# Wintrust Financial Corp: Form 10-Q for the period ended Sep 30, 2022

- Company: [Wintrust Financial Corp](/companies/wtfc.md) (CIK 1015328)
- Form: 10-Q
- Filed: 2022-11-08
- Accepted by EDGAR: Nov 8, 2022, 16:34 ET
- Period: 2022-09-30
- Accession: 0001015328-22-000180
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1015328/000101532822000180/wtfc-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1015328/000101532822000180/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $55.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $165.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $65.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $128.2m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $57.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $140.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | $143.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | $364.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | $2.21 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | $5.78 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | $2.24 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | $5.86 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 61,575,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 59,493,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | $1.06bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $37.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2022-01-01 to 2022-09-30 | $80.6m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2022-01-01 to 2022-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2022-09-30 | $52.38bn | us-gaap:Assets |
| Total liabilities | at 2022-09-30 | $47.74bn | us-gaap:Liabilities |
| Short-term borrowings | at 2022-09-30 | $9.2m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2022-09-30 | $4.64bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 168,874 characters.

### MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

### CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition of Wintrust Financial Corporation and its subsidiaries (collectively, “Wintrust” or the “Company”) as of September 30, 2022 compared with December 31, 2021 and September 30, 2021, and the results of operations for the three and nine month periods ended September 30, 2022 and September 30, 2021, should be read in conjunction with the unaudited consolidated financial statements and notes contained in this report and the risk factors discussed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”) and in Part II, Item 1A, of this Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties and, as such, future results could differ significantly from management’s current expectations. See the last section of this discussion for further information on forward-looking statements.

### Introduction

Wintrust is a financial holding company that provides traditional community banking services, primarily in the Chicago metropolitan area, southern Wisconsin and northwest Indiana, and operates other financing businesses on a national basis and in Canada through several non-bank business units. Additionally, Wintrust offers a full array of wealth management services primarily to customers in the Chicago metropolitan area, southern Wisconsin and northwest Indiana.

### Overview

### Impact of COVID-19

In March 2020, the outbreak of COVID-19 was recognized as a global pandemic by the World Health Organization, resulting in unprecedented uncertainty and volatility in world-wide financial markets. Despite the widespread distribution of vaccines and related boosters, the effects of the COVID-19 pandemic, including the continued emergence of variant strains of the virus, may impact the Company's future results. Please refer to Part II, Item 1A, “Risk Factors” of this Form 10-Q for additional information.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted. The CARES Act includes appropriations and other measures designed to address the impact of the COVID-19 pandemic, including the Paycheck Protection Program (“PPP”), which was designed to aid eligible small and medium-sized businesses through federally-guaranteed loans distributed through certain banks, under the administration of the Small Business Administration (“SBA”). From the date the Company began accepting applications, April 3, 2020, through June 30, 2021, the Company secured authorization from the SBA and funded over 19,400 PPP loans, which are forgivable under certain circumstances, with a carrying balance of approximately $4.8 billion. From the loans originated under the program, the Company generated net fees of $146.0 million, of which $144.4 million has been recognized through September 30, 2022. As of September 30, 2022 the carrying balance of such loans was reduced to approximately $43.7 million primarily resulting from forgiveness by the SBA.

### Third Quarter Highlights

The Company recorded net income of $143.0 million for the third quarter of 2022 compared to $109.1 million in the third quarter of 2021. The results for the third quarter of 2022 demonstrate continued momentum on our operating strengths and core fundamentals, including continued expansion of net interest income as a result of benefiting from the recent rise in interest rates, significant organic loan growth diversified across the portfolio and good credit quality metrics. Additionally, volatility in the interest rate environment resulted in significant negative fair value adjustments to the Company’s available-for-sale investment securities and derivative instruments designated as cash flow hedges portfolios, and a corresponding significant negative adjustment to accumulated other comprehensive income or loss. As a result, comprehensive income (loss) totaled a loss of $72.7 million for the third quarter of 2022 compared to a total income of $100.4 million for the third quarter of 2021. Comprehensive loss includes 1) net income as presented on the Company’s Consolidated Statements of Income and 2) other comprehensive income or loss from unrealized gains and losses on the Company’s available-for-sale investment securities portfolios and derivative contracts designated as cash flow hedges as well as foreign currency translation adjustments.

The Company increased its loan portfolio from $33.3 billion at September 30, 2021 and $34.8 billion at December 31, 2021 to $38.2 billion at September 30, 2022. The increase in the current period compared to the prior periods was primarily a result of organic growth in several portfolios, including the commercial, industrial and other (excluding PPP loans), commercial real estate, residential real estate loans held for investment, property and casualty insurance premium finance receivable and life insurance premium finance receivables portfolios. For more information regarding changes in the Company’s loan portfolio, see Financial Condition – Interest Earning Assets and Note 6 - Loans of the Consolidated Financial Statements in Item 1 of this report.

The Company recorded net interest income of $401.4 million in the third quarter of 2022 compared to $287.5 million in the third quarter of 2021. This increase in net interest income recorded in the third quarter of 2022 compared to the third quarter of 2021 resulted primarily from growth in earning assets, specifically a $4.4 billion increase in average loans, and a significant increase in net interest margin. Net interest margin of 3.34% (3.35% on a fully taxable-equivalent basis, non-GAAP) in the third quarter of 2022 compared favorably to 2.58% (2.59% on a fully taxable-equivalent basis, non-GAAP) in the third quarter of 2021, primarily due to higher yields on earning assets, most notably loans held-for-investment, as interest rates increased in the market (see “Net Interest Income” for further detail).

Non-interest income totaled $101.5 million in the third quarter of 2022 compared to $136.5 million in the third quarter of 2021. This decrease was primarily due to decreases in mortgage banking revenues due to origination volumes declining from historically elevated levels experienced in early 2021. (see “Non-Interest Income” for further detail).

Non-interest expense totaled $296.5 million in the third quarter of 2022, an increase of $14.3 million, or 5%, compared to the third quarter of 2021. The increase compared to the third quarter of 2021 was primarily attributable to higher salaries and benefits, higher advertising and marketing expense related to seasonal media advertising and sponsorship costs and higher miscellaneous expense partially offset by lower commissions due to lower mortgage loan originations (see “Non-Interest Expense” for further detail).

Management considers the maintenance of adequate liquidity to be important to the management of risk. Accordingly, during the third quarter of 2022, the Company continued its practice of maintaining appropriate funding capacity to provide the Company with adequate liquidity for its ongoing operations. In this regard, the Company benefited from its strong deposit base, a liquid short-term investment portfolio and its access to funding from a variety of external funding sources. At September 30, 2022, the Company had approximately $4.5 billion in overnight liquid funds and interest-bearing deposits with banks.

### RESULTS OF OPERATIONS

### Earnings Summary

The Company’s key operating measures and growth rates for the three and nine months ended September 30, 2022, as compared to the same period last year, are shown below:

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

|  | Three months ended September 30, 2022 | September 30, 2021 | Percentage (%) or Basis Point (bp) Change |
| --- | ---: | ---: | ---: |
| Net income | **$142,961** | $109,137 | 31% |
| Pre-tax income, excluding provision for credit losses (non-GAAP) (1) | **206,461** | 141,826 | 46 |
| Pre-tax income, excluding provision for credit losses, adjusted for changes in fair value of MSRs and early buy-out loans guaranteed by U.S. government agencies (non-GAAP) (1) | **208,933** | 142,714 | 46 |
| Net income per common share—Diluted | **2.21** | 1.77 | 25 |
| Net revenue (2) | **502,930** | 423,970 | 19 |
| Net interest income | **401,448** | 287,496 | 40 |
| Net interest margin | **3.34%** | 2.58% | 76 bps |
| Net interest margin - fully taxable-equivalent (non-GAAP) (1) | **3.35** | 2.59 | 76 |
| Net overhead ratio (3) | **1.53** | 1.22 | 31 |
| Return on average assets | **1.12** | 0.92 | 20 |
| Return on average common equity | **12.31** | 10.31 | 200 |
| Return on average tangible common equity (non-GAAP) (1) | **14.68** | 12.62 | 206 |

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

|  | Nine months ended September 30, 2022 | September 30, 2021 | Percentage (%) or Basis Point (bp) Change |
| --- | ---: | ---: | ---: |
| Net income | **$364,865** | $367,394 | (1)% |
| Pre-tax income, excluding provision for credit losses (non-GAAP) (1) | **536,325** | 432,189 | 24 |
| Pre-tax income, excluding provision for credit losses, adjusted for changes in fair value of MSRs and early buy-out loans guaranteed by U.S. government agencies (non-GAAP) (1) | **494,987** | 420,572 | 18 |
| Net income per common share—Diluted | **5.78** | 6.00 | (4) |
| Net revenue (2) | **1,405,760** | 1,281,334 | 10 |
| Net interest income | **1,038,546** | 828,981 | 25 |
| Net interest margin | **2.96%** | 2.58% | 38 bps |
| Net interest margin - fully taxable equivalent (non-GAAP) (1) | **2.97** | 2.59 | 38 |
| Net overhead ratio (3) | **1.35** | 1.15 | 20 |
| Return on average assets | **0.98** | 1.07 | (9) |
| Return on average common equity | **10.96** | 12.05 | (109) |
| Return on average tangible common equity (non-GAAP) (1) | **13.21** | 14.82 | (161) |
| **At end of period** |  |  |  |
| Total assets | **$52,382,939** | $47,832,271 | 10% |
| Total loans, excluding loans held-for-sale | **38,167,613** | 33,264,043 | 15 |
| Total loans, including loans held-for-sale | **38,543,773** | 34,189,355 | 13 |
| Total deposits | **42,797,191** | 39,952,558 | 7 |
| Total shareholders’ equity | **4,637,980** | 4,410,317 | 5 |
| Book value per common share (1) | **$69.56** | $70.19 | (1) |
| Tangible common book value per share (1) | **58.42** | 58.32 | 0 |
| Market price per common share | **81.55** | 80.37 | 1 |
| Allowance for loan and unfunded lending-related commitment losses to total loans | **0.83%** | 0.89% | (6) bps |

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

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

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

Certain returns, yields, performance ratios, and quarterly growth rates are “annualized” throughout this report to represent an annual time period. This is done for analytical purposes to better discern for decision-making purposes underlying performance trends when compared to full-year or year-over-year amounts. For example, balance sheet growth rates are most often expressed in terms of an annual rate. As such, 5% growth during a quarter would represent an annualized growth rate of 20%.

### SUPPLEMENTAL NON-GAAP FINANCIAL MEASURES/RATIOS

The accounting and reporting policies of the Company conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures and ratios are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components), taxable-equivalent net interest margin (including its individual components), the taxable-equivalent efficiency ratio, tangible common equity ratio, tangible book value per common share, return on average tangible common equity, pre-tax income, excluding provision for credit losses and pre-tax income, excluding provision for credit losses, adjusted for changes in the fair value of MSRs, net of economic hedge and early buy-out loans guaranteed by U.S. government agencies. 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 using tax rates effective as of the end of the period. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a fully taxable-equivalent basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses), measures how much it costs to produce one dollar of revenue. Securities gains or losses are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity ratio and tangible book value per common share as useful measurements of the Company’s equity. The Company references the return on average tangible common equity as a measurement of profitability. Management considers pre-tax income, excluding provision for credit losses, and pre-tax income, excluding provision for credit losses, adjusted for changes in the fair value of MSRs, net of economic hedge and early buy-out loans guaranteed by U.S. government agencies, as useful measurements of the Company’s core net income.

A reconciliation of certain non-GAAP performance measures and ratios used by the Company to evaluate and measure the Company’s performance to the most directly comparable GAAP financial measures is shown below:

*(Dollars and shares in thousands)*

| Reconciliation of Non-GAAP Net Interest Margin and Efficiency Ratio: | Three Months Ended September 30, 2022 | June 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: | ---: | ---: |
| **(A) Interest Income (GAAP)** | **$466,478** | $371,968 | $322,457 | **$1,166,698** | $947,505 |
| Taxable-equivalent adjustment: |  |  |  |  |  |
| - Loans | **1,030** | 568 | 411 | **2,025** | 1,210 |
| - Liquidity management assets | **502** | 472 | 492 | **1,439** | 1,486 |
| - Other earning assets | **1** | 1 | — | **4** | — |
| **(B) Interest Income (non-GAAP)** | **$468,011** | $373,009 | $323,360 | **$1,170,166** | $950,201 |
| **(C) Interest Expense (GAAP)** | **65,030** | 34,164 | 34,961 | **128,152** | 118,524 |
| **(D) Net Interest Income (GAAP) (A minus C)** | **$401,448** | $337,804 | $287,496 | **$1,038,546** | $828,981 |
| **(E) Net Interest Income, fully taxable-equivalent (non-GAAP) (B minus C)** | **$402,981** | $338,845 | $288,399 | **$1,042,014** | $831,677 |
| **Net interest margin (GAAP)** | **3.34%** | 2.92% | 2.58% | **2.96%** | 2.58% |
| **Net interest margin, fully taxable-equivalent (non-GAAP)** | **3.35** | 2.93 | 2.59 | **2.97** | 2.59 |
| (F) Non-interest income | **$101,482** | $102,942 | $136,474 | **$367,214** | $452,353 |
| (G) (Losses) gains on investment securities, net | **(3,103)** | (7,797) | (2,431) | **(13,682)** | 8 |
| (H) Non-interest expense | **296,469** | 288,668 | 282,144 | **869,435** | 849,145 |
| **Efficiency ratio (H/(D+F-G))** | **58.59%** | 64.36% | 66.17% | **61.25%** | 66.27% |
| **Efficiency ratio (non-GAAP) (H/(E+F-G))** | **58.41** | 64.21 | 66.03 | **61.10** | 66.13 |
| **Reconciliation of Non-GAAP Tangible Common Equity Ratio:** |  |  |  |  |  |
| Total shareholders’ equity (GAAP) | **$4,637,980** | $4,727,623 | $4,410,317 |  |  |
| Less: Non-convertible preferred stock (GAAP) | **(412,500)** | (412,500) | (412,500) |  |  |
| Less: Acquisition-related intangible assets (GAAP) | **(676,699)** | (679,827) | (675,910) |  |  |
| (I) Total tangible common shareholders’ equity (non-GAAP) | **$3,548,781** | $3,635,296 | $3,321,907 |  |  |
| (J) Total assets (GAAP) | **$52,382,939** | $50,969,332 | $47,832,271 |  |  |
| Less: Acquisition-related intangible assets (GAAP) | **(676,699)** | (679,827) | (675,910) |  |  |
| (K) Total tangible assets (non-GAAP) | **$51,706,240** | $50,289,505 | $47,156,361 |  |  |
| **Common equity to assets ratio (GAAP) (L/J)** | **8.1%** | 8.5% | 8.4% |  |  |
| **Tangible common equity ratio (non-GAAP) (I/K)** | **6.9** | 7.2 | 7.0 |  |  |
| **Reconciliation of Non-GAAP Tangible Book Value per Common Share:** |  |  |  |  |  |
| Total shareholders’ equity | **$4,637,980** | $4,727,623 | $4,410,317 |  |  |
| Less: Preferred stock | **(412,500)** | (412,500) | (412,500) |  |  |
| (L) Total common equity | **$4,225,480** | $4,315,123 | $3,997,817 |  |  |
| (M) Actual common shares outstanding | **60,743** | 60,722 | 56,956 |  |  |
| **Book value per common share (L/M)** | **$69.56** | $71.06 | $70.19 |  |  |
| **Tangible book value per common share (non-GAAP) (I/M)** | **58.42** | 59.87 | 58.32 |  |  |

| Reconciliation of Non-GAAP Return on Average Tangible Common Equity: |  |  |  |  |  |
| --- | ---: | ---: | ---: | ---: | ---: |
| (N) Net income applicable to common shares | **$135,970** | $87,522 | $102,146 | **$343,892** | $346,421 |
| Add: Acquisition-related intangible asset amortization | **1,492** | 1,579 | 1,877 | **4,680** | 5,923 |
| Less: Tax effect of acquisition-related intangible asset amortization | **(425)** | (445) | (509) | **(1,301)** | (1,576) |
| After-tax acquisition-related intangible asset amortization | **$1,067** | $1,134 | $1,368 | **$3,379** | $4,347 |
| (O) Tangible net income applicable to common shares (non-GAAP) | **$137,037** | $88,656 | $103,514 | **$347,271** | $350,768 |
| Total average shareholders' equity | **$4,795,387** | $4,526,110 | $4,343,915 | **$4,608,399** | $4,255,851 |
| Less: Average preferred stock | **(412,500)** | (412,500) | (412,500) | **(412,500)** | (412,500) |
| (P) Total average common shareholders' equity | **$4,382,887** | $4,113,610 | $3,931,415 | **$4,195,899** | $3,843,351 |
| Less: Average acquisition-related intangible assets | **(678,953)** | (681,091) | (677,201) | **(680,869)** | (679,167) |
| (Q) Total average tangible common shareholders’ equity (non-GAAP) | **$3,703,934** | $3,432,519 | $3,254,214 | **$3,515,030** | $3,164,184 |
| **Return on average common equity, annualized (N/P)** | **12.31%** | 8.53% | 10.31% | **10.96%** | 12.05% |
| **Return on average tangible common equity, annualized (non-GAAP) (O/Q)** | **14.68** | 10.36 | 12.62 | **13.21** | 14.82 |

| Reconciliation of Non-GAAP Pre-Tax, Pre-Provision Income, Adjusted for Changes in Fair Value of MSRs, net of economic hedge and Early Buy-out Loans Guaranteed by U.S. Government Agencies: |  |  |  |  |  |
| --- | ---: | ---: | ---: | ---: | ---: |
| Income before taxes | **$200,041** | $131,661 | $149,742 | **$505,382** | $500,751 |
| Add: Provision for credit losses | **6,420** | 20,417 | (7,916) | **30,943** | (68,562) |
| **Pre-tax income, excluding provision for credit losses (non-GAAP)** | **$206,461** | $152,078 | $141,826 | **$536,325** | $432,189 |
| Less: Changes in fair value of MSRs, net of economic hedge and early buy-out loans guaranteed by U.S. government agencies | **2,472** | (445) | 888 | **(41,338)** | (11,617) |
| **Pre-tax income, excluding provision for credit losses, adjusted for changes in fair value of MSRs, net of economic hedge and early buy-out loans guaranteed by U.S. government agencies (non-GAAP)** | **$208,933** | $151,633 | $142,714 | **$494,987** | $420,572 |

62

### Critical Accounting Estimates

The Company’s Consolidated Financial Statements are prepared in accordance with GAAP in the United States and prevailing practices of the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. Certain policies and accounting principles inherently have a greater reliance on the use of estimates, assumptions and judgments, and as such have a greater possibility that changes in those estimates and assumptions could produce financial results that are materially different than originally reported. Estimates, assumptions and judgments are necessary when assets and liabilities are required to be recorded at fair value, when a decline in the value of an asset not carried on the financial statements at fair value warrants an impairment write-down or valuation reserve to be established, or when an asset or liability needs to be recorded contingent upon a future event, are based on information available as of the date of the financial statements; accordingly, as information changes, the financial statements could reflect different estimates and assumptions. Management views critical accounting estimates to be those which are highly dependent on subjective or complex judgments, estimates and assumptions, and where changes in those estimates and assumptions could have a significant impact on the financial statements. Management currently views critical accounting estimates to include the determination of the allowance for credit losses, including the allowance for loan losses, the allowance for unfunded commitment losses and the allowance for held-to-maturity securities losses, estimations of fair value, the valuations required for impairment testing of goodwill, the valuation and accounting for derivative instruments and income taxes as the accounting areas that require the most subjective and complex judgments, and as such could be the most subject to revision as new information becomes available. For a more detailed discussion on these critical accounting estimates, see “Summary of Critical Accounting Estimates” beginning on page 55 of the Company’s 2021 Form 10-K.

### Net Income

Net income for the quarter ended September 30, 2022 totaled $143.0 million, an increase of $33.8 million, or 31%, compared to the quarter ended September 30, 2021. On a per share basis, net income for the third quarter of 2022 totaled $2.21 per diluted common share compared to $1.77 for the third quarter of 2021.

The increase in net income for the third quarter of 2022 as compared to the same period in the prior year is primarily attributable to increased net interest income, partially offset by lower mortgage banking revenue. See “Net Interest Income”, “Non-interest Income”, “Non-interest Expense” and “Loan Portfolio and Asset Quality” for further detail.

### Net Interest Income

The primary source of the Company’s revenue is net interest income. Net interest income is the difference between interest income and fees on earning assets, such as loans and securities, and interest expense on the liabilities to fund those assets, including interest-bearing deposits and other borrowings. The amount of net interest income is affected by both changes in the level of interest rates, and the amount and composition of earning assets and interest bearing liabilities.

#### Quarter Ended September 30, 2022 compared to the Quarters Ended June 30, 2022 and September 30, 2021

The following table presents a summary of the Company’s average balances, net interest income and related net interest margins, including a calculation on a fully taxable-equivalent basis, for the third quarter of 2022 as compared to the second quarter of 2022 (sequential quarters) and third quarter of 2021 (linked quarters):

*(Dollars in thousands)*

|  | Average Balance for three months ended, Sep 30, 2022 | Jun 30, 2022 | Sep 30, 2021 | Interest for three months ended, Sep 30, 2022 | Jun 30, 2022 | Sep 30, 2021 | Yield/Rate for three months ended, Sep 30, 2022 | Jun 30, 2022 | Sep 30, 2021 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1) | **$3,039,907** | $3,265,607 | $5,112,720 | **$17,466** | $7,154 | $2,000 | **2.28%** | 0.88% | 0.16% |
| Investment securities(2) | **6,655,215** | 6,589,947 | 5,065,593 | **39,071** | 37,013 | 25,681 | **2.33** | 2.25 | 2.01 |
| FHLB and FRB stock | **142,304** | 136,930 | 136,001 | **2,109** | 1,823 | 1,777 | **5.88** | 5.34 | 5.18 |
| Liquidity management assets(3)(8) | **$9,837,426** | $9,992,484 | $10,314,314 | **$58,646** | $45,990 | $29,458 | **2.37%** | 1.85% | 1.13% |
| Other earning assets(3)(4)(8) | **21,805** | 24,059 | 28,238 | **275** | 210 | 188 | **5.01** | 3.49 | 2.64 |
| Mortgage loans held-for-sale | **455,342** | 560,707 | 871,824 | **5,371** | 5,740 | 7,716 | **4.68** | 4.11 | 3.51 |
| Loans, net of unearned income(3)(5)(8) | **37,431,126** | 35,860,329 | 32,985,445 | **403,719** | 321,069 | 285,998 | **4.28** | 3.59 | 3.44 |
| Total earning assets(8) | **$47,745,699** | $46,437,579 | $44,199,821 | **$468,011** | $373,009 | $323,360 | **3.89%** | 3.22% | 2.90% |
| Allowance for loan and investment security losses | **(260,270)** | (260,547) | (269,963) |  |  |  |  |  |  |
| Cash and due from banks | **458,263** | 476,741 | 425,000 |  |  |  |  |  |  |
| Other assets | **2,779,002** | 2,699,653 | 2,837,652 |  |  |  |  |  |  |
| Total assets | **$50,722,694** | $49,353,426 | $47,192,510 |  |  |  |  |  |  |
| NOW and interest-bearing demand deposits | **$5,789,368** | $5,230,702 | $4,147,436 | **$8,041** | $2,553 | $1,916 | **0.55%** | 0.20% | 0.18% |
| Wealth management deposits | **3,078,764** | 2,835,267 | 2,353,721 | **11,068** | 3,685 | 1,176 | **1.43** | 0.52 | 0.20 |
| Money market accounts | **12,037,412** | 11,892,948 | 11,956,346 | **18,916** | 8,559 | 7,905 | **0.62** | 0.29 | 0.26 |
| Savings accounts | **3,862,579** | 3,882,856 | 3,851,523 | **2,130** | 347 | 406 | **0.22** | 0.04 | 0.04 |
| Time deposits | **3,675,930** | 3,687,778 | 4,236,317 | **5,761** | 3,841 | 7,902 | **0.62** | 0.42 | 0.74 |
| Interest-bearing deposits | **$28,444,053** | $27,529,551 | $26,545,343 | **$45,916** | $18,985 | $19,305 | **0.64%** | 0.28% | 0.29% |
| Federal Home Loan Bank advances | **1,403,573** | 1,197,390 | 1,241,073 | **6,812** | 4,878 | 4,931 | **1.93** | 1.63 | 1.58 |
| Other borrowings | **478,909** | 489,779 | 512,785 | **4,008** | 2,734 | 2,501 | **3.32** | 2.24 | 1.94 |
| Subordinated notes | **437,191** | 437,084 | 436,746 | **5,485** | 5,517 | 5,480 | **5.02** | 5.05 | 5.02 |
| Junior subordinated debentures | **253,566** | 253,566 | 253,566 | **2,809** | 2,050 | 2,744 | **4.33** | 3.20 | 4.23 |
| Total interest-bearing liabilities | **$31,017,292** | $29,907,370 | $28,989,513 | **$65,030** | $34,164 | $34,961 | **0.83%** | 0.46% | 0.48% |
| Non-interest-bearing deposits | **13,731,219** | 13,805,128 | 12,834,084 |  |  |  |  |  |  |
| Other liabilities | **1,178,796** | 1,114,818 | 1,024,998 |  |  |  |  |  |  |
| Equity | **4,795,387** | 4,526,110 | 4,343,915 |  |  |  |  |  |  |
| Total liabilities and shareholders’ equity | **$50,722,694** | $49,353,426 | $47,192,510 |  |  |  |  |  |  |
| Interest rate spread(6)(8) |  |  |  |  |  |  | **3.06%** | 2.76% | 2.42% |
| Less: Fully taxable-equivalent adjustment |  |  |  | **(1,533)** | (1,041) | (903) | **(0.01)** | (0.01) | (0.01) |
| Net free funds/contribution(7) | **$16,728,407** | $16,530,209 | $15,210,308 |  |  |  | **0.29** | 0.17 | 0.17 |
| Net interest income/margin (GAAP)(8) |  |  |  | **$401,448** | $337,804 | $287,496 | **3.34%** | 2.92% | 2.58% |
| Fully taxable-equivalent adjustment |  |  |  | **1,533** | 1,041 | 903 | **0.01** | 0.01 | 0.01 |
| Net interest income/margin, fully taxable-equivalent (non-GAAP)(8) |  |  |  | **$402,981** | $338,845 | $288,399 | **3.35%** | 2.93% | 2.59% |

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

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

*(3) Interest income on tax-advantaged loans, trading securities and investment securities reflects a tax-equivalent adjustment based on the marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021 were $1.5 million, $1.0 million and $903,000, respectively.*

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

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

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

*(7) Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.*

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

For the third quarter of 2022, net interest income totaled $401.4 million, an increase of $63.6 million as compared to the second quarter of 2022, and an increase of $114.0 million as compared to the third quarter of 2021. Net interest margin was 3.34% (3.35% on a FTE basis, non-GAAP) during the third quarter of 2022 compared to 2.92% (2.93% on a FTE basis, non-GAAP) during the second quarter of 2022, and 2.58% (2.59% on a FTE basis, non-GAAP) during the third quarter of 2021.

#### Nine months ended September 30, 2022 compared to nine months ended September 30, 2021

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

*(Dollars in thousands)*

|  | Average Balance for nine months ended, September 30, 2022 | September 30, 2021 | Interest for nine months ended, September 30, 2022 | September 30, 2021 | Yield/Rate for nine months ended, September 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-bearing deposits with banks, securities purchased under resale agreements and cash equivalents(1) | **$3,617,498** | $4,399,217 | **$26,738** | $4,352 | **0.99%** | 0.13% |
| Investment securities (2) | **6,542,077** | 4,597,997 | **108,947** | 69,562 | **2.23** | 2.02 |
| FHLB and FRB stock | **138,405** | 136,028 | **5,704** | 5,291 | **5.51** | 5.20 |
| Liquidity management assets (3)(8) | **$10,297,980** | $9,133,242 | **$141,389** | $79,205 | **1.84%** | 1.16% |
| Other earning assets (3)(4)(8) | **23,673** | 24,016 | **666** | 463 | **3.76** | 2.59 |
| Mortgage loans held-for-sale | **559,258** | 1,003,868 | **17,198** | 24,935 | **4.11** | 3.32 |
| Loans, net of unearned income (3)(5)(8) | **36,050,185** | 32,839,837 | **1,010,913** | 845,598 | **3.75** | 3.44 |
| Total earning assets (8) | **$46,931,096** | $43,000,963 | **$1,170,166** | $950,201 | **3.33%** | 2.95% |
| Allowance for loan and investment security losses | **(257,992)** | (294,033) |  |  |  |  |
| Cash and due from banks | **472,127** | 420,874 |  |  |  |  |
| Other assets | **2,718,562** | 2,922,933 |  |  |  |  |
| Total assets | **$49,863,793** | $46,050,737 |  |  |  |  |
| NOW and interest-bearing demand deposits | **$5,273,115** | $3,891,634 | **$12,584** | $5,826 | **0.32%** | 0.20% |
| Wealth management deposits | **2,808,709** | 2,265,212 | **15,671** | 3,133 | **0.75** | 0.18 |
| Money market accounts | **12,232,024** | 11,510,832 | **35,123** | 24,372 | **0.38** | 0.28 |
| Savings accounts | **3,883,092** | 3,723,420 | **2,813** | 1,238 | **0.10** | 0.04 |
| Time deposits | **3,741,014** | 4,579,161 | **13,564** | 36,978 | **0.48** | 1.08 |
| Interest-bearing deposits | **$27,937,954** | $25,970,259 | **$79,755** | $71,547 | **0.38%** | 0.37% |
| Federal Home Loan Bank advances | **1,281,273** | 1,234,929 | **16,506** | 14,658 | **1.72** | 1.59 |
| Other borrowings | **487,595** | 518,946 | **8,981** | 7,678 | **2.46** | 1.98 |
| Subordinated notes | **437,081** | 436,641 | **16,484** | 16,469 | **5.03** | 5.03 |
| Junior subordinated debentures | **253,566** | 253,566 | **6,426** | 8,172 | **3.34** | 4.25 |
| Total interest-bearing liabilities | **$30,397,469** | $28,414,341 | **$128,152** | $118,524 | **0.56%** | 0.56% |
| Non-interest-bearing deposits | **13,756,793** | 12,300,931 |  |  |  |  |
| Other liabilities | **1,101,132** | 1,079,614 |  |  |  |  |
| Equity | **4,608,399** | 4,255,851 |  |  |  |  |
| Total liabilities and shareholders’ equity | **$49,863,793** | $46,050,737 |  |  |  |  |
| Interest rate spread (6)(8) |  |  |  |  | **2.77%** | 2.39% |
| Less: Fully taxable-equivalent adjustment |  |  | **(3,468)** | (2,696) | **(0.01)** | (0.01) |
| Net free funds/contribution (7) | **$16,533,627** | $14,586,622 |  |  | **0.20** | 0.20 |
| Net interest income/margin (GAAP) (8) |  |  | **$1,038,546** | $828,981 | **2.96%** | 2.58% |
| Fully taxable-equivalent adjustment |  |  | **3,468** | 2,696 | **0.01** | 0.01 |
| Net interest income/margin, fully taxable-equivalent (non-GAAP) (8) |  |  | **$1,042,014** | $831,677 | **2.97%** | 2.59% |

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

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

*(3) Interest income on tax-advantaged loans, trading securities and investment securities reflects a taxable-equivalent adjustment based on a marginal federal corporate tax rate in effect as of the applicable period. The total adjustments for the nine months ended September 30, 2022 and September 30, 2021 were $3.5 million and $2.7 million, respectively.*

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

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

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

*(7) Net free funds are the difference between total average earning assets and total average interest-bearing liabilities. The estimated contribution to net interest margin from net free funds is calculated using the rate paid for total interest-bearing liabilities.*

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

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

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

*(In thousands)*

|  | Third Quarter of 2022 Compared to Second Quarter of 2022 | Third Quarter of 2022 Compared to Third Quarter of 2021 | First Nine Months of 2022 Compared to First Nine Months of 2021 |
| --- | ---: | ---: | ---: |
| Net interest income, FTE basis (non-GAAP)(1) for comparative period | $338,845 | $288,399 | $831,677 |
| Change due to mix and growth of earning assets and interest-bearing liabilities (volume) | 11,104 | 34,000 | 79,683 |
| Change due to interest rate fluctuations (rate) | 49,349 | 80,582 | 130,654 |
| Change due to number of days in each period | 3,683 | — | — |
| Less: FTE adjustment | (1,533) | (1,533) | (3,468) |
| Net interest income (GAAP)(1) for the period ended September 30, 2022 | $401,448 | $401,448 | $1,038,546 |
| FTE adjustment | 1,533 | 1,533 | 3,468 |
| Net interest income, FTE basis (non-GAAP)(1) | $402,981 | $402,981 | $1,042,014 |

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

### Non-interest Income

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

*(Dollars in thousands)*

|  | Three Months Ended September 30, 2022 | September 30, 2021 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Brokerage | **$4,587** | $5,230 | $(643) | (12)% |
| Trust and asset management | **28,537** | 26,301 | 2,236 | 9 |
| Total wealth management | **33,124** | 31,531 | 1,593 | 5 |
| Mortgage banking | **27,221** | 55,794 | (28,573) | (51) |
| Service charges on deposit accounts | **14,349** | 14,149 | 200 | 1 |
| Losses on investment securities, net | **(3,103)** | (2,431) | (672) | 28 |
| Fees from covered call options | **1,366** | 1,157 | 209 | 18 |
| Trading (losses) gains, net | **(7)** | 58 | (65) | NM |
| Operating lease income, net | **12,644** | 12,807 | (163) | (1) |
| Other: |  |  |  |  |
| Interest rate swap fees | **1,997** | 4,868 | (2,871) | (59) |
| BOLI | **248** | 2,154 | (1,906) | (88) |
| Administrative services | **1,533** | 1,359 | 174 | 13 |
| Foreign currency remeasurement (losses) gains | **(93)** | 77 | (170) | NM |
| Early pay-offs of capital leases | **138** | 209 | (71) | (34) |
| Miscellaneous | **12,065** | 14,742 | (2,677) | (18) |
| Total Other | **15,888** | 23,409 | (7,521) | (32) |
| **Total Non-interest Income** | **$101,482** | $136,474 | $(34,992) | (26)% |

#### NM - Not meaningful.

*(Dollars in thousands)*

|  | Nine Months Ended September 30, 2022 | September 30, 2021 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Brokerage | **$13,491** | $15,418 | $(1,927) | (12)% |
| Trust and asset management | **82,396** | 76,112 | 6,284 | 8 |
| Total wealth management | **95,887** | 91,530 | 4,357 | 5 |
| Mortgage banking | **137,766** | 219,872 | (82,106) | (37) |
| Service charges on deposit accounts | **45,520** | 39,434 | 6,086 | 15 |
| (Losses) gains on investment securities, net | **(13,682)** | 8 | (13,690) | NM |
| Fees from covered call options | **6,177** | 2,545 | 3,632 | NM |
| Trading gains, net | **4,058** | 39 | 4,019 | NM |
| Operating lease income, net | **43,126** | 39,487 | 3,639 | 9 |
| Other: |  |  |  |  |
| Interest rate swap fees | **9,866** | 10,176 | (310) | (3) |
| BOLI | **(588)** | 4,620 | (5,208) | NM |
| Administrative services | **4,977** | 3,843 | 1,134 | 30 |
| Foreign currency remeasurement gains (losses) | **15** | (606) | 621 | NM |
| Early pay-offs of capital leases | **563** | 352 | 211 | 60 |
| Miscellaneous | **33,529** | 41,053 | (7,524) | (18) |
| Total Other | **48,362** | 59,438 | (11,076) | (19) |
| **Total Non-interest Income** | **$367,214** | $452,353 | $(85,139) | (19)% |

#### NM - Not meaningful.

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

Wealth management revenue increased for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 due to an increase in trust and asset management fees. Trust and asset management fees are based primarily on the market value of the assets under management or administration as well as the volume of tax-deferred like-kind exchange services provided during a period. Such revenue increased for the three and nine months ended September 30, 2022 primarily as a result of increased activity in the tax-deferred like-kind exchange services provided as compared to the same periods in 2021. Wealth management revenue is comprised of the trust and asset management revenue of The Chicago Trust Company and Great Lakes Advisors, the brokerage commissions, managed money fees and insurance product commissions of Wintrust Investments and fees from tax-deferred like-kind exchange services provided by the Chicago Deferred Exchange Company.

Mortgage banking revenue decreased for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 as a result of a decrease in loans originated for sale and lower production margins, partially offset by more favorable fair value adjustments of MSRs. Mortgage loans originated for sale totaled $660.7 million in the third quarter of 2022 as compared to $1.6 billion in the third quarter of 2021. On a year-to-date basis, mortgage loans originated for sale totaled $2.4 billion for nine months ended September 30, 2022 as compared to $5.5 billion for nine months ended September 30, 2021. The decrease in originations was primarily due to rising interest rates reducing refinance incentives for borrowers. 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.

The Company records MSRs at fair value on a recurring basis. For the three months ended September 30, 2022, the fair value of the MSRs portfolio increased due to a favorable fair value adjustment of $9.8 million as well as retained servicing rights led to capitalization of $13.3 million, partially offset by a reduction in value of $6.0 million due to payoffs and paydowns of the existing portfolio. For the nine months ended September 30, 2022, the fair value of the MSRs portfolio increased due to a favorable fair value adjustment of $62.3 million as well as retained servicing rights led to capitalization of $38.9 million, partially offset by a reduction in value of $18.9 million due to payoffs and paydowns of the existing portfolio.

Mortgage banking revenue is also impacted by changes in the fair value of derivative contracts held to economically hedge a portion of the fair value adjustments related to the Company’s MSRs portfolio. The change in fair value of the derivative contracts held as an economic hedge for both the three and nine month periods ended September 30, 2022 was $2.3 million.

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

*(Dollars in thousands)*

| Originations: | Three Months Ended September 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: | ---: |
| Retail originations | **$448,846** | $1,153,265 | **$1,692,232** | $4,123,650 |
| Veterans First originations | **211,901** | 405,663 | **685,017** | 1,381,256 |
| Total originations for sale (A) | **$660,747** | $1,558,928 | **$2,377,249** | $5,504,906 |
| Originations for investment | **199,701** | 181,886 | **772,042** | 753,493 |
| Total originations | **$860,448** | $1,740,814 | **$3,149,291** | $6,258,399 |
| Retail originations as percentage of originations for sale | **68%** | 74% | **71%** | 75% |
| Veterans First originations as a percentage of originations for sale | **32** | 26 | **29** | 25 |
| Purchases as a percentage of originations for sale | **82%** | 56% | **69%** | 43% |
| Refinances as a percentage of originations for sale | **18** | 44 | **31** | 57 |
| **Production Margin:** |  |  |  |  |
| Production revenue (B) (1) | **$9,084** | $39,247 | **$41,180** | $148,060 |
| Total originations for sale (A) | **$660,747** | $1,558,928 | **$2,377,249** | $5,504,906 |
| Add: Current period end mandatory interest rate lock commitments to fund originations for sale (2) | **179,468** | 510,982 | **179,468** | 510,982 |
| Less: Prior period end mandatory interest rate lock commitments to fund originations for sale (2) | **301,322** | 605,400 | **353,509** | 1,072,717 |
| Total mortgage production volume (C) | **$538,893** | $1,464,510 | **$2,203,208** | $4,943,171 |
| Production margin (B/C) | **1.69%** | 2.68% | **1.87%** | 3.00% |
| **Mortgage Servicing:** |  |  |  |  |
| Loans serviced for others (D) | **$13,925,755** | $12,720,126 |  |  |
| MSRs, at fair value (E) | **229,671** | 133,552 |  |  |
| Percentage of MSRs to loans serviced for others (E/D) | **1.65%** | 1.05% |  |  |
| Servicing income | **$11,435** | $10,454 | **$33,265** | $29,920 |
| **Components of MSR:** |  |  |  |  |
| MSR - current period capitalization | **$13,260** | $15,546 | **$38,871** | $57,674 |
| MSR - collection of expected cash flow - paydowns | **(1,644)** | (1,036) | **(4,457)** | (2,755) |
| MSR - collection of expected cash flow - payoffs | **(4,397)** | (7,558) | **(14,438)** | (24,547) |
| MSR - changes in fair value model assumptions | **9,788** | (888) | **62,300** | 11,617 |
| Changes in fair value of derivative contract held as an economic hedge, net | **(2,318)** | — | **(2,318)** | — |
| MSR valuation adjustment, net of changes in fair value of derivative contract held as an economic hedge | **$7,470** | $(888) | **$59,982** | $11,617 |
| **Summary of Mortgage Banking Revenue:** |  |  |  |  |
| Production revenue (1) | **$9,084** | $39,247 | **$41,180** | $148,060 |
| Servicing income | **11,435** | 10,454 | **33,265** | 29,920 |
| MSR activity | **14,689** | 6,064 | **79,958** | 41,989 |
| Changes in fair value on early buy-out loans guaranteed by U.S. government agencies and other revenue | **(7,987)** | 29 | **(16,637)** | (97) |
| Total mortgage banking revenue | **$27,221** | $55,794 | **$137,766** | $219,872 |

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

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

Service charges on deposits increased for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 as a result of higher account analysis fees on deposit accounts which increased as a result of the Company’s commercial banking initiatives. Service charges on deposit accounts include fees charged to deposit customers for various services, including account analysis services, and are based on factors such as the size and type of customer, type of product and number of transactions. The fees are based on a standard schedule of fees and, depending on the nature of the service performed, the service is performed at a point in time or over a period of a month.

The Company recognized net losses on investment securities for the three and nine months ended September 30, 2022 of $3.1 million and $13.7 million, respectively, compared to net losses of $2.4 million and net gains of $8,000, respectively, for the same periods in 2021. Net losses for the three and nine months ended September 30, 2022 were primarily the result of unrealized losses on equity investments.

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

For the nine months ended September 30, 2022 and 2021, the Company recognized net trading gains of $4.1 million and $39,000, respectively. Trading gains and losses recorded by the Company primarily result from fair value adjustments related to interest rate derivatives not designated as hedges.

Interest rate swap fee revenue decreased for the three and nine months ended September 30, 2022 as compared to the same periods in 2021. Swap fee revenues result from interest rate swap transactions related to both customer-based trades and the related matched trades with inter-bank dealer counterparties. The revenue recognized on this customer-based activity is sensitive to the pace of organic loan growth, the shape of the yield curve and the customers’ expectations of interest rates.

Miscellaneous income decreased $2.7 million and $7.5 million, respectively, for the three and nine months ended September 30, 2022 as compared to the same periods in 2021. The decrease for the three months ended September 30, 2022 was primarily due to $1.8 million less partnership income compared to the to the same period in 2021. On a year-to-date basis, for the nine months ended September 30, 2022, the decrease also included $2.5 million of losses recorded in the second quarter of 2022 relating to the sale of a property no longer considered for future expansion and losses on the anticipated sale of a former data processing facility and the $4.0 million net gain on the sale of three branches recorded in the second quarter of 2021.

### Non-interest Expense

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

*(Dollars in thousands)*

| Salaries and employee benefits: | Three months ended September 30, 2022 | September 30, 2021 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Salaries | **$97,419** | $88,161 | $9,258 | 11% |
| Commissions and incentive compensation | **50,403** | 57,026 | (6,623) | (12) |
| Benefits | **28,273** | 25,725 | 2,548 | 10 |
| Total salaries and employee benefits | **176,095** | 170,912 | 5,183 | 3 |
| Software and equipment | **24,126** | 22,029 | 2,097 | 10 |
| Operating lease equipment depreciation | **9,448** | 10,013 | (565) | (6) |
| Occupancy, net | **17,727** | 18,158 | (431) | (2) |
| Data processing | **7,767** | 7,104 | 663 | 9 |
| Advertising and marketing | **16,600** | 13,443 | 3,157 | 23 |
| Professional fees | **7,544** | 7,052 | 492 | 7 |
| Amortization of other acquisition-related intangible assets | **1,492** | 1,877 | (385) | (21) |
| FDIC insurance | **7,186** | 6,750 | 436 | 6 |
| OREO expense, net | **229** | (1,531) | 1,760 | NM |
| Other: |  |  |  |  |
| Lending expenses, net of deferred originations costs | **4,533** | 5,999 | (1,466) | (24) |
| Travel and entertainment | **4,252** | 3,668 | 584 | 16 |
| Miscellaneous | **19,470** | 16,670 | 2,800 | 17 |
| Total other | **28,255** | 26,337 | 1,918 | 7 |
| **Total Non-interest Expense** | **$296,469** | $282,144 | $14,325 | 5% |

#### NM - Not meaningful.

*(Dollars in thousands)*

| Salaries and employee benefits: | Nine Months Ended September 30, 2022 | September 30, 2021 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Salaries | **$281,949** | $270,303 | $11,646 | 4% |
| Commissions and incentive compensation | **148,327** | 172,144 | (23,817) | (14) |
| Benefits | **85,500** | 82,091 | 3,409 | 4 |
| Total salaries and employee benefits | **515,776** | 524,538 | (8,762) | (2) |
| Software and equipment | **71,186** | 63,807 | 7,379 | 12 |
| Operating lease equipment depreciation | **27,930** | 30,733 | (2,803) | (9) |
| Occupancy, net | **53,202** | 55,841 | (2,639) | (5) |
| Data processing | **23,282** | 20,072 | 3,210 | 16 |
| Advertising and marketing | **45,139** | 33,294 | 11,845 | 36 |
| Professional fees | **23,821** | 21,943 | 1,878 | 9 |
| Amortization of other acquisition-related intangible assets | **4,680** | 5,923 | (1,243) | (21) |
| FDIC insurance | **21,864** | 19,713 | 2,151 | 11 |
| OREO expense, net | **(509)** | (1,013) | 504 | (50) |
| Other: |  |  |  |  |
| Lending expenses, net of deferred originations costs | **15,624** | 17,269 | (1,645) | (10) |
| Travel and entertainment | **10,825** | 6,266 | 4,559 | 73 |
| Miscellaneous | **56,615** | 50,759 | 5,856 | 12 |
| Total other | **83,064** | 74,294 | 8,770 | 12 |
| **Total Non-interest Expense** | **$869,435** | $849,145 | $20,290 | 2% |

#### NM - Not meaningful.

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

Total salaries and employee benefits expense increased for the three months ended September 30, 2022 as compared to the same period in 2021 primarily due to increased salaries expense, partially offset by decreased commissions and incentive compensation primarily due to lower commission expense due to declining mortgage production. On a year-to-date basis, for the nine months ended September 30, 2022 as compared to the same period in 2021, total salaries and employee benefits expense decreased primarily due to a reduction in commissions and incentive compensation, partially offset by an increase in salaries expense.

Software and equipment expense increased for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 as a result of higher software license fees as well as higher computer and software depreciation expense as the Company invests in enhancements to the digital customer experience, upgrades to infrastructure and enhancements to information security capabilities.

Advertising and marketing expenses increased for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 as a result of higher digital advertising costs as well as increased sponsorship activity. Marketing costs are incurred to promote the Company’s brand, commercial banking capabilities and various products, and to attract loans and deposits and announce new branch openings as well as the expansion of the Company’s non-bank businesses. The level of marketing expenditures depends on the type of marketing programs utilized, which are determined based on the market area, targeted audience, competition and various other factors.

Miscellaneous expense increased for the three and nine months ended September 30, 2022 as compared to the same periods in 2021 as a result of various other operational costs including a $1.1 million increase in non-income tax expense recorded in the third quarter of 2022 and a $1.3 million increase in postage compared to the nine month period ended September 30, 2021. Miscellaneous expense includes ATM expenses, correspondent bank charges, directors fees, telephone, postage, corporate insurance, dues and subscriptions, problem loan expenses and other miscellaneous operational losses and costs.

### Income Taxes

The Company recorded income tax expense of $57.1 million in the third quarter of 2022 compared to $40.6 million in the third quarter of 2021. The effective tax rates were 28.53% in the third quarter of 2022 compared to 27.12% in the third quarter of 2021. During the first nine months of 2022, the Company recorded income tax expense of $140.5 million compared to $133.4 million for the first nine months of 2021. The effective tax rates were 27.80% for the first nine months of 2022 and 26.63% for the first nine months of 2021.

The effective tax rate increased in the third quarter of 2022 as the Company recorded approximately $2.0 million of additional income tax expense related to earnings at its Canadian subsidiary. The tax, known as GILTI (“Global Intangible Low-taxed Income”), is a U.S. minimum tax on global profits. During the quarter, the impact of the rapid and significant strengthening of the U.S. dollar relative to the Canadian dollar caused the GILTI tax to be applicable.

### Operating Segment Results

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

The community banking segment’s net interest income for the quarter ended September 30, 2022 totaled $319.9 million as compared to $220.0 million for the same period in 2021, an increase of $99.9 million, or 45%. On a year-to-date basis, net interest income for the segment increased by $167.1 million from $643.2 million for the nine months ended September 30, 2021 to $810.3 million for the nine months ended September 30, 2022. The increase in the three and nine month periods was primarily attributable to increased interest and fees on loans due to of loan growth and increased interest rates, partially offset by increased interest expense on deposits. The community banking segment’s non-interest income totaled $60.6 million in the third quarter of 2022, a decrease of $33.7 million, or 36%, when compared to the third quarter of 2021 total of $94.3 million. On a year-to-date basis, non-interest income totaled $245.2 million for the nine months ended September 30, 2022, a decrease of $86.8 million, or 26%, compared to $332.0 million for the nine months ended September 30, 2021. The decrease in the three and nine month periods was primarily the result of reduced mortgage banking revenue due to lower originations for sale and lower gain on sale margin, partially offset by the increase in the fair value of MSRs related to changes in fair value model assumptions. The community banking segment recorded provision for credit losses of $3.6 million and $28.0 million, respectively, for the three and nine months ended September 30, 2022, compared to a release of credit reserves of $7.4 million and $69.2 million, respectively, for the same periods in 2021. The increase in provision for credit losses for the three and nine month periods was primarily the result of loan growth as well as the Company’s macroeconomic forecasts of key model inputs (most notably, Baa corporate credit spreads). The community banking segment’s net income for the quarter ended September 30, 2022 totaled $104.7 million, an increase of $35.9 million as compared to net income in the third quarter of 2021 of $68.8 million. On a year-to-date basis, the net income of the community banking segment for the nine months ended September 30, 2022 totaled $249.4 million as compared to $263.3 million for the nine months ended September 30, 2021.

The specialty finance segment’s net interest income totaled $64.1 million for the quarter ended September 30, 2022, compared to $52.7 million for the same period in 2021, an increase of $11.5 million, or 22%. On a year-to-date basis, net interest income for the segment increased $35.5 million, or 25% compared to the same period in 2021. The increase for both the three and nine month periods was primarily due to loan growth and increased interest rates on the premium finance receivables portfolios. The specialty finance segment’s non-interest income was relatively unchanged totaling $23.8 million and $24.4 million for the three months ended September 30, 2022 and 2021, respectively, and increased slightly to $72.9 million from $70.0 million for the nine months ended September 30, 2022 and 2021, respectively. Our property and casualty insurance premium finance operations, life insurance finance operations, lease financing operations and accounts receivable finance operations accounted for 42%, 30%, 24% and 4%, respectively, of the total revenues of our specialty finance business for the nine month period ended September 30, 2022. The net income of the specialty finance segment for the quarter ended September 30, 2022 totaled $27.2 million as compared to $30.2 million for the quarter ended September 30, 2021. On a year-to-date basis, the net income of the specialty finance segment for the nine months ended September 30, 2022 totaled $87.3 million as compared to $78.0 million for the nine months ended September 30, 2021.

The wealth management segment reported net interest income of $9.6 million for the third quarter of 2022 compared to $8.0 million in the same quarter of 2021, an increase of $1.6 million, or 20%. On a year-to-date basis, net interest income totaled $27.5 million for the first nine months of 2022, as compared to $23.2 million for the first nine months of 2021. Net interest income for this segment is primarily comprised of an allocation of the net interest income earned by the community banking segment on non-interest-bearing and interest-bearing wealth management customer account balances on deposit at the banks. Wealth management customer account balances on deposit at the banks averaged $2.8 billion and $2.3 billion in the first nine months of 2022 and 2021, respectively. This segment recorded non-interest income of $32.5 million for the third quarter of 2022 compared to $33.6 million for the third quarter of 2021. On a year-to-date basis, this segment recorded non-interest income of $93.3 million for the first nine months of 2022 as compared to $95.7 million for the first nine months of 2021. Distribution of wealth management services through each bank continues to be a focus of the Company. The Company is committed to growing the wealth management segment in order to better service its customers and create a more diversified revenue stream. The wealth management segment’s net income totaled $11.1 million for the third quarter of 2022 compared to $10.1 million for the third quarter of 2021. On a year-to-date basis, the wealth management segment’s net income totaled $28.1 million and $26.1 million for the nine month period ended September 30, 2022 and 2021, respectively.

### Financial Condition

Total assets were $52.4 billion at September 30, 2022, representing an increase of $4.6 billion, or 10%, when compared to September 30, 2021 and an increase of approximately $1.4 billion, or 11% on an annualized basis, when compared to June 30, 2022. Total funding, which includes deposits, all notes and advances, including secured borrowings and the junior subordinated debentures, was $46.3 billion at September 30, 2022, $44.9 billion at June 30, 2022, and $42.4 billion at September 30, 2021. See Notes 5, 6, 10, 11 and 12 of the Consolidated Financial Statements presented under Item 1 of this report for additional period-end detail on the Company’s interest-earning assets and funding liabilities.

### Interest-Earning Assets

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

*(Dollars in thousands)*

|  | Three Months Ended September 30, 2022 Balance | Percent | June 30, 2022 Balance | Percent | September 30, 2021 Balance | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Mortgage loans held-for-sale | **$455,342** | **1%** | $560,707 | 1% | $871,824 | 2% |
| Loans, net of unearned income |  |  |  |  |  |  |
| Commercial, excluding PPP | **$11,975,882** | **25%** | $11,537,091 | 25% | $9,732,838 | 22% |
| Commercial - PPP | **54,257** | **0** | 166,183 | 0 | 1,475,304 | 3 |
| Commercial real estate | **9,464,108** | **20** | 9,298,567 | 20 | 8,776,342 | 20 |
| Home equity | **326,747** | **1** | 323,687 | 1 | 355,510 | 1 |
| Residential real estate | **2,095,959** | **4** | 1,876,166 | 4 | 1,496,847 | 3 |
| Premium finance receivables | **13,454,596** | **28** | 12,588,284 | 27 | 11,118,607 | 26 |
| Other loans | **59,577** | **0** | 70,351 | 0 | 29,997 | 0 |
| Total average loans (1) | **$37,431,126** | **78%** | $35,860,329 | 77% | $32,985,445 | 75% |
| Liquidity management assets (2) | **9,837,426** | **21** | 9,992,484 | 22 | 10,314,314 | 23 |
| Other earning assets (3) | **21,805** | **0** | 24,059 | 0 | 28,238 | 0 |
| Total average earning assets | **$47,745,699** | **100%** | $46,437,579 | 100% | $44,199,821 | 100% |
| Total average assets | **$50,722,694** |  | $49,353,426 |  | $47,192,510 |  |
| Total average earning assets to total average assets |  | **94%** |  | 94% |  | 94% |

#### (1) Includes nonaccrual loans.

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

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

*Mortgage loans held-for-sale.* Average mortgage loans held-for-sale totaled $455.3 million in the third quarter of 2022, compared to $560.7 million in the second quarter of 2022 and $871.8 million in the third quarter of 2021. These balances represent mortgage loans awaiting subsequent sale in the secondary market with such sales eliminating the interest-rate risk associated with these loans, as they are predominantly long-term fixed rate loans, and provide a source of non-interest revenue. The decrease in average balance from 2021 to 2022 was primarily due to lower mortgage origination production as well as the transfer to held-for-investment classification of certain loans previously repurchased by the Company under the early buyout option available for loans sold to GNMA with servicing retained. See “Loan Portfolio and Asset Quality” section below in this Item 2 for additional discussion of these early buyout options.

*Loans, net of unearned income.* Average total loans, net of unearned income, totaled $37.4 billion in the third quarter of 2022, increasing $4.4 billion, or 13%, from the third quarter of 2021 and increasing $1.6 billion, or 17% on an annualized basis, from the second quarter of 2022. Average commercial loans, excluding PPP loans, totaled $12.0 billion in the third quarter of 2022, and increased $2.2 billion, or 23%, over the average balance in the third quarter of 2021 and $438.8 million, or 15% on an annualized basis, over the average balance in the second quarter of 2022. Average commercial PPP loans totaled $54.3 million in the third quarter of 2022, and decreased $1.4 billion, or 96%, from the average balance in the third quarter of 2021 and decreased $111.9 million from the average balance in the second quarter of 2022. The decrease in average commercial PPP loans in the third quarter of 2022 compared to the second quarter of 2022 and second quarter of 2021 was primarily the result of significant payoffs in the portfolio through the forgiveness process administered by the SBA. Average commercial real estate loans totaled $9.5 billion in the third quarter of 2022, increasing $687.8 million, or 8%, over the third quarter of 2021. Combined, the commercial and commercial real estate loan categories comprised 57% of the average loan portfolio in the third quarter of 2022 as compared to 59% in the second quarter of 2022 and 61% in the third quarter of 2021. Excluding the impact of PPP loans, growth realized in these aggregated categories for the third quarter of 2022 as compared to the sequential and prior year periods is primarily attributable to increased business development efforts.

Home equity loan portfolio averaged $326.7 million in the third quarter of 2022, and decreased $28.8 million, or 8% from the average balance of $355.5 million in same period of 2021. The decrease in the home equity loan portfolio is primarily the result of borrowers preferring to finance through longer term, low rate mortgage loans prior to rising interest rates in 2022. The Company has been actively managing its home equity portfolio to ensure that diligent pricing, appraisal and other underwriting activities continue to exist.

Residential real estate loans averaged $2.1 billion in the third quarter of 2022, and increased $599.1 million, or 40% from the average balance of $1.5 billion in same period of 2021. Additionally, compared to the quarter ended June 30, 2022, the average balance increased $219.8 million, or 46% on an annualized basis. The increase in average balance compared to both periods was partially due to the Company deciding to allocate more balances from its mortgage production for investment instead of for subsequent sale and servicing in the secondary market.

Average premium finance receivables totaled $13.5 billion in the third quarter of 2022, and accounted for 36% of the Company’s average total loans. In the third quarter of 2022, average premium finance receivables increased $2.3 billion, or 21%, from the same period of 2021. The increase during the third quarter of 2022 compared to the third quarter of 2021 was the result of continued originations within the portfolio due to hardening insurance market conditions driving a higher average size of new property and casualty insurance premium finance receivables as well as effective marketing and customer servicing. Approximately $4.1 billion of premium finance receivables were originated in the third quarter of 2022 compared to $3.1 billion during the same period of 2021. Premium finance receivables consist of a property and casualty portfolio and a life portfolio comprising approximately 42% and 58%, respectively, of the average total balance of premium finance receivables for the third quarter of 2022, and 42% and 58%, respectively, for the third quarter of 2021.

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

*Liquidity management assets.* Funds that are not utilized for loan originations are used to purchase investment securities and short term money market investments, to sell as federal funds and to maintain in interest bearing deposits with banks. Average liquidity management assets accounted for 21% and 23% of total average earning assets in the third quarter of 2022 and 2021, respectively. Average liquidity management assets decreased $476.9 million in the third quarter of 2022 compared to the same period of 2021. The balances of these assets can fluctuate based on management’s ongoing effort to manage liquidity and for asset liability management purposes. The Company will continue to prudently evaluate and utilize liquidity sources as needed, including the management of availability with the FHLB and FRB and utilization of the revolving credit facility with unaffiliated banks.

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

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

*(Dollars in thousands)*

|  | Nine Months Ended September 30, 2022 Balance | Percent | September 30, 2021 Balance | Percent |
| --- | ---: | ---: | ---: | ---: |
| Mortgage loans held-for-sale | **$559,258** | **1%** | $1,003,868 | 2% |
| Loans: |  |  |  |  |
| Commercial, excluding PPP | **$11,580,891** | **25%** | $9,432,203 | 22% |
| Commercial - PPP | **199,801** | **0** | 2,474,380 | 6 |
| Commercial real estate | **9,299,965** | **20** | 8,616,665 | 20 |
| Home equity | **326,410** | **1** | 381,115 | 1 |
| Residential real estate | **1,878,604** | **4** | 1,417,648 | 3 |
| Premium finance receivables | **12,704,880** | **27** | 10,475,164 | 25 |
| Other loans | **59,634** | **0** | 42,662 | 0 |
| Total average loans(1) | **$36,050,185** | **77%** | $32,839,837 | 77% |
| Liquidity management assets (2) | **10,297,980** | **22** | 9,133,242 | 21 |
| Other earning assets (3) | **23,673** | **0** | 24,016 | 0 |
| Total average earning assets | **$46,931,096** | **100%** | $43,000,963 | 100% |
| Total average assets | **$49,863,793** |  | $46,050,737 |  |
| Total average earning assets to total average assets |  | **94%** |  | 93% |

#### (1) Includes nonaccrual loans.

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

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

### LOAN PORTFOLIO AND ASSET QUALITY

### Loan Portfolio

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

*(Dollars in thousands)*

|  | September 30, 2022 Amount | % of Total | December 31, 2021 Amount | % of Total | September 30, 2021 Amount | % of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial | **$12,259,250** | **32%** | $11,904,068 | 34% | $11,187,972 | 33% |
| Commercial real estate | **9,578,184** | **25** | 8,990,286 | 26 | 8,885,714 | 27 |
| Home equity | **328,822** | **1** | 335,155 | 1 | 347,662 | 1 |
| Residential real estate | **2,235,459** | **6** | 1,637,099 | 5 | 1,547,736 | 5 |
| Premium finance receivables—property and casualty | **5,713,340** | **15** | 4,855,487 | 14 | 4,616,977 | 14 |
| Premium finance receivables—life insurance | **8,004,856** | **21** | 7,042,810 | 20 | 6,655,453 | 20 |
| Consumer and other | **47,702** | **0** | 24,199 | 0 | 22,529 | 0 |
| Total loans, net of unearned income | **$38,167,613** | **100%** | $34,789,104 | 100% | $33,264,043 | 100% |

*Commercial and commercial real estate loans.* Our commercial and commercial real estate loan portfolios are comprised primarily of lines of credit for working capital purposes and commercial real estate loans. The table below sets forth information regarding the types and amounts of our loans within these portfolios as of September 30, 2022 and 2021:

*(Dollars in thousands)*

| Commercial: | As of September 30, 2022 Total Balance | % of Losses Balance | Allowance For Credit Allocation | As of September 30, 2021 Total Balance | % of Losses Balance | Allowance For Credit Allocation |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial, industrial, and other, excluding commercial PPP | **$12,215,592** | **55.9%** | **$135,315** | $10,105,984 | 50.3% | $109,780 |
| Commercial PPP | **43,658** | **0.2** | **1** | 1,081,988 | 5.4 | 2 |
| **Total commercial** | **$12,259,250** | **56.1%** | **$135,316** | $11,187,972 | 55.7% | $109,782 |
| **Commercial Real Estate:** |  |  |  |  |  |  |
| Construction and development | **$1,525,511** | **7.0%** | **$51,389** | $1,343,715 | 6.7% | $34,101 |
| Non-construction | **8,052,673** | **36.9** | **99,329** | 7,541,999 | 37.6 | 105,934 |
| **Total commercial real estate** | **$9,578,184** | **43.9%** | **$150,718** | $8,885,714 | 44.3% | $140,035 |
| **Total commercial and commercial real estate** | **$21,837,434** | **100.0%** | **$286,034** | $20,073,686 | 100.0% | $249,817 |
| Commercial real estate - collateral location by state: |  |  |  |  |  |  |
| Illinois | **$6,510,120** | **68.0%** |  | $6,425,279 | 72.3% |  |
| Wisconsin | **849,894** | **8.9** |  | 790,477 | 8.9 |  |
| **Total primary markets** | **$7,360,014** | **76.9%** |  | $7,215,756 | 81.2% |  |
| Indiana | **326,217** | **3.4** |  | 307,631 | 3.5 |  |
| Florida | **236,578** | **2.5** |  | 117,990 | 1.3 |  |
| Texas | **177,990** | **1.9** |  | 108,239 | 1.2 |  |
| Colorado | **154,068** | **1.6** |  | 69,550 | 0.8 |  |
| California | **144,892** | **1.5** |  | 107,693 | 1.2 |  |
| Michigan | **131,457** | **1.4** |  | 71,961 | 0.8 |  |
| Other | **1,046,968** | **10.8** |  | 886,894 | 10.0 |  |
| **Total commercial real estate** | **$9,578,184** | **100.0%** |  | $8,885,714 | 100.0% |  |

We make commercial loans for many purposes, including working capital lines, which are generally renewable annually and supported by business assets, personal guarantees and additional collateral. Such loans may vary in size based on customer need. In addition, the Company has participated in the PPP starting in 2020. As of September 30, 2022 the carrying balance of such loans was reduced to approximately $43.7 million primarily resulting from forgiveness by the SBA. Commercial business lending is generally considered to involve a slightly higher degree of risk than traditional consumer bank lending. Primarily as a result of growth in the Company’s commercial loan portfolio, excluding PPP, our allowance for credit losses in our commercial loan portfolio increased to $135.3 million as of September 30, 2022 compared to $109.8 million as of September 30, 2021.

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, 76.9% of our commercial real estate loan portfolio is located in this region as of September 30, 2022. We have been able to effectively manage our total non-performing commercial real estate loans, aided by our credit management process. As of September 30, 2022, our allowance for credit losses related to this portfolio was $150.7 million compared to $140.0 million as of September 30, 2021. The increase in the allowance for credit losses is primarily a result of growth in our commercial real estate portfolio.

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

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

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

*Residential real estate.* Our residential real estate portfolio includes one- to four-family adjustable rate mortgages, construction loans to individuals and bridge financing loans for qualifying customers as well as certain long-term fixed rate loans. As of September 30, 2022, our residential loan portfolio totaled $2.2 billion, or 6% of our total outstanding loans.

Our adjustable rate mortgages are often non-agency conforming. Adjustable rate mortgage loans decrease the interest rate risk we face on our mortgage portfolio. However, this risk is not eliminated due to the fact that such loans generally provide for periodic and lifetime limits on the interest rate adjustments among other features. Additionally, adjustable rate mortgages may pose a higher risk of delinquency and default because they require borrowers to make larger payments when interest rates rise. As of September 30, 2022, $33.8 million of our residential real estate portfolio, including early buyout loans guaranteed by U.S. government agencies, or 1.5%, were classified as nonaccrual, $68.1 million in loans were 90 or more days past due and still accruing, $2.8 million were 30 to 89 days past due and $2.1 billion were current, or 95.3%. We believe that since our loan portfolio consists primarily of locally originated loans, and since the majority of our borrowers are longer-term customers with lower LTV ratios, we face a relatively low risk of borrower default and delinquency.

Due to interest rate risk considerations, we generally sell in the secondary market loans originated with long-term fixed rates, for which we receive fee income. We may also selectively retain certain of these loans within our banks’ own portfolios where they are non-agency conforming, or where the terms of the loans make them favorable to retain. A portion of the loans we sold into the secondary market were sold with the servicing of those loans retained. The amount of loans serviced for others as of September 30, 2022 and 2021 was $13.9 billion and $12.7 billion, respectively. All other mortgage loans sold into the secondary market were sold without the retention of servicing rights.

The Government National Mortgage Association (“GNMA”) optional repurchase programs allow financial institutions acting as servicers to buyout individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution was the original transferor of such loans. At the option of the servicer and without prior authorization from GNMA, the servicer may repurchase such delinquent loans for an amount equal to the remaining principal balance of the loan. Under FASB ASC Topic 860, “Transfers and Servicing,” this early buyout option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When the Company is deemed to have regained effective control over these loans under the unconditional repurchase option and the expected benefit of the potential repurchase is more than trivial, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans at fair value, regardless of whether the Company intends to exercise the early buyout option. These rebooked loans are reported as loans held-for-investment, part of the residential real estate portfolio, with the offsetting liability being reported in accrued interest payable and other liabilities. When the early buyout option on these rebooked GNMA loans is exercised, the repurchased loans continue to be carried at fair value. Additionally, such loans typically transfer to mortgage loans held-for-sale at the time of early buyout as the Company’s intent is to cure and resell such loans subsequent to repurchase from GNMA. If such intent to cure and resell changes subsequent to early buyout, the Company reclassifies such loans as held-for-investment. Early buyout loans classified as held-for-investment totaled $148.7 million at September 30, 2022 compared to $27.0 million at September 30, 2021. Such loans consist of both the rebooked GNMA loans and the early buyout exercised loans classified as held-for-investment discussed above. Rebooked GNMA loans held-for-investment amounted to $57.2 million at September 30, 2022, compared to $18.8 million balance at September 30, 2021. The increase in balance from September 30, 2021 to September 30, 2022 was the result of higher delinquencies between periods and less frequent exercising of the early buyout option by the Company. As of September 30, 2022, early buyout exercised loans held-for-investment totaled $91.5 million compared to $8.1 million as of September 30, 2021. As of September 30, 2022, early buyout exercised mortgage loans held-for-sale totaled $160.1 million compared to $354.6 million as of September 30, 2021. The decline in early buyout exercised mortgage loans held-for-sale relative to the prior year is primarily due to the resale of mortgage loans to GNMA as well as the reclassification of certain loans to held-for-investment classification due to an inability to resell due to continued delinquency.

It is not our current practice to underwrite, and we have no plans to underwrite, subprime, Alt A, no or little documentation loans, or option ARM loans.

*Premium finance receivables – property and casualty.* FIRST Insurance Funding and FIFC Canada originated approximately $3.5 billion in property and casualty insurance premium finance receivables in the third quarter of 2022 as compared to $2.8 billion of originations in the third quarter of 2021. During the nine months ended September 30, 2022 and 2021, FIRST Insurance Funding and FIFC Canada originated approximately $10.1 billion and $8.2 billion, respectively, in property and casualty insurance premium finance receivables. FIRST Insurance Funding and FIFC Canada make loans to businesses to finance the insurance premiums they pay on their property and casualty insurance policies. The loans are originated by working through independent medium and large insurance agents and brokers located throughout the United States and Canada. The insurance premiums financed are primarily for commercial customers’ purchases of liability, property and casualty and other commercial insurance.

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

*Premium finance receivables—life insurance.* Wintrust Life Finance originated approximately $550.1 million in life insurance premium finance receivables in the third quarter of 2022 as compared to $371.9 million of originations in the third quarter of 2021. During the nine months ended September 30, 2022 and 2021, Wintrust Life Finance originated approximately $1.3 billion and $1.1 billion, respectively, in life insurance premium finance receivables. The Company continues to experience a high level of competition and pricing pressure within the current market. These loans are originated directly with the borrowers with assistance from life insurance carriers, independent insurance agents, financial advisors and legal counsel. The life insurance policy is the primary form of collateral. In addition, these loans often are secured with a letter of credit, marketable securities or certificates of deposit. In some cases, Wintrust Life Finance may make a loan that has a partially unsecured position.

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

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

The following table classifies the loan portfolio at September 30, 2022 by date at which the loans reprice or mature, and the type of rate exposure:

*(In thousands)*

| As of September 30, 2022 Commercial | One year or less | From one to five years | From five to fifteen years Total | After fifteen years |  |
| --- | ---: | ---: | ---: | ---: | ---: |
| Fixed rate | **$469,049** | **$2,301,483** | **$1,516,860** | **$15,458** | **$4,302,850** |
| Fixed rate - PPP | **—** | **43,658** | **—** | **—** | **43,658** |
| Variable rate | **7,909,538** | **3,153** | **51** | **—** | **7,912,742** |
| Total commercial | **$8,378,587** | **$2,348,294** | **$1,516,911** | **$15,458** | **$12,259,250** |
| Commercial real estate |  |  |  |  |  |
| Fixed rate | **428,391** | **2,595,594** | **580,355** | **41,737** | **3,646,077** |
| Variable rate | **5,905,174** | **26,933** | **—** | **—** | **5,932,107** |
| Total commercial real estate | **$6,333,565** | **$2,622,527** | **$580,355** | **$41,737** | **$9,578,184** |
| Home equity |  |  |  |  |  |
| Fixed rate | **12,768** | **3,278** | **13,250** | **37** | **29,333** |
| Variable rate | **299,489** | **—** | **—** | **—** | **299,489** |
| Total home equity | **$312,257** | **$3,278** | **$13,250** | **$37** | **$328,822** |
| Residential real estate |  |  |  |  |  |
| Fixed rate | **13,424** | **4,647** | **30,725** | **1,024,557** | **1,073,353** |
| Variable rate | **58,622** | **223,238** | **880,246** | **—** | **1,162,106** |
| Total residential real estate | **$72,046** | **$227,885** | **$910,971** | **$1,024,557** | **$2,235,459** |
| Premium finance receivables - property & casualty |  |  |  |  |  |
| Fixed rate | **5,535,087** | **178,253** | **—** | **—** | **5,713,340** |
| Variable rate | **—** | **—** | **—** | **—** | **—** |
| Total premium finance receivables - property & casualty | **$5,535,087** | **$178,253** | **$—** | **$—** | **$5,713,340** |
| Premium finance receivables - life insurance |  |  |  |  |  |
| Fixed rate | **25,766** | **511,333** | **22,271** | **—** | **559,370** |
| Variable rate | **7,445,486** | **—** | **—** | **—** | **7,445,486** |
| Total premium finance receivables - life insurance | **$7,471,252** | **$511,333** | **$22,271** | **$—** | **$8,004,856** |
| Consumer and other |  |  |  |  |  |
| Fixed rate | **8,424** | **5,017** | **12** | **486** | **13,939** |
| Variable rate | **33,763** | **—** | **—** | **—** | **33,763** |
| Total consumer and other | **$42,187** | **$5,017** | **$12** | **$486** | **$47,702** |
| Total per category |  |  |  |  |  |
| Fixed rate | **6,492,909** | **5,599,605** | **2,163,473** | **1,082,275** | **15,338,262** |
| Fixed rate - PPP | **—** | **43,658** | **—** | **—** | **43,658** |
| Variable rate | **21,652,072** | **253,324** | **880,297** | **—** | **22,785,693** |
| Total loans, net of unearned income | **$28,144,981** | **$5,896,587** | **$3,043,770** | **$1,082,275** | **$38,167,613** |
| **Variable Rate Loan Pricing by Index:** |  |  |  |  |  |
| Prime |  |  |  |  | **$3,971,147** |
| One- month LIBOR |  |  |  |  | **5,057,295** |
| Three- month LIBOR |  |  |  |  | **197,233** |
| Twelve- month LIBOR |  |  |  |  | **5,701,876** |
| One- year CMT |  |  |  |  | **1,578,086** |
| Other U.S. Treasury tenors |  |  |  |  | **142,857** |
| SOFR tenors |  |  |  |  | **5,385,527** |
| Ameribor tenors |  |  |  |  | **334,478** |
| BSBY tenors |  |  |  |  | **38,138** |
| Other |  |  |  |  | **379,056** |
| Total variable rate |  |  |  |  | **$22,785,693** |

#### LIBOR - London Interbank Offered Rate.

#### SOFR - Secured Overnight Financing Rate.

#### CMT - Constant Maturity Treasury Rate.

#### Ameribor - American Interbank Offered Rate.

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

With its ongoing transition from LIBOR, the Company increased the portion of its loan portfolio with interest rate indices that are an alternative to LIBOR during the period, including emerging indices such as SOFR, Ameribor and BSBY. As shown above, at September 30, 2022, variable rate loans with loans priced at SOFR, Ameribor and BSBY totaled $5.4 billion, $334.5 million and $38.1 million, respectively. Additionally, the percentage of the Company’s variable rate loans indexed to LIBOR decreased to 48% at September 30, 2022 compared to 82% at September 30, 2021. The Company continues its transition of its loan portfolio from LIBOR for both loans existing at September 30, 2022 and future new originations.

### Past Due Loans and Non-Performing Assets

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

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

Generally, each loan officer is responsible for monitoring his or her loan portfolio, recommending a credit risk rating for each loan in their portfolio and ensuring the credit risk ratings are appropriate. These credit risk ratings are then ratified by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including a borrower’s financial strength, cash flow coverage, collateral protection and guarantees. The Company maintains an internal loan review function to independently review a portion of the loan portfolio to evaluate the appropriateness of management-assigned credit risk ratings. These ratings are subject to further review at each of our bank subsidiaries by the applicable regulatory authority, including the FRB of Chicago and the Office of the Comptroller of the Currency ("OCC"), and are also reviewed by our internal audit staff.

The Company’s Problem Loan Reporting system includes all such loans described above with credit risk ratings of 6 through 9. This system is designed to provide an ongoing detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible and, as a result, no longer share similar risk characteristics as its related pool. If that is the case, the individual loan is considered collateral dependent and individually assessed for an allowance for credit loss. The Company’s individual assessment utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions.

Through the credit risk rating process, such loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to nonaccrual status or a charge-off. If the Company determines that a loan amount or portion thereof is uncollectible, the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

The 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 are individually assessed at the time of the modification and on a quarterly basis to measure an allowance for credit loss. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan's original rate, or for collateral dependent loans, to the fair value of the collateral. Any shortfall is recorded as a reserve.

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

#### Non-performing Assets (1)

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

*(Dollars in thousands)*

| Loans past due greater than 90 days and still accruing (2): | September 30, 2022 | June 30, 2022 | December 31, 2021 | September 30, 2021 |
| --- | ---: | ---: | ---: | ---: |
| Commercial | **$237** | $— | $15 | $— |
| Commercial real estate | **—** | — | — | — |
| Home equity | **—** | — | — | 164 |
| Residential real estate | **—** | — | — | — |
| Premium finance receivables—property and casualty | **16,624** | 6,447 | 7,210 | 5,811 |
| Premium finance receivables—life insurance | **1,831** | — | 7 | — |
| Consumer and other | **31** | 25 | 137 | 126 |
| Total loans past due greater than 90 days and still accruing | **18,723** | 6,472 | 7,369 | 6,101 |
| **Nonaccrual loans:** |  |  |  |  |
| Commercial | **44,293** | 32,436 | 20,399 | 26,468 |
| Commercial real estate | **10,477** | 10,718 | 21,746 | 23,706 |
| Home equity | **1,320** | 1,084 | 2,574 | 3,449 |
| Residential real estate | **9,787** | 8,330 | 16,440 | 22,633 |
| Premium finance receivables—property and casualty | **13,026** | 13,303 | 5,433 | 7,300 |
| Premium finance receivables—life insurance | **—** | — | — | — |
| Consumer and other | **7** | 8 | 477 | 384 |
| Total nonaccrual loans | **78,910** | 65,879 | 67,069 | 83,940 |
| **Total non-performing loans:** |  |  |  |  |
| Commercial | **44,530** | 32,436 | 20,414 | 26,468 |
| Commercial real estate | **10,477** | 10,718 | 21,746 | 23,706 |
| Home equity | **1,320** | 1,084 | 2,574 | 3,613 |
| Residential real estate | **9,787** | 8,330 | 16,440 | 22,633 |
| Premium finance receivables—property and casualty | **29,650** | 19,750 | 12,643 | 13,111 |
| Premium finance receivables—life insurance | **1,831** | — | 7 | — |
| Consumer and other | **38** | 33 | 614 | 510 |
| Total non-performing loans | **$97,633** | $72,351 | $74,438 | $90,041 |
| Other real estate owned | **5,376** | 5,574 | 1,959 | 9,934 |
| Other real estate owned—from acquisitions | **1,311** | 1,265 | 2,312 | 3,911 |
| Other repossessed assets | **—** | — | — | — |
| Total non-performing assets | **104,320** | $79,190 | $78,709 | $103,886 |
| Accruing TDRs not included within non-performing assets | **$34,238** | $36,184 | 37,486 | $38,468 |
| **Total non-performing loans by category as a percent of its own respective category’s period-end balance:** |  |  |  |  |
| Commercial | **0.36%** | 0.27% | 0.17% | 0.24% |
| Commercial real estate | **0.11** | 0.11 | 0.24 | 0.27 |
| Home equity | **0.40** | 0.33 | 0.77 | 1.04 |
| Residential real estate | **0.44** | 0.40 | 1.00 | 1.46 |
| Premium finance receivables—property and casualty | **0.52** | 0.36 | 0.26 | 0.28 |
| Premium finance receivables—life insurance | **0.02** | — | 0.00 | — |
| Consumer and other | **0.08** | 0.07 | 2.54 | 2.26 |
| Total non-performing loans | **0.26%** | 0.20% | 0.21% | 0.27% |
| **Total non-performing assets, as a percentage of total assets** | **0.20%** | 0.16% | 0.16% | 0.22% |
| **Total nonaccrual loans as a percentage of total loans** | **0.21%** | 0.18% | 0.19% | 0.25% |
| **Allowance for credit losses as a percentage of nonaccrual loans** | **399.22%** | 473.76% | 446.78% | 352.70% |

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

*(2) As of September 30, 2022, June 30,2022, December 31, 2021, and September 30, 2021, approximately $1.1 million, $541,000, $320,000 and $445,000, respectively, of TDRs were past due greater than 90 days and still accruing interest.*

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

#### Loan Portfolio Aging

The tables below show the aging of the Company’s loan portfolio at September 30, 2022 and June 30, 2022:

*(Dollars in thousands)*

| As of September 30, 2022 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, excluding PPP loans | **$44,293** | **$237** | **$23,209** | **$31,640** | **$12,116,213** | **$12,215,592** |
| Commercial PPP loans | **—** | **—** | **1,432** | **3,277** | **38,949** | **43,658** |
| Commercial real estate |  |  |  |  |  |  |
| Construction and development | **889** | **—** | **—** | **5,715** | **1,518,907** | **1,525,511** |
| Non-construction | **9,588** | **—** | **6,041** | **24,256** | **8,012,788** | **8,052,673** |
| Home equity | **1,320** | **—** | **125** | **848** | **326,529** | **328,822** |
| Residential real estate, excluding early buy-out loans | **9,787** | **—** | **2,149** | **15** | **2,074,844** | **2,086,795** |
| Premium finance receivables |  |  |  |  |  |  |
| Property and casualty insurance loans | **13,026** | **16,624** | **15,301** | **21,128** | **5,647,261** | **5,713,340** |
| Life insurance loans | **—** | **1,831** | **13,628** | **44,954** | **7,944,443** | **8,004,856** |
| Consumer and other | **7** | **31** | **26** | **343** | **47,295** | **47,702** |
| Total loans, net of unearned income, excluding early buy-out loans | **$78,910** | **$18,723** | **$61,911** | **$132,176** | **$37,727,229** | **$38,018,949** |
| Early buy-out loans guaranteed by U.S. government agencies (1) | **24,020** | **68,067** | **489** | **104** | **55,984** | **148,664** |
| Total loans, net of unearned income | **$102,930** | **$86,790** | **$62,400** | **$132,280** | **$37,783,213** | **$38,167,613** |

*(Dollars in thousands)*

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

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

As of September 30, 2022, $61.9 million, or 0.2% of all loans, excluding early buy-out loans guaranteed by U.S. government agencies, were 60 to 89 days (or two payments) past due and $132.2 million of all loans or 0.3% were 30 to 59 days (or one payment) past due. As of June 30, 2022, $41.4 million, or 0.1% of all loans, excluding early buy-out loans guaranteed by U.S. government agencies, were 60 to 89 days (or two payments) past due and $138.0 million, or 0.4%, were 30 to 59 days (or one payment) past due. Many of the commercial and commercial real estate loans shown as 60 to 89 days and 30 to 59 days past due are included on the Company’s internal problem loan reporting system. Loans on this system are closely monitored by management on a monthly basis.

The Company's home equity and residential loan portfolios continue to exhibit low delinquency ratios. Home equity loans at September 30, 2022 that were current with regard to the contractual terms of the loan agreement represent 99.3% of the total home equity portfolio. Residential real estate loans, excluding early buy-out loans guaranteed by U.S. government agencies, at September 30, 2022 that were current with regards to the contractual terms of the loan agreements comprise 99.4% of total residential real estate loans outstanding.

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

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

*(In thousands)*

|  | Three Months Ended September 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | **$72,351** | $87,690 | **$74,438** | $127,513 |
| Additions from becoming non-performing in the respective period | **35,234** | 9,341 | **62,216** | 31,997 |
| Return to performing status | **(154)** | (3,322) | **(1,883)** | (3,976) |
| Payments received | **(20,417)** | (5,568) | **(44,585)** | (40,611) |
| Transfer to OREO and other repossessed assets | **(185)** | (720) | **(6,173)** | (5,752) |
| Charge-offs | **(341)** | (548) | **(4,664)** | (8,184) |
| Net change for niche loans (1) | **11,145** | 3,168 | **18,284** | (10,946) |
| **Balance at end of period** | **$97,633** | $90,041 | **$97,633** | $90,041 |

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

### Allowance for Credit Losses

The allowance for credit losses, specifically the allowance for loans losses and the allowance for unfunded commitment losses, represents management’s estimate of lifetime expected credit losses in the loan portfolio. The allowance for credit losses is determined quarterly using a methodology that incorporates important risk characteristics of each loan, as described below under “How We Determine the Allowance for Credit Losses” in this Item 2.

Management determined that the allowance for credit losses was appropriate at September 30, 2022, and that the loan portfolio is well diversified and well secured, without undue concentration in any specific risk area. While this process involves a high degree of management judgment, the allowance for credit losses is based on a comprehensive, well documented, and consistently applied analysis of the Company’s loan portfolio. This analysis takes into consideration all available information existing as of the financial statement date, including environmental factors such as economic, industry, geographical and political factors, when considered applicable. The relative level of allowance for credit losses is reviewed and compared to industry peers. This review encompasses levels of total non-performing loans, portfolio mix, portfolio concentrations and overall levels of net charge-off. Historical trending of both the Company’s results and the industry peers is also reviewed to analyze comparative significance.

#### Allowance for Credit Losses

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

*(Dollars in thousands)*

|  | Three Months Ended September 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: | ---: |
| **Allowance for credit losses at beginning of period** | **$312,109** | $304,031 | **$299,653** | $379,910 |
| **Provision for credit losses** | **6,193** | (7,909) | **30,711** | (68,584) |
| **Other adjustments** | **(105)** | (65) | **(139)** | (2) |
| **Charge-offs:** |  |  |  |  |
| Commercial | **780** | 1,352 | **11,122** | 16,370 |
| Commercial real estate | **24** | 406 | **841** | 2,798 |
| Home equity | **43** | 59 | **432** | 201 |
| Residential real estate | **5** | 10 | **471** | 15 |
| Premium finance receivables | **6,037** | 1,390 | **10,618** | 6,706 |
| Consumer and other | **635** | 112 | **1,081** | 330 |
| Total charge-offs | **7,524** | 3,329 | **24,565** | 26,420 |
| **Recoveries:** |  |  |  |  |
| Commercial | **2,523** | 816 | **4,057** | 2,170 |
| Commercial real estate | **55** | 373 | **640** | 1,087 |
| Home equity | **38** | 313 | **254** | 742 |
| Residential real estate | **60** | 5 | **71** | 245 |
| Premium finance receivables | **1,648** | 1,728 | **4,243** | 6,749 |
| Consumer and other | **31** | 92 | **103** | 158 |
| Total recoveries | **4,355** | 3,327 | **9,368** | 11,151 |
| **Net charge-offs** | **(3,169)** | (2) | **(15,197)** | (15,269) |
| **Allowance for credit losses at period end** | **$315,028** | $296,055 | **$315,028** | $296,055 |
| **Annualized net charge-offs by category as a percentage of its own respective category’s average:** |  |  |  |  |
| Commercial | **(0.06)%** | 0.02% | **0.08%** | 0.16% |
| Commercial real estate | **0.00** | 0.00 | **0.00** | 0.03 |
| Home equity | **0.01** | (0.28) | **0.07** | (0.19) |
| Residential real estate | **(0.01)** | 0.00 | **0.03** | (0.02) |
| Premium finance receivables | **0.13** | (0.01) | **0.07** | 0.00 |
| Consumer and other | **4.02** | 0.26 | **2.19** | 0.54 |
| Total loans, net of unearned income | **0.03%** | 0.00% | **0.06%** | 0.06% |
| **Loans at period-end** | **$38,167,613** | $33,264,043 |  |  |
| **Allowance for loan losses as a percentage of loans at period end** | **0.64%** | 0.75% |  |  |
| **Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end** | **0.83** | 0.89 |  |  |
| **Allowance for loan and unfunded loan-related commitment losses as a percentage of loans at period end, excluding PPP loans** | **0.83** | 0.92 |  |  |

The allowance for credit losses, as related to loans and lending-related commitments, is comprised of an allowance for loan losses, which is determined with respect to loans that we have originated, and an allowance for unfunded commitment losses. A separate allowance for held-to-maturity securities losses is measured related to such debt securities portfolio. Our allowance for unfunded commitment losses is determined with respect to funds that we have committed to lend but for which funds have not yet been disbursed and is computed using a methodology similar to that used to determine the allowance for loan losses. The allowance for unfunded lending-related commitments totaled $68.9 million and $47.4 million as of September 30, 2022 and September 30, 2021, respectively.

Additions to the allowance for credit losses are charged to earnings through the provision for credit losses. Charge-offs represent the amount of loans that have been determined to be uncollectible during a given period, and are deducted from the allowance for credit losses, and recoveries represent the amount of collections received from loans that had previously been charged off, and are credited to the allowance for credit losses. See Note 7 - Allowance for Credit Losses of the Consolidated

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

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

The allowance for credit losses is measured on a collective or pooled basis by loans that share similar risk characteristics. If the loan no longer exhibits risk characteristics similar to that of a pool, typically due to credit deterioration of the related borrower, the Company analyzes the loan for purposes of individually assessing a specific allowance for credit loss as part of the Problem Loan Reporting system review. A separate reserve is collectively measured for loans continuing to share risk characteristics and, as a result, remaining in the pools. See Note 7 - Allowance for Credit Losses of the Consolidated Financial Statements presented under Item 1 of this report for further discussion of the allowance for credit losses measurement process.

#### Collective Measurement

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

#### Individual Assessment

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

#### Home Equity, Residential Real Estate and Consumer Loans

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

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

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

#### Premium Finance Receivables

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

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

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

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

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

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

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

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

Having determined the net value based on the factors such as those noted above and compared that value to the book value of the loan, the Company arrives at a charge-off amount or a specific reserve included in the allowance for credit losses. In summary, for collateral dependent loans, appraisals are used as the fair value starting point in the estimate of net value. Estimated costs to sell are deducted from the appraised value, when appropriate under current accounting rules, to arrive at the net appraised value. Although an external appraisal is the primary source of valuation utilized for charge-offs on collateral 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 September 30, 2022, the Company had $43.2 million in loans modified in TDRs. The $43.2 million in TDRs represents 219 credits in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay. The balance decreased from $45.4 million representing 227 credits at June 30, 2022 and decreased from $48.5 million representing 254 credits at September 30, 2021.

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

Subsequent to its restructuring, any TDR that becomes nonaccrual or more than 90 days past-due and still accruing interest will be included in the Company’s non-performing loans. Each TDR was individually assessed when measuring the allowance for credit losses at September 30, 2022 and approximately $2.1 million was appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for credit losses. Additionally, at September 30, 2022, the Company was committed to lend an additional $257,000 of funds to borrowers under the contractual terms of TDRs.

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

*(In thousands)*

| Accruing TDRs: | September 30, 2022 | June 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: |
| Commercial | **$2,254** | $2,456 | $4,532 |
| Commercial real estate | **8,967** | 9,659 | 8,385 |
| Residential real estate and other | **23,017** | 24,069 | 25,551 |
| Total accruing TDRs | **$34,238** | $36,184 | $38,468 |
| **Nonaccrual TDRs: (1)** |  |  |  |
| Commercial | **$4,599** | $4,786 | $3,079 |
| Commercial real estate | **1,880** | 1,955 | 3,239 |
| Residential real estate and other | **2,516** | 2,453 | 3,685 |
| Total nonaccrual TDRs | **$8,995** | $9,194 | $10,003 |
| **Total TDRs:** |  |  |  |
| Commercial | **$6,853** | $7,242 | $7,611 |
| Commercial real estate | **10,847** | 11,614 | 11,624 |
| Residential real estate and other | **25,533** | 26,522 | 29,236 |
| Total TDRs | **$43,233** | $45,378 | $48,471 |

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

#### TDR Rollforward

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

| Three months ended September 30, 2022 (In thousands) | Commercial | Commercial Real Estate | Residential Real Estate and Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | **$7,242** | **$11,614** | **$26,522** | **$45,378** |
| Additions during the period | **—** | **—** | **708** | **708** |
| Reductions: |  |  |  |  |
| Charge-offs | **(133)** | **—** | **—** | **(133)** |
| Transferred to OREO and other repossessed assets | **—** | **—** | **—** | **—** |
| Removal of TDR loan status (1) | **—** | **(488)** | **—** | **(488)** |
| Payments received | **(256)** | **(279)** | **(1,697)** | **(2,232)** |
| **Balance at period end** | **$6,853** | **$10,847** | **$25,533** | **$43,233** |

| Three months ended September 30, 2021 (In thousands) | Commercial | Commercial Real Estate | Residential Real Estate and Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | $11,015 | $13,093 | $31,639 | $55,747 |
| Additions during the period | 1 | — | 558 | 559 |
| Reductions: |  |  |  |  |
| Charge-offs | (61) | — | — | (61) |
| Transferred to OREO and other repossessed assets | — | — | — | — |
| Removal of TDR loan status (1) | (2,121) | — | (617) | (2,738) |
| Payments received | (1,223) | (1,469) | (2,344) | (5,036) |
| **Balance at period end** | $7,611 | $11,624 | $29,236 | $48,471 |

| Nine months ended September 30, 2022 (In thousands) | Commercial | Commercial Real Estate | Residential Real Estate and Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | **$10,877** | **$10,471** | **$27,961** | **$49,309** |
| Additions during the period | **468** | **1,907** | **3,851** | **6,226** |
| Reductions: |  |  |  |  |
| Charge-offs | **(334)** | **(3)** | **(217)** | **(554)** |
| Transferred to OREO and other repossessed assets | **—** | **—** | **—** | **—** |
| Removal of TDR loan status (1) | **(1,120)** | **(488)** | **(287)** | **(1,895)** |
| Payments received | **(3,038)** | **(1,040)** | **(5,775)** | **(9,853)** |
| **Balance at period end** | **$6,853** | **$10,847** | **$25,533** | **$43,233** |

| Nine months ended September 30, 2021 (In thousands) | Commercial | Commercial Real Estate | Residential Real Estate and Other | Total |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | $18,190 | $16,726 | $33,276 | $68,192 |
| Additions during the period | 547 | 2,944 | 3,393 | 6,884 |
| Reductions: |  |  |  |  |
| Charge-offs | (2,358) | (23) | (7) | (2,388) |
| Transferred to OREO and other repossessed assets | (99) | — | (459) | (558) |
| Removal of TDR loan status (1) | (2,121) | (800) | (1,556) | (4,477) |
| Payments received | (6,548) | (7,223) | (5,411) | (19,182) |
| **Balance at period end** | $7,611 | $11,624 | $29,236 | $48,471 |

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

#### Other Real Estate Owned

In certain circumstances, the Company is required to take action against the real estate collateral of specific loans. The Company uses foreclosure only as a last resort for dealing with borrowers experiencing financial hardships. The Company employs extensive contact and restructuring procedures to attempt to find other solutions for our borrowers. The tables below present a summary of other real estate owned and shows the activity for the respective periods and the balance for each property type:

*(In thousands)*

|  | Three Months Ended September 30, 2022 | September 30, 2021 | Nine Months Ended September 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | **$6,839** | $15,572 | **$4,271** | $16,558 |
| Disposal/resolved | **(133)** | (1,949) | **(3,802)** | (7,263) |
| Transfers in at fair value, less costs to sell | **134** | 315 | **6,653** | 5,562 |
| Fair value adjustments | **(153)** | (93) | **(435)** | (1,012) |
| Balance at end of period | **$6,687** | $13,845 | **$6,687** | $13,845 |

*(In thousands)*

|  | Period End September 30, 2022 | June 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: |
| Residential real estate | **$1,585** | $1,630 | $1,592 |
| Residential real estate development | **—** | 133 | 934 |
| Commercial real estate | **5,102** | 5,076 | 11,319 |
| Total | **$6,687** | $6,839 | $13,845 |

89

### Deposits

Total deposits at September 30, 2022 were $42.8 billion, an increase of $2.8 billion, or 7%, compared to total deposits at September 30, 2021. See Note 10 - Deposits to the Consolidated Financial Statements in Item 1 of this report for a summary of period end deposit balances.

The following table sets forth, by category, the maturity of time certificates of deposit as of September 30, 2022:

| Time Certificates of Deposit Maturity/Re-pricing Analysis As of September 30, 2022 (Dollars in thousands) | Total Time Certificates of Deposits | Weighted-Average Rate of Maturing Time Certificates of Deposit (1) |
| --- | ---: | ---: |
| 1-3 months | **$1,057,147** | **1.15%** |
| 4-6 months | **631,633** | **0.56** |
| 7-9 months | **608,612** | **0.51** |
| 10-12 months | **674,541** | **1.01** |
| 13-18 months | **686,225** | **1.26** |
| 19-24 months | **164,543** | **0.81** |
| 24+ months | **253,617** | **1.81** |
| Total | **$4,076,318** | **0.99%** |

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

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

*(Dollars in thousands)*

|  | Three Months Ended September 30, 2022 Balance | Percent | June 30, 2022 Balance | Percent | September 30, 2021 Balance | Percent |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Non-interest-bearing | **$13,731,219** | **32%** | $13,805,128 | 33% | $12,834,084 | 32% |
| NOW and interest-bearing demand deposits | **5,789,368** | **14** | 5,230,702 | 13 | 4,147,436 | 11 |
| Wealth management deposits | **3,078,764** | **7** | 2,835,267 | 7 | 2,353,721 | 6 |
| Money market | **12,037,412** | **29** | 11,892,948 | 29 | 11,956,346 | 30 |
| Savings | **3,862,579** | **9** | 3,882,856 | 9 | 3,851,523 | 10 |
| Time certificates of deposit | **3,675,930** | **9** | 3,687,778 | 9 | 4,236,317 | 11 |
| Total average deposits | **$42,175,272** | **100%** | $41,334,679 | 100% | $39,379,427 | 100% |

Total average deposits for the third quarter of 2022 were $42.2 billion, an increase of $2.8 billion, or 7%, from the third quarter of 2021. The increase in average deposits is primarily attributable to organic growth of retail deposits.

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

#### Brokered Deposits

While the Company obtains a portion of its total deposits through brokered deposits, the Company does so primarily as an asset-liability management tool to assist in the management of interest rate risk, and the Company does not consider brokered deposits to be a vital component of its current liquidity resources. Historically, brokered deposits have represented a small component of the Company’s total deposits outstanding, as set forth in the table below:

*(Dollars in thousands)*

|  | September 30, 2022 | 2021 | December 31, 2021 | 2020 | 2019 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Total deposits | **$42,797,191** | $39,952,558 | $42,095,585 | $37,092,651 | $30,107,138 |
| Brokered deposits | **2,532,769** | 1,877,093 | 1,591,083 | 1,843,227 | 1,011,404 |
| Brokered deposits as a percentage of total deposits | **5.9%** | 4.7% | 3.8% | 5.0% | 3.4% |

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

### Other Funding Sources

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

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

*(In thousands)*

|  | Three Months Ended September 30, 2022 | June 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: |
| FHLB advances | **$1,403,573** | $1,197,390 | $1,241,073 |
| Other borrowings: |  |  |  |
| Notes payable | **69,562** | 74,912 | 90,960 |
| Short-term borrowings | **14,497** | 14,791 | 13,183 |
| Secured borrowings | **332,905** | 337,626 | 344,724 |
| Other | **61,945** | 62,450 | 63,918 |
| Total other borrowings | **$478,909** | $489,779 | $512,785 |
| Subordinated notes | **437,191** | 437,084 | 436,746 |
| Junior subordinated debentures | **253,566** | 253,566 | 253,566 |
| Total other funding sources | **$2,573,239** | $2,377,819 | $2,444,170 |

FHLB advances provide the banks with access to fixed-rate funds that are useful in mitigating interest rate risk and achieving an acceptable interest rate spread on fixed-rate loans or securities. Additionally, the banks have the ability to borrow shorter-term, overnight funding from the FHLB for other general purposes. FHLB advances to the banks totaled $2.3 billion at September 30, 2022 and $1.2 billion at December 31, 2021 and September 30, 2021.

Notes payable balances represent the balances on a loan agreement (“Credit Agreement”) with unaffiliated banks consisting of a $100.0 million revolving credit facility (“Revolving Credit Facility”) and a $150.0 million term facility (“Term Facility”). Both the Revolving Credit Facility and the Term Facility are available for corporate purposes such as to provide capital to fund continued growth at existing bank subsidiaries, possible future acquisitions and for other general corporate matters. The Company was contractually required to borrow the entire amount of the Term Facility on September 18, 2018 and all such borrowings must be repaid by September 18, 2023. At September 30, 2022 and 2021, the Company had a balance under the Term Facility of $64.3 million and $85.7 million, respectively. At September 30, 2022, the Company had no outstanding balance under the Revolving Credit Facility.

An additional amendment to the Credit Agreement was executed and effective as of September 13, 2022. The amendment provided for, among other things, increases in the applicable rate with respect to each Term SOFR Loan (in the case of a borrowing under the Revolving Credit Facility) from 1.45% to 1.55% and with respect to each Base Rate Loan (in the case of a borrowing under the Revolving Credit Facility) from 0.60% to 0.70%. The amendment also extended the maturity date under the Revolving Credit Facility to September 12, 2023.

Short-term borrowings include securities sold under repurchase agreements of customer sweep accounts in connection with master repurchase agreements at the banks. These borrowings totaled $9.2 million at September 30, 2022 compared to $9.2 million at December 31, 2021 and $14.1 million at September 30, 2021. This funding category typically fluctuates based on customer preferences and daily liquidity needs of the banks, their customers and the banks’ operating subsidiaries.

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

Other borrowings at September 30, 2022 represent a fixed-rate promissory note (“Fixed-Rate Promissory Note”) issued by the Company in June 2017. Amendments to the Fixed-Rate Promissory Note since issuance increased the principal amount to $66.4 million, reduced the interest rate to 1.70% and extended the maturity date to March 31, 2025. The Fixed-Rate Promissory Note relates to and is secured by three office buildings owned by the Company. At September 30, 2022, the Fixed-Rate Promissory Note had a balance of $61.8 million compared to $63.3 million at December 31, 2021 and $63.8 million at September 30, 2021. During the nine months ended September 30, 2022, the Company made monthly principal and interest payments.

At September 30, 2022, the Company had outstanding subordinated notes totaling $437.3 million compared to $436.9 million and $436.8 million outstanding at December 31, 2021 and September 30, 2021, respectively. In 2019, the Company issued $300.0 million of subordinated notes, receiving $296.7 million in net proceeds. The notes have a stated interest rate of 4.85% and mature in June 2029. In 2014, the Company issued $140.0 million of subordinated notes receiving $139.1 million in net proceeds. These notes have a stated interest rate of 5.00% and mature in June 2024. Subordinated notes are stated at par adjusted for unamortized issuance costs paid related to such debt.

The Company had $253.6 million of junior subordinated debentures outstanding as of September 30, 2022, December 31, 2021 and September 30, 2021. The amounts reflected on the balance sheet represent the junior subordinated debentures issued to eleven trusts by the Company and equal the amount of the preferred and common securities issued by the trusts. At September 30, 2022, the Company included $245.5 million of the junior subordinated debentures, net of common securities, in Tier 2 regulatory capital.

See Note 11 - FHLB Advances, Other Borrowings and Subordinated Notes and Note 12 - Junior Subordinated Debentures of the Consolidated Financial Statements presented under Item 1 of this report for details of period end balances and other information for these various funding sources.

### Shareholders’ Equity

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

|  | September 30, 2022 | June 30, 2022 | September 30, 2021 |
| --- | ---: | ---: | ---: |
| Tier 1 leverage ratio | **8.8%** | 8.8% | 8.1% |
| Risk-based capital ratios: |  |  |  |
| Tier 1 capital ratio | **9.9** | 9.9 | 9.9 |
| Common equity tier 1 capital ratio | **9.0** | 9.0 | 8.9 |
| Total capital ratio | **11.8** | 11.9 | 12.1 |
| Other ratio: |  |  |  |
| Total average equity-to-total average assets(1) | **9.5** | 9.2 | 9.2 |

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

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

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

*(2) Reflects the well-capitalized standard applicable to the Company for purposes of the Federal Reserve’s Regulation Y. The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies (“BHCs”) to reflect the higher capital requirements imposed under the U.S. Basel III Rule or to add Common Equity Tier 1 capital ratio and Tier 1 leverage ratio requirements to this standard. As a result, the Common Equity Tier 1 capital ratio and Tier 1 leverage ratio are denoted as “N/A” in this column. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to BHCs as the standard applicable to our subsidiary banks, we believe the Company’s capital ratios as of September 30, 2022 would exceed such revised well-capitalized standard.*

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

The Company’s principal sources of funds at the holding company level are dividends from its subsidiaries, borrowings under its loan agreement with unaffiliated banks and proceeds from the issuances of subordinated debt and additional equity. Refer to Notes 11, 12 and 18 of the Consolidated Financial Statements in Item 1 for further information on these various funding sources. Management is committed to maintaining the Company’s capital levels above the “Well Capitalized” levels established by the FRB for bank holding companies.

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

The Company continues to leverage its capital management framework to assess and monitor risk when making capital decisions, including uncertainty from the effects of the COVID-19 pandemic.

See Note 18 - Shareholders’ Equity and Earnings Per Share of the Consolidated Financial Statements presented under Item 1 of this report for details on the Company’s issuance of Series D Preferred Stock in June 2015, Series E Preferred Stock and associated Depositary Shares in May 2020, and additional common stock offering in June 2022. The Company hereby incorporates by reference Note 18 of the Consolidated Financial Statements presented under Item 1 of this report in its entirety.

### LIQUIDITY

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

In addition to the liquidity management noted above, in the second quarter of 2022, the Company sold a total of 3,450,000 shares of its common stock through a public offering. Net proceeds to the Company totaled approximately $285.7 million, net of estimated issuance costs. In the third quarter of 2022, we maintained our liquid assets to ensure that we would have the balance sheet strength to serve our clients. As a result, the Company believes that it has sufficient funds and access to funds to effectively meet its working capital and other needs as well as manage through the continued COVID-19 pandemic. The Company will continue to prudently evaluate liquidity sources, including the management of availability with the FHLB and FRB and utilization of the revolving credit facility with unaffiliated banks. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation -Interest-Earning Assets, -Deposits, -Other Funding Sources and -Shareholders’ Equity sections of this report for additional information regarding the Company’s liquidity position. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation -Overview section of this report for additional discussion of the impact of the COVID-19 pandemic.

### INFLATION

A banking organization’s assets and liabilities are primarily monetary. Changes in the rate of inflation typically do not have as great an impact on the financial condition of a bank as do changes in interest rates. Moreover, interest rates do not necessarily change at the same percentage as inflation. Accordingly, changes in inflation are not expected to have as material an impact on the Company’s business as entities operating in other industries. An analysis of the Company’s asset and liability structure provides the best indication of how the organization is positioned to respond to changing interest rates. See “Quantitative and Qualitative Disclosures About Market Risk” section of this report for additional information.

### FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of federal securities laws. Forward-looking information can be identified through the use of words such as “intend,” “plan,” “project,” “expect,” “anticipate,” “believe,” “estimate,” “contemplate,” “possible,” “will,” “may,” “should,” “would” and “could.” Forward-looking statements and information are not historical facts, are premised on many factors and assumptions, and represent only management’s expectations, estimates and projections regarding future events. Similarly, these statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, such as the impacts of the COVID-19 pandemic (including the continued emergence of variant strains), and which may include, but are not limited to, those listed below and the Risk Factors discussed under Item 1A of the Company’s 2021 Annual Report on Form 10-K and in any of the Company’s subsequent SEC filings. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Such forward-looking statements may be deemed to include, among other things, statements relating to the Company’s future financial performance, the performance of its loan portfolio, the expected amount of future credit reserves and charge-offs, delinquency trends, growth plans, regulatory developments, securities that the Company may offer from time to time, and management’s long-term performance goals, as well as statements relating to the anticipated effects on financial condition and results of operations from expected developments or events, the Company’s business and growth strategies, including future acquisitions of banks, specialty finance or wealth management businesses, internal growth and plans to form additional de novo banks or branch offices. Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including the following:

- the severity, magnitude and duration of the COVID-19 pandemic, including the continued emergence of variant strains, and the direct and indirect impact of such pandemic, as well as responses to the pandemic by the government, businesses and consumers, on our operations and personnel, commercial activity and demand across our business and our customers’ businesses;
- the disruption of global, national, state and local economies associated with the COVID-19 pandemic, which could affect the Company’s liquidity and capital positions, impair the ability of our borrowers to repay outstanding loans, impair collateral values and further increase our allowance for credit losses;
- the impact of the COVID-19 pandemic on our financial results, including possible lost revenue and increased expenses (including the cost of capital), as well as possible goodwill impairment charges;
- economic conditions and events that affect the economy, housing prices, the job market and other factors that may adversely affect the Company’s liquidity and the performance of its loan portfolios, particularly in the markets in which it operates;
- negative effects suffered by us or our customers resulting from changes in U.S. trade policies;
- the extent of defaults and losses on the Company’s loan portfolio, which may require further increases in its allowance for credit losses;
- estimates of fair value of certain of the Company’s assets and liabilities, which could change in value significantly from

period to period;

- the financial success and economic viability of the borrowers of our commercial loans;
- commercial real estate market conditions in the Chicago metropolitan area and southern Wisconsin;
- the extent of commercial and consumer delinquencies and declines in real estate values, which may require further increases in the Company’s allowance for credit losses;
- inaccurate assumptions in our analytical and forecasting models used to manage our loan portfolio;
- changes in the level and volatility of interest rates, the capital markets and other market indices (including developments and volatility arising from or related to the COVID-19 pandemic) that may affect, among other things, the Company’s liquidity and the value of its assets and liabilities;
- the interest rate environment, including a prolonged period of low interest rates or rising interest rates, either broadly or for some types of instruments, which may affect the Company’s net interest income and net interest margin, and which could materially adversely affect the Company’s profitability;
- competitive pressures in the financial services business which may affect the pricing of the Company’s loan and deposit products as well as its services (including wealth management services), which may result in loss of market share and reduced income from deposits, loans, advisory fees and income from other products;
- failure to identify and complete favorable acquisitions in the future or unexpected difficulties or developments related to the integration of the Company’s recent or future acquisitions;
- unexpected difficulties and losses related to FDIC-assisted acquisitions;
- harm to the Company’s reputation;
- any negative perception of the Company’s financial strength;
- ability of the Company to raise additional capital on acceptable terms when needed;
- disruption in capital markets, which may lower fair values for the Company’s investment portfolio;
- ability of the Company to use technology to provide products and services that will satisfy customer demands and create 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 (including ransomware);
- adverse effects of failures by our vendors to provide agreed upon services in the manner and at the cost agreed, particularly our information technology vendors;
- increased costs as a result of protecting our customers from the impact of stolen debit card information;
- accuracy and completeness of information the Company receives about customers and counterparties to make credit decisions;
- ability of the Company to attract and retain senior management experienced in the banking and financial services industries;
- environmental liability risk associated with lending activities;
- the impact of any claims or legal actions to which the Company is subject, including any effect on our reputation;
- losses incurred in connection with repurchases and indemnification payments related to mortgages and increases in reserves associated therewith;
- the loss of customers as a result of technological changes allowing consumers to complete their financial transactions without the use of a bank;
- the soundness of other financial institutions;
- the expenses and delayed returns inherent in opening new branches and de novo banks;
- liabilities, potential customer loss or reputational harm related to closings of existing branches;
- examinations and challenges by tax authorities, and any unanticipated impact of the Tax Act;
- changes in accounting standards, rules and interpretations, and the impact on the Company’s financial statements;
- the ability of the Company to receive dividends from its subsidiaries;
- the ability of the Company to successfully discontinue use of LIBOR and transition to an alternative rate for current and future transactions;
- a decrease in the Company’s capital ratios, including as a result of declines in the value of its loan portfolios, or otherwise;
- legislative or regulatory changes, particularly changes in regulation of financial services companies and/or the products and services offered by financial services companies, including those changes that are in response to the COVID-19 pandemic, including without limitation the Coronavirus Aid, Relief, and Economic Security Act, the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, and the rules and regulations that may be promulgated thereunder;
- a lowering of our credit rating;
- changes in U.S. monetary policy and changes to the Federal Reserve’s balance sheet, including changes in response to the COVID-19 pandemic, persistent inflation or otherwise;
- regulatory restrictions upon our ability to market our products to consumers and limitations on our ability to profitably operate our mortgage business;
- increased costs of compliance, heightened regulatory capital requirements and other risks associated with changes in regulation and the regulatory environment;
- the impact of heightened capital requirements;
- increases in the Company’s FDIC insurance premiums, or the collection of special assessments by the FDIC;
- delinquencies or fraud with respect to the Company’s premium finance business;
- credit downgrades among commercial and life insurance providers that could negatively affect the value of collateral securing the Company’s premium finance loans;
- the Company’s ability to comply with covenants under its credit facility;
- fluctuations in the stock market, which may have an adverse impact on the Company’s wealth management business and brokerage operation; and
- widespread outages of operational, communication, or other systems, whether internal or provided by third parties, natural or other disasters (including acts of terrorism, armed hostilities and pandemics), and the effects of climate change.

Therefore, there can be no assurances that future actual results will correspond to these forward-looking statements. The reader is cautioned not to place undue reliance on any forward-looking statement made by the Company. Any such statement speaks only as of the date the statement was made or as of such date that may be referenced within the statement. The Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events after the date of this report. Persons are advised, however, to consult further disclosures management makes on related subjects in its reports filed with the Securities and Exchange Commission and in its press releases.

## Market risk

As filed, 6,353 characters.

### QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As an ongoing part of its financial strategy, the Company attempts to manage the impact of fluctuations in market interest rates on net interest income. This effort entails providing a reasonable balance between interest rate risk, credit risk, liquidity risk and maintenance of yield. Asset-liability management policies are established and monitored by management in conjunction with the boards of directors of the banks, subject to general oversight by the Risk Management Committee of the Company’s Board of Directors. The policies establish guidelines for acceptable limits on the sensitivity of the market value of assets and liabilities to changes in interest rates.

Interest rate risk arises when the maturity or re-pricing periods and interest rate indices of the interest-earning assets, interest-bearing liabilities, and derivative financial instruments are different. It is the risk that changes in the level of market interest rates will result in disproportionate changes in the value of, and the net earnings generated from, the Company’s interest-earning assets, interest-bearing liabilities and derivative financial instruments. The Company continuously monitors not only the organization’s current net interest margin, but also the historical trends of these margins. In addition, management attempts to identify potential adverse changes in net interest income in future years as a result of interest rate fluctuations by performing simulation analysis of various interest rate environments. If a potential adverse change in net interest margin and/or net income is identified, management would take appropriate actions with its asset-liability structure to mitigate these potentially adverse situations.

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

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

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

| Static Shock Scenarios | +200 Basis Points | +100 Basis Points | -100 Basis Points |
| --- | ---: | ---: | ---: |
| **September 30, 2022** | **12.9%** | **7.1%** | **(8.7)%** |
| June 30, 2022 | 17.0 | 9.0 | (12.6) |
| September 30, 2021 | 24.3 | 11.5 | (7.8) |

| Ramp Scenarios | +200 Basis Points | +100 Basis Points | -100 Basis Points |
| --- | ---: | ---: | ---: |
| **September 30, 2022** | **6.5%** | **3.6%** | **(3.9)%** |
| June 30, 2022 | 10.2 | 5.3 | (6.9) |
| September 30, 2021 | 10.8 | 5.4 | (3.8) |

One method utilized by financial institutions, including the Company, to manage interest rate risk is to enter into derivative financial instruments. Derivative financial instruments include interest rate swaps, interest rate caps, floors and collars, futures, forwards, option contracts and other financial instruments with similar characteristics. Additionally, the Company enters into commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors. See Note 15 - Derivative Financial Instruments of the Consolidated Financial Statements in Item 1 of this report for further information on the Company’s derivative financial instruments.

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

## Controls and procedures

As filed, 1,139 characters.

### CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer carried out an evaluation under their supervision, with the participation of other members of management as they deemed appropriate, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as contemplated by Exchange Act Rule 13a-15. Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective, in all material respects, in timely alerting them to material information relating to the Company (and its consolidated subsidiaries) required to be included in the periodic reports the Company is required to file and submit to the SEC under the Exchange Act.

There were no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the period that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 127 characters.

There have been no material changes from the risk factors set forth under Part I, Item 1A “Risk Factors” in the 2021 Form 10-K.

Filed Nov 8, 2022.
Source: SEC EDGAR, the filing index for accession 0001015328-22-000180. Last ingested by Listed: Nov 5, 2026, 14:04 ET. No prices; not investment advice.