# Wintrust Financial Corp: Form 10-K for the period ended Dec 31, 2017

- Company: [Wintrust Financial Corp](/companies/wtfc.md) (CIK 1015328)
- Form: 10-K
- Filed: 2018-02-28
- Accepted by EDGAR: Feb 28, 2018, 17:22 ET
- Period: 2017-12-31
- Accession: 0001015328-18-000080
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1015328/000101532818000080/wtfc-201710xk.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1015328/000101532818000080/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2017-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2017-10-01 to 2017-12-31 | $32.7m | us-gaap:InterestExpense |
| Interest expense | 12 months, 2017-01-01 to 2017-12-31 | $114.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2017-10-01 to 2017-12-31 | $27.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 12 months, 2017-01-01 to 2017-12-31 | $132.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2017-10-01 to 2017-12-31 | $68.8m | us-gaap:NetIncomeLoss |
| Net income | 12 months, 2017-01-01 to 2017-12-31 | $257.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2017-10-01 to 2017-12-31 | $1.17 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 12 months, 2017-01-01 to 2017-12-31 | $4.40 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2017-10-01 to 2017-12-31 | $1.19 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 12 months, 2017-01-01 to 2017-12-31 | $4.53 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2017-01-01 to 2017-12-31 | 56,686,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2017-01-01 to 2017-12-31 | $401.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2017-01-01 to 2017-12-31 | $59.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 12 months, 2017-01-01 to 2017-12-31 | $40.5m | us-gaap:PaymentsOfDividends |
| Share repurchases | 12 months, 2017-01-01 to 2017-12-31 | $397.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2017-12-31 | $277.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2017-12-31 | $27.92bn | us-gaap:Assets |
| Total liabilities | at 2017-12-31 | $24.94bn | us-gaap:Liabilities |
| Short-term borrowings | at 2017-12-31 | $17.2m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2017-12-31 | $2.98bn | us-gaap:StockholdersEquity |

## Business

As filed, 94,012 characters.

### Overview

Wintrust Financial Corporation, an Illinois corporation (“we,” “Wintrust” or “the Company”), which was incorporated in 1992, is a financial holding company based in Rosemont, Illinois, with total assets of approximately $27.9 billion as of December 31, 2017. We conduct our businesses through three segments: community banking, specialty finance and wealth management. All segment measurements discussed below are based on the reportable segments and do not reflect intersegment eliminations.

We provide community-oriented, personal and commercial banking services to customers located in the Chicago metropolitan area, southern Wisconsin and northwest Indiana (“our market area”) through our fifteen wholly-owned-banking subsidiaries (collectively, the “banks”), as well as the origination and purchase of residential mortgages for sale into the secondary market through Wintrust Mortgage, a division of Barrington Bank and Trust Company, N.A. (“Barrington Bank”). For the years ended December 31, 2017, 2016 and 2015, the community banking segment had net revenues of $889 million, $819 million and $714 million, respectively, and net income of $175 million, $145 million and $102 million, respectively. The community banking segment had total assets of $22.8 billion, $21.2 billion and $19.2 billion as of December 31, 2017, 2016 and 2015, respectively. The community banking segment accounted for approximately 76% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2017.

We provide specialty finance services, including financing for the payment of commercial insurance premiums and life insurance premiums (“premium finance receivables”) on a national basis through FIRST Insurance Funding (“FIRST Insurance Funding”), a division of our wholly-owned subsidiary Lake Forest Bank & Trust Company, N.A. ("Lake Forest Bank"), and Wintrust Life Finance (“Wintrust Life Finance”), a division of Lake Forest Bank, and in Canada through our premium finance company, First Insurance Funding of Canada (“FIFC Canada”), lease financing and other direct leasing opportunities through our wholly-owned subsidiary, Wintrust Asset Finance, and short-term accounts receivable financing and outsourced administrative services through our wholly-owned subsidiary, Tricom, Inc. of Milwaukee (“Tricom”). For the years ended December 31, 2017, 2016 and 2015, the specialty finance segment had net revenues of $179 million, $148 million and $119 million, respectively, and net income of $66 million, $49 million and $42 million, respectively. The specialty finance segment had total assets of $4.5 billion, $3.9 billion and $3.1 billion as of December 31, 2017, 2016 and 2015, respectively. The specialty finance segment accounted for 15% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2017.

We provide a full range of wealth management services primarily to customers in our market area through three separate subsidiaries, The Chicago Trust Company, N.A. (“CTC”), Wayne Hummer Investments, LLC (“WHI”) and Great Lakes Advisors, LLC (“Great Lakes Advisors”). For the years ended December 31, 2017, 2016 and 2015, the wealth management segment had net revenues of $103 million, $97 million and $93 million, respectively, and net income of $17 million, $13 million and $13 million, respectively. The wealth management segment had total assets of $618 million, $612 million and $549 million as of December 31, 2017, 2016 and 2015, respectively. The wealth management segment accounted for 9% of our consolidated net revenues, excluding intersegment eliminations, for the year ended December 31, 2017.

### Our Business and Reporting Segments

As set forth in Note 23, “Segment Information,” our operations consist of three primary segments: community banking, specialty finance and wealth management. The three reportable segments are strategic business units that are separately managed as they offer different products and services and have different marketing strategies. In addition, each segment’s customer base has varying characteristics and each segment has a different regulatory environment. While the Company’s management monitors each of the fifteen bank subsidiaries’ operations and profitability separately, these subsidiaries have been aggregated into one reportable operating segment due to the similarities in products and services, customer base, operations, profitability measures and economic characteristics.

#### Community Banking

Through our community banking segment, our banks provide community-oriented, personal and commercial banking services to customers located in our market area. Our customers include individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the banks' local service areas. The banks have a strategy to provide comprehensive community-focused banking services. In keeping with this strategy, the banks provide highly personalized and responsive service, a characteristic of locally-owned and managed institutions. As such, the banks compete for deposits principally by offering depositors a variety of deposit programs, convenient office locations, hours and other services, and for loan originations primarily through the interest rates and loan fees they charge, the efficiency and quality of services they provide to borrowers and the variety of their loan and cash management products. Using our decentralized corporate structure to our advantage, we offer our MaxSafe® deposit accounts, which provide customers with expanded Federal Deposit Insurance Corporation (“FDIC”) insurance coverage by spreading a customer's deposit across our fifteen banks. This product differentiates our banks from many of our competitors that have consolidated their bank charters into branches. We also have a downtown Chicago office that works with each of our banks to capture commercial and industrial business. Our commercial and industrial lenders in our downtown office operate in close partnership with lenders at our community banks. By combining our expertise in the commercial and industrial sector with our high level of personal service and full suite of banking products, we believe we create another point of differentiation from both our larger and smaller competitors. Our banks also offer home equity, consumer, and real estate loans, safe deposit facilities, ATMs, internet banking and other innovative and traditional services specially tailored to meet the needs of customers in their market areas.

We developed our banking franchise through a combination of *de novo* organization and the purchase of existing bank franchises. The organizational efforts began in 1991, when a group of experienced bankers and local business people identified an unfilled niche in the Chicago metropolitan area retail banking market. As large banks acquired smaller ones and personal service was subjected to consolidation strategies, the opportunity increased for locally owned and operated, highly personal service-oriented banks. As a result, Lake Forest Bank was founded in December 1991 to service the Lake Forest and Lake Bluff communities.

We now own fifteen banks, including eight Illinois-chartered banks: Hinsdale Bank and Trust Company (“Hinsdale Bank”), Wintrust Bank, Libertyville Bank and Trust Company (“Libertyville Bank”), Northbrook Bank & Trust Company (“Northbrook Bank”), Village Bank & Trust (“Village Bank”), Wheaton Bank & Trust Company (“Wheaton Bank”), State Bank of the Lakes and St. Charles Bank & Trust Company (“St. Charles Bank”). In addition, we have one Wisconsin-chartered bank, Town Bank, and six nationally chartered banks: Lake Forest Bank, Barrington Bank, Crystal Lake Bank & Trust Company, N.A. (“Crystal Lake Bank”), Schaumburg Bank & Trust Company, N.A. (“Schaumburg Bank”), Beverly Bank & Trust Company, N.A. (“Beverly Bank”) and Old Plank Trail Community Bank, N.A. (“Old Plank Trail Bank”). As of December 31, 2017, we had 157 banking locations.

Each bank is subject to regulation, supervision and regular examination by: (1) the Secretary of the Illinois Department of Financial and Professional Regulation (“Illinois Secretary”) and the Board of Governors of the Federal Reserve System (“Federal Reserve”) for Illinois-chartered banks; (2) the Office of the Comptroller of the Currency (“OCC”) for nationally-chartered banks; or (3) the Wisconsin Department of Financial Institutions (“Wisconsin Department”) and the Federal Reserve for Town Bank.

We also engage in the retail origination and correspondent purchase of residential mortgages through Wintrust Mortgage. Most originated and purchased loans sold into the secondary market are sold with servicing released. Certain originated loans are sold to the Company's banks with servicing remaining within Wintrust Mortgage operations. Wintrust Mortgage maintains retail mortgage offices in a number of states, with the largest concentration located in the Chicago, Minneapolis and Los Angeles metropolitan areas.

We also offer several niche lending products through several of the banks. These include Barrington Bank's Community Advantage program, which provides lending, deposit and cash management services to condominium, homeowner and community associations; Hinsdale Bank's mortgage warehouse lending program, which provides loan and deposit services to mortgage brokerage companies located predominantly in the Chicago metropolitan area; and Lake Forest Bank's franchise lending program, which provides lending to restaurant franchisees. Other niches offered throughout our banking franchise include Wintrust Commercial Finance, which offers direct leasing opportunities; Wintrust Business Credit, which specializes in asset-based lending for middle-market companies; Wintrust SBA Lending, which is dedicated to offering expertise in Small Business Administration loans; Wintrust Commercial Real Estate, which concentrates on real estate lending solutions including commercial mortgages and construction loans; and Wintrust Government, Non-Profit & Hospital, which focuses on financial solutions for mission-based organizations such as hospitals, non-profits, educational institutions and local government operations.

#### Specialty Finance

Through our specialty finance segment, we offer financing of insurance premiums for businesses and individuals; accounts receivable financing, value-added, out-sourced administrative services; and other specialty finance businesses. FIRST Insurance Funding and Wintrust Life Finance engage in the premium finance receivables business, our most significant specialized lending niche, including commercial insurance premium finance and life insurance premium finance. We also engage in commercial insurance premium finance in Canada through our wholly-owned subsidiary FIFC Canada.

In their commercial insurance premium finance operations, FIRST Insurance Funding and FIFC Canada make loans to businesses to finance the insurance premiums they pay on their commercial insurance policies. Approved medium and large insurance agents and brokers located throughout the United States and Canada assist FIRST Insurance Funding and FIFC Canada, respectively, in arranging each commercial premium finance loan between the borrower and FIRST Insurance Funding or FIFC Canada, as the case may be. FIRST Insurance Funding or FIFC Canada evaluates each loan request according to its own underwriting criteria including the amount of the down payment on the insurance policy, the term of the loan, the credit quality of the insurance company providing the financed insurance policy, the interest rate, the borrower's previous payment history, if any, and other factors deemed appropriate. Upon approval of the loan by FIRST Insurance Funding or FIFC Canada, as the case may be, the borrower makes a down payment on the financed insurance policy, which is generally done by providing payment to the agent or broker, who then forwards it to the insurance company. FIRST Insurance Funding or FIFC Canada may either forward the financed amount of the remaining policy premiums directly to the insurance carrier or to the agent or broker for remittance to the insurance carrier on FIRST Insurance Funding's or FIFC Canada's behalf. In some cases the agent or broker may hold our collateral, in the form of the proceeds of the unearned insurance premium from the insurance company, and forward it to FIRST Insurance Funding or FIFC Canada in the event of a default by the borrower. This lending involves relatively rapid turnover of the loan portfolio and high volume of loan originations. Because the agent or broker is the primary contact to the ultimate borrowers who are located nationwide and because proceeds and our collateral may be handled by the agent or brokers during the term of the loan, FIRST Insurance Funding and FIFC Canada may be more susceptible to third party (i.e., agent or broker) fraud. The Company performs various controls and procedures including ongoing credit and other reviews of the agents and brokers as well as performs various internal audit steps to mitigate against the risk of material fraud.

The commercial and property premium finance business is subject to regulation in the majority of states. Regulation typically governs notices to borrowers prior to cancellation of a policy and required communication to insurance agents and insurance companies. FIRST Insurance Funding is qualified to provide financing of commercial insurance policies in all 50 states, the District of Columbia, Puerto Rico, Guam, and the U.S. Virgin Islands. FIRST Insurance Funding’s legal department regularly monitors changes to regulations and updates policies and programs accordingly.

Wintrust Life Finance also finances life insurance policy premiums generally used for estate planning purposes of high net-worth borrowers. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The cash surrender value of 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.

The life insurance premium finance business is governed under banking regulations but is not subject to additional systemic regulation. Wintrust Life Finance's compliance department regularly monitors the regulatory environment and the company's compliance with existing regulations. Wintrust Life Finance maintains a policy prohibiting the known financing of stranger-originated life insurance and has established procedures to identify and prevent the company from financing such policies. While a carrier could potentially put at risk the cash surrender value of a policy, which serves as Wintrust Life Finance's primary collateral, by challenging the validity of the insurance contract for lack of an insurable interest, Wintrust Life Finance believes it has strong counterclaims against any such claims by carriers, in addition to recourse to borrowers and guarantors as well as to additional collateral in certain cases.

Premium finance loans made by FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada are primarily secured by the insurance policies financed by the loans. These insurance policies are written by a large number of insurance companies geographically dispersed throughout the United States and Canada. Our premium finance receivables balances finance insurance policies that are spread among a large number of insurers, however one of the insurers represents approximately 14% of such balances and two additional insurers represent approximately 6% and 5%, respectively, of such balances. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada consistently monitor carrier ratings and financial performance of our carriers. In the event ratings fall below certain levels, most of Wintrust Life Finance's life insurance premium finance policies provide for an event of default and allow Wintrust Life Finance to have recourse to borrowers and guarantors as well as to additional collateral in certain cases. For the commercial premium finance business, the term of the loans is sufficiently short such that in the event of a decline in carrier ratings, FIRST Insurance Funding or FIFC Canada, as the case may be, can restrict or eliminate additional loans to finance premiums to such carriers. The majority of premium finance receivables 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.

Through our wholly-owned subsidiary Wintrust Asset Finance, we provide equipment financing through structured loan and lease products to customers in a variety of industries throughout the United States. Wintrust Asset Finance provides financing of fixed assets consisting of property, plant and equipment, transportation (trucks, trailers, rail, marine, buses), construction, manufacturing equipment, technology, oil and gas, restaurant equipment, medical and healthcare. During 2017, Wintrust Asset Finance contributed approximately $31.0 million to our revenue, which does not reflect intersegment eliminations.

Through our wholly-owned subsidiary Tricom, we provide high-yielding, short-term accounts receivable financing and value-added, outsourced administrative services, such as data processing of payrolls, billing and cash management services to the temporary staffing industry. Tricom’s clients, located throughout the United States, provide staffing services to businesses in diversified industries. During 2017, Tricom processed payrolls with associated client billings of approximately $686 million and contributed approximately $10.7 million to our revenue, net of interest expense. Net revenue is based on our reportable segments and does not reflect intersegment eliminations.

In 2017, our commercial premium finance operations, life insurance premium finance operations, leasing operations and accounts receivable finance operations accounted for 42%, 35%, 17% and 6%, respectively, of the total revenues of our specialty finance business.

#### Wealth Management

Through our wealth management segment, we offer a full range of wealth management services through three separate subsidiaries (WHI, CTC and Great Lakes Advisors): trust and investment services, asset management, securities brokerage services and 401(k) and retirement plan services. These subsidiaries are subject to regulation by the Securities and Exchange Commission (the “SEC”) and the Financial Industry Regulatory Authority (“FINRA”).

Great Lakes Advisors, our registered investment adviser with locations in downtown Chicago and Tampa Bay, Florida as well as in various banking offices of our fifteen banks, provides money management services and advisory services to individuals, institutions, and municipal and tax-exempt organizations. Great Lakes Advisors also provides portfolio management and financial advisory services for a wide range of pension and profit-sharing plans as well as money management and advisory services to CTC. As of December 31, 2017, the Company’s wealth management subsidiaries had approximately $24.6 billion of assets under administration, which included $2.7 billion of assets owned by the Company and its subsidiary banks.

CTC, our trust subsidiary, offers trust and investment management services to clients through offices located in downtown Chicago and at various banking offices of our fifteen banks. CTC is subject to regulation, supervision and regular examination by the OCC.

WHI, our registered broker/dealer subsidiary which has been operating since 1931, provides a full range of private client and securities brokerage services to clients located primarily in the Midwest. WHI is headquartered in downtown Chicago, operates an office in Appleton, Wisconsin, and has established branch locations in offices at a majority of our banks. WHI also provides a full range of investment services to clients through a network of relationships with community-based financial institutions primarily located in Illinois.

### Strategy and Competition

Historically, we have executed a growth strategy through branch openings and *de novo* bank formations, expansion of our wealth management and premium finance business, development of specialized earning asset niches and acquisitions of other community-oriented banks or specialty finance companies. After we made a decision to slow our growth from 2006 until 2008 due to unfavorable credit spreads, loosened underwriting standards by many of our competitors, and intense price competition, we raised capital and began to increase our lending and deposits in late 2008. From 2009 through 2012, this capital as well as additional capital raised during that period allowed us to be in a position to take advantage of opportunities in a disrupted marketplace by:

- Increasing our lending as other financial institutions pulled back;
- Hiring quality lenders and other staff away from larger and smaller institutions that may have substantially deviated from a customer-focused approach or who may have substantially limited the ability of their staff to provide credit or other services to their customers;
- Investing in dislocated assets such as the purchased life insurance premium finance portfolio, the Canadian commercial premium finance portfolio, trust and investment management companies and certain collateralized mortgage obligations; and
- Purchasing banks and banking assets either directly or through the FDIC-assisted process in areas key to our geographic expansion.

The Company has employed certain strategies since 2013 to manage net income amid an environment characterized by low interest rates and increased competition. In general, the Company has taken a steady and measured approach to grow strategically and manage expenses. Specifically, the Company has:

- Leveraged its internal loan pipeline and external growth opportunities to grow earnings assets to increase net interest income;
- Continued efforts to reduce interest costs by improving our funding mix;
- Written call option contracts on certain securities as an economic hedge to mitigate overall interest rate risk and enhance the securities' overall return by using fees generated from these options;
- Entered into mirror-image swap transactions to both satisfy customer preferences and maintain variable rate exposure;
- Purchased interest rate cap derivatives to potentially mitigate margin compression caused by the repricing of variable rate liabilities and lack of repricing of fixed rate loans and securities in a potential rising rate environment;
- Completed strategic acquisitions to expand our presence in existing and complimentary markets;
- Focused on cost control and leveraging our current infrastructure to grow without a commensurate increase in operating expenses; and
- Expanded the Wintrust Asset Finance direct leasing niche.

Our strategy and competitive position for each of our business segments is summarized in further detail, below.

#### Community Banking

We compete in the commercial banking industry through our banks in the communities they serve. The commercial banking industry is highly competitive and the banks face strong direct competition for deposits, loans and other financial related services. The banks compete with other commercial banks, thrifts, credit unions, stockbrokers, government-sponsored entities, mutual fund companies, insurance companies, factoring companies and other non-bank financial companies. Some of these competitors are local, while others are statewide or nationwide.

As a mid-size financial services company, we expect to benefit from greater access to financial and managerial resources than our smaller local competitors while maintaining our commitment to local decision-making and to our community banking philosophy. In particular, we are able to provide a wider product selection and larger credit facilities than many of our smaller competitors, and we believe our service offerings help us in recruiting talented staff. We continue to add lenders throughout the community banking organization, many of whom have joined us because of our ability to offer a range of products and level of services which compete effectively with both larger and smaller market participants. We have continued to expand our product delivery systems, including a wide variety of electronic banking options for our retail and commercial customers which allow us to provide a level of service typically associated with much larger banking institutions. Consequently, management views technology as a great equalizer to offset some of the inherent advantages of its significantly larger competitors. Additionally, we have access to public capital markets whereas many of our local competitors are privately held and may have limited capital-raising capabilities.

We also believe we are positioned to compete effectively with other larger and more diversified banks, bank holding companies and other financial services companies due to the multi-chartered approach that pushes accountability for building a franchise and a high level of customer service down to each of our banking franchises. Additionally, we believe that we provide a relatively complete portfolio of products that is responsive to the majority of our customers' needs through the retail and commercial operations supplied by our banks, and through our mortgage and wealth management operations. The breadth of our product mix allows us to compete effectively with our larger competitors, while our multi-chartered approach with local and accountable management provides for what we believe is superior customer service relative to our larger and more centralized competitors.

Wintrust Mortgage competes with large mortgage brokers as well as other banking organizations. Consolidation, on-going investor push-backs, enhanced regulatory guidance and the promise of equal oversight for both banks and independent lenders have created challenges for small and medium-sized independent mortgage lenders. Wintrust Mortgage's size, bank affiliation, regulatory competency, branding, technology, business development tools and reputation make the firm well positioned to compete in this environment. In 2017, we increased the amount of loans sold with servicing retained, including those loans sold to the Company's banks with servicing remaining within Wintrust Mortgage operations. While earnings will fluctuate with the rise and fall of long-term interest rates, we expect that mortgage banking revenue will be a continuous source of revenue for us and our mortgage lending relationships will continue to provide franchise value to our other financial service businesses.

In 2017, the Company opened four new branch locations in the Chicago metropolitan area. However, the Company closed two banking locations in 2017 as part of the integration of operations and the identification of under-performing locations. We believe this strategic branch expansion will allow us to grow into contiguous markets that we currently do not service and expand our footprint.

#### Specialty Finance

FIRST Insurance Funding and Wintrust Life Finance encounter intense competition from numerous other firms, including a number of national commercial premium finance companies, companies affiliated with insurance carriers, independent insurance brokers who offer premium finance services and other lending institutions. Some of their competitors are larger and have greater financial and other resources. FIRST Insurance Funding and Wintrust Life Finance compete with these entities by emphasizing a high level of knowledge of the insurance industry, flexibility in structuring financing transactions, and the timely funding of qualifying contracts. We believe that our commitment to service also distinguishes us from our competitors. Additionally, we believe that Wintrust Life Finance's acquisition of a large life insurance premium finance portfolio and related assets in 2009 enhanced our ability to market and sell life insurance premium finance products. FIFC Canada competes with one national commercial premium finance company and a few regional providers. In 2014, FIFC Canada expanded its operations through the acquisition of two affiliated Canadian insurance premium funding and payment services companies.

Wintrust Asset Finance competes with other bank-affiliated, independent, captive and vendor equipment leasing and finance companies. Wintrust Asset Finance believes a customer-focused origination philosophy, an experienced team, strong underwriting discipline and expert asset management enables them to compete effectively in a growing and dynamic market.

Tricom competes with numerous other firms, including a small number of similar niche finance companies and payroll processing firms, as well as various finance companies, banks and other lending institutions. Tricom's management believes that its commitment to service distinguishes it from competitors.

#### Wealth Management Activities

Our wealth management companies (CTC, WHI and Great Lakes Advisors) compete with larger wealth management subsidiaries of other larger bank holding companies as well as with other trust companies, brokerage and other financial service companies, stockbrokers and financial advisors. We believe we can successfully compete for trust, asset management and brokerage business by offering personalized attention and customer service to small to midsize businesses and affluent individuals. We continue to recruit and hire experienced professionals from the larger Chicago area wealth management companies, which is expected to help in attracting new customer relationships.

### Supervision and Regulation

#### Regulatory Environment

Our business is heavily regulated by both state and federal agencies. Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years, in response to the financial crisis as well as other factors such as technological and market changes. Regulatory enforcement and fines have also increased across the banking and financial services sector. Many of these changes have occurred as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and its implementing regulations, most of which are now in place. The current presidential administration has issued an executive order that sets forth principles for the reform of the federal financial regulatory framework, and the majority in Congress has also suggested an agenda for financial regulatory change. It is too early to assess whether there will be any major changes in the regulatory environment or only a rebalancing of the post financial crisis framework. The Company expects that its business will remain subject to extensive regulation and supervision.

The Company is a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), subject to regulation, supervision, and examination by the Federal Reserve. The Company is also subject to the disclosure and regulatory requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, both as administered by the SEC, as well as the rules of NASDAQ that apply to companies with securities listed on the NASDAQ Global Select Market. Our subsidiary banks are subject to regulation, supervision, and examination by the agency that granted their banking charters: (1) the OCC for Barrington Bank, Lake Forest Bank, Crystal Lake Bank, Schaumburg Bank, Beverly Bank and Old Plank Trail Bank; (2) the Illinois Secretary for Hinsdale Bank, Wintrust Bank, Libertyville Bank, Northbrook Bank, Village Bank, Wheaton Bank, State Bank of the Lakes and St. Charles Bank; and (3) the Wisconsin Department for Town Bank. Our Illinois and Wisconsin state-chartered bank subsidiaries are also members of the Federal Reserve System, subject to supervision and regulation by the Federal Reserve as their primary federal regulator. The deposits of all of our subsidiary banks are insured by the Deposit Insurance Fund (“DIF”) and, as such, the FDIC has additional oversight authority over the banks. The supervision, regulation and examination of banks and bank holding companies by bank regulatory agencies are intended primarily for the protection of depositors, the DIF, and the banking system as a whole, rather than shareholders of banks and bank holding companies, and in some instances may be contrary to their interests.

The Consumer Financial Protection Bureau (“CFPB”) has broad rulemaking authority over a wide range of federal consumer protection laws applicable to the business of our subsidiary banks and some other operating subsidiaries. Because each of our subsidiary banks has less than $10 billion in total consolidated assets, our subsidiary banks’ primary federal banking agency and, where applicable, state banking agency, not the CFPB, is responsible for examining and supervising the subsidiary banks’ compliance with federal consumer protection laws and regulations. Our non-bank subsidiaries are subject to regulation by their functional regulators, including applicable state finance and insurance agencies, the SEC, FINRA, the Chicago Stock Exchange, and the OCC, as well as by the Federal Reserve.

Federal and state laws, and the regulations of the bank regulatory agencies issued under them, affect the scope of business, the kinds and amounts of investments banks may make, reserve requirements, capital levels, the nature and amount of collateral for loans, the establishment of branches, the ability to merge, consolidate and acquire, dealings with insiders and affiliates and the payment of dividends. The regulatory agencies have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.

The following is a description of some of the laws and regulations that affect our business. By necessity, the descriptions below are summaries that do not purport to be complete, and that are qualified in their entirety by reference to those statutes and regulations discussed, and all regulatory interpretations thereof. Any changes in applicable laws, regulations, or the interpretations thereof could have a material adverse effect on our business or the business of our subsidiaries.

#### Bank Holding Company Regulation

The Company is a bank holding company that has elected to be treated as a financial holding company. The activities of bank holding companies generally are limited to the business of banking, managing or controlling banks, and certain other activities determined by the Federal Reserve to be closely related to banking. As a financial holding company, we may engage in an expanded range of activities, including activities that are considered to be financial in nature. Financial holding companies may also engage in activities incidental or complementary to financial activities, if the Federal Reserve determines that such activities pose no substantial risk to the safety or soundness of depository institutions or the financial system in general. Impermissible activities for financial holding companies and their subsidiaries include activities that are related to commerce, such as retail sales of nonfinancial products or manufacturing. As a result, subject to certain exceptions, the BHC Act generally prohibits us from acquiring direct or indirect ownership or control of voting shares of any company engaged in activities that are not permissible for us to engage in.

Maintaining our financial holding company status requires that the Company and each of our subsidiary banks remain “well-capitalized” and “well-managed” as defined by regulation and that each of our subsidiary banks maintain at least a “satisfactory” rating under the Community Reinvestment Act (“CRA”). If we or our subsidiary banks fail to continue to meet these requirements, we could be subject to restrictions on new activities and acquisitions, and/or be required to cease and possibly divest operations that conduct existing activities that are not permissible for a bank holding company that is not a financial holding company.

The BHC Act generally requires us to obtain prior approval from the Federal Reserve before acquiring direct or indirect ownership or control of more than 5% of the voting shares of an additional bank or bank holding company, or to merge or consolidate with another bank holding company. The Bank Merger Act generally requires our subsidiary banks to obtain prior regulatory approval to merge or consolidate with, or acquire substantially all of the assets of or assume deposits of, another bank. We must also be well-capitalized and well-managed, in order to acquire a bank located outside of our home state.

The Federal Deposit Insurance Act (“FDIA”) and Federal Reserve regulations and policy require us to serve as a source of financial and managerial strength for our subsidiary banks, and to commit resources to support the banks. This support may be required even if doing so may adversely affect our ability to meet other obligations.

#### Acquisitions of Ownership of the Company

Acquisitions of the Company’s voting stock above certain thresholds may be subject to prior regulatory notice or approval under applicable federal and state banking laws. Investors are responsible for ensuring that they do not, directly or indirectly, acquire shares of our stock in excess of the amount that can be acquired without regulatory approval or notice under the BHC Act, the Change in Bank Control Act, the Illinois Banking Act and Wisconsin banking laws.

#### Volcker Rule

We are prohibited under the Volcker Rule from (1) engaging in short-term proprietary trading for our own account, and (2) having certain ownership interests in and relationships with hedge funds or private equity funds. The fundamental prohibitions of the Volcker Rule apply to banking entities of any size, including the Company and its bank subsidiaries. The final Volcker Rule regulations contain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations and also permit certain ownership interests in certain types of funds to be retained. They also permit the offering and sponsoring of funds under certain conditions. The final Volcker Rule regulations impose significant compliance and reporting obligations on banking entities. The Company has put in place the compliance programs required by the Volcker Rule and has either divested or received extensions for any holdings in illiquid funds.

#### Capital Requirements

We and our subsidiary banks are required to maintain minimum risk-based and leverage capital ratios, as well as a capital conservation buffer ("Capital Conservation Buffer"), pursuant to regulations adopted by the Federal Reserve and the OCC to implement the Basel III capital framework (“U.S. Basel III Rule”).

#### Regulatory Capital and Risk-weighted Assets

Regulatory capital requirements apply to Common Equity Tier 1 capital, Tier 1 capital and total capital.

- Common Equity Tier 1 capital consists primarily of common stock and related surplus (net of Treasury stock), retained earnings, and certain minority interests, subject to certain regulatory adjustments. For us and our subsidiary banks, Common Equity Tier 1 capital does not include most elements of accumulated other comprehensive income (“AOCI”) because we exercised an opt-out election that was available to us with respect to certain changes in the capital treatment of AOCI. We made this election to avoid variations in the level of our capital depending on fluctuations in the fair value of our securities and derivatives portfolio.
- Tier 1 capital is composed of Common Equity Tier 1 capital and Additional Tier 1 capital. Additional Tier 1 capital consists primarily of non-cumulative perpetual preferred stock and related surplus, certain minority interests and, subject to certain regulatory limits, certain grandfathered cumulative perpetual preferred stock and certain grandfathered trust preferred securities.
- Total capital is composed of Tier 1 capital and Tier 2 capital. Tier 2 capital consists primarily of capital instruments and related surplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock, certain trust preferred securities and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets (“RWAs”) and, for institutions that have exercised the opt-out election regarding the treatment of AOCI up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.

Certain adjustments to and deductions from capital are required for purposes of calculating these regulatory capital measures, including with respect to goodwill, intangible assets, certain deferred tax assets, AOCI and investments in the capital instruments of unconsolidated financial institutions. Certain of these adjustments and deductions are subject to phase-in periods that began on January 1, 2015 and ended on January 1, 2018. On November 21, 2017, the federal banking agencies issued a final rule that, for certain bank holding companies and banks, including us and our subsidiary banks, delayed the last phase of the U.S. Basel III Rule’s transition provisions relating to capital deductions for mortgage servicing assets, certain deferred tax assets and investments in the capital instruments of unconsolidated financial institutions, and the recognition of minority interests in regulatory capital, until a revised rule is finalized. On September 26, 2017, the federal banking agencies issued a proposed rule that, for certain bank holding companies and banks, including us and our subsidiary banks, would simplify these regulatory capital deductions and limitations.

Under the U.S. Basel III Rule, risk weights are assigned to our and our subsidiary banks’ assets, exposures and certain off-balance sheet items to determine their risk-weighted assets ("RWAs"), which are used to calculate certain capital ratios. The September 26, 2017 proposed rule would replace the framework for applying heightened risk weights to high-volatility commercial real estate with a simpler framework that would focus on how loan proceeds are used, instead of underwriting criteria, to identify applicable exposures and would reduce the risk weight applied to applicable exposures from 150% to 130%. If adopted, these changes would apply prospectively.

#### Capital Ratio Requirements

Under the U.S. Basel III Rule, we and our subsidiary banks are required to maintain the following minimum capital ratios:

- Common Equity Tier 1 capital to RWAs ratio (“Common Equity Tier 1 Capital Ratio”) of 4.5%;
- Tier 1 capital to RWAs ratio (“Tier 1 Capital Ratio”) of 6.0%;
- Total capital to RWAs ratio (“Total Capital Ratio”) of 8.0%; and
- Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets and certain other deductions) ratio (“Tier 1 Leverage Ratio”) of 4.0%.

To be well-capitalized, our subsidiary banks must maintain the following capital ratios:

- Common Equity Tier 1 Capital Ratio of 6.5% or greater;
- Tier 1 Capital Ratio of 8.0% or greater;
- Total Capital Ratio of 10.0% or greater; and
- Tier 1 Leverage Ratio of 5.0% or greater.

The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the U.S. Basel III Rule. For purposes of the Federal Reserve’s Regulation Y, including determining whether a bank holding company meets the requirements to be a financial holding company, bank holding companies, such as the Company, must maintain a Tier 1 Capital Ratio of 6.0% or greater and a Total Capital Ratio of 10.0% or greater to be well-capitalized. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to our subsidiary banks, the Company’s capital ratios as of December 31, 2017 would exceed such revised well-capitalized standard. The Federal Reserve may require bank holding companies, including us, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a bank holding company’s particular condition, risk profile and growth plans.

Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators, including restrictions on our or our subsidiary banks’ ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications, or other restrictions on growth. Such actions, if undertaken, could have an adverse material effect on our operations or financial condition.

In addition to meeting the minimum capital requirements, under the U.S. Basel III Rule we and our banking subsidiaries must also maintain the required Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The Capital Conservation Buffer is calculated as a ratio of Common Equity Tier 1 capital to RWAs and it effectively increases the required minimum risk-based capital ratios. The Capital Conservation Buffer requirement is being phased in over a three-year period that began in January 1, 2016. When the phase-in period is complete on January 1, 2019, the Capital Conservation Buffer will be 2.5%. Throughout 2017, the required Capital Conservation Buffer was 1.25%, and the required Capital Conservation Buffer throughout 2018 will be 1.875%. The Tier 1 Leverage Ratio is not impacted by the Capital Conservation Buffer, and a banking institution may be considered well-capitalized while remaining out of compliance with the Capital Conservation Buffer.

The table below summarizes the capital requirements that we and our subsidiary banks must satisfy to avoid limitations on capital distributions and certain discretionary bonus payments (i.e., the required minimum capital ratios plus the Capital Conservation Buffer) during the remaining transition period for the Capital Conservation Buffer:

|  | Minimum Regulatory Capital Ratio Plus Capital Conservation Buffer 2017 | 2018 | 2019 |
| --- | ---: | ---: | ---: |
| Common Equity Tier 1 Capital Ratio | **5.75%** | 6.38% | 7.00% |
| Tier 1 Capital Ratio | **7.25** | 7.88 | 8.50 |
| Total Capital Ratio | **9.25** | 9.88 | 10.50 |

11

As of December 31, 2017, our and our subsidiary banks’ regulatory capital ratios were above the well-capitalized standards and met the then-applicable Capital Conservation Buffer. Based on current estimates, we believe that we and our subsidiary banks will continue to exceed all applicable well-capitalized regulatory capital requirements and the Capital Conservation Buffer, on a fully phased-in basis. Please refer to the table below for a summary of our regulatory capital ratios as of December 31, 2017, calculated using the regulatory capital methodology applicable to us during 2017.

|  | Company Regulatory Capital Ratios Minimum Regulatory Capital Ratio for the Company | Minimum Ratio + Capital Conservation Buffer(1) | Well-Capitalized Minimum for the Company(2) | The Company |
| --- | ---: | ---: | ---: | ---: |
| Common Equity Tier 1 Capital Ratio | **4.50%** | **5.75%** | **N/A** | **9.4%** |
| Tier 1 Capital Ratio | **6.00** | **7.25** | **6.00** | **9.9** |
| Total Capital Ratio | **8.00** | **9.25** | **10.00** | **12.0** |
| Tier 1 Leverage Ratio | **4.00** | **N/A** | **N/A** | **9.3** |

*(1) Reflects the Capital Conservation Buffer of 1.25% applicable during 2017. The Company already meets the Capital Conservation Buffer at the fully phased-in level of 2.5%.*

*(2) Reflects the well-capitalized standard applicable to the Company for purposes of the Federal Reserve’s Regulation Y.*

#### Liquidity Requirements

Historically, monitoring of bank and bank holding company liquidity has been addressed as a supervisory matter, without required formulaic measures set by regulation, and the liquidity requirements of the Company and our banking subsidiaries continue to be subject to supervision by federal and state banking regulators. Large financial firms are subject to the Liquidity Coverage Ratio (“LCR”) rule, which requires them to meet certain liquidity measures by holding an adequate amount of unencumbered high-quality liquid assets, such as Treasury securities and other sovereign debt. In addition, in May 2016 the federal banking agencies proposed a Net Stable Funding Ratio (“NSFR”) rule, which would require large financial firms to meet certain net stable funding measures by funding themselves with adequate amounts of medium- and long-term funding.

Although we and our subsidiary banks are not subject to the LCR and would not be subject to the NSFR as proposed, certain elements of the LCR rule and NSFR proposed rule could influence the supervisory policies of the federal banking agencies.

#### Capital Planning and Stress Testing Requirements

We are required to conduct annual company-run stress tests using data as of December 31st with submissions due to the Federal Reserve no later than July 31st of each following year. We are also required to publicly disclose the results of our stress tests. None of our subsidiary banks meet the asset thresholds that would cause them to be subject to stress testing requirements.

Congress is considering a bill that would, among other things, raise the threshold at which the company-run stress test requirements would apply from $10 billion in total consolidated assets to $250 billion in total consolidated assets, which would exempt us from these requirements. It is too early to tell whether this bill will become law.

#### Payment of Dividends and Share Repurchases

We are a legal entity separate and distinct from our banking and non-banking subsidiaries. Since our consolidated net income consists largely of net income of our bank and non-bank subsidiaries, our ability to pay dividends and repurchase shares depends upon our receipt of dividends from our subsidiaries. There are various federal and state law limitations on the extent to which our banking subsidiaries can declare and pay dividends to us, including regulatory capital requirements, general regulatory oversight to prevent unsafe or unsound practices and federal and state banking law requirements concerning the payment of dividends out of net profits or surplus. Applicable federal and state banking laws also prohibit, without prior regulatory approval, insured depository institutions, such as our bank subsidiaries, from making dividend distributions if such distributions are not paid out of available earnings. In addition, our right, and the right of our shareholders and creditors, to participate in any distribution of the assets or earnings of our bank and non-bank subsidiaries is further subject to the prior claims of creditors of our subsidiaries. No assurances can be given that the banks will, in any circumstances, pay dividends to the Company.

We and our bank subsidiaries must maintain the applicable Common Equity Tier 1 Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions, including dividends. When fully phased in on January 1, 2019, the Capital Conservation Buffer will be 2.5%. For more information on the Capital Conservation Buffer, see above.

Our ability to declare and pay dividends to our shareholders is similarly limited by federal banking law and Federal Reserve regulations and policy. Federal Reserve policy provides that a bank holding company should not pay dividends unless (1) the bank holding company’s net income over the last four quarters (net of dividends paid) is sufficient to fully fund the dividends, (2) the prospective rate of earnings retention appears consistent with the capital needs, asset quality and overall financial condition of the bank holding company and its subsidiaries and (3) the bank holding company will continue to meet minimum required capital adequacy ratios. The policy also provides that a bank holding company should inform the Federal Reserve reasonably in advance of declaring or paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in a material adverse change to the bank holding company’s capital structure. Bank holding companies also are required to consult with the Federal Reserve before increasing dividends or redeeming or repurchasing capital instruments. Additionally, the Federal Reserve could prohibit or limit the payment of dividends by a bank holding company if it determines that payment of the dividend would constitute an unsafe or unsound practice.

#### FDICIA and Prompt Corrective Action

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the federal bank regulatory agencies to take “prompt corrective action” regarding FDIC-insured depository institutions that do not meet certain capital adequacy standards. A depository institution’s treatment for purposes of the prompt corrective action provisions depends upon its level of capitalization and certain other factors. An institution that fails to remain well-capitalized becomes subject to a series of restrictions that increase in severity as its capital condition weakens. Such restrictions may include a prohibition on capital distributions, restrictions on asset growth or restrictions on the ability to receive regulatory approval of applications. The FDICIA also provides for enhanced supervisory authority over undercapitalized institutions, including authority for the appointment of a conservator or receiver for the institution. In certain instances, a bank holding company may be required to guarantee the performance of an undercapitalized subsidiary bank’s capital restoration plan.

As of December 31, 2017, each of the Company’s banks was categorized as “well-capitalized” and, in addition, met additional requirements under the Capital Conservation Buffer.

#### Enforcement Authority

The federal bank regulatory agencies have broad authority to issue orders to depository institutions and their holding companies prohibiting activities that constitute violations of law, rule, regulation, or administrative order, or that represent unsafe or unsound banking practices, as determined by the federal banking agencies. The federal banking agencies also are empowered to require affirmative actions to correct any violation or practice; issue administrative orders that can be judicially enforced; direct increases in capital; limit dividends and distributions; restrict growth; assess civil money penalties against institutions or individuals who violate any laws, regulations, orders, or written agreements with the agencies; order termination of certain activities of holding companies or their non-bank subsidiaries; remove officers and directors; order divestiture of ownership or control of a non-banking subsidiary by a holding company; or terminate deposit insurance and appoint a conservator or receiver. The Illinois and Wisconsin state bank regulatory agencies have similar authority and power with respect to our Illinois and Wisconsin state-chartered banks, respectively.

#### Safety and Soundness

The federal bank regulatory agencies have adopted a set of guidelines prescribing safety and soundness standards relating to internal controls and information systems, informational security, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, and compensation, fees and benefits. The guidelines prohibit excessive compensation as an unsafe and unsound practice, and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal shareholder.

During the past decade, properly managing risks has been identified as critical to the conduct of safe and sound banking activities and has become even more important as new technologies, product innovation, and the size and speed of financial transactions have changed the nature of banking markets. The agencies have identified a spectrum of risks facing banking institutions including, but not limited to, credit, market, liquidity, operational, legal, and reputational risk. Some of the regulatory pronouncements have focused on operational risk, which arises from the potential that inadequate information systems, operational problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses. New products and services, third-party risk management and cybersecurity are critical sources of operational risk that financial institutions are expected to address in the current environment. Our subsidiary banks are expected to have active board and senior management oversight; adequate policies, procedures, and limits; adequate risk measurement, monitoring, and management information systems; and comprehensive and effective internal controls.

#### Cross-Guarantee

Under the cross-guarantee provision of the FDIA, insured depository institutions such as our subsidiary banks may be liable to the FDIC for any losses incurred, or reasonably expected to be incurred, by the FDIC resulting from the default of, or FDIC assistance to, any other commonly controlled insured depository institution. An FDIC cross-guarantee claim against a depository institution is superior in right of payment to claims of the holding company and its affiliates against such depository institution. All of our subsidiary banks are commonly controlled within the meaning of the cross-guarantee provision.

#### Insurance of Deposit Accounts

The deposits of each of our subsidiary banks are insured by the Depositors Insurance Fund ("DIF") up to the standard maximum deposit insurance amount of $250,000 per depositor. Each of our subsidiary banks is subject to deposit insurance assessments based on the risk it poses to the DIF, as determined by the capital category and supervisory category to which it is assigned. The FDIC has authority to raise or lower assessment rates on insured deposits in order to achieve statutorily required reserve ratios in the DIF and to impose special additional assessments. Until December 31, 2018, insured depository institutions with total consolidated assets of $10 billion or more must pay an assessment surcharge. None of our bank subsidiaries are subject to this surcharge. However, there is a risk that our subsidiary banks’ deposit insurance premiums will increase if failures of insured depository institutions deplete the DIF or if the FDIC were to change its view of the risk that they pose to the DIF.

In addition, the Deposit Insurance Fund Act of 1996 authorizes the Financing Corporation (“FICO”) to impose assessments on DIF assessable deposits in order to service the interest on FICO’s bond obligations. The FICO assessment rate is adjusted quarterly and for the fourth quarter of 2017 was approximately 0.540 basis points (54 cents per $10,000 of assessable deposits).

#### Limits on Loans to One Borrower and Loans to Insiders

Federal and state banking laws impose limits on the amount of credit a bank can extend to any one person (or group of related persons). For national banks, this limit includes credit exposures arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions. In addition, state-chartered banks (including certain of our banking subsidiaries) are prohibited from engaging in derivative transactions unless the state lending limit laws take into account credit exposure to such transactions.

Applicable banking laws and regulations also place restrictions on loans by FDIC-insured banks and their affiliates to their directors, executive officers and principal shareholders.

#### Lending Standards and Guidance

The federal banking agencies adopted uniform regulations prescribing standards for extensions of credit that are secured by liens or interests in real estate or made for the purpose of financing permanent improvements to real estate. Under these regulations, all insured depository institutions, such as our subsidiary banks, must adopt and maintain written policies establishing appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures, and documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the federal bank regulators’ Interagency Guidelines for Real Estate Lending Policies.

#### Transaction Account Reserves

The Dodd-Frank Act eliminated prohibitions under federal law against the payment of interest on demand deposits, thus allowing businesses to have interest-bearing checking accounts.

Federal Reserve regulations require depository institutions to maintain reserves against their transaction accounts (primarily NOW and regular checking accounts). For 2018, the first $16.0 million of otherwise reservable balances are exempt from the reserve requirements; for transaction accounts aggregating more than $16.0 million to $122.3 million, the reserve requirement is 3% of total transaction accounts; and for net transaction accounts in excess of $122.3 million, the reserve requirement is 10% of the aggregate amount of total transaction accounts in excess of $122.3 million. These reserve requirements are subject to annual adjustment by the Federal Reserve. Our banks are in compliance with these requirements.

#### De Novo Branching and De Novo Banks

With the approval of applicable regulators, national banks and state banks may establish de novo branches in states other than their home state as if such state was the bank’s home state.

For a three-year period, newly chartered banks are subject to enhanced supervisory procedures, including higher capital requirements, more frequent examinations and other requirements.

#### Anti-Tying Provisions

Each of our subsidiary banks is prohibited from conditioning the availability of any product or service, or varying the price for any product or service, on the requirement that the customer obtain some additional product or service from the bank or any of its affiliates, other than loans, deposits and trust services.

#### Transactions with Affiliates

Certain transactions between a bank and its holding company or other non-bank affiliates are subject to various restrictions imposed by state and federal law and regulation. Such “covered transactions” include loans and other extensions of credit by the bank to the affiliate, investments in securities issued by the affiliate, purchases of assets from the affiliate, certain derivative transactions that create a credit exposure to an affiliate, the acceptance of securities issued by the affiliate as collateral for a loan, and the issuance of a guarantee, acceptance or letter of credit on behalf of the affiliate. In general, these affiliate transaction rules limit the amount of covered transactions between an institution and a single affiliate, as well as the aggregate amount of covered transactions between an institution and all of its affiliates. In addition, covered transactions that are credit transactions must be secured by acceptable collateral, and all affiliate transactions, including those that do not qualify as covered transactions, must be on terms that are at least as favorable to the bank as then-prevailing in the market for comparable transactions with unaffiliated entities. Transactions between affiliated banks may be subject to certain exemptions under applicable federal law.

#### Community Reinvestment Act

Under the CRA, insured depository institutions, including our subsidiary banks, have a continuing and affirmative obligation to help meet the credit needs of its entire community, including low and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for insured depository institutions nor does it limit an insured depository institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. However, insured depository institutions are rated on their performance in meeting the needs of their communities. The CRA requires each federal banking agency to take an insured depository institution’s CRA record into account when evaluating certain applications by the insured depository institution or its holding company, including applications for charters, branches and other deposit facilities, relocations, mergers, consolidations, acquisitions of assets or assumptions of liabilities, and bank and savings association acquisitions. An unsatisfactory record of performance may be the basis for denying or conditioning approval of an application by an insured depository institution or its holding company. The CRA also requires that all institutions publicly disclose their CRA ratings. Each of our subsidiary banks received a “satisfactory” or better rating from the Federal Reserve or the OCC on its most recent CRA performance evaluation.

#### Compliance with Consumer Protection Laws

Our subsidiary banks and some other operating subsidiaries are subject to a variety of federal and state statutes and regulations designed to protect consumers. The CFPB has broad rulemaking authority over a wide range of federal consumer protection laws that apply to banks and other providers of financial products and services, including the authority to prohibit “unfair, deceptive or abusive” acts and practices, but examination and supervision is carried out by each subsidiary bank’s primary federal banking agency and, where applicable, state banking agency, not the CFPB. In addition, the Dodd-Frank Act authorizes state attorneys general and other state officials to enforce consumer protection rules issued by the CFPB. State authorities have recently increased their focus on and enforcement of consumer protection rules.

Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to federal laws applicable to credit transactions, such as:

- the federal Truth-In-Lending Act and Regulation Z issued by the CFPB, governing disclosures of credit terms to consumer borrowers;
- The Real Estate Settlement Procedures Act and Regulation X issued by the CFPB, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;
- the Home Mortgage Disclosure Act and Regulation C issued by the CFPB, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;
- the Equal Credit Opportunity Act and Regulation B issued by the CFPB, prohibiting discrimination on the basis of various prohibited factors in extending credit;
- the Fair Credit Reporting Act and Regulation V issued by the CFPB, governing the use and provision of information to consumer reporting agencies;
- the Fair Debt Collection Practices Act and Regulation F issued by the CFPB, governing the manner in which consumer debts may be collected by collection agencies;
- the Service Members Civil Relief Act, applying to all debts incurred prior to commencement of active military service (including credit card and other open-end debt) and limiting the amount of interest, including service and renewal charges and any other fees or charges (other than bona fide insurance) that is related to the obligation or liability; and
- the guidance of the various federal agencies charged with the responsibility of implementing such federal laws.

Deposit operations are subject to, among others:

- the Truth in Savings Act and Regulation DD issued by the CFPB, which require disclosure of deposit terms to consumers;
- Regulation CC issued by the Federal Reserve Board, which relates to the availability of deposit funds to consumers;
- the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and
- the Electronic Fund Transfer Act and Regulation E issued by the CFPB, which governs automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

There are consumer protection standards that apply to functional areas of operation rather than applying only to loan or deposit products. Our subsidiary banks and some other operating subsidiaries are also subject to certain state laws and regulations designed to protect consumers.

The CFPB has promulgated many mortgage-related final rules since it was established under the Dodd-Frank Act, including rules related to the ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home Mortgage Disclosure Act requirements and appraisal and escrow standards for higher priced mortgages. Most of the provisions of these mortgage-related final rules are currently effective. In addition, several proposed revisions to mortgage-related rules are pending finalization. The mortgage-related final rules issued by the CFPB have materially restructured the origination, servicing and securitization of residential mortgages in the United States. These rules have impacted, and will continue to impact, the business practices of mortgage lenders, including the Company.

In order to ensure compliance with all mortgage-related rules and regulations, the Company consolidated its consumer mortgage loan origination and loan servicing operations within Wintrust Mortgage. All consumer mortgage applications are taken through Wintrust Mortgage, which has extensively trained loan originators located at many of our branches. While in certain limited cases our banks may offer specialized consumer mortgages to our customers, substantially all consumer mortgages for all of our banks are originated and closed by Wintrust Mortgage. Wintrust Mortgage then sells loans to third parties or to our banks. To the extent that we retain consumer mortgage loans in our bank portfolios, our banks have engaged Wintrust Mortgage to provide loan servicing.

Changes to consumer protection regulations, including those promulgated by the CFPB, could affect our business but the likelihood, timing and scope of any such changes and the impact any such change may have on us cannot be determined with any certainty. See Item 1A. Risk Factors.

#### Federal Preemption

The Dodd-Frank Act amended the laws governing federal preemption of state laws as applied to national banks, and eliminated federal preemption for subsidiaries of national banks. These changes may subject the Company’s national banks and their divisions, including Wintrust Mortgage, to additional state regulation and enforcement.

#### Debit Interchange

We are subject to a statutory requirement that interchange fees for electronic debit transactions that are paid to or charged by payment card issuers, including our bank subsidiaries, be reasonable and proportional to the cost incurred by the issuer. Interchange fees for electronic debit transactions are limited to 21 cents plus .05% of the transaction, plus an additional one cent per transaction fraud adjustment, impose requirements regarding routing and exclusivity of electronic debit transactions, and generally require that debit cards be usable in at least two unaffiliated networks.

#### Anti-Money Laundering Programs

The Bank Secrecy Act (“BSA”) and USA PATRIOT Act of 2001 (“USA PATRIOT Act”) contain anti-money laundering (“AML”) and financial transparency provisions intended to detect, and prevent the use of the U.S. financial system for, money laundering and terrorist financing activities. The BSA, as amended by the USA PATRIOT Act, requires depository institutions and their holding companies to undertake activities including maintaining an AML program, verifying the identity of clients, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies. Each of our subsidiary banks is subject to the BSA and, therefore, is required to provide its employees with AML training, designate an AML compliance officer and undergo an annual, independent audit to assess the effectiveness of its AML program. We have implemented policies, procedures and internal controls that are designed to comply with these AML requirements. In May 2016, the Financial Crimes Enforcement Network (“FinCEN”), which is a unit of the Treasury Department that drafts regulations implementing the USA PATRIOT Act and other AML and BSA legislation, issued final rules governing enhanced customer due diligence. The rules impose several new obligations on covered financial institutions with respect to their “legal entity customers,” including corporations, limited liability companies and other similar entities. For each such customer that opens an account (including an existing customer opening a new account), the covered financial institution must identify and verify the customer’s “beneficial owners,” who are specifically defined in the rules. The rules contain an exemption for insurance premium financing transactions, but cash refunds issued in connection with such transactions are not exempt, thus requiring verification of beneficial ownership before cash refunds may be issued to borrowers. Bank regulators are focusing their examinations on anti-money laundering compliance, and we will continue to monitor and augment, where necessary, our AML compliance programs. The federal banking agencies are required, when reviewing bank and bank holding company acquisition or merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicant.

#### Office of Foreign Assets Control Regulation

The U.S. Department of the Treasury’s Office of Foreign Assets Control, or “OFAC,” is responsible for administering economic sanctions that affect transactions with designated foreign countries, nationals and others, as defined by various Executive Orders and Acts of Congress. OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) a blocking of assets in which the government or “specially designated nationals” of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). OFAC also publishes lists of persons, organizations, and countries suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. Blocked assets (*e.g.*, property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal and reputational consequences.

#### Protection of Client Information

Legal requirements concerning the use and protection of client information affect many aspects of the Company’s business, and are continuing to evolve. They include the privacy and information safeguarding provisions of the Gramm-Leach-Bliley Act (“GLB Act”), the Fair Credit Reporting Act (“FCRA”) and the amendments adopted by the Fair and Accurate Credit Transactions Act of 2003, as well as state law requirements. The GLB Act requires a financial institution to disclose its privacy policy to certain customers, and requires the financial institution to allow those customers to opt-out of some sharing of the customers’ nonpublic personal information with nonaffiliated third persons. In accordance with these requirements, we and each of our banks and operating subsidiaries provide a written privacy notice to each affected customer when the customer relationship begins and on an annual basis. As described in the privacy notice, we protect the security of information about our customers, educate our employees about the importance of protecting customer privacy, and allow affected customers to opt out of certain types of information sharing. We and our subsidiaries also require business partners with which we share information to have adequate security safeguards and to follow the requirements of the GLB Act. The GLB Act, as interpreted by the federal banking regulators, and state laws require us to take certain actions, including possible notice to affected customers, in the event that sensitive customer information is compromised. We and/or each of the banks and operating subsidiaries may need to amend our privacy policies and adapt our internal procedures in the event that these legal requirements, or the regulators’ interpretation of them, change, or if new requirements are added.

Like other lenders, the banks and several of our operating subsidiaries use credit bureau data in their underwriting activities. Use of such data is regulated under the FCRA, and the FCRA also regulates reporting information to credit bureaus, prescreening individuals for credit offers, sharing of information between affiliates, and using affiliate data for marketing purposes. Similar state laws may impose additional requirements on us, the banks and our operating subsidiaries.

Violation of these legal requirements may expose us to regulatory action and private litigation, including claims for damages and penalties.

#### Current Expected Credit Loss Accounting Standard

In June 2016, the Financial Accounting Standards Board (“FASB”) issued a new current expected credit loss rule (“CECL”) which requires banks to record, at the time of origination, credit losses expected throughout the life of the asset portfolio on loans and held-to-maturity securities, as opposed the current practice of recording losses when it is probable that a loss event has occurred. The expected losses will be based on historical experience, current conditions, and reasonable and supportable forecasts. CECL will be effective in 2020 for SEC registrants and 2021 for all others. The Company is taking the necessary steps to be in compliance with the CECL accounting standard which is expected to become a critical accounting policy.

#### Broker-Dealer and Investment Adviser Regulation

WHI and Great Lakes Advisors are subject to extensive regulation under federal and state securities laws. WHI is registered as a broker-dealer with the SEC and in all 50 states, the District of Columbia and the U.S. Virgin Islands. Both WHI and Great Lakes Advisors are registered as investment advisers with the SEC. In addition, WHI is a member of several self-regulatory organizations (“SROs”), including FINRA and the Chicago Stock Exchange. In addition to SEC rules and regulations, the SROs adopt rules, subject to approval of the SEC, that govern all aspects of business in the securities industry and conduct periodic examinations of member firms. WHI is also subject to regulation by state securities commissions in states in which it conducts business. WHI and Great Lakes Advisors are registered only with the SEC as investment advisers, but certain of their advisory personnel are subject to regulation by state securities regulatory agencies.

As a result of federal and state registrations and SRO memberships, WHI is subject to overlapping schemes of regulation that cover all aspects of its securities businesses. Such regulations cover uses and safekeeping of clients’ funds; record-keeping and reporting requirements; supervisory and organizational procedures intended to assure compliance with securities laws and to prevent improper trading on material nonpublic information; personnel-related matters, including qualification and licensing of supervisory and sales personnel; limitations on extensions of credit in securities transactions; clearance and settlement procedures; “suitability” determinations as to certain customer transactions; limitations on the amounts and types of fees and commissions that may be charged to customers; and regulation of proprietary trading activities and affiliate transactions. Violations of the laws and regulations governing a broker-dealer’s actions can result in censures, fines, the issuance of cease-and-desist orders, revocation of licenses or registrations, the suspension or expulsion from the securities industry of a broker-dealer or its officers or employees, or other similar actions by both federal and state securities administrators, as well as the SROs.

As a registered broker-dealer, WHI is subject to the SEC’s net capital rule as well as the net capital requirements of the SROs of which it is a member. Net capital rules, which specify minimum capital requirements, are designed to measure general financial integrity and liquidity and require that at least a minimum amount of net assets be kept in relatively liquid form. Rules of FINRA and other SROs also impose limitations and requirements on the transfer of member organizations’ assets. Compliance with net capital requirements may limit the Company’s operations requiring the intensive use of capital. These requirements restrict the Company’s ability to withdraw capital from WHI, which in turn may limit the Company’s ability to pay dividends, repay debt or redeem or purchase shares of the Company’s own outstanding stock. WHI is a member of the Securities Investor Protection Corporation (“SIPC”), which subject to certain limitations, serves to oversee the liquidation of a member brokerage firm, and to return missing cash, stock and other securities owed to the firm’s brokerage customers, in the event a member broker-dealer fails. The general SIPC protection for customers’ securities accounts held by a member broker-dealer is up to $500,000 for each eligible customer, including a maximum of $250,000 for cash claims. SIPC does not protect brokerage customers against investment losses.

WHI in its capacity as an investment adviser is subject to regulations covering matters such as transactions between clients, transactions between the adviser and clients, custody of client assets and management of mutual funds and other client accounts. The principal purpose of regulation and discipline of investment firms is the protection of customers, clients and the securities markets rather than the protection of creditors and shareholders of investment firms. Sanctions that may be imposed for failure to comply with laws or regulations governing investment advisers include the suspension of individual employees, limitations on an adviser’s engaging in various asset management activities for specified periods of time, the revocation of registrations, other censures and fines. On April 26, 2016, the U.S. Department of Labor (“DOL”) adopted a final rule (“Fiduciary Rule”) under the Employee Retirement Income Security Act of 1974 that, among other changes and subject to certain exceptions, makes anyone, including broker-dealers, providing investment advice to retirement investors a fiduciary who must act in the best interest of clients when providing investment advice for direct or indirect compensation to a retirement plan, to a plan fiduciary, participant or beneficiary, or to an investment retirement account (“IRA”) or IRA holder. The Fiduciary Rule went into effect on June 9, 2017, with certain aspects subject to phased-in compliance. Full compliance was scheduled to be required by January 1, 2018, but on November 27, 2017, the DOL delayed the full compliance date to July 1, 2019. In addition, the DOL is undertaking an examination of the rule which may result in changes to the rule or related exemptions or a further change in the full compliance date.

#### Incentive Compensation

The federal banking agencies have issued joint guidance on incentive compensation designed to ensure that the incentive compensation policies of banking organizations, such as us and our subsidiary banks, do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization. In addition, the Dodd-Frank Act requires the federal banking agencies and the SEC to issue regulations or guidelines requiring covered financial institutions, including us and our subsidiary banks, to prohibit incentive-based payment arrangements that encourage inappropriate risks by providing compensation that is excessive or that could lead to material financial loss to the institution. A proposed rule was issued in 2016. Also pursuant to the Dodd-Frank Act, in 2015, the SEC proposed rules that would direct stock exchanges to require listed companies to implement clawback policies to recover incentive-based compensation from current or former executive officers in the event of certain financial restatements and would also require companies to disclose their clawback policies and their actions under those policies. We continue to evaluate the effect of the proposed rules, both of which are subject to further rulemaking procedures.

### Employees

At December 31, 2017, the Company and its subsidiaries employed a total of 4,075 full-time-equivalent employees. The Company provides its employees with comprehensive medical and dental benefit plans, life insurance plans, 401(k) plans and an employee stock purchase plan. The Company considers its relationship with its employees to be good.

### Available Information

The Company’s Internet address is www.wintrust.com. The Company makes available at this address, under the “Investor Relations” tab, free of charge, its Annual Report on Form 10-K, its annual reports to shareholders, Quarterly Reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

#### Supplemental Statistical Data

The following statistical information is provided in accordance with the requirements of The Securities Act Industry Guide 3, Statistical Disclosure by Bank Holding Companies, which is part of Regulation S-K as promulgated by the SEC. This data should be read in conjunction with the Company’s Consolidated Financial Statements and notes thereto, and Management’s Discussion and Analysis which are contained in Item 8 and Item 7, respectively, of this Annual Report on Form 10-K.

#### Investment Securities Portfolio

The following table presents the amortized cost and fair value of the Company’s investment securities portfolios, by investment category, as of December 31, 2017, 2016 and 2015:

*(Dollars in thousands)*

| Available-for-sale securities | 2017 Amortized Cost | Fair Value | 2016 Amortized Cost | Fair Value | 2015 Amortized Cost | Fair Value |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| U.S. Treasury | **$144,904** | **$143,822** | $142,741 | $141,983 | $312,282 | $306,729 |
| U.S. Government agencies | **157,638** | **156,915** | 189,540 | 189,152 | 70,313 | 70,236 |
| Municipal | **113,197** | **115,352** | 129,446 | 131,809 | 105,702 | 108,595 |
| Corporate notes: |  |  |  |  |  |  |
| Financial issuers | **30,309** | **30,051** | 65,260 | 64,392 | 80,014 | 80,043 |
| Other | **1,000** | **999** | 1,000 | 999 | 1,500 | 1,502 |
| Mortgage-backed: (1) |  |  |  |  |  |  |
| Mortgage-backed securities | **1,291,695** | **1,260,186** | 1,185,448 | 1,131,402 | 1,069,680 | 1,052,510 |
| Collateralized mortgage obligations | **60,092** | **59,539** | 30,105 | 29,682 | 40,421 | 40,087 |
| Equity securities | **34,234** | **36,802** | 32,608 | 35,248 | 51,380 | 56,686 |
| Total available-for-sale securities | **$1,833,069** | **$1,803,666** | $1,776,148 | $1,724,667 | $1,731,292 | $1,716,388 |
| **Held-to-maturity securities** |  |  |  |  |  |  |
| U.S. Government agencies | **$579,062** | **$565,019** | $433,343 | $408,880 | $687,302 | $680,162 |
| Municipal | **247,387** | **247,497** | 202,362 | 198,722 | 197,524 | 197,949 |
| Total held-to-maturity securities | **$826,449** | **$812,516** | $635,705 | $607,602 | $884,826 | $878,111 |

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

Tables presenting the carrying amounts and gross unrealized gains and losses for securities at December 31, 2017 and 2016 are included by reference to Note 3 to the Consolidated Financial Statements presented under Item 8 of this Annual Report on Form 10-K. The following table presents the carrying value of the investment securities portfolios as of December 31, 2017, by maturity distribution. Carrying value represents the fair value of investment securities classified as available-for-sale and the amortized cost of those classified as held-to-maturity.

*(Dollars in thousands)*

| Available-for-sale securities | Within 1 year | From 1 to 5 years | From 5 to 10 years | After 10 years | Mortgage- backed | Equity Securities | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| U.S. Treasury | $119,011 | $24,811 | $— | $— | $— | $— | $143,822 |
| U.S. Government agencies | 141,970 | 10,184 | 3,779 | 982 | — | — | 156,915 |
| Municipal | 36,095 | 39,155 | 25,585 | 14,517 | — | — | 115,352 |
| Corporate notes: |  |  |  |  |  |  |  |
| Financial issuers | 1,210 | 23,176 | 5,665 | — | — | — | 30,051 |
| Other | 999 | — | — | — | — | — | 999 |
| Mortgage-backed: (1) |  |  |  |  |  |  |  |
| Mortgage-backed securities | — | — | — | — | 1,260,186 | — | 1,260,186 |
| Collateralized mortgage obligations | — | — | — | — | 59,539 | — | 59,539 |
| Equity securities | — | — | — | — | — | 36,802 | 36,802 |
| Total available-for-sale securities | $299,285 | $97,326 | $35,029 | $15,499 | $1,319,725 | $36,802 | $1,803,666 |
| **Held-to-maturity securities** |  |  |  |  |  |  |  |
| U.S. Government agencies | $— | $5,104 | $131,237 | $442,721 | $— | $— | $579,062 |
| Municipal | 170 | 33,288 | 73,990 | 139,939 | — | — | 247,387 |
| Total held-to-maturity securities | $170 | $38,392 | $205,227 | $582,660 | $— | $— | $826,449 |

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

The weighted average yield for each range of maturities of securities, on a tax-equivalent basis, is shown below as of December 31, 2017:

| Available-for-sale securities | Within 1 year | From 1 to 5 years | From 5 to 10 years | After 10 years | Mortgage- backed | Equity Securities | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| U.S. Treasury | 0.87% | 1.31% | —% | —% | —% | —% | 0.95% |
| U.S. Government agencies | 0.91 | 1.32 | 5.55 | 1.71 | — | — | 1.05 |
| Municipal | 2.90 | 3.87 | 5.20 | 4.88 | — | — | 3.99 |
| Corporate notes: |  |  |  |  |  |  |  |
| Financial issuers | 2.26 | 2.66 | 2.14 | — | — | — | 2.55 |
| Other | 1.94 | — | — | — | — | — | 1.94 |
| Mortgage-backed: (1) |  |  |  |  |  |  |  |
| Mortgage-backed securities | — | — | — | — | 2.62 | — | 2.62 |
| Collateralized mortgage obligations | — | — | — | — | 3.24 | — | 3.24 |
| Equity securities | — | — | — | — | — | 0.83 | 0.83 |
| Total available-for-sale securities | 1.14% | 2.66% | 4.74% | 4.68% | 2.65% | 0.83% | 2.42% |
| **Held-to-maturity securities** |  |  |  |  |  |  |  |
| U.S. Government agencies | —% | 1.67% | 2.96% | 3.05% | —% | —% | 3.02% |
| Municipal | 4.58 | 3.25 | 4.63 | 5.57 | — | — | 4.98 |
| Total held-to-maturity securities | 4.58% | 3.04% | 3.56% | 3.66% | —% | —% | 3.61% |

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

## Risk factors

As filed, 88,599 characters.

An investment in our securities is subject to risks inherent to our business. Certain material risks and uncertainties that management believes affect Wintrust are described below. Before making an investment decision, you should carefully consider the risks and uncertainties described below together with all of the other information included or incorporated by reference in this Annual Report on Form 10-K and in our other filings with the SEC. Additional risks and uncertainties that management is not aware of or that management currently deems immaterial may also impair Wintrust's business operations. This Annual Report on Form 10-K is qualified in its entirety by these risk factors. If any of the following risks actually occur, our business, financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our securities could decline significantly, and you could lose all or part of your investment.

### Risks Related to Our Business and Operating Environment

***Deterioration in economic conditions may materially adversely affect the financial services industry and our business, financial condition, results of operations and cash flows.***

Our business activities and earnings are affected by general business conditions in the United States and abroad, including factors such as the level and volatility of short-term and long-term interest rates, inflation, home prices, unemployment and underemployment levels, bankruptcies, household income, consumer spending, fluctuations in both debt and equity capital markets, liquidity of the global financial markets, the availability and cost of capital and credit, investor sentiment and confidence in the financial markets, and the strength of the domestic economies in which we operate. The deterioration of any of these conditions can adversely affect our consumer and commercial businesses and securities portfolios, our level of charge-offs and provision for credit losses, our capital levels and liquidity, and our results of operations.

More specifically, the U.S. economy has generally strengthened and growth in economic activity in our geographic area has increased to a moderate pace over recent periods. As a lending institution, our business is directly affected by the ability of our borrowers to repay their loans, as well as by the value of collateral, such as real estate, that secures many of our loans. Any economic deterioration from current levels or slowing of current economic activity could lead to an increase in loan charge-offs and negatively affect consumer confidence as well as the level of business activity. However, net charge-offs, excluding covered loans, decreased to $15.0 million in 2017 from $16.9 million in 2016. Our balance of non-performing loans, excluding covered loans, and other real estate owned (“OREO”), excluding covered other real estate owned, was $90.2 million and $40.6 million, respectively, at December 31, 2017 compared to $87.5 million and $40.3 million, respectively, at December 31, 2016. Deterioration in the economy, real estate markets or increased unemployment rates, particularly in the markets in which we operate, will likely diminish the ability of our borrowers to repay loans that we have made to them, the value of any collateral securing such loans and may cause increases in delinquencies, problem assets, charge-offs and provision for credit losses, all of which could materially adversely affect our financial condition and results of operations. Further, the underwriting and credit monitoring policies and procedures that we have adopted may not prevent losses that could have a material adverse effect on our business, financial condition, results of operations and cash flows.

***Since our business is concentrated in the Chicago metropolitan and southern Wisconsin market areas, economic declines in the economy of this region could adversely affect our business.***

Except for our premium finance business and certain other niche businesses, our success depends primarily on the general economic conditions of the specific local markets in which we operate. Unlike larger national or other regional banks that are more geographically diversified, we provide banking and financial services to customers primarily in the Chicago metropolitan and southern Wisconsin market areas. The local economic conditions in these areas significantly impact the demand for our products and services as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources. Specifically, many of the loans in our portfolio are secured by real estate located in the Chicago metropolitan area. Any declines in economic conditions, including inflation, recession, unemployment, changes in securities markets or other factors impacting these local markets could, in turn, have a material adverse effect on our financial condition and results of operations. Deterioration in the real estate markets where collateral for our mortgage loans is located could adversely affect the borrower's ability to repay the loan and the value of the collateral securing the loan, and in turn the value of our assets.

In addition, the State of Illinois has experienced significant financial difficulty in recent years. To the extent that these issues impact the economic vitality of the state and the businesses operating in Illinois, businesses may be encouraged to leave the state or new employers may be discouraged to start or move businesses to Illinois, which could have a material adverse effect on our financial condition and results of operations.

***If our allowance for loan losses is not sufficient to absorb losses that may occur in our loan portfolio, our financial condition and liquidity could suffer.***

We maintain an allowance for loan losses that is intended to absorb credit losses that we expect to incur in our loan portfolio. At each balance sheet date, our management determines the amount of the allowance for loan losses based on our estimate of probable and reasonably estimable losses in our loan portfolio, taking into account probable losses that have been identified relating to specific borrowing relationships, as well as probable losses inherent in the loan portfolio and credit undertakings that are not specifically identified.

Because our allowance for loan losses represents an estimate of inherent losses, there is no certainty that it will be adequate over time to cover credit losses in the portfolio, particularly if there is deterioration in general economic or market conditions or events that adversely affect specific customers. In 2017, we charged off $15.0 million in loans, excluding covered loans, (net of recoveries) and increased our allowance for loan losses, excluding the allowance for covered loans, from $122.3 million at December 31, 2016 to $137.9 million at December 31, 2017. The increase in allowance in 2017 was primarily the result of significant loan growth during the period. Our allowance for loan losses, excluding the allowance for covered loans, represents 0.64% and 0.62% of total loans, excluding covered loans outstanding at December 31, 2017 and 2016, respectively. The Company's future adoption of Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” may result in an increase in the allowance for loan losses and related coverage ratios at the time of adoption regardless of changes in the economy and the related ability of borrowers to repay their loans. Such accounting rules are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.

Although we believe our loan loss allowance is adequate to absorb reasonably estimable losses in our loan portfolio, if our estimates are inaccurate and our actual loan losses exceed the amount that is anticipated, or if the loss assumptions we used in calculating our reserves are significantly different from those we actually experience, our financial condition and liquidity could be materially adversely affected.

For more information regarding our allowance for loan losses, see “Loan Portfolio and Asset Quality” under Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7.

***A significant portion of our loan portfolio is comprised of commercial loans, the repayment of which is largely dependent upon the financial success and economic viability of the borrower.***

The repayment of our commercial loans is dependent upon the financial success and viability of the borrower. If the economy weakens for a prolonged period or experiences deterioration or if the industry or market in which the borrower operates weakens, our borrowers may experience depressed or dramatic and sudden decreases in revenues that could hinder their ability to repay their loans. Our commercial loan portfolio totaled $6.8 billion or 31% of our total loan portfolio, at December 31, 2017, compared to $6.0 billion, or 30% of our total loan portfolio, at December 31, 2016.

Commercial loans are secured by different types of collateral related to the underlying business, such as accounts receivable, inventory and equipment. Should a commercial loan require us to foreclose on the underlying collateral, the unique nature of the collateral may make it more difficult and costly to liquidate, thereby increasing the risk to us of not recovering the principal amount of the loan. Accordingly, our business, results of operations and financial condition may be materially adversely affected by defaults in this portfolio.

***A substantial portion of our loan portfolio is secured by real estate, in particular commercial real estate. Deterioration in the real estate markets could lead to additional losses, which could have a material adverse effect on our financial condition and results of operations.***

As of both December 31, 2017 and 2016, approximately 39% and 41%, respectively, of our total loan portfolio was secured by real estate, the majority of which is commercial real estate. The commercial and residential real estate market continues to experience a variety of difficulties, including the Chicago metropolitan area and southern Wisconsin, in which a majority of our real estate loans are concentrated. Increases in commercial and consumer delinquency levels or declines in real estate market values would require increased net charge-offs and increases in the allowance for loan and lease losses, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, the Tax Cuts and Jobs Act of 2017 (“Tax Act”) that was signed into law on December 22, 2017 contains several provisions that will affect the tax consequences of home ownership and related borrowing. We cannot predict what impact, if any, the Tax Act will have on our mortgage lending business or the value of homes securing mortgages or other loans, but any decrease in mortgage lending, decrease in home values, or early repayment of mortgage loans caused by changes to the tax code as a result of the Tax Act could have a material adverse effect on our earnings and capital.

***Any inaccurate assumptions in our analytical and forecasting models could cause us to miscalculate our projected revenue or losses, which could adversely affect our financial condition.***

We use analytical and forecasting models to estimate the effects of economic conditions on our loan portfolio and probable loan performance. Those models reflect certain assumptions about market forces, including interest rates and consumer behavior that may be incorrect. If our analytical and forecasting models’ underlying assumptions are incorrect, improperly applied, or otherwise inadequate, we may suffer deleterious effects such as higher than expected loan losses, lower than expected net interest income, or unanticipated charge-offs, any of which could have a material adverse effect on our business, financial condition and results of operations.

***Unanticipated changes in prevailing interest rates and the effects of changing regulation could adversely affect our net interest income, which is our largest source of income.***

Wintrust is exposed to interest rate risk in its core banking activities of lending and deposit taking, since changes in prevailing interest rates affect the value of our assets and liabilities. Such changes may adversely affect our net interest income, which is the difference between interest income and interest expense. Our net interest income is affected by the fact that assets and liabilities reprice at different times and by different amounts as interest rates change. Net interest income represents our largest component of net income, and was $832.1 million and $722.2 million for the years ended December 31, 2017 and 2016, respectively.

Each of our businesses may be affected differently by a given change in interest rates. For example, we expect that the results of our mortgage banking business in selling loans into the secondary market would be negatively impacted during periods of rising interest rates, whereas falling interest rates could have a negative impact on the net interest spread earned on deposits as we would be unable to lower the rates on many interest bearing deposit accounts of our customers to the same extent as many of our higher yielding asset classes.

Additionally, increases in interest rates may adversely influence the growth rate of loans and deposits, the quality of our loan portfolio, loan and deposit pricing, the volume of loan originations in our mortgage banking business and the value that we can recognize on the sale of mortgage loans in the secondary market.

We seek to mitigate our interest rate risk through several strategies, which may not be successful. With the relatively low interest rates that prevailed in recent years, we were able to augment the total return of our investment securities portfolio by selling call options on fixed-income securities that we own. We recorded fee income of approximately $4.4 million, $11.5 million and $15.4 million for the years ended December 31, 2017, 2016 and 2015, respectively. We also mitigate our interest rate risk by entering into interest rate swaps and other interest rate derivative contracts from time to time with counterparties. To the extent that the market value of any derivative contract moves to a negative market value, we are subject to loss if the counterparty defaults. In the future, there can be no assurance that such mitigation strategies will be available or successful.

***Our liquidity position may be negatively impacted if economic conditions do not continue to improve or if they decline.***

Liquidity is a measure of whether our cash flows and liquid assets are sufficient to satisfy current and future financial obligations, such as demand for loans, deposit withdrawals and operating costs. Our liquidity position is affected by a number of factors, including the amount of cash and other liquid assets on hand, payment of interest and dividends on debt and equity instruments that we have issued, capital we inject into our bank subsidiaries, proceeds we raise through the issuance of securities, our ability to draw upon our revolving credit facility and dividends received from our banking subsidiaries. Our future liquidity position may be adversely affected by multiple factors, including:

- if our banking subsidiaries report net losses or their earnings are weak relative to our cash flow needs;
- if it is necessary for us to make capital injections to our banking subsidiaries;
- if changes in regulations require us to maintain a greater level of capital, as more fully described below;
- if we are unable to access our revolving credit facility due to a failure to satisfy financial and other covenants; or
- if we are unable to raise additional capital on terms that are satisfactory to us.

Weakness or worsening of the economy, real estate markets or unemployment levels may increase the likelihood that one or more of these events will occur. If our liquidity is adversely affected, it may have a material adverse effect on our business, results of operations and financial condition.

***The financial services industry is very competitive, and if we are not able to compete effectively, we may lose market share and our business could suffer.***

We face competition in attracting and retaining deposits, making loans, and providing other financial services (including wealth management services) throughout our market area. Our competitors include national, regional and other community banks, and a wide range of other financial institutions such as credit unions, government-sponsored enterprises, mutual fund companies, insurance companies, factoring companies and other non-bank financial companies such as marketplace lenders and other financial technology ("FinTech") companies. Many of these competitors have substantially greater resources and market presence or more advanced technology than Wintrust and, as a result of their size, may be able to offer a broader range of products and services, better pricing for those products and services, or newer technologies to deliver those products and services than we can. Several of our local competitors have experienced improvements in their financial condition over the past few years and are better positioned to compete for loans, acquisitions and personnel. The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and payment systems, and for banks that do not have a physical presence in our markets to compete for deposits. The absence of regulatory requirements may give non-bank financial companies a competitive advantage over Wintrust.

Our ability to compete successfully depends on a number of factors, including, among other things:

- the ability to develop, maintain and build upon long-term customer relationships based on top quality service and high ethical standards;
- the scope, relevance and pricing of products and services offered to meet customer needs and demands;
- the ability to expand our market position;
- the ability to uphold our reputation in the marketplace;
- the rate at which we introduce new products and services relative to our competitors;
- customer satisfaction with our level of service; and
- industry and general economic trends.

If we are unable to compete effectively, we will lose market share and income from deposits, loans and other products may be reduced. This could adversely affect our profitability and have a material adverse effect on our business, financial condition and results of operations.

***If we are unable to continue to identify favorable acquisitions or successfully integrate our acquisitions, our growth may be limited and our results of operations could suffer.***

In the past several years, we have completed numerous acquisitions of banks, other financial service related companies and financial service related assets, including acquisitions of troubled financial institutions, as more fully described below. We expect to continue to make such acquisitions in the future. Wintrust seeks merger or acquisition partners that are culturally similar, have experienced management, possess either significant market presence or have potential for improved profitability through financial management, economies of scale or expanded services. Failure to successfully identify and complete acquisitions likely will result in Wintrust achieving slower growth. Acquiring other banks, businesses or branches involves various risks commonly associated with acquisitions, including, among other things:

- potential exposure to unknown or contingent liabilities or asset quality issues of the target company;
- failure to adequately estimate the level of loan losses at the target company;
- difficulty and expense of integrating the operations and personnel of the target company;
- potential disruption to our business, including diversion of our management's time and attention;
- the possible loss of key employees and customers of the target company;
- difficulty in estimating the value of the target company; and
- potential changes in banking or tax laws or regulations that may affect the target company.

Acquisitions typically involve the payment of a premium over book and market values, and, therefore, some dilution of Wintrust's tangible book value and net income per common share may occur as a result of any future acquisitions. In addition, certain acquisitions may expose us to additional regulatory risks, including from foreign governments. Our ability to comply with any such regulations will impact the success of any such acquisitions. Furthermore, failure to realize the expected revenue increases, cost savings, increases in geographic or product presence, and/or other projected benefits from an acquisition could have a material adverse effect on our financial condition and results of operations.

***Our participation in FDIC-assisted acquisitions may present additional risks to our financial condition and results of operations.***

As part of our growth strategy, we have made opportunistic partial acquisitions of troubled financial institutions in transactions facilitated by the FDIC through our bank subsidiaries. These acquisitions, and any future FDIC-assisted transactions we may undertake, involve greater risk than traditional acquisitions because they are typically conducted on an accelerated basis, allowing less time for us to prepare for and evaluate possible transactions, or to prepare for integration of an acquired institution. These transactions also present risks of customer loss, strain on management resources related to collection and management of problem loans and problems related to the integration of operations and personnel of the acquired financial institutions. As a result, there can be no assurance that we will be able to successfully integrate the financial institutions we acquire, or that we will realize the anticipated benefits of the acquisitions. Additionally, while the FDIC may agree to assume certain losses in transactions that it facilitates, there can be no assurances that we would not be required to raise additional capital as a condition to, or as a result of, participation in an FDIC-assisted transaction. Any such transactions and related issuances of stock may have dilutive effect on earnings per share. Furthermore, we may face competition from other financial institutions with respect to proposed FDIC-assisted transactions.

We may also be subject to certain risks relating to any future loss sharing agreements with the FDIC. Under a loss sharing agreement, the FDIC generally agreed to reimburse the acquiring bank for a portion of any losses relating to covered assets of the acquired financial institution. This was an important financial term of any FDIC-assisted transaction, as troubled financial institutions often have poorer asset quality. As a condition to reimbursement, however, the FDIC required the acquiring bank to follow certain servicing procedures. A failure to follow servicing procedures or any other breach of a loss sharing agreement by us would result in the loss of FDIC reimbursement. In addition, reimbursable losses and recoveries under loss sharing agreements were based on the book value of the relevant loans and other assets as determined by the FDIC as of the effective dates of the acquisitions. The amount that the acquiring banks realized on these assets could differ materially from the carrying value that was reflected in our financial statements, based upon the timing and amount of collections on the covered loans. Any failure to receive reimbursement, or any material differences between the amount of reimbursements that we received and the carrying value reflected in our financial statements, would have a material negative effect on our financial condition and results of operations.

### Damage to our reputation may harm our business.

Maintaining trust in the Company is critical to our ability to attract and maintain customers, investors and employees. If our reputation is damaged, our business could be significantly harmed. Harm to our reputation could arise from numerous sources, including, among others, employee misconduct, security breaches, compliance failures, litigation or regulatory outcomes or governmental investigations. Our reputation could also be harmed by the failure or perceived failure of an affiliate or a vendor or other third party with which we do business, to comply with laws or regulations. In addition, our reputation or prospects could be significantly damaged by adverse publicity or negative information regarding the Company, whether or not true, that may be posted on social media, non-mainstream news services or other parts of the internet, and this risk can be magnified by the speed and pervasiveness with which information is disseminated through those channels.

Actions by the financial services industry generally or by certain members of or individuals in the industry can also affect our reputation. For example, the role played by financial services firms during and after the financial crisis, including concerns that consumers have been treated unfairly by financial institutions or that a financial institution had acted inappropriately with respect to the methods employed in offering products to customers, have damaged the reputation of the industry as a whole.

Should any of these or other events or factors that can undermine our reputation occur, there is no assurance that the additional costs and expenses that we may need to incur to address the issues giving rise to the damage to our reputation would not adversely affect our earnings and results of operations, or that damage to our reputation will not impair our ability to retain our existing customers and employees or attract new customers and employees. Harm to our reputation or the reputation of our industry may also result in greater regulatory or legislative scrutiny, which may lead to changes in laws or regulations that could constrain our business or operations. Events that result in damage to our reputation may also increase our litigation risk.

***An actual or perceived reduction in our financial strength may cause others to reduce or cease doing business with us, which could result in a decrease in our net interest income and fee revenues.***

Our customers rely upon our financial strength and stability and evaluate the risks of doing business with us. If we experience diminished financial strength or stability, actual or perceived, including due to market or regulatory developments, announced or rumored business developments or results of operations, or a decline in stock price, customers may withdraw their deposits or otherwise seek services from other banking institutions and prospective customers may select other service providers. The risk that we may be perceived as less creditworthy relative to other market participants is increased in the current market environment, where the consolidation of financial institutions, including major global financial institutions, is resulting in a smaller number of much larger counterparties and competitors. As our community banks become more closely identified with the Wintrust name, the impact of any perceived weakness or creditworthiness at either the holding company or our community banks may be greater than in prior periods. If customers reduce their deposits with us or select other service providers for all or a portion of the services that we provide them, net interest income and fee revenues will decrease accordingly, and could have a material adverse effect on our results of operations.

***If our growth requires us to raise additional capital, that capital may not be available when it is needed or the cost of that capital may be very high.***

We are required by regulatory authorities to maintain adequate levels of capital to support our operations (see “ - Risks Related to Our Regulatory Environment - If we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets”) and as we grow, internally and through acquisitions, the amount of capital required to support our operations grows as well. We may need to raise additional capital to support continued growth both internally and through acquisitions. Any capital we obtain may result in the dilution of the interests of existing holders of our common stock.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time which are outside our control and on our financial condition and performance. If we cannot raise additional capital when needed, or on terms acceptable to us, our ability to further expand our operations through internal growth and acquisitions could be materially impaired and our financial condition and liquidity could be materially and negatively affected.

***Disruption in the financial markets could result in lower fair values for our investment securities portfolio.***

The Company's available-for-sale and trading securities are carried at fair value.

Accounting standards require the Company to categorize these securities according to a fair value hierarchy. As of December 31, 2017, approximately 96% of the Company's available-for-sale securities were categorized in level 2 of the fair value hierarchy (meaning that their fair values were determined by quoted prices for similar assets or other observable inputs). Significant prolonged reduced investor demand could manifest itself in lower fair values for these securities and may result in recognition of an other-than-temporary or permanent impairment of these assets, which could lead to accounting charges and have a material adverse effect on the Company's financial condition and results of operations.

The remaining securities in our available-for-sale securities portfolio were categorized as level 3 (meaning that their fair values were determined by inputs that are unobservable in the market and therefore require a greater degree of management judgment). The determination of fair value for securities categorized in level 3 involves significant judgment due to the complexity of factors contributing to the valuation, many of which are not readily observable in the market. In addition, the nature of the business of the third party source that is valuing the securities at any given time could impact the valuation of the securities. Consequently, the ultimate sales price for any of these securities could vary significantly from the recorded fair value at December 31, 2017, especially if the security is sold during a period of illiquidity or market disruption or as part of a large block of securities under a forced transaction.

There can be no assurance that decline in market value associated with these disruptions will not result in other-than-temporary or permanent impairments of these assets, which would lead to accounting charges which could have a material negative effect on our business, financial condition and results of operations.

### Our controls and procedures may fail or be circumvented.

Management regularly reviews and updates our internal controls over financial reporting, disclosure controls and procedures and corporate governance policies and procedures. Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.

***New lines of business and new products and services are essential to our ability to compete but may subject us to additional risks.***

We continually implement new lines of business and offer new products and services within existing lines of business to offer our customers a competitive array of products and services. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology can increase efficiency and enable financial institutions to better serve customers and to reduce costs. However, some new technologies needed to compete effectively result in incremental operating costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in operations. Many of our competitors, because of their larger size and available capital, have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could cause a loss of customers and have a material adverse effect on our business.

At the same time, there can be substantial risks and uncertainties associated with these efforts, particularly in instances where the markets for such services are still developing. In developing and marketing new lines of business and/or new products or services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service. Furthermore, any new line of business and/or new product or service could have a significant impact on the effectiveness of our system of internal controls. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition, and results of operations.

***Our operational or security systems or infrastructure, or those of third parties, could fail or be breached, which could disrupt our business and adversely impact our results of operations, liquidity and financial condition, as well as cause legal or reputational harm.***

The potential for operational risk exposure exists throughout our business and, as a result of our interactions with, and reliance on, third parties, is not limited to our own internal operational functions. Our operational and security systems and infrastructure, including our computer systems, data management, and internal processes, as well as those of third parties, are integral to our performance. We rely on our employees and third parties in our day-to-day and ongoing operations, who may, as a result of human error, misconduct, malfeasance or failure, or breach of our or of third-party systems or infrastructure, expose us to risk. For example, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties with whom we interact or upon whom we rely. In addition, our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect to our own systems. Our financial, accounting, data processing, backup or other operating or security systems and infrastructure may fail to operate properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control, which could adversely affect our ability to process transactions or provide services. Such events may include sudden increases in customer transaction volume; electrical, telecommunications or other major physical infrastructure outages; natural disasters such as earthquakes, tornadoes, hurricanes and floods; disease pandemics; and events arising from local or larger scale political or social matters, including wars and terrorist acts. In addition, we may need to take our systems offline if they become infected with malware or a computer virus or as a result of another form of cyber-attack. In the event that backup systems are utilized, they may not process data as quickly as our primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or permanent loss of such data. We frequently update our systems to support our operations and growth and to remain compliant with all applicable laws, rules and regulations. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones, including business interruptions. Implementation and testing of controls related to our computer systems, security monitoring and retaining and training personnel required to operate our systems also entail significant costs. Operational risk exposures could adversely impact our results of operations, liquidity and financial condition, as well as cause reputational harm. In addition, we may not have adequate insurance coverage to compensate for losses from a major interruption.

***We face security risks, including denial of service attacks, hacking, social engineering attacks targeting our colleagues and customers, malware intrusion or data corruption attempts, in addition to the resulting identity theft that could result in the disclosure of confidential information, all of which could adversely affect our business or reputation, and create significant legal and financial exposure.***

Our computer systems and network infrastructure and those of third parties, on which we are highly dependent, are subject to security risks and could be susceptible to cyberattacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Our business relies on the secure processing, transmission, storage and retrieval of confidential, personal, proprietary and other information in our computer and data management systems and networks, and in the computer and data management systems and networks of third parties. In addition, to access our network, products and services, our customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own cybersecurity risks.

We, our customers, regulators and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to, and are likely to continue to be the target of, cyber-attacks. These cyber-attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information, ransomware, improper access by employees or vendors, attacks on personal email of employees, ransom demands to not expose security vulnerabilities in our systems or the systems of third parties or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers or of third parties, damage to our systems or other material disruption of our or our customers’ or other third parties’ network access or business operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to ensure the integrity of our systems and implement controls, processes, policies and other protective measures, we may not be able to anticipate all security breaches, nor may we be able to implement guaranteed preventive measures against such security breaches. Cyber threats are rapidly evolving and we may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, and the use of the internet and telecommunications technologies to conduct financial transactions. For example, cybersecurity risks may increase in the future as we continue to increase our mobile-payment and other internet-based product offerings and expand our internal usage of web-based products and applications. In addition, cybersecurity risks have significantly increased in recent years in part due to the increased sophistication and activities of organized crime affiliates, terrorist organizations, hostile foreign governments, disgruntled employees or vendors, activists and other external parties, including those involved in corporate espionage. Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks and "spear phishing" attacks are becoming more sophisticated and are extremely difficult to prevent. In such an attack, an attacker will attempt to fraudulently induce colleagues, customers or other users of our systems to disclose sensitive information in order to gain access to its data or that of its clients. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and may not be recognized until well after a breach has occurred. The risk of a security breach caused by a cyber-attack at a vendor or by unauthorized vendor access has also increased in recent years. Additionally, the existence of cyber-attacks or security breaches at third-party vendors with access to our data may not be disclosed to us in a timely manner.

We also face indirect technology, cybersecurity and operational risks relating to the customers, clients and other third parties with whom we do business or upon whom we rely to facilitate or enable our business activities, including, for example, financial counterparties, regulators and providers of critical infrastructure such as internet access and electrical power. As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyber-attack or other information or security breach that significantly degrades, deletes or compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including us. This consolidation, interconnectivity and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis. Any third-party technology failure, cyber-attack or other information or security breach, termination or constraint could, among other things, adversely affect our ability to effect transactions, service our clients, manage our exposure to risk or expand our business.

Cyber-attacks or other information or security breaches, whether directed at us or third parties, may result in a material loss or have material consequences. Furthermore, the public perception that a cyber-attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business. Hacking of personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention of system security could cause us serious negative consequences, including our loss of customers and business opportunities, significant disruption to our operations and business, misappropriation or destruction of our confidential information and/or that of our customers, or damage to our or our customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, additional compliance costs, and could adversely impact our results of operations, liquidity and financial condition.

### Failures by or of our vendors may adversely affect our operations.

We use and rely upon many external vendors to provide us with day-to-day products and services essential to our operations. We are thus exposed to risk that such vendors will not perform as contracted or at agreed-upon service levels. The failure of our vendors to perform as contracted or at necessary service levels for any reason could disrupt our operations, which could adversely affect our business. In addition, if any of our vendors experience insolvency or other business failure, such failure could affect our ability to obtain necessary products or services from a substitute vendor in a timely and cost-effective manner or prevent us from effectively pursuing certain business objectives entirely. Our failure to implement business objectives due to vendor nonperformance could adversely affect our financial condition and results of operations.

***We issue debit cards, and debit card transactions pose a particular cybersecurity risk that is outside of our control.***

Debit card numbers are susceptible to theft at the point of sale via the physical terminal through which transactions are processed and by other means of hacking. The security and integrity of these transactions are dependent upon retailers’ vigilance and willingness to invest in technology and upgrades. Despite third-party security risks that are beyond our control, we offer our customers protection against fraud and attendant losses for unauthorized use of debit cards in order to stay competitive in the marketplace. Offering such protection to our customers exposes us to potential losses which, in the event of a data breach at one or more retailers of considerable magnitude, may adversely affect our business, financial condition, and results of operations.

***We depend on the accuracy and completeness of information we receive about our customers and counterparties to make credit decisions.***

We rely on information furnished by or on behalf of customers and counterparties in deciding whether to extend credit or enter into other transactions. This information could include financial statements, credit reports, and other financial information. We also rely on representations of those customers, counterparties, or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports, or other financial information could have a material adverse impact on our business, financial condition and results of operations.

***If we are unable to attract and retain experienced and qualified personnel, our ability to provide high quality service will be diminished, we may lose key customer relationships, and our results of operations may suffer.***

We believe that our future success depends, in part, on our ability to attract and retain experienced personnel, including our senior management and other key personnel. Our business model is dependent upon our ability to provide high quality and personal service. In addition, as a holding company that conducts its operations through our subsidiaries, we are focused on providing entrepreneurial-based compensation to the chief executives of each our business units. As a Company with start-up and growth oriented operations, we are cognizant that to attract and retain the managerial talent necessary to operate and grow our businesses we often have to compensate our executives with a view to the business we expect them to manage, rather than the size of the business they currently manage. Accordingly, any executive compensation restrictions may negatively impact our ability to retain and attract senior management. The departure of a senior manager or other key personnel may damage relationships with certain customers, or certain customers may choose to follow such personnel to a competitor. The loss of any of our senior managers or other key personnel, or our inability to identify, recruit and retain such personnel, could materially and adversely affect our business, results of operations and financial condition.

***We are subject to environmental liability risk associated with lending activities.***

A significant portion of the Company's loan portfolio is secured by real property. In the ordinary course of business, the Company may foreclose on and take title to properties securing certain loans. In doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous or toxic substances are found, the Company may be liable for remediation costs, as well as for personal injury and property damage. In addition, we own and operate a number of properties that may be subject to similar environmental liability risks.

Environmental laws may require the Company to incur substantial expenses and could materially reduce the affected property's value or limit the Company's ability to use or sell the affected property. The costs associated with investigation and remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. Although the Company has policies and procedures to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on the Company's business, financial condition and results of operations.

***We are subject to claims and legal actions which could negatively affect our results of operations or financial condition.***

Periodically, as a result of our normal course of business, we are involved in claims and related litigation from our customers, employees or other parties. These claims and legal actions, whether meritorious or not, as well as reviews, investigations and proceedings by governmental and self-regulatory agencies could involve large monetary claims and significant legal expense. In addition, such actions may negatively impact our reputation in the marketplace and lessen customer demand. If such claims and legal actions are not decided in Wintrust's favor, our results of operations and financial condition could be adversely impacted.

***Losses incurred in connection with actual or projected repurchases and indemnification payments related to mortgages that we have sold into the secondary market may exceed our financial statement reserves and we may be required to increase such reserves in the future. Increases to our reserves and losses incurred in connection with actual loan repurchases and indemnification payments could have a material adverse effect on our business, financial condition, results of operations or cash flows.***

We engage in the origination and purchase of residential mortgages for sale into the secondary market. In connection with such sales, we make certain representations and warranties, which, if breached, may require us to repurchase such loans, substitute other loans or indemnify the purchasers of such loans for actual losses incurred in respect of such loans. Due, in part, to increased mortgage payment delinquency rates and declining housing prices during the post 2007 period, we have been receiving such requests for loan repurchases and indemnification payments relating to the representations and warranties with respect to such loans. We have been able to reach settlements with a number of purchasers, and believe that we have established appropriate reserves with respect to indemnification requests. It is possible that the number of such requests will increase or that we will not be able to reach settlements with respect to such requests in the future. Accordingly, it is possible that losses incurred in connection with loan repurchases and indemnification payments may be in excess of our financial statement reserves, and we may be required to increase such reserves and may sustain additional losses associated with such loan repurchases and indemnification payments in the future. Increases to our reserves and losses incurred by us in connection with actual loan repurchases and indemnification payments in excess of our reserves could have a material adverse effect on our business, financial condition, results of operations or cash flows.

***Consumers may decide not to use banks to complete their financial transactions, which could adversely affect our business and results of operations.***

Technology and other changes are allowing parties to complete financial transactions that historically have involved banks through alternative methods. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Consumers can also complete transactions such as paying bills and transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on our business, financial condition and results of operations.

### We may be adversely impacted by the soundness of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties and routinely execute transactions with counterparties in the financial services industry, including the Federal Home Loan Bank (“FHLB”), commercial banks, brokers and dealers, investment banks and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount due to us. Any such losses could have material adverse effect on our business, financial condition and results of operations.

***De novo operations often involve significant expenses and delayed returns and may negatively impact Wintrust's profitability.***

Our financial results have been and will continue to be impacted by our strategy of branch openings and de novo bank formations. We expect to increase the opening of additional branches as market conditions improve and, if the interest rate environment and economic climate and regulatory conditions become favorable, may resume de novo bank formations. It may take longer than expected or more than the amount of time Wintrust has historically experienced for new banks and/or banking facilities to reach profitability, and there can be no guarantee that these branches or banks will ever be profitable. Moreover, the FDIC's enhanced supervisory period for de novo banks of three years, including higher capital requirements during this period, could also delay a new bank's ability to contribute to the Company's earnings and impact the Company's willingness to expand through de novo bank formation. To the extent we undertake additional de novo bank, branch and business formations, our level of reported net income, return on average equity and return on average assets will be impacted by startup costs associated with such operations, and it is likely to continue to experience the effects of higher expenses relative to operating income from the new operations. These expenses may be higher than we expected or than our experience has shown, which could have a material adverse effect on our business, financial condition and results of operations.

***We are subject to examinations and challenges by tax authorities that may impact our financial results.***

In the normal course of business, we, as well as our subsidiaries, are routinely subject to examinations from federal and state tax authorities regarding the amount of taxes due in connection with investments we have made and the businesses in which we have engaged. Recently, federal and state tax authorities have become increasingly aggressive in challenging tax positions taken by financial institutions. These tax positions may relate to among other things tax compliance, sales and use, franchise, gross receipts, payroll, property and income tax issues, including tax base, apportionment and tax credit planning. The challenges made by tax authorities may result in adjustments to the timing or amount of taxable income or deductions or the allocation of income among tax jurisdictions. If any such challenges are made and are not resolved in our favor, they could have a material adverse effect on our financial condition and results of operations.

### Changes in federal and state tax laws and changes in interpretation of existing laws can impact our financial results

The federal government enacted the Tax Act on December 22, 2017, and given the current economic and political environment and ongoing budgetary pressures, the enactment of further new federal or state tax legislation may occur. The enactment of such legislation, or changes in the interpretation of existing law, including provisions impacting tax rates, apportionment, consolidation or combination, income, expenses and credits may have a material adverse effect on our business, financial condition and results of operations.

In particular, the final impacts of the Tax Act could be materially different from our current estimates. The Tax Act introduced significant changes to the tax code, including a reduction in the statutory federal income tax rate for corporations from 35% to 21% effective January 1, 2018, which required the Company to re-measure its existing net deferred tax liabilities as of the end of 2017 to reflect the new tax rate. This net tax benefit was partially offset by a one-time tax pursuant to the Tax Act on a deemed repatriation of unremitted earnings on our Canadian subsidiary. We continue to examine the impact the Tax Act may have on our business. The estimated impact of the Tax Act is based on management’s current knowledge and assumptions and recognized impacts could be materially different from current estimates based upon our further analysis of the Tax Act.

***Changes in accounting policies or accounting standards could materially adversely affect how we report our financial results and financial condition.***

Our accounting policies are fundamental to understanding our financial results and financial condition. Some of these policies require use of estimates and assumptions that affect the value of our assets or liabilities and financial results. Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If such estimates or assumptions underlying our financial statements are incorrect, we may experience material losses. From time to time, the FASB and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes, such as the new CECL standard discussed above, can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements.

***We are a bank holding company, and our sources of funds, including to pay dividends, are limited.***

We are a bank holding company and our operations are primarily conducted by and through our 15 operating banks, which are subject to significant federal and state regulation. Cash available to pay dividends to our shareholders, repurchase our shares or repay our indebtedness is derived primarily from dividends received from our banks and our ability to receive dividends from our subsidiaries is restricted. Various statutory provisions restrict the amount of dividends our banks can pay to us without regulatory approval. The banks may not pay cash dividends if that payment could reduce the amount of their capital below that necessary to meet the “adequately capitalized” level in accordance with regulatory capital requirements. It is also possible that, depending upon the financial condition of the banks and other factors, regulatory authorities could conclude that payment of dividends or other payments, including payments to us, is an unsafe or unsound practice and impose restrictions or prohibit such payments. Our inability to receive dividends from our banks could adversely affect our business, financial condition and results of operations.

### Anti-takeover provisions could negatively impact our shareholders.

Certain provisions of our articles of incorporation, by-laws and Illinois law may have the effect of impeding the acquisition of control of Wintrust by means of a tender offer, a proxy fight, open-market purchases or otherwise in a transaction not approved by our board of directors. For example, our board of directors may issue additional authorized shares of our capital stock to deter future attempts to gain control of Wintrust, including the authority to determine the terms of any one or more series of preferred stock, such as voting rights, conversion rates and liquidation preferences. As a result of the ability to fix voting rights for a series of preferred stock, the board has the power, to the extent consistent with its fiduciary duty, to issue a series of preferred stock to persons friendly to management in order to attempt to block a merger or other transaction by which a third party seeks control, and thereby assist the incumbent board of directors and management to retain their respective positions. In addition, our articles of incorporation expressly elect to be governed by the provisions of Section 7.85 of the Illinois Business Corporation Act, which would make it more difficult for another party to acquire us without the approval of our board of directors.

The ability of a third party to acquire us is also limited under applicable banking regulations. The BHC Act requires any “bank holding company” (as defined in the BHC Act) to obtain the approval of the Federal Reserve prior to acquiring more than 5% of our outstanding common stock. Any person other than a bank holding company is required to obtain prior approval of the Federal Reserve to acquire 10% or more of our outstanding common stock under the Change in Bank Control Act of 1978. Any holder of 25% or more of our outstanding common stock, other than an individual, is subject to regulation as a “bank holding company” under the BHC Act. For purposes of calculating ownership thresholds under these banking regulations, bank regulators would likely at least take the position that the minimum number of shares, and could take the position that the maximum number of shares, of Wintrust common stock that a holder is entitled to receive pursuant to securities convertible into or settled in Wintrust common stock, including pursuant to Wintrust's warrants to purchase Wintrust common stock held by such holder, must be taken into account in calculating a shareholder's aggregate holdings of Wintrust common stock.

These provisions may have the effect of discouraging a future takeover attempt that is not approved by our board of directors but which our individual shareholders may deem to be in their best interests or in which our shareholders may receive a substantial premium for their shares over then-current market prices. As a result, shareholders who might desire to participate in such a transaction may not have an opportunity to do so. Such provisions will also render the removal of our current board of directors or management more difficult.

### Uncertainty about the future of LIBOR may adversely affect our business.

On July 27, 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. The announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. It is currently impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR and it is impossible to predict the effect of any such alternatives on the value of LIBOR-based securities, including the Company’s Series D Preferred Stock or other securities or financial arrangements, given LIBOR’s role in determining market interest rates globally. Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR may adversely affect LIBOR rates and other interest rates. In the event that a published LIBOR rate is unavailable after 2021, the dividend rate on the Company’s Series D Preferred Stock, which are currently based on the LIBOR rate, will be determined as set forth in the accompanying offering documents, and the value of such securities may be adversely affected. Currently, the manner and impact of this transition and related developments, as well as the effect of these developments on our funding costs, loan, derivative and investment portfolios, asset-liability management and business, is uncertain.

### Risks Related to Our Regulatory Environment

***If we fail to meet our regulatory capital ratios, we may be forced to raise capital or sell assets.***

As a banking institution, we are subject to regulations that require us to maintain certain capital ratios, such as the ratio of our Tier 1 capital to our risk-based assets, and in recent years these regulatory and market expectations have increased substantially. If our regulatory capital ratios decline, as a result of decreases in the value of our loan portfolio or otherwise, we may be required to improve such ratios by either raising additional capital or by disposing of assets. If we choose to dispose of assets, we cannot be certain that we will be able to do so at prices that we believe to be appropriate, and our future operating results could be negatively affected. If we choose to raise additional capital, we may accomplish this by selling additional shares of common stock, or securities convertible into or exchangeable for common stock, which could significantly dilute the ownership percentage of holders of our common stock and cause the market price of our common stock to decline. Additionally, events or circumstances in the capital markets generally may increase our capital costs and impair our ability to raise capital at any given time.

### If our credit rating is lowered, our financing costs could increase.

We have been rated by Fitch Ratings as "BBB+" and DBRS as "A (low)".

Our creditworthiness is not fixed and should be expected to change over time as a result of company performance and industry conditions. We cannot give any assurances that our credit ratings will remain at current levels, and it is possible that our ratings could be lowered or withdrawn by Fitch Ratings or DBRS. Any actual or threatened downgrade or withdrawal of our credit rating could affect our perception in the marketplace and ability to raise capital, and could increase our debt financing costs.

***Changes in the United States’ monetary policy may restrict our ability to conduct our business in a profitable manner.***

Our ability to profitably operate is dependent, in part, upon federal fiscal policies that cannot be predicted. We are particularly affected by the monetary policies of the Federal Reserve, which influence money supply in the United States. Any change in the United States’ monetary policy, or worsening federal budgetary pressures, could affect our access to capital. Additionally, any trend toward inflation, economic decline, destabilizing of financial markets, or other factors beyond our control may significantly affect consumer demand for our products and consumers’ ability to repay loans, reducing our results of operations.

***Legislative and regulatory actions taken now or in the future regarding the financial services industry may significantly increase our costs or limit our ability to conduct our business in a profitable manner.***

We are subject to extensive federal and state regulation and supervision. The cost of compliance with such laws and regulations can be substantial and adversely affect our ability to operate profitably. While we are unable to predict the scope or impact of any potential legislation or regulatory action until it becomes final, it is possible that changes in applicable laws, regulations or interpretations thereof could significantly increase our regulatory compliance costs, impede the efficiency of our internal business processes, negatively impact the recoverability of certain of our recorded assets, require us to increase our regulatory capital, interfere with our executive compensation plans, or limit our ability to pursue business opportunities in an efficient manner including our plan for de novo growth and growth through acquisitions.

Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years, in response to the financial crisis as well as other factors such as technological and market changes. For example, as cybersecurity and data privacy risks for banking organizations and the broader financial system have significantly increased in recent years, cybersecurity and data privacy issues have become the subject of increasing legislative and regulatory focus. Regulatory enforcement and fines have also increased across the banking and financial services sector. Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations, most of which are now in place. The current presidential administration has issued an executive order that sets forth principles for the reform of the federal financial regulatory framework, and the majority in Congress has also suggested an agenda for financial regulatory change. It is too early to assess whether there will be any major changes in the regulatory environment or merely a rebalancing of the post financial crisis framework. The Company expects that its business will remain subject to extensive regulation and supervision, and any changes in the regulatory environment may, individually or in the aggregate, have a material adverse effect upon the Company's business, results of operations, cash flows and financial position.

***Financial reform legislation and increased regulatory rigor around consumer protection mortgage-related issues may reduce our ability to market our products to consumers and may limit our ability to profitably operate our mortgage business.***

The CFPB has broad rulemaking authority over a wide range of federal consumer protection laws applicable to the business of our subsidiary banks and some other operating subsidiaries, including the authority to prohibit “unfair, deceptive or abusive” acts and practices, but examination and supervision of our subsidiary banks is carried out by the primary federal banking agency and, where applicable, the state banking agency. Consumer protection is an area of heightened regulatory focus, and the CFPB has promulgated a number of specific regulatory requirements in this area. These rules have increased and may further increase the costs of doing business for all market participants, including our subsidiaries.

In particular, the mortgage-related final rules issued by the CFPB have materially restructured the origination, servicing and securitization of residential mortgages in the United States. These rules have impacted, and will continue to impact, the business practices of mortgage lenders, including the Company. For example, in order to ensure compliance with mortgage-related rules issued by the CFPB, the Company consolidated its consumer mortgage loan origination and loan servicing operations within Wintrust Mortgage.

In the wake of the mortgage crisis, the CFPB and federal and state banking agencies are closely examining the mortgage and mortgage servicing activities of depository financial institutions. Should these or other agencies have serious concerns with respect to our operations in this regard, the effect of such concerns could have a material adverse effect on our profits.

***Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business.***

Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. The CFPB has promulgated many mortgage-related final rules since it was established under the Dodd-Frank Act, including rules relating to the ability to repay loans and relating to qualified mortgage standards. Most of these mortgage-related rules have been adopted, although portions of certain of these rules have not yet become effective. In addition, several proposed revisions to mortgage-related rules are pending finalization. We may find it necessary to tighten our mortgage loan underwriting standards in response to the CFPB rules, which may constrain our ability to make loans consistent with our business strategies. It is our policy not to make predatory loans and to determine borrowers' ability to repay, but the law and related rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make. In addition, regulation related to redlining, fair lending, CRA compliance and BSA compliance create significant burdens which necessitate increased costs. Any failure to comply with any of these regulations could have a significant impact on our ability to operate, our ability to acquire or open new banks and/or result in meaningful fines.

***Regulatory initiatives regarding bank capital requirements may require heightened capital.***

Since 2013, the U.S. federal banking authorities have increased most of the required minimum regulatory capital ratios applicable to all U.S. banks that are subject to minimum capital requirements as well as to bank and saving and loan holding companies, other than “small bank holding companies” (generally bank holding companies with consolidated assets of less than $500 million). The U.S. federal banking authorities also introduced a new Common Equity Tier 1 Capital ratio and the concept of a capital conservation buffer in addition to changing the definition of capital. In 2012, the Federal Reserve also implemented the stress test requirements under the Dodd-Frank Act. As a bank holding company with between $10 billion and $50 billion in total consolidated assets, we are required to conduct annual stress tests based on scenarios provided by the Federal Reserve, and are required to publicly disclose the results of our stress tests.

These provisions, as well as any other aspects of current or proposed regulatory or legislative changes to laws applicable to the financial industry, have increased our compliance cost, are expected to impact the profitability of our business activities and may change certain of our business practices, including the ability to offer new products, obtain financing, attract deposits, make loans, and achieve satisfactory interest spreads, and could expose us to additional costs, including increased compliance costs. These changes also may require us to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect our business, financial condition and results of operations.

Our ability to engage in capital distributions, including paying dividends or repurchasing stock, may be restricted if we do not maintain the required Capital Conservation Buffer. In addition, we anticipate that our pro forma capital ratios, as reflected in the stress test calculations under the required stress test scenarios, will be an important factor considered by the Federal Reserve in evaluating whether proposed payments of dividends or stock repurchases are consistent with its prudential expectations.

***Our FDIC insurance premiums may increase, which could negatively impact our results of operations.***

Insured institution failures leading up to and following the financial crisis, as well as deterioration in banking and economic conditions, significantly increased FDIC loss provisions, resulting in a decline of its deposit insurance fund to historical lows at the peak of the crisis. In response, the Dodd-Frank Act and FDIC regulations changed the assessment base for federal deposit insurance from the amount of insured deposits to average total consolidated assets less average tangible capital, eliminated the maximum size of the DIF, eliminated the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds, and increased the minimum reserve ratio of the DIF from 1.15% to 1.35%. These developments also caused our FDIC insurance premiums to increase. There is a risk that the banks' deposit insurance premiums will increase in the future if failures of insured depository institutions once again deplete the DIF. Any such increase may negatively impact our financial condition and results of operations.

***Non-compliance with the USA PATRIOT Act, BSA or other laws and regulations could result in fines or sanctions.***

The USA PATRIOT Act and the BSA require financial institutions to develop programs to prevent financial institutions from being used for money laundering or the funding of terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with FinCEN. These rules require certain financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new accounts. Failure to comply with these regulations could result in fines or sanctions. An increasing number of banking institutions have received large fines for non-compliance with these laws and regulations. Although we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance can be given that these policies and procedures will be effective in preventing violations of these laws and regulations.

### Risks Related to Our Niche Businesses

***Our premium finance business may involve a higher risk of delinquency or collection than our other lending operations, and could expose us to losses.***

We provide financing for the payment of commercial insurance premiums and life insurance premiums on a national basis through FIRST Insurance Funding and Wintrust Life Finance, respectively, and financing for the payment of commercial insurance premiums in Canada through our wholly-owned subsidiary, FIFC Canada. Commercial insurance premium finance loans involve a different, and possibly higher, risk of delinquency or collection than life insurance premium finance loans and the loan portfolios of our bank subsidiaries because these loans are issued primarily through relationships with a large number of unaffiliated insurance agents and because the borrowers are located nationwide. As a result, risk management and general supervisory oversight may be difficult. As of December 31, 2017, we had $2.6 billion of commercial insurance premium finance loans outstanding, of which $2.3 billion were originated in the U.S. by FIRST Insurance Funding and $318.9 million were originated in Canada by FIFC Canada. Together, these loans represented 12% of our total loan portfolio as of such date.

FIRST Insurance Funding and FIFC Canada may also be more susceptible to third party fraud with respect to commercial insurance premium finance loans because these loans are originated and many times funded through relationships with unaffiliated insurance agents and brokers. In the second quarter of 2010, fraud perpetrated against a number of premium finance companies in the industry, including the property and casualty division of FIRST Insurance Funding, increased both the Company's net charge-offs and provision for credit losses by $15.7 million. Acts of fraud are difficult to detect and deter, and we cannot assure investors that our risk management procedures and controls will prevent losses from fraudulent activity.

Wintrust Life Finance may be exposed to the risk of loss in our life insurance premium finance business because of fraud. While Wintrust Life Finance maintains a policy prohibiting the known financing of stranger-originated life insurance and has established procedures to identify and prevent the company from financing such policies, Wintrust Life Finance cannot be certain that it will never provide loans with respect to such a policy. In the event such policies were financed, a carrier could potentially put at risk the cash surrender value of a policy, which serves as Wintrust Life Finance's primary collateral, by challenging the validity of the insurance contract for lack of an insurable interest.

See the below risk factor “Widespread financial difficulties or credit downgrades among commercial and life insurance providers could lessen the value of the collateral securing our premium finance loans and impair the financial condition and liquidity of FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada” for a discussion of further risks associated with our insurance premium finance activities.

While FIRST Insurance Funding and Wintrust Life Finance are licensed as required and carefully monitors compliance with regulation of each of its businesses, there can be no assurance that either will not be negatively impacted by material changes in the regulatory environment. FIFC Canada is not required to be licensed in most provinces of Canada, but there can be no assurance that future regulations which impact the business of FIFC Canada will not be enacted.

Additionally, to the extent that affiliates of insurance carriers, banks, and other lending institutions add greater service and flexibility to their financing practices in the future, our competitive position and results of operations could be adversely affected. Wintrust Life Finance's life insurance premium finance business could be materially negatively impacted by changes in the federal or state estate tax provisions. There can be no assurance that FIRST Insurance Funding and Wintrust Life Finance will be able to continue to compete successfully in its markets.

***Widespread financial difficulties or credit downgrades among commercial and life insurance providers could lessen the value of the collateral securing our premium finance loans and impair the financial condition and liquidity of FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada.***

FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada's premium finance loans are primarily secured by the insurance policies financed by the loans. These insurance policies are written by a large number of insurance companies geographically dispersed throughout the country. Our premium finance receivables balances finance insurance policies which are spread among a large number of insurers; however, one of the insurers represents approximately 14% of such balances and two additional insurers represent approximately 6% and 5%, respectively, of such balances. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada consistently monitor carrier ratings and financial performance of our carriers. While FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada can mitigate its risks as a result of this monitoring to the extent that commercial or life insurance providers experience widespread difficulties or credit downgrades, the value of our collateral will be reduced. FIRST Insurance Funding, Wintrust Life Finance and FIFC Canada are also subject to the possibility of insolvency of insurance carriers in the commercial and life insurance businesses that are in possession of our collateral. If one or more large nationwide insurers were to fail, the value of our portfolio could be significantly negatively impacted. A significant downgrade in the value of the collateral supporting our premium finance business could impair our ability to create liquidity for this business, which, in turn could negatively impact our ability to expand.

***Our wealth management business in general, and WHI's brokerage operation, in particular, exposes us to certain risks associated with the securities industry.***

Our wealth management business in general, and WHI's brokerage operations in particular, present special risks not borne by community banks that focus exclusively on community banking. For example, the brokerage industry is subject to fluctuations in the stock market that may have a significant adverse impact on transaction fees, customer activity and investment portfolio gains and losses. Likewise, additional or modified regulations may adversely affect our wealth management operations. Each of our wealth management operations is dependent on a small number of professionals whose departure could result in the loss of a significant number of customer accounts. A significant decline in fees and commissions or trading losses suffered in the investment portfolio could adversely affect our results of operations. In addition, we are subject to claim arbitration risk arising from customers who claim their investments were not suitable or that their portfolios were inappropriately traded. These risks increase when the market, as a whole, declines. The risks associated with retail brokerage may not be supported by the income generated by our wealth management operations.

## Properties

As filed, 1,831 characters.

The Company’s executive offices are located at 9700 W. Higgins Road, Rosemont, Illinois. The Company also leases office locations and retail space at 231 S. LaSalle Street in downtown Chicago. The Company’s banks operate through 157 banking facilities, the majority of which are owned. The Company owns 212 automatic teller machines, the majority of which are housed at banking locations. The banking facilities are located in communities throughout the Chicago metropolitan area, southern Wisconsin and northwest Indiana. Excess space in certain properties is leased to third parties.

The Company’s wealth management subsidiaries have one location in downtown Chicago, one in Appleton, Wisconsin, and one in Tampa Bay, Florida, all of which are leased, as well as office locations at several of our banks. Wintrust Mortgage is headquartered in our corporate headquarters in Rosemont, Illinois and has 52 locations in 14 states, all of which are leased, as well as office locations at several of our banks. FIRST Insurance Funding and Wintrust Life Finance have one location in Northbrook, Illinois which is owned and locations at 231 S. LaSalle Street in downtown Chicago, Jersey City, New Jersey, Long Island, New York and Newport Beach, California, all of which are leased. FIFC Canada has three locations in Canada that are leased, located in Toronto, Ontario, Wainwright, Alberta and Vancouver, British Columbia. Wintrust Asset Finance is located in our corporate headquarters in Rosemont, Illinois and has locations in Frisco, Texas and Mishawaka, Indiana, both of which are leased. Tricom has one location in Menomonee Falls, Wisconsin which is owned. In addition, the Company owns other real estate acquired for further expansion that, when considered in the aggregate, is not material to the Company’s financial position.

## Legal proceedings

As filed, 3,854 characters.

In accordance with applicable accounting principles, the Company establishes an accrued liability for litigation and threatened litigation actions and proceedings when those actions present loss contingencies which are both probable and estimable. In actions for which a loss is reasonably possible in future periods, the Company determines whether it can estimate a loss or range of possible loss. To determine whether a possible loss is estimable, the Company reviews and evaluates its material litigation on an ongoing basis, in conjunction with any outside counsel handling the matter, in light of potentially relevant factual and legal developments. This review may include information learned through the discovery process, rulings on substantive or dispositive motions, and settlement discussions.

On January 15, 2015, Lehman Brothers Holdings, Inc. (“Lehman Holdings”) sent a demand letter asserting that Wintrust Mortgage must indemnify it for losses arising from loans sold by Wintrust Mortgage to Lehman Brothers Bank, FSB under a Loan Purchase Agreement between Wintrust Mortgage, as successor to SGB Corporation, and Lehman Brothers Bank. The demand was the precursor for triggering the alternative dispute resolution process mandated by the U.S. Bankruptcy Court for the Southern District of New York. Lehman Holdings triggered the mandatory alternative dispute resolution process on October 16, 2015. On February 3, 2016, following a ruling by the federal Court of Appeals for the Tenth Circuit that was adverse to Lehman Holdings on the statute of limitations that is applicable to similar loan purchase claims, Lehman Holdings filed a complaint against Wintrust Mortgage and 150 other entities from which it had purchased loans in the U.S. Bankruptcy Court for the Southern District of New York. The mandatory mediation was held on March 16, 2016, but did not result in a consensual resolution of the dispute. The court entered a case management order governing the litigation on November 1, 2016. Lehman Holdings filed an amended complaint against Wintrust Mortgage on December 29, 2016. On March 31, 2017, Wintrust Mortgage moved to dismiss the amended complaint for lack of subject matter jurisdiction and improper venue. This motion remains pending before the court.

The Company has reserved an amount for the Lehman Holdings action that is immaterial to its results of operations or financial condition. Such litigation and threatened litigation actions necessarily involve substantial uncertainty and it is not possible at this time to predict the ultimate resolution or to determine whether, or to what extent, any loss with respect to these legal proceedings may exceed the amounts reserved by the Company.

On August 28, 2015, Wintrust Mortgage received a demand from RFC Liquidating Trust asserting that Wintrust Mortgage is liable to it for losses arising from loans sold by Wintrust Mortgage or its predecessors to Residential Funding Company LLC and/or related entities. Wintrust Mortgage recently negotiated a settlement of the RFC Liquidating Trust’s claim for an immaterial amount, which was finalized on October 30, 2017.

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.

## Management's discussion and analysis

As filed, 226,667 characters.

#### Forward Looking Statements

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A on page 22 of this Annual Report on Form 10-K, as well as other risks and uncertainties set forth from time to time in the Company’s other filings with the SEC. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

- negative economic conditions that adversely affect the economy, housing prices, the job market and other factors that may affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;
- the extent of defaults and losses on the Company’s loan portfolio, which may require further increases in its allowance for credit losses;
- estimates of fair value of certain of the Company’s assets and liabilities, which could change in value significantly from period to period;
- the financial success and economic viability of the borrowers of our commercial loans;
- commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;
- the extent of commercial and consumer delinquencies and declines in real estate values, which may require further increases in the Company’s allowance for loan and lease losses;
- inaccurate assumptions in our analytical and forecasting models used to manage our loan portfolio;
- changes in the level and volatility of interest rates, the capital markets and other market indices that may affect, among other things, the Company’s liquidity and the value of its assets and liabilities;
- competitive pressures in the financial services business which may affect the pricing of the Company’s loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products;
- failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of the Company’s recent or future acquisitions;
- unexpected difficulties and losses related to FDIC-assisted acquisitions;
- harm to the Company’s reputation;
- any negative perception of the Company’s financial strength;
- ability of the Company to raise additional capital on acceptable terms when needed;
- disruption in capital markets, which may lower fair values for the Company’s investment portfolio;
- ability of the Company to use technology to provide products and services that will satisfy customer demands and create efficiencies in operations and to manage risks associated therewith;
- failure or breaches of our security systems or infrastructure, or those of third parties;
- security breaches, including denial of service attacks, hacking, social engineering attacks, malware intrusion or data corruption attempts and identity theft;
- adverse effects on our information technology systems resulting from failures, human error or cyberattacks;
- adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors;
- increased costs as a result of protecting our customers from the impact of stolen debit card information;
- accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions;
- ability of the Company to attract and retain senior management experienced in the banking and financial services industries;
- environmental liability risk associated with lending activities;
- the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation;
- losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith;
- the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank;
- the soundness of other financial institutions;
- the expenses and delayed returns inherent in opening new branches and de novo banks;
- examinations and challenges by tax authorities, and any unanticipated impact of the Tax Act;
- changes in accounting standards, rules and interpretations such as the new CECL standard, and the impact on the Company’s financial statements;
- the ability of the Company to receive dividends from its subsidiaries;
- uncertainty about the future of LIBOR;
- a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;
- legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies;
- a lowering of our credit rating;
- changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet as a result of the end of its program of quantitative easing or otherwise;
- restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business resulting from the Dodd-Frank Act;
- increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory environment;
- the impact of heightened capital requirements;
- increases in the Company’s FDIC insurance premiums, or the collection of special assessments by the FDIC;
- delinquencies or fraud with respect to the Company’s premium finance business;
- credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans;
- the Company’s ability to comply with covenants under its credit facility; and
- fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation.

Therefore, there can be no assurances that future actual results will correspond to any 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 after the date of this Annual Report on Form 10-K, except as required by law. Persons are advised, however, to consult further disclosures management makes on related subjects in its reports filed with the SEC and in its press releases.

### MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion highlights the significant factors affecting the operations and financial condition of Wintrust for the three years ended December 31, 2017. This discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and Notes thereto, and Selected Financial Highlights appearing elsewhere within this Annual Report on Form 10-K.

### OPERATING SUMMARY

Wintrust’s key measures of profitability and balance sheet changes are shown in the following table:

*(Dollars in thousands, except per share data)*

|  | Years Ended December 31, 2017 | 2016 | 2015 | Percentage % or Basis Point (bp) Change 2016 to 2017 | Percentage % or Basis Point (bp) Change 2015 to 2016 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Net income | **$257,682** | $206,875 | $156,749 | **25%** | 32% |
| Net income per common share — Diluted | **4.40** | 3.66 | 2.93 | **20** | 25 |
| Net revenue (1) | **1,151,582** | 1,047,623 | 913,126 | **10** | 15 |
| Net interest income | **832,076** | 722,193 | 641,529 | **15** | 13 |
| Net interest margin | **3.41%** | 3.24% | 3.34% | **17 bp** | (10) bp |
| Net interest margin - fully taxable equivalent (non-GAAP) (2) | **3.44** | 3.26 | 3.36 | **18** | (10) |
| Net overhead ratio (3) | **1.56** | 1.47 | 1.70 | **9** | (23) |
| Return on average assets | **0.98** | 0.85 | 0.75 | **13** | 10 |
| Return on average common equity | **9.26** | 8.37 | 7.15 | **89** | 122 |
| Return on average tangible common equity (non-GAAP) (2) | **11.63** | 10.90 | 9.44 | **73** | 146 |
| **At end of period** |  |  |  |  |  |
| Total assets | **$27,915,970** | $25,668,553 | $22,909,348 | **9%** | 12% |
| Total loans, excluding loans held-for-sale, excluding covered loans | **21,640,797** | 19,703,172 | 17,118,117 | **10** | 15 |
| Total loans, including loans held-for-sale, excluding covered loans | **21,954,389** | 20,121,546 | 17,506,155 | **9** | 15 |
| Total deposits | **23,183,347** | 21,658,632 | 18,639,634 | **7** | 16 |
| Total shareholders’ equity | **2,976,939** | 2,695,617 | 2,352,274 | **10** | 15 |
| Book value per common share (2) | **$50.96** | $47.12 | $43.42 | **8** | 9 |
| Tangible common book value per common share (2) | **41.68** | 37.08 | 33.17 | **12** | 12 |
| Market price per common share | **82.37** | 72.57 | 48.52 | **14** | 50 |
| Excluding covered loans: |  |  |  |  |  |
| Allowance for credit losses to total loans(4) | **0.64%** | 0.63% | 0.62% | **1 bp** | 1 bp |
| Non-performing loans to total loans | **0.42** | 0.44 | 0.49 | **(2)** | (5) |

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

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

*(3) The net overhead ratio is calculated by netting total non-interest expense and total non-interest income and dividing by that period’s total average assets. A lower ratio indicates a higher degree of efficiency.*

*(4) The allowance for credit losses includes both the allowance for loan losses and the allowance for lending-related commitments.*

Please refer to the Consolidated Results of Operations section later in this discussion for an analysis of the Company’s operations for the past three years.

### NON-GAAP FINANCIAL MEASURES/RATIOS

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

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE 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.

The following table presents 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 for the last five years.

*(Dollars and shares in thousands, except per share data)*

| Calculation of Net Interest Margin and Efficiency Ratio | Years Ended December 31, 2017 | 2016 | 2015 | 2014 | 2013 |
| --- | ---: | ---: | ---: | ---: | ---: |
| **(A) Interest Income (GAAP)** | **$946,468** | $812,457 | $718,464 | $671,267 | $630,709 |
| Taxable-equivalent adjustment: |  |  |  |  |  |
| -Loans | **3,760** | 2,282 | 1,431 | 1,128 | 842 |
| -Liquidity management assets | **3,713** | 3,630 | 3,221 | 2,000 | 1,407 |
| -Other earning assets | **14** | 40 | 57 | 41 | 11 |
| **(B) Interest Income - FTE** | **$953,955** | $818,409 | $723,173 | $674,436 | $632,969 |
| **(C) Interest Expense (GAAP)** | **114,392** | 90,264 | 76,935 | 72,692 | 80,082 |
| **(D) Net interest Income - FTE (B minus C)** | **$839,563** | $728,145 | $646,238 | $601,744 | $552,887 |
| **(E) Net Interest Income (GAAP) (A minus C)** | **$832,076** | $722,193 | $641,529 | $598,575 | $550,627 |
| **Net interest margin (GAAP-derived)** | **3.41%** | 3.24% | 3.34% | 3.51% | 3.49% |
| Net interest margin — FTE | **3.44** | 3.26 | 3.36 | 3.53 | 3.50 |
| (F) Non-interest income (GAAP) | **$319,506** | $325,430 | $271,597 | $215,240 | $222,397 |
| (G) Gains (losses) on investment securities, net (GAAP) | **45** | 7,645 | 323 | (504) | (3,000) |
| (H) Non-interest expense (GAAP) | **731,817** | 681,685 | 628,419 | 546,847 | 502,551 |
| **Efficiency ratio (H/(E+F-G))** | **63.55%** | 65.55% | 68.84% | 67.15% | 64.76% |
| **Efficiency ratio - FTE (H/(D+F-G))** | **63.14** | 65.18 | 68.49 | 66.89 | 64.57 |
| **Calculation of Tangible Common Equity ratio (at period end)** |  |  |  |  |  |
| Total shareholders' equity (GAAP) | **$2,976,939** | $2,695,617 | $2,352,274 | $2,069,822 | $1,900,589 |
| (I) Less: Convertible preferred stock (GAAP) | **—** | (126,257) | (126,287) | (126,467) | (126,477) |
| Less: Non-convertible preferred stock (GAAP) | **(125,000)** | (125,000) | (125,000) | — | — |
| Less: Goodwill and other intangible assets (GAAP) | **(519,505)** | (520,438) | (495,970) | (424,445) | (393,760) |
| (J) Total tangible common shareholders’ equity | **$2,332,434** | $1,923,922 | $1,605,017 | $1,518,910 | $1,380,352 |
| Total assets (GAAP) | **$27,915,970** | $25,668,553 | $22,909,348 | $19,998,840 | $18,081,756 |
| Less: Goodwill and other intangible assets (GAAP) | **(519,505)** | (520,438) | (495,970) | (424,445) | (393,760) |
| (K) Total tangible assets | **$27,396,465** | $25,148,115 | $22,413,378 | $19,574,395 | $17,687,996 |
| **Tangible common equity ratio (J/K)** | **8.5%** | 7.7% | 7.2% | 7.8% | 7.8% |
| **Tangible common equity ratio, assuming full conversion of preferred stock ((J-I)/K)** | **8.5** | 8.2 | 7.7 | 8.4 | 8.5 |
| **Calculation of book value per common share** |  |  |  |  |  |
| Total shareholders’ equity (GAAP) | **$2,976,939** | $2,695,617 | $2,352,274 | $2,069,822 | $1,900,589 |
| Less: Preferred stock (GAAP) | **(125,000)** | (251,257) | (251,287) | (126,467) | (126,477) |
| (L) Total common equity | **$2,851,939** | $2,444,360 | $2,100,987 | $1,943,355 | $1,774,112 |
| (M) Actual common shares outstanding | **55,965** | 51,881 | 48,383 | 46,805 | 46,117 |
| **Book value per common share (L/M)** | **$50.96** | $47.12 | $43.42 | $41.52 | $38.47 |
| **Tangible common book value per share (J/M)** | **41.68** | 37.08 | 33.17 | 32.45 | 29.93 |
| **Calculation of return on average common equity** |  |  |  |  |  |
| (N) Net income applicable to common shares | **$247,904** | $192,362 | $145,880 | $145,075 | $128,815 |
| Add: After-tax intangible asset amortization | **2,907** | 2,986 | 2,879 | 2,881 | 2,828 |
| (O) Tangible net income applicable to common shares | **$250,811** | $195,348 | $148,759 | $147,956 | $131,643 |
| Total average shareholders' equity | **$2,842,081** | $2,549,929 | $2,232,989 | $1,993,959 | $1,856,706 |
| Less: Average preferred stock | **(165,114)** | (251,258) | (191,416) | (126,471) | (153,724) |
| (P) Total average common shareholders' equity | **$2,676,967** | $2,298,671 | $2,041,573 | $1,867,488 | $1,702,982 |
| Less: Average intangible assets | **(519,910)** | (506,241) | (466,225) | (408,642) | (376,762) |
| (Q) Total average tangible common shareholders’ equity | **$2,157,057** | $1,792,430 | $1,575,348 | $1,458,846 | $1,326,220 |
| **Return on average common equity (N/P)** | **9.26%** | 8.37% | 7.15% | 7.77% | 7.56% |
| **Return on average tangible common equity (O/Q)** | **11.63** | 10.90 | 9.44 | 10.14 | 9.93 |

47

### OVERVIEW AND STRATEGY

### 2017 Highlights

The Company recorded net income of $257.7 million for the year of 2017 compared to $206.9 million and $156.7 million for the years of 2016 and 2015, respectively. The results for 2017 demonstrate continued operating strengths including strong loan and deposit growth which, coupled with increased net interest margin, resulted in higher net interest income, growth in the leasing business and stable credit quality metrics. Additionally, the Company's net income was positively impacted by a $7.6 million net tax benefit related to the enactment of the Tax Act.

The Company increased its loan portfolio, excluding loans held-for-sale and covered loans, from $19.7 billion at December 31, 2016 to $21.6 billion at December 31, 2017. This increase was primarily a result of the Company’s commercial banking initiative as well as growth in the commercial real estate portfolio and life insurance premium finance receivables portfolio. The Company is focused on making new loans, including in the commercial and commercial real estate sector, where opportunities that meet our underwriting standards exist. For more information regarding changes in the Company’s loan portfolio, see “Analysis of Financial Condition – Interest Earning Assets” and Note 4 “Loans” of the Consolidated Financial Statements presented under Item 8 of this Annual Report on Form 10-K.

Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during 2017, 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. The Company had overnight liquid funds and interest-bearing deposits with banks of $1.3 billion at December 31, 2017 and 2016.

The Company recorded net interest income of $832.1 million in 2017 compared to $722.2 million and $641.5 million in 2016 and 2015, respectively. The higher level of net interest income recorded in 2017 compared to 2016 resulted primarily from a $2.1 billion increase in average earning assets and a 17 basis point increase in the net interest margin in 2017

Non-interest income totaled $319.5 million in 2017, decreasing $5.9 million, or 2%, compared to 2016. The decrease in non-interest income in 2017 compared to 2016 was primarily attributable to a decrease in mortgage banking revenues, lower fees from covered call options, lower gains realized on investment securities, decreases in fees from customer interest rate swap fees and a gain on the extinguishment of junior subordinated debentures recognized in the previous year. This was partially offset by higher operating lease income from growth in our leasing divisions and an increase in wealth management revenue (see “Non-Interest Income” section later in this Item 7 for further detail).

Non-interest expense totaled $731.8 million in 2017, increasing $50.1 million, or 7%, compared to 2016. The increase compared to 2016 was primarily attributable to a $24.9 million increase in salaries and employee benefits, higher operating lease equipment depreciation, an increase in professional fees, and higher marketing expenses. The increase in salaries and employee benefits was, specifically, attributable to a $15.5 million increase in salaries resulting from annual salary increases and larger staffing as the Company grew, a $5.1 million increase in commissions and incentive compensation primarily attributable to the Company's long-term incentive program, and a $4.3 million increase in employee benefits due to higher retirement savings plan costs.

As the Company continues to experience strong growth in its balance sheet, controlling operating expenses is a continued focus throughout the Company's various business units. Management monitors expense control from period to period throughout the Company and places an emphasis on specifically the Company's net overhead ratio, which provides a measure of efficiency both consolidated and across business units. The Company's goal is to maintain a net overhead ratio below 1.50% on a consolidated basis.

### Economic Environment

The economic environment in 2017 was characterized by rising interest rates and continued competition as banks have experienced improvements in their financial condition allowing them to be more active in the lending market. The Company has employed certain strategies to manage net income in the current rate environment, including those discussed below.

#### Net Interest Income

The Company has leveraged its internal loan pipeline and external growth opportunities to grow its earning assets base. The Company has also continued its efforts to shift a greater portion of its deposit base to non-interest bearing deposits. These deposits as a percentage of total deposits were 29% on December 31, 2017 as compared to 27% on December 31, 2016. In 2017, the

Company's net interest margin increased to 3.41% (3.44% on a fully tax-equivalent basis) as compared to 3.24% (3.26% on a fully tax-equivalent basis) in 2016 primarily as a result of rising interest rates. As a result of the growth in earning assets, improvement in funding mix and increased net interest margin, the Company increased net interest income by $109.9 million in 2017 compared to 2016.

The Company has continued its practice of writing call options against certain U.S. Treasury and Agency securities to economically hedge the securities positions and receive fee income to compensate for net interest margin compression. In 2017, the Company recognized $4.4 million in fees on covered call options compared to $11.5 million in 2016.

The Company utilizes “back to back” interest rate derivative transactions, primarily interest rate swaps, to receive floating rate interest payments related to customer loans. In these arrangements, the Company makes a floating rate loan to a borrower who prefers to pay a fixed rate. To accommodate the risk management strategy of certain qualified borrowers, the Company enters a swap with its borrower to effectively convert the borrower's variable rate loan to a fixed rate. However, in order to minimize the Company's exposure on these transactions and continue to receive a floating rate, the Company simultaneously executes an offsetting mirror-image swap with various third parties.

#### Non-Interest Income

The interest rate environment impacts the profitability and mix of the Company's mortgage banking business which generated revenues of $113.5 million in 2017 and $128.7 million in 2016, representing 10% of total net revenue in 2017 and 12% in 2016. Mortgage banking revenue is primarily comprised of gains on sales of mortgage loans originated for new home purchases as well as mortgage refinancing. Mortgage banking revenue is partially offset by corresponding commission and overhead costs. Mortgage originations totaled $3.7 billion and $4.4 billion in 2017 and 2016, respectively. In 2017, approximately 75% of originations were mortgages associated with new home purchases compared to 58% in 2016, while 25% of originations were related to refinancing of mortgages compared to 42% in 2016. Assuming the housing market continues to improve and interest rates rise, we expect a higher percentage of originations to be attributed to new home purchases.

#### Non-Interest Expense

Management believes expense management is important amid the low interest rate environment and increased competition to enhance profitability. Cost control and an efficient infrastructure should position the Company appropriately as it continues its growth strategy. Management continues to be disciplined in its approach to growth and plans to leverage the Company's existing expense infrastructure to expand its presence in existing and complimentary markets.

Potentially impacting the cost control strategies discussed above, the Company anticipates increased costs resulting from the changing regulatory environment in which we operate. We have already experienced increases in compliance-related costs and compliance with the Dodd-Frank Act requires us to invest significant additional management attention and resources.

#### Credit Quality

The Company's credit quality metrics remained stable in 2017 compared to 2016. The Company continues to actively address non-performing assets and remains disciplined in its approach to grow without sacrificing asset quality.

In particular:

- The Company’s 2017 provision for credit losses, excluding covered loans, totaled $30.0 million, compared to $34.8 million in 2016 and $33.7 million in 2015. Net charge-offs, excluding covered loans, decreased to $15.0 million in 2017 (of which $5.3 million related to commercial and commercial real estate loans), compared to $16.9 million in 2016 (of which $5.3 million related to commercial and commercial real estate loans) and $19.2 million in 2015 (of which $6.5 million related to commercial and commercial real estate loans).
- The Company's allowance for loan losses, excluding covered loans, increased to $137.9 million at December 31, 2017, reflecting an increase of $15.6 million, or 13%, when compared to 2016. At December 31, 2017, approximately $55.2 million, or 40%, of the allowance for loan losses was associated with commercial real estate loans and another $57.8 million, or 42%, was associated with commercial loans.
- The Company has significant exposure to commercial real estate. At December 31, 2017, $6.6 billion, or 30%, of our loan portfolio was commercial real estate, with approximately 89% located in our market area. The commercial real estate loan portfolio, excluding purchased credit impaired (“PCI”) loans, was comprised of $872.0 million related to land and

construction, $894.8 million related to office buildings loans, $951.5 million related to retail loans, $883.0 million related to industrial use, $915.6 million related to multi-family loans and $1.9 billion related to mixed use and other use types. In analyzing the commercial real estate market, the Company does not rely upon the assessment of broad market statistical data, in large part because the Company’s market area is diverse and covers many communities, each of which is impacted differently by economic forces affecting the Company’s general market area. As such, the extent of the decline in real estate valuations can vary meaningfully among the different types of commercial and other real estate loans made by the Company. The Company uses its multi-chartered structure and local management knowledge to analyze and manage the local market conditions at each of its banks. As of December 31, 2017, the Company had approximately $22.0 million of non-performing commercial real estate loans representing approximately 0.34% of the total commercial real estate loan portfolio.

- Total non-performing loans (loans on non-accrual status and loans more than 90 days past due and still accruing interest), excluding covered loans, were $90.2 million (of which $22.0 million, or 24%, was related to commercial real estate) at December 31, 2017, an increase of $2.7 million compared to December 31, 2016. Non-performing loans as a percentage of total loans, excluding covered loans, were 0.42% at December 31, 2017 compared to 0.44% at December 31, 2016.
- The Company’s other real estate owned, excluding covered other real estate owned, increased by $364,000, to $40.6 million during 2017, from $40.3 million at December 31, 2016. The increase in other real estate owned is primarily a result of $2.9 million of other real estate owned reclassified from covered assets as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017. The $40.6 million of other real estate owned as of December 31, 2017 was comprised of $30.9 million of commercial real estate property, $7.5 million of residential real estate property and $2.2 million of residential real estate development property.

During 2017, management continued its efforts to aggressively resolve problem loans through liquidation, rather than retention of loans or real estate acquired as collateral through the foreclosure process. Management believes these actions will serve the Company well in the future by providing some protection for the Company from further valuation deterioration and permitting Management to spend less time on resolution of problem loans and more time on growing the Company’s core business and the evaluation of other opportunities.

Management continues to direct significant attention toward the prompt identification, management and resolution of problem loans. The Company has restructured certain loans by providing economic concessions to borrowers to better align the terms of their loans with their current ability to pay. At December 31, 2017, approximately $49.8 million in loans had terms modified representing troubled debt restructurings (“TDRs”), with $39.7 million of these TDRs continuing in accruing status. See Note 5, “Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans,” of the Consolidated Financial Statements presented under Item 8 of this Annual Report on Form 10-K for additional discussion of TDRs.

The Company enters into residential mortgage loan sale agreements with investors in the normal course of business. The Company’s practice is generally not to retain long-term fixed rate mortgages on its balance sheet in order to mitigate interest rate risk, and consequently sells most of such mortgages into the secondary market. These agreements provide recourse to investors through certain representations concerning credit information, loan documentation, collateral and insurability. Investors request the Company to indemnify them against losses on certain loans or to repurchase loans which the investors believe do not comply with applicable representations. An increase in requests for loss indemnification can negatively impact mortgage banking revenue as additional recourse expense. The liability for estimated losses on repurchase and indemnification claims for residential mortgage loans previously sold to investors was $3.0 million and $4.2 million at December 31, 2017 and 2016, respectively.

### Community Banking

Through our community banking franchise, we provide banking and financial services primarily to individuals, small to mid-sized businesses, local governmental units and institutional clients residing primarily in the local areas we service. Profitability of this franchise is primarily driven by our net interest income and margin, our funding mix and related costs, the level of non-performing loans and other real estate owned, the amount of mortgage banking revenue and our history of acquiring banking operations and establishing *de novo* banks.

*Net interest income and margin*. The primary source of our 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 liabilities to fund those assets, including deposits and other borrowings. Net interest income can change significantly from period to period based on general levels of interest rates, customer prepayment patterns, the mix of interest-earning assets and the mix of interest-bearing and non-interest bearing deposits and borrowings.

*Funding mix and related costs.* The most significant source of funding in community banking is core deposits, which are comprised of non-interest bearing deposits, non-brokered interest-bearing transaction accounts, savings deposits and domestic time deposits. Our branch network is the principal source of core deposits, which generally carry lower interest rates than wholesale funds of comparable maturities. Community banking profitability has been bolstered in recent years as the Company funded strong loan growth with a more desirable blend of funds. Additionally, non-interest bearing deposits have grown as a result of the Company's commercial banking initiative and fixed term certificates of deposits have become a smaller percentage of the overall funding mix.

*Level of non-performing loans and other real estate owned*. The level of non-performing loans and other real estate owned can significantly impact our profitability as these loans and other real estate owned do not accrue any income, can be subject to charge-offs and write-downs due to deteriorating market conditions and generally result in additional legal and collections expenses. The Company's credit quality measures have improved in recent years.

*Mortgage banking revenue*. Our community banking franchise is also influenced by the level of fees generated by the origination of residential mortgages and the sale of such mortgages into the secondary market by Wintrust Mortgage. The Company recognized a decrease of $15.3 million in mortgage banking revenue in 2017 compared to 2016 as a result of lower origination volumes in 2017. Mortgage originations totaled $3.7 billion and $4.4 billion in 2017 and 2016, respectively.

*Expansion of banking operations.* Our historical financial performance has been affected by costs associated with growing market share in deposits and loans, establishing and acquiring banks, opening new branch facilities and building an experienced management team. Our financial performance generally reflects the improved profitability of our banking subsidiaries as they mature, offset by the costs of establishing and acquiring banks and opening new branch facilities.

In determining the timing of the opening of additional branches of existing banks, and the acquisition of additional banks, we consider many factors, particularly our perceived ability to obtain an adequate return on our invested capital driven largely by the then existing cost of funds and lending margins, the general economic climate and the level of competition in a given market. While expansion activity from 2007 through 2009 had been at a level below earlier periods in our history, we resumed the formation of additional branches and acquisitions of additional banks starting in 2010. See discussion of 2017 and 2016 acquisition activity in the “Recent Acquisition Transactions” section below.

In addition to the factors considered above, before we engage in expansion through *de novo* branches we must first make a determination that the expansion fulfills our objective of enhancing shareholder value through potential future earnings growth and enhancement of the overall franchise value of the Company. Generally, we believe that, in normal market conditions, expansion through *de novo* growth is a better long-term investment than acquiring banks because the cost to bring a de novo location to profitability is generally substantially less than the premium paid for the acquisition of a healthy bank. Each opportunity to expand is unique from a cost and benefit perspective. Both FDIC-assisted and non-FDIC-assisted acquisitions offer a unique opportunity for the Company to expand into new and existing markets in a non-traditional manner. Potential acquisitions are reviewed in a similar manner as a *de novo* branch opportunities, however, FDIC-assisted and non-FDIC-assisted acquisitions have the ability to immediately enhance shareholder value. Factors including the valuation of our stock, other economic market conditions, the size and scope of the particular expansion opportunity and competitive landscape all influence the decision to expand via *de novo* growth or through acquisition.

### Specialty Finance

Through our specialty finance segment, we offer financing of insurance premiums for businesses and individuals; accounts receivable financing, value-added, out-sourced administrative services; and other specialty finance businesses.

#### Financing of Commercial Insurance Premiums

The primary driver of profitability related to the financing of commercial insurance premiums is the net interest spread that FIRST Insurance Funding and FIFC Canada can produce between the yields on the loans generated and the cost of funds allocated to the business unit. The commercial insurance premium finance business is a competitive industry and yields on loans are influenced by the market rates offered by our competitors. The majority of loans originated by FIRST Insurance Funding 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. We fund these loans primarily through our deposits, the cost of which is influenced by competitors in the retail banking markets in our market area.

#### Financing of Life Insurance Premiums

The primary driver of profitability related to the financing of life insurance premiums is the net interest spread that Wintrust Life Finance can produce between the yields on the loans generated and the cost of funds allocated to the business unit. Profitability of financing both commercial and life insurance premiums is also meaningfully impacted by leveraging information technology systems, maintaining operational efficiency and increasing average loan size, each of which allows us to expand our loan volume without significant capital investment.

### Wealth Management

We offer a full range of wealth management services including trust and investment services, asset management solutions, securities brokerage services, and 401(k) and retirement plan services through three separate subsidiaries (WHI, CTC and Great Lakes Advisors).

The primary drivers of profitability of the wealth management business can be associated with the level of commission received related to the trading performed by the brokerage customers for their accounts and the amount of assets under management for which investments, asset management and trust units receive a management fee for advisory, administrative and custodial services. As such, revenues are influenced by a rise or fall in the debt and equity markets and the resulting increase or decrease in the value of our client accounts on which our fees are based. The commissions received by the brokerage unit are not as directly influenced by the directionality of the debt and equity markets but rather the desire of our customers to engage in trading based on their particular situations and outlooks of the market or particular stocks and bonds. Profitability in the brokerage business is impacted by commissions which fluctuate over time.

### Financial Regulatory Reform

Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased in recent years, in response to the financial crisis as well as other factors such as technological and market changes. Regulatory enforcement and fines have also increased across the banking and financial services sector. Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations, most of which are now in place. The current presidential administration has issued an executive order that sets forth principles for the reform of the federal financial regulatory framework, and the majority in Congress has also suggested an agenda for financial regulatory change. It is too early to assess whether there will be any major changes in the regulatory environment or only a rebalancing of the post financial crisis framework. The Company expects that its business will remain subject to extensive regulation and supervision.

The exact impact of the changing regulatory environment on our business and operations depends upon the final implementing regulations under the Dodd-Frank Act that have not yet been adopted or become fully effective, any legislative or regulatory changes to reform the financial regulatory framework, and the actions of our competitors, customers, and other market participants. However, the changes mandated by the Dodd-Frank Act, as well as other possible legislative and regulatory changes, generally could have a significant impact on us by, for example, requiring us to change our business practices; requiring us to meet more stringent capital, liquidity and leverage ratio requirements; limiting our ability to pursue business opportunities; imposing additional costs and compliance obligations on us; limiting fees we can charge for services; impacting the value of our assets; or otherwise adversely affecting our businesses and our earnings’ capabilities. We have already experienced significant increases in compliance related costs in recent years, and we are now subject to more stringent risk-based capital and leverage ratio requirements than we were prior to the adoption of the U.S. Basel III Rule. We will continue to monitor the impact that the implementation of applicable rules, regulations and policies arising out of the Dodd-Frank Act and any legislative or regulatory changes to reform the financial regulatory framework will have on our organization.

#### Recent Rules Regarding Mortgage Origination and Servicing

The CFPB has promulgated many mortgage-related final rules since it was established under the Dodd-Frank Act, including regulations related to mortgage origination and servicing practices. Among other things, these regulations require mortgage lenders to assess and verify borrowers' “ability to repay” and establish a category of “qualified mortgages” that are presumed to comply with this requirement. The Dodd-Frank Act and CFPB regulations establish enhanced liability for the mortgage lender, as well as assignees, with respect to mortgages that do not meet the criteria to be a “qualified mortgage” as defined under the relevant rule and for which the mortgage lender has not otherwise assessed and verified the borrower’s ability to repay the mortgage. CFPB regulations also cover compensation of loan officers and brokers, escrow accounts for payment of taxes and insurance, mortgage billing statements, force-placed insurance, servicing practices with respect to delinquent borrowers and loss mitigation procedures, and Home Mortgage Disclosure Act requirements. We have centralized our mortgage origination and servicing operations within the Wintrust Mortgage division of Barrington Bank and have implemented compliance programs for each of these new requirements as applicable to our business. In addition to changes in applicable laws and regulations, mortgage lending and servicing, and consumer protection laws and regulations more generally, have been an area of increased supervisory and enforcement focus over the past several years. For further discussion of the rules related to mortgage origination and servicing applicable to us and our subsidiary banks, see “Business - Supervision and Regulation.”

Proposals have been made to amend some of the consumer protection statutes and implementing regulations to which our mortgage business is subject, and additional proposals may be made or final amendments adopted in 2018 or beyond. In addition, proposals to reform the residential mortgage market may include changes to the operations of Fannie Mae and Freddie Mac (including potential winding down of their operations), and reduction of mortgage loan products available in Federal Housing Administration programs. Changes to consumer protection laws or regulations, including regulations promulgated by the CFPB, or to the structure of the residential mortgage market could affect our business, but the likelihood, timing and scope of any such changes and the impact any such change may have on us cannot be determined with any certainty.

#### Developments Related to Capital

Under the U.S. Basel III Rule, we and our subsidiary banks are required to maintain minimum risk-based capital ratios and minimum leverage ratios that are higher than the previously applicable ratios. In addition, we and our subsidiary banks now must maintain a minimum Capital Conservation Buffer to avoid becoming subject to restrictions on capital distributions and certain discretionary bonus payments to management. The risk-based capital ratios and leverage ratio our subsidiary banks must maintain to be considered well-capitalized have also increased. The phase-in periods for the U.S. Basel III Rule applicable to us and our subsidiary banks commenced on January 1, 2016 and generally extend until 2019. We believe that we will continue to exceed all well-capitalized regulatory requirements and the Capital Conservation Buffer on a fully phased-in basis. We are also required to conduct annual company-run stress tests, though none of our subsidiary banks meet the asset threshold that would cause them to be subject to stress testing requirements.

On November 21, 2017, the federal banking agencies issued a final rule that, for certain bank holding companies and banks, including us and our subsidiary banks, delayed the last phase of the U.S. Basel III Rule’s transition provisions relating to capital deductions for mortgage servicing assets, certain deferred tax assets and investments in the capital instruments of unconsolidated financial institutions, and the recognition of minority interests in regulatory capital, until a revised rule is finalized. On September 26, 2017, the federal banking agencies issued a proposed rule that, for certain bank holding companies and banks, including us and our subsidiary banks, would simplify these regulatory capital deductions and limitations. Additionally, Congress is considering a bill that would, among other things, raise the threshold at which the company-run stress test requirements would apply from $10 billion in total consolidated assets to $250 billion in total consolidated assets, which would exempt us from these requirements. It is too early to tell whether this bill will become law. For further discussion of the capital and stress test rules applicable to us and our subsidiary banks, see “Business - Supervision and Regulation.”

### Recent Acquisition Transactions

#### Acquisition of American Homestead Mortgage, LLC

On February 14, 2017, the Company acquired certain assets and assumed certain liabilities of the mortgage banking business of American Homestead Mortgage, LLC ("AHM"), in a business combination. AHM is located in Montana's Flathead Valley and originated approximately $55 million of residential mortgage loans in 2016.

#### Acquisition of First Community Financial Corporation

On November 18, 2016, the Company completed its acquisition of First Community Financial Corporation (“FCFC”). FCFC was the parent company of First Community Bank. First Community Bank was merged into the Company's wholly-owned subsidiary St. Charles Bank. In addition to two banking locations in Elgin, Illinois, the Company acquired approximately $187.3 million in assets, including $79.5 million of loans, and assumed approximately $150.3 million in deposits.

#### Acquisition of select performing loans and related relationships from an affiliate of GE Capital Franchise Finance

On August 19, 2016, the Company, through its wholly-owned subsidiary Lake Forest Bank, completed its acquisition of approximately $561.4 million in select performing loans and related relationships from an affiliate of GE Capital Franchise Finance, which were added to the Company's existing franchise finance portfolio. The loans are to franchise operators (primarily quick service restaurant concepts) in the Midwest and in the Western portion of the United States.

#### Acquisition of Generations Bancorp, Inc.

On March 31, 2016, the Company completed its acquisition of Generations Bancorp, Inc. (“Generations”). Generations was the parent company of Foundations Bank (“Foundations”). Foundations was merged into the Company's wholly-owned subsidiary Town Bank. In addition to a banking location in Pewaukee, Wisconsin, the Company acquired approximately $134.2 million in assets, including $67.4 million in loans, and assumed approximately $100.2 million in deposits.

#### Acquisition of Community Financial Shares, Inc.

On July 24, 2015, the Company completed its acquisition of Community Financial Shares, Inc (“CFIS”). CFIS was the parent company of Community Bank - Wheaton/Glen Ellyn (“CBWGE”). CBWGE was merged into the Company's wholly-owned subsidiary Wheaton Bank. In addition to the banking facilities the Company acquired approximately $350.5 million of assets, including $159.5 million of loans, and assumed approximately $290.0 million of deposits.

#### Acquisition of Suburban Illinois Bancorp, Inc.

On July 17, 2015, the Company completed its acquisition of Suburban Illinois Bancorp, Inc. (“Suburban”). Suburban was the parent company of Suburban Bank & Trust Company (“SBT”). SBT was merged into the Company's wholly-owned subsidiary Hinsdale Bank. In addition to the banking facilities, the Company acquired approximately $494.7 million of assets, including $257.8 million of loans, and assumed approximately $416.7 million of deposits.

#### Acquisition of North Bank

On July 1, 2015, the Company, through its wholly-owned subsidiary Wintrust Bank, completed its acquisition of North Bank. Through this transaction the Company acquired two banking locations in downtown Chicago. In addition to the banking facilities, the Company acquired approximately $117.9 million of assets, including $51.6 million of loans, and assumed approximately $101.0 million of deposits.

#### Acquisition of Delavan Bancshares, Inc.

On January 16, 2015 the Company completed its acquisition of Delavan Bancshares, Inc. ("Delavan"). Delavan was the parent company of Community Bank CBD. Community Bank CBD was merged into the Company's wholly-owned subsidiary Town Bank. In addition to the banking facilities, the Company acquired approximately $224.1 million of assets, including $128.0 million of loans and assumed approximately $170.2 million of deposits.

### Other Completed Transactions

#### Termination of Loss Share Agreements

On October 16, 2017, the Company entered into agreements with the FDIC that terminated all existing loss share agreements with the FDIC. Under the terms of the agreements, the Company made a net payment of $15.2 million to the FDIC as consideration for the early termination of the loss share agreements. The Company recorded a pre-tax gain of approximately $0.4 million to write off the remaining loss share asset, relieve the claw-back liability and recognize the payment to the FDIC.

#### Mandatory Conversion of Series C Preferred Stock

On April 27, 2017, the Company caused a mandatory conversion of its remaining 124,184 shares of 5.00% Non-Cumulative Perpetual Convertible Preferred Stock, Series C (the "Series C Preferred Stock") (issued in March 2012) into 3,069,828 shares of the Company's common stock at a conversion rate of 24.72 shares of common stock per share of Series C Preferred Stock. Cash was paid in lieu of fractional shares for an amount considered insignificant.

#### Public Issuance of the Company's Common Stock

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

#### Issuance of 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, no par value per share (the “Series D Preferred Stock”), with a liquidation preference of $25 per share for $125.0 million in a public offering. Dividends on the Series D Preferred Stock are payable quarterly in arrears when, as and if declared by the Company's Board of Directors or a duly authorized committee thereof (collectively, the “Board”) at a rate of 6.50% per annum on the liquidation preference of $25 per share from the original issuance date to, but excluding, July 15, 2025. From (and including) July 15, 2025, dividends on the Series D Preferred Stock will be payable quarterly in arrears, when, as and if declared by the Board, at a floating rate equal to the then-applicable three-month LIBOR (as defined in the Certificate of Designations) plus a spread of 4.06% per annum. The dividend rate of such floating rate dividend will be reset quarterly. The Company received proceeds, after deducting underwriting discounts, commissions and related costs, of approximately $120.8 million from the issuance, which were intended to be used for general corporate purposes.

### SUMMARY OF CRITICAL ACCOUNTING POLICIES

The Company’s Consolidated Financial Statements are prepared in accordance with GAAP in the United States and prevailing practices of the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. Certain policies and accounting principles inherently have a greater reliance on the use of estimates, assumptions and judgments, and as such have a greater possibility that changes in those estimates and assumptions could produce financial results that are materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required or elected 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.

A summary of the Company’s significant accounting policies is presented in Note 1 to the Consolidated Financial Statements in Item 8. These policies, along with the disclosures presented in the other financial statement notes and in this Management’s Discussion and Analysis section, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. 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 views critical accounting policies to include the determination of the allowance for loan losses, allowance for covered loan losses and the allowance for losses on lending-related commitments, loans acquired with evidence of credit quality deterioration since origination, estimations of fair value, the valuations required for impairment testing of goodwill, the valuation and accounting for derivative instruments and income taxes as the accounting areas that require the most subjective and complex judgments, and as such could be most subject to revision as new information becomes available.

#### Allowance for Loan Losses, Allowance for Covered Loan Losses and Allowance for Losses on Lending-Related Commitments

The allowance for loan losses and the allowance for covered loan losses represent management’s estimate of probable credit losses inherent in the loan portfolio. Determining the amount of the allowance for loan 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 impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which are susceptible to significant change. The loan portfolio also represents the largest asset type on the 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 but for which funds have not yet been disbursed. See Note 1, “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements in Item 8 and the section titled “Loan Portfolio and Asset Quality” in Item 7 for a description of the methodology used to determine the allowance for loan losses, allowance for covered loan losses and the allowance for lending-related commitments.

#### Loans Acquired with Evidence of Credit Quality Deterioration since Origination

Under accounting guidance applicable to loans acquired with evidence of credit quality deterioration since origination, the excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining estimated life of the loans, using the effective-interest method. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. Changes in the expected cash flows from the date of acquisition will either impact the accretable yield or result in a charge to the provision for credit losses. Subsequent decreases to expected principal cash flows will result in a charge to provision for credit losses and a corresponding increase to allowance for loan losses. Subsequent increases in expected principal cash flows will result in recovery of any previously recorded allowance for loan losses, to the extent applicable, and a reclassification from nonaccretable difference to accretable yield for any remaining increase. All changes in expected interest cash flows, including the impact of prepayments, will result in reclassifications to/from the nonaccretable difference.

#### Estimations of Fair Value

A portion of the Company’s assets and liabilities are carried at fair value on the Consolidated Statements of Condition, with changes in fair value recorded either through earnings or other comprehensive income in accordance with applicable accounting principles generally accepted in the United States. These include the Company’s trading account securities, available-for-sale securities, derivatives, mortgage loans held-for-sale, certain loans held-for-investment and mortgage servicing rights (“MSRs”). The determination of fair value is important for certain other assets, including goodwill and other intangible assets, impaired loans, and other real estate owned that are periodically evaluated for impairment using fair value estimates.

Fair value is generally defined as the amount at which an asset or liability could be exchanged in a current transaction between willing, unrelated parties, other than in a forced or liquidation sale. Fair value is based on quoted market prices in an active market, or if market prices are not available, is estimated using models employing techniques such as matrix pricing or discounting expected cash flows. The significant assumptions used in the models, which include assumptions for interest rates, discount rates, prepayments and credit losses, are independently verified against observable market data where possible. Where observable market data is not available, the estimate of fair value becomes more subjective and involves a high degree of judgment. In this circumstance, fair value is estimated based on management’s judgment regarding the value that market participants would assign to the asset or liability. This valuation process takes into consideration factors such as market illiquidity. Imprecision in estimating these factors can impact the amount recorded on the balance sheet for a particular asset or liability with related impacts to earnings or other comprehensive income. See Note 21, “Fair Value of Assets and Liabilities,” to the Consolidated Financial Statements in Item 8 for a further discussion of fair value measurements.

#### Impairment Testing of Goodwill

The Company performs impairment testing of goodwill for each of its reporting units on an annual basis or more frequently when events warrant, using a qualitative or quantitative approach. Using a qualitative approach, the Company reviews any recent events or circumstances that would indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These events and circumstances include the performance of the Company, the condition of the related industry in which the reporting unit operates and general economic environment and other factors. If the Company determines it is not more likely than not that there is impairment based on an evaluation of these events and circumstances, the Company may forgo the two-step quantitative approach.

Using a quantitative approach, the goodwill impairment analysis involves a two-step process. The first step is a comparison of the reporting unit’s fair value to its carrying value. If the carrying value of a reporting unit was determined to have been higher than its fair value, the second step would have to be performed to measure the amount of impairment loss. The second step allocates the fair value to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical purchase price allocation analysis that would calculate the implied fair value of goodwill. If the implied fair value of goodwill is less than the recorded goodwill, the Company would record an impairment charge for the difference. Valuations are estimated in good faith by management through the use of publicly available valuations of comparable entities and discounted cash flow models using internal financial projections in the reporting unit’s business plan.

Under both a qualitative and quantitative approach, the goodwill impairment analysis requires management to make subjective judgments in determining if an indicator of impairment has occurred. Events and factors that may significantly affect the analysis include: a significant decline in the Company’s expected future cash flows, a substantial increase in the discount rate, a sustained, significant decline in the Company’s stock price and market capitalization, a significant adverse change in legal factors or in the business climate. Other factors might include changing competitive forces, customer behaviors and attrition, revenue trends, cost structures, along with specific industry and market conditions. Adverse change in these factors could have a significant impact on the recoverability of intangible assets and could have a material impact on the Company’s consolidated financial statements.

As of December 31, 2017, the Company had three reporting units: Community Banking, Specialty Finance and Wealth Management. Based on the Company’s 2017 goodwill impairment testing, no goodwill impairment was indicated for any of the reporting units on their respective annual testing dates.

#### Derivative Instruments

The Company utilizes derivative instruments to manage risks such as interest rate risk or market risk. The Company’s policy prohibits using derivatives for speculative purposes.

Accounting for derivatives differs significantly depending on whether a derivative is designated as an accounting hedge, which is a transaction intended to reduce a risk associated with a specific asset or liability or future expected cash flow at the time it is purchased. In order to qualify as an accounting hedge, a derivative must be designated as such at inception by management and meet certain criteria. Management must also continue to evaluate whether the instrument effectively reduces the risk associated with that item. To determine if a derivative instrument continues to be an effective hedge, the Company must make assumptions and judgments about the continued effectiveness of the hedging strategies and the nature and timing of forecasted transactions. If the Company’s hedging strategy were to become ineffective, hedge accounting would no longer apply and the reported results of operations or financial condition could be materially affected.

#### Income Taxes

The Company is subject to the income tax laws of the United States, its states, Canada and other jurisdictions where it conducts business. These laws are complex and subject to potentially different interpretations by the taxpayer and the various taxing authorities. In determining the provision for income taxes, management must make judgments and estimates about the application of these inherently complex laws, related regulations and case law. In the process of preparing the Company’s tax returns, management attempts to make reasonable interpretations of the tax laws. These interpretations are subject to challenge by the tax authorities upon audit or to reinterpretation based on management’s ongoing assessment of facts and evolving case law. Management reviews its uncertain tax positions and recognition of the benefits of such positions on a regular basis.

On a quarterly basis, management assesses the reasonableness of its effective tax rate based upon its current best estimate of net income and the applicable taxes expected for the full year. Deferred tax assets and liabilities are reassessed on a quarterly basis, if business events or circumstances warrant. Additionally, any enactment of new tax rates such as the enactment of the Tax Act in December 2017 requires the Company to re-measure its existing deferred tax assets and liabilities to reflect the new tax rate, with such adjustments recognized in current year earnings.

### CONSOLIDATED RESULTS OF OPERATIONS

The following discussion of Wintrust’s results of operations requires an understanding that a majority of the Company’s bank subsidiaries have been started as de novo banks since December 1991. Wintrust has a strategy of continuing to build its customer base and securing broad product penetration in each marketplace that it serves. The Company has expanded its banking franchise from three banks with five offices in 1994 to 15 banks with 157 offices at the end of 2017. FIRST Insurance Funding and Wintrust Life Finance have matured into separate divisions that generated, on a national basis, $6.5 billion in total premium finance receivables in 2017 within the United States. FIFC Canada, acquired in 2012, originated $625.3 million in Canadian commercial premium finance receivables in 2017. In addition, the wealth management companies have been building a team of experienced professionals who are located within a majority of the banks.

### Earnings Summary

Net income for the year ended December 31, 2017, totaled $257.7 million, or $4.40 per diluted common share, compared to $206.9 million, or $3.66 per diluted common share, in 2016, and $156.7 million, or $2.93 per diluted common share, in 2015. During 2017, net income increased by $50.8 million and earnings per diluted common share increased by $0.74. During 2016, net income increased by $50.1 million and earnings per diluted common share decreased by $0.73. Net income increased in 2017 as compared to 2016 primarily as a result of an increase in net interest income driven by growth in earning assets and an improvement in net interest margin and an increase in operating lease income, partially offset by lower mortgage banking revenue and increased salary and employee benefits and operating lease equipment depreciation. Net income increased in 2016 as compared to 2015 primarily as a result of an increase in net interest income driven by growth in earning assets, an increase in mortgage banking revenues and operating lease income, partially offset by increased salary and employee benefits and operating lease equipment depreciation.

### 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.

Net interest income in 2017 totaled $832.1 million, up from $722.2 million in 2016 and $641.5 million in 2015, representing an increase of $109.9 million, or 15%, in 2017 and an increase of $80.7 million, or 13%, in 2016. The table presented later in this section, titled “Changes in Interest Income and Expense,” presents the dollar amount of changes in interest income and expense, by major category, attributable to changes in the volume of the balance sheet category and changes in the rate earned or paid with respect to that category of assets or liabilities for 2017 and 2016. Average earning assets increased $2.1 billion, or 9%, in 2017 and $3.1 billion, or 16%, in 2016. Loans are the most significant component of the earning asset base as they earn interest at a higher rate than the other earning assets. Average loans, excluding covered loans, increased $2.2 billion, or 12%, in 2017 and $2.6 billion, or 16%, in 2016. Total average loans, excluding covered loans, as a percentage of total average earning assets were 86%, 84% and 84% in 2017, 2016 and 2015, respectively. The average yield on loans, excluding covered loans, was 4.19% in 2017, 3.96% in 2016 and 4.01% in 2015, reflecting an increase of 23 basis points in 2017 and a decrease of five basis points in 2016. The higher loan yields in 2017 compared to 2016 is primarily a result of the rising interest rate environment. The average yield on liquidity management assets was 2.28% in 2017, 2.08% in 2016 and 2.30% in 2015, reflecting an increase of 20 basis points in 2017 and a decrease of 22 basis points in 2016. The average rate paid on interest bearing deposits, the largest component of the Company’s interest bearing liabilities, was 0.52% in 2017, 0.40% in 2016 and 0.37% in 2015, representing an increase of 12 basis points in 2017 and an increase of three basis points in 2016. The higher level of interest bearing deposits rates in 2017 compared to 2016 is primarily due to upward re-pricing of retail deposits as a result of rising interest rates. As a result of the above, net interest margin increased to 3.41% (3.44% on a fully tax-equivalent basis) in 2017 compared to 3.24% (3.26% on a fully tax-equivalent basis) in 2016.

Net interest income and net interest margin were also affected by amortization of valuation adjustments to earning assets and interest-bearing liabilities of acquired businesses. Assets and liabilities of acquired businesses are required to be recognized at their estimated fair value at the date of acquisition. These valuation adjustments represent the difference between the estimated fair value and the carrying value of assets and liabilities acquired. These adjustments are amortized into interest income and interest expense based upon the estimated remaining lives of the assets and liabilities acquired.

### Average Balance Sheets, Interest Income and Expense, and Interest Rate Yields and Costs

The following table sets forth the average balances, the interest earned or paid thereon, and the effective interest rate, yield or cost for each major category of interest-earning assets and interest-bearing liabilities for the years ended December 31, 2017, 2016 and 2015. The yields and costs include loan origination fees and certain direct origination costs that are considered adjustments to yields. Interest income on non-accruing loans is reflected in the year that it is collected, to the extent it is not applied to principal. Such amounts are not material to net interest income or the net change in net interest income in any year. Non-accrual loans are included in the average balances. Net interest income and the related net interest margin have been adjusted to reflect tax-exempt income, such as interest on municipal securities and loans, on a tax-equivalent basis. This table should be referred to in conjunction with discussion of the financial condition and results of operations of the Company.

*(Dollars in thousands)*

| Assets | Average Balance for the year ended December 31, 2017 | 2016 | 2015 | Interest for the year ended December 31, 2017 | 2016 | 2015 | Yield/Rate for the year ended December 31, 2017 | 2016 | 2015 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest bearing deposits with banks | **$854,534** | $822,361 | $524,163 | **$9,252** | $4,236 | $1,486 | **1.08%** | 0.52% | 0.28% |
| Investment securities | **2,590,260** | 2,611,909 | 2,371,930 | **67,028** | 65,668 | 64,227 | **2.59** | 2.51 | 2.71 |
| FHLB and FRB stock | **89,333** | 120,726 | 90,004 | **4,370** | 4,287 | 3,232 | **4.89** | 3.55 | 3.59 |
| Federal funds sold and securities purchased under resale agreements | **1,486** | 7,484 | 6,409 | **2** | 4 | 4 | **0.08** | 0.06 | 0.05 |
| Total liquidity management assets (1) (6) | **$3,535,613** | $3,562,480 | $2,992,506 | **$80,652** | $74,195 | $68,949 | **2.28%** | 2.08% | 2.30% |
| Other earning assets (1) (2) (6) | **25,951** | 28,992 | 30,161 | **662** | 931 | 962 | **2.55** | 3.21 | 3.19 |
| Loans, net of unearned income (1) (3) (6) | **20,788,946** | 18,628,261 | 16,022,371 | **870,390** | 737,694 | 641,917 | **4.19** | 3.96 | 4.01 |
| Covered loans | **40,665** | 102,948 | 186,427 | **2,251** | 5,589 | 11,345 | **5.54** | 5.43 | 6.09 |
| Total earning assets (6) | **$24,391,175** | $22,322,681 | $19,231,465 | **$953,955** | $818,409 | $723,173 | **3.91%** | 3.67% | 3.76% |
| Allowance for loan and covered loan losses | **(133,432)** | (118,229) | (103,459) |  |  |  |  |  |  |
| Cash and due from banks | **239,638** | 248,507 | 249,488 |  |  |  |  |  |  |
| Other assets | **1,872,321** | 1,839,272 | 1,622,343 |  |  |  |  |  |  |
| Total assets | **$26,369,702** | $24,292,231 | $20,999,837 |  |  |  |  |  |  |
| **Liabilities and Shareholders’ Equity** |  |  |  |  |  |  |  |  |  |
| Deposits — interest bearing: |  |  |  |  |  |  |  |  |  |
| NOW and interest bearing demand deposits | **$2,402,254** | $2,438,052 | $2,246,451 | **$5,027** | $4,014 | $3,159 | **0.21%** | 0.16% | 0.14% |
| Wealth management deposits | **2,125,177** | 1,877,020 | 1,456,289 | **13,952** | 8,206 | 3,702 | **0.66** | 0.44 | 0.25 |
| Money market accounts | **4,482,137** | 4,343,332 | 3,888,781 | **12,588** | 9,254 | 7,961 | **0.28** | 0.21 | 0.20 |
| Savings accounts | **2,471,663** | 1,887,748 | 1,610,603 | **7,715** | 3,313 | 2,415 | **0.31** | 0.18 | 0.15 |
| Time deposits | **4,423,067** | 4,074,734 | 4,069,180 | **44,044** | 33,622 | 31,626 | **1.00** | 0.83 | 0.78 |
| Total interest bearing deposits | **$15,904,298** | $14,620,886 | $13,271,304 | **$83,326** | $58,409 | $48,863 | **0.52%** | 0.40% | 0.37% |
| FHLB advances | **380,412** | 653,529 | 380,935 | **8,798** | 10,886 | 9,110 | **2.31** | 1.67 | 2.39 |
| Other borrowings | **255,136** | 248,753 | 232,895 | **5,370** | 4,355 | 3,627 | **2.10** | 1.75 | 1.56 |
| Subordinated notes | **139,022** | 138,912 | 138,812 | **7,116** | 7,111 | 7,105 | **5.12** | 5.12 | 5.12 |
| Junior subordinated notes | **253,566** | 254,591 | 258,203 | **9,782** | 9,503 | 8,230 | **3.81** | 3.67 | 3.14 |
| Total interest-bearing liabilities | **$16,932,434** | $15,916,671 | $14,282,149 | **$114,392** | $90,264 | $76,935 | **0.67%** | 0.57% | 0.54% |
| Non-interest bearing deposits | **6,182,048** | 5,409,923 | 4,144,378 |  |  |  |  |  |  |
| Other liabilities | **413,139** | 415,708 | 340,321 |  |  |  |  |  |  |
| Equity | **2,842,081** | 2,549,929 | 2,232,989 |  |  |  |  |  |  |
| Total liabilities and shareholders’ equity | **$26,369,702** | $24,292,231 | $20,999,837 |  |  |  |  |  |  |
| Interest rate spread (4) (6) |  |  |  |  |  |  | **3.24%** | 3.10% | 3.22% |
| Less: Fully tax-equivalent adjustment |  |  |  | **$(7,487)** | $(5,952) | $(4,709) | **(0.03)** | (0.02) | (0.02) |
| Net free funds/contribution (5) | **$7,458,741** | $6,406,010 | $4,949,316 |  |  |  | **0.20** | 0.16 | 0.14 |
| Net interest income/margin (6) (GAAP) |  |  |  | **$832,076** | $722,193 | $641,529 | **3.41%** | 3.24% | 3.34% |
| Fully tax-equivalent adjustment |  |  |  | **$7,487** | $5,952 | $4,709 | **0.03** | 0.02 | 0.02 |
| Net interest income/margin (6) - FTE |  |  |  | **$839,563** | $728,145 | $646,238 | **3.44** | 3.26 | 3.36 |

*(1) Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on a marginal federal corporate tax rate of 35%. The total adjustments for the years ended December 31, 2017, 2016 and 2015 were $7.5 million, $6.0 million and $4.7 million, respectively.*

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

*(3) Loans, net of unearned income, include loans held-for-sale and non-accrual loans.*

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

*(5) Net free funds is 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.*

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

### Changes In Interest Income and Expense

The following table shows the dollar amount of changes in interest income and expense by major categories of interest-earning assets and interest-bearing liabilities attributable to changes in volume or rate for the periods indicated:

*(Dollars in thousands)*

| Interest income: | Years Ended December 31, 2017 Compared to 2016 Change Due to Rate | Change Due to Volume | Total Change | 2016 Compared to 2015 Change Due to Rate | Change Due to Volume | Total Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest bearing deposits with banks | **$4,855** | **$161** | **$5,016** | $1,619 | $1,131 | $2,750 |
| Investment securities | **1,925** | **(648)** | **1,277** | (4,943) | 5,975 | 1,032 |
| FHLB and FRB stock | **1,373** | **(1,290)** | **83** | (37) | 1,092 | 1,055 |
| Federal funds sold and securities purchased under resale agreements | **2** | **(4)** | **(2)** | — | — | — |
| Total liquidity management assets | **$8,155** | **$(1,781)** | **$6,374** | $(3,361) | $8,198 | $4,837 |
| Other earning assets | **(154)** | **(89)** | **(243)** | 20 | (34) | (14) |
| Loans, net of unearned income | **43,354** | **87,864** | **131,218** | (8,167) | 103,093 | 94,926 |
| Covered loans | **108** | **(3,446)** | **(3,338)** | (1,123) | (4,633) | (5,756) |
| Total interest income | **$51,463** | **$82,548** | **$134,011** | $(12,631) | $106,624 | $93,993 |
| **Interest Expense:** |  |  |  |  |  |  |
| Deposits — interest bearing: |  |  |  |  |  |  |
| NOW and interest bearing demand deposits | **$1,050** | **$(37)** | **$1,013** | $369 | $486 | $855 |
| Wealth management deposits | **3,169** | **2,577** | **5,746** | 2,197 | 2,307 | 4,504 |
| Money market accounts | **3,075** | **259** | **3,334** | 333 | 960 | 1,293 |
| Savings accounts | **3,157** | **1,245** | **4,402** | 444 | 454 | 898 |
| Time deposits | **7,516** | **2,906** | **10,422** | 2,097 | (101) | 1,996 |
| Total interest expense — deposits | **$17,967** | **$6,950** | **$24,917** | $5,440 | $4,106 | $9,546 |
| FHLB advances | **3,379** | **(5,467)** | **(2,088)** | (3,361) | 5,137 | 1,776 |
| Other borrowings | **911** | **104** | **1,015** | 127 | 601 | 728 |
| Subordinated notes | **—** | **5** | **5** | (2) | 8 | 6 |
| Junior subordinated notes | **342** | **(63)** | **279** | 1,364 | (91) | 1,273 |
| Total interest expense | **$22,599** | **$1,529** | **$24,128** | $3,568 | $9,761 | $13,329 |
| **Net interest income (GAAP)** | **$28,864** | **81,019** | **109,883** | $(16,199) | 96,863 | 80,664 |
| Fully tax-equivalent adjustment | **$1,265** | **$270** | **$1,535** | $624 | $619 | $1,243 |
| **Net interest income - FTE** | **$30,129** | **$81,289** | **$111,418** | $(15,575) | $97,482 | $81,907 |

The changes in net interest income are created by changes in both interest rates and volumes. In the table above, volume variances are computed using the change in volume multiplied by the previous year’s rate. Rate variances are computed using the change in rate multiplied by the previous year’s volume. The change in interest due to both rate and volume has been allocated between factors in proportion to the relationship of the absolute dollar amounts of the change in each. The change in interest due to an additional day resulting from the 2016 leap year has been allocated entirely to the change due to volume.

### Non-Interest Income

The following table presents non-interest income by category for 2017, 2016 and 2015:

*(Dollars in thousands)*

|  | Years ended December 31, 2017 | 2016 | 2015 | 2017 compared to 2016 $ Change | % Change | 2016 compared to 2015 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Brokerage | **$22,863** | $25,519 | $27,030 | **$(2,656)** | **(10)%** | $(1,511) | (6)% |
| Trust and asset management | **58,903** | 50,499 | 46,422 | **8,404** | **17** | 4,077 | 9 |
| Total wealth management | **$81,766** | $76,018 | $73,452 | **$5,748** | **8%** | $2,566 | 3% |
| Mortgage banking | **113,472** | 128,743 | 115,011 | **(15,271)** | **(12)** | 13,732 | 12 |
| Service charges on deposit accounts | **34,513** | 31,210 | 27,384 | **3,303** | **11** | 3,826 | 14 |
| Gains on investment securities | **45** | 7,645 | 323 | **(7,600)** | **(99)** | 7,322 | NM |
| Fees from covered call options | **4,402** | 11,470 | 15,364 | **(7,068)** | **(62)** | (3,894) | (25) |
| Trading (losses) gains, net | **(845)** | 91 | (247) | **(936)** | **NM** | 338 | NM |
| Operating lease income, net | **29,646** | 16,441 | 2,728 | **13,205** | **80** | 13,713 | NM |
| Other: |  |  |  |  |  |  |  |
| Interest rate swap fees | **7,379** | 12,024 | 9,487 | **(4,645)** | **(39)** | 2,537 | 27 |
| BOLI | **3,524** | 3,594 | 4,622 | **(70)** | **(2)** | (1,028) | (22) |
| Administrative services | **4,165** | 4,409 | 4,252 | **(244)** | **(6)** | 157 | 4 |
| Gain on extinguishment of debt | **—** | 3,588 | — | **(3,588)** | **(100)** | 3,588 | NM |
| Early pay-offs of leases | **1,228** | 728 | — | **500** | **69** | 728 | — |
| Miscellaneous | **40,211** | 29,469 | 19,221 | **10,742** | **36** | 10,248 | 53 |
| Total Other | **$56,507** | $53,812 | $37,582 | **$2,695** | **5%** | $16,230 | 43% |
| Total Non-Interest Income | **$319,506** | $325,430 | $271,597 | **$(5,924)** | **(2)%** | $53,833 | 20% |

#### NM—Not Meaningful

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

Wealth management revenue is comprised of the trust and asset management revenue of the CTC and Great Lakes Advisors and the brokerage commissions, managed money fees and insurance product commissions at WHI.

Brokerage revenue is directly impacted by trading volumes. In 2017, brokerage revenue totaled $22.9 million, reflecting a decrease of $2.7 million, or 10%, compared to 2016. In 2016, brokerage revenue totaled $25.5 million, reflecting a decrease of $1.5 million, or 6%, compared to 2015. The decrease in brokerage revenue during 2017 compared to 2016 can be attributed to decreased customer trading activity.

Trust and asset management revenue totaled $58.9 million in 2017, an increase of $8.4 million, or 17%, compared to 2016. Trust and asset management revenue totaled $50.5 million in 2016, an increase of $4.1 million, or 9%, compared to 2015. Trust and asset management fees are based primarily on the market value of the assets under management or administration. Higher asset levels from new customers and new financial advisors along with market appreciation helped drive revenue growth in 2017 compared to 2016 and 2016 compared to 2015.

Mortgage banking revenue totaled $113.5 million in 2017, $128.7 million in 2016, and $115.0 million in 2015, reflecting a decrease of $15.3 million, or 12%, in 2017, and an increase of $13.7 million, or 12%, in 2016. 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 loans originated or purchased for sale were $3.7 billion in 2017 compared to $4.4 billion in 2016, and $3.9 billion in 2015. The decrease in volume is the result of fewer purchases and loan refinancings due to a more favorable mortgage banking environment during 2016. Mortgage revenue is also impacted by changes in the fair value of MSRs as the Company does not hedge this change in fair value. The Company originates mortgage loans held-for-sale with associated MSRs either retained or released. The Company records MSRs at fair value on a recurring basis.

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

*(Dollars in thousands)*

|  | Years Ended December 31, 2017 | 2016 | 2015 |
| --- | ---: | ---: | ---: |
| Retail originations | **$3,142,824** | $4,020,788 | $3,647,018 |
| Correspondent originations | **549,261** | 365,551 | 256,759 |
| (A) Total originations | **$3,692,085** | $4,386,339 | $3,903,777 |
| Purchases as a percentage of originations | **75%** | 58% | 61% |
| Refinances as a percentage of originations | **25** | 42 | 39 |
| Total | **100%** | 100% | 100% |
| (B) Production revenue (1) | **$90,458** | $113,360 | $112,683 |
| Production margin (B/A) | **2.45%** | 2.58% | 2.89% |
| (C) Loans serviced for others | **$2,929,133** | $1,784,760 | $939,819 |
| (D) MSRs, at fair value | **33,676** | 19,103 | 9,092 |
| Percentage of MSRs to loans serviced for others (D/C) | **1.15%** | 1.07% | 0.97% |

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

Service charges on deposit accounts totaled $34.5 million in 2017, $31.2 million in 2016 and $27.4 million in 2015, reflecting an increase of 11% in 2017 and 14% in 2016. The increase in recent years is primarily a result of higher account analysis fees on deposit accounts which have increased as a result of the Company's commercial banking initiative as well as additional service charges on deposit accounts from acquired institutions.

The Company recognized $45,000, $7.6 million and $323,000 in net gains on investment securities in 2017, 2016 and 2015, respectively. The Company did not recognize any other-than-temporary impairment charges in 2017, 2016 and 2015.

Fees from covered call option transactions totaled $4.4 million in 2017, $11.5 million in 2016 and $15.4 million in 2015. The Company has typically written call options with terms of less than three months against certain U.S. Treasury and agency securities held in its portfolio for liquidity and other purposes. Management has effectively entered into these transactions with the goal of economically hedging security positions and enhancing its overall return on its investment portfolio by using fees generated from these options to compensate for net interest margin compression. These option transactions are designed to mitigate overall interest rate risk and to increase the total return associated with holding certain investment securities and do not qualify as hedges pursuant to accounting guidance. Fees from covered call options decreased primarily as a result of selling call options against a smaller volume of underlying securities resulting in lower premiums received by the Company in 2017 compared to 2016 and 2015. There were no outstanding call option contracts at December 31, 2017, December 31, 2016 or December 31, 2015.

The Company recognized $845,000 of trading losses in 2017 compared to trading gains of $91,000 in 2016 and trading losses of $247,000 in 2015. Trading gains and losses recorded by the Company primarily result from fair value adjustments related to interest rate derivatives not designated as hedges.

Operating lease income totaled $29.6 million in 2017 compared to $16.4 million in 2016 and $2.7 million in 2015. The increase in 2017 and 2016 is primarily related to growth in business from the Company's leasing divisions.

Interest rate swap fee revenue totaled $7.4 million in 2017, $12.0 million in 2016 and $9.5 million in 2015. 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. The fluctuations in swap fee revenue in 2017 and 2016 primarily results from fluctuations in interest rate swap transactions related to both customer-based trades and the related matched trades with inter-bank dealer counterparties.

Bank owned life insurance (“BOLI”) generated non-interest income of $3.5 million in 2017, $3.6 million in 2016 and $4.6 million in 2015. This income typically represents adjustments to the cash surrender value of BOLI policies. The Company initially purchased BOLI to consolidate existing term life insurance contracts of executive officers and to mitigate the mortality risk associated with death benefits provided for in executive employment contracts and in connection with certain deferred compensation arrangements.

The Company has also assumed additional BOLI policies as the result of the acquisition of certain banks. The cash surrender value of BOLI totaled $145.9 million at December 31, 2017 and $141.6 million at December 31, 2016, and is included in other assets.

Administrative services revenue generated by Tricom was $4.2 million in 2017, $4.4 million in 2016 and $4.3 million in 2015. This revenue comprises income from administrative services, such as data processing of payrolls, billing and cash management services, to temporary staffing service clients located throughout the United States. Tricom also earns interest and fee income from providing high-yielding, short-term accounts receivable financing to this same client base, which is included in the net interest income category.

The $3.6 million net gain on extinguishment of debt in 2016 was the result of the extinguishment of $15.0 million of junior subordinated debentures that resulted in a $4.3 million gain, partially offset by a $717,000 loss as a result of the prepayment of $262.4 million of FHLB advances.

The Company realized gains of $1.2 million and $728,000 in 2017 and 2016, respectively, representing gains realized from the early pay-off of leases originated and managed by the Company's leasing division.

Miscellaneous other non-interest income totaled $40.2 million in 2017, $29.5 million in 2016 and $19.2 million in 2015. Miscellaneous income includes loan servicing fees, income from other investments, service charges and other fees. The increase in miscellaneous other income for 2017 compared to 2016 primarily resulted from increased fees from loan syndications and higher accretion recognized on loss-share assets. The increase in miscellaneous other income for 2016 compared to 2015 primarily resulted from a $2.4 million positive foreign currency re-measurement adjustment related to the company's Canadian subsidiary, lower losses on sales of assets and $2.6 million in higher commitment fees.

### Non-Interest Expense

The following table presents non-interest expense by category for 2017, 2016 and 2015:

*(Dollars in thousands)*

| Salaries and employee benefits: | Years ended December 31, 2017 | 2016 | 2015 | 2017 compared to 2016 $ Change | % Change | 2016 compared to 2015 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Salaries | **$226,151** | $210,623 | $197,475 | **$15,528** | **7%** | $13,148 | 7% |
| Commissions and incentive compensation | **133,511** | 128,390 | 120,138 | **5,121** | **4** | 8,252 | 7 |
| Benefits | **70,416** | 66,145 | 64,467 | **4,271** | **6** | 1,678 | 3 |
| Total salaries and employee benefits | **$430,078** | $405,158 | $382,080 | **$24,920** | **6%** | $23,078 | 6% |
| Equipment | **38,358** | 37,055 | 32,889 | **1,303** | **4** | 4,166 | 13 |
| Operating lease equipment depreciation | **24,107** | 13,259 | 1,749 | **10,848** | **82** | 11,510 | NM |
| Occupancy, net | **52,920** | 50,912 | 48,880 | **2,008** | **4** | 2,032 | 4 |
| Data processing | **31,495** | 28,776 | 26,940 | **2,719** | **9** | 1,836 | 7 |
| Advertising and marketing | **30,830** | 24,776 | 21,924 | **6,054** | **24** | 2,852 | 13 |
| Professional fees | **27,835** | 20,411 | 18,225 | **7,424** | **36** | 2,186 | 12 |
| Amortization of other intangible assets | **4,401** | 4,789 | 4,621 | **(388)** | **(8)** | 168 | 4 |
| FDIC insurance | **16,231** | 16,065 | 12,386 | **166** | **1** | 3,679 | 30 |
| OREO expenses, net | **3,593** | 5,187 | 4,483 | **(1,594)** | **(31)** | 704 | 16 |
| Other: |  |  |  |  |  |  |  |
| Commissions — 3rd party brokers | **4,178** | 5,161 | 5,474 | **(983)** | **(19)** | (313) | (6) |
| Postage | **6,763** | 7,184 | 7,030 | **(421)** | **(6)** | 154 | 2 |
| Miscellaneous | **61,028** | 62,952 | 61,738 | **(1,924)** | **(3)** | 1,214 | 2 |
| Total other | **$71,969** | $75,297 | $74,242 | **$(3,328)** | **(4)%** | $1,055 | 1% |
| Total Non-Interest Expense | **$731,817** | $681,685 | $628,419 | **$50,132** | **7%** | $53,266 | 8% |

#### NM—Not Meaningful

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

Salaries and employee benefits is the largest component of non-interest expense, accounting for 59% of the total in 2017 compared to 59% of the total in 2016 and 61% of the total 2015. For the year ended December 31, 2017, salaries and employee benefits totaled $430.1 million and increased $24.9 million, or 6%, compared to 2016. This increase can be attributed to a $15.5 million increase in salaries resulting from annual salary increases and larger staffing as the Company grows and a $5.1 million increase in commissions and incentive compensation primarily attributable to the Company's long-term incentive program. For the year ended December 31, 2016, salaries and employee benefits totaled $405.2 million and increased $23.1 million, or 6%, compared to 2015. This increase can be attributed to a $13.1 million increase in salaries resulting from annual salary increases, additional employees from various acquisitions and larger staffing as the Company grows, an $8.3 million increase in commissions and incentive compensation primarily attributable to higher expenses on variable pay based arrangements and an $1.7 million increase in employee benefits primarily due to higher insurance costs.

Equipment expense totaled $38.4 million in 2017, $37.1 million in 2016 and $32.9 million in 2015, reflecting an increase of 4% in 2017 and an increase of 13% in 2016. The increase in equipment expense in 2017 and 2016 was primarily related to increased software license fees and higher depreciation as a result of equipment purchases. Equipment expense includes furniture, equipment and computer software, depreciation and repairs and maintenance costs.

Operating lease equipment depreciation expense totaled $24.1 million in 2017, $13.3 million in 2016 and $1.7 million in 2015. The increases in 2017 compared to 2016 and 2016 compared to 2015 were primarily related to growth in business from the Company's leasing divisions.

Occupancy expense for the years 2017, 2016 and 2015 was $52.9 million, $50.9 million and $48.9 million, respectively, reflecting increases of 4% in 2017 and 4% in 2016. The increase in 2017 was primarily the result of increased depreciation on owned locations as well as higher maintenance and repairs. Occupancy expense includes depreciation on premises, real estate taxes and insurance, utilities and maintenance of premises, as well as net rent expense for leased premises.

Data processing expenses totaled $31.5 million in 2017, $28.8 million in 2016 and $26.9 million in 2015, representing an increase of 9% in 2017 and an increase of 7% in 2016. The amount of data processing expenses incurred fluctuates based on the overall growth of loan and deposit accounts as well as additional expenses recorded related to bank acquisition transactions. The increase in both periods was primarily due to continued growth in the Company during the period.

Advertising and marketing expenses totaled $30.8 million for 2017, $24.8 million for 2016 and $21.9 million for 2015. Marketing costs are incurred to promote the Company’s brand, commercial banking capabilities, the Company’s MaxSafe® suite of products, community-based products, to attract loans and deposits and to announce new branch openings as well as the expansion of the Company's non-bank businesses. The increase in 2017 and 2016 was primarily due to expenses for community-related advertisements and sponsorships . 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. Management continues to utilize mass market media promotions as well as targeted marketing programs in certain market areas. In 2017, 2016 and 2015, the Company incurred increased advertising and marketing costs to increase Wintrust's name recognition associated with the overall goal of becoming “Chicago's Bank” and “Wisconsin's Bank.”

Professional fees totaled $27.8 million in 2017, $20.4 million in 2016 and $18.2 million in 2015. The increase in 2017 as compared to 2016 related primarily to higher consulting fees related to continued investment in various areas of the Company including technology and an enhanced customer experience as well as higher legal fees. The increase in 2016 as compared to 2015 related primarily to increased legal fees incurred in connection with acquisitions and additional consulting services. Professional fees include legal, audit and tax fees, external loan review costs and regulatory exam assessments.

FDIC insurance totaled $16.2 million for 2017, $16.1 million for 2016 and $12.4 million for 2015. The increase in 2016 as compared to 2015 was primarily the result of an increased assessment base due to the Company's asset growth during 2016 as well as higher assessment rates and the change in FDIC assessment methodology in the fourth quarter of 2016.

OREO expense was $3.6 million in 2017, $5.2 million in 2016, and $4.5 million in 2015. The decrease in 2017 compared to 2016 was primarily the result of fewer negative valuation adjustments of OREO properties and lower expenses to maintain OREO properties. OREO expenses include all costs associated with obtaining, maintaining and selling other real estate owned properties as well as valuation adjustments.

Miscellaneous non-interest expense decreased $1.9 million, or 3%, in 2017 compared to 2016 and increased $1.2 million, or 2%, in 2016 compared to 2015. Miscellaneous non-interest expense includes ATM expenses, correspondent banking charges, directors’ fees, telephone and communication, travel and entertainment, corporate insurance, dues and subscriptions, problem loan expenses, operating losses and lending origination costs that are not deferred.

### Income Taxes

The Company recorded income tax expense of $132.3 million in 2017 compared to $125.0 million in 2016 and $95.0 million in 2015. The effective tax rates were 33.9% in 2017 and 37.7% in 2016 and 2015. The lower effective tax rate for the year ended 2017 compared to the years ended 2016 and 2015 was primarily due to a $7.6 million income tax benefit related to the enactment of the Tax Act. The enactment of the Tax Act in 2017, which reduced the statutory federal income tax rate for corporations from 35% to 21% effective January 1, 2018, required the Company to re-measure its existing net deferred tax liabilities at year end to reflect the new tax rate, which resulted in a $10.5 million net tax benefit. This net tax benefit was partially offset by a $2.9 million one-time tax pursuant to the Tax Act on a deemed repatriation of unremitted earnings on our Canadian subsidiary. Additionally, the lower effective tax rate for the year ended 2017 as compared to the years ended 2016 and 2015 was due to recording $6.2 million of excess tax benefits related to the adoption of new accounting rules for income taxes attributed to share-based compensation that became effective on January 1, 2017. In years prior to 2017, these excess tax benefits on share-based compensation were recorded directly to the Company's shareholders' equity. Approximately $3.4 million of the excess tax benefits were recorded in the first quarter of 2017. Excess tax benefits are expected to be higher in the first quarter of each year when the majority of the Company's share-based awards vest, and will fluctuate throughout the year based on the Company's stock price and timing of employee stock option exercises and vesting of other share-based awards. Please refer to Note 16 to the Consolidated Financial Statements in Item 8 for further discussion and analysis of the Company's tax position, including a reconciliation of the tax expense computed at the statutory tax rate to the Company's actual tax expense.

### Operating Segment Results

As described in Note 23 to the Consolidated Financial Statements in Item 8, the Company’s operations consist of three primary segments: community banking, specialty finance and wealth management. The Company’s profitability is primarily dependent on the net interest income, provision for credit losses, non-interest income and operating expenses of its community banking segment. For purposes of internal segment profitability, management allocates certain intersegment and parent company balances. Management allocates a portion of revenues to the specialty finance segment related to loans and leases originated by the specialty finance segment and sold or assigned to the community banking segment. Similarly, for purposes of analyzing the contribution from the wealth management segment, management allocates a portion of the net interest income earned by the community banking segment on deposit balances of customers of the wealth management segment to the wealth management segment. Finally, expenses incurred at the Wintrust parent company are allocated to each segment based on each segment's risk-weighted assets.

The community banking segment’s net interest income for the year ended December 31, 2017 totaled $677.5 million as compared to $588.8 million for the same period in 2016, an increase of $88.6 million, or 15%, and the segment’s net interest income in 2016 compared to 2015 increased $65.7 million or 13%. The increase in 2017 compared to 2016 was primarily attributable to growth in earning assets and higher net interest margin. The increase in 2016 compared to 2015 was primarily attributable to growth in earning assets including those acquired in bank acquisitions. The community banking segment's provision for credit losses totaled $27.1 million in 2017 compared to $30.9 million in 2016 and $29.7 million in 2015. The provision for credit losses decreased in 2017 compared to 2016 due to improved credit quality metrics, partially offset by an increase in loans, excluding covered loans, during 2017. The provision for credit losses increased in 2016 compared to 2015 primarily as a result of an increase in loans, excluding covered loans, during 2016. Non-interest income for the community banking segment decreased $19.1 million, or 8%, in 2017 when compared to 2016 and increased $39.2 million, or 20%, in 2016 when compared to 2015. The decrease in 2017 compared to 2016 was primarily attributable to a decrease in mortgage banking revenue, lower gains realized on sales of investment securities and lower fees from covered call options. The increase in 2016 compared to 2015 was primarily attributable to higher mortgage banking revenues from higher originations as a result of the favorable mortgage environment. The community banking segment’s net income for the year ended December 31, 2017 totaled $174.8 million, an increase of $30.2 million, compared to net income of $144.7 million in 2016. Net income for the year ended December 31, 2016 of $144.7 million was an increase of $42.7 million as compared to net income in 2015 of $101.9 million.

The specialty finance segment’s net interest income totaled $118.3 million for the year ended December 31, 2017, compared to $98.2 million in the same period of 2016, an increase of $20.1 million, or 20%. The specialty finance segment’s net interest income for the year ended December 31, 2016 increased $13.0 million, or 15%, from $85.3 million in 2015. The increase in 2017 compared to 2016 was primarily attributable to growth in average loans and higher yields on the premium finance receivables portfolios. The increase in 2016 compared to 2015 was primarily attributable to growth in average loans. The specialty finance segment's provision for credit losses totaled $2.7 million in 2017 compared to $3.2 million in 2016 and 2015. The provision for credit losses decreased in 2017 compared to 2016 and 2015 primarily due to improved credit quality metrics, including reduced levels of nonperforming loans. The specialty finance segment’s non-interest income totaled $60.4 million for the year ended December 31, 2017 compared to $49.7 million in 2016 and $33.6 million in 2015. The increase in non-interest income in 2017 is primarily a result of higher originations and increased balances related to the premium finance portfolio and growth in business from the Company's leasing division. For 2017, our commercial premium finance operations, life insurance premium finance operations, leasing operations and accounts receivable finance operations accounted for 42%, 35%, 17% and 6%, respectively, of the total revenues of our specialty finance business. Net income of the specialty finance segment totaled $65.7 million, $48.8 million and $42.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The wealth management segment reported net interest income of $18.9 million for 2017, $18.6 million for 2016 and $17.0 million for 2015. Net interest income for this segment is primarily comprised of an allocation of 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 $992.0 million, $1.0 billion and $890.6 million in 2017, 2016 and 2015, respectively. This segment recorded non-interest income of $84.3 million for 2017 as compared to $78.5 million for 2016 and $75.5 million for 2015. This increase is primarily due to growth in assets from new and existing customers and market appreciation. Distribution of wealth management services through each bank continues to be a focus of the Company as the number of brokers in its banks continues to increase. 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 reported net income of $17.2 million for 2017 compared to $13.4 million for 2016 and $12.7 million for 2015.

### ANALYSIS OF FINANCIAL CONDITION

Total assets were $27.9 billion at December 31, 2017, representing an increase of $2.2 billion, or 9%, when compared to December 31, 2016. Total funding, which includes deposits, all notes and advances, including secured borrowings and junior subordinated debentures, was $24.4 billion at December 31, 2017 and $22.5 billion at December 31, 2016. See Notes 3, 4, and 10 through 14 of the Consolidated Financial Statements in Item 8 for additional period-end detail on the Company’s interest-earning assets and funding liabilities.

### Interest-Earning Assets

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

*(Dollars in thousands)*

| Loans: | Years Ended December 31, 2017 Balance | Percent | 2016 Balance | Percent | 2015 Balance | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial | **$6,241,253** | **26%** | $5,268,454 | 24% | $4,250,698 | 22% |
| Commercial real estate | **6,363,002** | **26** | 5,835,480 | 26 | 4,990,657 | 26 |
| Home equity | **691,629** | **3** | 759,615 | 3 | 749,760 | 4 |
| Residential real estate (1) | **1,083,010** | **4** | 1,065,676 | 5 | 899,039 | 5 |
| Premium finance receivables | **6,281,896** | **26** | 5,563,139 | 25 | 4,973,095 | 26 |
| Other loans | **128,156** | **1** | 135,897 | 1 | 159,122 | 1 |
| Total loans, net of unearned income(2) excluding covered loans | **$20,788,946** | **86%** | $18,628,261 | 84% | $16,022,371 | 84% |
| Covered loans | **40,665** | **—** | 102,948 | — | 186,427 | 1 |
| Total average loans (2) | **$20,829,611** | **86%** | $18,731,209 | 84% | $16,208,798 | 85% |
| Liquidity management assets (3) | **$3,535,613** | **14%** | $3,562,480 | 16% | $2,992,506 | 15% |
| Other earning assets (4) | **25,951** | **—** | 28,992 | — | 30,161 | — |
| Total average earning assets | **$24,391,175** | **100%** | $22,322,681 | 100% | $19,231,465 | 100% |
| Total average assets | **$26,369,702** |  | $24,292,231 |  | $21,009,773 |  |
| Total average earning assets to total average assets |  | **92%** |  | 92% |  | 92% |

#### (1) Includes mortgage loans held-for-sale

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

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

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

Total average earning assets increased $2.1 billion, or 9%, in 2017 and $3.1 billion, or 16%, in 2016. Average earning assets comprised 92% of average total assets in 2017, 2016, and 2015.

*Loans.* Average total loans, net of unearned income, totaled $20.8 billion and increased $2.1 billion, or 11%, in 2017 and $2.5 billion, or 16%, in 2016. Average commercial loans totaled $6.2 billion in 2017, and increased $972.8 million, or 18%, over the average balance in 2016, while average commercial real estate loans totaled $6.4 billion in 2017, increasing $527.5 million, or 9%, since 2016. From 2015 to 2016, average commercial loans increased $1.0 billion, or 24%, while average commercial real estate loans increased by $844.8 million, or 17%. Combined, these categories comprised 61% of the average loan portfolio in 2017 and 59% in 2016. The growth realized in these categories for 2017 and 2016 is primarily attributable to increased business development efforts.

Home equity loans averaged $691.6 million in 2017, and decreased $68.0 million, or 9%, when compared to the average balance in 2016. Home equity loans averaged $759.6 million in 2016, and increased $9.9 million, or 1%, when compared to the average balance in 2015. Unused commitments on home equity lines of credit totaled $826.5 million at December 31, 2017 and $836.2 million at December 31, 2016. 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 $1.1 billion in 2017, and increased $17.3 million, or 2%, from the average balance in 2016. In 2016, residential real estate loans averaged $1.1 billion, and increased $166.6 million, or 19%, from the average balance in 2015. The residential real estate loan category includes mortgage loans held-for-sale. By selling residential mortgage loans into the secondary market, the Company eliminates the interest-rate risk associated with these loans, as they are predominantly long-term fixed rate loans, and provides a source of non-interest revenue.

Average premium finance receivables totaled $6.3 billion in 2017, and accounted for 30% of the Company’s average total loans. In 2017, average premium finance receivables increased $718.8 million, or 13%, compared to 2016. In 2016, average premium finance receivables increased $590.0 million, or 12%, from the average balance of $5.0 billion in 2015. The increase during 2017 and 2016 was the result of continued originations within the portfolio due to effective marketing and customer servicing. Approximately $7.1 billion of premium finance receivables were originated in 2017 compared to approximately $6.8 billion in 2016.

Other loans represent a wide variety of personal and consumer loans to individuals as well as high-yielding short-term accounts receivable financing to clients in the temporary staffing industry located throughout the United States. Consumer loans generally have shorter terms and higher interest rates than mortgage loans but generally involve more credit risk due to the type and nature of the collateral. Additionally, short-term accounts receivable financing may also involve greater credit risks than generally associated with the loan portfolios of more traditional community banks depending on the marketability of the collateral.

Covered loans averaged $40.7 million in 2017, and decreased $62.3 million, or 60%, when compared to 2016. In 2016, average covered loans totaled $102.9 million and decreased $83.5 million, or 45%, from 2015. Covered loans represented loans acquired through the nine FDIC-assisted transactions, all of which occurred prior to 2013. These loans were subject to loss sharing agreements with the FDIC. The FDIC agreed to reimburse the Company for 80% of losses incurred on the purchased loans, foreclosed real estate, and certain other assets. On October 16, 2017, the Company entered into agreements with the FDIC that terminated all existing loss share agreements with the FDIC. The Company will be solely responsible for all future charge-offs, recoveries, gains, losses and expenses related to the previously covered assets as the FDIC will no longer share in those amounts. See Note 7, “Business Combinations,” for a discussion of these acquisitions, including the aggregation of these loans by risk characteristics when determining the initial and subsequent fair value.

*Liquidity Management Assets.* Funds that are not utilized for loan originations are used to purchase investment securities and short term money market investments, to sell as federal funds and to maintain in interest-bearing deposits with banks. Average liquidity management assets accounted for 14%, 16% and 16% of total average earning assets in 2017, 2016 and 2015, respectively. Average liquidity management assets decreased $26.9 million in 2017 compared to 2016, and increased $570.0 million in 2016 compared to 2015. The balances of these assets can fluctuate based on management’s ongoing effort to manage liquidity and for asset liability management purposes.

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

### Deposits and Other Funding Sources

Total deposits at December 31, 2017, were $23.2 billion, increasing $1.5 billion, or 7%, compared to the $21.7 billion at December 31, 2016. Average deposit balances in 2017 were $22.1 billion, reflecting an increase of $2.1 billion, or 10%, compared to the average balances in 2016. During 2016, average deposits increased $2.6 billion, or 15%, compared to the prior year.

The increase in year end and average deposits in 2017 over 2016 is primarily attributable to the Company's additional deposits associated with the increased commercial lending relationships. The Company continues to see a beneficial shift in its deposit mix as average non-interest bearing deposits increased $772.1 million, or 14% in 2017 compared to 2016, with period end balances ending at 29% of total deposits at December 31, 2017, compared to 27% at December 31, 2016.

The following table presents the composition of average deposits by product category for each of the last three years:

*(Dollars in thousands)*

|  | Years Ended December 31, 2017 Balance | Percent | 2016 Balance | Percent | 2015 Balance | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Non-interest bearing deposits | **$6,182,048** | **28%** | $5,409,923 | 27% | $4,144,378 | 24% |
| NOW and interest bearing demand deposits | **2,402,254** | **11** | 2,438,051 | 12 | 2,246,451 | 13 |
| Wealth management deposits | **2,125,177** | **10** | 1,877,020 | 9 | 1,456,289 | 8 |
| Money market accounts | **4,482,137** | **20** | 4,343,332 | 23 | 3,888,781 | 23 |
| Savings accounts | **2,471,663** | **11** | 1,887,748 | 9 | 1,610,603 | 9 |
| Time certificates of deposit | **4,423,067** | **20** | 4,074,735 | 20 | 4,069,180 | 23 |
| Total average deposits | **$22,086,346** | **100%** | $20,030,809 | 100% | $17,415,682 | 100% |

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

The following table presents average deposit balances for each bank and the relative percentage of total consolidated average deposits held by each bank during each of the past three years:

*(Dollars in thousands)*

|  | Years Ended December 31, 2017 Balance | Percent | 2016 Balance | Percent | 2015 Balance | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Wintrust Bank | **$3,848,012** | **17%** | $3,410,462 | 16% | $2,871,755 | 17% |
| Lake Forest Bank | **2,494,951** | **11** | 2,242,961 | 11 | 1,927,484 | 11 |
| Hinsdale Bank | **1,761,825** | **8** | 1,646,559 | 8 | 1,505,057 | 9 |
| Northbrook Bank | **1,748,342** | **8** | 1,522,177 | 8 | 1,235,701 | 7 |
| Town Bank | **1,599,066** | **8** | 1,530,953 | 8 | 1,288,312 | 7 |
| Barrington Bank | **1,435,608** | **7** | 1,331,023 | 7 | 1,177,254 | 7 |
| Old Plank Trail Bank | **1,215,786** | **6** | 1,119,326 | 6 | 1,069,543 | 6 |
| Village Bank | **1,195,933** | **5** | 1,116,247 | 6 | 953,194 | 5 |
| Wheaton Bank | **1,183,185** | **5** | 1,077,386 | 5 | 853,841 | 5 |
| Libertyville Bank | **1,140,095** | **5** | 1,069,408 | 5 | 1,017,398 | 6 |
| Beverly Bank | **959,179** | **4** | 845,576 | 4 | 732,054 | 4 |
| Schaumburg Bank | **912,886** | **4** | 802,919 | 4 | 679,260 | 4 |
| St. Charles Bank | **906,791** | **4** | 726,660 | 4 | 641,231 | 4 |
| State Bank of the Lakes | **882,684** | **4** | 823,940 | 4 | 758,243 | 4 |
| Crystal Lake Bank | **802,003** | **4** | 765,212 | 4 | 705,355 | 4 |
| Total deposits | **$22,086,346** | **100%** | $20,030,809 | 100% | $17,415,682 | 100% |
| Percentage increase from prior year |  | **10%** |  | 15% |  | 12% |

Various acquisitions, are partially responsible for the deposit fluctuations from 2015 to 2016. These acquisitions are discussed in Note 7, “Business Combinations.” The Company's continued overall growth during 2017 and 2016 also contributed to these deposit fluctuations.

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

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

*(Dollars in thousands)*

|  | Years Ended December 31, 2017 Average Balance | Percent of Total | 2016 Average Balance | Percent of Total | 2015 Average Balance | Percent of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Federal Home Loan Bank advances | **$380,412** | **37%** | $653,529 | 50% | $380,936 | 37% |
| Subordinated notes | **139,022** | **13** | 138,912 | 11 | 138,812 | 14 |
| Notes payable | **46,744** | **5** | 61,738 | 5 | 40,112 | 4 |
| Short-term borrowings | **38,756** | **4** | 41,852 | 3 | 55,862 | 6 |
| Other | **33,964** | **3** | 18,555 | 1 | 18,577 | 2 |
| Secured borrowings | **135,672** | **13** | 126,608 | 10 | 118,344 | 12 |
| Total other borrowings | **255,136** | **25** | 248,753 | 19 | 232,895 | 24 |
| Junior subordinated debentures | **253,566** | **25** | 254,591 | 20 | 258,203 | 25 |
| Total other funding sources | **$1,028,136** | **100%** | $1,295,785 | 100% | $1,010,846 | 100% |

Notes payable balances represent the balances on a $150 million loan agreement with unaffiliated banks consisting of a $75.0 million revolving credit facility and a $75.0 million term facility. Both loan facilities are available for corporate purposes such as to provide capital to fund continued growth at existing bank subsidiaries, possible future acquisitions and for other general corporate matters. At December 31, 2017, the Company had a balance under the term facility of $41.2 million compared to $52.4 million at December 31, 2016. The Company was contractually required to borrow the entire amount of the term facility on June 15, 2015 and all such borrowings must be repaid by June 15, 2020. At December 31, 2017 and December 31, 2016, the Company had no outstanding balance on the $75.0 million revolving credit facility.

FHLB advances provide the banks with access to fixed rate funds which are useful in mitigating interest rate risk and achieving an acceptable interest rate spread on fixed rate loans or securities. FHLB advances to the banks totaled $559.7 million at December 31, 2017 and $153.8 million at December 31, 2016. See Note 11, “Federal Home Loan Bank Advances,” to the Consolidated Financial Statements for further discussion of the terms of these advances.

The average balance of secured borrowings primarily represents a third party Canadian transaction (“Canadian Secured Borrowing”). Under the Canadian Secured Borrowing, in December 2014, the Company, through its subsidiary, FIFC Canada, sold an undivided co-ownership interest in all receivables owed to FIFC Canada to an unrelated third party in exchange for a cash payment of approximately C$150 million pursuant to a receivables purchase agreement (“Receivables Purchase Agreement”). The Receivables Purchase Agreement was amended in December 2015, effectively extending the maturity date from December 15, 2015 to December 15, 2017. Additionally, at that time, the unrelated third party paid an additional C$10 million, which increased the total payments to C$160 million. The Receivables Purchase Agreement was again amended in December 2017, effectively extending the maturity date from December 15, 2017 to December 16, 2019. Additionally, at that time, the unrelated third party paid an additional C$10 million, which increased the total payments to C$170 million. These transactions were not considered sales of receivables and, as such, related proceeds received are reflected on the Company’s Consolidated Statements of Condition as a secured borrowing owed to the unrelated third party, net of unamortized debt issuance costs, and translated to the Company’s reporting currency as of the respective date. At December 31, 2017, the translated balance of the Canadian Secured Borrowing totaled $135.1 million with an interest rate of 2.214%. The remaining balance within secured borrowings at December 31, 2017 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.

At December 31, 2017 and 2016, subordinated notes totaled $139.1 million and $139.0 million, respectively. During 2014, the Company issued $140.0 million of subordinated notes receiving $139.1 million in net proceeds. The notes have a stated interest rate of 5.00% and mature in June 2024.

Short-term borrowings include securities sold under repurchase agreements and federal funds purchased. These borrowings totaled $17.2 million and $61.8 million at December 31, 2017 and 2016, respectively. Securities sold under repurchase agreements represent sweep accounts for certain customers in connection with master repurchase agreements at the banks as well as short-term borrowings from banks and brokers. This funding category typically fluctuates based on customer preferences and daily liquidity needs of the banks, their customers and the banks’ operating subsidiaries. See Note 13, “Other Borrowings,” to the Consolidated Financial Statements for further discussion of these borrowings.

The Company has $253.6 million of junior subordinated debentures outstanding as of December 31, 2017 and 2016. 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. The balance increased $19.1 million in 2015 as a result of the addition of the Suburban Illinois Capital Trust II and Community Financial Shares Statutory Trust II acquired as a part of the acquisitions of Suburban and CFIS, respectively. Additionally, in January 2016, the Company acquired $15.0 million of the $40.0 million of trust preferred securities issued by Wintrust Capital Trust VIII from a third-party investor. The purchase effectively extinguished $15.0 million of junior subordinated debentures related to Wintrust Capital Trust VIII and resulted in a $4.3 million gain from the early extinguishment of debt. See Note 14, “Junior Subordinated Debentures,” of the Consolidated Financial Statements for further discussion of the Company’s junior subordinated debentures. Prior to January 1, 2015, the junior subordinated debentures, subject to certain limitations, qualified as Tier 1 regulatory capital of the Company and the amount in excess of those certain limitations could, subject to other restrictions, be included in Tier 2 capital. Starting in 2015, a portion of these junior subordinated debentures qualified as Tier 1 regulatory capital of the Company and the amount in excess of those certain limitations, subject to certain restrictions, was included in Tier 2 capital. At December 31, 2015, $65.1 million and $195.4 million of the junior subordinated debentures, net of common securities, were included in the Company's Tier 1 and Tier 2 regulatory capital, respectively. Starting in 2016, none of the junior subordinated debentures qualified as Tier 1 regulatory capital of the Company resulting in $245.5 million of the junior subordinated debentures, net of common securities, being included in the Company's Tier 2 regulatory capital.

Other borrowings at December 31, 2017 include a fixed-rate promissory note issued by the Company in June 2017 (“Fixed-Rate Promissory Note”) related to and secured by two office building owned by the Company, and non-recourse notes issued by the

Company to other banks related to certain capital leases. At December 31, 2017, the Fixed-Rate Promissory Note had a balance of $49.0 million. Under the Fixed-Rate Promissory Note, the Company will make monthly principal payments and pay interest at a fixed rate of 3.36% until maturity on June 30, 2022. At December 31, 2017, the non-recourse notes related to certain capital leases totaled $151,000. See Note 13, “Other Borrowings,” to the Consolidated Financial Statements in Item 8 for further discussion of these borrowings.

*Shareholders’ Equity*. Total shareholders’ equity was $3.0 billion at December 31, 2017, an increase of $281.3 million from the December 31, 2016 total of $2.7 billion. The increase in 2017 was primarily a result of net income of $257.7 million in 2017, $27.8 million from the issuance of shares of the Company's common stock pursuant to various stock compensation plans, net of treasury shares, $13.5 million in net unrealized gain from investment securities, net of tax, $12.9 million credited to surplus for stock-based compensation costs, $7.0 million of foreign currency translation adjustments, net of tax, $3.0 million of net unrealized gains on cash flow hedges, net of tax, partially offset by common stock dividends of $30.8 million and preferred stock dividends of $9.8 million.

Changes in shareholders’ equity from 2015 to 2016 were primarily a result of net income of $206.9 million in 2016, $152.9 million from the issuance of the Company's common Stock in June 2016, net of costs, $15.4 million from the issuance of shares of the Company's common stock (and related tax benefit) pursuant to various stock compensation plans, net of treasury shares, $9.3 million credited to surplus for stock-based compensation costs, $6.4 million of net unrealized gains on cash flow hedges, net of tax, and $2.7 million of foreign currency translation adjustments, net of tax, partially offset by common stock dividends of $24.1 million, preferred stock dividends of $14.5 million and $11.6 million in net unrealized losses from investment securities, net of tax.

### LOAN PORTFOLIO AND ASSET QUALITY

### Loan Portfolio

The following table shows the Company’s loan portfolio by category as of December 31 for each of the five previous fiscal years:

*(Dollars in thousands)*

|  | 2017 Amount | % of Total | 2016 Amount | % of Total | 2015 Amount | % of Total | 2014 Amount | % of Total | 2013 Amount | % of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial | **$6,787,677** | **31%** | $6,005,422 | 30% | $4,713,909 | 27% | $3,924,394 | 26% | $3,253,687 | 25% |
| Commercial real estate | **6,580,618** | **30** | 6,196,087 | 31 | 5,529,289 | 32 | 4,505,753 | 31 | 4,230,035 | 32 |
| Home equity | **663,045** | **3** | 725,793 | 4 | 784,675 | 5 | 716,293 | 5 | 719,137 | 5 |
| Residential real estate | **832,120** | **4** | 705,221 | 4 | 607,451 | 3 | 483,542 | 3 | 434,992 | 3 |
| Premium finance receivables—commercial | **2,634,565** | **12** | 2,478,581 | 12 | 2,374,921 | 14 | 2,350,833 | 16 | 2,167,565 | 16 |
| Premium finance receivables—life insurance | **4,035,059** | **19** | 3,470,027 | 18 | 2,961,496 | 17 | 2,277,571 | 16 | 1,923,698 | 15 |
| Consumer and other | **107,713** | **1** | 122,041 | 1 | 146,376 | 1 | 151,012 | 1 | 167,488 | 1 |
| Total loans, net of unearned income, excluding covered loans | **$21,640,797** | **100%** | $19,703,172 | 100% | $17,118,117 | 99% | $14,409,398 | 98% | $12,896,602 | 97% |
| Covered loans | **—** | **—** | 58,145 | — | 148,673 | 1 | 226,709 | 2 | 346,431 | 3 |
| Total loans | **$21,640,797** | **100%** | $19,761,317 | 100% | $17,266,790 | 100% | $14,636,107 | 100% | $13,243,033 | 100% |

71

*Commercial and commercial real estate loans.* Our commercial and commercial real estate loan portfolios are comprised primarily of commercial real estate loans and lines of credit for working capital purposes. The table below sets forth information regarding the types, amounts and performance of our loans within these portfolios (excluding covered loans) as of December 31, 2017 and 2016:

*(Dollars in thousands)*

| Commercial: | As of December 31, 2017 Balance | % of Total Balance | Allowance For Loan Losses Allocation | As of December 31, 2016 Balance | % of Total Balance | Allowance For Loan Losses Allocation |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial, industrial and other | $4,342,505 | 32.5% | $39,901 | $3,744,712 | 30.7% | $29,831 |
| Franchise | 847,597 | 6.3 | 6,451 | 869,721 | 7.1 | 4,744 |
| Mortgage warehouse lines of credit | 194,523 | 1.5 | 1,454 | 204,225 | 1.7 | 1,548 |
| Asset-based lending | 980,466 | 7.3 | 8,236 | 875,070 | 7.2 | 6,860 |
| Leases | 413,172 | 3.1 | 1,242 | 294,914 | 2.4 | 858 |
| PCI - commercial loans (1) | 9,414 | 0.1 | 527 | 16,780 | 0.1 | 652 |
| **Total commercial** | **$6,787,677** | **50.8%** | **$57,811** | **$6,005,422** | **49.2%** | **$44,493** |
| **Commercial Real Estate:** |  |  |  |  |  |  |
| Construction | $745,514 | 5.6% | $8,728 | $610,239 | 5.0% | $7,304 |
| Land | 126,484 | 0.9 | 3,838 | 104,801 | 0.9 | 3,679 |
| Office | 894,833 | 6.7 | 5,736 | 867,674 | 7.1 | 5,769 |
| Industrial | 883,019 | 6.6 | 5,767 | 770,601 | 6.3 | 6,660 |
| Retail | 951,527 | 7.1 | 7,389 | 912,593 | 7.5 | 5,948 |
| Multi-family | 915,644 | 6.8 | 9,509 | 807,624 | 6.6 | 8,070 |
| Mixed use and other | 1,935,705 | 14.5 | 13,879 | 1,952,175 | 16.0 | 13,953 |
| PCI - commercial real estate (1) | 127,892 | 1.0 | 381 | 170,380 | 1.4 | 39 |
| **Total commercial real estate** | **$6,580,618** | **49.2%** | **$55,227** | **$6,196,087** | **50.8%** | **$51,422** |
| **Total commercial and commercial real estate** | **$13,368,295** | **100.0%** | **$113,038** | **$12,201,509** | **100.0%** | **$95,915** |
| Commercial real estate—collateral location by state: |  |  |  |  |  |  |
| Illinois | $5,128,434 | 78.0% |  | $4,927,270 | 79.4% |  |
| Wisconsin | 712,835 | 10.8 |  | 646,429 | 10.4 |  |
| **Total primary markets** | **$5,841,269** | **88.8%** |  | $5,573,699 | 89.8% |  |
| Indiana | 138,316 | 2.1 |  | 120,999 | 2.0 |  |
| Florida | 69,427 | 1.1 |  | 77,528 | 1.3 |  |
| Arizona | 58,594 | 0.9 |  | 53,512 | 0.9 |  |
| Michigan | 47,167 | 0.7 |  | 32,078 | 0.5 |  |
| California | 68,478 | 1.0 |  | 42,590 | 0.7 |  |
| Other (no individual state greater than 0.7%) | 357,367 | 5.4 |  | 295,681 | 4.8 |  |
| **Total** | **$6,580,618** | **100.0%** |  | $6,196,087 | 100.0% |  |

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

We make commercial loans for many purposes, including working capital lines, which are generally renewable annually and supported by business assets, personal guarantees and additional collateral. Commercial business lending is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. Primarily as a result of growth in the commercial portfolio in 2017 and higher required specific reserves on impaired loans within the portfolio, our allowance for loan losses in our commercial loan portfolio is $57.8 million as of December 31, 2017 compared to $44.5 million as of December 31, 2016.

Our commercial real estate loans are generally secured by a first mortgage lien and assignment of rents on the property. Since most of our bank branches are located in the Chicago metropolitan area and southern Wisconsin, 88.8% of our commercial real estate loan portfolio is located in this region as of December 31, 2017. While commercial real estate market conditions have improved recently, a number of specific markets continue to be under stress. We have been able to effectively manage our total non-performing commercial real estate loans. As of December 31, 2017, our allowance for loan losses related to this portfolio is $55.2 million compared to $51.4 million as of December 31, 2016.

The Company also participates in mortgage warehouse lending by providing interim funding to unaffiliated mortgage bankers to finance residential mortgages originated by such bankers for sale into the secondary market. The Company’s loans to the mortgage bankers are secured by the business assets of the mortgage companies as well as the specific mortgage loans funded by the Company, after they have been pre-approved for purchase by third party end lenders. The Company may also provide interim financing for packages of mortgage loans on a bulk basis in circumstances where the mortgage bankers desire to competitively bid on a number of mortgages for sale as a package in the secondary market. Amounts advanced with respect to any particular mortgage loan are usually required to be repaid within 21 days. During 2017, our mortgage warehouse lines decreased to $194.5 million as of December 31, 2017 from $204.2 million as of December 31, 2016.

*Home equity loans.* Our home equity loans and lines of credit are originated by each of our banks in their local markets where we have a strong understanding of the underlying real estate value. Our banks monitor and manage these loans, and we conduct an automated review of all home equity loans and lines of credit at least twice per year. This review collects current credit performance for each home equity borrower and identifies situations where the credit strength of the borrower is declining, or where there are events that may influence repayment, such as tax liens or judgments. Our banks use this information to manage loans that may be higher risk and to determine whether to obtain additional credit information or updated property valuations.

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

*Residential real estate mortgages.* Our residential real estate portfolio predominantly includes one- to four-family adjustable rate mortgages that have repricing terms generally from one to three years, construction loans to individuals and bridge financing loans for qualifying customers. As of December 31, 2017, our residential loan portfolio totaled $832.1 million, or 4% of our total outstanding loans.

Our adjustable rate mortgages relate to properties located principally in the Chicago metropolitan area and southern Wisconsin or vacation homes owned by local residents. These adjustable rate mortgages are often non-agency conforming. Adjustable rate mortgage loans decrease the interest rate risk we face on our mortgage portfolio. However, this risk is not eliminated due to the fact that such loans generally provide for periodic and lifetime limits on the interest rate adjustments among other features. Additionally, adjustable rate mortgages may pose a higher risk of delinquency and default because they require borrowers to make larger payments when interest rates rise. As of December 31, 2017, $18.0 million of our residential real estate mortgages, or 2.2% of our residential real estate loan portfolio were classified as nonaccrual, $5.3 million were 90 or more days past due and still accruing (0.6%), $9.7 million were 30 to 89 days past due (1.2%) and $799.2 million were current (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.

While we generally do not originate loans for our own portfolio with long-term fixed rates due to interest rate risk considerations, we can accommodate customer requests for fixed rate loans by originating such loans and then selling them into the secondary market, for which we receive fee income. We may also selectively retain certain of these loans within the banks’ own portfolios where they are non-agency conforming, or where the terms of the loans make them favorable to retain. A portion of the loans we sold into the secondary market were sold with the servicing of those loans retained. The amount of loans serviced for others as of December 31, 2017 and 2016 was $2.9 billion and $1.8 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.

It is not our current practice to underwrite, and we have no plans to underwrite, subprime, Alt A, no or little documentation loans, or option ARM loans. As of December 31, 2017 approximately $1.3 million of our mortgage loans consist of interest-only loans.

*Premium finance receivables — commercial.* FIRST Insurance Funding and FIFC Canada originated approximately $6.1 billion in commercial insurance premium finance receivables during 2017 as compared to approximately $5.8 billion in 2016. FIRST Insurance Funding and FIFC Canada make loans to businesses to finance the insurance premiums they pay on their commercial insurance policies. The loans are originated by working through independent medium and large insurance agents and brokers located throughout the United States and Canada. The insurance premiums financed are primarily for commercial customers’ purchases of liability, property and casualty and other commercial insurance.

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

*Premium finance receivables — life insurance.* Wintrust Life Finance originated approximately $968.4 million in life insurance premium finance receivables in 2017 as compared to $1.1 billion in 2016. The Company continues to experience increased competition and pricing pressure within the current market. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The life insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In some cases, Wintrust Life Finance may make a loan that has a partially unsecured position.

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

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

*Covered loans.* Covered loans represented loans acquired through eight FDIC-assisted transactions, all of which occurred prior to 2013. These loans were subject to loss sharing agreements with the FDIC. The FDIC agreed to reimburse the Company for 80% of losses incurred on the purchased loans, foreclosed real estate, and certain other assets. On October 16, 2017, the Company entered into agreements with the FDIC that terminated all existing loss share agreements with the FDIC. Starting on October 16, 2017, the Company is solely responsible for all charge-offs, recoveries, gains, losses and expenses related to the previously covered assets as the FDIC no longer shares in those amounts. See Note 7, "Business Combinations," of the Consolidated Financial Statements presented under Item 8 of this report for further discussion of these acquisitions, including the aggregation of these loans by risk characteristics when determining the initial and subsequent fair value.

*Foreign.* The Company had approximately $318.9 million of loans to businesses of foreign countries as of December 31, 2017 compared to $307.7 million at December 31, 2016. This balance as of December 31, 2017 consists of loans originated by FIFC Canada.

#### Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table classifies the loan portfolio, excluding covered loans, at December 31, 2017 by date at which the loans reprice or mature, and the type of rate exposure:

*(Dollars in thousands)*

| Commercial |  | One year or less | From one to five years | Over five years | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Fixed rate |  | **$162,137** | **$916,046** | **$548,248** | **$1,626,431** |
| Variable rate |  | **5,153,353** | **6,113** | **1,780** | **5,161,246** |
| Total commercial |  | **$5,315,490** | **$922,159** | **$550,028** | **$6,787,677** |
| Commercial real estate |  |  |  |  |  |
| Fixed rate |  | **$430,938** | **$1,744,750** | **$257,890** | **$2,433,578** |
| Variable rate |  | **4,120,039** | **26,564** | **437** | **4,147,040** |
| Total commercial real estate |  | **$4,550,977** | **$1,771,314** | **$258,327** | **$6,580,618** |
| Home equity |  |  |  |  |  |
| Fixed rate | 8,126,000 | **$10,100** | **$4,849** | **$58,402** | **$73,351** |
| Variable rate | 598,726,000 | **589,694** | **—** | **—** | **589,694** |
| Total home equity | 606,852,000 | **$599,794** | **$4,849** | **$58,402** | **$663,045** |
| Residential real estate |  |  |  |  |  |
| Fixed rate |  | **$58,459** | **$30,114** | **$149,453** | **$238,026** |
| Variable rate |  | **59,307** | **221,629** | **313,158** | **594,094** |
| Total residential real estate |  | **$117,766** | **$251,743** | **$462,611** | **$832,120** |
| Premium finance receivables - commercial |  |  |  |  |  |
| Fixed rate |  | **$2,561,032** | **$73,533** | **$—** | **$2,634,565** |
| Variable rate |  | **—** | **—** | **—** | **—** |
| Total premium finance receivables - commercial |  | **$2,561,032** | **$73,533** | **$—** | **$2,634,565** |
| Premium finance receivables - life insurance |  |  |  |  |  |
| Fixed rate |  | **$13,114** | **$33,355** | **$2,130** | **$48,599** |
| Variable rate |  | **3,986,460** | **—** | **—** | **3,986,460** |
| Total premium finance receivables - life insurance |  | **$3,999,574** | **$33,355** | **$2,130** | **$4,035,059** |
| Consumer and other |  |  |  |  |  |
| Fixed rate |  | **$53,936** | **$12,491** | **$4,001** | **$70,428** |
| Variable rate |  | **37,266** | **19** | **—** | **37,285** |
| Total consumer and other |  | **$91,202** | **$12,510** | **$4,001** | **$107,713** |
| Total per category |  |  |  |  |  |
| Fixed rate |  | **$3,289,716** | **$2,815,138** | **$1,020,124** | **$7,124,978** |
| Variable rate | 45,854,000 | **13,946,119** | **254,325** | **315,375** | **14,515,819** |
| Total loans, net of unearned income, excluding covered loans | 54,908,000 | **$17,235,835** | **$3,069,463** | **$1,335,499** | **$21,640,797** |
| **Variable Rate Loan Pricing by Index:** |  |  |  |  |  |
| Prime |  | **$2,798,945** |  |  |  |
| One- month LIBOR |  | **7,052,440** |  |  |  |
| Three- month LIBOR |  | **412,169** |  |  |  |
| Twelve- month LIBOR |  | **4,012,009** |  |  |  |
| Other |  | **240,256** |  |  |  |
| Total variable rate |  | **$14,515,819** |  |  |  |

75

### Past Due Loans and Non-Performing Assets

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

|  |  |  |
| --- | ---: | --- |
| 1 Rating | — | Minimal Risk (Loss Potential — none or extremely low) (Superior asset quality, excellent liquidity, minimal leverage) |
| 2 Rating | — | Modest Risk (Loss Potential demonstrably low) (Very good asset quality and liquidity, strong leverage capacity) |
| 3 Rating | — | Average Risk (Loss Potential low but no longer refutable) (Mostly satisfactory asset quality and liquidity, good leverage capacity) |
| 4 Rating | — | Above Average Risk (Loss Potential variable, but some potential for deterioration) (Acceptable asset quality, little excess liquidity, modest leverage capacity) |
| 5 Rating | — | Management Attention Risk (Loss Potential moderate if corrective action not taken) (Generally acceptable asset quality, somewhat strained liquidity, minimal leverage capacity) |
| 6 Rating | — | Special Mention (Loss Potential moderate if corrective action not taken) (Assets in this category are currently protected, potentially weak, but not to the point of substandard classification) |
| 7 Rating | — | Substandard Accrual (Loss Potential distinct possibility that the bank may sustain some loss, but no discernible impairment) (Must have well defined weaknesses that jeopardize the liquidation of the debt) |
| 8 Rating | — | Substandard Non-accrual (Loss Potential well documented probability of loss, including potential impairment) (Must have well defined weaknesses that jeopardize the liquidation of the debt) |
| 9 Rating | — | Doubtful (Loss Potential extremely high) (These assets have all the weaknesses in those classified “substandard” with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly improbable) |
| 10 Rating | — | Loss (fully charged-off) (Loans in this category are considered fully uncollectible.) |

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

The Company’s problem loan reporting system automatically includes all loans with credit risk ratings of 6 through 9. This system is designed to provide an on-going detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible or an impairment reserve may be established. The Company’s impairment analysis utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real-estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions. An appraisal is ordered at least once a year for these loans, or more often if market conditions dictate. In the event that the underlying value of the collateral cannot be easily determined, a detailed valuation methodology is prepared by the Managed Asset Division. A summary of this analysis is provided to the directors’ loan committee of the bank which originated the credit for approval of a charge-off, if necessary.

Through the credit risk rating process, loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to non-accrual status, a charge-off or the establishment of a specific impairment reserve. In the event a collateral shortfall is identified during the credit review process, the Company will work with the borrower for a principal reduction and/or a pledge of additional collateral and/or additional guarantees. In the event that these options are not available, the loan may be subject to a downgrade of the credit risk rating. If we determine that a loan amount, or portion thereof, is uncollectible the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Managed Asset Division undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses.

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

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

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

#### Non-Performing Assets, excluding covered assets

The following table sets forth the Company’s non-performing assets and TDRs performing under the contractual terms of the loan agreement, excluding covered assets and PCI loans, as of the dates shown:

*(Dollars in thousands)*

| Loans past due greater than 90 days and still accruing (1): | 2017 (3) | 2016 | 2015 | 2014 | 2013 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commercial | **$—** | $174 | $541 | $474 | $— |
| Commercial real estate | **—** | — | — | — | 230 |
| Home equity | **—** | — | — | — | — |
| Residential real estate | **3,278** | — | — | — | — |
| Premium finance receivables – commercial | **9,242** | 7,962 | 10,294 | 7,665 | 8,842 |
| Premium finance receivables – life insurance | **—** | 3,717 | — | — | — |
| Consumer and other | **40** | 144 | 150 | 119 | 105 |
| Total loans past due greater than 90 days and still accruing | **$12,560** | $11,997 | $10,985 | $8,258 | $9,177 |
| **Non-accrual loans (2):** |  |  |  |  |  |
| Commercial | **15,696** | 15,875 | 12,712 | 9,157 | 10,780 |
| Commercial real estate | **22,048** | 21,924 | 26,645 | 26,605 | 46,658 |
| Home equity | **8,978** | 9,761 | 6,848 | 6,174 | 10,071 |
| Residential real estate | **17,977** | 12,749 | 12,043 | 15,502 | 14,974 |
| Premium finance receivables – commercial | **12,163** | 14,709 | 14,561 | 12,705 | 10,537 |
| Premium finance receivables – life insurance | **—** | — | — | — | — |
| Consumer and other | **740** | 439 | 263 | 277 | 1,137 |
| Total non-accrual loans | **$77,602** | $75,457 | $73,072 | $70,420 | $94,157 |
| **Total non-performing loans:** |  |  |  |  |  |
| Commercial | **$15,696** | $16,049 | $13,253 | $9,631 | $10,780 |
| Commercial real estate | **22,048** | 21,924 | 26,645 | 26,605 | 46,888 |
| Home equity | **8,978** | 9,761 | 6,848 | 6,174 | 10,071 |
| Residential real estate | **21,255** | 12,749 | 12,043 | 15,502 | 14,974 |
| Premium finance receivables – commercial | **21,405** | 22,671 | 24,855 | 20,370 | 19,379 |
| Premium finance receivables – life insurance | **—** | 3,717 | — | — | — |
| Consumer and other | **780** | 583 | 413 | 395 | 1,242 |
| Total non-performing loans | **$90,162** | $87,454 | $84,057 | $78,677 | $103,334 |
| Other real estate owned | **20,244** | 17,699 | 26,849 | 36,419 | 43,398 |
| Other real estate owned – from acquisitions | **20,402** | 22,583 | 17,096 | 9,223 | 7,056 |
| Other repossessed assets | **153** | 581 | 174 | 303 | 542 |
| Total non-performing assets | **$130,961** | $128,317 | $128,176 | $124,622 | $154,330 |
| TDRs performing under the contractual terms of the loan agreement | **$39,683** | $29,911 | $42,744 | $69,697 | $78,610 |
| **Total non-performing loans by category as a percent of its own respective category’s period-end balance:** |  |  |  |  |  |
| Commercial | **0.23%** | 0.27% | 0.28% | 0.25% | 0.33% |
| Commercial real estate | **0.34** | 0.35 | 0.48 | 0.59 | 1.11 |
| Home equity | **1.35** | 1.34 | 0.87 | 0.86 | 1.40 |
| Residential real estate | **2.55** | 1.81 | 1.98 | 3.21 | 3.44 |
| Premium finance receivables – commercial | **0.81** | 0.91 | 1.05 | 0.87 | 0.89 |
| Premium finance receivables – life insurance | **—** | 0.11 | — | — | — |
| Consumer and other | **0.72** | 0.48 | 0.28 | 0.26 | 0.74 |
| Total non-performing loans | **0.42%** | 0.44% | 0.49% | 0.55% | 0.80% |
| **Total non-performing assets, as a percentage of total assets** | **0.47%** | 0.50% | 0.56% | 0.62% | 0.85% |
| **Allowance for loan losses as a percentage of total non-performing loans** | **152.95%** | 139.83% | 125.39% | 116.56% | 93.80% |

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

*(2) Non-accrual loans included TDRs totaling $10.1 million, $11.8 million, $9.1 million, $12.6 million and $28.5 million as of the years ended 2017, 2016, 2015, 2014 and 2013, respectively.*

*(3) Includes $2.6 million of non-performing loans and $2.9 million of other real estate owned reclassified from covered assets as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017.*

#### Loan Portfolio Aging

The following table shows, as of December 31, 2017, only 0.5% of the entire portfolio is in a non-performing loan status (non-accrual or greater than 90 days past due and still accruing interest) with only 0.7% either one or two payments past due. In total,

98.8% of the Company’s total loan portfolio as of December 31, 2017 is current according to the original contractual terms of the loan agreements.

The tables below show the aging of the Company’s loan portfolio at December 31, 2017 and 2016:

| As of December 31, 2017 (Dollars in thousands) Loan Balances: Commercial | Non- accrual | 90+ days and still accruing | 60-89 days past due | 30-59 days past due | Current | Total Loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial, industrial and other | **$11,260** | **$—** | **$3,746** | **$13,392** | **$4,314,107** | **$4,342,505** |
| Franchise | **2,447** | **—** | **—** | **—** | **845,150** | **847,597** |
| Mortgage warehouse lines of credit | **—** | **—** | **—** | **4,000** | **190,523** | **194,523** |
| Asset-based lending | **1,550** | **—** | **283** | **10,057** | **968,576** | **980,466** |
| Leases | **439** | **—** | **3** | **1,958** | **410,772** | **413,172** |
| PCI - commercial (1) | **—** | **877** | **186** | **—** | **8,351** | **9,414** |
| Total commercial | **$15,696** | **$877** | **$4,218** | **$29,407** | **$6,737,479** | **$6,787,677** |
| Commercial real-estate: |  |  |  |  |  |  |
| Construction | **3,143** | **—** | **—** | **200** | **742,171** | **745,514** |
| Land | **188** | **—** | **—** | **5,156** | **121,140** | **126,484** |
| Office | **2,438** | **—** | **—** | **4,458** | **887,937** | **894,833** |
| Industrial | **811** | **—** | **—** | **2,412** | **879,796** | **883,019** |
| Retail | **12,328** | **—** | **668** | **148** | **938,383** | **951,527** |
| Multi-family | **—** | **—** | **—** | **1,034** | **914,610** | **915,644** |
| Mixed use and other | **3,140** | **—** | **1,423** | **9,641** | **1,921,501** | **1,935,705** |
| PCI - commercial real-estate (1) | **—** | **7,135** | **2,255** | **6,277** | **112,225** | **127,892** |
| Total commercial real-estate | **$22,048** | **$7,135** | **$4,346** | **$29,326** | **$6,517,763** | **$6,580,618** |
| Home equity | **8,978** | **—** | **518** | **4,634** | **648,915** | **663,045** |
| Residential real estate, including PCI | **17,977** | **5,304** | **1,303** | **8,378** | **799,158** | **832,120** |
| Premium finance receivables |  |  |  |  |  |  |
| Commercial insurance loans | **12,163** | **9,242** | **17,796** | **15,849** | **2,579,515** | **2,634,565** |
| Life insurance loans | **—** | **—** | **4,837** | **10,017** | **3,820,936** | **3,835,790** |
| PCI - life insurance loans (1) | **—** | **—** | **—** | **—** | **199,269** | **199,269** |
| Consumer and other | **740** | **101** | **242** | **727** | **105,903** | **107,713** |
| Total loans, net of unearned income | **$77,602** | **$22,659** | **$33,260** | **$98,338** | **$21,408,938** | **$21,640,797** |

| As of December 31, 2017 Aging as a % of Loan Balance: Commercial | Non- accrual | 90+ days and still accruing | 60-89 days past due | 30-59 days past due | Current | Total Loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial, industrial and other | **0.3%** | **—%** | **0.1%** | **0.3%** | **99.3%** | **100.0%** |
| Franchise | **0.3** | **—** | **—** | **—** | **99.7** | **100.0** |
| Mortgage warehouse lines of credit | **—** | **—** | **—** | **2.1** | **97.9** | **100.0** |
| Asset-based lending | **0.2** | **—** | **—** | **1.0** | **98.8** | **100.0** |
| Leases | **0.1** | **—** | **—** | **0.5** | **99.4** | **100.0** |
| PCI - commercial (1) | **—** | **9.3** | **2.0** | **—** | **88.7** | **100.0** |
| Total commercial | **0.2%** | **—%** | **0.1%** | **0.4%** | **99.3%** | **100.0%** |
| Commercial real estate: |  |  |  |  |  |  |
| Construction | **0.4** | **—** | **—** | **—** | **99.6** | **100.0** |
| Land | **0.1** | **—** | **—** | **4.1** | **95.8** | **100.0** |
| Office | **0.3** | **—** | **—** | **0.5** | **99.2** | **100.0** |
| Industrial | **0.1** | **—** | **—** | **0.3** | **99.6** | **100.0** |
| Retail | **1.3** | **—** | **0.1** | **—** | **98.6** | **100.0** |
| Multi-family | **—** | **—** | **—** | **0.1** | **99.9** | **100.0** |
| Mixed use and other | **0.2** | **—** | **0.1** | **0.5** | **99.2** | **100.0** |
| PCI - commercial real-estate (1) | **—** | **5.6** | **1.8** | **4.9** | **87.7** | **100.0** |
| Total commercial real-estate | **0.3%** | **0.1%** | **0.1%** | **0.4%** | **99.1%** | **100.0%** |
| Home equity | **1.4** | **—** | **0.1** | **0.7** | **97.8** | **100.0** |
| Residential real estate, including PCI | **2.2** | **0.6** | **0.2** | **1.0** | **96.0** | **100.0** |
| Premium finance receivables |  |  |  |  |  |  |
| Commercial insurance loans | **0.5** | **0.4** | **0.7** | **0.6** | **97.8** | **100.0** |
| Life insurance loans | **—** | **—** | **0.1** | **0.3** | **99.6** | **100.0** |
| PCI - life insurance loans (1) | **—** | **—** | **—** | **—** | **100.0** | **100.0** |
| Consumer and other | **0.7** | **0.1** | **0.2** | **0.7** | **98.3** | **100.0** |
| Total loans, net of unearned income | **0.4%** | **0.1%** | **0.2%** | **0.5%** | **98.8%** | **100.0%** |

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

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

| As of December 31, 2016 Aging as a % of Loan Balance: Commercial | Nonaccrual | 90+ days and still accruing | 60-89 days past due | 30-59 days past due | Current | Total Loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial, industrial and other | 0.4% | —% | 0.1% | 0.3% | 99.2% | 100.0% |
| Franchise | — | — | — | 0.1 | 99.9 | 100.0 |
| Mortgage warehouse lines of credit | — | — | — | — | 100.0 | 100.0 |
| Asset-based lending | 0.2 | — | — | 0.2 | 99.6 | 100.0 |
| Leases | 0.2 | — | — | 0.5 | 99.3 | 100.0 |
| PCI - commercial (1) | — | 10.1 | 0.6 | 14.5 | 74.8 | 100.0 |
| Total commercial | 0.3% | —% | —% | 0.3% | 99.4% | 100.0% |
| Commercial real-estate |  |  |  |  |  |  |
| Construction | 0.4% | —% | —% | 0.3% | 99.3% | 100.0% |
| Land | 0.4 | — | 0.2 | — | 99.4 | 100.0 |
| Office | 0.5 | — | 0.5 | 0.1 | 98.9 | 100.0 |
| Industrial | 0.9 | — | 0.6 | 0.3 | 98.2 | 100.0 |
| Retail | 0.1 | — | 0.1 | 0.4 | 99.4 | 100.0 |
| Multi-family | 0.1 | — | — | 0.2 | 99.7 | 100.0 |
| Mixed use and other | 0.3 | — | 0.1 | 0.6 | 99.0 | 100.0 |
| PCI - commercial real-estate (1) | — | 9.5 | 2.2 | 5.2 | 83.1 | 100.0 |
| Total commercial real-estate | 0.4% | 0.3% | 0.2% | 0.5% | 98.6% | 100.0% |
| Home equity | 1.3 | — | 0.2 | 0.9 | 97.6 | 100.0 |
| Residential real estate, including PCI | 1.8 | 0.2 | 0.1 | 1.2 | 96.7 | 100.0 |
| Premium finance receivables |  |  |  |  |  |  |
| Commercial insurance loans | 0.6 | 0.3 | 0.2 | 0.6 | 98.3 | 100.0 |
| Life insurance loans | — | 0.1 | 0.5 | 0.5 | 98.9 | 100.0 |
| PCI - life insurance loans (1) | — | — | — | — | 100.0 | 100.0 |
| Consumer and other | 0.4 | 0.2 | 0.1 | 0.7 | 98.6 | 100.0 |
| Total loans, net of unearned income, excluding covered loans | 0.4% | 0.2% | 0.2% | 0.5% | 98.7% | 100.0% |
| Covered loans | 3.6 | 4.3 | 0.4 | 2.7 | 89.0 | 100.0 |
| Total loans, net of unearned income | 0.4% | 0.2% | 0.2% | 0.5% | 98.7% | 100.0% |

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

As of December 31, 2017, only $33.3 million of all loans, or 0.2%, were 60 to 89 days past due and $98.3 million, or 0.5%, were 30 to 59 days (or one payment) past due. As of December 31, 2016, $43.7 million of all loans, excluding covered loans, or 0.2%, were 60 to 89 days past due and $95.8 million, or 0.5%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company’s home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at December 31, 2017 that are current with regard to the contractual terms of the loan agreement represent 97.8% of the total home equity portfolio. Residential real estate loans, including PCI loans, at December 31, 2017 that are current with regards to the contractual terms of the loan agreements comprise 96.0% of these residential real estate loans outstanding.

### Non-performing Loans Rollforward

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

*(Dollars in thousands)*

|  | 2017 | 2016 |
| --- | ---: | ---: |
| Balance at beginning of period | **$87,454** | $84,057 |
| Additions, net from non-covered portfolio | **55,738** | 42,927 |
| Additions, net from covered non-performing loans subsequent to loss share expiration | **2,572** | 81 |
| Return to performing status | **(3,596)** | (3,260) |
| Payments received | **(27,202)** | (19,976) |
| Transfers to OREO and other repossessed assets | **(9,236)** | (7,046) |
| Charge-offs | **(10,362)** | (10,323) |
| Net change for niche loans (1) | **(5,206)** | 994 |
| Balance at end of period | **$90,162** | $87,454 |

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

PCI loans are excluded from non-performing loans as they continue to earn interest income from the related accretable yield, independent of performance with contractual terms of the loan. See Note 5, “Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans,” of the Consolidated Financial Statements in Item 8 for further discussion of non-performing loans and the loan aging during the respective periods.

### Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of the probable and reasonably estimable loan losses that our loan portfolio is expected to incur. The allowance for loan losses is determined quarterly using a methodology that incorporates important risk characteristics of each loan, as described below under “How We Determine the Allowance for Credit Losses” in this Item 7. This process is subject to review at each of our bank subsidiaries by the applicable regulatory authority, including the FRB of Chicago, the OCC, the State of Illinois and the State of Wisconsin.

The following table sets forth the allocation of the allowance for loan and covered loan losses and the allowance for losses on lending-related commitments by major loan type and the percentage of loans in each category to total loans for the past five fiscal years:

*(Dollars in thousands)*

| Allowance for loan losses and allowance for covered loan losses allocation: | December 31, 2017 Amount | % of Loan Type to Total Loans | December 31, 2016 Amount | % of Loan Type to Total Loans | December 31, 2015 Amount | % of Loan Type to Total Loans | December 31, 2014 Amount | % of Loan Type to Total Loans | December 31, 2013 Amount | % of Loan Type to Total Loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial | **$57,811** | **31%** | $44,493 | 30% | $36,135 | 27% | $31,699 | 26% | $23,092 | 25% |
| Commercial real-estate | **55,227** | **30** | 51,422 | 31 | 43,758 | 32 | 35,533 | 31 | 48,658 | 32 |
| Home equity | **10,493** | **3** | 11,774 | 4 | 12,012 | 5 | 12,500 | 5 | 12,611 | 5 |
| Residential real-estate | **6,688** | **4** | 5,714 | 4 | 4,734 | 3 | 4,218 | 3 | 5,108 | 3 |
| Premium finance receivables – commercial | **5,356** | **12** | 6,125 | 12 | 6,016 | 14 | 5,726 | 16 | 4,842 | 16 |
| Premium finance receivables – life insurance | **1,490** | **19** | 1,500 | 18 | 1,217 | 17 | 787 | 16 | 741 | 15 |
| Consumer and other | **840** | **1** | 1,263 | 1 | 1,528 | 1 | 1,242 | 1 | 1,870 | 1 |
| **Total allowance for loan losses** | **$137,905** | **100%** | $122,291 | 100% | $105,400 | 99% | $91,705 | 98% | $96,922 | 97% |
| Covered loans | **—** | **—** | 1,322 | — | 3,026 | 1 | 2,131 | 2 | 10,092 | 3 |
| **Total allowance for loan losses and allowance for covered loan losses** | **$137,905** | **100%** | $123,613 | 100% | $108,426 | 100% | $93,836 | 100% | $107,014 | 100% |
| **Allowance category as a percent of total allowance for loan losses and allowance for covered loan losses:** |  |  |  |  |  |  |  |  |  |  |
| Commercial | **42%** |  | 36% |  | 33% |  | 34% |  | 22% |  |
| Commercial real-estate | **40** |  | 42 |  | 40 |  | 38 |  | 45 |  |
| Home equity | **7** |  | 9 |  | 11 |  | 13 |  | 12 |  |
| Residential real-estate | **5** |  | 5 |  | 4 |  | 4 |  | 5 |  |
| Premium finance receivables—commercial | **4** |  | 5 |  | 6 |  | 6 |  | 5 |  |
| Premium finance receivables—life insurance | **1** |  | 1 |  | 1 |  | 1 |  | 1 |  |
| Consumer and other | **1** |  | 1 |  | 2 |  | 2 |  | 1 |  |
| **Total allowance for loan losses** | **100%** |  | 99% |  | 97% |  | 98% |  | 91% |  |
| Covered loans | **—** |  | 1 |  | 3 |  | 2 |  | 9 |  |
| **Total allowance for loan losses** | **100%** |  | 100% |  | 100% |  | 100% |  | 100% |  |
| **Allowance for losses on lending-related commitments:** |  |  |  |  |  |  |  |  |  |  |
| Commercial and commercial real estate | **$1,269** |  | $1,673 |  | $949 |  | $775 |  | $719 |  |
| **Total allowance for credit losses including allowance for covered loan losses** | **$139,174** |  | $125,286 |  | $109,375 |  | $94,611 |  | $107,733 |  |

Management determined that the allowance for loan losses was appropriate at December 31, 2017, and that the loan portfolio is well diversified and well secured, without undue concentration in any specific risk area. While this process involves a high degree of management judgment, the allowance for credit losses is based on a comprehensive, well documented, and consistently applied analysis of the Company’s loan portfolio. This analysis takes into consideration all available information existing as of the financial statement date, including environmental factors such as economic, industry, geographical and political factors. The relative level of allowance for credit losses is reviewed and compared to industry peers. This review encompasses the levels of total nonperforming loans, portfolio mix, portfolio concentrations, current geographic risks and overall levels of net charge-offs. Historical trending of both the Company’s results and the industry peers is also reviewed to analyze comparative significance.

#### Allowance for Credit Losses, Excluding Covered Loans

The following tables summarize the activity in our allowance for credit losses during the last five fiscal years.

*(Dollars in thousands)*

|  | 2017 | 2016 | 2015 | 2014 | 2013 |
| --- | ---: | ---: | ---: | ---: | ---: |
| **Allowance for loan losses at beginning of year** | **$122,291** | $105,400 | $91,705 | $96,922 | $107,351 |
| **Provision for credit losses** | **29,982** | 34,790 | 33,747 | 22,889 | 45,984 |
| **Other adjustments (1)** | **573** | (291) | (737) | (824) | (938) |
| **Reclassification from (to) allowance for unfunded lending-related commitments** | **69** | (725) | (138) | (56) | 640 |
| **Charge-offs:** |  |  |  |  |  |
| Commercial | **5,159** | 7,915 | 4,253 | 4,153 | 14,123 |
| Commercial real estate | **4,236** | 1,930 | 6,543 | 15,788 | 32,745 |
| Home equity | **3,952** | 3,998 | 4,227 | 3,895 | 6,361 |
| Residential real estate | **1,284** | 1,730 | 2,903 | 1,750 | 2,958 |
| Premium finance receivables – commercial | **7,335** | 8,193 | 7,060 | 5,722 | 5,063 |
| Premium finance receivables – life insurance | **—** | — | — | 4 | 17 |
| Consumer and other | **729** | 925 | 521 | 792 | 1,110 |
| Total charge-offs | **$22,695** | $24,691 | $25,507 | $32,104 | $62,377 |
| **Recoveries:** |  |  |  |  |  |
| Commercial | **1,870** | 1,594 | 1,432 | 1,198 | 1,655 |
| Commercial real estate | **2,190** | 2,945 | 2,840 | 1,334 | 2,526 |
| Home equity | **746** | 484 | 312 | 535 | 432 |
| Residential real estate | **452** | 225 | 283 | 335 | 289 |
| Premium finance receivables – commercial | **2,128** | 2,374 | 1,288 | 1,139 | 1,108 |
| Premium finance receivables – life insurance | **—** | — | 16 | 11 | 13 |
| Consumer and other | **299** | 186 | 159 | 326 | 239 |
| Total recoveries | **$7,685** | $7,808 | $6,330 | $4,878 | $6,262 |
| Net charge-offs, excluding covered loans | **$(15,010)** | $(16,883) | $(19,177) | $(27,226) | $(56,115) |
| **Allowance for loan losses at year end** | **$137,905** | $122,291 | $105,400 | $91,705 | $96,922 |
| **Allowance for unfunded lending-related commitments at year end** | **$1,269** | $1,673 | $949 | $775 | $719 |
| **Allowance for credit losses at year end** | **$139,174** | $123,964 | $106,349 | $92,480 | $97,641 |
| **Net charge-offs (recoveries) by category as a percentage of its own respective category’s average:** |  |  |  |  |  |
| Commercial | **0.05%** | 0.12% | 0.07% | 0.08% | 0.41% |
| Commercial real estate | **0.03** | (0.02) | 0.07 | 0.33 | 0.74 |
| Home equity | **0.46** | 0.46 | 0.52 | 0.47 | 0.79 |
| Residential real estate | **0.08** | 0.14 | 0.29 | 0.19 | 0.35 |
| Premium finance receivables – commercial | **0.20** | 0.24 | 0.24 | 0.19 | 0.19 |
| Premium finance receivables – life insurance | **0.00** | 0.00 | 0.00 | 0.00 | 0.00 |
| Consumer and other | **0.34** | 0.54 | 0.23 | 0.28 | 0.47 |
| Total loans, net of unearned income, excluding covered loans | **0.07%** | 0.09% | 0.12% | 0.20% | 0.44% |
| **Net charge-offs as a percentage of the provision for credit losses** | **50.06%** | 48.53% | 56.83% | 118.94% | 122.04% |
| **Year-end total loans (excluding covered loans)** | **$21,640,797** | $19,703,172 | $17,118,117 | $14,409,398 | $12,896,602 |
| **Allowance for loan losses as a percentage of loans at end of year** | **0.64%** | 0.62% | 0.62% | 0.64% | 0.75% |
| **Allowance for credit losses as a percentage of loans at end of year** | **0.64%** | 0.63% | 0.62% | 0.64% | 0.76% |

*(1) Includes $742,000 of allowance for covered loan losses reclassified as a result of the termination of all existing loss share agreements with the FDIC during the fourth quarter of 2017.*

The allowance for credit losses, excluding the allowance for covered loan losses, is comprised of an allowance for loan losses, which is determined with respect to loans that we have originated, and an allowance for lending-related commitments. Our allowance for lending-related commitments is determined with respect to funds that we have committed to lend but for which funds have not yet been disbursed and is computed using a methodology similar to that used to determine the allowance for loan losses. The allowance for unfunded lending-related commitments totaled $1.3 million as of December 31, 2017 compared to $1.7 million as of December 31, 2016.

Additions to the allowance for loan losses are charged to earnings through the provision for credit losses. Charge-offs represent the amount of loans that have been determined to be uncollectible during a given period, and are deducted from the allowance for loan losses, and recoveries represent the amount of collections received from loans that had previously been charged off, and are credited to the allowance for loan losses. See Note 5, “Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans,” of the Consolidated Financial Statements presented under Item 8 of this report for further discussion of activity within the allowance for loan losses during the period and the relationship with respective loan balances for each loan category and the total loan portfolio, excluding covered loans.

#### How We Determine the Allowance for Credit Losses

The allowance for loan losses includes an element for estimated probable but undetected losses and for imprecision in the credit risk models used to calculate the allowance. If the loan is impaired, the Company analyzes the loan for purposes of calculating our specific impairment reserves as part of the Problem Loan Reporting system review. A general reserve is separately determined for loans not considered impaired. See Note 5, “Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans,” of the Consolidated Financial Statements presented under Item 8 of this report for further discussion of the specific impairment reserve and general reserve as it relates to the allowance for credit losses for each loan category and the total loan portfolio, excluding covered loans.

#### Specific Impairment Reserves:

Loans with a credit risk rating of a 6 through 9 are reviewed on a monthly basis to determine if (a) an amount is deemed uncollectible (a charge-off) or (b) it is probable that the Company will be unable to collect amounts due in accordance with the original contractual terms of the loan (impaired loan). If a loan is impaired, the carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for collateral dependent loans, to the fair value of the collateral less the estimated cost to sell. Any shortfall is recorded as a specific impairment reserve.

At December 31, 2017, the Company had $105.1 million of impaired loans with $36.1 million of this balance requiring $8.0 million of specific impairment reserves. At December 31, 2016, the Company had $90.5 million of impaired loans with $33.1 million of this balance requiring $6.4 million of specific impairment reserves. The most significant fluctuation in impaired loans requiring specific impairment reserves from 2016 to 2017 occurred within the commercial, industrial and other, retail commercial real estate and industrial commercial real estate portfolios. The recorded investment and specific impairment reserves in commercial, industrial and other portfolio increased $3.6 million and $2.9 million, respectively, which was primarily the result of one loan becoming non-performing and requiring $2.3 million of specific impairment reserves. The recorded investment and specific impairment reserves in retail commercial real estate portfolio increased by $13.8 million and $1.2 million, respectively, due to one relationship becoming non-performing and requiring $1.2 million of specific impairment reserves. The recorded investment and specific impairment reserves in industrial real estate portfolio decreased $4.8 million and $1.8 million, respectively, as a result of a sale and partial charge-off of one relationship with a recorded investment of $4.0 million and a specific impairment reserve of $1.7 million

See Note 5, “Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans,” of the Consolidated Financial Statements presented under Item 8 of this report for further discussion of impaired loans and the related specific impairment reserve.

#### General Reserves:

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

We determine this component of the allowance for loan losses by classifying each loan into (i) categories based on the type of collateral that secures the loan (if any), and (ii) one of ten categories based on the credit risk rating of the loan, as described above under “Past Due Loans and Non-Performing Assets” in this Item 7. Each combination of collateral and credit risk rating is then assigned a specific loss factor that incorporates the following factors:

- historical loss experience;
- changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;
- changes in national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio;
- changes in the nature and volume of the portfolio and in the terms of the loans;
- changes in the experience, ability, and depth of lending management and other relevant staff;
- changes in the volume and severity of past due loans, the volume of non-accrual loans, and the volume and severity of adversely classified or graded loans;
- changes in the quality of the bank’s loan review system;
- changes in the underlying collateral for collateral dependent loans;
- the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and
- the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the bank’s existing portfolio.

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

#### Home Equity and Residential Real Estate Loans

The determination of the appropriate allowance for loan losses for residential real estate and home equity loans differs slightly from the process used for commercial and commercial real estate loans. The same credit risk rating system, Problem Loan Reporting system, collateral coding methodology and loss factor assignment are used. The only significant difference is in how the credit risk ratings are assigned to these loans.

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

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

#### Premium Finance Receivables

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

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

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

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

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

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

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

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

Having determined the net value based on the factors such as those noted above and compared that value to the book value of the loan, the Company arrives at a charge-off amount or a specific reserve included in the allowance for loan losses. In summary, for collateral dependent loans, appraisals are used as the fair value starting point in the estimate of net value. Estimated costs to sell are deducted from the appraised value to arrive at the net appraised value. Although an external appraisal is the primary source of valuation utilized for charge-offs on collateral dependent loans, alternative sources of valuation may become available between appraisal dates. As a result, we may utilize values obtained through these 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 December 31, 2017, the Company had $49.8 million in loans classified as TDRs. The $49.8 million in TDRs represents 80 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 $41.7 million representing 89 credits at December 31, 2016.

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 5, “Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans,” of Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K 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 nonperforming loans. Each TDR was reviewed for impairment at December 31, 2017 and approximately $3.9 million of impairment was present and appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for loan losses. Additionally, the Company was committed to lend additional funds to borrowers totaling $1.8 million and $7,000 at December 31, 2017 and 2016, respectively, under the contractual terms related to TDRs.

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

*(Dollars in thousands)*

| Accruing TDRs: | December 31, 2017 | December 31, 2016 |
| --- | ---: | ---: |
| Commercial | **$19,917** | $4,643 |
| Commercial real estate | **16,160** | 19,993 |
| Residential real estate and other | **3,606** | 5,275 |
| Total accruing TDRs | **$39,683** | $29,911 |
| Non-accrual TDRs: (1) |  |  |
| Commercial | **$4,000** | $1,487 |
| Commercial real estate | **1,340** | 8,153 |
| Residential real estate and other | **4,763** | 2,157 |
| Total non-accrual TDRs | **$10,103** | $11,797 |
| **Total TDRs:** |  |  |
| Commercial | **$23,917** | $6,130 |
| Commercial real estate | **17,500** | 28,146 |
| Residential real estate and other | **8,369** | 7,432 |
| Total TDRs | **$49,786** | $41,708 |
| **Weighted-average contractual interest rate of TDRs** | **4.40%** | 4.33% |

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

#### TDR Rollforward

The table below presents a summary of TDRs as of December 31, 2017, 2016 and 2015, and shows the changes in the balance during those periods:

| Year Ended December 31, 2017 (Dollars in thousands) | Commercial | Commercial Real Estate | Residential Real Estate and Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | **$6,130** | **$28,146** | **$7,432** | **$41,708** |
| Additions during the period | **20,031** | **1,245** | **3,049** | **24,325** |
| Reductions: |  |  |  |  |
| Charge-offs | **(454)** | **(1,024)** | **(156)** | **(1,634)** |
| Transferred to OREO and other repossessed assets | **—** | **(770)** | **(165)** | **(935)** |
| Removal of TDR loan status (1) | **(610)** | **(2,331)** | **—** | **(2,941)** |
| Payments received | **(1,180)** | **(7,766)** | **(1,791)** | **(10,737)** |
| Balance at period end | **$23,917** | **$17,500** | **$8,369** | **$49,786** |

| Year Ended December 31, 2016 (Dollars in thousands) | Commercial | Commercial Real Estate | Residential Real Estate and Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | $5,747 | $38,707 | $7,399 | $51,853 |
| Additions during the period | 3,294 | 8,521 | 1,082 | 12,897 |
| Reductions: |  |  |  |  |
| Charge-offs | (1,482) | (1,051) | (212) | (2,745) |
| Transferred to OREO and other repossessed assets | — | (1,433) | (535) | (1,968) |
| Removal of TDR loan status (1) | — | (7,816) | — | (7,816) |
| Payments received | (1,429) | (8,782) | (302) | (10,513) |
| Balance at period end | $6,130 | $28,146 | $7,432 | $41,708 |

| Year Ended December 31, 2015 (Dollars in thousands) | Commercial | Commercial Real Estate | Residential Real Estate and Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | $7,576 | $67,623 | $7,076 | $82,275 |
| Additions during the period | — | 370 | 1,664 | 2,034 |
| Reductions: |  |  |  |  |
| Charge-offs | (397) | (1,975) | (140) | (2,512) |
| Transferred to OREO and other repossessed assets | (562) | (2,290) | (414) | (3,266) |
| Removal of TDR loan status (1) | (490) | (13,019) | — | (13,509) |
| Payments received | (380) | (12,002) | (787) | (13,169) |
| Balance at period end | $5,747 | $38,707 | $7,399 | $51,853 |

*(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.*

#### Potential Problem Loans

Management believes that any loan where there are serious doubts as to the ability of such borrowers to comply with the present loan repayment terms should be identified as a non-performing loan and should be included in the disclosure of “Past Due Loans and Non-Performing Assets.” Accordingly, at the periods presented in this Annual Report on Form 10-K, the Company has no potential problem loans as defined by SEC regulations.

#### Loan Concentrations

Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities which would cause them to be similarly impacted by economic or other conditions. The Company had no concentrations of loans exceeding 10% of total loans at December 31, 2017, except for loans included in the specialty finance operating segment, which are diversified throughout the United States and Canada.

#### 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, excluding covered other real estate owned, and shows the activity for the respective periods and the balance for each property type:

*(Dollars in thousands)*

|  | Year Ended December 31, 2017 | December 31, 2016 |
| --- | ---: | ---: |
| Balance at beginning of period | **$40,282** | $43,945 |
| Disposal/resolved | **(15,412)** | (25,174) |
| Transfers in at fair value, less costs to sell | **13,864** | 9,225 |
| Transfers in from covered OREO subsequent to loss share expiration | **3,611** | 7,513 |
| Additions from acquisition | **—** | 8,294 |
| Fair value adjustments | **(1,699)** | (3,521) |
| Balance at end of period | **$40,646** | $40,282 |

*(Dollars in thousands)*

|  | Period End December 31, 2017 | December 31, 2016 |
| --- | ---: | ---: |
| Residential real estate | **$7,515** | $8,063 |
| Residential real estate development | **2,221** | 1,349 |
| Commercial real estate | **30,910** | 30,870 |
| Total | **$40,646** | $40,282 |

### Liquidity and Capital Resources

The Company and the banks are subject to various regulatory capital requirements established by the federal banking agencies that take into account risk attributable to balance sheet and off-balance sheet activities. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly discretionary — actions by regulators, that if undertaken could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the banks must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Federal Reserve’s capital guidelines require bank holding companies to maintain a minimum ratio of qualifying total capital to risk-weighted assets of 8.0%, of which at least 4.50% must be in the form of Common Equity Tier 1 capital and 6.0% must be in the form of Tier 1 capital. The Federal Reserve also requires a minimum leverage ratio of Tier 1 capital to total assets of 4.0%. In addition the Federal Reserve continues to consider the Tier 1 leverage ratio in evaluating proposals for expansion or new activities.

The following table summarizes the capital guidelines for bank holding companies, as well as certain ratios relating to the Company’s equity and assets as of December 31, 2017, 2016 and 2015:

|  | Minimum Ratios | Minimum Ratio + Capital Conservation Buffer | Well Capitalized Ratios | 2017 | 2016 | 2015 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Common Equity Tier 1 capital to risk-weighted assets | 4.5% | 5.75% | 6.5% | **9.4%** | 8.6% | 8.4% |
| Tier 1 capital to risk-weighted assets | 6.0 | 7.25 | 8.0 | **9.9** | 9.7 | 10.0 |
| Total capital to risk-weighted assets | 8.0 | 9.25 | 10.0 | **12.0** | 11.9 | 12.2 |
| Tier 1 leverage ratio | 4.0 | N/A | 5.0 | **9.3** | 8.9 | 9.1 |
| Total average equity to total average assets | N/A | N/A | N/A | **10.8** | 10.5 | 10.6 |
| Dividend payout ratio | N/A | N/A | N/A | **12.7** | 13.1 | 15.0 |

As reflected in the table, each of the Company’s capital ratios at December 31, 2017, exceeded the well-capitalized ratios established by the Federal Reserve. Refer to Note 18 of the Consolidated Financial Statements for further information on the capital positions of the banks.

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 12, 13, 14 and 22 of the Consolidated Financial Statements in Item 8 for further information on the Company’s subordinated notes, other borrowings, junior subordinated debentures and shareholders’ equity, respectively. Management is committed to maintaining the Company’s capital levels above the “Well Capitalized” levels established by the Federal Reserve for bank holding companies.

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

In June 2015, the Company issued and sold 5,000,000 shares of the Series D Preferred Stock, with a liquidation preference of $25 per share for $125.0 million in a public offering. Dividends on the Series D Preferred Stock are payable quarterly in arrears when, as and if declared by the Board at a rate of 6.50% per annum on the original liquidation preference of $25 per share from the original issuance date to, but excluding, July 15, 2025. From (and including) July 15, 2025, dividends on the Series D Preferred Stock will be payable quarterly in arrears, when, as and if declared by the Board, at a floating rate equal to the then-applicable three-month LIBOR (as defined in the Certificate of Designations) plus a spread of 4.06% per annum. The dividend rate of such floating rate dividends will be reset quarterly. The Company received proceeds, after deducting underwriting discounts, commissions and related costs, of approximately $120.8 million from the issuance, which were intended to be used for general corporate purposes. The Series D Preferred Stock is listed on the NASDAQ Global Select Market under the symbol “WTFCM.”

The Series C Preferred Stock was convertible into common stock at the option of the holder subject to customary anti-dilution adjustments. In 2016, 30 shares of the Series C Preferred Stock were converted at the option of the respective holders into 729 shares of the Company's common stock. In 2015, 180 shares of the Series C Preferred Stock were converted at the option of the respective holders into 4,374 shares of the Company's common stock. On April 25, 2017, 2,073 shares of the Series C Preferred Stock were converted at the option of the respective holder into 51,244 shares of the Company's common stock. On April 27, 2017, the Company caused a mandatory conversion of its remaining 124,184 shares of Series C Preferred Stock into 3,069,828 shares of the Company's common stock at a conversion rate of 24.72 shares of common stock per share of Series C Preferred Stock. Cash was paid in lieu of fractional shares for an amount considered insignificant.

The Board approved the first semi-annual dividend on the Company’s common stock in January 2000 and continued to approve semi-annual dividends until quarterly dividends were approved starting in 2014. The payment of dividends is also subject to statutory restrictions and restrictions arising under the terms of the Company's Series D Preferred Stock, the Company’s trust preferred securities offerings units and under certain financial covenants in the Company’s revolving and term facilities. Under the terms of these separate facilities entered into on December 15, 2014 (and subsequently amended), the Company is prohibited from paying dividends on any equity interests, including its common stock and preferred stock, if such payments would cause the Company to be in default under its facilities or exceed a certain threshold. In January, April, July and October of 2017, Wintrust declared a quarterly cash dividend of $0.14 per common share. In January, April, July and October of 2016, Wintrust declared a quarterly cash dividend of $0.12 per common share. In January, April, July and October of 2015, Wintrust declared a quarterly cash dividend of $0.11 per common share. In January of 2018, Wintrust declared a quarterly cash dividend of $0.19 per common share. Taking into account the limitations on the payment of dividends, the final determination of timing, amount and payment of dividends is at the discretion of the Company’s Board of Directors and will depend on the Company’s earnings, financial condition, capital requirements and other relevant factors.

Banking laws impose restrictions upon the amount of dividends that can be paid to the holding company by the banks. Based on these laws, the banks could, subject to minimum capital requirements, declare dividends to the Company without obtaining regulatory approval in an amount not exceeding (a) undivided profits, and (b) the amount of net income reduced by dividends paid for the current and prior two years.

Since the banks are required to maintain their capital at the well-capitalized level (due to the Company being a financial holding company), funds otherwise available as dividends from the banks are limited to the amount that would not reduce any of the banks’ capital ratios below the well-capitalized level. During 2017, 2016 and 2015, the subsidiaries paid dividends to Wintrust totaling $122.0 million, $59.0 million, and $22.2 million, respectively. At January 1, 2017, subject to minimum capital requirements at the banks, approximately $317.7 million was available as dividends from the banks without prior regulatory approval and without compromising the banks’ well-capitalized positions.

Liquidity management at the banks involves planning to meet anticipated funding needs at a reasonable cost. Liquidity management is guided by policies, formulated and monitored by the Company’s senior management and each Bank’s asset/liability committee, which take into account the marketability of assets, the sources and stability of funding and the level of unfunded commitments. The banks’ principal sources of funds are deposits, short-term borrowings and capital contributions from the holding company. In addition, the banks are eligible to borrow under FHLB advances and certain banks are eligible to borrow at the FRB Discount Window, another source of liquidity.

Core deposits are the most stable source of liquidity for community banks due to the nature of long-term relationships generally established with depositors and the security of deposit insurance provided by the FDIC. Core deposits are generally defined in the industry as total deposits less time deposits with balances greater than $100,000. Due to the affluent nature of many of the communities that the Company serves, management believes that many of its time deposits with balances in excess of $100,000 are also a stable source of funds. Currently, standard deposit insurance coverage is $250,000 per depositor per insured bank, for each account ownership category.

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:

*(Dollars in thousands)*

|  | December 31, 2017 | 2016 | 2015 | 2014 | 2013 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Total deposits | **$23,183,347** | 21,658,632 | 18,639,634 | 16,281,844 | 14,668,789 |
| Brokered Deposits (1) | **1,445,306** | 1,159,475 | 862,026 | 718,986 | 476,139 |
| Brokered deposits as a percentage of total deposits (1) | **6.2%** | 5.4% | 4.6% | 4.4% | 3.2% |

*(1) Brokered Deposits include certificates of deposit obtained through deposit brokers, deposits received through the Certificate of Deposit Account Registry Program, as well as wealth management deposits of brokerage customers from unaffiliated companies which have been placed into deposit accounts of the banks.*

The banks routinely accept deposits from a variety of municipal entities. Typically, these municipal entities require that banks pledge marketable securities to collateralize these public deposits. At December 31, 2017 and 2016, the banks had approximately $1.6 billion and $1.3 billion, respectively, of securities collateralizing public deposits and other short-term borrowings. Public deposits requiring pledged assets are not considered to be core deposits, however they provide the Company with a reliable, lower cost, short-term funding source than what is available through many other wholesale alternatives.

Other than as discussed in this section, the Company is not aware of any known trends, commitments, events, regulatory recommendations or uncertainties that would have any material adverse effect on the Company’s capital resources, operations or liquidity.

### CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE SHEET ARRANGEMENTS

The Company has various financial obligations, including contractual obligations and commitments that may require future cash payments.

*Contractual Obligations.* The following table presents, as of December 31, 2017, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of the nature of each obligation is included in the referenced note to the Consolidated Financial Statements in Item 8:

*(Dollars in thousands)*

|  | Note Reference | Payments Due in One year or less | From one to three years | From three to five years | Over five years | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Deposits | 10 | $21,943,197 | 1,096,678 | 143,158 | 314 | 23,183,347 |
| FHLB advances (1) | 11 | 344,663 | — | 215,000 | — | 559,663 |
| Subordinated notes | 12 | — | — | — | 139,088 | 139,088 |
| Other borrowings | 13 | 51,302 | 165,674 | 47,482 | 1,665 | 266,123 |
| Junior subordinated debentures | 14 | — | — | — | 253,566 | 253,566 |
| Operating leases | 15 | 12,791 | 26,545 | 22,577 | 104,270 | 166,183 |
| Purchase obligations (2) |  | 55,069 | 37,882 | 24,145 | 88,768 | 205,864 |
| Total |  | $22,407,022 | 1,326,779 | 452,362 | 587,671 | 24,773,834 |

*(1) Certain advances provide the FHLB with call dates which are not reflected in the above table.*

*(2) Purchase obligations presented above primarily relate to certain contractual cash obligations for pending acquisitions, marketing obligations and services related to the construction of facilities, data processing and the outsourcing of certain operational activities.*

The Company also enters into derivative contracts under which the Company is required to either receive cash from or pay cash to counterparties depending on changes in interest rates. Derivative contracts are carried at fair value representing the net present value of expected future cash receipts or payments based on market rates as of the balance sheet date. Because the derivative assets and liabilities recorded on the balance sheet at December 31, 2017 do not represent the amounts that may ultimately be paid under these contracts, these assets and liabilities are not included in the table of contractual obligations presented above.

#### Commitments.

The following table presents a summary of the amounts and expected maturities of significant commitments as of December 31, 2017. Further information on these commitments is included in Note 19 of the Consolidated Financial Statements in Item 8.

*(Dollars in thousands)*

| Commitment type: | One year or less | From one to three years | From three to five years | Over five years | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commercial, commercial real estate and construction | $2,081,587 | 1,606,671 | 535,521 | 200,455 | 4,424,234 |
| Residential real estate | 446,334 | — | — | — | 446,334 |
| Revolving home equity lines of credit | 826,458 | — | — | — | 826,458 |
| Letters of credit | 122,788 | 47,549 | 24,857 | 720 | 195,914 |
| Commitments to sell mortgage loans | 551,874 | — | — | — | 551,874 |

Our remaining commitment to fund community investments totaled $9.5 million, which includes future cash outlays for the construction and development of properties for low-income housing, support for small businesses, and historic tax credit projects that qualify for CRA purposes. These commitments are not included in the commitments table above, as the timing and amounts are based upon the financing arrangements provided in each project’s partnership or operating agreement and could change due to variances in the construction schedule, project revisions, or the cancellation of the project.

*Contingencies.* The Company enters into residential mortgage loan sale agreements with investors in the normal course of business. These agreements usually require certain representations concerning credit information, loan documentation, collateral and insurability. Investors have requested the Company to indemnify them against losses on certain loans or to repurchase loans which the investors believe do not comply with applicable representations. Upon completion of its own investigation, the Company generally repurchases or provides indemnification on certain loans. Indemnification requests are generally received within two years subsequent to sale. Management maintains a liability for estimated losses on loans expected to be repurchased or on which indemnification is expected to be provided and regularly evaluates the adequacy of this recourse liability based on trends in repurchase and indemnification requests, actual loss experience, known and inherent risks in the loans and current economic conditions. At December 31, 2017, the liability for estimated losses on repurchase and indemnification was $3.0 million and was included in other liabilities on the balance sheet.

## Market risk

As filed, 6,600 characters.

### Effects of Inflation

A banking organization’s assets and liabilities are primarily monetary. Changes in the rate of inflation do not have as great an impact on the financial condition of a bank as do changes in interest rates. Moreover, interest rates do not necessarily change at the same percentage as inflation. Accordingly, changes in inflation are not expected to have a material impact on the Company.

### Asset-Liability Management

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. 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 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. Please refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the net interest margin.

Since the Company’s primary source of interest bearing liabilities is from customer deposits, the Company’s ability to manage the types and terms of such deposits is somewhat limited by customer preferences and local competition in the market areas in which the banks operate. The rates, terms and interest rate indices of the Company’s interest earning assets result primarily from the Company’s strategy of investing in loans and securities that permit the Company to limit its exposure to interest rate risk, together with credit risk, while at the same time achieving an acceptable interest rate spread.

The Company’s exposure to interest rate risk is reviewed on a regular basis by management and the Risk Management Committees of the boards of directors of the banks and the Company. The objective of the review is to measure the effect on net income and to adjust balance sheet and derivative financial instruments to minimize the inherent risk while at the same time maximize net interest income.

The following interest rate scenarios display the percentage change in net interest income over a one-year time horizon assuming increases and decreases of 100 and 200 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 December 31, 2017 and December 31, 2016 is as follows:

| Static Shock Scenarios | +200 Basis Points | +100 Basis Points | -100 Basis Points | -200 Basis Points |
| --- | ---: | ---: | ---: | ---: |
| **December 31, 2017** | **17.7%** | **9.0%** | **(11.8)%** | **(23.2)%** |
| December 31, 2016 | 18.5 | 9.6 | (13.2) | (19.6) |

| Ramp Scenarios | +200 Basis Points | +100 Basis Points | -100 Basis Points | -200 Basis Points |
| --- | ---: | ---: | ---: | ---: |
| **December 31, 2017** | **8.9%** | **4.6%** | **(5.1)%** | **(12.0)%** |
| December 31, 2016 | 7.6 | 4.0 | (5.0) | (9.2) |

94

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 and floors, futures, forwards, option contracts and other financial instruments with similar characteristics. Additionally, the Company enters into commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors. See Note 20, “Derivative Financial Instruments,” of the Financial Statements presented under Item 8 of this Annual Report on Form 10-K for further information on the Company’s derivative financial instruments.

During 2017 and 2016, the Company entered into certain covered call option transactions related to certain securities held by the Company. The Company uses these option transactions (rather than entering into other derivative interest rate contracts, such as interest rate floors) to economically hedge positions and compensate for net interest margin compression by increasing the total return associated with the related securities through fees generated from these options. Although the revenue received from these options is recorded as non-interest income rather than interest income, the increased return attributable to the related securities from these options contributes to the Company’s overall profitability. The Company’s exposure to interest rate risk may be impacted by these transactions. To mitigate this risk, the Company may acquire fixed rate term debt or use other financial derivative instruments. There were no covered call options outstanding as of December 31, 2017 or 2016.

## Controls and procedures

As filed, 8,337 characters.

#### Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. 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 were effective, in ensuring the information relating to the Company (and its consolidated subsidiaries) required to be disclosed by the Company in the reports it files or submits under the Exchange Act was recorded, processed, summarized and reported in a timely manner.

#### Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

#### Report on Management’s Assessment of Internal Control Over Financial Reporting

Wintrust Financial Corporation is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this Annual Report on Form 10-K. The consolidated financial statements and notes included in this Annual Report on Form 10-K have been prepared in conformity with generally accepted accounting principles in the United States and necessarily include some amounts that are based on management’s best estimates and judgments.

We, as management of Wintrust Financial Corporation, are responsible for establishing and maintaining adequate internal control over financial reporting that is designed to produce reliable financial statements in conformity with generally accepted accounting principles in the United States. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Company’s system of internal control over financial reporting as of December 31, 2017, in relation to criteria for the effective internal control over financial reporting as described in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (COSO Criteria). Based on this assessment, management concluded that, as of December 31, 2017, the Company's system of internal control over financial reporting is effective and meets the criteria of the COSO Criteria. Ernst & Young LLP, the independent registered public accounting firm that audited the Company's financial statements included in this Annual Report on Form 10-K, has issued an attestation report on management’s assessment of the Corporation’s internal control over financial reporting. Their report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017.

|  |  |
| --- | --- |
| /s/ Edward J. Wehmer | /s/ David L. Stoehr |
| Edward J. Wehmer | David L. Stoehr |
| President and | Executive Vice President & |
| Chief Executive Officer | Chief Financial Officer |

Rosemont, Illinois

February 28, 2018

#### Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Wintrust Financial Corporation

### Opinion on Internal Control over Financial Reporting

We have audited Wintrust Financial Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wintrust Financial Corporation and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of condition of the Company as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes, of the Company and our report dated February 28, 2018 expressed an unqualified opinion thereon.

### Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report on Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

### Definition and Limitation of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Chicago, Illinois

February 28, 2018

Filed Feb 28, 2018.
Source: SEC EDGAR, the filing index for accession 0001015328-18-000080. Last ingested by Listed: Nov 5, 2026, 14:04 ET. No prices; not investment advice.