquired loans that were classified as PCD based upon various factors as of the acquisition date, including internal risk rating methodologies and prior classification as a TDR. The following table provides estimated details as of the date of acquisition on PCD loans acquired in 2021:

~~(Dollars in thousands)~~

~~Insurance Agency Loan Portfolio~~

~~Contractually required payments (unpaid principal balance)~~

~~13,882~~

~~Allowance for credit losses~~ ~~(1)~~

~~(2,806)~~

~~Discount, net of any premium~~

~~(214)~~

~~Purchase price of PCD loans acquired~~

~~10,862~~

~~(1)~~The initial allowance for credit losses on PCD loans acquired during 2021 measured approximately $2.8 million, of which $2.3 million was charged off related to PCD loans that met the Company’s charge-off policy at the time of acquisition. After considering these loans that were immediately charged off, the net impact of PCD allowance for credit losses at the acquisition date was approximately $470,000.

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

In accordance with ASC 326, the Company is required to measure the allowance for credit losses of financial assets with similar risk characteristics on a collective or pooled basis. In considering the segmentation of financial assets measured at amortized

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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 assets held at amortized cost, specifically the Company's loan portfolio and debt securities classified as held-to-maturity. ~~Below is a summary~~Descriptions of the ~~Company's~~Company’s loan portfolio segments and major debt security ~~types:~~types are included in Note (5) “Allowance for Credit Losses” of the 2022 Form 10-K.

~~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. Individually assessed collateral dependent commercial loans are primarily collateralized by equipment and the enterprise value or assets of the specific business.

The Company also originated loans through the PPP. Administered by the SBA, the PPP provided short-term relief primarily related to the disruption from COVID-19 to companies and non-profits that meet the SBA’s definition of an eligible small business. Under the program, the SBA will forgive all or a portion of the loan if, during a certain period, loans were used for qualifying expenses. If all or a portion of the loan was not forgiven, the borrower is responsible for repayment. PPP loans are fully guaranteed by the SBA, including any portion not forgiven. The SBA guarantee 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 (utilized in related assessment of individually assessed collateral dependent loans). 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 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 lines of credit at least twice per year. The 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, including early buy-out loans guaranteed by U.S. government agencies:~~ ~~The Company's residential real estate portfolio includes one- to four-family adjustable rate mortgages that have repricing terms generally over~~

~~Table of Contents~~

five years, construction loans to individuals and bridge financing loans for qualifying customers, as well as certain long-term fixed rate loans. 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 loan 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. Collateral dependent residential real estate loans that are individually assessed when measuring the allowance for credit losses are primarily collateralized by such one- to four-family properties noted above. 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.

Additionally, early buy-out loans guaranteed by U.S. government agencies include loans in which the Company is eligible or has exercised its option under the Government National Mortgage Association (“GNMA”) securitization program to repurchase certain delinquent mortgage loans. Such loans were previously transferred by the Company with servicing of such loans retained. Early buy-out loans are insured or guaranteed by the Federal Housing Administration (“FHA”) or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.

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

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

~~Consumer and other loans:~~ Included in the consumer and other loan category is a wide variety of personal and consumer loans to individuals. The Company originates consumer loans in order to provide a wider range of financial services to its 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 includes bond issuances 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 the Company’s own past loss experience with similar investments, 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

~~Table of Contents~~

Condition and totaled ~~$130.9~~$245.1 million at ~~June 30, 2022, $117.4~~March 31, 2023, $214.0 million at December 31, ~~2021,~~2022, and ~~$119.1~~$124.4 million at ~~June 30, 2021.~~March 31, 2022.

The tables below show the aging of the Company’s loan portfolio by the segmentation noted above at ~~June 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~June 30, 2021:~~March 31, 2022:


As of June 30, 2022				90+ days and still accruing			60-89 days past due				30-59 days past due
As of March 31, 2023															As of March 31, 2023						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		$	32,436	$	—				$	7,756			$	13,897			$	11,910,927				$	11,965,016
Commercial PPP loans		—		—			9,033				223				72,833				82,089
Commercial, industrial and other																						Commercial, industrial and other		$	47,950		$	—		$	10,755			$	95,593	$	12,422,687	$	12,576,985

Commercial real estate	Commercial real estate																					Commercial real estate
Construction and development	Construction and development	889		—			—				1,144				1,504,285				1,506,318			Construction and development		5,404			—			4,438				19,616		1,567,595		1,597,053
Non-construction	Non-construction	9,829		—			6,771				33,076				7,851,211				7,900,887			Non-construction		5,792			—			16,101				53,064		8,567,068		8,642,025

Home equity	Home equity	1,084		—			154				930				323,658				325,826			Home equity		1,190			—			116				1,118		334,592		337,016

Residential real estate, excluding early buy-out loans	Residential real estate, excluding early buy-out loans	8,330		—			534				147				1,956,040				1,965,051			Residential real estate, excluding early buy-out loans		11,333			104			74				19,183		2,278,699		2,309,393

Premium finance receivables	Premium finance receivables																					Premium finance receivables
Property and casualty insurance loans	Property and casualty insurance loans	13,303		6,447			15,299				23,313				5,483,085				5,541,447			Property and casualty insurance loans		18,543			9,215			14,287				32,545		5,664,290		5,738,880
Life insurance loans	Life insurance loans	—		—			1,796				65,155				7,541,482				7,608,433			Life insurance loans		—			1,066			21,552				52,975		8,050,209		8,125,802

Consumer and other	Consumer and other	8		25			8				119				44,020				44,180			Consumer and other		6			87			10				379		41,683		42,165
Total loans, net of unearned income, excluding early buy-out loans	Total loans, net of unearned income, excluding early buy-out loans	$	65,879	$	6,472		$	41,351			$	138,004			$	36,687,541			$	36,939,247		Total loans, net of unearned income, excluding early buy-out loans		$	90,218		$	10,472		$	67,333			$	274,473	$	38,926,823	$	39,369,319
Early buy-out loans guaranteed by U.S. government agencies (1)	Early buy-out loans guaranteed by U.S. government agencies (1)	23,815		50,314			272				—				39,455				113,856			Early buy-out loans guaranteed by U.S. government agencies (1)		29,245			36,920			—				1,485		128,502		196,152
Total loans, net of unearned income	Total loans, net of unearned income	$	89,694	$	56,786		$	41,623			$	138,004			$	36,726,996			$	37,053,103		Total loans, net of unearned income		$	119,463		$	47,392		$	67,333			$	275,958	$	39,055,325	$	39,565,471


As of December 31, 2021				90+ days and still accruing			60-89 days past due				30-59 days past due
As of December 31, 2022																			As of December 31, 2022					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		$	20,399	$	—				$	23,492			$	42,933			$	11,258,961			$	11,345,785
Commercial PPP loans		—		15			770				928				556,570				558,283
Commercial, industrial and other																									Commercial, industrial and other	$	35,579		$	462			$	21,128		$	56,696		$	12,435,299			$	12,549,164

Commercial real estate	Commercial real estate																								Commercial real estate
Construction and development	Construction and development	1,377		—			—				2,809				1,352,018				1,356,204						Construction and development	416			—			361			14,390			1,471,763				1,486,930
Non-construction	Non-construction	20,369		—			284				37,634				7,575,795				7,634,082						Non-construction	5,971			—			1,883			16,285			8,439,878				8,464,017

Home equity	Home equity	2,574		—			—				1,120				331,461				335,155						Home equity	1,487			—			—			2,152			329,059				332,698

Residential real estate, excluding early buy-out loans	Residential real estate, excluding early buy-out loans	16,440		—			982				12,145				1,576,704				1,606,271						Residential real estate, excluding early buy-out loans	10,171			—			4,364			9,982			2,183,078				2,207,595

Premium finance receivables	Premium finance receivables																								Premium finance receivables
Property and casualty insurance loans	Property and casualty insurance loans	5,433		7,210			15,490				22,419				4,804,935				4,855,487						Property and casualty insurance loans	13,470			15,841			14,926			40,557			5,764,665				5,849,459
Life insurance loans	Life insurance loans	—		7			12,614				66,651				6,963,538				7,042,810						Life insurance loans	—			17,245			5,260			68,725			7,999,768				8,090,998

Consumer and other	Consumer and other	477		137			34				509				23,042				24,199						Consumer and other	6			49			18			224			50,539				50,836
Total loans, net of unearned income, excluding early buy-out loans	Total loans, net of unearned income, excluding early buy-out loans	$	67,069	$	7,369		$	53,666			$	187,148			$	34,443,024			$	34,758,276					Total loans, net of unearned income, excluding early buy-out loans	$	67,100		$	33,597		$	47,940		$	209,011		$	38,674,049			$	39,031,697
Early buy-out loans guaranteed by U.S. government agencies (1)	Early buy-out loans guaranteed by U.S. government agencies (1)	—		—			—				275				30,553				30,828						Early buy-out loans guaranteed by U.S. government agencies (1)	31,279			47,450			984			1,584			83,491				164,788
Total loans, net of unearned income	Total loans, net of unearned income	$	67,069	$	7,369		$	53,666			$	187,423			$	34,473,577			$	34,789,104					Total loans, net of unearned income	$	98,379		$	81,047		$	48,924		$	210,595		$	38,757,540			$	39,196,485

(1)Early buy-out loans are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.

1714

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As of June 30, 2021				90+ days and still accruing			60-89 days past due				30-59 days past due
As of March 31, 2022															As of March 31, 2022						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		$	23,232	$	1,244				$	5,204			$	18,468			$	9,514,721				$	9,562,869
Commercial PPP loans		—		—			—				10				1,879,397				1,879,407
Commercial, industrial and other																						Commercial, industrial and other		$	16,878		$	—		$	1,294			$	31,889	$	11,533,902	$	11,583,963

Commercial real estate	Commercial real estate																					Commercial real estate
Construction and development	Construction and development	1,030		—			—				2,207				1,382,012				1,385,249			Construction and development		1,054			—			—				1,409		1,393,943		1,396,406
Non-construction	Non-construction	25,005		—			4,382				17,491				7,246,242				7,293,120			Non-construction		11,247			—			2,648				28,732		7,796,041		7,838,668

Home equity	Home equity	3,478		—			301				777				365,250				369,806			Home equity		1,747			—			199				545		318,944		321,435

Residential real estate, excluding early buy-out loans	Residential real estate, excluding early buy-out loans	23,050		—			1,584				2,139				1,452,734				1,479,507			Residential real estate, excluding early buy-out loans		7,262			—			293				18,808		1,723,526		1,749,889

Premium finance receivables	Premium finance receivables																					Premium finance receivables
Property and casualty insurance loans	Property and casualty insurance loans	6,418		3,570			7,759				8,793				4,495,331				4,521,871			Property and casualty insurance loans		6,707			12,363			8,890				21,278		4,888,170		4,937,408
Life insurance loans	Life insurance loans	—		—			—				23,965				6,335,591				6,359,556			Life insurance loans		—			—			22,401				15,522		7,316,240		7,354,163

Consumer and other	Consumer and other	485		178			22				75				8,264				9,024			Consumer and other		4			43			5				221		48,246		48,519
Total loans, net of unearned income, excluding early buy-out loans	Total loans, net of unearned income, excluding early buy-out loans	$	82,698	$	4,992		$	19,252			$	73,925			$	32,679,542			$	32,860,409		Total loans, net of unearned income, excluding early buy-out loans		$	44,899		$	12,406		$	35,730			$	118,404	$	35,019,012	$	35,230,451
Early buy-out loans guaranteed by U.S. government agencies (1)	Early buy-out loans guaranteed by U.S. government agencies (1)	—		—			—				—				50,778				50,778			Early buy-out loans guaranteed by U.S. government agencies (1)		4,661			28,958			—				185		16,292		50,096
Total loans, net of unearned income	Total loans, net of unearned income	$	82,698	$	4,992		$	19,252			$	73,925			$	32,730,320			$	32,911,187		Total loans, net of unearned income		$	49,560		$	41,364		$	35,730			$	118,589	$	35,035,304	$	35,280,547

(1)Early buy-out loans are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.

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~~Descriptions of the ~~Company's~~Company’s credit quality indicators by financial ~~asset.~~asset are included in Note (5) “Allowance for Credit Losses” of the 2022 Form 10-K.

~~Loan portfolios~~

The Company's ability to manage credit risk depends in large part on its 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. For loans measured at amortized cost (or excluding loans measured at fair value, such as early buy-out loans guaranteed by U.S. government agencies), 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, and 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.

~~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.~~

~~Early buy-out loans guaranteed by U.S. government agencies:~~ As noted above, such loans are measured at fair value and thus excluded from the measurement of the allowance for credit losses. Credit risk ratings assigned to such loans are considered in the measurement of fair value as well as related guarantees provided by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.

Generally, 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

~~Table of Contents~~

bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including: a borrower’s financial strength, cash flow coverage, collateral protection and guarantees.

The Company’s Problem Loan Reporting system includes all such loans described above with credit risk ratings of 6 through 9. This system is designed to provide an ongoing 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, such 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 nonaccrual status or a charge-off. If the Company determines that a loan amount or portion thereof is uncollectible, the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

The table below shows the Company’s loan portfolio by credit quality indicator and year of origination at ~~June 30, 2022:~~March 31, 2023:


		Year of Origination														Revolving		Total			Year of Origination														Revolving		Total
(In thousands)	(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving		to Term		Loans		(In thousands)	2023		2022		2021		2020		2019		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	$	1,260,184	$	2,565,443	$	1,279,656	$	758,679	$	558,129	$	963,346	$	4,008,344	$	45,005	$	11,438,786	Pass	$	752,119	$	2,576,073	$	2,081,628	$	940,341	$	603,016	$	1,213,066	$	3,872,419	$	3,497	$	12,042,159
Special mention	Special mention	5,275		40,753		38,258		62,110		54,302		42,247		82,418		235		325,598		Special mention	402		55,314		92,315		9,462		23,220		10,695		149,012		268		340,688
Substandard accrual	Substandard accrual	1,993		43,404		26,150		18,264		7,454		8,171		62,689		71		168,196		Substandard accrual	—		13,415		40,397		2,401		12,670		40,814		36,035		456		146,188
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	—		94		3,594		4,729		12,493		3,555		7,971		—		32,436		Substandard nonaccrual/doubtful	—		550		5,479		10,985		28,490		2,215		231		—		47,950
Total commercial, industrial and other	Total commercial, industrial and other	$	1,267,452	$	2,649,694	$	1,347,658	$	843,782	$	632,378	$	1,017,319	$	4,161,422	$	45,311	$	11,965,016	Total commercial, industrial and other	$	752,521	$	2,645,352	$	2,219,819	$	963,189	$	667,396	$	1,266,790	$	4,057,697	$	4,221	$	12,576,985
Commercial PPP
Pass		$	—	$	63,524	$	17,374	$	—	$	—	$	—	$	—	$	—	$	80,898
Special mention		—		18		680		—		—		—		—		—		698
Substandard accrual		—		—		493		—		—		—		—		—		493
Substandard nonaccrual/doubtful		—		—		—		—		—		—		—		—		—
Total commercial PPP		$	—	$	63,542	$	18,547	$	—	$	—	$	—	$	—	$	—	$	82,089

Construction and development	Construction and development																			Construction and development
Pass	Pass	$	177,013	$	452,444	$	447,683	$	201,983	$	41,299	$	107,465	$	19,842	$	—	$	1,447,729	Pass	$	42,635	$	506,714	$	512,801	$	204,113	$	111,497	$	119,478	$	12,626	$	369	$	1,510,233
Special mention	Special mention	—		1,051		—		3,583		17,951		2,001		—		—		24,586		Special mention	—		—		1,475		16,480		23,494		14,360		—		—		55,809
Substandard accrual	Substandard accrual	—		—		8,458		310		11,743		12,603		—		—		33,114		Substandard accrual	—		2,337		—		8,301		—		14,969		—		—		25,607
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	—		—		—		—		—		889		—		—		889		Substandard nonaccrual/doubtful	—		4,190		798		—		—		416		—		—		5,404
Total construction and development	Total construction and development	$	177,013	$	453,495	$	456,141	$	205,876	$	70,993	$	122,958	$	19,842	$	—	$	1,506,318	Total construction and development	$	42,635	$	513,241	$	515,074	$	228,894	$	134,991	$	149,223	$	12,626	$	369	$	1,597,053
Non-construction	Non-construction																			Non-construction
Pass	Pass	$	954,387	$	1,534,813	$	1,061,773	$	871,589	$	667,917	$	2,356,129	$	153,903	$	3,425	$	7,603,936	Pass	$	472,528	$	1,862,370	$	1,441,054	$	1,002,397	$	814,910	$	2,637,342	$	184,246	$	649	$	8,415,496
Special mention	Special mention	4,405		3,881		7,518		37,670		48,762		93,106		—		—		195,342		Special mention	—		4,351		11,872		2,140		29,868		74,174		1,439		—		123,844
Substandard accrual	Substandard accrual	—		—		—		18,124		26,759		46,897		—		—		91,780		Substandard accrual	—		—		3,163		22,041		16,827		54,862		—		—		96,893
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	—		—		—		—		—		9,829		—		—		9,829		Substandard nonaccrual/doubtful	—		—		—		—		—		5,792		—		—		5,792
Total non-construction	Total non-construction	$	958,792	$	1,538,694	$	1,069,291	$	927,383	$	743,438	$	2,505,961	$	153,903	$	3,425	$	7,900,887	Total non-construction	$	472,528	$	1,866,721	$	1,456,089	$	1,026,578	$	861,605	$	2,772,170	$	185,685	$	649	$	8,642,025
Home equity	Home equity																			Home equity
Pass	Pass	$	—	$	—	$	—	$	56	$	—	$	5,352	$	304,216	$	—	$	309,624	Pass	$	—	$	—	$	—	$	—	$	56	$	5,633	$	317,387	$	—	$	323,076
Special mention	Special mention	—		—		—		—		238		61		4,281		—		4,580		Special mention	—		—		—		—		—		1,430		2,193		—		3,623
Substandard accrual																				Substandard accrual	—		—		—		—		—		8,214		869		44		9,127
Substandard nonaccrual/doubtful																				Substandard nonaccrual/doubtful	—		—		77		116		18		880		99		—		1,190
Total home equity																				Total home equity	$	—	$	—	$	77	$	116	$	74	$	16,157	$	320,548	$	44	$	337,016
Residential real estate																				Residential real estate
Early buy-out loans guaranteed by U.S. government agencies																				Early buy-out loans guaranteed by U.S. government agencies	$	—	$	—	$	769	$	9,250	$	19,430	$	166,703	$	—	$	—	$	196,152
Pass																				Pass	95,403		815,003		825,881		225,297		118,840		196,150		—		—		2,276,574

1915

Table of Contents


Substandard accrual		—		—		—		—		—		8,847		702		989		10,538
Substandard nonaccrual/doubtful		—		—		—		—		43		1,041		—		—		1,084
Total home equity		$	—	$	—	$	—	$	56	$	281	$	15,301	$	309,199	$	989	$	325,826
Residential real estate
Early buy-out loans guaranteed by U.S. government agencies		$	—	$	1,021	$	5,575	$	19,486	$	18,474	$	69,300	$	—	$	—	$	113,856
Pass		502,728		839,183		244,861		129,292		53,337		168,254		—		—		1,937,655
Special mention	Special mention	280		576		169		765		2,046		4,071		—		—		7,907		Special mention	40		3,816		718		1,992		542		4,488		—		—		11,596
Substandard accrual	Substandard accrual	554		1,088		2,936		572		247		5,762		—		—		11,159		Substandard accrual	323		1,204		1,825		1,182		1,100		4,256		—		—		9,890
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	—		93		253		1,858		424		5,702		—		—		8,330		Substandard nonaccrual/doubtful	—		284		1,100		759		1,665		7,525		—		—		11,333
Total residential real estate	Total residential real estate	$	503,562	$	841,961	$	253,794	$	151,973	$	74,528	$	253,089	$	—	$	—	$	2,078,907	Total residential real estate	$	95,766	$	820,307	$	830,293	$	238,480	$	141,577	$	379,122	$	—	$	—	$	2,505,545
Premium finance receivables - property and casualty	Premium finance receivables - property and casualty																			Premium finance receivables - property and casualty
Pass	Pass	$	4,519,689	$	899,305	$	13,424	$	4,835	$	302	$	—	$	—	$	—	$	5,437,555	Pass	$	2,826,947	$	2,757,313	$	35,647	$	5,270	$	906	$	—	$	—	$	—	$	5,626,083
Special mention	Special mention	77,334		10,917		54		—		—		—		—		—		88,305		Special mention	42,025		49,190		969		17		—		—		—		—		92,201
Substandard accrual	Substandard accrual	951		1,333		—		—		—		—		—		—		2,284		Substandard accrual	205		1,700		148		—		—		—		—		—		2,053
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	2,540		10,729		34		—		—		—		—		—		13,303		Substandard nonaccrual/doubtful	777		16,975		779		12		—		—		—		—		18,543
Total premium finance receivables - property and casualty	Total premium finance receivables - property and casualty	$	4,600,514	$	922,284	$	13,512	$	4,835	$	302	$	—	$	—	$	—	$	5,541,447	Total premium finance receivables - property and casualty	$	2,869,954	$	2,825,178	$	37,543	$	5,299	$	906	$	—	$	—	$	—	$	5,738,880
Premium finance receivables - life	Premium finance receivables - life																			Premium finance receivables - life
Pass	Pass	$	170,609	$	654,884	$	982,199	$	854,124	$	732,262	$	4,213,755	$	—	$	—	$	7,607,833	Pass	$	49,164	$	550,396	$	830,917	$	1,056,414	$	936,674	$	4,699,645	$	—	$	—	$	8,123,210
Special mention	Special mention	—		600		—		—		—		—		—		—		600		Special mention	—		—		1,156		1,436		—		—		—		—		2,592
Substandard accrual	Substandard accrual	—		—		—		—		—		—		—		—		—		Substandard accrual	—		—		—		—		—		—		—		—		—
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	—		—		—		—		—		—		—		—		—		Substandard nonaccrual/doubtful	—		—		—		—		—		—		—		—		—
Total premium finance receivables - life	Total premium finance receivables - life	$	170,609	$	655,484	$	982,199	$	854,124	$	732,262	$	4,213,755	$	—	$	—	$	7,608,433	Total premium finance receivables - life	$	49,164	$	550,396	$	832,073	$	1,057,850	$	936,674	$	4,699,645	$	—	$	—	$	8,125,802
Consumer and other	Consumer and other																			Consumer and other
Pass	Pass	$	1,347	$	2,141	$	522	$	787	$	928	$	11,500	$	26,724	$	—	$	43,949	Pass	$	750	$	2,469	$	1,414	$	200	$	433	$	5,306	$	31,392	$	—	$	41,964
Special mention	Special mention	—		2		1		5		—		120		7		—		135		Special mention	—		6		1		—		2		133		3		—		145
Substandard accrual	Substandard accrual	—		6		1		—		—		72		9		—		88		Substandard accrual	—		2		—		—		—		40		8		—		50
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	—		7		—		1		—		—		—		—		8		Substandard nonaccrual/doubtful	—		—		6		—		—		—		—		—		6
Total consumer and other	Total consumer and other	$	1,347	$	2,156	$	524	$	793	$	928	$	11,692	$	26,740	$	—	$	44,180	Total consumer and other	$	750	$	2,477	$	1,421	$	200	$	435	$	5,479	$	31,403	$	—	$	42,165
Total loans	Total loans																			Total loans
Early buy-out loans guaranteed by U.S. government agencies	Early buy-out loans guaranteed by U.S. government agencies	$	—	$	1,021	$	5,575	$	19,486	$	18,474	$	69,300	$	—	$	—	$	113,856	Early buy-out loans guaranteed by U.S. government agencies	$	—	$	—	$	769	$	9,250	$	19,430	$	166,703	$	—	$	—	$	196,152
Pass	Pass	7,585,957		7,011,737		4,047,492		2,821,345		2,054,174		7,825,801		4,513,029		48,430		35,907,965		Pass	4,239,546		9,070,338		5,729,342		3,434,032		2,586,332		8,876,620		4,418,070		4,515		38,358,795
Special mention	Special mention	87,294		57,798		46,680		104,133		123,299		141,606		86,706		235		647,751		Special mention	42,467		112,677		108,506		31,527		77,126		105,280		152,647		268		630,498
Substandard accrual	Substandard accrual	3,498		45,831		38,038		37,270		46,203		82,352		63,400		1,060		317,652		Substandard accrual	528		18,658		45,533		33,925		30,597		123,155		36,912		500		289,808
Substandard nonaccrual/doubtful	Substandard nonaccrual/doubtful	2,540		10,923		3,881		6,588		12,960		21,016		7,971		—		65,879		Substandard nonaccrual/doubtful	777		21,999		8,239		11,872		30,173		16,828		330		—		90,218
Total loans	Total loans	$	7,679,289	$	7,127,310	$	4,141,666	$	2,988,822	$	2,255,110	$	8,140,075	$	4,671,106	$	49,725	$	37,053,103	Total loans	$	4,283,318	$	9,223,672	$	5,892,389	$	3,520,606	$	2,743,658	$	9,288,586	$	4,607,959	$	5,283	$	39,565,471
Current period gross write offs																				Current period gross write offs	$	478	$	4,893	$	1,194	$	337	$	318	$	131	$	—	$	—	$	7,351

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.

2016

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As of June 30, 2022		Year of Origination												Total
As of March 31, 2023																As of March 31, 2023	Year of Origination												Total
(In thousands)	(In thousands)	2022		2021		2020		2019		2018		Prior		Balance		(In thousands)	2023		2022		2021		2020		2019		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	$	115,000	$	147,797	$	25,000	$	4,007	$	—	$	2,827	$	294,631	1-4 internal grade	$	—	$	160,000	$	147,804	$	25,000	$	4,000	$	2,804	$	339,608
5-7 internal grade	5-7 internal grade	—		—		—		—		—		—		—		5-7 internal grade													—
8-10 internal grade	8-10 internal grade	—		—		—		—		—		—		—		8-10 internal grade													—
Total U.S. government agencies	Total U.S. government agencies	$	115,000	$	147,797	$	25,000	$	4,007	$	—	$	2,827	$	294,631	Total U.S. government agencies	$	—	$	160,000	$	147,804	$	25,000	$	4,000	$	2,804	$	339,608
Municipal	Municipal															Municipal
1-4 internal grade	1-4 internal grade	$	—	$	7,045	$	285	$	160	$	7,444	$	164,708	$	179,642	1-4 internal grade	$	—	$	1,042	$	6,978	$	264	$	618	$	165,818	$	174,720
5-7 internal grade	5-7 internal grade	—		—		—		—		—		—		—		5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	8-10 internal grade	—		—		—		—		—		—		—		8-10 internal grade	—		—		—		—		—		—		—
Total municipal	Total municipal	$	—	$	7,045	$	285	$	160	$	7,444	$	164,708	$	179,642	Total municipal	$	—	$	1,042	$	6,978	$	264	$	618	$	165,818	$	174,720
Mortgage-backed securities	Mortgage-backed securities															Mortgage-backed securities
1-4 internal grade	1-4 internal grade	$	373,230	$	2,517,475	$	—	$	—	$	—	$	—	$	2,890,705	1-4 internal grade	$	5,065	$	606,922	$	2,422,478	$	—	$	—	$	—	$	3,034,465
5-7 internal grade	5-7 internal grade	—		—		—		—		—		—		—		5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	8-10 internal grade	—		—		—		—		—		—		—		8-10 internal grade	—		—		—		—		—		—		—
Total mortgage-backed securities	Total mortgage-backed securities	$	373,230	$	2,517,475	$	—	$	—	$	—	$	—	$	2,890,705	Total mortgage-backed securities	$	5,065	$	606,922	$	2,422,478	$	—	$	—	$	—	$	3,034,465
Corporate notes	Corporate notes															Corporate notes
1-4 internal grade	1-4 internal grade	$	4,961	$	—	$	6,011	$	7,355	$	3,223	$	27,024	$	48,574	1-4 internal grade	$	—	$	14,964	$	—	$	6,009	$	7,291	$	29,797	$	58,061
5-7 internal grade	5-7 internal grade	—		—		—		—		—		—		—		5-7 internal grade	—		—		—		—		—		—		—
8-10 internal grade	8-10 internal grade	—		—		—		—		—		—		—		8-10 internal grade	—		—		—		—		—		—		—
Total corporate notes	Total corporate notes	$	4,961	$	—	$	6,011	$	7,355	$	3,223	$	27,024	$	48,574	Total corporate notes	$	—	$	14,964	$	—	$	6,009	$	7,291	$	29,797	$	58,061
Total held-to-maturity securities	Total held-to-maturity securities													$	3,413,552	Total held-to-maturity securities													$	3,606,854
Less: Allowance for credit losses	Less: Allowance for credit losses													(83)		Less: Allowance for credit losses													(463)
Held-to-maturity securities, net of allowance for credit losses	Held-to-maturity securities, net of allowance for credit losses													$	3,413,469	Held-to-maturity securities, net of allowance for credit losses													$	3,606,391

Measurement of Allowance for Credit Losses

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


		June 30,		December 31,		June 30,			March 31,		December 31,		March 31,
(In thousands)	(In thousands)	2022		2021		2021		(In thousands)	2023		2022		2022

Allowance for loan losses	Allowance for loan losses	$	251,769	$	247,835	$	261,089	Allowance for loan losses	$	287,972	$	270,173	$	250,539
Allowance for unfunded lending-related commitments losses	Allowance for unfunded lending-related commitments losses	60,340		51,818		42,942		Allowance for unfunded lending-related commitments losses	87,826		87,275		50,629
Allowance for loan losses and unfunded lending-related commitments losses	Allowance for loan losses and unfunded lending-related commitments losses	312,109		299,653		304,031		Allowance for loan losses and unfunded lending-related commitments losses	375,798		357,448		301,168
Allowance for held-to-maturity securities losses	Allowance for held-to-maturity securities losses	83		78		90		Allowance for held-to-maturity securities losses	463		488		159
Allowance for credit losses	Allowance for credit losses	$	312,192	$	299,731	$	304,121	Allowance for credit losses	$	376,261	$	357,936	$	301,327

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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.~~cancelable. 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.~~doubtful. If foreclosure is probable or the asset is considered collateral-dependent, expected credit losses are measured based upon the fair value of the underlying collateral adjusted for selling costs, if appropriate. Underlying collateral across the Company's segments consist primarily of real estate, land and construction assets as well as general business assets of the borrower. As of ~~June 30, 2022,~~March 31, 2023, excluding loans carried at fair value, substandard nonaccrual loans totaling ~~$25.7~~$23.3 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. Loans identified as being reasonably expected to be modified into TDRs in the future totaled $135,000 as of June 30, 2022.

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

Loan portfolios

A summary of activity in the allowance for credit losses, specifically for the loan portfolio (i.e. allowance for loan losses and allowance for unfunded commitment losses), for the three and ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ is as follows.


Three months ended June 30, 2022				Commercial Real Estate			Home Equity				Residential Real Estate			Premium Finance Receivables			Consumer and Other			Total Loans
Three months ended March 31, 2023													Three months ended March 31, 2023			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	$	120,911	$	144,906				$	10,566				$	9,429		$	14,722							$	634		$		301,168	Allowance for credit losses at beginning of period		$	142,769				$	184,352				$	7,573			$	11,585			$	10,671	$	498	$	357,448

Cumulative effect adjustment from the adoption of ASU 2022-02																							Cumulative effect adjustment from the adoption of ASU 2022-02		111			1,356			(33)					(692)					—				(1)				741
Other adjustments	Other adjustments	—		—			—				—			(56)			—			(56)				Other adjustments		—			—			—						—					4				—				4
Charge-offs	Charge-offs	(8,928)		(40)			(192)				—			(2,903)			(253)			(12,316)			Charge-offs		(2,543)			(5)			—					—					(4,650)				(153)				(7,351)
Recoveries	Recoveries	996		553			123				6			1,119			23			2,820			Recoveries		392			100			35					4					1,323				32				1,886
Provision for credit losses	Provision for credit losses	29,940		(1,687)			(3,507)				1,044			(5,380)			83			20,493			Provision for credit losses		8,772			8,977			153					537					4,607				24				23,070

Allowance for credit losses at period end	Allowance for credit losses at period end	$	142,919	$	143,732		$	6,990			$	10,479		$	7,502		$	487		$	312,109		Allowance for credit losses at period end		$	149,501		$	194,780		$	7,728				$	11,434				$	11,955			$	400			$	375,798
By measurement method:	By measurement method:																						By measurement method:
Individually measured	Individually measured	$	5,674	$	99		$	105			$	790		$	—		$	—		$	6,668		Individually measured		$	11,281		$	1,621		$	—				$	—				$	—			$	1			$	12,903
Collectively measured	Collectively measured	137,245		143,633			6,885				9,689			7,502			487			305,441			Collectively measured		138,220			193,159			7,728					11,434					11,955				399				362,895

Loans at period end	Loans at period end																						Loans at period end
Individually measured	Individually measured	$	34,892	$	20,377		$	11,876			$	18,333		$	—		$	79		$	85,557		Individually measured		$	47,950		$	11,196		$	1,190				$	11,280				$	—			$	6			$	71,622
Collectively measured	Collectively measured	12,012,213		9,386,828			313,950				1,937,817			13,149,880			44,101			36,844,789			Collectively measured		12,529,035			10,227,882			335,826					2,286,733					13,864,682				42,159				39,286,317

Loans held at fair value	Loans held at fair value	—		—			—				122,757			—			—			122,757			Loans held at fair value		—			—			—					207,532					—				—				207,532

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Three months ended June 30, 2021 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 $ 95,640 $ 181,792 $ 11,382 $ 14,242 $ 17,477 $ 676 $ 321,209
Other adjustments — — — — 33 — 33
Charge-offs (3,237) (1,412) (142) (3) (2,077) (104) (6,975)
Recoveries 902 514 328 36 3,239 34 5,053
Provision for credit losses 5,202 (22,372) (361) 1,409 1,227 (394) (15,289)
Allowance for credit losses at period end $ 98,507 $ 158,522 $ 11,207 $ 15,684 $ 19,899 $ 212 $ 304,031
By measurement method:
Individually measured $ 8,625 $ 1,257 $ 213 $ 1,045 $ — $ 77 $ 11,217
Collectively measured 89,882 157,265 10,994 14,639 19,899 135 292,814
Loans at period end
Individually measured $ 30,144 $ 35,694 $ 18,080 $ 29,384 $ — $ 552 $ 113,854
Collectively measured 11,412,132 8,642,675 351,726 1,445,561 10,881,427 8,472 32,741,993
Loans held at fair value — — — 55,340 — — 55,340

Six months ended June 30, 2022 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 $ 119,307 $ 144,583 $ 10,699 $ 8,782 $ 15,859 $ 423 $ 299,653
Other adjustments — — — — (34) — (34)
Charge-offs (10,342) (817) (389) (466) (4,581) (446) (17,041)
Recoveries 1,534 585 216 11 2,595 72 5,013
Provision for credit losses 32,420 (619) (3,536) 2,152 (6,337) 438 24,518
Allowance for credit losses at period end $ 142,919 $ 143,732 $ 6,990 $ 10,479 $ 7,502 $ 487 $ 312,109

Six months ended June 30, 2021 Commercial Real Estate Home Equity Residential Real Estate Premium Finance Receivables Consumer and Other Total Loans
(In thousands) Commercial
Allowance for credit losses at beginning of period $ 94,212 $ 243,603 $ 11,437 $ 12,459 $ 17,777 $ 422 $ 379,910
Other adjustments — — — — 63 — 63
Charge-offs (15,018) (2,392) (142) (5) (5,316) (218) (23,091)
Recoveries 1,354 714 429 240 5,021 66 7,824
Provision for credit losses 17,959 (83,403) (517) 2,990 2,354 (58) (60,675)
Allowance for credit losses at period end $ 98,507 $ 158,522 $ 11,207 $ 15,684 $ 19,899 $ 212 $ 304,031


Three months ended March 31, 2022	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	$	119,307	$	144,583	$	10,699	$	8,782	$	15,859	$	423	$	299,653

Other adjustments	—		—		—		—		22		—		22

Charge-offs	(1,414)		(777)		(197)		(466)		(1,678)		(193)		(4,725)
Recoveries	538		32		93		5		1,476		49		2,193
Provision for credit losses	2,480		1,068		(29)		1,108		(957)		355		4,025
Allowance for credit losses at period end	$	120,911	$	144,906	$	10,566	$	9,429	$	14,722	$	634	$	301,168
By measurement method:
Individually measured	$	3,698	$	522	$	127	$	800	$	—	$	5	$	5,152
Collectively measured	117,213		144,384		10,439		8,629		14,722		629		296,016

Loans at period end
Individually measured	$	19,651	$	22,370	$	12,904	$	17,842	$	—	$	79	$	72,846
Collectively measured	11,564,312		9,212,704		308,531		1,724,159		12,291,571		48,440		35,149,717

Loans held at fair value	—		—		—		57,984		—		—		57,984

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2023, and 2022, the Company recognized approximately ~~$20.5~~$23.1 million and ~~$24.5~~$4.0 million of provision for credit losses, respectively, related to loans and lending agreements. The provision for each period was primarily the result of loan growth ~~during the second quarter~~ as well as the Company's macroeconomic forecasts of key model inputs (most notably, Baa corporate credit spreads). Uncertainties remain regarding expected economic performance and macroeconomic forecasts utilized in the measurement of the allowance for credit losses as of ~~June 30, 2022.~~March 31, 2023. Other key drivers of provision for credit losses in these portfolios include, but are not limited to, stable loan risk rating migration. Net charge-offs in the three ~~and six~~ month periods ending ~~June 30,~~March 31, 2023 and 2022, totaled ~~$9.5~~$5.5 million and ~~$12.0~~$2.5 million, respectively.

Held-to-maturity debt securities

The allowance for credit losses on ~~its~~the Company’s held-to-maturity debt securities is presented as a reduction to the amortized cost basis of held-to-maturity securities on the Company's Consolidated Statements of Condition. For the three ~~and six~~ month ~~periods~~period ended ~~June 30,~~March 31, 2023 and 2022, the Company recognized approximately ~~$(76,000)~~$(25,000) and ~~$5,000~~$81,000, respectively, of provision for credit losses related to held-to-maturity ~~securities, respectively.~~securities. At ~~June 30, 2022,~~March 31, 2023, the Company did not identify any losses within its portfolio that it would deem a credit loss and require additional measurement of an allowance for credit losses.

~~Table of Contents~~

~~TDRs~~

~~At June 30, 2022, the Company had $45.4 million in loans modified in TDRs. The $45.4 million in TDRs represents 227 credits in which economic concessions were granted~~Loan Modifications to ~~certain borrowers to better align the terms of their loans with their current ability to pay.~~Borrowers Experiencing Financial Difficulties

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

A modification of a loan with an existing credit risk rating of 6 or worse or a modification of any other credit, which will result in a restructured credit risk rating of 6 or worse must be reviewed for possible TDR classification. In that event, 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.~~difficulties.

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

TDRs are individually assessed at the time of the modification and on a quarterly basis to measure an allowance for credit loss. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan's original rate, or for collateral dependent loans, to the fair value of the collateral. Any shortfall is recorded as a reserve. Each TDR was individually assessed at June 30, 2022 and approximately $2.3 million of reserve was present and appropriately reserved for through the Company’s normal reserving methodology.

~~TDRs~~Restructurings 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 other real estate owned (“OREO”), which is included within other assets in the Consolidated Statements of Condition. For any residential real estate property collateralizing a consumer mortgage loan, the Company is considered to possess the related collateral only if legal title is obtained upon completion of foreclosure, or the borrower conveys all interest in the residential real estate property to the Company through completion of a deed in lieu of foreclosure or similar legal agreement. At ~~June 30, 2022,~~March 31, 2023, the Company had ~~$1.8~~$1.1 million of foreclosed residential real estate properties included within OREO. Further, the recorded investment in residential mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process totaled ~~$10.9~~$53.4 million and ~~$14.2~~$7.7 million at ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

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The table below presents a summary of the balance immediately following the modification of loans to borrowers experiencing financial difficulties during the three months ended March 31, 2023:


Three months ended March 31, 2023 (Dollars in thousands)	Total (1)		Percentage of Total Class of Loan		Extension of Term (1)		Reduction of Interest Rate (1)			Delay in Contractual Payments (1)		Extension of Term and Reduction of Interest Rate (1)

Commercial
Commercial, industrial and other	$	37,474	0.3	%	$	1,938	$	221		$	35,265	$	50
Commercial real estate

Non-construction	1,333		—		467		827			39		—
Home equity	203		0.1		203		—			—		—
Residential real estate	1,708		0.1		1,253		271			—		184
Premium finance receivables
Property and casualty insurance loans	11		0.0		3		—			—		8
Total loans	$	40,729	0.1	%	$	3,864	$	1,319		$	35,304	$	242

Weighted average magnitude of modifications:
Duration of extension and delayed payment terms					27 months					17 months
Reduction of interest rate							275		bps

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

The following table presents a summary of all loans for borrowers experiencing financial difficulties modified during the three months ended March 31, 2023, and such loans that were in payment default under the restructured terms during the respective periods below:


(Dollars in thousands)	As of March 31, 2023			Three Months Ended March 31, 2023
	Total (2)		Payments in Default (1)(2)
Commercial
Commercial, industrial and other	$	37,474		$	2
Commercial real estate

Non-construction	1,333			828
Home equity	203			104
Residential real estate	1,708			—
Premium finance receivables
Property and casualty insurance loans	11			11
Total loans	$	40,729		$	945

(1)Modified loans considered to be in payment default are over 30 days past due subsequent to the restructuring.

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

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TDRs

Reporting periods prior to the adoption of ASU 2022-02 as of January 1, 2023 present information on loan modifications representing TDRs under the prior accounting standards and related disclosure requirements.

The ~~tables~~table below ~~present~~presents a summary of the ~~post-modification~~ balance immediately following the modification of loans restructured during the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 ~~and 2021, respectively,~~ which represent TDRs:

Three months ended June 30, 2022
(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 2 $ 186 2 $ 185 — $ — — $ — — $ —
Commercial real estate
Non-construction — — — — — — — — — —
Residential real estate and other 14 2,235 14 2,235 10 1,805 — — — —
Total loans 16 $ 2,421 16 $ 2,420 10 $ 1,805 — $ — — $ —


Three months ended June 30, 2021 (Dollars in thousands)		Total (1)(2)			Extension at Below Market Terms (2)			Reduction of Interest Rate (2)			Modification to Interest-only Payments (2)			Forgiveness of Debt (2)
		Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Three months ended March 31, 2022 (Dollars in thousands)																	Three months ended March 31, 2022 (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	3	$	395	3	$	395	—	$	—	—	$	—	—	$	—	Commercial, industrial and other	3	$	282	2	$	120	1	$	85	2	$	247	—	$	—

Commercial real estate	Commercial real estate																Commercial real estate

Non-construction	Non-construction	3	2,707		2	2,164		1	543		—	—		—	—		Non-construction	2	1,907		1	1,178		1	1,178		2	1,907		—	—
Residential real estate and other	Residential real estate and other	10	1,097		10	1,097		2	616		—	—		—	—		Residential real estate and other	8	908		8	908		7	762		—	—		—	—
Total loans	Total loans	16	$	4,199	15	$	3,656	3	$	1,159	—	$	—	—	$	—	Total loans	13	$	3,097	11	$	2,206	9	$	2,025	4	$	2,154	—	$	—

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

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

During the three months ended ~~June 30,~~March 31, 2022, 1613 loans totaling ~~$2.4~~$3.1 million were determined to be ~~TDRs, compared to 16 loans totaling $4.2 million during the three months ended June 30, 2021.~~TDRs. Of these loans extended at below market terms, the weighted average extension had a term of ~~approximately 63 months during the quarter ended June 30, 2022 compared to 106~~71 months for the quarter ended ~~June 30, 2021.~~March 31, 2022. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately ~~96 basis points and 183~~79 basis points during the three months ended ~~June 30, 2022 and 2021, respectively.~~March 31, 2022. Additionally, no principal balances were forgiven during the ~~quarters~~quarter ended ~~June 30, 2022 and 2021.~~

Six months ended June 30, 2022
(Dollars in thousands)
Total (1)(2)
Extension at
Below Market
Terms (2)
Reduction of Interest
Rate (2)
Modification to
Interest-only
Payments (2)
Forgiveness of Debt(2)
Count Balance Count Balance Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 5 $ 468 4 $ 305 1 $ 85 2 $ 247 — $ —
Commercial real estate
Non-construction 2 1,907 1 1,178 1 1,178 2 1,907 — —
Residential real estate and other 22 3,143 22 3,143 17 2,567 — — — —
Total loans 29 $ 5,518 27 $ 4,626 19 $ 3,830 4 $ 2,154 — $ —

~~Table of Contents~~

Six months ended June 30, 2021
(Dollars in thousands)
Total (1)(2)
Extension at
Below Market
Terms (2)
Reduction of Interest
Rate (2)
Modification to
Interest-only
Payments (2)
Forgiveness of Debt(2)
Count Balance Count Balance Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 5 $ 546 5 $ 546 — $ — — $ — — $ —
Commercial real estate
Non-construction 5 2,944 4 2,401 2 656 1 113 — —
Residential real estate and other 26 2,835 26 2,835 11 1,906 — — — —
Total loans 36 $ 6,325 35 $ 5,782 13 $ 2,562 1 $ 113 — $ —

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

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

During the six months ended June 30, 2022, 29 loans totaling $5.5 million were determined to be TDRs, compared to 36 loans totaling $6.3 million during the six months ended June 30, 2021. Of these loans extended at below market terms, the weighted average extension had a term of approximately 67 months during the six months ended June 30, 2022 compared to 108 months

for the six months ended June 30, 2021. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 87 basis points and 152 basis points for the year-to-date periods ended June 30, 2022 and 2021, respectively. Interest-only payment terms were approximately four months and six months during the six months ended June 30, 2022 and 2021, respectively. Additionally, no balances were forgiven in the first six months ended June 30, 2022 and 2021.March 31, 2022.

The following table presents a summary of all loans restructured in TDRs during the twelve months ended ~~June 30,~~March 31, 2022 ~~and 2021,~~ and such loans that were in payment default under the restructured terms during the respective periods below:

(Dollars in thousands) As of June 30, 2022
Three Months Ended
June 30, 2022
Six months ended June 30, 2022
Total (1)(3)
Payments in Default (2)(3)
Payments in Default (2)(3)
Count Balance Count Balance Count Balance
Commercial
Commercial, industrial and other 16 $ 4,995 10 $ 4,469 11 $ 4,711
Commercial real estate
Non-construction 2 1,907 — — — —
Residential real estate and other 39 6,159 2 345 2 345
Total loans 57 $ 13,061 12 $ 4,814 13 $ 5,056


(Dollars in thousands)	(Dollars in thousands)	As of June 30, 2021			Three Months Ended June 30, 2021			Six months ended June 30, 2021	(Dollars in thousands)	As of March 31, 2022								Three Months Ended March 31, 2022
		Total (1)(3)			Payments in Default (2)(3)			Payments in Default (2)(3)		Total (1)(3)								Payments in Default (2)(3)
		Count	Balance		Count	Balance				Count		Balance			(Dollars in thousands)		Count			Balance			Count			Balance
Commercial	Commercial
Commercial, industrial and other	Commercial, industrial and other	14	$	3,875	4	$	1,371				4		$	1,371				17			$	5,205		11			$	4,526

Commercial real estate	Commercial real estate															Commercial real estate

Non-construction	Non-construction	9	4,090		2	1,176					3		1,383				Non-construction		5			4,613			2			2,163

Residential real estate and other	Residential real estate and other	70	11,418		5	379					5		379			Residential real estate and other		35			5,021			1			104
Total loans	Total loans	93	$	19,383	11	$	2,926				12		$	3,133		Total loans		57			$	14,839		14			$	6,793

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

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

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

~~Table of Contents~~

~~(8)~~(7) Goodwill and Other Acquisition-Related 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, 2021		Goodwill Acquired		Impairment Loss		Goodwill Adjustments		June 30, 2022		(In thousands)	December 31, 2022		Goodwill Acquired		Impairment Loss		Goodwill Adjustments		March 31, 2023
Community banking	Community banking	$	545,671	$	—	$	—	$	—	$	545,671	Community banking	$	545,671	$	—	$	—	$	—	$	545,671
Specialty finance	Specialty finance	40,105		—		—		(440)		39,665		Specialty finance	38,480		—		—		63		38,543
Wealth management	Wealth management	69,373		—		—		—		69,373		Wealth management	69,373		—		—		—		69,373
Total	Total	$	655,149	$	—	$	—	$	(440)	$	654,709	Total	$	653,524	$	—	$	—	$	63	$	653,587

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The specialty finance unit’s goodwill ~~decreased $440,000~~increased $63,000 in the first ~~six~~three months of ~~2022~~2023 as a result of foreign currency translation adjustments related to the Canadian acquisitions.

The Company assesses each reporting unit’s goodwill for impairment on at least an annual basis and considers potential indicators of impairment at each reporting date between annual goodwill impairment tests. At October 1, ~~2021,~~2022, the Company utilized a ~~quantitative~~qualitative 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~~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. 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.

At the conclusion of this assessment of all reporting units, the Company determined that as of ~~June 30, 2022,~~March 31, 2023, it was more likely than not that the fair value of all reporting units exceeded the respective carrying value of such reporting unit.

~~Table of Contents~~

A summary of acquisition-related intangible assets as of the dates shown and the expected amortization of finite-lived acquisition-related intangible assets as of ~~June 30, 2022~~March 31, 2023 is as follows:


(In thousands)	(In thousands)	June 30, 2022		December 31, 2021		June 30, 2021		(In thousands)	March 31, 2023		December 31, 2022		March 31, 2022
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	(40,404)		(38,067)		(35,549)		Accumulated amortization	(43,473)		(42,501)		(39,243)
Net carrying amount	Net carrying amount	$	14,802	$	17,139	$	19,657	Net carrying amount	$	11,733	$	12,705	$	15,963
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	$	20,602	$	22,939	$	25,457	Total net carrying amount	$	17,533	$	18,505	$	21,763
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	$	1,966	$	1,967	$	1,969	Gross carrying amount	$	1,962	$	1,962	$	1,968
Accumulated amortization	Accumulated amortization	(1,756)		(1,721)		(1,686)		Accumulated amortization	(1,799)		(1,785)		(1,738)
Net carrying amount	Net carrying amount	$	210	$	246	$	283	Net carrying amount	$	163	$	177	$	230
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	(16,124)		(15,308)		(14,173)		Accumulated amortization	(17,175)		(16,926)		(15,724)
Net carrying amount	Net carrying amount	$	4,306	$	5,122	$	6,257	Net carrying amount	$	3,255	$	3,504	$	4,706
Total acquisition-related intangible assets:	Total acquisition-related intangible assets:							Total acquisition-related intangible assets:
Gross carrying amount	Gross carrying amount	$	83,402	$	83,403	$	83,405	Gross carrying amount	$	83,398	$	83,398	$	83,404
Accumulated amortization	Accumulated amortization	(58,284)		(55,096)		(51,408)		Accumulated amortization	(62,447)		(61,212)		(56,705)
Total other acquisition-related intangible assets, net	Total other acquisition-related intangible assets, net	$	25,118	$	28,307	$	31,997	Total other acquisition-related intangible assets, net	$	20,951	$	22,186	$	26,699


Estimated amortization
Actual in ~~six~~three months ended ~~June 30, 2022~~March 31, 2023	$	~~3,188~~1,235
Estimated remaining in ~~2022~~	~~2,923~~
~~Estimated—~~2023	~~4,658~~3,422
Estimated—2024	3,259
Estimated—2025	2,552
Estimated—2026	1,954
Estimated—2027	1,450

Table of Contents

The core deposit intangibles recognized in connection with prior bank acquisitions are amortized over a ten-year period on an accelerated basis. The customer list intangibles recognized in connection with the purchase of life insurance premium finance assets in 2009 are being amortized over an 18-year period on an accelerated basis. The customer list and other intangibles recognized in connection with prior acquisitions within the wealth management segment are being amortized over a period of up to ten years on a straight-line basis. Indefinite-lived intangible assets consist of certain trade and domain names recognized in connection with the acquisition of certain assets 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 acquisition-related intangibles totaled approximately ~~$3.2~~$1.2 million and ~~$4.0~~$1.6 million for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~Table of Contents~~

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

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


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,		June 30,		June 30,		June 30,			March 31,		March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022
Balance at beginning of the period		$	199,146	$	124,316	$	147,571	$	92,081
Fair value at beginning of the period										Fair value at beginning of the period	$	230,225	$	147,571
Additions from loans sold with servicing retained	Additions from loans sold with servicing retained	11,210		17,512		25,611		42,128		Additions from loans sold with servicing retained	5,107		14,401

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	(1)		(144)		(176)		(402)		Early buyout options (“EBO”) exercised	—		(175)

Payoffs and paydowns	Payoffs and paydowns	(6,838)		(8,540)		(12,854)		(18,708)		Payoffs and paydowns	(3,909)		(6,016)
Changes in valuation inputs or assumptions	Changes in valuation inputs or assumptions	9,147		(5,540)		52,512		12,505		Changes in valuation inputs or assumptions	(6,953)		43,365
Fair value at end of the period	Fair value at end of the period	$	212,664	$	127,604	$	212,664	$	127,604	Fair value at end of the period	$	224,470	$	199,146
Unpaid principal balance of mortgage loans serviced for others	Unpaid principal balance of mortgage loans serviced for others	$	13,643,623	$	12,307,337					Unpaid principal balance of mortgage loans serviced for others	$	14,080,461	$	13,426,535

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. MSRs are included in other assets in the Consolidated Statements of Condition. 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.

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.

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 not 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 MSRs. The gain or loss associated with these derivative contracts is included in mortgage banking revenue. For more information regarding these hedges outstanding as of March 31, 2023, see Note (13) “Derivative Financial Instruments” in Item 1 of this report. There were no such options or swaps outstanding as of ~~June 30, 2022 or June 30, 2021. For more information regarding these hedges, see Note 15 - Derivative Financial Instruments in Item 1 of this report.~~March 31, 2022.

2923

Table of Contents

~~(10)~~(9) Deposits

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


(Dollars in thousands)	(Dollars in thousands)	June 30, 2022			December 31, 2021			June 30, 2021			(Dollars in thousands)	March 31, 2023			December 31, 2022			March 31, 2022
Balance:	Balance:										Balance:
Non-interest-bearing	Non-interest-bearing	$	13,855,844		$	14,179,980		$	12,796,110		Non-interest-bearing	$	11,236,083		$	12,668,160		$	13,748,918
NOW and interest-bearing demand deposits	NOW and interest-bearing demand deposits	5,918,908			4,646,944			3,933,167			NOW and interest-bearing demand deposits	5,576,558			5,591,986			5,089,724
Wealth management deposits	Wealth management deposits	3,182,407			2,612,759			2,150,851			Wealth management deposits	1,809,933			2,463,833			2,542,995
Money market	Money market	12,273,350			12,840,432			11,784,213			Money market	13,552,277			12,886,795			13,012,460
Savings	Savings	3,686,596			3,846,681			3,776,400			Savings	5,192,108			4,556,635			4,089,230
Time certificates of deposit	Time certificates of deposit	3,676,221			3,968,789			4,363,875			Time certificates of deposit	5,351,252			4,735,135			3,735,995
Total deposits	Total deposits	$	42,593,326		$	42,095,585		$	38,804,616		Total deposits	$	42,718,211		$	42,902,544		$	42,219,322
Mix:	Mix:										Mix:
Non-interest-bearing	Non-interest-bearing	33		%	34		%	33		%	Non-interest-bearing	26		%	30		%	32		%
NOW and interest-bearing demand deposits	NOW and interest-bearing demand deposits	13			11			10			NOW and interest-bearing demand deposits	13			13			12
Wealth management deposits	Wealth management deposits	7			6			5			Wealth management deposits	4			5			6
Money market	Money market	29			31			30			Money market	32			30			31
Savings	Savings	9			9			10			Savings	12			11			10
Time certificates of deposit	Time certificates of deposit	9			9			12			Time certificates of deposit	13			11			9
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”) and trust and asset management customers of the Company.

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

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


(In thousands)	(In thousands)	June 30, 2022		December 31, 2021		June 30, 2021		(In thousands)	March 31, 2023		December 31, 2022		March 31, 2022
FHLB advances	FHLB advances	$	1,166,071	$	1,241,071	$	1,241,071	FHLB advances	$	2,316,071	$	2,316,071	$	1,241,071
Other borrowings:	Other borrowings:							Other borrowings:
Notes payable	Notes payable	69,619		80,319		91,016		Notes payable	192,666		199,793		74,969
Short-term borrowings	Short-term borrowings	16,418		9,198		15,597		Short-term borrowings	10,124		17,612		15,872
Secured borrowings	Secured borrowings	334,467		341,327		347,663		Secured borrowings	320,007		317,942		328,889
Other	Other	62,283		63,292		64,217		Other	60,751		61,267		62,786
Total other borrowings	Total other borrowings	482,787		494,136		518,493		Total other borrowings	583,548		596,614		482,516
Subordinated notes	Subordinated notes	437,162		436,938		436,719		Subordinated notes	437,493		437,392		437,033
Total FHLB advances, other borrowings and subordinated notes	Total FHLB advances, other borrowings and subordinated notes	$	2,086,020	$	2,172,145	$	2,196,283	Total FHLB advances, other borrowings and subordinated notes	$	3,337,112	$	3,350,077	$	2,160,620

Descriptions of the Company’s FHLB ~~Advances~~advances, other borrowings, and subordinated notes are included in Note (11) “Federal Home Loan Bank Advances”, Note (12) “Subordinated Notes” and Note (13) “Other Borrowings” of the 2022 Form 10-K.

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,~~At March 31, 2023, the ~~Company established a $150.0 million~~outstanding principal balance under the term loan facility ~~(“Term Facility”), which is part of a loan agreement (“Credit Agreement”) with unaffiliated banks. The Credit Agreement consists of the Term Facility with an original~~

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~~outstanding balance of $150.0~~was $192.7 million and a $100.0 million revolving credit facility (“Revolving Credit Facility”). At June 30, 2022, the Company had a notes payable balance of $69.6 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 Companythere 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. The Company is required to make quarterly payments of principal plus interest on the Term Facility. At June 30, 2022, the Company had no 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. Another amendment to the Credit Agreement was executed on and effective as of September 14, 2021, which provided for, among other things, extension of the maturity date under the Revolving Credit Facility to September 13, 2022. A further amendment to the Credit Agreement was executed on and effective as of December 23, 2021, which provided for, among other things, a $50.0 million increase to the commitment balance of the Revolving Credit Facility to $100.0 million and the addition of SOFR language for the Revolving Credit Facility.

revolving credit facility. Borrowings under the 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 lenders prime rate, (b) the federal funds rate plus 50 basis points, and (c) Term SOFR for a one-month tenor in effect on such day plus 110 basis points (in the case of a borrowing under the Revolving Credit Facility) or the Eurodollar Rate (as defined below) that would be applicable for an interest period of one month plus 100 basis points (in the case of a borrowing under the Term Facility). Borrowings under the agreement that are considered “Term SOFR Loans” bear interest at a rate equal to the sum of (1) 145 basis points (in the case of a borrowing under the Revolving Credit Facility) or 125 basis points if considered “Eurodollar Rate Loans” (in the case of a borrowing under the Term Facility) plus (2) the SOFR rate for the applicable period, as adjusted for statutory reserve requirements for eurocurrency liabilities (the “Eurodollar Rate”). A commitment fee isnotes payable ~~quarterly equal to 0.30% of the actual daily amount by which the lenders’ commitment under the Revolving Credit Facility exceeded the amount outstanding under such facility.~~

~~Borrowings under the amended Credit Agreement~~ are secured by pledges of and first priority perfected security interests in the Company’s equity interest in its bank subsidiaries and contain several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and other indebtedness. At ~~June 30, 2022,~~March 31, 2023, 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.

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Short-term Borrowings

Short-term borrowings include securities sold under repurchase agreements of customer sweep accounts in connection with master repurchase agreements at the banks. These borrowings totaled $16.4 million at June 30, 2022 compared to $9.2 million at December 31, 2021 and $15.6 million at June 30, 2021. The Company records securities sold under repurchase agreements at their gross value and does not offset positions on the Consolidated Statements of Condition. As of ~~June 30, 2022,~~March 31, 2023, the Company had pledged securities related to its customer balances in sweep accounts of ~~$25.9~~$18.3 million. Securities pledged for customer balances in sweep accounts and short-term borrowings from brokers are maintained under the Company’s control and consist of mortgage-backed ~~securities.~~securities and U.S. government agencies. 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 ~~June 30, 2022~~March 31, 2023 disaggregated by investment category and maturity of the related customer sweep account, and reconciled to the outstanding balance of securities sold under repurchase agreements:


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






Mortgage-backed securities	$	~~25,927~~18,348




~~Total collateral pledged~~	~~25,927~~
Excess collateral	~~9,509~~8,224
Securities sold under repurchase agreements	$	~~16,418~~10,124

~~Other Borrowings~~

Other borrowings at June 30, 2022 represent a fixed-rate promissory note issued by the Company in June 2017 and amended in March 2020 and in October 2021 (“Fixed-Rate Promissory Note”) related to and secured by 3 office buildings owned by the Company. At June 30, 2022, the Fixed-Rate Promissory Note had a balance of $62.3 million compared to $63.3 million at December 31, 2021 and $64.2 million at June 30, 2021. 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. A second amendment to the Fixed-Rate Promissory Note was executed and effective as of October 6, 2021 which reduced the interest rate to 1.70%. Under the Fixed-Rate Promissory Note, during the six months ended June 30, 2022, the Company made monthly principal payments and paid interest at a fixed rate of 1.70%. The Fixed-Rate Promissory Note contains several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and indebtedness. At June 30, 2022, the Company was in compliance with all such covenants.

Secured Borrowings

Secured borrowings at June 30, 2022 primarily represent transactions to sell an undivided co-ownership interest in all receivables owed to the Company’s subsidiary, First Insurance Funding of Canada (“FIFC Canada”). In December 2014, FIFC Canada sold such interest to an unrelated third party in exchange for a cash payment of approximately C$150 million pursuant to a receivables purchase agreement (“Receivables Purchase Agreement”). Amendments to the Receivables Purchase Agreement since issuance increased the total payments to C$420 million and extended the maturity date to December 15, 2023. These transactions were not considered sales of receivables and, as such, related proceeds received are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the unrelated third party, net of unamortized debt issuance costs, and translated to the Company’s reporting currency as of the respective date. At ~~June 30, 2022,~~March 31, 2023, the translated balance of the secured ~~borrowing~~borrowings totaled ~~$326.0~~$310.6 million compared to ~~$332.2~~$309.7 million at December 31, ~~2021~~2022 and ~~$338.5~~$319.8 million at ~~June 30, 2021.~~March 31, 2022. The interest rate under the ~~Receivables Purchase Agreement~~receivables purchase agreement is the Canadian Commercial Paper Rate plus 78 basis points.

The remaining ~~$8.5~~$9.4 million within secured borrowings at ~~June 30, 2022~~March 31, 2023 represents other sold interests in certain loans by the Company that were not considered sales and, as such, related proceeds received are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the various unrelated third parties.

~~Subordinated Notes~~Other Borrowings

Other borrowings contain several restrictive covenants, including the maintenance of various capital adequacy levels, asset quality and profitability ratios, and certain restrictions on dividends and indebtedness. At ~~June 30, 2022,~~March 31, 2023, the Company had outstanding subordinated notes totaling $437.2 million compared to $436.9 million and $436.7 million outstanding at December 31, 2021 and June 30, 2021, respectively. During the second quarter of 2019, the Company issued $300.0 million of subordinated notes, receiving $296.7 millionwas 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 tocompliance with all such ~~debt.~~covenants.

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

As of June 30, 2022, the Company owned 100% of the common securities of 11 trusts, Wintrust Capital Trust III, Wintrust Statutory Trust IV, Wintrust Statutory Trust V, Wintrust Capital Trust VII, Wintrust Capital Trust VIII, Wintrust Capital Trust IX, Northview Capital Trust I, Town Bankshares Capital Trust I, First Northwest Capital Trust I, Suburban Illinois Capital Trust II, and Community Financial Shares Statutory Trust II (the “Trusts”) set up to provide long-term financing. The Northview, Town, First Northwest, Suburban, and Community Financial Shares capital trusts were acquired as part of the acquisitions of Northview Financial Corporation, Town Bankshares, Ltd., First Northwest Bancorp, Inc., Suburban Illinois 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 ~~June 30, 2022.~~March 31, 2023. The junior subordinated debentures represent the par value of the obligations owed to the Trusts.

(Dollars in thousands) Common
Securities Trust
Preferred
Securities Junior
Subordinated
Debentures Rate
Structure
Contractual Rate
at 6/30/2022
Issue
Date Maturity
Date Earliest
Redemption
Date
Wintrust Capital Trust III $ 774 $ 25,000 $ 25,774 L+3.25 4.29 % 04/2003 04/2033 04/2008
Wintrust Statutory Trust IV 619 20,000 20,619 L+2.80 5.05 % 12/2003 12/2033 12/2008
Wintrust Statutory Trust V 1,238 40,000 41,238 L+2.60 4.85 % 05/2004 05/2034 06/2009
Wintrust Capital Trust VII 1,550 50,000 51,550 L+1.95 3.78 % 12/2004 03/2035 03/2010
Wintrust Capital Trust VIII 1,238 25,000 26,238 L+1.45 3.70 % 08/2005 09/2035 09/2010
Wintrust Capital Trust IX 1,547 50,000 51,547 L+1.63 3.46 % 09/2006 09/2036 09/2011
Northview Capital Trust I 186 6,000 6,186 L+3.00 4.29 % 08/2003 11/2033 08/2008
Town Bankshares Capital Trust I 186 6,000 6,186 L+3.00 4.29 % 08/2003 11/2033 08/2008
First Northwest Capital Trust I 155 5,000 5,155 L+3.00 5.25 % 05/2004 05/2034 05/2009
Suburban Illinois Capital Trust II 464 15,000 15,464 L+1.75 3.58 % 12/2006 12/2036 12/2011
Community Financial Shares Statutory Trust II 109 3,500 3,609 L+1.62 3.45 % 06/2007 09/2037 06/2012
Total $ 253,566 4.07 %


(Dollars in thousands)	Common Securities		Trust Preferred Securities		Junior Subordinated Debentures		Rate Structure	Contractual Rate at 3/31/2023		Issue Date	Maturity Date	Earliest Redemption Date
Wintrust Capital Trust III	$	774	$	25,000	$	25,774	L+3.25	8.08	%	04/2003	04/2033	04/2008
Wintrust Statutory Trust IV	619		20,000		20,619		L+2.80	7.96	%	12/2003	12/2033	12/2008
Wintrust Statutory Trust V	1,238		40,000		41,238		L+2.60	7.76	%	05/2004	05/2034	06/2009
Wintrust Capital Trust VII	1,550		50,000		51,550		L+1.95	6.82	%	12/2004	03/2035	03/2010
Wintrust Capital Trust VIII	1,238		25,000		26,238		L+1.45	6.61	%	08/2005	09/2035	09/2010
Wintrust Capital Trust IX	1,547		50,000		51,547		L+1.63	6.50	%	09/2006	09/2036	09/2011
Northview Capital Trust I	186		6,000		6,186		L+3.00	7.81	%	08/2003	11/2033	08/2008
Town Bankshares Capital Trust I	186		6,000		6,186		L+3.00	7.81	%	08/2003	11/2033	08/2008
First Northwest Capital Trust I	155		5,000		5,155		L+3.00	8.16	%	05/2004	05/2034	05/2009
Suburban Illinois Capital Trust II	464		15,000		15,464		L+1.75	6.62	%	12/2006	12/2036	12/2011
Community Financial Shares Statutory Trust II	109		3,500		3,609		L+1.62	6.49	%	06/2007	09/2037	06/2012
Total					$	253,566		7.16	%

The junior subordinated debentures totaled $253.6 million at ~~June 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~June 30, 2021.~~March 31, 2022.

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The interest rates on the variable rate junior subordinated debentures are based on the three-month ~~LIBOR rate~~London Interbank Offered Rate (“LIBOR”) and reset on a quarterly basis. At ~~June 30, 2022,~~March 31, 2023, the weighted average contractual interest rate on the junior subordinated debentures was ~~4.07%~~7.16%. ~~Prior to 2021,~~

Under the ~~Company entered into interest rate swaps with an aggregate notional value~~Adjustable Interest Rate (LIBOR) Act (“AIRLA”) and Part 253 of ~~$210.0 million to hedge the variable cash flows on certain junior subordinated debentures. Such interest rate swaps matured in 2021 and no separate hedging derivatives were outstanding at~~Regulation ZZ (Rule 253), after June 30, ~~2022. Distributions on the common and preferred securities issued by the Trusts are payable quarterly at a rate per annum equal to~~2023, the interest ~~rates being earned by the Trusts on the junior subordinated debentures. Interest expense~~rate on the junior subordinated debentures ~~is deductible for income tax purposes.~~

~~The Company has guaranteed the payment~~will, by operation of ~~distributions and payments upon liquidation or redemption~~law, change their base rate from USD LIBOR to Chicago Mercantile Exchange (“CME”) Term Secured Overnight Financing Rate (“SOFR”) of the ~~trust preferred securities, in each case to the extent~~same tenor, plus an applicable tenor spread adjustment. CME Term SOFR is an indicative, forward-looking measurement of ~~funds held~~daily overnight SOFR. CME Term SOFR is published by ~~the Trusts.~~CME Group Inc., as administrator of that rate. 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 atcalculation agent for 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~~series of the junior subordinated debentures ~~at maturity or their earlier redemption. The junior subordinated debentures are redeemable in whole or in part prior~~may also make additional administrative conforming changes to ~~maturity at any time after~~ the ~~earliest redemption dates shown in the table, and earlier at the discretion~~terms of ~~the Company if~~

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~~certain conditions are met, and, in any event, only after the Company has obtained Federal Reserve Bank (“FRB”) approval, if then required under applicable guidelines or regulations.~~

~~At June 30, 2022, the Company included $245.5 million~~that series of the junior subordinated debentures ~~net of common securities, in Tier 2 regulatory capital.~~under AIRLA and Rule 253.

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

~~Disaggregation of Revenue~~

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

(Dollars in thousands) Three Months Ended Six Months Ended
Revenue from contracts with customers Location in income statement June 30,
2022 June 30,
2021 June 30,
2022 June 30,
2021
Brokerage and insurance product commissions Wealth management $ 4,272 $ 5,148 $ 8,904 $ 10,188
Trust Wealth management 7,585 5,379 13,184 10,396
Asset management Wealth management 19,512 20,163 40,675 39,415
Total wealth management 31,369 30,690 62,763 59,999
Mortgage broker fees Mortgage banking 134 114 556 190
Service charges on deposit accounts Service charges on deposit accounts 15,888 13,249 31,171 25,285
Administrative services Other non-interest income 1,591 1,228 3,444 2,484
Card-related fees Other non-interest income 2,892 2,187 5,317 3,961
Other deposit-related fees Other non-interest income 3,370 3,265 6,545 6,582
Total revenue from contracts with customers $ 55,244 $ 50,733 $ 109,796 $ 98,501

~~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 quarterly basis in advance or in arrears depending upon the contract. Upfront fees received related to the facilitation of tax-deferred like-kind exchange transactions are deferred until the transaction is completed. Additional fees earned for certain extraordinary services performed on behalf of the customers are recognized when the service has been performed.

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

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~~product commissions. Trade commissions and any other fees received for additional services are recognized at the point in time when the performance obligation has been satisfied.~~

~~Mortgage Broker Fees~~

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

~~Service Charges on Deposit Accounts~~

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

~~Administrative Services~~

Administrative services revenue is earned from providing outsourced administrative services, such as data processing of payrolls, billing and cash management services, to temporary staffing service clients located throughout the United States. Fees are charged periodically (typically once within 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 becomes 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) June 30,
2022 December 31,
2021 June 30,
2021
Contract assets $ — $ — $ —
Contract liabilities $ 1,484 $ 1,588 $ 1,704
Mortgage broker fees receivable $ 27 $ 73 $ 11
Administrative services receivable 220 68 199
Wealth management receivable 11,756 11,748 11,274
Card-related fees receivable 484 921 1,556
Total receivables from contracts with customer $ 12,487 $ 12,810 $ 13,040

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 $610,000 and $698,000 for the six months ended June 30, 2022 and 2021, respectively. Receivables are recognized in the period the Company provides services and when the Company's right to consideration is unconditional. The card-related fee receivable is the result of volume-based fees 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~~

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 2022~~

~~734~~

~~Estimated—2023~~

~~400~~

~~Estimated—2024~~

~~250~~

~~Estimated—2025~~

~~100~~

~~Estimated—2026~~

—

~~Total~~

~~1,484~~

~~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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~~(14)~~(12) Segment Information

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

The 3three 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 15fifteen bank subsidiaries’ operations and profitability separately, these subsidiaries have been aggregated into 1one reportable operating segment due to the similarities in products and services, customer base, operations, profitability measures, and economic characteristics.

For purposes of internal segment profitability, management allocates certain intersegment and parent company balances. Management allocates a portion of revenues to the specialty finance segment related to loans and leases originated by the specialty finance segment and sold or assigned to the community banking segment. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates a portion of the net interest income earned by the community banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. See Note ~~10 - Deposits,~~(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~~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 Note (1) “Summary of Significant Accounting Policies” ~~in Note 1~~ of the ~~Company’s 2021~~2022 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
(Dollars in thousands) June 30,
2022 June 30,
2021
Net interest income:
Community Banking $ 261,726 $ 219,679 $ 42,047 19 %
Specialty Finance 58,718 45,194 13,524 30
Wealth Management 9,534 7,765 1,769 23
Total Operating Segments 329,978 272,638 57,340 21
Intersegment Eliminations 7,826 6,952 874 13
Consolidated net interest income $ 337,804 $ 279,590 $ 58,214 21 %
Provision for credit losses:
Community Banking $ 20,225 $ (15,163) $ 35,388 NM
Specialty Finance 192 (136) 328 NM
Wealth Management — — — — %
Total Operating Segments 20,417 (15,299) 35,716 NM
Intersegment Eliminations — — — —
Consolidated provision for credit losses $ 20,417 $ (15,299) $ 35,716 NM
Non-interest income:
Community Banking $ 62,714 $ 90,410 $ (27,696) (31) %
Specialty Finance 24,992 22,464 2,528 11
Wealth Management 30,226 31,843 (1,617) (5)
Total Operating Segments 117,932 144,717 (26,785) (19)
Intersegment Eliminations (14,990) (15,344) 354 (2)
Consolidated non-interest income $ 102,942 $ 129,373 $ (26,431) (20) %
Net revenue:
Community Banking $ 324,440 $ 310,089 $ 14,351 5 %
Specialty Finance 83,710 67,658 16,052 24
Wealth Management 39,760 39,608 152 0
Total Operating Segments 447,910 417,355 30,555 7
Intersegment Eliminations (7,164) (8,392) 1,228 (15)
Consolidated net revenue $ 440,746 $ 408,963 $ 31,783 8 %
Segment profit:
Community Banking $ 54,647 $ 72,752 $ (18,105) (25) %
Specialty Finance 30,558 23,850 6,708 28
Wealth Management 9,308 8,507 801 9
Consolidated net income $ 94,513 $ 105,109 $ (10,596) (10) %
Segment assets:
Community Banking $ 40,098,458 $ 37,619,971 $ 2,478,487 7 %
Specialty Finance 9,207,215 7,701,921 1,505,294 20
Wealth Management 1,663,659 1,416,558 247,101 17
Consolidated total assets $ 50,969,332 $ 46,738,450 $ 4,230,882 9 %

~~NM - Not meaningful~~

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		Six Months Ended				$ Change in Contribution		% Change in Contribution			Three Months Ended				$ Change in Contribution		% Change in Contribution
(Dollars in thousands)	(Dollars in thousands)	June 30, 2022		June 30, 2021						(Dollars in thousands)	March 31, 2023		March 31, 2022
Net interest income:	Net interest income:									Net interest income:
Community Banking	Community Banking	$	490,341	$	423,168	$	67,173	16	%	Community Banking	$	369,848	$	228,615	$	141,233	62	%
Specialty Finance	Specialty Finance	114,088		90,093		23,995		27		Specialty Finance	70,351		55,370		14,981		27
Wealth Management	Wealth Management	17,910		15,214		2,696		18		Wealth Management	8,955		8,376		579		7
Total Operating Segments	Total Operating Segments	622,339		528,475		93,864		18		Total Operating Segments	449,154		292,361		156,793		54
Intersegment Eliminations	Intersegment Eliminations	14,759		13,010		1,749		13		Intersegment Eliminations	8,841		6,933		1,908		28
Consolidated net interest income	Consolidated net interest income	$	637,098	$	541,485	$	95,613	18	%	Consolidated net interest income	$	457,995	$	299,294	$	158,701	53	%
Provision for credit losses:	Provision for credit losses:									Provision for credit losses:
Community Banking	Community Banking	$	24,343	$	(61,735)	$	86,078	NM		Community Banking	$	21,099	$	4,118	$	16,981	NM
Specialty Finance	Specialty Finance	180		1,089		(909)		(83)	%	Specialty Finance	1,946		(12)		1,958		NM
Wealth Management	Wealth Management	—		—		—		—		Wealth Management	—		—		—		—
Total Operating Segments	Total Operating Segments	24,523		(60,646)		85,169		NM		Total Operating Segments	23,045		4,106		18,939		NM
Intersegment Eliminations	Intersegment Eliminations	—		—		—		—		Intersegment Eliminations	—		—		—		—
Consolidated provision for credit losses	Consolidated provision for credit losses	$	24,523	$	(60,646)	$	85,169	NM		Consolidated provision for credit losses	$	23,045	$	4,106	$	18,939	NM
Non-interest income:	Non-interest income:									Non-interest income:
Community Banking	Community Banking	$	184,602	$	237,678	$	(53,076)	(22)	%	Community Banking	$	68,733	$	121,888	$	(53,155)	(44)	%
Specialty Finance	Specialty Finance	49,114		45,573		3,541		8		Specialty Finance	25,790		24,122		1,668		7
Wealth Management	Wealth Management	60,804		62,094		(1,290)		(2)		Wealth Management	30,297		30,578		(281)		(1)
Total Operating Segments	Total Operating Segments	294,520		345,345		(50,825)		(15)		Total Operating Segments	124,820		176,588		(51,768)		(29)
Intersegment Eliminations	Intersegment Eliminations	(28,788)		(29,466)		678		(2)		Intersegment Eliminations	(17,051)		(13,798)		(3,253)		24
Consolidated non-interest income	Consolidated non-interest income	$	265,732	$	315,879	$	(50,147)	(16)	%	Consolidated non-interest income	$	107,769	$	162,790	$	(55,021)	(34)	%
Net revenue:	Net revenue:									Net revenue:
Community Banking	Community Banking	$	674,943	$	660,846	$	14,097	2	%	Community Banking	$	438,581	$	350,503	$	88,078	25	%
Specialty Finance	Specialty Finance	163,202		135,666		27,536		20		Specialty Finance	96,141		79,492		16,649		21
Wealth Management	Wealth Management	78,714		77,308		1,406		2		Wealth Management	39,252		38,954		298		1
Total Operating Segments	Total Operating Segments	916,859		873,820		43,039		5		Total Operating Segments	573,974		468,949		105,025		22
Intersegment Eliminations	Intersegment Eliminations	(14,029)		(16,456)		2,427		(15)		Intersegment Eliminations	(8,210)		(6,865)		(1,345)		20
Consolidated net revenue	Consolidated net revenue	$	902,830	$	857,364	$	45,466	5	%	Consolidated net revenue	$	565,764	$	462,084	$	103,680	22	%
Segment profit:	Segment profit:									Segment profit:
Community Banking	Community Banking	$	144,746	$	194,553	$	(49,807)	(26)	%	Community Banking	$	134,232	$	90,099	$	44,133	49	%
Specialty Finance	Specialty Finance	60,162		47,753		12,409		26		Specialty Finance	36,737		29,604		7,133		24
Wealth Management	Wealth Management	16,996		15,951		1,045		7		Wealth Management	9,229		7,688		1,541		20
Consolidated net income	Consolidated net income	$	221,904	$	258,257	$	(36,353)	(14)	%	Consolidated net income	$	180,198	$	127,391	$	52,807	41	%
Segment assets:										Segment assets:
Community Banking										Community Banking	$	41,611,980	$	40,050,015	$	1,561,965	4	%
Specialty Finance										Specialty Finance	9,841,044		8,624,501		1,216,543		14
Wealth Management										Wealth Management	1,420,487		1,576,145		(155,658)		(10)
Consolidated total assets										Consolidated total assets	$	52,873,511	$	50,250,661	$	2,622,850	5	%

NM - Not meaningful

~~(15)~~(13) 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)~~index or commodity price) 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

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economically hedge specific investment securities and receive fee income, effectively enhancing the overall yield on such securities to compensate for net interest margin compression; and (5) options and swaps to economically hedge a portion of the fair value adjustments related to the Company’s mortgage servicing rights portfolio. The Company also enters into derivatives (typically interest rate ~~swaps)~~swaps and commodity forward contracts) 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. Commodity derivative fair values are computed based on changes in the price per unit stated in the contract compared to those prevailing at the measurement date.

The table below presents the fair value of the Company’s derivative financial instruments as of ~~June 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~June 30, 2021:~~March 31, 2022:


		Derivative Assets							Derivative Liabilities
						Derivative Assets							Derivative Liabilities
(In thousands)	(In thousands)	June 30, 2022		December 31, 2021			June 30, 2021		June 30, 2022		December 31, 2021			June 30, 2021		(In thousands)	March 31, 2023		December 31, 2022		March 31, 2022		March 31, 2023		December 31, 2022		March 31, 2022
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	$	151	$	47,309		$	34,743	$	—	$	10,401		$	24,272	Interest rate derivatives designated as Cash Flow Hedges	$	25,730	$	—	$	13,257	$	43,412	$	58,198	$	3,361
Interest rate derivatives designated as Fair Value Hedges	Interest rate derivatives designated as Fair Value Hedges	10,396		1,474			78		128		5,841			9,373		Interest rate derivatives designated as Fair Value Hedges	13,732		16,768		7,388		—		—		1,716
Total derivatives designated as hedging instruments under ASC 815	Total derivatives designated as hedging instruments under ASC 815	$	10,547	$	48,783		$	34,821	$	128	$	16,242		$	33,645	Total derivatives designated as hedging instruments under ASC 815	$	39,462	$	16,768	$	20,645	$	43,412	$	58,198	$	5,077
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	$	165,209	$	103,710		$	153,510	$	164,979	$	103,665		$	153,714	Interest rate derivatives	$	219,869	$	269,670	$	119,056	$	219,053	$	271,109	$	115,002
Interest rate lock commitments	Interest rate lock commitments	6,649		10,560			23,175		173		885			2,834		Interest rate lock commitments	5,356		1,711		3,447		67		58		1,558
Forward commitments to sell mortgage loans	Forward commitments to sell mortgage loans	906		1,625			781		1,963		1,878			3,153		Forward commitments to sell mortgage loans	121		220		10,063		2,953		414		147
Commodity forward contracts																Commodity forward contracts	491		257		—		315		162		—
Foreign exchange contracts	Foreign exchange contracts	614		330			93		614		330			93		Foreign exchange contracts	8,705		8,222		323		8,632		8,137		323
Total derivatives not designated as hedging instruments under ASC 815	Total derivatives not designated as hedging instruments under ASC 815	$	173,378	$	116,225		$	177,559	$	167,729	$	106,758		$	159,794	Total derivatives not designated as hedging instruments under ASC 815	$	234,542	$	280,080	$	132,889	$	231,020	$	279,880	$	117,030
Total Derivatives	Total Derivatives	$	183,925	$	165,008		$	212,380	$	167,857	$	123,000		$	193,439	Total Derivatives	$	274,004	$	296,848	$	153,534	$	274,432	$	338,078	$	122,107

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to net interest income and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps and interest rate collars as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts to or from a counterparty in exchange for the Company ~~making~~receiving or paying 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~~settlement of amounts in which the interest rate index specified in the contract

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exceeds the agreed upon cap strike price or ~~the payment of amounts~~ in which the interest rate index specified in the contract is below the agreed upon floor strike price at the end of each period.

As of ~~June 30, 2022,~~March 31, 2023, the Company had various interest rate collar and swap derivatives designated as cash flow hedges of variable rate loans and various interest rate swap derivatives designated as cash flow hedges of variable rate ~~deposits and 1 interest rate collar derivative designated as a cash flow hedge of the Company's variable rate Term Facility.~~deposits. 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 income as interest payments are made on such variable rate loans or interest expense as interest payments are made on such

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variable rate deposits. The changes in fair value (net of tax) are separately disclosed in the Consolidated Statements of Comprehensive Income.

The table below provides details on these cash flow hedges, summarized by derivative type and maturity, as of ~~June 30, 2022:~~March 31, 2023:

June 30, 2022
(In thousands) Notional Fair Value
Maturity Date Amount Asset (Liability)
Interest Rate Swaps:
July 2022 $ 230,000 $ 0
August 2022 235,000 0
Interest Rate Collars:
September 2023 69,643 151
Total Cash Flow Hedges $ 534,643 $ 151


	March 31, 2023
	Notional		Fair Value
(In thousands)	Amount		Asset (Liability)
Interest Rate Collars at 1-month CME term SOFR:

Buy 2.250% floor, sell 3.743% cap; matures September 2025	$	1,250,000	$	(16,675)
Buy 2.750% floor, sell 4.320% cap; matures October 2026	500,000		(126)
Buy 2.000% floor, sell 3.450% cap; matures September 2027	1,250,000		(26,069)
Interest Rate Swaps at 1-month CME term SOFR:
Fixed 3.748%; matures December 2025	250,000		26
Fixed 3.759%; matures December 2025	250,000		99
Fixed 3.680%; matures February 2026	250,000		(251)
Fixed 4.176%; matures March 2026	250,000		3,342
Fixed 3.915%; matures March 2026	250,000		1,531
Fixed 4.450%; matures July 2026	250,000		6,502
Fixed 3.515%, matures December 2026	250,000		123
Fixed 3.512%; matures December 2026	250,000		97
Fixed 3.453%; matures February 2027	250,000		(291)
Fixed 4.150%; matures July 2027	250,000		7,238
Fixed 3.748%; matures March 2028	250,000		4,649
Fixed 3.526%; matures March 2028	250,000		2,123
Total Cash Flow Hedges	$	6,000,000	$	(17,682)

In the first quarter of 2022, the Company terminated interest rate swap derivative contracts designated as cash flow hedges of variable rate deposits with a total notional value of $1.0 billion and a five-year term effective July 2022. At the time of termination, the fair value of the derivative contracts totaled an asset of $66.5 million, with such adjustments to fair value recorded in accumulated other comprehensive income or loss. In the second quarter of 2022, the Company terminated two additional interest rate swap derivative contracts designated as cash flow hedges of variable rate deposits with a total notional value of $500.0 million each effective since April 2020. The remaining terms of such derivative contracts were through March 2023 and April 2024 and, at the time of termination, the fair value of the derivative contracts totaled assets of $3.7 million and $10.7 million, respectively, with such adjustments to fair value recorded in accumulated other comprehensive income or loss. In the fourth quarter of 2022, the Company terminated one additional interest rate collar derivative contract designated as a cash flow hedge of the term facility with a total notional value of $64.3 million effective since September 2018. The remaining term of such derivative contract was through September 2023 and, at the time of termination, the fair value of the derivative contract totaled an asset of $875,000, with such adjustments to fair value recorded in accumulated other comprehensive income or loss.

For all such terminations, as the hedged forecasted transactions (interest payments on variable rate ~~deposits)~~deposits and the term facility) are still expected to occur over the remaining term of such terminated derivatives, such adjustments will remain in accumulated other comprehensive income or loss and be reclassified as a reduction to interest expense on a straight-line basis over the original term of the terminated derivative contracts.

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A rollforward of the amounts in accumulated other comprehensive income or loss related to interest rate derivatives designated as cash flow hedges, including such derivative contracts terminated during the period, follows:

Three Months Ended Six Months Ended
(In thousands) June 30,
2022 June 30,
2021 June 30,
2022 June 30,
2021
Unrealized gain (loss) at beginning of period $ 76,389 $ 19,259 $ 36,908 $ (31,533)
Amount reclassified from accumulated other comprehensive income to interest expense on deposits, other borrowings and junior subordinated debentures 1,012 6,866 6,365 13,562
Amount of income recognized in other comprehensive income 1,363 (15,654) 35,491 28,442
Unrealized gain at end of period $ 78,764 $ 10,471 $ 78,764 $ 10,471


	Three Months Ended
(In thousands)	March 31, 2023		March 31, 2022
Unrealized gain at beginning of period	$	10,026	$	36,908
Amount reclassified from accumulated other comprehensive income or loss to interest income or expense on deposits, loans, and other borrowings	3,572		5,353
Amount of gain recognized in other comprehensive income or loss	31,094		34,128
Unrealized gain at end of period	$	44,692	$	76,389

As of ~~June 30, 2022,~~March 31, 2023, the Company ~~estimates~~estimated that during the next ~~twelve~~12 months ~~$21.4~~$85.8 million will be reclassified from accumulated other comprehensive income or loss as ~~a decrease~~an increase to net interest ~~expense.~~income. Such estimate consists ~~primarily~~ of ~~amounts~~$19.2 million reclassified as a reduction to interest expense on the terminated cash flow hedges discussed ~~above.~~above and $66.6 million reclassified as an addition to interest income related to the interest rate collars and swaps noted above that remain outstanding.

Fair Value Hedges of Interest Rate Risk

Interest rate swaps designated as fair value hedges involve the payment of fixed amounts to a counterparty in exchange for the Company receiving variable payments over the life of the agreements without the exchange of the underlying notional amount. As of ~~June 30, 2022,~~March 31, 2023, the Company had 1314 interest rate swaps with an aggregate notional amount of ~~$208.9~~$206.0 million that were designated as fair value hedges primarily associated with fixed rate commercial and industrial and commercial real estate loans as well as life insurance premium finance receivables. ~~NaN of these interest rate swaps with an aggregate notional amount of $73.9 million has terms starting after June 30, 2022.~~

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 ~~June 30, 2022:~~March 31, 2023:


			June 30, 2022								March 31, 2023
(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	$	124,188	$	(10,234)	$	(119)	Interest rate swaps	Loans, net of unearned income		$	138,254	$	(13,682)	$	(100)
		Available-for-sale debt securities	1,013		6		—			Available-for-sale debt securities		898		(15)		—

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

(In thousands)
Derivatives in Fair Value Hedging Relationships
Location of (Loss)/Gain Recognized
in Income on Derivative Three Months Ended Six Months Ended
June 30, 2022 June 30, 2022
Interest rate swaps Interest and fees on loans $ 7 $ 23
Interest income - investment securities — —

(In thousands)

Derivatives in Fair Value Hedging Relationships

Location of (Loss)/Gain Recognized
in Income on Derivative

Three Months Ended

March 31, 2023

Interest rate swaps

Interest and fees on loans

(9)

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.

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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~~recently related to the LIBOR index. As of ~~June 30, 2022,~~March 31, 2023, there were no interest rate caps outstanding that were designed to act as an economic hedge. ~~In the second quarter of~~During 2022, the Company terminated an interest rate cap derivative contract related to LIBOR that was not designated as an accounting hedge with a total notional value of $1.0 billion.

Additionally, the Company has interest rate derivatives, including swaps and option products, resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products (typically interest rate swaps) directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively convert a variable rate loan to a fixed rate. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At ~~June 30,~~March 31, 2023 and December 31, 2022, the Company had interest rate derivative transactions with an aggregate notional amount of approximately ~~$9.7~~$9.9 billion and $9.6 billion, respectively, (all interest rate swaps and caps with customers and third parties) related to this program. ~~These~~At March 31, 2023 these interest rate derivatives had maturity dates ranging from ~~July 2022~~April 2023 to January 2037.

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 its residential mortgage loan production when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company’s mortgage banking derivatives have not been designated as being in hedge relationships. At ~~June 30,~~March 31, 2023 and December 31, 2022, the Company had interest rate lock commitments with an aggregate notional amount of approximately $208.2 million and $121.6 million, and forward commitments to sell mortgage loans with an aggregate notional amount of approximately ~~$675.5~~$498.0 million and ~~interest rate lock commitments with an aggregate notional amount of approximately $323.2 million.~~$321.0 million, respectively. The fair values of these derivatives

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were estimated based on changes in mortgage rates from the dates of the commitments. Changes in the fair value of these mortgage banking derivatives are included in mortgage banking revenue.

Commodity Derivatives—The Company has commodity forward contracts resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively purchase or sell a given commodity at an agreed-upon price on an agreed-upon settlement date. 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, 2023 and December 31, 2022, the Company had commodity derivative transactions with an aggregate notional amount of approximately $5.6 million and $3.6 million, respectively, (all forward contracts with customers and third parties) related to this program. At March 31, 2023, these commodity derivatives had maturity dates ranging from April 2023 to October 2024.

Foreign Currency Derivatives—~~These derivatives include~~The Company has foreign currency derivative contracts ~~used~~resulting from a service the Company provides to ~~manage the foreign exchange~~certain qualified customers. The Company’s banking subsidiaries execute certain derivative products directly with qualified customers to facilitate their respective risk ~~associated with~~management strategies related to foreign currency ~~denominated assets and transactions. Foreign currency contracts, which include spot and forward contracts, represent agreements~~fluctuations. For example, these arrangements allow the Company’s customers to effectively exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date. AsIn 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 ~~result~~mirror-image and because of ~~fluctuations~~differences in ~~foreign currencies,~~counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the ~~U.S. dollar-equivalent~~fair 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~~derivatives are ~~expected to substantially offset this variability.~~included in other non-interest income. As of ~~June 30,~~March 31, 2023 and December 31, 2022, the Company held foreign currency derivatives with an aggregate notional amount of approximately ~~$18.7 million.~~$225.2 million and $226.2 million, respectively.

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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 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 the fair value of these contracts are recognized as other non-interest income. There were no covered call options outstanding as of ~~June 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 or ~~June 30, 2021.~~March 31, 2022.

Periodically, the Company will purchase options for the right to purchase securities not currently held within the ~~banks'~~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 no such options or swaps outstanding as~~As of ~~June 30, 2022,~~March 31, 2023 and December 31, ~~2021 or June 30, 2021.~~2022, the Company held three interest rate derivatives with an aggregate notional value of $245.0 million and $190.0 million, respectively, for such purpose of economically hedging a portion of the fair value adjustment related to its mortgage servicing rights portfolio.

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				Six Months Ended				(In thousands)		Three Months Ended
Derivative	Derivative	Location in income statement	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021		Derivative	Location in income statement	March 31, 2023		March 31, 2022
Interest rate swaps and caps	Interest rate swaps and caps	Trading gains (losses), net	$	161	$	(539)	$	4,185	$	(111)	Interest rate swaps and caps	Trading gains, net	$	800	$	4,024
Mortgage banking derivatives	Mortgage banking derivatives	Mortgage banking revenue	(7,550)		(10,480)		(14,919)		(27,959)		Mortgage banking derivatives	Mortgage banking revenue	3,640		(7,369)
Commodity contracts											Commodity contracts	Trading gains (losses), net	177		—
Foreign exchange contracts	Foreign exchange contracts	Trading gains (losses), net	—		(3)		—		(8)		Foreign exchange contracts	Trading gains, net	—		—
Covered call options	Covered call options	Fees from covered call options	1,069		1,388		4,811		1,388		Covered call options	Fees from covered call options	10,391		3,742

Derivative contract held as economic hedge on MSRs											Derivative contract held as economic hedge on MSRs	Mortgage banking revenue	946		—

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~~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~~Company’s standard loan underwriting process since these derivatives are secured through collateral provided by the loan agreements. Actual exposures are monitored against various types of credit limits established to contain risk within parameters. When deemed necessary, appropriate types and amounts of collateral are obtained to minimize credit exposure.

The Company has agreements with certain of its interest rate derivative counterparties that contain cross-default provisions, which provide that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain of its derivative counterparties that contain a provision allowing the counterparty to terminate the derivative positions if the Company fails to maintain its status as a well or adequately capitalized institution, which would require the Company to settle its obligations under the agreements. As of ~~June 30, 2022, the fair value of~~March 31, 2023, there were no interest rate derivatives in a net liability position that were subject to such ~~agreements, which~~agreements. The fair value of such derivatives includes accrued interest related to these agreements, was approximately $100,000. 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

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

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'~~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~~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~~table below ~~summarize~~summarizes the ~~Company's~~Company’s interest rate derivatives and offsetting positions as of the dates shown.

Derivative Assets Derivative Liabilities
Fair Value Fair Value
(In thousands) June 30,
2022 December 31,
2021 June 30,
2021 June 30,
2022 December 31,
2021 June 30,
2021
Gross Amounts Recognized $ 175,756 $ 152,493 $ 188,331 $ 165,107 $ 119,907 $ 187,359
Less: Amounts offset in the Statements of Condition — — — — — —
Net amount presented in the Statements of Condition $ 175,756 $ 152,493 $ 188,331 $ 165,107 $ 119,907 $ 187,359
Gross amounts not offset in the Statements of Condition
Offsetting Derivative Positions (6,009) (52,832) (37,895) (6,009) (52,832) (37,895)
Collateral Posted (163,412) (3,530) — (91) (55,201) (146,240)
Net Credit Exposure $ 6,335 $ 96,131 $ 150,436 $ 159,007 $ 11,874 $ 3,224

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	Derivative Assets						Derivative Liabilities
	Fair Value						Fair Value
(In thousands)	March 31, 2023		December 31, 2022		March 31, 2022		March 31, 2023		December 31, 2022		March 31, 2022
Gross Amounts Recognized	$	259,331	$	286,438	$	139,701	$	262,465	$	329,307	$	120,079
Less: Amounts offset in the Statements of Condition	—		—		—		—		—		—
Net amount presented in the Statements of Condition	$	259,331	$	286,438	$	139,701	$	262,465	$	329,307	$	120,079
Gross amounts not offset in the Statements of Condition
Offsetting Derivative Positions	(55,838)		(64,100)		(19,557)		(55,838)		(64,100)		(19,557)
Collateral Posted	(181,884)		(194,666)		(70,807)		—		—		(257)
Net Credit Exposure	$	21,609	$	27,672	$	49,337	$	206,627	$	265,207	$	100,265

~~(16)~~(14) 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 determine the fair value of these securities. When these inputs are not available, broker/dealer quotes may be obtained by the vendor to determine the fair value of the security. We review the vendor’s pricing methodologies to determine if observable market information is being used, versus unobservable inputs. Fair value measurements using

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significant inputs that are unobservable in the market due to limited activity or a less liquid market are classified as Level 3 in the fair value hierarchy. The fair value of U.S. Treasury securities and certain equity securities with readily determinable fair value are based on unadjusted quoted prices in active markets for identical securities. As such, these securities are classified as Level 1 in the fair value hierarchy.

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

At ~~June 30, 2022,~~March 31, 2023, the Company classified ~~$113.5~~$112.3 million of municipal securities as Level 3. These municipal securities are bond issues for various municipal government entities primarily located in the Chicago metropolitan area and southern

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Wisconsin and are privately placed, non-rated bonds without CUSIP numbers. 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 ~~second~~first quarter of ~~2022,~~2023, 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 ~~June 30, 2022~~March 31, 2023 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.

Mortgage loans held-for-sale—The fair value of mortgage loans held-for-sale is typically determined by reference to investor price sheets for loan products with similar characteristics. Loans measured with this valuation technique are classified as Level 2 in the fair value hierarchy.

At ~~June 30, 2022,~~March 31, 2023, the Company classified ~~$89.0~~$44.3 million of certain delinquent mortgage loans held-for-sale as Level 3. For such delinquent loans in which investor interest may be limited, the Company estimates fair value by discounting future scheduled cash flows for the specific loan through its life, adjusted for estimated credit losses. The Company uses a discount rate based on prevailing market coupon rates on loans with similar characteristics. The assumed weighted average discount rate used as an input to value these loans at ~~June 30, 2022~~March 31, 2023 was ~~4.80%~~5.96%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. Additionally, the weighted average credit discount used as an input to value the specific loans was ~~0.29%~~0.22% with credit loss discount ranging from 0%~~-8%~~-10% at ~~June 30, 2022.~~March 31, 2023.

Loans held-for-investment—The fair value for certain loans in which the Company previously 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 prepayment or life assumptions. These loans primarily consist of early buyout loans guaranteed by U.S. government agencies that are delinquent and, as a result, investor interest may be limited. The Company uses a discount rate based on the actual coupon rate of the underlying loan. At ~~June 30, 2022,~~March 31, 2023, the Company classified ~~$84.8~~$69.5 million of loans held-for-investment carried at fair value as Level 3. The assumed weighted average discount rate used as an input to value these loans at ~~June 30, 2022~~March 31, 2023 was ~~4.86%~~5.98%. 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 average life as well as credit losses. The weighted average prepayments speed used as an input to value current loans was ~~6.82%~~6.92% at ~~June 30, 2022.~~March 31, 2023. Prepayment speeds are inversely related to the fair value of these loans as an increase in prepayment speeds results in a decreased valuation. For delinquent loans in which performance is not assumed and there is a higher probability of resolution of the loan ending in foreclosure, the weighted average life of such loans was ~~2.5~~5.4 years. Average life is inversely related to the fair value of these loans as an increase in estimated life results in a decreased valuation. Additionally, the weighted average credit discount used as an input to value the specific loans was ~~0.65%~~0.86% with credit loss discounts ranging from 0%~~-8%~~-13% at ~~June 30, 2022.~~March 31, 2023.

MSRs—Fair value for MSRs is determined utilizing a valuation model which calculates the fair value of each servicing right based on the present value of estimated future cash flows. The Company uses a discount rate commensurate with the risk associated with each servicing right, given current market conditions. At ~~June 30, 2022,~~March 31, 2023, the Company classified ~~$212.7~~$224.5 million of MSRs as Level 3. The weighted average discount rate used as an input to value the pool of MSRs at ~~June 30, 2022~~March 31, 2023 was

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~~9.80%~~ 10.33% with discount rates applied ranging from ~~7%-19%~~3%-33%. The higher the rate utilized to discount estimated future cash flows, the lower the fair value measurement. The fair value of MSRs was also estimated based on other assumptions including prepayment speeds and the cost to service. Prepayment speeds ranged from 0%~~-90%~~-100% or a weighted average prepayment speed of ~~6.82%~~6.92%. Further, for current and delinquent loans, the Company assumed a weighted average cost of servicing of ~~$75~~$76 and ~~$318,~~$403, respectively, per loan. Prepayment speeds and the cost to service are both inversely related to the fair value of MSRs as an increase in prepayment speeds or the cost to service results in a decreased valuation. See Note ~~9 - Mortgage~~(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 mortgage loans, commodity future contracts and foreign currency contracts. Interest rate swaps, caps and collars and

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commodity future contracts are valued by a third party, using models that primarily use market observable inputs, such as yield curves and commodity prices prevailing at the measurement date, 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 date of the commitments. The fair value of foreign currency derivatives is computed based on change in foreign currency rates stated in the contract compared to those prevailing at the measurement date.

At ~~June 30, 2022,~~March 31, 2023, the Company classified ~~$6.6~~$5.4 million of derivative assets related to interest rate locks as Level 3. The fair value of interest rate locks is based on prices obtained for loans with similar characteristics from third parties, adjusted for the pull-through rate, which represents the Company’s best estimate of the likelihood that a committed loan will ultimately fund. The weighted-average pull-through rate at ~~June 30, 2022~~March 31, 2023 was ~~85%~~82.06% with pull-through rates applied ranging from ~~22%~~31% to 100%. Pull-through rates are directly related to the fair value of interest rate locks as an increase in the pull-through rate results in an increased valuation.

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

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


		June 30, 2022									March 31, 2023
(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	$	—	$	—	$	—	$	—	U.S. Treasury	$	4,948	$	4,948	$	—	$	—
U.S. Government agencies		48,087		—		48,087		—
U.S. government agencies										U.S. government agencies	74,862		—		74,862		—
Municipal	Municipal	166,705		—		53,220		113,485		Municipal	160,386		—		48,129		112,257
Corporate notes	Corporate notes	89,813		—		89,813		—		Corporate notes	83,675		—		83,675		—
Mortgage-backed	Mortgage-backed	2,665,516		—		2,665,516		—		Mortgage-backed	2,935,974		—		2,935,974		—
Trading account securities	Trading account securities	1,010		—		1,010		—		Trading account securities	102		—		102		—
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	93,295		85,229		8,066		—		Equity securities with readily determinable fair value	111,943		103,877		8,066		—
Mortgage loans held-for-sale	Mortgage loans held-for-sale	513,232		—		424,269		88,963		Mortgage loans held-for-sale	302,493		—		258,243		44,250
Loans held-for-investment	Loans held-for-investment	122,757		—		37,959		84,798		Loans held-for-investment	202,143		—		132,650		69,493
MSRs	MSRs	212,664		—		—		212,664		MSRs	224,470		—		—		224,470
Nonqualified deferred compensation assets	Nonqualified deferred compensation assets	13,936		—		13,936		—		Nonqualified deferred compensation assets	14,379		—		14,379		—
Derivative assets	Derivative assets	183,925		—		177,276		6,649		Derivative assets	274,004		—		268,648		5,356
Total	Total	$	4,110,940	$	85,229	$	3,519,152	$	506,559	Total	$	4,389,379	$	108,825	$	3,824,728	$	455,826
Derivative liabilities	Derivative liabilities	$	167,857	$	—	$	167,857	$	—	Derivative liabilities	$	274,432	$	—	$	274,432	$	—


	December 31, 2022
(In thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities
U.S. Treasury	$	14,948	$	14,948	$	—	$	—
U.S. government agencies	74,222		—		74,222		—
Municipal	168,655		—		51,118		117,537
Corporate notes	85,705		—		85,705		—
Mortgage-backed	2,899,487		—		2,899,487		—
Trading account securities	1,127		—		1,127		—
Equity securities with readily determinable fair value	110,365		102,299		8,066		—
Mortgage loans held-for-sale	299,935		—		251,280		48,655
Loans held-for-investment	179,932		—		95,767		84,165
MSRs	230,225		—		—		230,225
Nonqualified deferred compensation assets	13,899		—		13,899		—
Derivative assets	296,848		—		295,137		1,711
Total	$	4,375,348	$	117,247	$	3,775,808	$	482,293
Derivative liabilities	$	338,078	$	—	$	338,078	$	—

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December 31, 2021
(In thousands) Total Level 1 Level 2 Level 3
Available-for-sale securities
U.S. Treasury $ — $ — $ — $ —
U.S. Government agencies 52,507 — 52,507 —
Municipal 165,594 — 59,907 105,687
Corporate notes 95,704 — 95,704 —
Mortgage-backed 2,013,988 — 2,013,988 —
Trading account securities 1,061 — 1,061 —
Equity securities with readily determinable fair value 90,511 82,445 8,066 —
Mortgage loans held-for-sale 817,912 — 817,912 —
Loans held-for-investment 38,598 — 22,707 15,891
MSRs 147,571 — — 147,571
Nonqualified deferred compensation assets 16,240 — 16,240 —
Derivative assets 165,008 — 154,448 10,560
Total $ 3,604,694 $ 82,445 $ 3,242,540 $ 279,709
Derivative liabilities $ 123,000 $ — $ 123,000 $ —


		June 30, 2021									March 31, 2022
(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	$	—	$	—	$	—	$	—	U.S. Treasury	$	—	$	—	$	—	$	—
U.S. Government agencies		78,854		—		78,854		—
U.S. government agencies										U.S. government agencies	49,637		—		49,637		—
Municipal	Municipal	168,296		—		50,690		117,606		Municipal	155,489		—		55,088		100,401
Corporate notes	Corporate notes	98,542		—		98,542		—		Corporate notes	82,939		—		82,939		—
Mortgage-backed	Mortgage-backed	1,842,916		—		1,842,916		—		Mortgage-backed	2,710,833		—		2,710,833		—
Trading account securities	Trading account securities	2,667		—		2,667		—		Trading account securities	852		—		852		—
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	86,316		78,250		8,066		—		Equity securities with readily determinable fair value	92,689		84,623		8,066		—
Mortgage loans held-for-sale	Mortgage loans held-for-sale	984,994		—		984,994		—		Mortgage loans held-for-sale	606,545		—		606,545		—
Loans held-for-investment	Loans held-for-investment	55,340		—		44,333		11,007		Loans held-for-investment	57,984		—		13,520		44,464
MSRs	MSRs	127,604		—		—		127,604		MSRs	199,146		—		—		199,146
Nonqualified deferred compensation assets	Nonqualified deferred compensation assets	16,590		—		16,590		—		Nonqualified deferred compensation assets	15,447		—		15,447		—
Derivative assets	Derivative assets	212,380		—		189,810		22,570		Derivative assets	153,534		—		150,087		3,447
Total	Total	$	3,674,499	$	78,250	$	3,317,462	$	278,787	Total	$	4,125,095	$	84,623	$	3,693,014	$	347,458
Derivative liabilities	Derivative liabilities	$	193,439	$	—	$	193,439	$	—	Derivative liabilities	$	122,107	$	—	$	122,107	$	—

The aggregate remaining contractual principal balance outstanding as of ~~June 30, 2022,~~March 31, 2023, December 31, ~~2021~~2022 and ~~June 30, 2021~~March 31, 2022 for mortgage loans held-for-sale measured at fair value under ASC 825 was ~~$510.7~~$307.3 million, ~~$801.6~~$308.9 million and ~~$949.5~~$606.7 million, respectively, while the aggregate fair value of mortgage loans held-for-sale was ~~$513.2~~$302.5 million, ~~$817.9~~$299.9 million and ~~$985.0~~$606.5 million, for the same respective periods, as shown in the above tables. At ~~June 30, 2022, $6.0~~March 31, 2023, $3.3 million of mortgage loans held-for-sale were classified as ~~nonaccrual.~~nonaccrual as compared to $5.8 million as of December 31, 2022 and none as of March 31, 2022. Additionally, there were ~~$55.6~~$41.4 million of loans past due greater than 90 days and still accruing in the mortgage loans held-for-sale portfolio as of ~~June 30, 2022~~March 31, 2023 compared to ~~$125.5~~$44.0 million as of December 31, ~~2021~~2022 and ~~$110.7~~$113.0 million as of ~~June 30, 2021.~~March 31, 2022. All of the nonaccrual loans and loans past due greater than 90 days and still accruing ~~as of June 30,~~within the mortgage loans held-for-sale portfolio at March 31, 2023, December 31, 2022, and March 31, 2022 were individual delinquent mortgage loans bought back from GNMA at the unconditional option of the Company as servicer for those loans.

The aggregate remaining contractual principal balance outstanding as of March 31, 2023, December 31, 2022 and March 31, 2022 for mortgage loans held-for-investment measured at fair value under ASC 825 was $204.5 million, $184.0 million and $58.7 million, respectively, while the aggregate fair value of mortgage loans held-for-investment was $202.1 million, $179.9 million and $58.0 million, respectively, as shown in the above tables.

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The changes in Level 3 assets measured at fair value on a recurring basis during the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ are summarized as follows:

Mortgage loans held-for-sale U.S. Government agencies Loans held-for- investment Mortgage
servicing rights Derivative assets
(In thousands) Municipal
Balance at April 1, 2022 $ 100,401 $ — $ — $ 44,464 $ 199,146 $ 3,447
Total net gains (losses) included in:
Net income (1)
— (2,900) — (1,775) 13,518 3,202
Other comprehensive income (loss) (685) — — — — —
Purchases 15,497 — — — — —
Issuances — — — — — —
Sales — — — — — —
Settlements (1,728) — — (7,231) — —
Net transfers into/(out of) Level 3
— 91,863 — 49,340 — —
Balance at June 30, 2022 $ 113,485 $ 88,963 $ — $ 84,798 $ 212,664 $ 6,649

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


				Mortgage loans held-for-sale				U.S. Government Agencies		Loans held-for- investment				Mortgage servicing rights				Derivative Assets										Mortgage loans held-for-sale			U.S. Government agencies			Loans held-for- investment			Mortgage servicing rights			Derivative assets
(In thousands)	(In thousands)	Municipal										(In thousands)	Municipal
Balance at January 1, 2022		$	105,687			$	—			$	—					$	15,891				$	147,571				$	10,560
Total net gains (losses) included in:
Balance at January 1, 2023																					Balance at January 1, 2023		$	117,537				$	48,655		$	—		$	84,165		$	230,225		$	1,711
Total net (losses) gains included in:																					Total net (losses) gains included in:
Net income (1)	Net income (1)	—		(2,900)				—		(2,547)				65,093						(3,911)			Net income (1)		—					466			—			364			(5,755)			3,645
Other comprehensive income (loss)		(6,134)		—				—		—				—				—
Other comprehensive income or loss																					Other comprehensive income or loss		(1,662)					—			—			—			—			—
Purchases	Purchases	16,743		—				—		—				—				—			Purchases		4,418					—			—			—			—			—
Issuances	Issuances	—		—				—		—				—				—			Issuances		—					—			—			—			—			—
Sales	Sales	—		—				—		—				—				—			Sales		—					—			—			—			—			—
Settlements	Settlements	(2,811)		—				—		(8,898)				—				—			Settlements		(8,036)					(18,619)			—			(20,322)			—			—
Net transfers into/(out of) Level 3		—		91,863				—		80,352				—				—
Balance at June 30, 2022		$	113,485	$	88,963			$	—	$	84,798			$	212,664			$	6,649
Net transfers into Level 3																					Net transfers into Level 3		—					13,748			—			5,286			—			—
Balance at March 31, 2023																					Balance at March 31, 2023		$	112,257				$	44,250		$	—		$	69,493		$	224,470		$	5,356

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

Table of Contents


				Mortgage loans held-for-sale				U.S. Government Agencies		Loans held-for- investment				Mortgage servicing rights				Derivative Assets										Mortgage loans held-for-sale			U.S. Government agencies			Loans held-for- investment			Mortgage servicing rights			Derivative assets
(In thousands)	(In thousands)	Municipal										(In thousands)	Municipal
Balance at January 1, 2021		$	109,876			$	—			$	1,966					$	10,280				$	92,081				$	48,091
Balance at January 1, 2022																					Balance at January 1, 2022		$	105,687				$	—		$	—		$	15,891		$	147,571		$	10,560
Total net gains (losses) included in:	Total net gains (losses) included in:																				Total net gains (losses) included in:
Net income (1)	Net income (1)	—		—				(4)		(363)				35,523						(25,521)			Net income (1)		—					—			—			(772)			51,575			(7,113)
Other comprehensive income (loss)		(2,442)		—				(24)		—				—				—
Other comprehensive income or loss																					Other comprehensive income or loss		(5,449)					—			—			—			—			—
Purchases	Purchases	18,163		—				—		—				—				—			Purchases		1,246					—			—			—			—			—
Issuances	Issuances	—		—				—		—				—				—			Issuances		—					—			—			—			—			—
Sales	Sales	—		—				—		—				—				—			Sales		—					—			—			—			—			—
Settlements	Settlements	(7,991)		—				(1,938)		(3,977)				—				—			Settlements		(1,083)					—			—			(1,667)			—			—
Net transfers into/(out of) Level 3		—		—				—		5,067				—				—
Balance at June 30, 2021		$	117,606	$	—			$	—	$	11,007			$	127,604			$	22,570
Net transfers into Level 3																					Net transfers into Level 3		—					—			—			31,012			—			—
Balance at March 31, 2022																					Balance at March 31, 2022		$	100,401				$	—		$	—		$	44,464		$	199,146		$	3,447

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

Also, the Company may be required, from time to time, to measure certain other assets at fair value on a non-recurring 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 non-recurring basis that were still held in the balance sheet at the end of the period, the following table provides the carrying value of the related individual assets or portfolios at ~~June 30, 2022:~~March 31, 2023:


		June 30, 2022								Three Months Ended June 30, 2022 Fair Value Losses Recognized, net					Six Months Ended June 30, 2022 Fair Value Losses Recognized, net			March 31, 2023													Three Months Ended March 31, 2023 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
Individually assessed loans - foreclosure probable and collateral-dependent	Individually assessed loans - foreclosure probable and collateral-dependent	$	59,921	$	—	$	—	$	59,921			$	9,161					$	12,041	Individually assessed loans - foreclosure probable and collateral-dependent	$	71,622		$	—		$	—		$	71,622		$	2,501
Other real estate owned (1)	Other real estate owned (1)	6,839		—		—		6,839		282					282		Other real estate owned (1)	9,361				—			—			9,361			104
Total	Total	$	66,760	$	—	$	—	$	66,760	$	9,443				$	12,323	Total	$	80,983			$	—		$	—		$	80,983		$	2,605

(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 ~~7 – Allowance~~(6) “Allowance for Credit ~~Losses.~~Losses”. At ~~June 30, 2022,~~March 31, 2023, the Company had ~~$85.6~~$71.6 million of individually assessed loans classified as Level 3. OfAll of the ~~$85.6~~$71.6 million of individually assessed loans ~~$59.9 million~~ were measured at fair value based on the underlying collateral of the loan as shown in the table above. ~~The remaining $25.7 million~~None 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.

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The Company’s Managed Assets Division is primarily responsible for the valuation of Level 3 inputs for other real estate owned. At ~~June 30, 2022,~~March 31, 2023, the Company had ~~$6.8~~$9.4 million of other real estate owned classified as Level 3. The unobservable input applied to other real estate owned relates to the 10% reduction to the appraisal value representing the estimated cost of sale of the foreclosed property. A higher discount for the estimated cost of sale results in a decreased carrying value.

The valuation techniques and significant unobservable inputs used to measure both recurring and non-recurring Level 3 fair value measurements at ~~June 30, 2022~~March 31, 2023 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

(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

113,485

Bond pricing

Equivalent rating

BBB-AA+

N/A

Increase

Municipal securities

112,257

Bond pricing

Equivalent rating

BBB-AA+

N/A

Increase

Mortgage loans held-for-sale

88,963

Discounted cash flows

Discount rate

4.80%

Decrease

Mortgage loans held-for-sale

44,250

Discounted cash flows

Discount rate

5.96%

Decrease

Credit discount

0% - 8%

0.29%

Decrease

Credit discount

0% - 10%

0.22%

Decrease

Loans held-for-investment

84,798

Discounted cash flows

Discount rate

4.80% - 5.38%

4.86%

Decrease

Loans held-for-investment

69,493

Discounted cash flows

Discount rate

5.96% - 6.25%

5.98%

Decrease

Credit discount

0% - 8%

0.65%

Decrease

Credit discount

0% - 13%

0.86%

Decrease

Constant prepayment rate (CPR) - current loans

6.82%

Decrease

Constant prepayment rate (CPR) - current loans

6.92%

Decrease

Average life - delinquent loans (in years)

1.0 year - 11.0 years

2.5 years

Decrease

Average life - delinquent loans (in years)

1.2 years - 10.2 years

5.4 years

Decrease

MSRs

212,664

Discounted cash flows

Discount rate

7% - 19%

9.80%

Decrease

MSRs

224,470

Discounted cash flows

Discount rate

3% - 33%

10.33%

Decrease

Constant prepayment rate (CPR)

0% - 90%

6.82%

Decrease

Constant prepayment rate (CPR)

0% - 100%

6.92%

Decrease

Cost of servicing

$70 - $200

Decrease

Cost of servicing

$70 - $200

Decrease

Cost of servicing - delinquent

$200 - 1,000

318

Decrease

Cost of servicing - delinquent

$200 - 1,000

403

Decrease

Derivatives

6,649

Discounted cash flows

Pull-through rate

22% - 100%

84.9

Increase

Derivatives

5,356

Discounted cash flows

Pull-through rate

31% - 100%

82.06

Increase

Measured at fair value on a non-recurring basis:

Individually assessed loans - foreclosure probable and collateral-dependent

59,921

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

Individually assessed loans - foreclosure probable and collateral-dependent

71,622

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

Other real estate owned

6,839

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

Other real estate owned

9,361

Appraisal value

Appraisal adjustment - cost of sale

10%

10.00%

Decrease

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


		At June 30, 2022				At December 31, 2021				At June 30, 2021					At March 31, 2023				At December 31, 2022				At March 31, 2022
		Carrying		Fair		Carrying		Fair		Carrying		Fair			Carrying		Fair		Carrying		Fair		Carrying		Fair
(In thousands)	(In thousands)	Value		Value		Value		Value		Value		Value		(In thousands)	Value		Value		Value		Value		Value		Value
Financial Assets:	Financial Assets:													Financial Assets:
Cash and cash equivalents	Cash and cash equivalents	$	498,947	$	498,947	$	411,205	$	411,205	$	435,009	$	435,009	Cash and cash equivalents	$	445,986	$	445,986	$	490,966	$	490,966	$	462,572	$	462,572
Securities sold under agreements to repurchase with original maturities exceeding three months	Securities sold under agreements to repurchase with original maturities exceeding three months	475,000		475,000		700,000		700,000		—		—		Securities sold under agreements to repurchase with original maturities exceeding three months	—		—		—		—		700,000		700,000
Interest-bearing deposits with banks	Interest-bearing deposits with banks	3,266,541		3,266,541		5,372,603		5,372,603		4,707,415		4,707,415		Interest-bearing deposits with banks	1,563,578		1,563,578		1,988,719		1,988,719		4,013,597		4,013,597
Available-for-sale securities	Available-for-sale securities	2,970,121		2,970,121		2,327,793		2,327,793		2,188,608		2,188,608		Available-for-sale securities	3,259,845		3,259,845		3,243,017		3,243,017		2,998,898		2,998,898
Held-to-maturity securities	Held-to-maturity securities	3,413,469		2,900,269		2,942,285		2,900,694		2,498,232		2,480,232		Held-to-maturity securities	3,606,391		2,976,198		3,640,567		2,949,821		3,435,729		3,146,427
Trading account securities	Trading account securities	1,010		1,010		1,061		1,061		2,667		2,667		Trading account securities	102		102		1,127		1,127		852		852
Equity securities with readily determinable fair value	Equity securities with readily determinable fair value	93,295		93,295		90,511		90,511		86,316		86,316		Equity securities with readily determinable fair value	111,943		111,943		110,365		110,365		92,689		92,689
FHLB and FRB stock, at cost	FHLB and FRB stock, at cost	136,138		136,138		135,378		135,378		136,625		136,625		FHLB and FRB stock, at cost	244,957		244,957		224,759		224,759		136,163		136,163
Brokerage customer receivables	Brokerage customer receivables	21,527		21,527		26,068		26,068		23,093		23,093		Brokerage customer receivables	16,042		16,042		16,387		16,387		22,888		22,888
Mortgage loans held-for-sale, at fair value	Mortgage loans held-for-sale, at fair value	513,232		513,232		817,912		817,912		984,994		984,994		Mortgage loans held-for-sale, at fair value	302,493		302,493		299,935		299,935		606,545		606,545
Loans held-for-investment, at fair value	Loans held-for-investment, at fair value	122,757		122,757		38,598		38,598		55,340		55,340		Loans held-for-investment, at fair value	202,143		202,143		179,932		179,932		57,984		57,984
Loans held-for-investment, at amortized cost	Loans held-for-investment, at amortized cost	36,930,346		36,165,838		34,750,506		35,297,878		32,855,847		32,831,405		Loans held-for-investment, at amortized cost	39,363,328		38,577,761		39,016,553		38,018,678		35,222,563		35,989,840
Nonqualified deferred compensation assets	Nonqualified deferred compensation assets	13,936		13,936		16,240		16,240		16,590		16,590		Nonqualified deferred compensation assets	14,379		14,379		13,899		13,899		15,447		15,447
Derivative assets	Derivative assets	183,925		183,925		165,008		165,008		212,380		212,380		Derivative assets	274,004		274,004		296,848		296,848		153,534		153,534
Accrued interest receivable and other	Accrued interest receivable and other	283,626		283,626		268,921		268,921		270,087		270,087		Accrued interest receivable and other	417,066		417,066		379,719		379,719		278,873		278,873
Total financial assets	Total financial assets	$	48,923,870	$	47,646,162	$	48,064,089	$	48,569,870	$	44,473,203	$	44,430,761	Total financial assets	$	49,822,257	$	48,406,497	$	49,902,793	$	48,214,172	$	48,198,334	$	48,676,309
Financial Liabilities	Financial Liabilities													Financial Liabilities
Non-maturity deposits	Non-maturity deposits	$	38,917,105	$	38,917,105	$	38,126,796	$	38,126,796	$	34,440,741	$	34,440,741	Non-maturity deposits	$	37,366,959	$	37,366,959	$	38,167,409	$	38,167,409	$	38,483,327	$	38,483,327
Deposits with stated maturities	Deposits with stated maturities	3,676,221		3,683,452		3,968,789		3,965,372		4,363,875		4,352,116		Deposits with stated maturities	5,351,252		4,970,556		4,735,135		4,085,058		3,735,995		3,735,750
FHLB advances	FHLB advances	1,166,071		1,116,429		1,241,071		1,186,280		1,241,071		1,161,457		FHLB advances	2,316,071		2,255,580		2,316,071		2,219,983		1,241,071		1,193,080
Other borrowings	Other borrowings	482,787		483,592		494,136		494,670		518,493		518,493		Other borrowings	583,548		555,615		596,614		569,342		482,516		483,202
Subordinated notes	Subordinated notes	437,162		434,809		436,938		472,684		436,719		476,683		Subordinated notes	437,493		410,827		437,392		409,395		437,033		446,711
Junior subordinated debentures	Junior subordinated debentures	253,566		281,085		253,566		212,226		253,566		206,614		Junior subordinated debentures	253,566		252,663		253,566		253,405		253,566		268,913
Derivative liabilities	Derivative liabilities	167,857		167,857		123,000		123,000		193,439		193,439		Derivative liabilities	274,432		274,432		338,078		338,078		122,107		122,107
Accrued interest payable	Accrued interest payable	8,233		8,233		9,304		9,304		10,551		10,551		Accrued interest payable	42,015		42,015		22,176		22,176		14,269		14,269
Total financial liabilities	Total financial liabilities	$	45,109,002	$	45,092,562	$	44,653,600	$	44,590,332	$	41,458,455	$	41,360,094	Total financial liabilities	$	46,625,336	$	46,128,647	$	46,866,441	$	46,064,846	$	44,769,884	$	44,747,359

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, municipal bonds issued by various municipal government entities primarily located in the Chicago metropolitan area and southern Wisconsin and mortgage-backed securities. 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

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on carrying values. The fair value of residential loans is based on secondary market sources for securities backed by similar loans, adjusted for differences in loan characteristics. The fair value for other fixed rate loans is estimated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect credit and interest rate risks inherent in the loan. In accordance with ASC 820, the Company has categorized loans as a Level 3 fair value measurement.

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

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

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

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

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

In May 2022, the Company’s shareholders approved the 2022 Stock Incentive Plan (“the 2022 Plan”) which provides for the issuance of up to 1,200,000 shares of common stock plus any shares of common stock that were available for awards under the 2015 Plan as of the effective date of the 2022 Plan. The 2022 Plan replaced the 2015 Stock Incentive Plan (“the 2015 Plan”), and similarly, the 2015 Plan replaced the 2007 Stock Incentive Plan (“the 2007 Plan”) and the 2007 Plan replaced the 1997 Stock Incentive Plan (“the 1997 Plan”). The 2022 Plan, 2015 Plan, 2007 Plan and 1997 Plan are collectively referred to as “the Plans.” The 2022 Plan has substantially similar terms to the predecessor plans. 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 2022 Plan. All grants made after the approval of the 2022 Plan are made pursuant to the 2022 Plan. As of ~~June 30, 2022,~~March 31, 2023, approximately ~~1,596,000~~1.2 million shares were available for future grants, assuming the maximum number of shares are issued for the performance awards ~~outstanding. The~~outstanding, approved under the Company Stock Incentive Plans ~~cover substantially all employees of Wintrust. The Compensation Committee~~(“the Plans”). Descriptions of the ~~Board~~Plans are included in Note (18) “Stock Compensation Plans and Other Employee Benefit Plans” of ~~Directors administers all stock-based compensation programs and authorizes all awards granted pursuant to~~ the ~~Plans.~~2022 Form 10-K.

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

Beginning in 2011, the Company has awarded annual grants under the Long-Term Incentive Program (“LTIP”), which is administered under the Plans. The LTIP is designed in part to align the interests of management with the interests of shareholders, foster retention, create a long-term focus based on sustainable results and provide participants with a target long-term incentive opportunity. LTIP grants in 2022 and 2021 consisted of a combination of performance-based stock awards with a performance condition metric, performance-based stock awards with a market condition metric and time-vested restricted shares, and in 2020 consisted of a combination of performance-based stock awards and performance-based cash awards (both with a performance condition metric) and time-vested restricted shares. LTIP grants from 2017 through 2019 consisted of a combination of performance-based stock awards and performance-based cash awards, and 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

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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.

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. 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 ~~$7.0~~$8.3 million in the ~~second~~first quarter of ~~2022~~2023 and ~~$3.3~~$7.9 million in the ~~second~~first quarter of ~~2021, and $14.9 million and $6.2 million in the six month periods ended June 30, 2022 and 2021, respectively.~~2022.

A summary of the ~~Company’s~~Plans’ stock option activity for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and March 31, 2022 ~~and June 30, 2021~~ is presented below:


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, 2022		193,447	$	41.62
Outstanding at January 1, 2023								Outstanding at January 1, 2023	68,093	$	41.14
Granted	Granted	—	—					Granted	—	—
Exercised	Exercised	(83,507)	42.39					Exercised	(54,218)	40.87
Forfeited or canceled	Forfeited or canceled	(1,430)	40.87					Forfeited or canceled	—	—
Outstanding at June 30, 2022		108,510	$	41.04	1.2	$	4,244
Exercisable at June 30, 2022		108,510	$	41.04	1.2	$	4,244
Outstanding at March 31, 2023								Outstanding at March 31, 2023	13,875	$	42.18	4.7	$	427
Exercisable at March 31, 2023								Exercisable at March 31, 2023	13,875	$	42.18	4.7	$	427


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, 2021		520,663	$	42.47
Outstanding at January 1, 2022								Outstanding at January 1, 2022	193,447	$	41.62

Granted	Granted	—	—					Granted	—	—
Exercised	Exercised	(237,892)	43.05					Exercised	(79,376)	42.32
Forfeited or canceled	Forfeited or canceled	(590)	46.86					Forfeited or canceled	(771)	40.87
Outstanding at June 30, 2021		282,181	$	41.98	1.7	$	9,496
Exercisable at June 30, 2021		280,632	$	41.95	1.6	$	9,453
Outstanding at March 31, 2022								Outstanding at March 31, 2022	113,300	$	41.13	1.4	$	5,869
Exercisable at March 31, 2022								Exercisable at March 31, 2022	113,300	$	41.13	1.4	$	5,869

(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~~Company’s stock.

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The aggregate intrinsic value of options exercised during the ~~six~~three months ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and June 30, 2021,~~ was ~~$4.7~~$2.5 million and ~~$7.6~~$4.5 million, respectively. Cash received from option exercises under the Plans for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and March 31, 2022 ~~and June 30, 2021~~ was ~~$3.5~~$2.2 million and ~~$10.2~~$3.4 million, respectively.

A summary of the Plans’ restricted share activity for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and March 31, 2022 ~~and June 30, 2021~~ is presented below:


		Six months ended June 30, 2022			Six months ended June 30, 2021				Three months ended March 31, 2023			Three months ended March 31, 2022
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	476,813	$	61.33	234,794	$	59.02	Outstanding at January 1	610,155	$	73.21	476,813	$	61.33
Granted	Granted	204,043	96.95		261,498	63.01		Granted	242,576	89.82		194,849	97.30
Vested and issued	Vested and issued	(56,380)	64.44		(10,022)	75.15		Vested and issued	(96,649)	64.14		(52,465)	65.42
Forfeited or canceled	Forfeited or canceled	(9,722)	72.87		(7,525)	63.76		Forfeited or canceled	(1,968)	77.37		(3,615)	66.37
Outstanding at June 30		614,754	$	72.68	478,745	$	60.79
Vested, but not issuable at June 30		96,400	$	52.83	94,729	$	52.30
Outstanding at March 31								Outstanding at March 31	754,114	$	79.70	615,582	$	72.34
Vested, but deferred, at March 31								Vested, but deferred, at March 31	97,888	$	53.30	95,806	$	52.67

A summary of the Plans’ performance-based stock award activity, based on the target level of the awards, for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and March 31, 2022 ~~and June 30, 2021~~ is presented below:

Six months ended June 30, 2022 Six months ended June 30, 2021
Performance-based Stock Common
Shares Weighted
Average
Grant-Date
Fair Value Common
Shares Weighted
Average
Grant-Date
Fair Value
Outstanding at January 1 557,255 $ 62.94 482,608 $ 71.15
Granted 160,326 97.16 207,620 58.93
Added by performance factor at vesting — — — —
Vested and issued — — — —
Expired, canceled or forfeited (163,803) 71.44 (131,287) 86.79
Outstanding at June 30 553,778 $ 70.34 558,941 $ 62.94
Vested, but deferred at June 30 35,424 $ 44.04 34,889 $ 43.41


	Three months ended March 31, 2023			Three months ended March 31, 2022
Performance-based Stock	Common Shares	Weighted Average Grant-Date Fair Value		Common Shares	Weighted Average Grant-Date Fair Value
Outstanding at January 1	545,379	$	70.30	557,255	$	62.94
Granted	185,514	92.48		159,202	97.21
Added by performance factor at vesting	23,161	63.64		—	—
Vested and issued	(178,203)	63.64		—	—
Forfeited or canceled	(2,301)	78.20		(159,952)	71.56
Outstanding at March 31	573,550	$	79.24	556,505	$	70.27
Vested, but deferred, at March 31	35,852	$	44.59	35,285	$	43.88

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~~(18)~~(16) ~~Shareholders’ Equity~~Accumulated Other Comprehensive Income or Loss and Earnings Per Share

~~Common Stock Offering~~

In June 2022, the Company sold a total of 3,450,000 shares of its common stock through a public offering. Net proceeds to the Company totaled approximately $285.7 million, net of estimated issuance costs.

~~Series D Preferred Stock~~

In June 2015, the Company issued and sold 5,000,000 shares of fixed-to-floating rate 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 from October 15, 2020 to, but excluding, July 15, 2025, and from (and including) July 15, 2025 at a floating rate equal to the Five-Year Treasury Rate (as defined in the certificate of designations for the Series E Preferred Stock) plus 6.507%.

~~Other~~

At the January 2022 meeting of the board of directors of the Company (the “Board of Directors”), a quarterly cash dividend of $0.34 per share ($1.36 on an annualized basis) was declared. It was paid on February 24, 2022 to shareholders of record as of February 10, 2022. At the April 2022 Board of Directors meeting, a quarterly cash dividend of $0.34 per share ($1.36 on an annualized basis) was declared. It was paid on May 26, 2022 to shareholders of record as of May 12, 2022.

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Accumulated Other Comprehensive Income ~~(Loss)~~or Loss

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

Accumulated
Unrealized
Gains (Losses)
on Securities Accumulated
Unrealized Gains (Losses) on
Derivative
Instruments Accumulated
Foreign
Currency
Translation
Adjustments Total
Accumulated
Other
Comprehensive
Income (Loss)
Balance at April 1, 2022 $ (142,604) $ 56,060 $ (29,455) $ (115,999)
Other comprehensive (loss) income during the period, net of tax, before reclassifications (122,154) 999 (6,593) (127,748)
Amount reclassified from accumulated other comprehensive (loss) income into net income, net of tax — 742 — 742
Amount reclassified from accumulated other comprehensive (loss) income related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax (32) — — (32)
Net other comprehensive (loss) income during the period, net of tax $ (122,186) $ 1,741 $ (6,593) $ (127,038)
Balance at June 30, 2022 $ (264,790) $ 57,801 $ (36,048) $ (243,037)
Balance at January 1, 2022 $ 8,724 $ 27,111 $ (31,743) $ 4,092
Other comprehensive (loss) income during the period, net of tax, before reclassifications (273,268) 26,022 (4,305) (251,551)
Amount reclassified from accumulated other comprehensive (loss) income into net income, net of tax (183) 4,668 — 4,485
Amount reclassified from accumulated other comprehensive (loss) income related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax (63) — — (63)
Net other comprehensive (loss) income during the period, net of tax $ (273,514) $ 30,690 $ (4,305) $ (247,129)
Balance at June 30, 2022 $ (264,790) $ 57,801 $ (36,048) $ (243,037)
Balance at April 1, 2021 $ 26,022 $ 14,167 $ (30,085) $ 10,104
Other comprehensive income (loss) during the period, net of tax, before reclassifications 4,628 (11,483) 2,309 (4,546)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax (427) 5,036 — 4,609
Amount reclassified from accumulated other comprehensive income (loss) related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax (34) — — (34)
Net other comprehensive income (loss) during the period, net of tax $ 4,167 $ (6,447) $ 2,309 $ 29
Balance at June 30, 2021 $ 30,189 $ 7,720 $ (27,776) $ 10,133
Balance at January 1, 2021 $ 70,737 $ (23,090) $ (32,265) $ 15,382
Other comprehensive (loss) income during the period, net of tax, before reclassifications (39,891) 20,862 4,489 (14,540)
Amount reclassified from accumulated other comprehensive income (loss) into net income, net of tax (581) 9,948 — 9,367
Amount reclassified from accumulated other comprehensive income (loss) related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax (76) — — (76)
Net other comprehensive (loss) income during the period, net of tax $ (40,548) $ 30,810 $ 4,489 $ (5,249)
Balance at June 30, 2021 $ 30,189 $ 7,720 $ (27,776) $ 10,133


(In thousands)	Accumulated Unrealized (Losses) Gains on Securities		Accumulated Unrealized Gains (Losses) on Derivative Instruments		Accumulated Foreign Currency Translation Adjustments		Total Accumulated Other Comprehensive (Loss) Income
Balance at January 1, 2023	$	(386,057)	$	7,381	$	(48,960)	$	(427,636)
Other comprehensive income during the period, net of tax, before reclassifications	34,503		22,808		710		58,021
Amount reclassified from accumulated other comprehensive loss into net income, net of tax	(409)		2,620		—		2,211
Amount reclassified from accumulated other comprehensive income or loss related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(32)		—		—		(32)
Net other comprehensive income during the period, net of tax	$	34,062	$	25,428	$	710	$	60,200
Balance at March 31, 2023	$	(351,995)	$	32,809	$	(48,250)	$	(367,436)



Balance at January 1, 2022	$	8,724	$	27,111	$	(31,743)	$	4,092
Other comprehensive (loss) income during the period, net of tax, before reclassifications	(151,114)		25,023		2,288		(123,803)
Amount reclassified from accumulated other comprehensive income or loss into net income, net of tax	(183)		3,926		—		3,743
Amount reclassified from accumulated other comprehensive loss related to amortization of unrealized gains on investment securities transferred to held-to-maturity from available-for-sale, net of tax	(31)		—		—		(31)
Net other comprehensive (loss) income during the period, net of tax	$	(151,328)	$	28,949	$	2,288	$	(120,091)
Balance at March 31, 2022	$	(142,604)	$	56,060	$	(29,455)	$	(115,999)


(In thousands)	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the
Details Regarding the Component of Accumulated Other Comprehensive Income (Loss)	Three Months Ended				Impacted Line on the Consolidated Statements of Income
	March 31,
	2023		2022
Accumulated unrealized gains on securities
Gains included in net income	$	560	$	250		Gains (losses) on investment securities, net
	560		250			Income before taxes
Tax effect	(151)		(67)			Income tax expense
Net of tax	$	409	$	183		Net income

Accumulated unrealized gains on derivative instruments
Amount reclassified to interest income on loans	$	9,072	$	—		Interest on Loans
Amount reclassified to interest expense on deposits	$	(5,588)	$	4,819		Interest on deposits
Amount reclassified to interest expense on other borrowings	88		534			Interest on other borrowings

	(3,572)		(5,353)			Income before taxes
Tax effect	952		1,427			Income tax expense
Net of tax	$	(2,620)	$	(3,926)		Net income

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Amount Reclassified from Accumulated Other Comprehensive Income (Loss) for the
Details Regarding the Component of Accumulated Other Comprehensive Income (Loss) Three Months Ended Six Months Ended Impacted Line on the
Consolidated Statements of Income
June 30, June 30,
2022 2021 2022 2021
Accumulated unrealized gains on securities
Gains included in net income $ — $ 584 $ 250 $ 794 (Losses) gains on investment securities, net
— 584 250 794 Income before taxes
Tax effect — (157) (67) (213) Income tax expense
Net of tax $ — $ 427 $ 183 $ 581 Net income
Accumulated unrealized losses on derivative instruments
Amount reclassified to interest expense on deposits $ 657 $ 5,054 $ 5,476 $ 9,951 Interest on deposits
Amount reclassified to interest expense on other borrowings 355 653 889 1,322 Interest on other borrowings
Amount reclassified to interest expense on junior subordinated debentures — 1,159 — 2,289 Interest on junior subordinated debentures
(1,012) (6,866) (6,365) (13,562) Income before taxes
Tax effect 270 1,830 1,697 3,614 Income tax expense
Net of tax $ (742) $ (5,036) $ (4,668) $ (9,948) Net income

Earnings per Share

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


			Three Months Ended				Six Months Ended							Three Months Ended
(In thousands, except per share data)	(In thousands, except per share data)		June 30, 2022		June 30, 2021			June 30, 2022		June 30, 2021		(In thousands, except per share data)			March 31, 2023		March 31, 2022
Net income	Net income		$	94,513	$	105,109		$	221,904	$	258,257	Net income			$	180,198	$	127,391
Less: Preferred stock dividends	Less: Preferred stock dividends		6,991		6,991			13,982		13,982		Less: Preferred stock dividends			6,991		6,991
Net income applicable to common shares	Net income applicable to common shares	(A)	$	87,522	$	98,118		$	207,922	$	244,275	Net income applicable to common shares	(A)		$	173,207	$	120,400

Weighted average common shares outstanding	Weighted average common shares outstanding	(B)	58,063		57,049			57,632		56,977		Weighted average common shares outstanding	(B)		60,950		57,196
Effect of dilutive potential common shares	Effect of dilutive potential common shares											Effect of dilutive potential common shares
Common stock equivalents	Common stock equivalents		775		726			823		691		Common stock equivalents			873		862
Weighted average common shares and effect of dilutive potential common shares	Weighted average common shares and effect of dilutive potential common shares	(C)	58,838		57,775			58,455		57,668		Weighted average common shares and effect of dilutive potential common shares	(C)		61,823		58,058
Net income per common share:	Net income per common share:											Net income per common share:
Basic	Basic	(A/B)	$	1.51	$	1.72		$	3.61	$	4.29	Basic	(A/B)		$	2.84	$	2.11
Diluted	Diluted	(A/C)	$	1.49	$	1.70		$	3.56	$	4.24	Diluted	(A/C)		$	2.80	$	2.07

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 of inclusion would either reduce the loss per share or increase the income per share.

At the January 2023 meeting of the board of directors of the Company (the “Board of Directors”), a quarterly cash dividend of $0.40 per share ($1.60 on an annualized basis) was declared. It was paid on February 23, 2023 to shareholders of record as of February 9, 2023.

(17) Subsequent Events

On April 3, 2023, the Company completed its acquisition of Rothschild & Co Asset Management US Inc. and Rothschild & Co Risk Based Investments LLC (collectively, “Rothschild & Co Asset Management U.S.”), from Rothschild & Co North America Inc. The acquired entities were merged into the Company’s subsidiary, Great Lakes Advisors, LLC.

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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 ~~June 30, 2022~~March 31, 2023 compared with December 31, ~~2021~~2022 and ~~June 30, 2021,~~March 31, 2022, and the results of operations for the three ~~and six~~ month periods ended ~~June 30,~~March 31, 2023 and March 31, 2022, ~~and June 30, 2021,~~ 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, ~~2021~~2022 (“~~2021~~2022 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 and offers a full array of wealth management services, primarily to customers 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. Although vaccines and related boosters are now being widely distributed, the COVID-19 pandemic, including the continued emergence of variant strains of the virus, may continue to impact the Company's future results.

Following two years during which designated Company employees worked almost entirely remotely, at present, the majority of the Company’s workforce has discontinued fully remote work and has transitioned back to working on site, for all or a portion of the workweek, where enhanced health and safety measures have been implemented.

Since March of 2020, the Company took a number of actions to help ensure that it had 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”). Additionally, in June 2022, the Company sold a total of 3,450,000 shares of its common stock through a public offering. Net proceeds to the Company totaled approximately $285.7 million, net of estimated issuance costs. The Company believes that it currently has adequate liquidity and capital. However, we will continue to prudently evaluate available liquidity sources if necessary.

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 was 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 June 30, 2021, the Company secured authorization from the SBA and funded over 19,400 PPP loans, which are forgivable under certain circumstances, with a carrying balance of approximately $4.8 billion. From the loans originated under the program, the Company generated net fees of $146.0 million, of which $143.9 million has been recognized through June 30, 2022. As of June 30, 2022 the carrying balance of such loans was reduced to approximately $82.1 million primarily resulting from forgiveness by the SBA.

Although many restrictive measures related to the COVID-19 pandemic have been lifted and associated economic conditions appear to have stabilized, we continue to monitor the impact of COVID-19 closely, so that the Company can implement necessary responses as circumstances evolve. The extent to which the COVID-19 pandemic, and its impact on the economy and our customers, will impact our operations and financial conditions remains uncertain. Please refer to Part II, Item 1A, “Risk Factors” of this Form 10-Q for additional information.

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~~Second~~First Quarter Highlights

The Company recorded net income of ~~$94.5~~$180.2 million for the ~~second~~first quarter of ~~2022~~2023 compared to ~~$105.1~~$127.4 million in the ~~second~~first quarter of ~~2021.~~2022. The results for the ~~second~~first quarter of ~~2022~~2023 demonstrate ~~continued momentum on our operating strengths~~the Company’s ability to navigate industry disruptions during the period with stable deposits due to the Company’s strong deposit franchise and ~~core fundamentals, including~~balanced business model. Other key drivers included continued expansion of net interest income as a result of ~~growth~~benefiting from the recent rise in ~~the~~interest rates contributing to record net ~~interest margin, significant organic loan growth diversified across the portfolio~~income and ~~historically~~continued good credit quality metrics. Additionally, volatility in the interest rate environment resulted in a significant negative fair value adjustments to the Company’s available-for-sale investment securities portfolio and a corresponding significant negative adjustment to accumulated other comprehensiveComprehensive income or loss. As a result, comprehensive income (loss) totaled comprehensive losses of $32.5 million for the second quarter of 2022 compared to comprehensive income of $105.1 million for the second quarter of 2021. Comprehensive loss includes 1) net income as presented on the Company’s Consolidated Statements of Income and 2) other comprehensive income or loss from unrealized gains and losses on the Company’s available-for-sale investment securities portfolios and derivative contracts designated as cash flow hedges as well as foreign currency translation adjustments. Comprehensive income totaled $240.4 million for the first quarter of 2023 compared to $7.3 million for the first quarter of 2022.

The Company increased its loan portfolio from ~~$32.9~~$35.3 billion at ~~June 30, 2021~~March 31, 2022 and ~~$34.8~~$39.2 billion at December 31, ~~2021~~2022 to ~~$37.1~~$39.6 billion at ~~June 30, 2022.~~March 31, 2023. The increase in the current period compared to the prior periods was primarily a result of organic growth in several portfolios, including the commercial, industrial and other, ~~(excluding PPP loans),~~ commercial real estate, residential real estate loans held for investment ~~property and casualty 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 ~~6 - Loans~~(5) “Loans” of the Consolidated Financial Statements in Item 1 of this report.

The Company recorded net interest income of ~~$337.8~~$458.0 million in the ~~second~~first quarter of ~~2022~~2023 compared to ~~$279.6~~$299.3 million in the ~~second~~first quarter of ~~2021.~~2022. This increase in net interest income recorded in the ~~second~~first quarter of ~~2022~~2023 compared to the ~~second~~first quarter of ~~2021~~2022 resulted primarily from growth in earning assets, specifically a ~~$2.8~~$4.3 billion increase in average loans, and ana significant increase in net interest ~~margin.~~margin, partially offset by the impact of two fewer days in the quarter. Net interest margin of ~~2.92% (2.93%~~3.81% (3.83% on a fully taxable-equivalent basis, non-GAAP) in the ~~second~~first quarter of ~~2022~~2023 compared favorably to ~~2.62% (2.63%~~2.60% (2.61% on a fully taxable-equivalent basis, non-GAAP) in the ~~second~~first quarter of ~~2021,~~2022, primarily due to ~~lower repricing~~higher yields on ~~time deposits and a shift in~~ earning ~~asset mix through liquidity deployment with increasing~~assets, most notably loans ~~and investment securities and decreasing levels of lower yielding liquidity management assets~~held-for-investment, as market interest rates increased (see ~~"Net~~“Net Interest ~~Income"~~Income” for further detail).

Non-interest income totaled ~~$102.9~~$107.8 million in the ~~second~~first quarter of ~~2022~~2023 compared to ~~$129.4~~$162.8 million in the ~~second~~first quarter of ~~2021.~~2022. This decrease was primarily due to ~~decreases in~~lower mortgage banking revenues ~~due~~related to declining origination volumes ~~declining from historically elevated levels experienced in early 2021~~ as ~~well as losses on investment securities~~a result of rising interest rates reducing refinance incentives for borrowers (see “Non-Interest Income” for further detail).

Non-interest expense totaled ~~$288.7~~$299.2 million in the ~~second~~first quarter of ~~2022,~~2023, an increase of ~~$8.6~~$14.9 million, or 3%5%, compared to the ~~second~~first quarter of ~~2021. The~~2022. This increase compared to the ~~second~~first quarter of ~~2021~~2022 was primarily attributable to ~~higher advertising~~increased salaries, and ~~marketing expense related to seasonal media advertising and sponsorship costs and~~higher miscellaneous expense including interest payments made on collateral received for swaps and call options totaling $2.0 million and a $2.1 million increase in postage, partially offset by ~~lower~~decreased commissions ~~due to lower~~and incentive compensation and reduced loan expenses in line with declining mortgage ~~loan originations~~production in the first quarter of 2023 (see “Non-Interest Expense” for further detail).

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Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during the ~~second~~first quarter of ~~2022,~~2023, the Company continued its practice of maintaining appropriate funding capacity to provide the Company with adequate liquidity for its ongoing operations. In this regard, the Company benefited from its strong deposit base, a liquid short-term investment portfolio and its access to funding from a variety of external funding sources. ~~At June 30, 2022, the Company had approximately $3.8 billion in overnight liquid funds~~See “Deposits” and ~~interest-bearing deposits with banks.~~“Other Funding Sources” for additional information regarding liquidity sources.

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RESULTS OF OPERATIONS

Earnings Summary

The Company’s key operating measures and growth rates for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, as compared to the same period last year, are shown below:

Three months ended
(Dollars in thousands, except per share data) June 30,
2022 June 30,
2021 Percentage (%) or
Basis Point (bp) Change
Net income $ 94,513 $ 105,109 (10) %
Pre-tax income, excluding provision for credit losses (non-GAAP) (1)
152,078 128,851 18
Pre-tax income, excluding provision for credit losses, adjusted for changes in fair value of MSRs and early buy-out loans guaranteed by U.S. government agencies (non-GAAP) (1)
151,633 134,391 13
Net income per common share—Diluted 1.49 1.70 (12)
Net revenue (2)
440,746 408,963 8
Net interest income 337,804 279,590 21
Net interest margin 2.92 % 2.62 % 30 bps
Net interest margin - fully taxable-equivalent (non-GAAP) (1)
2.93 2.63 30
Net overhead ratio (3)
1.51 1.32 19
Return on average assets 0.77 0.92 (15)
Return on average common equity 8.53 10.24 (171)
Return on average tangible common equity (non-GAAP) (1)
10.36 12.62 (226)


		Six months ended									Three months ended
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	June 30, 2022			June 30, 2021			Percentage (%) or Basis Point (bp) Change		(Dollars in thousands, except per share data)	March 31, 2023			March 31, 2022			Percentage (%) or Basis Point (bp) Change
Net income	Net income	$	221,904		$	258,257		(14)	%	Net income	$	180,198		$	127,391		41	%
Pre-tax income, excluding provision for credit losses (non-GAAP) (1)	Pre-tax income, excluding provision for credit losses (non-GAAP) (1)	329,864			290,363			14		Pre-tax income, excluding provision for credit losses (non-GAAP) (1)	266,595			177,786			50
Pre-tax income, excluding provision for credit losses, adjusted for changes in fair value of MSRs and early buy-out loans guaranteed by U.S. government agencies (non-GAAP) (1)		286,054			277,858			3

Net income per common share—Diluted	Net income per common share—Diluted	3.56			4.24			(16)		Net income per common share—Diluted	2.80			2.07			35
Net revenue (2)	Net revenue (2)	902,830			857,364			5		Net revenue (2)	565,764			462,084			22
Net interest income	Net interest income	637,098			541,485			18		Net interest income	457,995			299,294			53
Net interest margin	Net interest margin	2.76		%	2.58		%	18	bps	Net interest margin	3.81		%	2.60		%	121	bps
Net interest margin - fully taxable equivalent (non-GAAP) (1)		2.77			2.59			18
Net interest margin - fully taxable-equivalent (non-GAAP) (1)										Net interest margin - fully taxable-equivalent (non-GAAP) (1)	3.83			2.61			122
Net overhead ratio (3)	Net overhead ratio (3)	1.25			1.11			14		Net overhead ratio (3)	1.49			1.00			49

Return on average assets	Return on average assets	0.91			1.15			(24)		Return on average assets	1.40			1.04			36
Return on average common equity	Return on average common equity	10.22			12.97			(275)		Return on average common equity	15.67			11.94			373
Return on average tangible common equity (non-GAAP) (1)	Return on average tangible common equity (non-GAAP) (1)	12.40			15.99			(359)		Return on average tangible common equity (non-GAAP) (1)	18.55			14.48			407
At end of period	At end of period									At end of period
Total assets	Total assets	$	50,969,332		$	46,738,450		9	%	Total assets	$	52,873,511		$	50,250,661		5	%
Total loans, excluding loans held-for-sale	Total loans, excluding loans held-for-sale	37,053,103			32,911,187			13		Total loans, excluding loans held-for-sale	39,565,471			35,280,547			12
Total loans, including loans held-for-sale	Total loans, including loans held-for-sale	37,566,335			33,896,181			11		Total loans, including loans held-for-sale	39,867,964			35,887,092			11
Total deposits	Total deposits	42,593,326			38,804,616			10		Total deposits	42,718,211			42,219,322			1
Total shareholders’ equity	Total shareholders’ equity	4,727,623			4,339,011			9		Total shareholders’ equity	5,015,506			4,492,256			12

Book value per common share (1)	Book value per common share (1)	$	71.06		$	68.81		3		Book value per common share (1)	$	75.24		$	71.26		6
Tangible common book value per share (1)	Tangible common book value per share (1)	59.87			56.92			5		Tangible common book value per share (1)	64.22			59.34			8
Market price per common share	Market price per common share	80.15			75.63			6		Market price per common share	72.95			92.93			(22)

Allowance for loan and unfunded lending-related commitment losses to total loans	Allowance for loan and unfunded lending-related commitment losses to total loans	0.84		%	0.92		%	(8)	bps	Allowance for loan and unfunded lending-related commitment losses to total loans	0.95		%	0.85		%	10	bps

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

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

(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 ~~pre-tax income, excluding provision for credit losses~~ and pre-tax income, excluding provision for credit ~~losses, adjusted for changes in the fair value of MSRs and early buy-out loans guaranteed by U.S. government agencies.~~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~~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.

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Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis 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 ~~and pre-tax income, excluding provision for credit losses, adjusted for changes in the fair value of MSRs and early buy-out loans guaranteed by U.S. government agencies,~~ as a useful ~~measurements~~measurement of the 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 Six Months Ended
June 30, March 31, June 30, June 30, June 30,
(Dollars and shares in thousands) 2022 2021 2021 2022 2021
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:
(A) Interest Income (GAAP) $ 371,968 $ 328,252 $ 319,579 $ 700,220 $ 625,048
Taxable-equivalent adjustment:
- Loans 568 427 415 995 799
- Liquidity management assets 472 465 494 937 994
- Other earning assets 1 2 — 3 —
(B) Interest Income (non-GAAP) $ 373,009 $ 329,146 $ 320,488 $ 702,155 $ 626,841
(C) Interest Expense (GAAP) 34,164 28,958 39,989 63,122 83,563
(D) Net Interest Income (GAAP) (A minus C) $ 337,804 $ 299,294 $ 279,590 $ 637,098 $ 541,485
(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C) $ 338,845 $ 300,188 $ 280,499 $ 639,033 $ 543,278
Net interest margin (GAAP) 2.92 % 2.60 % 2.62 % 2.76 % 2.58 %
Net interest margin, fully taxable-equivalent (non-GAAP) 2.93 2.61 2.63 2.77 2.59
(F) Non-interest income $ 102,942 $ 162,790 $ 129,373 $ 265,732 $ 315,879
(G) (Losses) gains on investment securities, net (7,797) (2,782) 1,285 (10,579) 2,439
(H) Non-interest expense 288,668 284,298 280,112 572,966 567,001
Efficiency ratio (H/(D+F-G)) 64.36 % 61.16 % 68.71 % 62.73 % 66.32 %
Efficiency ratio (non-GAAP) (H/(E+F-G)) 64.21 61.04 68.56 62.60 66.18
Reconciliation of Non-GAAP Tangible Common Equity Ratio:
Total shareholders’ equity (GAAP) $ 4,727,623 $ 4,492,256 $ 4,339,011
Less: Non-convertible preferred stock (GAAP) (412,500) (412,500) (412,500)
Less: Acquisition-related intangible assets (GAAP) (679,827) (682,101) (678,333)
(I) Total tangible common shareholders’ equity (non-GAAP) $ 3,635,296 $ 3,397,655 $ 3,248,178
(J) Total assets (GAAP) $ 50,969,332 $ 50,250,661 $ 46,738,450
Less: Acquisition-related intangible assets (GAAP) (679,827) (682,101) (678,333)
(K) Total tangible assets (non-GAAP) $ 50,289,505 $ 49,568,560 $ 46,060,117
Common equity to assets ratio (GAAP) (L/J) 8.5 % 8.1 % 8.4 %
Tangible common equity ratio (non-GAAP) (I/K) 7.2 6.9 7.1
Reconciliation of Non-GAAP Tangible Book Value per Common Share:
Total shareholders’ equity $ 4,727,623 $ 4,492,256 $ 4,339,011
Less: Preferred stock (412,500) (412,500) (412,500)
(L) Total common equity $ 4,315,123 $ 4,079,756 $ 3,926,511
(M) Actual common shares outstanding 60,722 57,253 57,067
Book value per common share (L/M) $ 71.06 $ 71.26 $ 68.81
Tangible book value per common share (non-GAAP) (I/M) 59.87 59.34 56.92

Reconciliation of Non-GAAP Return on Average Tangible Common Equity:
(N) Net income applicable to common shares $ 87,522 $ 120,400 $ 98,118 $ 207,922 $ 244,275
Add: Acquisition-related intangible asset amortization 1,579 1,609 2,039 3,188 4,046
Less: Tax effect of acquisition-related intangible asset amortization (445) (430) (553) (870) (1,068)
After-tax acquisition-related intangible asset amortization $ 1,134 $ 1,179 $ 1,486 $ 2,318 $ 2,978
(O) Tangible net income applicable to common shares (non-GAAP) $ 88,656 $ 121,579 $ 99,604 $ 210,240 $ 247,253
Total average shareholders' equity $ 4,526,110 $ 4,500,460 $ 4,256,778 $ 4,513,356 $ 4,211,088
Less: Average preferred stock (412,500) (412,500) (412,500) (412,500) (412,500)
(P) Total average common shareholders' equity $ 4,113,610 $ 4,087,960 $ 3,844,278 $ 4,100,856 $ 3,798,588
Less: Average acquisition-related intangible assets (681,091) (682,603) (679,535) (681,843) (680,166)
(Q) Total average tangible common shareholders’ equity (non-GAAP) $ 3,432,519 $ 3,405,357 $ 3,164,743 $ 3,419,013 $ 3,118,422
Return on average common equity, annualized (N/P) 8.53 % 11.94 % 10.24 % 10.22 % 12.97 %
Return on average tangible common equity, annualized (non-GAAP) (O/Q) 10.36 14.48 12.62 12.40 15.99

Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income, Adjusted for Changes in Fair Value of MSRs and Early Buy-out Loans Guaranteed by U.S. Government Agencies:
Income before taxes $ 131,661 $ 173,680 $ 144,150 $ 305,341 $ 351,009
Add: Provision for credit losses 20,417 4,106 (15,299) 24,523 (60,646)
Pre-tax income, excluding provision for credit losses (non-GAAP) $ 152,078 $ 177,786 $ 128,851 $ 329,864 $ 290,363
Less: Changes in fair value of MSRs and early buy-out loans guaranteed by U.S. government agencies (445) (43,365) 5,540 (43,810) (12,505)
Pre-tax income, excluding provision for credit losses, adjusted for changes in fair value of MSRs and early buy-out loans guaranteed by U.S. government agencies (non-GAAP) $ 151,633 $ 134,421 $ 134,391 $ 286,054 $ 277,858


	Three Months Ended
	March 31,			December 31,			March 31,
(Dollars and shares in thousands)	2023			2022			2022
Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio:
(A) Interest Income (GAAP)	$	639,690		$	580,745		$	328,252
Taxable-equivalent adjustment:
- Loans	1,872			1,594			427
- Liquidity management assets	551			538			465
- Other earning assets	4			1			2
(B) Interest Income (non-GAAP)	$	642,117		$	582,878		$	329,146
(C) Interest Expense (GAAP)	181,695			123,929			28,958
(D) Net Interest Income (GAAP) (A minus C)	$	457,995		$	456,816		$	299,294
(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C)	$	460,422		$	458,949		$	300,188

Net interest margin (GAAP)	3.81		%	3.71		%	2.60		%
Net interest margin, fully taxable-equivalent (non-GAAP)	3.83			3.73			2.61
(F) Non-interest income	$	107,769		$	93,839		$	162,790
(G) (Losses) gains on investment securities, net	1,398			(6,745)			(2,782)
(H) Non-interest expense	299,169			307,836			284,298
Efficiency ratio (H/(D+F-G))	53.01		%	55.23		%	61.16		%
Efficiency ratio (non-GAAP) (H/(E+F-G))	52.78			55.02			61.04

Reconciliation of Non-GAAP Tangible Common Equity Ratio:
Total shareholders’ equity (GAAP)	$	5,015,506		$	4,796,838		$	4,492,256

Less: Non-convertible preferred stock (GAAP)	(412,500)			(412,500)			(412,500)
Less: Acquisition-related intangible assets (GAAP)	(674,538)			(675,710)			(682,101)
(I) Total tangible common shareholders’ equity (non-GAAP)	$	3,928,468		$	3,708,628		$	3,397,655
(J) Total assets (GAAP)	$	52,873,511		$	52,949,649		$	50,250,661
Less: Acquisition-related intangible assets (GAAP)	(674,538)			(675,710)			(682,101)
(K) Total tangible assets (non-GAAP)	$	52,198,973		$	52,273,939		$	49,568,560
Common equity to assets ratio (GAAP) (L/J)	8.7		%	8.3		%	8.1		%
Tangible common equity ratio (non-GAAP) (I/K)	7.5			7.1			6.9

Reconciliation of Non-GAAP Tangible Book Value per Common Share:
Total shareholders’ equity	$	5,015,506		$	4,796,838		$	4,492,256
Less: Preferred stock	(412,500)			(412,500)			(412,500)
(L) Total common equity	$	4,603,006		$	4,384,338		$	4,079,756
(M) Actual common shares outstanding	61,176			60,794			57,253
Book value per common share (L/M)	$	75.24		$	72.12		$	71.26
Tangible book value per common share (non-GAAP) (I/M)	64.22			61.00			59.34

6246

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	Three Months Ended
	March 31,			December 31,			March 31,
(Dollars in thousands)	2023			2022			2022
Reconciliation of Non-GAAP Return on Average Tangible Common Equity:
(N) Net income applicable to common shares	$	173,207		$	137,826		$	120,400
Add: Acquisition-related intangible asset amortization	1,235			1,436			1,609
Less: Tax effect of acquisition-related intangible asset amortization	(321)			(370)			(430)
After-tax acquisition-related intangible asset amortization	$	914		$	1,066		$	1,179
(O) Tangible net income applicable to common shares (non-GAAP)	$	174,121		$	138,892		$	121,579
Total average shareholders’equity	$	4,895,271		$	4,710,856		$	4,500,460
Less: Average preferred stock	(412,500)			(412,500)			(412,500)
(P) Total average common shareholders’ equity	$	4,482,771		$	4,298,356		$	4,087,960
Less: Average acquisition-related intangible assets	(675,247)			(676,371)			(682,603)
(Q) Total average tangible common shareholders’ equity (non-GAAP)	$	3,807,524		$	3,621,985		$	3,405,357
Return on average common equity, annualized (N/P)	15.67		%	12.72		%	11.94		%
Return on average tangible common equity, annualized (non-GAAP) (O/Q)	18.55			15.21			14.48


Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income:
Income before taxes	$	243,550	$	195,173	$	173,680
Add: Provision for credit losses	23,045		47,646		4,106
Pre-tax income, excluding provision for credit losses (non-GAAP)	$	266,595	$	242,819	$	177,786

Critical Accounting ~~Policies~~Estimates

The Company’s Consolidated Financial Statements are prepared in accordance with GAAP in the United States, ~~and~~ prevailing practices of the banking ~~industry. Application~~industry, and the application of ~~these principles requires management~~accounting policies of which are described in Note (1) “Summary of Significant Accounting Policies” to ~~make~~the Consolidated Financial Statements in Item 8 of the Company’s 2022 Form 10-K. These policies require numerous estimates and strategic or economic assumptions, ~~and judgments that affect the amounts reported~~which may prove inaccurate or subject to variations. Changes in ~~the financial statements and accompanying notes. Certain policies and accounting principles inherently~~underlying factors, assumptions or estimates could have a ~~greater reliance~~material impact on the ~~use~~Company’s future financial condition and results 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. Managementoperations. At March 31, 2023, 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. These estimates were reviewed with the Audit Committee of the Company’s Board of Directors.

Allowance for Credit Losses, including the Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Allowance for Held-to-Maturity Debt Securities

The allowance for credit losses represents management’s estimate of expected credit losses over the life of a financial asset carried at amortized cost. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the fair value of the underlying collateral and amount and timing of expected future cash flows on individually assessed financial assets, estimated credit losses on pools of loans with similar risk characteristics, and consideration of reasonable and supportable forecasts of macroeconomic conditions, all of which are susceptible to significant change. At March 31, 2023, the loan and held-to-maturity debt securities portfolios represent 82% of the total assets on the Company’s consolidated balance sheet. The Company also maintains an allowance for lending-related commitments, specifically unfunded loan commitments and letters of credit, which relates to certain amounts the Company is committed to lend (not unconditionally cancelable) but for which funds have not yet been disbursed.

Key macroeconomic variable data points that are significant inputs into our credit loss models for the commercial and commercial real estate portfolios are the Baa corporate credit spread as well as the Commercial Real Estate Pricing Index (“CREPI”) specifically related to the commercial real estate portfolio. Holding all other inputs constant, the table below shows the impact of changes in these key macroeconomic variable data points on the estimate of allowance for credit losses.

Impact to estimated allowance for credit losses from an increased or higher input value

Baa Credit Spread

Increases

CRE Price Index

Decreases

Table of Contents

Holding all other inputs constant, the following table provides a sensitivity analysis for the commercial and commercial real estate portfolios based on a 20 basis point change in Baa credit spreads from the assumption utilized in the estimate of that portfolio’s allowance for credit losses at March 31, 2023:


Baa Credit Spread
	Narrows	Widens
Commercial	Decreases estimate by 10%-15%	Increases estimate by 10%-15%
Commercial Real Estate:
Construction	Decreases estimate by 15%-20%	Increases estimate by 15%-20%
Non-Construction	Decreases estimate by 4%-5%	Increases estimate by 4%-5%

Holding all other inputs constant, the following table provides a sensitivity analysis for the commercial real estate construction and non-construction portfolios based on a 10% change in CREPI from the assumption utilized in the estimate of that portfolio’s allowance for credit losses at March 31, 2023:


CRE Price Index
	Increases	Decreases
Commercial Real Estate:
Construction	Decreases estimate by 30%-35%	Increases estimate by 130%-135%
Non-Construction	Decreases estimate by 25%-30%	Increases estimate by 40%-45%

See Note (6) “Allowance for Credit Losses” to the Consolidated Financial Statements in Item 1 of this report and the section titled “Credit Quality” in Item 2 of this report for a description of the methodology used to determine the allowance for credit losses.

For a more detailed discussion on these critical accounting ~~policies,~~estimates, see “Summary of Critical Accounting Estimates” beginning on page 5554 of the ~~Company’s 2021~~2022 Form 10-K.

Net Income

Net income for the quarter ended ~~June 30, 2022~~March 31, 2023 totaled ~~$94.5~~$180.2 million, an ~~decrease~~increase of ~~$10.6~~$52.8 million, or ~~10%~~41%, compared to the quarter ended ~~June 30, 2021.~~March 31, 2022. On a per share basis, net income for the ~~second~~first quarter of ~~2022~~2023 totaled ~~$1.49~~$2.80 per diluted common share compared to ~~$1.70~~$2.07 for the ~~second~~first quarter of ~~2021.~~2022.

The ~~decrease~~increase in net income for the ~~second~~first quarter of ~~2022~~2023 as compared to the same period in the prior year is primarily attributable to ~~a release of credit reserves in the second quarter of 2021 compared to an increase in credit reserves in the second quarter of 2022 due to the Company’s strong loan growth as well as~~increased net interest income, partially offset by lower mortgage banking ~~revenue in the quarter, partially offset by higher net interest income.~~revenue. See “Net Interest Income”, “Non-interest Income”, “Non-interest Expense” and ~~“Loan Portfolio and Asset~~“Credit 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 ~~June 30, 2022~~March 31, 2023 compared to the Quarters Ended ~~March~~December 31, 2022 and ~~June 30, 2021~~March 31, 2022

The following table presents a summary of the Company’s average balances, net interest income and related net interest margins, including a calculation on a fully taxable-equivalent basis, for the ~~second~~first quarter of ~~2022~~2023 as compared to the ~~first~~fourth quarter of 2022 (sequential quarters) and ~~second~~first quarter of ~~2021~~2022 (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)	Jun 30, 2022		Mar 31, 2022		Jun 30, 2021		Jun 30, 2022		Mar 31, 2022		Jun 30, 2021		Jun 30, 2022		Mar 31, 2022		Jun 30, 2021		(Dollars in thousands)	Mar 31, 2023		Dec 31, 2022		Mar 31, 2022		Mar 31, 2023		Dec 31, 2022		Mar 31, 2022		Mar 31, 2023		Dec 31, 2022		Mar 31, 2022
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1)	Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1)	$	3,265,607	$	4,563,726	$	3,844,355	$	7,154	$	2,118	$	1,153	0.88	%	0.19	%	0.12	%	Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1)	$	1,235,748	$	2,449,889	$	4,563,726	$	13,538	$	21,612	$	2,118	4.44	%	3.50	%	0.19	%
Investment securities(2)	Investment securities(2)	6,589,947		6,378,022		4,771,403		37,013		32,863		24,117		2.25		2.09		2.03		Investment securities(2)	7,956,722		7,310,383		6,378,022		60,494		53,630		32,863		3.08		2.91		2.09
FHLB and FRB stock	FHLB and FRB stock	136,930		135,912		136,324		1,823		1,772		1,769		5.34		5.29		5.20		FHLB and FRB stock	233,615		185,290		135,912		3,680		2,918		1,772		6.39		6.25		5.29
Liquidity management assets(3)(8)	Liquidity management assets(3)(8)	$	9,992,484	$	11,077,660	$	8,752,082	$	45,990	$	36,753	$	27,039	1.85	%	1.35	%	1.24	%	Liquidity management assets(3)(8)	$	9,426,085	$	9,945,562	$	11,077,660	$	77,712	$	78,160	$	36,753	3.34	%	3.12	%	1.35	%
Other earning assets(3)(4)(8)	Other earning assets(3)(4)(8)	24,059		25,192		23,354		210		181		150		3.49		2.91		2.59		Other earning assets(3)(4)(8)	18,445		18,585		25,192		313		289		181		6.87		6.17		2.91
Mortgage loans held-for-sale	Mortgage loans held-for-sale	560,707		664,019		991,011		5,740		6,087		8,183		4.11		3.72		3.31		Mortgage loans held-for-sale	270,966		308,639		664,019		3,528		3,997		6,087		5.28		5.14		3.72
Loans, net of unearned income(3)(5)(8)	Loans, net of unearned income(3)(5)(8)	35,860,329		34,830,520		33,085,174		321,069		286,125		285,116		3.59		3.33		3.46		Loans, net of unearned income(3)(5)(8)	39,093,368		38,566,871		34,830,520		560,564		500,432		286,125		5.82		5.15		3.33

Total earning assets(8)	Total earning assets(8)	$	46,437,579	$	46,597,391	$	42,851,621	$	373,009	$	329,146	$	320,488	3.22	%	2.86	%	3.00	%	Total earning assets(8)	$	48,808,864	$	48,839,657	$	46,597,391	$	642,117	$	582,878	$	329,146	5.34	%	4.73	%	2.86	%
Allowance for loan and investment security losses	Allowance for loan and investment security losses	(260,547)		(253,080)		(285,686)														Allowance for loan and investment security losses	(282,704)		(252,827)		(253,080)
Cash and due from banks	Cash and due from banks	476,741		481,634		470,566														Cash and due from banks	488,457		475,691		481,634
Other assets	Other assets	2,699,653		2,675,899		2,910,250														Other assets	3,060,701		3,025,097		2,675,899
Total assets	Total assets	$	49,353,426	$	49,501,844	$	45,946,751													Total assets	$	52,075,318	$	52,087,618	$	49,501,844

NOW and interest-bearing demand deposits	NOW and interest-bearing demand deposits	$	5,230,702	$	4,788,272	$	3,829,023	$	2,553	$	1,990	$	1,886	0.20	%	0.17	%	0.20	%	NOW and interest-bearing demand deposits	$	5,271,740	$	5,598,291	$	4,788,272	$	18,772	$	14,982	$	1,990	1.44	%	1.06	%	0.17	%
Wealth management deposits	Wealth management deposits	2,835,267		2,505,800		2,226,612		3,685		918		958		0.52		0.15		0.17		Wealth management deposits	2,167,081		2,883,247		2,505,800		12,258		14,079		918		2.29		1.94		0.15
Money market accounts	Money market accounts	11,892,948		12,773,805		11,487,954		8,559		7,648		8,373		0.29		0.24		0.29		Money market accounts	12,533,468		12,319,842		12,773,805		68,276		45,468		7,648		2.21		1.46		0.24
Savings accounts	Savings accounts	3,882,856		3,904,299		3,728,271		347		336		402		0.04		0.03		0.04		Savings accounts	4,830,322		4,403,113		3,904,299		15,816		8,421		336		1.33		0.76		0.03
Time deposits	Time deposits	3,687,778		3,861,371		4,632,796		3,841		3,962		12,679		0.42		0.42		1.10		Time deposits	5,041,638		4,023,232		3,861,371		29,680		12,497		3,962		2.39		1.23		0.42
Interest-bearing deposits	Interest-bearing deposits	$	27,529,551	$	27,833,547	$	25,904,656	$	18,985	$	14,854	$	24,298	0.28	%	0.22	%	0.38	%	Interest-bearing deposits	$	29,844,249	$	29,227,725	$	27,833,547	$	144,802	$	95,447	$	14,854	1.97	%	1.30	%	0.22	%
Federal Home Loan Bank advances	Federal Home Loan Bank advances	1,197,390		1,241,071		1,235,142		4,878		4,816		4,887		1.63		1.57		1.59		Federal Home Loan Bank advances	2,474,882		2,088,201		1,241,071		19,135		13,823		4,816		3.14		2.63		1.57
Other borrowings	Other borrowings	489,779		494,267		525,924		2,734		2,239		2,568		2.24		1.84		1.96		Other borrowings	602,937		480,553		494,267		7,854		5,313		2,239		5.28		4.39		1.84
Subordinated notes	Subordinated notes	437,084		436,966		436,644		5,517		5,482		5,512		5.05		5.02		5.05		Subordinated notes	437,422		437,312		436,966		5,488		5,520		5,482		5.02		5.05		5.02
Junior subordinated debentures	Junior subordinated debentures	253,566		253,566		253,566		2,050		1,567		2,724		3.20		2.47		4.25		Junior subordinated debentures	253,566		253,566		253,566		4,416		3,826		1,567		6.97		5.90		2.47
Total interest-bearing liabilities	Total interest-bearing liabilities	$	29,907,370	$	30,259,417	$	28,355,932	$	34,164	$	28,958	$	39,989	0.46	%	0.39	%	0.56	%	Total interest-bearing liabilities	$	33,613,056	$	32,487,357	$	30,259,417	$	181,695	$	123,929	$	28,958	2.19	%	1.51	%	0.39	%
Non-interest-bearing deposits	Non-interest-bearing deposits	13,805,128		13,734,064		12,246,274														Non-interest-bearing deposits	12,171,631		13,404,036		13,734,064
Other liabilities	Other liabilities	1,114,818		1,007,903		1,087,767														Other liabilities	1,395,360		1,485,369		1,007,903
Equity	Equity	4,526,110		4,500,460		4,256,778														Equity	4,895,271		4,710,856		4,500,460
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	49,353,426	$	49,501,844	$	45,946,751													Total liabilities and shareholders’ equity	$	52,075,318	$	52,087,618	$	49,501,844
Interest rate spread(6)(8)	Interest rate spread(6)(8)													2.76	%	2.47	%	2.44	%	Interest rate spread(6)(8)													3.15	%	3.22	%	2.47	%
Less: Fully taxable-equivalent adjustment	Less: Fully taxable-equivalent adjustment							(1,041)		(894)		(909)		(0.01)		(0.01)		(0.01)		Less: Fully taxable-equivalent adjustment							(2,427)		(2,133)		(894)		(0.02)		(0.02)		(0.01)
Net free funds/contribution(7)	Net free funds/contribution(7)	$	16,530,209	$	16,337,974	$	14,495,689							0.17		0.14		0.19		Net free funds/contribution(7)	$	15,195,808	$	16,352,300	$	16,337,974							0.68		0.51		0.14
Net interest income/margin (GAAP)(8)	Net interest income/margin (GAAP)(8)							$	337,804	$	299,294	$	279,590	2.92	%	2.60	%	2.62	%	Net interest income/margin (GAAP)(8)							$	457,995	$	456,816	$	299,294	3.81	%	3.71	%	2.60	%
Fully taxable-equivalent adjustment	Fully taxable-equivalent adjustment							1,041		894		909		0.01		0.01		0.01		Fully taxable-equivalent adjustment							2,427		2,133		894		0.02		0.02		0.01
Net interest income/margin, fully taxable-equivalent (non-GAAP)(8)	Net interest income/margin, fully taxable-equivalent (non-GAAP)(8)							$	338,845	$	300,188	$	280,499	2.93	%	2.61	%	2.63	%	Net interest income/margin, fully taxable-equivalent (non-GAAP)(8)							$	460,422	$	458,949	$	300,188	3.83	%	3.73	%	2.61	%

(1)Includes interest-bearing deposits with banks and securities purchased under resale agreements with original maturities of greater than three months. Cash equivalents include federal funds sold and securities purchased under resale agreements with original maturities of three months or less.

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

(3)Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the three months ended ~~June 30,~~March 31, 2023, December 31, 2022 and March 31, 2022 ~~and June 30, 2021~~ were ~~$1,041,000, $894,000~~$2.4 million, $2.1 million and ~~$909,000,~~$894,000, respectively.

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

(5)Loans, net of unearned income, include nonaccrual 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 measure/ratio.

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For the ~~second~~first quarter of ~~2022,~~2023, net interest income totaled ~~$337.8~~$458.0 million, an increase of ~~$38.5~~$1.2 million as compared to the fourth quarter of 2022, and an increase of $158.7 million as compared to the first quarter of ~~2022, and an increase of $58.2 million as compared to the second quarter of 2021.~~2022. Net interest margin was ~~2.92% (2.93%~~3.81% (3.83% on a FTE basis, non-GAAP) during the ~~second~~first quarter of 2023 compared to 3.71% (3.73% on a FTE basis, non-GAAP) during the fourth quarter of 2022, ~~compared to~~and 2.60% (2.61% on a FTE basis, non-GAAP) during the first quarter of ~~2022, and 2.62% (2.63% on a FTE basis, non-GAAP) during the second quarter of 2021.~~

~~Six months endedJune 30, 2022 compared to six months ended June 30, 2021~~

The following table presents a summary of the Company’s net interest income and related net interest margin, including a calculation on a fully taxable-equivalent basis, for the six months ended June 30, 2022 compared to the six months ended June 30, 2021:

Average Balance
for six months ended,
Interest
for six months ended,
Yield/Rate
for six months ended,
(Dollars in thousands) June 30,
2022 June 30,
2021 June 30,
2022 June 30,
2021 June 30,
2022 June 30,
2021
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1)
$ 3,911,080 $ 4,036,553 $ 9,272 $ 2,352 0.48 % 0.12 %
Investment securities (2)
6,484,570 4,360,323 69,876 43,881 2.17 2.03
FHLB and FRB stock 136,424 136,043 3,595 3,514 5.31 5.21
Liquidity management assets (3)(8)
$ 10,532,074 $ 8,532,919 $ 82,743 $ 49,747 1.58 % 1.18 %
Other earning assets (3)(4)(8)
24,622 21,870 391 275 3.20 2.55
Mortgage loans held-for-sale 612,078 1,070,985 11,827 17,219 3.90 3.24
Loans, net of unearned income (3)(5)(8)
35,348,269 32,765,825 607,194 559,600 3.46 3.44
Total earning assets (8)
$ 46,517,043 $ 42,391,599 $ 702,155 $ 626,841 3.04 % 2.98 %
Allowance for loan and investment security losses (256,834) (306,268)
Cash and due from banks 479,174 418,777
Other assets 2,687,842 2,966,281
Total assets $ 49,427,225 $ 45,470,389
NOW and interest-bearing demand deposits $ 5,010,709 $ 3,761,614 $ 4,543 $ 3,909 0.18 % 0.21 %
Wealth management deposits 2,671,444 2,220,223 4,603 1,957 0.35 0.18
Money market accounts 12,330,943 11,284,383 16,207 16,468 0.27 0.29
Savings accounts 3,893,519 3,658,307 683 832 0.04 0.05
Time deposits 3,774,095 4,753,424 7,803 29,076 0.42 1.23
Interest-bearing deposits $ 27,680,710 $ 25,677,951 $ 33,839 $ 52,242 0.25 % 0.41 %
Federal Home Loan Bank advances 1,219,110 1,231,806 9,694 9,727 1.60 1.59
Other borrowings 492,011 522,078 4,973 5,177 2.04 2.00
Subordinated notes 437,025 436,588 10,999 10,989 5.03 5.03
Junior subordinated debentures 253,566 253,566 3,617 5,428 2.84 4.26
Total interest-bearing liabilities $ 30,082,422 $ 28,121,989 $ 63,122 $ 83,563 0.42 % 0.60 %
Non-interest-bearing deposits 13,769,792 12,029,936
Other liabilities 1,061,655 1,107,376
Equity 4,513,356 4,211,088
Total liabilities and shareholders’ equity $ 49,427,225 $ 45,470,389
Interest rate spread (6)(8)
2.62 % 2.38 %
Less: Fully taxable-equivalent adjustment (1,935) (1,793) (0.01) (0.01)
Net free funds/contribution (7)
$ 16,434,621 $ 14,269,610 0.15 0.21
Net interest income/margin (GAAP) (8)
$ 637,098 $ 541,485 2.76 % 2.58 %
Fully taxable-equivalent adjustment 1,935 1,793 0.01 0.01
Net interest income/margin, fully taxable-equivalent (non-GAAP) (8)
$ 639,033 $ 543,278 2.77 % 2.59 %

~~(1)~~Includes interest-bearing deposits with banks and securities purchased under resale agreements with original maturities of greater than three months. Cash equivalents include federal funds sold and securities purchased under resale agreements with original maturities of three months or less.

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

~~(3)~~Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on a marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the six months ended ended June 30, 2022 and June 30, 2021 were $1.9 million and $1.8 million, respectively.

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

~~(5)Loans, net of unearned income, include nonaccrual 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.~~

~~Table of Contents~~

2022.

Analysis of Changes in Net Interest Income on a FTE basis (non-GAAP)

The following table presents an analysis of the changes in the Company’s net interest income on a FTE basis (non-GAAP) comparing the three month period ended ~~June 30, 2022~~March 31, 2023 to each of the three month periods ended ~~March~~December 31, 2022 and ~~June 30, 2021, and six month periods ended June 30, 2022 and 2021.~~March 31, 2022. The reconciliations set forth the changes in the net interest income on a FTE basis (non-GAAP) as a result of changes in volumes, changes in rates and differing number of days in each period:


		Second Quarter of 2022 Compared to First Quarter of 2022		Second Quarter of 2022 Compared to Second Quarter of 2021				First Six Months of 2022 Compared to First Six Months of 2021			First Quarter of 2023 Compared to Fourth Quarter of 2022				First Quarter of 2023 Compared to First Quarter of 2022
(In thousands)	(In thousands)					(In thousands)
Net interest income, FTE basis (non-GAAP)(1) for comparative period	Net interest income, FTE basis (non-GAAP)(1) for comparative period	$	300,188			$	280,499					$	543,278	Net interest income, FTE basis (non-GAAP)(1) for comparative period	$	458,949	$	300,188
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)	4,410		23,783				47,371		Change due to mix and growth of earning assets and interest-bearing liabilities (volume)	(4,478)				17,377
Change due to interest rate fluctuations (rate)	Change due to interest rate fluctuations (rate)	30,949		34,563				48,384		Change due to interest rate fluctuations (rate)	16,149				142,857
Change due to number of days in each period	Change due to number of days in each period	3,298		—				—		Change due to number of days in each period	(10,198)				—
Less: FTE adjustment	Less: FTE adjustment	(1,041)		(1,041)				(1,935)		Less: FTE adjustment	(2,427)				(2,427)
Net interest income (GAAP)(1) for the period ended June 30, 2022		$	337,804	$	337,804			$	637,098
Net interest income (GAAP)(1) for the period ended March 31, 2023										Net interest income (GAAP)(1) for the period ended March 31, 2023	$	457,995			$	457,995
FTE adjustment	FTE adjustment	1,041		1,041				1,935		FTE adjustment	2,427				2,427
Net interest income, FTE basis (non-GAAP)(1)	Net interest income, FTE basis (non-GAAP)(1)	$	338,845	$	338,845			$	639,033	Net interest income, FTE basis (non-GAAP)(1)	$	460,422			$	460,422

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

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)	June 30, 2022		June 30, 2021				(Dollars in thousands)		March 31, 2023					March 31, 2022
Brokerage	Brokerage	$	4,272	$	5,148			$	(876)					(17)		%	Brokerage	$	4,533		$	4,632		$	(99)		(2)	%
Trust and asset management	Trust and asset management	27,097		25,542		1,555					6		Trust and asset management	25,412					26,762			(1,350)			(5)
Total wealth management(1)	Total wealth management(1)	31,369		30,690		679					2		Total wealth management(1)	29,945					31,394			(1,449)			(5)
Mortgage banking	Mortgage banking	33,314		50,584		(17,270)					(34)		Mortgage banking	18,264					77,231			(58,967)			(76)
Service charges on deposit accounts	Service charges on deposit accounts	15,888		13,249		2,639					20		Service charges on deposit accounts	12,903					15,283			(2,380)			(16)
(Losses) gains on investment securities, net		(7,797)		1,285		(9,082)					NM
Gains (losses) on investment securities, net													Gains (losses) on investment securities, net	1,398					(2,782)			4,180			NM
Fees from covered call options	Fees from covered call options	1,069		1,388		(319)					(23)		Fees from covered call options	10,391					3,742			6,649			NM
Trading gains (losses), net		176		(438)		614					NM
Trading gains, net													Trading gains, net	813					3,889			(3,076)			(79)
Operating lease income, net	Operating lease income, net	15,007		12,240		2,767					23		Operating lease income, net	13,046					15,475			(2,429)			(16)
Other:	Other:												Other:
Interest rate swap fees	Interest rate swap fees	3,300		2,820		480					17		Interest rate swap fees	2,606					4,569			(1,963)			(43)
BOLI	BOLI	(884)		1,342		(2,226)					NM		BOLI	1,351					48			1,303			NM
Administrative services	Administrative services	1,591		1,228		363					30		Administrative services	1,615					1,853			(238)			(13)
Foreign currency remeasurement gains (losses)		97		(782)		879					NM
Foreign currency remeasurement (losses) gains													Foreign currency remeasurement (losses) gains	(188)					11			(199)			NM
Early pay-offs of capital leases	Early pay-offs of capital leases	160		195		(35)					(18)		Early pay-offs of capital leases	365					265			100			38
Miscellaneous	Miscellaneous	9,652		15,572		(5,920)					(38)		Miscellaneous	15,260					11,812			3,448			29
Total Other	Total Other	13,916		20,375		(6,459)					(32)		Total Other	21,009					18,558			2,451			13
Total Non-interest Income	Total Non-interest Income	$	102,942	$	129,373	$	(26,431)				(20)	%	Total Non-interest Income	$	107,769				$	162,790		$	(55,021)		(34)	%

~~NM -~~ (1)Wealth management revenue is comprised of the trust and asset management revenue of the CTC and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions at Wintrust Investments and fees from tax-deferred like-kind exchange services provided by CDEC.

NM—Not ~~meaningful.~~Meaningful.

6650

Table of Contents

Six Months Ended $
Change %
Change
(Dollars in thousands) June 30,
2022 June 30,
2021
Brokerage $ 8,904 $ 10,188 $ (1,284) (13) %
Trust and asset management 53,859 49,811 4,048 8
Total wealth management 62,763 59,999 2,764 5
Mortgage banking 110,545 164,078 (53,533) (33)
Service charges on deposit accounts 31,171 25,285 5,886 23
(Losses) gains on investment securities, net (10,579) 2,439 (13,018) NM
Fees from covered call options 4,811 1,388 3,423 NM
Trading gains (losses), net 4,065 (19) 4,084 NM
Operating lease income, net 30,482 26,680 3,802 14
Other:
Interest rate swap fees 7,869 5,308 2,561 48
BOLI (836) 2,466 (3,302) NM
Administrative services 3,444 2,484 960 39
Foreign currency remeasurement gains (losses) 108 (683) 791 NM
Early pay-offs of capital leases 425 143 282 NM
Miscellaneous 21,464 26,311 (4,847) (18)
Total Other 32,474 36,029 (3,555) (10)
Total Non-interest Income $ 265,732 $ 315,879 $ (50,147) (16) %

~~NM - Not meaningful.~~

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

~~Wealth management~~Mortgage banking revenue ~~increased in~~decreased for the ~~second quarter of 2022~~three months ended March 31, 2023 as compared to the ~~second quarter of 2021 due to an increase~~same period 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 revenue increased in the second quarter of 2022 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 second quarter of 2021. 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.

~~Mortgage banking revenue decreased in the second quarter of 2022 as compared to the second quarter of 2021~~ as a result of a decrease in loans originated for sale and lower production margins, partially offset by more favorable fair value adjustments of mortgage servicing rights. Mortgage loans originated for sale totaled $821.0 million in the second quarter of 2022 as compared to $1.7 billion in the second quarter of 2021. The decrease in originations was primarily due to rising interest rates reducing refinance incentives for borrowers.margins. Mortgage banking revenue includes revenue from activities related to originating, selling and servicing residential real estate loans for the secondary market. A main factor in the mortgage banking revenue recognized by the Company is the volume of mortgage loans originated or purchased for sale. Mortgage ~~revenue is also impacted by changes~~loans originated for sale totaled $372.3 million in the ~~fair value~~first quarter of ~~MSRs.~~ 2023 as compared to $895.5 million in the first quarter of 2022. The decrease in originations was primarily due to rising interest rates reducing refinance incentives for borrowers. The percentage of origination volume from refinancing activities was 20% for the three months ended March 31, 2023 as compared to 47% for the same period in 2022.

The Company records MSRs at fair value on a recurring basis.

~~During~~ For the ~~second quarter of 2022,~~three months ended March 31, 2023, the fair value of the MSRs portfolio ~~increased~~decreased ~~as a favorable~~due to an unfavorable fair value adjustment of ~~$9.1~~$7.0 million ~~was recorded~~ as well as retained servicing rights led to capitalization of $~~11.2~~5.1 million, partially offset by a reduction in value of ~~$6.8~~$3.9 million due to payoffs and paydowns of the existing portfolio.

~~Table~~ See Note (8) “Mortgage Servicing Rights (“MSRs”)” to the Consolidated Financial Statements in Item 1 of ~~Contents~~

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

Three Months Ended Six Months Ended
(Dollars in thousands) June 30,
2022 June 30,
2021 June 30,
2022 June 30,
2021
Originations:
Retail originations $ 595,601 $ 1,328,721 $ 1,243,386 $ 2,970,385
Veterans First originations 225,378 395,290 473,116 975,593
Total originations for sale (A) $ 820,979 $ 1,724,011 $ 1,716,502 $ 3,945,978
Originations for investment 297,713 249,749 572,341 571,607
Total originations $ 1,118,692 $ 1,973,760 $ 2,288,843 $ 4,517,585
Retail originations as percentage of originations for sale 73 % 77 % 72 % 75 %
Veterans First originations as a percentage of originations for sale 27 23 28 25
Purchases as a percentage of originations for sale 78 % 53 % 65 % 38 %
Refinances as a percentage of originations for sale 22 47 35 62
Production Margin:
Production revenue (B) (1)
$ 17,511 $ 37,531 $ 32,096 $ 108,813
Total originations for sale (A) $ 820,979 $ 1,724,011 $ 1,716,502 $ 3,945,978
Add: Current period end mandatory interest rate lock commitments to fund originations for sale (2)
301,322 605,400 301,322 605,400
Less: Prior period end mandatory interest rate lock commitments to fund originations for sale (2)
330,196 798,534 353,509 1,072,717
Total mortgage production volume (C) $ 792,105 $ 1,530,877 $ 1,664,315 $ 3,478,661
Production margin (B/C) 2.21 % 2.45 % 1.93 % 3.13 %
Mortgage Servicing:
Loans serviced for others (D) $ 13,643,623 $ 12,307,337
MSRs, at fair value (E) 212,664 127,604
Percentage of MSRs to loans serviced for others (E/D) 1.56 % 1.04 %
Servicing income $ 10,979 $ 9,830 $ 21,830 $ 19,466
Components of MSR:
MSR - current period capitalization $ 11,210 $ 17,512 $ 25,611 $ 42,128
MSR - collection of expected cash flow - paydowns (1,598) (991) (2,813) (1,719)
MSR - collection of expected cash flow - payoffs (5,240) (7,549) (10,041) (16,989)
MSR - changes in fair value model assumptions 9,147 (5,540) 52,512 12,505
Summary of Mortgage Banking Revenue:
Production revenue (1)
$ 17,511 $ 37,531 $ 32,096 $ 108,813
Servicing income 10,979 9,830 21,830 19,466
MSR activity 13,519 3,432 65,269 35,925
Changes in fair value on early buy-out loans guaranteed by U.S. government agencies and other revenue (8,695) (209) (8,650) (126)
Total mortgage banking revenue $ 33,314 $ 50,584 $ 110,545 $ 164,078

~~(1)Production revenue represents revenue earned from the origination and subsequent sale~~a summary of ~~mortgages, including gains on loans sold and fees from originations,~~the changes in ~~other related financial instruments carried at fair~~the carrying value ~~processing and other related activities, and excludes servicing fees,~~of MSRs.

Mortgage banking revenue is also impacted by changes in the fair value of ~~servicing rights and changes~~derivative contracts held to economically hedge a portion of the fair value adjustments related to the ~~mortgage recourse obligation and other non-production revenue.~~

~~(2)Certain volume adjusted~~Company’s MSRs portfolio. The change in fair value of the derivative contracts held as an economic hedge for the ~~estimated pull-through rate of the loan, which represents the Company’s best estimate of the likelihood that~~three months ended March 31, 2023 was a ~~committed loan will ultimately fund.~~$0.9 million positive valuation adjustment.

Service charges on deposits ~~increased in~~decreased for the ~~second quarter of 2022~~three months ended March 31, 2023 as compared to the ~~second quarter of 2021~~same period in 2022 as a result of ~~higher~~lower account analysis fees on commercial deposit accounts ~~which increased~~and lower fees as a result of the Company’s ~~commercial banking initiatives.~~elimination of the overdraft and item return fees for consumer 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.

~~The Company recognized net losses~~Net gains on investment securities ~~of $7.8 million in~~for the ~~second quarter of 2022 compared to net gains of $1.3 million in the second quarter of 2021. Net losses in the second quarter of 2022~~three months ended March 31, 2023 were primarily the result of unrealized ~~losses~~gains on equity investments. The Company did not recognize any credit-related write-down or other-than-temporary impairment charges within its available-for-sale or held-to-maturity investment securities portfolio for the three months ended March 31, 2023 and the same period in 2022.

~~Table of Contents~~

The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has effectively entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment ~~portfolio by using fees generated from these options to compensate for net interest margin compression.~~portfolio. These option transactions are designed to ~~mitigate overall interest rate risk~~increase the total return associated with holding certain investment securities and do not qualify as hedges pursuant to accounting guidance. There were no outstanding call option contracts at ~~June 30, 2022~~March 31, 2023 and ~~June 30, 2021.~~2022.

~~The Company recognized $176,000 of trading gains in the second quarter of 2022 compared to trading losses of $438,000 in second quarter of 2021.~~ Trading gains ~~and losses recorded by~~for the ~~Company~~three months ended March 31, 2023 primarily ~~result~~resulted from fair value adjustments related to interest rate derivatives not designated as hedges.

~~Interest rate swap fee revenue totaled $3.3~~Miscellaneous non-interest income includes loan servicing fees, income from other investments, service charges and other fees. The increase in miscellaneous other income for the three months ended March 31, 2023 compared to 2022 was primarily due to favorable fair value adjustments for EBO loans of $1.1 million in 2023 compared to unfavorable fair value adjustments of $900,000 in the ~~second quarter~~first three months of 2022 and $2.8 million in second quarter of 2021. Swap fee revenues result from interest rate swap transactions related to both customer-based trades and the related matched trades with inter-bank dealer counterparties. The revenue recognized on this customer-based activity is sensitive to the pace of organic loan growth, the shape of the yield curve and the customers’ expectations of interest rates.2022.

~~Miscellaneous income decreased $5.9 million in the second quarter~~

Table of 2022 as compared to the second quarter of 2021 primarily due to $2.5 million of losses recorded in the second quarter of 2022 relating to the sale of a property no longer considered for future expansion and losses on the anticipated sale of a former data processing facility and the $4.0 million net gain on the sale of three branches recorded in the second quarter of 2021.

Contents

Non-interest Expense

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

Three months ended $
Change %
Change
(Dollars in thousands) June 30,
2022 June 30,
2021
Salaries and employee benefits:
Salaries $ 92,414 $ 91,089 $ 1,325 1 %
Commissions and incentive compensation 46,131 53,751 (7,620) (14)
Benefits 28,781 27,977 804 3
Total salaries and employee benefits 167,326 172,817 (5,491) (3)
Software and equipment 24,250 20,866 3,384 16
Operating lease equipment depreciation 8,774 9,949 (1,175) (12)
Occupancy, net 17,651 17,687 (36) 0
Data processing 8,010 6,920 1,090 16
Advertising and marketing 16,615 11,305 5,310 47
Professional fees 7,876 7,304 572 8
Amortization of other acquisition-related intangible assets 1,579 2,039 (460) (23)
FDIC insurance 6,949 6,405 544 8
OREO expense, net 294 769 (475) (62)
Other:
Lending expenses, net of deferred originations costs 4,270 6,717 (2,447) (36)
Travel and entertainment 3,897 1,918 1,979 NM
Miscellaneous 21,177 15,416 5,761 37
Total other 29,344 24,051 5,293 22
Total Non-interest Expense $ 288,668 $ 280,112 $ 8,556 3 %

~~NM - Not meaningful.~~

~~Table of Contents~~


		Six Months Ended				$ Change				% Change			Three months ended					$ Change		% Change
(Dollars in thousands)	(Dollars in thousands)	June 30, 2022		June 30, 2021				(Dollars in thousands)	March 31, 2023					March 31, 2022
Salaries and employee benefits:	Salaries and employee benefits:														Salaries and employee benefits:
Salaries	Salaries	$	184,530	$	182,142	$	2,388			1	%	Salaries	$	108,354		$	92,116	$	16,238	18	%
Commissions and incentive compensation	Commissions and incentive compensation	97,924		115,118		(17,194)				(15)		Commissions and incentive compensation	39,799			51,793		(11,994)		(23)
Benefits	Benefits	57,227		56,366		861				2		Benefits	28,628			28,446		182		1
Total salaries and employee benefits	Total salaries and employee benefits	339,681		353,626		(13,945)				(4)		Total salaries and employee benefits	176,781			172,355		4,426		3
Software and equipment	Software and equipment	47,060		41,778		5,282				13		Software and equipment	24,697			22,810		1,887		8
Operating lease equipment depreciation		18,482		20,720		(2,238)				(11)
Operating lease equipment												Operating lease equipment	9,833			9,708		125		1
Occupancy, net	Occupancy, net	35,475		37,683		(2,208)				(6)		Occupancy, net	18,486			17,824		662		4
Data processing	Data processing	15,515		12,968		2,547				20		Data processing	9,409			7,505		1,904		25
Advertising and marketing	Advertising and marketing	28,539		19,851		8,688				44		Advertising and marketing	11,946			11,924		22		0
Professional fees	Professional fees	16,277		14,891		1,386				9		Professional fees	8,163			8,401		(238)		(3)
Amortization of other acquisition-related intangible assets	Amortization of other acquisition-related intangible assets	3,188		4,046		(858)				(21)		Amortization of other acquisition-related intangible assets	1,235			1,609		(374)		(23)
FDIC insurance	FDIC insurance	14,678		12,963		1,715				13		FDIC insurance	8,669			7,729		940		12
OREO expense, net	OREO expense, net	(738)		518		(1,256)				NM		OREO expense, net	(207)			(1,032)		825		(80)
Other:	Other:											Other:
Lending expenses, net of deferred originations costs	Lending expenses, net of deferred originations costs	11,091		11,270		(179)				(2)		Lending expenses, net of deferred originations costs	1,764			6,821		(5,057)		(74)
Travel and entertainment	Travel and entertainment	6,573		2,598		3,975				NM		Travel and entertainment	4,590			2,676		1,914		72
Miscellaneous	Miscellaneous	37,145		34,089		3,056				9		Miscellaneous	23,803			15,968		7,835		49
Total other	Total other	54,809		47,957		6,852				14		Total other	30,157			25,465		4,692		18
Total Non-interest Expense	Total Non-interest Expense	$	572,966	$	567,001	$	5,965			1	%	Total Non-interest Expense	$	299,169		$	284,298	$	14,871	5	%

NM - Not meaningful.

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

~~Total salaries~~Salaries and employee benefits expense ~~decreased in~~increased for the ~~second quarter of 2022~~three months ended March 31, 2023 as compared to the ~~second quarter of 2021~~same period in 2022 primarily due to ~~reduced~~increased salaries, partially offset by decreased commissions and incentive compensation ~~expense. Commissions and incentive compensation decreased primarily due to~~as a result of lower commission expense ~~due~~related to declining mortgage production.

~~Software and equipment expense increased in~~Lending expenses, net of deferred origination costs decreased for the ~~second quarter of 2022~~three months ended March 31, 2023 as compared to the ~~second~~same period in 2022 primarily due to lower loan originations in the first quarter of 2021 as a result of higher software license fees as well as higher computer and software depreciation expense as the Company invests in enhancements to the digital customer experience, upgrades to infrastructure and enhancements to information security capabilities.2023.

Advertising and marketing expenses increased in the second quarter of 2022 compared to the second quarter of 2021 as a result of higher digital advertising costs as well as increased sponsorship activity. 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 type of marketing programs utilized, which are determined based on the market area, targeted audience, competition and various other factors.

Miscellaneous expense increased in the second quarter of 2022 compared to the second quarter of 2021 as a result of various other operational costs including a $1.3 million increase in postage compared to second quarter of 2021. Miscellaneous expense includes ATM expenses, correspondent bank charges, ~~directors~~directors’ fees, telephone, postage, corporate insurance, dues and subscriptions, problem loan expenses and other miscellaneous operational losses and costs. Miscellaneous expense increased for the three months ended March 31, 2023 as compared to the same period in 2022 as a result of interest payments made on collateral received for swaps and call options totaling $2.0 million and a $2.1 million increase in postage.

Income Taxes

The Company recorded income tax expense of ~~$37.1~~$63.4 million in the ~~second~~first quarter of ~~2022~~2023 compared to ~~$39.0~~$46.3 million in the ~~second~~first quarter of ~~2021.~~2022. The effective tax rates were ~~28.21%~~26.01% in the ~~second~~first quarter of ~~2022~~2023 compared to ~~27.08%~~26.65% in the ~~second~~first quarter of 2021. During the first six months of 2022, the Company recorded income tax expense of $83.4 million compared to $92.8 million for the first six months of 2021. The effective tax rates were 27.33% for the first six months of 2022 and 26.42% for the first six months of 2021.2022.

~~Table of Contents~~

The effective tax rates were partially impacted by ~~an overall lower level of pretax net income in the three months and six months ended June 30, 2022 period as well as 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 shared-based awards. The Company recorded net excess tax benefits of ~~$2.3~~$2.8 million ~~in the first six months of 2022, compared to excess tax benefits of $1.5 million in the first six months of 2021 related to share-based compensation, most of which was recorded~~ in the first quarter of ~~each year.~~2023, compared to net excess tax benefits of $2.2 million in the first quarter of 2022 related to share-based compensation.

Table of Contents

Operating Segment Results

~~As described in Note 14 - Segment Information to the Consolidated Financial Statements in Item 1 of this report, the~~The Company’s operations consist of three primary segments: community banking, specialty finance and wealth management. Refer to Note (12) “Segment Information” to the Consolidated Financial Statements in Item 1 of this report for further information on the Company’s primary segments. The Company’s profitability is primarily dependent on the net interest income, provision for credit losses, non-interest income and operating expenses of its community banking segment. For purposes of internal segment profitability, management allocates certain intersegment and parent company balances. Management allocates a portion of revenues to the specialty finance segment related to loans and leases originated by the specialty finance segment and sold or assigned to the community banking segment. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates a portion of the net interest income earned by the community banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. Finally, expenses incurred at the Wintrust parent company are allocated to each segment based on each segment's risk-weighted assets.

The community banking segment’s net interest income for the quarter ended ~~June 30, 2022~~March 31, 2023 totaled ~~$261.7~~$369.8 million as compared to ~~$219.7~~$228.6 million for the same period in ~~2021,~~2022, an increase of ~~$42.0~~$141.2 million, or ~~19%~~62%. On a year-to-date basis, net interest income for the segment increased by $67.2 million from $423.2 million for the six months ended June 30, 2021 to $490.3 million for the six months ended June 30, 2022. The increase in the three ~~and six~~ month ~~periods~~period was primarily attributable to ~~earning asset~~increased interest and fees on loans due to of loan growth and ~~lower deposits rates.~~increased interest rates, partially offset by increased interest expense on deposits. The community banking segment’s non-interest income totaled ~~$62.7~~$68.7 million in the ~~second~~first quarter of ~~2022,~~2023, a decrease of ~~$27.7~~$53.2 million, or ~~31%~~44%, when compared to the ~~second~~first quarter of ~~2021~~2022 total of ~~$90.4~~$121.9 million. ~~On a year-to-date basis, non-interest income totaled~~ ~~$184.6 million~~ ~~for the six months ended June 30, 2022, a decrease of~~ ~~$53.1 million, or 22%, compared to~~ ~~$237.7 million~~ ~~for the~~ ~~six months ended June 30, 2021.~~ The decrease in the three ~~and six~~ month ~~periods~~period was primarily the result of reduced mortgage banking revenue due to lower originations for sale and lower gain on sale margin ~~partially offset by the increase~~as well as a decrease in the fair value of MSRs related to changes in fair value model assumptions. The community banking segment recorded provision for credit losses of $~~20.2~~21.1 million ~~and~~ ~~$24.3 million, respectively,~~for the ~~three and~~ ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, compared to ~~a release of credit reserves of $15.2~~$4.1 million ~~and $61.7 million, respectively,~~ for the same ~~periods~~period in ~~2021.~~2022. The increase in provision for credit losses for the three ~~and six~~ month ~~periods~~period was primarily ~~attributable~~due to ~~positive changes~~deterioration in the ~~Company’s~~ macroeconomic forecasts ~~in the same periods of 2021, in addition to improvement in portfolio characteristics, resulting in a significant release of reserves at that time~~and loan growth.. The community banking segment’s net income for the quarter ended ~~June 30, 2022~~March 31, 2023 totaled ~~$54.6~~$134.2 million, ~~a decrease~~an increase of ~~$18.1~~$44.1 million as compared to net income in the ~~second~~first quarter of ~~2021~~2022 of ~~$72.8~~$90.1 million.

The specialty finance segment’s net interest income totaled ~~$58.7~~$70.4 million for the quarter ended ~~June 30, 2022,~~March 31, 2023, compared to ~~$45.2~~$55.4 million for the same period in ~~2021,~~2022, an increase of ~~$13.5~~$15.0 million, or ~~30%~~27%. ~~On a year-to-date basis, net interest income for the segment increased $24.0 million, or 27% compared to the same period in 2021.~~ The increase for ~~both~~ the three ~~and six~~ month ~~periods~~period was primarily ~~attributable~~due to loan growth ~~in earning assets~~and increased interest rates on the premium finance receivables portfolios. The specialty finance segment’s non-interest income ~~totaled $25.0~~increased to $25.8 million ~~and $22.5~~from $24.1 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $49.1 million and $45.6 million for the six month periods ended June 30, 2022 and 2021,~~ respectively. ~~The increase in non-interest income for both the three and six month periods~~ was primarily the result of higher originations and increased balances related to the property and casualty insurance premium finance portfolio and growth in business from the Company’s leasing division. Our property and casualty insurance premium finance operations, life insurance finance operations, lease financing operations and accounts receivable finance operations accounted for ~~42%~~43%, ~~29%~~33%, ~~25%~~21% and 4%3%, respectively, of the total revenues of our specialty finance business for the ~~six~~three month period ended ~~June 30, 2022.~~March 31, 2023. The net income of the specialty finance segment for the quarter ended ~~June 30, 2022~~March 31, 2023 totaled ~~$30.6~~$36.7 million as compared to ~~$23.9~~$29.6 million for the quarter ended June 30, 2021. On a year-to-date basis, the net income of the specialty finance segment for the six months ended June 30, 2022 totaled $60.2 million as compared to $47.8 million for the six months ended June 30, 2021.March 31, 2022.

The wealth management segment reported net interest income of ~~$9.5~~$9.0 million for the ~~second~~first quarter of ~~2022~~2023 compared to ~~$7.8~~$8.4 million in the same quarter of ~~2021,~~2022, an increase of ~~$1.8 million,~~$579,000, or ~~23%~~7%. ~~On a year-to-date basis, net interest income totaled $17.9 million for the first six months of 2022, as compared to $15.2 million for the first six months of 2021.~~ 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 ~~$2.7~~$2.2 billion and ~~$2.2~~$2.5 billion in the first ~~six~~three months of ~~2022~~2023 and ~~2021,~~2022, respectively. This segment recorded non-interest income of ~~$30.2 million for the second quarter of 2022~~

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~~compared to $31.8 million for the second quarter of 2021. On a year-to-date basis, this segment recorded non-interest income of $60.8~~$30.3 million for the first ~~six months~~quarter of ~~2022 as~~2023 compared to ~~$62.1~~$30.6 million for the first ~~six months~~quarter of ~~2021.~~2022. 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 ~~$9.3~~$9.2 million for the ~~second~~first quarter of ~~2022~~2023 compared to ~~$8.5~~$7.7 million for the ~~second~~first quarter of ~~2021. On a year-to-date basis, the wealth management segment’s net income totaled $17.0 million and $16.0 million for the six month period ended June 30, 2022 and 2021, respectively.~~2022.

Financial Condition

Total assets were ~~$51.0~~$52.9 billion at ~~June 30, 2022,~~March 31, 2023, representing an increase of ~~$4.2~~$2.6 billion, or 9%5%, when compared to ~~June 30, 2021~~March 31, 2022 and ~~an increase~~a decrease of approximately ~~$718.7~~$76.1 million, or 6%1% on an annualized basis, when compared to ~~March~~December 31, 2022. Total funding, which includes deposits, all notes and advances, including secured borrowings and the junior subordinated debentures, was ~~$44.9~~$46.3 billion at ~~June 30,~~March 31, 2023, $46.5 billion at December 31, 2022, and $44.6 billion at March 31, ~~2022, and $41.3 billion at June 30, 2021.~~2022. See Notes ~~5, 6, 10, 11~~(4), (5), (9), (10) and 12(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.

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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
		June 30, 2022				March 31, 2022				June 30, 2021					March 31, 2023				December 31, 2022				March 31, 2022
(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	$	560,707	1	%	$	664,019	1	%	$	991,011	2	%	Mortgage loans held-for-sale	$	270,966	1	%	$	308,639	1	%	$	664,019	1	%
Loans, net of unearned income	Loans, net of unearned income													Loans, net of unearned income
Commercial, excluding PPP		$	11,537,091	25	%	$	11,221,409	24	%	$	9,377,392	22	%
Commercial - PPP		166,183		0		382,572		1		2,877,731		7
Commercial														Commercial	$	12,401,473	25	%	$	12,245,207	25	%	$	11,603,981	25	%

Commercial real estate	Commercial real estate	9,298,567		20		9,133,587		20		8,573,493		20		Commercial real estate	10,144,301		21		9,825,886		20		9,133,587		20
Home equity	Home equity	323,687		1		328,817		1		379,853		1		Home equity	333,195		1		330,761		1		328,817		1
Residential real estate	Residential real estate	1,876,166		4		1,658,884		4		1,453,072		3		Residential real estate	2,336,190		5		2,234,596		5		1,658,884		4
Premium finance receivables	Premium finance receivables	12,588,284		27		12,056,395		25		10,383,218		24		Premium finance receivables	13,811,566		28		13,850,648		28		12,056,395		25
Other loans	Other loans	70,351		0		48,856		0		40,415		1		Other loans	66,643		0		79,773		0		48,856		0
Total average loans (1)	Total average loans (1)	$	35,860,329	77	%	$	34,830,520	75	%	$	33,085,174	78	%	Total average loans (1)	$	39,093,368	80	%	$	38,566,871	79	%	$	34,830,520	75	%
Liquidity management assets (2)	Liquidity management assets (2)	9,992,484		22		11,077,660		24		8,752,082		20		Liquidity management assets (2)	9,426,085		19		9,945,562		20		11,077,660		24
Other earning assets (3)	Other earning assets (3)	24,059		0		25,192		0		23,354		0		Other earning assets (3)	18,445		0		18,585		0		25,192		0
Total average earning assets	Total average earning assets	$	46,437,579	100	%	$	46,597,391	100	%	$	42,851,621	100	%	Total average earning assets	$	48,808,864	100	%	$	48,839,657	100	%	$	46,597,391	100	%
Total average assets	Total average assets	$	49,353,426			$	49,501,844			$	45,946,751			Total average assets	$	52,075,318			$	52,087,618			$	49,501,844
Total average earning assets to total average assets	Total average earning assets to total average assets			94	%			94	%			93	%	Total average earning assets to total average assets			94	%			94	%			94	%

(1)Includes nonaccrual 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~~Mortgage loans held-for-sale ~~totaled $560.7 million in the second quarter of 2022, compared to $664.0 million in the first quarter of 2022 and $991.0 million in the second quarter of 2021. These balances represent mortgage~~represents such 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 provide a source of non-interest revenue. The decrease in average balance from ~~2021~~2022 to ~~2022~~2023 was primarily due to lower mortgage origination production due primarily to higher interest rates as well as the transfer to held-for-investment classification of certain loans previously repurchased by the Company under the early buyout option available for loans sold to GNMA with servicing retained. See ~~“Loan Portfolio and Asset Quality” section~~ below ~~in this Item 2~~ for additional discussion of these early buyout options.

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Loans, net of unearned income. Average total loans, net of unearned income, totaled $35.9 billion in the second quarter of 2022, increasing $2.8 billion, or 8%, from the second quarter of 2021 and increasing $1.0 billion, or 12% on an annualized basis, from the first quarter of 2022. Average commercial loans, excluding PPP loans, totaled $11.5 billion in the second quarter of 2022, and increased $2.2 billion, or 23%, over the average balance in the second quarter of 2021 and $315.7 million, or 11% on an annualized basis, over the average balance in the first quarter of 2022. Average commercial PPP loans totaled $166.2 million in the second quarter of 2022, and decreased $2.7 billion, or 94%, from the average balance in the second quarter of 2021 and decreased $216.4 million from the average balance in the first quarter of 2022. The decrease in average commercial PPP loans in the second quarter of 2022 compared to the first quarter of 2022 and second quarter of 2021 was primarily the result of significant payoffs in the portfolio through the forgiveness process administered by the SBA. Average commercial real estate loans totaled $9.3 billion in the second quarter of 2022, increasing $725.1 million, or 8%, over the second quarter of 2021. Combined, the commercial and commercial real estate loan categories comprised ~~59%~~58% of the average loan portfolio in the ~~second~~first quarter of 2023 as compared to 57% in the fourth quarter of 2022 ~~as compared to~~and 60% in the first quarter of ~~2022 and 63% in the second quarter of 2021.~~2022. Excluding the impact of ~~PPP~~ loans originated through the Paycheck Protection Program (“PPP”), growth realized in these aggregated categories for the ~~second~~first quarter of ~~2022~~2023 as compared to the sequential and prior year periods is primarily attributable to increased business development efforts.

~~Home equity loan portfolio averaged $323.7 million in the second quarter of 2022, and decreased $56.2 million, or 15% from the average balance of $379.9 million in same period of 2021.~~ The ~~decrease in the~~ home equity loan portfolio ishas remained relatively steady primarily ~~the~~as a result of borrowers preferring to finance through longer term, low rate mortgage ~~loans.~~loans prior to rising interest rates in 2022. 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 $1.9 billion in the second quarter of 2022, and increased $423.1 million, or 29% from the average balance of $1.5 billion in same period of 2021. Additionally, compared to the quarter ended March 31, 2022, the average balance increased $217.3 million, or 53% on an annualized basis. The increase in the residential real estate 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. The residential real estate loan portfolio includes certain loans guaranteed by U.S. government agencies under the Government National Mortgage Association (“GNMA”) optional repurchase programs. Such 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

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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. 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. If such intent to cure and resell changes subsequent to early buyout, the Company reclassifies such loans as held-for-investment. Early buyout loans classified as held-for-investment totaled $196.2 million at March 31, 2023 compared to $50.1 million at March 31, 2022. Such loans consist of both the rebooked GNMA loans and the early buyout exercised loans classified as held-for-investment discussed above. Rebooked GNMA loans held-for-investment amounted to $119.3 million at March 31, 2023, compared to $13.5 million at March 31, 2022. The increase in balance from March 31, 2022 to March 31, 2023 was the result of higher delinquencies between periods and less frequent exercising of the early buyout option by the Company. As of March 31, 2023, early buyout exercised loans held-for-investment totaled $76.9 million compared to $36.6 million as of March 31, 2022. As of March 31, 2023, early buyout exercised mortgage loans held-for-sale totaled $146.8 million compared to $310.0 million as of March 31, 2022. The decline in early buyout exercised mortgage loans held-for-sale relative to the prior year is primarily due to the resale of mortgage loans to GNMA as well as the reclassification of certain loans to held-for-investment classification due to an inability to resell due to continued delinquency.

~~Average~~The increase in the premium finance receivables ~~totaled $12.6 billion in~~during the ~~second~~first quarter of 2022, and accounted for 35% of the Company’s average total loans. In the second quarter of 2022, average premium finance receivables increased $2.2 billion, or 21%, from the same period of 2021. The increase during the second quarter of 20222023 compared to the ~~second~~first quarter of ~~2021~~2022 was the result of continued originations within the portfolio due to hardening insurance market conditions driving a higher average size of new property and casualty insurance premium finance receivables as well as effective marketing and customer servicing. Approximately ~~$3.9~~$3.8 billion of premium finance receivables were originated in the ~~second~~first quarter of ~~2022~~2023 compared to $3.4 billion during the same period of ~~2021.~~2022. Premium finance receivables consist of a property and casualty portfolio and a life portfolio comprising approximately ~~41%~~42% and ~~59%~~58%, respectively, of the average total balance of premium finance receivables for the ~~second~~first quarter of ~~2022,~~2023, and 40% and 60%, respectively, for the ~~second~~first quarter of ~~2021.~~2022.

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 22% and 20% of total average earning assets in the second quarter of 2022 and 2021, respectively. Average liquidity management assets increased $1.2 billion in the second quarter of 2022 compared to the same period of 2021. 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.

~~Other earning assets.~~ ~~Other earning assets include brokerage customer receivables~~

Maturities and ~~trading account securities. In the normal course~~Sensitivities 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 creditLoans to ~~its customers, subject to various regulatory and internal margin requirements, collateralized by cash and securities~~Changes 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

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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.

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

Six Months Ended
June 30, 2022 June 30, 2021
(Dollars in thousands) Balance Percent Balance Percent
Mortgage loans held-for-sale $ 612,078 1 % $ 1,070,985 3 %
Loans:
Commercial, excluding PPP $ 11,380,122 24 % $ 9,279,395 22 %
Commercial - PPP 273,779 1 2,982,197 7
Commercial real estate 9,216,533 20 8,535,503 20
Home equity 326,238 1 394,130 1
Residential real estate 1,768,125 4 1,377,392 3
Premium finance receivables 12,323,809 26 10,148,109 24
Other loans 59,663 0 49,099 0
Total average loans(1)
$ 35,348,269 76 % $ 32,765,825 77 %
Liquidity management assets (2)
10,532,074 23 8,532,919 20
Other earning assets (3)
24,622 0 21,870 0
Total average earning assets $ 46,517,043 100 % $ 42,391,599 100 %
Total average assets $ 49,427,225 $ 45,470,389
Total average earning assets to total average assets 94 % 93 %

~~(1)Includes nonaccrual loans.~~

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

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

~~LOAN PORTFOLIO AND ASSET QUALITY~~

~~Loan Portfolio~~Interest Rates

The following table ~~shows~~classifies the ~~Company’s~~ loan portfolio at March 31, 2023 by ~~category as~~date at which the loans reprice or mature, and the type of ~~the dates shown:~~rate exposure:

June 30, 2022 December 31, 2021 June 30, 2021
% of % of % of
(Dollars in thousands) Amount Total Amount Total Amount Total
Commercial $ 12,047,105 32 % $ 11,904,068 34 % $ 11,442,276 35 %
Commercial real estate 9,407,205 25 8,990,286 26 8,678,369 26
Home equity 325,826 1 335,155 1 369,806 1
Residential real estate 2,078,907 6 1,637,099 5 1,530,285 5
Premium finance receivables—property and casualty 5,541,447 15 4,855,487 14 4,521,871 14
Premium finance receivables—life insurance 7,608,433 21 7,042,810 20 6,359,556 19
Consumer and other 44,180 0 24,199 0 9,024 0
Total loans, net of unearned income $ 37,053,103 100 % $ 34,789,104 100 % $ 32,911,187 100 %


As of March 31, 2023	One year or less		From one to five years		From five to fifteen years		After fifteen years
(In thousands)									Total
Commercial
Fixed rate	$	499,853	$	2,594,118	$	1,608,735	$	14,047	$	4,716,753

Variable rate	7,858,277		1,955		—		—		7,860,232
Total commercial	$	8,358,130	$	2,596,073	$	1,608,735	$	14,047	$	12,576,985
Commercial real estate
Fixed rate	534,274		2,777,288		616,509		52,951		3,981,022
Variable rate	6,249,717		8,299		40		—		6,258,056
Total commercial real estate	$	6,783,991	$	2,785,587	$	616,549	$	52,951	$	10,239,078
Home equity
Fixed rate	11,913		2,931		—		33		14,877
Variable rate	322,138		—		1		—		322,139
Total home equity	$	334,051	$	2,931	$	1	$	33	$	337,016
Residential real estate
Fixed rate	16,639		3,889		30,584		1,078,608		1,129,720
Variable rate	69,098		245,174		1,061,553		—		1,375,825
Total residential real estate	$	85,737	$	249,063	$	1,092,137	$	1,078,608	$	2,505,545
Premium finance receivables - property & casualty

7455

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Fixed rate	5,619,254		119,626		—		—		5,738,880
Variable rate	—		—		—		—		—
Total premium finance receivables - property & casualty	$	5,619,254	$	119,626	$	—	$	—	$	5,738,880
Premium finance receivables - life insurance
Fixed rate	106,992		534,387		22,836		—		664,215
Variable rate	7,461,587		—		—		—		7,461,587
Total premium finance receivables - life insurance	$	7,568,579	$	534,387	$	22,836	$	—	$	8,125,802
Consumer and other
Fixed rate	5,507		5,263		51		477		11,298
Variable rate	30,867		—		—		—		30,867
Total consumer and other	$	36,374	$	5,263	$	51	$	477	$	42,165
Total per category
Fixed rate	6,794,432		6,037,502		2,278,715		1,146,116		16,256,765

Variable rate	21,991,684		255,428		1,061,594		—		23,308,706
Total loans, net of unearned income	$	28,786,116	$	6,292,930	$	3,340,309	$	1,146,116	$	39,565,471
Variable Rate Loan Pricing by Index:
SOFR tenors									$	9,065,867
One- year CMT									5,008,849
One- month LIBOR									2,490,152
Three- month LIBOR									80,560
Twelve- month LIBOR									2,342,910
Prime									3,640,088
Ameribor tenors									341,332
Other U.S. Treasury tenors									74,865
BSBY tenors									52,235
Other									211,848
Total variable rate									$	23,308,706

SOFR - Secured Overnight Financing Rate.

CMT - Constant Maturity Treasury Rate.

LIBOR - London Interbank Offered Rate.

Ameribor - American Interbank Offered Rate.

BSBY - Bloomberg Short Term Bank Yield Index.

With its ongoing transition from LIBOR, the Company increased the portion of its loan portfolio with interest rate indices that are an alternative to LIBOR during the period, including emerging indices such as SOFR, CMT, and Ameribor. As shown above, at March 31, 2023, variable rate loans with loans priced at SOFR, CMT, and Ameribor totaled $9.1 billion, $5.0 billion and $341.3 million, respectively. Additionally, the percentage of the Company’s variable rate loans indexed to LIBOR decreased to 21% at March 31, 2023 compared to 71% at March 31, 2022. The Company continues its transition of its loan portfolio from LIBOR for both loans existing at March 31, 2023 and future new originations.

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CREDIT QUALITY

Commercial and ~~commercial real estate loans.~~Commercial Real Estate Loan Portfolios

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 ~~June 30, 2022~~March 31, 2023 and ~~2021:~~2022:


		As of June 30, 2022				As of June 30, 2021					As of March 31, 2023								As of March 31, 2022
							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	$	11,965,016	55.8	%		$	142,916	$	9,562,869		47.5	%	$	98,505	Commercial, industrial, and other, excluding commercial PPP	$	12,559,790	55.0	%	$	149,501	$	11,329,999	54.4	%	$	120,910
Commercial PPP	Commercial PPP	82,089		0.4			3		1,879,407			9.3		2		Commercial PPP	17,195		0.1		—		253,964		1.2		1
Total commercial	Total commercial	$	12,047,105	56.2	%		$	142,919	$	11,442,276		56.8	%	$	98,507	Total commercial	$	12,576,985	55.1	%	$	149,501	$	11,583,963	55.6	%	$	120,911
Commercial Real Estate:	Commercial Real Estate:															Commercial Real Estate:
Construction and development	Construction and development	$	1,506,318	7.0	%		$	45,522	$	1,385,249		6.9	%	$	38,550	Construction and development	$	1,597,053	7.0	%	$	75,069	$	1,396,406	6.7	%	$	34,206

Non-construction	Non-construction	7,900,887		36.8			98,210		7,293,120			36.3		119,972		Non-construction	8,642,025		37.9		119,711		7,838,668		37.7		110,700

Total commercial real estate	Total commercial real estate	$	9,407,205	43.8	%		$	143,732	$	8,678,369		43.2	%	$	158,522	Total commercial real estate	$	10,239,078	44.9	%	$	194,780	$	9,235,074	44.4	%	$	144,906
Total commercial and commercial real estate	Total commercial and commercial real estate	$	21,454,310	100.0	%		$	286,651	$	20,120,645		100.0	%	$	257,029	Total commercial and commercial real estate	$	22,816,063	100.0	%	$	344,281	$	20,819,037	100.0	%	$	265,817

Commercial real estate - collateral location by state:	Commercial real estate - collateral location by state:															Commercial real estate - collateral location by state:
Illinois	Illinois	$	6,525,160	69.4	%				$	6,328,851		72.9	%			Illinois	$	6,626,135	64.7	%			$	6,450,630	69.8	%
Wisconsin	Wisconsin	789,738		8.4					770,366			8.9				Wisconsin	882,547		8.6				771,336		8.4
Total primary markets	Total primary markets	$	7,314,898	77.8	%				$	7,099,217		81.8	%			Total primary markets	$	7,508,682	73.3	%			$	7,221,966	78.2	%
Indiana	Indiana	320,495		3.4					295,103			3.4				Indiana	343,926		3.4				340,862		3.7
Florida	Florida	221,174		2.4					113,222			1.3				Florida	264,234		2.6				183,824		2.0
Arizona		100,705		1.1					85,684			1.0
Colorado																Colorado	220,226		2.2				99,682		1.1
California	California	156,077		1.7					108,836			1.3				California	190,510		1.9				137,726		1.5
Texas	Texas	153,535		1.6					111,775			1.2				Texas	176,364		1.7				164,144		1.8
Michigan																Michigan	142,202		1.4				93,405		1.0
Other	Other	1,140,321		12.0					864,532			10.0				Other	1,392,934		13.5				993,465		10.7
Total commercial real estate	Total commercial real estate	$	9,407,205	100.0	%				$	8,678,369		100.0	%			Total commercial real estate	$	10,239,078	100.0	%			$	9,235,074	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 2020. As of June 30, 2022 the carrying balance of such loans was reduced to approximately $82.1 million primarily resulting from forgiveness by the SBA. Commercial business lending is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. Primarily as a result of growth in the Company’s commercial loan portfolio, excluding PPP, our allowance for credit losses in our commercial loan portfolio increased to ~~$142.9~~$149.5 million as of ~~June 30, 2022~~March 31, 2023 compared to ~~$98.5~~$120.9 million as of ~~June 30, 2021.~~March 31, 2022.

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, ~~77.8%~~73.3% of our commercial real estate loan portfolio is located in this region as of ~~June 30, 2022.~~March 31, 2023. We have been able to effectively manage our total non-performing commercial real estate loans, aided by our credit management process. As of ~~June 30, 2022,~~March 31, 2023, our allowance for credit losses related to this portfolio was ~~$143.7~~$194.8 million compared to ~~$158.5~~$144.9 million as of ~~June 30, 2021~~March 31, 2022. The ~~decrease~~increase in the allowance for credit losses is primarily a result of growth in our commercial real estate portfolio is primarily due to the impact on the Company’s loan loss modeling from improving macroeconomic conditions and expectations between the two reporting dates primarily related to the Commercial Real Estate Price Index.portfolio.

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.

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~~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 June 30, 2022, our residential loan portfolio totaled $2.1 billion, or 6% of our total outstanding loans.

Our adjustable rate mortgages are often non-agency conforming. Adjustable rate mortgage loans decrease the interest rate risk we face on our mortgage portfolio. However, this risk is not eliminated due to the fact that such loans generally provide for periodic and lifetime limits on the interest rate adjustments among other features. Additionally, adjustable rate mortgages may pose a higher risk of delinquency and default because they require borrowers to make larger payments when interest rates rise. As of June 30, 2022, $32.1 million of our residential real estate portfolio, including early buyout loans guaranteed by U.S. government agencies, or 1.5%, were classified as nonaccrual, $50.3 million in loans were 90 or more days past due and still accruing, $953,000 were 30 to 89 days past due and $2.0 billion were current, or 96.0%. 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 June 30, 2022 and 2021 was $13.6 billion and $12.3 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.

The Government National Mortgage Association ("GNMA") optional repurchase programs allow financial institutions acting as servicers to 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. 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. If such intent to cure and resell changes subsequent to early buyout, the Company reclassifies such loans as held-for-investment. Early buyout loans classified as held-for-investment totaled $113.9 million at June 30, 2022 compared to $50.8 million at June 30, 2021. Such loans consist of both the rebooked GNMA loans and the early buyout exercised loans classified as held-for-investment discussed above. Rebooked GNMA loans held-for-investment amounted to $34.8 million at June 30, 2022, compared to $44.3 million balance at June 30, 2021. The decrease in balance from June 30, 2021 to June 30, 2022 was the result of declining delinquencies between periods. As of June 30, 2022, early buyout exercised loans held-for-investment totaled $79.1 million compared to $6.4 million as of June 30, 2021. As of June 30, 2022, early buyout exercised mortgage loans held-for-sale totaled $218.5 million compared to $352.0 million as of June 30, 2021.

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~~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.~~

~~Premium finance receivables – property and casualty.~~ FIRST Insurance Funding and FIFC Canada originated approximately $3.6 billion in property and casualty insurance premium finance receivables in the second quarter of 2022 as compared to $3.0 billion of originations in the second quarter of 2021. During the six months ended June 30, 2022 and 2021, FIRST Insurance Funding and FIFC Canada originated approximately $6.5 billion and $5.5 billion, respectively, in property and casualty insurance premium finance receivables. FIRST Insurance Funding and FIFC Canada make loans to businesses to finance the insurance premiums they pay on their property and casualty 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 $369.7 million in life insurance premium finance receivables in the second quarter of 2022 as compared to~~ ~~$360.0 million~~ of originations in the second quarter of 2021. During the six months ended June 30, 2022 and 2021, Wintrust Life Finance originated approximately $743.7 million and $690.3 million, respectively, in life insurance premium finance receivables. The Company continues to experience a high level of 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 June 30, 2022 by date at which the loans reprice or mature, and the type of rate exposure:~~

As of June 30, 2022 One year or less From one to five years From five to fifteen years After fifteen years
(In thousands) Total
Commercial
Fixed rate $ 464,118 $ 2,246,393 $ 1,395,019 $ 12,365 $ 4,117,895
Fixed rate - PPP 9,032 73,057�� — — 82,089
Variable rate 7,843,285 3,783 53 — 7,847,121
Total commercial $ 8,316,435 $ 2,323,233 $ 1,395,072 $ 12,365 $ 12,047,105
Commercial real estate
Fixed rate 425,615 2,542,948 599,290 40,377 3,608,230
Variable rate 5,780,969 18,006 — — 5,798,975
Total commercial real estate $ 6,206,584 $ 2,560,954 $ 599,290 $ 40,377 $ 9,407,205
Home equity
Fixed rate 12,945 3,571 2,124 39 18,679
Variable rate 307,147 — — — 307,147
Total home equity $ 320,092 $ 3,571 $ 2,124 $ 39 $ 325,826
Residential real estate
Fixed rate 15,003 4,731 31,471 984,504 1,035,709
Variable rate 62,764 206,163 774,271 — 1,043,198
Total residential real estate $ 77,767 $ 210,894 $ 805,742 $ 984,504 $ 2,078,907
Premium finance receivables - property & casualty
Fixed rate 5,380,040 161,407 — — 5,541,447
Variable rate — — — — —
Total premium finance receivables - property & casualty $ 5,380,040 $ 161,407 $ — $ — $ 5,541,447
Premium finance receivables - life insurance
Fixed rate 16,346 497,654 21,784 — 535,784
Variable rate 7,072,649 — — — 7,072,649
Total premium finance receivables - life insurance $ 7,088,995 $ 497,654 $ 21,784 $ — $ 7,608,433
Consumer and other
Fixed rate 10,538 5,276 97 490 16,401
Variable rate 27,779 — — — 27,779
Total consumer and other $ 38,317 $ 5,276 $ 97 $ 490 $ 44,180
Total per category
Fixed rate 6,324,605 5,461,980 2,049,785 1,037,775 14,874,145
Fixed rate - PPP 9,032 73,057 — — 82,089
Variable rate 21,094,593 227,952 774,324 — 22,096,869
Total loans, net of unearned income $ 27,428,230 $ 5,762,989 $ 2,824,109 $ 1,037,775 $ 37,053,103
Variable Rate Loan Pricing by Index:
Prime $ 3,699,801
One- month LIBOR 6,534,892
Three- month LIBOR 237,028
Twelve- month LIBOR 6,747,889
U.S. Treasury tenors 130,698
SOFR tenors 3,586,073
Ameribor tenors 332,768
BSBY tenors 29,945
Other 797,775
Total variable rate $ 22,096,869

~~LIBOR - London Interbank Offered Rate.~~

~~SOFR - Secured Overnight Financing Rate.~~

~~Ameribor - American Interbank Offered Rate.~~

~~BSBY - Bloomberg Short Term Bank Yield Index.~~

~~Table of Contents~~

With its ongoing transition from LIBOR, the Company increased the portion of its loan portfolio with interest rate indices that are an alternative to LIBOR during that period, including emerging indices such as SOFR, Ameribor and BSBY. As shown above, at June 30, 2022, variable rate loans with loans priced at SOFR, Ameribor and BSBY totaled $3.6 billion, $332.8 million and $29.9 million, respectively. Additionally, the percentage of the Company’s variable rate loans indexed to LIBOR decreased to 61% at June 30, 2022 compared to 85% at June 30, 2021. The Company continues its transition of its loan portfolio from LIBOR for both loans existing at June 30, 2022 and future new originations.

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~~Description of the Company’s 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 discernible impairment) (Must have well defined weaknesses that jeopardize the liquidation of the debt)

~~8 Rating —~~						~~Substandard Nonaccrual (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.)~~

~~Generally, each loan officer is responsible for monitoring his or her loan portfolio, recommending a credit risk rating for each loan~~included in ~~their portfolio~~Item 7 - Management’s Discussion 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 numberAnalysis of ~~factors including a borrower’s financial strength, cash flow coverage, collateral protection~~Financial Condition and ~~guarantees. The Company maintains an internal loan review function to independently review a portion~~Results of Operations 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.2022 Form 10-K.

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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.

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~~ ~~(1)~~

~~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) June 30,
2022 March 31,
2022 December 31,
2021 June 30,
2021
Loans past due greater than 90 days and still accruing (1):
Commercial $ — $ — $ 15 $ 1,244
Commercial real estate — — — —
Home equity — — — —
Residential real estate — — — —
Premium finance receivables—property and casualty 6,447 12,363 7,210 3,570
Premium finance receivables—life insurance — — 7 —
Consumer and other 25 43 137 178
Total loans past due greater than 90 days and still accruing 6,472 12,406 7,369 4,992
Nonaccrual loans:
Commercial 32,436 16,878 20,399 23,232
Commercial real estate 10,718 12,301 21,746 26,035
Home equity 1,084 1,747 2,574 3,478
Residential real estate 8,330 7,262 16,440 23,050
Premium finance receivables—property and casualty 13,303 6,707 5,433 6,418
Premium finance receivables—life insurance — — — —
Consumer and other 8 4 477 485
Total nonaccrual loans 65,879 44,899 67,069 82,698
Total non-performing loans:
Commercial 32,436 16,878 20,414 24,476
Commercial real estate 10,718 12,301 21,746 26,035
Home equity 1,084 1,747 2,574 3,478
Residential real estate 8,330 7,262 16,440 23,050
Premium finance receivables—property and casualty 19,750 19,070 12,643 9,988
Premium finance receivables—life insurance — — 7 —
Consumer and other 33 47 614 663
Total non-performing loans $ 72,351 $ 57,305 $ 74,438 $ 87,690
Other real estate owned 5,574 4,978 1,959 10,510
Other real estate owned—from acquisitions 1,265 1,225 2,312 5,062
Other repossessed assets — — — —
Total non-performing assets 79,190 $ 63,508 $ 78,709 $ 103,262
Accruing TDRs not included within non-performing assets $ 36,184 $ 35,922 $ 37,486 $ 44,019
Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial 0.27 % 0.15 % 0.17 % 0.21 %
Commercial real estate 0.11 0.13 0.24 0.30
Home equity 0.33 0.54 0.77 0.94
Residential real estate 0.40 0.40 1.00 1.51
Premium finance receivables—property and casualty 0.36 0.39 0.26 0.22
Premium finance receivables—life insurance — — 0.00 —
Consumer and other 0.07 0.10 2.54 7.35
Total non-performing loans 0.20 % 0.16 % 0.21 % 0.27 %
Total non-performing assets, as a percentage of total assets 0.16 % 0.13 % 0.16 % 0.22 %
Total nonaccrual loans as a percentage of total loans 0.18 % 0.13 % 0.19 % 0.25 %
Allowance for credit losses as a percentage of nonaccrual loans 473.76 % 670.77 % 446.78 % 367.64 %

~~(1)~~Excludes early buy-out loans guaranteed by U.S. government agencies. Early buy-out loans are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.

~~(2)~~As of June 30, 2022, approximately $541,000 of TDRs were past due greater than 90 days and still accruing interest. As of March 31, 2022, December 31, 2021, and June 30, 2021, approximately $320,000 of TDRs were past due greater than 90 days and still accruing interest.

~~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 due to ongoing macroeconomic uncertainty and related impacts on borrowers. Management will continue to actively review and monitor its loan portfolios, in an effort to identify problem credits in a timely

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

Loan Portfolio Aging

~~The tables below show the aging~~As of ~~the Company’s loan portfolio at June 30, 2022 and~~ March 31, ~~2022:~~

Nonaccrual 90+ days
and still
accruing 60-89
days past
due 30-59
days past
due Current Total Loans
As of June 30, 2022
(Dollars in thousands)
Loan Balances:
Commercial
Commercial, industrial and other, excluding PPP loans $ 32,436 $ — $ 7,756 $ 13,897 $ 11,910,927 $ 11,965,016
Commercial PPP loans — — 9,033 223 72,833 82,089
Commercial real estate
Construction and development 889 — — 1,144 1,504,285 1,506,318
Non-construction 9,829 — 6,771 33,076 7,851,211 7,900,887
Home equity 1,084 — 154 930 323,658 325,826
Residential real estate, excluding early buy-out loans 8,330 — 534 147 1,956,040 1,965,051
Premium finance receivables
Property and casualty insurance loans 13,303 6,447 15,299 23,313 5,483,085 5,541,447
Life insurance loans — — 1,796 65,155 7,541,482 7,608,433
Consumer and other 8 25 8 119 44,020 44,180
Total loans, net of unearned income, excluding early buy-out loans $ 65,879 $ 6,472 $ 41,351 $ 138,004 $ 36,687,541 $ 36,939,247
Early buy-out loans guaranteed by U.S. government agencies (1)
23,815 50,314 272 — 39,455 113,856
Total loans, net of unearned income $ 89,694 $ 56,786 $ 41,623 $ 138,004 $ 36,726,996 $ 37,053,103

Nonaccrual 90+ days
and still
accruing 60-89
days past
due 30-59
days past
due Current Total Loans
As of March 31, 2022
(Dollars in thousands)
Loan Balances:
Commercial
Commercial, industrial and other, excluding PPP loans $ 16,878 $ — $ 1,294 $ 31,873 $ 11,279,954 $ 11,329,999
Commercial PPP loans — — — 16 253,948 253,964
Commercial real estate
Construction and development 1,054 — — 1,409 1,393,943 1,396,406
Non-construction 11,247 — 2,648 28,732 7,796,041 7,838,668
Home equity 1,747 — 199 545 318,944 321,435
Residential real estate, excluding early buy-out loans 7,262 — 293 18,808 1,723,526 1,749,889
Premium finance receivables
Property and casualty insurance loans 6,707 12,363 8,890 21,278 4,888,170 4,937,408
Life insurance loans — — 22,401 15,522 7,316,240 7,354,163
Consumer and other 4 43 5 221 48,246 48,519
Total loans, net of unearned income, excluding early buy-out loans $ 44,899 $ 12,406 $ 35,730 $ 118,404 $ 35,019,012 $ 35,230,451
Early buy-out loans guaranteed by U.S. government agencies (1)
4,661 28,958 — 185 16,292 50,096
Total loans, net of unearned income $ 49,560 $ 41,364 $ 35,730 $ 118,589 $ 35,035,304 $ 35,280,547

~~(1)Early buy-out loans are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.~~

~~As of June 30, 2022, $41.4 million of all loans,~~2023, excluding early buy-out loans guaranteed by U.S. government agencies, $67.3 million, or ~~0.1%~~0.2% of all loans, were 60 to 89 days (or two payments) past due and ~~$138.0~~$274.5 million, or 0.7% of all loans, ~~or 0.4%~~ were 30 to 59 days (or one payment) past due. As of ~~March~~December 31, 2022, ~~$35.7 million of all loans,~~ excluding early buy-out loans guaranteed by U.S. government agencies, $47.9 million, or 0.1%, of all loans, were 60 to 89 days (or two payments) past due and ~~$118.4~~$209.0 million, or ~~0.3%,~~0.5% of all loans, 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.

~~Table of Contents~~

The Company's home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at ~~June 30, 2022~~March 31, 2023 that were current with regard to the contractual terms of the loan agreement represent 99.3% of the total home equity portfolio. Residential real estate loans, excluding early buy-out loans guaranteed by U.S. government agencies, at ~~June 30, 2022~~March 31, 2023 that were current with regards to the contractual terms of the loan agreements comprise ~~99.5%~~98.7% of total residential real estate loans outstanding. For more information regarding delinquent loans as of March 31, 2023, see Note (6) “Allowance for Credit Losses” in Item 1.

Table of Contents

Non-performing Assets (1)

The following table sets forth the Company's non-performing assets performing under the contractual terms of the loan agreement as of the dates shown.


(Dollars in thousands)	March 31, 2023			December 31, 2022			March 31, 2022
Loans past due greater than 90 days and still accruing (2):
Commercial	$	—		$	462		$	—
Commercial real estate	—			—			—
Home equity	—			—			—
Residential real estate	104			—			—
Premium finance receivables—property and casualty	9,215			15,841			12,363
Premium finance receivables—life insurance	1,066			17,245			—
Consumer and other	87			49			43
Total loans past due greater than 90 days and still accruing	10,472			33,597			12,406
Nonaccrual loans:
Commercial	47,950			35,579			16,878
Commercial real estate	11,196			6,387			12,301
Home equity	1,190			1,487			1,747
Residential real estate	11,333			10,171			7,262
Premium finance receivables—property and casualty	18,543			13,470			6,707
Premium finance receivables—life insurance	—			—			—
Consumer and other	6			6			4
Total nonaccrual loans	90,218			67,100			44,899
Total non-performing loans:
Commercial	47,950			36,041			16,878
Commercial real estate	11,196			6,387			12,301
Home equity	1,190			1,487			1,747
Residential real estate	11,437			10,171			7,262
Premium finance receivables—property and casualty	27,758			29,311			19,070
Premium finance receivables—life insurance	1,066			17,245			—
Consumer and other	93			55			47
Total non-performing loans	$	100,690		$	100,697		$	57,305
Other real estate owned	8,050			8,589			4,978
Other real estate owned—from acquisitions	1,311			1,311			1,225
Other repossessed assets	—			—			—
Total non-performing assets	110,051			$	110,597		$	63,508

Total non-performing loans by category as a percent of its own respective category’s period-end balance:
Commercial	0.38		%	0.29		%	0.15		%
Commercial real estate	0.11			0.06			0.13
Home equity	0.35			0.45			0.54
Residential real estate	0.46			0.43			0.40
Premium finance receivables—property and casualty	0.48			0.50			0.39
Premium finance receivables—life insurance	0.01			0.21			—
Consumer and other	0.22			0.11			0.10
Total non-performing loans	0.25		%	0.26		%	0.16		%
Total non-performing assets, as a percentage of total assets	0.21		%	0.21		%	0.13		%
Total nonaccrual loans as a percentage of total loans	0.23		%	0.17		%	0.13		%
Allowance for credit losses as a percentage of nonaccrual loans	416.54		%	532.71		%	670.77		%

(1)Excludes early buy-out loans guaranteed by U.S. government agencies. Early buy-out loans are insured or guaranteed by the FHA or the U.S. Department of Veterans Affairs, subject to indemnifications and insurance limits for certain loans.

At this time, management believes reserves are appropriate to absorb losses that are expected upon the ultimate resolution of these credits. Significant increases may occur in subsequent periods due to ongoing macroeconomic uncertainty and related impacts on borrowers. Management will continue to actively review and monitor its loan portfolios, in an effort to identify problem credits in a timely manner.

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Non-performing Loans Rollforward, excluding early buy-out loans guaranteed by U.S. government agencies

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


		Three Months Ended				Six Months Ended					Three Months Ended
		June 30,		June 30,		June 30,		June 30,			March 31,		March 31,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022
Balance at beginning of period	Balance at beginning of period	$	57,305	$	99,059	$	74,438	$	127,513	Balance at beginning of period	$	100,697	$	74,438
Additions from becoming non-performing in the respective period	Additions from becoming non-performing in the respective period	22,841		12,762		26,982		22,656		Additions from becoming non-performing in the respective period	24,455		4,141

Return to performing status	Return to performing status	(1,000)		—		(1,729)		(654)		Return to performing status	(480)		(729)
Payments received	Payments received	(4,029)		(12,312)		(24,168)		(35,043)		Payments received	(5,261)		(20,139)
Transfer to OREO and other repossessed assets	Transfer to OREO and other repossessed assets	(1,611)		(3,660)		(5,988)		(5,032)		Transfer to OREO and other repossessed assets	—		(4,377)
Charge-offs	Charge-offs	(1,969)		(4,684)		(4,323)		(7,636)		Charge-offs	(1,159)		(2,354)
Net change for niche loans (1)	Net change for niche loans (1)	814		(3,475)		7,139		(14,114)		Net change for niche loans (1)	(17,562)		6,325
Balance at end of period	Balance at end of period	$	72,351	$	87,690	$	72,351	$	87,690	Balance at end of period	$	100,690	$	57,305

(1)This includes activity for premium finance receivables and indirect consumer 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 June 30, 2022, 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.

~~Table of Contents~~

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. A description of how the Company determines the allowance for credit losses is included in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of the 2022 Form 10-K.

Management determined that the allowance for credit losses was appropriate at March 31, 2023, 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.

Table of Contents

Allowance for Credit Losses

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


		Three Months Ended						Six Months Ended							Three Months Ended
(Dollars in thousands)	(Dollars in thousands)	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021			(Dollars in thousands)	March 31, 2023			March 31, 2022
Allowance for credit losses at beginning of period	Allowance for credit losses at beginning of period	$	301,168		$	321,209		$	299,653		$	379,910		Allowance for credit losses at beginning of period	$	357,448		$	299,653

Cumulative effect adjustment from the adoption of ASU 2022-02														Cumulative effect adjustment from the adoption of ASU 2022-02	741			—
Provision for credit losses	Provision for credit losses	20,493			(15,289)			24,518			(60,675)			Provision for credit losses	23,070			4,025
Other adjustments	Other adjustments	(56)			33			(34)			63			Other adjustments	4			22

Charge-offs:	Charge-offs:													Charge-offs:
Commercial	Commercial	8,928			3,237			10,342			15,018			Commercial	2,543			1,414
Commercial real estate	Commercial real estate	40			1,412			817			2,392			Commercial real estate	5			777
Home equity	Home equity	192			142			389			142			Home equity	—			197
Residential real estate	Residential real estate	—			3			466			5			Residential real estate	—			466
Premium finance receivables		2,903			2,077			4,581			5,316
Premium finance receivables - property & casualty														Premium finance receivables - property & casualty	4,629			1,671
Premium finance receivables - life insurance														Premium finance receivables - life insurance	21			7
Consumer and other	Consumer and other	253			104			446			218			Consumer and other	153			193

Total charge-offs	Total charge-offs	12,316			6,975			17,041			23,091			Total charge-offs	7,351			4,725
Recoveries:	Recoveries:													Recoveries:
Commercial	Commercial	996			902			1,534			1,354			Commercial	392			538
Commercial real estate	Commercial real estate	553			514			585			714			Commercial real estate	100			32
Home equity	Home equity	123			328			216			429			Home equity	35			93
Residential real estate	Residential real estate	6			36			11			240			Residential real estate	4			5
Premium finance receivables		1,119			3,239			2,595			5,021
Premium finance receivables - property & casualty														Premium finance receivables - property & casualty	1,314			1,476
Premium finance receivables - life insurance														Premium finance receivables - life insurance	9			—
Consumer and other	Consumer and other	23			34			72			66			Consumer and other	32			49

Total recoveries	Total recoveries	2,820			5,053			5,013			7,824			Total recoveries	1,886			2,193
Net charge-offs	Net charge-offs	(9,496)			(1,922)			(12,028)			(15,267)			Net charge-offs	(5,465)			(2,532)
Allowance for credit losses at period end	Allowance for credit losses at period end	$	312,109		$	304,031		$	312,109		$	304,031		Allowance for credit losses at period end	$	375,798		$	301,168

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	0.27		%	0.08		%	0.15		%	0.22		%	Commercial	0.07		%	0.03		%
Commercial real estate	Commercial real estate	(0.02)			0.04			0.01			0.04			Commercial real estate	0.00			0.03
Home equity	Home equity	0.09			(0.20)			0.11			(0.15)			Home equity	(0.04)			0.13
Residential real estate	Residential real estate	0.00			(0.01)			0.05			(0.03)			Residential real estate	0.00			0.11
Premium finance receivables		0.06			(0.04)			0.03			0.01
Premium finance receivables - property & casualty														Premium finance receivables - property & casualty	0.23			0.02
Premium finance receivables - life insurance														Premium finance receivables - life insurance	0.00			0.00
Consumer and other	Consumer and other	1.31			0.69			1.26			0.62			Consumer and other	0.74			1.19

Total loans, net of unearned income	Total loans, net of unearned income	0.11		%	0.02		%	0.07		%	0.09		%	Total loans, net of unearned income	0.06		%	0.03		%

Loans at period-end	Loans at period-end	$	37,053,103		$	32,911,187								Loans at period-end	$	39,565,471		$	35,280,547
Allowance for loan losses as a percentage of loans at period end	Allowance for loan losses as a percentage of loans at period end	0.68		%	0.79		%							Allowance for loan losses as a percentage of loans at period end	0.73		%	0.71		%
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	0.84			0.92									Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end	0.95			0.85
Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end, excluding PPP loans		0.84			0.98

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 $60.3 million and $42.9 million as of June 30, 2022 and June 30, 2021, 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 ~~7 - Allowance~~(6) “Allowance for Credit ~~Losses~~Losses” of the Consolidated

~~Table of Contents~~

Financial Statements presented 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 7 - Allowance for Credit Losses 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 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 nonaccrual status to minimize losses.

~~Table of Contents~~

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

~~Premium Finance Receivables~~

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

~~Methodology in Assessing Impairment and Charge-off Amounts~~

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

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

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

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

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

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

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

~~Table of Contents~~

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

~~TDRs~~

At June 30, 2022, the Company had $45.4 million in loans modified in TDRs. The $45.4 million in TDRs represents 227 credits in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay. The balance increased from $44.9 million representing 227 credits at March 31, 2022 and decreased from $55.7 million representing 273 credits at June 30, 2021.

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

Subsequent to its restructuring, any TDR that becomes nonaccrual or more than 90 days past-due and still accruing interest will be included in the Company’s non-performing loans. Each TDR was individually assessed when measuring the allowance for credit losses at June 30, 2022 and approximately $2.3 million was appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for credit losses. Additionally, at June 30, 2022, the Company was committed to lend an additional $545,000 of funds to borrowers under the contractual terms of TDRs.

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

June 30, March 31, June 30,
(In thousands) 2022 2022 2021
Accruing TDRs:
Commercial $ 2,456 $ 2,773 $ 6,911
Commercial real estate 9,659 10,068 9,659
Residential real estate and other 24,069 23,081 27,449
Total accruing TDRs $ 36,184 $ 35,922 $ 44,019
Nonaccrual TDRs: (1)
Commercial $ 4,786 $ 4,935 $ 4,104
Commercial real estate 1,955 2,050 3,434
Residential real estate and other 2,453 1,964 4,190
Total nonaccrual TDRs $ 9,194 $ 8,949 $ 11,728
Total TDRs:
Commercial $ 7,242 $ 7,708 $ 11,015
Commercial real estate 11,614 12,118 13,093
Residential real estate and other 26,522 25,045 31,639
Total TDRs $ 45,378 $ 44,871 $ 55,747

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

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~~TDR Rollforward~~

~~The tables below present a summary of TDRs as of June 30, 2022 and June 30, 2021, and show the change in the balance during those periods:~~

Three months ended June 30, 2022
(In thousands)
Commercial Commercial
Real Estate Residential
Real Estate
and Other Total
Balance at beginning of period $ 7,708 $ 12,118 $ 25,045 $ 44,871
Additions during the period 186 — 2,235 2,421
Reductions:
Charge-offs (191) — — (191)
Transferred to OREO and other repossessed assets — — — —
Removal of TDR loan status (1)
— — — —
Payments received (461) (504) (758) (1,723)
Balance at period end $ 7,242 $ 11,614 $ 26,522 $ 45,378

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

Six months ended June 30, 2022
(In thousands)
Commercial Commercial
Real Estate Residential
Real Estate
and Other Total
Balance at beginning of period $ 10,877 $ 10,471 $ 27,961 $ 49,309
Additions during the period 468 1,907 3,143 5,518
Reductions:
Charge-offs (201) (3) (217) (421)
Transferred to OREO and other repossessed assets — — — —
Removal of TDR loan status (1)
(1,120) — (287) (1,407)
Payments received (2,782) (761) (4,078) (7,621)
Balance at period end $ 7,242 $ 11,614 $ 26,522 $ 45,378

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

~~(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.

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Other Real Estate Owned

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~~show the activity for the respective periods and the balance for each property type:


		Three Months Ended		Six Months Ended				Three Months Ended
(In thousands)	(In thousands)	June 30, 2022		June 30, 2021		June 30, 2022			June 30, 2021		(In thousands)	March 31, 2023		March 31, 2022
Balance at beginning of period	Balance at beginning of period	$	6,203	$	15,813	$	4,271		$	16,558	Balance at beginning of period	$	9,900	$	4,271
Disposal/resolved	Disposal/resolved	(1,172)		(3,152)		(3,669)			(5,314)		Disposal/resolved	(435)		(2,497)
Transfers in at fair value, less costs to sell	Transfers in at fair value, less costs to sell	2,090		3,660		6,519			5,247		Transfers in at fair value, less costs to sell	—		4,429

Fair value adjustments	Fair value adjustments	(282)		(749)		(282)			(919)		Fair value adjustments	(104)		—
Balance at end of period	Balance at end of period	$	6,839	$	15,572	$	6,839		$	15,572	Balance at end of period	$	9,361	$	6,203


		Period End							Period End
(In thousands)	(In thousands)	June 30, 2022		March 31, 2022		June 30, 2021		(In thousands)	March 31, 2023		December 31, 2022		March 31, 2022
Residential real estate	Residential real estate	$	1,630	$	1,127	$	1,952	Residential real estate	$	1,051	$	1,585	$	1,127
Residential real estate development		133		—		1,030

Commercial real estate	Commercial real estate	5,076		5,076		12,590		Commercial real estate	8,310		8,315		5,076
Total	Total	$	6,839	$	6,203	$	15,572	Total	$	9,361	$	9,900	$	6,203

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Deposits

Total deposits at ~~June 30, 2022~~March 31, 2023 were ~~$42.6~~$42.7 billion, an increase of ~~$3.8 billion,~~$498.9 million, or ~~10%~~1%, compared to total deposits at ~~June 30, 2021.~~March 31, 2022. See Note ~~10 - Deposits~~(9) “Deposits” to the Consolidated Financial Statements in Item 1 of this report for a summary of period end deposit balances.

The following table sets forth, by category, the maturity of time certificates of deposit as of ~~June 30, 2022:~~March 31, 2023:


Time Certificates of Deposit Maturity/Re-pricing Analysis As of June 30, 2022 (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 March 31, 2023 (Dollars in thousands)						Time Certificates of Deposit Maturity/Re-pricing Analysis As of March 31, 2023 (Dollars in thousands)	Total Time Certificates of Deposits		Weighted-Average Rate of Maturing Time Certificates of Deposit (1)
1-3 months	1-3 months	$	806,666	0.36	%	1-3 months	$	1,318,052	2.93	%
4-6 months	4-6 months	714,444		0.39		4-6 months	1,081,367		2.42
7-9 months	7-9 months	600,188		0.39		7-9 months	922,367		2.24
10-12 months	10-12 months	600,812		0.48		10-12 months	885,299		3.11
13-18 months	13-18 months	562,331		0.66		13-18 months	655,805		3.12
19-24 months	19-24 months	241,172		0.45		19-24 months	348,591		2.77
24+ months	24+ months	150,608		1.03		24+ months	139,771		2.14
Total	Total	$	3,676,221	0.47	%	Total	$	5,351,252	2.73	%

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

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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
		June 30, 2022				March 31, 2022				June 30, 2021					March 31, 2023				December 31, 2022				March 31, 2022
(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	$	13,805,128	33	%	$	13,734,064	34	%	$	12,246,274	32	%	Non-interest-bearing	$	12,171,631	29	%	$	13,404,036	32	%	$	13,734,064	34	%
NOW and interest-bearing demand deposits	NOW and interest-bearing demand deposits	5,230,702		13		4,788,272		12		3,829,023		10		NOW and interest-bearing demand deposits	5,271,740		13		5,598,291		13		4,788,272		12
Wealth management deposits	Wealth management deposits	2,835,267		7		2,505,800		6		2,226,612		6		Wealth management deposits	2,167,081		5		2,883,247		7		2,505,800		6
Money market	Money market	11,892,948		29		12,773,805		30		11,487,954		30		Money market	12,533,468		30		12,319,842		29		12,773,805		30
Savings	Savings	3,882,856		9		3,904,299		9		3,728,271		10		Savings	4,830,322		11		4,403,113		10		3,904,299		9
Time certificates of deposit	Time certificates of deposit	3,687,778		9		3,861,371		9		4,632,796		12		Time certificates of deposit	5,041,638		12		4,023,232		9		3,861,371		9
Total average deposits	Total average deposits	$	41,334,679	100	%	$	41,567,611	100	%	$	38,150,930	100	%	Total average deposits	$	42,015,880	100	%	$	42,631,761	100	%	$	41,567,611	100	%

Total average deposits for the ~~second~~first quarter of ~~2022~~2023 were ~~$41.3~~$42.0 billion, an increase of ~~$3.2 billion,~~$448.3 million, or 8%1%, from the ~~second~~first quarter of ~~2021.~~2022. Total deposits remained stable in the first quarter as the diversity of our deposit base showed its resilience in a volatile market. The ~~increase~~Company has experienced a change in ~~average~~the mix of deposits ~~is primarily attributable~~as non-interest bearing deposits have migrated to ~~organic growth of retail deposits.~~interest-bearing products.

Wealth management deposits are funds from the brokerage customers of Wintrust Investments, CDEC and trust and asset management customers of the Company 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:


		June 30,						December 31,										March 31,						December 31,
(Dollars in thousands)	(Dollars in thousands)	2022			2021			2021			2020			2019			(Dollars in thousands)	2023			2022			2022			2021			2020
Total deposits	Total deposits	$	42,593,326		$	38,804,616		$	42,095,585		$	37,092,651		$	30,107,138		Total deposits	$	42,718,211		$	42,219,322		$	42,902,544		$	42,095,585		$	37,092,651
Brokered deposits	Brokered deposits	1,791,443			2,142,346			1,591,083			1,843,227			1,011,404			Brokered deposits	4,015,271			2,541,159			3,174,093			1,591,083			1,843,227
Brokered deposits as a percentage of total deposits	Brokered deposits as a percentage of total deposits	4.2		%	5.5		%	3.8		%	5.0		%	3.4		%	Brokered deposits as a percentage of total deposits	9.4		%	6.0		%	7.4		%	3.8		%	5.0		%

Brokered deposits include certificates of deposit obtained through deposit brokers, deposits received through the Certificate of Deposit Account Registry Program, ~~(“CDARs”),~~ and certain 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 FHLB advances, notes payable, short-term borrowings, ~~notes payable, FHLB advances,~~secured borrowings, 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.

As of March 31, 2023, the Company had approximately $14.8 billion of uninsured deposits of which $1.8 billion were fully collateralized deposits. Uninsured deposits are estimated based on the methodologies and assumptions used for the Company’s regulatory reporting requirements. The net position of $13.0 billion of uninsured and uncollateralized deposits represents approximately 30% of total deposits as of March 31, 2023. The Company had total liquidity sources, including cash, collateralized funding sources and the value of unpledged securities, of $10.9 billion or approximately 84% of uninsured and uncollateralized deposits as of March 31, 2023. In addition, at the end of the first quarter of 2023, the Company was in the

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process of pledging additional collateral to both the FHLB and FRB and, as a result, the Company’s liquidity sources are expected to substantially exceed uninsured and uncollateralized deposits during the second quarter of 2023.

On March 12, 2023, the Federal Reserve established the Bank Term Funding Program (“BTFP”). The Company has registered for the BTFP but has not participated and does not intend to participate. However, this is an additional option as an available short-term liquidity source.

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
June 30, March 31, June 30,
(In thousands) 2022 2022 2021
FHLB advances $ 1,197,390 $ 1,241,071 $ 1,235,142
Other borrowings:
Notes payable 74,912 80,261 96,306
Short-term borrowings 14,791 13,456 15,034
Secured borrowings 337,626 337,590 350,219
Other 62,450 62,960 64,365
Total other borrowings $ 489,779 $ 494,267 $ 525,924
Subordinated notes 437,084 436,966 436,644
Junior subordinated debentures 253,566 253,566 253,566
Total other funding sources $ 2,377,819 $ 2,425,870 $ 2,451,276

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 June 30, 2022, March 31, 2022 and June 30, 2021.


	Three Months Ended
	March 31,		December 31,		March 31,
(In thousands)	2023		2022		2022
FHLB advances	$	2,474,882	$	2,088,201	$	1,241,071
Other borrowings:
Notes payable	199,717		87,215		80,261
Short-term borrowings	22,840		15,206		13,456
Secured borrowings	319,453		316,693		337,590
Other	60,927		61,439		62,960
Total other borrowings	$	602,937	$	480,553	$	494,267
Subordinated notes	437,422		437,312		436,966
Junior subordinated debentures	253,566		253,566		253,566
Total other funding sources	$	3,768,807	$	3,259,632	$	2,425,870

Notes payable balances represent the balances on a ~~loan~~credit agreement ~~(“Credit~~(as amended, the “Credit Agreement”) with certain unaffiliated ~~banks consisting~~banks. The Credit Agreement consisted of a $150.0 million term loan facility and a $100.0 million revolving credit ~~facility (“Revolving~~facility. On December 12, 2022, the Company entered into an amendment and restatement of the Credit ~~Facility”)~~Agreement pursuant to the Amended and ~~a $150.0 million term facility (“Term Facility”). Both~~Restated Credit Agreement dated as of December 12, 2022, among the ~~Revolving Credit Facility~~Company and the ~~Term Facility are available~~unaffiliated banks named therein as lenders and agents (the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement provides for, ~~corporate purposes such as~~among other things, an increase to ~~provide capital~~the term loan facility to ~~fund continued growth at~~$200.0 million. In connection with the entry into the Amended and Restated Credit Agreement, the outstanding term loan under the existing ~~bank subsidiaries, possible future acquisitions and for other general corporate matters. In December~~Credit Agreement was paid in full pursuant to the terms thereof. As of ~~2021,~~March 31, 2023, the ~~Revolving Credit Facility was amended to increase the commitment amount by $50.0 million for a total commitment of $100.0 million. At June 30, 2022 and 2021, the Company had a~~outstanding principal balance under the ~~Term Facility of $69.6~~term loan facility was $192.7 million and ~~$91.0 million, respectively. The Company~~there was ~~contractually required to borrow the entire amount of the Term~~

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~~Facility on September 18, 2018 and all such borrowings must be repaid by September 18, 2023. At June 30, 2022, the Company had~~ no outstanding principal balance under the ~~Revolving Credit Facility.~~

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 June 30, 2022 include a fixed-rate promissory note issued by the Company in June 2017 and amended in March 2020 and in October 2021 (“Fixed-Rate Promissory Note”) related to and secured by three office buildings owned by the Company. At June 30, 2022, the Fixed-Rate Promissory Note had a balance of $62.3 million compared to $63.3 million at December 31, 2021 and $64.2 million at June 30, 2021. 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. Another amendment to the Fixed-Rate Promissory Note was executed and effective as of October 6, 2021. The amendment reduced the interest rate from 3.00% to 1.70%. Under the Fixed-Rate Promissory Note, during the six months ended June 30, 2022, the Company made monthly principal payments and paid interest at a fixed rate of 1.70%.

At June 30, 2022, the Company had outstanding subordinated notes totaling $437.2 million compared to $437.0 million and $436.7 million outstanding at December 31, 2021 and June 30, 2021, 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. During 2014, the Company issued $140.0 million of subordinated notes receiving $139.1 million in net proceeds. These notes have a stated interest rate of 5.00% and mature in June 2024. Subordinated notes are stated at par adjusted for unamortized costs paid related to the different issuances of such debt.

The Company had $253.6 million of junior subordinated debentures outstanding as of June 30, 2022, December 31, 2021 and June 30, 2021. 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 June 30, 2022, the Company included $245.5 million of the junior subordinated debentures, net of common securities, in Tier 2 regulatory capital.

revolving credit facility.

See Note ~~11 - FHLB~~(10) “FHLB Advances, Other Borrowings and Subordinated ~~Notes~~Notes” and Note ~~12 - Junior~~(11) “Junior Subordinated ~~Debentures~~Debentures” 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. The Company hereby incorporates by reference Note (10) and Note (11) of the Consolidated Financial Statements presented under Item 1 of this report in its entirety.

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:


		June 30, 2022		March 31, 2022		June 30, 2021			March 31, 2023		December 31, 2022		March 31, 2022
Tier 1 leverage ratio	Tier 1 leverage ratio	8.8	%	8.1	%	8.2	%	Tier 1 leverage ratio	9.1	%	8.8	%	8.1	%
Risk-based capital ratios:	Risk-based capital ratios:							Risk-based capital ratios:
Tier 1 capital ratio	Tier 1 capital ratio	9.9		9.6		10.1		Tier 1 capital ratio	10.1		10.0		9.6
Common equity tier 1 capital ratio	Common equity tier 1 capital ratio	9.0		8.6		9.0		Common equity tier 1 capital ratio	9.2		9.1		8.6
Total capital ratio	Total capital ratio	11.9		11.6		12.4		Total capital ratio	12.1		11.9		11.6
Other ratio:	Other ratio:							Other ratio:
Total average equity-to-total average assets(1)	Total average equity-to-total average assets(1)	9.2		9.1		9.3		Total average equity-to-total average assets(1)	9.4		9.0		9.1

(1)Based on quarterly average balances.

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Minimum
Capital
Requirements
Minimum Ratio + Capital Conservation Buffer(1)
Minimum Well
Capitalized(2)
Leverage ratio 4.0 % NA N/A
Tier 1 capital to risk-weighted assets 6.0 8.5 6.0
Common equity Tier 1 capital to risk-weighted assets 4.5 7.0 N/A
Total capital to risk-weighted assets 8.0 10.5 10.0


	Minimum Capital Requirements		Minimum Ratio + Capital Conservation Buffer(1)	Minimum Well Capitalized(2)
Tier 1 leverage ratio	4.0	%	N/A	N/A
Risk-based capital ratios:
Tier 1 capital ratio	6.0		8.5	6.0
Common equity tier 1 capital ratio	4.5		7.0	N/A
Total capital ratio	8.0		10.5	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 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 ~~June 30, 2022~~March 31, 2023 would exceed such revised well-capitalized standard.

In February 2019, the OCC, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (“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 ~~11, 12~~(10) and 18(11) of the Consolidated Financial Statements in Item 1 for further information on these various funding sources. ~~Management is committed to maintaining~~See Note (23) “Shareholders’ Equity” of the Consolidated Financial Statements presented under Item 7 of the 2022 Form 10-K for details on the Company’s ~~capital levels above the “Well Capitalized” levels established by the FRB for bank holding companies.~~issuance of Series D Preferred Stock in June 2015, Series E Preferred Stock and associated Depositary Shares in May 2020 and additional common stock offering in June 2022.

The Company’s Board of Directors approves dividends from time to time, however, the ability to declare a dividend is limited by the Company’s financial condition, the terms of the Company’s Series D and Series E Preferred Stock, the terms of the Company’s Trust Preferred Securities offerings and under certain financial covenants in the Company’s revolving and term facilities. In January of 2023, the Company declared a quarterly cash dividend of $0.40 per common share. In January, April, July and ~~April~~October of 2022, the Company declared a quarterly cash dividend of $0.34 ~~per common share. In January, April, July and October of 2021, the Company declared a quarterly cash dividend of $0.31~~ per common share.

The Company continues to leverage its capital management framework to assess and monitor risk when making capital ~~decisions, including uncertainty from~~decisions. Management is committed to maintaining the ~~COVID-19 pandemic. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation - Overview section of this report~~Company’s capital levels above the “Well Capitalized” levels established by the FRB for ~~additional discussion of the impact of the COVID-19 pandemic.~~bank holding companies.

See Note 18 - Shareholders’ Equity and Earnings Per Share 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, Series E Preferred Stock and associated Depositary Shares in May 2020, and additional common stock offering in June 2022. The Company hereby incorporates by reference Note 18 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 addition to the liquidity management noted above, in ~~the second quarter of~~ 2022, the Company sold a total of 3,450,000 shares of its common stock through a public offering. Net proceeds to the Company totaled approximately $285.7 million, net of estimated issuance costs. In the ~~second~~first quarter of ~~2022,~~2023, we maintained our liquid assets to ensure that we would have the balance sheet strength to serve our clients. As a result, the Company believes that it has sufficient funds and access to funds to effectively meet its working capital and other ~~needs as well as manage through the continued COVID-19 pandemic.~~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.

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INFLATION

A banking organization’s assets and liabilities are primarily monetary. Changes in the rate of inflation typically 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 as material an impact on the Company’s business as entities operating in other industries. 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 continued 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 ~~2021~~2022 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and plans to form additional de novo banks or branch offices, and management’s long-term performance goals, as well as statements relating to the anticipated effects on the Company’s 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 continued 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;

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•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;

•~~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 and events 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, including an actual or threatened U.S. government debt default or rating downgrade, 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;

•the interest rate environment, including a prolonged period of low interest rates or rising 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

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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 and similar events or data corruption attempts and identity theft;

•adverse effects on our information technology systems resulting from failures, human error or 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;~~industries, and ability of the Company to effectively manage the planned transition of the chief executive officer role;

•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;~~institutions and the impact of recent failures of financial institutions, including broader financial institution liquidity risk and concerns;

•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 on the Company’s financial statements;

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•the ability of the Company to receive dividends from its subsidiaries;

•~~uncertainty about~~ the ~~discontinued~~ability of the Company to successfully discontinue use of LIBOR and transition to an alternative ~~rate;~~benchmark rate for current and future transactions;

•a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;

•legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services ~~companies, including those~~ companies;

•changes ~~that are~~ in ~~response to the COVID-19 pandemic, including without limitation the Coronavirus Aid, Relief,~~laws, regulations, rules, standards and ~~Economic Security Act, the Economic Aid to Hard-Hit Small Businesses, Nonprofits~~contractual obligations regarding data privacy and ~~Venues Act, and the rules and regulations that may be promulgated thereunder;~~cybersecurity;

•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,~~ persistent inflation 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;

•fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation; ~~and~~

•widespread outages of operational, communication, or other systems, whether internal or provided by third parties, natural or other disasters (including acts of terrorism, armed hostilities and pandemics), and the effects of climate ~~change.~~change; and

•the severity, magnitude and duration of the COVID-19 pandemic, including the continued 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 the economy, our financial results, operations and personnel, commercial activity and demand across our business and our customers’ businesses.

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

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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 and decreases of 100 and 200 ~~basis points and decreases of 100~~ basis points. The Static Shock Scenario results incorporate actual cash flows and repricing characteristics for balance sheet instruments following an instantaneous, parallel change in market rates based upon a static (i.e. no growth or constant) balance sheet. Conversely, the Ramp Scenario results incorporate management’s projections of future volume and pricing of each of the product lines following a gradual, parallel change in market rates over twelve months. Actual results may differ from these simulated results due to timing, magnitude, and frequency of interest rate changes as well as changes in market conditions and management strategies. The interest rate sensitivity for both the Static Shock and Ramp Scenarios at ~~June 30,~~March 31, 2023, December 31, 2022 and March 31, 2022 ~~and June 30, 2021~~ is as follows:


Static Shock Scenarios	Static Shock Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points		Static Shock Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points		-200 Basis Points
June 30, 2022		17.0	%	9.0	%	(12.6)	%
March 31, 2023								March 31, 2023	4.2	%	2.4	%	(2.4)	%	(7.3)	%
December 31, 2022								December 31, 2022	7.2		3.8		(5.0)		(12.1)	%
March 31, 2022	March 31, 2022	21.4		11.0		(11.3)		March 31, 2022	21.4		11.0		(11.3)		(18.7)	%
June 30, 2021		24.6		11.7		(6.9)


Ramp Scenarios	Ramp Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points		Ramp Scenarios	+200 Basis Points		+100 Basis Points		-100 Basis Points		-200 Basis Points
June 30, 2022		10.2	%	5.3	%	(6.9)	%
March 31, 2023								March 31, 2023	3.0	%	1.7	%	(1.3)	%	(3.4)	%
December 31, 2022								December 31, 2022	5.6		3.0		(2.9)		(6.8)	%
March 31, 2022	March 31, 2022	11.2		5.8		(7.1)		March 31, 2022	11.2		5.8		(7.1)		(12.4)	%
June 30, 2021		11.4		5.8		(3.3)

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One method utilized by financial institutions, including the Company, to manage interest rate risk is to enter into derivative financial instruments. Derivative financial instruments include interest rate swaps, interest rate caps, floors and collars, futures, forwards, option contracts and other financial instruments with similar characteristics. Additionally, the Company enters into

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commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors. See Note ~~15 - Derivative~~(13) “Derivative Financial ~~Instruments~~Instruments” of the Consolidated Financial Statements in Item 1 of this report for further information on the Company’s derivative financial instruments.

As shown above, the magnitude of potential changes in net interest income in various interest rate scenarios has continued to diminish. Given the recent unprecedented rise in interest rates, the Company has made a conscious effort to reposition its exposure to changing interest rates given the uncertainty of the future interest rate environment. To this end, management has executed various derivative instruments including collars and receive fixed swaps to hedge variable rate loan exposures and originated a higher percentage of its loan originations in longer term fixed rate loans. The Company will continue to monitor current and projected interest rates and expects to execute additional derivatives to mitigate potential fluctuations in net interest margin in future years.

Periodically, the Company enters into certain covered call option transactions related to certain securities held by the Company. The Company uses these option transactions (rather than entering into other derivative interest rate contracts, such as interest rate floors) to economically hedge positions and compensate for net interest margin compression by increasing the total return associated with the related securities through fees generated from these options. Although the revenue received from these options is recorded as non-interest income rather than interest income, the increased return attributable to the related securities from these options contributes to the Company’s overall profitability. The Company’s exposure to interest rate risk may be impacted by these transactions. To further mitigate this risk, the Company may acquire fixed rate term debt or use financial derivative instruments. There were no covered call options outstanding as of ~~June 30, 2022~~March 31, 2023 and ~~June 30, 2021.~~March 31, 2022. See Note ~~15 - Derivative~~(13) “Derivative Financial ~~Instruments~~Instruments” of the Consolidated Financial Statements in Item 1 of this report for further information on the Company’s fees from covered call options for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~June 30, 2021.~~March 31, 2022.

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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.

Wintrust ~~Mortgage Wage Payment~~Financial ERISA Matter

On ~~October 17, 2018, a~~July 29, 2022, former Wintrust ~~Mortgage~~ employee filed a ~~lawsuit~~class action in the ~~Superior~~District Court for the Northern District of ~~Los Angeles County, California~~Illinois asserting claims under the federal Employee Retirement Income Security Act (“ERISA”) against Wintrust ~~Mortgage alleging violation~~Financial Corporation. Plaintiff alleges Wintrust breached its fiduciary duty in the selection of ~~California wage payment statutes~~BlackRock Target Date funds for inclusion in its 401(k) plan, that Wintrust failed to monitor the performance of those funds, and in the alternative, Wintrust should be liable for breach of trust. Plaintiff’s sole basis for the allegations is that BlackRock Target Date funds allegedly performed more poorly than two comparable funds over a three year period. Wintrust is one of several public companies that were sued on ~~behalf of herself and all other hourly, non-exempt employees of Wintrust Mortgage in California. Wintrust Mortgage received service of~~identical grounds within the ~~complaint on November 4, 2018. Wintrust Mortgage filed its response to~~same week by the ~~complaint on February 25, 2019.~~same plaintiff’s law firm. On November ~~1, 2019, the plaintiff's counsel~~8, 2022, Wintrust 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~~dismiss the ~~court continued~~entire complaint. The motion has been fully briefed. We believe plaintiff’s allegations to be legally and factually meritless and otherwise lack sufficient information to estimate the motion to September 8, 2020. On September 8, 2020, the court requested the parties make certain changes to the settlement agreement that were immaterial to the parties’ settlement terms. The parties revised the settlement agreement consistent with the court's recommendations and submitted the revised settlement agreement to the court for its approval. On January 27, 2021, the court entered its preliminary approvalamount of the settlement. After no class members opted out or objected to the settlement, the court issued its final approval of the settlement on June 17, 2021 and on June 18, 2021, Wintrust Mortgage tendered the settlement amount to the class claims administrator. Payments to class members have been completed and this matter is closed. The Company had reserved an amount for this settlement that is immaterial to its results of operations or financial condition.any potential liability.

Wintrust Mortgage California PAGA Matter

On May 24, 2022, a former Wintrust Mortgage employee filed a California Private Attorney General Act (“PAGA”) suit, not individually, but as representative of all Wintrust Mortgage’s California hourly employees, against Wintrust Mortgage in the Superior Court of San Diego County, California. Plaintiff alleges Wintrust Mortgage failed to provide: (i) accurate sick leave accrual and pay; (ii) overtime wages; (iii) accurately itemized wage statements; (iv) meal breaks and meal premiums; (v) timely payment of earned wages; (vi) payment of all earned wages; and (vii) payment of all vested vacation hours. Wintrust Mortgage disputes the validity of Plaintiff’s claims and believes, to the extent there were defects in complying with California law governing the payment of compensation to Plaintiff, such errors would have been de minimis. Plaintiff also has an arbitration agreement with a collective and class action ~~waiver.~~waiver and on January 19, 2023, Wintrust Mortgage moved to compel arbitration. The court entered and continued the motion until June 23, 2023 and stayed further proceedings in anticipation of a California Supreme Court decision on PAGA arbitrations. We believe plaintiff’s allegations to be legally and factually meritless and otherwise lack sufficient information to estimate the amount of any potential liability.

Wintrust Mortgage Fair Lending Matter

On May 25, 2022, a Wintrust Mortgage customer filed a putative class action and asserted individual claims against Wintrust Mortgage and Wintrust Financial Corporation in the District Court for the Northern District of Illinois. Plaintiff alleges that Wintrust Mortgage discriminated against black/African American borrowers and brings class claims under the Equal Credit Opportunity Act, Sections 1981 and 1982 under Chapter 42 of the United States Code; and the Fair Housing Act of 1968. Plaintiff also asserts individual claims under theories of promissory estoppel, fraudulent inducement, and breach of contract. On September 23, 2022, Wintrust filed a motion to dismiss the entire suit. The motion has been fully briefed and the matter is awaiting a decision by the court. We vigorously dispute these allegations, believe them to be legally and factually meritless, and otherwise lack sufficient information to estimate the amount of any potential liability.

Other Matters

In addition, the Company and its subsidiaries, from time to time, are subject to pending and threatened legal action and proceedings arising in the ordinary course of business.

Based on information currently available and upon consultation with counsel, management believes that the eventual outcome of any pending or threatened legal actions and proceedings described above, including our ordinary course litigation, will not have a material adverse effect on the operations or financial condition of the Company. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the results of operations or financial condition for a particular period.

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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 ~~2021~~2022 Form 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. 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 stock. This authorization is incremental to the remaining authorization of approximately $23 million under the previous program, which the Board approved in 2019. The repurchase authorization does not have an expiration date. No purchases of the Company’s common shares were made by or on behalf of the Company or any “affiliated purchaser” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during the three ~~or six~~ months ended ~~June 30, 2022.~~March 31, 2023.

Item 5: Other Information

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 5, 2023, the Company announced that Jeffrey D. Hahnfeld, currently the Company’s Senior Vice President and Corporate Controller, has been promoted to the position of Executive Vice President, Controller and Chief Accounting Officer of the Company, effective immediately. In connection with this event, Mr. Hahnfeld became the Company’s principal accounting officer and David L. Stoehr, our Executive Vice President and Chief Financial Officer, will continue serving as the Company’s principal financial officer but will no longer be considered the Company’s principal accounting officer.

Mr. Hahnfeld, age 52, joined the Company in March 2004. Mr. Hahnfeld has served as the Company’s Senior Vice President and Corporate Controller since February 2013 and as the Company’s Senior Vice President of Finance since February 2009.

There are no arrangements or understandings between Mr. Hahnfeld and any other persons pursuant to which he was appointed as Executive Vice President, Controller and Chief Accounting Officer, no family relationships among any of the Company’s directors or executive officers and Mr. Hahnfeld, and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934. Mr. Hahnfeld is also not a party to any material plan, contract or arrangement in connection with his appointment to Executive Vice President, Controller and Chief Accounting Officer.

Amended Series D Preferred Stock Certificate of Designations.

On May 5, 2023, the Company filed the Restated Certificate of Designations (the “Restated Certificate of Designations”) relating to its existing 5,000,000 shares of Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D, no par value per share (the “Series D Preferred Stock”), with the Secretary of State of the State of Illinois, which became effective upon filing. The Restated Certificate of Designations supplements the Company’s original Certificate of Designations relating to the Series D Preferred Stock that was filed with the Secretary of State of the State of Illinois on June 24, 2015 (the “Original Certificate of Designations”).

Under the Original Certificate of Designations, dividends on the Series D Preferred Stock are payable quarterly in arrears when, as and if declared by the Company’s Board of Directors (the “Board”) or a duly authorized committee thereof: (i) from the date of the issuance to but excluding July 15, 2025, at a fixed rate of 6.50% per annum on the liquidation preference of $25 per share of Series D Preferred Stock, and (ii) from and including July 15, 2025 and thereafter (the “Floating Rate Period”), at a floating rate equal to the then applicable three-month London Interbank Offered Rate (“LIBOR”), plus a spread of 4.06% per annum, on the liquidation preference of $25 per share of Series D Preferred Stock. It is expected that immediately after June 30, 2023 three-month LIBOR will cease to be published on a representative basis by its administrator, ICE Benchmark Administration. The Original Certificate of Designations does not contain a replacement benchmark rate for three-month LIBOR.

The Board of Governors of the Federal Reserve System (the “Board of Governors”) promulgated Regulation ZZ (“Regulation ZZ”) implementing the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) to establish benchmark replacement rates based on the Secured Overnight Financing Rate (“SOFR”) for contracts governed by U.S. law that reference certain tenors of U.S. dollar LIBOR and that do not have terms that provide for the use of a clearly defined and practicable replacement benchmark rate, such as the Original Certificate of Designations. Pursuant to the LIBOR Act and Regulation ZZ, on the first London banking day after June 30, 2023 (such date or such different date determined by the Board of Governors as the date on which such LIBOR tenor will cease to be published or cease to be representative, the “LIBOR Replacement Date”), references to three-month LIBOR in the Original Certificate of Designations shall, by operation of law, (i) become null and void and (ii) be replaced with Three-Month CME Term SOFR, a forward-looking term rate based on SOFR administered by CME Group Benchmark Administration, Ltd., plus a tenor spread adjustment of 0.26161%, without the need of any consent of holders of the Series D Preferred Stock, in accordance with the LIBOR Act and Regulation ZZ.

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The Restated Certificate of Designations memorializes the changes to be effected to the Original Certificate of Designations by the LIBOR Act and Regulation ZZ effective as of the LIBOR Replacement Date, including the replacement of three-month LIBOR with Three-Month CME Term SOFR, plus a tenor spread adjustment of 0.26161%. Consequently, during the Floating Rate Period commencing on July 15, 2025, any dividends the Board declares on the Series D Preferred Stock will be paid at a rate of the then current Three-Month CME Term SOFR plus 0.26161%, plus a spread of 4.06% per annum.

The foregoing description of the Restated Certificate of Designations does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Restated Certificate of Designations, which is filed as Exhibit 3.2 to this Quarterly Report on Form 10-Q and is incorporated by reference.

Item 6: Exhibits:

(a)Exhibits

(

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


3.1						Amended and Restated By-laws of the Company, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 30, 2023).

3.2						Restated Certificate of Designations of Wintrust Financial Corporation, filed on May 5 , 2023 with the Secretary of State of the State of Illinois, designating the preferences, limitations, voting powers and relative rights of the Series D Preferred Stock.

10.1						~~2022 Stock Incentive Plan~~Amended and Restated Employment Agreement, dated as of January 26, 2023, between the Company and Edward J. Wehmer (incorporated by reference to Exhibit ~~10.1~~10.2 of the Company’s Current Report on Form 8-K ~~Filed~~filed with the Securities and Exchange Commission on ~~May 27, 2022)~~January 30, 2023).*

10.2						~~Tenth Amending~~Amended and Restated Employment Agreement, dated as of ~~May 2, 2022, by~~January 26, 2023, between the Company and ~~between First Insurance Funding of Canada Inc. and CIBC Mellon Trust Company in its capacity as trustee of Plaza Trust, by its Financial Service Agent, Royal Bank of Canada~~Timothy S. Crane (incorporated by reference to Exhibit 10.1 of the ~~Company’s~~Company's Current Report on Form 8-K ~~Filed~~filed with the Securities and Exchange Commission on ~~May 3, 2022)~~January 30, 2023).

~~10.3~~						Performance Guarantee Confirmation, dated as of May 2, 2022, confirming the Performance Guarantee dated as of December 16, 2014, by and between the Company and Plaza Trust (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K Filed with the Securities and Exchange Commission on May 3, 2022).

~~10.4~~						Fee Letter dated as of May 2, 2022 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 May 3, 2022).*

31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (1)

101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(1)Includes the following financial information included in the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2022,~~March 31, 2023, 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

~~102~~72

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

WINTRUST FINANCIAL CORPORATION

(Registrant)

Date:

~~August 8, 2022~~May 9, 2023

/s/ DAVID L. STOEHR

David L. Stoehr

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

Date:

May 9, 2023

/s/ JEFFREY D. HAHNFELD

Jeffrey D. Hahnfeld

Executive Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer and duly authorized officer)

~~103~~73


Three months ended June 30, 2021	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	$	95,640	$	181,792	$	11,382	$	14,242	$	17,477	$	676	$	321,209

Other adjustments	—		—		—		—		33		—		33

Charge-offs	(3,237)		(1,412)		(142)		(3)		(2,077)		(104)		(6,975)
Recoveries	902		514		328		36		3,239		34		5,053
Provision for credit losses	5,202		(22,372)		(361)		1,409		1,227		(394)		(15,289)
Allowance for credit losses at period end	$	98,507	$	158,522	$	11,207	$	15,684	$	19,899	$	212	$	304,031
By measurement method:
Individually measured	$	8,625	$	1,257	$	213	$	1,045	$	—	$	77	$	11,217
Collectively measured	89,882		157,265		10,994		14,639		19,899		135		292,814

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

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


(Dollars in thousands)	As of June 30, 2022			Three Months Ended June 30, 2022			Six months ended June 30, 2022
	Total (1)(3)			Payments in Default (2)(3)			Payments in Default (2)(3)
	Count	Balance		Count	Balance			Count	Balance
Commercial
Commercial, industrial and other	16	$	4,995	10	$	4,469		11	$	4,711



Commercial real estate


Non-construction	2	1,907		—	—			—	—




Residential real estate and other	39	6,159		2	345			2	345
Total loans	57	$	13,061	12	$	4,814		13	$	5,056


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

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


	Average Balance for six months ended,		Interest for six months ended,				Yield/Rate for six months ended,
(Dollars in thousands)	June 30, 2022		June 30, 2021		June 30, 2022			June 30, 2021		June 30, 2022		June 30, 2021
Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1)	$	3,911,080	$	4,036,553	$	9,272		$	2,352	0.48	%	0.12	%
Investment securities (2)	6,484,570		4,360,323		69,876			43,881		2.17		2.03
FHLB and FRB stock	136,424		136,043		3,595			3,514		5.31		5.21
Liquidity management assets (3)(8)	$	10,532,074	$	8,532,919	$	82,743		$	49,747	1.58	%	1.18	%
Other earning assets (3)(4)(8)	24,622		21,870		391			275		3.20		2.55
Mortgage loans held-for-sale	612,078		1,070,985		11,827			17,219		3.90		3.24
Loans, net of unearned income (3)(5)(8)	35,348,269		32,765,825		607,194			559,600		3.46		3.44

Total earning assets (8)	$	46,517,043	$	42,391,599	$	702,155		$	626,841	3.04	%	2.98	%
Allowance for loan and investment security losses	(256,834)		(306,268)
Cash and due from banks	479,174		418,777
Other assets	2,687,842		2,966,281
Total assets	$	49,427,225	$	45,470,389

NOW and interest-bearing demand deposits	$	5,010,709	$	3,761,614	$	4,543		$	3,909	0.18	%	0.21	%
Wealth management deposits	2,671,444		2,220,223		4,603			1,957		0.35		0.18
Money market accounts	12,330,943		11,284,383		16,207			16,468		0.27		0.29
Savings accounts	3,893,519		3,658,307		683			832		0.04		0.05
Time deposits	3,774,095		4,753,424		7,803			29,076		0.42		1.23
Interest-bearing deposits	$	27,680,710	$	25,677,951	$	33,839		$	52,242	0.25	%	0.41	%
Federal Home Loan Bank advances	1,219,110		1,231,806		9,694			9,727		1.60		1.59
Other borrowings	492,011		522,078		4,973			5,177		2.04		2.00
Subordinated notes	437,025		436,588		10,999			10,989		5.03		5.03
Junior subordinated debentures	253,566		253,566		3,617			5,428		2.84		4.26
Total interest-bearing liabilities	$	30,082,422	$	28,121,989	$	63,122		$	83,563	0.42	%	0.60	%
Non-interest-bearing deposits	13,769,792		12,029,936
Other liabilities	1,061,655		1,107,376
Equity	4,513,356		4,211,088
Total liabilities and shareholders’ equity	$	49,427,225	$	45,470,389
Interest rate spread (6)(8)										2.62	%	2.38	%
Less: Fully taxable-equivalent adjustment					(1,935)			(1,793)		(0.01)		(0.01)
Net free funds/contribution (7)	$	16,434,621	$	14,269,610						0.15		0.21
Net interest income/margin (GAAP) (8)					$	637,098		$	541,485	2.76	%	2.58	%
Fully taxable-equivalent adjustment					1,935			1,793		0.01		0.01
Net interest income/margin, fully taxable-equivalent (non-GAAP) (8)					$	639,033		$	543,278	2.77	%	2.59	%


	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
As of June 30, 2022
(Dollars in thousands)
Loan Balances:
Commercial






Commercial, industrial and other, excluding PPP loans	$	32,436	$	—	$	7,756	$	13,897	$	11,910,927	$	11,965,016
Commercial PPP loans	—		—		9,033		223		72,833		82,089
Commercial real estate
Construction and development	889		—		—		1,144		1,504,285		1,506,318
Non-construction	9,829		—		6,771		33,076		7,851,211		7,900,887







Home equity	1,084		—		154		930		323,658		325,826

Residential real estate, excluding early buy-out loans	8,330		—		534		147		1,956,040		1,965,051

Premium finance receivables
Property and casualty insurance loans	13,303		6,447		15,299		23,313		5,483,085		5,541,447
Life insurance loans	—		—		1,796		65,155		7,541,482		7,608,433

Consumer and other	8		25		8		119		44,020		44,180
Total loans, net of unearned income, excluding early buy-out loans	$	65,879	$	6,472	$	41,351	$	138,004	$	36,687,541	$	36,939,247
Early buy-out loans guaranteed by U.S. government agencies (1)	23,815		50,314		272		—		39,455		113,856
Total loans, net of unearned income	$	89,694	$	56,786	$	41,623	$	138,004	$	36,726,996	$	37,053,103


Three months ended June 30, 2022 (In thousands)	Commercial		Commercial Real Estate		Residential Real Estate and Other		Total
Balance at beginning of period	$	7,708	$	12,118	$	25,045	$	44,871
Additions during the period	186		—		2,235		2,421
Reductions:
Charge-offs	(191)		—		—		(191)
Transferred to OREO and other repossessed assets	—		—		—		—
Removal of TDR loan status (1)	—		—		—		—
Payments received	(461)		(504)		(758)		(1,723)
Balance at period end	$	7,242	$	11,614	$	26,522	$	45,378